Evanston Ins. Co. v. 155 Hamilton Dev., LLC

EVANSTON INSURANCE COMPANY, Cross-complainant and Appellant,

v.155 HAMILTON DEVELOPMENT, LLC et al., Cross-defendants and Respondents.

B243145

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION TWO

Filed: June 25, 2013

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County Super. Ct. No. BC447544)

APPEAL from a judgment of the Superior Court of Los Angeles County. Deirdre Hill, Judge. Affirmed.

Manning, Kass, Ellrod, Ramirez, Trester, John M. Hochhausler and Ladell Hulet Muhlestein for Cross-complainant and Appellant.

James Mortensen for Cross-defendants and Respondents.

The issue presented in this insurance coverage action is whether a claim was "received" by an insured corporation within the meaning of a "claims made" insurance policy before the date on which the policy was cancelled. The trial court interpreted the term "received by the insured," which was undefined in the policy, to mean that a claim letter was deposited in the mailbox at the insured's place of business. Applying the presumption accorded by Evidence Code section 641, the trial court then found that two claim letters sent by first class mail to the insured's address of record was received by the insured before the policy cancellation date, despite testimony by the insured's sole employee that he did not see either letter until after the instant lawsuit commenced. The trial court concluded that the claim was covered under the policy and on that basis entered judgment against the insurer. We affirm the judgment.

BACKGROUND

The parties

Appellant Evanston Insurance Company (Evanston) issued a professional liability insurance policy to Greg Riley, P.E., The Structural Engineering Consultants, Inc. (SEC) as the named insured. Greg Riley (Riley) was the principal engineer, owner, and president of SEC. SEC performed structural engineering services for respondents 155 Hamilton Development, LLC and 155 Hamilton, Ltd. (collectively, Hamilton) at a condominium project being developed by Hamilton in Beverly Hills (the project).

The policy

The professional liability insurance policy issued by Evanston to SEC (the policy) provides indemnity coverage and defense against claims made during the policy period of June 1, 2007 to June 1, 2008. The policy was cancelled effective March 21, 2008 because SEC defaulted on a loan that funded the policy premiums.

The policy's insuring provision provides in relevant part:

"The Company shall pay on behalf of the Insured all sums in excess of the Deductible amount . . . , which the Insured shall become legally obligated to pay as Damages as a result of Claims first made against the Insured during the Policy Period . . . and reported to the Company . . . , by reason of a Wrongful Act . . . ."

The policy defines "Claim" as follows: "Claim means a written demand received by the Insured for money or remedial Professional Services involving this policy . . . ."

The claim and underlying action

During the summer of 2007, Hamilton discovered structural problems in the project. Hamilton notified SEC, and SEC prepared plans to address those problems.

In July 2007, SEC relocated its offices from 27200 Tourney Road, Suite 390, in Valencia, California, 91355, to a new location, also in Valencia and within the same zip code, at 25115 Avenue Stanford, Suite B-125. At the time SEC moved its offices, it placed a mail forwarding order with the post office, requesting that mail be forwarded from the Tourney Road address to the new address on Avenue Stanford. SEC thereafter received forwarded mail at the Avenue Stanford address.

In the fall of 2007, SEC began experiencing financial difficulties. By February 2008, SEC had laid off all of its employees except Riley.

In March and April 2008, Hamilton sent four letters to SEC informing SEC that structural problems at the project had resulted in increased costs ranging from $700,000 to $1 million, and asking SEC to put its insurance company on notice of the claim. The letters, dated March 10, 2008, March 15, 2008, March 27, 2008, and April 29, 2008, were sent by Hamilton's attorney via first class mail to SEC's Tourney Road address, which was the address then listed for SEC on its own website and on the website for the California Secretary of State. None of the four letters was returned to Hamilton by the postal service as undeliverable.

Of the four letters sent by Hamilton's attorney, only the April 29, 2008 letter was seen by Riley before the instant lawsuit commenced. Riley saw the April 29, 2008 letter in early May 2008, at SEC's new address on Avenue Stanford. The April 29, 2008 letter had arrived by mail at the Avenue Stanford address, even though it was addressed to SEC's former Tourney Road address.

Hamilton sued SEC in October of 2009 for engineering defects in the project (the underlying action). SEC tendered the lawsuit to Evanston, who notified SEC on November 9, 2009, that no coverage was available under the policy.

SEC filed for bankruptcy on December 29, 2008. Hamilton obtained an order from the bankruptcy court lifting the automatic stay so that it could proceed in the underlying action for purposes of collecting insurance proceeds available to SEC.

The instant action

SEC filed the instant declaratory relief action against Evanston, seeking a determination that SEC had no coverage available to it under the policy but that Evanston owed SEC a duty to defend the underlying action until the trial court issued its decision regarding coverage under the policy. In its complaint, SEC alleged that it received Hamilton's claim in early May 2008, more than a month after the policy had been cancelled. Evanston filed a cross-complaint for declaratory relief against SEC and Hamilton seeking a determination that the underlying action was not covered under the policy.

The trial

The matter proceeded to a court trial. For purposes of the trial, the parties agreed and stipulated that the policy was cancelled on March 21, 2008, for SEC's nonpayment of the policy premium and that no claim received by SEC on or after that date could be considered timely under the terms of the policy. The parties further stipulated that Evanston had received notice of Hamilton's claim "as soon as practicable," as required under the policy, and that the sole basis for rejecting the claim was Evanston's contention that the claim was not received by SEC prior to the policy cancellation date.

At the trial, Hamilton's attorney, James Mortensen, testified he sent four letters to SEC notifying SEC of construction defects in the project and asking SEC to contact its insurance carrier. The letters, dated March 10, March 15, March 27, and April 29, 2008, were sent by first class mail to the address listed for SEC on its own website and on the website for the California Secretary of State, and were mailed either on the date indicated on the letter or the following day. None of the letters was returned as undeliverable.

Riley testified that SEC filed a mail forwarding order with the post office in July 2007 when SEC moved its office from Tourney Road to Avenue Stanford. SEC thereafter began receiving mail at the Avenue Stanford address which had beenforwarded from the former Tourney Road address. Riley further testified that of the four claim letters sent by Hamilton's counsel to SEC, the April 29, 2008 letter was only one he saw before the instant litigation commenced. The April 29, 2008 letter arrived by mail at SEC's Avenue Stanford address and Riley opened the letter in early May 2008. Because of SEC's financial difficulties, Riley was the sole remaining employee at SEC after February 2008 and the only person who would thereafter open SEC's mail. Riley described conditions at SEC at that time as chaotic and admitted that mail may have remained unopened for months. Riley further testified he did not know whether any of Hamilton's previous claim letters dated March 10, 15, or 27, 2008 had been delivered to SEC's Avenue Stanford address.

Evanston's claims manager, Melanie Brown, testified that the term "received by the Insured" as used in the policy can have several meanings. Brown agreed the term could mean deposit of a sealed claim letter in the mailbox at the insured's office. Brown further agreed that the insured would not have to open a sealed claim letter deposited in the insured's mailbox and read the contents of the letter in order to be deemed to have received the claim.

At the conclusion of the trial, the trial court found that Hamilton sent four claim letters on or within a day of March 10, 15, 27 and April 29, 2008, by first class mail to SEC at its Tourney Road address, which was SEC's then address of record with the California Secretary of State's office. Applying the presumption accorded by Evidence Code section 641, the trial court then found that it was more likely than not that Hamilton's claim letters dated March 10, 2008 and March 15, 2008, were received by SEC in the ordinary course of mail before the March 21, 2008 policy cancellation date. That presumption, the trial court found, was not rebutted by any evidence produced by Evanston. The trial court concluded that Hamilton's claim letters were properly addressed to SEC's Tourney Road address because Hamilton was entitled to rely on that address as SEC's address of record listed with the California Secretary of State and on SEC's own website. The trial court further found that it was "probable" that Hamilton's March 10 and March 15, 2008 letters were delivered by mail to SEC's Avenue Stanfordaddress before the March 21, 2008 policy cancellation date because both the Avenue Stanford and the Tourney Road addresses were located within...