California Court Holds that “Care, Custody or Control” Exclusion in Additional Insured Endorsement Only Bars Coverage for AI Where There Was Exclusive or Complete Control

A general contractor (“GC”) was covered as an additional insured on its roofing subcontractor’s commercial general liability (“CGL”) policy.  In a construction defect action related to roofing, the insurer refused to defend the GC on the basis of language in the additional insured endorsement excluding coverage for damage to “property in the care, custody or control of the additional insured.”  In a resulting declaratory judgment action as to the insurer’s duty to defend, the trial court held the “care, custody or control” exclusion in the endorsement precluded coverage, and on appeal, the California Court of Appeal reversed.  McMillin Homes Construction, Inc. v. National Fire & Marine Ins. Co., 247 Cal. Rptr. 3d 825 (Cal. Ct. App. 2019).

The California Court of Appeal held that the “care, custody or control” exclusion applies only where the additional insured had “exclusive or complete control.”  Where there is only “shared control,” as was the case for the GC and its roofing subcontractor, the exclusion does not bar coverage.

As argued by the insurer, the “care, custody or control” exclusion would bar any coverage for a general contractor for construction defect liability arising from its subcontractor’s work.  In other words and as the California Court of Appeal recognized, under that reading the “care, custody or control” exclusion would render an additional insured endorsement useless for a general contractor for construction defect actions which is the primary purpose, or at least a primary purpose, of a general contractor obtaining an additional insured endorsement on its subcontractor’s policy.