Acceptance Ins. Co. v. Syufy Enterprises

• Decision Date: 19 January 1999
• Docket Number: No. A080638,A080638
• Citation: 81 Cal.Rptr.2d 557,69 Cal.App.4th 321
• Court: California Court of Appeals Court of Appeals
• Parties: , 99 Cal. Daily Op. Serv. 534, 99 Daily Journal D.A.R. 600 ACCEPTANCE INSURANCE COMPANY, Plaintiff and Appellant, v. SYUFY ENTERPRISES et al., Defendants and Respondents.

Page 557

81 Cal.Rptr.2d 557

69 Cal.App.4th 321, 99 Cal. Daily Op. Serv. 534,

99 Daily Journal D.A.R. 600

ACCEPTANCE INSURANCE COMPANY, Plaintiff and Appellant, v. SYUFY ENTERPRISES et al., Defendants and Respondents.

No. A080638.

Court of Appeal, First District, Division 3, California.

Jan. 19, 1999.

Review Denied April 14, 1999.

Donald R. Wild, Paul Fife, Robert Lindkvist, Wild, Carey & Fife, San Francisco, for Appellant.

Donald W. Rees, Patricia Scott, Gordon & Rees, San Francisco, for Respondent Reliance Insurance Company of Illinois.

Jeremy Sugerman, Geoffrey Gordon-Creed, Gordon-creed, Kelley, Holl & Sugerman, San Francisco, for Respondents Syufy Enterprises and Syufy Century Corporation.

PARRILLI, J.

A contractor's employee working on the roof of a building is injured as he climbs through a hatch providing the only roof access. The hatch was negligently maintained by the building owner. In a personal injury action by the employee, is the building owner covered by an endorsement to the contractor's commercial general liability policy making the owner an additional insured "but only with respect to liability arising out of" the contractor's work for the owner? Like the great majority of courts in other jurisdictions where such issues have been considered, we conclude the additional insured endorsement applies, whether the clause in question is considered ambiguous and thus construed in favor of coverage, or whether it is given the broad meaning generally accorded to the term "arising out of" in contracts of insurance.

Acceptance Insurance Company (AIC) appeals from judgments in favor of respondents Reliance Insurance Company of Illinois (Reliance), and Syufy Enterprises and related entities (collectively, Syufy). The judgments were entered after the trial court granted summary judgment motions by Reliance and Syufy. At issue is whether Syufy is covered by the additional insured endorsement obtained by AIC's named insured, C & C Building Automation Company (C & C), which performed electrical work for Syufy. Because there is a cross-complaint by Syufy pending in the trial court, we have dismissed the appeal from the judgment obtained by Syufy under the one final judgment rule. (Morehart v. County of Santa Barbara (1994) 7 Cal.4th 725, 743, 29 Cal.Rptr.2d 804, 872 P.2d 143.) However, the Reliance judgment is properly before us, and the parties raise the same issue regarding both judgments. We affirm the Reliance judgment.

BACKGROUND

The relevant facts are undisputed. C & C contracted with Syufy to upgrade the lighting and temperature controls at a theater owned by Syufy. Although the contract stated "Owner is to carry necessary insurance," C & C requested its commercial general liability insurer, AIC, to provide additional insured coverage to Syufy. The endorsement issued by AIC provided that Syufy was included as an insured under the policy, "but only with respect to liability arising out of 'your work' for that insured by or for you." The policy specified that "you" and "your" referred to C & C, the named insured. It defined "your work" as "[w]ork or operations performed by you or on your behalf." Syufy was also covered by a policy from Reliance, which by its terms was excess to other insurance available to Syufy, and which included a self-insured retention of $150,000.

In April 1994, C & C employee Kurt Weber was working on the roof of Syufy's theater. His wife was visiting him on the job. Weber took a break to take his wife to the airport, after which he planned to return to work. A roof hatch provided the only access to and from the roof. As Weber was climbing down through the hatch, it fell and severed one of his fingers. Weber sued Syufy, alleging his injury was the result of Syufy's failure to provide and maintain a safe closing mechanism on the hatch, and its failure to warn him about the hatch's defective condition. Syufy tendered the defense of Weber's action to AIC, and AIC accepted the tender without reservation. Through investigation and discovery, AIC eventually learned that Weber was leaving to take his wife to the airport at the time of the accident, and that neither he nor any C & C employee ever did any work on the hatch. AIC also came to believe that Syufy had known for several years that the hatch was defective.

AIC sent Syufy a letter advising that there was potentially no coverage under the additional insured endorsement. AIC asked Syufy to notify Reliance about the incident and about Reliance's duty to participate in the defense and indemnification of Weber's claim. AIC noted that a mandatory settlement conference was scheduled the next month, requested Syufy and Reliance to attend, and declared its intent to seek indemnification for any damages that did not arise out of C & C's work. Thereafter, AIC funded a $400,000 settlement with Weber on Syufy's behalf. AIC then brought the instant action against Syufy and Reliance, seeking declaratory relief regarding the parties' rights and obligations in the defense and indemnification of Weber's claim, and equitable contribution or indemnification for the costs of defending and settling the Weber action.

The trial court granted Reliance's motion for summary judgment on the ground that the AIC policy "unambiguously provides coverage to Syufy for Syufy's independent negligence."

DISCUSSION

Summary judgment is properly granted when there is no triable issue of material fact and the moving party is entitled to judgment as a matter of law. When, as in this case, there is no dispute about the relevant facts, we exercise our independent judgment regarding their legal effect. The only issue before us involves the meaning and application of the language in AIC's policy, which is a pure issue of law. (Code Civ. Proc., § 437c, subd. (c); Old Republic Ins. Co. v. Superior Court (1998) 66 Cal.App.4th 128, 141-142, 77 Cal.Rptr.2d 642; Lebas Fashion Imports of USA, Inc. v. ITT Hartford Ins. Group (1996) 50 Cal.App.4th 548, 555, 59 Cal.Rptr.2d 36.)

"While insurance contracts have special features, they are still contracts to which the ordinary rules of contractual interpretation apply. The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties. Such intent is to be inferred, if possible, solely from the written provisions of the contract. If contractual language is clear and explicit, it governs.

"A policy provision will be considered ambiguous when it is capable of two or more constructions, both of which are reasonable. The fact that a term is not defined in the polic[y] does not make it ambiguous. Nor does disagreement concerning the meaning of a phrase, or the fact that a word or phrase isolated from its context is susceptible of more than one meaning. Language in a contract must be construed in the context of that instrument as a whole, and in the circumstances of th[e] case, and cannot be found to be ambiguous in the abstract. If an asserted ambiguity is not eliminated by the language and context of the policy, courts then invoke the principle that ambiguities are generally construed against the party who caused the uncertainty to exist (i.e., the insurer) in order to protect the insured's reasonable expectation of coverage." (Foster-Gardner, Inc. v. National Union Fire Ins. Co. (1998) 18 Cal.4th 857, 868, 77 Cal.Rptr.2d 107, 959 P.2d 265, citations and internal quotation marks omitted.)

AIC contends the "liability arising out of 'your work' " clause of the additional insured endorsement is ambiguous, because it might be interpreted to include any liability arising while C & C was on Syufy's premises to perform its work, or it might be restricted to liability arising directly from C & C's work product. AIC suggests extrinsic evidence must be consulted to resolve the ambiguity. It argues that because the contract between Syufy and C & C called on Syufy to "carry necessary insurance" without requiring C & C to name Syufy as an additional insured under C & C's policy, the parties must have contemplated that the additional insured endorsement would cover Syufy only where C & C's work or operations exposed Syufy to liability where none would otherwise exist. Because Weber was injured after he stopped working and was leaving the job site, through a roof hatch on which C & C performed no work, and which injured him solely because of Syufy's negligent maintenance, there could be no coverage under the additional insured endorsement, according to AIC.

There are several problems with AIC's analysis, even accepting its premise that the clause at issue is ambiguous. First, AIC fails to explain how the contract between Syufy and C & C affected AIC's understanding of the additional insured endorsement's scope. If policy language appears ambiguous, we must first attempt to interpret the ambiguous provision in the sense the insurer believed the insured would reasonably and objectively have understood it when the policy was issued. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264-1265, 10 Cal.Rptr.2d 538, 833 P.2d 545.) The record does not indicate that AIC reviewed the contract between Syufy and C & C before issuing the additional insured endorsement.

Second, the contract provision requiring Syufy to carry "necessary insurance" does not logically support AIC's restrictive reading of the additional insured endorsement. Instead, the contract's insurance provision appears to be fundamentally inconsistent with the issuance of the endorsement. Additional insured coverage would not have been needed if Syufy were providing whatever insurance was "necessary" for purposes of its contract with C & C.

Finally, AIC fails to confront the familiar rule that when an ambiguity remains unresolved after considering the policy's language and context, and the parties' objectively reasonable expectations, then the ambiguity is resolved against the insurer and in favor of coverage. (...