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American States Insurance Co. v. Travelers Property Casualty Co., of America

California Court of Appeal, Second District, Fifth Division

January 27, 2014

AMERICAN STATES INSURANCE COMPANY, Plaintiff, Cross-defendant, and Appellant,
v.
TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, Defendant, Cross-complainant, and Respondent; Irais Gomez et al., Cross-defendants and Appellants.

APPEAL from a judgment of the Superior Court of Los Angeles County, Barbara Scheper, Judge. Reversed and remanded with directions. (Los Angeles County Super. Ct. No. BC459824).

Page 496

COUNSEL

[167 Cal.Rptr.3d 290] Edwards & Hunter, Richard P. Edwards, for Plaintiff, Cross-defendant, and Appellant American States Insurance Company.

Gary A. Dordick, Mark J. Bloom, for Cross-defendants and Appellants Irais Gomez, Esmeragdo Gomez, and Royal Catering Company.

Cates Peterson, Mark D. Peterson; Greines, Martin, Stein & Richland, Robert A. Olson and Edward L. Xanders, for Defendant, Cross-complainant, and Respondent Travelers Property Casualty Company of America.

OPINION

MOSK, J.

Page 497

INTRODUCTION

One of the operators of a leased food truck was burned inside the truck by oil from a deep fryer that splashed on her. The insurers for the lessor dispute with one another coverage. The automobile insurer claims that the injury should be covered under the commercial general liability policy that, although excluding coverage for injuries arising out of the use of automobiles, [1] covers " mobile equipment," defined as vehicles used for a primary purpose other than transporting persons or cargo. The commercial general liability insurer asserts that the primary purpose of the food truck was to transport persons and cargo so that it is not within the mobile equipment exception to

Page 498

the auto exclusion. In reversing the judgment, we hold that the primary purpose of the food truck was not to transport persons or cargo, and therefore the commercial general liability policy coverage for products liability applied in this case.

BACKGROUND

A. The Gomezes' Food Truck

Royal Catering Company (Royal) owned a fleet of food trucks. It leased its trucks to operators who drove from site to site selling food. Royal leased one of these trucks to Esmeragdo Gomez, who, along with his wife Irais Gomez, operated the truck. The Gomezes' food truck had only two seats and two seatbelts. The truck was not equipped to transport persons other than a driver and a cook. Each day, Mr. Gomez returned the food truck to Royal. Royal washed and maintained the truck and repaired it as necessary.

The Gomezes' food truck was equipped with a specially designed deep fryer, grill, steam table, oven, refrigerator, and coffee maker. That equipment was built into the truck and was not designed to be used apart from the truck. Royal provided the Gomezes with the food supplies, pots, pans, and cooking equipment they used to serve their customers. One side of the Gomezes' food truck was constructed so that a person inside the truck could serve food to customers outside the truck— that side of the truck opened, and there was a folding shelf attached to the outside of the truck.

On a typical day, Mr. Gomez would begin his route at 5:00 a.m. and complete it at 1:00 p.m., following the same route and making 12 or 13 stops. When the Gomezes' food truck was not " under way," it was parked while food was prepared or sold to customers. Most of the food was [167 Cal.Rptr.3d 291] prepared before the Gomezes left the Royal parking lot.

B. The Accident and the Gomez Action

On the day of the accident, Mr. Gomez was driving the Gomezes' food truck. A guest sat in the truck's passenger seat, and Mrs. Gomez stood in the rear of the truck. At an intersection, Mr. Gomez swerved to avoid an approaching truck. Mr. Gomez's evasive action failed to avoid a collision. Just prior to the collision, hot oil splashed on and burned Mrs. Gomez.

The Gomezes and the passenger in their truck brought an action (the Gomez action) against Royal and others for injuries sustained in connection with the accident. In their action, the Gomezes asserted causes of action against Royal for products liability (negligence), products liability (design

Page 499

defect), negligent infliction of emotional distress, and property damage. Mr. Gomez also asserted a cause of action against Royal for loss of consortium.

Royal tendered the Gomez action to American States Insurance Company (American States), which had issued automobile (American States Auto Policy) and excess automobile insurance policies to Royal. American States agreed to provide a defense under a reservation of rights. Royal and American States tendered the Gomez action to Travelers Property and Casualty Company of America (Travelers), which had issued to Royal commercial general liability (Travelers Primary CGL Policy) and excess-umbrella general liability policies. Travelers declined to provide a defense. American States negotiated with the Gomezes to settle their claims against Royal in the Gomez action.[2] Travelers declined to participate in the settlement of the Gomez action. American States paid $500,000 to the Gomezes to settle all possible claims against Royal under American States's Auto Policy. Under the settlement, the Gomezes could pursue their products liability claims against Royal, but only to the extent such claims were covered by Travelers's insurance policies.

American States, Royal, and the Gomezes submitted the Gomez action to binding arbitration. The arbitration concerned only Royal's liability on a products liability theory— i.e., that Royal provided a defective deep fryer basket, which caused the hot oil to spill on Mrs. Gomez. Royal stipulated to liability on a products liability theory, but challenged the amount of damages and the apportionment of fault. The arbitration award stated, in part, " The burning oil spilled out of the deep fryer container because Defendant [in that matter] Royal ..., the commercial lessor, had supplied the subject truck with the improper fryer baskets, which blocked the latching mechanism from closing."

Regarding responsibility for the accident that caused Mrs. Gomez's burn injuries, the Arbitrator found: " 1. That responsibility for the subject vehicular accident lies with Raul Carrillo's [the driver of the truck that collided with the Gomezes' food truck] failure to yield the right-of-way to Esmeragdo Gomez; [¶] 2. That with regard to Irais Gomez's burn injuries, there were several concurring causes, which proximately caused same. These included Mr. Carrillo's negligence; the admitted negligence of Royal Catering Truck, Inc. in failing to provide the proper fryer basket, which was the most direct cause of Ms. Gomez's unfortunate injuries; the negligence of Esmeragdo Gomez in allowing his wife, Irais Gomez to remain, unrestrained, [167 Cal.Rptr.3d 292] in the

Page 500

rear/kitchen part of the catering truck; and Mrs. Gomez herself in failing to take proper precautions for her own safety. [¶] These liability proportions for Mrs. Gomez's injuries are assigned as follows: [¶] 1. To Raul Carillo: 20%; [¶] 2. To Royal Catering Trucks, Inc.: 40%; [¶] 3. To Esmeragdo Gomez: 25% [¶] 4. To Irais Gomez: 15%."

Based on the arbitrator's award, by stipulation, a judgment was entered against Royal on Mr. Gomez's loss of consortium claim and Mrs. Gomez's products liability claims in the total amount of $2,428,577.34, including costs. The Gomezes' remaining causes of action were dismissed.

C. The Litigation

American States brought an action against Travelers, and Travelers cross-complained against American States; both insurance companies sought to establish Royal's coverage under the other company's insurance policies.

1. American States's Complaint and Travelers's Cross-complaint

American States brought an action against Travelers seeking a declaration that Travelers had a duty to defend Royal in the Gomez action under the Travelers primary and excess-umbrella general liability policies and for equitable contribution and equitable subrogation/indemnity for American States's payment of the defense costs and settlement in the Gomez action. Travelers cross-complained against American States, the Gomezes, and Royal seeking declarations that Travelers had no duty to defend or indemnify Royal in the Gomez action under either the Travelers Primary CGL Policy or the Travelers excess-umbrella general liability policy, that America States had a duty to defend and indemnify Royal in the Gomez action under the American States Auto Policy, and that American States had a duty [167 Cal.Rptr.3d 293] to indemnify Royal in the Gomez action under the American States excess auto policy before Travelers had any duty to do so under the Travelers excess-umbrella general liability policy [3].

2. American States's Summary Judgment Motion and Travelers's Summary Adjudication Motion

American States moved for summary judgment, arguing that Travelers had a duty to defend and indemnify Royal in the Gomez action because the

Page 501

Gomezes' food truck was " mobile equipment" and thus not subject to the auto exclusion in the Travelers Primary CGL Policy; the Gomezes' food truck and the equipment installed in the truck— i.e., the deep fryer basket— was a " product" covered by the Travelers Primary CGL Policy and excluded from coverage under the American States Auto Policy; and Travelers had a duty to defend Royal under the Travelers excess-umbrella policy if there was no coverage under the Travelers Primary CGL Policy or the American States Auto Policy. Travelers moved for summary adjudication, arguing that it did not have a duty to defend or indemnify Royal in the Gomez action under the Travelers Primary CGL Policy because the auto exclusion in its policy precluded coverage; it did not have a duty to defend Royal in the Gomez action under the Travelers excess-umbrella CGL policy because American States had a duty to defend Royal under the America States Auto Policy; it did not have a duty to indemnify Royal in the Gomez action under the Travelers excess-umbrella CGL policy because American States had not exhausted the limits of the American States Auto Policy in settling the Gomez action; and American States had the duty to defend and indemnify Royal in the Gomez action under the American States Auto Policy because the Gomezes' food truck, a covered auto under that policy, was in an accident.

At oral argument on their respective summary judgment and summary adjudication motions, American States and Travelers agreed that there were no facts in dispute and that the only issue for the trial court to decide was the proper interpretation of the relevant insurance policies. American States and Travelers also stipulated in writing that certain facts in their respective separate statements of undisputed facts were true. Counsel for the Gomezes and Royal signed the stipulation concerning the facts in Travelers's separate statement, but did not sign the stipulation concerning the facts in American States's separate statement. The Gomezes and Royal unsuccessfully attempted to join in American States's summary judgment motion.

3. Summary Judgment and Appeal

The trial court granted Travelers's motion for summary adjudication and denied American States's motion for summary judgment. It held that the Gomezes' food truck was an " auto" and not " mobile equipment," reasoning that " the whole point ... of this endeavor is to move food and other items to places where people are waiting to buy them" and that food was the " cargo" the Gomezes' food truck transported. The trial court dismissed Travelers's

Page 502

remaining cause of action that was not part of Travelers's summary adjudication motion, and entered judgment for Travelers. American States, as well as Royal and the Gomezes, appealed.[4]

D. The Insurance Policies[5]

1. The Travelers Commercial General Liability Policy (Policy No. Y-630-1397C542-TIL-07) (the Travelers Primary CGL Policy)

Section I of the Travelers Primary CGL Policy contained coverage for bodily injury and property damage ...


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