- Insurers not entitled to intervene in construction defect trial as a matter of right.
- In subsequent DJ, Insurers have right to determination of which portions of damages are covered under CGL policies between the Insurers and Insureds.
CONSTRUCTION DEFECT ACTION
- Insurers provided independent counsel to defend subject to ROR.
- At end of discovery, Insurers motioned to intervene for limited purpose of participating in preparation of a special verdict form or a general verdict form accompanied by answers to interrogatories for submission to jury during trial.
- Insurers hoped jury would determine which portions of the damages were covered, obviating need for the DJ.
- Trial court denied motions; Insurers’ appeal was certified.
MOTION TO INTERVENE
- Decision to grant or deny within discretion of the trial court.
- Court will not disturb decision absent manifest abuse of discretion that results in error of law amounting to a deprivation of rights of the party.
- Entity seeking intervention must:
(1) Timely application;
(2) assert an (real, material, substantial) interest;
(3) demonstrate that without intervention, disposition of the action may impair or impede ability to protect that interest;
(4) demonstrate that its interest is inadequately represented by other parties.
- Insurers are not “real parties in interest” cannot satisfy the four-part test and have not met the requirements to intervene as a matter of right.
- Insurers’ intervention would (1) unnecessarily complicate the action, including altering the Association’s burden of proof and possibly delaying the trial, and (2) create a conflict of interest for the Insureds’ counsel, who were supplied to them by the Insurers.
- It was not the intent in Newman to categorically foreclose a subsequent DJ to resolve a coverage dispute. To the extent Newman may be read to foreclose an insurer’s subsequent DJ to resolve the coverage dispute, we modify Newman accordingly.
- Harleysville neither mandates intervention nor forecloses a DJ to resolve a coverage dispute.
- The parties offer varying approaches on the specifics of how a subsequent DJ should be tried.
- A significant point of contention is the Insurers’ concern that any coverage decisions in the DJs will be bound by factual determinations made in the construction defect action.
HOW TO FAIRLY ALLOCATE COVERED AND NON-COVERED DAMAGES?
- Insureds and the Insurers are not precluded from introducing evidence as to which damages are covered (or excluded from coverage).
- The parties are bound by the jury verdict.
- We reject the notion that, in a DJ, it is “improper and purely speculative” to allocate a general verdict into covered and non-covered damages.
- We do not oppose the parties coming to an agreement on a framework for allocating damages, subject to the approval of the court.
- Failing an agreement of the parties, we set forth a default approach that shall serve as the framework for use in DJs for allocating covered and non-covered damages.
- This default allows litigants in a DJ to use percentages, rather than exact dollar amounts, to determine the amount of covered and non-covered damages in a general verdict.
- The primary source of evidence in the DJ should be the transcript of the merits hearing.
- In the discretion of the court, additional evidence may be presented that is relevant to the coverage dispute determination, such as expert testimony.
- The additional evidence, if any, must be narrowly tailored to the coverage dispute question, as the transcript of the merits hearing will be the primary source of evidence.
- The trier of fact shall then make a determination allocating on a percentage basis what portion of the underlying verdict constitutes covered damages and what portion constitutes non-covered damages.
- Perfect precision in allocating damages is not always achievable.
- Where perfect precision is not achievable, a fair approximation must suffice.
- Our research persuades us that the percentage-based approach will best achieve a fair allocation of damages.