INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS

No third-party beneficiary

Chris LaBarbera hired Richard Knight, d/b/a Knight Construction, to remodel a house pursuant to a contract that provided Knight would defend and indemnify LaBarbera for all claims arising out of the work. Knight obtained a general liability policy from Security National Insurance Company that covered damages Knight was obligated to pay because of bodily injury to a third party. The policy also covered Knight’s “liability for damages … [a]ssumed in a contract or agreement that is an ‘insured contract.’”

Security National acknowledged that the indemnity provision in Knight’s contract with LaBarbera was an “insured contract” within the meaning of the policy. The policy also provided: “If we defend an insured [i.e., Knight] against a suit and an indemnitee of the insured [i.e., LaBarbera] is also named as a party to the suit, we will defend that indemnitee” if certain conditions were met.

During the remodeling work, a subcontractor suffered catastrophic injuries and sued both LaBarbera and Knight. LaBarbera’s liability insurer, underwriters at Lloyd’s of London (Underwriters), defended him in that lawsuit, and Security National defended Knight. LaBarbera also tendered his defense to Knight and to Security National, but they either ignored or rejected the tender.

After settling the underlying lawsuit for $465,000, LaBarbera and Under-writers sued Knight and Security National, seeking to recover the full $465,000 settlement amount and over $100,000 in expenses and attorney fees incurred to defend LaBarbera in that lawsuit.

Security National moved for summary judgment on the ground that all claims against it were barred because the undisputed facts established that it did not have an obligation to defend or indemnify LaBarbera. The trial court granted the motion and entered judgment in favor of Security National.

LaBarbera and Underwriters appealed, but the appellate court affirmed, adopting different reasoning than the trial court. The court agreed with Security National that the indemnitee defense clause in Knight’s general liability policy did not bestow third-party beneficiary rights on the indemnitee, LaBarbera, who benefited only incidentally from the clause. Because LaBarbera was not a third-party beneficiary under Knight’s policy, he was precluded from bringing a direct action against Security National.

LaBarbera, et al. v. Security National Insurance Company—California Courts of Appeal, Third Appellate District—December 28, 2022—No. C093414.