Reagen's Vacuum Truck Service, Inc. v. Beaver Ins. Co.

Decision Date07 December 1994
Docket NumberNo. B073701,B073701
Citation31 Cal.App.4th 375,37 Cal.Rptr.2d 89
CourtCalifornia Court of Appeals Court of Appeals
PartiesREAGEN'S VACUUM TRUCK SERVICE, INC., etc., et al., Plaintiffs and Appellants, v. BEAVER INSURANCE COMPANY, etc., Defendant and Respondent.

Henderson & Wohlgemuth and Andrew K. Whitman, Ventura, for plaintiffs and appellants.

Nemecek & Cole and Jonathan B. Cole and Karen K. Coffin, Sherman Oaks, for defendant and respondent.

STEVEN J. STONE, Associate Justice.

Reagen's Vacuum Truck Service, Inc., Bennie Reagen and Dennis Reynolds (Reagen's) appeal from a judgment following entry of summary judgment in favor of Beaver Insurance Company (Beaver). Reagen's, in its first amended complaint, had alleged causes of action against Beaver for breach of duty of good faith and fair dealing, breach of contract, breach of fiduciary duties, fraud, and negligence stemming from the manner in which Beaver allegedly handled defense of a claim against Reagen's by an injured employee. Beaver moved for summary judgment against Reagen's on grounds that there was no potential for coverage under the terms of Reagen's insurance policy with Beaver and that Reagen's had suffered no compensable damage because Harbor Insurance, in a settlement with Reagen's, agreed to pay all expenses relating to the defense of the underlying action. The trial court granted summary judgment based upon the policy's exclusion.

Reagen's contends that the trial court: 1) erroneously ruled no coverage existed under the terms of the employer's liability portion of the policy; and 2) erroneously concluded that the court's ruling on the coverage issue disposed of all material issues raised by the complaint. We affirm the judgment.


Reagen's was engaged in a business of providing vacuum truck cleaning services for large petroleum storage tanks. While Reagen's was covered by Beaver's workers' compensation and employer liability policy, one of Reagen's employees, Shawn Cherry, filed a complaint against Reagen's in the Ventura County Superior Court alleging debilitating injury and illness from exposure to toxic chemicals during his employment with Reagen's. Cherry's amended complaint included Chevron, U.S.A., Inc., Shell Western E and P, Inc., and Union Oil Company as defendants. The complaint alleged the intentional torts of intentional concealment and aggravation of injury and intentional infliction of emotional distress, by wilfully and intentionally concealing knowledge that exposure to the petroleum by-products was hazardous and refusal to provide protective devices even after other employees had been overcome by noxious fumes.

Reagen's turned to its various insurers to provide a defense. Beaver defended Reagen's in the direct action by Shawn Cherry and settled Mr. Cherry's claim. Reagen's oil company clients who were named as additional defendants in the Cherry suit, cross-complained against Reagen for equitable and contractual indemnity. Beaver had not assumed the defense of the oil companies and denied coverage for the cross-complaints based upon a contractually assumed liability exclusion in the policy. Reagen's brought suit against Beaver and other insurance companies. Reagen's alleged that Beaver postured the settlement of the action so that the bulk of Reagen's financial responsibility would not fall within the direct action brought by Cherry but would fall instead within the cross-complaints prosecuted by the oil companies for which Beaver denied coverage.

Beaver moved for summary judgment on grounds that its policy specifically and unambiguously excluded coverage for "bodily injury intentionally caused or aggravated" by the insured and that it had no duty to defend the oil companies who Reagen's had contractually agreed to indemnify. Reagen's moved for summary adjudication of issues based on its "bad faith" claim. The trial court ruled that Harbor Insurance had the obligation to defend Reagen's under its general comprehensive liability policy, but that Beaver had no duty to defend because there was no coverage. Based upon its ruling, the court found unnecessary the resolution of Reagen's motion for summary adjudication of issues.

1. Standard of Review.

To warrant a grant of summary judgment, the defendant must establish either a complete defense to plaintiff's action or demonstrate the absence of an essential element of plaintiff's case. (Davis v. Gaschler (1992) 11 Cal.App.4th 1392, 1396, 14 Cal.Rptr.2d 679; Saldana v. Globe-Weis Systems Co. (1991) 233 Cal.App.3d 1505, 1510-1511, 285 Cal.Rptr. 385; Code Civ.Proc., § 437c.) In revisiting the matter on appeal, we undertake an independent review. (Davis, supra, 11 Cal.App. 4th at p. 1396, 14 Cal.Rptr.2d 679; Saldana, supra, 233 Cal.App.3d at p. 1515, 285 Cal.Rptr. 385.) We are not bound by the reasons stated by the trial court supporting its ruling as we review the ruling and not its rationale. (Stratton v. First Nat. Life Ins. Co. (1989) 210 Cal.App.3d 1071, 1083, 258 Cal.Rptr. 721.)

2. Construction of Policy.

Reagen's asserts that the court never should have reached the issue of the "intentionally caused injury" exclusion because the additional insured endorsements should have provided direct and primary coverage to the oil companies. Further, Reagen's asserts that "it is clear" the type of injury claimed by Shawn Cherry falls within the employer's liability coverage under the employer's liability policy.

Where the meaning of documents is in dispute, we interpret the writing independently as a matter of law, absent conflicting evidence. (Stratton v. First Nat. Life Ins. Co., supra, 210 Cal.App.3d 1071, 1084, 258 Cal.Rptr. 721.) In construing insurance contracts, doubts, uncertainties and ambiguities in the policy language ordinarily should be construed in favor of the insured to protect the insured's reasonable expectation of coverage. (Producers Dairy Delivery Co. v. Sentry Ins. Co. (1986) 41 Cal.3d 903, 912, 226 Cal.Rptr. 558, 718 P.2d 920.) Whether language in the policy is ambiguous is a question of law. (Ibid.) Language in a policy is ambiguous when it is capable of two or more constructions, both of which are reasonable. (Ibid.) We cannot strain interpretation of policy language to find an ambiguity, nor can a finding of ambiguity be based on an unreasonable misunderstanding on the part of the insured. (Id., at pp. 912, 913, 226 Cal.Rptr. 558, 718 P.2d 920; see also Bay Cities Paving & Grading, Inc. v. Lawyers' Mutual Ins. Co. (1993) 5 Cal.4th 854, 867, 21 Cal.Rptr.2d 691, 855 P.2d 1263.)

The employer's liability policy was written in conjunction with the workers' compensation policy. Under Reagen's interpretation, by adding the oil companies as additional insureds, the employer's liability policy became a general comprehensive policy as to those named insureds. This interpretation would run counter to the statutory prohibition that liability insurance not include workers' compensation insurance and the rule of the Insurance Commissioner that other classes of insurance may not be included in the same policy providing workers' compensation and employers' liability insurance. (Producers Dairy Delivery Co. v. Sentry Ins. Co., supra, 41 Cal.3d 903, 914, 226 Cal.Rptr. 558, 718 P.2d 920.)

"[E]mployers' liability insurance is traditionally written in conjunction with workers' compensation policies, and is intended to serve as a 'gap-filler,' providing protection to the employer in those situations where the employee has a right to bring a tort action despite the provisions of the workers' compensation statute or the employee is not subject to the workers' compensation law.... Generally, these two kinds of coverage are mutually exclusive.... Most employers' liability policies limit coverage to liability for which the insured is held liable as an employer." (Producers Dairy Delivery Co. v. Sentry Ins. Co., supra, 41 Cal.3d 903, 916, 226 Cal.Rptr. 558, 718 P.2d 920, fn. omitted; see also B & E Convalescent Center v. State Compensation Ins. Fund (1992) 8 Cal.App.4th 78, 87-88, fn. 9, 9 Cal.Rptr.2d 894.)

Reagen's asserts that its policy with Beaver added certain oil companies as additional insureds. However, the record contains copies of endorsements only as to Chevron Geothermal, Union Oil Company, and Sun Exploration and Production. These endorsements are expressly limited to employees on the payroll of Reagen's. The policy stated that "You are insured if you are an employer named in item 1 of the Information Page." Consequently, Beaver would have a duty to defend the additional insureds only if Cherry was acting in the capacity of employee to the additional insureds.

As stated in Producers Dairy Delivery Co. v. Sentry Ins. Co., supra, 41 Cal.3d 903, 916, 226 Cal.Rptr. 558, the workers' compensation policy and the employers' liability provisions in Beaver's policy were meant to be read together. Reagen's proffered interpretation would require Beaver to pay for Cherry's injuries twice, once through workers' compensation on Reagen's behalf, and the second time by providing on Reagen's behalf indemnity for Cherry's tort suit. (Id., at p. 917, 226 Cal.Rptr. 558.) This dual recovery is contrary to the concept of employers' liability insurance and violative of the statutory policy of the state. (Ibid.) If the trial court correctly found that Beaver owed no duty to defend Reagen's, there was no need to discuss Reagen's opposition to the motion on grounds of the additional endorsements

3. Duty to Defend.

The duty of an insurer to defend an insured is broader than the duty to indemnify. (Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 295, 24 Cal.Rptr.2d 467, 861 P.2d 1153; Devin v. United Services Auto. Assn. (1992) 6 Cal.App.4th 1149, 1157, 8 Cal.Rptr.2d 263.) An insurer may owe a duty to defend where no damages are ultimately awarded. (Montrose Chemical Corp., supra, 6 Cal.4th at p. 295, 24...

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