J and J Realty Holdings v. Great American E & S Ins. Co. ( 2020 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS DEC 11 2020
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
J & J REALTY HOLDINGS, No. 19-56172
Plaintiff-Appellant, D.C. No. 2:18-cv-02487-DGM-E
v.
GREAT AMERICAN E & S MEMORANDUM*
INSURANCE COMPANY,
Defendant-Appellee.
Appeal from the United States District Court
for the Central District of California
Dolly Gee, District Judge, Presiding
Submitted December 9, 2020**
Pasadena, California
Before: OWENS and LEE, Circuit Judges, and COGAN,*** District Judge.
J & J Realty Holdings appeals from the district court’s grant of summary
judgment in favor of Great American E & S Insurance Company. The district court
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
***
The Honorable Brian M. Cogan, United States District Judge for the
Eastern District of New York, sitting by designation.
resolved this insurance coverage dispute in favor of Great American and held that
an employer’s liability exclusion applied. We have jurisdiction under 28 U.S.C.
§ 1291, and we review de novo a district court’s grant of summary judgment. Baker
v. Liberty Mut. Ins. Co., 143 F.3d 1260, 1263 (9th Cir. 1998). We affirm.
1. Great American issued a joint insurance policy (“Policy”) to Lance
Campers Manufacturing Company and J & J, which leased its parking lot to Lance.
The Policy contains an Employer’s Liability Exclusion, which bars coverage for
personal injury suits brought by an “employee of any insured.” When an employee
of Lance suffered an injury in the parking lot and sued both J & J and Lance, Great
American denied coverage to both insureds on the basis that the employee was an
employee of “any insured.” J & J, however, argued that “any insured” was
ambiguous in light of the Policy’s Separation of Insureds Clause, which directs “this
insurance” to apply “as if each named insured were the only named insured” and
“separately to each insured against whom claim is made or suit is brought.”
2. The district court properly held that the Employer’s Liability Exclusion
bars coverage in the underlying personal injury action, notwithstanding the existence
of the Separation of Insureds Clause. As a threshold matter, the Employer’s Liability
Exclusion originally barred coverage for personal injury suits brought by an
employee of “the insured.” This language was modified via an endorsement that
replaced “the insured” with “any insured.” J & J challenges the enforceability of
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this endorsement for the first time on appeal, but we conclude that the endorsement
was sufficiently clear and conspicuous to be valid.
Turning to the “any insured” language itself, the phrase “an employee of any
insured” unambiguously refers to an employee of either J & J or Lance. Because
the underlying action in this case was brought by an employee of Lance, the plain
language of the Employer’s Liability Exclusion thus bars coverage for J & J in the
underlying action. J & J maintains, however, that the phrase “any insured” is
rendered ambiguous by the Policy’s Separation of Insureds Clause. The problem
with J & J’s interpretation is that applying the Separation of Insureds Clause to limit
the universe of “any insured” to only the party seeking coverage (in this case, J & J)
would require us to read the phrase “any insured” as if it said “the insured.” Those
words are meaningfully different. Such a reading would thus nullify the “any
insured” endorsement. And under California law, we “must interpret contractual
language in a manner which gives force and effect to every provision, and not in a
way which renders some clauses nugatory, inoperative or meaningless.” City of
Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 68 Cal. App. 4th 445,
473 (1998).
Not only that, but J & J’s preferred reading would render meaningless other
parts of the Employer’s Liability Exclusion as well. For example, that provision also
contains language stating that the exclusion should apply “whether the insured may
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be liable as an employer or in any other capacity.” As the district court explained,
reading the exclusion to apply only to the employer of employees that sustain
injuries during the course of employment would mean that the employer’s liability
would always be in its capacity as an employer and never in “any other capacity,”
thus rendering the “in any other capacity” language meaningless. The fact that the
text of the provision specifically contemplates the exclusion applying to both
employers and non-employers further supports applying the plain language of the
Employer’s Liability Exclusion to exclude coverage for the underlying action.
The California Supreme Court’s decision in Minkler v. Safeco Ins. Co. of
America, 49 Cal. 4th 315 (2010) does not change this outcome. Although Minkler
does contain an ostensibly broad direction to treat each insured as if they were the
“sole person covered” for all policy purposes, Minkler, 49 Cal. 4th at 323, the
California Supreme Court was also careful to limit Minkler’s holding to its facts.
Specifically, the court made clear that the “reasoning and conclusion” in Minkler
were only meant to apply to “the specific circumstances of this case, which involves
the interplay between a severability clause and an exclusion for the intentional acts
of ‘an’ insured,” and that Minkler should not be read to “mean a severability clause
necessarily affects all exclusions framed in terms of ‘an’ or ‘any’ insured.” Id. at
329 n.5. What is more, Minkler explicitly acknowledged that there could be “some
cases” where “the collective application of an exclusion that refers to ‘an’ or ‘any’
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insured may be so clear in context that the presence of a severability clause could
neither create, nor resolve, an ambiguity.” Id.This is one of those clear cases, and Minkler is readily distinguishable. For
one, Minkler’s primary concern about thwarting the reasonable expectations of an
innocent insured is much less persuasive here. That case involved a highly unique
situation in in which a homeowner lost liability coverage due to an intentional-acts
exclusion because her adult son, the tortfeasor, was deemed to be an additional
insured solely by virtue of living in her house temporarily. Minkler, 49 Cal. 4th at
332-33. J & J, on the other hand, is a sophisticated business entity that voluntarily
entered into a lessor-lessee relationship with Lance and was explicitly listed as an
additional named insured under Lance’s insurance policy. In this case, it is much
more of a stretch to say that J & J had no reason to expect that the Employer’s
Liability Exclusion would be triggered by its co-insured’s circumstances, especially
considering the fact that, as discussed above, the scope of the exclusion was
explicitly broadened via an endorsement.
3. Next, the district court also properly held that J & J’s claim for breach
of the implied covenant of good faith and fair dealing could not survive in the
absence of any potential for coverage. Under California law, “if there is no potential
for coverage and, hence, no duty to defend under the terms of the policy, there can
be no action for breach of the implied covenant of good faith and fair dealing because
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the covenant is based on the contractual relationship between the insured and the
insurer.” Waller v. Truck Ins. Exch., Inc., 11 Cal. 4th 1, 36 (1995).
4. Finally, the district court did not abuse its discretion in overruling J &
J’s objections to certain pieces of evidence on summary judgment. The district court
correctly explained that even though some pieces of evidence were not necessarily
admissible in their submitted form, the underlying evidence could still be considered
as long as it could later be provided in an admissible form at trial. See JL Beverage
Co., LLC v. Jim Beam Brands Co., 828 F.3d 1098, 1110 (9th Cir. 2016). And the
district court did not abuse its discretion in determining that the objected-to evidence
could likely be presented in an admissible form at trial.
AFFIRMED.
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