Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-03115/USCOURTS-caed-2_09-cv-03115-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: Civil Miscellaneous Case

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

NAVIGATORS SPECIALTY INSURANCE )

COMPANY, )

)

Plaintiff, ) 2:09-cv-03115-GEB-DAD

)

v. ) ORDER GRANTING PLAINTIFF’S

) MOTION FOR SUMMARY JUDGMENT

HOWARD DRYWALL, INC.; J P HEINTZ & )

COMPANY INC.; and JUAN MANUEL )

LOPEZ, )

)

Defendants. )

)

On February 5, 2010, plaintiff Navigators Speciality

Insurance Company (“Navigators”) filed a motion for summary judgment

under Federal Rule of Civil Procedure 56(c) on its claim against

defendants Howard Drywall, Inc. (“Howard Drywall”) and J P Heintz &

Company, Inc. (“J P Heintz”). The motion concerns whether, under a

commercial general liability insurance policy Navigators issued to

Howard Drywall, Navigators is obligated to indemnify or defend either

Howard Drywall or J P Heintz in a pending state court proceeding. 

Both Howard Drywall and J P Heintz argue that Navigators’ summary

judgment motion should be denied or continued to allow for additional

discovery under Federal Rule of Civil Procedure 56(f), and

alternatively, oppose the motion. Navigators’ motion was heard on

March 8, 2010. For the reasons stated below, J P Heintz and Howard

Drywall’s Rule 56(f) motion is DENIED and Navigators’ motion for

summary judgment is GRANTED.

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J P Heintz further requests that judicial notice be taken of 1

J P Heintz’s answer to Navigators’ complaint in this federal action.

However, documents that are on file need not be judicially noticed to be

considered. Therefore, this portion of Howard Drywall’s request is

denied. Similarly, Howard Drywall’s request that judicial notice be

taken of its answer to Navigators’ complaint is denied for the same

reason.

2

I. LEGAL STANDARD

A party seeking summary judgment bears the initial burden of

demonstrating the absence of a genuine issue of material fact for

trial. Celotex Corp. v. Catrett, 477 U.S., 317, 323 (1986). If this

burden is satisfied, “the non-moving party must set forth, by

affidavit or as otherwise provided in [Federal] Rule [of Civil

Procedure] 56, specific facts showing that there is a genuine issue

for trial.” T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors

Ass’n, 809 F.2d 626, 630 (9th Cir. 1987) (quotations and citation

omitted) (emphasis omitted). When deciding a summary judgment motion,

all reasonable inferences that can be drawn from the evidence “must be

drawn in favor of the non-moving party.” Bryan v. McPherson, --- F.3d

----, 2009 WL 5064477, at *2 (9th Cir. 2009).

Navigators requests that judicial notice be taken of two

documents: 1) Lopez’s complaint against J P Heintz in the Lopez v. J P

Heintz litigation (“Lopez”), Case No. 34-2008-00029816, pending in the

Sacramento County Superior Court; and 2) J P Heintz’s cross-complaint

filed against Howard Drywall in Lopez. J P Heintz also requests that

judicial notice be taken of an order continuing the trial date in the

Lopez case.1

Under Federal Rule of Evidence 201, a district court may

take judicial notice of a fact that is “not subject to reasonable

dispute” because “it is either (1) generally known within the

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J P Heintz objects to the admission of insurance policy number 2

04-00006013 issued by Navigators to Howard Drywall, which is attached as

Exhibit A to O’Hara’s declaration, arguing “it is inadmissible hearsay,”

“lacks proper authentication” and “lack of personal knowledge.” (J P

Heintz’s Objections to Pl.’s Evidence 1:23-24.) Specifically, J P

Heintz argues “there are no facts stated in the O’Hara declaration

establishing that O’Hara has knowledge when the subject policy was

amended to include an absolute exclusion for bodily injury to employees

. . . .” (Id. 1:24-27.) J P Heintz’s objections are overruled. O’Hara

declares she has “personal knowledge regarding the issuance of the

Navigators insurance policy at issue in this litigation” and that

“Exhibit A is a true and correct copy of policy number 04-00006012

(continued...)

3

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). “[P]roceedings in

other courts, both within and [outside of] the federal judicial

system, if [they] have a direct relation to matters at issue” may be

judicially noticed. United States ex rel. Robinson Rancheria Citizens

Council v. Boreno, Inc., 971 F.2d 244, 248 (9th Cir. 1992) (taking

judicial notice of California Superior Court decision). Since Lopez

is directly related to this action, judicial notice may be taken of

the three filings in that case. Therefore, both Navigators and J P

Heintz’s requests for judicial notice of filings in Lopez are granted. 

II. STATEMENT OF UNDISPUTED FACTS

On November 28, 2006, Builders & Tradesmen Insurance

Services (“BTIS”), Navigators’ underwriter, received an application

for insurance prepared and submitted by Wasserman & Associates

(“Wasserman”) on behalf of its client, Howard Drywall. (Mozell Decl.

¶ 4.) Navigators then issued commercial general liability insurance

to Howard Drywall under policy number 04-00006013 (the “Policy”),

which was effective from December 1, 2006 to December 1, 2007. (Pl.’s

Response to Defs.’ SUF ¶ 7; O’Hara Decl. Ex. A.) Richard Drywall, 2

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(...continued) 2

issued by Navigators to Howard Drywall, Inc.” (O’Hara Decl. ¶¶ 1-2.)

These averments are sufficient to authenticate and admit the insurance

policy. Further, the insurance policy is “excluded from the definition

of hearsay and is admissible evidence because it is a legally operative

document that defines the rights and liabilities of the parties in this

case.” Stuart v. UNUM Life Ins. Co. of Am., 217 F.3d 1145, 1154 (9th

Cir. 2000) (citations and quotations omitted).

Further, Howard Drywall and J P Heintz agree that a commercial

general liability policy was issued. However, they dispute and deny

that the employer’s liability exclusion endorsement, which excludes J

P Heintz from coverage under the Policy, was in effect. This argument

is addressed below, when considering the validity of the endorsement. 

Navigators objects to the admission of this fact as 3

irrelevant. Navigators’ objection, however, is overruled. 

4

the President and Chief Executive Officer of Howard Drywall, did not

receive a copy of the Policy from Wasserman until May 14, 2007. 

(Howard Decl. ¶ 6.)

 On December 29, 2006, Juan Manuel Lopez, an employee of

Howard Drywall’s, went to a church to perform work for Howard Drywall. 

(Pl.’s Response to Defs.’ Separate Statement of Undisputed Facts

(“SUF”) ¶¶ 1-2.) Shortly after his arrival at the church, Lopez fell

down an elevator shaft. (Id. ¶ 3.) 

Prior to Lopez’s accident, in June 2000, Howard Drywall, as

a subcontractor, had entered into a contract with general contractor J

P Heintz, under which Howard Drywall was “obligated to defend and

fully indemnify [J P Heintz] . . . against all claims, lawsuits, and

damages brought by any person against [J P Heintz] . . . arising out

of [Howard Drywall’s] work at the subject job site.” (J P Heintz

Additional Statement of Facts ¶ 3) (emphasis in original.) The 3

contract between Howard Drywall and J P Heintz also required Howard

Drywall to obtain a comprehensive general liability insurance policy

covering bodily injury claims and naming J P Heintz as an additional

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insured. (Id. ¶ 5.) This subcontract agreement was unmodified and in

effect at the time of Lopez’s accident at the church in December 2006. 

(Id. ¶ 4.)

Lopez filed a complaint in the Sacramento County Superior

Court on December 19, 2008, alleging a negligence claim against J P

Heintz based upon the December 2006 accident. (Pl.’s Response to

Defs.’ SUF ¶ 5.) J P Heintz then filed a cross-complaint against

Howard Drywall on February 27, 2009, alleging a contractual indemnity

claim. (Id. ¶ 6.) In that claim, J P Heintz alleges “Cross-Defendant

Howard Drywall, Inc. is contractually obligated to defend and

indemnify [J P Heintz] . . . pursuant to a written contract entered

into before [Lopez’s] accident . . . .” (Navigators’ Request for

Judicial Notice (“RJN”) Ex. B.)

 On November 9, 2009, Navigators filed a complaint in this

federal court, seeking “a judicial declaration that it owes no duty to

defend or indemnify either defendant [J P Heintz] . . . or defendant

[Howard Drywall] . . . under the insurance policy Navigators issued to

[Howard Drywall], regarding a bodily lawsuit brought in Sacramento

County Superior Court by Howard Drywall’s injured employee, [Lopez] .

. ., because the Navigators policy excludes coverage for any claim

arising out of bodily injury to any insured’s employee.” (Compl.

1:18-24.) 

III. J P Heintz and Howard Drywall’s Rule 56(f) Motion

J P Heintz argues Navigators’ summary judgment motion should

be denied under Federal Rule of Civil Procedure 56(f) (“Rule 56(f)”)

to allow it time to conduct discovery concerning whether Navigators

waived, or is estopped, from denying coverage under the Policy. 

Howard Drywall joins in J P Heintz’s Rule 56(f) motion. At oral

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argument, J P Heintz’s counsel clarified that defendants only seek

discovery into what Navigators or its underwriter knew or should have

known about Howard Drywall’s insurance needs in light of the fact that

Navigators had previously insured Howard Drywall. J P Heintz’s

counsel argued that an exhibit attached to Navigators’ reply brief

revealed that Navigators had insured Howard Drywall from 2002 to 2003. 

Specifically, J P Heintz seeks to discover the underwriting file as

well as depose BTIS’s declarant, Penny Mozell. J P Heintz’s counsel

further argued that this discovery is relevant to whether J P Heintz

and Howard Drywall are entitled to reform the Policy to provide

coverage to J P Heintz.

Navigators counters that defendants have not satisfied Rule

56(f)’s requirements since defendants cannot create coverage through

either the doctrines of waiver or estoppel. At oral argument,

Navigators’ counsel further opined that discovery into what

Navigators’ or its underwriter knew about Howard Drywall’s insurance

needs is irrelevant since the Policy reflects the parties’ bargainedfor contract. 

Rule 56(f) states: “If a party opposing [a summary judgment]

motion shows by affidavit that, for specified reasons, it cannot

present facts essential to justify its opposition, the court may: (1)

deny the motion; (2) order a continuance to enable affidavits to be

obtained, depositions to be taken, or other discovery to be

undertaken; or (3) issue any other just order.” Fed. R. Civ. P.

56(f). “To prevail under Rule [56(f)], [a party] opposing a motion

for summary judgment must make (a) a timely application (b) which

specifically identifies (c) relevant information, (d) where there is

some basis for believing that the information sought actually exists. 

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The burden is on the party seeking additional discovery to proffer

sufficient facts to show that the evidence sought exists, and that it

would prevent summary judgment.” Blough v. Holland Realty, Inc., 574

F.3d 1084, 1091 n.5 (9th Cir. 2009). 

“The rule is well established that the doctrines of implied

waiver and of estoppel based upon the conduct or action of the

insurer, are not available to bring within the coverage of a policy

risks not covered by its terms, or risk expressly excluded therefrom,

and the application of the doctrines in this respect is therefore to

be distinguished from the waiver of, or estoppel to assert, grounds of

forfeiture.” Supervalu, Inc. v. Wexford Underwriting Managers, Inc.,

175 Cal. App. 4th 64, 77 (2009). It is undisputed that if the

endorsement at issue in this litigation is valid, the terms of the

Policy do not provide coverage to either J P Heintz or Howard Drywall

for Lopez’s bodily injury claim. Therefore, neither the doctrines of

waiver or estoppel may operate to extend coverage to Howard Drywall or

J P Heintz. Accordingly, discovery on these issues would not preclude

an award of summary judgment in Navigators’ favor. 

Further, defendants have not demonstrated that the discovery

they seek would establish a right to reformation of the Policy and

preclude awarding summary judgment in Navigators’ favor. Under

California law, reformation “may be had when there has been a

negligent misrepresentation, mutual mistake, or a mistake, suspected

or known by the party opposing reformation, made by the party seeking

reformation.” Rail Servs. of Am. v. State Compensation Ins. Fund, 110

Cal. App. 4th 323, 333 (2003) (citations omitted); see also Cal. Civ.

Code § 3399 (providing for reformation of a contract). “The purpose

of reformation is to correct a written instrument in order to

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effectuate a common intention of both parties which was incorrectly

reduced to writing.” Alderson v. Ins. Co. of N. Am., 223 Cal. App. 3d

397, 411 (1990). 

Defendants have not explained how the discovery they seek on

the coverage Navigators’ provided Howard Drywall four years prior to

the issuance of the Policy, establishes that when the Policy was

formed, there was a “common intention” shared by both Navigators and

Howard Drywall to extend certain coverage under the Policy to J P

Heintz. That Navigators may have previously provided certain coverage

to Howard Drywall does not demonstrate that a “mistake” was made when

the Policy was formed. Therefore, defendants have not shown that the

discovery they see would preclude awarding summary judgment in

Navigators favor. Accordingly, defendants’ motion for a continuance

or denial under Rule 56(f) is DENIED.

IV. DISCUSSION

Navigators argues it is entitled to summary judgment on its

claim for declaratory relief since a valid endorsement in the Policy

“excludes coverage for any claim of bodily injury brought by any

employee of any insured” and Lopez was an employee of Howard Drywall,

an insured. (Mot. for Summ. J. 7:27-28.) Howard Drywall and J P

Heintz each filed oppositions, raising nearly identical arguments. 

Both argue that “amendment” to the employer’s liability exclusion of

the Policy is inconsistent with the reasonable expectations of Howard

Drywall and J P Heintz; and, there is a material question of fact as

to whether or not Howard Drywall and J P Heintz had notice of the

exclusion from coverage. (J P Heintz Opp’n 2-6, Howard Drywall Opp’n

4-9.)

//

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A. Applicable Principles of Insurance Contract Interpretation

An insurer’s duty to defend or indemnify is clearly defined

under California law:

The duty to defend is broader than the obligation to

indemnify, from which it must be distinguished. The

duty to defend exists whenever an insurer ascertains

facts which give rise to the potential of liability

to indemnify. Unlike the obligation to indemnify,

which is only determined when the insured’s

underlying liability is established, the duty to

defend must be assessed at the very outset of a case

. . . . Thus, when a suit against an insured

alleges a claim that potentially could subject the

insured to liability for covered damages, an insured

must defend unless and until the insurer can

demonstrate, by reference to undisputed facts, that

the claim cannot be covered. In order to establish

a duty to defend, an insured need only establish the

existence of a potential for coverage; while to

avoid the duty, the insurer must establish the

absence of any such potential. In general, where

there is any doubt as to whether the duty to defend

exists, the doubt must be resolved in favor of the

insured and against the insurer.

Ringler Associates Inc. v. Maryland Cas. Co., 80 Cal. App. 4th 1165,

1185-86 (2000) (citations omitted) (emphasis in original). Further,

“[i]t is well settled that because the duty to defend is broader than

the duty to indemnify, a determination that there is no duty to defend

automatically means that there is no duty to indemnify.” Certain

Underwriters at Lloyd’s of London v. Superior Court, 24 Cal. 4th 945,

961 (2001) (quotations and citations omitted). Therefore, to prevail

on its summary judgment motion, Navigators must establish that the

undisputed facts demonstrate that Lopez’s claim “cannot be covered”

under the Policy.

The principles of insurance contract interpretation are also

well-settled under California law:

Interpretation of an insurance policy is

a question of law. While insurance contracts

have special features, they are still contracts

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to which ordinary rules of contractual

interpretation apply. Thus, the mutual

intention of the parties at the time the

contract is formed governs interpretation. If

possible, [courts] infer this intent solely

from the written provisions of the insurance

policy. If the policy language is clear and

explicit, it governs.

When interpreting a policy provision,

[courts] must give its terms their ordinary and

popular sense unless used by the parties in a

technical sense or a special meaning is given

to them by usage. . . .

A policy provision is ambiguous only if it

is susceptible to two or more reasonable

constructions despite the plain meaning of its

terms within the context of the policy as a

whole. The court may then invoke the principle

that ambiguities are generally construed

against the party who caused the uncertainty to

exist (i.e., the insurer) in order to protect

the insured’s reasonable expectation of

coverage.

Palmer v. Truck Ins. Exchange, 21 Cal. 4th 1109, 1115 (1999)

(quotations and citations omitted).

“Endorsements are modifications to the basic insuring forms

in [an insurance] policy . . . .” Adams v. Explorer Ins. Co., 107

Cal. App. 4th 438, 450 (2003) (citation omitted); see also Haynes v.

Farmers Ins. Exchange, 32 Cal. 4th 1198, 1208 (2004) (stating that

“insurers may rely on endorsements to modify printed terms of a form

policy”). “Endorsements on an insurance policy form part of the

insurance contract, and the policy of insurance with the endorsements

and riders thereon must be construed together as a whole.” Adams, 107

Cal. App. 4th at 451 (quotations and citations omitted). “If there is

a conflict in meaning between an endorsement and the body of the

policy, the endorsement controls.” Aerojet-General Corp. v. Transport

Indem. Co., 17 Cal. 4th 38, 50 n.4 (1997) (quotations and citation

omitted). However, any endorsement that “takes away or limits

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The Commercial General Liability Coverage Form is a standard 4

form drafted by the Insurance Services Office (“ISO”), a nonprofit trade

association. Montrose Chemical Corp. v. Admiral Ins. Co., 10 Cal. 4th

645, 671 n.13 (1995). “Most carriers use the basic ISO forms, at least

as the starting point for their general liability policies.” Id.

11

coverage reasonably expected by an insured must be conspicuous, plain

and clear” to be enforceable. Haynes, 32 Cal. 4th at 1204. “The

burden of making coverage exceptions and limitations conspicuous,

plain and clear rests with the insurer.” Id. (citations omitted). 

B. The Insurance Policy

The Policy is fifty-eight pages long and consists of three

“Declarations” pages located at pages 000002, 000004 and 000012,

“Common Policy Conditions,” located at page 000007, a “Commercial

General Liability Coverage Form” beginning on page 000030, and twentyfive endorsements and other forms placed throughout the policy. (Id.)

The Commercial General Liability Coverage Form constitutes

the “main body” of the policy and provides the “insuring agreement,”

under which Navigators agrees to “pay those sums that the insured

becomes legally obligated to pay as damages because of ‘bodily injury’

. . . to which this insurance applies.” (O’Hara Decl. Ex. A. at 4

000030.) The Commercial General Liability Coverage Form further

specifies that the “insuring agreement” “applies to ‘bodily injury’ .

. . only if: (1) The “bodily injury” . . . is caused by an

“occurrence” that takes place in the “coverage territory”; [and] (2)

The “bodily injury” . . . occurs during the policy period . . . .” 

(Id.) The Commercial General Liability Coverage Form also limits the

“insuring agreement” providing for certain “exclusions” from coverage. 

(Id.) In particular, the Commercial General Liability Coverage Form

provides:

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This insurance does not apply to: . . .

e. Employer’s Liability

“Bodily Injury” to:

(1) An “employee” of the insured arising out

of and in the course of:

(a) Employment by the insured; or

(b) Performing duties related to the

conduct of the insured’s business;

. . .

This exclusion applies:

(1) Whether the insured may be liable as an

employer or in any other capacity; and

(2) To any obligation to share damages with

or repay someone else who must pay

damages because of the injury.

This exclusion does not apply to liability

assumed by the insured under an “insured

contract.”

(Id. at 000031) (emphasis added). 

However, Form ANF-168 (07/99), titled “Amendment -

Employer’s Liability Exclusion,” (“Employer’s Liability Exclusion

Endorsement”) located on page 000024, states that it is an endorsement

“modif[ying] insurance provided under the . . . [Commercial General

Liability Coverage Part].” (Id. at 000024.) Specifically, the

Employer’s Liability Exclusion Endorsement provides that “Exclusion e.

Employer’s Liability of item 2. Exclusions, COVERAGE A. BODILY

INJURY AND PROPERTY DAMAGE LIABILITY, SECTION 1 - COVERAGES is

replaced by the following: 

e. Employers Liability

“Bodily Injury” to:

(1) Any “employee” or “temporary worker” of any

insured arising out of and in the course of:

(a) Employment by any insured; or

(b) Performing duties related to the conduct

of an insured’s business . . . 

This exclusion applies:

(1) Whether an insured may be liable as an

employer or in any other capacity; and

(2) To any obligation to share damages with or

repay someone else who must pay damages

because of the injury.

(Id.) (emphasis added).

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 Navigators attached the wrong “Exhibit B” to O’Hara’s 5

declaration. After defendants had filed their oppositions, Navigators

filed a “Notice of Errata,” attaching the correct form as “Exhibit B.”

Neither Howard Drywall nor J P Heintz challenged the admission of this

exhibit at the hearing.

13

Form ANF-ES 160 (5/2006), the “Blanket Additional Insured

Endorsement,” located on page 000016, also states that it modifies the

provisions of the Commercial General Liability Coverage Form. (Id. at

00016.) Specifically, the Blanket Additional Insured Endorsement

provides that “WHO IS AN INSURED (Section II) [of the Commercial

General Liability Coverage Form] is amended to include as an insured

the person or organization shown in the Schedule . . . .” (Id.) 

Navigators attached as Exhibit B to O’Hara’s declaration an executed

form AN-ES 160 (5/2006), listing in the “Schedule,” J P Heintz and St.

Anna Greek Orthodox Church. (O’Hara Decl. Ex. B, Notice of Errata,

Ex. B.) This endorsement states that it is applicable to Policy 5

Number 04-00006013, under which Howard Drywall is the named insured,

and is effective December 1, 2006 through December 1, 2007. (Id.)

C. Validity of the Employer’s Liability Exclusion Endorsement

Navigators argues the Employer’s Liability Exclusion

Endorsement in the Policy is valid under California law because it is

conspicuous, plain and clear. Howard Drywall and J P Heintz’s do not

directly challenge this assertion; rather, they argue that “[t]here

was no clear and unambiguous notice to [Howard Drywall] or its

additional insured J P Heintz, of any addition of an absolute employee

exclusion, other than posting a one-page document in the middle of a

59-page policy.” (Howard Drywall’s Opp’n 7:9-12.) At oral argument,

Howard Drywall and J P Heintz’s counsel only argued that Navigators’

motion should be continued or denied under Rule 56(f); neither

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addressed the underlying merits of Navigators’ summary judgment

motion.

 An endorsement is “conspicuous” if “it will attract the

reader’s attention.” Haynes, 32 Cal. 4th at 1204. “Courts have found

coverage exclusions in policies not to be conspicuous where they were

hidden, or placed on an overcrowded page that readers could easily

overlook.” Venoco, Inc. v. Gulf Underwriters Ins. Co., 175 Cal. App.

4th 750, 758 (2009) (quotations and citations omitted). “Conversely,

an exclusionary clause in the same size print and intensity as the

rest of the policy and appearing under an appropriate heading is

“conspicuous as a matter of law.” Haynes, 32 Cal. 4th at 1217. 

A conspicuous inquiry also assesses where the endorsement “actually

has been positioned and printed within the policy at issue.” Haynes,

32 Cal. 4th at 1209 (citation omitted). In determining

conspicuousness, “[t]he policy should be read as a layman would read

it and not as it might be analyzed by an attorney or insurance

expert.” Haynes, 32 Cal. 4th at 1204 (quotations and citations

omitted). 

In Haynes, the California Supreme Court held an “endorsement

to be inconspicious where: it was listed on the policy’s declarations

page only by alphanumeric designation (S9064); the language in the

endorsement itself was not bolded, italicized, enlarged, underlined,

in different font, capitalized, boxed, set apart, or in any other way

distinguished from the rest of the fine print; one of the terms in the

title was nowhere defined; and the relevant limiting language was in

the least conspicuous position on the page - essentially buried.” 

Zurich Am. Ins. v. Grand Avenue Transport, No. C 09-00197 CRB, 2010 WL

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682530, at *4 (N.D. Cal. Feb. 23, 2010) (quoting and citing Haynes, 32

Cal. 4th at 1207-09).

In the Policy, on page 000012, there is a “Declarations”

page for the “Commercial General Liability Coverage Part.” (O’Hara

Decl. Ex. A at 000012.) At the bottom of that page, there is a “box”

titled “Forms and Endorsements.” (Id.) The first line of text within

the box, states in bold, “Forms and Endorsements applying to this

Coverage Part and made part of this policy at the time of Issue” and

then lists the alphanumeric designation of twenty-five endorsements. 

(Id.) One of those listed endorsements is ANF 168 (07/99), which

corresponds to the Employer’s Liability Exclusion Endorsement. (Id.)

The Employer’s Liability Exclusion Endorsement is located on page

000024, before the Commercial General Liability Coverage Form. The

first line of text on the page, in capitalized and bolded letters,

states, “THIS ENDORSEMENT CHANGES THE POLICY, PLEASE READ IT

CAREFULLY.” (Id. at 000024.) Underneath that line of text, also in

capitalized and bold letters, the endorsement is titled as “AMENDMENT

- EMPLOYER’S LIABILITY EXCLUSION.” (Id.) The page then states “This

endorsement modifies insurance provided under the following part:

COMMERCIAL GENERAL LIABILITY COVERAGE PART.” (Id.) The text of the

endorsement proceeds to identify the provision of the Commercial

General Liability Coverage Form that is to be replaced by the language

provided in the endorsement, which is quoted in full above. (Id.) 

While it is preferable that an endorsement be listed on the

declarations page or elsewhere by its full name, rather than by its

alphanumeric designation, there is no authority suggesting that alone,

is sufficient to deem the Employer’s Liability Exclusion Endorsement

inconspicuous. Further, as in Zurich, “[t]he printing of the

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endorsement is . . . clear. At its top is the statement, in large,

[bold,] all-capital letters, that the endorsement changes the policy. 

The title of the endorsement . . . [is also in] bold, all capital

letters. The text of the endorsement is set apart on its own . . .,

is uncrowded and has no unrelated text surrounding it.” Id. While

Howard Drywall and J P Heintz appear to argue that the Employer’s

Liability Exclusion Endorsement is inconspicuous because it is located

on page 24 of a 58 page policy, they have cited no authority

suggesting this placement is sufficient to render the endorsement

inconspicuous. The endorsement is clearly labeled as such, and while

it is located on page 000024, it precedes the main body of the policy

which begins on page 000030. Therefore, Navigators has satisfied its

burden of demonstrating that the Employer’s Liability Exclusion

Endorsement is sufficiently conspicuous. See also Palub v. Hartford

Underwriters Ins. Co., 92 Cal. App. 4th 645, 653 (2001) (finding onepage endorsement, labeled as “Amendatory Endorsement,” attached to

main body of policy, conspicuous) (abrogated on other grounds).

“Conspicuous placement of exclusionary language is only one

of two rigid drafting rules required of insurers to exclude or limit

coverage. The language itself must be plain and clear. This means

more than the traditional requirement that contract terms be

unambiguous. Precision is not enough. Understandability is also

required.” Haynes, 32 Cal. 4th at 1211 (quotations and citations

omitted). Neither Howard Drywall nor J P Heintz have challenged the

Employer’s Liability Exclusion Endorsement as being not plain or

clear. Further, the language of the Endorsement is undeniably

“unambiguous and understandable.”

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In their opposition briefs, Howard Drywall and J P Heintz

primarily argue “Navigators knew and/or should have known . . . that

Howard Drywall expected Navigators to provide liability coverage to” J

P Heintz; the Policy should be interpreted in light of Howard

Drywall’s subcontract with J P Heintz and Howard Drywall’s reasonable

expectations; and further, that Howard Drywall did not have notice of

the exclusionary endorsement.

Howard Drywall submitted a declaration from Richard Howard,

the president and chief executive officer of Howard Drywall, in which

he declares that Howard Drywall has employed Wasserman as its broker

for obtaining general commercial liability policies for more than five

years. (Howard Decl. ¶ 2.) He further declares that he provided

Wasserman with “copies of [Howard Drywall’s] contract with J P Heintz”

(Id.) In his deposition testimony, Howard states that he expected

that Wasserman would obtain coverage that would satisfy his

contractual obligations to J P Heintz. (Worthington Decl. Ex. A at

53.) Howard also declares that “[u]nbeknownst to [him] at the time,

the ‘renewal’ policy for the period of December 1, 2006 to December 1,

2007 was written by a company [he] had not previously done business

with: [Navigators].” (Howard Decl. ¶ 5.) Lastly, Howard declares

that he “was not provided with a copy of the [Navigators] . . . policy

until it was mailed to [him] by [Wasserman] . . . on May 14, 2007.” 

(Id. ¶ 6.)

Navigators responds that the Policy was a “new” policy and

not a renewal. Navigators points to page 00004 of the policy on which

the policy is identified as “NEW.” While Howard Drywall and J P

Heintz put forward evidence demonstrating that Howard Drywall’s

president and CEO thought the Policy was a “renewal” and that

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Wasserman labeled it as a “renewal” in a letter it sent to Howard

Drywall, Jeffrey Einhorn, Howard Drywall’s insurance broker at

Wasserman who obtained the coverage, stated in his deposition that

when Howard Drywall needed to renew its insurance coverage, he “placed

the business with a different carrier.” (Worthington Decl. Ex. B.) 

Further, Einhorn states that Navigators is not affiliated with North

American Capacity, the insurance company that insured Howard Drywall

from February 1, 2005 to December 1, 2006. (Id.; Howard Decl. ¶ 4.)

Therefore, Howard Drywall and J P Heintz’s argument that the policy

was a “renewal,” is unavailing.

Howard Drywall and J P Heintz’s arguments that the Policy

conflicts with Howard Drywall’s reasonable expectations is similarly

unpersuasive. As explained in St. Paul Fire and Marine Ins. Co. v.

Am. Dynasty Surplus Lines Ins. Co., upon which defendants rely, “[i]f

contractual language is clear and explicit, it governs”; only if the

terms “are in any respect ambiguous or uncertain” are the “objectively

reasonable expectations of the insured” protected. 101 Cal. App. 4th

1038, 1058 (2002); see also Wolf Machinery Co. v. Ins. Co. of N. Am.,

133 Cal. App. 3d 324, 328 (1982) (stating that “[a] reading of the

authorities convinces us that the doctrine of reasonable expectation

of coverage comes into play only where there is an ambiguity present

in the policy”). “[E]vidence of the undisclosed subjective intent of

the parties is irrelevant to determining the meaning of contractual

language.” Winet v. Price, 4 Cal. App. 4th 1159, 1166 n.3 (1992)

(citation omitted). Neither Howard Drywall nor J P Heintz have

identified any ambiguity in the insurance policy; they merely assert

that one of the endorsements is invalid and ineffective. Since there

is “no ambiguity [in the policy] . . . the reasonable expectation of

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coverage doctrine is not applicable.” Wolf Machinery Co., 133 Cal.

App. 3d at 328. Further, while Howard Drywall and J P Heintz argue

that Navigators “knew or should have known” of Howard Drywall’s

obligation to provide insurance to J P Heintz, neither defendant has

cited any authority suggesting that even if Navigators was aware of

Howard Drywall’s subcontract with J P Heintz, it would override the

express terms of the Policy.

Howard Drywall and J P Heintz’s argument that the terms of

the subcontract should inform interpretation of the Policy also fails.

Howard Drywall and J P Heintz rely on California Civil Code section

1642 for support, which provides that “[s]everal contracts relating to

the same matters, between the same parties, and made as parts of

substantially one transaction, are to be taken together.” Section

1642, however, is inapplicable here. The subcontract executed by

Howard Drywall and J P Heintz in June 2000 does not “relat[e] to the

same matters” as Howard Drywall’s December 2006 insurance contract

with Navigators, nor should the two contracts be treated as “parts of

substantially one transaction.” “[A]n additional insured endorsement

creates a contractual obligation that is entirely separate and apart

from any indemnification obligation that may exist in an underlying

construction contract.” Am. Cas. Co. or Reading, PA v. Gen. Star

Indem. Co., 125 Cal. App. 4th 1510, 1527 (2005). Therefore, “[t]he

policy language controls, not the subcontract language.” Great

Western Drywall, Inc. v. Interstate Fire & Cas. Co., 161 Cal. App.

4th, 1033, 1043 (2008). St. Paul Fire and Marine Ins. Co., upon which

defendants again rely, is not controlling. As explained by the court

in American Cas. Co., St. Paul “held only that we could consider the

underlying indemnity contract between the insured parties in order to

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resolve an ambiguity in the language of the ‘additional insured’

endorsement . . . .” Am. Cas. Co. of Reading, P.A., 125 Cal. App. 4th

at 1528. Since neither Howard Drywall nor J P Heintz are asserting

there is any ambiguity in the Policy, their subcontract may not be

considered in interpreting the Policy.

Howard Drywall and J P Heintz also both argue there is a

genuine issue of material fact as to the date the “exclusion was

applicable” and “when said exclusion was amended by endorsement.” (J

P Heintz Opp’n 5:26-28; Howard Drywall Opp’n 8:13-21.) The

“Declarations” page on 000012 of the Policy lists the “Forms and

Endorsements applying to this Coverage Part and made part of [the]

policy at the time of issue.” The Employer’s Liability Exclusion

Endorsement, form ANF 168 (07/99) is listed. Therefore, the

Employer’s Liability Exclusion Endorsement was part of the Policy at

the Policy’s inception. Accordingly, Howard Drywall and J P Heintz

have not demonstrated that there is any genuine issue of material fact

concerning the effective date of the Employer’s Liability Exclusion

Endorsement.

Lastly, neither Howard Drywall nor J P Heintz has pointed to

any authority suggesting that the fact that Howard Drywall’s only

received a copy of the Policy from Wasserman months after its

effective date, is relevant to the validity of the endorsement or the

Policy. 

Since the Employer’s Liability Exclusion Endorsement is

conspicuous, plain and clear, it is valid and controlling. The plain

meaning of the Employer’s Liability Exclusion Endorsement operates to

exclude coverage for bodily injury claims from “an employee . . . of

any insured.” The exclusion applies “[w]hether an insured may be

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liable as an employer or in any other capacity” and “[t]o any

obligation to share damages with or repay someone else who must pay

damages because of the injury.” It is undisputed that Lopez was an

employee of Howard Drywall, an insured under the Policy, and J P

Heintz was named as an additional insured. Therefore, the Policy does

not extend coverage to Howard Drywall for Lopez’s bodily injury claim. 

Further, the exclusion applies to any obligation Howard Drywall may

have to repay someone else for Lopez’s claim, and accordingly, the

Policy also excludes coverage to Howard Drywall for J P Heintz’s

cross-complaint. Lastly, the Policy further excludes coverage to J P

Heintz, as an insured who may be liable in a capacity other than as an

employer. The Employer’s Liability Exclusion Endorsement, therefore,

precludes coverage for J P Heintz and Howard Drywall relating to

Lopez’s bodily injury claim. Since there is no possibility of

coverage, Navigators has no duty to defend nor indemnify either Howard

Drywall or J P Heintz and is entitled to summary judgment on its claim

for declaratory relief.

V. CONCLUSION

For the stated reasons, Navigators’ motion for summary

judgment is GRANTED. Navigators is entitled to the declaratory

judgment it seeks and has no duty to defend or indemnify either Howard

Drywall or J P Heintz in the Lopez action. This case shall be closed.

Dated: March 17, 2010

 

GARLAND E. BURRELL, JR.

United States District Judge

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