Cal-Farm Ins. Co. v. Tac Exterminators, Inc.

• Decision Date: 25 September 1985
• Docket Number: CAL-FARM
• Citation: 218 Cal.Rptr. 407,172 Cal.App.3d 564
• Court: California Court of Appeals Court of Appeals
• Parties: INSURANCE COMPANY, Plaintiff and Appellant, v. TAC EXTERMINATORS, etc., et al., Defendants and Respondents. Civ. B002219.

Page 407

218 Cal.Rptr. 407

172 Cal.App.3d 564

CAL-FARM INSURANCE COMPANY, Plaintiff and Appellant, v. TAC EXTERMINATORS, etc., et al., Defendants and Respondents.

Civ. B002219.

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

Sept. 25, 1985.

As Modified Oct. 21, 1985.

[172 Cal.App.3d 569] Edwards J. Roberts, Los Angeles, for plaintiff and appellant.

Amil Roth, Los Angeles, for defendant and respondent TAC Exterminators, Inc.

Earl H. Greenstein, Beverly Hills, for defendant and respondent Gera Thole.

No appearance by defendants and respondents Alad Ladder Co., Bethel Lutheran Church and Sunset Ladder Co., Inc.

KLEIN, Presiding Justice.

Plaintiff and appellant Cal-Farm Insurance Company (Cal-Farm) ¹ appeals from a declaratory judgment determining rights and obligations under a policy issued to defendant and respondent TAC Exterminators, Inc. (TAC) in its favor.

Because the general liability policy covered the nature and kind of risks in the underlying death action, Cal-Farm has a duty to defend TAC from the cross-complaint filed in said action, and the trial court's ruling to that effect is affirmed. However, because exclusion (j) is applicable, Cal-Farm need not indemnify TAC, if TAC is found to have signed an indemnity agreement with Sunset Ladder Company (Sunset Ladder) and if Sunset Ladder suffers liability in the underlying action. That part of the trial court's ruling to the contrary is reversed.

PROCEDURAL AND FACTUAL BACKGROUND

Cal-Farm brought a declaratory relief action to determine the relative rights and duties of the parties under a policy of liability insurance issued by Cal-Farm to TAC, which was cross-complained against in an underlying wrongful death action.

On May 21, 1980 Donald Casey (Casey) was an employee of TAC and fell off a ladder while on the job. The fall resulted in injuries causing his death. The ladder was rented by TAC from Sunset Ladder. At the time of rental, a written contract was allegedly signed by TAC holding Sunset Ladder harmless from any liability.

After receiving workers' compensation benefits upon Casey's death, his widow and surviving children filed a wrongful death action naming various defendants, including Sunset Ladder, but not Casey's employer, TAC. ²

State Compensation Insurance Fund, TAC's worker's compensation insurer, filed a lien in the wrongful death action for benefits paid to Casey's survivors. Sunset Ladder filed a cross-complaint against TAC and others alleging inter alia, that TAC had contracted to indemnify Sunset Ladder for any liability sustained by Sunset Ladder by reason of Casey's heirs' prevailing in their suit.

TAC tendered the defense of the cross-complaint to Cal-Farm which undertook said defense with a reservation of right to deny coverage.

Judgment in the declaratory relief action was entered on October 31, 1983 in favor of TAC, and other defendants, the trial court Cal-Farm appealed the ruling.

ruling that Cal-Farm has the duty to defend TAC, and that the policy provides indemnity coverage to TAC with respect to the subject matter in the underlying death action.

CONTENTIONS

Cal-Farm contends TAC's general liability policy does not provide for the risks TAC is exposed to in the underlying death action because the provisions do not cover death actions. It further avers that the exclusion clauses deny relief as follows: Clause (a) denies coverage for liability assumed by TAC under any contract or agreement; clause (i) precludes coverage for any obligation for which TAC may be held liable under workers' compensation; and clause (j) eliminates coverage for bodily injury to any employee of TAC arising in the course of employment or out of any obligation of TAC to indemnify another for damages arising out of such injury.

DISCUSSION

1. Proper standard of review.

The interpretation of an insurance policy, like any other contract, is a matter of law as to which a reviewing court must make its own independent determination. (Boogaert v. Occidental Life Ins. Co. (1983) 150 Cal.App.3d 875, 879, 198 Cal.Rptr. 357; Ohio Casualty Ins. Co. v. Hartford Accident & Indemnity Co. (1983) 148 Cal.App.3d 641, 644, 196 Cal.Rptr. 164; Pechtel v. Universal Underwriters Ins. Co. (1971) 15 Cal.App.3d 194, 201, 93 Cal.Rptr. 53.)

This court is bound by the trial court's factual findings as to the intent and expectations of TAC as to policy coverage which are supported by substantial evidence, and all factual conflicts must be resolved in favor of the judgment. (Underwriters Ins. Co. v. Purdie (1983) 145 Cal.App.3d 57, 64, 193 Cal.Rptr. 248.) Both parties agree there are no material issues of fact in dispute.

However, since the underlying action has not yet been tried, the resolution of coverage must be determined by accepting as true all the allegations contained in the complaint in the underlying action. ³ (Ibid.)

2. The general liability provisions arguably cover a wrongful death action.

Cal-Farm first argues the policy does not cover the underlying wrongful death action because it is limited to bodily injury and/or property damage.

The policy, entitled on the front page as GENERAL LIABILITY-AUTOMOBILE POLICY, provides for general liability insurance as follows: "The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of [p] A. bodily injury or [p] B. property damage [p] to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, ..."

Although "bodily injury" is defined in the policy as "sickness or disease sustained by a person," "damages" is defined to include "damages for death and for care and loss of services resulting from bodily injury...."

Cal-Farm also argues the policy was not issued for "contractual" coverage. However, nowhere does the policy define what "contractual" liability means. Instead, the policy promises to pay all sums which TAC becomes legally obligated to pay as damages for bodily injury even if the suit is groundless, false or fraudulent.

Insurance contracts are considered "adhesion contracts" (Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 269-270 Further, it is elementary insurance law that any ambiguity or uncertainty must be resolved against the insurer (Continental Cas. Co. v. Phoenix Constr. Co. (1956) 46 Cal.2d 423, 437, 296 P.2d 801; Steven v. Fidelity & Casualty Co. (1962) 58 Cal.2d 862, 871, 27 Cal.Rptr. 172, 377 P.2d 284), and general policy provisions are interpreted broadly so as to provide the greatest possible coverage to the insured. (State Farm Mut. Auto. Ins. Co. v. Partridge (1973) 10 Cal.3d 94, 101, 109 Cal.Rptr. 811, 514 P.2d 123.)

54 Cal.Rptr. 104, 419 P.2d 168), and courts must evaluate not only the provisions of the policy but construe them to give the protection the insured reasonably had a right to expect. (Id., at p. 270, fn. 7, 54 Cal.Rptr. 104, 419 P.2d 168.)

Here, an ambiguity exists as to whether death was an injury covered under the policy. Based on the above cited rules of insurance law, the ambiguity must be construed in TAC's favor. Additionally, since TAC believed it was purchasing a general liability policy, it was reasonable for it to expect the policy would provide a defense when it was cross-complained into a wrongful death action.

3. Cal-Farm has a "duty to defend" TAC in the underlying action.

Cal-Farm insists that even if TAC had coverage under the general provisions of the policy, the exclusion clauses took away such coverage, leaving it no duty to defend the cross-complaint in the underlying death action. The three relevant exclusion clauses are (a), (i) and (j). Exclusion (a) denies coverage for liability assumed by the insured under any contract or agreement. Exclusion (i) denies coverage for any obligation for which the insured may be held liable under workers' compensation or similar law. Exclusion (j) denies coverage for bodily injury to any employee arising out of the course of the worker's employment with the insured or out of any obligation of the insured to indemnify another because of damages arising out of such injury. ⁴

The leading case on "duty to defend" interpreting exclusionary clauses is Gray v. Zurich Insurance Co., supra, 65 Cal.2d 263, 54 Cal.Rptr. 104, 419 P.2d 168. At issue in Gray was whether the insured had an action against his insurer for its failure to defend him against a complaint for assault. The insurer alleged that an exclusionary clause of the policy excused it from defending an action for an intentionally caused bodily injury. (Id., at pp. 266-267, 54 Cal.Rptr. 104, 419 P.2d 168.)

Gray held the insurer must defend a suit which potentially seeks damages within the coverage of the policy. (Id., at p. 275, 54 Cal.Rptr. 104, 419 P.2d 168.) In Gray, as in the instant case, the insurer relied on the exclusionary clause as negating its duty to defend. The Gray court rejected the contention the duty to defend arises only if the insurer is bound to indemnify the insured and held the duty to defend is broader than the obligation to indemnify. (Id., at p. 271, 54 Cal.Rptr. 104, 419 P.2d 168.)

The Gray court reasoned the insurer bears a duty to defend when there is merely a potentiality of liability because the insurance contract is one of adhesion and courts must therefore look to the reasonable expectations of the insured and moreover, it cannot be determined whether the third party indemnity claim falls within the coverage of the policy until the underlying suit is resolved. (Id., at pp. 271-272, 54 Cal.Rptr. 104, 419 P.2d 168.)

The holding of Gray has been followed in numerous cases. In Ohio Casualty Insurance Co. v. Hubbard (...