PENN-STAR INSURANCE COMPANY V. ZENITH INSURANCE COMPANY

• Court: Court of Appeals for the Ninth Circuit
• Decided: December 28, 2022
• Docket: 21-16930
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS DEC 28 2022 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

PENN-STAR INSURANCE COMPANY, No. 21-16930

Plaintiff-counter- D.C. No. defendant-Appellant, 1:18-cv-01319-DAD-EPG

v. MEMORANDUM* ZENITH INSURANCE COMPANY

Defendant-counter- claimant-Appellee.

Appeal from the United States District Court for the Eastern District of California Dale A. Drozd, District Judge, Presiding

Argued and Submitted December 9, 2022 San Francisco, California

Before: BRESS and VANDYKE, Circuit Judges, and RESTANI,** Judge. Concurrence by Judge VANDYKE.

Penn-Star Insurance Company appeals the district court’s grant of summary

judgment to Zenith Insurance Company in this dispute between two insurers

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Jane A. Restani, Judge for the United States Court of International Trade, sitting by designation. concerning the costs of defending and settling a state court lawsuit regarding a

serious traffic accident. We assume the parties’ familiarity with the relevant facts.

We have jurisdiction under 28 U.S.C. § 1291, and we review the grant of summary

judgment de novo. Westport Ins. Corp. v. Cal. Cas. Mgmt. Co., 916 F.3d 769, 773

(9th Cir. 2019). We reverse.

The Penn-Star policy contains a specific endorsement excluding coverage for

“‘[b]odily injury’ or ‘property damage’ arising out of the ownership, maintenance

or use by any person or entrustment to others, of any aircraft, ‘auto,’ or watercraft.”

(Emphasis added). The auto exclusion endorsement “deleted in its entirety” and

“replaced” a narrower provision from earlier in the policy, which had excluded from

coverage bodily injury or property damage arising out of the “ownership,

maintenance, use or entrustment to others of any aircraft, ‘auto’ or watercraft owned

or operated by or rented or loaned to any insured.” (Emphasis added). The auto

exclusion endorsement noted the change in bolded capital letters at the top of the

page, instructing the reader: “THIS ENDORSEMENT CHANGES THE

POLICY. PLEASE READ IT CAREFULLY.”

Under California law, if an insured reasonably expects coverage, then the

court will find that an exclusion from coverage is unenforceable unless the exclusion

is “conspicuous, plain and clear.” Haynes v. Farmers Ins. Exch., 89 P.3d 381, 385

(Cal. 2004) (citation omitted). An exclusion is conspicuous if it is “placed and

2 printed so that it will attract the reader’s attention.” Id. It is plain and clear if it is

“stated precisely and understandably, in words that are part of the working

vocabulary of the average layperson.” Id.

The underlying accident involved a Toyota Camry operated by a third party

and a tractor owned by Zenith’s insured and driven by a contracted farm worker.

We need not decide whether a tractor is an “auto” within the meaning of the

exclusion because the Toyota Camry clearly qualifies as “any . . . auto” “use[d] by

any person.” The district court concluded otherwise on the ground that the Toyota

Camry was not owned or operated by any insured party. But Penn-Star’s auto

exclusion, which is conspicuous, plain, and clear, is drafted broadly and is not

limited to autos used by insureds.

Zenith points us to Essex Ins. Co. v. City of Bakersfield, 65 Cal. Rptr. 3d 1

(Cal. Ct. App. 2007), but that case is distinguishable. The relevant provision in Essex

did not specify whether the exclusion pertained broadly to any person or merely to

any insured. See id. at 8. Here, by contrast, Penn-Star’s auto exclusion specifically

applied to the use of “any” auto “by any person.” In addition, unlike in Essex, Penn-

Star’s auto exclusion endorsement specifically replaced an earlier provision that only

excluded autos “operated by . . . any insured.” And unlike Essex, 65 Cal. Rptr. 3d

at 9–10, this is not a case in which the collision took place between vehicles that

were wholly unconnected to the insured parties; here, the tractor was driven by

3 Golden Labor’s employee and owned by Camp, which was an “additional insured”

under the Penn-Star policy.

We thus conclude that the Toyota Camry was an “auto” “use[d] by any

person.” And the parties do not dispute that the collision between the Camry and

the tractor “ar[ose] out of” the use of the Camry. Thus, the collision fell within Penn-

Star’s auto exclusion and was conspicuously, plainly, and clearly outside Penn-

Star’s coverage. In light of our conclusion, we need not reach Penn-Star’s other

assignments of error.

REVERSED.

4 FILED DEC 28 2022 VANDYKE, J., concurring, MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS I concur in the panel’s decision. It is not clear to me that, if the appellee had

properly raised the issue, the injury here sufficiently “ar[ose] out of the … use … [of

an] ‘auto’” such that the exclusion in Penn-Star’s policy would apply. See, e.g.,

Southgate Recreation & Park Dist. v. California Ass’n. for Park & Recreation Ins.,

130 Cal. Rptr. 2d 728, 733 (Cal. Ct. App. 2003) (reasoning that a harm arises out of

an event when it “originat[es], grow[s,] or flow[s] from the event” (citation

omitted)). That is particularly unclear on this record, which is silent as to whether

the Camry’s involvement was anything other than as the mere “situs” of the injury

inflicted by the tractor. See Kramer v. State Farm Fire & Cas. Co., 90 Cal. Rptr. 2d

301, 306 (Cal. Ct. App.), as modified on denial of reh’g (Dec. 8, 1999) (reasoning

that a harm does not arise from an auto when the auto “merely serv[ed] as the situs

for the activity”); Am. Nat. Prop. & Cas. Co. v. Julie R., 90 Cal. Rptr. 2d 119, 122–

23 (Cal. Ct. App. 1999) (concluding that “[m]ere use of a vehicle in some way

connected to the events giving rise to the injury is insufficient”; use of the vehicle

must be a “predominating cause” or “substantial factor” in causing the injury

(citations omitted)).

The district court arguably concluded that the plaintiffs’ injury did not “arise

out of” the use of the Camry, stating that “as alleged in the underlying state court

complaint, there is no connection between the use or ownership of the vehicle the plaintiffs in the state court action were traveling in and the injuries they incurred as

a result of the collision.” But appellant disputed that conclusion in its opening brief

on appeal, and appellee in its response brief failed to address the “arise out of”

language at all. Appellee therefore forfeited any argument that the injury did not

“arise out of” the use of an auto. See United States v. Dreyer, 804 F.3d 1266, 1277

(9th Cir. 2015) (“Generally, an appellee waives any argument it fails to raise in its

answering brief.”). I accordingly concur with the panel’s conclusion.