Fireman's Fund Ins. Co. v. City of Turlock

• Decision Date: 09 July 1985
• Citation: 216 Cal.Rptr. 796,170 Cal.App.3d 988
• Court: California Court of Appeals Court of Appeals
• Parties: FIREMAN'S FUND INSURANCE COMPANY, Plaintiff, Cross-defendant and Respondent, v. CITY OF TURLOCK et al., Defendants, Cross-complainants and Appellants; United States Fire Insurance Company, Cross-defendant and Respondent; California Union Insurance Company, Respondent. Civ. F003449.

Page 796

216 Cal.Rptr. 796

170 Cal.App.3d 988

FIREMAN'S FUND INSURANCE COMPANY, Plaintiff, Cross-defendant and Respondent, v. CITY OF TURLOCK et al., Defendants, Cross-complainants and Appellants United States Fire Insurance Company, Cross-defendant and Respondent California Union Insurance Company, Respondent.

Civ. F003449.

Court of Appeal, Fifth District, California.

July 9, 1985.

As Corrected Aug. 2, 1985.

[170 Cal.App.3d 991] Dietrich, Glasrud & Jones and Myron F. Smith, Fresno, for defendants, cross-complainants and appellants.

McCormick, Barstow, Sheppard, Wayte & Carruth and James P. Wagoner, Fresno, for plaintiff, cross-defendant and respondent.

Chinello, Chinello, Shelton & Auchard and Daniel I. Aller III, Fresno, for cross-defendant and respondent.

Bronson, Bronson & McKinnon, Paul H. Cyril, Elliot L. Bien and Richard L. Antognini, San Francisco, for respondent.

OPINION

BEST, Associate Justice.

This is an appeal from a judgment entered in favor of plaintiff and cross-defendant Fireman's Fund Insurance Company (hereinafter Fireman's Fund), intervenor California Union Insurance Company (hereinafter Cal. Union), and cross-defendant United States Fire Insurance Company (hereinafter U.S. Fire). Said judgment was based upon each of the above-named parties' successful motion for summary judgment against defendant and cross-complainant City of Turlock (hereinafter City) and Lou Ann Watson.

This is an action for declaratory relief to determine if insurance coverage was provided to City for acts and/or events transpiring in 1975 surrounding the firing, reinstatement and termination of Charles Polston.

STATEMENT OF FACTS

The action arises out of the December 1974 termination of Charles Polston's employment as a police officer with City. Polston appealed the termination to the Turlock City Council and a hearing was held. Watson was the city attorney for City at all relevant times.

At the commencement of the second session of the hearing, Polston's counsel approached Watson to explore the possibility of settling the matter. Watson then undertook extensive negotiations on City's behalf, and eventually the claim was settled. One of the settlement terms provided that City would reinstate Polston retroactively, but that Polston would secretly submit to City a signed letter of resignation to become effective on June 1, 1975.

A dispute arose between Polston and City as to the particular terms of this agreement. Polston contended that the agreement provided for his secret resignation to remain confidential forever. City and Watson contended that the resignation was to remain confidential only until June 1, 1975, the resignation's effective date.

Sometime after June 1, 1975, Watson disclosed the previously arranged secret resignation to reporters from the Modesto Bee, the Fresno Bee and the Turlock Journal. Polston filed a claim with the Turlock City Council for breach of the secrecy agreement, and the city council denied the claim.

Polston then filed suit in the Stanislaus County Superior Court seeking damages for breach of contract and for fraud. In that action, a jury awarded Polston damages against City on the breach-of-contract cause of action and against both City and Watson on the fraud cause of action. These awards, modified by a remittitur on the breach-of-contract cause of action, were upheld on appeal by this court. The California Supreme Court denied a petition for hearing, and the judgment is now final. ¹

City has defended Watson's actions with respect to Polston, has never disciplined or reprimanded her for those actions and retained her in her position as city attorney. While the "Polston v. City of Turlock" action was pending, Fireman's Fund filed suit for declaratory relief in the Stanislaus County Superior Court. Fireman's Fund sought a judicial determination of its rights and obligations with respect to the "Polston v. City of Turlock" action under a comprehensive general liability policy Fireman's Fund had issued to City. City filed a cross-complaint naming its umbrella carrier for the time period in question, U.S. Fire, as a cross-defendant and seeking a declaratory relief judgment against said umbrella carrier, claiming that said policy provides coverage to City for the events in question. Thereafter, Watson's errors and omissions carrier, Cal. Union, intervened in this action seeking a declaration of its rights and obligations for the Polston verdicts, if any, to both City and Watson.

DISCUSSION

I

Did the trial court err in granting the summary judgment motions?

A. Standard of Review.

The rules governing the summary judgment procedure have been succinctly stated on numerous occasions.

"We have summarized the well-established rules governing summary judgment procedure as follows: ' "The matter to be determined by the trial court in considering such a motion is whether the defendant (or the plaintiff) has presented any facts which give rise to a triable issue. The court may not pass upon the issue itself. Summary judgment is proper only if the affidavits in support of the moving party would be sufficient to sustain a judgment in his favor and his opponent does not by affidavit show such facts as may be deemed by the judge hearing the motion sufficient to present a triable issue. The aim of the procedure is to discover, through the media of affidavits, whether the parties possess evidence requiring the weighing procedures of a trial. In examining the sufficiency of affidavits filed in connection with the motion, the affidavits of the moving party are strictly construed and those of his opponent liberally construed, and doubts as to the propriety of granting the motion should be resolved in favor of the party opposing the motion. Such summary procedure is drastic and should be used with caution so that it does not become a substitute for the open trial method of determining facts." ' (Corwin v. Los Angeles Newspaper Service Bureau, Inc., 4 Cal.3d 842, 851-852 [94 Cal.Rptr. 785, 484 P.2d 953].)" (Empire West v. Southern California Gas Co. (1974) 12 Cal.3d 805, 808, 117 Cal.Rptr. 423, 528 P.2d 31.)

As stated above, to be granted summary judgment the moving party's supporting papers must be sufficient to sustain a judgment in his favor. When the defendant is the moving party, his task is to negate completely an essential element of plaintiff's case or to establish a complete defense. (Saatzer v. Smith (1981) 122 Cal.App.3d 512, 517, 176 Cal.Rptr. 68.) This task is limited to addressing those issues or theories of liability raised in plaintiff's complaint. The papers filed by the party opposing summary judgment must also be directed to the issues raised in the complaint; therefore, the opposing papers may not create issues outside of the pleadings. (Willard v. Hagemeister (1981) 121 Cal.App.3d 406, 414, 175 Cal.Rptr. 365; IT Corp. v. Superior Court (1978) 83 Cal.App.3d 443, 451-452, 147 Cal.Rptr. 828; Keniston v. American Nat. Ins. Co. (1973) 31 Cal.App.3d 803, 812, 107 Cal.Rptr. 583.)

B. Is the breach-of-contract verdict covered by the Fireman's Fund policy?

City argues that three provisions of the Fireman's Fund policy provide coverage for City's liability to Polston: the comprehensive general liability provision, the personal injury liability endorsement and the contractual liability endorsement.

The parties agree that one case (it appears the only case) has addressed insurance policy language similar to that which we have here. In International Surplus Line Ins. Co. v. Devonshire Coverage Corp. (1979) 93 Cal.App.3d 601, 155 Cal.Rptr. 870, the issue was whether a Hartford Insurance policy issued to Devonshire covered Devonshire's liability to Central National Insurance Company of Omaha. Devonshire had issued to Central a fire insurance policy for a Pennsylvania business. Devonshire's agreement with Central provided that Devonshire would either obtain reinsurance or indemnify Central for risks in excess of $500,000. Devonshire never obtained reinsurance, and Central prevailed in a suit for indemnity when a fire to the Pennsylvania business caused over $1 million in damages. Devonshire's coverage action against Hartford followed.

As in the present case, the Hartford policy in question covered general liability, and an endorsement reached liability assumed by contract. The policy's insuring language extended coverage only to amounts that the insured "shall become legally obligated to pay as damages." The court construed this phrase to be synonymous with language that an insurer was obligated to pay "damages for liability imposed by law." Both phrases, the court noted, have been uniformly interpreted as referring to liability "ex delicto" as distinguished from "ex contractu." Thus, the policy covered tort, but not contract liability. (Devonshire Coverage Corp., supra, at p. 611, 155 Cal.Rptr. 870; see also Ritchie v. Anchor Casualty Co. (1955) 135 Cal.App.2d 245, 254-257, 286 P.2d 1000.)

The Fireman's Fund policy in the present case includes the same phrase in the insuring paragraph that was found controlling in Devonshire; coverage is provided only for amounts that the insured "shall become legally obligated to pay as damages." Thus, under Devonshire, standard liability policies such as the Fireman's Fund policy involved herein cover only tort liabilities, and not those in contract.

City contends, and Fireman's Fund agrees, that in determining whether the contract verdict sounds in tort or in contract under the Devonshire case, the court must determine the "nature of the damages" awarded. (International Surplus Line Ins. Co. v. Devonshire Coverage Corp., supra, 93 Cal.App.3d at p. 610, 155 Cal.Rptr. 870.)

City is incorrect in its contention that the determination of the "nature of the damages" is a factual question. In Devonshire, as in the present case, an analysis of the liability underlying the award determines as a matter of law the nature of the damages.

In Devo...