Case Name: A.B.S. CLOTHING COLLECTION, INC., Plaintiff and Appellant, v. HOME INSURANCE COMPANY, Defendant and Respondent
Court: Court of Appeal of the State of California
Jurisdiction: California
Decision Date: 1995-05-19
Citations: 34 Cal. App. 4th 1470
Docket Number: No. B077598
Parties: A.B.S. CLOTHING COLLECTION, INC., Plaintiff and Appellant, v. HOME INSURANCE COMPANY, Defendant and Respondent.
Judges: 
Reporter: California Appellate Reports, Fourth Series
Volume: 34
Pages: 1470–1498

Head Matter:
[No. B077598.
Second Dist., Div. Seven.
May 19, 1995.]
A.B.S. CLOTHING COLLECTION, INC., Plaintiff and Appellant, v. HOME INSURANCE COMPANY, Defendant and Respondent.
Counsel
Revere, Rykoff & Wallace, Frank Revere, Tirana Horowitz and Janette S. Bodenstein for Plaintiff and Appellant.
David T. DiBiase and Gary J. Valeriano for Defendant and Respondent.

Opinion:
Opinion
JOHNSON, J.
Introduction
This breach of contract action by a policyholder against its insurance company raises the following question. When an employee embezzles funds from an employer over a period of years during which the employer carries insurance against employee dishonesty from the same insurer, may the employer recover up to the insurer's limit of liability for each year in which the embezzlement occurs?
This is a question of first impression in California. Courts in other jurisdictions have generally held if coverage is based on a series of separate, independent contracts, then the employer is entitled to recover up to the limit of liability for each policy period in which a loss occurs. On the other hand, if there is but one continuous contract, then the employer's recovery cannot exceed the limit of liability stated in the contract regardless of the number of years the coverage has been in force, the number of policies issued or the number of premiums the employer has paid.
In this action the trial court determined in summary judgment proceedings the policies issued to the employer over a period of years constituted one continuous contract under which the insurer's liability was noncumulative. Therefore, the insurer's liability did not exceed an amount equal to its liability for one policy period. It was undisputed the insurer had paid the insured an amount equal to its liability for one policy period. Therefore, the trial court held the insurer had not breached the contract and was entitled to summary judgment.
We have determined the trial court applied the correct legal principles to this case. However, upon independent review of the policy provisions contained in the record (National Union Fire Ins. Co v. Lynette C. (1991) 228 Cal.App.3d 1073, 1077 [279 Cal.Rptr. 394]), we have concluded those provisions do not support a finding the policies constituted one continuous, noncumulative contract. Therefore, it was error to enter summary judgment for the insurer.
Facts and Proceedings Below
Plaintiff, A.B.S. Clothing Collection, Inc. (A.B.S.) is a corporation engaged in the manufacturing and sale of clothing. In 1989 A.B.S. contracted with defendant Home Insurance Company (Home) for commercial insurance, including commercial crime coverage which indemnifies A.B.S. for losses resulting from employee dishonesty.
The original policy issued by Home provided a "policy period" of April 4, 1989, to April 4, 1990, and a $100,000 limit of liability for loss under the crime coverage. Home issued two subsequent policies covering policy periods from April 4,1990, to April 4,1991, and April 4,1991, to April 4,1992. Each policy stated it was a "renewal of' the preceding policy and carried a different policy number. Except for the policy periods and policy numbers the provisions of each policy were identical, so far as we can tell from the record. A.B.S. paid an annual premium for the crime coverage. The premium for the last two policy periods was $1,675.
In May 1991, A.B.S. presented a claim to Home under its crime coverage. The claim showed that between July 1988 and May 1991 two employees had stolen a total of at least $1.4 million from an A.B.S. checking account. The yearly breakdown of the loss was:
April 4, 1988, to April 4, 1989: $100,692.27
April 4, 1989, to April 4, 1990: $557,636.97
April 4, 1990, to April 4, 1991: $779,388.45
April 4, 1991, to April 4, 1992: $ 78,181.62
Home acknowledged the validity of A.B.S.'s claim and issued a draft in the amount of $100,000 which it contended represented the limit of its liability under the employee dishonesty coverage.
A.B.S. disputed Home's interpretation of its liability and contended Home was liable up to its limit of liability of $100,000 for each policy period coverage was in effect as well as for the year preceding the original policy under the extension of coverage provisions contained in that policy. Thus, according to A.B.S., Home was liable for $378,181.62 calculated as follows; $100,000 for the 1988-1989 policy period, $100,000 for the 1989-1990 policy period, $100,000 for the 1990-1991 policy period and $78,191.62 for the 1991-1992 policy period.
As a result of this dispute over the extent of Home's liability, A.B.S. initiated this action for breach of contract and tortious breach of contract.
Home moved for summary judgment on the ground it had not breached its contract with A.B.S. because the unambiguous provisions of its contract limited its liability to the sum of $100,000 regardless of the number of years the coverage was in force, the number of policies issued or the number of premiums paid. The trial court determined there were no material questions of fact, there was no ambiguity in the coverage provisions regarding Home's limit of liability, and Home's construction of the limit of liability provision was correct as a matter of law. Home's motion for summary judgment was granted and a judgment was subsequently entered in favor of Home. A.B.S. appealed from the judgment.
Discussion
I. An Insurer Seeking to Limit the Amount of Its Liability to the Insured for Losses Incurred During Successive Years of Coverage Must Show by Clear and Unambiguous Policy Language That the Parties Intended to Enter Into One Continuous Contract.
The question whether an insured is entitled to recover the limit of liability for each year a fidelity policy is in effect, when an employee's dishonesty takes place in each year, has been the subject of decisions in other jurisdictions since at least 1896. (De Jernette v. Fidelity & Casualty Co. (Ky.Ct.App. 1896) 33 S.W. 828, 830.) Remarkably, it has taken nearly a century for this question to reach a California appellate court. This long delay, however, has provided us with a wealth of case law on which to draw for an answer.
The courts which have addressed the question have approached it from a consideration of the nature of the obligation assumed by the insurer: whether the indemnity afforded is based on separate and distinct contracts for each year involved or is based on a single continuous contract of insurance which remains in effect until cancelled by one of the parties. Over the years, the rule has developed " 'that a renewal of a fidelity policy or bond constitutes a separate and distinct contract for the period of time covered by such renewal unless it appears to be the intention of the parties as evidenced by the provisions thereof that such policy or bond and the renewal thereof shall constitute one continuous contract.' " (City of Miami Springs v. Travelers Indem. Co. (Fla.Dist.Ct.App. 1978) 365 So.2d 1030, 1032, quoting from Krey Packing Co. v. Employers' Liability Assur. Corp. (Mo.Ct.App. 1939) 127 S.W.2d 780, 782; accord, among others, Great American Indemnity Co. v. State (Tex.Civ.App. 1950) 229 S.W.2d 850; Massachusetts Bonding & Ins. Co. v. Board of Co. Com'rs (1937) 100 Colo. 398 [68 P.2d 555, 556].)
Where indemnity is afforded through separate and distinct contracts for specific policy periods the insurer is generally held liable up to its limit of liability for each policy period. (E.g., White Dairy Co. v. St. Paul Fire and Marine Insurance Co. (N.D.Ala. 1963) 222 F.Supp. 1014,1017-1018; City of Miami Springs v. Travelers Indem. Co., supra, 365 So.2d at p. 1031; Great American Indemnity Co. v. State, supra, 229 S.W.2d at p. 853.) On the other hand, where the terms of the contract, taken as a whole, establish an intention the policy be continued indefinitely, subject to the payment of an annual premium, the contract is a continuous one and the insurer's limit of liability is the amount stated in the contract regardless of the number of years involved or number of premiums paid. (E.g., Columbia Hospital v. United States Fidelity & G. Co. (D.C. Cir. 1951) 188 F.2d 654, 657 [88 App.D.C. 251]; United States Fidelity & Guaranty Co. v. Barber (6th Cir. 1934) 70 F.2d 220, 226; Scranton Volunteer Fire Co. v. United States F. & G. Co. (2d Cir. 1971) 450 F.2d 775, 776; Santa Fe General Office Credit Union v. Gilberts (1973) 12 Ill.App.3d 693 [299 N.E.2d 65, 71].)
It has been argued determining the limit of an insurer's liability on the basis of whether the contract is "separate" or "continuous" produces unfair results in the case of the insured whose contract is continuous. Suppose, for example, employers A and B have identical coverage, identical policy limits of $100,000 and suffer identical losses of $100,000 each year for four years as the result of employee dishonesty. Suppose, further, each employer first discovers its loss in the fourth year. Employer A, whose contract is deemed "continuous," would recover only $100,000 of its $400,000 loss. Employer B, which had a separate contract in each year a loss occurred, would recover its full loss of $400,000. Furthermore, because employer A suffered a loss of $100,000 in the first year coverage was in effect but did not discover this loss until the fourth year, employer A made premium payments for three years for coverage which in fact did not exist. Employer A, it appears, would have been better off if it had placed its coverage with different insurance companies each year. (See In re Endeco, Inc. (8th Cir. 1983) 718 F.2d 879, 882; Columbia Hospital v. United States Fidelity & G. Co., supra, 188 F.2d at p. 600 (Clark, J., dis.); White Dairy Co. v. St. Paul Fire and Marine Insurance Co., supra, 222 F.Supp. at p. 1018.)
This apparent unfairness, however, is ameliorated to some extent by other considerations.
Some courts have noted contracts for employee fidelity coverage are commercial transactions entered into at arm's length usually by sophisticated business persons who cannot be heard to complain they made a bad bargain (United States Fidelity & Guaranty Co. v. Barber, supra, 70 F.2d at p. 226; Columbia Hospital v. United States Fidelity & G. Co., supra, 188 F.2d at p. 659) especially when they may have bargained for a lower limit of liability under the policy in return for a lower premium (id. at p. 660; State ex rel. Guste v. Aetna Cas. & Sur. Co. (La.Ct.App. 1982) 417 So.2d 404, 406; Santa Fe General Office Credit Union v. Gilberts, supra, 299 N.E.2d at pp. 71-72.)
Other courts have pointed out the bargain for a continuous contract is not as one-sided as it might first appear. Under a continuous contract, the insurer remains liable throughout the entire term of the contract. This means the insurer is liable for the policy limit even though this total is reached by adding amounts embezzled over a period of years. The insured need not prove the loss occurred in any particular year so long as it can establish the loss took place while the policy was in effect. If the insured took out a new policy with a different company each year, it would have to prove the exact time when a particular loss occurred so as to place it under the coverage of the policy issued for a specific year. The insured might fail to recover altogether if it did not discover and report the loss under a particular policy within the period specified in that policy. In contrast, under a continuing contract the period for discovering and reporting losses follows the total period during which the contract has been in effect. (Columbia Hospital v. United States Fidelity & G. Co., supra, 188 F.2d at p. 657; see also Scranton Volunteer Fire Co. v. United States F. & G. Co., supra, 450 F.2d at p. 777.)
It can also be argued important public policy interests are served by denying an employer the right to recover the policy limit for each year a loss occurs through employee dishonesty. Such a limitation on the employer's recovery encourages the employer to take steps to prevent losses through employee dishonesty and to promptly discover dishonesty if it occurs. Taking steps to reduce losses allows insurers to hold down insurance rates and, indirectly, reduces the cost of the employer's goods or services to the public.
Notwithstanding the arguable benefits of a continuous contract, courts generally have recognized affording a recovery equal to only one year's policy limit when the insured has paid several years' premiums is contrary to the insured's reasonable expectation of coverage. (In re Endeco, Inc., supra, 718 F.2d at p. 882; Penalosa Co-Op v. Farmland Mut. Ins. (1990) 14 Kan.App.2d 321 [789 P.2d 1196, 1200]; Standard Acc. Ins. Co. v. Collingdale State Bank (3d Cir. 1936) 85 F.2d 375, 376; Hood v. Simpson (1934) 206 N.C. 748 [175 S.E. 193, 199].) Therefore, courts will not limit the insurer's liability for losses incurred during successive years of its own coverage unless there is clear and unambiguous language showing the parties intended to enter into one continuous contract. (Scranton Volunteer Fire Co. v. United States F. & G. Co., supra, 450 F.2d at p. 776; Columbia Hospital v. United States Fidelity & G. Co., supra, 188 F.2d at pp. 657, 659; United States Fidelity & Guaranty Co. v. Barber, supra, 70 F.2d at p. 226; White Dairy Co. v. St. Paul Fire and Marine Insurance Co., supra, 222 F.Supp. at p. 1016; State ex rel. Guste v. Aetna Cas. & Sur. Co., supra, 417 So.2d at p. 406.
II. On the Record Before Us, the Home Policies Do Not Contain Clear and Unambiguous Language Showing the Parties Intended to Enter Into One Continuous Contract.
The principles governing interpretation of insurance contracts are familiar and well settled. Words used in the contract are ordinarily given their common and popular meaning. Each clause of the contract must be considered with reference to every other relevant clause and the clauses construed together in order to ascertain the intent of the parties. Similarly, in construing the meaning of a specific policy provision we do not view the provision in isolation but in the context of other relevant policy provisions. If the policy language is clear and explicit, it governs. If, on the other hand, the provision is susceptible to two or more reasonable constructions, it must be construed in accordance with the objectively reasonable expectations of the insured. Finally, if applying the foregoing rules does not eliminate or resolve any alleged ambiguity, the ambiguity is resolved against the insurer in favor of liability under the policy. (La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co. (1994) 9 Cal.4th 27, 37 [36 Cal.Rptr.2d 100, 884 P.2d 1048].)
With these principles in mind we turn to the provisions of the Home policies as contained in the record before us.
A. Neither the "Non-cumulation" Nor "Prior Loss" Provisions Support a Finding of Intent to Enter Into a Continuous Contract.
Each policy Home issued contained a "non-cumulation" clause providing: "Regardless of the number of years this insurance remains in force or the number of premiums paid, no Limit of Insurance cumulates from year to year or period to period."
In addition, the policies contained two "prior loss" provisions. The first, which applied to policies issued by other companies, provided for coverage of loss due to employee dishonesty sustained under any prior insurance if the loss would have been covered under the present policy, the time in which to discover the loss under the prior insurance has expired and there was no lapse in coverage. Insurance under this provision "is part of, not in addition to," the limit of the present policy. The second "prior loss" provision, which applied to policies issued by Home or any of its affiliates, provided: "If any loss is covered: (a) Partly by this insurance; and (b) partly by any prior cancelled or terminated insurance that we or any affiliate had issued to you . the most we will pay is the larger of the amount recoverable under this insurance or the prior insurance."
Home contends the "non-cumulation" provision by itself, or in combination with the "prior loss" provisions, shows a clear and unambiguous intent the several policies issued to A.B.S. constitute one continuous contract. We disagree.
Courts called upon to construe "non-cumulation" clauses similar to the one in Home's policies have found them ambiguous at best. While the clause might be construed to mean the insurer's liability is limited to a maximum aggregate amount, it can also reasonably be read to mean the limit of liability in one policy year cannot be carried over and added to the limit of liability in the succeeding policy year; nor can a loss in excess of the policy limit in one year be carried over and applied against the limit of liability in a succeeding year. (Columbia Heights Motors v. Allstate Ins. Co. (Minn. 1979) 275 N.W.2d 32, 36; Penalosa Co-Op v. Farmland Mut. Ins., supra, 789 P.2d at p. 1200; City of Miami Springs v. Travelers Indem. Co., supra, 365 So.2d at pp. 1031-1032; Great American Indemnity Co. v. State, supra, 229 S.W.2d at p. 853.) Under the latter interpretation, if A.B.S. employees embezzled $125,000 in the first policy year, $150,000 in the second policy year and $25,000 in the third policy year the limitation against cumulative liability would prevent the carrying forward of the excess of $25,000 from the first year and $50,000 from the second year in order to claim the full policy limit of $100,000 in the third year.
Interpreting the "non-cumulation" clause to prohibit loss carryover from one policy period to the next is consistent with the ordinary meaning of the word "cumulate." The American Heritage Dictionary defines' "cumulate" as "To gather in a heap . To combine into one unit, merge." (American Heritage Diet. (2d college ed. 1982) p. 348.) Thus, the liability for employee dishonesty cannot be carried over from one period to the next. It may not be allowed to "cumulate," i.e., to heap or combine into one unit.
A "non-cumulation" clause nearly identical to the one in the Home's policies was determined to be ambiguous in Cincinnati Ins. v. Hopkins Sporting Goods (Iowa 1994) 522 N.W.2d 837, 838. The clause stated: " 'Regardless of the number of years this endorsement shall continue in force and the number of premiums which shall be payable or paid, the Company's total limit of liability shall not be cumulative from year to year or period to period.' "
The insurer contended this clause meant its $15,000 limit of liability applied no matter how many years the policy was in effect. The insured argued it was entitled to coverage of up to $15,000 per year for every year the policy was in effect. In upholding a declaratory judgment in favor of the insured, the Iowa Supreme Court concluded "[The] clause, especially the word 'cumulatively,' can be interpreted as supporting the position either of Cincinnati or Hopkins. Case authority supports both interpretations. . . . [D The view favoring Hopkins' understanding, though perhaps not more persuasive, is, again, plausible." (Cincinnati Ins. v. Hopkins Sporting Goods, supra, 522 N.W.2d at pp. 839-840.) Applying the rule if words of an insurance policy are susceptible to two interpretations, the interpretation favoring the insured must be adopted, (id. at p. 839) the court affirmed the judgment for the insured on this issue.
Another "non-cumulation" clause nearly identical to the one here was at issue in Columbia Heights Motors v. Allstate Ins. Co., supra. That clause provided: " ' "Regardless of the number of years this form shall continue in force and the number of premiums which shall be payable or paid, the limit of Allstate's liability as specified in the Table of Limits of Liability in the Schedule shall not be cumulative from year to year or period to period." ' " (275 N.W.2d at p. 35.) The court held the insured's interpretation of this clause "would appear to be the more reasonable" and that the clause "would appear to prevent cumulation of any portion of the $25,000 annual limit unpaid in previous years." (Id. at p. 36.)
The cases relied on by Home are distinguishable from the present case. In two of the cases the courts found the insurance contracts were continuous because they had no expiration date. (Columbia Hospital v. United States Fidelity & G. Co., supra, 188 F.2d at p. 656; Santa Fe General Office Credit Union v. Gilberts, supra, 299 N.E.2d at p. 79.) The Home policies, by contrast, had specific beginning and ending dates of coverage. In the third case relied on by Home, one bond was issued and renewed from year-to-year by payment of an annual renewal premium. (State ex rel. Guste v. Aetna Cas. & Sur. Co., supra, 417 So.2d at p. 406.) The court in that case also relied on extrinsic evidence of the insured's intent to enter into one continuous contract. (Ibid.) Here, Home issued three separate policies, and there is no extrinsic evidence of the parties' intent to enter into one continuous contract. Furthermore, although "non-cumulation" clauses were present in the policies considered in these cases, their presence was not a controlling factor in the courts' decisions. Indeed, as noted in Columbia Hospital, these cases would have been decided the same way even in the absence of a "non-cumulation" clause. (188 F.2d at p. 657.)
We have found only one case in which a "non-cumulation" clause was held sufficient by itself to limit the insurer's liability to an aggregate amount regardless of the number of years coverage was in effect. (Graphic Arts Mut. Ins. v. C.W. Warthen (1990) 240 Va. 457 [397 S.E.2d 876, 877].) The court arrived at its holding without any discussion of the authorities to the contrary or any independent analysis. We decline to follow it.
Relying on Kavaney Realtor v. Travelers Ins. (N.D. 1993) 501 N.W.2d 335, 341-342, Home argues the combination of a "non-cumulation" clause and "prior loss" provisions is sufficient to support a finding the parties intended a continuous contract of insurance.
In Kavaney, the insurer issued three separate policies effective for specific periods. Each policy had "non-cumulation" and "prior loss" provisions. The noncumulation clause was different from the one included in the Home policies. It provided " 'Regardless of the number of years this form shall be in force, The Travelers' total limit of liability shall not be cumulative.' " (501 N.W.2d at p. 341, italics added.) The "prior loss" provisions, however, were similar to those in the Home policies before us and thus deserve further analysis.
The "prior loss" provision applicable to policies issued by Travelers or its affiliates covered losses where the previous policy had expired but the discovery period for bringing a claim under that policy had not expired. This provision also stated the liability of the Travelers Companies shall not exceed in the aggregate the limit under the prior policy or the current policy whichever is greater. The "prior loss" provision applicable to policies issued by companies other than Travelers covered losses where both the previous policy and the discovery period under that policy had expired, there had been no lapse in coverage between the previous policy and the current one, and the loss would have been recoverable under the current policy if it had been in effect when the acts causing such loss occurred. Recovery under this provision could not exceed the limit applicable to the previous policy or the current policy, whichever was smaller. (501 N.W.2d at p. 341.)
Relying principally on the "prior loss" provision applicable to policies issued by companies other than Travelers, the Kavaney court reasoned, "The combination of the provision against cumulation of coverage and this provision, extending coverage to prior losses, indicates the intention that the policies constitute one continuous and noncumulative contract." (501 N.W.2d at p. 342.)
We find Kavaney's reasoning questionable for several reasons.
The "prior loss" provision applicable to policies issued by other companies only applied if the loss would have been covered under the Travelers' policy had it been in effect at the time the loss occurred. (501 N.W.2d at p. 341.) In other words, if the terms of coverage under the previous policy would have covered a loss which the Travelers' policy would not have covered had it been in effect at the time then the prior loss would not be covered under the Travelers' policy. Furthermore, even if the insured would have had coverage for the prior loss under the terms of the Travelers' policy, if the limit of liability under the previous policy was lower than the limit of liability under the current Travelers' policy the insured's recovery would be limited to the lower amount. In our view, these limitations are inconsistent with an intent the previous policy and the current Travelers' policy constitute one continuous contract.
Assuming, however, this "prior loss" provision is susceptible to the interpretation given it by the Kavaney court, it is also reasonably susceptible to an interpretation the insured's intent was simply to purchase "prior loss" coverage insuring it against the risk it might recover nothing under the previous policy if it failed to discover the loss until after the limitations period for filing claims on that policy had run. (Cf. Cincinnati Ins. v. Hopkins Sporting Goods, supra, 522 N.W.2d at p. 839.) Thus the parties' intent to enter into one continuous contract cannot be clearly and unambiguously established by this "prior loss" provision of the contact.
The "prior loss" provision applicable to previous policies issued by Travelers also fails to support a finding of an intent the previous policies and the current policy constitute one continuous contract. By its terms, this "prior loss" provision only applies if the time limitations for filing claims under the previous policy have not run. The insured derives no benefit from a "continuous contract" in this situation because if the time limitation has not run, the insured can file a claim directly under the previous policy. As other courts have pointed out, the true purpose of this type of "prior loss" provision is to prevent the insured from recovering for the same loss under both the previous policy and the current policy. (White Dairy Co. v. St. Paul Fire and Marine Insurance Co., supra, 222 F.Supp. at p. 1018; Globe Indemnity Co. v. Wolcott & Lincoln (8th Cir. 1945) 152 F.2d 545, 548.)
Even if we were to agree coverage of "prior losses" is evidence of a continuing contract, this would not resolve the issue in the present case because the Home policies contain other provisions which support the conclusion each policy was intended as a separate, independent contract or create an ambiguity as to the parties' intent.
B. Other Provisions in the Home Policies Are Consistent With Separate, Independent Contracts or Ambiguous as to the Parties' Intent.
Home issued a separate policy document each year. Each policy was effective for a specified "policy period." The second policy stated it was a "renewal" of the first; the third stated it was a "renewal" of the second. Each policy contained a $100,000 "limit of insurance" as to crime coverage. Each policy contained a pledge from Home that "[i]n return for the payment of the premium, and subject to all the terms of this policy, we agree with you to provide the insurance as stated in this policy." (Italics added.) Each policy also provided: "The Policy Period is shown in the Declarations. . . . [W]e will pay only for loss that you sustain through acts committed or events occurring during the Policy Period." (Italics added.) The issuance of separate policy documents, each of which refers to terms, conditions and losses under that particular policy, is strong evidence the original policy and the subsequent renewal policies were intended to be separate and distinct contracts. (White Dairy Co. v. St. Paul Fire and Marine Insurance Co., supra, 222 F.Supp. at p. 1016; City of Miami Springs v. Travelers Indem. Co., supra, 365 So.2d at p. 1030; Great American Indemnity Co. v. State, supra, 229 S.W.2d at p. 853; City of Middlesboro v. American Surety Co. (1947) 307 Ky. 769 [211 S.W.2d 670, 672]; Massachusetts Bonding & Ins. Co. v. Board of Co. Com'rs (1937) 100 Colo. 398 [68 P.2d 555]; Krey Packing Co. v. Employers' Liability Assur. Corp., supra, 127 S.W.2d atp. 782; Mayor, etc., of Brunswick v. Harvey (1902) 114 Ga. 733 [40 S.E. 754, 756]; De Jernette v. Fidelity & Casualty Co., supra, 33 S.W. at p. 830.)
Each of the Home policies also provided, "We will pay only for covered loss discovered no later than one year from the end of the policy period." (Italics added.) Thus, a loss covered under the first policy period—April 4, 1989, to April 4, 1990—would have to be discovered no later than April 4, 1991, if A.B.S. was to recover for that loss. This provision is significant evidence the policies were intended as separate, independent contracts because, it will be recalled, one of the purported advantages of a continuous contract is that the period for discovering losses follows the total period during which the contract has been in effect. (Columbia Hospital v. United States Fidelity & G. Co., supra, 188 F.2d at p. 657.) Using the example given in Columbia Hospital, if the contract was in effect for a total of 10 years the insured could recover for a loss occurring in the first year even if it was not discovered until 12 years later, 2 years after cancellation of coverage. (Ibid.)
The Home policies define "occurrence" as "all loss . . . whether the result of a single act or series of acts" without reference to a policy period or any other time boundary. (Italics added.) Home contends defining an "occurrence" as all loss without limitation to any specific policy period supports a finding its policies were intended to be part of a single continuing contract under which its liability was limited to a total of $100,000 for all loss during the life of the insurance. (Cf. Penalosa Co-Op v. Farmland Mut. Ins., supra, 789 P.2d at pp. 1199-1200 [definition of "occurrence" as acts "during the policy period" supported finding of separate, independent contracts].) We note, however, another provision in the Home policies provides: "The most we will pay for any one 'occurrence' is the applicable Limit of Insurance shown in the Declarations." (Italics added.) These provisions create an ambiguity as to the extent of Home's liability because while defining "occurrence" as "all loss" suggests there can be only one occurrence during the life of the insurance, the provision restricting liability "for any one occurrence" suggests there could be more than one occurrence.
C. Conclusion.
In summary, the policy provisions submitted on the motion for summary judgment do not clearly and unambiguously show Home and A.B.S. intended to enter into one continuous contract of insurance, nor does the "non-cumulation" clause by itself unambiguously limit Home's liability to $100,000 over the life of the insurance. The policy provisions are at best ambiguous on these issues. These ambiguities must be construed in favor of A.B.S. Therefore, Home failed to meet its burden of showing A.B.S. cannot establish a breach of contract or tortious breach of contract or that Home has a complete defense to those causes of action and the trial court erred in granting judgment to Home. (Code Civ. Proc., § 437c, subd. (o)(2).)
Disposition
The judgment is reversed and the matter remanded to the trial court for further proceedings consistent with the views expressed in our opinion. Each party to bear its own costs on appeal.
Lillie, P. J., concurred.
State ex rel. Guste v. Aetna Cas. & Sur. Co. (La. 1983) 429 So.2d 106 does not support Home's position. The court in that case did not address the question whether the noncumulation clause was ambiguous but accepted the insurance company's interpretation for purposes of deciding whether, if so interpreted, the clause violated public policy. (Id. at pp. 110-111.) The court upheld the clause against a challenge on public policy grounds, relying on the analysis contained in the Scranton and Columbia Hospital cases discussed, ante, at page 1477.
A.B.S. contends Kavaney is distinguishable from the present case because the "noncumulation" clause in the Travelers' policies, unlike the Home policies, referred to the insurer's "total limit of liability" "regardless of the number of years this [insurance] shall be in force." We need not decide whether a reference to "total" liability would remove the ambiguity in Home's "non-cumulation" clause.