Filed 3/19/18; Certified for publication 4/17/18 (order attached)

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

ALL GREEN ELECTRIC, INC.,

Plaintiff and Appellant,

v.

SECURITY NATIONAL 

INSURANCE COMPANY,

Defendant and

Respondent.

 B279456

 (Los Angeles County

 Super. Ct. No. BC601672)

APPEAL from a judgment of the Superior Court of Los 

Angeles County, Teresa A. Beaudet, Judge. Affirmed.

Lang, Hanigan & Carvalho and Timothy R. Hanigan for 

Plaintiff and Appellant.

Lewis Brisbois Bisgaard & Smith, Lane J. Ashley and 

Jordon E. Harriman for Defendant and Respondent.

* * * * * *
2

Plaintiff and appellant All Green Electric, Inc. (All Green),

appeals from a grant of summary judgment in favor of its insurer, 

defendant and respondent Security National Insurance Company 

(SNIC). All Green requested that SNIC defend a lawsuit alleging 

that All Green negligently installed electrical equipment for a 

medical scanner. The trial court concluded that the lawsuit fell 

under a coverage exclusion for loss of use of property caused by a 

deficiency in All Green’s work, and SNIC had no duty to provide a 

defense. We affirm.

BACKGROUND

1. The Jacobs Lawsuit

In March 2012, J. Bruce Jacobs, a medical doctor, hired All 

Green to perform electrical work as part of the construction of 

Jacobs’s MRI and X-ray facility, including running power and 

outlets to a room in which a mammography unit was to be 

installed by Hologic, Inc. (Hologic). Hologic installed the unit but 

then discovered it was not operating correctly due to a magnetic 

field in the room. Hologic advised Jacobs to install the unit in a 

different room, and Jacobs retained All Green to run power to 

that room as well.

Despite the move to the second room, the magnetic field 

persisted and the unit continued to malfunction. Jacobs hired 

MRI Corporation to install steel shielding in the second room, but 

the magnetic field continued to interfere with the operation of the 

unit.

Jacobs then hired an electromagnetic field expert who 

determined that the magnetic field was caused by a loose bolt in 

an electrical cabinet installed by All Green. When the bolt was 

tightened, the magnetic field instantly disappeared.
3

Jacobs filed a complaint against All Green, Hologic, and 

MRI Corporation. Jacobs asserted one cause of action for 

negligence against All Green, alleging that All Green breached its 

duty of care “by failing to properly install all the electrical 

components relating to the Project including, without limitation, 

failing to tighten one of the bolts in the utility cabinet installed 

by All Green.” Jacobs alleged that this negligence resulted in a 

magnetic field that “interfered with the operation of” the 

mammography unit and “threatened the health of all persons in 

the facility.” Jacobs sought damages, including costs for 

unnecessary modifications and repairs, payments to outside 

sources for substitute mammography testing, operational costs 

and expenses, damage to Jacobs’s reputation, lost profits, and the 

loss of Jacobs’s HMO contract.

2. SNIC’s Denial of All Green’s Claim

All Green tendered defense of the lawsuit to its insurer, 

SNIC, with whom it had policies covering liability for bodily 

injury and property damage. All Green’s owner informed SNIC’s 

senior claims examiner that All Green denied the allegations in 

the complaint, that all the bolts had been properly tightened, and 

that All Green’s work had passed two inspections.

SNIC ultimately denied All Green’s claim on the basis of 

the “impaired property” exclusion in All Green’s policies.1 The 

exclusion, titled in the policies as “Damage To Impaired Property 

 

1 The impaired property exclusion “bars coverage for liability 

arising out of a defect in a contractor’s work or failure to perform 

a contract that renders other property useless or less usable.” 

(Croskey et. al., Cal. Practice Guide: Insurance Litigation (The 

Rutter Group 2017) ¶ 7:1484.2, p. 7E-52.) It does not apply when 

property has been physically injured. (Id. at ¶ 7:1484.3.)
4

Or Property Not Physically Injured,” states that the policies do 

not apply to “ ‘Property damage’ to ‘impaired property’ or 

property that has not been physically injured, arising out of: [¶]

(1) A defect, deficiency, inadequacy or dangerous condition in 

‘your product’ or ‘your work;’ or [¶] (2) A delay or failure by you 

or anyone acting on your behalf to perform a contract or 

agreement in accordance with its terms.” The provision further 

states that “[t]his exclusion does not apply to the loss of use of 

other property arising out of the sudden and accidental physical 

injury to ‘your product’ or ‘your work’ after it has been put to its 

intended use.”

The policies define “impaired property” as “tangible 

property, other than ‘your product’ or ‘your work,’ that cannot be 

used or is less useful because: [¶] a. it incorporates ‘your 

product’ or ‘your work’ that is known or thought to be defective, 

deficient, inadequate or dangerous; or [¶] b. You have failed to 

fulfill the terms of a contract or agreement; [¶] if such property 

can be restored to use by the repair, replacement, adjustment or 

removal of ‘your product’ or ‘your work’ or your fulfilling the 

terms of the contract or agreement.” As relevant here, “your 

work” is defined as “[w]ork or operations performed by you or on 

your behalf” as well as “[m]aterials, parts or equipment furnished 

in connection with such work or operations.”

SNIC’s denial letter explained that the mammography unit 

was “impaired property” in that it “could not be used because All 

Green failed to fulfill the terms of its contract (by tightening the 

bolt and/or meeting the standard of care),” but could be “restored 

to use by simply tightening the bolt, i.e., by ‘adjustment’ of All 

Green’s work.” Alternatively, the unit was “property that was 

not physically injured.” The exclusion applied because “[t]he 
5

failure to tighten the bolt was a ‘defect, deficiency, inadequacy . . .

in . . . “your work” ’.” The letter further concluded that the 

exception for “sudden and accidental physical injury” to All 

Green’s work did not apply because there had been no physical 

injury, and the fact that the bolt was loose was not sudden or a 

result of an event that occurred after it was “put to its intended 

use.”

3. Proceedings below

All Green filed a complaint against SNIC seeking a 

declaratory judgment that SNIC had a duty to defend All Green

in the Jacobs lawsuit. The complaint also alleged breach of 

contract and breach of the implied covenant of good faith and fair 

dealing.

SNIC moved for summary judgment, arguing that the 

impaired property exclusion applied. There were no disputed 

facts in the parties’ separate statements.

The trial court granted summary judgment in favor of

SNIC, finding that the damages claimed in the Jacobs lawsuit fell 

under the impaired property exclusion. The court stated that the 

Jacobs lawsuit “claims negligence on the part of [All Green] for 

failure to tighten a bolt that resulted in loss of use of the 

mammogram machine. That is property damage (loss of use) to 

impaired property (property that cannot be used which 

incorporates [All Green’s] work thought to be deficient) which 

arose out of the alleged deficient work.” As to All Green’s 

contention that it was not at fault, the court said “whether [All 

Green] ultimately prevails in the underlying action has no 

bearing on whether the claim itself is covered by the policy.”

All Green timely appealed.
6

DISCUSSION

1. Applicable law

“[A] liability insurer owes a broad duty to defend its 

insured against claims that create a potential for indemnity.” 

(Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076, 1081

(Horace Mann).) “ ‘[T]he carrier must defend a suit which 

potentially seeks damages within the coverage of the policy.’ ”

(Ibid.) “The determination whether the insurer owes a duty to 

defend usually is made in the first instance by comparing the 

allegations of the complaint with the terms of the policy. Facts 

extrinsic to the complaint also give rise to a duty to defend when 

they reveal a possibility that the claim may be covered by the 

policy.” (Ibid.)

“The insurer’s defense duty is obviated where the facts are 

undisputed and conclusively eliminate the potential the policy 

provides coverage for the third party’s claim. [Citation.] An 

insurer is entitled to summary judgment that no potential for 

indemnity exists if the evidence establishes no coverage under 

the policy as a matter of law. [Citation.] We review an order 

granting summary judgment de novo ‘ “ ‘when, on undisputed 

facts, the order is based on the interpretation or application of 

the terms of an insurance policy.’ ” ’ ” (Regional Steel Corp. v. 

Liberty Surplus Ins. Corp. (2014) 226 Cal.App.4th 1377, 1389 

(Regional Steel).)

“A trial court properly grants a motion for summary 

judgment only if no issues of triable fact appear and the moving 

party is entitled to judgment as a matter of law. (Code Civ. Proc., 

§ 437c, subd. (c).) ‘The moving party bears the burden of showing 

the court that the plaintiff “has not established, and cannot 

reasonably expect to establish,” ’ the elements of his or her cause 
7

of action.” (Zubillaga v. Allstate Indemnity Co. (2017) 12 

Cal.App.5th 1017, 1026.)

2. Analysis

In its opening brief, All Green primarily argues that SNIC 

failed to establish the applicability of the impaired property 

exclusion. In its reply, it focuses on the exclusion’s exception for 

“sudden and accidental physical injury” to All Green’s work “after 

it has been put to its intended use,” and argues that SNIC failed 

to establish that the exception did not apply. We reject both 

arguments.

a. Impaired property exclusion

All Green does not dispute that if a failure to properly 

install the bolt and other electrical components led to the loss of 

use of the mammography unit, the impaired property exclusion 

would bar coverage for the damages claimed in the Jacobs 

complaint. But All Green contends that there were other possible 

reasons the bolt could have been loose independent of any 

negligence on All Green’s part; All Green suggests a truck could 

have hit the electrical cabinet, or vandals or an earthquake could 

have damaged it. All Green argues that if it was not negligent or 

otherwise deficient in the performance of its contract, then the 

elements of the impaired property exclusion would not be met 

and SNIC would have a duty to defend.

We disagree. The duty to defend arises if a lawsuit creates 

“a potential for indemnity,” that is, a potential for liability of a 

sort covered under the policy. (Horace Mann, supra, 4 Cal.4th at

p. 1081.) If there is no possibility of such liability, then there is 

no possibility of coverage and no corresponding duty to defend. 

Here, the only liability alleged in the complaint was a type not 

covered by the policy: the mammography unit’s temporary 
8

malfunction (loss of use) as a result of All Green’s purported 

failure to properly install the bolt and other electrical 

components (a deficiency in All Green’s work). All Green 

proposes no possible theory under which All Green would be 

subject to liability covered by the policy under these 

circumstances, nor can we conceive of any. (See Gray v. Zurich 

Insurance Co. (1966) 65 Cal.2d 263, 275, fn. 15 (Gray) [“[T]he 

insurer need not defend if the third party complaint can by no 

conceivable theory raise a single issue which could bring it within 

the policy coverage.”].) Thus, it is undisputed that if Jacobs’s

allegations against All Green were found true, SNIC would not 

have to indemnify.

Nor would SNIC have to indemnify if, as All Green 

contended to SNIC’s claims examiner, All Green’s work was done 

properly and it was not responsible for the loose bolt. In such a 

circumstance, All Green would not be liable to Jacobs and there 

would be nothing to indemnify. Even if All Green is technically 

correct that its lack of negligence negates the impaired property 

exclusion, it would not give rise to a duty to defend because the 

lack of negligence would also negate All Green’s liability.

State Farm Fire & Casualty Co. v. Drasin (1984) 152 

Cal.App.3d 864 (Drasin) is analogous. The Drasins were sued for 

malicious prosecution by a business partner. (Id. at p. 866.)

They requested defense from their homeowner’s insurance 

carrier, State Farm, which sought a declaratory judgment that it 

had no duty to defend or indemnify. (Id. at pp. 866-867.) The 

Court of Appeal affirmed summary judgment for State Farm. 

(Id. at p. 870.) The court concluded that because liability for 

malicious prosecution requires a finding of malice, indemnity was 

barred by Insurance Code section 533, which states that “[a]n 
9

insurer is not liable for a loss caused by the wilful act of the 

insured . . . .” (Drasin, supra, at pp. 867-868, citing Maxon v. 

Security Ins. Co. (1963) 214 Cal.App.2d 603.) On this basis, the 

court held that the complaint “does not potentially seek damages 

that come within the coverage of the subject policy. If the 

Drasins’ original action against [the business partner] is held to 

be without malice and therefore not wilful, then there is no 

liability under the policy. Similarly, if the Drasins’ original 

action against [the business partner] is held to be wilful and with 

malice, again there is no liability under the policy.” (Drasin, 

supra, at p. 868.) Because “ ‘[t]he obligation to defend is 

predicated upon liability for the loss covered by the policy,’ ” and 

there was no possibility of such liability, there was no duty to 

defend. (Id. at pp. 868-869, italics omitted.)

Drasin supports the trial court’s conclusion here that 

“whether [All Green] ultimately prevails in the underlying action 

has no bearing on whether the claim itself is covered by the 

policy.” Because SNIC would have no obligation to indemnify 

regardless of whether All Green was negligent, either because 

there was no liability or because the liability fell under the 

impaired property exclusion, SNIC had no duty to defend.

All Green argues that SNIC’s coverage counsel was unable 

in deposition to provide any facts supporting his conclusion that 

the impaired property exclusion applied. All Green further 

argues that SNIC was aware of extrinsic facts suggesting the 

exclusion did not apply, namely All Green’s assurances that the 

work was completed adequately and had passed two inspections.

Thus, All Green contends, SNIC could not conclusively establish 

that the impaired property exclusion applied.
10

These arguments are unavailing. SNIC was entitled to 

assess its duty to defend based on the allegations in the 

complaint and any extrinsic facts that “reveal a possibility that 

the claim may be covered by the policy.” (Horace Mann, supra, 4 

Cal.4th at p. 1081.) The complaint did not give rise to any 

covered liability. And the only “facts” All Green contends should 

have been considered are denials of liability or evidence of due 

care that, if true, would also obviate coverage. (See Drasin, 

supra, 152 Cal.App.3d at p. 868.) Although a duty to defend 

arises “[i]f any facts stated or fairly inferable in the complaint, or 

otherwise known or discovered by the insurer, suggest a claim 

potentially covered by the policy” (Scottsdale Ins. Co. v. MV 

Transportation (2005) 36 Cal.4th 643, 655), here neither the 

complaint nor the purported facts offered by All Green suggest a 

coverable claim.

b. Exception for sudden and accidental physical 

injury

In its reply brief, All Green turns its focus to the exception 

to the impaired property exclusion—for “sudden and accidental 

physical injury” to All Green’s work “after it has been put to its 

intended use”—and argues that SNIC has failed to establish that 

the exception does not apply.2 We disagree.

To the extent All Green is suggesting that its work could 

have suffered a sudden and accidental physical injury caused by 

someone or something other than All Green (such as the 

 

2 All Green, as the insured, bears the ultimate burden of 

proving at trial that an exception to a coverage exclusion applies. 

(Aydin Corp. v. First State Ins. Co. (1998) 18 Cal.4th 1183, 1192.) 

We need not decide whether that same burden applies on 

summary judgment; SNIC prevails even if it bears the burden.
11

aforementioned truck, vandals, or earthquake),3 this is simply 

retreading the argument that it was not All Green’s negligence 

that caused the mammography unit to malfunction. As discussed 

above, under this circumstance there would be no liability and 

thus no indemnity and corresponding duty to defend.

But in its reply brief All Green suggests some additional 

scenarios in which All Green could have properly installed the 

bolt, but itself later inadvertently damaged the electrical cabinet 

and knocked the bolt loose. All Green proposes that All Green’s 

owner could have returned to Jacobs’s facility after the work was 

completed and “tripped and accidentally banged into the cabinet” 

or one of All Green’s workers involved with a different project at 

the facility “could have hit the electrical cabinet with a ladder or 

other heavy equipment.”4 Although All Green does not so state, 

presumably it means to propose scenarios in which All Green’s 

negligence is the cause of the “sudden and accidental physical 

injury,” in which case its liability arguably could be covered by 

SNIC’s policies.

But the allegations in the complaint and the extrinsic facts 

in the record do not “reveal a possibility” (Horace Mann, supra, 4 

Cal.4th at p. 1081) that these scenarios occurred. The complaint 

 

3 All Green does not cite case law or other authority 

concerning the “sudden and accidental physical injury” exception 

and does not explain how any of its proposed scenarios fall within 

it. We assume without deciding that these scenarios would fall 

within the exception if they occurred.

4 Again, we assume without deciding that these scenarios 

would fall within the exception if they occurred and further 

assume that but for that exception these scenarios would be 

subject to the impaired property exclusion. 
12

does not allege that All Green negligently damaged its work after 

installing it; it alleges that All Green “fail[ed] to properly install 

all the electrical components relating to the Project including, 

without limitation, failing to tighten one of the bolts in the utility 

cabinet installed by All Green.” These allegations do not 

encompass the possibility that All Green properly installed the 

bolt but later knocked it loose.

Nor has All Green identified any extrinsic facts suggesting 

it damaged the electrical cabinet after the work was complete, 

suddenly and accidentally or otherwise. When assessing the duty 

to defend, “ ‘[t]he ultimate question is whether the facts alleged 

[or known] “fairly apprise” the insurer that the suit is [or could 

be] upon a covered claim.’ ” (Shanahan v. State Farm General 

Ins. Co. (2011) 193 Cal.App.4th 780, 786 (Shanahan).) “ ‘[T]he 

insurer has no duty to defend where the potential for liability is 

“ ‘tenuous and farfetched.’ ” ’ ” (Ibid.)

The only extrinsic facts All Green has identified are its 

owner’s statements to SNIC that All Green performed the work 

properly and passed two inspections. While this information 

certainly called All Green’s liability for poor workmanship into 

question, it did not “ ‘ “fairly apprise” ’ ” SNIC that All Green 

might have otherwise damaged the electrical cabinet after the 

work was complete. (Shanahan, supra, 193 Cal.App.4th at 

p. 786.) Indeed, All Green’s owner expressly denied any 

negligence, telling SNIC that he “did not do anything wrong in 

connection with the Project, and that All Green’s work on the 

Project did not cause the electrical problems alleged in the 

Jacob[s] Complaint.” Far from implying any liability on All 

Green’s part, these statements instead would suggest to SNIC 

that All Green had nothing at all to do with the damages claimed 
13

by Jacobs. Under these circumstances, the possibility that All 

Green had later damaged the otherwise properly installed 

cabinet and bolt was too “ ‘ “ ‘tenuous and farfetched’ ” ’ ” to 

impose a duty to defend on SNIC. (Ibid.)

All Green contends that to defeat summary judgment it 

“need only provide any conceivable theory whereby the claim 

could have been covered under the policies.” But that theory 

must be based on the allegations in the complaint or extrinsic 

facts known to the insurer at the start of the underlying lawsuit. 

(Horace Mann, supra, 4 Cal.4th at p. 1081; see Montrose 

Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 295 

[existence of duty to defend turns on “ ‘those facts known by the 

insurer at the inception of a third party lawsuit’ ”].) All Green 

points to no authority permitting an insured to manufacture 

hypothetical scenarios beyond those encompassed by the

pleadings or the facts known to the insurer in order to give rise to 

a duty to defend. But that is precisely what All Green is 

attempting here.

Gray, supra, 65 Cal.2d 263, a seminal duty-to-defend case 

cited extensively by All Green, does not support its position. 

Gray held that an insurer had a duty to defend a lawsuit alleging 

an intentional assault, despite a coverage exclusion for 

intentional torts, because the allegations could support a 

judgment that the conduct was unintentional. (Id. at p. 276.) 

The duty to defend depended on the facts of the case, not the 

theory of recovery: “In light of the likely overstatement of the 

complaint and of the plasticity of modern pleading, we should 

hardly designate the third party as the arbiter of the policy’s 

coverage.” (Ibid.)
14

This holding is inapplicable here. In Gray, the allegation 

that the insured physically attacked someone could support

numerous possible theories of liability, including intentional 

assault and negligence. Under those circumstances, the insurer 

could not deny a defense simply because the complaint chose to 

pursue only one of those theories. Here, in contrast, we are not 

presented with allegations or facts that under an unpleaded 

theory might give rise to liability. Under any theory, All Green’s 

failure to install the bolt properly would bar coverage under the 

policy. And there were no extrinsic facts suggesting All Green 

might have been negligent in some other, coverable respect that 

might be added to the complaint at a later time.

At oral argument, All Green’s counsel emphasized Vann v. 

Travelers Companies (1995) 39 Cal.App.4th 1610 (Vann), but this 

case is also unavailing. In Vann, an insurer, citing a coverage 

exclusion for liability resulting from pollution, refused to provide 

a defense to an auto body shop in a lawsuit alleging that the shop 

had “ ‘improperly handled and disposed of’ ” various hazardous 

substances. (Id. at p. 1613.) The Court of Appeal reversed a 

grant of summary judgment in favor of the insurer, in part 

because the pollution exclusion contained an exception for sudden 

and accidental discharges. (Id. at pp. 1612-1613, 1618.) The

court “note[d] the complaint contain[ed] only vague allegations 

concerning the nature of the acts causing the alleged

contamination and [the insured’s] knowledge, expectation or 

intent in connection with such acts.” (Id. at p. 1615.) Thus, the 

allegations were “certainly broad enough to ‘raise the possibility’ 

that the environmental contamination alleged in the complaint 

will fall within the coverage of [the insurer’s] policies.” (Ibid.) 

Because the insurer had not “produce[d] undisputed evidence 
15

precluding that possibility,” summary judgment was improperly 

granted. (Id. at p. 1616.)

Vann is distinguishable from the case here. In Vann, the 

complaint was broad, alleging the insured had released 

pollutants without indication of how, when, or why. Under those 

purported facts, the insurer was on notice of the possibility that 

the discharge might have been sudden and accidental, just as it 

might have also been intentional. The insured did not have to 

invent facts to fit its potential liability within the terms of the 

insurance policy; the existing allegations were sufficient for that 

purpose. Here, in contrast, the complaint specifically alleges that 

All Green’s negligence occurred when installing the bolt in the 

first place, with no suggestion that it might have happened later. 

There were no facts known to SNIC indicating that All Green had 

been negligent in some other way. Thus, there was no potential 

for covered liability creating a duty to defend.

c. Additional claims

The trial court also properly granted summary judgment on 

All Green’s claim for breach of contract; SNIC could not breach 

an obligation it did not have. The lack of an underlying 

contractual obligation also precluded a claim under the implied 

covenant of good faith and fair dealing. (Waller v. Truck Ins. 

Exchange, Inc. (1995) 11 Cal.4th 1, 36 [“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.”].) The trial court properly granted 

summary judgment on that claim as well.
16

DISPOSITION

The judgment is affirmed. SNIC is entitled to costs on 

appeal.

HALL, J.*

WE CONCUR:

BIGELOW, P. J.

RUBIN, J.

 

* Judge of the Los Angeles Superior Court, assigned by the 

Chief Justice pursuant to article VI, section 6 of the California 

Constitution.
1

Filed 4/17/18

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

ALL GREEN ELECTRIC, INC.,

Plaintiff and Appellant,

v.

SECURITY NATIONAL 

INSURANCE COMPANY,

Defendant and 

Respondent.

 B279456

 (Los Angeles County

 Super. Ct. No. BC601672)

 ORDER CERTIFYING

 OPINION FOR

 PUBLICATION

 NO CHANGE IN

 JUDGMENT

THE COURT:*

The opinion in the above-entitled matter filed on March 19, 

2018, was not certified for publication in the Official Reports. For 

good cause, it now appears that the opinion should be published 

in the Official Reports, and it is so ordered.

 

* BIGELOW, P. J. RUBIN, J. HALL, J.**

** Judge of the Los Angeles Superior Court, assigned by the 

Chief Justice pursuant to article VI, section 6 of the California 

Constitution.