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American States Insurance Co. v. Progressive Casualty Insurance Co.

December 14, 2009


APPEAL from a judgment of the Superior Court of Sacramento County, Shelleyanne W. L. Chang, Judge. Reversed. (Super. Ct. No. 06AS03888)

The opinion of the court was delivered by: Butz , J.


Liability insurance policies for commercial motor vehicles typically include an "omnibus clause." As pertinent here, that clause defines as an "insured" one who is vicariously liable for the conduct of a named insured or a permissive user in using or operating the covered vehicle.

In this appeal, we conclude that such an "omnibus clause" may make a person or entity that is potentially vicariously liable under the peculiar risk doctrine an "insured," and thereby entitled to a defense pursuant to the insurance policy. Under the peculiar risk doctrine, one may be held vicariously liable if he hires an independent contractor to do work that is likely to create a peculiar risk of harm to others unless special precautions are taken.

The alleged peculiar risk in the present case arose out of a trucker-pedestrian accident at the lone entrance of a construction site. There is evidence that this intersection entrance required the trucker to make a U-turn (while driving westbound in eastbound lanes), encroach on at least two pedestrian crosswalks, jump a curb, and drive across a sidewalk.

We reverse a summary judgment and a stipulated judgment that concluded, as a matter of law, that the trucker's insurers did not owe a duty to defend the developer/general contractor/grading contractor under any vicarious liability theory.


In this action, plaintiff and appellant American States Insurance Company (American) seeks a defense on behalf of its insureds--in the underlying pedestrian/trucker lawsuit--from defendant and respondent insurers, Progressive Casualty Insurance Company (Progressive) and Wilshire Insurance Company (Wilshire). American also seeks a declaration that Progressive provide the primary coverage for the lawsuit.

The trucker/pedestrian collision occurred as follows. On July 15, 2005, Victor Meza, a self-employed trucker, was driving a tractor- trailer at the only entrance to a construction site in San Diego when the rear portion of his trailer ran over a pedestrian, Yevdokia Bristman (Bristman). As a result, both of Bristman's legs had to be amputated. Meza was the sole owner and operator of the tractor (truck) and was insured by Progressive. Western Trucking LLC (Western) was the sole owner of the trailer and was insured by Wilshire.

At the time of the accident, Meza was hauling dirt under an agreement with Western. Western in turn was operating under an oral agreement with Vinci Pacific Corporation (Vinci), the grading contractor on the construction project (the Project). The Project's general contractor was Garden Communities (Garden). The Project's developer was TRII LLC (TRII). Vinci was a named insured under a commercial auto policy issued by American; Garden and TRII were additional insureds under that policy. Vinci, Garden and TRII (collectively, the Vinci parties) tendered their defense of the pedestrian Bristman's action (Bristman Lawsuit) to American. American accepted the tender under a reservation of rights.

The complaint in the Bristman Lawsuit, which was filed in San Diego Superior Court, alleged in part a cause of action for motor vehicle negligence against the Vinci parties, claiming that they employed Meza and that Meza and Western were their agents. The Bristman Lawsuit also alleged that the Vinci parties were liable for failing to take necessary safety precautions at the Project's intersection entrance. Meza and Western, in turn, cross-complained against each other and the Vinci parties, alleging that the Vinci parties were vicariously liable.

American tendered the defense of the Vinci parties in the Bristman Lawsuit to Progressive and Wilshire. In denying this tender, Progressive and Wilshire noted that the Vinci parties were not named or additional insureds under the Progressive or Wilshire policies, and were not using the truck involved in the Bristman accident.

In the Bristman Lawsuit, the Vinci parties individually moved for summary judgment. As relevant here, those parties disputed Bristman's claim that they were vicariously liable for Meza's operation of his truck. In denying these summary judgment motions, the Bristman trial court found in part that there were triable issues of material fact concerning (1) whether Garden retained control over Meza's operation of his truck, (2) whether the peculiar risk doctrine applied, and (3) whether Vinci was a substantial factor in causing Bristman's injuries.*fn2

That brings us to the present action, which American filed in Sacramento Superior Court (hereafter Defense Lawsuit). Through this action, American seeks (1) declaratory relief concerning Progressive's and Wilshire's duty to defend the Vinci parties in the Bristman Lawsuit, and (2) reimbursement of sums American paid in defending the Bristman Lawsuit.*fn3

In the Defense Lawsuit, American moved for summary adjudication and Wilshire moved for summary judgment/adjudication. Both motions raised the dispositive issue of whether Progressive and Wilshire had a duty to defend the Vinci parties in the Bristman Lawsuit. After taking judicial notice of the Bristman Lawsuit--in the sense that Progressive and Wilshire had notice of plaintiff Bristman's contentions and supporting facts--the trial court in this Defense Lawsuit found, as a matter of law, that Progressive and Wilshire did not have any duty to defend the Vinci parties in the Bristman Lawsuit. The Defense trial court found that there was no agency relationship between Meza/Western and the Vinci parties, and that the peculiar risk doctrine did not apply. A judgment for Wilshire, and a stipulated judgment for Progressive, followed. This appeal from American then ensued.


I. Background

A. The Issue

The dispositive issue is whether there is a triable issue of material fact that American's insureds, the Vinci parties, were potentially vicariously liable in the Bristman Lawsuit under the theory of retained control establishing agency or under the doctrine of peculiar risk. We answer "no" as to the retained control theory, but "yes" as to the peculiar risk doctrine. Accordingly, as we shall explain, Progressive and Wilshire owed the Vinci parties--pursuant to this potential vicarious liability under the peculiar risk doctrine--a duty to defend them in the Bristman Lawsuit, absent additional evidence regarding this duty.

B. Standard of Review

A summary judgment is to be upheld if all the evidentiary papers submitted--which we review independently--show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law. We do not resolve factual issues but ascertain whether there are any to resolve. (Code Civ. Proc., § 437c, subd. (c); Colores v. Board of Trustees (2003) 105 Cal.App.4th 1293, 1305 (Colores); Flait v. North American Watch Corp. (1992) 3 Cal.App.4th 467, 474-475.)

Because a summary judgment denies the losing party its day in court, we liberally construe the evidence in support of that party and resolve doubts concerning the evidence in that party's favor. (Wiener v. Southcoast Childcare Centers, Inc. (2004) 32 Cal.4th 1138, 1142; Colores, supra, 105 Cal.App.4th at p. 1305.)

C. Legal Principles Governing Duty to Defend and Burden of Proof in Summary Judgment/Declaratory Relief Context

A liability insurer must defend its insured whenever it ascertains facts that give rise to the potential of liability under the policy. (Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 295 (Montrose); Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 275-277 (Gray); Amato v. Mercury Casualty Co. (1993) 18 Cal.App.4th 1784, 1789- 1790.)

"The insurer's duty to defend the `insured' includes both the named insured(s) and anyone else included in the policy's definition of `insured.'" (Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2009) § 7:514.5, p. 7B-7 [hereafter Croskey]; see also Maryland Casualty Co. v. Nationwide Ins. Co. (1998) 65 Cal.App.4th 21, 29-30.)

In determining its duty to defend, the insurer must consider facts from any source--the complaint, the insured, and other sources. (Montrose, supra, 6 Cal.4th at pp. 298-299; Gray, supra, 65 Cal.2d at p. 276; Croskey, supra, § 7:581, p. 7B-27.) An insurer does not have a continuing duty to investigate the potential for coverage if it has made an informed decision on coverage at the time of tender. (Gunderson v. Fire Ins. Exchange (1995) 37 Cal.App.4th 1106, 1114.) However, where the information available at the time of tender shows no coverage, but information available later shows otherwise, a duty to defend may then arise. (See Marie Y. v. General Star Indemnity Co. (2003) 110 Cal.App.4th 928, 957; Croskey, supra, §§ 7:519.5, 7:519, p. 7B-9.)

In an action in which some claims are potentially covered and others are not, the insurer must defend the entire action, including those claims for which there is no potential coverage under the policy--even if those claims predominate. It is enough that a single claim is potentially covered by the policy; the insurer owes a duty to defend even if all other claims against the insured are clearly not covered. This duty to defend the entire "mixed" action is justified, not contractually, but "prophylactically, as an obligation imposed by law in support of the [insurance] policy." (Buss v. Superior Court (1997) 16 Cal.4th 35, 48-49 (Buss), fn. omitted; Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076, 1081, 1084; Cassady v. Morgan, Lewis & Bockius LLP (2006) 145 Cal.App.4th 220, 235; Croskey, supra, ยงยง 7:629- 7:630.1, p. 7B-41.) This duty to defend an entire action continues "until the insurer produces undeniable evidence supporting an allocation of a specific portion of the defense costs to a non-covered claim." ...

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