Zelda, Inc. v. Northland Insurance (56 Cal. App. 4th 1252, 1997)

Opinion

BARON, J.

The trial court granted summary judgment on appellants’ complaint for breach of insurance contract and bad faith against respondent Northland Insurance Company (hereafter Northland). We affirm.

Facts

The following facts are not in dispute: Appellant Zelda, Inc. (hereafter Zelda), operates a restaurant known as the Lodge in North Hollywood. During the pertinent period, appellants Glenn D. Taylor and Stuart A. Zinn were Zelda’s officers and directors, and each owned one-half of Zelda’s capital stock.

On June 4, 1990, respondent Northland issued a one-year commercial insurance policy to Zelda. The policy provided coverage for, inter alia, bodily injury and personal injury liability, and contained an exclusion concerning bodily injury arising from assault or battery. This policy was subsequently renewed and was effective through June 4, 1992.

On January 5,1992, police officers filed a report about an alleged incident at the Lodge on that date. The report states that when Dino Pascale announced last call at 1:45 a.m., Felix Trujillo refused to give up his drink and attempted to punch Pascale, who then defended himself by punching Trujillo.

On January 10, 1992, an attorney representing Trujillo wrote a letter to appellants stating that Trujillo had a claim for injuries and damages sustained during the January 5 incident. Appellants forwarded this letter to Northland. On March 16, 1992, Northland responded that it would not indemnify or defend appellants concerning Trujillo’s claim, citing the policy exclusion concerning assault and battery.

On March 16, 1992, Trujillo’s attorney again wrote to appellants, alleging the following facts: “For no reason whatsoever, your employee threw Felix Trujillo to the ground. Once Mr. Trujillo was on the ground, your employee kicked Mr. Trujillo in the mouth. As a result, Mr. Trujillo suffered a severe laceration to his lower lip and chin. Further, Mr. Trujillo’s upper two front teeth were kicked out. As a result of his injuries, Mr. Trujillo suffered, and still continues to suffer, great pain. In addition, Mr. Trujillo suffers from severe and extreme emotional distress as a result of the beating.” The letter further alleged that appellants had failed to ensure the safety of an invitee on their premises, had negligently hired and supervised an employee, were vicariously liable for the intentional tort of their employee, and were liable for the emotional distress intentionally and negligently inflicted by their employee.

On May 6, 1992, counsel for appellants forwarded the March 16 letter to Northland, seeking indemnification and a defense because Trujillo’s claim was “grounded on negligence” (italics omitted) and was “asserted on a respondeat superior theory.” Northland denied this request on May 29, 1992, again citing the policy’s exclusion concerning assault and battery.

On June 18, 1992, Trujillo filed a complaint containing claims for premises liability, negligence, intentional tort, and punitive damages against Zelda, Taylor, and Dino Pascale, who is alleged to be the “negligently hired, trained, and supervised employee and agent” of Zelda and Taylor who beat Trujillo. Under each claim, the complaint recited the factual allegations asserted in the March 18 letter to appellants.

On August 31, 1992, Trujillo filed a first amended complaint against Zelda, Taylor, and Zinn containing claims for assault and battery, intentional infliction of emotional distress, negligent hiring, training and supervising, negligent infliction of emotional distress, and punitive damages. These claims alleged that appellants were liable for the conduct of those persons who assaulted and battered Trujillo, or who “negligently assaulted . . . and battered” Trujillo.

On September 16, 1992, appellants’ counsel forwarded the first amended complaint to Northland, requesting reconsideration of its prior decision. However, Northland denied, and continues to deny, that it had a duty to defend or indemnify appellants.

On November 25, 1992, Trujillo filed a second amended complaint against appellants and Pascale containing claims for assault and battery, negligent hiring, supervising and retaining of employee, and punitive damages. Trujillo eventually dismissed his intentional tort claims against appellants, and settled his action against them in October 1993.

Relevant Procedural History

On October 13, 1993, appellants filed their complaint against Northland for breach of contract, bad faith, fraud and deceit, negligent and intentional infliction of emotional distress, and declaratory relief. On August 1, 1995, Northland filed its motion for summary judgment, citing the assault and battery exclusion and contending that it had no duty to indemnify or defend appellants under the policy in the Trujillo action. On October 6, 1995, appellants filed their motion for summary adjudication of issues, contending that Northland had a duty to defend appellants in the Trujillo action.

Following a hearing on October 27, 1995, the trial court granted North-land’s motion and denied appellants’ motion. Judgment was filed on November 7, 1995. This appeal followed.

Discussion

A. Standard of Review

We review the trial court’s ruling on Northland’s motion for summary judgment de novo. (Lunardi v. Great-West Life Assurance Co. (1995) 37 Cal.App.4th 807, 819 [44 Cal.Rptr.2d 56].)

“A defendant is entitled to summary judgment if the record establishes as a matter of law that none of the plaintiff’s asserted causes of action can prevail. [Citation.]” (Molko v. Holy Spirit Assn. (1988) 46 Cal.3d 1092, 1107 [252 Cal.Rptr. 122, 762 P.2d 46].) A defendant moving for summary judgment has the burden of “negating] a necessary element of the plaintiff’s case, and demonstrating] that under no hypothesis is there a material issue of fact that requires the process of a trial. [Citation.]” (Ibid.) To do that, the defendant may rely either on affirmative evidence or discovery responses of the plaintiff showing the absence of evidence necessary to establish at least one essential element of the plaintiff’s case. (Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 589-590 [37 Cal.Rptr.2d 653].) Once the defendant carries this substantive burden, the burden shifts back to the plaintiff to show that a triable issue of one or more material facts exists as to the plaintiff’s case. (Barber v. Marina Sailing, Inc. (1995) 36 Cal.App.4th 558, 562 [42 Cal.Rptr.2d 697].) All doubts as to whether there are any triable issues of fact are to be resolved in favor of the party opposing summary judgment. (Ibid.)

B. Insurer’s Duties

Appellants’ key contentions concern Northland’s duties to defend and indemnify under the policy. In Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076 [17 Cal.Rptr.2d 210, 846 P.2d 792], our Supreme Court summarized the principles governing adjudication of these duties: “[A] liability insurer owes a broad duty to defend its insured against claims that create a potential for indemnity. (Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263 . . . (Gray).) As we said in Gray, ‘the carrier must defend a suit which potentially seeks damages within the coverage of the policy.’ [Citation.] Implicit in this rule is the principle that the duty to defend is broader than the duty to indemnify; an insurer may owe a duty to defend its insured in an action in which no damages ultimately are awarded. [Citations.] [*][] The determination whether the insurer owes a duty to defend usually is made in the first instance by comparing the allegations of the complaint with the terms of the policy. Facts extrinsic to the complaint also give rise to a duty to defend when they reveal a possibility that the claim may be covered by the policy. [Citation.]” (Horace Mann Ins. Co. v. Barbara B., supra, 4 Cal.4th at p. 1081, italics omitted.)

To the extent appellants’ contentions raise issues of policy interpretation, we are guided by the following principles: “Insurance policies are contracts and, therefore, are governed in the first instance by the rules of construction applicable to contracts. Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs its interpretation. [Citation.] Such intent is to be inferred, if possible, solely from the written provisions of the contract. [Citation.] The ‘clear and explicit’ meaning of these provisions, interpreted in their ‘ordinary and popular sense,’ controls judicial interpretation unless ‘used by the parties in a technical sense, or unless a special meaning is given to them by usage.’ [Citations.] If the meaning a layperson would ascribe to the language of a contract of insurance is clear and unambiguous, a court will apply that meaning. [Citations.]” (Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 666-667 [42 Cal.Rptr.2d 324, 913 P.2d 878].)

Appellants contend that summary judgment was improperly granted because (1) the policy potentially covered the Trujillo action under the provisions concerning liability for bodily injury, (2) the policy potentially covered this action under the provisions concerning liability for personal injury, and (3) Northland owed appellants a duty to defend because it failed to obtain a declaratory judgment when the defense was tendered. As we explain below, appellants’ contentions fail, and thus summary judgment was proper.

C. Coverage A and the Assault and Battery Exclusion

Appellants’ first contention is that the trial court erred in concluding that a policy exclusion precluded coverage for the Trujillo action under the bodily injury provisions of “coverage A.” The policy here provides under coverage A that Northland “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.” Such injury or damage is covered only if it is caused by an occurrence, which the policy defines as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” However, an endorsement to coverage A provides that there is no coverage for “ ‘[b]odily injury’ or ‘property damage’: [