Schrillo Co. v. Hartford Accident & Indemnity Co.

• Decision Date: 29 May 1986
• Citation: 181 Cal.App.3d 766,226 Cal.Rptr. 717
• Court: California Court of Appeals Court of Appeals
• Parties: HIGHLANDS INSURANCE COMPANY, Plaintiff, * v. SCHRILLO COMPANY et al., Defendants. SCHRILLO COMPANY, Cross-Complainant and Appellant, v. HARTFORD ACCIDENT AND INDEMNITY COMPANY et al., Cross-Defendants and Respondents. Civ. B009207, B009416.

Page 717

226 Cal.Rptr. 717

181 Cal.App.3d 766

HIGHLANDS INSURANCE COMPANY, Plaintiff,^* v. SCHRILLO COMPANY et al., Defendants.

SCHRILLO COMPANY, Cross-Complainant and Appellant, v. HARTFORD ACCIDENT AND INDEMNITY COMPANY et al., Cross-Defendants and Respondents.

Civ. B009207, B009416.

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

May 29, 1986.

Review Denied Aug. 13, 1986.

Buchalter, Nemer, Fields, Chrystie & Younger, Robert A. Zeavin, John N. Quisenberry and Alan H. Barbanel, Los Angeles, for plaintiff, Highlands Ins. Co.

Irell & Manella, Gregory R. Smith, Thomas W. Johnson, Jr. and Melodie K. Larsen, Los Angeles, for defendant, cross-complainant and appellant, Schrillo Co.

Overton, Lyman & Prince and Kelley K. Beck, Los Angeles, for cross-defendant and respondent, Hartford Acc. and Indem. Co.

L. THAXTON HANSON, Associate Justice.

INTRODUCTION

Cross-complainant Schrillo Company ("Schrillo") appeals from the superior

                court's granting of a motion for summary judgment brought by cross-defendant Hartford Accident and Indemnity Company ("Hartford"). 1  Schrillo had filed a cross-complaint for declaratory relief against Hartford which, on the grounds of lack of coverage, had declined to defend or indemnify Schrillo in a separate action brought by a third party against Schrillo.  We affirm
                

BACKGROUND

Schrillo, principally a manufacturer of components used in the fabrication and assembly of aircraft parts, began the manufacture of power steering units for installation in Ford Trucks late in 1972 and discontinued the manufacture of the units in early 1975. On or about May 21, 1975, a power steering unit (manufactured by Schrillo prior to March 1975) was shipped to a distributor in the Minnesota area and, on August 18, 1975, installed in the truck of Larry A. Senger. In 1981, Mr. Senger filed a civil action against Schrillo ² alleging that on May 15, 1977 he had been critically injured when his truck crashed as a result of a "lock-up" in Schrillo's power steering unit. Mr. Senger alleged that Schrillo was negligent in the manufacture of the power steering unit which had been installed in his truck.

Schrillo tendered the defense of the Senger litigation to Hartford who declined to defend or indemnify Schrillo in the Senger action on the grounds that no bodily injury resulted within either of its policy periods. Schrillo thereafter settled the Senger litigation for $400,000.

In September 1983, Schrillo's excess carrier, Highlands Insurance Company ("Highlands"), filed a complaint for declaratory relief against Schrillo and Hartford alleging that Highlands was required neither to defend nor indemnify Schrillo in the Senger litigation. Schrillo cross-complained for declaratory relief against Highlands and Hartford alleging that it was entitled to reimbursement from Highlands and/or Hartford for costs incurred in defending and settling the Senger action. Hartford moved for summary judgment asserting that it had no duty to indemnify or defend Schrillo since Mr. Senger's alleged injury occurred in 1977, two years after the termination of Hartford's policy period. On July 24, 1985, the Los Angeles Superior Court (Hon. Irving A. Shimer, judge presiding) granted cross-defendant Hartford's motion for summary judgment. ³ Schrillo appeals.

FACTS

The following facts are undisputed: 1) That the two consecutive liability policies of insurance (identical in content) issued by Hartford to Schrillo covered the period from May 17, 1973 to April 17, 1975; 2) that Schrillo manufactured the power steering unit giving rise to the Senger action during the Hartford policy period; 3) that on approximately May 21, 1975, after the expiration of the last Hartford policy, Schrillo shipped the power steering unit giving rise to the Senger litigation to a distributor in Minnesota; and 4) that Mr. Senger's alleged bodily injuries occurred on May 15, 1977.

ISSUES

On appeal, cross-complainant Schrillo, in brief, contends that the Hartford policy Cross-defendant Hartford, in sum, asserts that the Hartford policy is not ambiguous, that the wordage is conspicuous, plain, and clear and that the Senger claim arose outside the coverage period of the policy.

covers the Senger claim because the wordage in the policy is ambiguous and not sufficiently conspicuous, plain and clear to exclude coverage.

Thus, the determinative issues raised on appeal can be distilled into two rhetorical questions: 1) whether or not Hartford's policies unambiguously, in conspicuous, plain and clear language, limits coverage to injuries occurring within the policy periods; and 2) whether or not Hartford's "Restrictive Hazards" endorsement, as raised the first time on appeal, can reasonably be construed to provide coverage for injuries occurring outside Hartford's policy period.

DISCUSSION

I.

Does the Hartford policy unambiguously limit, in conspicuous, plain and clear language, coverage to injuries occurring within the policy period? YES.

"An insurance policy is a contract, and when the terms are plain and unambiguous, it is the duty of the court to hold the parties to such contract. The court will not indulge in a forced construction of an insurance policy so as to fasten a liability on the insurance company which it has not assumed." (St. Paul Fire & Marine Ins. Co. v. Coss (1978) 80 Cal.App.3d 888, 896, 145 Cal.Rptr. 836.)

"It is, of course, well established that an insurer has a right to limit the policy coverage in plain and understandable language, and is at liberty to limit the character and extent of the risk it undertakes to assume (Continental Cas. Co. v. Phoenix Constr. Co. (1956) 46 Cal.2d 423, 431-432 [296 P.2d 801, 57 A.L.R.2d 914]; Kincer v. Reserve Ins. Co. (1970) 11 Cal.App.3d 714, 718 )." (VTN Consolidated, Inc. v. Northbrook Ins. Co. (1979) 92 Cal.App.3d 888, 892, 155 Cal.Rptr. 172.)

"[A]bsent a clear indication to the contrary, words in an insurance policy are to be read in their plain and ordinary sense." (Nichols v. Great American Ins. Co. (1985) 169 Cal.App.3d 766, 775, 215 Cal.Rptr. 416.)

In the case at bench, the two consecutive Hartford policies which insured Schrillo provided liability coverage in identical terms. The face sheet (or jacket) of the "CASUALTY INSURANCE POLICY" [bold type capitalized] issued by Hartford to Schrillo, under the headings "General Policy Provisions--Form 8117" [bold type]--"COVERAGE" [bold type capitalized] reveals the following language:

"Insurance is afforded by the Coverage Parts forming a part hereof, subject to such limits of liability as are stated therein and subject to all the terms of the policy having reference thereto.

Thereunder, and under the words "DEFINITIONS" [bold type capitalized], are listed the following definitions relevant to this case:

" 'BODILY INJURY' [bold type] means bodily injury, sickness or disease sustained by any person which occurs during the policy period, including death at any time resulting therefrom;" (Emphasis added.)

" 'OCCURRENCE' [bold type] means 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;" (Emphasis original.)

Under "COMPREHENSIVE GENERAL LIABILITY INSURANCE COVERAGE PART" [bold type capitalized] appears the following:

"I. COVERAGE A--BODILY INJURY LIABILITY

"COVERAGE B--PROPERTY DAMAGE LIABILITY

"The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of Coverage A--bodily injury or Coverage B--property damage We note that each time a defined term is used in the policy that it is italicized. We perceive nothing ambiguous, inconspicuous or unclear about the above quoted plain language.

to which this insurance applies, caused by an occurrence, ..." (Emphasis original.)

The case of Sylla v. United States Fid. & Guar. Co., supra, 54 Cal.App.3d 895, 127 Cal.Rptr. 38, ⁴ heavily relied upon by Schrillo is not only factually distinguishable (involving a specialized garagekeeper's policy) ⁵ but also does not represent the weight of authority. The other cases cited by Schrillo in its opening and reply briefs are either factually distinguishable, not to point, or unpersuasive.

"The [well settled] general rule is that the time of occurrence of an accident within the meaning of an indemnity policy is not the time that the wrongful act was committed, but the time when the complaining party was actually damaged. [Citations]" (Emphasis added.) (Remmer v. Glens Falls Indem. Co. (1956) 140 Cal.App.2d 84, 88, 295 P.2d 19; ⁶ see also Chamberlain v. Smith (1977) 72 Cal.App.3d 835, 846, 140 Cal.Rptr. 493; Arant v. Signal Insurance Co. (1977) 67 Cal.App.3d 514, 516, 136 Cal.Rptr. 689; Tijsseling v. General Acc. Etc. Assur. Corp. (1976) 55 Cal.App.3d 623, 626, 127 Cal.Rptr. 681; Kaiser Foundation Hospitals v. North Star Reinsurance Corp. (1979) 90 Cal.App.3d 786, 790, fn. 5, 153 Cal.Rptr. 678.)

In Remmer v. Glens Falls Indemn. Co., supra, 140 Cal.App.2d 84, 88-90, 295 P.2d 19, the reviewing court was faced with a policy with a virtually identical definition of an "occurrence" as in the instant case.

In Remmer, the insured had graded and filled some of his property in 1947 which changed its natural contours. As a result, in January 1952, an earth and rock slide from the insured's property overran the property of a neighbor, who filed suit against the insured for damages on April 18, 1952. Glens Falls, however, provided liability coverage to the insured that was only effective from October 26, 1945 to its cancellation on January 15, 1948. Therefore, it denied coverage on the ground that the claim was not based upon an "occurrence" taking place within the policy period. On appeal, the Remmer court concluded this denial was correct, stating at page 88, 295 P.2d 19; "The general rule is that the time of the occurrence of an accident within the...