Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_13-cv-01365/USCOURTS-caed-1_13-cv-01365-2/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Injunctive &amp; Declaratory Relief

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IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

EVANSTON INSURANCE COMPANY, 

an Illinois corporation,

Plaintiff,

v.

NORTH AMERICAN CAPACITY 

INSURANCE COMPANY, a New 

Hampshire corporation,

Defendant.

__________________________________/

1:13-cv-01365-AWI-SAB

ORDER REGARDING DEFENDANT’S 

MOTION FOR PARTIAL SUMMARY 

JUDGMENT

I. Introduction

This action arises from a dispute regarding the scope of Defendant North American 

Capacity Insurance Company‟s (“NAC”) responsibility to provide legal defense for Berry & 

Berry, Inc. (“Berry & Berry”), construction and development company mutually insured by 

Plaintiff Evanston Insurance Company (“Evanston”) and NAC. Evanston contends that NAC had 

a joint responsibility with Evanston to defend Berry & Berry against claims arising from the 

matters within the scope of the liability policies. NAC claims that no duty to defend was 

triggered because Berry & Berry failed to pay the required $10,000 per-claim Self-Insured 

Retention Endorsements (“SIR Endorsement”). NAC filed a motion for partial summary 

judgment pursuant to Federal Rule of Civil Procedure 56. For the following reasons, NAC‟s 

motion will be granted.

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II. Background

Evanston issued three consecutive commercial general liability policies to Berry & Berry. 

The policies collectively covered the period from July 1, 2002 until July 1, 2005. Doc. 2 

(“Compl.”) at ¶ 7. The policies provided that Evanston would “pay those sums that [Berry & 

Berry] becomes legally obligated to pay as damages because of „bodily injury‟ or „property 

damage‟ to which this insurance applies.” Compl. at ¶ 7. Evanston also had the “right and duty to 

defend any “suit” seeking those damages.” Compl. at ¶ 7.

NAC issued two consecutive commercial general liability policies to Berry & Berry. 

Those policies collectively covered the period from July 1, 2000 to July 1, 2002. Section I of 

both policies provide that NAC “will pay those sums that [Berry & Berry] becomes legally 

obligated to pay as damages for bodily injury or property damage to which th[e] insurance 

applies.” Declaration of Counsel in Support of Motion for Summary Judgment, Exhibit 1 (“Doc. 

16”) at p. 24; Exhibit 2 (“Doc. 16-1”) at p. 30. According to the first policy NAC also has “the 

right and duty to defend any suit seeking those damages.” Doc. 16 at p. 24. The first policy goes 

on to specify that NAC‟s “duty to defend is excess over and shall not contribute where the 

insured has any other insurance under which, but for the existence of this Policy, any other 

insurer is obligated to provide a defense.” Doc. 16 at p. 24. The second policy provides that NAC 

“will have the right and duty to defend any suit seeking [bodily injury or property damages

which the insurance covers], unless an insured has another policy of insurance which obligates 

another insurer to provide a defense, in which case, [NAC‟s] duty to defend is excess.” Doc. 16-

1 at p. 30.

Both NAC policies contain SIR endorsements which provide in relevant part:

The self-insured retention (retained limit) applies to each and every claim made 

against you, regardless of how many claims arise from a single occurrence or are 

combined in a single suit, and the company has not duty to defend you unless and 

until the amount of the retained limit has been exhausted by payment of 

settlements, judgments, or claims expense. (claims expenses do reduce the 

retained limit)

***

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In the event of a conflict between any of the terms, conditions or provisions of the 

policy and this endorsement, this endorsement shall control the application of 

insurance to...

***

(B) The “retained limit” for each and every claim arising as the result of an 

“occurrence”... shall be: [¶] $10,000.00 [¶] regardless of the number of claims 

from a single occurrence, suits brought or the number of claims incorporated into 

one such suit.

Doc. 16 at p. 13; Doc. 16-1 at p. 24 (emphasis original).

Both NAC policies define “claim” and “claims” collectively as follows:

Claim or Claims means a request or demand received by any insured or the 

Company for money or services, including the service of suit or institution of 

arbitration proceedings against any insured.

Doc. 16 at p. 35; Doc. 16-1 at p. 41. NAC also defines the term “occurrence” as follows:

Occurrence means an accident, including continuous or repeated exposure to 

substantially the same general harm.

Doc. 16 at p. 36; Doc. 16-1 at p. 42.

Five separate actions have been filed against Berry & Berry in the Madera County 

Superior Court alleging property damage resulting from faulty construction: Adame, et al. v. 

Berry & Berry Inc., et al, arising from damage to 13 homes (Joint Statement of Material Facts, 

Doc. 17-1 (“JSF”) at No. 5) or 16 homes (Evanston‟s Statement of Disputed Facts, Doc. 20 

(“SDF”) at No. 1); Aguirre, et al. v. Berry & Berry, Inc. et al., arising from damage to 58 homes

(Motion for Partial Summary Judgment, Doc.15-1 (“MSJ”) at p. 5; JSF at No. 6) or 172 homes 

(Compl. at ¶ 18.) or 107 homes (SDF at No. 2); Arredondo, et al. v. DMP Development 

Corporation1, Inc., et al., arising from damage to 34 homes (MSJ at p. 5; JSF at No. 7) or 83 

homes (Compl. at ¶ 23; SDF at No. 3); Barrera, et. al. v. Berry & Berry Inc., et al., arising from 

damage to 57 homes (MSJ at p. 6; JSF at No. 8) or 63 homes (Compl. at ¶ 28; SDF at No. 4); and 

Carranza, et al. v. DMP Development Corporation, et al., arising from damage to 80 homes

 

1

It is undisputed that DMP, Inc. is a named insured on both NAC policies. JSF at No. 2-3. 

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(MSJ at p. 6; JSF at No. 9; SDF at No. 5) or 110 homes (Compl. at ¶ 33). In each of the actions,

Evanston is either presently defending or has defended Berry & Berry. 

Berry & Berry sought defense from NAC based on a claim that the SIR was satisfied in 

each suit by Berry & Berry paying $10,000.00 in each suit, triggering NAC‟s duty to defend. 

Compl. at ¶ 39. NAC refused to defend Berry & Berry until a $10,000 SIR was satisfied as to 

each home involved in each of underlying suits. It is undisputed that NAC has not contributed to 

Berry & Berry‟s defense in any of the aforementioned actions. Both Evanston and NAC have

contributed to the settlements achieved to date in the underlying cases. MSJ at p. 1.

III. Legal Standard

“A party may move for summary judgment, identifying each claim or defense – or the 

part of each claim or defense – on which summary judgment is sought. The court shall grant 

summary judgment 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). The moving 

party bears the initial burden of “informing the district court of the basis for its motion, and 

identifying those portions of „the pleadings, depositions, answers to interrogatories, and 

admissions on file, together with the affidavits, if any,‟ which it believes demonstrate the 

absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); 

see Fed. R. Civ. P. 56(c)(1)(A). “Where the non-moving party bears the burden of proof at trial, 

the moving party need only prove that there is an absence of evidence to support the non-moving 

party‟s case.” In re Oracle Corp. Securities Litigation, 627 F.3d 376, 387 (9th Cir. 2010) (citing 

Celotex, 477 U.S. at p. 325). If the moving party meets its initial burden, the burden shifts to the 

non-moving party to present evidence establishing the existence of a genuine dispute as to any 

material fact. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585-86 

(1986). To overcome summary judgment, the opposing party must demonstrate a factual dispute 

that is both material, i.e., it affects the outcome of the claim under the governing law, see 

Anderson, 477 U.S. at 248; T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 

630 (9th Cir.1987), and genuine, i.e., the evidence is such that a reasonable jury could return a 

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verdict for the nonmoving party. See Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1436 (9th 

Cir.1987). In order to demonstrate a genuine issue, the opposing party “must do more than 

simply show that there is some metaphysical doubt as to the material facts.... Where the record 

taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 

„genuine issue for trial.‟” Matsushita, 475 U.S. at p. 587 (citation omitted).

A court ruling on a motion for summary judgment must construe all facts and inferences in the 

light most favorable to the non-moving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 

242, 255 (1986). Nevertheless, inferences are not drawn out of the air, and it is the opposing 

party's obligation to produce a factual predicate from which the inference may be drawn. See 

Richards v. Nielsen Freight Lines, 602 F.Supp. 1224, 1244–45 (E.D.Cal.1985), aff'd, 810 F.2d 

898, 902 (9th Cir.1987). 

IV. Discussion

A. Governing California Law

In this diversity action, California law governs the question of whether the subject policy 

provides coverage. See Travelers Prop. Cas. Co. of Am. v. ConocoPhillips Co., 546 F.3d 1142, 

1145 (9th Cir.2008).

In the insurance context, California courts “generally resolve ambiguities in favor of 

coverage.” AIU Ins. Co. v. Superior Court, 51 Cal.3d 807, 822 (Cal.1990). Moreover, California 

courts generally interpret the coverage clauses of insurance policies broadly, to protect “the 

objectively reasonable expectations of the insured.” AIU, 51 Cal.3d at 822. “Whether a contract 

provision is ambiguous is a question of law.” Meridian Project Systems, 426 F.Supp.2d 1101,

1109 (E.D. 2006) (quoting Centigram Argentina, S.A. v. Centigram Inc., 60 F.Supp.2d 1003, 

1007 (N.D. Cal 1999).

“The California Supreme Court has established a three-step process for analyzing 

insurance contracts with the primary aim of giving effect to the mutual intent of the parties.” In 

re K F Dairies, Inc. & Affiliates, 224 F.3d 922, 925-926 (9th Cir.2000) (citing AIU, 51 Cal.3d at 

821–23). The Ninth Circuit summarizes California's three-step analysis as follows:

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The first step is to examine the “clear and explicit meanings” of the terms as used 

in their “ordinary and popular sense.” In assessing the terms' meanings, we may 

not take individual terms out of context: Language in a contract must be construed 

in the context of that instrument as a whole ... and cannot be found to be 

ambiguous in the abstract. Thus, if the meaning a layperson would ascribe to 

contract language is not ambiguous, we apply that meaning.

If (and only if) a term is found to be ambiguous after undertaking the first step of 

the analysis, the court then proceeds to the second step and resolves the ambiguity 

by looking to the expectations of a reasonable insured. Under California law, an 

insurance policy provision is ambiguous when it is capable of two or more 

constructions both of which are reasonable.

Finally, if the ambiguity still remains, it is construed against the party who caused 

the ambiguity to exist. In the insurance context, this is almost always the insurer, 

as the California Supreme Court has held that ambiguities are generally resolved 

in favor of coverage, and that the courts are to generally interpret the coverage 

clauses of insurance policies broadly, protecting the objectively reasonable 

expectations of the insured.

In re K F Dairies, Inc. & Affiliates, 224 F.3d 922 at 925–26 (citations and internal quotation 

marks omitted).

B. Defendant‟s Argument

Defendant has moved for summary judgment based on the argument that - in the context 

of a self-insured retention – a “claim” as defined by its liability policies and as commonly 

interpreted by relevant caselaw is made on a per-home basis. 

C. Plaintiff‟s Argument

Plaintiff relies heavily upon Clarendon America Insurance Company v. North American 

Capacity Insurance Company, 186 Cal.App.4th 556 (2010), where the California Court of 

Appeal determined that the term “claim” as used in an NAC policy – containing an endorsement,

entitled “Defense of Claims or Suits,” not found in the present case, and not containing any 

definition of the term “claim” as found in the present case – did not have an ordinary meaning 

that could only be understood to create a per-home SIR nor was it unambiguous, i.e. the insured 

could reasonably have believed that the SIR applied to each action, even if filed by multiple 

homeowners. 

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D. The SIR Applied on a Per-Home Basis

“It is well recognized that self-insurance retentions are the equivalent to primary liability 

insurance, and that policies which are subject to self-insured retentions are „excess policies‟

which have no duty to indemnify until the self-insured retention is exhausted.” Pacific 

Employers Ins. Co. v. Domino's Pizza, Inc., 144 F.3d 1270, 1276-77 (9th Cir. 1998) (applying 

California law) (citing, inter alia, General Star Indem. Co. v. Superior Court, 47 Cal.App.4th 

1586 (1996); accord Forecast Homes, Inc. v. Steadfast Ins. Co., 181 Cal.App.4th 1466, 1474 

(2010).

2

It is therefore necessary to determine whether the per-claim $10,000 SIR applies perhouse, as advanced by NAC, or per-action, as advanced by Evanston. 

This Court first looks to “clear and explicit meaning” of the term “claim” as used in its

“ordinary and popular sense.” See AIU, 51 Cal.3d at 821–23. To that end, “[i]f contractual 

language is clear and explicit, it governs.” Kohlhase v. Safeco Ins. Co. of Am., 484 F. App'x 106, 

107 (9th Cir. 2012) (quoting Minkler v. Safeco Ins. Co. of Am., 49 Cal.4th 315 (2010)).

The policies define the term “claim” collectively with “claims” as follows: “Claim or 

Claims means a request or demand received by any insured or the Company for money or 

services, including the service of suit or institution of arbitration proceedings against any 

insured.” Doc. 16 at p. 35; Doc. 16-1 at p. 41.

The court in Devillier v. Alpine Exploration Companies, Inc., encountered nearly 

identical language, defining “claim” and “claims” collectively. Devillier, 946 So.2d 738, 743 

(La. Ct. App. 2006). In Devillier, the SIR endorsement applied to “each „claim‟ and each 

„pollution condition.‟” The SIR endorsement also used the terms “claim” and “claims” in the 

same breath: “In the event of a claim or claims arising which appear likely to exceed the Self–

Insured Retention, no costs, other than adjusting expenses, shall be incurred by the Insured 

without the written consent of the Company[.]” Devillier, 946 So.2d at 742-744. In that context, 

 

2 Pacific Employers holds that a SIR acts as primary insurance to the policy that it applies to; the mere fact that a 

policy contains a SIR does not make the insurer an excess insurer for all purposes. NAC has not alleged that it is an 

excess insurer for all purposes such that Evanston would be precluded from seeking contribution. Such could not be 

the case because the NAC policies predate the Evanston policies by two years. Accordingly, Berry & Berry had to 

have exhausted its SIR before NAC was obliged to pay a dollar. See Mt. McKinley Ins. Co. v. Swiss Reinsurance 

America Corp., 757 F.Supp.2d 952, 958 (N.D. Cal. 2010). 

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the court found that the policy treated “claim” and “claims” as indistinguishable. Such is not the 

case here.

Here, the SIR endorsement provides that “the retained limit for each and every claim 

arising from the resulting from an occurrence ... shall be: $10,000.00 regardless of the number 

of claims from a single occurrence, suits brought or the number of claims incorporated into one 

such suit.” Doc. 16 at p. 13; Doc. 16-1 at p. 24 (emphasis and internal quotations omitted). 

Adopting the approach of the Louisiana court in treating the singular and plural as 

interchangeable in this situation would defeat the clear purpose the SIR endorsement and result 

in a grammatically nonsensical reading. For example, the readings “each and every claims” or 

“regardless of the number of claim ... incorporated into one suit,” ignore NAC‟s purposeful 

differentiation between the singular and plural where that differentiation is the focus. Defining 

claim and claims collectively, in this context, does not render the term “claim” ambiguous.

Plaintiff argues that the inclusion of the term “suit” in the definition of the term “claim” 

renders the term “claim” ambiguous such that Berry & Berry could reasonably have believed that 

a single SIR would apply to any suit filed, even if filed by multiple homeowners. See Clarendon, 

186 Cal.App.4th at 568-569. In Clarendon, the court addressed an insurance policy very similar 

to the policy before this Court with the exception that this policy defines the term “claim.” The 

Clarendon court held that “the term „claim,‟ both within the context of the SIR endorsement and 

other policy provisions, [was] distinguished from the term „suit.‟” Clarendon, 186 Cal.App.4th at 

569. However, the Clarendon court pointed out that, “in the context of the SIR endorsement, the 

policy contemplate[d] that numerous „claims‟ may comprise a „suit[]‟ [and concluded that the 

policy] language support[ed] NAC's construction of the ... „per claim‟ SIR as applying to a 

single claim rather than a single suit.” Clarendon, 186 Cal.App.4th at 569. The Clarendon court 

found that “claim” was used synonymously with “suit,” only in the “Defense of Claims or Suits” 

endorsement – an endorsement absent in the present case. In fact the court noted that the 

“Defense of Claims or Suits” endorsement was of “particular significance in determining 

whether ... a reasonable insured ... would have understood that the ... „per claim‟ SIR applied to 

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the action as a whole ... rather than to each of the ... homes involved in [the action.]” 

Clarendon, 186 Cal.App.4th at 570.

Here, “claim” as defined in the policies includes “the service of suit or institution of 

arbitration proceedings.” Doc. 16 at p. 35; Doc. 16-1 at p. 41. However, “suit” is also defined: 

“[s]uit means a civil proceeding in which damage because of bodily injury, property damage, 

personal injury or advertising injury to which this insurance applies are alleged.” Doc. 16 at p. 

37; Doc. 16-1 at p. 43. Although a “suit” necessarily includes at least one “request or demand 

received by any insured or the Company for money or services,” it cannot be reasonably 

understood from the policy, taken as a whole, that claim and suit – separately defined terms - are 

used synonymously. This is especially clear in the context of the SIR endorsement which clearly 

distinguishes one from the other. It reads: “[t]he self-insured retention (retained limit) applies to 

each and every claim made against you, regardless of how many claims ... are combined in a 

single suit.” Doc. 16 at p. 13; Doc. 16-1 at p. 24.

The question remains whether the per-claim SIR in this case unambiguously applies on a 

per-home basis. In the context of the underlying contracts – commercial general liability

insurance to insure against defects or damage to multiple single-family homes – a “request or 

demand ... for money or services” arising as the result of “an accident, including continuous or 

repeated exposure to substantially the same general harm” against the insured could take many 

forms.3 However, Berry & Berry could not reasonably believed that the SIR retention applied 

only a single time to an entire suit without regard to the number of claims it contained. As an 

illustration, plaintiffs in the underlying suits could have filed each claim individually rather than 

as a group. In such a case, Berry & Berry could not reasonably have believed that only a single 

SIR would apply. Further, the SIR endorsement specifically indicates that the SIR applies 

equally “regardless of the number of claims from a single occurrence, suits brought or the 

number of claims incorporated into one such suit.” Such language would be of no effect if claims 

 

3

For instance, NAC has provided the Court with no explanation as to why a demand for repair of a defective 

condition of a home built by Berry & Berry would not constitute a separate claim as a claim for damages resulting 

from an injury caused to the same homeowner by the same defective condition. However, even if such an ambiguity 

exists it does not work in favor of Berry & Berry and Evanston. 

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that could have been brought separately were subject to only a single SIR when brought together. 

Although this language may be onerous, it is unambiguous. In this case, the SIR could not 

reasonably be interpreted to apply as Plaintiff argues. Rather, the only reasonable interpretation 

is that the SIR applies on a per-home basis.

Unless and until the per-home SIR is met, NAC has no duty to defend.

V. Conclusion

Based on the foregoing, IT IS HEREBY ORDERED that:

1. Defendant‟s motion for partial summary judgment is GRANTED;

2. The SIR endorsements in both NAC policies related to this case are determined to apply 

on a “per-home” basis.

IT IS SO ORDERED.

Dated: July 2, 2014 

 SENIOR DISTRICT JUDGE

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