Real Estate and Construction Law Blog

Fire Insurance Exchange v. Superior Court (Altman)
116 Cal. App. 4th 446 (2d Dist. Mar. 2, 2004)

A group of homeowners whose homes were damaged in the 1994 Northridge earthquake brought claims against their insurance companies to recover under their policies and for damages, alleging breach of contract, insurance bad faith, fraud and negligence. The trial court found the policy at issue to be ambiguous and certain exclusions related to land stabilization and building code upgrades to be invalid and unenforceable. The insurance companies filed a petition for a writ of mandate. The Court of Appeal analyzed the "plain, unambiguous language of the policy" and reversed the trial court's finding that the policy included the cost of repairing the land under damaged structures.

The Court of Appeal affirmed the trial court's finding that the policy includes coverage for the increased costs of repair or replacement of damaged buildings where such increased costs are due to the need to conform to updated building codes. The Court concluded that the statutory language of Insurance Code Section 2071 (setting forth the standard form fire insurance policy) did not control because the policy did not "substantially comply" with Section 2071.

Thus, the Court applied the "usual rules of policy interpretation." The Court found that the policy exclusion for loss caused by "enforcement of any ordinance or law regarding construction" was ambiguous, therefore any doubt must be resolved in favor of coverage.