Court Opinion

ID: 7805009
Source: CourtListenerOpinion
Date Created: 2022-08-30 22:01:30.625385+00
Date Added: 2024-06-11T16:29:55.851164
License: Public Domain

Filed 8/30/22

                     CERTIFIED FOR PUBLICATION

       IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                       FIRST APPELLATE DISTRICT

                                  DIVISION 3

 24TH & HOFFMAN INVESTORS,
 LLC, et al.,
        Plaintiffs and Respondents,          A163670

 v.                                          (City & County of San Francisco
 NORTHFIELD INSURANCE                        Super. Ct. No. CGC-19-581415)
 COMPANY,
        Defendant and Appellant.

       Appellant Northfield Insurance Company (Northfield) issued a policy to
respondent 24th & Hoffman Investors, LLC (24th & Hoffman, or the insured)
to insure an apartment complex it owned. The policy’s coverage excludes
liability for violations of the insured’s duty to maintain a habitable premises;
this exclusion also encompasses coverage for “any claim or ‘suit’ ” that also
alleges habitability claims. Two tenants sued 24th & Hoffman, along with
two of the LLC’s members (collectively, respondents), alleging multiple
habitability claims as well as other causes of action that were arguably not
based on habitability. Northfield declined to defend the tenants’ lawsuit,
and, after settling the underlying action, respondents brought the current
action against Northfield for breach of its duty to defend them. The primary
question in this case is whether the phrase “any claim or ‘suit’ ” in the
habitability exclusion relieved Northfield of its obligation to provide a defense
to the underlying action.

                                        1
      The trial court concluded the case presented a “ ‘mixed’ ” action
containing both potentially covered and uncovered claims, and that
Northfield was therefore obliged to provide a defense. (Buss v. Superior
Court (1997) 16 Cal.4th 35 (Buss).) The court granted summary adjudication
to respondents on this issue and entered judgment accordingly. We conclude
the plain terms of the contract exclude all of the claims in the underlying
action, and we accordingly reverse.
               FACTUAL AND PROCEDURAL BACKGROUND
I.    The Property
      Respondents Adam Phillips and 366 Development, LLC are real estate
developers. 24th & Hoffman is their joint venture, formed to invest in and
develop San Francisco properties. One such investment property is a six-
unit, residential compound at 24th Street and Hoffman Avenue (the
apartments).
      24th & Hoffman planned to buy out each of the tenants in the
apartments, then renovate and sell the units. In December 2017, it
purchased a “property and comprehensive liability insurance policy” from
Northfield to insure the apartments. The same month, it began contacting
tenants, and it soon reached agreements with five of the tenants to move out.
However, the tenants of the sixth unit, Karen Lee and Aya Osada, decided to
remain at the property. By mid-2018, renovations on the bought-out units
had begun.
II.   The Underlying Action
      Lee and Osada (the underlying plaintiffs) brought an action against
24th & Hoffman, 366 Development, and Phillips in San Francisco Superior

                                       2
Court (Lee v. 24th and Hoffman Investors, LLC, (Super. Ct. S.F. City &
County, Case No. CGC-18-571219) (the underlying action)).1
      The underlying complaint alleged that respondents allowed a variety of
“substandard, indecent, offensive, and hazardous conditions” at the property.
Some of those alleged conditions involved problems at the plaintiffs’
apartment caused by the renovations: a broken window, obstruction of their
windows, doors, and deck, and blocked light. Others involved physical
intrusions on common spaces, such as the presence of trash, debris,
construction materials, and tools, and dumping of construction waste at the
property. The construction also allegedly caused frequent utility
interruptions, a failure to secure the property or provide a closing and locking
exterior door, destruction of the garden and plants, pest and vermin
infestations, uncontained construction debris and dust (including lead-based
and asbestos-containing dust), disruptively loud noise and vibration, and
noxious odors and fumes. Other alleged wrongful acts were, on their face, not
directly caused by the construction; for instance, the complaint alleged
respondents stole and destroyed the underlying plaintiffs’ personal property,
and respondents sought to have the underlying plaintiffs provide testimony
to assist them in evicting a neighboring tenant as a condition of providing
buy-out funds. The claims for conversion and trespass to chattels were based
on alleged damage to personal property stored in a locker that was—the
parties later agreed—neither located in the plaintiff’s unit nor authorized for
use under their lease.
      Based on these general allegations, the underlying plaintiffs asserted
eleven causes of action: negligence; nuisance; breach of contract; breach of

      The action also named as defendants a construction company and its
      1

owners, who are not parties to this appeal.

                                       3
the implied warranty of habitability; breach of the implied covenant of quiet
enjoyment; statutory violations, based on conditions making the premises
untenantable and the presence of lead hazards (Civ. Code, §§ 1941 & 1941.1;
Health & Saf. Code, §17920.10); tenant harassment (San Francisco Admin.
Code, § 37.10B); unfair business practices (Bus. & Prof. Code, §§ 17200,
17203); retaliation; conversion; and trespass to chattels.
III.   Respondents’ Tender and Northfield’s Denial
       Respondents tendered the defense of the underlying action to
Northfield, which declined to defend it on the ground that it fell within the
policy’s exclusion of actions arising out of breach of the implied warranty of
habitability.
       The insurance policy provisions relevant here provide comprehensive
general liability coverage to the insureds for allegations of bodily injury,
property damage, and personal injury caused by an occurrence. There is no
dispute that the underlying action alleged causes of action that on their face
fall within these provisions, but the policy contains exclusions for actions
arising from breach of the implied warranty of habitability. And, after
stating that Northfield would defend and indemnify the insured in any
“ ‘suit’ ” seeking covered damages, the bodily injury and property damage
coverage continues, “However, we will have no duty to defend the insured
against any ‘suit’ seeking damages for ‘bodily injury’ or ‘property damage’ to
which this insurance does not apply.” The policy includes similar terms for
claims of “personal and advertising injury liability.”
       As to each coverage at issue here, the policy excludes two kinds of
claims. First, it excludes claims “(1) [a]rising out of the: [¶] (a) Actual or
alleged violation of any federal, state or local law, code, regulation, ordinance
or rule relating to the habitability of any premises; [¶] (b) Breach of any

                                         4
lease, rental agreement, warranty or covenant to maintain a premises in a
habitable condition; or [¶] (c) Wrongful eviction from, wrongful entry into or
invasion of the right of private occupancy . . . due to failure to maintain a
premises in a habitable condition.” Second, it excludes claims (2) “[a]lleged in
any claim or ‘suit’ that also alleges any violation, breach or wrongful eviction,
entry or invasion as set forth in Paragraphs (1)(a)–(c) above.” The effect of
this final “catch-all” provision is at the heart of the dispute before us.
      When Northfield rejected their tender, respondents defended the
underlying action with their own counsel and reached a settlement of
approximately $150,000.
IV.   Procedural History
      Respondents brought this action against Northfield on December 10,
2019, alleging that Northfield wrongfully denied coverage in the underlying
action. They asserted causes of action for breach of contract, bad faith breach
of insurance contract, negligence, and declaratory relief. After reaching a
partial settlement, respondents dismissed the bad faith cause of action and
the parties filed cross-motions for summary adjudication or judgment.
      In their motion for summary adjudication, respondents argued that
Northfield had a duty to defend them in the underlying action. In its motion
for summary judgment, in turn, Northfield contended that the undisputed
facts show that the “Habitability Exclusion” barred coverage for the
underlying action.
      The trial court granted respondents’ motion for summary adjudication,
finding as a matter of law that Northfield owed them a duty to defend in the
underlying action. The court concluded that three of the causes of action—
retaliation, conversion, and trespass to chattels—were not habitability

                                         5
claims, and that in such a “ ‘mixed action,’ ” Northfield had a duty to defend
the action in its entirety. (Buss, supra, 16 Cal.4th at pp. 48–49.)
      Without prejudice to Northfield’s right to appeal, the parties stipulated
that the court’s ruling established that Northfield had breached its
contractual duty to defend the underlying action, that the resulting contract
damages were $350,000, and that, to the extent there were any remaining
disputed triable issues of fact, the parties would withdraw them and ask the
trial court to dismiss all remaining causes of action and enter judgment. The
trial court entered judgment in respondents’ favor, and Northfield appealed.
                                DISCUSSION
I.    Legal Standards
      The trial court’s grant of summary adjudication is subject to de novo
review. (Paslay v. State Farm General Insurance Co. (2016) 248 Cal.App.4th
639, 644.) Summary adjudication is proper if the undisputed evidence shows
that there is no triable issue of material fact and the moving party is entitled
to judgment as a matter of law. (First Street Plaza Partners v. City of Los
Angeles (1998) 65 Cal.App.4th 650, 659; Code Civ. Proc., § 437c, subd. (c).)
      “ ‘In reviewing de novo a superior court’s summary adjudication order
in a dispute over the interpretation of the provisions of a policy of insurance,
the reviewing court applies settled rules governing the interpretation of
insurance contracts.’ ” (County of San Diego v. Ace Property & Casualty Ins.
Co. (2005) 37 Cal.4th 406, 414.) In carrying out our review, we bear in mind
that, “[w]hile insurance contracts have special features, they are still
contracts to which the ordinary rules of contractual interpretation apply.
[Citation.] The fundamental goal of contractual interpretation is to give
effect to the mutual intention of the parties.” (Bank of the West v. Superior
Court (1992) 2 Cal.4th 1254, 1264.) If possible, that intent is inferred “solely

                                        6
from the written provisions of the contract. [Citation.] The ‘clear and
explicit’ meaning of these provisions, interpreted in their ‘ordinary and
popular sense,’ unless ‘used by the parties in a technical sense or a special
meaning is given to them by usage’ [citation], controls judicial interpretation.
[Citation.] Thus, if the meaning a layperson would ascribe to contract
language is not ambiguous, we apply that meaning.” (AIU Ins. Co. v.
Superior Court (1990) 51 Cal.3d 807, 821–822 (AIU).)
      An insurer ordinarily is free to limit the risks it assumes, and we do not
rewrite any provision of any contract, including an insurance contract, for
any purpose, including perceived public policy benefits. (Underwriters of
Interest Subscribing to Policy Number AXXXXXXXX v. ProBuilders Specialty
Ins. Co. (2015) 241 Cal.App.4th 721, 729 (Underwriters of Interest); Certain
Underwriters at Lloyd’s of London v. Superior Court (2001) 24 Cal.4th 945,
967–968 (Certain Underwriters).) However, any ambiguity is generally
resolved in favor of coverage. (AIU Ins. Co., supra, 51 Cal.3d at p. 822.) We
interpret the terms of an insurance policy de novo. (Powerine Oil Co., Inc. v.
Superior Court (2005) 37 Cal.4th 377, 390.)
      A liability insurer has a “broad duty to defend its insured against
claims that create a potential for indemnity.” (Montrose Chemical Corp. v.
Superior Court (1993) 6 Cal.4th 287, 295 (Montrose).) If, on the other hand,
there is no potential for coverage, the insurer has no duty to defend. (La
Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co. (1994) 9 Cal.4th
27, 40 (La Jolla Beach & Tennis Club).) This standard is met “ ‘if the third
party complaint can by no conceivable theory raise a single issue which could
bring it within the policy coverage.’ ” (Montrose, at p. 300.) Thus, the duty to
defend is “not without limits”; rather, it is “limited by ‘the nature and kind of

                                        7
risk covered by the policy.’ ” (La Jolla Beach & Tennis Club, at p. 39, italics
omitted.)
      “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.” (Horace Mann Ins. Co. v. Barbara B. (1993)
4 Cal.4th 1076, 1081.) Additionally, extrinsic facts known to the insurer may
either give rise to a duty to defend or show conclusively there is no possibility
a claim is covered by the policy. (Montrose, supra, 6 Cal.4th at pp. 295, 298–
299.) There may also be a duty to defend if “under the facts alleged,
reasonably inferable, or otherwise known, the complaint could fairly be
amended to state a covered liability.” (Scottsdale Insurance Co. v. MV
Transportation (2005) 36 Cal.4th 643, 654 (Scottsdale).) We resolve any
doubts about whether the facts establish a duty to defend in favor of the
insured. (Montrose, at pp. 299–300.)
II.   Effect of the Habitability Exclusion
      With these standards in mind, we consider whether the trial court was
correct when it ruled the catch-all provision—excluding claims because they
are alleged in a “ ‘suit’ that also alleges” a violation or breach of a duty
related to habitability—was unenforceable.
      A.    The Exclusion Was Plain, Clear, and Conspicuous
      Respondents contend the catch-all portion of this exclusion may not be
enforced because it is not plain, clear, or conspicuous. An insurer “ ‘cannot
escape its basic duty to insure by means of an exclusionary clause that is
unclear. . . . [T]o be enforceable, any provision that takes away or limits
coverage reasonably expected by an insured must be ‘conspicuous, plain and
clear.’ [Citation.] Thus, any such limitation must be placed and printed so
that it will attract the reader’s attention. Such a provision also must be

                                         8
stated precisely and understandably, in words that are part of the working
vocabulary of the average layperson. [Citations.] The burden of making
coverage exceptions and limitations conspicuous, plain and clear rests with
the insurer.” (Haynes v. Farmers Ins. Exchange (2004) 32 Cal.4th 1198, 1204
(Haynes).) Exclusionary language is construed in the context of the policy as
a whole, in the circumstances of the case, “and ‘cannot be found to be
ambiguous in the abstract.’ ” (S.B.C.C., Inc. v. St. Paul Fire & Marine Ins.
Co. (2010) 186 Cal.App.4th 383, 397 (S.B.C.C.).)
      We conclude, as did the trial court, that the exclusion is plain and clear.
We find guidance in S.B.C.C., which considered and upheld a similar catch-
all exclusion regarding violations of certain intellectual property laws.
(S.B.C.C., at pp. 390–391.) Rejecting a contention that the exclusion was not
stated in clear and unmistakable language, the appellate court explained,
“Here the challenged exclusion is clear and explicit; it expressly states that in
addition to the listed forms of intellectual property infringement, there is no
coverage for ‘any other injury or damage that’s alleged in any claim or suit
which also alleges any such infringement or violation.” (Id. at p. 397.) The
exclusion before us is similarly plain and clear. It is contained in an
exclusion titled “EXCLUSION—HABITABILTY OF PREMISES,” and the
separate sections concerning the bodily injury or property damage liability
and personal and advertising injury liability are labeled “Habitability of
Premises.” The language of the catch-all provision in each section excludes
injury or damages “[a]lleged in any claim or ‘suit’ that also alleges any
violation, breach or wrongful eviction, entry or invasion as set forth in
Paragraphs (1)(a)–(c) above,” where the enumerated paragraphs specifically
refer to the duty to maintain premises in a habitable condition. This
language, like that in S.B.C.C., is clear.

                                        9
      Against this conclusion, respondents proffer a series of hypothetical
situations under which the scope of coverage might not be clear or might
change over time, and they argue the exclusion’s lack of guidance in these
scenarios means it is not clear. For instance, what if an action is filed against
an insured alleging only covered claims, and a habitability claim is added
only later? What if the habitability claim is later dismissed? If a tenant and
guest both have claims for injuries from a fire caused by a landlord’s
negligence, does it make a difference if they bring their actions jointly or
separately? However interesting these scenarios might be in the abstract,
the short answer is that we consider policy terms in the circumstances of the
case, not in the abstract, to determine if they are ambiguous. (Waller v.
Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18; S.B.C.C., supra, 186
Cal.App.4th at p. 397.) The facts of this case present no ambiguity of the sort
respondents posit. The habitability claims were integral to the underlying
action from the start, and they were not dismissed before the case was
settled.
      Respondents also argue that the catch-all exclusion was not
conspicuous because it was “buried” in an untitled subsection of the
habitability exclusion. We disagree. The same contention was recently
rejected in a federal district court case, Northfield Ins. Co. v. Hudani
(C.D.Cal. 2021) 2021 U.S.Dist. Lexis 193435, pages *7, *11–*13 (Hudani),2
which considered an exclusion identical to that before us now, with section 1
excluding habitability claims and section 2 excluding coverage for injures
alleged in a claim or suit that also alleges habitability claims. The court

      2We may cite unpublished federal decisions as persuasive, although
not precedential, authority. (Elkman v. National States Ins. Co. (2009) 173
Cal.App.4th 1305, 1319, fn. 6.)

                                       10
explained, “A policy limitation is conspicuous when ‘placed and printed so
that it will attract the reader’s attention.’ . . . [I]f section 1 of the exclusion is
able to catch a reader’s attention, it is hard to see why the reader would lose
interest before reading section 2 of the exclusion. The two sections form the
whole of the exclusion.” (Id. at p. *12, quoting Haynes, supra, 32 Cal.4th at p.
1204.) Moreover, the exclusion was listed in the endorsements and
exclusions on page 2 of the policy, and it was located on its own page with
bold and large font headings. (Hudani, at pp. *12–*13.) It was also, the
district court concluded, placed in the logical portion of the policy, because
the catch-all provision was best understood in the context of the habitability
exclusion itself. (Id. at p. *13.)
      Similarly here, the habitability exclusion is listed in the schedule of
forms and endorsements at the beginning of the policy documents. It is
clearly marked “EXCLUSION—HABITABILTY OF PREMISES” and is on
a separate page with a warning on the top line: “THIS ENDORSEMENT
CHANGES THE POLICY. PLEASE READ IT CAREFULLY.” As to each
coverage, the catch-all provision is in a separate numbered paragraph. And,
as in Hudani, supra, 2021 U.S.Dist. Lexis 193435, the catch-all provision is
logically related to the habitability exclusion itself. Respondents’ contention
that the exclusion is unenforceable because it is not conspicuous fails.
      B.     None of the Claims is Potentially Covered
      We next consider whether the underlying action pled claims that the
policy potentially covers. Under the rule explained in Buss, the presence of
even one potentially covered claim would impose on Northfield the duty to
defend the underlying action.
      In Buss, our high court considered the right of an insurer to seek
reimbursement from an insured for defense costs. The Court ruled the

                                          11
insurer may receive reimbursement only for costs that can be allocated solely
to claims that are not even potentially covered. (Buss, supra, 16 Cal.4th at
p. 39.) In the course of reaching its decision, the Court explained the rules
governing the insurer’s duty to defend an action in three situations: when all
claims were potentially covered, when none was, and when some were. (Id.
at pp. 47–48.) As to the first category, the insurer has a duty to defend, an
obligation that is “express in the policy’s language” and rests on the fact that
the insured has paid premiums for a defense. (Id. at p. 47.) In the second
category, where none of the claims is even potentially covered, the insurer
need not defend. (Ibid.) In the third category, a “ ‘mixed’ action,” the insurer
must defend, but the contractual duty extends only to those claims that are at
least potentially covered. (Id. at p. 48.) Nevertheless, our high court imposed
an obligation immediately to defend a mixed action in its entirety. This duty
is not contractual, but rather is “imposed by law in support of the policy.”
(Id. at p. 49.) Imposing this duty ensures the policyholder has a meaningful,
immediate defense of the claims that are potentially covered under the
agreement the parties have made. An immediate defense requires that an
insurer not “parse the claims, dividing those that are at least potentially
covered from those that are not,” but instead defend the entire action if even
one claim is potentially covered. (Ibid.) Thus, the obligation to defend
uncovered claims is expressly tethered to the contractual agreement to
provide a defense to those claims that the policy does cover. It does not exist
independently of the parties’ contract, but rather exists to fulfill it.
      The trial court here viewed the underlying action as a mixed one for
purposes of the rule of Buss because, it found, three of the causes of action—
for retaliation, conversion, and trespass to chattels—did not arise from the
duty to provide habitable premises. We question that conclusion as to the

                                        12
retaliation cause of action. Among other things, the underlying plaintiffs
alleged respondents retaliated against them for complaining about conditions
at the property, and one form the alleged retaliation took was a decrease in
housing services. But even if this claim implicates the duty to provide
habitable premises, it seems the causes of action for conversion and trespass
to chattels do not. They are based on damage to personal property the
underlying plaintiffs stored in a locker they were not authorized under their
lease to use. These claims make no mention of, and do not rely on,
substandard conditions at the property. We will assume for purposes of our
discussion that the trial court was correct that at least these two claims do
not themselves arise from habitability. Nevertheless, as we shall explain, the
court erred in concluding the underlying action alleged potentially covered
claims.
      The most pertinent case decided by a court of this state is S.B.C.C.,
which considered an insurance policy that excluded not only violations of
specified intellectual property laws but also “ ‘any other injury or damage
that’s alleged in any claim or suit which also alleges any such infringement
or violation.’ ” (S.B.C.C., supra, 186 Cal.App.4th at p. 397, italics omitted.)
The appellate court found the exclusion clear and explicit, and concluded
that, because the underlying complaint included such intellectual property
allegations, the policy did not offer coverage for any of the causes of action
alleged in the complaint. (Id. at pp. 396–397.) Similarly in the policy at issue
here, the catch-all provision excludes coverage for any of the causes of action
alleged in the underlying action because the action includes habitability
claims.
      Respondents seek to distinguish S.B.C.C. on the ground that the
exclusion there expressly stated it did not apply to certain bodily injury,

                                       13
property damage, and advertising injury claims. As a result, respondents
argue, there was no ambiguity in the policy in S.B.C.C. (S.B.C.C., supra, 186
Cal.App.4th at pp. 390–391.) We do not see the force of this argument, as we
have already concluded that the language in the exclusion before us is not
ambiguous. Nor are we persuaded by respondents’ effort to discount this
portion of S.B.C.C. as mere dicta. Our reading of the case tells us it is part of
the court’s reasoning; indeed, the catch-all provision is the reason the
S.B.C.C. court was untroubled by the insured’s argument that “only one of
[the] claims was for trade secrets violation.” (Id. at p. 396.)
      Because of the paucity of cases from California state courts considering
the effect of similar catch-all provisions in insurance contracts, we look to
federal cases for insight. A number have considered the effect of similar
provisions, and most have found them enforceable and concluded they
negated the insurer’s duty to defend an action. (See, e.g., Hudani, supra,
2021 U.S.Dist. Lexis 193435 at pp. *8–*14 [identical habitability exclusion
enforceable]; Great American E&S Ins. Co. v. Theos Medical Systems, Inc.
(N.D.Cal. 2019) 357 F.Supp.3d 953, 969–972 [intellectual property catch-all
exclusion barred coverage of entire action]; Pinnacle Brokers Ins. Solutions
LLC v. Sentinel Ins. Co., Ltd. (N.D.Cal. Sep. 2, 2015, No. 15-cv-02976-JST)
2015 U.S.Dist. Lexis 117299, p. *10 (Pinnacle) [intellectual property catch-all
exclusion “clear and explicit, and therefore governs”]; Tria Beauty, Inc. v.
Nat. Fire Ins. Co. (N.D.Cal. May 20, 2013, No. C 12-05465 WHA) 2013
U.S.Dist. Lexis 71499, pp. *22–23 [claim need not have logical or legal link to
intellectual property cause of action for catch-all exclusion to apply];
Molecular Bioproducts, Inc. v. St. Paul Mercury Ins. Co. (S.D.Cal. July 9,
2003, No. 03-0046-IEG (LSP)) 2003 U.S.Dist. Lexis 27903, p. *13 [intellectual
property catch-all exclusion is “clear and explicit” and insured therefore not

                                        14
entitled to defense]; see also Hartford Cas. Ins. Co. v. Dental USA, Inc.
(N.D.Ill. June 24, 2014, No. 13 C 7637) 2014 U.S.Dist. Lexis 85529, pp. *13–
*16 [rejecting claim that catch-all exclusion made insurance policy illusory];
Ventana Medical Systems v. St. Paul Fire & Marine Ins. Co. (D.Ariz. 2010)
709 F.Supp.2d 744, 757–759, affd. (9th Cir. 2011) 454 Fed.Appx. 596.)
      Despite these authorities, respondents contend that, because some of
the underlying claims did not arise out of habitability issues, the underlying
action was a mixed action under the rule of Buss, and Northfield was obliged
to defend them. They rely primarily on two cases. In Saarman Construction,
Ltd. v. Ironshore Specialty Insurance Co. (N.D.Cal. 2017) 230 F.Supp.3d
1068, an action was brought against the insured party, Saarman, for
negligent repair work that resulted in water damage to the plaintiff’s
property, causing mold growth and other property damage. (Id. at pp. 1077–
1078.) Saarman tendered the defense to its insurer, Ironshore Specialty
Insurance Co., which denied coverage based on an exclusion of “any claim,
demand, or ‘suit’ alleging . . . ‘Bodily Injury,’ [or] ‘Property Damage’ . . .
arising out of, in whole or in part, the actual, alleged, or threatened . . .
existence of any mold.” (Id. at p. 1178.) Applying California law, the district
court concluded the insurer could not rely on this language to avoid its duty
to defend a mixed action that included a covered claim for water damage.
According to the court, the rule of Buss prevented insurers from
“contract[ing] around their duty to defend mixed actions in this way,” because
the obligation to defend “is not even rooted in the contractual language itself,
but rather is ‘imposed by law in support of the policy.’ ” (Saarman, at
p. 1080, quoting Buss, supra, 16 Cal.4th at p. 48.) Thus, language in the
mold exclusion barring coverage for claims that did not depend on allegations

                                         15
regarding mold was, in the court’s view, unenforceable. (Saarman, at
p. 1080.)
      The other case on which respondents primarily rely, Conway v.
Northfield Ins. Co. (N.D.Cal. 2019) 399 F.Supp.3d 950, considers the effect of
an insurance policy issued by Northfield that included a habitability
exclusion with a catch-all provision identical to that before us now. (Id. at p.
957.) The insured was sued by a tenant, who alleged claims as to both her
residential premises and her commercial premises, both covered by the lease.
(Id. at p. 955.) Important to the court’s decision, the tenant’s habitability
claims, such as power outages and lack of proper ventilation, related only to
the residential premises. (Id. at p. 966.) The district court concluded that the
habitability exclusion did not preclude coverage for claims related to the
commercial premises, stating, “The mere fact that a habitability issue may
exist in a complaint is insufficient to satisfy the exclusion.” (Id. at p. 967.)
      Saarman and Conway do not persuade us that this is a mixed action
Northfield was obligated to defend under the rule of Buss. We reiterate that
an insurer is free to limit the risk it assumes by contract, and we may not
rewrite the contract for any purpose. (Certain Underwriters, supra, 24
Cal.4th at pp. 967–968; Underwriters of Interest, supra, 241 Cal.App.4th at p.
729.) The policy excludes all claims in a suit that alleges violations of the
duty to provide a habitable premises, and such claims were unquestionably
alleged in the complaint in the underlying action. Thus, by the plain terms of
the insurance contract, none of the causes of action is potentially covered
because all are excluded by one portion or the other of the habitability
provision—either because they allege habitability violations (excluded in
paragraph 1(a)–(c)) or because they appear in the same lawsuit as claims that
allege habitability violations (excluded in paragraph 2).

                                        16
      This conclusion does not run afoul of Buss; it renders Buss irrelevant.
Buss found a duty to mount a defense even of uncovered claims “in support of
the policy”—that is, in support of the obligations the insurer was paid to
assume. (Buss, supra, 16 Cal.4th at p. 49.) But that reasoning has no
application to obligations the insurer did not assume. The proper question
before us, then, is not whether the underlying plaintiffs’ claims for
retaliation, conversion, and trespass to chattels would have been potentially
covered in the absence of the habitability exclusion; it is whether they are
potentially covered under the policy to which the parties actually agreed.
The answer to that question is no. These claims are not covered because they
are alleged in a suit that also alleges habitability claims. Any other result
would have us find a duty to defend “in the air,” independent of Northfield’s
contractual obligations. (See Buss, at p. 48.) The rule of Buss is therefore
inapplicable, and Northfield had no duty to defend respondents. To the
extent that Saarman and Conway are inconsistent with this conclusion, we
respectfully disagree with them, and follow instead the reasoning of Hudani,
S.B.C.C., and Pinnacle (which was authored by the same judge as Saarman),
and the other federal cases cited above.
      In an effort to avoid this result, respondents argue Northfield was
obliged to defend them because the underlying plaintiffs could have amended
their complaint to withdraw all habitability claims and proceeded only on the
causes of action for conversion and trespass to chattels. They rely on
Scottsdale, supra, 36 Cal.4th at page 654, which explains that a duty to
defend arises if under the facts alleged, reasonably inferable, or known, the
complaint could be amended to state a covered claim. But an insured “may
not trigger the duty to defend by speculating about . . . ways in which the
third party claimant might amend its complaint at some future date.”

                                       17
(Gunderson v. Fire Ins. Exchange (1995) 37 Cal.App.4th 1106, 1114; accord,
Advent, Inc. v. National Union Fire Ins. Co. of Pittsburgh (2016)
6 Cal.App.5th 443, 460.) It is speculative in the extreme to suggest the
underlying plaintiffs would withdraw the habitability claims—nine of 11
causes of action—that form the backbone of their complaint. Scottsdale does
not require Northfield to engage in such speculation.
         We recognize the oddity of an insurance contract that covers certain
claims against the insured if those claims are filed in a lawsuit on their own,
and not if such claims are brought in a suit that also alleges habitability
claims. But we know of no California authority that prevents the parties
from contracting for such coverage, as they did here. Indeed, respondents do
not dispute that the catch-all provision limits indemnity benefits where
habitability claims are brought alongside other claims. And if there is no
potential for indemnity coverage on any of the claims in the underlying
action, then Northfield has no duty to defend it. (See La Jolla Beach &
Tennis Club, supra, 9 Cal.4th at p. 40.)
                                                  DISPOSITION
         The judgment is reversed. Appellant shall recover its costs on appeal.

                                                                    TUCHER, P.J.

WE CONCUR:

PETROU, J.
RODRÍGUEZ, J.

24th Street & Hoffman Inv., LLC et al. v. Northfield Ins. Co. (A163670)

                                                             18
Trial Court:   City & County of San Francisco Superior Court

Trial Judge:   Hon. Ethan P. Schulman

Counsel:       Hinshaw & Culbertson, Ray Tamaddon Defendant and
                 Appellant

               Pacific Law partners, Clarke B. Holland, Jenny J. Chu, and
                  Amanda C. Glenn for Plaintiffs and Respondents

                                  19