Opinion
D073601
05-29-2018
THV INVESTMENTS, LLC, Plaintiff and Appellant, v. CERTAIN UNDERWRITERS AT LLOYDS OF LONDON, 100% SYNDICATE 5151 et al., Defendants and Respondents.
Law Offices of Robert A. Brown, Robert A. Brown; Law Offices of Lyle F. Middleton and Lyle F. Middleton for Plaintiff and Appellant. Blau Keane Law Group, David S. Blau and Angela Jacolyn Armitage for Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. RIC1303699) APPEAL from a judgment of the Superior Court of Riverside County, John W. Vineyard, Judge. Affirmed. Law Offices of Robert A. Brown, Robert A. Brown; Law Offices of Lyle F. Middleton and Lyle F. Middleton for Plaintiff and Appellant. Blau Keane Law Group, David S. Blau and Angela Jacolyn Armitage for Defendants and Respondents.
In this insurance coverage dispute, THV Investments, LLC (THV) appeals from a judgment of dismissal entered after the trial court granted summary judgment in favor of Certain Underwriters at Lloyds of London, 100% Syndicate 5151 (Lloyds) and several of Lloyds's related entities. In granting summary judgment, the trial court found that Lloyds owed no duty to defend or indemnify its insured, Ernesto R. Ruiz, in a separate lawsuit that THV filed against Ruiz relating to the unsuccessful development of a residential subdivision. Specifically, the trial court concluded that the causes of action that THV asserted against Ruiz in the separate action did not constitute claims for "property damage," and thus did not fall within the scope of coverage under Ruiz's commercial general liability insurance policy (the CGL Policy). Additionally, the trial court found that two endorsements to the CGL Policy—which limited Lloyds's duty to defend and indemnify Ruiz against claims related to the development of tract housing projects and the provision of professional services—independently discharged Lloyds of any obligation to provide coverage to Ruiz in his lawsuit with THV.
For the reasons discussed post, we agree with the trial court. Therefore, we affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
I. The Underlying Action and the CGL Policy
In 2004, Ruiz, a general contractor, entered into a contract with Alejandro Alatorre and Alatorre & Associates, Inc. (Alatorre), pursuant to which Alatorre agreed to perform civil engineering services for the development of a 16-home residential subdivision (the Subdivision) in San Jacinto, California (the City). Under the agreement, Alatorre agreed to draft tract maps for the Subdivision, provide an aerial survey of the property, and prepare street, curb, gutter, and sidewalk improvement plans.
In 2005, Ruiz entered into a second contract with James and Jayne Tutt—who were members of the limited liability company, THV—for the sale of the Subdivision property. Under this agreement, Ruiz agreed to sell the Tutts the real property for the Subdivision in "turn-key" condition, such that the Tutts could immediately move onto the property, install infrastructure, and build homes for resale. All did not go according to plan. Alatorre purportedly fell behind schedule while performing his engineering duties, which delayed Ruiz's sale of the Subdivision property to the Tutts. Furthermore, although Alatorre submitted tract maps to the City and received City approval for those plans, the Tutts contended that Alatorre's plans were inaccurate and needed to be redrawn and resubmitted to the City, at an additional cost of $19,000.
The Tutts assigned their rights in the Subdivision to THV and, in 2009, THV filed suit against Ruiz and other defendants who participated in the sale of the property, alleging breach of contract and negligence (the Underlying Action). In its complaint, THV alleged that "Defendants and/or their agents negligently designed and engineered the [S]ubdivision . . . which had to be redone to meet City of San Jacinto specification [sic] causing damage to the Plaintiffs [sic] in the way of re-engineering fees and costs as well as delay damages. In commencing the construction of the subdivision." THV also alleged that the purported delay of the property sale caused the lender for the development project, 1st Centennial Bank (the Bank), to discontinue its funding of the project and institute a collection action. That collection action resulted in a $250,000 settlement payment to the Bank.
The record does not reveal whether THV, the Tutts, or a third party made the $250,000 payment to the Bank to resolve the Bank's collection action.
Throughout the relevant time frame, Ruiz maintained a CGL Policy through Lloyds. Three provisions of the CGL Policy are relevant for purposes of this appeal.
First, the CGL Policy requires Lloyds to defend and indemnify Ruiz in any suit claiming "property damage," which is defined as (1) "[p]hysical injury to tangible property, including all resulting loss of use of that property" and (2) "[l]oss of use of tangible property that is not physically injured."
Second, the CGL Policy contains an endorsement (the Tract Housing Endorsement) stating that Lloyds need not provide coverage in any suit for property damage that "arises out of, or is related to an insured's or an insured's Independent Contractor [sic] or an insured's sub-contractor's operations, work, or product [sic] that are incorporated into the new construction of a 'tract housing' project or development." The Tract Housing Endorsement defines "tract housing," in turn, as "any housing project or development that includes the construction of five (5) or more single-family homes, whether attached or detached, in any or all phases of the project or development, regardless of the number of developers."
" 'Endorsements are modifications 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. (2003) 107 Cal.App.4th 438, 450.)
Finally, the CGL Policy contains an endorsement (the Professional Liability Endorsement) that excludes coverage for property damage "arising out of the rendering of or failure to render any professional services by [insured] or on [insured's] behalf, but only with respect to either or both of the following operations: [¶] (a) Providing engineering, architectural or surveying services to others in [insured's] capacity as an engineer, architect or surveyor; and [¶] (b) Providing, or hiring independent professionals to provide, engineering, architectural or surveying services in connection with construction work [insured] perform[s]." The Professional Liability Endorsement defines professional services to include "[p]reparing, approving, or failing to prepare or approve, maps, shop drawings, opinions, reports, surveys, field orders, change orders, or drawings and specifications," and "[s]upervisory or inspection activities performed as part of any related architectural or engineering activities."
In 2011, Ruiz tendered the defense of the Underlying Action to Lloyds, which denied coverage. Shortly after, THV and Ruiz settled the Underlying Action and stipulated to the entry of judgment in THV's favor in the amount of $1.4 million. In exchange, THV agreed not to execute the judgment against Ruiz and Ruiz granted THV an assignment of his rights and interests pertaining to the CGL Policy. THV and Ruiz filed a motion for approval of their good faith settlement under Code of Civil Procedure section 877.6 (the Settlement Motion), which the trial court granted.
Code of Civil Procedure section 877.6 states as follows: "(a)(1) Any party to an action in which it is alleged that two or more parties are joint tortfeasors . . . shall be entitled to a hearing on the issue of the good faith of a settlement entered into by the plaintiff or other claimant and one or more alleged tortfeasors . . . . [¶] . . . (c) A determination by the court that [a] settlement was made in good faith shall bar any other joint tortfeasor or co-obligor from any further claims against the settling tortfeasor or co-obligor for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault."
II. The Instant Action
In 2013, THV—as the assignee of Ruiz's rights and interests—filed this action (the Instant Action) against Lloyds and several related entities, including Montpelier US Insurance Co., Montpelier Capital Limited, Montpelier at Lloyd's Limited (formerly known as Montpelier Underwriting Agencies Limited), Montpelier Re Holdings Ltd. (named as Montpelier Reinsurance Ltd., but served as Montpelier Re Holdings Ltd.), and Montpelier Underwriting, Inc. (Defendants). THV asserted three causes of action for (1) collection of judgment under Insurance Code section 11580, (2) bad faith, and (3) breach of the CGL Policy. Each cause of action rested on Lloyds's purported duty to defend and indemnify Ruiz in the Underlying Action.
Under Insurance Code section 11580, "a plaintiff who obtains a judgment against a defendant insured under [a liability insurance] policy is then entitled to bring an action directly against the liability insurer to recover the policy benefits." (Catholic Mutual Relief Society v. Superior Court (2007) 42 Cal.4th 358, 367.)
Defendants moved for summary judgment on all causes of action, arguing that the CGL Policy did not require Lloyds to provide coverage in the Underlying Action because, according to Defendants, THV's causes of action did not seek recovery for any "property damage." In addition, Defendants asserted that the Tract Housing Endorsement precluded coverage because the claims at issue in the Underlying Action arose from the development of a 16-home residential tract housing project. Finally, Defendants contended that the Professional Services Endorsement precluded coverage because THV's claims were based on the allegedly negligent rendering of engineering services. In support of their summary judgment motions, Defendants filed the complaint from the Underlying Action, the Settlement Motion, the engineering services contract between Ruiz and Alatorre, and the sale contract between Ruiz and the Tutts.
In opposition, THV argued that the claims at issue in the Underlying Action were covered claims for "loss of use" of property, namely for "loss of use" of THV's money. Next, THV argued that the Tract Housing Endorsement did not foreclose coverage because the tract maps that Alatorre prepared were defective, and thus were never "incorporated" into the Subdivision (as discussed ante, the Tract Housing Endorsement applies only to operations, work, or products that are "incorporated into the new construction of a 'tract housing' project or development"). Finally, THV argued that the Professional Services Endorsement did not preclude coverage because, according to THV, Ruiz did not perform "construction" work (as noted ante, the Professional Services Endorsement applies only to services performed "in connection with construction work"). Together with its opposition, THV filed a three-page declaration from James Tutt and no other evidence.
The trial court adopted all three of Defendants' arguments and granted Defendants' motions for summary judgment. Without engaging in an extended analysis, the trial court found that THV's claims did not fall within the scope of coverage because, in the trial court's words, "[n]one of the claims [were] loss of use of tangible property damages [sic], and Plaintiff describes them as 'economic loss' items." The trial court did not directly address THV's arguments regarding the applicability of the Tract Housing Endorsement or the Professional Services Endorsement, but nevertheless determined that both of those endorsements applied, precluded coverage in the Underlying Action, and warranted summary judgment in the Instant Action. Finally, the trial court concluded that Mr. Tutt's declaration was "conclusory and lack[ed] foundation" and, on that basis, sustained Defendants' objections to the declaration. THV appealed.
DISCUSSION
I. Standards of Review and Rules of Insurance Policy Interpretation
A trial court properly grants summary judgment where no triable issue of material fact exists and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) In the context of an insurance dispute, "[a]n 'insurer is entitled to summary [judgment] that 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.' " (Great Western Drywall, Inc. v. Interstate Fire & Casualty Co. (2008) 161 Cal.App.4th 1033, 1038-1039 (Great Western).) " ' "We apply a de novo standard of review to an order granting summary judgment when, on undisputed facts, the order is based on the interpretation or application of the terms of an insurance policy." [Citations.] In reviewing de novo a superior court's summary [judgment] order in a dispute over the interpretation of the provisions of a policy of insurance, the reviewing court applies settled rules governing the interpretation of insurance contacts.' " (Stellar v. State Farm General Ins. Co. (2007) 157 Cal.App.4th 1498, 1503.)
" ' "While insurance contracts have special features, they are still contracts to which the ordinary rules of contractual interpretation apply." [Citations.] "The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties." [Citations.] "Such intent is to be inferred, if possible, solely from the written provisions of the contract." ' " (Powerine Oil Co., Inc. v. Superior Court (2005) 37 Cal.4th 377, 390.) "Whether a clause is ambiguous and whether [an insured has] an objectively reasonable expectation of coverage in light of the insuring language are questions of law." (Windsor Food Quality Co., Ltd. v. Underwriters of Lloyds of London (2015) 234 Cal.App.4th 1178, 1185.) "Courts do not engage in forced construction of insuring clauses to find coverage, nor will they strain to create an ambiguity where none exists." (Ray v. Valley Forge Ins. Co. (1999) 77 Cal.App.4th 1039, 1044.)
II. Scope of Insurer's Duties
"An insurer's duty to indemnify and its duty to defend an insured 'lie at the core of the standard [insurance] policy.' [Citation.] The duty to defend is broader than the duty to indemnify. [Citation.] 'Unlike the obligation to indemnify, which is only determined when the insured's liability is established, the duty to defend must be assessed at the very outset of a case.' " (Hartford Casualty Ins. Co. v. Swift Distribution, Inc. (2014) 59 Cal.4th 277, 286-287 (Hartford).) When determining whether a duty to defend exists, the insurer must compare the allegations of the complaint and the terms of the insurance policy. (Id. at p. 287.) Furthermore, the insurer must consider " 'extrinsic facts known to the insurer suggest[ing] that the claim may be covered.' " (Ibid.)
"While the duty to defend is broad, it is 'not unlimited; it is measured by the nature and kinds of risks covered by the policy.' " (Hartford, supra, 59 Cal.4th at p. 288.) Thus, an insurer " ' "need not defend if the third party complaint can by no conceivable theory raise a single issue which could bring it within the policy coverage." ' " (Great Western, supra, 161 Cal.App.4th at p. 1039.) Stated differently, there is "no duty to defend if there is no potential for coverage." (Upasani v. State Farm General Ins. Co. (2014) 227 Cal.App.4th 509, 514.) "In general, doubt as to whether an insurer owes a duty to defend 'must be resolved in favor of the insured.' " (Hartford, at p. 287.)
III. Interpretation of the CGL Policy
A. Coverage for Property Damage
As noted ante, the CGL Policy requires Lloyds—as a general matter, and subject to the endorsements discussed post—to defend and indemnify Ruiz in any suit claiming losses for "property damage." The CGL Policy defines "property damage" to include both (1) "[p]hysical injury to tangible property, including all resulting loss of use of that property" and (2) "[l]oss of use of tangible property that is not physically injured." THV does not contend that it ever sought damages for "physical injury to tangible property," so as to trigger coverage under the first definition of "property damage." In fact, THV expressly states in its appellate briefing that it claimed damages in the Underlying Action only for "loss of use" of its tangible property.
We treat THV's concessions as binding judicial admissions. (See Brandwein v. Butler (2013) 218 Cal.App.4th 1485, 1515, fn. 19 [statements made in appellate briefing treated as binding concessions].)
The potential existence of coverage therefore depends on whether THV in fact asserted claims against Ruiz for "loss of use" of tangible property. THV contends that it sought three types of "loss of use" damages—(1) $537,588.77 in "out of pocket" payments that were made to Ruiz for the real property on which the Subdivision was to be built; (2) $250,000 in "out of pocket" costs for the settlement payment that was made to the Bank to resolve the Bank's collection action; and (3) $19,000 in "re-engineering costs" that were incurred to redraft and resubmit tract maps for the Subdivision after the Tutts deemed Alatorre's tract plans to be deficient. Defendants, citing our decision in Advanced Network, Inc. v. Peerless Ins. Co. (2010) 190 Cal.App.4th 1054 (ANI), argue that all these claims were for "loss of property," not the "loss of use" of property. We agree with Defendants.
In ANI, the insured—a company that contracted to service a credit union's cash distribution machines—brought a breach of contract action against its insurer, after the company's employee stole money from the credit union and the insurer refused to defend the insured in a third party lawsuit related to the theft. (ANI, supra, 190 Cal.App.4th at pp. 1057-1059.) The trial court entered judgment in favor of the insured, finding that the claims in the third party lawsuit, which were based on the employee's conversion of money, sought recovery for "loss of use" of property. (Id. at pp. 1059-1060.) We reversed that decision, however, finding that "the terms 'loss of use' and 'loss' are not interchangeable for insurance purposes." (Id. at p. 1063.) As we explained, we would need to "ignore the words 'of use' in the term 'loss of use' " to conclude that a permanent deprivation of property is the same thing as a "loss of use" of property. (Id. at pp. 1063-1064.) For that reason, we found that "[c]overage for 'loss of use' does not apply to an underlying action in which the claimant seeks only the replacement value of converted property." (Id. at p. 1064.)
In Collin v. American Empire Ins. Co. (1994) 21 Cal.App.4th 787 (Collin), our colleagues in the Second District reached the same conclusion. In Collin, landlords sued their tenant's insurer to collect on a default judgment that they obtained against their tenant after the tenant absconded with the landlords' personal property. (Id. at pp. 797-802.) The landlords argued, and the trial court agreed, that the landlords' claims fell within the scope of the tenant's insurance policy, which covered claims for "loss of use" of property. (Id. at pp. 800-802.) The Court of Appeal reversed, finding that the landlords' claims were not "loss of use" claims because " '[l]oss of use' of property is different from 'loss' of property." (Id. at p. 818.) For illustration purposes: if a vehicle is stolen, "[t]he value of the 'loss of use' of the car is the rental value of a substitute vehicle; the value of the 'loss' of the car is its replacement cost." (Ibid.) Because the damages the landlords sought "were not 'loss of use' damages but the value of the property itself," no coverage existed. (Id. at pp. 818-819.)
Federal courts construing California law have reached similar conclusions as well. In Atmel Corp. v. St. Paul Fire & Marine Ins. Co. (N.D.Cal. 2006) 430 F.Supp.2d 989, 991 (Atmel), for instance, a disk drive manufacturer sued a chip manufacturer that sold chips to the disk drive manufacturer, alleging that the seller's chips were "defective." According to the disk drive manufacturer, these defective chips required the disk drive manufacturer to inspect, repair, and/or replace its customers' disk drives at great financial cost. (Id. at p. 992.) The disk drive manufacturer and the chip manufacturer settled the underlying case and, in a subsequent coverage dispute between the chip manufacturer and its insurer, the Atmel court concluded that the underlying lawsuit did not involve claims for "loss of use" of property. (Id. at pp. 992-993.) As the Atmel court explained, the disk drive manufacturer's "damages primarily consisted of costs associated with repairing and replacing the . . . chips," not "loss of use of the drives." (Id. at p. 994.) According to the court, the disk drive manufacturer's claims for repair and replacement damages were "too attenuated from a 'loss of use' " to trigger coverage under the "loss of use" provisions of the chip manufacturer's insurance policy. (Id. at pp. 994-995.)
Like the claims at issue in ANI, Collin, and Atmel, each of the categories of damages that THV sought in the Underlying Action were intended to permanently replace property, not to compensate THV for a temporary loss of use of property. The first category of damages consisted of $537,588.77 in monetary payments that, in THV's words, the Tutts provided Ruiz "for the raw, tangible land itself." The second category of damages involved a $250,000 payment to the Bank to resolve the Bank's collection action. And the third category of damages included $19,000 in "re-engineering costs" related to the redrafting and resubmission of the Subdivision tract plans. The common thread between these claims is that for each category of damages, THV sought the complete replacement of its out-of-pocket monetary losses, i.e., its loss of property. THV did not claim damages arising from a temporary "loss of use" of its property.
THV does not even attempt to rebut this fact in its reply brief. Instead, THV devotes much of its appellate briefing to a discussion of issues that have minimal bearing on the outcome of this appeal. For example, THV discusses Borg v. Transamerica Ins. Co. (1996) 47 Cal.App.4th 448 at length, in an apparent attempt to establish that real property (like the property Ruiz sold to the Tutts) constitutes "tangible property." THV also dedicates several pages of briefing to an out-of-state district court case, State Farm Fire and Casualty Ins. Co. v. White (N.D.Ga. 1991) 777 F.Supp. 952, which purports to stand for the proposition that a tract map (like the one Alatorre prepared) constitutes "tangible property." But even if we were to accept that real property and tract maps are "tangible property," that fact alone would not require us to rule in THV's favor because THV never pursued causes of action for loss of use of that tangible property. As discussed ante, THV instead asserted causes of action based on THV's purported loss of property, which are not covered under the CGL Policy.
The Settlement Motion states that THV experienced $1.2 million in lost profits related to the development of 12 single family homes. It is conceivable that these lost profits might constitute damages for "loss of use" of tangible property. However, THV's counsel never raised that argument in the trial court or on appeal. Accordingly, THV has forfeited the argument and we need not address the issue here. (People ex rel. Herrera v. Stender (2012) 212 Cal.App.4th 614, 644-645 [appellant forfeited argument by failing to raise it in the trial court]; In re Marriage of Falcone & Fyke (2008) 164 Cal.App.4th 814, 830 ["We are not bound to develop appellants' arguments for them."].)
Accordingly, we find that no potential coverage existed under the CGL Policy. Lloyds therefore owed no duty to defend or indemnify Ruiz in the Underlying Action and the trial court properly granted summary judgment in the Instant Action.
B. The Tract Housing Endorsement
Defendants also argued, and the trial court agreed, that there was no potential for coverage in the Underlying Action because the claims that THV asserted against Ruiz fell within the scope of the Tract Housing Endorsement, one of several coverage exclusions in the CGL Policy. As discussed ante, that endorsement disclaims coverage for any property damage "that arises out of, or is related to an insured's or an insured's Independent Contractor [sic] or an insured's sub-contractor's operations, work, or product [sic] that are incorporated into the new construction of a 'tract housing' project or development." Once again, we agree with Defendants.
Under the plain language of the Tract Housing Endorsement, claims that arise out of any work that is "incorporated into the new construction of a 'tract housing' project or development" are excluded from coverage, regardless of whether the insured (Ruiz) or a sub-contractor (in this case, Alatorre) performs the work. THV does not dispute this fact. Nor does THV dispute that the Subdivision plan—which contemplated the development of 16 homes—constitutes "tract housing," as that term is defined in the CGL Policy. Instead, THV's sole argument regarding the Tract Housing Endorsement is that the tract maps that Alatorre prepared were "defective" and, as a result, were not ultimately "incorporated" into the Subdivision.
In advancing this argument, THV impliedly asks that we interpret the Tract Housing Endorsement as though it disclaimed coverage only for damages arising out of or related to operations, work, or products that are incorporated into the "final and completed" version of a tract housing project or development. However, we cannot interpret the Tract Housing Endorsement in that manner because the Tract Housing Endorsement does not contain the terms "final and completed," and "it is not our place to add or subtract contractual language." (Rideau v. Stewart Title of California Inc. (2015) 235 Cal.App.4th 1286, 1300; see Vons Cos. v. United States Fire Ins. Co. (2000) 78 Cal.App.4th 52, 58-59 ["We do not have the power to create for the parties a contract that they did not make and cannot insert language that one party now wishes were there."].)
THV's interpretation of the Tract Housing Endorsement would not only require that we add contractual language into the agreement that does not already exist; it would also conflict with the definition of "tract housing" contained within the Tract Housing Endorsement. The Tract Housing Endorsement broadly defines "tract housing" as "any housing project or development that includes the construction of five (5) or more single-family homes . . . in any and all phases of the project or development . . . ." The parties' use of the clause "any and all phases of the project or development" is expansive enough, in our view, to encompass the project's initial design, planning, and engineering stages. Thus, so long as Alatorre provided operations, work, or products that were "incorporated" into the Subdivision during its initial design, planning, and engineering phases, the Tract Housing Endorsement applies.
There is no question that Alatorre provided work product that was incorporated into the Subdivision during at least certain phases of the project. According to the Settlement Motion that THV filed in the Underlying Action, Alatorre prepared and "submitted a final version of [his] engineering plans and [a] final Tract Map" to the City, which approved Alatorre's plans. Although the Tutts later demanded that the tract map be redrawn and resubmitted for City approval, that subsequent development does not negate the undisputed fact that Alatorre's engineering plans were, at minimum, "incorporated" into the project during its initial planning and engineering phases.
Furthermore, the evidence that THV submitted in the trial court—a perfunctory, three-page declaration from THV member James Tutt—does not alter our conclusion. In his declaration, Mr. Tutt merely states that Alatorre's tract map was not "incorporated" into the "tract housing" construction. This conclusory statement does not recount facts of which Mr. Tutt was competent to testify, and instead purports to interpret and apply the terms of the CGL Policy. However, "[t]he interpretation and application of the terms of an insurance policy present questions of law" that are reserved for the courts. (Gin v. Pennsylvania Life Ins. Co. (2005) 134 Cal.App.4th 939, 943.) Accordingly, the trial court properly declined to consider Mr. Tutt's statement. (See Devin v. United Services Auto. Assn. (1992) 6 Cal.App.4th 1149, 1158, fn. 5 [testimony that purported to interpret insurance policy involved legal conclusions and did not prevent trial court from granting nonsuit for defendant]; see also Morrow v. Los Angeles Unified School Dist. (2007) 149 Cal.App.4th 1424, 1445 ["The manner in which the law should apply to particular facts is a legal question and is not subject to expert, much less lay, opinion."].)
Because Alatorre's tract maps were "incorporated into" the Subdivision, we find that the Tract Housing Endorsement foreclosed the possibility of coverage in the Underlying Action. On that basis, the trial court properly granted summary judgment.
C. The Professional Liability Endorsement
The trial court found no possibility of coverage for a third reason as well: the Professional Liability Endorsement excludes coverage for damages arising out of or related to the rendering of or failure to render professional services. We agree.
As discussed ante, the Professional Liability Endorsement disclaims coverage for property damage "arising out of the rendering of or failure to render any professional services by [insured] or on [insured's] behalf, but only with respect to either or both of the following operations: ¶ (a) Providing engineering, architectural or surveying services to others in [insured's] capacity as an engineer, architect or surveyor; and ¶ (b) Providing, or hiring independent professionals to provide, engineering, architectural or surveying services in connection with construction work [insured] perform[s]." THV does not dispute that Alatorre performed professional engineering services as part of the Subdivision project. However, THV argues that Alatorre did not render those services "in connection with construction" work. In support of this argument, THV again relies on Mr. Tutt's declaration, which states that "[n]either Ruiz nor Alatorre performed any construction work." The evidence disproves Mr. Tutt's conclusory statement.
For example, under Ruiz's contract with the Tutts, Ruiz agreed to provide plans for Subdivision improvements and ensure that the Subdivision tract map was recorded. In the Underlying Action, THV itself stated that, "[a]s part of the consideration for the purchase of the property, [Ruiz was] to deliver an engineered, completely subdivided piece of land with all local government approvals in place for a 16 homesite subdivision. [Ruiz was] to provide a 'turn-key' subdivision, ready for Plaintiffs to move onto, install the infrastructure and begin building homes for sale." THV even described Ruiz as a "general contractor" in the Settlement Motion. Thus, in addition to selling the Tutts real property, Ruiz was responsible for completing or arranging for the completion of civil engineering plans, subdividing or arranging for the subdivision of the property, and ensuring that the City approved the tract maps.
We find that these tasks—though they occurred relatively early in the overall development of the Subdivision—constitute "construction work" for purposes of the Professional Liability Endorsement. (See Wallich v. Salkin (1963) 219 Cal.App.2d 157, 161 ["Historically, the practice of architecture encompassed all phases of construction, including the drafting of plans, engineering and construction."]; cf. Lab. Code, § 1720, subd. (a)(1) ["For purposes of this paragraph, 'construction' includes work performed during the design and preconstruction phases of construction, including, but not limited to, inspection and land surveying work."].) Accordingly, we find that the Professional Liability Endorsement foreclosed potential coverage under the CGL Policy.
Mr. Tutt's statement that Ruiz did not engage in "construction" purports to interpret and apply the CGL Policy. As discussed ante, the interpretation and application of an insurance contract is a matter reserved for the courts. Therefore, Mr. Tutt's statement is not relevant and was properly discarded by the trial court. (See Devin, supra, 6 Cal.App.4th at p. 1158, fn. 5.)
D. The Good Faith Settlement Approval
Finally, THV—relying on Pruyn v. Agricultural Ins. Co. (1995) 36 Cal.App.4th 500 (Pruyn)—contends that the trial court improperly granted summary judgment because the settlement approval that was entered in the Underlying Action established (or rather, should have established) a presumption in the Instant Action that Defendants were liable for the amount of the stipulated judgment. We reject THV's argument and its mischaracterization of the Pruyn court's holding.
In Pruyn, a homeowner filed an action against a homeowners association for negligence and breach of contract, executed a stipulated judgment with the homeowners association, and obtained settlement approval under Civil Code section 877.6. (Pruyn, supra, 36 Cal.App.4th at pp. 508-512.) The homeowner then filed an action against the homeowners association's insurers to recover the amount of the stipulated judgment. (Id. at pp. 512-513.) On demurrer, the insurers argued that settlement approval obtained under Civil Code section 877.6 is not binding on an insurer that has not consented to the settlement, and the trial court agreed. (Pruyn, at pp. 512-513.) The Pruyn court reversed, finding that an insured who has wrongfully been denied coverage may "negotiate the best possible settlement" and, if he or she obtains approval of a stipulated settlement, an evidentiary presumption will arise in a subsequent insurance coverage action "with respect to the existence and amount of the insured's liability." (Id. at p. 509.)
However, the Pruyn court did not hold that settlement approval under Civil Code section 877.6 establishes a presumption that the insurer has improperly denied coverage to the insured, as THV argues. On the contrary, the Pruyn court explained that a "settlement, or a judgment rendered upon a stipulation of such a settlement, becomes presumptive evidence only of the liability of the insured and the amount thereof . . . ." (Pruyn, supra, 36 Cal.App.4th at p. 528, italics added.) Thus, even under Pruyn, a plaintiff who files an insurance coverage dispute against an insurer is still "required to establish certain basic or foundational facts," including the key fact that "the insurer wrongfully failed or refused to provide coverage or a defense" to its insured. (Ibid.) Here, for the reasons discussed ante, THV did not make this foundational showing.
DISPOSITION
The judgment of the trial court is affirmed. Defendants to recover their costs on appeal.
McCONNELL, P. J. WE CONCUR: HUFFMAN, J. O'ROURKE, J.