Nazarian v. Colony Ins. Co. CA2/7 ( 2016 )

Filed 2/8/16 Nazarian v. Colony Ins. Co. CA2/7
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California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
RICHARD NAZARIAN, et al., B257595
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. BC501308)
v.
COLONY INSURANCE COMPANY,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los Angeles County, Malcolm
Mackey, Judge. Affirmed.
Reisman & Reisman, Daniel A. Reisman; Law Office of John J. Perlstein and John
L. Perlstein for Plaintiffs and Appellants.
Ropers, Majeski, Kohn & Bentley, Michael T. Ohira and Terry Anastassiou for
Defendant and Respondent.
____________________________
Richard Nazarian and the RCN Corporation appeal from the judgment entered in
favor of Colony Insurance Company in this action for breach of an insurance contract. In
the underlying lawsuit, Michael Florman had sued Nazarian and RCN for breach of
contract, breach of warranty, negligence, and misrepresentation in conjunction with a
home construction project. Nazarian requested that his insurance carrier Colony defend
him in the action. Colony declined, asserting that the Florman complaint sought damages
for residential construction expressly excluded from coverage under the insurance policy.
Nazarian and RCN then brought this action for declaratory judgment, breach of contract,
and breach of the implied covenant of good faith and fair dealing. The trial court granted
summary judgment on the grounds that the policy afforded no coverage for the claims
asserted in the underlying litigation and that Colony had no duty to defend Nazarian and
RCN in that action. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
I. Florman’s Action
In March 2009, the Nickel Company, identified as a division of RCN Corporation,
entered into a contract with Michael Florman to construct an 8,500 square foot single
family residence for Florman and his wife in Pacific Palisades. In 2012 Florman sued
Nazarian individually and under the fictitious business name of The Nickel Company, as
well as a corporation identified as “RCN Corporation dba The Nickel Company” for
breach of contract, breach of warranty, negligence, and misrepresentation. Florman’s
complaint alleged that Nazarian had represented himself to Florman and his wife as an
experienced licensed general contractor who could and would build their dream home to
their specifications and within their budget. Florman alleged that Nazarian, “on behalf of
himself and the entities he controlled or under which name he did
business . . . represented to the [Flormans] that he could and would take complete
responsibility for the construction of their Home, and that such could and would be
completed to their satisfaction for approximately [$1,500,000].” Nazarian, the complaint
alleged, further represented that he would personally act as the construction
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superintendent and would closely monitor the work. Based on Nazarian’s
representations, the Flormans hired Nazarian and his businesses to construct their home.
Nazarian and his businesses discontinued their work on the Florman construction project
prior to the completion of the work initially envisioned. Florman alleged that Nazarian
and his businesses did not act competently; that their work fell below the standard of
care; that they failed to provide appropriate supervision and cost control; that their
subcontractors’ work was deficient in many respects, causing substantial damage to the
dwelling; and that the home was not free of construction defects. These allegations were
incorporated into Florman’s causes of action for breach of contract, breach of express and
implied warranty, and negligence.
II. The Insurance Policy and Tender of Defense
Nazarian tendered the Florman lawsuit to Colony for defense and indemnification.
Colony had issued a liability insurance policy to “Richard Charles Nazarian, d.b.a.
The Nickel Company,”1 which was initially effective November 14, 2008, through
November 14, 2009 (Policy No. GL950087), and was renewed though November 14,
2010 (Policy No. GL950087-1).
The policy provided commercial general liability coverage: “We will pay those
sums that the insured becomes legally obligated to pay as damages because of ‘bodily
injury’ or ‘property damage’ to which this insurance applies.” The policy expressly set
forth the right and duty to defend the insured against suits seeking covered damages, and
disclaimed any obligation to defend the insured in a lawsuit seeking damages for bodily
injury or property damage to which the insurance did not apply. By means of
Endorsement U159-0702, the policy expressly limited the commercial general liability
1 Nazarian submitted a declaration in conjunction with his opposition to the motion
for summary judgment in which he stated that he is the principal and sole shareholder of
the RCN Corporation, and that RCN does business under the fictitious name of The
Nickel Company.
3
coverage to bodily injury or property damage that resulted from the business described as
“GENERAL CONTRACTOR: REMODELING.”
With another endorsement, the policy also expressly excluded coverage for any
claims arising from residential construction work, except as otherwise specified by the
policy. This endorsement, U527-0607, was entitled, “EXCLUSION: ANY
RESIDENTIAL CONSTRUCTION WORK EXCEPT AS SPECIFIED.”2 The
endorsement modified the coverage under the commercial general liability coverage to
add the following exclusion: “This insurance does not apply to ‘bodily injury’ or
‘property damage’ included in the ‘products-completed operations hazard’ and arising out
of or resulting from ‘your work’ on any ‘residential construction.’” “Residential
construction” was defined to mean “buildings, structures or other improvements to real
property constructed, maintained or sold for the purpose of being used by natural persons
as a dwelling, inclusive of all infrastructure improvements in connection therewith,
including, but not limited to, grading/excavating, utilities, road paving/curbs/sidewalks.”
The policy provided that the exclusion for residential construction “may be subject
to exception, as set forth below, but only if the box corresponding to the description of
any such exception is checked, and then only to the extent of the exception so described.”
None of the boxes corresponding to the described exceptions was checked.
Colony denied coverage and rejected Nazarian’s request for a defense on the basis
that Florman’s suit concerned new residential construction and was therefore excluded
from coverage.3
2 We are aware that in the course of the summary judgment briefing, Nazarian and
RCN contended that the applicable version of the endorsement excluded “new residential
construction” as opposed to “any residential construction,” but as discussed below we
quote the language of the policy from the copy that Nazarian and RCN attached and
incorporated by reference into their complaint.
3 In denying coverage, Colony reproduced language from the policy and
Endorsement U527-0607. Colony’s recitation of the policy language involved the “new
residential construction” version of the endorsement rather than the “any residential
4
III. Nazarian and RCN’s Action Against Colony and the Summary
Judgment
Nazarian and RCN sued Colony, among others, for breach of contract and breach
of the implied covenant of good faith and fair dealing. They also requested a declaration
of the rights of the parties. According to the allegations in the complaint, Colony
breached its insurance contract and the implied covenant of good faith and fair dealing by
refusing to defend and indemnify Nazarian and RCN in the Florman action.
Colony moved for summary judgment. After reviewing the evidence and hearing
argument, the trial court concluded that the insurance policy did not provide coverage for
Nazarian individually or doing business as The Nickel Company for the claims asserted
in the Florman action and that Colony had no duty to defend him in either capacity; that
the policy did not provide coverage to RCN under either its corporate name or fictitious
name of The Nickel Company for the claims asserted in the Florman action and that
Colony had no duty to defend it; that the cause of action for violation of the covenant of
good faith and fair dealing failed in the absence of insurance coverage; and that Colony
was entitled to summary adjudication of the cause of action for violation of the covenant
of good faith and fair dealing under the genuine dispute doctrine (see Wilson v. 21st
Century Ins. Co. (2007) 42 Cal. 4th 713, 723-724) because a genuine dispute existed as to
whether Colony owed any duties under the policy. The court entered judgment in
Colony’s favor. Nazarian and RCN appeal.
DISCUSSION
I. Applicable Principles and Standard of Review
The interpretation of an insurance policy is a question of law and follows the
general rules of contract interpretation. (Haynes v. Farmers Ins. Exchange (2004) 32
Cal. 4th 1198, 1204; Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal. 4th 1, 18
construction” version attached to and incorporated by reference into the complaint by
Nazarian and RCN.
5
(Waller).) “The fundamental rules of contract interpretation are based on the premise that
the interpretation of a contract must give effect to the ‘mutual intention’ of the parties.
‘Under statutory rules of contract interpretation, the mutual intention of the parties at the
time the contract is formed governs interpretation. (Civ. Code, § 1636.) Such intent is to
be inferred, if possible, solely from the written provisions of the contract. (Id., § 1639.)’”
(Waller, at p. 18.) “When interpreting a policy provision, we give its words their
ordinary and popular sense except when they are used by the parties in a technical or
other special sense.” (Haynes, at p. 1204.) “A policy provision will be considered
ambiguous when it is capable of two or more constructions, both of which are reasonable.
[Citation.] But language in a contract must be interpreted as a whole, and in the
circumstances of the case, and cannot be found to be ambiguous in the abstract.”
(Waller, at p. 18.) When a policy is clear and unequivocal, the only thing the insured
may reasonably expect is the coverage afforded by the plain language of the mutually
agreed-upon terms. (TIG Ins. Co. of Michigan v. Homestore, Inc. (2006) 137
Cal. App. 4th 749, 755; see VTN Consolidated, Inc. v. Northbrook Ins. Co. (1979) 92
Cal. App. 3d 888, 892 [insurance policy “must be construed from the language used
and . . . where . . . its terms are plain and unambiguous, the courts have a duty to enforce
the contract as agreed upon by the parties”].)
“Ordinarily, the objective intent of the contracting parties is a legal question
determined solely by reference to the contract’s terms. [Citations.] [¶] The court
generally may not consider extrinsic evidence of any prior agreement or
contemporaneous oral agreement to vary or contradict the clear and unambiguous terms
of a written, integrated contract. [Citations.] Extrinsic evidence is admissible, however,
to interpret an agreement when a material term is ambiguous. [Citations.] [¶] When the
meaning of the words used in a contract is disputed, the trial court engages in a three-step
process. First, it provisionally receives any proffered extrinsic evidence that is relevant
to prove a meaning to which the language of the instrument is reasonably susceptible.
[Citations.] If, in light of the extrinsic evidence, the language is reasonably susceptible to
the interpretation urged, the extrinsic evidence is then admitted to aid the court in its role
6
in interpreting the contract. [Citations.] When there is no material conflict in the
extrinsic evidence, the trial court interprets the contract as a matter of law. [Citations.]
This is true even when conflicting inferences may be drawn from the undisputed extrinsic
evidence [citations] or that extrinsic evidence renders the contract terms susceptible to
more than one reasonable interpretation. [Citations.] If, however, there is a conflict in
the extrinsic evidence, the factual conflict is to be resolved by the jury. [Citations.]”
(Wolf v. Walt Disney Pictures and Television (2008) 162 Cal. App. 4th 1107, 1126-1127
(Wolf), footnote omitted.)
An insurer must defend any action that seeks damages potentially covered by the
policy. (Gray v. Zurich Insurance Co. (1966) 65 Cal. 2d 263, 275.) Determination of
potential coverage is made by comparing the allegations in the third party complaint with
the terms of the policy, considering as well any extrinsic facts made known to the insurer
at the inception of the case that reveal a possibility the claim may be covered. (Waller,
supra, 11 Cal.4th at p. 19; Barnett v. Fireman’s Fund Ins. Co. (2001) 90 Cal. App. 4th
500, 509.) Doubts as to whether the facts give rise to a duty to defend are resolved in the
insured’s favor. (Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal. 4th 1076, 1081.)
“[T]he duty to defend, although broad, is not unlimited; it is measured by the nature and
kinds of risks covered by the policy. [Citation.]” (Waller, at p. 19.) When no possibility
of coverage exists, the insurer has no duty to defend. (Ibid.; Aetna Casualty & Surety Co.
v. Superior Court (1993) 19 Cal. App. 4th 320, 327 [duty to defend, while broader than
duty to indemnify, is not unlimited; if complaint shows “no potential liability for covered
damages as a matter of law, there can be no potential for indemnification, nor can there
be a duty to defend”].)
A motion for summary judgment is properly granted only when “all the papers
submitted show that there is no triable issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.” (Code Civ. Proc., § 437c, subd. (c).)
We review a grant of summary judgment de novo and decide independently whether the
triable facts not subject to dispute warrant judgment for the moving party as a matter of
law. (Intel Corp. v. Hamidi (2003) 30 Cal. 4th 1342, 1348.) On an appeal from a
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summary judgment, “[a]s with an appeal from any judgment, it is the appellant’s
responsibility to affirmatively demonstrate error, and, therefore, to point out the triable
issues the appellant claims are present by citation to the record and any supporting
authority. In other words, review is limited to issues which have been adequately raised
and briefed.” (Lewis v. County of Sacramento (2001) 93 Cal. App. 4th 107, 116,
disapproved on another ground as recognized in Kaufman & Broad Communities, Inc. v.
Performance Plastering, Inc. (2005) 133 Cal. App. 4th 26, 41-42.) “[I]t is not a reviewing
court’s role to construct theories or arguments which would undermine the judgment.”
(Mead v. Sanwa Bank California (1998) 61 Cal. App. 4th 561, 564.) As the California
Supreme Court has long held, “‘[a]n appellate court cannot assume the task of
discovering the error in a ruling.” (Bradley v. Butchart (1933) 217 Cal. 731, 747; see
also In re Phoenix H. (2009) 47 Cal. 4th 835, 845.) “We do not serve as ‘backup
appellate counsel,’ or make the parties’ arguments for them.” (Inyo Citizens for Better
Planning v. Board of Supervisors (2009) 180 Cal. App. 4th 1, 14, quoting Mansell v.
Board of Administration (1994) 30 Cal. App. 4th 539, 546.)
II. Scope of Coverage Under the Policy
From the inception of the handling of this insurance claim, the parties have all
proceeded on the understanding that whether Nazarian and RCN’s activities constituted
remodeling or residential construction was the central question that would determine
whether there was coverage and a duty to defend in the Florman litigation: If Nazarian
and RCN were remodeling the Florman home, the policy would offer coverage and there
would be a duty to defend; but if they were engaged in residential construction, the
Colony policy did not cover that work and there would be no duty to defend. In Colony’s
claim notes, which were submitted to the trial court in support of Nazarian and RCN’s
opposition to the motion for summary judgment, Colony noted on October 1, 2012, that
this new construction defect litigation naming Nazarian as the general contractor and
project manager implicated “exclusion U527 which does not give back any residential
construction of any type so all residential construction is excluded, as such there is no
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coverage for this loss . . . . ” This is a reference to Endorsement U527-0607, the
exclusion modifying the commercial general liability coverage to exclude any residential
construction. Subsequently, on October 11, 2012, Colony denied coverage on the basis
that the litigation involved new residential construction and was therefore outside the
scope of the policy. A few days later, Nazarian’s insurance broker contacted Colony to
assert that the work constituted remodeling. Colony responded that if Nazarian “could
provide permits or contracts to show it was a remodel,” it would reevaluate its denial of
coverage.
As evidenced by a chain of electronic mail correspondence that was before the
trial court at summary judgment, the parties continued to debate whether the work on the
Florman home constituted remodeling or construction. The attorney for Nazarian and
RCN contacted Colony on October 24, 2012, requesting that Colony reconsider its
position because Nazarian and RCN “did not build a new home and in fact only did site
work to an existing property,” so the exclusion Colony had relied upon did not apply.
Colony responded that it agreed that if this was a remodel rather than construction, the
claim would fall within the scope of the insurance policy. Colony’s specialist advised
counsel that he had asked “the insured and the insured’s agent for documentation that this
was not new construction in spite of the allegations in the complaint that the insured
planned and constructed the home. I am more than willing to retain defense counsel once
this is confirmed. The insured indicated he had permits which indicated that this was in
fact a remodel, would you have such documents?” Nazarian and RCN’s counsel
responded, “I will get what we have—there was an existing structure and thus not new
construction.” The Colony specialist wrote to counsel, “Again[,] I am not saying that is
not the case, I just have seen nothing to confirm that. Will the insured sign a letter to me
attesting to that? If so that will work.”
On October 24, 2012, Nazarian’s counsel sent to Colony what he described as “the
permit showing the existing structure and the demo work done—clearly existing
construction and thus a defense is owed. Please advise if you are appointing counsel.”
The Colony specialist wrote a claim note that day in which he stated that Nazarian and
9
RCN’s attorney “has sent several emails alleging the home built was remodel not new
construction. He then sent a permit which he alleges shows there was demo work done
on an existing home. That it does, it shows the home, garage and pool were completely
removed[,] the lo[t] cleared and the sewer line capped. As such the insured had to build a
completely new structure, he did not renovate or remodel an existing structure, so how
they get that this is not new construction is not yet known to me. I have asked the
att[orney] to call me and discuss.” Later that day, the Colony specialist noted that the
attorney had called and taken the position that “the fact that the insured did the demo
constitutes remodel???? Even though he did infrastructure work and retaining walls for
the new home to be built. I would disagree and still feel the U159-designated work
remodeling contractor [Endorsement U159-0702, limiting commercial general
liability coverage to the business of “GENERAL CONTRACTOR: REMODELING”]
and the[ ]U527 residential new construction which includes infrastructure [Endorsement
No. U527-0607] both apply here. The permit issued to the insured is clear that this lot
was completely cleared before the insured did any work on it other than demo.”
Accordingly, on October 25, 2012, Colony advised Nazarian’s counsel that it had
reviewed the further information that had been provided but that the company’s coverage
position remained unchanged. The claim notes state that counsel was “pushing back.
Indicating this was not new construction, etc. We are not convinced and as such will
maintain our position. Counsel has threatened to seek declaratory relief.”
As this correspondence shows, the parties understood this insurance policy
identically and never considered its language to be ambiguous. The only question, which
the parties discussed at length, was the factual matter of whether the insured had been
engaged in remodeling or new construction. The parties agreed that this was the key
question at the summary judgment stage as well. Colony sought summary judgment on
Nazarian and RCN’s claims on the ground that the work done as residential construction,
and was not therefore covered under the policy: “Plaintiffs were not sued because of
home remodeling, but for residential construction. Plaintiffs demolished the house to the
ground, and graded and prepared the building site as part of the construction of a new
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8,500 square foot luxury residence.” Nazarian and RCN, in turn, argued in opposition to
summary judgment that they did not “exclusively perform new residential construction
on the Florman project,” and that “at least some of the work that Nazarian performed on
the Florman project falls well within the definition of remodeling.”4
The trial court resolved the dispute at summary judgment on the same basis upon
which it had been litigated: by determining whether Nazarian and RCN’s work
constituted remodeling or residential construction. The court wrote, “The insuring
agreement of the Colony Policies provides in relevant part that coverage is provided only
if the claim results from the business of remodeling. This limitation is conspicuously set
forth in Endorsement U159-0702 of the Colony Policies.” The trial court continued,
“The plain language of this language is clear, and must be respected. It reflects the
insurance requested by “Richard Charles Nazarian d.b.a. The Nickel Company”—
coverage for remodeling work, and not residential construction.” The court concluded
that the allegations in the Florman complaint alleged residential construction rather than
remodeling. Because Nazarian and RCN engaged in residential construction, and
4 Nazarian appeared to believe that the contents of his application for insurance
were relevant to the determination of the policy’s coverage, as he referred to the
application in the declaration he submitted in opposition to the motion for summary
judgment. While insurance contracts may incorporate other documents by reference (see,
e.g., Kleveland v. Chicago Title Ins. Co. (2006) 141 Cal. App. 4th 761, 765), this policy
did not incorporate Nazarian’s application. The policy contained only one coverage part.
According to the Commercial General Liability Coverage Part Declarations, that
coverage part consisted of that Declarations form, the Common Policy Conditions, the
Commercial General Liability Coverage Form, and the endorsements indicated on the
Declarations page. The Declarations page provided that the applicable forms and
endorsements were listed on a separate schedule, Form U001, and Form U001 listed
those forms and endorsements included in the policy. At no point on any of these pages
did the policy refer to or specify that it included the application. Moreover, in the
Common Policy Conditions, the policy specified: “This policy contains all the
agreements between you and us concerning the insurance afforded.” The policy provided
that its terms could be amended or waived “only by endorsement issued by us and made a
part of this policy.” Therefore, Nazarian’s application is not a part of the insurance
policy.
11
Endorsements U159-0702 and U527-0607 limited the policy coverage to remodeling and
excluded residential construction, the trial court concluded that there was no coverage
and no duty to defend under the policy.
On appeal, Nazarian and RCN contend that the trial court should not have granted
summary judgment against them. They argue that “[b]ecause at least some of Nazarian’s
operations on the Florman project can be defined as remodeling, there is potential for a
covered claim.” They continue, “When Nazarian commenced work on the Florman
home, there was an existing residential structure. Nazarian then engaged in operations to
change the structure and form of existing residential property. Certain elements were
demolished, whereas other elements were retained and altered, including the driveway,
the gate, and the retaining walls. [Citation.] Nazarian’s work thus fits within the
definition of remodeling.” Colony, in turn, argues that the Nazarian defendants
demolished a pre-existing structure, leaving only parts of a driveway, retaining wall, and
gate; and that he performed some grading and excavation, all of which constituted
residential construction rather than remodeling. We consider whether Colony
demonstrated as a matter of law that Nazarian and RCN’s work fell outside the scope of
coverage of the policy; that is, whether the work performed constituted remodeling or
residential construction.
III. Summary Judgment
We conclude that summary judgment was proper here, because Colony
successfully demonstrated, as a matter of law, that the policy did not cover the causes of
action tendered to it, and that the relevant extrinsic evidence shows that the policy is not
reasonably susceptible to Nazarian’s argument on appeal. (Wolf, supra, 162 Cal.App.4th
at pp. 1126-1127.) Endorsement U159-0702 of Nazarian’s insurance policy expressly
limited Nazarian’s coverage to the business of “GENERAL CONTRACTOR:
REMODELING.” Nazarian and RCN do not dispute that this endorsement is part of the
insurance policy. We agree with the trial court that this language is clear and
unambiguous, and that the policy was expressly limited to covering remodeling work.
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When the policy is read as a whole, as insurance policies are (Waller, supra, 11
Cal.4th at p. 18), both Endorsement U159-0702 and Endorsement U527-0607, excluding
any residential construction, demonstrate that the intent of the policy was to cover the
insured with respect to remodeling activities and to exclude residential construction from
the scope of coverage. Indeed, Nazarian and RCN expressly conceded in their briefing
that if the version of Endorsement U527-0607 that prohibits “any residential construction
work except as specified” is in fact the operative endorsement, “then the claims against
them in the underlying action would not be covered.” That version is the operative
endorsement here. The version of Endorsement U527-0607 with “any residential
construction” language was attached, as part of the insurance policy, as Exhibit A to the
complaint. Nazarian and RCN pleaded in the complaint that Exhibit A was a copy of the
applicable policy and incorporated it by reference into the complaint. This constituted a
binding judicial admission by Nazarian and RCN that the insurance policy included the
“any residential construction” version of Endorsement U527-0607. (See Food Safety Net
Services v. Eco Safe Systems USA, Inc. (2012) 209 Cal. App. 4th 1118, 1126-1127; St.
Paul Mercury Ins. Co. v. Frontier Pacific Ins. Co. (2003) 111 Cal. App. 4th 1234, 1248.)
As such, the Nazarian defendants have conceded in their briefing that the claims alleged
in the Florman litigation are not covered by the Colony commercial general liability
policy. We agree.5
5 We do not, however, decide in this opinion whether Endorsement U527-0607
precludes coverage in this case. At our request, the parties submitted two rounds of
supplemental briefing on various matters relating to Endorsement U527-0607, including
whether Colony met its burden on summary judgment to establish it had no duty to
defend Nazarian in light of that endorsement. From the parties’ supplemental briefing, it
is clear that a determination of whether the work here falls within the endorsement’s
products-completed operations hazard, as well as whether other policy exclusions
concerning works in progress would apply if the endorsement’s products-completed
operations hazard does not, requires a factual determination of whether Nazarian’s work
on the project was completed or abandoned. Because these issues were not litigated
before the trial court, the evidentiary record on appeal is insufficient to permit a
determination of whether completion or abandonment occurred and whether the products-
completed operations hazard applies here. Although we cannot on this record determine
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The complaint in the Florman litigation alleged not remodeling but the demolition
of an existing house and construction of a new home. In the complaint, Florman alleged
that he and his wife contacted Nazarian as part of planning “to build the home of their
dreams.” They were “in a position to plan and construct a large (approximately 8,500
square feet) residence . . . which they desired to have built in accordance with the highest
standard of care.” Florman and his wife were seeking general contractors and
subcontractors “to build their home,” and they were dependent on professional advice
because they had “almost no experience with residential construction.” According to the
complaint, Nazarian represented that he would “build the home of their dreams.” The
Flormans met with Nazarian “to ensure that he and his companies were fully conversant
with what was to be constructed and the circumstances surrounding the same, the site, the
proposed home, their expectations, and all other relevant matters.” Nazarian was alleged
to have represented that he “would take complete responsibility for the construction of
their Home” and that he would personally act as the construction superintendent.
Florman alleged that he retained the Nazarian defendants in the belief that the home
would be constructed as promised.
Nazarian and RCN argue that “at least some” of the work performed “can be
defined as remodeling,” and thus there was a potential of coverage and a duty to defend.
Because there was a home present on the property when Nazarian began work, Nazarian
and RCN argue that they were “chang[ing] the structure and form of existing residential
property.” Acknowledging the demolition but noting that a few items were retained and
whether Endorsement U527-0607 excludes coverage for the work performed here, we
may nonetheless look to the endorsement, together with the other portions of the policy,
as expressing the policy’s general intent to provide coverage for remodeling but to
exclude coverage for residential construction. This is consistent with the method in
which the parties and the trial court relied upon this exclusion, as none of the litigants
made an argument in the summary judgment moving papers or at the hearing that this
exclusion was irrelevant, and the trial court relied on this exclusion to help develop an
understanding of what was covered and what was not covered by the policy. (Waller,
supra, 11 Cal.4th at p. 18 [insurance contracts are interpreted as a whole].)
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altered, Nazarian and RCN claim on appeal that the work performed “fits within the
definition of remodeling.” The complaint and available extrinsic facts, however,
demonstrated that the scope of the construction work exceeded anything that could be
considered remodeling. Nazarian, in his declaration submitted in opposition to the
motion for summary judgment, described the work he performed for Florman as
including “demolishing much of the existing structure, excavating, adding some of the
foundation, and waterproofing.” The only features that Nazarian could identify
remaining after the demolition were the driveway, the gate, and a retaining wall. We
agree with the trial court that the record shows that “Plaintiffs demolished the old home
to make way for the construction of the Flormans’ ‘dream home’” and that they “graded
and prepared the building site as part of the construction of a new 8,500 square foot
luxury residence.”
According to the complaint provided to Colony when Nazarian tendered the
lawsuit for defense and indemnification, Nazarian and RCN were involved in building a
new house for Florman and were sued as a result. Because the policy was expressly
limited to remodeling, Colony reasonably concluded that there was no potential for
coverage for Nazarian or RCN. With no coverage provided by the policy for the Florman
action, Colony did not breach the insurance contract by declining to defend or indemnify
Nazarian and RCN; and without a valid cause of action for breach of the insurance
contract, the cause of action for breach of the implied covenant of good faith and fair
dealing necessarily fails as well. (Waller, supra, 11 Cal.4th at pp. 35-36.) Summary
judgment was therefore appropriate.
Nazarian and RCN argue, however, that there was a potential for coverage because
property damage was alleged in the Florman complaint. Specifically, they rely on
paragraph 137 of the Florman complaint, in which Florman identified 10 different
negligent acts in conjunction with the work performed at the residence site. According to
Nazarian and RCN, “at least one of these alleged acts of negligence must constitute an
occurrence [of property damage] under the policy,” but they fail to present any argument
as to how these acts of property damage in the course of residential construction can
15
survive the insurance policy’s limitation of coverage to property damage that arises from
remodeling work. Nazarian and RCN have not established any error.
Nazarian and RCN also contend that because the business description on the
Common Policy Declarations page of the insurance policy states “Remodeling
Contractor” and the Commercial General Liability Coverage Part Declarations form lists
classifications for “Contractors executive supervisors or executive superintendents” and
“Contractors—subcontracted work—in connection with construction, reconstruction,
repair or erection of buildings,” the only way to give meaning to all words in the policy is
to conclude that these words were part of the business description, thus leading to a
potential for coverage here. While courts must give meaning to all words in a policy,
they must also avoid constructions that render words superfluous or a nullity. (Civ.
Code, § 1641.) Nazarian and RCN’s proposed construction would render the other
express limitations of coverage in the policy a nullity. By its own terms, the policy must
be read through the lens of Endorsement U159-0702, which specifically limits the
coverage provided by the policy to the business of “GENERAL CONTRACTOR:
REMODELING,” as well as the broader intent to exclude residential construction
expressed in Endorsement U527-0607. Applying Endorsement U159-0702’s limitation
of coverage does not render the Common Policy Declarations or the Commercial General
Liability Coverage Part Declarations a nullity; it merely restricts coverage to those
contracting tasks involving remodeling.
Our conclusion that as a matter of law there existed no potential for coverage
under the policy makes it unnecessary to address Nazarian and RCN’s remaining
arguments that RCN may be considered an insured under the policy for purposes of the
duty to defend against the Florman action and that the genuine dispute doctrine cannot
support the summary adjudication of the implied covenant of good faith and fair dealing
cause of action.
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DISPOSITION
The judgment is affirmed. Respondent shall recover its costs on appeal.
ZELON, Acting P. J.
We concur:
SEGAL, J.
*
BECKLOFF, J.

Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
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