The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge
This case arises from a wrongful death action in which two different insurers, Continental Casualty Company ("Continental") and St. Paul Surplus Lines Insurance Company ("St. Paul") both provided certain insurance coverage. St. Paul issued a general liability issue policy with limits of $5,000,000 to Crown Equipment Corporation ("Crown"), the company that manufactured a forklift the decedent was operating at the time he was killed. The accident itself occurred at the premises utilized by Tasq Technology, Inc. ("Tasq").
Tasq was an additional named insured under a $1,000,000 general liability insurance policy issued by St. Paul. Continental also insured Crown as an additional insured under its policy. Finally, Continental provided a $25,000,000 umbrella policy to cover additional liability exceeding the limits of its primary policy.
Through the present action for declaratory relief, Continental seeks judicial determination that the St. Paul policy, as a primary policy, has been exhausted with respect to any liability accruing to Crown before Crown has any additional obligation to provide coverage under its umbrella policy to Crown. In settling the underlying wrongful death lawsuit, Continental paid the entire $1,000,000 limit of its primary policy along with $2,500,000 of its umbrella policy to settle all claims against both Crown and Tasq. St. Paul refused to contribute to that settlement despite its $5,000,000 in general liability coverage inuring to Crown's benefit as enumerated above.
Now before the Court are cross motions for summary judgment, filed on behalf of both Continental and St. Paul with respect to the applicable priority of coverage. The parties have agreed that the question of priority should be decided before any apportionment of negligence is addressed for purposes of assigning any particular monetary liability to either Crown or Tasq, respectively.
As set forth below, this Court determines that the St. Paul policy is primary and must be exhausted as to Crown's liability before coverage under Continental's excess policy is triggered.
The Court is unpersuaded by St. Paul's various arguments as to why coverage under its policy should not apply. Continental's corresponding motion for partial summary judgment will accordingly be granted. St. Paul's cross motion for summary judgment, or alternatively for partial summary judgment, will be denied.*fn1
Daniel Coupe, an employee of West Coast Conveyer and Equipment, was killed on June 19, 2001 while operating a forklift manufactured by Crown at a Tasq warehouse located in Roseville, California. The forklift implicated in Mr. Coupe's death was leased by Tasq from Crown Credit Company. Mr. Coupe's employer had contracted with Tasq to install shelving at Tasq's warehouse. Mr. Coupe died after the Crown stand-up forklift he was using allegedly malfunctioned and pinned Coupe between the forklift and the shelving racks in Tasq's warehouse.
Daniel Coupe's survivors filed a wrongful death lawsuit on June 25, 2002 alleging both negligence and products liability claims against Crown and claims sounding in negligence against Tasq. The master lease agreement pertaining to the forklift at issue, which was entered into between Tasq and Crown Credit Corporation, provided that Crown would not be liable to Tasq for any defect in the forklift for any liability arising out of Tasq's possession, use or operation of the forklift.
See Lease, Ex. I to Stip. of Facts on Cross-Motions, ¶¶ 4.02-4.03. The lease also obligated Tasq to maintain comprehensive general liability coverage with a combined $2,000,000 single limit against any bodily injury or property damage arising out of, or in any related to, Tasq's possession, use or operation of the forklift. Id. at 6.03. The lease further required that insurance to name Crown as an additional insured. Id.
Consistent with the terms of the lease, Tasq's insurance coverage with Continental exceeded the $2,000,000 (at $3,500,000 between the primary and umbrella policies) and further named Crown as an additional insured. As stated above, Crown also had its own general liability policy through St. Paul. That policy had a self-insured retention limit of $250,000 which had to be paid on Crown's behalf before any additional coverage under the St. Paul policy accrued. The St. Paul policy covered liability only and did not provide a defense.
In providing primary coverage, the Continental policy provided a per occurrence limit of $1,000,000 with an insuring clause that stated in pertinent part as follows:
"We will pay those sums that the insured becomes legally obligated to pay, as damages because of 'bodily injury' or 'property damage to which this insurance applies. We will have the right and duty to defend the insured against any 'suit' seeking those damages." Continental General Liability Policy, Ex. B to Stipulation of Facts, p. 82. The Continental umbrella policy, in turn, agreed to pay on behalf of an insured all sums up to its $25,000,000 policy limit that are in excess of either scheduled or unscheduled underlying, or primary, coverage. The Continental umbrella policy states:
SECTION III- LIMITS OF INSURANCE
3. We shall only be liable for the "ultimate net loss" in excess of:
a. The applicable limits of "scheduled underlying insurance" in item 5 of the Declarations for "incidents" covered by "scheduled underlying insurance", plus the limits of any "unscheduled underlying insurance" which also provides coverage for such "incidents".
Continental Umbrella Policy, Ex. C. to Stipulation of Facts, p. 21 (emphasis added). The policy goes on to define "ultimate net loss" as not including litigation-related costs or expenses. "Scheduled underlying insurance" is the Continental primary policy on which the umbrella coverage rests, and "unscheduled underlying coverage would, on its face, appear to include the St. Paul general liability policy issued to Crown, since the term is defined as meaning "insurance policies available to an insured" (here Crown) whether primary, excess, or otherwise. Id.
The St. Paul general liability policy, for its part, also agrees to pay "amounts any protected person is legally required to pay as damages for covered bodily injury or property damage that... happens while this agreement is in effect..." St. Paul General Liability Policy, Ex. D to Stipulation of Facts, p. SP 0014-15. With respect to other primary insurance, the St. Paul provides: /// /// /// ///
"When there is other primary insurance, we'll share with that insurance the amounts you're legally required to pay as damages.....
However, we'll apply this agreement as excess insurance over the part or parts of any other insurance which provide: ... protection to you as an additional insured or additional protected person if you agree that we may apply this agreement as excess insurance."
Id. at SP 0035. Based on the above provision, and given its representation that pursuant to said terms, Crown has agreed that St. Paul's policy is excess to the Continental policies, St. Paul maintains that its policy is indeed excess in the calculus of determining the priority of coverage for the subject loss. Additionally, in part due to the purported status of the St. Paul policy as excess, St. Paul also argues that the lease's indemnity agreement also prevents its coverage from accruing until after both the Continental policies.
Once the underlying wrongful death lawsuit was instituted, Continental assumed the defense of its named insured, Tasq. Crown did not seek a defense from its own primary insurer, St. Paul, because the St. Paul policy did not include any defense obligation, but did tender its defense to Continental. Although Continental initially denied Crown's defense tender, it ultimately defended both Tasq and Crown in the underlying action under a reservation of rights. It appointed counsel to defend Tasq and funded the separate cost of Crown's separate defense ...