LAW OFFICES
OF
ANDREA LYNN RICE
A Professional Corporation
12100 Wilshire Boulevard
Suite 780
Los Angeles, California 90025
Telephone (310) 207-3717
Facsimile (310) 207-6785
Los Angeles Appeallate Attorney
LIABILITY UPDATE
April 18, 2008
In Boeing Co. v. Continental Casualty 2007 Daily Journal D.A.R 18419, the Second Appellate District of the California Court of Appeal held that a party to an indemnity contract is incapable of alleging status as an additional insured under a commercial general liability policy where the policy requires that the insured has requested in writing that it be added.
Christmas in April USA (CIA) is a nonprofit corporation based in Washington, D.C. CIA enlists volunteers to repair and rehabilitate the homes of low-income, elderly and disadvantaged persons. CIA solicits companies such as Boeing Co. (Boeing) to encourage its employees to volunteer for reconstruction projects.
On April 28, 2001, Todd Black (Black), an employee of California State University at Long Beach (CSULB), allegedly was injured while working as a volunteer on a CIA project at the home of Sam and Annie Nichols (Nichols) in Long Beach. On April 24, 2002, Black filed suit against Boeing, CSULB and Nichols (Black v. Boeing et al.). As against Boeing, Black pled causes of action for negligence, product liability and breach of implied warranty. Black asserted that Boeing was a joint venturer with CSULB and CIA on the Nichols project, his work at the Nichols home was under the direction and supervision of Boeing and Boeing supplied him with a defective step-stool.
Boeing tendered its defense in Black to Continental Casualty Company (Continental). On April 24, 2003, Continental declined the tender in a letter which stated in relevant part: “[Continental] insured [CIA] under the above-referenced policy, however, this policy does not identify [Boeing] as an additional insured. We have confirmed with our insured that they did not have a legal requirement to name [Boeing] as an additional insured nor did [Boeing] request to be added as an additional insured on [CIA’s] policy. . . . [¶] We have also confirmed that no contract exists as between your client and our insured. At this time, [Continental] respectfully rejects your request to defend and indemnify [Boeing].” Boeing defended the Black action and obtained summary judgment on August 4, 2003 on various grounds.
On January 19, 2006, Boeing sued Continental to recover its defense costs in the Black action. Boeing’s theory that it was an additional insured under CIA’s Continental policy was based on the language of the following endorsement: “The following are additional insureds: [¶] . . . [¶] 3. Any person, (other than the named insured, or any employee of the named insured) or an organization while acting as any agent for, or on behalf of the named insured, including but not limited to real estate agents, however, such coverage will be granted only on written request of the insured and for such limits as are afforded by this policy.”
Continental demurred to Boeing’s complaint. Citing the language of the additional insured endorsement, Continental contended that Boeing can qualify as an additional insured only if Boeing could establish that the insured, i.e., CIA, made a written request that additional insured coverage be extended to Boeing, and in the absence of any “allegation anywhere that any insured requested Continental provide additional insured coverage for Boeing, Boeing did not allege sufficient facts to establish that it was an additional insured.”
The trial court sustained Continental’s demurrer without leave to amend, explaining “whether only the named insured can seek coverage or someone else is entitled to seek coverage under the terms of the policy, coverage has to be requested, and a person or entity has to become an insured before they assert a right to indemnity. [¶] The company has to undertake to insure someone, and then anything which is insured under the policy gives rise to a right to demand indemnity under the policy. [¶] But someone who’s never been accepted as an insured, someone who’s never asked to become an insured, who becomes injured, can't then write a letter asking to be covered for the injury. That just isn't the way the law contemplates insurance will work, nor do insurance companies contemplate having to be liable for coverage to the world of volunteers, all of whom are unknown until after they've suffered injury.”
Boeing filed a timely notice of appeal from the judgment of dismissal. The Court of Appeal affirmed.
The appellate court noted as a preliminary matter that Boeing admittedly was not the named insured. CIA, a corporation, was the only person or entity identified in the policy as the “named insured.” “Further, section II of the policy, setting forth the policy’s ‘WHO IS AN INSURED’ provisions, is unavailing to Boeing. Under those provisions, CIA, as a corporation, was an insured, as were its executive officers and directors (with respect to their duties as officers and directors) and its stockholders (only with respect to their liability as stockholders). In addition, pursuant to Section II, the following were also insureds under the policy: CIA’s employees for acts within the scope of their employment; any person acting as CIA’s real estate manager; any person or organization having custody of CIA’s property upon death; and CIA’s legal representative upon death-none of which provisions is relevant here.”
Boeing’s case against Continental stands or falls with the application of the policy’s special endorsement for additional insureds. To reiterate, said endorsement provides in relevant part: “The following are additional insureds: [¶] . . . [¶] 3. Any person, (other than the named insured, or any employee of the named insured) or an organization while acting as any agent for, or on behalf of the named insured, including but not limited to real estate agents, however, such coverage will be granted only on written request of the insured and for such limits as are afforded by this policy.” (Italics added.)
Boeing asserted that, to trigger coverage for an additional insured, the special endorsement stated that “the insured,” not the “named insured,” must make a written request to the insurer, and here, it made such a written request to Continental. “We reject Boeing’s attempt to create an ambiguity in this regard. As discussed, ambiguity is not necessarily to be found in the fact that a word or phrase isolated from its context is susceptible of more than one meaning; the critical principle is that an insurance policy must be interpreted as a whole and in context.”
The court pointed out that paragraph B of the policy’s Common Policy Conditions stated in relevant part: “CHANGES [¶] This policy contains all the agreements between you and us concerning the insurance afforded. The first Named Insured shown in the Declarations is authorized to make changes in the terms of this policy with our consent.” (Italics added.) “Thus, solely CIA, as the named insured, had the authority to request changes to the policy, and with the consent of Continental.”
Reading Paragraph B in conjunction with the special endorsement for additional insureds, it is clear that Boeing had no standing to make written request to Continental to be named as an additional insured under the policy. [¶] Because Boeing did not qualify as an additional insured under CIA’s policy, Continental did not owe Boeing a defense in the Black personal injury action. Therefore, the trial court properly sustained Continental’s demurrer to Boeing’s first amended complaint without leave to amend.
----Andrea Lynn Rice
OF
ANDREA LYNN RICE
A Professional Corporation
12100 Wilshire Boulevard
Suite 780
Los Angeles, California 90025
Telephone (310) 207-3717
Facsimile (310) 207-6785
Los Angeles Appeallate Attorney
LIABILITY UPDATE
April 18, 2008
In Boeing Co. v. Continental Casualty 2007 Daily Journal D.A.R 18419, the Second Appellate District of the California Court of Appeal held that a party to an indemnity contract is incapable of alleging status as an additional insured under a commercial general liability policy where the policy requires that the insured has requested in writing that it be added.
Christmas in April USA (CIA) is a nonprofit corporation based in Washington, D.C. CIA enlists volunteers to repair and rehabilitate the homes of low-income, elderly and disadvantaged persons. CIA solicits companies such as Boeing Co. (Boeing) to encourage its employees to volunteer for reconstruction projects.
On April 28, 2001, Todd Black (Black), an employee of California State University at Long Beach (CSULB), allegedly was injured while working as a volunteer on a CIA project at the home of Sam and Annie Nichols (Nichols) in Long Beach. On April 24, 2002, Black filed suit against Boeing, CSULB and Nichols (Black v. Boeing et al.). As against Boeing, Black pled causes of action for negligence, product liability and breach of implied warranty. Black asserted that Boeing was a joint venturer with CSULB and CIA on the Nichols project, his work at the Nichols home was under the direction and supervision of Boeing and Boeing supplied him with a defective step-stool.
Boeing tendered its defense in Black to Continental Casualty Company (Continental). On April 24, 2003, Continental declined the tender in a letter which stated in relevant part: “[Continental] insured [CIA] under the above-referenced policy, however, this policy does not identify [Boeing] as an additional insured. We have confirmed with our insured that they did not have a legal requirement to name [Boeing] as an additional insured nor did [Boeing] request to be added as an additional insured on [CIA’s] policy. . . . [¶] We have also confirmed that no contract exists as between your client and our insured. At this time, [Continental] respectfully rejects your request to defend and indemnify [Boeing].” Boeing defended the Black action and obtained summary judgment on August 4, 2003 on various grounds.
On January 19, 2006, Boeing sued Continental to recover its defense costs in the Black action. Boeing’s theory that it was an additional insured under CIA’s Continental policy was based on the language of the following endorsement: “The following are additional insureds: [¶] . . . [¶] 3. Any person, (other than the named insured, or any employee of the named insured) or an organization while acting as any agent for, or on behalf of the named insured, including but not limited to real estate agents, however, such coverage will be granted only on written request of the insured and for such limits as are afforded by this policy.”
Continental demurred to Boeing’s complaint. Citing the language of the additional insured endorsement, Continental contended that Boeing can qualify as an additional insured only if Boeing could establish that the insured, i.e., CIA, made a written request that additional insured coverage be extended to Boeing, and in the absence of any “allegation anywhere that any insured requested Continental provide additional insured coverage for Boeing, Boeing did not allege sufficient facts to establish that it was an additional insured.”
The trial court sustained Continental’s demurrer without leave to amend, explaining “whether only the named insured can seek coverage or someone else is entitled to seek coverage under the terms of the policy, coverage has to be requested, and a person or entity has to become an insured before they assert a right to indemnity. [¶] The company has to undertake to insure someone, and then anything which is insured under the policy gives rise to a right to demand indemnity under the policy. [¶] But someone who’s never been accepted as an insured, someone who’s never asked to become an insured, who becomes injured, can't then write a letter asking to be covered for the injury. That just isn't the way the law contemplates insurance will work, nor do insurance companies contemplate having to be liable for coverage to the world of volunteers, all of whom are unknown until after they've suffered injury.”
Boeing filed a timely notice of appeal from the judgment of dismissal. The Court of Appeal affirmed.
The appellate court noted as a preliminary matter that Boeing admittedly was not the named insured. CIA, a corporation, was the only person or entity identified in the policy as the “named insured.” “Further, section II of the policy, setting forth the policy’s ‘WHO IS AN INSURED’ provisions, is unavailing to Boeing. Under those provisions, CIA, as a corporation, was an insured, as were its executive officers and directors (with respect to their duties as officers and directors) and its stockholders (only with respect to their liability as stockholders). In addition, pursuant to Section II, the following were also insureds under the policy: CIA’s employees for acts within the scope of their employment; any person acting as CIA’s real estate manager; any person or organization having custody of CIA’s property upon death; and CIA’s legal representative upon death-none of which provisions is relevant here.”
Boeing’s case against Continental stands or falls with the application of the policy’s special endorsement for additional insureds. To reiterate, said endorsement provides in relevant part: “The following are additional insureds: [¶] . . . [¶] 3. Any person, (other than the named insured, or any employee of the named insured) or an organization while acting as any agent for, or on behalf of the named insured, including but not limited to real estate agents, however, such coverage will be granted only on written request of the insured and for such limits as are afforded by this policy.” (Italics added.)
Boeing asserted that, to trigger coverage for an additional insured, the special endorsement stated that “the insured,” not the “named insured,” must make a written request to the insurer, and here, it made such a written request to Continental. “We reject Boeing’s attempt to create an ambiguity in this regard. As discussed, ambiguity is not necessarily to be found in the fact that a word or phrase isolated from its context is susceptible of more than one meaning; the critical principle is that an insurance policy must be interpreted as a whole and in context.”
The court pointed out that paragraph B of the policy’s Common Policy Conditions stated in relevant part: “CHANGES [¶] This policy contains all the agreements between you and us concerning the insurance afforded. The first Named Insured shown in the Declarations is authorized to make changes in the terms of this policy with our consent.” (Italics added.) “Thus, solely CIA, as the named insured, had the authority to request changes to the policy, and with the consent of Continental.”
Reading Paragraph B in conjunction with the special endorsement for additional insureds, it is clear that Boeing had no standing to make written request to Continental to be named as an additional insured under the policy. [¶] Because Boeing did not qualify as an additional insured under CIA’s policy, Continental did not owe Boeing a defense in the Black personal injury action. Therefore, the trial court properly sustained Continental’s demurrer to Boeing’s first amended complaint without leave to amend.
----Andrea Lynn Rice
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