Ghilotti Bros., Inc. v. American Safety Indemnity Co.

FILED
NOT FOR PUBLICATION AUG 30 2012
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
GHILOTTI BROS., INC., No. 10-17231
Plaintiff - Appellee, D.C. No. 3:09-cv-02735-VRW
v.
MEMORANDUM *
AMERICAN SAFETY INDEMNITY
COMPANY,
Defendant - Appellant.
Appeal from the United States District Court
for the Northern District of California
Vaughn R. Walker, District Judge, Presiding
Argued and Submitted November 15, 2011
San Francisco, California
Before: THOMAS, GOULD, and BYBEE, Circuit Judges.
American Safety Indemnity Company (“ASIC”) appeals the district court’s
order granting summary judgment in favor of Ghilotti Bros., Inc. (“Ghilotti”). The
district court found that ASIC, as Ghilotti’s insurer under a commercial general
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
liability insurance policy, has a duty to defend Ghilotti in the underlying suit filed
against Ghilotti in California court.
As an initial matter, ASIC claims that Ghilotti lacks standing under Article
III of the Constitution to pursue this action because there is no “case” or
“controversy.” It argues that because other insurers are fully defending Ghilotti
and because Ghilotti was found to have no liability in the underlying litigation in
California trial court, the only harm Ghilotti has alleged from ASIC’s failure to
defend it is speculative. Yet “we have consistently held that a dispute between an
insurer and its insureds over the duties imposed by an insurance contract satisfies
Article III’s case and controversy requirement,” Gov’t Emps. Ins. Co. v. Dizol, 133
F.3d 1220, 1222 n.2 (9th Cir. 1998) (en banc), regardless of whether there is an
active underlying suit, Aetna Cas. & Sur. Co. v. Merritt, 974 F.2d 1196, 1199 (9th
Cir. 1992). Here, the underlying litigation has not terminated,1 and there remains
the possibility that the other insurers may withdraw their defense or seek
1
We grant Ghilotti’s request for judicial notice contained in its motion filed
October 5, 2011, and we take notice that the underlying litigation continues in the
California Court of Appeal, though it does not change our holding.
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reimbursement from Ghilotti for the expenses of defending it. Ghilotti has
standing to pursue this appeal.2
With regard to ASIC’s duty to defend, the district court found that there was
at least one potential occurrence covered by the insurance contract and that no
policy exclusions unambiguously barred coverage. ASIC claims, inter alia, that the
district court erred in finding that the Total Prior Work Exclusion (“TPWE”) in the
insurance contract did not preclude indemnity for the claims against Ghilotti.
Under California law, “[t]he duty to defend arises if the facts known to the insurer
indicate a potential or possibility for indemnity.” Nat’l Steel Corp. v. Golden
Eagle Ins. Co., 121 F.3d 496, 499 (9th Cir. 1997) (citing Montrose Chem. Corp. of
Cal. v. Superior Court, 861 P.2d 1153, 1157 (Cal. 1993)). Ambiguities in
exclusionary clauses are to be interpreted in favor of coverage, and to be effectual
an exclusionary clause must be phrased in language that is “conspicuous, plain and
2
If the litigation were complete, our answer on standing might be different.
An insured is entitled to only one full defense. San Gabriel Valley Water Co. v.
Hartford Accident & Indem. Co., 82 Cal. App. 4th 1230, 1241, 98 Cal. Rptr. 2d 807
(2000). An insurer's refusal to defend “is of no consequence to an insured whose
representation is provided by another insurer: under such circumstances, the
insured [is] not faced with an undue financial burden or deprived of the expertise
and resources available to insurance carriers in making prompt and competent
investigations as to the merits of lawsuits filed against their insureds.” Horace
Mann Ins. Co. v. Barbara B., 61 Cal. App. 4th 158, 164, 71 Cal. Rptr. 2d 350
(1998) (quoting Ceresino v. Fire Ins. Exch., 215 Cal. App. 3d 814, 823, 264 Cal.
Rptr. 30 (1989)) (internal quotation marks omitted).
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clear.” State Farm Mut. Auto. Ins. Co. v. Jacober, 514 P.2d 953, 958 (Cal. 1973)
(quoting Steven v. Fid. & Cas. Co., 377 P.2d 284, 294 (Cal. 1962) (emphasis
removed).
The TPWE is a separate endorsement that provides in part that “[t]he
‘occurrence’ and resulting injury or damage must result, in its entirety, from ‘your
work’ performed during the policy period of this policy.” It then states
If “your work” was performed in part during the policy period of this
policy and in part before the policy period of this policy, any
“occurrence” and resulting injury or damage claimed to result from
“your work” will be deemed to have resulted, in its entirety, solely
from ‘your work’ prior to the policy period of this policy . . . .
We find the meaning of this exclusion to be unambiguous. If work occurs in part
prior to the policy period and some damage results from such work, that damage
will not be covered by the policy. Here, the Second Amended Cross-Complaint
filed in the underlying litigation alleges that Ghilotti performed work and
destroyed trees on the property of the project site, Drake’s Cove, “[o]n or about
September 2, 2003.” Nothing in the materials available to ASIC at the time
Ghilotti tendered its request for a defense contradicts that Ghilotti performed work
on the property then. Because the policy period of the insurance contract did not
begin until October 1, 2003, Ghilotti clearly performed work at Drake’s Cove
prior to the policy period, and any resulting damage is not covered by the policy.
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That some work and damage may have occurred due to work at Drake’s Cove
within the policy period does not alter the fact that, under the TPWE, all work and
damage is deemed to have occurred prior to the beginning of the policy. The
TPWE precludes coverage for all of the claims against Ghilotti under its contract
with ASIC. ASIC therefore has no duty to defend Ghilotti in the underlying suit.
Because the TPWE precludes all coverage under the policy, we do not reach
ASIC’s other challenges to the district court’s order.
REVERSED AND REMANDED.
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