Columbia Casualty Co. v. Northwestern Nat. Ins. Co.

• Citation: 282 Cal.Rptr. 389,231 Cal.App.3d 457
• Decision Date: 20 June 1991
• Docket Number: No. D011567,D011567
• Parties: COLUMBIA CASUALTY COMPANY, Cross-complainant and Appellant, v. NORTHWESTERN NATIONAL INSURANCE COMPANY, Cross-defendant and Respondent.
• Court: California Court of Appeals

Page 389

282 Cal.Rptr. 389

231 Cal.App.3d 457

COLUMBIA CASUALTY COMPANY, Cross-complainant and Appellant, v. NORTHWESTERN NATIONAL INSURANCE COMPANY, Cross-defendant and Respondent.

No. D011567.

Court of Appeal, Fourth District, Division 1, California.

June 20, 1991.

Rehearing Denied July 17, 1991.

Review Denied Sept. 18, 1991.

McInnis, Fitzgerald, Rees, Sharkey & McIntyre, Thomas E. Sharkey, Ralph W. Peters, San Diego, Horvitz & Levy, Barry R. Levy and Mitchell C. Tilner, Encino, for cross-complainant and appellant.

Adams, Duque & Hazeltine, Robert H. Roe, San Diego, Patricia L. Hensley, Newport Beach, Tribler & Orpett, P.C. and D.J. Sartorio, Chicago, Ill., for cross-defendant and respondent.

THOMPSON, Associate Justice.

This is an appeal from a judgment of dismissal entered after the trial court granted cross-defendant Northwestern National Insurance Company's (Northwestern) motion for judgment on the pleadings on Columbia Casualty Company's (Columbia) cross-complaint. We conclude that the allegations of Columbia's cross-complaint state a good cause of action for declaratory relief against Northwestern that is not refuted by judicial notice or a concession by Columbia. Accordingly, we reverse the judgment.

I THE CONTEXT OF THIS APPEAL

In May 1985 Jacquelyn Johnson (Johnson) was seriously injured when an automobile in which she was a passenger was struck by a Coca Cola Bottling Company of San Diego (Coca Cola) truck. In August 1985 Johnson filed an action against Coca Cola which Coca Cola ultimately settled for $1,850,000. The case at bench arises out of a dispute over the relative obligations of Northwestern and Columbia, both of which issued policies insuring Coca Cola, to indemnify Coca Cola for its liability to Johnson. ¹

On August 4, 1988, Coca Cola filed an action against Columbia seeking a declaration that Columbia was obligated to indemnify it for $850,000 of the sum it had paid in settlement of Johnson's claim. Coca Cola asserted in its complaint that it was insured against the Johnson claim under policies issued by Mission National Insurance Company (Mission) as its primary carrier and by Columbia as its excess carrier. Mission is alleged in this complaint to provide umbrella coverage in the amount of $5 million in excess of an underlying self-insured retained limit of $1 million, and Columbia is alleged to provide $10 million in coverage in excess to the Mission policy. Coca Cola's complaint does not refer to Northwestern as one of its insurers.

The complaint continues with allegations of Coca Cola's payment of $850,000 in excess of $1 million to Johnson and that Mission had declared bankruptcy and hence provided no coverage under its policy. The complaint asserts that because of the insolvency of Mission the Columbia policy "drops down" to provide coverage to Coca Cola for all liability in excess of Coca Cola's "$1 million self retention."

On August 7, 1989, Columbia filed its second amended cross-complaint, the pleading at issue in this appeal. This pleading names as defendants Northwestern, Coca Cola, and California Insurance Guarantee Association (CIGA). Northwestern is named "because its interests may be affected by the resolution of [the] controversy" between Columbia and Coca Cola. The cross-complaint seeks a declaration that: (1) Northwestern is a necessary party to the litigation, and (2) as to indemnification of liability for the Johnson claim, a policy of insurance issued by Northwestern and covering Coca Cola provides primary coverage to the extent of $1 million over a deductible of $1 million before Columbia's obligation arises. ² Columbia's second amended cross-complaint incorporates by reference copies of the Northwestern, Mission, and Columbia insurance policies.

On October 20, 1989, the trial court granted Northwestern's motion for judgment on the pleadings on the cause of action against it contained in Columbia's cross-complaint. Columbia's appeal from this judgment is at issue here. On September 21, 1990, the trial court, having found that the Columbia policy "drops down" to provide coverage for the Johnson claim, rendered its judgment dismissing Columbia's cross-complaint against Coca Cola. Appeal from this later judgment is also now pending in this court but as yet is unbriefed.

II RELEVANT FACTS

A motion for judgment on the pleadings is the equivalent of a demurrer made after the pleadings are in. (6 Witkin, Cal.Procedure (3d ed. 1985) Proceedings Without Trial, § 263, p. 564.) Hence the propriety of the trial court's action in granting Northwestern's motion must be tested by the sufficiency of the allegations included in Columbia's cross-complaint (Hughes v. Western MacArthur Co. (1987) 192 Cal.App.3d 951, 954-955, 237 Cal.Rptr. 738) amplified only by matter that may properly be judicially noticed by the court (Barker v. Hull (1987) 191 Cal.App.3d 221, 224, 236 Cal.Rptr. 285) and concessions made by the pleader, here Columbia. We recite the facts which follow in this light to determine whether the content of the three insurance policies incorporated by reference or matter extraneous to the second amended cross-complaint which can properly be considered on a motion for judgment on the pleadings controvert the cross-complaint's express allegation of coverage by the Northwestern policy.

At the time that Johnson was injured Coca Cola was insured by three policies issued to its parent company covering liability from automobile accidents: a first level policy from Northwestern, the coverage of which is at issue in this case; a second level excess policy issued by Mission with a policy limit of $5 million, and a third level excess policy issued by Columbia.

A The Northwestern Policy

Northwestern policy No. CLA255714 covers the period October 1, 1984, to October 1, 1985, and contains the following relevant provisions:

(a) A Combined Single Limit Endorsement reads in pertinent part as follows: "The total liability of the Company [ (Northwestern) ] for all damages and ultimate net loss ... shall be $1,000,000 as the result of any one occurrence."

(b) An Indemnification Endorsement states: " 'The Company [ (Northwestern) ] will indemnify the insured for all sums which the insured shall ... [be] obligated to pay as damages, all as more fully defined by the term "ultimate net loss," because of bodily injury ... caused by an occurrence. The Company shall not be obligated to indemnify for such ultimate net loss after the applicable limit of the Company's liability has been exhausted by payment of such ultimate net loss.' "

(c) An Ultimate Net Loss Endorsement defines "ultimate net loss" as "the total sum which the insured, ... pays as a consequence of any occurrence hereunder, including obligations ... [for] personal injury, ... [and] shall also include ... all sums paid as ... fees, charges and law costs, ... expense for ... lawyers, ... and investigators and other persons and for litigation, settlement, adjustment and investigation of claims...."

(d) A Deductible Endorsement states: "[I]t is agreed that $1,000,000 shall be deducted from the amount of any loss, including defense coverage, as a result of each occurrence reported under this policy."

B The Mission Policy

The Mission policy, covering the same period as the Northwestern policy, contains the following pertinent provisions:

(a) "The company shall be liable for $5,000,000 ultimate net loss each occurrence, ... in excess of:

(1) The amount recoverable under the underlying insurance set forth under Schedule A [paragraph DII A(1) of the policy covering auto insurance] ... or

(2) Under coverage B [products liability and other liability coverage except automobile], self-insured retained limit of $1,000,000 ultimate net loss each occurrence ... with respect to ultimate net loss not covered by underlying insurance set out in schedule A; it being understood, however, that other insurance available to the insured ... shall reduce or, if it is $1,000,000 or more per occurrence ... shall eliminate the insured's obligation with respect to the self-insured retained limit...."

(b) "All amounts and/or retained limits set forth in III A(1) ... are subject to the following maximums: [p] With respect to Esmark, Inc., $3,000,000 ultimate net loss in the aggregate ... under III A(1).... [p] (This aggregate provision with respect to III A(1) applies only to the following policy ... under schedule A: [p] Northwestern National Insurance Company Comprehensive General and Auto Liability Policy No. CLA 255714)...."

(c) "The term 'self-insured retained limit' means the amount of ultimate net loss which, in the absence of underlying insurance set forth under schedule A ... is retained by the insured."

(d) "The term 'ultimate net loss' means the total sum which the insured, or any company as its insurer ... or both, pays as a consequence of any occurrence...."

(e) "It is a condition of this policy that the underlying insurance(s) as set out in schedule A ... shall be maintained in full effect, except for any reduction of the aggregate limit or limits applicable thereto. Failure of the insured to comply with the foregoing shall not invalidate this policy, but in the event of such failure, the company shall only be liable to the same extent as it would have been had the insured complied."

(f) "The insured may insure any part of or all of the self-insured retention indicated by limits of liability, section B, or take advantage of any other insurance available to it without prejudice to or invalidation of coverage under this policy. If any such insurance is less than the insured's self-insured retentions, then the insured will make up the difference."

Schedule A to the Mission policy in listing underlying insurance states that as to "Comprehensive General and Automobile Liability" the underlying insurance policy is Northwestern CLA255714 with a policy limit of $1 million "each occurrence."

C The Columbia Policy

The Columbia...