Nabisco, Inc. v. Transport Indemnity Co.
| Decision Date | 10 June 1983 |
| Citation | 192 Cal.Rptr. 207,143 Cal.App.3d 831 |
| Court | California Court of Appeals Court of Appeals |
| Parties | NABISCO, INC., Cross-Complainant & Appellant, v. TRANSPORT INDEMNITY CO., Cross-Defendant & Respondent. Civ. 30260. |
Kinkle, Rodiger & Spriggs and Michael J. Logan, Santa Ana, for cross-complainant & appellant.
Cotkin, Collins, Kolts & Franscell and Raphael Cotkin, Larry W. Mitchell and Georgette Renata Herget, Los Angeles, Attorneys for cross-defendant & respondent.
In this insurance coverage dispute, the superior court found a Transport Indemnity Company (Transport) policy to be excess and hence no duty by Transport to defend or indemnify Nabisco Company (Nabisco) in an underlying personal injury action.
The facts are essentially undisputed. James J. Berry, a Trans-Con Lines truck driver, sued Nabisco for personal injuries sustained while loading his employer's vehicle at a Nabisco facility. On the date of the accident, Nabisco was the named insured under Home Insurance Company's (Home) umbrella excess policy number HEC-4764111, which provided coverage for losses in excess of $50,000 up to $5 million. 1 Nabisco was responsible for the first $50,000 of any loss. Although it could have purchased coverage for the Home deductible, Nabisco processed all liability claims under the retained limit of $50,000 "in house" because it was more cost-effective. The Nabisco attorney who supervised this department testified the Berry lawsuit was treated as a "self-insured" or "uninsured" claim to which the company's self-insured retention of $50,000 applied.
Trans-Con was the named insured under two Transport insurance policies. Number 00251 provided primary automobile liability coverage up to $50,000 per occurrence and number 00251-X provided excess coverage of $9,950,000 per occurrence. The primary Transport policy contained an "other insurance" clause which deemed its coverage excess if "there is other insurance or self-insurance."
Nabisco, claiming the status of additional insured under the primary Transport policy, tendered its defense in the Berry action to Transport. Transport refused the tender based on Nabisco's self-insurance and the Home umbrella coverage. 2 Nabisco eventually settled with Berry for $150,000. Home contributed $100,000; Nabisco paid the remainder and incurred more than $20,000 in defense expenses. Nabisco sued for reimbursement of its defense costs, settlement contribution, and punitive damages, based on Transport's alleged bad faith refusal to accept its tender of defense. The Transport Primary Policy is Expressly Excess Where There is "Other Insurance or Self-Insurance."
Nabisco urges us to disregard express language in the Transport policy, which deems its coverage excess where there is other insurance or self-insurance. Nabisco contends the term "self-insurance" as used in the Transport policy is not specifically defined and argues this creates an ambiguity which should be resolved in favor of primary coverage, including defense expenses. Not so. Courts generally enforce excess coverage provisions, particularly where there is no reasonable expectation of primary coverage and the rights of insureds and accident victims are unaffected by its application. (National American Insurance Co. v. Insurance Co. of North America (1977) 74 Cal.App.3d 565, 574, 140 Cal.Rptr. 828.) General principles of equity and express language in the Transport and Home policies militate against the result urged by Nabisco.
Nabisco does not claim it is confused by the concept of self-insurance; nor could it reasonably do so, since its arrangement with Home was deliberately designed to provide self-insurance for the amount of the Home deductible. The Home policy does not define self-insurance and Nabisco apparently understands its terms. In fact, in its argument for primary coverage by Transport, Nabisco relies on the very portion of the Home policy purporting to exclude defense expenses where self-insurance is involved. 3 The evidence is overwhelming that Nabisco was conversant with the concept of self-insurance and was in fact self-insured for the first $50,000 of any loss. 4 (See United States Steel Corp. v. Transport Indemnity Co. (1966) 241 Cal.App.2d 461, 475, 50 Cal.Rptr. 576, interpreting the same policy language under remarkably similar facts; and Lovy v. State Farm Insurance Co. (1981) 117 Cal.App.3d 834, 859, 173 Cal.Rptr. 307, where the court interpreted the term "retained limit" in an umbrella policy similar to Home's as meaning a form of self-insurance.)
Nabisco's resort to hypothetical hyperbole (the "mom and pop" grocery store argument) to conjure up an ambiguity in the Transport policy similarly fails. Ambiguity in an insurance policy, if it exists, must be found in the circumstances of the particular case; it may not be created in the abstract. (VTN Consolidated, Inc. v. Northbrook Insurance Co. (1979) 92 Cal.App.3d 888, 892, 155 Cal.Rptr. 172.)
In construing the language of insurance policies, words are given their popular and ordinary meaning. (Giddings v. Industrial Indemnity Co. (1980) 112 Cal.App.3d 213, 218, 169 Cal.Rptr. 278.) We recognize the term "self-insurance," while perhaps a misnomer, is nevertheless a common and accepted concept in risk management today. (Lovy v. State Farm Insurance Co., supra, 117 Cal.App.3d 834, 173 Cal.Rptr. 307; Metro U.S. Services, Inc. v. City of Los Angeles (1979) 96 Cal.App.3d 678, 683, 158 Cal.Rptr. 207; and Barrett, Attorney's Guide to Insurance & Risk Management (1978), Self Insurance, p. 481.) As used in the Transport policy the term self-insurance" is not ambiguous. Consequently, Transport's coverage is excess over both Nabisco's $50,000 of self-insurance and Home's $5 million umbrella policy.
Generally, an excess insurer has no duty to participate in the insured's defense or contribute to a settlement on its behalf until primary coverages are exhausted. (Signal Companies, Inc. v. Harbor Insurance Co. (1980) 27 Cal.3d 359, 367, 165 Cal.Rptr. 799, 612 P.2d 889; Olympic Insurance Co. v. Employers Surplus Lines Insurance Co. (1981) 126 Cal.App.3d 593, 601, 178 Cal.Rptr. 908.) Even where an excess carrier's defense and indemnity obligations do arise, the primary insurer remains responsible for defense expenses attributable to its coverage. (Aetna Casualty & Surety Co. v....
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