Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_13-cv-03499/USCOURTS-cand-3_13-cv-03499-9/pdf.json

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

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IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 

NAVIGATORS SPECIALTY INSURANCE 

COMPANY, 

 Plaintiff, 

 v. 

ST. PAUL SURPLUS LINES INSURANCE 

COMPANY, LIBERTY SURPLUS 

INSURANCE CORPORATION, TRAVELERS 

PROPERTY CASUALTY COMPANY OF 

AMERICA, NORTH AMERICAN CAPACITY 

INSURANCE COMPANY, and DOES 1 

through 100, inclusive, 

 Defendants. 

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Case No. 13-cv-03499 SC

ORDER ON CROSS MOTIONS FOR 

SUMMARY JUDGMENT 

I. INTRODUCTION 

This matter concerns an action by Navigators Specialty 

Insurance Company ("Navigators") against several insurance 

carriers, including defendant North American Capacity Insurance 

Company ("NAC"), for contribution of defense fees incurred in the 

defense of Navigator's named insured, McDevitt & McDevitt 

Construction Corporation ("McDevitt"), for claims arising from a 

construction project in Petaluma, California. Now before the Court 

are Navigators' and NAC's cross motions for summary judgment as to 

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NAC's duty to defend McDevitt under California law. Both motions 

are fully briefed,1

 and the Court finds them suitable for 

disposition without oral argument pursuant to Civil Local Rule 7-

1(b). The essential facts are undisputed. 

Because McDevitt is not an additional insured to the NAC 

insurance policy, Navigators cannot prove that NAC had a duty to 

defend McDevitt. Navigators therefore has no right to 

reimbursement of defense fees and costs from NAC. Accordingly, 

Navigators' partial motion for summary judgment as to NAC's duty to 

defend is DENIED and NAC's motion for summary judgment is GRANTED. 

II. BACKGROUND 

This case involves causes of action for declaratory relief, 

equitable contribution, and equitable subrogation arising out of 

NAC's alleged breach of its duty to defend and indemnify 

Navigators' named insured, McDevitt, against two underlying and 

consolidated actions for alleged construction defects ("Underlying 

Actions"). Navigators alleges that NAC had a duty to defend 

McDevitt as an additional insured under F&M Steel, Inc.'s ("F&M") 

insurance policy with NAC ("NAC Policy"). 

A. The Underlying Actions 

The Underlying Actions arose out of alleged defects in the 

design and construction of a commercial condominium complex located 

at 3820 Cypress Drive in Petaluma, California ("Project"). 

McDevitt was the general contractor for the Project, and F&M 

 

1

 ECF Nos. 90 ("Navigators' Mot."); 92 ("NAC's Opp'n"); 96 

("Navigators' Reply"); 93 ("NAC's Mot."); 99 ("Navigators' Opp'n"); 

101 ("NAC's Reply"). 

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subcontracted with McDevitt to provide "a complete structural steel 

package" for the Project ("Subcontract"). Joint Stipulation of 

Facts ("JSF") ¶ 3. F&M’s original scope of work under the 

subcontract was completed in June of 2005. In addition, F&M 

performed "EXTRA" work on the Project in November 2005, consisting 

of the installation of a lavatory sink bracket in unit four of the 

condominium complex. Id. ¶ 5. 

In the first of the Underlying Actions, a condominium 

association sought damages from McDevitt and F&M for alleged 

construction defects to the Project's common areas. 3820 Cypress 

Condo Assoc. v. MMM Enterprises, LLC, et al., Sonoma County 

Superior Court Case No. SCV248794 ("3820 Cypress Action"). 

Navigators defended McDevitt in the 3820 Cypress Action, and NAC 

defended F&M. 

In the second of the Underlying Actions, the owners of units 

three, nine, ten, and eleven of the Project sought damages from 

McDevitt and F&M for alleged construction defects to those units. 

Point Reyes Bird Observatory, et al. v. MMM Enterprises, LLC, et 

al., Sonoma County Superior Court Case No. SCV250623 ("PRBO 

Action"). Again, Navigators defended McDevitt, and NAC defended 

F&M. 

On February 4, 2013, the 3820 Cypress Action and the PRBO 

Action were consolidated (collectively "Underlying Actions"). 

Navigators tendered the defense of McDevitt for the Underlying 

Actions to NAC, asserting that Navigators was entitled to NAC's 

participation in the defense and indemnity of McDevitt because 

McDevitt was allegedly an additional insured under the NAC Policy. 

In response, NAC disclaimed coverage by letter, asserting that 

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McDevitt was not an additional insured under F&M's policy. 

B. The Policies 

F&M's Subcontract with McDevitt required F&M to "obtain a 

comprehensive policy of public liability insurance . . . 

includ[ing] coverage for liability assumed under contract or 

agreement and completed operations coverage . . ." JSF, Ex. 1 at 

NACC000002. The Subcontract further provided that the 

subcontractor shall name [McDevitt] . . . as additional 

insureds. The following language will be included by 

endorsement . . . : "It is further agreed that such 

insurance as is afforded by this policy for the benefit 

of the above additional insured(s) shall be PRIMARY 

insurance as respects any claims . . . arising out of the 

named insured’s operations . . ." 

Id. 

The NAC Policy provided F&M commercial general liability 

coverage for bodily injury and property damage during the policy 

period of October 1, 2005 to October 1, 2006 only if 

(1) The "bodily injury" or "property damage" is caused by 

an "occurrence" that takes place in the "coverage 

territory"; and 

(2) The "bodily injury" or "property damage" occurs 

during the policy period. 

JSF, Ex. 11 at NAC000045. 

Pursuant to the Subcontract, F&M also obtained an additional 

insured endorsement modifying the NAC Policy so as to include 

[a]ny person or organization to which you are obligated 

by virtue of written contract to provide insurance such 

as is afforded by this policy, but only with respect to 

(1) occurrences taking place after such written contract 

has been executed and (2) occurrences resulting from work 

performed by you during the policy period, or occurrences 

resulting from the conduct of your business during the 

policy period.2

 

2

 The only specially defined terms are the words “you” -- defined 

as the named insured, F&M (JSF, Ex. 11 at NAC000052) -- and 

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JSF ¶ 17, Ex. 12 ("AI Endorsement") (emphasis added). Navigators 

claims that McDevitt qualified as an additional insured under this 

provision. NAC disagrees, arguing that the work performed by F&M 

that allegedly caused the occurrences giving rise to the Underlying 

Actions -- that is, the property damage to the common areas and 

units three, nine, ten, and eleven of the Project -- occurred prior 

to the policy period. 

C. Litigation History 

Navigators filed a Third Amended Complaint for declaratory 

relief regarding defendants' duty to defend and indemnify McDevitt 

in the Underlying Actions, equitable contribution regarding defense 

costs associated with the Underlying Actions, and equitable 

subrogation, naming NAC and three other insurance companies as 

defendants. ECF No. 55 ("Compl."). The defendant insurance 

companies insured McDevitt's subcontractors. The subcontractors 

were defendants -- along with McDevitt -- in the Underlying 

Actions. Navigators argues that it is entitled to contribution 

from the defendant insurance companies for the defense costs and 

indemnity it incurred in the Underlying Actions on behalf of 

McDevitt because McDevitt was allegedly an additional insured under 

the policies issued by the defendants to McDevitt's subcontractors. 

On April 24, 2015, Navigators filed a motion for summary 

judgment as to NAC's duty to defend McDevitt in the Underlying 

Actions. NAC filed a cross motion for summary judgment on May 8, 

2008. Both motions are now before the Court. 

 

“occurrence” -- defined as “an accident, including continuous or 

repeated exposure to substantially the same general harmful 

conditions” (Id. at NAC000063). 

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III. LEGAL STANDARD 

A. Summary Judgment 

Entry of summary judgment is proper "if the movant shows that 

there is no genuine dispute as to any material fact and the movant 

is entitled to judgment as a matter of law." Fed. R. Civ. P. 

56(a). "In order to carry its burden of production, the moving 

party must either produce evidence negating an essential element of 

the nonmoving party's claim or defense or show that the nonmoving 

party does not have enough evidence of an essential element to 

carry its ultimate burden of persuasion at trial." Nissan Fire & 

Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1102 (9th 

Cir. 2000). "The evidence of the nonmovant is to be believed, and 

all justifiable inferences are to be drawn in his favor." 

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Summary 

judgment should be entered against a party that fails to make a 

showing sufficient to establish the existence of an element 

essential to its case. Celotex Corp. v. Catrett, 477 U.S. 317, 323 

(1986). 

B. Insurance Contract Interpretation 

Where the underlying facts are undisputed, interpretation of an 

insurance policy is a question of law. Merced Mut. Ins. Co. v. 

Mendez, 213 Cal. App. 3d 41, 45 (1989); see also Legacy Vulcan 

Corp. v. Super. Ct., 185 C.A. 4th 667, 688 (2010) ("Contract 

interpretation, including the resolution of any ambiguity, is 

solely a judicial function, unless interpretation turns on 

credibility of extrinsic evidence."). 

California courts follow four basic rules of construction when 

interpreting an insurance policy: 

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(a) Unambiguous policy terms are given their "plain 

meaning" in the "context" of the policy and of the way in 

which they are used. 

(b) In the absence of a plain meaning, that is, where the 

terms are in fact ambiguous, they are construed so as to 

give effect to the insured's "objectively reasonable 

expectations." 

(c) If the previous rule fails to resolve the ambiguity, 

the terms are construed against the insurer . . . 

(d) Even if unambiguous, exclusions from coverage must be 

"conspicuous, plain, and clear" to be enforceable. 

2 Witkin, Summary of Cal. Law 10th (2005), Insurance, § 48 

(internal citations omitted); see also Legacy Vulcan Corp., 185 

C.A. 4th at 688 (describing the rules of policy interpretation). 

C. Actions to Obtain Contribution from a Coinsurer 

In an action by an insurer to obtain contribution from a 

coinsurer, the burden is on the insurer who paid the loss to show 

that a potential coverage obligation arose or existed under the 

coinsurer's policy. See Safeco Ins. Co. of Am. v. Super. Ct., 140 

CA 4th 874, 879 (2006). The plaintiff meets its burden of proof 

when it makes a prima facie showing of a potential for coverage 

under the coinsurer's liability insurance policy. Id. at 881. The 

burden then shifts to the defendant to prove the absence of 

coverage. Id. 

IV. DISCUSSION 

In order for Navigators to make a prima facie showing of a 

potential for coverage under NAC's Policy, it must first show that 

McDevitt qualifies as an additional insured. The schedule of the 

AI Endorsement in the NAC Policy sets out three requirements. 

First, the additional insured must be a "person or organization 

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to which [F&M is] obligated by virtue of a written contract to 

provide insurance." AI Endorsement at NAC000050. The parties do 

not dispute that F&M's subcontract with McDevitt required F&M to 

name McDevitt as an additional insured. 

Second, the AI Endorsement specifies that a party is covered 

as an additional insured "only with respect to . . . occurrences 

taking place after such written contract has been executed." Id. 

The parties do not dispute that the occurrences at issue in the 

Underlying Actions took place after the Subcontract with McDevitt 

was executed. 

Third, the AI Endorsement states that a party qualifies as an 

additional insured only with respect to "occurrences resulting from 

work performed by [F&M] during the policy period, or occurrences 

resulting from the conduct of [F&M's] business during the policy 

period." Id. It is undisputed that the liabilities at issue in 

the Underlying Actions consisted of damage to the Project's common 

areas and units three, nine, ten, and eleven. It is also 

undisputed that F&M completed its work on the common areas and 

units three, nine, ten, and eleven by June 2005, several months 

prior to the start of the NAC Policy's coverage period. In fact, 

the only work that was completed on the Project by F&M during the 

policy period was the installation of a sink bracket in unit four 

in November 2005. F&M's work on the sink bracket, however, did not 

cause the property damage in the Underlying Actions. Nevertheless, 

Navigators argues that because some of F&M's work under the 

Subcontract (the installation of the sink bracket in unit four) was 

completed during the policy period, all of F&M's work under the 

Subcontract (including its work on the common areas and units 

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three, nine, ten, and eleven) should be considered within the 

policy period. The parties' cross motions for summary judgment on 

NAC's duty to defend therefore turn on the Court's construction of 

the phrase "work [and business conduct] performed by [F&M] during 

the policy period," and whether that construction encompasses F&M's 

work on the sink bracket in unit four. 

In interpreting the AI Endorsement, the Court's first task is 

to determine if the language in question is ambiguous. Navigators 

argues that the language is "patently ambiguous" because it 

allegedly differs from standard additional insured endorsements 

which are "commonly understood to provide coverage to the 

additional insured for property damage . . . arising out of the 

named insured’s completed operations." Navigators’ Mot. at 17-18. 

If the language of the AI Endorsement is clear and explicit, 

however, the fact that it differs from "standard" additional 

insured endorsements is immaterial. See Bank of the W. v. Super. 

Ct., 2 Cal. 4th 1254, 1264 (1992) ("If contractual language is 

clear and explicit, it governs."); see also Waller v. Truck Ins. 

Exchange, Cal. 4th 1, 18 (1995) (holding that courts should "not 

strain to create ambiguity where none exists"). For the reasons 

below, the Court finds the phrase "occurrences resulting from work 

performed by you during the policy period, or occurrences resulting 

from the conduct of your business during the policy period" to be 

clear and explicit. 

"Occurrence" is specifically defined in the NAC Policy as "an 

accident, including continuous or repeated exposure to 

substantially the same general harmful conditions." JSF, Ex. 11 at 

NAC000063. Here, occurrence refers to the property damage 

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allegedly caused by construction defects to the common areas and 

units three, nine, ten, and eleven of the Project. 

The Court finds that the phrases "resulting from work" and 

"resulting from the conduct of your business" mean that the 

"occurrence" must have been caused by F&M's "work" or "conduct." 

"Work" is not specifically defined by the NAC Policy. Using the 

plain meaning of the word in the context of the AI Endorsement 

Schedule, a layman would understand "work" to refer to F&M's 

provision of services and materials under the Subcontract. The 

dictionary definition of "work" reinforces this interpretation, 

defining "work" as the "[p]hysical and mental exertion to attain an 

end, esp. as controlled by and for the benefit of an employer." 

Black's Law Dictionary 1635 (8th ed. 2004). Thus, in the context 

of the AI Endorsement, "work" means F&M's "physical and mental 

exertion" on the Project pursuant to the Subcontract with McDevitt 

that resulted in the "occurrence." The Court finds that "conduct 

of your business" is broader than "work" and encompasses all other 

business activities in addition to the specific "physical and 

mental exertion" that F&M performed under the Subcontract. 

"During the policy period" modifies "work" and "conduct of 

your business." Specifically, the "physical and mental exertion" 

under the Subcontract or other business "conduct" that caused the 

"occurrence" must have been performed during the policy period -- 

specifically, between October 1, 2005 and October 1, 2006. Here, 

the "physical and mental exertion" that caused the property damage 

to the common areas and units three, nine, ten, and eleven of the 

Project was F&M's provision of the structural steel package, which 

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was completed months before the policy period began.3 Even if the 

Court were to adopt the broadest possible definition of "conduct of 

your business," Navigators does not point to any conduct during the 

policy period that could have contributed to the property damage in 

the Underlying Actions. Thus, because there is no evidence that 

F&M's work or business conduct during the policy period caused the 

occurrence that gave rise to the liabilities in the Underlying 

Actions, McDevitt is not an additional insured under the NAC 

Policy. Because McDevitt does not qualify as an additional 

insured, Navigators cannot show a potential for coverage under the 

NAC Policy. 

Navigators asks the Court to interpret the word "work" to 

include "the entirety of the work F&M performed under the 

subcontract with McDevitt."4

 Navigators' Mot. at 12. In other 

words, it urges the Court to read the AI Endorsement schedule as if 

it said, "occurrences resulting from work, any part of which was 

completed during the policy period."5 Navigators' proposed 

interpretation, however, is contrary to the plain meaning of the 

clear and explicit language of the AI Endorsement schedule as it 

was actually written.6

 See Cal. Dairies Inc. v. RSUI Indem. Co., 

 

3

 Navigators does not claim that the "EXTRA" work performed in 

November 2005 on the sink bracket in unit four contributed to the 

property damage in the Underlying Actions. Even if it did, there 

is no evidence to support such a claim. 

4

 In support of its proposed interpretation, Navigators cites 

without explanation Roger H. Prouix v. Crest-Liners, Inc., 98 Cal. 

App. 4th 182, 196-97 (2002). Prouix, however, does not provide any 

support for Navigators' proposed interpretation. 

5

 At the very least, Navigators' proposed interpretation would 

require the Court to arbitrarily replace the phrase "during the 

policy period" with the phrase "any time under the contract." 

6

 Further, even if the Court were to adopt Navigators' proposed 

interpretation, McDevitt would not necessarily qualify as an 

additional insured. The work that was performed in November 2005 

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617 F. Supp. 2d 1023, 1030 n.3 (E.D. Cal. 2009) (holding that 

undefined insurance policy terms should be interpreted as laymen 

would read them);7

 AIU Ins. Co. v. Super. Ct., 51 Cal. 3d 807, 822 

(1990) (holding that "if the meaning a layperson would ascribe to 

contract language is not ambiguous," then the court applies that 

meaning). 

Navigators also argues that because the disputed language 

allegedly limits the scope of coverage, it should be interpreted 

narrowly against the insurer. While it is true that exclusionary 

clauses should be interpreted narrowly against the insurer, 

Navigators' argument presupposes that McDevitt is an additional 

insured and that the disputed language merely changes the scope of 

the coverage afforded. The disputed language, however, does not 

change the scope of coverage; rather, it limits the status of 

additional insureds to certain liabilities. California courts have 

rejected arguments claiming that similar language provided coverage 

while merely changing the scope of the coverage. See Gemini Ins. 

 

was "EXTRA" and separate from the scope of work under the 

Subcontract. "Extra work" in construction law, is "work not 

required under the contract; something done or furnished in 

addition to the contract's requirements; work entirely outside and 

independent of the contract and not contemplated by it." Black's 

Law Dictionary 1635 (8th ed. 2004). Thus, it is questionable 

whether F&M performed any work at all under the Subcontract during 

the policy period. 

7

 "Work" was not a specifically defined term in the NAC Policy. 

Although the NAC Policy defines the term “your work”, that 

specifically defined term is not used in the AI Endorsement. 

Moreover, the AI Endorsement does not place quotation marks around 

the word "work" to indicate that it was specifically defined. See 

JSF, Ex. 11 at NAC 000052 (“[W]ords and phrases that appear in 

quotation marks have special meaning.”). Accordingly, the Court 

declines to apply the definition of “your work” to the word “work” 

and applies its plain meaning instead. Scott v. Cont'l Ins. Co., 

44 Cal. App. 4th 24, 28-29 (1996) ("Words in an insurance policy, 

unless given special meanings by the policy itself, must be 

understood in their ordinary sense."). 

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Co. v. Delos Ins. Co., 211 Cal. App. 4th 719, 722-23 (2012); Nat'l 

Union Fire Ins. Co. of Pittsburgh, Pa. v. Nationwide Ins. Co., 69 

Cal. App. 4th 709, 720 (1990). Regardless, even interpreted 

narrowly, the terms of the AI Endorsement clearly require the 

property damage at issue in the Underlying Actions to have been 

caused by work performed during the policy period. Navigators' 

proposed alternative interpretations are not a "narrow" reading of 

the language in the AI Endorsement; they are an unreasonable 

reading of language that is otherwise clear and explicit. 

Next, Navigators argues that because NAC defended its named 

insured, F&M, in the Underlying Actions, it follows that NAC had a 

duty to defend its additional insured, McDevitt. Not so. Although 

it is true that an insurer's duty to defend an additional insured 

is as broad as its duty to defend its named insured (see Presley 

Homes, Inc. v. Am. States Ins. Co., 90 Cal. App. 4th 571, 574 

(2001)), for the reasons provided above, McDevitt is not an 

additional insured with respect to the Underlying Actions. 

Regardless, NAC's decision to defend F&M is irrelevant as to 

whether NAC has a duty to defend McDevitt. 

Finally, Navigators argues that because NAC allegedly never 

responded to its tender of the PRBO Action, NAC waived its right to 

disclaim coverage. NAC responded to Navigators' tender of the PBRO 

Action on August 27, 2012 by forwarding a copy of NAC's prior 

denial of the 2830 Cypress Action. JSF ¶ 32. Just because NAC's 

response to the PRBO Action was the same as its response to the 

2830 Cypress Action, however, does not mean that NAC intentionally 

relinquished its right to deny coverage in the PBRO Action. On the 

contrary, even if NAC could have made its position more explicit, 

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NAC's August 27 response communicated its intention to deny 

coverage in the PRBO Action on the same grounds that it denied 

coverage in the 2830 Cypress Action. 

V. CONCLUSION 

The undisputed facts show that McDevitt was not an additional 

insured under the terms of the AI Endorsement because McDevitt's 

liability to the plaintiff in the Underlying Actions was not the 

result of an "occurrence" caused by F&M's work performed during the 

period of coverage provided by the NAC Policy. As a result, 

Navigators cannot show that a potential coverage obligation arose 

or existed under the NAC Policy. Accordingly, NAC did not have a 

duty to defend McDevitt, and Navigators has no right to 

reimbursement. 

For the reasons given herein, Plaintiff's Motion for Summary 

Judgment is DENIED, and Defendant's Motion for Summary Judgment is 

GRANTED. 

 IT IS SO ORDERED. 

 Dated: June 17, 2015 

UNITED STATES DISTRICT JUDGE 

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