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Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

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NOT FOR PUBLICATION F I L E D 

 

 UNITED STATES COURT OF APPEALS OCT 08, 1998

 

 FOR THE NINTH CIRCUIT CATHY A.CATTERSON, CLERK

 U.S. COURT OF APPEALS 

 )

BOEHRINGER MANNHEIM CORPORATION, ) No. 97-55433

an Indiana Corporation, and )

DePUY INC., an Indiana Corporation, ) 

 ) D.C. No. CV 95-05041-KMW 

 

Plaintiffs-Appellants, )

 )

 v. ) M E M O R A N D U M1

 )

ALLIANZ UNDERWRITERS INSURANCE )

COMPANY, a California Corporation, )

 )

 Defendant-Appellee. )

 )

 )

 )

Appeal from the United States District Court

for the Central District of California

 Kim McLane Wardlaw, District Judge, Presiding

Submitted2 September 17, 1998 

Pasadena, California

 

1

This disposition is not appropriate for publication and may not be cited to or by the courts of this

circuit except as provided by 9th Cir. R. 36-3.

 

2

The panel unanimously found this case suitable for decision without oral argument. Fed. R. App. P.

34(a) and Ninth Circuit Rule 34-4.

 Case: 97-55433, 10/08/1998, ID: 3555375, DktEntry: 25, Page 1 of 8
Before: BROWNING, PREGERSON, and HAWKINS, Circuit Judges.

Plaintiffs-Appellants Boehringer Mannheim Corp. and DePuy,

Inc. (collectively, "BMC") and Defendant-Appellee Allianz

Underwriters Insurance Co. are insured and insurer, respectively. 

BMC manufactures orthopaedic devices, including the acetabular cup

system ("ACS"), an appliance used in hip-replacement surgeries. 

The ACS proved systematically defective, generating many claims

against BMC. When a disagreement arose concerning which of two

BMC-Allianz policies was to pay the ACS claims, BMC raised

contract and tort claims against Allianz in district court. 

The district court granted Allianz' summary judgment motion

on BMC's claims for breach of contract and for breach of the

covenant of good faith and fair dealing. The district court held

a bench trial on BMC's remaining equitable claims for mistake,

estoppel, and waiver. After the trial, the court ruled in favor

of Allianz. BMC timely appeals both of these judgments.

We have jurisdiction pursuant to § 28 U.S.C. §§ 1291 and

1292. The parties are familiar with the factual and procedural

history of this case and we will not refer to it hereafter except

as necessary to explain our decision. For the reasons set forth

below, we affirm. 

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STANDARD OF REVIEW

We review the district court's grant of summary judgment de

novo. See Covey v. Hollydale Mobilehome Estates, 116 F.3d 830,

834 (9th Cir. 1997). To determine whether a genuine issue of

material fact existed that would preclude summary judgment, we

review the evidence in the light most favorable to the nonmoving

party, in this case BMC. See id. Our review is limited to the

record as it stood before the district court at the time it made

each of its respective rulings. See Lippi v. City Bank, 955 F.2d

599, 604 (9th Cir. 1991).

ANALYSIS

1. BMC's Contract Claim

a. Ambiguity of the Trigger

BMC argues that the district court misread the 1989 and 1990

BMC-Allianz policies when it concluded they contained unambiguous

first-claim triggers of coverage for all claims. The plain

language of those policies compels us to reject BMC's argument. 

Both of the policies are captioned "Claims Made Commercial

Umbrella." Under the batch clause, all claims arising from a

similar product defect are treated as a single "loss." Under the

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insuring agreements, all "losses" trigger coverage as of the date

that the first written claim is submitted to the insured. Because

BMC received the first written ACS claim in December 1989, the

1989 policy was triggered for all of the losses that BMC

thereafter lumped in the ACS batch. None of the other language

cited by BMC creates a genuine issue of material fact as to the

policies' ambiguity. We hold that the district court correctly

determined that the 1989 and 1990 BMC-Allianz policies were

unambiguous. 

b. Admissibility of Extrinsic Evidence

BMC states correctly that California law required the

district court to receive extrinsic evidence when determining

whether the policies were ambiguous and to admit that evidence if,

in light of all the evidence, the policy language was reasonably

susceptible to its interpretation. See PG&E Co. v. G.W. Thomas

Drayage & Rigging Co., 69 Cal. 2d 33, 40 (1968) (en banc). BMC

argues that the district court should have received evidence that 

Allianz knew that the batch clause proposed by BMC came from a

policy that contained an occurrence-reported trigger; evidence

that the 1986, 1993, and 1994 BMC-Allianz policies contained

different trigger language; and evidence of insurance industry

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practice contained in several declarations. Because none of this

evidence makes the policies reasonably susceptible of the

interpretation BMC urges, we hold that BMC's extrinsic evidence

was irrelevant and thus, inadmissible. Therefore, we hold that

any error was harmless.

First, BMC complains that the court refused to acknowledge

extrinsic evidence showing that Allianz knew BMC had lifted the

batch clause from an XL policy. This evidence was irrelevant

because knowing the source of the batch clause does not make the

1989 and 1990 policies reasonably susceptible of BMC's assertion

that it desired occurrence-reported triggers for these policies. 

In fact, this evidence does not even support the inference that

Allianz thought BMC desired an occurrence-reported trigger. 

Because the XL batch clause contained a broader, more detailed

definition of "batch" arguably more beneficial to the insured than

that set forth in the old BMC-Allianz batch clause, and because

BMC never gave Allianz a copy of the XL trigger clause, the more

rational interpretation of this evidence is that BMC sought the XL

batch clause for its broader language. 

Second, BMC contends that the district court should have

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received into evidence the 1986, 1993, and 1994 BMC-Allianz

policies. Those policies differed from the 1989 and 1990 policies

in that they combined the batch clause with the first-claim 

trigger language, which was repeated in the insuring agreements. 

By way of contrast, the XL batch clause that BMC negotiated for

the 1989 and 1990 policies contained no trigger language, although

the insuring agreements still specified a first-claim trigger. 

Nevertheless, the language of the insuring agreements in all of

the policies supports the district court's conclusion that the

parties intended to retain the first-claim trigger. Because the

1986, 1993 and 1994 BMC-Allianz policies do not make the 1989 and

1990 policies reasonably susceptible of the inference that the

parties ever abandoned a first-claim trigger, this extrinsic

evidence was irrelevant. 

Finally, BMC argues that the district court erred when it

refused to receive several declarations that describe insurance

industry practice. But these declarations do not make any

language in the policies reasonably susceptible of the

interpretation that BMC urges. The declaration of former New York

State Insurance Superintendent Richard Stewart does not even

establish industry practice in the relevant time period. Stewart,

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who submitted the declaration in 1996, repeatedly described

features of "today's policies" and conspicuously did not state

whether those features were prevalent when the parties drafted

these policies in 1988-89, when the occurrence-reported trigger

was new. The district court's failure to consider these

declarations therefore was harmless.

For these reasons, we hold that BMC's extrinsic evidence was

inadmissible to aid the district court in its interpretation of 

the 1989 and 1990 policies. Thus, the district court's failure to

receive BMC's extrinsic evidence was harmless.

2. BMC's Tort Claim

The district court stated that, because BMC's contract claim

lacked merit, its tort claim for breach of the covenant of good

faith and fair dealing also must fail. This ruling was correct. 

Under California law, an action for breach of the covenant of good

faith and fair dealing is no more valid than the underlying

contract claim. See Carma Developers (Calif.), Inc. v. Marathon

Development Calif. Inc., 2 Cal. 4th 342, 373-74 (1989). Because

we have concluded that the district court correctly found BMC's

contract claim to be meritless, we must also affirm the district

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court's summary disposition of BMC's tort claim in favor of

Allianz.

3. BMC' Equitable Claims

After a bench trial, the district court concluded that BMC

had not shown mistake, estoppel, or waiver. BMC argues that the

court's evaluation of the evidence at trial was tainted by its

erroneous conclusion that the policies were unambiguous. Because

we have held that the district court correctly found the policies

to be unambiguous, we reject this argument. 

CONCLUSION

For the foregoing reasons, the district court's judgment is

AFFIRMED.

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