According to the decision, the subcontractor sued the general contractor over a payment dispute, and the general contractor served a cross-complaint based on several causes of action, including allegations that the subcontractor negligently damaged property. The subcontractor then tendered the defense of the cross-complaint to the general contractor’s insurer, under a policy on which the subcontractor was an additional named insured. The insurer denied coverage based on the cross-suits exclusion in the policy, and the subcontractor sued the insurer for breach of contract and bad faith. Following cross-motions for summary judgment in the trial court, judgment was awarded to the insurer.
On appeal, the appellate court affirmed the decision of the trial court. In the appellate court’s view, coverage was unavailable for the suit by the general contractor against the subcontractor as a matter of law, because the policy contained a cross-suits exclusion that excluded from coverage suits between insureds. While the policy also contained an exception to that exclusion for actions to apportion liability between insureds where one insured is sued for a covered loss, and while the cross-claim brought by the general contractor did contain allegations of property damage, which was arguably a suit for a “covered loss,” the appellate court determined that the apportionment exception only applied to a suit for a covered loss brought by a third party against an insured, not by one insured against another.