Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Marin County Super. Ct. No. CV 026306
SIMONS, Acting P.J.
Plaintiff Robert Kinann (appellant) appeals a summary judgment in favor of defendant California Insurance Guarantee Association (respondent) in his action against it for breach of the duty to assume the obligations of appellant’s insolvent insurer Environmental and Casualty Insurance Company (ECIC) pursuant to Insurance Code section 1063.1. Appellant contends summary judgment was improperly granted because the court erroneously determined there was no potential for coverage under the subject commercial general liability (CGL) policy of the claims against appellant in an underlying action. We reject the contention and affirm.
In April 2002, ECIC was declared insolvent and respondent administered the claim pursuant to Insurance Code section 1063 et seq.
Preliminarily, we note that appellant’s opening brief fails to comply with California Rules of Court, rule 8.204(a)(1)(C), because its factual summary is not supported by citations to the appellate record. However, we have chosen to disregard the noncompliance. (Cal. Rules of Court, rule 8.204(e)(C).)
On July 27, 2000, appellant, as Kinann & Associates Contracting, Inc., entered into a contract with Greg and Dianne Brown for the construction of a single family residence in San Anselmo, California.
On October 23, 2001, before construction of the Browns’ house was completed, it was destroyed by a fire of unknown cause and origin. From May 28, 2001 to May 28, 2002, appellant was covered under a CGL policy issued by ECIC. In December 2001, appellant filed a claim for coverage with ECIC. In January 2002, ECIC refused a tender of defense of the Browns’ claim.
On April 24, 2002, the Browns filed a first amended complaint (the Brown action) against appellant individually and doing business as various entities for breach of contract, negligence, misrepresentation, and intentional infliction of emotional distress. The negligence cause of action alleges that appellant failed to “design, develop, construct, supervise, manage, secure and renovate [the Browns’] home with proper and approved construction techniques and failed to employ proper engineers and subcontractors.” The complaint also alleged that following the fire, appellant had taken no steps to recommence or complete construction.
The record does not reveal the filing date of the Browns’ original complaint against appellant.
The Complaint
In January 2005, appellant, doing business as Kinann & Associates Contracting and Kinann & Associates Contracting, Inc., and Pamela Jean Kinann (hereafter, collectively, appellant) filed a second amended complaint against respondent and others for breach of contract and other related claims. In essence, the complaint alleges causes of action for breach of contract, declaratory and injunctive relief, breach of the implied covenant of good faith and fair dealing, violation of Business and Professions Code section 17200, and “duty to assume the obligations of a member insurer.” The thrust of the complaint is that respondent refused on appellant’s behalf to investigate, defend and settle the Brown action, and respondent improperly revoked appellant’s CGL policy prior to its expiration.
The CGL Policy
ECIC issued appellant CGL Policy No. CGL595007 for the period May 28, 2001 to May 28, 2002. The policy provides in relevant part:
“SECTION I - COVERAGES
“COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY
“1. Insuring Agreement
“a. We will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies. . . . However, we will have no duty to defend the insured against any ‘suit’ seeking damages for ‘bodily injury’ or ‘property damage’ to which this insurance does not apply. We may, at our discretion, investigate any ‘occurrence’ and settle any claim or ‘suit’ that may result. . . . [¶] . . .
“b. 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’ occurs during the policy period. [¶] . . .
“2. Exclusions
“This insurance does not apply to: [¶] . . .
“j. Damage to Property
“ ‘Property damage’ to: [¶] . . .
“(5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations . . . .”
“SECTION V - DEFINITIONS
“14. ‘Products-completed operations hazard’:
“a. Includes all ‘bodily injury’ and ‘property damage’ occurring away from premises you own or rent and arising out of ‘your product’ or ‘your work’ except:
“(1) Products that are still in your physical possession; or
“(2) Work that has not yet been completed or abandoned. However, ‘your work’ will be deemed completed at the earliest of the following times:
“(a) When all of the work called for in your contract has been completed.
“(b) When all of the work to be done at the job site has been completed if your contract calls for work at more than one job site.
“(c) When that part of the work done at a job site has been put to its intended use by any person or organization other than another contractor or subcontractor working on the same project.
“Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed. [¶] . . .
“15. ‘Property damage’ means:
“a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
“b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the ‘occurrence’ that caused it.”
Summary Judgment Motion
In May 2006, respondent moved for summary judgment on various grounds, including that there was no potential for coverage of appellant’s claims under the policy. The court granted the motion on the ground that the policy provides no potential for coverage for the bodily injury or property damage that the Brown action alleges resulted from appellant’s negligent design, construction, hiring and/or supervision during the building of the Browns’ house.
In support of his opposition to the summary judgment motion, appellant included a document entitled, “Environmental and Casualty Insurance[,] Small Contractors Program General Rules” (hereafter program rules), which appellant argues “state clearly that the [subject] policy is intended to provide coverage for property damage claims that result [from] ongoing operations as well as completed operations.” The program rules are not dated and do not specifically refer to the subject policy, and no evidence was presented that the subject policy incorporates or is in any way dependent upon the program rules. The only date stated on the program rules is a handwritten “7/5/00” which is outside the period of the subject policy. For these reasons, the program rules do not impact our review of the court’s summary judgment.
The court found that the Browns’ negligence cause of action alleged that appellant’s tortious conduct caused the Browns to suffer property damage and the conduct occurred before the house was completed. The court concluded that the negligence claim essentially alleged property damage resulting from appellant’s “ongoing operations,” and the policy’s damage to property exclusion (hereafter exclusion (j)(5)) excludes coverage for “property damage” to the Browns’ house arising from appellant’s or his subcontractors’ “ongoing operations” on the Browns’ property. The court also found that the “products-completed operations hazard” provision did not apply because the provision applies only to bodily injury or property damage resulting from appellant’s “completed” operations, and it was undisputed that the Browns’ house burned down before appellant completed construction.
Discussion
Standard of Review
The issue before us turns upon the proper interpretation and application of language in a policy of insurance and these are questions of law. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18.) “An insurer has a duty to defend the insured whenever it ascertains facts from the complaint, the insured or elsewhere that give rise to the potential of liability under the policy. [Citation.] Once the duty to defend attaches, the insurer is obligated to defend against all claims involved in the action, those not covered as well as those covered by the policy, until the insurer produces evidence supporting an allocation. [Citation.] An insurer that wrongfully refuses to defend is liable on the judgment against the insured. [Citation.]” (Jane D. v. Ordinary Mutual (1995) 32 Cal.App.4th 643, 649.)
“[Respondent] is authorized only to ‘pay and discharge covered claims.’ [Citation.]” (Saylin v. California Ins. Guarantee Assn. (1986) 179 Cal.App.3d 256, 262.) “[Insurance Code section 1063.1, subdivision (c)(1)] defines ‘covered claims’ to mean ‘the obligations of an insolvent insurer . . . (i) imposed by law and within the coverage of an insurance policy of the insolvent insurer; (ii) which were unpaid by the insolvent insurer; (iii) which are presented as a claim to the liquidator in this state or to [respondent] . . .; . . . (v) for which the assets of the insolvent insurer are insufficient to discharge in full’ and which satisfy certain other statutory requirements.” (Parkwoods Community Assn. v. California Ins. Guarantee Assn. (2006) 141 Cal.App.4th 1362, 1366.)
An insurer is entitled to summary adjudication when no potential for indemnity exists and thus no duty to defend exists if the evidence establishes as a matter of law that there is no coverage. We review an order granting summary judgment de novo when, on undisputed facts, the order is based on the interpretation or application of the terms of an insurance policy. (Pacific Indemnity Co. v. Bellefonte Ins. Co. (2000) 80 Cal.App.4th 1226, 1232.)
Insurance Policy Interpretation
In construing an insurance policy we look first to the language of the contract in order to ascertain its plain meaning or the meaning a layperson would ordinarily attach to it. (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at pp. 18.) If the contractual language is clear and explicit, it controls. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264.) “A policy provision will be considered ambiguous when it is capable of two or more constructions, both of which are reasonable.” (Waller, at p. 18.) However, “if ‘a term in an insurance policy has been judicially construed, it is not ambiguous and the judicial construction of the term should be read into the policy unless the parties express a contrary intent.’ [Citation.]” (CDM Investors v. Travelers Casualty & Surety Co. (2006) 139 Cal.App.4th 1251, 1257.) “The scope of coverage . . . is to be construed with regard to the intent and reasonable expectations of the insured. [Citations.]” (Interinsurance Exchange v. Macias (1981) 116 Cal.App.3d 935, 938.) The insured has the burden of bringing the claim within the basic scope of coverage. (Waller, at p. 16.)
To afford the insured the greatest possible protection, coverage provisions are interpreted broadly, while policy exclusions are strictly construed. (MacKinnon v. Truck Ins. Exchange (2003) 31 Cal.4th 635, 648.) In addition, exceptions to exclusions are broadly construed in favor of the insured. (Aydin Corp. v. First State Ins. Co. (1998) 18 Cal.4th 1183, 1192; National Union Fire Ins. Co. v. Lynette C. (1991) 228 Cal.App.3d 1073, 1082.) “ ‘ “[A]n insurer cannot escape its basic duty to insure by means of an exclusionary clause that is unclear. As we have declared time and again ‘any exception to the performance of the basic underlying obligation must be so stated as clearly to apprise the insured of its effect.’ [Citation.] Thus, ‘the burden rests upon the insurer to phrase exceptions and exclusions in clear and unmistakable language.’ [Citation.] The exclusionary clause ‘must be conspicuous, plain and clear.’ ” [Citation.] This rule applies with particular force when the coverage portion of the insurance policy would lead an insured to reasonably expect coverage for the claim purportedly excluded.’ [Citation.]” (E.M.M.I. Inc. v. Zurich American Ins. Co (2004) 32 Cal.4th 465, 471.)
CGL Policies
The purpose of a CGL policy is “ ‘ “to provide the insured with the broadest spectrum of protection against liability for unintentional and unexpected personal injury or property damage arising out of the conduct of the insured’s business.” ’ ” (MacKinnon v. Truck Ins. Exchange, supra, 31 Cal.4th at p. 654.) The coverage language “establishes a reasonable expectation that the insured will have coverage for ordinary acts of negligence resulting in bodily injury [or property damage]. [Citation.] Coverage will therefore be found unless [an] exclusion conspicuously, plainly and clearly apprises the insured that certain acts of ordinary negligence . . . will not be covered. [Citation.]” (Id. at p. 649.)
“The stated intent of the CGL policy form is to exclude coverage for contractors’ ‘business risks’ while protecting contractors against consequential damages. . . . [¶] ‘. . . In exchange for the payment of a premium, an insurer assumes certain risks that otherwise would be the obligation of the insured. In order to have predictable and affordable insurance rates, the insurers’ assumptions of risk are usually limited to those beyond the “effective control” of the insured. That principle applies to the CGL insurance policy.’ ” (Franco, Insurance Coverage for Faulty Workmanship Claims Under Commercial General Liability Policies (1995) 30 Tort & Ins. L.J. 785, 786, fns. omitted (hereafter Franco).)
There Is No Potential for Coverage under the Policy
Appellant first contends there are disputed facts which defeat the court’s conclusion that coverage is excluded under exclusion (j)(5) of the policy. Exclusion (j)(5) excludes coverage for property damage to “[t]hat particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations.”
“The intent of exclusion (j)(5) is to bar coverage for the work being done by a contractor when claims arise at the time the work is being performed. This bar exists irrespective of whether the claim is being made against the contractor performing the work or the upstream contractor supervising the work.” (Franco, supra, 30 Tort & Ins. L.J. at p. 796.) Exclusion (j)(5) applies only while operations are being performed. Once construction is complete, this exclusion is inapplicable. (Id. at p. 797.)
For exclusion (j)(5) to apply, all of the damage for which the third party claimant seeks recovery must be damage to the “particular part of real property” on which the insured contractor or subcontractor was performing work. (See Roger H. Proulx & Co. v. Crest-Liners, Inc. (2002) 98 Cal.App.4th 182, 202.) Appellant notes that there are two elements to exclusion (j)(5). “First, the damage must have occurred on that particular part of the realty where the insured, or his subs, were performing operations. Second, the damage must have arisen out of the insured’s operations. [¶] The second element of this exclusion has not been satisfied.” Appellant’s challenge to the trial court’s ruling on the second element of exclusion (j)(5) rests on the contention that a triable issue of fact exists whether its operations caused the fire because it is undisputed that the fire that destroyed the Browns’ house before its completion was “of an unknown cause and origin.”
Appellant does not challenge the trial court’s ruling that all of the damage was to the particular part of the real property on which appellant was performing operations.
Appellant’s focus on the cause of the fire is misleading. As the trial court noted, the negligence cause of action in the Browns’ complaint alleges that the Browns suffered property damage as a result of appellant’s “negligent design, development, construction, supervision, management, security and renovation” of the Browns’ home “beginning in or about July 2000 and continuing.” Although the negligence cause of action incorporates by reference the factual allegation that the Browns’ home was destroyed by fire in October 2001, before construction was completed, that cause of action is limited to damages resulting from appellant’s acts or omissions. Thus, it alleges the Browns suffered property damage arising from appellant’s negligent design, construction and supervision of the Browns’ home, and that, following the fire, appellant did not recommence or complete construction. Contrary to appellant’s assertion, potential liability exists only for damages flowing from appellant’s ongoing operations, and coverage for that liability is specifically excluded.
Appellant next argues the policy includes coverage for property damage arising from ongoing operations as well as completed operations. However, the plain language of exclusion (j)(5) excludes coverage for property damage caused during ongoing construction operations performed by the insured or by contractors or subcontractors working on its behalf. (See Baroco West, Inc. v. Scottsdale Ins. Co. (2003) 110 Cal.App.4th 96, 103-104.) Summary judgment was properly granted in favor of respondent.
Because we affirm the trial court’s ruling on exclusion (j)(5), we need not address the court’s alternative ruling that relied upon the policy’s products-completed operations hazard clause.
Disposition
The judgment is affirmed.
We concur GEMELLO, J., NEEDHAM, J.