Insurance Coverage Newslettter: Transport Inc. v. Superior Court

by Low, Ball & Lynch

Vulcan Materials Corp. manufactured and sold PCE, a pollutant used by dry cleaners. R.R. Street & Co. was a distributor for Vulcan, and an additional insured under an umbrella policy issued by Transport Insurance to Vulcan. Vulcan and Street were sued in various pollution cases involving alleged soil and groundwater contamination by PCE. Street sought coverage under an umbrella policy issued to Vulcan by Transport. According to Street, because it was not covered under Vulcan’s primary policies, the Transport policy had to drop down to protect it.

In prior coverage litigation between Vulcan and Transport, a different division of the Court of Appeal had found the term “underlying insurance” in the Transport policy to be ambiguous. Street argued Transport was collaterally estopped by the result in the prior case from arguing that “underlying insurance” was anything other than the policies identified in the Transport policy (thus meaning Street was entitled to coverage from Transport notwithstanding the fact it also had coverage under its own primary layer policies).

The Court of Appeal disagreed, holding that the ambiguous term “underlying insurance” had to be interpreted in light of the objective, reasonable expectations of the party seeking coverage; i.e., the additional insured Street, not those of the named insured. The court also held there was no collateral estoppel because Street’s objective, reasonable expectations had not been adjudicated in the prior case.

Berendes v. Farmers Insurance 
221 CA 4th 571

Kristina Berendes was a pedestrian struck and killed by an underinsured motorist.  Prior to the accident, Kristina’s father had taken out automobile policies on a 2001 Chrysler PT Cruiser and on a 2005 Mercedes Benz ML 350. Kristina paid an additional monthly premium to be listed as a rated driver on the PT Cruiser policy, and her father had given her the Mercedes-Benz as a gift for graduating college. However, the policy set up for the Mercedes did not list any rated drivers. Kristina’s husband and daughter brought an underinsured motorist claim against Farmers Insurance Exchange (“Farmers”), which refused to pay.  Farmers denied the claim, and they sued.  Farmers prevailed on a summary judgment motion.

The liability coverage part of the policy defined “insured” as including any “listed person,” but the UM/UIM coverage part paralleled the UM/UIM statute, covering the named insured and resident relatives for all purposes, but insuring all others only when in, upon or alighting from the insured vehicle. Consequently, although Kristina might have been insured under the policy for liability purposes, and while she would be covered for UM/UIM purposes while in or entering/leaving the vehicle, under the express terms of the policy she was not otherwise an insured for purposes of any UM/UIM claim.  Summary judgment for Farmers was upheld.

Farmers v. Superior Court (Bautista) 
220 CA4th 1199

Jose Bautista was insured under a homeowner’s policy of insurance issued by Farmers Insurance Exchange (“FIE”).  Bautista was sued in connection with the death of his granddaughter Valerie, who was struck by Bautista’s truck as he pulled into his driveway.  The child’s parents sued Bautista, alleging negligence in the operation of the vehicle, and sued his wife Sara, who had been watching her at the Bautista home, alleging negligent supervision of the child.   FIE filed a declaratory judgment action seeking a determination regarding whether the automobile exclusion in Bautista’s homeowner’s policy applied to preclude coverage for the loss.  Farmers’ motion for summary judgment was denied at trial, based on the trial court’s finding that Sara’s negligent supervision was independent of the “use” of the motor vehicle, so the auto exclusion did not apply.  Farmers appealed.

The Court of Appeal reversed, holding that the automobile exclusion precluded coverage in this case because the automobile played an active role in causing the injury. The Court reasoned that the alleged negligent supervision of Valerie by Sara was only negligent because it exposed Valerie to the danger of negligent automobile use.  It was not independent of the “use” of the vehicle, and coverage was thus excluded.

American Safety Indemnity v. Admiral Insurance 
220 CA4th 1

Developer Horton hired Ebensteiner to grade land. Ebensteiner executed an indemnity agreement in favor of Horton requiring indemnification even if Horton’s conduct also contributed to the loss.  Ebensteiner was insured by American Safety Insurance Company (“ASIC”).  Horton was an additional insured on the ASIC policy.  Admiral insured Horton, and its policy contained a $250,000 self-insured retention (SIR) endorsement.  The endorsement required the Horton entities to pay the first specified amount of any damages recovered by a third party. The endorsement specified that the “Retained Limit” only included “damages otherwise payable under the policy.”

Grading work performed by Ebensteiner allegedly caused two landslides, resulting in damage to several homes. The homeowners sued Holding and Ebensteiner.  ASIC defended the case, paying all defense costs for Ebensteiner, Horton, and two Horton-related parties who were not listed as additional insureds on the ASIC policy.  Admiral did not defend or contribute to the settlement, claiming that it did not owe the Horton entities a duty to defend because satisfaction of the SIR by Horton was a pre-requisite to defense, as well as indemnity.  ASIC obtained summary adjudication that Admiral owed Horton and the Horton entities a duty to defend.  The Court of Appeal agreed.   While recognizing that many liability policies do contain SIR clauses that expressly and unambiguously make payment of an SIR obligation a condition of any obligation under the policy, including any duty to defend, the Court found that Admiral’s policy did not contain any such express conditions.  Rather, it was applicable only to “damages otherwise payable,” and not defense costs.  As such, ASIC was entitled to reimbursement from Admiral.

Swanson v. State Farm 
219 CA4th 1153

Terry Swanson and her neighbors the Bitettis were involved in litigation over a failed retaining wall.  Swanson sued the Bitettis for property damage and personal injury, and the Bitettis cross-complained for premises liability and negligence.  Swanson’s attorney tendered defense of the cross-complaint to her homeowner’s carrier, State Farm.  State Farm accepted the defense pursuant to a reservation of rights, including whether the claimed damages qualified as bodily injury or property damage.  State Farm agreed to pay Swanson’s counsel as Cumis counsel, although he requested a higher rate, commensurate with what he was being paid by Swanson.  Ultimately, the parties agreed to have State Farm pay $150 per hour, with Swanson also paying him $50 per hour on his actions as Cumis counsel.

Subsequently, State Farm amended its original reservation of rights and withdrew certain policy defenses it had previously raised.  State Farm claimed that this “eliminated the Cumis-triggering conflict” and appointed counsel of its choosing to further represent Swanson.    Swanson’s own counsel continued to defend her and bill State Farm, which made no further payments.  The case went to trial and the jury found in favor of Swanson and awarded no monetary damages.

Swanson filed an action for bad faith, requesting recovery of what she paid her attorney to defend her as well as other general bad faith damages.  State Farm filed a motion for summary judgment and won.  The Court of Appeal agreed, holding that when State Farm withdrew its Cumis-triggering reservation of rights, it no longer had an obligation to allow Swanson to control the litigation or an obligation to pay the attorneys’ fees of Swanson’s Cumis counsel.

Progressive v. CSAA 
218 CA4th 1145

Benjamin White was injured in a traffic collision while riding as a passenger in a vehicle being operated by Scott Tortora.  Progressive Choice Insurance Company insured Tortora and the California State Automobile Association Inter Insurance Bureau (CSAA) insured White.  After settling with an underinsured motorist, White presented his UIM claim to both Progressive and CSAA, since that settlement did not compensate him in full for his injury.  After CSAA denied coverage, Progressive settled the UIM claim in full and sought contribution on a pro-rata basis from CSAA.

CSAA had denied coverage on the basis of Insurance Code §11580.2(c)(2), which states that the policy’s UM/UIM coverage does not apply  as either primary or excess coverage “to bodily injury of the insured while in…a motor vehicle other than the described motor vehicle if the owner thereof” has similar UM/UIM insurance.  Here, the Progressive policy described the subject vehicle, and CSAA’s did not.  Therefore, CSAA claimed its coverage was not applicable. However, while CSAA listed a number of the statutory UIM exclusions from Section 11580.2 in its policy, it did not expressly include (c)(2).  CSAA argued that the language of its “other insurance” provision incorporated the exclusion.  The Court of Appeal disagreed, noting that CSAA’s provision provided that its policy would be excess in such situations, while Section 11580.2(c)(2) provided that there would be no coverage in such a situation.

The Court of Appeal held that CSAA could not enforce the statutory exclusion since it was not among those listed in the policy. While CSAA’s other insurance provision would make its policy excess to Progressive’s, the “other insurance” provision in Progressive policy’s called for pro-rata sharing of the claim.  As such, under Insurance Code §11580.2(d), pro-rated coverage under the two policies would be applicable.   Progressive was entitled to reimbursement.



DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Low, Ball & Lynch | Attorney Advertising

Written by:

Low, Ball & Lynch

Low, Ball & Lynch on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.