Insurance Co. of the West v. Haralambos Beverage Co.

• Decision Date: 03 November 1987
• Docket Number: No. B017929,B017929
• Court: California Court of Appeals Court of Appeals
• Parties: INSURANCE COMPANY OF THE WEST, Plaintiff, Cross-Defendant, and Respondent, v. HARALAMBOS BEVERAGE COMPANY; Tony Haralambos; and H.T. Haralambos, Defendants, Cross-Complainants & Appellants.

Page 427

241 Cal.Rptr. 427

195 Cal.App.3d 1308

INSURANCE COMPANY OF THE WEST, Plaintiff, Cross-Defendant, and Respondent, v. HARALAMBOS BEVERAGE COMPANY; Tony Haralambos; and H.T. Haralambos, Defendants, Cross-Complainants & Appellants.

No. B017929.

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

Nov. 3, 1987.

As Modified Nov. 17, 1987.

Brown, Reed & Gibson, and John E. Nordin, II, Pasadena, for defendants, cross-complainants, and appellants

Haight, Dickson, Brown & Bonesteel, Roy G. Weatherup, Michael J. Leahy, Mary J. Ueki, and Jose H. Garcia, Santa Monica, for plaintiff, cross-defendant and respondent.

THOMPSON, Associate Justice.

Defendants Haralambos Beverage Company, Tony Haralambos, and H.T. Haralambos (collectively HBC), appeal from an adverse judgment on plaintiff Insurance Company of the West's (ICW) complaint for declaratory relief and equitable indemnification. Because a triable issue of material fact exists concerning ICW's right to equitable indemnification, summary judgment was improperly granted. Reversed and remanded.

FACTS & PROCEEDINGS BELOW

HBC, a beverage distributor, contracted with W.F. Mickey Body Company, Inc. (Mickey Body), a manufacturer of beverage route trailers, for the manufacture and sale of two trailers. Although HBC had agreed to pay Mickey Body for the trailers, HBC failed to do so after receiving delivery. ¹ Mickey Body filed suit against HBC and others in United States District Court, Central District of California, on January 13, 1983 (No. CV 83 0819 WMB (Bx)), for breach of contract, fraud, and wrongful possession.

HBC, through its private counsel, Brown, Reed & Gibson, tendered the defense of the Mickey Body suit to ICW, under HBC's commercial multiperil policy. On May 4, 1983, ICW's agent, Sharon Killion, orally agreed to provide a defense subject to a reservation of rights during a telephone conversation with attorney Nordin of the Brown firm.

According to Nordin's May 10, 1983 letter to Killion confirming their conversation of May 4, 1983, Killion had "advised [Nordin] that [the] defense would be under a reservation of rights and that [Killion] would forward a letter to [Nordin] setting forth the specific reasons for such a reservation." Further, HBC would be allowed to select its own counsel at ICW's expense, because ICW was defending under a reservation of rights. HBC would continue to be represented by the Brown firm, and ICW would select its own counsel to associate in the defense. ²

The promised reservation of rights letter was not sent to HBC until almost six months later, on November 2, 1983. The letter stated, in pertinent part: "A review of the litigation indicates the plaintiff [Mickey Body] is praying for recovery of money damages. Please be advised that your policy with Insurance Company of the West offers coverage for bodily injury and property damage. Bodily injury is defined as 'bodily injury, sickness or disease sustained by any person which occurs during the policy period including death at any time resulting therefrom.' Property damage "Your policy of insurance contains a definition of occurrence which indicates it is 'an accident, including continuous or repeated exposure to conditions which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.' Please be advised that many of the allegations involved in this complaint involve intentional acts and, therefore, would not be covered under the policy issued by Insurance Company of the West....

                is defined as '(1) Physical injury to or destruction of tangible property which occurs during the policy period including loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period.'   Money damages do not fit either of the definitions described above, and, therefore, the Insurance Company of the West will not be in a position to indemnify you if a verdict is rendered based upon money damages
                

"In view of the foregoing, any steps taken by Insurance Company of the West to investigate and defend this situation are undertaken fully reserving all rights we have under the above-captioned policy to deny coverage outright at a later date. Subject to this reservation of rights, we have allowed your personal attorneys, Brown, Reed & Gibson, to provide you a defense at our expense."

The Mickey Body action was tried on November 10 and November 23, 1983, and judgment was entered in favor of Mickey Body on March 26, 1984. The court found that Mickey Body had expected to receive $44,757.70 from HBC under the purchase agreement, and that Mickey Body had received only $3,711.06 due to HBC's breach of contract. The court awarded Mickey Body contract damages against HBC of $42,026, plus interest and costs. ³

After unsuccessfully attempting to settle its coverage disputes with HBC, ICW filed the instant action for declaratory relief, seeking a declaration that the policy does not apply to the Mickey Body action and that ICW has no duty to defend or indemnify the claim because the claim does not arise from suit against the insured for bodily injury or property damages, or from damages caused by an "occurrence." ICW also sought equitable indemnification for defense costs incurred in the Mickey Body suit.

HBC answered the complaint and cross-complained for declaratory relief, seeking a declaration that ICW had a duty to defend, indemnify, and reimburse HBC for expenses incurred in the Mickey Body suit.

ICW successfully moved for summary judgment, and was awarded defense costs incurred in the Mickey Body action of $46,953.11, and costs of suit of $215.75. Judgment was entered on November 22, 1985, and this appeal followed.

STANDARD OF REVIEW

The rules governing summary judgment procedure have been often repeated:

"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 procedure 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." ' [Citation.]" (Empire West v. Southern California Gas Co. (1974) 12 Cal.3d 805, 808, 117 Cal.Rptr. 423, 528 P.2d 31.)

ISSUES

With respect to coverage issues, HBC contends that ICW owed a duty to defend and indemnify under the policy's contractual liability coverage endorsement, and that a triable issue of fact exists as to whether ICW is estopped from asserting coverage defenses.

With respect to restitution for defense costs, HBC contends a triable issue of fact exists as to whether ICW voluntarily paid defense costs.

DISCUSSION

A. ICW Owed No Duty To Defend And Indemnify HCW In The Mickey Body Action

We find that the Mickey Body complaint contained no claim that can reasonably be construed as potentially seeking recovery for property damage or bodily injury. Hence we conclude there was no duty owed by ICW to defend HBC in that action.

"An insurer's duty to defend litigation brought against its insured is broader than its duty to indemnify (Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 276-277, 54 Cal.Rptr. 104, 419 P.2d 168; [citations] ). The insurer must furnish a defense when it learns facts creating the potential of liability under the policy [citations]. But the insurer's obligation is not unlimited; the duty to defend is measured by the nature and kind of risks covered by the policy [citations]." (Giddings v. Industrial Indemnity Co. (1980) 112 Cal.App.3d 213, 217-218, 169 Cal.Rptr. 278.)

" 'In construing the language of an insurance policy, a court should give the words used their plain and ordinary meaning, unless the policy clearly indicates to the contrary.... When the language is clear, a court should not give it a strained construction to impose on the insurer a liability it has not assumed....' [Citation.]" (St. Paul Fire & Marine Ins. Co. v. Superior Court (1984) 161 Cal.App.3d 1199, 1202, 208 Cal.Rptr. 5.)

This case, like Giddings, supra, is readily distinguishable from Gray and many of the cases following it, which have broadly interpreted the insurer's duty to defend. (See, e.g., Val's Painting & Drywall, Inc. v. Allstate Ins. Co. (1975) 53 Cal.App.3d 576, 126 Cal.Rptr. 267.) In Val's Painting, "damage of the type covered by the policy had undisputably occurred, and the insurer relied on an unclear exclusionary clause in asserting it was not obligated to defend its insured. Here, on the other hand, the question concerns the scope of the basic coverage itself: did the [Mickey Body action] potentially seek to recover for 'property damage' [and bodily injury damage] covered by [the ICW] polic[y]?" (Giddings, supra, 112 Cal.App.3d at p. 218, 169 Cal.Rptr. 278; St. Paul Fire & Marine, supra, 161 Cal.App.3d at p. 1203, fn. 1, 208 Cal.Rptr. 5.)

Here, the policy contained the standard comprehensive general liability endorsement that the "company will pay on...