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Associated Industries Insurance Co., Inc. v. Mt. Hawley Insurance Co.

United States District Court, N.D. California

February 27, 2018

ASSOCIATED INDUSTRIES INSURANCE COMPANY, INC., a Florida corporation, Plaintiff,
v.
MT. HAWLEY INSURANCE COMPANY, an Illinois corporation, Defendant.

          ORDER GRANTING MOTION FOR SUMMARY JUDGMENT

          WILLIAM ALSUP UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         In this action for insurance declaratory relief, the question is whether or not a subcontractor's insurer must defend a suit against the general contractor arising out of an accident at the worksite where the subcontractor was performing its work for the general contractor. This order holds that the subcontractor's insurer violated its duty to defend the general contractor.

         STATEMENT

         Plaintiff Associated Industries Insurance Company, Inc., and defendant Mt. Hawley Insurance Company are both issuers of commercial general-liability insurance. Associated issued a policy to Imac Construction, Inc., effective February 12, 2013 to February 12, 2014. In 2013, Imac contracted to build structural concrete on “The View, ” an affordable-housing construction project in Downey, California. On May 21, 2013, before beginning work on The View, Imac hired J. Ginger Masonry, LP, as a subcontractor for “Masonry and Masonry Reinforcement” work. Imac also hired Hof & Yates Rebar as a subcontractor for “Rebar Supply and Installation” work.

         Section 3 of the subcontract agreement between Imac and J. Ginger required in relevant part that J. Ginger carry general-liability insurance with a one million dollar limit per “occurrence” and a provision or endorsement naming Imac “as an additional insured as respects liabilities arising out of [J. Ginger's] performance of the work under this contract, and providing that such insurance is primary insurance as respects the interests of [Imac] and that any other insurance maintained by [Imac] is excess and not contributing insurance with the insurance required hereunder” (see Dkt. No. 14-1 at 5). Section 16 further provided that J. Ginger would indemnify and hold Imac harmless “from any and all claims, demands, liabilities, judgments liens, encumbrances, costs and expenses . . . arising out of or in connection with the obligations herein made and undertaken by [J. Ginger], or the operations and work conducted by [J. Ginger].” J. Ginger would not, however, provide indemnity “against liability or loss caused by the sole negligence or sole willful misconduct of [Imac]” (id. at 9).

         Pursuant to Section 3 of the subcontract agreement, J. Ginger obtained a policy from Mt. Hawley effective July 23, 2013, to July 23, 2014. Section I(1) of the coverage form stated Mt. Hawley “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” and “will have the right and duty to defend the insured against any ‘suit' seeking those damages” (Dkt. No. 14-2 at 42). The scope of commercial general-liability coverage under the policy was modified by “Form C, ” an endorsement that listed as additional insured “[a]ll persons or organizations where required by written contract.” Coverage extended to such additional insured under Form C only with respect to liability arising out of work and operations performed by J. Ginger or on its behalf, as well as the materials, parts, or equipment furnished in connection with such work or operations (see Id. at 58, 72). Form C also provided, “To the extent required under contract, this policy will apply as primary insurance to additional insureds . . . and other insurance which may be available to such additional insureds will be non-contributory” (id. at 72).

         The scope of commercial general-liability coverage under the policy was also modified by “Form B, ” a narrower endorsement that listed as additional insured “any person or organization for whom [J. Ginger is] performing operations when [J. Ginger] and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on [J. Ginger's] policy.” Form B provided in part (id. at 78):

Such person or organization is an additional insured only with respect to liability for “bodily injury, ” “property damage” or “personal and advertising injury” caused, in whole or in part, by:
1. [J. Ginger's] acts or omissions; or
2. The acts or omissions of those acting on [J. Ginger's] behalf;
in the performance of [J. Ginger's] “ongoing operations” for the additional insured.

         The key distinction between Form C and Form B for our purposes, as discussed further below in the context of the parties' arguments, is that Form C generally covered liability arising out of work and operations performed by J. Ginger or on its behalf whereas Form B covered only liability caused by acts or omissions performed by J. Ginger or on its behalf.

         Section IV(4) of the coverage form stated the insurance provided by Mt. Hawley would be primary unless it was “excess over, ” among other things, “[a]ny other primary insurance available to [J. Ginger] covering liability for damages arising out of the premises or operations, or the products and completed operations, for which [J. Ginger has] been added as an additional insured by attachment of an endorsement” (id. at 53). If the insurance provided by Mt. Hawley was “excess, ” then Mt. Hawley would have “no duty . . . to defend [J. Ginger] against any ‘suit' if any other insurer has a duty to defend [J. Ginger] against that ‘suit'” (ibid.). The foregoing provision, however, was amended by another endorsement, which added language that stated, ‚ÄúThis insurance is excess over ...


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