Case Number: BC542691??? Hearing Date: August 02, 2016??? Dept: 56
Case Name: West Coast Switchgear Inc. v. Continental Insurance Company
Case No.: BC542691
Matter: Defendant?s Motion for Summary Judgment/Adjudication
Tentative Ruling: MSJ & MSA are denied.
Plaintiff West Coast Switchgear Inc. (changed to GSCW Inc.) filed this insurance action against Defendant Continental Insurance Company. The operative FAC asserts causes of action for (1) breach of contract and (2) breach of the covenant of good faith and fair dealing. Continental moves for summary judgment or adjudication.
Background ?
Continental issued an insurance policy to Plaintiff effective 5/6/12 to 5/6/13. On 10/2/12 Craig Litch suffered injuries from an electrical shock while working on DCOR?s maritime platform. On 10/1/13 Craig and Ann Litch filed a personal injury action against DCOR (the Litch Action) which did not name or make allegations against Plaintiff.
Plaintiff and DCOR were parties to a Master Service Agreement (MSA), which requires Plaintiff to maintain comprehensive or commercial general liability insurance covering Plaintiff?s operations, to which DCOR would be added as an additional insured. The MSA has an indemnity clause which provides that Plaintiff?s indemnity obligations (other than to defend) would not apply to matters determined by final judgment to have been caused solely by the negligence or willful misconduct of DCOR.
Continental?s insurance policy contains a contractual liability exclusion which states: ?This exclusion does not apply to liability for damages: . . . (2) Assumed in a contract or agreement that is an ?insured contract,? provided the ?bodily injury? or ?property damage? occurs subsequent to the execution of the contract or agreement. Solely for the purposes of liability assumed in an ?insured contract,? reasonable attorney fees and necessary litigation expenses incurred by or for a party other than an insured are deemed to be damages because of ?bodily injury? or ?property damage,? provided: (a) Liability to such party for, and for the cost of, that party?s defense has also been assumed in the same ?insured contract;? and (b) Such attorney fees and litigation expenses are for defense of that party against a civil or alternative dispute resolution proceeding in which damages to which this insurance applies are alleged.?
Continental?s insurance policy contains an additional insured provision, which applies to parties whom Plaintiff is required to add as an additional insured under a written contract or agreement (currently in effect and executed prior to the covered damages) but no coverage applies to liability resulting from the sole negligence of the additional insured.
Continental?s insurance policy also contains a primary and non-contributory provision concerning additional insureds, which provides that Continental?s insurance is primary if Plaintiff?s written contract or agreement with the additional insured so states but the provision will not apply if Continental?s policy specifies that the additional insured coverage is excess.
Duty to Defend ?
Continental argues that the Litch Action did not trigger a duty to defend under either the insured-contract exception to the contractual liability exclusion or the additional insured provisions. This is the same basis asserted for both claims in Plaintiff? FAC.
?The determination whether the insurer owes a duty to defend usually is made in the first instance by comparing the allegations of the complaint with the terms of the policy. Facts extrinsic to the complaint also give rise to a duty to defend when they reveal a possibility that the claim may be covered by the policy.? Montrose Chemical v. Superior Court (1993) 6 Cal.4th 287, 295 (citations omitted). ?To prevail, the insured must prove the existence of a potential for coverage, while the insurer must establish the absence of any such potential. In other words, the insured need only show that the underlying claim may fall within policy coverage; the insurer must prove it cannot. Facts merely tending to show that the claim is not covered, or may not be covered, but are insufficient to eliminate the possibility that resultant damages (or the nature of the action) will fall within the scope of coverage, therefore add no weight to the scales.? 6 Cal.4th at 300.
It is undisputed that the Litch Action does not contain allegations against Plaintiff. But there is evidence that DCOR hired an attorney, Nile Kinney; Kinney requested Plaintiff to defend DCOR in the Litch Action; on 10/23/12 Kinney told Continental?s claim representatives that Plaintiff had subcontracted the work and DCOR believed that Plaintiff? subcontractors were negligent for not telling employees that DCOR was going to re-energize the platform; and on 11/4/13 Kinney told Continental?s claim representatives that he had witness statements from DCOR stating that Plaintiff?s subcontractors were at fault and that a cross-complaint would be filed.
This evidence is sufficient to raise triable issues of fact as to whether Continental had a duty to defend when it was made aware of extrinsic facts to the complaint in the Litch Action which supported Plaintiff?s fault for the damages claimed in the Litch Action. Indeed, there is evidence that some of Continental?s representatives initially reached a tentative conclusion that Kinney?s representations supported a duty to defend.
Insured-Contract Exception ?
Continental argues that the damages covered by the insured-contract exception to the contractual liability exclusion (i.e., reasonable attorney fees and necessary litigation expenses incurred by a party other than the insured) were never the subject of a court order such that that Plaintiff became legally obligated to pay them. In support of this argument, Continental principally relies on Certain Underwriters at Lloyd?s v. Superior Court (Powerine) (2001) 24 Cal.4th 945, 963. Powerine is inapposite because it concerned the duty to indemnify, which is narrower than the duty to defend. Additionally, Continental has misconstrued the applicable language of the insured-contract exception which applies to Plaintiff?s assumed liability for attorney fees and litigation expenses. This is to be distinguished from the language of the insurance policy concerning Continental?s indemnity obligations for Plaintiff (i.e., sums that the insured becomes legally obligated to pay as damages).
Continental also argues that the insured-contract exception cannot create coverage, relying on Alex Robertson v. Imperial Casualty (1992) 8 Cal.App.4th 338. Alex Robertson is inapposite, because it held that a potential indemnitee (such as DCOR) cannot sue the indemnitor?s insurer (such as Continental) to impose a duty to defend. 8 Cal.App.4th at 345-46. This holding was based on clear and unambiguous policy language stating that the insurer only had a duty to defend its insured, and the conclusion that the potential indemnitee was not an insured. 8 Cal.App.4th at 343-44. Neither of these conditions has been established here. Additionally, the Court of Appeal did not consider whether the indemnitor owed a duty to defend and whether any resulting liability of the indemnitor is covered by the insurance policy. 8 Cal.App.4th at 346 n.5. Therefore, Alex Robertson may preclude insurance claims brought by DCOR against Continental, but those are not the claims raised by this action by Plaintiff against Continental.
Additional Insured ?
Continental argues that the allegations in the Litch Action complaint suggest that DCOR was solely negligent. But as stated above, there are triable issues of material fact as to whether Continental was informed by DCOR?s counsel of the potential fault of Plaintiff?s subcontractors. This is sufficient to raise triable issues of fact as to whether this information revealed a possibility that the Litch Action may be covered by the additional insured provisions. See Monticello Ins. Co. v. Essex Ins. Co. (2009) 162 Cal.App.4th 1376, 1387. This evidence does not consist of mere speculation about unpled third party claims, such as Gunderson v. Fire Ins. Exchange (1995) 37 Cal.App.4th 1106, 1114.
Continental argues that its insurance policy is not primary, but the primary and non-contribution provision does not clearly and unambiguously establish that Continental?s insurance policy is excess. While the MSA does not explicitly state that Continental?s insurance policy is primary, this does not necessarily mean that Continental?s insurance policy is excess.
Continental finally argues that Plaintiff is judicially estopped from asserting that DCOR was an additional insured. It contends that Plaintiff did not assert DCOR was an additional insured in opposition to a motion for judgment on the pleadings, and it previously told DCOR that Continental did not insure DCOR. But the requirements for judicial estoppel have not been established, because there is no showing that Plaintiff has been successful in asserting a previously contrary position in this action. See Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 181-83. Notably, the motion for judgment on the pleadings was denied on other grounds, with no finding that DCOR was an additional insured.
Concealment ?
Continental contends that Plaintiff?s insurance application misrepresented material facts, which supports rescission of the policy. Continental?s evidence only suggests that Plaintiff may have failed to accurately identify that it had ?hold harmless? agreements, had subcontractors or performed marine work. Materiality depends on whether the true facts, if known, would have made the contract less desirable to the insurer. See Thompson v. Occidental Life (1973) 9 Cal.3d 904, 916. Continental has failed to present any evidence as to materiality, and Plaintiff has submitted evidence that raises triable issues of fact as to whether the incorrect answers were material.
Objections ?
Gemini Insurance Co. has submitted an opposition to the motion, which includes objections as to notice; the objections and other matters raised are moot. Plaintiff and Continental have objected to opposing evidence; all objections are overruled.
Ruling ?
Summary judgment and summary adjudication are denied on all grounds.