Filed 10/10/19

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

TARGET CORPORATION,

 Plaintiff and Appellant,

v.

GOLDEN STATE INSURANCE 

COMPANY LIMITED et al.,

 Defendants and Respondents.

2d Civil No. B279995

(Super. Ct. No. NC059999)

(Los Angeles County)

This appeal involves complex issues in the interpretation of 

indemnification/defense clauses and additional insured 

endorsements. Target Corporation (retailer) appeals from the 

judgment entered in favor of respondents Golden State Insurance 

Company Limited (carrier) and its insured, McKesson 

Corporation (supplier), which had distributed a pharmaceutical 

product to retailer. Supplier’s contract with retailer included a

clause requiring supplier to indemnify and defend retailer. 

Retailer was named as an additional insured on the policy that 

carrier had issued to supplier. 

A customer purchased from retailer the pharmaceutical

product distributed by supplier. She had an adverse reaction to 
2

the product that resulted in serious bodily injury. Customer sued 

retailer, but supplier and carrier refused to defend it. Retailer 

brought the present action against supplier and carrier seeking 

to compel them to defend it. The trial court granted supplier’s 

and carrier’s motion for summary adjudication because 

customer’s lawsuit was based not on a defective product 

distributed by supplier, but on retailer’s alleged mislabeling of 

the product and failure to warn of possible adverse reactions to 

the product. 

We conclude that the indemnification/defense clause in 

supplier’s contract with retailer and the additional insured 

endorsement do not require supplier and carrier to defend 

retailer against customer’s lawsuit. Accordingly, we affirm.

Factual and Procedural Background

Supplier distributes prescription drugs, in bulk, to 

retailers. It does not manufacture drugs. Supplier and retailer

entered into a Pharmaceutical Supply Agreement (the 

Agreement). The Agreement contained a broad indemnification 

clause requiring supplier to “indemnify, hold harmless, and 

defend [retailer] . . . against any and all actions [or] claims . . . 

relating to or arising out of . . . Products purchased by [retailer] 

from [supplier], . . . provided however, that the foregoing 

indemnity shall not apply to any claims . . . arising out of or due 

to the negligence or willful misconduct or omission of 

[retailer] . . . .” The Agreement said that “[supplier] shall obtain 

and maintain . . . commercial general liability insurance . . . , 

including products liability/completed operations . . . [and] 

coverage for contractual indemnification obligations.” The policy 

will “provide that [retailer] is included as an additional insured.” 
3

The Agreement stated that it “shall be governed by and construed 

in accordance with the laws of the State of Minnesota.” 

Carrier issued a commercial general liability insurance 

policy designating supplier as the named insured and retailer as 

an additional insured. The additional insured endorsement

provided that coverage applies “only with respect to ‘bodily injury’ 

or ‘property damage’ arising out of ‘your products’ [supplier’s 

products] . . . which are distributed or sold in the regular course 

of the vendor’s business [retailer’s business].” There is a key 

exception to the general coverage provision: Additional insured 

coverage does not apply to “[r]epackaging” of products or 

“[p]roducts which, after distribution or sale by you [supplier] 

have been labeled or relabeled.” The endorsement defined “[y]our 

products” as “[a]ny products of the named insured [supplier].” 

(Bold omitted; see infra pp. 8-9.)

In August 2012 customer “filed products liability and 

professional negligence claims against [retailer and supplier] 

after developing a rare skin reaction . . . that she believes was 

caused by her ingestion of a prescription drug product . . . (a 

generic form of Septra DS [also known as Bactrim DS]) 

(hereinafter, the ‘Product’) she purchased at [retailer’s] 

pharmacy” in Northridge, California. Supplier had distributed 

the Product to retailer. Retailer “tendered the defense of the 

Underlying Action to [supplier],” which “accepted [retailer’s] 

tender.” 

Customer’s second amended complaint (customer’s 

complaint) consisted of six causes of action against retailer and 

supplier. The complaint alleged, “The bottle containing the 

Product supplied to [customer] instructed her to ‘Finish All Of 

This Medicine Unless Otherwise Directed By Your Doctor.’” 
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Customer contended that the label was “misleading and 

defective” because it did not contain “the FDA-approved” warning 

that the Product “should be discontinued at the first appearance 

of skin rash or any sign of adverse reaction.” (Bold and 

capitalization omitted.) Retailer and supplier allegedly “gave 

[customer] written instructions and literature regarding the 

description and use of the Product . . . which [she] relied upon, 

[and] which was inaccurate.” 

According to customer’s complaint, in October 2011 her

“skin began to peel off all over her body. As a result, she was 

transferred to the burn unit at the University of Utah’s hospital 

where she remained in critical care for approximately 7 1/2 weeks 

after being diagnosed with Stevens-Johnson Syndrome and Toxic 

Epidermal Necrolysis . . . .” Retailer and supplier “failed . . . to 

provide adequate warnings to [customer] regarding the potential 

serious danger and proper use of the Product.”

At customer’s request, in January 2014 her action against 

supplier, but not against retailer, was dismissed without

prejudice pursuant to an agreement between customer and 

supplier. In June 2015 the action against supplier was dismissed 

with prejudice.

In October 2014 retailer filed a motion for summary 

judgment. In opposition to the motion, customer stated: “Here,

the evidence is that [retailer] did not use due care in labeling the 

medication.” [Customer] is not attempting to hold [retailer] liable 

on the basis that [it] dispensed a defectively designed drug.” 

“[Retailer] failed to properly warn [her] regarding the 

prescription for [the Product it] filled. [Retailer’s] failures were 

ones of both omission and commission. [It] not only omitted to 

provide warnings of side effects and adverse reactions that 
5

should have been given, the instructions and warnings [it] did 

give were wrong. Following the instructions and not being 

properly warned, [customer] suffered the serious adverse reaction 

of having much of her skin burn off of her body.” 

In its January 2015 ruling denying retailer’s motion for 

summary judgment, the trial court said, “[Customer’s] basis for 

her claims is . . . failure to warn.” The court concluded: “The 

breach of warranty and strict liability claims survive because 

[retailer] designed and provided the labeling for the drug it 

dispensed, changing the FDA-approved labeling. The retailer

thus was not providing the drug as it was given by the 

manufacturer. [Customer] claims that this constitutes a 

mislabeling, which is providing a product.” “The negligence 

causes of action survive because of the allegations that [retailer] 

negligently represented that the warnings and directions were 

adequate and ‘negligently failed to disclose . . . important safety 

and injury information’ about the drug.” 

In February 2015 carrier and supplier terminated their 

defense of retailer. In April 2015 retailer brought the present 

action for “the wrongful denial of a defense under contractual 

indemnity clauses by . . . [supplier] and under an insurance policy 

issued by . . . [carrier].” The complaint consists of three causes of 

action. The first cause of action is for declaratory relief. It seeks 

a declaration that supplier and carrier must defend retailer and 

“pay for those amounts which [retailer] incurs to satisfy any 

settlement of or judgment in [customer’s] action.” The second 

cause of action alleges that carrier and supplier breached their 

contractual obligations and an implied covenant of good faith and 

fair dealing “by terminating their defense of [retailer].” The third 

cause of action seeks indemnity and contribution against supplier 
6

for (1) fees and costs incurred by retailer in defending against 

customer’s action, and (2) any sums paid by retailer to customer. 

In November 2015 carrier and supplier filed a motion for 

summary adjudication as to the first and second causes of action. 

They argued that supplier has no duty to defend retailer because

customer’s “claims against [retailer] arise directly out of its own 

alleged mistakes in labeling the medication.” Carrier also has no 

duty to defend retailer because customer’s “claims actually 

identify [retailer’s] label as the relevant product, and the 

additional insured coverage only applies to claims arising out of 

supplier’s products.” 

In January 2016 customer “resolved her claims against 

[retailer].” In March 2016 the trial court granted carrier’s and 

supplier’s motion for summary adjudication as to the first and 

second causes of action of retailer’s lawsuit. In September 2016 

retailer voluntarily dismissed without prejudice its third cause of 

action for indemnity and contribution against supplier. 

Judgment was subsequently entered in carrier’s and supplier’s

favor. 

Standard of Review

“A motion for summary adjudication shall be granted . . . if 

it completely disposes of a cause of action . . . .” (Code Civ. Proc., 

§ 437c, subd. (f)(1).) “Summary adjudication motions are 

‘procedurally identical’ to summary judgment motions. 

[Citation.]” (Serri v. Santa Clara University (2014) 226 

Cal.App.4th 830, 859.)

“The purpose of the law of summary judgment is to provide 

courts with a mechanism to cut through the parties’ pleadings in 

order to determine whether, despite their allegations, trial is in 

fact necessary to resolve their dispute. [Citation.]” (Aguilar v. 
7

Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) A motion for 

summary judgment “shall be granted if all the papers submitted 

show that there is no triable issue as to any material fact and 

that the moving party is entitled to a judgment as a matter of 

law.” (Code Civ. Proc., § 437c, subd. (c).) 

“[W]e independently review the record that was before the 

trial court when it ruled on [carrier’s and supplier’s] motion. 

[Citations.] In so doing, we view the evidence in the light most 

favorable to [retailer] as the losing part[y], resolving evidentiary 

doubts and ambiguities in [its] favor. [Citation.]” (Martinez v. 

Combs (2010) 49 Cal.4th 35, 68.) “We must presume the 

judgment is correct . . . .” (Jones v. Department of Corrections 

and Rehabilitation (2007) 152 Cal.App.4th 1367, 1376.) “‘As with 

an appeal from any judgment, it is the appellant’s [retailer’s] 

responsibility to affirmatively demonstrate error . . . .’” (Claudio 

v. Regents of the University of California (2005) 134 Cal.App.4th 

224, 230.)

The Trial Court Did Not Err in Granting

Carrier’s Motion for Summary Adjudication

The issue here is one of pure law because it involves the 

interpretation of carrier’s additional insured endorsement. 

“‘When determining whether a particular policy provides a 

potential for coverage . . . , we are guided by the principle that 

interpretation of an insurance policy is a question of law.

[Citation.]’ [Citation.] [¶] ‘The insurer is entitled to summary 

adjudication that no potential for indemnity exists . . . if the 

evidence establishes as a matter of law that there is no coverage. 

[Citation.] . . .’ [Citations.]” (Powerine Oil Co. v. Superior Court

(2005) 37 Cal.4th 377, 390.)
8

The additional insured coverage applies “only with respect 

to ‘bodily injury’ or ‘property damage’ arising out of ‘your 

products,’” i.e., supplier’s products. “California courts have 

consistently given a broad interpretation to the terms ‘arising out 

of’ or ‘arising from’ in various kinds of insurance provisions. It is 

settled that this language does not import any particular 

standard of causation or theory of liability into an insurance 

policy. Rather, it broadly links a factual situation with the event 

creating liability, and connotes only a minimal causal connection 

or incidental relationship.” (Acceptance Ins. Co. v. Syufy

Enterprises (1999) 69 Cal.App.4th 321, 328, italics added.)

There is no “minimal causal connection or incidental 

relationship” between the Product distributed by supplier and 

customer’s injury. (Acceptance Ins. Co. v. Syufy Enterprises, 

supra, 69 Cal.App.4th at p. 328.) Customer claimed that her 

injury arose not from a defective product, but from retailer’s 

failure to warn of the risks and possible side effects of the 

Product. Supplier did not distribute or have any role in 

preparing the information about the Product that retailer

provided to customer. Retailer acknowledges: “Suppliers of 

medications to retail pharmacies never supply those medications 

in a form suitable for simply handing over the drug to the retail 

customer. Those medications always are transferred [by the 

retailer] from bulk containers to individual ones, with labels 

individually prepared [by the retailer] for each customer.” 

Moreover, the additional insured endorsement does not 

apply to “[r]epackaging” of products or “[p]roducts which, after 

distribution or sale by [supplier] have been labeled or relabeled.” 

Retailer repackaged the Product and labeled it before customer 

purchased it. Retailer notes that in the trial court “[carrier]
9

contended that [retailer’s] action of taking the medication from 

the bulk container in which it was sold by [supplier] and placing 

it in an individual container for [customer], with a label on that 

container provided by [retailer] itself, came within the exclusions 

of [the additional insured] [e]ndorsement . . . for repackaging and 

labeling and relabeling.” We agree with carrier because

customer’s claim was based on retailer’s mislabeling of a product 

that was not defective. (See SDR Co., Inc. v. Federal Ins. Co.

(1987) 196 Cal.App.3d 1433). 

The Trial Court Did Not Err in Granting

Supplier’s Motion for Summary Adjudication

Retailer argues: “If [carrier’s] interpretation of [the 

additional insured endorsement] is accurate, then [supplier] 

breached its contractual obligation to obtain insurance coverage 

that actually provided [retailer] with the insurance protection it 

had bargained for.” Therefore, the trial court erroneously 

granted supplier’s motion for summary adjudication as to the 

second cause of action for breach of contract. 

We disagree. The second cause of action did not allege that

supplier had breached its contractual obligation to obtain 

additional insured coverage for retailer. It alleged that supplier 

had “breached [its] obligation[] to [retailer] under the . . . 

Agreement[] . . . by terminating [its] defense of [retailer].”

In any event, there is no evidence that supplier failed to 

obtain the required insurance. The Agreement did not impose on 

supplier a duty to provide additional insured coverage that would 

protect retailer from customer’s claim that it had mislabeled the 

medication and had failed to warn of possible adverse reactions 

and side effects.
10

Supplier agreed to “indemnify, hold harmless, and defend 

[retailer] . . . against any and all actions [or] claims . . . relating to 

or arising out of . . . Products purchased by [retailer] from 

[supplier], . . . provided however, that the foregoing indemnity 

shall not apply to any claims . . . arising out of or due to the 

negligence or willful misconduct or omission of [retailer] . . . .” 

Supplier’s obligation to defend retailer is broader than 

carrier’s obligation. Supplier has a duty to defend as to claims 

“relating to or arising out of” its products, while carrier has a 

duty to defend only as to claims “arising out of” [not relating to] 

supplier’s products. (Italics added.) (See Rice v. Downs (2016) 

248 Cal.App.4th 175, 186, concerning the interpretation of

arbitration clauses [“clauses requiring arbitration of a claim . . . 

‘arising out of’ an agreement, i.e., excluding language such as 

‘relating to this agreement’ . . . , are ‘generally considered to be 

more limited in scope than would be . . . a clause agreeing to 

arbitrate “‘any controversy . . . arising out of or relating to this 

agreement’”’”].)

Carrier and supplier argue that the indemnification clause 

“unambiguously bars [retailer’s] claim for indemnity [against 

supplier] where, as here, [customer’s] claim [against retailer] was 

based solely on [retailer’s] own negligence.” Retailer replies: 

“[Supplier’s] reading of the indemnification provision of the

Agreement[] would deprive [retailer] of a defense and of 

indemnification merely because of the allegation of negligence, 

regardless whether there was any merit to that allegation.” “The 

only reasonable reading of the exception to [supplier’s] duty to 

defend and indemnify is that it applies to situations where in 

fact [retailer] was negligent and where the ‘claims . . .’ in fact 

arose out of or were due to that negligence on the part of 
11

[retailer.] [¶] Thus, in order for [supplier] to obtain summary 

adjudication of the issue of whether it continued to owe [retailer] 

a duty to defend and indemnify, it was not enough for it merely to 

show that the pending allegations in the lawsuit at issue involved 

an allegation of [retailer’s] negligence and a claim that 

[customer’s] injuries arose from that negligence. [Supplier] had 

to establish as undisputed that [retailer] was in fact negligent, 

and that [customer’s] claimed injuries in fact arose from that 

negligence. But [supplier] did not even attempt to make such a 

showing.” “Since [supplier] did not show that fact to be 

undisputed as part of its motion for summary adjudication, that 

motion should not have been granted.” 

We look to Minnesota law because the Agreement specifies

that it shall be construed in accordance with Minnesota law.

“‘[T]he primary goal of contract interpretation is to determine 

and enforce the intent of the parties.’” (Staffing Specifix, Inc. v.

TempWorks Management Services, Inc. (Minn. 2018) 913 N.W.2d 

687, 692.) “[T]he court must give all terms their plain, ordinary 

and popular meaning so as to effect the intent of the parties.

[Citation.] The parties’ intent should be determined, ‘not by a 

process of dissection in which words or phrases are isolated from 

their context, but rather from a process of synthesis in which 

words and phrases are given a meaning in accordance with the 

obvious purpose of the . . . contract as a whole.’” (Davis by Davis

v. Outboard Marine Corp. (Minn.Ct.App. 1987) 415 N.W.2d 719, 

723.)

Retailer is claiming that supplier must defend it unless 

supplier establishes that customer’s claim of negligence is in fact 

meritorious. This is contrary to Minnesota law concerning an 

insurer’s obligation to defend. We recognize that supplier is an 
12

indemnitor, not an insurer, but insurance law is pertinent. “An 

insurer’s obligation to defend its named insured does not depend 

on the merits of the claim asserted but on whether the 

allegations of the complaint against the insured state a cause of 

action within the coverage afforded by the policy.” 

(Meadowbrook, Inc. v. Tower Ins. Co. (Minn. 1997) 559 N.W.2d 

411, 419; see also Wooddale Builders, Inc. v. Maryland Casualty

Co. (Minn. 2006) 722 N.W.2d 283, 302 [“the duty to defend exists 

regardless of the merits of the underlying claims”].) “In addition 

to looking at the complaint, the insurer can look to facts outside 

the complaint to determine whether coverage exists.” (Haarstad

v. Graff (Minn. 1994) 517 N.W.2d 582, 584.) 

Thus, in determining whether an insurer has a duty to 

defend, Minnesota courts consider the nature of the claim against 

the insured and whether that claim is covered by the policy, not 

whether the claim is meritorious. If the claim is within the 

policy’s coverage, the duty to defend is triggered. It is not 

triggered if the claim falls outside the policy’s coverage. 

There is no reason why the rule should be different where 

the duty to defend arises not under an insurance policy, but 

under an indemnification clause in an agreement between a 

pharmaceutical distributor and a vendor that purchases drugs 

from the distributor. The distributor is not required to defend 

the vendor until, as retailer maintains, it “‘establish[es] as 

undisputed that [the vendor] was in fact negligent, and that [the 

plaintiff’s] claimed injuries . . . arose from that negligence.’” It is 

doubtful that the distributor would be able to establish this until 

the issue was resolved by the trial court or a jury. Moreover, it is 

the plaintiff’s obligation, not the distributor’s, to prove 

negligence. The practical effect of retailer’s theory is that the 
13

distributor would have to defend the vendor until a final 

judgment was entered in the negligence action. This would 

render meaningless the exception to the Agreement’s duty to 

defend. “The law requires us to construe a contract as a whole so 

as to harmonize all provisions, if possible, and to avoid a 

construction that would render one or more provisions 

meaningless.” (Stiglich Const., Inc. v. Larson (Minn.Ct.App. 

2001) 621 N.W.2d 801, 803.)

Disposition

The judgment is affirmed. Carrier and supplier shall 

recover their costs on appeal.

CERTIFIED FOR PUBLICATION.

YEGAN, J.

We concur:

GILBERT, P. J.

TANGEMAN, J.
Ross M. Klein, Judge

Superior Court County of Los Angeles

______________________________

Manning & Kass, Ellrod, Ramirez, Trester, John M. 

Hochhausler and Steven J. Renick; Resnick & Louis and Martin 

D. Holly for Plaintiff and Appellant.

Farella Braun Martel, Erica Villanueva and Shanti Eagle 

for Defendants and Respondents.