Gribaldo, Jacobs, Jones and Associates v. Agrippina Versicherunges A.G.
| Decision Date | 30 December 1969 |
| Citation | 3 Cal.App.3d 73,83 Cal.Rptr. 480 |
| Court | California Court of Appeals Court of Appeals |
| Parties | GRIBALDO, JACOBS, JONES AND ASSOCIATES, a California corporation, and Testing & Controls, Inc., a California corporation, Plaintiffs and Appellants, v. AGRIPPINA VERSICHERUNGES A. G., English and American Insurance Company, Ltd., World Auxiliary Insurance Corp., Ltd., Appleton & Cox of California, Inc., and Ralph Jackson, Defendants and Respondents. Civ. 25823. |
Guy Blase, Lawrence A. Klein, Spaeth, Blase & Farman, Palo Alto, for appellants.
Jones & Daniels and Robert E. Jones, Los Angeles, for respondents.
This is an appeal by plaintiffs from a declaratory judgment. Plaintiffs commenced this action seeking a judicial determination of their rights and duties under an errors and omissions indemnity insurance policy issued to plaintiff corporations by defendants. In essence, the declaration sought by plaintiffs was directed to the meaning of the deductible feature of the policy and its application to defense costs.
Defendants, foreign organizations engaged in the business of writing insurance in California through duly dualified brokers, issued to plaintiffs and architects or engineers professional indemnity insurance policy covering the period from April 13, 1964 to April 13, 1967.
The policy 'indemnifies the Assured [plaintiffs] against any claim or claims for breach of professional duty * * * which may be made against them during the period * * * by reason of any negligent act, error or omission, * * *' The policy further provides that defendants 'shall not be liable for any claim or claims unless the amount of claim exceeds the amount stated in the said Schedule as the deductible, * * *' The deductible stated in the schedule is $2,500.
The policy does not directly impose a duty on defendants to defend actions against plaintiffs. The matters of defense and defense costs are mentioned only in the 'conditions' to the policy as follows:
The dispute below centered around defendants' position that their liability is limited to situations where the actual claim paid plus applicable defense costs actually total more than the deductible amount of $2,500. It was plaintiffs' position that defendants had an actual duty to defend and that defendants were required to pay defense costs whenever the initial demand against plaintiffs exceeded the deductible, no matter what the outcome of the demand.
Among other things the trial court found that the policy was neither ambiguous nor uncertain; that under the terms of the policy defendants were not required to defend plaintiffs against the claims or demands of third parties for alleged breach of professional duty within the purview of the policy; that defendants' obligation under the policy arises only if the liability of plaintiffs is fixed and is discharged in an amount exceeding the deductible $2,500; and that in accordance with the policy and Civil Code section 2778, 1 subdivision 3, defendants are obligated to reimburse plaintiffs for costs and attorney fees incurred and paid by plaintiffs in the defense of claims embraced within the provisions of the policy, that is, those claims in excess of $2,500 actually paid by plaintiffs. 2
The court then concluded that the policy is neither anbiguous nor uncertain and that defendants are obligated to reimburse plaintiffs for attorney's fees, costs and expenses incurred in the defense of any claim only when the claim is paid by plaintiffs and only when the payment exceeds $2,500. Judgment was entered accordingly.
Before proceeding to discuss the interpretation of the subject insurance policy we observe that 'An indemnity provision of a contract is to be construed under the same rules governing other contracts with a view of determining the actual intent of the parties.' (J.A. Payton v. KuhnMurphy Inc., 253 Cal.App.2d 278, 281, 61 Cal.Rptr. 575, 578; Buchalter v. Levin, 252 Cal.App.2d 367, 375, 60 Cal.Rptr. 369.) In indemnity contracts, moreover, the provisions of section 2778 3 prescribing the rules for interpreting indemnity agreements, are as much a part of such instrument as those set out therein, unless a contrary intention appears. (Thode v. McAmis, 96 Cal.App.2d 833, 836-837, 216 P.2d 548; Weaver v. Grunbaum, 31 Cal.App.2d 42, 49-50, 87 P.2d 406.)
Plaintiffs place strong reliance upon the case of Gray v. Zurich Insurance Co., 65 Cal.2d 263, 54 Cal.Rptr. 104, 419 P.2d 168, and particularly on the principle they extract therefrom that 'In interpreting an insurance policy we apply the general principle that doubts as to meaning must be resolved against the insurer and that any exception to the performance of the basic underlying obligation must be so stated as clearly to apprise the insured of its effect.' (p. 269, 54 Cal.Rptr. p. 107, 419 P.2d p. 171.) We take cognizance of this rule but also observe that it must be applied in conjunction with the rules applicable to the interpretation of contract. 4
Plaintiffs contend that the insurance policy is ambiguous and uncertain. Accordingly, they offered extrinsic evidence for the purpose of establishing that it was the intent of the parties that the policy afford plaintiffs the right to recover defense costs and expenses regardless of the amount paid by plaintiffs as the result of a claim of a third party. This evidence was admitted subject to defendants' motion to strike, which was timely interposed. 5 The trial court took the motion under submission and in its written memorandum of decision stated that it was unnecessary for the court to rule on the motion on the basis that there was nothing in the evidence offered by plaintiffs which showed an intent of the parties contrary to that expressed in the policy as interpreted pursuant to section 2778.
In Delta Dynamics, Inc. v. Arioto, 69 Cal.2d 525, 528, 72 Cal.Rptr. 785, 787, 446 P.2d 785, 787 the Supreme Court, relying on Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co., 69 Cal.2d 33, 39-40, 69 Cal.Rptr. 561, 442 P.2d 641, states the applicable principle thusly: "The test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible.' To determine whether offered evidence is relevant to prove such a meaning the court must consider all credible evidence offered to prove the intention of the parties. 'If the court decides, after considering this evidence, that the language of a contract, in the light of all the circumstances, is 'fairly susceptible of either one of the two interpretations contended for * * *' [citations], extrinsic evidence to prove either of such meanings is admissible.' [Citation.]'
In applying the foregoing test, the preliminary consideration of all credible evidence offered to prove the intention of the parties requires that the trial court consider evidence which includes testimony as to the circumstances surrounding the making of the agreement including the object, nature and subject matter of the writing so that the court can place itself in the same situation in which the parties found themselves at the time of contracting. (Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co., supra, at p. 40, 69 Cal.Rptr. 561, 442 P.2d 641.)
Adverting to the extrinsic evidence offered by plaintiffs and preliminarily considered by the trial court in the instant case, we observe the following testimony. Donald Brown, plaintiffs' insurance broker, testified that he discussed with Ralph Jackson, a surplus line underwriter for Appleton & Cox of California, Inc., the local agents for defendants, how the deductible operated in relationship to the defense costs; that when he told Jackson, following the receipt of a policy form and prior to the issuance of the policy, that he could not 'interpret' the exact action that would be taken if claims did occur, Jackson advised him that there would be a $2,500 deductible applicable to a claim under the policy and that legal fees would be taken care of under the policy without a deductible. Brown also testified that he later got a different interpretation from Jackson when he asked Jackson to contact the underwriters directly to get an interpretation from them, and that he was advised by the underwriters that the interpretation made by plaintiffs was completely wrong. He testified that this communication was not received until early 1967.
Guy Blase, an attorney for plaintiffs, also testified that prior to the issuance of the policy he too had a conversation with Jackson concerning defense costs. He testified that Jackson told him that if a claim was in excess of the...
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