Pa. Gen. Ins. Co. v. American SAFETY Indem. Co.

• Decision Date: 27 October 2010
• Docket Number: No. D054522.,D054522.
• Citation: 111 Cal.Rptr.3d 403,185 Cal.App.4th 1515
• Court: California Court of Appeals Court of Appeals
• Parties: PENNSYLVANIA GENERAL INSURANCE COMPANY, Plaintiff and Appellant, v. AMERICAN SAFETY INDEMNITY COMPANY, Defendant, Cross-complainant and Appellant; National Union Fire Insurance Company of Pittsburgh, Cross-defendant and Respondent.

185 Cal.App.4th 1515

111 Cal.Rptr.3d 403

PENNSYLVANIA GENERAL INSURANCE COMPANY, Plaintiff and Appellant,

v. AMERICAN SAFETY INDEMNITY COMPANY, Defendant, Cross-complainant and Appellant;National Union Fire Insurance Company of Pittsburgh, Cross-defendant and Respondent.

No. D054522.

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

June 3, 2010.

Review Denied Oct. 27, 2010.

COPYRIGHT MATERIAL OMITTED.

COPYRIGHT MATERIAL OMITTED.

Wolkin Curran, Brandt L. Wolkin, San Francisco, and Dawn A. Silberstein, Piedmont, for Plaintiff and Appellant.

Blau & Associates, David S. Blau, David M. Morrow, Los Angeles, and James Whitemyer for Defendant, Cross-complainant and Appellant.

Branson, Brinkop, Griffith & Stong, John H. Podesta, John R. Campo, Redwood City, and Geoffrey Hutchinson for Cross-defendant and Respondent.

McDONALD, J.

D.A. Whitacre Construction, Inc., (Whitacre), a framing subcontractor on a construction project, was insured under a commercial general liability (CGL) insurance policy issued by plaintiff Pennsylvania General Insurance Company (Pennsylvania General) for the period October 1998 through December 2001. While insured by Pennsylvania General, Whitacre entered into a subcontract to perform work on a project and completed that work. At the conclusion of Pennsylvania General's coverage period, and after Whitacre's work on the project was completed, Whitacre was insured by a CGL policy issued by defendant American Safety Indemnity Company (ASIC), for the period December 2001 through December 2002. ¹

In an ensuing construction defect lawsuit involving Whitacre (the construction defect litigation), various parties alleged that Whitacre's work on the project was improperly done and had created various problems with the project. Whitacre tendered its defense to both Pennsylvania General and ASIC. Pennsylvania General accepted Whitacre's tender of the defense under a reservation of rights and ultimately paid the defense and settlement costs for Whitacre. ASIC declined Whitacre's tender, asserting there was no possibility of coverage under its policy, and did not participate in defending or indemnifying Whitacre.

After the underlying construction defect litigation was settled, Pennsylvania General filed the present lawsuit against ASIC seeking equitable contribution from ASIC for a portion of the defense and indemnity costs paid by Pennsylvania General. The trial court, ruling on cross-motions for summary judgment, concluded ASIC had no responsibility to pay any portion of the defense or indemnity costs because there was no potential coverage under ASIC's policy for the claims asserted against Whitacre in the construction defect litigation and entered summary judgment for ASIC. Pennsylvania General timely appealed.

I FACTUAL BACKGROUND

A. The Involved Entities

Whitacre was a framing subcontractor. Pennsylvania General insured Whitacre under a CGL policy for the period October 7, 1998, through December 31, 2001. ASIC insured Whitacre under a CGL policy for the period December 31, 2001, through December 31, 2002. National Union Fire Insurance Company of Pittsburgh, Pennsylvania (National), a cross-defendant, insured Whitacre under a CGL policy for the period December 31, 2002, through October 1, 2005.

B. The Project

In the summer of 1999 an entity known as “900 F Street Partners” (owners) retained GAFCON/Taylor Ball, Joint Venture (GAFCON) as general contractor for a construction project. In December 1999, GAFCON entered into a subcontract with Whitacre pursuant to which Whitacre agreed to provide framing and rough carpentry work for the project. Whitacre substantially completed its work by June 2001, although it performed some punchlist work after June 2001. The final inspection notice for the entire project was issued in March 2002.

C. The Third Party Lawsuits

In the construction defect litigation, involving a series of lawsuits commenced in April 2002 that ultimately consolidated, owners alleged there were numerous problems in the construction of the project. Among the claims asserted in the construction defect litigation was the allegation that Whitacre's work was deficient and had caused damage to the project. ²

D. The Defense and Settlement

Whitacre tendered the defense of the construction defect litigation to numerous insurers, including Pennsylvania General and ASIC. Pennsylvania General accepted the tender of the defense for Whitacre as well as for GAFCON as an additional insured under the policy under a reservation of rights. ³ ASIC declined Whitacre's tender of the defense (as well as GAFCON's tender of the defense as an additional insured under the ASIC policy), asserting various provisions of its policy excluded coverage for the claims asserted in the construction defect litigation, including a “pre-existing damage” exclusion in ASIC's policy.

Pennsylvania General funded the defense of Whitacre and GAFCON in the construction defect litigation and paid about $780,000 as defense costs. Pennsylvania General and its assignor paid an additional $775,000 to settle the claims asserted in the construction defect litigation against its insureds. ⁴

II THE PRESENT ACTION

Pennsylvania General filed the present action seeking declaratory relief and equitable contribution from ASIC, asserting ASIC's policy provided coverage for some or all of the damages sought against Whitacre in the construction defect litigation and therefore ASIC should be required to contribute to the defense and settlement costs paid by Pennsylvania General. ASIC's answer denied its policy provided any potential for coverage and therefore asserted it owed no defense or indemnity obligations to Whitacre. ASIC filed a cross-complaint against a subsequent insurer (National) asserting that, if ASIC owed any obligation to share in the costs of defending and indemnifying Whitacre, it was entitled to equitable contribution from National as another insurer that also owed defense or indemnity obligations to Whitacre.

All parties filed motions seeking summary judgment. ⁵ ASIC argued it was entitled to summary judgment because its policy covered only damages caused by an occurrence during the term of the policy, and expressly excluded coverage for any loss that first manifested before the term of its policy. ASIC argued that because its policy contained language eliminating any potential coverage under the “progressive damage-continuous trigger” of Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 42 Cal.Rptr.2d 324, 913 P.2d 878 ( Montrose ), it could not have an obligation to defend and indemnify Whitacre concurrent with any defense and indemnification by any prior insurer for Whitacre, and the absence of any possible concurrent obligation shared with Pennsylvania General precluded Pennsylvania General's claim for equitable contribution. Pennsylvania General opposed ASIC's motion, arguing that because there was potential coverage under both ASIC's policy and Pennsylvania General's policy, it was entitled to contribution from ASIC for the defense costs and was presumptively entitled to contribution for the settlement costs.

Pennsylvania General's cross-motion for summary judgment interposed the same arguments: there was at least a potential for coverage under ASIC's policy for the claims asserted in the construction defect litigation; this potential coverage entitled Pennsylvania General (as another insurer that honored its obligation to provide a defense to Whitacre) to require ASIC to contribute to the defense costs under equitable contribution principles; and ASIC was presumptively liable to contribute to the settlement costs. ASIC's opposition to Pennsylvania General's motion asserted there was no potential for coverage under its policy, and therefore no duty to defend or indemnify, because ASIC's policy contained language excluding coverage for any occurrence that happened before the effective date of its policy. ASIC argued the term “occurrence” employed in ASIC's policy expressly and unambiguously referred to the underlying conduct that caused the resulting damage, rather than to the damage resulting from that conduct, and it was undisputed Whitacre's conduct was completed before the effective date of ASIC's policy. ASIC therefore argued there was no potential for coverage under ASIC's policy, regardless of when the damage resulting from Whitacre's conduct may have occurred, because all of Whitacre's work (the causal conduct) was completed prior to ASIC's policy period; ASIC's definition of “occurrence” did not suggest damage resulting from that conduct was germane to determining when there was an occurrence.

The trial court granted ASIC's motion for summary judgment and denied Pennsylvania General's motion for summary judgment, concluding ASIC's policy excluded coverage for the claims asserted against Whitacre in the construction defect litigation because Whitacre's work was completed before the inception of ASIC's policy. The trial court reasoned that under ASIC's CGL policy:

“The terms ‘occurrence’ and ‘property damage’ are distinctly defined and are not synonymous. In evaluating the trigger of coverage in the policies, there are two separate triggers, ‘occurrence’ and ‘property damage’ which are not the same, in light of the fact that ‘property damage’ is caused by an ‘occurrence.’ [Citations.] An occurrence is a causal event. [Citation.] [¶] ... [ASIC's] policy requires that ... the occurrence [both] ... ‘happen during the term of the insurance’ ... and cause property damage during the policy period. It also excludes a prior ‘occurrence’.... [¶] ... [¶] In the context of the underlying action, the Court finds that the ‘occurrence’ (the act causing the injury/damage), here the defective framing work performed by Whitacre, could arise no later than the time Whitacre's framing work on the project was completed. The undisputed evidence establishes that Whitacre's work was...