Alex Robertson Co. v. Imperial Casualty & Indemnity Co., B058218

• Decision Date: 22 July 1992
• Docket Number: No. B058218,B058218
• Citation: 10 Cal.Rptr.2d 165,8 Cal.App.4th 338
• Parties: ALEX ROBERTSON COMPANY, Plaintiff and Appellant, v. IMPERIAL CASUALTY & INDEMNITY COMPANY, Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

Page 165

10 Cal.Rptr.2d 165

8 Cal.App.4th 338

ALEX ROBERTSON COMPANY, Plaintiff and Appellant, v. IMPERIAL CASUALTY & INDEMNITY COMPANY, Defendant and Respondent.

No. B058218.

Court of Appeal, Second District, Division 7, California.

July 22, 1992.

Review Denied Oct. 16, 1992.

Negele, Knopfler, Pierson & Robertson, and George Knopfler and Deborah Broom Pegg, Universal City, for plaintiff/appellant.

Wild & Zaragoza, and Donald R. Wild and Paul D. Fife, San Francisco, for defendant/respondent.

JOHNSON, Associate Justice.

This is an appeal from a judgment in favor of defendant insurance company after the trial court granted its motion for summary judgment. Plaintiff's action is for breach of contract, breach of the implied covenant of good faith and fair dealing and violation of Insurance Code section 790.03 (unfair practices). The issues on appeal are whether, under a contractual liability coverage endorsement, defendant owed a duty to defend plaintiff in an action by a third party and whether defendant presently owes plaintiff a duty to indemnify it for loss under the judgment rendered in favor of the third party. The trial court concluded defendant owed neither duty to plaintiff. We affirm.

FACTS AND PROCEEDINGS BELOW

Plaintiff, the Alex Robertson Company (Robertson), a general contractor, entered into several contracts with Melvin and Stephen Jaffee, National Lumber & Supply, Inc. and others (collectively referred to as Jaffee) to build single family residences and retail stores throughout Southern California. Robertson then entered into a contract with William E. Skinner & Associates (Skinner), an architectural firm, whereby Skinner agreed to provide Robertson with architectural plans and specifications for the store to be built in El Toro. ¹

At the time the architectural services agreement was executed, Skinner did not carry professional liability insurance. Robertson demanded Skinner obtain such insurance and agreed to pay the premiums. Robertson referred Skinner to Mr. Saliba, Robertson's insurance broker, who proceeded to obtain a liability policy for Skinner from Imperial Casualty & Indemnity Company (Imperial). In the course of negotiating insurance coverage for Skinner, Imperial requested a copy of the contract between Skinner and Robertson. The Skinner/Robertson contract submitted to Imperial contains an indemnity clause under which Skinner agrees to indemnify and hold harmless Robertson from liability, suits, claims, demands, judgments or penalties arising out of Skinner's negligent acts, errors or omissions. ²

Imperial issued a professional liability policy specifically naming Skinner as the "insured" under the policy. Under the During the time the policy was in effect, Jaffee sued Robertson for breach of contract and negligence in connection with the construction of the El Toro store, among others. (Hereafter referred to as the Jaffee litigation.) Robertson tendered defense of the claims related to the retail store to Imperial which denied the tender on the ground Robertson was not an "insured" under the policy. The Jaffee litigation proceeded to trial. The trial judge found Robertson breached its contract for the construction of the El Toro and Diamond Bar stores by "fail[ing] to provide a roof on each store that was called for in the plans and specifications." The trial judge further found, "the manner of installation was improper under the circumstances and contract...." Jaffee was awarded a judgment of $955,636 on the El Toro store and $138,455 on the Diamond Bar store.

                heading, "Exclusions" the policy provides coverage will not apply to claims arising out of insured's agreement to assume the liability of others unless the insured would have been liable even in the absence of such agreement.  The policy also contains a "Contractual Liability Coverage Endorsement" modifying the exclusion of coverage for liability assumed by contract described above.  The endorsement specifically refers to Robertson and provides the insurance afforded by the policy extends to liability which may be imposed on Robertson and which liability is assumed in writing "by the insured under the written contract described below...."  The contract referred to is described as "architectural services on commercial building."   The endorsement also imposes certain limitations on the contractual liability covered under the policy.  (This endorsement is the principal policy provision at issue and is discussed in greater detail below.)
                

Following the judgment in the Jaffee litigation, Robertson demanded Imperial pay the portion of the judgment pertaining to the El Toro and Diamond Bar stores on behalf of its insured, Skinner. Imperial rejected Robertson's demand on the grounds Skinner denied any negligence in connection with the design of the stores; Skinner was not a party to the Jaffee litigation and therefore his liability, if any, was not determined by the judgment; and the award on its face shows the judgment was based on Robertson's breach of contract and negligence in the construction of the stores' roofs.

Thereafter, Robertson filed the present action against Imperial alleging breach of contract, breach of the covenant of good faith and fair dealing, and breach of statutory duties under the Insurance Code and requesting declaratory relief. Imperial moved for summary judgment on the grounds it had no duty to defend Robertson because Robertson was not an insured under the policy and it had no present duty to indemnify Robertson for any loss resulting from the Jaffee litigation because Skinner's liability for such loss has not yet been determined. The trial court concurred as to both grounds and granted Imperial's motion for summary judgment. A judgment was entered in favor of Imperial and Robertson filed a timely notice of appeal.

DISCUSSION

I. STANDARD OF REVIEW

The determination of Robertson's appeal requires interpretation of the insurance policy issued by Imperial. We are not bound by the trial court's interpretation of the policy. Instead, we review the question of coverage independently. (Economy Lumber Co. v. Insurance Co. of North America (1984) 157 Cal.App.3d 641, 645, 204 Cal.Rptr. 135.) In doing so, we bear in mind two well-settled principles. The duty to defend under an insurance policy is broader than the duty to indemnify. (Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 275, 54 Cal.Rptr. 104, 419 P.2d 168.) Uncertainties in the terms of coverage are resolved in favor of the insured in order to protect its reasonable expectation of coverage. (Producers Dairy Delivery Co. v. Sentry Ins. Co. (1986) 41 Cal.3d 903, 912, 226 Cal.Rptr. 558, 718 P.2d 920.)

The duty to defend, however, is a contractual one. In this case the duty, under the policy, is limited to the "insured." Furthermore, expectations of coverage must be reasonable in light of the plain language of the policy. (Farm Air Flying Service v. Southeastern Aviation Ins. Services, Inc. (1988) 206 Cal.App.3d 637, 641, 254 Cal.Rptr. 1.)

II. IMPERIAL DID NOT OWE A DUTY TO DEFEND ROBERTSON IN THE JAFFEE LITIGATION.

The policy provides Imperial "shall defend any suit against the Insured seeking damages to which this insurance applies...." It also provides, "[t]he unqualified word 'Insured' wherever used (including endorsements forming a part hereof), shall mean the Named Insured...." The named insured on the policy is William E. Skinner & Associates. Thus, the policy provides in clear and unambiguous language that Imperial's duty to defend extends only to Skinner.

Nevertheless, Robertson contends it is an insured under the policy, or at least a triable question of fact exists as to that issue, by reason of the Contractual Liability Coverage Endorsement, the intent of Robertson, Skinner and Robertson's insurance agent, Saliba, that Robertson be covered, and evidence Robertson was billed for and paid the premiums on the policy. We reject this contention for the reasons discussed below.

A Contractual Liability Coverage Endorsement does not make the person an insured whose liability is assumed by the party insured under the policy. Rather, as the endorsement clearly states, it extends the insurance afforded under the policy to include coverage for liability assumed by contract by the person insured. ³ Here, the effect of the endorsement is to extend coverage, within the limits specified in the endorsement, to the liability assumed by Skinner in its contract with Robertson. ⁴

Professional liability policies often exclude indemnification agreements with third parties because such agreements may expand the professional's liability beyond the traditional malpractice concept. (3 Stein, Construction Law (1992) §§ 13.06[j] & 13.17[c][i], pp. 13-53 & 13-152.)

Here, for example, Imperial's policy provides, "Insuring Agreements and all other provisions of this insurance shall not apply to claims or 'costs, charges and expenses' for or arising out of liability of others assumed by the Insured by agreement under any contract, whether oral or in writing, unless such liability would have attached to the Insured even in the absence of such agreement." This exclusion is modified by the Contractual Liability Coverage Endorsement set out in footnote 3. (See Loyola Marymount University v. Hartford Accident & Indemnity Co. (1990) 219 Cal.App.3d 1217, 1226, 271 Cal.Rptr. 528.) As stated above, the effect of the endorsement was to provide liability coverage to Skinner in situations where Skinner had, by written contract, assumed the liability of Robertson. (Cf. International Surplus Lines Ins. Co. v. Devonshire Coverage Corp. (1979) 93 Cal.App.3d 601, 608, 155 Cal.Rptr. 870.) Robertson was a potential indemnitee of Skinner under the indemnification clause of the Skinner/Robertson contract (see fn. 4, ante ) but Robertson was not an "insured" under the policy Imperial issued to Skinner.

Although we have found no California cases squarely on point,...