Opinion ID: 739567
Heading Depth: 2
Heading Rank: 1

Heading: Interpretation of the Certificate

Text: 20 The overriding goal of contract interpretation is to give effect to the parties' mutual intentions as of the time of contracting. Ticor Title Ins. Co. v. Employers Ins. of Wausau, 48 Cal.Rptr.2d 368, 373 (Cal.Ct.App.1995) (citing Cal.Civ.Code § 1636.) Where contract language is clear and explicit and does not lead to an absurd result, the court must determine the parties' intent from the written provisions of the contract and may go no further. AIU Ins. Co. v. Superior Court, 799 P.2d 1253, 1264 (Cal.1990); Cal.Civ.Code §§ 1638, 1639. The words of a contract generally are to be understood in their ordinary and popular sense unless the parties use them in a technical sense or a special meaning is given to them by usage. Ticor, 48 Cal.Rptr.2d at 373 (quoting Cal.Civ.Code § 1644). 21 If, however, the terms of a contract are ambiguous or uncertain, the court must interpret the promise in the sense in which the promisor believed, at the time of making it, that the promisee understood it. Cal.Civ.Code § 1649. This rule, as applied to a promise of coverage in an insurance policy, protects the objectively reasonable expectations of the insured. Bank of the West v. Superior Court, 833 P.2d 545, 552 (Cal.1992) (citing AIU Ins. Co., 799 P.2d at 1264). If use of this rule does not eliminate the uncertainty then the court construe[s] the applicable language against the insurer, the drafter who created the uncertainty. Ticor, 48 Cal.Rptr.2d at 373. 22 A policy provision is ambiguous if it is capable of more than one reasonable construction. Bank of the West, 833 P.2d at 552 (citing Producers Dairy Delivery Co. v. Sentry Ins. Co., 718 P.2d 920 (Cal.1986)). The court should not, however, strain the policy language to create an ambiguity, but should construe the provision in relation to the whole of the instrument, with each clause giving meaning to the other. Sentry, 718 P.2d at 927 n. 7; Cal.Civ.Code § 1641. 23 Section A of Skandia's reinsurance Certificate, which is only a description of the reinsurance policy, is ambiguous because it is capable of more than one reasonable construction: the section may be read to mean that the Skandia-AIIC reinsurance policy excludes all asbestos claims (as the trial court found); or, that the AIIC-OCF policy, which follows form to the Aetna umbrella policy, excludes asbestos claims only as provided in Endorsement No. 10 of the Aetna umbrella policy. The insuring agreement itself, found in paragraph 1 of the General Conditions of the Certificate, does not clarify Skandia's coverage. The agreement recites that Skandia's liability shall follow the ceding Company's (Company) liability in accordance with the terms and conditions of the policy reinsured hereunder except with respect to those terms and/or conditions as may be inconsistent with the terms of this Certificate. The terms of this Certificate are not clear. 24 Because Skandia's reinsurance contract is ambiguous, we must determine if there are material issues of fact regarding the objectively reasonable expectations of the insured. Bank of the West, 833 P.2d at 552. To determine the reasonable expectations of the insured, AIIC, we must look to evidence outside the four corners of the reinsurance policy, thereby necessarily implicating the parol evidence rule. 25 Under California's parol evidence rule, extrinsic evidence may be admitted to interpret an agreement intended by the parties as a final expression of their agreement, but not to contradict its terms. Cal.Civ.Proc.Code § 1856(a), (g). If an agreement is integrated, extrinsic evidence may be admitted to prove an interpretation of the agreement to which it is reasonably susceptible, but not to prove a meaning of which the language [of the contract] is not reasonably susceptible. Pacific Gas & Elec. Co. v. G.W. Thomas Drayage & Rigging Co., 442 P.2d 641, 645 n. 7 (Cal.1968). 26 Whether or not a contract is intended by the parties as a final expression of their agreement with respect to such terms as are included therein is a question of law for the court. Haggard v. Kimberly Quality Care, Inc., 46 Cal.Rptr.2d 16, 21 (Cal.Ct.App.1995) (citations omitted). The resolution of whether the parol evidence rule applies is also one of law to be determined by the court. Banco Do Brasil, S.A. v. Latian, Inc., 285 Cal.Rptr. 870, 885 (Cal.Ct.App.1991). However, where extrinsic evidence is considered under the parol evidence rule, and the extrinsic evidence conflicts, the evidence must be weighed by a trier of fact. Sicor Ltd. v. Cetus Corp., 51 F.3d 848, 856 (9th Cir.1995) (applying California law.) 27 As a matter of law, the plain and unambiguous language of paragraph 10 of the General Conditions of Skandia's reinsurance Certificate indicates that the written contract was integrated. Because the Certificate is integrated, extrinsic evidence may be admitted to prove an interpretation of the agreement to which it is reasonably susceptible, but not to prove a meaning of which it is not reasonably susceptible. Pacific Gas, 442 P.2d at 645 n. 7. It is undisputed that neither AIIC nor Skandia intended to provide full coverage for OCF's asbestos-related claims because, at least until receipt of the OCF letter in July 1979, both AIIC and Skandia believed that Endorsement No. 10 in the underlying Aetna-OCF umbrella policy effectively limited asbestos-related liability. 28 The extrinsic evidence conflicts, however, on the question of whether the Certificate was an absolute exclusion for asbestos claims or whether the Certificate provided a limited exclusion for asbestos claims (as stated in Endorsement No. 10 of the Aetna policy). On this record, at least two genuine issues of material fact remain: (1) As written on March 28, 1979, was Section A a limited exclusion conditioned upon the requested confirmation by OCF, or was it an absolute exclusion that would be changed to a limited exclusion upon such confirmation?; and (2) Did the OCF letter provide the requested confirmation, or did it suggest that OCF's exposure to asbestos liability was not limited to the two subsidiaries excluded by Endorsement No. 10? Therefore, the evidence must be weighed by a trier of fact. See Sicor, 51 F.3d at 856. 29 For the foregoing reasons, the district court erred when it determined as a matter of law that Skandia's reinsurance Certificate unambiguously and absolutely excluded any liability for asbestos-related claims. Genuine issues of material fact exist that preclude summary judgment of dismissal on this issue.