Prudential-LMI Commercial Insurance v. Superior Court

Trustees of a family trust (insureds) built an apartment house and insured it with four successive property insurers between 1971 and 1986. Prudential-LMI Commercial Insurance (Prudential) insured the property between 1977 and 1980, with a policy that contained the statutory one-year limitations period requiring notice within 60 days after a loss and an exclusion for earth-movement damage. While replacing flooring in November 1985, the insureds discovered an extensive crack in the building’s foundation. Prudential concluded that expansive soil caused the building’s foundation to rupture. In August 1987, just before receiving formal written notice that Prudential was denying the insureds’ claim under the exclusion, the insureds sued Prudential and three other insurers that had insured the property between 1971 and 1986. Prudential sought summary judgment after discovering that when carpet was installed in 1982 that covered the damaged area, the insureds observed no damage—and this was two years after Prudential’s coverage had ended. Prudential also claimed that because the insureds filed suit more than 20 months after filing their claim, the action was time-barred under the one-year limitations period. The trial court denied Prudential’s motion, and Prudential sought a writ of mandamus in the appellate court, arguing the limitations and failure-to-give-timely-notice defenses. The court of appeal directed the trial court to grant Prudential relief. The insureds and Prudential appealed the one-year suit provision and successive-insurer issues, respectively.