Court Opinion

ID: 9719558
Source: CourtListenerOpinion
Date Created: 2023-08-26 07:55:53.380381+00
Date Added: 2024-06-11T18:24:08.131376
License: Public Domain

BROWN (G. A.), P. J.
I dissent.
The narrow question in this case is whether fire suppression costs for which an insured is made liable to the state by statute (see Health & Saf. Code, § 13009) for a negligently caused fire are covered by liability insurance policies under which the insurers agree to “pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of . . . property damage . . . caused by an occurrence, . . .”
The action brought by the State of California for recovery of fire suppression costs is one specified by the Legislature to be contractual in nature and which does not exist in the absence of statute. (Health & Saf. Code, § 13009; People v. Wilson (1966) 240 Cal.App.2d 574, 576-577 [49 Cal.Rptr. 792].)
The Supreme Court of California has thrice interpreted similar insurance policy language to cover damages to physical or tangible property only; as an intermediate appellate court, we are bound by those precedents. (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455 [20 Cal.Rptr. 321, 369 P.2d 937].)
The first case is Geddes & Smith, Inc. v. St. Paul Mercury Indemnity Co. (1959) 51 Cal.2d 558 [334 P.2d 881] (referred to as “Geddes I”), which was an action brought by a building contractor against the liability insurance carrier for a manufacturer of aluminum doors, doorjambs and appurtenant hardware. In 76 houses the contractor installed 760 aluminum doors, doorjambs and accessory hardware which had been supplied by the manufacturer. Within a period of six months after installation defects appeared. In remedying the damage to the houses caused by the defective doors, the plaintiff incurred extraordinary expenses in removing, installing, repairing, storing and shipping the original doors and their replacements, and further damages consisting of loss by reason of increased office overhead, loss of profits and injury to goodwill. The plaintiff had obtained a judgment against the defendant’s insured manufacturer in an action in which the defendant insurance company had refused to provide a defense; *755plaintiff then brought the Geddes I action against the door manufacturer’s insurance carrier to recover the amount of the judgment under the insurance policy issued by the carrier.
The insuring agreement of the policy involved in Geddes I obligated the defendant: “ ‘To pay on behalf of the Insured all sums which the insured shall become obligated to pay by reason of the liability imposed upon him by law or contract because of injury to or destruction of property, including the loss of use thereof, caused by accident.’ ” (Italics added.) (51 Cal.2d at p. 562.) Thus, the pertinent language is identical to that in the case at bench.
Insofar as germane to the present case, the court in Geddes I held that the obligation of the insurance company under the public liability insurance policy to pay on behalf of its insured sums which the insured is legally obligated to pay “because of . . . property damage” is limited to damage to physical or tangible property and does not cover such items as increased overhead, loss of profits or goodwill. Importantly, the court rejected the view that coverage existed for damage to such intangible property interest if a showing was made that “but for” damage to tangible property, it would not have occurred, thus rejecting the concept that coverage is coextensive with the consequential damage suffered by an insured. The court said: “Plaintiff’s judgment against the insured was not limited to such damages. In addition to costs of removal of the doors and loss of use of the houses, it included the other costs of handling the defective doors and their replacements, loss of profits, and loss of goodwill. Plaintiff contends, however, that these additional items of damages constituted damages to its business and goodwill and were therefore damages ‘because of injury to or destruction of property.’ We cannot agree with this contention.
“When coverage C is read in the light of the exclusions applicable thereto, it is clear that the word property refers to physical or tangible property. Thus it is such property, not goodwill or a business entity, that is ordinarily thought of as the subject of use, and it is to damage to such property that all of the exclusions are directed. Any breach of contract may harm the business of the injured party, and if sufficiently serious, may affect his goodwill. Such damages, however, are not commonly thought of as injuries to or destruction of property within the meaning of a public liability insurance policy .... Such damages are no less outside the coverage of the policy because there was also damage to the houses.” (Italics added.) (51 Cal.2d at pp. 565-566.)
The issue raised in Geddes & Smith, Inc. v. St. Paul Mercury Indem. Co. (1965) 63 Cal.2d 602 [47 Cal.Rptr. 564, 407 P.2d 868] (referred *756to as “Geddes II”) was whether the trial court correctly applied the measure of damages set forth in Geddes I. The court reaffirmed its earlier decision that the insurance carrier was only liable for damages to tangible or physical property, but stated it would allow recovery for damage to other property interests if the damage provided a measure of monetary damage to the tangible or physical property in question. The court said, at page 609: “However, defendant asserts that this overhead represents an injury to plaintiff’s business, and that no part of it is recoverable under our previous decision because it does not constitute damage to physical or tangible property. This contention confuses two issues which should be carefully distinguished: the first concerns the type of injury covered by the policy, and it was in the context of this question that we stated that only damage to physical or tangible property was recoverable; the second is the method by which the damage to the physical property is to be measured in monetary terms. [¶] . . . . Neither the salaries of the workmen nor the expenses of overhead are themselves physical property; they are recoverable because they provide a measure of the dollar amount of the injury to the houses.”
The Geddes cases and Hogan hold that recovery is limited to damages to physical or tangible property and does not extend to damages to' nonphysical or intangible property. Those cases deny recovery because the damages there involved, just as in the case at bench, were not damages to physical property. Thus, the court excluded coverage for all damages other than damages to physical property or those that may properly be used as a measure of damages to physical property. The decision herein violates those principles. The majority in substance has made the coverage under the policy coextensive with the amount of damages the insured may be liable for “because of” the negligently caused fire. In addition to being contrary to the two Geddes cases and Hogan, I believe such an approach is unwarranted and unsound in principle and opens the door to the extension of coverage to losses which, though tangentially resulting from the negligence of the insured, are only indirectly related to the physical damage to property. It is undoubtedly this concern the Supreme Court had in mind in the two Geddes cases and in Hogan in limiting the coverage to damage to physical property.
The language in question is clear and unambiguous, and its terms must be effectuated. (Canadian Indem. Co. v. West. Nat. Ins. Co. (1955) 134 Cal.App.2d 512, 516-517 [286 P.2d 532].) The issue is not what the insured may be liable for as a result of a fire, such as suppression costs incurred by the State of California arising by reason of a separate statutory obligation, but what the terms of the insurance contract provide. In this *757respect, the courts should not indulge in remaking the contract for the parties simply because an insurance company is a party. As the court aptly said in Canadian Indem. Co. v. West. Nat. Ins. Co., supra, at pages 516-517: “It is true that as between the insurer and the assured, a policy is to be construed most strictly against the insurer if the language used in the policy is ambiguous. But, as said in Wendt v. Wallace, ... [188 Minn. 488 (247 N.W. 569)], a case cited by appellant, if the langauge is clear, it is the duty of the court to give it effect, and this duty cannot be ignored because of the fact that an insurance company is a party to the action. This rule is enunciated in Carabelli v. Mountain States Life Ins. Co., 8 Cal.App.2d 115, 117 [46 P.2d 1004], where it is said that where ‘terms are plain and explicit, the courts cannot create a new contract for the parties by a forced construction of such plain and explicit terms. Thus the rule of liberal construction in favor of the insured can only have application when the policy presents some uncertainty or ambiguity.’ ”
The interpretation of the insurance policy language to cover items of loss other than injury to tangible property could lead to absurd results. For example, if a third party should suffer personal injuries while trying to save his property from a negligently caused fire, he would have an action for personal injuries against the insured under the “rescue doctrine.” (Solgaard v. Guy F. Atkinson Co. (1971) 6 Cal.3d 361, 368 [99 Cal.Rptr. 29, 491 P.2d 821].) The injuries would clearly be “because of” the negligent damage to the property under the elastic interpretation of that term in the majority opinion. Yet it obviously would be absurd to say the property damage coverage under the policy extended to such personal injuries.1
Finally, the court mentions Insurance Code section 531, subdivision (b). That section is totally inapposite to this case, having application to first party insurance contracts only, such as a fire insurance policy. The one conclusion that may be drawn from its existence is that had the Legislature intended the costs of rescue to be recoverable under a third-party liability policy, such as in the case at bench, similar legislation would have been enacted. The absence of such enactment may be taken as an implied intention by the Legislature that such costs should not be recoverable.
I would reverse the judgment.

The policy, of course, has separate personal injury coverage. This fact, however, does not diminish the efficacy of the illustration posed, inasmuch as suppression costs are no more damage to property than are personal injuries.