Opinion
No. C 03-02460 SI
November 18, 2003
JUDGMENT
In accordance with the Court's Order of November 18, 2003, judgment is hereby entered. IT IS SO ADJUDGED.
ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
On November 7, 2003, the Court heard oral argument on the parties' cross-motions for summary judgment. Having considered the arguments of counsel and the papers submitted, the Court hereby GRANTS defendant's motion for summary judgment and DENIES plaintiffs motion for summary judgment.BACKGROUND
On or about August 20, 2001, plaintiff Colorado Structures, Inc. (CSI), a general contractor, entered into a subcontract with Vaca Valley Roofing, Inc., dba Old Country Roofing (OCR) for construction work on a Wal-Mart building in Martinez, California. Decl. of Upson, Ex. A. On August 22, 2001, OCR employee Michael Sheehan was injured at the Wal-Mart site when he stepped through an uncovered skylight in the roof. Decl. of M. Johnson, Ex. D. Sheehan filed an action in state court ("Sheehan action") against CSI, Wal-Mart, and other defendants, alleging that CSI's negligence caused his injuries. Compl. ¶ 8. CSI cross-claimed against OCR in the Sheehan action for express and implied indemnity, breach of contract, and contribution. Id.
As indicated on the first page of the subcontract, the parties apparently anticipated an execution date of July 17, 2001, but OCR's president dated his or her signature August 20, 2001. The CSI signatory did not indicate a date. Decl. of Upson, Ex. A. However, the date of execution is immaterial, as explained below.
The Wal-Mart project subcontract required OCR to add CSI to OCR's commercial general liability insurance policy as an additional insured, to indemnify C SI against any claim brought against it by one of OCR's employees in the course of performance. Decl. of M. Johnson, Ex. D. Defendant North American Capacity Insurance Company (N AC) is the issuer of OCR's policy. OCR did not obtain a certificate of insurance from N AC adding CSI to its policy as an additional insured until after the accident, on September 11, 2001. Id., Ex. I. In the meantime, CSI did not exercise its right to obtain insurance on behalf of OCR at OCR's expense, as provided in the subcontract. Id., Ex. C.
CSI, believing itself covered under OCR's policy, tendered notice of suit in the Sheehan action to OCR by a letter dated November 8, 2002.Id., Ex. E. OCR's attorney rejected CSI's tender on November 13, 2002.Id., Ex. F. On January 28, 2003, NAC's third party claims administrator contacted CSI to state that it was "not in a position to either accept or reject your request for defense and indemnification," pending further investigation. Id., Ex. G. CSI received no further communication from OCR, NAC, or the claims administrator. Id., at 4-5. NAC never picked up CSI's tender, and CSI continues to defend the Sheehan action without indemnification from OCR or NAC. Compl. ¶ 14.
CSI brought suit in this Court against NAC seeking: (1) a declaratory judgment that NAC is obligated under the policy to defend and indemnify CSI in the Sheehan action; (2) restitution for breach of contract, including legal fees incurred in defending the Sheehan action: and (3) injunctive relief compelling NAC to defend and indemnify CSI. Compl. ¶ 16. Jurisdiction is proper under 28 U.S.C. § 1332, since CSI is a Colorado corporation and NAC is a New Hampshire corporation, and the amount in controversy exceeds $75,000. Venue is proper in this district because a substantial part of the events and omissions giving rise to this action occurred in Contra Costa County. Now before the Court are the parties' cross-motions for summary judgment.
LEGAL STANDARD
Summary judgment is proper where there is no genuine issue as to any material fact, and the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552 (1986). The moving party, however, has no burden to negate or disprove matters on which the non-moving party will have the burden of proof at trial. The moving party need only point out to the Court that there is an absence of evidence to support the non-moving party's case. Id. at 325.The burden then shifts to the non-moving party to "designate `specific facts showing that there is a genuine issue for trial.'" Id., at 324,citing Fed.R.Civ.P. 56(e). To carry this burden, the non-moving party must "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd, v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356(1986). "The mere existence of a scintilla of evidence . . . will be insufficient; there must be evidence on which the jury could reasonably find for the [non-movingparty]." Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 2512(1986).
In deciding a motion for summary judgment, the evidence is viewed in the light most favorable to the non-moving party, and all justifiable inferences are to be drawn in its favor. Id. at 255. "Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge [when] ruling on a motion for summary judgment." Id.
DISCUSSION
1. Summary judgmentAlthough plaintiff captions its paper as a motion for partial summary judgment, its three summary judgment requests are substantively identical to the three causes of action identified in the complaint, and would dispose of the entire case, excepting fees and costs. PL's Mot. for Summ. J. at 2. Likewise, defendant's motion for summary judgment, urging that CSI was not insured at the time of the accident and that the policy has no retroactive effect, would also be dispositive of the entire case. Def.'s Mot. for Summ. J. at 1-2.
Of the four factual disputes identified by the parties, none is material. First, as defendant points out, it is unclear when OCR forwarded its tender of suit to NAC. Def.'s Opp'n. at 12. CSI tendered defense and indemnity in the Sheehan action to OCR in a letter dated November 8, 2002. Decl. of Johnson, Ex. E. On January 28, 2003, NAC's third party claims administrator contacted CSI, but did not accept tender pending further investigation. Id. Ex. G. CSI received no further communication from OCR, NAC, or the claims administrator. Id., at 4-5. Given that NAC never picked up CSI's tender, it is immaterial whether tender was constructively made at the time CSI alerted OCR, or when OCR forwarded the letter to NAC. This factual issue has no bearing on the construction and validity of the insurance policy, which is the only legal issue remaining before the Court, as explained below.
Second, defendant asserts that a triable issue offact remains as to the amount of defense fees and costs incurred by CSI in the Sheehan action. Def.'s Opp'n. at 12. However, uncertainty as to the amount of damages is not a material fact at the summary judgment stage, and in no way affects the legal question as to whether a duty to indemnify exists.
Third, plaintiff filed an objection to defendant's use of the deposition of Jean Johnson, attached to the declaration of defendant's counsel. Generally, judicialnotice of other legal proceedings, even when before the same judge, is inappropriate as to the verity of the facts therein. See Lee v. City of Los Angeles, 250 F.3d 668, 690 (9th Cir. 2001). Nonetheless, plaintiffs objection is without consequence, as the information in the deposition that is unavailable elsewhere is not material.
Finally, the parties dispute the date of die subcontract between OCR and CSI. Plaintiff states that the date of execution is July 17, 2001, Decl. of Johnson at 2, ostensibly based on the typed-in date on the first page of the subcontract. Defendant argues that "earliest possible execution date" was August 20, 2001, based on the signature of OCR's president, and that the CSI signatory failed to indicate a date. Def.'s Mot. for Summ. J. at 3. Regardless of whether the subcontract became effective before the accident, the only parties to it are OCR and CSI. The subcontract does not affect the Court's interpretation of the insurance policy.
Absent a dispute over material facts, the remaining issue of law is properly before the Court on cross-motions for summary judgment. The sole question is one of contract interpretation: whether the policy covered CSI at the time of Sheehan's accident. The construction of an insurance policy is a matter of law where, as here, the text of the policy itself is not subject to competing inferences, and where no parol evidence is introduced in aid of interpretation. See Continental Cas. Co. v. Phoenix Const. Co., 46 Cal.2d 423, 429-30 (1956). Interpretation of the policy depends, rather, on the relation between the three relevant endorsements within the policy, and whether the policy is an "occurrence" policy or a "completed operations" policy, as explained below.
The parties agree that California law governs the interpretation of the policy. When ruling on a summary judgment motion, a federal court sitting in diversity jurisdiction will apply the forum state's rule of decision regarding elements of a state law contract action. See Bank of California v. Opie, 663 F.2d 977, 980 (9th Cir. 1981).
An endorsement is a "modification to the basic insuring forms in the policy. Endorsements may alter or vary any term or condition of the policy." Adams v. Explorer Ins. Co., 107 Cal.App.4th 438, 450 (2003),citing Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2002) ¶ 3:188, p. 3-50.
2. Interpretation of the policy
A. Relation between endorsements
Three sections of the policy are relevant to the Court's inquiry: Endorsement 11, Endorsement 20, and the Additional Insured Endorsement (or the "20-10 Endorsement"). Endorsement 11, the "blanket" additional insured provision, states:
A. The term "additional insured" shall also include any person or organization specifically designated an "additional insured" on a certificate of insurance approved by the company. . . .
B. Coverage for any additional insured shall incept at 12:01 A.M. on the date the certificate designating such person or organization as an additional insured is approved by the company. . . .
F. The duty to defend and indemnify the additional insured seeking coverage pursuant to this additional insured endorsement is excess to any primary insurance which identifies the additional insured as a named insured. . . .
Compl. Ex. A (emphasis added). Notably, in section (B), Endorsement 11 provides a default onset date for all additional insured parties later added to the policy. As explained below, neither of the other endorsements modifies this provision in any way. Section (F), however, is explicitly pre-empted by Endorsement 20, which modifies the policy to provideprimary insurance for additional insured parties, as opposed to the default excess insurance:
It is agreed such insurance as is afforded by this policy for the benefit of the additional insured(s) shown in endorsement number (11) shall be primary insurance. Any other insurance maintained by the additional insured(s) shall be excess and non-contributory but only as respect any claim, loss or liability arising out of the operations of the named insured. . . .Id (emphasis added). The 20-10 Endorsement, which adds CSI to OCR's policy as an additional insured, states:
WHO IS AN INSURED (Section 11) is amended to include as an insured the person or organization shown in the Schedule [CSI] but only with respect to liability arising out of your ongoing operations performed for that insured.
The insurance provided by this endorsement for the Additional Insured(s) is primary and any other insurance maintained by the Additional Insured(s) is excess only and is non-contributory with the insurance provided herein.Id. Ex. B.
To determine whether CSI was covered by the policy at the time of the accident, the key issue becomes how to interpret the absence of an onset date in the 20-10 Endorsement. Plaintiff asserts that without an explicit onset date, "the effective date of this endorsement relates back to the inception date of the policy or July 1, 2001." PL's Reply at 2. Defendant argues that the onset date in Endorsement 11 controls, and that the policy thus did not become effective until 12:01 A.M. on September 11, 2001, when the certificate of insurance was issued. Def.'s Opp'n. at 6,citing Decl. of M. Johnson, Ex. I.
According to plaintiff, the 20-10 Endorsement embodies NAC's intent to relate the date of coverage back to the beginning of the policy period, because NAC would have otherwise expressly included an onset date. PL's Opp'n. at 3. Plaintiff relies on Pardee Construction Co. v. Ins. Co. of the West, 77 Cal.App.4th 1340, 1359 (2000), where the court held that an insurer's failure to use "available language" in limiting coverage as to time or place manifested an intent not to do so. The insurance policy inPardee, however, was a "completed operations" policy. A completed operations policy differs categorically from an "occurrence" policy in that it provides retroactive coverage for construction projects completedprior to the onset date, while an occurrence policy covers injuries and loss after the onset date, during the policy period. The policy at issue here is an occurrence policy. A failure to include the onset date in a completed operations policy materially affects the construction of the policy; since coverage is retroactive, lack of an onset date implies coverage dating to the beginning of the construction project. Conversely, the same omission in an occurrence policy has no effect on its construction, because, by design, it covers loss going forward from the date of acceptance, until the end of the policy period.
That NAC's policy is an occurrence policy is clear not only from the title of the form, but also from the content of the policy's main provisions, which state:
This insurance applies to bodily injury and property damage only if:
(1) The bodily injury or property damage is caused by an occurrence that takes place in the coverage territory; and
(2) The bodily injury or property damage is caused by an occurrence which takes place during the policy period. . . .
Def.'s Reply at 5. citing Peel. of M. Johnson, Ex. A (emphasis in original). Conversely, completed operations policies or "claims made" policies cover claims made during the policy period, even if the action or occurrence giving rise to the loss occurred before the policy period (e.g., a structural flaw that does not become manifest until after construction ceases). See Montrose Chemical Corp. v. Admiral Ins. Co., 10 Cal.4th 645, 673 (1995).
Moreover, unlike Pardee, the policy at issue here contains a blanket provision (Endorsement 11) which establishes an onset date of 12:01 A.M. on the day the certificate is issued. Unless expressly provided, subsequent endorsements do not replace one another outright, but are designed to act in concert. Where a subsequent endorsement adds one condition without expressly modifying another, it cannot be said that the first is eclipsed simply because the latter is given effect. See Adams, 107 Cal.App.4th at 451 (courts should construe a policy and all its endorsements together as a whole); Jane D. v. Ordinary Mutual 32 Cal.App.4th 643, 651 (1995) (specific provision governs as against a general provision even though the latter, standing alone, would be broad enough to include the subject to which the more specific provision relates). The silence of the 20-10 Endorsement as to the onset date cannot be construed as eclipsing the onset date expressly provided in Endorsement 11. Accordingly, this Court finds that coverage began on September 11, 2001, the date the certificate of insurance was issued.
B. CSFs contractual duty to provide insurance on behalf of OCR
Per the subcontract between CSI and OCR, OCR was contractually obligated to add CSI as an additional insured to its policy prior to commencing work. Section 19 of the subcontract provides: "Before commencing any work, Subcontractor shall furnish Contractor with Certificates of Insurance . . . evidencing that the Insurance required hereunder is in force and effect" Decl. of Upson, Ex. A. Clearly, OCR intended to add CSI as a named insured for the Wal-Mart project, since it eventually procured a certificate of insurance as required by the subcontract, but it did so in a tardy fashion. The certificate of insurance, dated September 11, 2001, postdates the subcontract's execution date by 21 days and the accident by 19 days.
Even if CSI alleged that OCR breached the subcontract by not procuring coverage prior to commencing performance, this is immaterial to the construction of the insurance policy. NAC is not a party to the subcontract, and OCR is not a party here. Absent allegations of false representation, CSI cannot claim that OCR breached the subcontract, because CSI retained the option of securing coverage on behalf of the OCR in the event a certificate of insurance was not received prior to the start of construction. The second part of Section 19 of the subcontract states:
In the event Subcontractor fails to furnish Contractor with acceptable Certificates of Insurance before the time named in the Subcontract Agreement for commencing work, Contractor shall have the right to purchase insurance at the Subcontractor's expense, or terminate this Subcontract Agreement.Id. In view of this provision, CSI is not entitled to assume that OCR has secured coverage. CSI exposed itself to liability during the period of the accident by not securing coverage on behalf of OCR, at OCR's expense. Whether OCR represented coverage where none existed is not a matter between the instant parties or before this Court. The parties' intent as portrayed in the subcontract has no bearing on the insurance policy itself.
To summarize, this Court finds that: (1) the policy went into effect on September 11, 2001, (2) the policy is an "occurrence" policy, based on the language of the policy as a whole, and (3) the occurrence policy provides no retroactive coverage before a certificate of insurance is issued. Accordingly, CSI was not covered by the policy with respect to the Sheehan accident.
CONCLUSION
For the foregoing reasons and for good cause shown: (1) plaintiffs motion for summary judgment is DENIED; and (2) defendant's motion for summary judgment is GRANTED. [Docket ## 9, 12 and 16.]IT IS SO ORDERED.