Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_16-cv-01565/USCOURTS-casd-3_16-cv-01565-1/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332in Diversity-Insurance Contract

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

TERRA NOVA GAS STATION, INC., a 

California Corporation, GOLDEN 

SUNRISE PROPERTIES LLC, a 

California Limited Liability Company,

Plaintiffs,

v.

AMCO INSURANCE COMPANY, an 

Iowa Corporation, ALLIED 

INSURANCE COMPANY, an Iowa 

Corporation, and DOES 1 to 100, 

inclusive,

Defendants.

Case No.: 16cv1565-JLS (DHB)

ORDER GRANTING MOTION FOR 

JUDGMENT ON THE PLEADINGS

(ECF No. 16)

Presently before the Court is Defendants Amco Insurance Company’s and Allied 

Insurance Company’s Motion for Judgment on the Pleadings (“MJP”). (ECF No. 16). Also 

before the Court are Plaintiffs’ Response in Opposition to (“Opp’n”), (ECF No. 18), and 

Defendants’ Reply in Support of (“Reply”), (ECF No. 19), Defendants’ Motion. The Court 

vacated the scheduled hearing and took the matter under submission without oral argument 

pursuant to Civil Local Rule 7.1(d)(1). (ECF No. 20.) Having considered the Parties’ 

arguments and the law, the Court GRANTS Defendants’ Motion.

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BACKGROUND

Plaintiffs are the owners and operators of a gas station and convenience store located 

in Chula Vista, California. (Notice of Removal Ex. 1 (“Compl.”), ¶ 7, ECF No. 1-2.)

Defendants insured Plaintiffs’ property via a written contract and insurance policy, which

document Plaintiffs in turn attached to their Complaint. (Id.; id. Ex. A (the “Insurance 

Policy”).)

The underlying dispute arises from Defendants’ denial of coverage for an August 

2014 incident where Plaintiffs’ fuel tank was allegedly “damaged by the acts of Shell Oil 

and . . . its agents and employees.” (Id. ¶ 8.) Specifically, Plaintiffs allege they “received a 

delivery of fuel from [their] supplier” and the person who “delivered the fuel . . . punctured 

the tank when he dropped the measurement stick in the tank to determine its fuel level.”

(Opp’n 2.) Defendants denied coverage for the incident, initially stating that the damage 

was caused by “long term wear and tear from other deliveries[,]” (id.; Reply 3 n.2), and 

later asserting that the Insurance Policy’s “Negligent Work” exclusion bars Plaintiffs’ 

recovery, (see generally MJP). Defendants now move for judgment on the pleadings based 

on the latter theory. (See generally MJP.)1

LEGAL STANDARD

Any party may move for judgment on the pleadings “[a]fter the pleadings are 

closed—but early enough not to delay trial.” Fed. R. Civ. P. 12(c). A motion for judgment 

on the pleadings attacks the legal sufficiency of the claims alleged in the complaint. See

Dworkin v. Hustler Magazine Inc., 867 F.2d 1188, 1192 (9th Cir. 1989) (“Because the 

motions are functionally identical, the same standard of review applicable to a Rule 12(b) 

motion applies to its Rule 12(c) analog.”). The Court must construe “all material allegations 

of the non-moving party as contained in the pleadings as true, and [construe] the pleadings 

in the light most favorable to the [non-moving] party.” Doyle v. Raley’s Inc., 158 F.3d 

 

1 Plaintiffs bring causes of action for breach of contract and breach of the implied covenant of good faith 

and fair dealing. (Compl. ¶¶ 12–35.)

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1012, 1014 (9th Cir. 1998). “Judgment on the pleadings is proper when the moving party 

clearly establishes on the face of the pleadings that no material issue of fact remains to be 

resolved and that it is entitled to judgment as a matter of law.” Hal Roach Studios, Inc. v. 

Richard Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir. 1990).

ANALYSIS

The Parties do not dispute that the Insurance Policy and its Negligent Work 

Exclusion are enforceable and control the outcome of Defendants’ Motion. Accordingly, 

the only question is whether the Negligent Work exclusion bars coverage for the particular 

cause of damage here at issue—the Shell delivery driver puncturing the fuel tank with her 

measuring device. The Court begins its analysis by looking to the plain text of the 

exclusion. 

The relevant exclusion reads:

c. Negligent Work

Faulty, inadequate or defective: 

(1) Planning, zoning, development, surveying, siting; 

(2)22Design, specifications, workmanship, work methods, repair, 

construction, renovation, remodeling, grading, compaction, failure to 

protect the property; 

(3) Materials used in repair, construction, renovation or remodeling; or 

(4) Maintenance; 

of part or all of any property on or off the described premises.

(Insurance Policy 26, ECF No. 1-2, at 61.) Defendants argue that either of section (c)(2)’s 

exclusions for “workmanship” or “work methods” directly cover the damage here at issue. 

(MTD 5–8.) Plaintiffs disagree, noting that “the policy does not define the term ‘work[,]’ ” 

and arguing—without citation to authority—that “it is clear the policy is not referring to 

work in the classic sense of one’s labor” but instead “refers to ‘work’ in the sense of the 

result” of one’s “labor or things.” (Opp’n 7–8.) The Court agrees with Defendants. 

As an initial matter, Plaintiffs include a paragraph discussing general California 

contract-law principles regarding ambiguity. (Id. at 6.) And although Plaintiffs do not 

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actually argue that the language here at issue is ambiguous, (see id. at 7–9), the Court 

nonetheless first addresses this issue of construction.

“The question of whether policy language is ambiguous is one of law.” Johnson v. 

Cont’l Ins. Cos., 202 Cal. App. 3d 477, 480 (1988). Ordinarily “[t]he ‘clear and explicit’

meaning of [contract] 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’

. . . , controls judicial interpretation.” AIU Ins. Co. v. Superior Court, 51 Cal. 3d 807, 822 

(1990) (citing Cal. Civ. Code §§ 1638, 1644). However, if there is “actual or apparent 

ambiguity” in the contract language then as a general matter the language will be construed 

in favor of the insured. Johnson, 202 Cal. App. 3d at 481. But “the predicate to interpreting 

ambiguities in favor of coverage is that the policy be reasonably susceptible to more than 

one interpretation. Where a policy clearly excludes coverage, [the court] will not indulge 

in tortured constructions to divine some theoretical ambiguity in order to find coverage.”

Titan Corp. v. Aetna Cas. & Sur. Co., 22 Cal. App. 4th 457, 469 (1994) (emphasis in 

original) (citing City of Laguna Beach v. Mead Reinsurance Corp., 226 Cal. App. 3d 822, 

830–31 (1990)).

In the present case, it is true that the “Negligent Work” exception is syntactically 

nonsensical when either of Defendants’ argued terms are utilized. For example, it makes 

sense to provide an exclusion for “faulty . . . siting . . . of part or all of any property on or 

off the described premises.” (Insurance Policy 26, ECF No. 1-2, at 61 (emphasis added).) 

Or perhaps—while not grammatically perfect—for “inadequate . . . specifications . . . of 

part or all of any property on or off the described premises.” (Id. (emphasis added).)

However, “faulty . . . workmanship . . . of part or all of any property on or off the described 

premises” makes demonstrably less sense. (Id. (emphasis added).) The first possible 

construction, an exclusion for “faulty . . . workmanship . . . [created on behalf] of part or 

all of any property[,]” (id.), requires that there be, perhaps, automated machinery of some 

sort that would otherwise be covered by protection but somehow negligently produces 

work product. The second construction, an exclusion for “faulty . . . workmanship . . . [in 

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the creation or care] of part or all of any property[,]” (id.), is rendered completely redundant

by the language that immediately follows: exclusions for “faulty . . . repair, construction, 

renovation, remodeling, grading, [or] compaction . . . of part or all of any property[,]” (id. 

(emphases added).) Finally, implicating these same problems—but even more 

nonsensical—is “defective . . . work methods . . . of part or all of any property on or off the 

described premises.”2(Id. (emphasis added).)

However, just because something is poorly drafted does not therefore necessarily 

make it ambiguous. See Bay Cities Paving & Grading, Inc. v. Lawyers’ Mut. Ins. Co., 5 

Cal. 4th 854, 867 (1993) (“[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.” (alteration in original) (one instance of emphasis removed, 

remaining emphasis in original) (quoting Bank of the W. v. Superior Court, 2 Cal. 4th 1254, 

1265 (1992))); Titan Corp., 22 Cal. App. 4th at 469 (noting that ambiguity results only 

when the language as a whole is “reasonably susceptible to more than one interpretation”

(emphasis in original)). And in the present case, taken in concert, the varying aspects of 

the exclusion reveal a common theme: a purpose to exclude coverage regarding any 

negligent work that is performed in readying for use or maintaining the covered buildings

or fixtures.3 Viewed in this light, it is clear that the policy directly addresses and excludes 

the type of damage that here occurred. A third-party contractor was evaluating the fuel tank 

in order to maintain its usefulness to the business; i.e., without checking the fuel level 

Plaintiffs would not have known when to refill the tank except to wait for the pumps to 

literally run dry, thus costing Plaintiffs valuable business. Unfortunately, the third-party 

 

2 There is a third, most egregious, example: a purported exclusion for “faulty . . . failure to protect the 

property . . . of part or all of any property on or off the described premises.” (Id. (emphasis added).)

3 Although Defendants do not argue it, perhaps the most on-point provision is the exclusion for “faulty 

. . . [m]aintenance . . . of part . . . of any property on or off the described premises.” (Insurance Policy 26 

(emphasis added).) There are no syntactical problems in construction, and the whole purpose of the fuel 

tank here at issue is to hold fuel for customers so that Plaintiffs’ business can turn a profit. Accordingly, 

checking fuel levels in order to keep the tank full and at profit-maximizing capacity is clearly 

“maintenance” of the otherwise-covered tank.

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contractor allegedly used a negligent work method in maintaining the fixture’s economic 

viability to Plaintiffs’ business, which in turn harmed the fixture and Plaintiffs’ business. 

However, this specific type of harm is excluded under Plaintiffs’ policy, and thus the plain 

language of the exclusion establishes that Defendants have no liability in this suit.

Defendants’ cited case of Waldsmith v. State Farm Fire and Casualty, Co. further 

confirms this conclusion. 232 Cal. App. 3d 693 (1991). In Waldsmith, the California Court 

of Appeal determined that the relevant insurance policy excluded damage to the plaintiff’s 

home when the damage was caused by a landslide allegedly stemming from the city’s 

negligent maintenance of a nearby water main. Id. at 695–99. Notably, the relevant 

exclusion specified that:

We do not insure for loss consisting of one or more of the items below . . . . 

[¶] a. conduct, act, failure to act, or decision of any person, group, organization 

or government body whether intentional, wrongful, negligent, or without 

fault; [¶] b. defect, weakness, inadequacy, fault or unsoundness in: [¶] (1) 

planning, zoning development, surveying, siting; [¶] (2) design, 

specifications, workmanship, construction grading, compaction; [¶] (3) 

materials used in construction or repair or; [¶] (4) maintenance [¶] of any 

property including land structures or improvements of any kind whether on 

or off the residence premises.

Waldsmith, 232 Cal. App. 3d at 695–96 (footnote omitted) (emphases added). The 

Waldsmith Court ultimately held that “negligent maintenance of the water main appears to 

fall squarely under the exclusions . . . .” 232 Cal. App. 3d at 696.

Plaintiffs both attempt to distinguish Waldsmith and cite four out-of-circuit cases

(three applying New York law and one applying Oklahoma law) in support of their

construction of the relevant exclusion. (Opp’n 7–9.) The Court neither agrees with 

Plaintiff’s argued distinctions nor finds the out-of-circuit authority persuasive. Although 

Plaintiff contends that Waldsmith concerned only government negligence in constructing 

and maintaining a water main, these distinctions do not negate the crucial factual 

similarities to this case: a third-party actor negligently performing a required action that 

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ultimately harms the plaintiff. And to the extent Plaintiffs correctly interpret their cited 

precedent from (1) several New York-based, intermediate appellate courts; (2) the 

Southern District of New York; and (3) the Tenth Circuit, none of these cases refute the 

clear language of the California contract here at issue and the similarity between Waldsmith

and this case. 

CONCLUSION

Given the foregoing, the Court GRANTS Defendants’ Motion for Judgment on the 

Pleadings. Because the insurance contract specifically excludes coverage for the 

underlying cause of Plaintiffs’ claims, no amendment will be able to cure Plaintiff’s 

pleading defect. See Guebara v. Allstate Ins. Co., 237 F.3d 987, 992 (9th Cir. 2001) (“In 

order to establish a breach of the implied covenant of good faith and fair dealing under 

California law, a plaintiff must [first] show . . . benefits due under the policy were withheld

. . . .”). Accordingly, this Order concludes the litigation in this matter. The Clerk SHALL 

close the file.

IT IS SO ORDERED.

Dated: June 26, 2017

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