The “Loss in Progress” Rule – 4
Although it is true that the loss-in-progress rule as codified in [California Insurance Code] sections 22 and 250 draws no distinction between, and thus is applicable to, first party property insurance and third party liability insurance policies, the distinctions inherent in the two types of coverage necessarily result in a different analysis when the rule is applied in the liability insurance context. As we have explained, first party property insurance policies provide coverage for damage to the insured’s own property. In that context, insurance cannot be obtained for damage which has already occurred because the absence of risk precludes coverage. (California Insurance Code §§ 22, 250). Third party liability insurance policies, in contrast, afford coverage for “sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage.” In the liability insurance context, insurance cannot be obtained for a “known liability.”
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