Daily Blast January 13, 2014

The California Court of Appeal, Second Appellate District, Division Five (Los Angeles), issued an opinion in Transport Insurance Company v. Superior Court of Los Angeles County (Jan. 13, 2014, B249470) __ Cal.App.4th ___, analyzing “whether an additional insured to an excess and umbrella general liability insurance policy is entitled to a defense by the insurer.” (Slip opn., p. 2.) The Court of Appeal held that the intent of the additional insured “is relevant to the construction of that contract because the intent of the named insured in requesting the added coverage is directly dependent on the bargain that the additional named insured made with the named insured."(Id. at p. 10.)

Transport Insurance Company (“Transport”) issued a commercial excess and umbrella liability policy to Vulcan Materials Company (“Vulcan”), a manufacturing company. (Slip opn., p. 2.) Transport’s policy named R.R. Street & Co., Inc. (“Street”), a distribution company, as an additional insured with respect its distribution or sale of a solvent used in the dry cleaning industry. (Ibid.) Vulcan and Street were named as defendants in a number of actions regarding the manufacture and distribution of the solvent. (Id. at p. 3.) Transport refused to defend Street in these matters. Street and its insurer cross-complained against Transport alleging that Transport had a duty to defend them under the Vulcan policy. (Id. at pp. 6-7.) The trial court granted summary adjudication in favor of Street and its insurer. The trial court relied on Legacy Vulcan Corp. v. Superior Court (2010) 185 Cal.App.4th 677, which interpreted the rights obligations under the policy issued by Transport to Vulcan based on Vulcan’s objectively reasonable expectations of coverage. (Id. at p. 5.)             

The Court of Appeal granted Transport’s petition for writ of mandate and vacated the trial court’s order granting summary adjudication in favor of Street and its insurer. (Slip opn., p. 8.) The court stated that the language of the policy with respect to umbrella coverage was ambiguous. (Id. at p. 9.) Ambiguities in an insurance policy are resolved “in a manner consistent with the objectively reasonable expectations of the ‘party claiming coverage.” (Ibid.) The court reasoned that special rules apply to insurance contracts. (Id. at p. 10.) “Despite the fact that the additional named insured is not a party to the insurance contract, his intent is relevant to the construction of that contract because the intent of the named insured in requesting the added coverage is directly dependent on the bargain that the additional named insured made with the name insured." (Ibid.) Street, the additional insured, was the party claiming coverage. Therefore, “the relevant inquiry in this case was Street and not Vulcan’s objectively reasonable expectations of coverage, a matter not litigated in Legacy Vulcan, supra, 185 Cal.App.4th 677. . . .” (Id. at p. 11.)

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