Haering v. Topa Ins. Co.

244 Cal.App.4th 725

198 Cal.Rptr.3d 291

Larry HAERING, Plaintiff and Appellant,

v.TOPA INSURANCE COMPANY, Defendant and Respondent.

B260235

Court of Appeal, Second District, Division 2, California.

Filed February 3, 2016

Shernoff Bidart Echeverria Bentley, Michael J. Bidart, Ricardo Echeverria, Claremont and Matthew W. Clark, for Plaintiff and Appellant.

Selman Breitman, Alan B. Yuter and Rachel E. Hobbs, Los Angeles, for Defendant and Respondent.

CHAVEZ, J.

The issue presented in this appeal is whether an excess liability insurance policy that "follows form" to an underlying primary policy that provides uninsured motorist/underinsured motorist (UM/UIM) coverage must also provide such coverage after the underlying policy limit has been exhausted. We hold that the excess policy does not provide coverage for first party UM/UIM claims because the policy's insuring agreement unambiguously limits the insurer's indemnity obligation to third party liability claims. We therefore affirm the judgment entered in the excess insurer's favor.

BACKGROUND

Plaintiff and appellant Larry Haering (plaintiff) is the owner of California Fleet, Inc. California Fleet was an insured under a primary insurance policy issued by State National Insurance Company, with a policy period of December 9, 2011 to December 9, 2012 (the State National policy). California Fleet was also an insured under an excess liability policy issued by Topa Insurance Company (Topa), with a policy period from December 9, 2011 to December 9, 2012 (the Topa policy). The Topa policy designates the State National policy as the underlying primary policy.

State National policy

The State National policy's declarations page lists the types of coverage afforded under the policy and the applicable policy limits, including a $1 million each "Accident" "Garage Operations" limit, a $2 million "Garage Operations" aggregate limit, and a $1 million limit for UM/UIM coverage. The State National policy is modified by an endorsement that provides UM coverage as follows:

"We will pay all sums the ‘insured’ is legally entitled to recover as compensatory damages from the owner or driver of an ‘uninsured motor vehicle.’ The damages must result from ‘bodily injury’ sustained by the ‘insured’ caused by an ‘accident.’ The owner's or driver's liability for these damages must result from the ownership, maintenance or use of the "uninsured motor vehicle."

Topa policy

The Topa policy's insuring agreement provides in relevant part as follows:

"1. Excess Liability Indemnity"To indemnify the insured for the amount of loss which is in excess of the applicable limits of liability, whether collectible or not, of the Underlying Insurance inserted in Item 6¹ of the Declarations, provided that this policy shall apply only to those coverages for which a limit of liability is inserted in Item 5² of the Declarations. If such scheduled Underlying Insurance contains a sub-limit in a lesser amount than the scheduled limit, the Insurance afforded by this policy shall apply in the same manner it would have applied had the scheduled limit been maintained and not reduced by the sub-limit. Provided further that the limit of the Company's liability under this policy shall not exceed the applicable amount inserted in Item 5 of the Declarations.

"The provisions of the immediate underlying policy are incorporated as a part of this policy except for:

"(a) any obligation to investigate, defend, or pay for costs incident to the same;

"(b) the amount of the limits of liability;

"(c) any ‘other insurance’ provision, and

"(d) any other provisions therein which are inconsistent with the provisions of this policy.

"If the applicable coverage in the immediate underlying policy insures accidents rather than occurrences, then ‘accident’ is substituted for ‘occurrence’ in the applicable coverage of this policy."

The term "loss" is defined in the Topa policy as "the sum paid in settlement of losses for which the Insured is liable after making deduction for all recoveries, salvages or other insurance (other than recoveries under the policy of the Underlying Insurance) whether recoverable or not, and shall include all expenses and ‘costs.’ " The term "immediate underlying policy" is defined as the Underlying Insurance listed in Item 6 of the declarations.

The Topa policy excludes coverage for "any liability or obligation imposed on the Insured under ... any uninsured motorists, underinsured motorists or automobile no-fault or first party personal injury law."

Plaintiff's accident and tender to Topa

On October 14, 2012, plaintiff was injured in a motor vehicle accident caused by a negligent driver who was an insured under a policy with a $25,000 liability limit. In February 2013, plaintiff settled his claim against the negligent driver by accepting the $25,000 limit under the driver's policy. In May 2013, plaintiff submitted a claim to State National and eventually recovered the policy limit under the $1 million uninsured motorist endorsement to the State National policy.³

On July 23, 2013, plaintiff submitted a claim to Topa for $1 million in excess coverage. Plaintiff maintained that the Topa policy followed form to the State National policy and incorporated the $1 million UM/UIM endorsement.

Topa denied coverage for plaintiff's claim on two principal grounds: (1) the policy's insuring agreement limits coverage to third party liability claims, and (2) a policy exclusion barred coverage for liability imposed under any UM/UIM law.

The instant lawsuit

Plaintiff commenced the instant action on September 26, 2013, asserting causes of action against Topa for breach of contract, breach of the covenant of good faith and fair dealing, and declaratory relief. After Topa answered, plaintiff filed a motion for summary adjudication of a single issue—whether the Topa policy obligated Topa to provide UM/UIM coverage for injuries plaintiff sustained in the October 14, 2012 accident.

Following a July 14, 2014 hearing on plaintiff's summary adjudication motion, the trial court denied the motion, ruling that the Topa policy covered only third party liability claims, and not a first party UM/UIM claim for benefits for injuries sustained by the insured. Plaintiff and Topa entered into a stipulation for entry of judgment, preserving plaintiff's right to file the instant appeal. Judgment was entered in Topa's favor, and this appeal followed.

DISCUSSION

I. Standard of review

The standard of review for an order granting or denying a motion for summary adjudication is de novo. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 860, 107 Cal.Rptr.2d 841, 24 P.3d 493.) The trial court's stated reasons for granting summary adjudication are not binding on the reviewing court, which reviews the trial court's ruling, not its rationale. (Kids' Universe v. In2Labs (2002) 95 Cal.App.4th 870, 878, 116 Cal.Rptr.2d 158.)

II. Applicable legal principles

A. Policy interpretation

" ‘Interpretation of an insurance policy is a question of law and follows the general rules of contract interpretation. [Citation.] "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. [Citation.] Such intent is to be inferred, if possible, solely from the written provisions of the contract. [Citation.] The "clear and explicit" meaning of these provisions, interpreted in their "ordinary and popular sense," unless "used by the parties in a technical sense or a special meaning is given to them by usage" [citation], controls judicial interpretation. [Citation.]’...." [Citation.]' [Citation.]" (TRB Investments, Inc. v. Fireman's Fund Ins. Co. (2006) 40 Cal.4th 19, 27, 50 Cal.Rptr.3d 597, 145 P.3d 472.) Policy provisions must be interpreted in context, giving effect to every part of the policy with " ‘each clause helping to interpret the other.’ " (Palmer v. Truck Ins. Exchange (1999) 21 Cal.4th 1109, 1115, 90 Cal.Rptr.2d 647, 988 P.2d 568.)

If the language of the policy is clear and explicit, it governs. (Foster–Gardner, Inc. v. National Union Fire Ins. Co. (1998) 18 Cal.4th 857, 868, 77 Cal.Rptr.2d 107, 959 P.2d 265 (Foster–Gardner ).) " ‘ "A policy provision will be considered ambiguous when it is capable of two or more constructions, both of which are reasonable." [Citations.] The fact that a term is not defined in the policies does not make it ambiguous. [Citations.]

Nor does "[d]isagreement concerning the meaning of a phrase," or " ‘the fact that a word or phrase isolated from its context is susceptible of more than one meaning.’ " [Citation.] " ‘[L]anguage in a contract must be construed in the context of that instrument as a whole, and in the circumstances of that case, and cannot be found to be ambiguous in the abstract.’ " [Citation.]....' [Citation.]" (Powerine Oil Co., Inc. v. Superior Court (2005) 37 Cal.4th 377, 390–391, 33 Cal.Rptr.3d 562, 118 P.3d 589.)

The insured bears the burden of bringing a claim within the basic scope of coverage of a policy's insuring agreement, and a court will not indulge a forced interpretation of the insuring agreement to bring a claim within the scope of its coverage. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 16, 44 Cal.Rptr.2d 370, 900 P.2d 619 (Waller ).)

B. First party insurance distinguished from third party liability insurance

The distinction between first party insurance and third party liability insurance is pertinent to our analysis. "[A] first party insurance policy provides coverage for loss or damage sustained directly by the insured.... A third party liability policy, in contrast, provides coverage for liability of the insured to a ‘third party’.... In the usual first party policy, the insurer promises to pay money to the insured upon the happening of an event, the risk of which has been...