Navigators Specialty Insurance Company v. St Paul Surplus Lines Insurance et al
Filing
108
ORDER by Judge Samuel Conti denying 90 Motion for Summary Judgment; granting 93 Motion for Summary Judgment. (sclc1, COURT STAFF) (Filed on 6/17/2015)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
united States District Court
For the Northern District of California
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NAVIGATORS SPECIALTY INSURANCE
COMPANY,
) Case No. 13-cv-03499 SC
)
) ORDER ON CROSS MOTIONS FOR
Plaintiff,
) SUMMARY JUDGMENT
)
v.
)
)
)
ST. PAUL SURPLUS LINES INSURANCE )
COMPANY, LIBERTY SURPLUS
)
INSURANCE CORPORATION, TRAVELERS )
PROPERTY CASUALTY COMPANY OF
)
AMERICA, NORTH AMERICAN CAPACITY )
INSURANCE COMPANY, and DOES 1
)
through 100, inclusive,
)
)
Defendants.
)
)
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I. INTRODUCTION
This matter concerns an action by Navigators Specialty
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Insurance Company ("Navigators") against several insurance
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carriers, including defendant North American Capacity Insurance
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Company ("NAC"), for contribution of defense fees incurred in the
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defense of Navigator's named insured, McDevitt & McDevitt
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Construction Corporation ("McDevitt"), for claims arising from a
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construction project in Petaluma, California.
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are Navigators' and NAC's cross motions for summary judgment as to
Now before the Court
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NAC's duty to defend McDevitt under California law.
Both motions
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are fully briefed,1 and the Court finds them suitable for
3
disposition without oral argument pursuant to Civil Local Rule 7-
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1(b).
The essential facts are undisputed.
Because McDevitt is not an additional insured to the NAC
5
defend McDevitt.
8
united States District Court
insurance policy, Navigators cannot prove that NAC had a duty to
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For the Northern District of California
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reimbursement of defense fees and costs from NAC.
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Navigators' partial motion for summary judgment as to NAC's duty to
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Navigators therefore has no right to
Accordingly,
defend is DENIED and NAC's motion for summary judgment is GRANTED.
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II. BACKGROUND
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This case involves causes of action for declaratory relief,
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equitable contribution, and equitable subrogation arising out of
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NAC's alleged breach of its duty to defend and indemnify
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Navigators' named insured, McDevitt, against two underlying and
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consolidated actions for alleged construction defects ("Underlying
18
Actions").
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McDevitt as an additional insured under F&M Steel, Inc.'s ("F&M")
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insurance policy with NAC ("NAC Policy").
A.
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Navigators alleges that NAC had a duty to defend
The Underlying Actions
The Underlying Actions arose out of alleged defects in the
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design and construction of a commercial condominium complex located
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at 3820 Cypress Drive in Petaluma, California ("Project").
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McDevitt was the general contractor for the Project, and F&M
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1
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ECF Nos. 90 ("Navigators' Mot."); 92 ("NAC's Opp'n"); 96
("Navigators' Reply"); 93 ("NAC's Mot."); 99 ("Navigators' Opp'n");
101 ("NAC's Reply").
2
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subcontracted with McDevitt to provide "a complete structural steel
2
package" for the Project ("Subcontract").
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Facts ("JSF") ¶ 3.
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subcontract was completed in June of 2005.
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performed "EXTRA" work on the Project in November 2005, consisting
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of the installation of a lavatory sink bracket in unit four of the
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condominium complex.
Joint Stipulation of
F&M’s original scope of work under the
In addition, F&M
Id. ¶ 5.
united States District Court
For the Northern District of California
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In the first of the Underlying Actions, a condominium
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association sought damages from McDevitt and F&M for alleged
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construction defects to the Project's common areas.
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Condo Assoc. v. MMM Enterprises, LLC, et al., Sonoma County
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Superior Court Case No. SCV248794 ("3820 Cypress Action").
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Navigators defended McDevitt in the 3820 Cypress Action, and NAC
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defended F&M.
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3820 Cypress
In the second of the Underlying Actions, the owners of units
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three, nine, ten, and eleven of the Project sought damages from
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McDevitt and F&M for alleged construction defects to those units.
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Point Reyes Bird Observatory, et al. v. MMM Enterprises, LLC, et
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al., Sonoma County Superior Court Case No. SCV250623 ("PRBO
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Action").
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F&M.
Again, Navigators defended McDevitt, and NAC defended
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On February 4, 2013, the 3820 Cypress Action and the PRBO
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Action were consolidated (collectively "Underlying Actions").
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Navigators tendered the defense of McDevitt for the Underlying
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Actions to NAC, asserting that Navigators was entitled to NAC's
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participation in the defense and indemnity of McDevitt because
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McDevitt was allegedly an additional insured under the NAC Policy.
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In response, NAC disclaimed coverage by letter, asserting that
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McDevitt was not an additional insured under F&M's policy.
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B.
The Policies
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F&M's Subcontract with McDevitt required F&M to "obtain a
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comprehensive policy of public liability insurance . . .
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includ[ing] coverage for liability assumed under contract or
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agreement and completed operations coverage . . ."
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NACC000002.
united States District Court
For the Northern District of California
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The Subcontract further provided that the
subcontractor shall name [McDevitt] . . . as additional
insureds.
The following language will be included by
endorsement . . . : "It is further agreed that such
insurance as is afforded by this policy for the benefit
of the above additional insured(s) shall be PRIMARY
insurance as respects any claims . . . arising out of the
named insured’s operations . . ."
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JSF, Ex. 1 at
Id.
The NAC Policy provided F&M commercial general liability
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coverage for bodily injury and property damage during the policy
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period of October 1, 2005 to October 1, 2006 only if
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(1) The "bodily injury" or "property damage" is caused by
an "occurrence" that takes place in the "coverage
territory"; and
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(2) The "bodily injury"
during the policy period.
or
"property
damage"
occurs
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JSF, Ex. 11 at NAC000045.
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Pursuant to the Subcontract, F&M also obtained an additional
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insured endorsement modifying the NAC Policy so as to include
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[a]ny person or organization to which you are obligated
by virtue of written contract to provide insurance such
as is afforded by this policy, but only with respect to
(1) occurrences taking place after such written contract
has been executed and (2) occurrences resulting from work
performed by you during the policy period, or occurrences
resulting from the conduct of your business during the
policy period.2
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The only specially defined terms are the words “you” -- defined
as the named insured, F&M (JSF, Ex. 11 at NAC000052) -- and
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JSF ¶ 17, Ex. 12 ("AI Endorsement") (emphasis added).
Navigators
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claims that McDevitt qualified as an additional insured under this
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provision.
NAC disagrees, arguing that the work performed by F&M
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that allegedly caused the occurrences giving rise to the Underlying
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Actions -- that is, the property damage to the common areas and
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units three, nine, ten, and eleven of the Project -- occurred prior
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to the policy period.
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united States District Court
For the Northern District of California
C.
Litigation History
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Navigators filed a Third Amended Complaint for declaratory
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relief regarding defendants' duty to defend and indemnify McDevitt
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in the Underlying Actions, equitable contribution regarding defense
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costs associated with the Underlying Actions, and equitable
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subrogation, naming NAC and three other insurance companies as
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defendants.
ECF No. 55 ("Compl.").
The defendant insurance
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companies insured McDevitt's subcontractors.
The subcontractors
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were defendants -- along with McDevitt -- in the Underlying
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Actions.
Navigators argues that it is entitled to contribution
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from the defendant insurance companies for the defense costs and
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indemnity it incurred in the Underlying Actions on behalf of
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McDevitt because McDevitt was allegedly an additional insured under
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the policies issued by the defendants to McDevitt's subcontractors.
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On April 24, 2015, Navigators filed a motion for summary
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judgment as to NAC's duty to defend McDevitt in the Underlying
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Actions.
NAC filed a cross motion for summary judgment on May 8,
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2008.
Both motions are now before the Court.
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“occurrence” -- defined as “an accident, including continuous or
repeated exposure to substantially the same general harmful
conditions” (Id. at NAC000063).
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III. LEGAL STANDARD
Entry of summary judgment is proper "if the movant shows that
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there is no genuine dispute as to any material fact and the movant
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is entitled to judgment as a matter of law."
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56(a).
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party must either produce evidence negating an essential element of
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united States District Court
A.
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For the Northern District of California
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Summary Judgment
the nonmoving party's claim or defense or show that the nonmoving
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party does not have enough evidence of an essential element to
Fed. R. Civ. P.
"In order to carry its burden of production, the moving
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carry its ultimate burden of persuasion at trial."
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Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1102 (9th
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Cir. 2000).
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all justifiable inferences are to be drawn in his favor."
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Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
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judgment should be entered against a party that fails to make a
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showing sufficient to establish the existence of an element
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essential to its case.
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(1986).
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B.
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Nissan Fire &
"The evidence of the nonmovant is to be believed, and
Summary
Celotex Corp. v. Catrett, 477 U.S. 317, 323
Insurance Contract Interpretation
Where the underlying facts are undisputed, interpretation of an
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insurance policy is a question of law.
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Mendez, 213 Cal. App. 3d 41, 45 (1989); see also Legacy Vulcan
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Corp. v. Super. Ct., 185 C.A. 4th 667, 688 (2010) ("Contract
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interpretation, including the resolution of any ambiguity, is
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solely a judicial function, unless interpretation turns on
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credibility of extrinsic evidence.").
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Merced Mut. Ins. Co. v.
California courts follow four basic rules of construction when
interpreting an insurance policy:
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(a) Unambiguous policy terms are given their "plain
meaning" in the "context" of the policy and of the way in
which they are used.
(b) In the absence of a plain meaning, that is, where the
terms are in fact ambiguous, they are construed so as to
give effect to the insured's "objectively reasonable
expectations."
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(c) If the previous rule fails to resolve the ambiguity,
the terms are construed against the insurer . . .
(d) Even if unambiguous, exclusions from coverage must be
"conspicuous, plain, and clear" to be enforceable.
united States District Court
For the Northern District of California
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2 Witkin, Summary of Cal. Law 10th (2005), Insurance, § 48
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(internal citations omitted); see also Legacy Vulcan Corp., 185
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C.A. 4th at 688 (describing the rules of policy interpretation).
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C.
Actions to Obtain Contribution from a Coinsurer
In an action by an insurer to obtain contribution from a
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coinsurer, the burden is on the insurer who paid the loss to show
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that a potential coverage obligation arose or existed under the
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coinsurer's policy.
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CA 4th 874, 879 (2006).
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when it makes a prima facie showing of a potential for coverage
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under the coinsurer's liability insurance policy.
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burden then shifts to the defendant to prove the absence of
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coverage.
See Safeco Ins. Co. of Am. v. Super. Ct., 140
The plaintiff meets its burden of proof
Id. at 881.
The
Id.
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IV. DISCUSSION
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In order for Navigators to make a prima facie showing of a
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potential for coverage under NAC's Policy, it must first show that
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McDevitt qualifies as an additional insured.
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AI Endorsement in the NAC Policy sets out three requirements.
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The schedule of the
First, the additional insured must be a "person or organization
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to which [F&M is] obligated by virtue of a written contract to
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provide insurance."
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not dispute that F&M's subcontract with McDevitt required F&M to
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name McDevitt as an additional insured.
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AI Endorsement at NAC000050.
The parties do
Second, the AI Endorsement specifies that a party is covered
taking place after such written contract has been executed."
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united States District Court
as an additional insured "only with respect to . . . occurrences
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For the Northern District of California
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The parties do not dispute that the occurrences at issue in the
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Underlying Actions took place after the Subcontract with McDevitt
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Id.
was executed.
Third, the AI Endorsement states that a party qualifies as an
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additional insured only with respect to "occurrences resulting from
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work performed by [F&M] during the policy period, or occurrences
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resulting from the conduct of [F&M's] business during the policy
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period."
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the Underlying Actions consisted of damage to the Project's common
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areas and units three, nine, ten, and eleven.
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undisputed that F&M completed its work on the common areas and
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units three, nine, ten, and eleven by June 2005, several months
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prior to the start of the NAC Policy's coverage period.
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the only work that was completed on the Project by F&M during the
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policy period was the installation of a sink bracket in unit four
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in November 2005.
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cause the property damage in the Underlying Actions.
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Navigators argues that because some of F&M's work under the
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Subcontract (the installation of the sink bracket in unit four) was
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completed during the policy period, all of F&M's work under the
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Subcontract (including its work on the common areas and units
Id.
It is undisputed that the liabilities at issue in
It is also
In fact,
F&M's work on the sink bracket, however, did not
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Nevertheless,
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three, nine, ten, and eleven) should be considered within the
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policy period.
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NAC's duty to defend therefore turn on the Court's construction of
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the phrase "work [and business conduct] performed by [F&M] during
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the policy period," and whether that construction encompasses F&M's
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work on the sink bracket in unit four.
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The parties' cross motions for summary judgment on
In interpreting the AI Endorsement, the Court's first task is
united States District Court
For the Northern District of California
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to determine if the language in question is ambiguous.
Navigators
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argues that the language is "patently ambiguous" because it
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allegedly differs from standard additional insured endorsements
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which are "commonly understood to provide coverage to the
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additional insured for property damage . . . arising out of the
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named insured’s completed operations."
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If the language of the AI Endorsement is clear and explicit,
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however, the fact that it differs from "standard" additional
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insured endorsements is immaterial.
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Ct., 2 Cal. 4th 1254, 1264 (1992) ("If contractual language is
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clear and explicit, it governs."); see also Waller v. Truck Ins.
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Exchange, Cal. 4th 1, 18 (1995) (holding that courts should "not
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strain to create ambiguity where none exists").
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below, the Court finds the phrase "occurrences resulting from work
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performed by you during the policy period, or occurrences resulting
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from the conduct of your business during the policy period" to be
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clear and explicit.
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Navigators’ Mot. at 17-18.
See Bank of the W. v. Super.
For the reasons
"Occurrence" is specifically defined in the NAC Policy as "an
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accident, including continuous or repeated exposure to
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substantially the same general harmful conditions."
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NAC000063.
JSF, Ex. 11 at
Here, occurrence refers to the property damage
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allegedly caused by construction defects to the common areas and
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units three, nine, ten, and eleven of the Project.
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The Court finds that the phrases "resulting from work" and
"occurrence" must have been caused by F&M's "work" or "conduct."
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"Work" is not specifically defined by the NAC Policy.
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plain meaning of the word in the context of the AI Endorsement
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united States District Court
"resulting from the conduct of your business" mean that the
5
For the Northern District of California
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Schedule, a layman would understand "work" to refer to F&M's
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provision of services and materials under the Subcontract.
Using the
The
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dictionary definition of "work" reinforces this interpretation,
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defining "work" as the "[p]hysical and mental exertion to attain an
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end, esp. as controlled by and for the benefit of an employer."
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Black's Law Dictionary 1635 (8th ed. 2004).
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of the AI Endorsement, "work" means F&M's "physical and mental
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exertion" on the Project pursuant to the Subcontract with McDevitt
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that resulted in the "occurrence."
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of your business" is broader than "work" and encompasses all other
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business activities in addition to the specific "physical and
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mental exertion" that F&M performed under the Subcontract.
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Thus, in the context
The Court finds that "conduct
"During the policy period" modifies "work" and "conduct of
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your business."
Specifically, the "physical and mental exertion"
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under the Subcontract or other business "conduct" that caused the
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"occurrence" must have been performed during the policy period --
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specifically, between October 1, 2005 and October 1, 2006.
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the "physical and mental exertion" that caused the property damage
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to the common areas and units three, nine, ten, and eleven of the
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Project was F&M's provision of the structural steel package, which
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Here,
Court were to adopt the broadest possible definition of "conduct of
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your business," Navigators does not point to any conduct during the
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policy period that could have contributed to the property damage in
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the Underlying Actions.
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F&M's work or business conduct during the policy period caused the
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occurrence that gave rise to the liabilities in the Underlying
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united States District Court
was completed months before the policy period began.3
2
For the Northern District of California
1
Actions, McDevitt is not an additional insured under the NAC
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Policy.
Even if the
Thus, because there is no evidence that
Because McDevitt does not qualify as an additional
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insured, Navigators cannot show a potential for coverage under the
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NAC Policy.
Navigators asks the Court to interpret the word "work" to
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include "the entirety of the work F&M performed under the
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subcontract with McDevitt."4
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words, it urges the Court to read the AI Endorsement schedule as if
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it said, "occurrences resulting from work, any part of which was
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completed during the policy period."5
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interpretation, however, is contrary to the plain meaning of the
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clear and explicit language of the AI Endorsement schedule as it
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was actually written.6
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Navigators' Mot. at 12.
In other
Navigators' proposed
See Cal. Dairies Inc. v. RSUI Indem. Co.,
Navigators does not claim that the "EXTRA" work performed in
November 2005 on the sink bracket in unit four contributed to the
property damage in the Underlying Actions. Even if it did, there
is no evidence to support such a claim.
4
In support of its proposed interpretation, Navigators cites
without explanation Roger H. Prouix v. Crest-Liners, Inc., 98 Cal.
App. 4th 182, 196-97 (2002). Prouix, however, does not provide any
support for Navigators' proposed interpretation.
5
At the very least, Navigators' proposed interpretation would
require the Court to arbitrarily replace the phrase "during the
policy period" with the phrase "any time under the contract."
6
Further, even if the Court were to adopt Navigators' proposed
interpretation, McDevitt would not necessarily qualify as an
additional insured. The work that was performed in November 2005
11
1
617 F. Supp. 2d 1023, 1030 n.3 (E.D. Cal. 2009) (holding that
2
undefined insurance policy terms should be interpreted as laymen
3
would read them);7 AIU Ins. Co. v. Super. Ct., 51 Cal. 3d 807, 822
4
(1990) (holding that "if the meaning a layperson would ascribe to
5
contract language is not ambiguous," then the court applies that
6
meaning).
7
Navigators also argues that because the disputed language
united States District Court
For the Northern District of California
8
allegedly limits the scope of coverage, it should be interpreted
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narrowly against the insurer.
While it is true that exclusionary
10
clauses should be interpreted narrowly against the insurer,
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Navigators' argument presupposes that McDevitt is an additional
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insured and that the disputed language merely changes the scope of
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the coverage afforded.
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change the scope of coverage; rather, it limits the status of
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additional insureds to certain liabilities.
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rejected arguments claiming that similar language provided coverage
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while merely changing the scope of the coverage.
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was "EXTRA" and separate from the scope of work under the
Subcontract. "Extra work" in construction law, is "work not
required under the contract; something done or furnished in
addition to the contract's requirements; work entirely outside and
independent of the contract and not contemplated by it." Black's
Law Dictionary 1635 (8th ed. 2004). Thus, it is questionable
whether F&M performed any work at all under the Subcontract during
the policy period.
7
"Work" was not a specifically defined term in the NAC Policy.
Although the NAC Policy defines the term “your work”, that
specifically defined term is not used in the AI Endorsement.
Moreover, the AI Endorsement does not place quotation marks around
the word "work" to indicate that it was specifically defined. See
JSF, Ex. 11 at NAC 000052 (“[W]ords and phrases that appear in
quotation marks have special meaning.”). Accordingly, the Court
declines to apply the definition of “your work” to the word “work”
and applies its plain meaning instead. Scott v. Cont'l Ins. Co.,
44 Cal. App. 4th 24, 28-29 (1996) ("Words in an insurance policy,
unless given special meanings by the policy itself, must be
understood in their ordinary sense.").
19
20
21
22
23
24
25
26
27
28
The disputed language, however, does not
12
California courts have
See Gemini Ins.
Union Fire Ins. Co. of Pittsburgh, Pa. v. Nationwide Ins. Co., 69
3
Cal. App. 4th 709, 720 (1990).
4
narrowly, the terms of the AI Endorsement clearly require the
5
property damage at issue in the Underlying Actions to have been
6
caused by work performed during the policy period.
7
proposed alternative interpretations are not a "narrow" reading of
8
united States District Court
Co. v. Delos Ins. Co., 211 Cal. App. 4th 719, 722-23 (2012); Nat'l
2
For the Northern District of California
1
the language in the AI Endorsement; they are an unreasonable
9
reading of language that is otherwise clear and explicit.
10
Regardless, even interpreted
Navigators'
Next, Navigators argues that because NAC defended its named
11
insured, F&M, in the Underlying Actions, it follows that NAC had a
12
duty to defend its additional insured, McDevitt.
13
it is true that an insurer's duty to defend an additional insured
14
is as broad as its duty to defend its named insured (see Presley
15
Homes, Inc. v. Am. States Ins. Co., 90 Cal. App. 4th 571, 574
16
(2001)), for the reasons provided above, McDevitt is not an
17
additional insured with respect to the Underlying Actions.
18
Regardless, NAC's decision to defend F&M is irrelevant as to
19
whether NAC has a duty to defend McDevitt.
20
Not so.
Although
Finally, Navigators argues that because NAC allegedly never
21
responded to its tender of the PRBO Action, NAC waived its right to
22
disclaim coverage.
23
Action on August 27, 2012 by forwarding a copy of NAC's prior
24
denial of the 2830 Cypress Action.
25
response to the PRBO Action was the same as its response to the
26
2830 Cypress Action, however, does not mean that NAC intentionally
27
relinquished its right to deny coverage in the PBRO Action.
28
contrary, even if NAC could have made its position more explicit,
NAC responded to Navigators' tender of the PBRO
13
JSF ¶ 32.
Just because NAC's
On the
1
NAC's August 27 response communicated its intention to deny
2
coverage in the PRBO Action on the same grounds that it denied
3
coverage in the 2830 Cypress Action.
4
5
6
V. CONCLUSION
The undisputed facts show that McDevitt was not an additional
united States District Court
insured under the terms of the AI Endorsement because McDevitt's
8
For the Northern District of California
7
liability to the plaintiff in the Underlying Actions was not the
9
result of an "occurrence" caused by F&M's work performed during the
10
period of coverage provided by the NAC Policy.
11
Navigators cannot show that a potential coverage obligation arose
12
or existed under the NAC Policy.
13
duty to defend McDevitt, and Navigators has no right to
14
reimbursement.
15
As a result,
Accordingly, NAC did not have a
For the reasons given herein, Plaintiff's Motion for Summary
16
Judgment is DENIED, and Defendant's Motion for Summary Judgment is
17
GRANTED.
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IT IS SO ORDERED.
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Dated: June 17, 2015
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UNITED STATES DISTRICT JUDGE
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