Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_14-cv-00609/USCOURTS-caed-2_14-cv-00609-7/pdf.json

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

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

ATAIN SPECIALTY INSURANCE 

COMPANY,

Plaintiff,

v.

SIERRA PACIFIC MANAGEMENT 

COMPANY and CALIFORNIA CAPITAL 

INSURANCE COMPANY,

Defendants.

No. 2:14-cv-00609-TLN-DB

ORDER

CALIFORNIA CAPITAL INSURANCE 

COMPANY,

Counterclaimant,

v.

ATAIN SPECIALTY INSURANCE 

COMPANY,

Counterdefendant.

CALIFORNIA CAPITAL INSURANCE 

COMPANY,

Third-Party Plaintiff,

v.

JERRY LEE and BETTY LEE,

Third-Party Defendants.

Case 2:14-cv-00609-TLN-DB Document 89 Filed 11/03/16 Page 1 of 22
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This matter is before the Court on Plaintiff Atain Specialty Insurance Company’s

(“Atain”) motion for summary judgment (ECF No. 49), Defendant and Counterclaimant 

California Capital Insurance Company’s (“California Capital”) motion for partial summary 

judgment (ECF No. 54), and Third-Party Defendants Jerry Lee and Betty Lee’s motion for

summary judgment (ECF No. 48). For the reasons discussed below, Atain’s motion is 

GRANTED, California Capital’s motion is DENIED, and the Lees’ motion is GRANTED.

I. FACTUAL BACKGROUND

This case involves two separate disputes, both about who must bear the costs of defending 

and settling an underlying personal injury lawsuit. The first is a coverage dispute between two 

insurance companies, Atain and California Capital. The second is a dispute between California 

Capital and its insureds, Jerry and Betty Lee, over whether the Lees must reimburse California 

Capital for a portion of what it paid on the Lees’ behalf to settle the underlying lawsuit. 

The underlying lawsuit was Deanna Dailey v. Lee Jerry/Betty ’98 Fam RV TR, et al., No. 

CVCS 11-1339 (Sutter Cty. Super. Ct. filed June 16, 2011) (Dailey). (Pl.’s Resp. to Def.’s Stmt. 

Undisp. Facts (SUF1) No. 1, ECF No. 63.) In Dailey, Deanna Dailey sued both the owner and 

the property management company of the Pagoda Garden Apartments, where Dailey had lived for 

roughly ten years. (SUF1 Nos. 1–3, ECF No. 63.) The owner of Pagoda Garden was a trust

named Lee Jerry/Betty ’98 Fam RV TR.1 The property management company was Sierra Pacific 

Management Company, Inc (“Sierra Pacfic”).

The Dailey complaint alleged that while living at Pagoda Garden, Dailey developed a 

severe pulmonary illness that doctors later opined was a form of hypersensitivity pneumonitis 

called Pigeon Breeder’s Disease. (SUF1 Nos. 3, 35–36, ECF No. 63.) Although Dailey was not a 

pigeon breeder, for nearly a decade Dailey had unwittingly breathed a fine dust of pigeon feathers 

and pigeon droppings—carried into her apartment through the building’s ventilation system. 

(Def.’s Resp. to Pl.’s Stmt. Undisp. Facts (SUF2) Nos. 18–21, ECF No. 72.) The pigeons roosted 

on the roof of Dailey’s building, in and around the roof-mounted heating, ventilation, and air 

conditioning (HVAC) units. (SUF2 No. 19, ECF No. 72.) Dailey alleged that the Lees and Sierra 

 

1 The Court refers to the owner as the Lees for the sake of clarity.

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Pacific had been negligent in owning and maintaining Pagoda Garden because they did not keep 

the pigeons away from the HVAC units. (SUF2 No. 19, ECF No. 72.) Dailey also alleged that 

the Lees and Sierra Pacific had been negligent because they failed to warn tenants of the health 

dangers associated with the building’s pigeon problem. (SUF2 No. 20, ECF No. 72.) Both the 

Lees and Sierra Pacific turned to their insurance companies for defense and indemnification.

Those insurance companies are the original parties in this case. Atain insured Sierra 

Pacific. (SUF1 Nos. 4–7, ECF No. 63.) California Capital insured the Lees. (SUF2 Nos. 59, 62,

ECF No. 72.) California Capital also insured Sierra Pacific as an additional insured under the 

policies it issued to the Lees. (SUF2 Nos. 59, 62, ECF No. 72.) Sierra Pacific tendered its 

defense to Atain three times. (SUF2 Nos. 22, 37, 42, ECF No. 72.) Atain declined the tender 

each time, citing policy provisions that ostensibly precluded coverage, but tendered the defense to 

California Capital. (SUF2 Nos. 32–35, 40–41, 46–47, ECF No. 72.) California Capital 

undertook the defense and Sierra Pacific assigned its rights against Atain to California Capital. 

(SUF2 No. 36, ECF No. 72; Stargardter Decl. Ex. H, ECF No. 52-8.) California Capital 

eventually paid $1.9 million to settle the Dailey lawsuit. (SUF2 No. 50, ECF No. 72.) Atain did 

not contribute to the defense or the settlement. The insurance companies dispute whether Atain 

had a duty to defend and indemnify Sierra Pacific in Dailey.

In this lawsuit, the insurance companies ask the Court to determine whether Atain was 

required to contribute. Atain seeks a declaratory judgment that it was not required to defend or 

indemnify Sierra Pacific in Dailey. (Pl.’s Compl. ¶¶ 44–79, ECF No. 1.) California Capital seeks 

the opposite, and requests equitable contribution and indemnity from Atain. (Df.’s Answer and 

Countercl., ¶¶ 26–42, ECF No. 14.) Armed with Sierra Pacific’s assignment of rights, California 

Capital also asserts claims against Atain for breach of contract and bad faith based on Atain’s 

repeated refusals to defend and indemnify Sierra Pacific. (Df.’s Answer and Countercl., ¶¶ 43–

54, ECF No. 14.) Finally, in its third-party complaint against the Lees, California Capital seeks a 

declaratory judgment that its coverage of the Lees was limited to $1 million. (Third-Party Compl. 

(TPC) ¶¶ 11–12, ECF No. 15.) And because California Capital spent more than $1 million to 

settle and defend the Dailey lawsuit, California Capital also seeks $900,000 in reimbursement 

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from the Lees. (TPC ¶¶ 16–25, ECF No. 15.) 

II. REQUESTS FOR JUDICIAL NOTICE

Atain asks the Court to take judicial notice of the Dailey complaint. (Pl.’s RJN, ECF No. 

53.) The Dailey complaint is docketed in several places, including (ECF No. 53-1.) California 

Capital asks the Court to take judicial notice of an order entered in Dailey following a hearing on 

a motion for summary judgment. (Df.’s RJN, ECF No. 57.) That order is docketed as (Ex.1 to 

California Capital’s Index of Documentary Evidence, ECF No. 60-1.) These requests are not 

opposed.

The Court may take judicial notice of facts that can be “accurately and readily determined 

from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). The 

record of a state court proceeding is one such source. E.g., NuCal Foods, Inc. v. Quality Egg 

LLC, 887 F.Supp.2d 977, 984 (E.D. Cal. 2012). The Court cannot accept the representations 

made in the state court documents as true, but it may take judicial notice of the documents 

themselves and the fact that those representations were made. Id. Subject to that caveat, both 

requests are granted.

III. LEGAL STANDARDS

A. Summary Judgment

Summary judgment is proper if there are no genuine disputes as to any material facts and 

the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp. 

v. Catrett, 477 U.S. 317, 322 (1986). “The inquiry performed is the threshold inquiry of 

determining whether there is the need for a trial—whether, in other words, there are any genuine 

factual issues that properly can be resolved only by a finder of fact because they may reasonably 

be resolved in favor of either party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). 

A district court should grant summary judgment if the evidence “would require a directed verdict 

for the moving party.” Id. at 251. Cross motions for summary judgment are evaluated separately 

under the same standard. Am. Civil Liberties Union of Nev. v. City of Las Vegas ̧333 F.3d 1092, 

1097 (9th Cir. 2003). Here, the parties dispute how the Court should interpret the relevant 

insurance policies. That is a question of law. Waller v. Truck Ins. Exch., Inc., 11 Cal.4th 1, 18 

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(1995).

B. California Law on Interpreting Insurance Policies

This is a diversity case, so the Court will apply California law to interpret the insurance 

policies. See Bell Lavalin, Inc. v. Simcoe and Erie General Ins. Co., 61 F.3d 742, 745 (9th Cir. 

1995) (applying state law in diversity suit about insurance policy interpretation). “Interpretation 

of an insurance policy is a question of law and follows the general rules of contract 

interpretation.” MacKinnon v. Truck Ins. Exch., 31 Cal. 4th 635, 647 (2003) (citing Waller, 11 

Cal.4th at 18).

In California, a contract must be interpreted “to give effect to the mutual intention of the 

parties as it existed at the time of contracting.” Cal. Civ. Code § 1636. If possible, the Court will

infer that mutual intention solely from the plain language of the contract, read as a whole. Id. at 

§§ 1638, 1641. The Court must read contract language in its “ordinary and popular sense,” unless 

the parties specify otherwise or particular words have taken on a special meaning through usage. 

Id. at 1644. The Court may find that a policy provision is ambiguous if the provision is capable 

of two or more reasonable constructions. MacKinnon, 31 Cal. 4th at 648. “But language in a 

contract must be interpreted as a whole, and in the circumstances of the case, and cannot be found 

to be ambiguous in the abstract.” Id. In the insurance context, coverage provisions are 

“interpreted broadly so as to afford the greatest possible protection to the insured, [whereas] ... 

exclusionary clauses are interpreted narrowly against the insurer.” Id. If the Court finds that 

particular terms are ambiguous, it will interpret them to protect the “objectively reasonable 

expectations of the insured.” State v. Allstate Ins. Co., 45 Cal. 4th 1008, 1018 (2009).

IV. ANALYSIS

All three parties have filed motions for summary judgment. The Court begins with the 

Lees’ motion for summary judgement because it involves an issue that also affects the motions by 

Atain and California Capital. The Court then turns to Atain’s motion for summary judgment and 

California Capital’s cross-motion for partial summary judgment. Both of those motions address 

the same primary legal issue: whether Atain had a duty to defend and indemnify Sierra Pacific in 

Dailey. The Court has considered the motions separately, but, because the motions both concern 

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the same issue, the Court addresses them simultaneously. Lastly, the Court considers Atain’s 

motion for summary judgment on California Capital’s claim for breach of the implied covenant of 

good faith and fair dealing.

A. The Lees’ Motion for Summary Judgment: Stacking

California Capital insured the Lees under six successive liability policies in effect from 

February 2006 through February 2012.2Each policy was in effect for one year. Each policy 

states that the Lees’ coverage under the policy is limited to $1 million per occurrence and $2 

million in aggregate.3 California Capital claims that each policy’s per-occurrence limit caps its 

overall coverage of the Lees at $1million. (TPC ¶ 12, ECF No. 15.) California Capital also 

claims that it is entitled to $900,000 in reimbursement under Blue Ridge Ins. Co. v. Jacobsen, 25 

Cal. 4th 489 (2001). (TPC ¶¶ 22–25, ECF No. 15.) In their motion for summary judgment, the 

Lees argue that the Dailey settlement did not exceed the limits of their policies. (Third-Party 

Defs.’ Mot. for Summ. J. (“Lee Mot.”) 10:1–12:5, ECF No. 48-1.) Specifically, the Lees argue 

that their policies may be “stacked.” (Lee Mot. 11:23–12:5, ECF No. 48-1.) The Lees also argue 

that California Capital cannot meet the elements of Blue Ridge so reimbursement is not available. 

(Lee Mot. 12:7–17:26, ECF No. 48-1.)

Continuous injury cases like Dailey often involve a single occurrence that stretches across 

multiple policy periods. In those cases, per-occurrence policy limits sometimes “stop[] short of 

satisfying the coverage responsibilities of the policies” and leave the insured vastly underprotected. State of Cal. v. Cont’l Ins. Co., 55 Cal. 4th 186, 200 (2012). Policy limits may be

“stacked” to avoid that outcome. In this context, stacking means combining the policy limits of 

each policy period to “form one giant ‘uber-policy’ with a coverage limit equal to the sum of all 

purchased insurance policies.” Id. at 201. If the Lees’ policies are stacked, they will be insured 

for several million dollars because the Dailey complaint alleged a continuous injury spanning 

multiple policy periods. Cf. Cont’l, 55 Cal. 4th at 201–02. If not, they will only be insured up to 

 

2 Nott Decl. Ex. B (“2006 Policy”) at 2, ECF No. 48-4; Nott Decl. Ex. C (“2007 Policy”) at 2, ECF No. 48-5; 

Nott Decl. Ex. D (“2008 Policy”) at 2, ECF No. 48-6; Nott Decl. Ex. E (“2009 Policy”) at 2, ECF No. 48-7; Nott 

Decl. Ex. F (“2010 Policy”) at 2, ECF No. 48-8; Nott Decl. Ex. G (“2011 Policy”) at 2, ECF No. 48-9.

3

2006 Policy at 3, ECF No. 48-4; 2007 Policy at 4, ECF No. 48-5; 2008 Policy at 4, ECF No. 48-6; 2009 

Policy at 4, ECF No. 48-7; 2010 Policy at 3, ECF No. 48-8; 2011 Policy at 3, ECF No. 48-9.

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$1 million for each occurrence, regardless of the length of that occurrence. 

California law favors stacking in continuous-injury cases. In Continental, the Supreme 

Court of California held that standard policy language permits policies to be stacked and that a 

pro-stacking rule vindicates the parties’ reasonable expectations regarding indemnification and 

liability. Cont’l, 55 Cal. 4th at 201. “[T]he insurer reasonably expects to pay for . . . damage

occurring during a long-tail loss it covered, but only up to its policy limits, while the insured 

reasonably expects indemnification for the time periods in which it purchased insurance 

coverage.” Id. But the Continental court was quick to add that insurers could avoid stacking by 

including anti-stacking provisions in their policies. Id. at 202.

California Capital and the Lees dispute whether the policies in this case contain antistacking provisions. California Capital argues that the “Liability and Medical Expenses Limits of 

Insurance” section in each policy is an anti-stacking provision. (Third-Party Pl.’s Opp’n to ThirdParty Defs.’ Mot. for Summ. J. (“Opp’n to Lee Mot.”) 5:14–19, ECF No. 66.) In each policy, that 

section states:

D. Liability and Medical Expenses Limits of Insurance

. . . .

2. The most we will pay for the sum of all damages because of all:

a. “Bodily injury,” property damage” and medical expenses arising 

out of any one “occurrence” . . . .

. . . .

is the Liability and Medical Expenses limit shown in the 

Declarations.

(Third-Party Defs.’ Resp. to Third-Party Pl.’s Stmt. Undisp. Facts (SUF3) No. 2, ECF No. 75.) 

In each policy, that section also states “the limits of this policy apply separately to each 

consecutive annual period and to any remaining period of less than 12 months.”

4

 Each policy 

defines “occurrence” as “an accident, including continuous or repeated exposure to substantially 

 

4

2006 Policy at 42, ECF No. 48-4; 2007 Policy at 42, ECF No. 48-5; 2008 Policy at 42, ECF No. 48-6; 2009 

Policy at 42, ECF No. 48-7; 2010 Policy at 43, ECF No. 48-8; 2011 Policy at 41, ECF No. 48-9.

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the same general harmful conditions.” (SUF3 No. 3, ECF No. 75.) For each policy, the limit 

shown in the Declarations is $1 million per occurrence.5Finally, the Declarations page of each 

policy states that “each paid claim . . . reduces the amount of insurance provided during [the] 

applicable annual period.”6

The Lees argue that the policy limits are simply policy limits, not anti-stacking provisions. 

(Lee Mot. 8:6–22, 11:23–25, ECF No. 48-1.) According to the Lees, the policy limits do “not 

provide that the limit of liability for a single year bars additional years of coverage when the 

conduct and injuries span multiple policy periods or where there are ongoing or continuous 

injuries.” (Lee Mot. 8:9–11, ECF No. 48-1.) The Lees also point out that each policy refers to its 

policy limits on an annual basis. (Lee Mot. 8:3–5, 8:12–15, ECF No. 48-1.) According to the 

Lees, the California Capital policies do not take the Continental court up on its suggestion to

include anti-stacking language. (Lee Mot. 8:19–22, ECF No. 48-1.) The Lees assert that they 

reasonably expected multiple years of protection in return for buying multiple years of coverage. 

(Lee Mot. 10:11–10:22, ECF No. 48-1.)

California Capital replies that its policies, unlike those in Continental, specifically prohibit

stacking. (Opp’n to Lee Mot. 5:20–23, ECF No. 66.) California Capital contends that the Dailey 

lawsuit alleged a single occurrence of continuous injury. (Opp’n to Lee Mot. 5:25–6:16, ECF No. 

66.) California Capital argues that the “most [it] will pay for the sum of all damages . . . arising 

out of any one occurrence” is $1 million. (Opp’n to Lee Mot. 5:15–19, ECF No. 66.) Thus, 

California Capital asserts that its coverage was limited to $1 million, regardless of whether the 

Lees purchased successive policies. (Opp’n to Lee Mot. 11:8–11, ECF No. 66.) In support of its 

position, California Capital relies on Safeco Ins. Co. of America v. Fireman’s Fund Ins. Co., 148 

Cal. App. 4th 620 (2007), which it contends involved similar facts and policies that did not stack. 

(Opp’n to Lee Mot. 5:1–19, ECF No. 66.)

Looking to the plain language of the policies, it is clear that they do not prohibit stacking.

 

5

2006 Policy at 3, ECF No. 48-4; 2007 Policy at 4, ECF No. 48-5; 2008 Policy at 4, ECF No. 48-6; 2009 

Policy at 4, ECF No. 48-7; 2010 Policy at 3, ECF No. 48-8; 2011 Policy at 3, ECF No. 48-9.

6

2006 Policy at 3, ECF No. 48-4; 2007 Policy at 4, ECF No. 48-5; 2008 Policy at 4, ECF No. 48-6; 2009 

Policy at 4, ECF No. 48-7; 2010 Policy at 3, ECF No. 48-8; 2011 Policy at 3, ECF No. 48-9.

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True, each policy states that its per-occurrence coverage is capped at $1 million, but the policies 

do not state that the per-occurrence limit applies across policy periods.7 Just the opposite: as the 

Lees point out, each policy refers to its per-occurrence limit on an annual basis. For example, 

each policy states “the limits of this policy apply separately to each consecutive annual period.”

8

 

That language makes plain that the policy limits “apply separately” to each policy period. That is 

precisely the point of stacking. Even assuming the policies are ambiguous, the Lees prevail since, 

“Provisions which purport to exclude coverage or substantially limit liability must be set forth in 

plain, clear and conspicuous language.” Thompson v. Occidental Life Ins. Co., 9 Cal. 3d 904, 921 

(1973) (citing Gray v. Zurich Ins. Co., 65 Cal. 2d 263, 273 (1966)). If the policies do not clearly 

allow stacking, neither do they clearly prohibit it. 

California Capital’s reliance on Safeco is misplaced for two reasons. First, Safeco was 

decided by a California court of appeal in 2007, before the California Supreme Court decided 

Continental. Second, Safeco is inapposite because the operative issue in Safeco was different 

than the issue in the instant case. In the instant case, the issue is whether policy limits can be 

stacked when an ongoing occurrence spans multiple policy periods. In Safeco, the issue was 

whether an ongoing occurrence existed at all. Safeco, 148 Cal. App. 4th at 625. Safeco involved 

liability for damage from a landslide. Id. The landslide itself happened quickly but debris from 

the landslide was not cleaned up for several years. Id. Damage from the landslide thus existed 

throughout multiple policy periods, but the parties disputed whether the lingering damage created 

an “occurrence” that spanned multiple policy periods. Id. In the instant case, Dailey did not 

allege a sudden accident and lingering damage. Dailey alleged an ongoing, continuous, and 

progressive injury, as California Capital itself points out. (Opp’n to Lee Mot. 6:10–11, ECF No. 

66.) As noted above, herein, Continental is on point with the instant matter, not Safeco.

California Capital’s attempt to distinguish Continental is also unavailing. California 

Capital asserts that its policies, unlike the policies in Continental, contain anti-stacking 

 

7

2006 Policy at 3, ECF No. 48-4; 2007 Policy at 4, ECF No. 48-5; 2008 Policy at 4, ECF No. 48-6; 2009 

Policy at 4, ECF No. 48-7; 2010 Policy at 3, ECF No. 48-8; 2011 Policy at 3, ECF No. 48-9.

8

2006 Policy at 42, ECF No. 48-4; 2007 Policy at 42, ECF No. 48-5; 2008 Policy at 42, ECF No. 48-6; 2009 

Policy at 42, ECF No. 48-7; 2010 Policy at 43, ECF No. 48-8; 2011 Policy at 41, ECF No. 48-9.

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provisions. (Opp’n to Lee Mot. 5:20–23, ECF No. 66.) California Capital also contends that 

those anti-stacking provisions are the text of each policy’s “Liability and Medical Expenses

Limits of Insurance” section. (Opp’n to Lee Mot. 5:14–18, ECF No. 66). In each policy, that 

section states “[t]he most [California Capital] will pay for the sum of all damages because of 

all . . . “Bodily injury” . . . arising out of any one “occurrence” . . . is the Liability and Medical 

Expenses limit shown in the Declarations.” (SUF3 No. 2, ECF No. 75.) The Court notes that the 

policies in Continental contained language virtually identical to the California Capital policies,

herein, and the Continental court held that the policies did not prohibit stacking.9The Continental

policies stated “[t]he limits of [the insurer]’s liability shall be . . . [a specified dollar 

amount] . . . each occurrence.” State of Cal. v. Cont’l Ins. Co., 88 Cal. Rptr. 3d 288, 305 (2009),

aff'd, 55 Cal. 4th 186 (alterations in original). California Capital’s contention that each policy’s 

“Liability and Medical Expenses Limits of Insurance” section is an anti-stacking provision,

(Opp’n to Lee Mot. 5:14–23, ECF No. 66.), is contrary to the Continental court’s decision that the

policies in that case did not contain anti-stacking provisions. Cont’l, 55 Cal. 4th at 202. Nothing 

in the California Capital policies suggests a different result is warranted here.

The Court concludes that the Lees may stack their policy limits. Consistent with 

Continental, the Lees were insured up to the policy limit of each policy that was triggered by the 

Dailey lawsuit.10 Dailey alleged a continuous injury that triggered multiple policy periods. “[I]f 

an occurrence is continuous across two or more policy periods, the insured has paid two or more 

premiums and can recover up to the combined total of the policy limits. There is nothing unfair 

or unexpected in allowing stacking in a continuous long-tail loss.” Cont’l, 55 Cal. 4th at 202. 

The Court need not reach the issue of Blue Ridge reimbursement because the amount of the 

Dailey settlement did not exceed the Lees’ coverage.

//

 

9 Continental involved policies issued by several different insurers, but “the pertinent language of all the 

policies at issue [was] essentially identical.” Cont’l, 55 Cal. 4th at 193. 

10 In its opposition, California Capital argues that the term “trigger” is relevant to an insurer’s duty to defend, 

but not its duty to indemnify. (Opp’n to Lee Mot. 4:1–27, ECF No. 66.) California Capital cites Safeco for this 

proposition. Safeco may have been correct when it was decided. Since then, the Supreme Court of California in 

Continental applied the concept of a continuous-injury trigger to an insurer’s duty to indemnify. See Fluor Corp. v. 

Superior Court, 61 Cal. 4th 1175, 1217 (2015) (stating the same). 

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B. Atain and California Capital’s Motions: The Coverage Dispute

As to the coverage dispute between Atain and California Capital, the insurance companies 

dispute whether Atain had a duty to defend and indemnify Sierra Pacific in Dailey. The Court 

will provide a brief overview of those duties to better set out the parties’ arguments. There are 

two types of insurance relevant to their dispute: primary insurance and excess insurance. Primary 

insurance is coverage that applies immediately upon the happening of an occurrence that gives 

rise to liability for the insured. E.g., Olympic Ins. Co. v. Employers Surplus Lines Ins. Co., 126 

Cal. App. 3d 593, 597 (1981). Excess insurance is coverage that applies only after primary 

coverage has been exhausted. Id.

Primary insurers and excess insurers have different obligations. A primary insurer 

shoulders a large burden. Not only must a primary insurer indemnify its insured for losses 

covered under its policies, but it must also defend its insured whenever the insured faces liability 

that may even potentially be covered under the policies. Montrose Chem. Corp. v. Superior 

Court, 6 Cal. 4th 287, 295 (1993). “[T]he duty to defend is broader than the duty to indemnify; 

an insurer may owe a duty to defend its insured in an action in which no damages ultimately are 

awarded.” Id. On the other hand, where there is no possibility that a claim will be covered, the 

insurer has no duty to defend. Waller, 11 Cal. 4th at 19. An excess insurer has no duty to defend

or indemnify its insureds until the primary insurance has been exhausted by judgment or 

settlement. Signal Companies, Inc. v. Harbor Ins. Co., 27 Cal. 3d 359, 368 (1980); Cmty. 

Redevelopment Agency v. Aetna Cas. & Sur. Co., 50 Cal. App. 4th 329, 339 (1996).

Atain and California Capital disagree about the effect of two provisions in the Atain 

policies. Both provisions purport to limit the coverage provided under the policies. The first 

disputed provision is the Malpractice and Professional Services Exclusion in the Atain policies, 

which the parties and Court refer to as the Professional Services Exclusion. Policies like the ones 

Atain issued to Sierra Pacific have two essential parts: the insuring agreement that defines the 

risks the policy covers, and a series of exclusions that withdraw coverage for certain risks that are 

otherwise within the scope of the insuring agreement. Waller, 11 Cal. 4th at 16. Atain and 

California Capital agree that the Dailey allegations fell within the scope of the Atain policies’ 

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insuring agreements. (SUF1 No. 15, ECF No. 63.) The parties dispute whether the Professional 

Services Exclusion withdrew that coverage.

The Professional Service Exclusion is present in each of the four successive policies Atain 

issued to Sierra Pacific. In the 2008, 2009, and 2010 policies, the Professional Services 

Exclusion states:

This insurance does not apply to:

"Bodily Injury," "Property Damage," or "Personal and Advertising 

Injury," including payment for loss or defense costs in connection 

with any claim made against any insured based upon, arising out of, 

directly or indirectly resulting from, in consequence of, or in any 

way involving the rendering or failure to render any professional 

service by, but not limited to any Accountant, Architect, Engineer, 

Insurance Agent or Broker, Lawyer, Medical Professional, or Real 

Estate Agent Broker, or any other service that is of a professional 

nature.

(SUF1 No. 12, ECF No. 63.) The 2007 policy also contains a professional services exclusion, 

which states simply that the insurance does not apply to “‘Bodily Injury,’ ‘Property Damage,’ or 

‘Personal and Advertising Injury,’ due to the rendering or failure to render any professional 

service.” (SUF1 No. 13, ECF No. 63.) 

The second disputed provision is the Real Estate Property Managed endorsement. In the 

parlance of the insurance industry, an endorsement is simply an amendment to an insurance 

policy. Endorsement, BLACK’S LAW DICTIONARY (10th ed. 2014). The Real Estate Property 

Managed endorsement adds an “other insurance” clause to the policies. “Other insurance” 

clauses are provisions found in most insurance policies that attempt to limit the insurer’s liability 

where other insurance covers the same risk. Fireman's Fund Ins. Co. v. Maryland Cas. Co., 65 

Cal. App. 4th 1279, 1304 (1998). There are three main types of “other insurance” clauses: pro 

rata clauses, excess clauses, and escape clauses.11 The Real Estate Property Managed 

endorsement is an excess clause. The endorsement is the same in each of the four successive 

Atain policies. In relevant part, it states:

 

11 Pro rata clauses provide that if there is other insurance available, the insurer is not liable for more than a pro 

rata share of the loss. Olympic Ins. Co., 126 Cal. App. 3d at 598. Excess clauses provide that if there is other 

insurance available, the insurer will not be liable until losses exceed the other insurance. Id. Escape clauses provide 

that if there is other insurance, the insurer will not cover the loss at all. Id.

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With respect to your liability arising out of your management of 

property for which you are acting as real estate manager, this 

insurance is excess over any other valid and collectible insurance 

available to you.

(SUF1 No. 14, ECF No. 63.) Elsewhere, the Atain policies specify that when the insurance is 

excess, Atain has no duty to defend Sierra Pacific and no duty to indemnify until Sierra Pacific’s 

other primary insurance is exhausted.12

Atain and California Capital first dispute the effect of the Professional Services Exclusion.

They agree that Sierra Pacific’s liability in Dailey is within the scope of Atain’s insuring 

agreement. (SUF1 No. 15, ECF No. 63.) But Atain argues the Professional Services Exclusion 

withdraws coverage for that liability. (Pl.’s Mot. for Summ. J. (“Atain Mot.”) 12:20–15:26, ECF 

No. 49.) Atain argues that the Professional Services Exclusion eliminated any possibility that

Sierra Pacific’s liability in Dailey would be covered by the Atain policies, so Atain had no duty to 

defend or indemnify Sierra Pacific. (Atain Mot. 20:11–15, ECF No. 49.) Atain and California 

Capital also dispute the effect of the Real Estate Property Managed endorsement. Specifically, 

they dispute whether the endorsement is enforceable at all. (Atain Mot. 16:1–17:27, ECF No. 49; 

Def.’s Mot. for Summ. J. (“CC Mot.”) 15:4–16:9, ECF No. 54.)

i. The Professional Services Exclusion

Atain and California Capital disagree about whether the Professional Service Exclusion 

removed from coverage Sierra Pacific’s liability in Dailey. Atain argues that Sierra Pacific’s 

liability in Dailey arises from its negligence in providing, or failing to provide, a professional

service—namely, property management. (Atain Mot. 14:11–16, ECF No. 49.) According to 

Atain, Sierra Pacific was sued for its inadequate performance of a professional service, and thus 

its liability for that failure is specifically excluded from coverage in the Atain policies. (Atain 

Mot. 15:1–5, ECF No. 49.) Atain argues that it only insured Sierra Pacific for things like 

premises liability at its offices, “not liability arising out of its rendering of professional services at 

the apartment complexes it was servicing.” (Atain Mot. 15:23–26, ECF No. 49.) 

 

12 Rock. Decl. Ex. A at 66, ECF No. 51-1; Rock. Decl. Ex. B at 66, ECF No. 51-2; Rock. Decl. Ex. C at 64, 

ECF No. 51-3; Rock. Decl. Ex. D at 70, ECF No. 51-4.

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California Capital disagrees for three reasons. First, California Capital argues that 

property management is not a professional service. (CC Mot. 12:14–13:5, ECF No. 54.) Second, 

California Capital argues that, even if property management is a professional service in a general 

sense, Sierra Pacific’s liability stems in part from ordinary rather than professional negligence 

because Sierra Pacific employees tried to deal with the Pagoda Garden pigeon problem 

themselves as handymen. (CC Mot. 13:6–14:2, ECF No. 54.) Third, California Capital argues 

that the policy terms as a whole demonstrate that Atain insured Sierra Pacific in the latter’s 

capacity as a property management company. (Def.’s Opp’n to Pl.’s Mot. for Summ. J. (“Opp’n 

to Atain Mot.”) 6:1–7:6, ECF No. 69.)

The Court agrees with California Capital’s third argument. Atain and California Capital 

devote much of their briefing to debating whether property management is a professional service, 

but the Court need not probe the metes and bounds of the term “professional services” to resolve 

their dispute. The relevant inquiry is not whether property management is a professional service 

in the abstract. Instead, the relevant inquiry is what risks Atain and Sierra Pacific mutually 

intended the policies to cover at the time of contracting. See MacKinnon, 31 Cal.4th at 647–48 

(stating that a court must give effect to the mutual intention of the parties based on the contract 

language taken as a whole).

The Real Estate Property Managed endorsement undermines Atain’s arguments for 

exclusion. The endorsement states “[w]ith respect to your liability arising out of your 

management of property for which you are acting as real estate manager, this insurance is excess 

over any other valid and collectible insurance available to you.” (SUF1 No. 14, ECF No. 63 

(emphasis added).) The language shows that both Atain and Sierra Pacific recognized that Sierra 

Pacific could incur some liability, covered under the policies, for actions it undertook as a 

property manager. A valid endorsement changes the policy to which it is attached. Manzarek v. 

St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1032 (9th Cir. 2008) (citing Haynes v. Farmers 

Ins. Exch., 32 Cal. 4th 1198, 1208 (2004)). “[I]f a conflict exists between the main body of the 

policy and an endorsement, the endorsement prevails.” Id. Here, the Real Estate Property 

Managed endorsement illustrates that the mutual intent of the parties was not to categorically 

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withdraw from coverage the risks associated with Sierra Pacific’s property management 

activities. 

ii. The Real Estate Property Managed Endorsement

Atain and California Capital also dispute whether the Real Estate Property Managed 

endorsement converted Atain into an excess insurer under the circumstances. Atain argues that 

the endorsement modified the primary policy it issued to Sierra Pacific, converting it into an 

excess policy in this case. (Atain Mot. 16:1–18:6, ECF No. 49.) Atain also argues that its 

obligations as an excess insurer never arose because the Dailey settlement did not exhaust the 

California Capital policies for the reasons discussed above. (Atain Mot. 18:7–19:9, ECF No. 49.) 

California Capital argues that the endorsement is unenforceable. (CC Mot. 15:4–16:19, ECF No. 

54.)

California Capital argues that the Real Estate Property Managed endorsement is 

unenforceable for two reasons. First, California Capital relies on Fireman’s Fund and Edmonson 

Prop. Mgmt. v. Kwock, 156 Cal. App. 4th 197 (2007), to argue that the Real Estate Property 

Managed endorsement is unenforceable on its face because California courts routinely disregard 

excess clauses. (CC Mot. 15:4–28, ECF No. 54.) Second, again relying on Fireman’s Fund, 

California Capital argues that the Real Estate Property Managed endorsement conflicts with an

excess clause in the California Capital policies, so both clauses must be ignored and the losses 

prorated amongst the policies. (CC Mot. 16:13–19, ECF No. 54.) Atain concedes that California 

Capital is generally correct. (Pl.’s Opp’n to Def.’s Mot. for Summ. J. (“Opp’n to CC 

Mot.”)10:23–11:5, ECF No. 62.) But Atain points the Court to Hartford Cas. Ins Co. v. 

Travelers Indem. Co., 110 Cal. App. 4th 710 (2003), and argues that the courts do not override 

the policy language of excess clauses when they are narrowly drafted. (Opp’n to CC Mot. 11:6–

14, ECF No. 62.) Atain also cites Hartford for the proposition that excess clauses do not 

necessarily conflict simply because they appear initially to be at odds. (Opp’n to CC Mot. 11:15–

21, ECF No. 62.) A review of California case law provides context for the parties’ arguments.

California Capital first relies on Fireman’s Fund. Fireman’s Fund was an action between 

two insurance companies, Fireman’s Fund Insurance Company and Maryland Casualty Company. 

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Fireman’s Fund, 65 Cal. App. 4th at 1287. Fireman’s Fund paid to defend and settle a lawsuit on 

behalf of a common insured. Id. at 1302. Maryland did not contribute. Id. Fireman’s Fund then 

sought equitable contribution and indemnification from Maryland. Id. at 1288. Fireman’s Fund 

prevailed before the trial court, but was dissatisfied with the way the court allocated the costs the 

two insurers had to bear. Id. Before the trial court and again on appeal, Fireman’s Fund argued 

that it had been allocated more than its fair share of the costs associated with the underlying 

lawsuit. Id. at 1303. Specifically, Fireman’s Fund argued that an “other insurance” clause in its 

policies rendered it an excess insurer during part of the relevant period. Id. That clause stated 

“[t]his insurance is excess over any other insurance, whether primary or excess, contingent or on 

any other basis . . . [t]hat is valid and collectible insurance.” Id. at 1303 (original emphasis 

omitted). A clause in the Maryland policies stated that, when other insurance covered the same 

loss, losses would be allocated between the insurers on a pro rata basis. Id. The trial court 

refused to enforce Fireman’s Fund’s excess clause. Id. 

The court of appeal affirmed. The court began by noting the general rule that courts “will 

therefore generally honor the language of excess ‘other insurance’ clauses when no prejudice to 

the interests of the insured will ensue.” Fireman’s Fund. 65 Cal. App. 4th at 1304. But the court 

recognized that sometime conflicts arise to test that rule. For example, “where two or more 

primary insurers’ policies contain excess ‘other insurance’ clauses purporting to be excess to each 

other,” courts disregard the conflicting clauses and prorate the loss among the insurers. Id. at 

1304–05. As the court noted, if both excess clauses were enforced, the insured would be deprived 

of protection that it had paid for simply because each policy denied primary coverage based on 

the existence of the other. Id. (citing Olympic Ins. Co., 126 Cal. App. 3d at 599). 

Fireman’s Fund involved a slightly different scenario, a collision between Fireman’s 

Fund’s excess clause and Maryland’s pro rata clause. The court noted several then-recent 

opinions that had disregarded excess clauses and ordered proration in that scenario. Fireman’s 

Fund, 65 Cal. App. 4th at 1305. The Fireman’s Fund court reasoned that several public policy 

considerations justified that rule. Id. First, excess clauses can be tantamount to escape clauses, 

“whereby coverage purports to disappear in the presence of other insurance.” Id. Escape clauses 

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are generally disfavored as a matter of public policy. Id. Second, the court reasoned that 

enforcement of the excess clause over the pro rata clause would lead to an absurd result: “courts 

[would] only predictably enforce proration between policies when they all have conflicting 

‘excess other insurance’ language barring proration.” Id. at 1306 (internal citations omitted). 

Finally, the court noted that the rules regarding equitable contribution between insurers are 

different than the rules applicable in a case between an insurer and its insured. Id. (citing Signal 

Companies, 27 Cal. 3d at 369). In a case between coinsurers, “[t]heir respective obligations flow 

from equitable principles designed to accomplish ultimate justice in the bearing of a specific 

burden.” Id. The court considered the equities of the case and held that the trial court properly 

disregarded Fireman’s Fund’s excess clauses. Id. at 1307. 

California Capital also relies on Kwock. Like Fireman’s Fund, Kwock involved an action 

by one insurer against another for equitable contribution for the costs of settling a personal injury 

lawsuit against a mutual insured. Kwock, 156 Cal. App. 4th at 200. The insurers were Farmers 

Insurance Group and California Capital. Id. In the underlying lawsuit, a personal injury plaintiff 

sued both the owner and the property manager of an apartment complex. Id. California Capital 

insured the owner, and also the property manager as an additional insured. Id. Farmers insured 

the property manager. Id. California Capital paid to defend and settle the claim. Id. Farmers did 

not contribute, arguing that its coverage was excess. Id. The crux of Kwock was whether an 

indemnification agreement between the property owner and property manager rendered Farmers’ 

policy excess. Id. at 202. But that argument was only brought to the fore because the court 

would not enforce an excess clause in the Farmers policy. Id. at 202–04.

Unlike Fireman’s Fund, Kwock did not involve conflicting “other insurance” clauses. 

The Farmers policy contained an excess clause, but the California Capital policy did not. Kwock, 

156 Cal. App. 4th at 203. Nevertheless, the Kwock court took as a given that the excess clause 

was unenforceable. Id. at 203–04. The court reasoned that an excess clause in an otherwise 

primary policy acts as an escape clause that “attempts to have coverage, paid for with the 

insured’s premiums, evaporate in the presence of other insurance.” Id. at 203 (citing Commerce 

& Industry Ins. Co. v. Chubb Custom Ins. Co., 75 Cal. App. 4th 739, 745 (1999)). As the Kwock 

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court noted, “[e]scape clauses are discouraged and generally not given effect in actions where the 

insurance company who paid the liability is seeking equitable contribution from the carrier who is 

seeking to avoid the risk it was paid to cover.” Id.

Fireman’s Fund and Kwock illustrate the modern trend, but the modern trend is not an 

ironclad rule. Atain relies on Hartford for an exception to that trend. (Atain Mot. 16:11–17:5, 

ECF No. 49.) Hartford involved an action between coinsurers for declaratory relief concerning 

who would bear the costs of defending and settling a lawsuit against a mutual insured. Hartford, 

110 Cal. App. 4th at 712. The insurance companies were Travelers Indemnity Company and 

Hartford Casualty Insurance Company. Id. Travelers insured a landlord and Hartford insured the 

tenant. Id. at 714–15. Hartford also insured the landlord under the tenant’s policy as an 

additional insured. Id. at 714, 716. When the landlord was sued, both Travelers and Hartford 

accepted the defense and ultimately settled the underlying lawsuit. Id. at 713. Each insurer then 

sought a declaratory judgment that it had no liability to defend or indemnify the landlord. Id. 

Ultimately, the trial court enforced an excess clause in the Travelers policy, entitling Travelers to 

recoup its costs from Hartford. Id. at 715. Hartford appealed. 

On appeal, Hartford argued that the trial court had erred by enforcing the excess clause in 

the Travelers policy. Hartford, 110 Cal. App. 4th at 724. The Travelers excess clause was 

contained in an endorsement entitled Other Insurance—Additional Insureds. Id. at 714–715. 

That endorsement stated: 

This insurance is excess over any of the other Insurance; whether 

primary, excess, contingent or on any other basis . . . [t]hat is valid 

and collectible Insurance available to you [the landlord] if you are 

added as an additional insured under any other policy.

Id. The Hartford policy also had an excess clause. The Hartford excess clause provided that 

Hartford’s coverage was primary unless there was other insurance for fire, extended coverage, 

builder’s risks, and similar coverage, and when its policyholder was an additional insured under 

another policy. Id. at 726.

The Hartford court recognized the modern trend disfavoring excess clauses, but held that 

the particular policies in Hartford justified enforcement of the Travelers excess clause. Hartford, 

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110 Cal. App. 4th at 724–26. The Hartford court distinguished Fireman’s Fund and its kin on 

two grounds. First, unlike the broad excess clause in Fireman’s Fund, the Travelers excess 

clause was limited to narrow circumstances. Id. at 726–27. “A clause that carves out this 

intended exception to primary coverage is not similar to an escape clause, where the insurer 

appears to offer coverage that in fact evaporates in the presence of other insurance.” Id. Second, 

also unlike Fireman’s Fund, the Travelers excess clause and the Hartford excess clause did not 

conflict:

By its terms, the Hartford policy is primary except in specified 

instances that do not apply in this case. The Travelers policy is 

primary except in the specific instance that does apply in this 

case—when the insured is named as an additional insured under 

another policy, which makes the Travelers policy excess by 

definition. Because the policy terms, as they apply in this case, do 

not conflict . . . there is no reason to disregard the express terms of 

both policies.

Id. at 727. The Hartford court concluded that equity did not justify overriding the terms of the 

insurance policies in that case. Id.

California Capital asserts that Hartford provides no guidance because it involved an 

express agreement that required one contracting party to purchase primary insurance while the 

other contracting party’s insurance was agreed to be excess. (Def.’s Reply 8:17–25, ECF No. 

81.) California Capital is correct that Hartford did involve such an agreement, which was one of 

the terms in a lease. But that agreement was not why the Hartford court distinguished Fireman’s 

Fund. “The result in this case is based on the language of the relevant policies. References to the 

terms of the lease serve only to highlight the intent of the parties.” Hartford, 110 Cal. App. 4th at 

728. 

Here, the Real Estate Property Managed endorsement is an excess clause in the spirit of 

Hartford. It is not tantamount to an escape clause, as California Capital asserts. Rather, it 

converts Atain’s coverage to excess in one particular scenario, when liability arises out of Sierra 

Pacific’s property management activities. As Kwock illustrates, broad excess clauses are often 

disregarded because they attempt “to have coverage, paid for with the insured’s premiums, 

evaporate in the presence of other insurance.” Kwock, 156 Cal.App.4th at 204. But that equitable 

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consideration—although compelling—is simply not present in cases where the excess clause 

applies narrowly and is added by endorsement. A narrow excess clause added by endorsement is 

not an insurer’s attempt to hoodwink its insured into purchasing illusory coverage. Rather, it is a 

contractual provision that declares a policy to be excess “in the situation where the parties and the 

insurers are most likely to intend that result.” Hartford, 110 Cal. App. 4th at 726. See also 

Certain Underwriters at Lloyds, London v. Arch Specialty Ins. Co., 246 Cal. App. 4th 418, 436

(2016) (distinguishing Hartford because of the difference between broad excess clauses and 

narrow excess clauses); Underwriters of Interest Subscribing to Policy No. A15274001 v. 

ProBuilders Specialty Ins. Co., 241 Cal. App. 4th 721, 733 (2015) (same).

California Capital next argues that if the Real Estate Property Managed endorsement is 

enforceable at all, it is in conflict with the excess clause in the California Capital policies. The 

California Capital excess clause states in relevant part:

If there is other insurance covering the same loss or damage, we 

will pay only for the amount of covered loss or damage in excess of 

the amount due from that other insurance, whether you can collect 

on it or not . . . .

13

California Capital argues that this clause renders its policies excess too, so both excess clauses 

must be struck and the costs of Dailey prorated between the insurers. (CC Mot. 16:13–19, ECF 

No. 54.) 

However, like the policies in Hartford, these policies do not actually conflict. By their 

terms, both the Atain policies and the California Capital policies are primary unless a predicate 

condition converts the policies to excess. In the Atain policies, that predicate condition is a set of 

factual circumstances leading the insured to face a particular type of liability: “liability arising out 

of [Sierra Pacific’s] management of property.” (SUF1 No. 14, ECF No. 63.) In the California 

Capital policies, that predicate condition is the availability of “other insurance covering the same 

loss or damage.”14 Sierra Pacific faced liability in Dailey arising out of its management of 

 

13 2006 Policy at 48, ECF No. 48-4; 2007 Policy at 48, ECF No. 48-5; 2008 Policy at 48, ECF No. 48-6; 2009 

Policy at 49, ECF No. 48-7; 2010 Policy at 48, ECF No. 48-8; 2011 Policy at 48, ECF No. 48-9.

14 2006 Policy at 48, ECF No. 48-4; 2007 Policy at 48, ECF No. 48-5; 2008 Policy at 48, ECF No. 48-6; 2009 

Policy at 49, ECF No. 48-7; 2010 Policy at 48, ECF No. 48-8; 2011 Policy at 48, ECF No. 48-9.

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property, so the predicate condition in the Atain policies was met. Atain became an excess insurer 

in the context of that lawsuit. And because Atain became an excess insurer, it did not provide 

“other insurance covering the same loss or damage.”15 The predicate condition in the California 

Capital policies was not met, so California Capital’s excess clause could not take effect and create 

a conflict. Cf. Cal. State Auto. Ass'n Inter-Ins. Bureau v. Progressive Cas. Ins. Co., No. C 11-

1747 MEJ, 2012 WL 1438835, at *3 (N.D. Cal. Apr. 25, 2012) (following Hartford and finding 

no conflict between a narrow excess clause and a broad excess clause).16

The Real Estate Property Managed endorsement rendered the Atain policies excess with 

respect to Dailey. California Capital’s policies were not exhausted for the reasons discussed 

above. Consequently, Atain’s obligations as an excess insurer were not triggered. Atain had no 

duty to defend or indemnify Sierra Pacific in the Dailey lawsuit. 

C. Bad Faith and Breach of Contract

This case also involves a dispute between Atain and California Capital. Armed with 

Sierra Pacific’s assignment of rights, California Capital asserted a claim against Atain for breach 

of the implied covenant of good faith and fair dealing. (Def.s’ Countercl. ¶¶ 47–54, ECF No. 14.) 

Atain moves for summary judgment on that claim. (Atain Mot. 19:10–20:9, ECF No. 49.) Atain 

argues that where there is no coverage, there can be no bad faith. (Atain Mot. 19:13–17, ECF No. 

49.) 

Atain is correct. “It is clear that if there is no potential for coverage and, hence, no duty to 

defend under the terms of the policy, there can be no action for breach of the implied covenant of 

good faith and fair dealing because the covenant is based on the contractual relationship between 

the insured and the insurer.” Waller, 11 Cal. 4th at 36 (emphasis in original). Since this Court 

 

15 2006 Policy at 48, ECF No. 48-4; 2007 Policy at 48, ECF No. 48-5; 2008 Policy at 48, ECF No. 48-6; 2009 

Policy at 49, ECF No. 48-7; 2010 Policy at 48, ECF No. 48-8; 2011 Policy at 48, ECF No. 48-9.

16 The Court also notes the irony in California Capital’s “conflicting-clauses” argument. Whereas the Real 

Estate Property Managed endorsement is the type of narrowly drawn excess clause approved in Hartford, California 

Capital’s broad excess clause is plainly the kind that California courts disfavor and often do not enforce. Courts 

sometimes look past policy language in equitable contribution actions because the obligations of coinsurers arise not 

from contract, but from “equitable principles designed to accomplish ultimate justice in bearing a specific burden.” 

Fireman’s Fund, 65 Cal. App. 4th at 1295. Even if the Real Estate Property Managed endorsement and California 

Capital’s excess clause were truly in conflict, the Court cannot see how the cause of ultimate justice would be served 

by disregarding the Real Estate Property Managed endorsement—that is, by allowing an unenforceable clause to 

cancel out the effect of an enforceable one.

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has concluded that Atain had no duty to defend Sierra Pacific in Dailey, as a matter of law, 

California Capital’s bad faith claim must fail. 

V. CONCLUSION

For the reasons discussed above, the following is hereby ordered:

The Lees’ motion for summary judgment (ECF No. 48) is GRANTED. The Clerk of the 

Court shall enter judgment in the Lees’ favor on California Capital’s first and second claims for 

relief. (TPC, ECF No. 15.)

Atain’s motion for summary judgment (ECF No. 49) is GRANTED. The Clerk of the 

Court shall enter judgment in Atain’s favor on Atain’s first and second claims for relief. (Pl.’s 

Compl., ECF No. 1.) The Clerk of the Court shall also enter judgment in Atain’s favor on 

California Capital’s first, second, third, fourth, fifth, and sixth claims for relief. (Df.’s Answer 

and Countercl., ECF No. 14.)

California Capital’s motion for summary judgment (ECF No. 54) is DENIED.

IT IS SO ORDERED

Dated: November 2, 2016

Case 2:14-cv-00609-TLN-DB Document 89 Filed 11/03/16 Page 22 of 22