Tustin Field Gas & Food, Inc. v. Mid-Century Ins. Co.

• Citation: 219 Cal.Rptr.3d 909,13 Cal.App.5th 220
• Decision Date: 03 July 2017
• Docket Number: B268850
• Court: California Court of Appeals
• Parties: TUSTIN FIELD GAS & FOOD, INC., Plaintiff and Appellant, v. MID-CENTURY INSURANCE COMPANY, Defendant and Respondent.

13 Cal.App.5th 220

219 Cal.Rptr.3d 909

TUSTIN FIELD GAS & FOOD, INC., Plaintiff and Appellant,

v.MID-CENTURY INSURANCE COMPANY, Defendant and Respondent.

B268850

Court of Appeal, Second District, Division 2, California.

Filed July 3, 2017

Murray M. Sinclair & Associates and Murray M. Sinclair, Los Angeles, for Plaintiff and Appellant.

Tharpe & Howell, Timothy D. Lake and Eric B. Kunkel, Sherman Oaks, for Defendant and Respondent.

HOFFSTADT, J.

This case involves a question of insurance coverage: When has a building or part of a building "collapsed" if that term is left undefined in an insurance policy? The gas station owner in this case demanded that its insurance company pay up when the fiberglass sheath of one of its underground gasoline storage tanks split after resting on a rock for 16 years. On cross-motions for summary judgment and/or adjudication, the trial court ruled that this was not a collapse as a matter of law. We agree, and affirm.

FACTS AND PROCEDURAL BACKGROUND

I. Facts

A. The underground storage tanks

Tustin Field Gas & Food, Inc. (plaintiff) owns a gas station and minimart in Palm Springs, California. The station stores the gas dispensed by its pumps in two underground 15,000-gallon tanks. The tanks are located approximately 30 feet from the minimart, and are buried beneath a six or seven inch concrete slab and five or six feet of dirt. The tanks themselves are cylinders

approximately 30 feet long and nine feet in diameter, and are double-walled: They have an inner wall made of steel, wrapped in a synthetic honeycomb, and then sheathed with an outer wall made of "fragile" fiberglass. The tanks are connected to the pumps through pipes carrying the fuel and are connected to the minimart with electrical conduit.

When these tanks were originally placed underground in 1997, the installer did not follow the tank manufacturer's instructions to bury them in pea gravel or crushed rock. Instead, the installer just dug a hole, placed the tanks into that hole, and then covered them with "native soil" containing rocks, boulders, chunks of asphalt, rusted pipes, and other debris. The first tank, referred to as Underground Storage Tank-1 or "UST-1," was set atop a boulder with a nine-inch diameter as well as atop pockets of air.

B. Discovery of damage to UST-1's fiberglass sheath

In September 2013, plaintiff conducted its annual test of UST-1's integrity and learned that its fiberglass sheath was no longer intact. (Health & Saf. Code, § 25284.2 [requiring annual testing of underground tanks].) This was the first time either tank had failed a test in the 16 years since the tanks were installed. The tanks were excavated. The fiberglass sheath on the underside of UST-1 had a long, narrow crack that partially touched the nine-inch boulder, which had itself cracked in two. UST-1's inner steel wall was still intact, and UST-1's outer fiberglass sheath had not lost its cylindrical shape. There was no "imminent danger" that UST-1's inner steel wall would be crushed inward. Plaintiff paid to have UST-1's fiberglass sheath patched.

C. Claim against insurance policy

At the time of the testing, plaintiff had an insurance policy (the Policy) covering property damage with defendant Mid-Century Insurance Company (defendant). Plaintiff presented a claim for the cost of excavating and repairing UST-1.

The Coverage section of the Policy (Section A) provides that defendant "will pay for direct physical loss of or damage to Covered Property at the premises ... caused by or resulting from any Covered Cause of Loss."

As pertinent here, Section A.1. of the Policy defines Covered Property to include "[b]uildings, meaning the buildings and structures at the premises ..., including ... (2) Fixtures, including outdoor fixtures; [and] (3) Permanently installed: (a) Machinery; and (b) Equipment."

Also as pertinent here, Section A.3. of the Policy defines "Covered Causes of Loss" as "Risks Of Direct Physical Loss unless the loss is ... Excluded in Section B., Exclusions ..." In its Exclusions section (Section B), the Policy provides that defendant "will not pay for loss or damage caused directly or indirectly by any of the following.... regardless of any other cause or event that contributes concurrently or in any sequence to the loss," and goes on to specify, in pertinent part, "Collapse, except as provided in the Additional Coverage for Collapse" (Section B.2.i.).

The Collapse subsection of the Additional Coverages section (Section A.5.d. of the Policy) provides that defendant "will pay for direct physical loss or damage to Covered Property, caused by a collapse of a building or any part of a building insured under this policy, if the collapse is caused by one or more of the following: ... (b) Hidden decay; ... (d) Weight of people or personal property; ... (f) Use of defective material or methods in construction, remodeling or renovation if the collapse occurs during the course of the construction, remodeling or renovation. However, if the collapse occurs after construction, remodeling or renovation is complete and is caused in part by [an enumerated] cause of loss ..., [defendant] will pay for the loss or damage even if use of defective material or methods in construction, remodeling or renovation, contributes to the collapse." This subsection also specifies that "Collapse does not include settling, cracking, shrinkage, bulging or expansion." (Accord, Section B.2.k.(4) [excluding from Covered Causes of Loss "[s]ettling, cracking, shrinking or expansion"].)

In a letter, defendant denied plaintiff's demand for coverage on two grounds: (1) the damage to UST-1 did not qualify as "damage to a building or any part of a building"; and (2) "it does not appear that the efficient proximate cause [of that damage] is Collapse."

II. Procedural Background

Plaintiff sued defendant for (1) breach of contract, (2) bad faith denial of insurance coverage, in violation of the implied covenant of good faith and fair dealing, and (3) declaratory relief pronouncing defendant's "duty to indemnify Plaintiff up to the limit of liability."

Plaintiff then moved for summary adjudication of its declaratory relief action, and defendant moved for summary judgment. The trial court viewed the motions as "essentially cross-motions."

In a 10-page order, the trial court granted summary judgment for defendant and denied summary adjudication for plaintiff. The court concluded that UST-1 constituted Covered Property under the Policy, reasoning that (1) defendant "appear[ed] to have conceded" that point, and (2) UST-1 otherwise qualified as "permanently installed equipment" and as a "fixture," both of which satisfied the Policy's definition of "building" and hence of Covered Property.

The court nevertheless concluded that there was no Covered Cause of Loss because there had been no "collapse." Specifically, the court ruled that plaintiff had to show an "actual" collapse of UST-1. The court noted that the Policy did not define the term collapse.

Doheny West Homeowners' Assn. v. American Guarantee & Liability Ins. Co. (1997) 60 Cal.App.4th 400, 401, 406, 70 Cal.Rptr.2d 260 (Doheny West ), the court observed, had construed an insurance policy that did not define collapse but provided coverage for "loss or damage caused by or resulting from risks of direct physical loss involving collapse of a building or any part of a building" as providing coverage for both actual and imminent collapse. However, the court found the Policy to be "not as broad" as the policy in Doheny West because it "does not include the broader phrases ‘risk of loss' and ‘involving collapse.’ " The court went on to conclude that there was no evidence of an actual collapse of UST-1 because "plaintiff ha[d] failed to submit evidence that UST-1 suffered a complete change in structure and lost its distinctive character as an [underground storage tank.]" Plaintiff had shown, at most, that UST-1 was no longer usable under pertinent laws because its outer sheath had been breached, but the court ruled that a mere "impairment of [UST-1's] structural integrity" did not constitute an "actual collapse."

Because plaintiff was not entitled to benefits under the Policy, the court concluded that all three of plaintiff's claims failed as a matter of law.

After the trial court issued its formal order granting summary judgment and entered judgment, plaintiff timely filed a notice of appeal.

DISCUSSION

Plaintiff argues that the trial court erred in granting summary judgment to defendant. We review such grants de novo. (Hampton v. County of San Diego (2015) 62 Cal.4th 340, 347, 195 Cal.Rptr.3d 773, 362 P.3d 417.)

I. General Principles

Summary judgment is appropriate when the moving party demonstrates "[it] is entitled to a judgment as a matter of law" because, among other things, the nonmoving party (here, plaintiff) cannot establish "[o]ne or more of the elements of [its] cause of action." (Code Civ. Proc., § 437c, subds. (c), (o )(1) & (p)(2).) Here, all three of plaintiff's claims—for breach of contract, bad faith denial of insurance, and declaratory relief—rest on the common element that plaintiff show it is entitled to coverage under the Policy. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821, 124 Cal.Rptr.3d 256, 250 P.3d 1115 ["breach" is an element of a breach of contract action]; Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390, 408, 97 Cal.Rptr.2d 151, 2 P.3d 1 ["without coverage there can be no liability for bad faith on the part of the insurer"]; Hartford Casualty Ins. Co. v. Swift Distribution, Inc. (2014) 59 Cal.4th 277, 287, 172 Cal.Rptr.3d 653, 326 P.3d 253 (Hartford ) [duty to indemnify turns on whether claim is actually covered by policy].)

Whether plaintiff is entitled to coverage under the Policy turns initially on two questions: (1) What does the Policy mean by the term collapse?; and (2) Has plaintiff raised a triable issue of fact as to whether the damage to UST-1 was caused by a collapse, once...