Court Concepts, Inc. v. Scottsdale Indemnity Company

Filing 15

ORDER Denying Plaintiff's 8 Motion for Partial Summary Judgment. Signed by Judge Gonzalo P. Curiel on 7/25/18. (dlg)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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COURT CONCEPTS, INC., a California
corporation,

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ORDER DENYING MOTION FOR
PARTIAL SUMMARY JUDGMENT

Plaintiffs,

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Case No.: 18-cv-421-GPC-BGS

v.
[DKT. NO. 8.]

SCOTTSDALE INDEMNITY
COMPANY, an Ohio corporation,

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Defendant.

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Before the Court is Plaintiff Court Concepts, Inc.’s (“Court Concepts”) Motion for

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Partial Summary Judgment. Dkt. No. 8. Plaintiff seeks a declaration from this Court that

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Defendant Scottsdale Insurance Company1 (“SIC”) owes Plaintiff a duty to defend in

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Gamett, et. al v. Dennis Mathis Construction, et al., San Diego County Superior Court

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Case No. 37-2017-00002603-CU-CD-CTL and QCB Holding LLC, et. al v. Pete Hill

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Construction Company, et al., San Diego County Superior Court Case No. 37-2016-

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00027195-CU-BC-CTL. Dkt. No. 8-1 at 1.

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Defendant asserts that they were erroneously sued as Scottsdale Indemnity Company and that their
actual name is Scottsdale Insurance Company. Dkt. No. 10 at 1.
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Plaintiff filed their motion on April 17, 2018, concurrently with the Declaration of

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Mark Copeland (“Copeland Decl.”), a separate statement of undisputed material facts,

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and a request for judicial notice. Dkt. No. 8. On May 9, 2018, SIC filed its opposition,

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along with a response to Plaintiff’s separate statement of undisputed facts, the

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Declaration of Pamela Still, and the Declaration of David Bold. Dkt. No. 10. Plaintiff

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filed their reply on May 23, 2018, with evidentiary objections2 and a statement of reply to

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the additional material facts presented by SIC. Dkt. No. 12.
For the reasons set forth below, the Court DENIES Plaintiff’s Motion for Partial

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Summary Judgment.
I.

JURISDICTION
This Court has subject matter jurisdiction pursuant to the diversity statute, 28

U.S.C. § 1332, and the Declaratory Judgment Act, 28 U.S.C. § 2201, et seq. See, e.g.,
Am. Cas. Co. of Reading, Penn. v. Krieger, 181 F.3d 1113, 1119 (9th Cir. 1999)
(affirming discretionary exercise of jurisdiction over declaratory judgment action brought
by insurer against insured based on diversity of citizenship). In this diversity action, the
court applies California law to interpret the insurance policy at issue. See Bell Lavalin,
Inc. v. Simcoe & Erie Gen. Ins. Co., 61 F.3d 742, 745 (9th Cir. 1995); Erie Railroad Co.
v. Tompkins, 304 U.S. 64 (1938).
II.

LEGAL STANDARD

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Federal Rule of Civil Procedure 56 empowers the Court to enter summary judgment

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on factually unsupported claims or defenses, and thereby “secure the just, speedy and

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inexpensive determination of every action.” Celotex Corp. v. Catrett, 477 U.S. 317, 325,

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Plaintiff filed Objections to the Declarations of David Bold and Pamela Still. Dkt. No. 12-1 and 12-2.
To the extent that any objected-to-evidence is relevant and relied on by the court herein, the court
overrules any asserted objections to that evidence. See Brady v. Grendene USA, Inc., No. 3:12-CV0604-GPC-KSC, 2014 WL 5847276, at *6 (S.D. Cal. Nov. 12, 2014).
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327 (1986). Summary judgment is appropriate if the “pleadings, depositions, answers to

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interrogatories, and admissions on file, together with the affidavits, if any, show that there

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is no genuine issue as to any material fact and that the moving party is entitled to judgment

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as a matter of law.” Fed. R. Civ. P. 56(c). A fact is material when it affects the outcome

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of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

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Where the moving party bears the burden of proof at trial, that party bears the initial

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burden of producing evidence that would entitle it to a directed verdict at trial. See C.A.R.

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Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000). Where

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the moving party would not bear the burden of proof at trial, that party bears the initial

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burden of either producing evidence that negates an essential element of the non-moving

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party's claims, or showing that the non-moving party does not have enough evidence of an

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essential element to carry its ultimate burden of persuasion at trial. See Nissan Fire &

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Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000). If the moving party

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does not satisfy its initial burden, then the non-moving party has no obligation to produce

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anything and summary judgment must be denied. If, however, the moving party satisfies

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its initial burden of production, then the non-moving party must produce admissible

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evidence to show there exists a genuine issue of material fact. Id. at 1102–03.

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Under California law, a party may move for partial summary judgment as to the

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issue of an insurer’s duty to defend an insured. Transamerica Ins. Co. v. Superior Court,

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29 Cal. App. 4th 1705, 1712-13 (1995).

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III.

REQUESTS FOR JUDICIAL NOTICE
A court may take judicial notice of any fact not subject to reasonable dispute in

that it is either (1) generally known within the territorial jurisdiction of the trial court or
(2) capable of accurate and ready determination by resort to sources whose accuracy
cannot reasonably be questioned. Fed. R. Evid. 201(b).

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Plaintiff requests that the Court take judicial notice of three publically available

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documents in support of their motion for partial summary judgment. These documents

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include (A) the Second Amended Complaint in Gamett v. Dennis Mathis Construction;

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(B) the First Amended Complaint in QCB Holdings v. Pete Hill Construction Co.; and

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(C) Pete Hill Construction Company’s First Amended Cross-Complaint in QCB Holdings

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v. Pete Hill Construction Co.. As these are court documents filed in the public record,

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the Court will take judicial notice of these pleadings under Federal Rule of Evid. 201(b).

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See Perkins v. LinkedIn Corporation, 53 F. Supp. 3d 1190, 1204 (N.D. Cal. 2014)

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(“[C]ourt documents already in the public record and documents filed in other courts” are

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proper subjects of judicial notice); Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d

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741, 746 n.6 (9th Cir.2006) (taking judicial notice of pleadings, memoranda, and other

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court filings).

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Defendant requests that the Court take judicial notice of an Agency License Detail

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computer print-out from the California Department of Insurance website showing the

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insurer appointments held by agent Scottish American Insurance General Agency, Inc.

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formerly known as Yates & Associates Insurance Services, Inc.. Dkt. No. 10-4. The

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Court has verified that this information is available in the public domain and is capable of

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accurate and ready determination by resort to sources whose accuracy cannot reasonably

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be questioned.3 Accordingly, the Court will also take judicial notice of Defendant’s

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Exhibit 1. See Abdullah v. U.S. Secur. Assocs., Inc., 731 F.3d 952, 959, n. 10 (9th Cir.

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2013) (taking judicial notice of California Division of Labor Standards Enforcement

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opinion letters pursuant to FRE 201(b)).

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This exhibit is readily accessible on the California Department of Insurance’s website at
https://interactive.web.insurance.ca.gov/webuser/Licw_Agy_Det$.STARTUP?Z_ORG_ID=9570&Z_A
GY_LIC_NBR=0705050.
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IV.

BACKGROUND

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Court Concepts is a licensed general engineering contractor specializing in

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construction of game court, playground, softscape, hardscape and recreation area designs,

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installations and renovations on public and private works projects throughout Southern

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California. Copeland Decl. ¶ 3. In particular, Court Concepts specializes in high-end

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tennis courts for residential and commercial applications. Id.

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A.

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Between November 20, 2012 and November 20, 2017, Court Concepts purchased

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commercial general liability insurance policies to cover its work and to protect it from loss.

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Id. ¶ 8. In November 2012, Plaintiff applied for commercial general liability insurance

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from Crosby Insurance, Inc., a retail insurance agency which brokered the policy through

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the wholesale agency Yates & Associates Insurance (“Yates”). Still Decl. ¶ 2. Yates had

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an appointment to transact insurance business on behalf of SIC and served as an

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independent, non-exclusive insurance agent. Id.

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Plaintiff described the nature of his business and operations as “[g]eneral engineering

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contractor specializing in recreation construction. Build/refurbish tennis courts, game

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courts, playgrounds & parks.” Still Decl. ¶ 3; Ex. B. Yates elected to issue Plaintiff a

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commercial general liability policy of insurance underwritten and issued by Yates on

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behalf of SIC under policy number CPS1706324 effective 11/20/12 – 11/20/13. Still Decl.

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¶ 4. This policy included Endorsement UTS 276s, which was included as a part of SIC’s

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General Contractors – Residential program. Id. ¶¶ 5-6. Moreover, SIC also required

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Endorsement UTS 306s to be included in the CPS1706324 policy. Id. ¶ 7.

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Insurance Policy

In its initial insurance application,

On October 18, 2013, Plaintiff renewed the policy through a retail agency called
SIC possesses a “Contractors

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Patriot Risk and Insurance Services. Still Decl. ¶ 8.

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Questionnaire” on “Patriot” letterhead wherein Plaintiff reported to Patriot that none of its

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work involved new residential construction and 100% of its work was in relation to

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remodels. Still Decl. ¶ 9; Ex. C.

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Contractors/Developers General Liability Application submitted to Patriot, dated 11/19/13

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wherein Plaintiff reported that 50% of its operations involved new construction, with 40%

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pertaining to residential new construction, and 50% of its operations related to remodeling.

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Still Decl. ¶ 10; Ex. D.

Further, SIC is in possession of a General

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An SIC commercial liability renewal policy was issued by Yates to Patriot for

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Plaintiff under SIC’s General Contractor program for the policy period November 2013 to

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November 2014 and included Endorsements UTS-276s and UTS-306s. Still Decl. ¶ 11.

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This policy was renewed through the general wholesaler to Patriot for the November 2014

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to November 2015 period under the Artisan program (Program Code No. 00KJ) and also

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contained Endorsements UTS-276s and UTS-306s. Id. ¶ 12.

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Each policy insured Plaintiff for liability arising from its general contractor work.

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In particular, “Coverage A” provided coverage for claims made against Plaintiff for

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damages because of “bodily injury” or “property damage” caused by an “occurrence”

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subject to the limits of liability. Dkt. No. 8-3 at 8-13. Each policy contained Endorsements

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UTS-276s and UTS-306s which provided exclusions from coverage. See Dkt. No. 8-3 at

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56, 314.

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B.

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Endorsement UTS-276s titled “Development/New Construction Residential Project

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UTS-276s

Exclusion” states in relevant part:
This insurance does not apply to damages/ “damages” because of “bodily
injury,” “property damage,” “personal and advertising injury” or “error or
omission” arising from “your work” on, in connection with or in any way
relating to a “residential project.”
However, this exclusion shall not apply to “your work”:
1. On or in connection with apartment buildings;
2. If all work occurs after the single-family or multifamily housing units,
townhouses, townhomes, residential condominiums or cooperatives,

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duplexes or “mixed-use buildings” have been completed, received
municipal or governmental certification of occupancy (or equivalent
permission to occupy), sold and occupied and your operations or
“your work” for repair, remodeling, building addition or expansion is
is contracted directly with an individual unit owner, individual
homeowner, or contractor working under direct contract with same;
3. In the following state(s) [If left blank this exclusion applies in all
states]:

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We shall have no duty or obligation to provide or pay for the investigation or
defense of any loss, cost, expense, claim or “suit” excluded by this
endorsement.
All other terms and conditions of this policy remain unchanged.
For purposes of this endorsement, the following definitions apply:

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“Residential project” means any project involving the original
development or original construction of one or more single-family or
multi-family housing units, townhouses, townhomes, residential
condominiums or co-operatives, duplexes, other structures converted
into condominiums or any other type of domicile intended for
individual or collective residential ownership, and shall include the
original development or original construction of all areas appurtenant
to these structures, including but not limited to land acquisition, site
improvements, excavation or grading of land, utilities, driveways,
walkways, roadways, swimming pools, retaining walls, construction
of any other structure, building, or common areas.

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“Mixed-use buildings” means structures and improvements thereto,
which contain both residential units and commercial

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Dkt. No. 8-3 at 56; Still Decl. ¶ 12.
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UTS-306s

Endorsement UTS-306 – Residential Exclusion (Not Including Apartments) provides:
This insurance does not apply, either directly or as assumed by contract, to
any lawsuits, actions or other claim for liability for “bodily injury,”
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“property damage” or “personal and advertising injury” (“personal injury” or
“advertising injury”) arising from or in any way relating to the insured’s
operations or any other involvement in any condominium, townhouse or
residential:
1. Development;
2. Construction
3. Reconstruction; or
4. Renovation
that occurs:
a. Prior to inception of this policy;
b. During this policy term; or
c. Prior to the inception of this policy and that continues into this
policy term
Dkt. No. 8-3 at 314.

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D.

GAMETT PROJECT

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In August 2013, Court Concepts entered into a contract with James Gamett and

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Shauna Gamett to provide services related to the construction of a tennis court at the real

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property owned by these individuals in the city of Encinitas. Copeland Decl. ¶ 10. Court

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Concepts installed a tennis court outside of the residence. At that time, Court Concepts did

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not pull a permit for the tennis court pursuant to City of Encinitas rules because it was not

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a structure. Further, no engineering work was performed for the Court. Id. ¶ 11.

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In January 20, 2017, James Gamett and Shauna Gamett filed suit in San Diego

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Superior Court, Case No. 37-2017-00002603-CU-CD-CTL (“Gamett Action”) against

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Dennis Mathis Construction, Inc. and other contractor defendants for (1) Breach of

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Contract; (2) Negligence; (3) Negligence Per Se; (4) Breach of Express Warranties; and

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(5) Breach of Implied Warranties. Court Concepts was named as Doe Defendant 76 in the

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Gamett Action. See RJN, Dkt. No. 8-10, Ex. A.

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On or about November 30, 2017, Court Concepts tendered the Gamett Action to SIC

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seeking defense and indemnity under the terms of the Policies. Copeland Decl. ¶ 14. The

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Gamett Action alleges inter alia construction defects and property damage resulting from

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cracking of the tennis court slab and fence pulling away at the perimeter of the tennis

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courts. Copeland Decl. ¶ 15. On or about December 8, 2017, SIC sent correspondence to

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Court Concepts refusing to defend or indemnify COURT CONCEPTS. Copeland Decl. ¶

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16; Ex. 3. On February 7, 2018, Court Concepts sent correspondence to SIC disputing the

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basis for the rejection and demanding that SIC defend and indemnify Court Concepts in

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the Gamett Action. Copeland Decl. ¶ 17; Ex. 4.

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E.

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In August 2013, Court Concepts also entered into a subcontract agreement with Pete

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Hill Construction Company, Inc. to provide services related to the construction of a tennis

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court at real property owned by QCB Holdings, LLC (“QCB”) and Zeling Cai in the city

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of San Diego. Copeland Decl. ¶ 18. Court Concepts construed a tennis court outside this

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residence. Id. ¶ 19. Court Concepts did not pull a permit for the tennis court as none was

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required and did not submit a plan to the City for the tennis court as none was required. Id.

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¶ 19. No engineering work was performed. Id. On June 30, 2017, QCB and Zeling Cai

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filed a First Amended Complaint in San Diego Superior Court Case No. 37-2016-

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00027195-CU-BC-CTL (“QCB Action”) against the Pete Hill Construction Company for

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(1) Violation of the Standards Enumerated Under California Civil Code § 896, et seq.; (2)

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Breach of Implied Warranties; (3) Breach of Contract; (4) Breach of Implied Covenant of

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Good Faith and Fair Dealing; (5) Common Counts; (6) Open Book Account; (7)

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Conversion; and (8) Negligence. RJN, Dkt. No. 8-10, Ex. B. On August 18, 2017, Pete

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Hill Construction Company, Inc. filed a cross-complaint in the QCB Action naming Court

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Concepts as a cross-defendant. RJN, Dkt. No. 8-10, Ex. C.

QCB PROJECT

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Court Concepts timely tendered the QCB Action to SIC seeking defense and

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indemnity under the Policies. Copeland Decl. ¶ 22. On or about January 2, 2018, SIC sent

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correspondence to Court Concepts refusing to defend or indemnify Court Concepts in the

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QCB Action. Copeland Decl. ¶ 23; Ex. 6. On February 7, 2018, Court Concepts sent

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correspondence to Scottsdale disputing the denial and once again demanding that SIC

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indemnify and defend Court Concepts in the QCB Action. Copeland Decl. ¶ 25; Ex. 7.
V.

ANALYSIS
Court Concepts argues that it is entitled to partial summary judgment on the duty to

defend because (1) there is a potential for policy coverage for its tennis court construction
work and (2) the residential exclusions relied upon by SIC are inapplicable to the facts of
the case. Defendant asserts that the residential exclusions clearly and unambiguously
exclude coverage for the construction of tennis courts, and, therefore, there is no duty to
defend.
A.

Interpretation of Insurance Policies

Insurance policies are construed under the same rules that govern the interpretation
of contracts. St. Paul Mercury Ins. Co. v. Frontier Pacific Ins. Co., 111 Cal. App. 4th
1234, 1243 (2003). Policies are interpreted to “give effect to the mutual intent of the parties
at the time of contracting, and such intent is ascertained, if possible, from the clear and
explicit language of the contract. Id. (internal citations omitted). “Coverage provisions
are construed broadly in favor of the insured, while exclusion provisions are construed
strictly against the insurer. [Citation.] However, strict construction does not mean strained
construction; under the guise of strict construction, we may not rewrite a policy to bind the
insurer to a risk that it did not contemplate and for which it has not been paid. [Citation.]”
National Union Fire Ins. Co. v. Lynette C., 228 Cal.App.3d 1073, 1077 (1991). Under
California law, “[a]n insurer may select the risks it will insure and those it will not, and a
clear exclusion will be respected.” Smith Kandal Real Estate v. Continental Cas. Co., 67
Cal. App. 4th 406, 414 (1998) (citations omitted).
If contractual language is clear and explicit it governs, but when policy language is
ambiguous, rules applicable to resolving ambiguity control. Id. An insurance policy
provision is “ambiguous when it is capable of two or more constructions both of which are
reasonable.” Bay Cities Paving & Grading, Inc. v. Lawyer’s Mutual Ins. Co., 5 Cal. 4th
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854, 867 (1993) (emphasis in original). “In analyzing a policy for uncertainties, the

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language used must be read in its ordinary sense, according it the meaning which would

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ordinarily be attached to it by a layman.” NN Investors Life Ins. Co. v. Superior Court, 208

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Cal. App. 3d 1070, 1072 (1989). “Courts will not adopt a strained or absurd interpretation

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in order to create an ambiguity where none exists.” Reserve Insurance Co. v. Pisciotta, 30

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Cal. 3d 800, 807 (1982). “Any doubts, uncertainties, or ambiguities in policy language

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must be resolved in favor of the insured. However, this principle of construction comes

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into play only if it is first determined that an ambiguity exists, which is also a question of

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law.” NN Investors, 208 Cal. App. 3d at 1072.

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The question of whether a duty to defend exists in the insurance context is “generally

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a question of law.” Transamerica Ins. Co. v. Superior Court, 29 Cal. App. 4th 1705, 1713

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(1994). “The duty to defend is determined by reference to the policy, the complaint, and

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all facts known to the insurer from any source.” Montrose Chem. Corp. of Cal. v. Superior

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Court, 6 Cal. 4th 287, 300 (1993). An insurer's duty to defend arises only where there is

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potential coverage under the policy. Marglen Industries, Inc. v. Aetna Casualty & Surety

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Co., 4 Cal.App.4th 414, 422 (1992). Where there is “no possibility of coverage, there is

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no duty to defend.” Transamerica, 29 Cal. App. 4th at 1714. California courts resolve any

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doubts as to the existence of the duty to defend in favor of the insured. Anthem Electronics,

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Inc. v. Pac. Employers Ins. Co., 302 F.3d 1049, 1054 (9th Cir. 2002). Furthermore, “[a]n

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insurer has a duty to defend when the policy is ambiguous and the insured would

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reasonably expect the insurer to defend him or her against the suit based on the nature and

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kind of risk covered by the policy.” Foster-Gardner, Inc. v. Nat’l Union Fire Ins. Co., 18

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Cal 4th 857 (1998). The determination of whether an insured's expectation of coverage is

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reasonable is a question of law. Dyer v. Northbrook Property & Casualty Ins. Co., 210

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Cal.App.3d 1540, 1549 (1989); Marglen, 4 Cal. App. 4th at 422.

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The initial burden falls on the insured to demonstrate that its claim comes within the

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scope of basic coverage. Aydin Corp. v. First State Ins. Co., 959 P.2d 1213, 1215 (Cal.

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1998). If that burden is satisfied, the burden shifts to the insurer to show that some

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exclusion applies. Id.
Initial Burden –– Potential for Coverage

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B.

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Court Concepts built a tennis court at the residences of both the Gamett and QCB

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projects and each lawsuit alleges property damage arising from the construction of the

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tennis courts. See RJN, Dkt. No. 8-10, Ex. A at 15 (Gamett suit alleging “cracking at tennis

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court slab”); Ex. C at 26 (QCB suit alleging extensive cracks throughout the tennis court

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surface and “ponding water” resulting from improper sloping of the court surface). Each

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of the issued policies protect Plaintiff from property damage claims arising from its

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construction work. As such, Plaintiff has met its prima facie burden to show its claim

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comes within the scope of basic coverage. See American Star Ins. Co. v. Insurance Co. of

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the West, 232 Cal. App. 3rd 1320, 1325 (1991).

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C.

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Defendant argues that the plain and unambiguous language of UTS-276s titled

Insurer’s Burden –– Exclusions

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“Development/New Construction Residential Project Exclusion” and UTS-306s exclude

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coverage for claims arising from the construction of tennis courts. The Court addresses

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these exclusions in turn.

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1.

UTS-276s
Ambiguity — “Residential Project”

UTS-276s provides the following exclusion:
This insurance does not apply to damages/ “damages” because of “bodily
injury,” “property damage,” “personal and advertising injury” or “error or
omission” arising from “your work” on, in connection with or in any way
relating to a “residential project.” (emphasis added)

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Meanwhile, UTS-276s goes on to define “residential project” as follows:

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For purposes of this endorsement, the following definitions apply:

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“Residential project” means any project involving the original development
or original construction of one or more single-family or multi-family
housing units, townhouses, townhomes, residential condominiums or
cooperatives, duplexes, other structures converted into condominiums or any
other type of domicile intended for individual or collective residential
ownership, and shall include the original development or original
construction of all areas appurtenant to these structures, including but not
limited to land acquisition, site improvements, excavation or grading of
land, utilities, driveways, walkways, roadways, swimming pools, retaining
walls, construction of any other structure, building, or common areas.

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Dkt. No. 8-3 at 56 (emphasis added).
UTS-276s excludes coverage for property damage that arises from original
development or work on or in any way connected or related to a “residential project.”
“Residential project” is defined under the policy. To the extent that the exclusion defines
the term “residential project,” the special meaning controls. See Alterra Excess and
Surplus Insurance Company v. Snyder, 234 Cal. App. 4th 1390, 1402 (2015) (“Moreover,
if the policy’s terms are used by the parties in a technical sense or a special meaning is
given to them by usage, this use or meaning controls judicial interpretation.”) (internal
marks omitted).
The definition of “residential project” is “any project involving the original
development or original construction” of, inter alia, single-family housing units intended
for individual or collective residential ownership and includes “original construction of all
areas appurtenant to these structures.” Dkt. No. 8-3 at 56. Here, the two lawsuits allege
that the tennis court construction was related to original construction of housing units
owned by individuals. However, Plaintiff interprets this phrase as limiting the exclusion
to construction of the living quarters of a residential structure and to those parts of a
residence that are specifically identified in the exclusion. Plaintiff’s interpretation of
“residential” conforms to the dictionary meaning of “residential” which is “Designed for
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people to live in,” oxforddictionaries.com/definition/residential (accessed July 19, 2018)

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and “Used as a residence or by residents,” Merriam-Webster Online Dictionary,

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http:www.merriam-webster.com/dictionary/residential (accessed July 19, 2018). While

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Plaintiff argues that the exclusion is inapplicable because a tennis court is not a residential

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structure, the plain language clearly indicates that the exclusion covers more than just

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residential structures and applies to areas “appurtenant to” the structures. The term

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“appurtenant” is defined as “appertaining or pertinent; accessory,” Collins Online

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Dictionary, http:www.collinsdictionary.com/us/dictionary/english/appurtenant.

9

“appurtenant to” the only definition provided, the Court would conclude that the exclusion

10

is ambiguous as that term, by itself, is subject to more than one reasonable interpretation.

11

Cf. Sandgren v. Fire Ins. Exch., 64 Cal. App. 3d 634, 636 (1976) (if appurtenance was the

12

only characteristic employed in the policy, ambiguity would be self-evident). For clarity,

13

the exclusion provides specific examples to define “appurtenant” as: “including but not

14

limited to land acquisition, site improvements, excavation or grading of land, utilities,

15

driveways, walkways, roadways, swimming pools, retaining walls, construction of any

16

other structure, building, or common areas.”

Were

17

Plaintiff’s construction of “all areas appurtenant to” would ignore the phrase

18

“including but not limited to” and limit the exclusion to the examples provided under the

19

definition. However, the use of the word “including,” is “ordinarily a term of enlargement

20

rather than limitation.” Ortega Rock Quarry v. Golden Eagle Ins. Corp., 141 Cal. App.

21

4th 969, 981 (citing Hassan v. Mercy American River Hospital, 31 Cal. 4th 709, 713 (2003)

22

(“The statutory definition of a thing as ‘including’ certain things does not necessarily place

23

thereon a meaning limited to the inclusions.”). At the same time, the California Court of

24

Appeal has held that the term “include, but need not be limited to” is a “term of expansion,”

25

but that the term is not one of “unlimited expansion.” County of Yolo v. Los Rios

26

Community College Dist., 5 Cal. App. 4th 1242, 1254 (1992). The term is necessarily

27
28

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18-cv-421-GPC-BGS

1

limited by the doctrine of ejusdem generis such that “where general words relate to the

2

enumeration of specific classes of things, the general words will be construed as applicable

3

only to things of the same general nature or class as those enumerated.” Id. See also Scally

4

v. Pacific Gas & Electric Co., 23 Cal. App. 3d 806, 819 (1972) (construing the words

5

“other” or “any other” to include only “others of like kind or character”). Under the

6

principle of ejusdem generis, “[p]articular expressions qualify those which are general.”

7

Ortega, 141 Cal. App. 4th at 981.

8

Cases applying ejusdem generis in the interpretation of statutes have used it as an

9

aid to be used where statutory language is ambiguous. Moore v. Conliffe, 7 Cal. 4th 634,

10

671 (1994) (“The rule of ejusdem generis aids in the construction of a statute if there is an

11

ambiguity.”) Meanwhile, insurance coverage cases have applied the canon to ascertain

12

whether an ambiguity exists for the purpose of determining whether there is a duty to

13

defend. See Ortega Rock Quarry v. Golden Eagle Ins. Corp., 141 Cal. App. 4th 969, 986-

14

990 (2006) (applying ejusdem generis to find pollution exclusion not ambiguous);

15

Tsakopoulos v. American Mfrs. Mut. Ins. Co., 2003 WL 22595248 (applying ejusdem

16

generis to find pollution exclusion ambiguous); Stone v. Hartford Cas. Co., 470 F. Supp.

17

2d 1088, 1098 (C.D. Cal. 2006) (applying an ejusdem generis type analysis to find a duty

18

to defend where professional services exclusion covered additional non-enumerated

19

activities under “includes, but is not limited to” clause); Atain Specialty Insurance

20

Company v. Szetela, 2016 WL 1138139, at *6 (E.D. Cal. Mar. 23, 2016) (applying ejusdem

21

generis to find no ambiguity and denying a duty to defend). The Court agrees with Ortega,

22

Tsakopoulos, Stone, and Atain and finds––as a threshold matter––that the doctrine of

23

ejusdem generis is properly applied in determining if there is a duty to defend under an

24

insurance policy.4

25
4

26

Consequently, the Court disagrees with the proposition––drawn from the California legislative
context––that ejusdem generis applies only when there is an ambiguity. Finding an ambiguity would

27
28

15
18-cv-421-GPC-BGS

1

“The proper question is whether a particular phrase is ambiguous in the context of

2

this policy and the circumstance of this case.” St. Paul Fire and Marine Ins. Co. v.

3

American Dynasty Surplus Lines Ins. Co., 101 Cal. App. 4th 1038, 1056 (2002) (emphasis

4

in original). This question is answered through the eyes of a reasonable person in the

5

position of the insured. Id. Under ejusdem generis, a general term following the listing of

6

specific classes of things is restricted to those that are of the “same general nature or class”

7

as the specific examples listed. White v. Ultramar, Inc., 21 Cal. 4th 563, 573 (1999) (citing

8

Harris v. Capital Growth Investors XIV, 52 Cal. 3d 1142, 1159 (1991)). This canon of

9

construction “seeks to ascertain common characteristics among things of the same kind,

10

class, or nature.” White, 21 Cal. 4th at 573.

11

In applying ejusdem generis to insurance coverage issues, the Court looks to

12

decisions that have interpreted “includes but not limited to” and catch-all phrases in

13

deciding whether there is a duty to defend. The court in Stone v. Hartford Cas. Co., 470

14

F. Supp. 2d. 1088, 1098 (C.D. Cal. 2006) considered a “professional service” exclusion

15

that was expanded with “includes but is not limited to” language. The policy excluded

16

damages due to the failure to render any “professional service” where “[the exclusion]

17

includes but is not limited to: (1) Legal, accounting or advertising services; (2) Preparing,

18

approving, or failing to prepare or approve maps, shop drawings, opinions, reports,

19

surveys, field orders, change orders, design or drawings and specifications; (3)

20

Supervisory, inspection, architectural or engineering activities.” Id. at 1097-98. The Court

21
22
23
24
25
26
27
28

necessarily trigger a duty to defend. See Foster-Gardner, Inc. v. Nat'l Union Fire Ins. Co., 18 Cal. 4th
857, 869 (1998) (“An insurer has a duty to defend when the policy is ambiguous and the insured would
reasonably expect the insurer to defend him or her against the suit based on the nature and kind of risk
covered by the policy.”). If the Court accepted the requirement to first find an ambiguity prior to
applying ejusdem generis, then the Court could never apply ejusdem generis in the duty to defend
context as the mere application of the canon would indicate the presence of an ambiguity.
Consequently, the Court concludes that it may utilize the canon of ejusdem generis in interpreting an
insurance policy to determine whether an ambiguity exists for purposes of establishing a duty to defend.
Otherwise, the Court would necessarily need to conclude that Ortega, Tsakopoulos, Stone, and Atain
were wrongly decided.
16
18-cv-421-GPC-BGS

1

concluded that the “professional services” exclusion “clearly applies to the Stones’ claims

2

based on Szucs’ professional undertaking to draft plans for room additions, construct

3

and/or supervise construction of the additions, and install a driveway.” Id. at 1098. There

4

the Court rejected plaintiff’s attempt to argue that certain services performed were not

5

specifically identified finding that:

6
7
8
9
10
11

[Plaintiffs’] further attempt to avoid the “professional services” exclusion by
arguing that some of Szucs' services-including measuring and handling
windows and shear wall, removing drywall and insulation, and working with
electricians and plumbers-are not among those described in the “professional
services” exclusions' list of non-covered services. [Plaintiff] ignore[s] the
“professional services” exclusion's plain language stating that the scope of
the exclusion “includes, but is not limited to” the various excluded services
listed therein.

12

Id. at 1098 (emphasis added). Accordingly, the Stone Court granted summary judgment

13

on the duty to defend in favor of the insurance company. Id. at 1099.

14

Here, similar to Stone, the defendant is interpreting an exclusion to cover a category

15

or activity that is not among the list of examples. Stone supports the conclusion that a duty

16

to defend can be properly denied based upon application of the “includes, but is not limited

17

to” clause. Similarly, the district court in Atain relied on ejusdem generis in interpreting a

18

policy exclusion for professional services. The court found that the catch-all phrase “any

19

other service that is of a professional nature” included “pilot car services” where the

20

enumerated examples of professional jobs falling within the exception included

21

“Accountant, Architect, Engineer, Insurance Agent or Broker, Lawyer, Medical

22

Professional or Real Estate Agent Broker.” Atain Specialty Insurance Company v. Szetela,

23

2016 WL 1138139, at *6 (E.D. Cal. Mar. 23, 2016). See also Atain Specialty Ins. Co. v.

24

North Bay Waterproofing, Inc., 2013 WL 1819609, at *6 (N.D. Cal. 2013) (“The catch-all

25

phrase ‘and other residential or tract housing project’ envisions that structures not included

26

in the list of specific examples will nevertheless fall within the scope of the Total

27
28

17
18-cv-421-GPC-BGS

1

Residential Exclusion.). Similar to Szetela, UTS-276s contains a “catch-all” provision

2

(“construction of any other structure, building, or common areas”) triggering an ejusdem

3

generis analysis. Also, like Stone, UTS-276s contains “including but not limited to”

4

language that clearly indicates that categories of construction beyond the enumerated

5

examples are intended to be excluded as “areas appurtenant to” the residential structure.

6

Here, the question is whether the specific examples provided make clear that

7

characteristics of tennis courts are the same in kind, class, or nature as the enumerated

8

exemplars. In other words, the Court evaluates whether the enumerated examples would

9

clearly indicate to a reasonable person in the position of the insured that original

10

construction5 of a tennis court is covered as “construction of all areas appurtenant to” a

11

residential structure.

12

The Court concludes that the construction of a tennis court is of the “same kind,

13

class, or nature” as the enumerated examples. First, the examples clearly include areas that

14

are outside of the residential portion of the residence, like tennis courts. Second, tennis

15

courts are “installed on grade” and “grading” of land is a specifically identified activity

16

under the exclusion. See Copeland Decl. ¶ 19. Third, tennis courts are of the same nature

17

as “walkways” in that they both involve the construction of surface areas that are traversed

18

by people. The CEO of Court Concepts himself compared tennis court construction to

19

sidewalk construction stating that tennis court construction is “installed on grade, similar

20

to sidewalks and patios.”

21

construction of a tennis court––from a construction perspective––is of the same class and

22

nature as activities involved in the construction of a walkway. Fourth, the construction of

Copeland Decl. ¶ 19.

This statement indicates that the

23
24
25
26
27
28

5

Both the Gamett and QCB projects involved original residential constructions. Thus, the language
excluding from the exclusion work done after the buildings have been completed is inapplicable. See
Dkt. No. 8-3 at 56 (exclusion does not apply to work that occurs after the homes have been “completed .
. . sold and occupied.”). Instead, the Gamett and QCB projects fit squarely within the exclusion’s
language of “original development or original construction of all areas appurtenant to these structures.”
See Dkt. No. 8-3 at 56.
18
18-cv-421-GPC-BGS

1

a tennis court appears to include at least some work involving utilities as the questionnaire

2

indicated 10% of the firm’s subcontracting costs involved electrical subcontracting. Dkt.

3

No. 10-8 at 5. Finally, the enumerated examples specifically include a recreational

4

structure (“swimming pools”). A reasonable insured person––reading “swimming pools”

5

in the enumerated examples––would have realized that large outdoor recreational facilities,

6

like a tennis court, would be part of “all areas appurtenant” to a residential structure.

7

Applying ejusdem generis, the Court concludes that the enumerated examples are a

8

list of outdoor construction activities taking place outside the confines of the residential

9

structure and that construction of a tennis court is unequivocally similar to the types of

10

activities enumerated on that list. See White, 21 Cal. 4th at 573 (ejusdem generis seeks to

11

“ascertain common characteristics among things of the same kind, class, or nature.”).

12

Accordingly, an objectively reasonable person in the position of the insured should have

13

expected that a tennis court would be excluded by the UTS-276s residential exclusion.

14

In addition, it is clear that Plaintiff’s initial application for insurance in November

15

2012 made no reference to new residential construction. See Dkt. No. 10-6 at 1-12. Indeed,

16

the only reference to any “residential” construction is a quote dated 10/19/2012 listing the

17

“Program Type” to be “Gen. Contractors (Residential – Remodeling).” Dkt. No. 10-6 at

18

12 (emphasis added). Plaintiff’s SIC policy issued for the period of November 2012 to

19

November 2013 included Endorsement UTS 276s (and UTS 306s discussed below), both

20

of which involve residential exclusions. Still Decl. ¶ 6-7. When Plaintiff filled out a

21

questionnaire in April 2013, Plaintiff reported that he did not perform new residential

22

construction. See Dkt. 10-7 at 6 (stating that work contained 0% new construction, 5-20%

23

HOA’s, and 60-80% commercial/municipal). Furthermore, Plaintiff wrote in response to

24

the question “In the past 10 years, has, or in the future will, any of your work involve the

25

construction of, or be for custom homes, single family homes, condominiums or

26

townhouses?” that his work involved “Resurfacing only. HOA’s yes but very few.” Dkt.

27
28

19
18-cv-421-GPC-BGS

1

No. 10-7 at 8. This shows that Plaintiff’s work in 2012-13––from which the relevant policy

2

containing the residential exclusions was based––involved only residential remodeling

3

work. It was not until November 2013 that Plaintiff first reported that 40% of his work

4

involved new residential construction. See Dkt. No. 10-7 (listing 40% residential new

5

construction with a hand-written note stating “Residential is Exterior Tennis Courts – No

6

Structures”). Consequently, these facts demonstrate that Plaintiff did not need or seek

7

coverage for new residential projects in his initial 2012 application and subsequent April

8

2013 questionnaire. As a result, he was issued a policy containing residential policy

9

exclusions that he chose to renew despite the fact that by late 2013 his workload now

10
11

contained significant new residential construction.
Furthermore, the Court observes that the policy purchased by Court Concepts

12

included general liability coverage for several types of potential cases other than new

13

residential construction. For example, the policy could potentially cover property

14

damage at one of Court Concepts’ commercial or municipal clients. “While [SIC]

15

assumed the risk of these kinds of losses, [SIC] did not assume the risk of [Court

16

Concepts’] errors and omissions.” See Stone, 470 F. Supp. 2d at 1099. If Court Concepts

17

had wished to ensure liability coverage for its new residential construction, it could have

18

purchased such coverage (likely at a higher premium).

19

In conclusion, Court Concepts had notice based on the plain language of the UTS

20

276-s exclusion that any tennis court it constructed on a new residence would be

21

excluded because they are of the same “kind, class, or nature” as the enumerated

22

examples. Here, even strictly construing the exclusion against the insurer, there is no

23

possibility that an objectively reasonable person in the position of the insured would not

24

have considered tennis courts to involve “construction of all areas appurtenant to” the

25

residential structures.

26
27
28

20
18-cv-421-GPC-BGS

Objectively Reasonable Expectation

1
2

Finally, Plaintiff argues that it had an objectively reasonable expectation that a

3

defense would be provided in these circumstances. Dkt. No. 8 at 22 (citing Marie Y. v.

4

General Star. Indem. Co., 110 Cal. App. 4th 928, 951 (2003)) (“In such a case, whether

5

there is a duty to defend depends upon the language of the insurance contract and whether

6

it created an objectively reasonable expectation on the part of the insured that a defense

7

would be provided in the circumstances.”). Specifically, Plaintiff points to a statement in

8

Court Concepts’ Application for Insurance for the period of November 20, 2013 through

9

November 20, 2014 stating that “Residential is Exterior Tennis Courts – No Structures”

10

and argues that this assertion placed SIC on notice that Court Concepts was constructing

11

tennis courts in a residential environment and yet SIC still chose not to explicitly exclude

12

tennis courts from its policies. Dkt. No. 8-6 at 38, 43.

13

The Court disagrees and finds that while Plaintiff may have had a subjective

14

expectation that SIC would provide a defense as to these lawsuits, there was no

15

objectively reasonable basis to believe that the policies covered original development

16

tennis courts that were appurtenant to a residence. As explained above, Plaintiff made no

17

reference to new residential work in the 2012-13 application or April 2013 questionnaire.

18

Clearly, Plaintiff did not seek coverage for new residential projects in the initial 2012

19

application and subsequent April 2013 questionnaire. SIC issued a policy containing

20

residential policy exclusions that Court Concepts chose to renew despite the fact that by

21

late 2013 Plaintiff’s workload now contained significant new residential construction.

22

Under these circumstances, it was not reasonable for Plaintiff to expect a defense would

23

be provided.

24

In addition, an insured’s “reasonable expectation of coverage is merely an

25

interpretative tool used to resolve an ambiguity once it is found to exist and cannot be

26

relied upon to create an ambiguity where none exists.” California Traditions, Inc. v.

27
28

21
18-cv-421-GPC-BGS

1

Claremont Liability Ins. Co., 197 Cal. App. 4th 410, 420-21 (2011) (internal citations and

2

quotation marks omitted). Here, the Court has concluded that no ambiguity in this

3

exclusion exists; therefore the insured’s reasonable expectation of coverage cannot be

4

relied upon to create an ambiguity. Moreover, the clarity of the exclusion means that

5

Court Concepts’ expectation to the contrary was subjective and unreasonable, and

6

therefore not an objectively reasonable expectation. See id. (“[W]hen a policy excludes

7

any potential for coverage, any expectation to the contrary on the part of the insured

8

would have been subjective and unreasonable.”) (internal citations omitted).
Accordingly, because UTS-276s expressly and unambiguously excludes “all areas

9
10

appurtenant to” residential structures and the Court finds that the tennis courts

11

constructed by Court Concepts were part of “all areas appurtenant” to the residential

12

structures, the Court concludes that there is no possibility of coverage under these

13

policies. See Reserve Insurance Co. v. Pisciotta, 30 Cal. 3d 800, 809 (1982) (“The

14

insurance company's obligation to provide coverage can be limited only by exclusions

15

phrased in language which clearly and unmistakably communicates to the insured the

16

specific circumstances under which the expected coverage will not be provided.”);

17

Montrose, 6 Cal. 4th at 300 (a duty to defend does not exist only where the complaint

18

“can by no conceivable theory raise a single issue which could bring it within the policy

19

coverage.”). Because the moving party Court Concepts has not shown that they are

20

entitled to judgment as a matter of law, the Court will DENY Plaintiff’s Motion for

21

Partial Summary Judgment6 requesting that the Court declare that SIC has a duty to

22

defend.

23

2.

24
25

UTS-306s

While the Court need not reach whether UTS-306s applies given its prior finding,
the Court also addresses whether UTS-306s would provide a theory of coverage.

26
27
28

6

SIC has not moved for partial summary judgment on this issue.
22
18-cv-421-GPC-BGS

1

Plaintiff asks that the Court adopt an interpretation of the policy language such that “the

2

insured’s operations or any other involvement in any other condominium, townhouse, or

3

residential development, construction, reconstruction or renovation” means the insured’s

4

operations have to take place inside the structure for the exclusion to apply.

5

Here, the Court finds that Plaintiff’s interpretation is reasonable. Endorsement

6

UTS-306s is ambiguous. Unlike UTS-276s which provided a list of “all areas

7

appurtenant” to the residential structure that were included in the definition of

8

“residential project,” UTS-306s does not provide any language defining the outer barriers

9

of what constitutes a “residential development, construction, reconstruction, or

10

renovation.” As such, it is not clear that construction of a tennis court constitutes

11

residential construction under UTS-306s and it is reasonable to construe the term as

12

limited to construction of the residential portion of the project. See Bay Cities Paving &

13

Grading, Inc. v. Lawyer’s Mutual Ins. Co., 5 Cal. 4th 854, 867 (1993) (“An insurance

14

policy provision is ambiguous when it is capable of two or more constructions both of

15

which are reasonable.”) (emphasis in original).

16
17

Nevertheless, the ambiguity of UTS-306s does not affect the Court finding that
UTS-276s clearly excludes the construction of tennis courts from the policy.

18
19
20
21
22
23
24

CONCLUSION
The Court DENIES Plaintiff’s Motion for Partial Summary Judgment requesting
that the Court declare that SIC has a duty to defend Court Concepts in the underlying
Gamett and QCB Actions.
IT IS SO ORDERED.
Dated: July 25, 2018

25
26
27
28

23
18-cv-421-GPC-BGS