IRONSHORE SPECIALTY INSURANCE COMPANY v. EVEREST INDEMNITY INSURANCE COMPANY (2023)

ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

Before the Court are Plaintiff Ironshore Specialty Insurance Company's (“Plaintiff”) Motion for Summary Judgment (“Pl.'s Mot.,” Dkt. No. 58-42) and Defendant Everest Indemnity Insurance Company's (“Defendant”) Motion for Summary Judgment (“Def.'s Mot.,” Dkt. No. 60). Plaintiff filed an Opposition (“Pl.'s Opp'n,” Dkt. No. 73) and a Reply in support of its Motion (“Pl.'s Reply,” Dkt. No. 78). Defendant filed an Opposition (“Def.'s Opp'n,” Dkt. No. 75) and Reply in support of its Motion (“Def.'s Reply,” Dkt. No. 79). Both parties have filed several requests for judicial notice. The Court heard oral arguments on December 9, 2022. Because the Motions turn on the same issues, the Court considers them together. For the following reasons, the Court GRANTS Defendant's Motion, and DENIES Plaintiff's Motion.

I. BACKGROUND

This action regards a dispute between two insurance companies, Plaintiff and Defendant. Here, Plaintiff seeks to recover defense costs and indemnity that it paid in connection with an insurance claim for a construction project in Beverly Hills against mutual insureds of itself and Defendant. The facts of this case are mostly undisputed.

A. Factual Background

Pacific Northstar Reeves, LLC (“PNR”) was the developer of a luxury condominium community known as Maison Reeves, located at 261 Reeves Drive, Beverly Hills, California (“the Project”). (Pl.'s Statement of Undisputed Facts “PSUF” 1 (Dkt. No. 58-41).) The Project consisted of twenty-three residential units and common areas. (Def.'s Statement of Undisputed Facts “DSUF” 7 (Dkt. No. 60-2).) Avoca, USA, Inc. (“Avoca”) was the general contractor on the Project. (DSUF 13.) H & R Construction Surfacing, Inc. (“H & R”) was one of 20 subcontractors involved in the Project. (DSUF 10, 92.)

Defendant issued a wrap policy for the Project, Policy No. 5000000372-031 (the “Policy”), to PNR for the period October 31, 2003 to October 31, 2006. (PSUF 2.) The policy's expiration date was extended to March 31, 2007, (PSUF 2.) PNR and Avoca USA, Inc. (“Avoca”) are named insureds under the Policy. (Def.'s Statement of Undisputed Facts “DSUF” (Dkt. No. 60-2).)

On June 28, 2007, PNR's project manager, Myra Spence, requested that Defendant extend the policy until September 30, 2007. (Vogrin Decl. ¶ 10, Ex. H (Dkt. No. 58-9.) Spence indicated in the letter, “The project is nearly completed (approximately 97% -- we are at the ‘core and shell’ stage), but none of the units has yet been sold.” (Id.) On July 3, 2007, Everest responded indicating that it would extend the Policy until September 30, 2007 in exchange for an additional premium of $50,000. (Keaster Decl. ¶¶ 78–79, Ex. 30-31 (Dkt. Nos. 77-30, 77-31).) Spence responded that same day and wrote “I have reviewed Everests offer and think that we will pass.” (Keaster Decl. ¶ 81, Ex. 33 (Dkt. No. 77-33).)

On or about September 18, 2008, Thomas Henry Coleman was appointed as Receiver for PNR to oversee completion of the Project, pursuant to California Superior Court Case No. BC388637. (PSUF 7.) Coleman sought wrap coverage from Plaintiff, who issued Policy No. 01CC10905001 (“Ironshore Policy”). (PSUF 8-9.) The Ironshore Policy had a coverage term of June 23, 2009 to June 23, 2011, and named Coleman, PNR, and Avoca as insureds. (Vogrin Decl. ¶ 12, Ex. K (Dkt. No. 58-12).) On October 7, 2009, Plaintiff issued to Coleman Policy No. 01CC10905002, an excess policy with a coverage term of June 23, 2009 to June 23, 2011. (Vogrin Decl. ¶ 13, Ex. L (Dkt. No. 58-13).)

On September 29, 2011, Perry E. Rhodes of Smylie & Associates, on behalf of Coleman sent a letter to Joyce DeCastro at Carl Warren & Company on behalf of Everest. (Vogrin Decl. ¶ 15, Ex. M (Dkt. No. 58-14).) This letter stated that “[a] previous tender was made by our firm to Everest Indemnity Insurance Company with respect to construction defect claims asserted against our client by Maison Reeves Homeowners' Association,” and demanded that “Everest reimburse our client $500,000 for amounts incurred or anticipated to be incurred to remediate covered losses.” (Id.) The letter then outlined the defects asserted by the HOA: problems with the French door thresholds, roof leaks, planter box leaks, water leaks, lack of adequate ventilation, drainage-related damages, excessive noise transmission caused by installation deficiencies, easily dented floors, and sewage line-relate defects. (Id.)

B. The PNR CD Action

In a letter dated April 8, 2014, Peter Pritchard, counsel for PNR, informed Defendant of a Notice of Legal Proceedings submitted by the HOA. (PSUF 12.) Carl Warren & Company, on behalf of Defendant, acknowledge receipt of the letter on April 23, 2014, and stated “Carl Warren & Co. on behalf of Everest Indemnity is beginning its investigation into the above-captioned matter.” (Vogrin Decl. ¶ 17, Ex. O (Dkt. No. 58-16).)

On September 26, 2014, Maison Reeves Homeowners' Association (“HOA”) filed a Complaint against PNR in the action entitled Maison Reeves HOA v. Pacific Northstar Property Group, LLC, et al., Los Angeles County Superior Court Case No. BC558992 (“PNR CD Action”), seeking damages for alleged construction defects at the Maison Reeves condominium project. (DSUF 6.) The complaint alleged defects with drainage-sumps, path of travel, structural slab in garage, podium deck waterproofing, garage wall waterproofing, roofing, rated doors, finishes, stucco screed, tile-exterior, and paint and rated vents. (PSUF 14.) Because PNR was a suspended company and could not appear and defend itself, Plaintiff filed a Complaint in Intervention of behalf of PNR in the PNR CD Action on April 3, 2015. (DSUF 9.) On November 9, 2015, Plaintiff, on behalf of PNR, sought leave to file a cross-complaint against the Project's subcontractors. (DSUF 10.) The court denied the request, finding the motion untimely and prejudicial to the HOA. (DSUF 11.)

On January 20, 2015, RiverStone Claims Managements (“RiverStone”), on behalf of Defendant, informed PNR's counsel that Defendant would deny coverage in connection with the PNR Action. (PSUF 15.) Defendant stated: “Everest Indemnity has no duty to defend or to indemnify the insured in the [PNR CD Action], as there is no product-completed operations coverage during the policy period.” (Id.) Defendant also stated “Per the Self Insured Retention endorsement, there is not duty to defend or to indemnify the insured until the insured satisfied the self-insured retention. Everest Indemnity disclaims coverage as it appears the SIR has not been exhausted by payment of defense expenses, settlement, or judgment.” (Vogrin Decl. ¶ 19, Ex. Q (Dkt. No. 58-18).)

C. The Avoca CD Action

On February 18, 2016, the HOA filed a separate action against Avoca, entitled Maison Reeves HOA v. Avoca USA, Inc. et al., Los Angeles County Superior Court Case No. BC610856 (“Avoca CD Action”), seeking damages for alleges construction defects at the Project. (DSUF 12.) The HOA filed a First Amended Complaint in the Avoca DC Action on March 7, 2016. (DSUF 14.) On May 9, 2016, because Avoca was a suspended corporation and could not appear or defend itself, Plaintiff filed a cross-complaint on behalf of Avoca in the Avoca CD Action “solely in its capacity as an insurer of a suspended corporation,” against twenty subcontractors, including H & R. (DSUF 15.) Plaintiff's cross-complaint in the Avoca CD Action alleged causes of action of total implied/equitable indemnity, equitable contribution, negligence and declaratory relief. (DSUF 16.)

In January 2017, H & R's counsel sent a letter to RiverStone on behalf of Defendant, tendering the defense of H & R in the Avoca CD Action under the Policy. (DSUF 72.) While the parties dispute whether Defendant sent a letter declining coverage, there is no dispute that Defendant did not provide H & R a defense. (See Dkt. No. 75-1 ¶ 20; Dkt. No. 73-17 ¶ 73.)

D. The Everest Policy

Defendant's Policy states the following relevant insuring language:

SECTION I – COVERAGES

COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damages’ to which this insurance applied. We will have the right and duty to defend the insured against any ‘suit’ seeking those damages. However, we will have no duty to defend the insured against any ‘suit’ seeking damages for ‘bodily injury’ or ‘property damage’ to which this insurance does not apply.

(DSUF 27.)

The Policy also states the following relevant excerpt in the “Exclusion – Property Damage to Project” endorsement:

COMMERCIAL GENERAL LIABILITY COVERAGE PART

The following exclusion is added to Section I, Coverage A Bodily Injury and Property Damage Liability 2.

Exclusions:

This Insurance does not apply to “property damage” to the project insured by this policy during the course of construction. Construction includes, but is not limited to, construction renovation, rehabilitation, demolition, excavation or landscaping. Project includes, but is not limited to, buildings or structures and any supplies, materials or equipment used or to be used in connection with the project.

(DSUF 28.)

The Policy also states in the “Contractors Products-Completed Operations Hazard – Applicable Law” endorsement:

COMMERCIAL GENERAL LIABILITY COVERAGE PART

1. Section 1, Coverage A Bodily Injury And Property Liability, 1. Insuring Agreement part b. (2) is deleted and replaced by:

(2) The “bodily injury” or “property damage” occurs during the policy period, except for “bodily injury” or “property damage” included in the “products completed operations hazard”. For “bodily injury” or “property damage” included in the “products-completed operations hazard”, the “bodily injury” or “property damage” occurs during the policy period or within the “contractors products-completed operations period”; and

2. “Contractors products-completed operations period” means during the period of time allowed by the applicable law for claims or “suits” to be brought against the insured.

3. The occurrence period described in this endorsement is considered part of the original policy period for purposes of determining the Limits of Insurance. The Products-Completed Operations Aggregate Limit applies for the entire policy period including the “contractors products-completed period.”

(DSUF 31; Vogrin Decl. ¶ 6, Ex. D (Dkt. No. 58-5) (“Policy”).)

The Policy defined “products-completed operations hazard” as follows:

16. “Products-completed operations hazard”:

a. Includes all “bodily injury” and “property damages” occurring away from premises you own or rent and arising our of “your product” or “your work” except:

(1) Products that are still in your physical possession; or

(2) Work that has not yet been completed or abandoned. However, “your work” will be deemed completed at the earliest of the following times:

(a) When all of the work called for in your contract has been completed.

(b) When all of the work to be done at the job site has been completed if your contract calls for work at more than one job site.

(c) When part of the work done at a job site has been put to its intended use by any other person or organization other than another contractor or subcontractor working on the same project.

Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed.

(DSUF 32.)

II. LEGAL STANDARD

A motion for summary judgment must be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party bears the initial burden of identifying the elements of the claim or defense and evidence that it believes demonstrates the absence of an issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Where the nonmoving party will have the burden of proof at trial, the movant can prevail merely by pointing out that there is an absence of evidence to support the nonmoving party's case. Id. The nonmoving party then “must set forth specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 248, 106 S.Ct. 2505.

“Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no ‘genuine issue for trial.’ ” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation omitted). The Court must draw all reasonable inferences in the nonmoving party's favor. In re Oracle Corp. Sec. Litig., 627 F.3d 376, 387 (9th Cir. 2010) (citing Anderson, 477 U.S. at 255, 106 S.Ct. 2505). Nevertheless, inferences are not drawn out of thin air; it is the nonmoving party's obligation to produce a factual predicate from which the inference may be drawn. Richards v. Nielsen Freight Lines, 602 F. Supp. 1224, 1244–45 (E.D. Cal. 1985), aff'd, 810 F.2d 898 (9th Cir. 1987). “[M]ere disagreement or the bald assertion that a genuine issue of material fact exists” does not preclude summary judgment. Harper v. Wallingford, 877 F.2d 728, 731 (9th Cir. 1989).

III. JUDICIAL NOTICE

Both parties have filed several requests for judicial notice in connection with their motions, oppositions, and replies, requesting the Court take notice of various state court filings from the underlying actions. These requests are unopposed, with the exception of one request; Defendant opposes Plaintiff's request that the Court take judicial notice of the Declaration of Peter Pritchard that was filed in the underlying actions, and the exhibits attached to it. Defendant argues that the Court cannot take notice of the factual assertions contained within the Declaration.

Under Federal Rule of Evidence 201, a court may take judicial notice of “matters of public record.” See Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006) (“We may take judicial notice of court filings and other matters of public record.”). However, “[j]ust because the document itself is susceptible to judicial notice does not mean that every assertion of fact within that document is judicially noticeable for its truth.” Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018). Accordingly, the Court will take judicial notice of all the documents, but will not accept the facts asserted within any document as being established.

IV. EVIDENTIARY OBJECTIONS

Defendant lodges several garden variety evidentiary objections based on relevance, lack of foundation, and hearsay. (See generally Dkt. Nos. 75-11, 79-1.) Defendant takes issue with portions of the Declaration of Diane P. Palumbo (Dkt. No. 58-35), exhibits attached to the Declaration of George J. Vogrin (Dkt. No. 58-1), exhibits attached to the Declaration of Daniel Chonkich (Dkt. No. 58-30).

Objections that evidence is irrelevant or speculative do not typically need to be ruled on in a summary judgment setting like this one, because these types of evidence are not considered under the summary judgment standard to begin with. See Burch v. Regents of the Univ. of Cal., 433 F.Supp.2d 1110, 1119 (E.D. Cal. 2006). Put differently, if a court thinks a piece of evidence is irrelevant, the court was never going to consider that evidence in its analysis, regardless of a party's objections or lack thereof. Along the same lines, undue prejudice and confusion is less of a concern when presenting evidence to a court rather than a jury. And where, as here, the parties file numerous objections on a summary judgment motion, it is “often unnecessary and impractical for a court to methodically scrutinize each objection and give a full analysis of each argument raised.” See Doe v. Starbucks, Inc., No. SACV 08-00582 AG (CWx), 2009 WL 5183773, at *1 (C.D. Cal. Dec. 18, 2009). Accordingly, to the extent any of the objected-to evidence is relied on in this Order, those objections are OVERRULED. Any remaining objections are also OVERRULED AS MOOT. See Burch, 433 F. Supp. 2d 1110, 1122 (E.D. Cal. 2006) (concluding that “the court will [only] proceed with any necessary rulings on defendants' evidentiary objections”).

V. PROCEDURAL OBJECTIONS

Defendant, as part of its Reply in support of its Motion for Summary Judgment, objects to a portion of the Declaration of George J. Vogrin (Dkt. No. 73-1), as well as Exhibit CC, the Declaration of Peter J. Pritchard in support of a motion for summary adjudication filed in the underlying actions, and Exhibit F attached to that declaration. (See Dkt. No. 79-2.) Defendant argues this evidence should be excluded under Fed. R. Civ. P 37(c) because Plaintiff failed to name Pritchard in its initial disclosures, and did not disclose Exhibit CC, or Exhibit F attached to that declaration, in response to Defendant's discovery requests. Although Plaintiff failed to comply with Rule 26, the Court finds this failure harmless, as the declaration was publicly filed in the underlying action at issue, meaning Defendant was on notice of the document and that Pritchard was an individual likely to have discoverable information.

VI. DISCUSSION

Plaintiff moves for summary judgment on all causes of action. Plaintiff argues that Defendant owed a duty to defend to PNR, Avoca, and H & R under the Policy, because coverage under the products-completed operations hazard provision was triggered once the Project was completed, and covered the types of allegations made against them. Plaintiff argues that Defendant wrongfully abandoned their insureds by refusing to provide a defense. Because Plaintiff did provide a defense for PNR and Avoca, Plaintiff argues that it is entitled to equitable contribution for expenses paid towards their defense and the settlement with the HOA. Additionally, Plaintiff, as the assignee of H & R's right to sue Defendant for claims relating to Defendant's abandonment, argues that Defendant is liable to H & R for breach of contract. Finally, because Plaintiff secured a judgment against H & R, Plaintiff argues that all of these facts establish a claim under Cal. Ins. Code 11580, which permits a plaintiff with the right to bring a direct action against a defendant's insurer that does not defend its insured after obtaining a judgment.

Defendant moves for summary judgment on all causes of action. Defendants argue that Defendant did not owe PNR, Avoca, or H & R a duty to defend because (1) there is no evidence that any of them satisfied the Self-Insured Retention payment, (2) there is no coverage for ongoing construction, and (3) the products-completed operations hazard was not triggered because the Project was not completed during the Policy period. Defendant argues that this means it does not owe Plaintiff equitable contribution for its defense of PNR and Avoca, and also that Plaintiff's equitable contribution claim has exceeded the statute of limitations. Defendant also argues that Plaintiff cannot demonstrate that Defendant breached any contract with H & R, as there is no evidence that H & R was enrolled in the Policy as a subcontractor. Finally, Defendant argues that the judgment Plaintiff obtained against H & R, which assigned to Plaintiff H & R's rights to sue Defendant and permits Plaintiff to sue under Cal. Ins. Code § 11580, is unreasonable and unenforceable.

The Court finds that Defendant did not have a duty to defend any party in the underlying actions, because the products-completed operations coverage was not triggered. Because this issue is dispositive of all causes of action, the Court will not reach the remaining issues.

A. Duty to Defend

A liability insurer “owes a broad duty to defend its insured against claims that create a potential for indemnity.” Montrose Chem. Corp. v. Superior Court, 6 Cal. 4th 287, 295, 24 Cal.Rptr.2d 467, 861 P.2d 1153 (1993). The duty to defend may exist even when coverage is in doubt and/or no damages are ultimately awarded: “[t]he duty arises on tender of defense and continues until the underlying lawsuit is concluded or until the insurer establishes, by reference to undisputed facts, the absence of any potential for coverage.” El-Com Hardware, Inc. v. Fireman's Fund Ins. Co., 92 Cal. App.4th 205, 213, 111 Cal.Rptr.2d 670 (2001) (citing Montrose, 6 Cal. 4th at 300, 24 Cal.Rptr.2d 467, 861 P.2d 1153). If the underlying complaint “can by no conceivable theory raise a single issue which could bring it within the policy coverage,” then there is no duty to defend. La Jolla Beach & Tennis Club, Inc. v. Indus. Indem. Co., 9 Cal. 4th 27, 39, 36 Cal.Rptr.2d 100, 884 P.2d 1048 (1994), as modified (Mar. 2, 1995) (citation omitted). “In an action wherein none of the claims is even potentially covered because it does not even possibly embrace any triggering harm of the specific sort within the policy period caused by an included occurrence, the insurer does not have a duty to defend.” Baroco West, Inc. v. Scottsdale Ins. Co., 110 Cal. App. 4th 96, 103, 1 Cal.Rptr.3d 464 (2003).

“The duty to defend is determined by comparing the allegations of the third party complaint with the terms of the policy. Facts extrinsic to the complaint known to the insurer at the inception of the third party lawsuit may also give rise to a duty to defend when they reveal a possibility the policy may cover the claim.” El-Com Hardware, Inc., 92 Cal. App. 4th at 212-13, 111 Cal.Rptr.2d 670.

1. Products-Completed Operations Hazard Required the Project to be Completed During the Policy Period

“The California Supreme Court has established a three-step process for analyzing insurance contracts with the primary aim of giving effect to the mutual intent of the parties.” In re K F Dairies, Inc. & Affiliates, 224 F.3d 922, 925 (9th Cir. 2000) (citing AIU Ins. Co. v. Super. Ct. of Santa Clara County, 51 Cal. 3d 807, 821-23, 274 Cal.Rptr. 820, 799 P.2d 1253 (1990)). First, “examine the ‘clear and explicit’ meanings of the terms as used in their ‘ordinary and popular sense.’ ” Id. The policy must be read as a whole, and individual terms cannot be taken out of context. Id. “If (and only if) a term is found to be ambiguous after undertaking the first step of the analysis, the court then proceeds to the second step and resolves the ambiguity ‘by looking to the expectations of a reasonable insured.’ ” Id. “Finally, if the ambiguity still remains, it is construed against the party who caused the ambiguity to exist.” Id.

Defendant's policy modified the standard contract language. Policies ordinarily cover bodily or property injuries that occur during the policy period. Defendant modified that language by endorsement, so that it covered any “ ‘bodily injury’ or ‘property damage’ [that] occurs during the policy period, except for ‘bodily injury’ or ‘property damage’ included in the ‘products completed operations hazard’.” Policy at EVEREST000012 (emphasis added). For injuries included in the products-completed operations hazard definition, the injury would be covered if it occurred “during the policy period or within the ‘contractors products-completed operations period,’ ” meaning the “time allowed by the applicable law for claims or ‘suits’ to be brought against the insured.” (Id.) Essentially, Defendants enlarged the time period during which a bodily injury or property injury would be covered, so long as it fit within the definition of the products-completed operations hazard. Therefore, the ultimate question is when the project needed to be completed by in order to take advantage of this enlarged time period.

Plaintiff argues that coverage begins under the products-completed operations once the work is completed, regardless of whether the work was completed during the policy period. Plaintiff argues that products-completed operations hazard only requires that there was property damage that arose from a named insured's work, and that the work has been completed. It does not explicitly require that the work be completed during the policy period.

Defendant points to California cases, where courts have held that the standard language for products-completed operations hazard requires the work to be completed during the policy period. Defendant relies on Baroco West, Inc. v. Scottsdale Ins. Co., 110 Cal. App. 4th 96, 105, 1 Cal.Rptr.3d 464 (2003), which involved the construction of a home. The California Court of Appeal held that “there was no potential for coverage under the completed operations provision of the policy” where the work had not been completed during the policy period. Defendant also cites to Clarendon Am. Ins. Co. v. General Sec. Indem. Co. of Arizona, 193 Cal. App. 4th 1311, 1324, 124 Cal.Rptr.3d 1 (2011), which found that the plain language of the products-completed operations hazard provision, which is identical to Defendant's, did not apply because the work had not been completed by the named insured during the policy period. Defendant argues that because its Policy has the same products-completed operations hazard language, that the same reading applies here.

The Court finds that when the contract is read as a whole, the contract unambiguously requires the work to be completed during the policy period. Under California law, an insurance policy provision is “ambiguous when it is capable of two or more constructions both of which are reasonable.” In re K F Dairies, 224 F.3d at 926 (quoting Bay Cities Paving & Grading, Inc. v. Lawyers' Mutual Ins. Co., 5 Cal.4th 854, 875, 21 Cal.Rptr.2d 691, 855 P.2d 1263 (1993)). Defendant's construction of the Policy is the only reasonable reading, as Plaintiff's construction of the contract is contrary to the plain language of the Policy.

Plaintiff's reading, that the provision only requires the work to be completed, but not within any specific time frame, only makes sense if the products-completed operations hazard provision is read in isolation. Indeed, if other definitions or contract provisions were read in isolation, it would appear that they too were not subject to any time limitations. However, when taken as a whole, the terms of the policy are clearly limited by the coverage period and the endorsements extending the policy, unless otherwise specified. Plaintiff's argument that the “Contractors products-completed operations period” controls or somehow modified when the work had to be completed by requires misreading the contract. The plain language of the contract makes clear that in order for an insured to take advantage of the “Contractors products-completed operations period,” the injury must be those “included in” the products-completed operations hazard. This means that the products-completed operations hazard must be satisfied before the language regarding the “Contractors products-completed operations period” can even be considered. Because the terms of the policy are limited by the coverage period, unless otherwise specified, the only reasonable reading is that all facts satisfying the products-completed operations hazard must have occurred during the policy period. In other words, the insureds must have completed their work during the policy period.

Additionally, even if the Court found the contract ambiguous, Plaintiff's reading would not comport with the expectations of a reasonable insured. If the Court adopted Plaintiff's reading, Defendant would owe a duty defend so long as the project was completed or abandoned eventually. Under Plaintiff's theory of coverage, the Policy could have expired when the Project was barely completed, and Defendant still would have owed a duty to defend so long as the work was finished at some point. This reading would essentially create a perpetual duty to defend, under which Defendant would have no way of knowing when it might be required to provide coverage. Plaintiff's argument that California's statute of repose provides a 10-year outer limitation is unconvincing, and reinforces the unreasonableness of Plaintiff's interpretation. The statute states:

“No action may be brought to recover damages from any person, or the surety of a person, who develops real property or performs or furnishes the design, specifications, surveying, planning, supervision, testing, or observation of construction or construction of an improvement to real property more than 10 years after the substantial completion of the development or improvement for any of the following.”

Cal. Civ. Pro. § 337.15(a) (emphasis added). Based on the plain text, the statute of repose is not triggered until the project has reached substantial completion. If Defendant's Policy had expired before the Project reached substantial completion, then under Plaintiff's reading of the Policy, Plaintiff could trigger a 10-year duty to defend years after the expiration of the Policy, without Defendant even knowing that the Project was still ongoing. That is unreasonable. No reasonable insured would have believed that the Policy would create a perpetual duty to defend. Rather, a reasonable insured would have understood that the products-completed operations hazard required the Project to be completed during the Policy period; otherwise, the policy end date and extensions would be superfluous.

This understanding is even reflected in PNR's own actions. Indeed, there would be no reason for PNR to seek additional coverage from Plaintiff if the Project was insured for the next 10 years. In 2009, PNR's Receiver Coleman sought additional coverage from Plaintiff. When PNR's insurance broker, CRC Insurance, reached out to Plaintiff, CRC stated: “This policy was insured under an Everest Wrap but the completed ops cover was never triggered as their policy term was only through 3/31/07. As Everest declined to extend we are looking to put a completed ops policy in place which will cover the entire project term through completion.” (Dkt. No. 77-40.) It is apparent that the named insured understood – just like any reasonable insured would – that there was no coverage under the products-completed operations hazard.

2. The Project Was Not Completed During the Policy Period

There is no genuine dispute that the Project was not completed during the policy period. In June 2007, PNR's Project Manager Myra Spence sought an extension of Defendant's Policy. Spence indicated “The project is nearly completed (approximately 97% -- we are at the ‘core and shell’ stage), but none of the units has yet been sold.” See Dkt. No. 58-9. Additionally, when PNR's insurance broker, CRC Insurance, sought insurance coverage from Plaintiff in 2009, CRC stated that the Project “was started and completed from 10/31/03 through 8/10/07.” (Dkt. No. 77-40.) Finally, the Project's Certificate of Completion was not recorded until November 14, 2007. Based on this evidence, no reasonable juror could conclude that the Project was completed within the Policy Period.

Plaintiff, at oral argument, raised the possibility that there could be a potential dispute over whether H & R completed the work under its contract during the policy period. However, this is nothing more than Plaintiff's counsel's speculation. See Loomis v. Cornish, 836 F.3d 991, 997 (9th Cir. 2016) (“Mere allegation and speculation do not create a factual dispute for purposes of summary judgment.”). Plaintiff has not presented any evidence that raises a genuine question as to whether any party, including H & R, had completed the Project during the policy period.

Moreover, even if H & R did complete its work during the policy period, the Court agrees with Defendant that Plaintiff has not demonstrated H & R was enrolled in the Policy. The Named Insureds section of the Policy lists “All contractors and subcontractors enrolled in the Owner Controlled Insurance Program.” The word “enrolled” means that some additional step must have been taken to add a subcontractor to the policy. However, Plaintiff cannot point to any affirmative act taken to enroll H & R in the policy. Plaintiff relies on a subcontractor agreement with Salter Company, wherein Salter Company agreed to provide H & R Wrap Insurance. (Palumbo Decl. ¶ 9, Ex. 8 (Dkt. No. 58-40).) However, Plaintiff has not explained how H & R's contract with a third party – who is also not a named insured – could have enrolled H & R in the Policy. Likewise, Plaintiff has not pointed to any evidence showing that Defendant or any named insured authorized Salter Company to enroll subcontractors into the Policy.

VII. CONCLUSION

Accordingly, because the Policy unambiguously required the work to have been completed during the Policy period, and because no reasonable jury could find that the work was completed on time, Defendant did not owe PNR, Avoca, or H & R a duty to defend. Therefore, Plaintiff's causes of action fail as a matter of law.

For the foregoing reasons, Plaintiff's Motion for Summary Judgment is therefore DENIED. Defendant's Motion for Summary Judgment is GRANTED. Defendant is ORDERED to file a Proposed Judgment within five (5) days of the issuance of this Order. The Pretrial Conference and Jury Trial dates are vacated.

ANDRÉ BIROTTE JR., UNITED STATES DISTRICT COURT JUDGE