J and J Realty Holdings v. Great American E & S Ins. Co.

• Court: Court of Appeals for the Ninth Circuit
• Decided: December 11, 2020
• Docket: 19-56172
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS DEC 11 2020 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

J & J REALTY HOLDINGS, No. 19-56172

Plaintiff-Appellant, D.C. No. 2:18-cv-02487-DGM-E

v.

GREAT AMERICAN E & S MEMORANDUM* INSURANCE COMPANY,

Defendant-Appellee.

Appeal from the United States District Court for the Central District of California Dolly Gee, District Judge, Presiding

Submitted December 9, 2020** Pasadena, California

Before: OWENS and LEE, Circuit Judges, and COGAN,*** District Judge.

J & J Realty Holdings appeals from the district court’s grant of summary

judgment in favor of Great American E & S Insurance Company. The district court

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). *** The Honorable Brian M. Cogan, United States District Judge for the Eastern District of New York, sitting by designation. resolved this insurance coverage dispute in favor of Great American and held that

an employer’s liability exclusion applied. We have jurisdiction under 28 U.S.C.

§ 1291, and we review de novo a district court’s grant of summary judgment. Baker

v. Liberty Mut. Ins. Co., 143 F.3d 1260, 1263 (9th Cir. 1998). We affirm.

1. Great American issued a joint insurance policy (“Policy”) to Lance

Campers Manufacturing Company and J & J, which leased its parking lot to Lance.

The Policy contains an Employer’s Liability Exclusion, which bars coverage for

personal injury suits brought by an “employee of any insured.” When an employee

of Lance suffered an injury in the parking lot and sued both J & J and Lance, Great

American denied coverage to both insureds on the basis that the employee was an

employee of “any insured.” J & J, however, argued that “any insured” was

ambiguous in light of the Policy’s Separation of Insureds Clause, which directs “this

insurance” to apply “as if each named insured were the only named insured” and

“separately to each insured against whom claim is made or suit is brought.”

2. The district court properly held that the Employer’s Liability Exclusion

bars coverage in the underlying personal injury action, notwithstanding the existence

of the Separation of Insureds Clause. As a threshold matter, the Employer’s Liability

Exclusion originally barred coverage for personal injury suits brought by an

employee of “the insured.” This language was modified via an endorsement that

replaced “the insured” with “any insured.” J & J challenges the enforceability of

2 this endorsement for the first time on appeal, but we conclude that the endorsement

was sufficiently clear and conspicuous to be valid.

Turning to the “any insured” language itself, the phrase “an employee of any

insured” unambiguously refers to an employee of either J & J or Lance. Because

the underlying action in this case was brought by an employee of Lance, the plain

language of the Employer’s Liability Exclusion thus bars coverage for J & J in the

underlying action. J & J maintains, however, that the phrase “any insured” is

rendered ambiguous by the Policy’s Separation of Insureds Clause. The problem

with J & J’s interpretation is that applying the Separation of Insureds Clause to limit

the universe of “any insured” to only the party seeking coverage (in this case, J & J)

would require us to read the phrase “any insured” as if it said “the insured.” Those

words are meaningfully different. Such a reading would thus nullify the “any

insured” endorsement. And under California law, we “must interpret contractual

language in a manner which gives force and effect to every provision, and not in a

way which renders some clauses nugatory, inoperative or meaningless.” City of

Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 68 Cal. App. 4th 445,

473 (1998).

Not only that, but J & J’s preferred reading would render meaningless other

parts of the Employer’s Liability Exclusion as well. For example, that provision also

contains language stating that the exclusion should apply “whether the insured may

3 be liable as an employer or in any other capacity.” As the district court explained,

reading the exclusion to apply only to the employer of employees that sustain

injuries during the course of employment would mean that the employer’s liability

would always be in its capacity as an employer and never in “any other capacity,”

thus rendering the “in any other capacity” language meaningless. The fact that the

text of the provision specifically contemplates the exclusion applying to both

employers and non-employers further supports applying the plain language of the

Employer’s Liability Exclusion to exclude coverage for the underlying action.

The California Supreme Court’s decision in Minkler v. Safeco Ins. Co. of

America, 49 Cal. 4th 315 (2010) does not change this outcome. Although Minkler

does contain an ostensibly broad direction to treat each insured as if they were the

“sole person covered” for all policy purposes, Minkler, 49 Cal. 4th at 323, the

California Supreme Court was also careful to limit Minkler’s holding to its facts.

Specifically, the court made clear that the “reasoning and conclusion” in Minkler

were only meant to apply to “the specific circumstances of this case, which involves

the interplay between a severability clause and an exclusion for the intentional acts

of ‘an’ insured,” and that Minkler should not be read to “mean a severability clause

necessarily affects all exclusions framed in terms of ‘an’ or ‘any’ insured.” Id. at

329 n.5. What is more, Minkler explicitly acknowledged that there could be “some

cases” where “the collective application of an exclusion that refers to ‘an’ or ‘any’

4 insured may be so clear in context that the presence of a severability clause could

neither create, nor resolve, an ambiguity.” Id.

This is one of those clear cases, and Minkler is readily distinguishable. For

one, Minkler’s primary concern about thwarting the reasonable expectations of an

innocent insured is much less persuasive here. That case involved a highly unique

situation in in which a homeowner lost liability coverage due to an intentional-acts

exclusion because her adult son, the tortfeasor, was deemed to be an additional

insured solely by virtue of living in her house temporarily. Minkler, 49 Cal. 4th at

332-33. J & J, on the other hand, is a sophisticated business entity that voluntarily

entered into a lessor-lessee relationship with Lance and was explicitly listed as an

additional named insured under Lance’s insurance policy. In this case, it is much

more of a stretch to say that J & J had no reason to expect that the Employer’s

Liability Exclusion would be triggered by its co-insured’s circumstances, especially

considering the fact that, as discussed above, the scope of the exclusion was

explicitly broadened via an endorsement.

3. Next, the district court also properly held that J & J’s claim for breach

of the implied covenant of good faith and fair dealing could not survive in the

absence of any potential for coverage. Under California law, “if there is no potential

for coverage and, hence, no duty to defend under the terms of the policy, there can

be no action for breach of the implied covenant of good faith and fair dealing because

5 the covenant is based on the contractual relationship between the insured and the

insurer.” Waller v. Truck Ins. Exch., Inc., 11 Cal. 4th 1, 36 (1995).

4. Finally, the district court did not abuse its discretion in overruling J &

J’s objections to certain pieces of evidence on summary judgment. The district court

correctly explained that even though some pieces of evidence were not necessarily

admissible in their submitted form, the underlying evidence could still be considered

as long as it could later be provided in an admissible form at trial. See JL Beverage

Co., LLC v. Jim Beam Brands Co., 828 F.3d 1098, 1110 (9th Cir. 2016). And the

district court did not abuse its discretion in determining that the objected-to evidence

could likely be presented in an admissible form at trial.

AFFIRMED.