In Forecast Homes, Inc. vs. Steadfast Insurance Company, 181 Cal.App.4th 1466 (2010), the Court examined whether Steadfast Insurance Company, which had issued liability policies to several subcontractors with “additional insured” endorsements, was required to defend and indemnify the developer in construction defect litigation. The issue was whether the developer as additional insured could pay the self-insured retention (“SIR”) to trigger Steadfast’s obligations.
The developer’s contracts required the subcontractors to include the developer as an additional insured on their policies. This they did. However, each of the Steadfast policies included a $2,500 SIR, that had not been paid. The developer was willing to pay it, but Steadfast argued that the policies required the name insureds (subcontractors) to satisfy the SIR. No other person or entity, it contended, could satisfy the SIR.
Steadfast agreed that payment of damages and/or defense costs adding up to $2,500 would trigger Steadfast’s duty to defend the named insured subcontractor and the developer, the additional insured. The dispute was therefore limited to who was permitted to activate coverage by paying the SIR.
The policy language stated that:
This last statement is what the Legacy Court rejected as a general understanding of SIRs. The outcomes in both cases could be harmonized by examining the specific language of the policies. In Forecast, the policy’s SIR provision referred to both “damages and defense costs,” while the SIR provision in Legacy was set apart from the “duty to defend” provision, among other things.