Opinion
Review Granted June 24, 1998.
Previously published at 62 Cal.App.4th 789
Hollins, Schechter & Feinstein, Andrew S. Hollins, Kenneth E. Gertz, Orange, Greines, Martin, Stein & Richland, Irving H. Greines and Marc J. Poster, Beverly Hills, for Petitioners.
No appearance for Respondent.
Engstrom, Lipscomb & Lack, Jerry A. Ramsey and Brian J. Heffernan, Los Angeles, for Real Parties in Interest.
MIRIAM A. VOGEL, Presiding Justice.
Does a general contractor's commercial general liability policy afford coverage for the contractor's negligent failure to meet a contractual deadline for completion of a construction project? No. BACKGROUND
Peck/Jones Construction Corporation entered a contract with Center West Limited, pursuant to which Peck/Jones agreed to build an office building and to complete it on or before July 30, 1989. When the project was not completed on time (it was eight months late), Center West sued Peck/Jones and others who had worked on the project, alleging breach of contract and negligence. Peck/Jones gave notice to its insurer (Truck Insurance Exchange) and Truck, reserving its rights, provided a defense in the Center West action. The case was tried to a private judge (Hon. Leon Savitch, ret.), who found that Peck/Jones had breached its contract and was negligent in failing to complete the project by the promised date. Judge Savitch apportioned Center West's damages among Peck/Jones and others, and entered a judgment against Peck/Jones for more than $2.2 million. Truck refused to pay the judgment, pointing to the language of the commercial general liability (CGL) policy it had sold to Peck/Jones. According to the negotiated policy, Truck had agreed to "pay on behalf of [Peck/Jones] all sums which [Peck/Jones] shall become obligated to pay by reason of the liability imposed by law, or assumed by contract, because of injury to or destruction of property, including the loss of use of property caused by an occurrence." (Italics added.)
The contract was guaranteed by Jerve Jones, who is included in our references to Peck/Jones.
Peck/Jones sued Truck for breach of the insurance contract and bad faith. Truck answered and (at some point before trial) the action was trifurcated into coverage, bad faith, and damages phases. During trial of the coverage phase, Peck/Jones and Truck stipulated that the policy was broker-negotiated (and thus not a contract of adhesion), that the policy language was not ambiguous, and that Peck/Jones had completed the Center West project without defects, but not on time. The trial court (Hon. Harold I. Cherness) nevertheless concluded that Peck/Jones was covered for its breach of the Center West contract--because (according to Judge Cherness) Judge Savitch had found that Peck/Jones had been negligent (as well as that it had breached its contract). Truck then filed this petition for a writ of mandate.
DISCUSSION
Truck contends the policy covered Peck/Jones's liability "imposed by law" or "assumed by contract," not its liability "imposed by contract" (or, stated differently, that the policy covered Peck/Jones for tort liability, not breach of contract liability). Peck/Jones contends the language of the policy is sufficiently broad to cover a "negligent breach of contract." We agree with Truck.
A.
Without reinventing the wheel, we summarize the governing rules. An insurer's duty to indemnify is measured by the nature and kind of risks covered by the policy, which is interpreted to effectuate the mutual intent of the parties and to give effect to their reasonable expectations. When the policy's language is clear and explicit, it will be interpreted in its ordinary and popular sense. When the language is arguably ambiguous but has been judicially construed, that construction replaces the ambiguity and becomes part of the policy. (AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 821-823, 274 Cal.Rptr. 820, 799 P.2d 1253; Wilmington Liquid Bulk Terminals, Inc. v. Somerset Marine Inc. (1997) 53 Cal.App.4th 186, 192-193, 61 Cal.Rptr.2d 727; Collin v. American Empire Ins. Co. (1994) 21 Cal.App.4th 787, 802-803, 810, 26 Cal.Rptr.2d 391; Bartlome v. State Farm Fire & Casualty Co. (1989) 208 Cal.App.3d 1235, 1239, 256 Cal.Rptr. 719; Highlands Ins. Co. v. Universal Underwriters Ins. Co. (1979) 92 Cal.App.3d 171, 174-176, 154 Cal.Rptr. 683.)
B.
The policy uses standard CGL language intended and understood to provide coverage only for tort liability, not contract liability. Truck promised "[t]o pay on behalf of [Peck/Jones] all sums which [Peck/
"Tort obligations are in general obligations that are imposed by law--apart from and independent of promises made and therefore apart from the manifested intention of the parties--to avoid injury to others." (Prosser and Keeton, Torts (5th ed. 1984) § 92, p. 655.) "Contract obligations" are those where the obligation to do something (or not to do something) exists solely because of a manifested intent to do that thing (or not do it). (Id. at p. 656.) But for Peck/Jones's contractual promise to complete the project by the date specified in the contract, Peck/Jones would not have incurred liability to Center West (and not even Peck/Jones suggests there is some independent duty of tort law that imposed on it an obligation to complete the project by July 30, 1989). Thus, Peck/Jones's obligation was ex contractu, not ex delicto.
C.
Peck/Jones insists the distinction between that which is ex delicto and that which is ex contractu is blurred and often overlapping, and contends the finding that it was "negligent" when it failed to complete the project on time triggers coverage under the Truck policy. Peck/Jones's conceptual scaffolding does not support its conclusions.
First, we reject Peck/Jones's reliance on a line of pleading cases. It is true, as Peck/Jones contends and as Division Three of our Court pointed out in North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 69 Cal.Rptr.2d 466, that a contract to perform services may impose a duty on the service provider to do so reasonably and carefully, and that its failure to do so may subject it to liability to the other contracting party for both negligence and breach of contract. (Id. at pp. 769-770, 774-776, 69 Cal.Rptr.2d 466.) So what? The fact that Peck/Jones may have been liable to Center West for damages founded on negligence as well as those arising from a breach of the Center West contract has nothing to do with whether the insurance contract Peck/Jones made with Truck provides coverage for breach of contract damages. (See WDC Venture v. Hartford Accident and Indem. Co. (D.Hawai'i 1996) 938 F.Supp. 671, 679 [the fact that recovery is allowed for tortious breach of contract has no bearing on whether there is insurance coverage for contract-based actions].)
Second, we reject Peck/Jones's contention (unsupported by any authority) that
D.
Peck/Jones purchased and paid for coverage for tort liability, not contract liability. As a result, a finding of coverage for Peck/Jones's contract liability would "have the effect of making [Truck] a sort of silent business partner subject to great risk in the economic venture without any prospects of sharing in the economic benefit. The expansion of the scope of the insurer's liability would be enormous without corresponding compensation." (Toombs NJ Inc. v. Aetna Cas. & Sur. (1991) 404 Pa.Super. 471, 591 A.2d 304, 306.) We will not rewrite the contractual terms accepted by both parties.
DISPOSITION
Let a peremptory writ of mandate issue commanding the trial court to (1) vacate its order and statement of decision, (2) enter a new order with a finding of no coverage, and (3) enter a final judgment in favor of Truck Insurance Exchange. Truck is awarded its costs of these writ proceedings.
ORTEGA, Acting P.J., and MASTERSON, J., concur.