Energy Ins. Mut. Ltd. v. Ace Am. Ins. Co.
14 Cal. App. 5th 281
Cal. Ct. App. 5th2017Background
- An unmarked high‑pressure petroleum pipeline owned by Kinder Morgan was struck during excavation, causing an explosion that killed and injured workers; underlying wrongful death and personal injury suits alleged failure to locate and mark the pipeline.
- Kinder Morgan had excess coverage (AEGIS primary excess; EIM as following‑form excess). Comforce (staffing company supplying construction inspectors) had a primary CGL policy and a $25M umbrella policy issued by ACE containing a professional services exclusion.
- ACE participated in defense under reservation for the primary policy but denied coverage under the umbrella policy citing the professional services exclusion; underlying suits settled and EIM (Kinder Morgan’s excess insurer) paid over $30M.
- EIM sued ACE seeking reimbursement/indemnity (equitable subrogation, contribution, indemnity), arguing Kinder Morgan was an additional insured under Comforce’s ACE umbrella and that the professional services exclusion should not bar Kinder Morgan’s coverage.
- The trial court granted summary judgment for ACE, finding the umbrella policy’s professional services exclusion barred coverage for the claims; EIM appealed.
Issues
| Issue | Plaintiff's Argument (EIM) | Defendant's Argument (ACE) | Held |
|---|---|---|---|
| Whether claims arise from "services of a professional nature" excluded by the umbrella policy | The exclusion is vague/ill‑defined and should not apply; Kinder Morgan’s expected additional insured coverage would be rendered illusory | The underlying claims stem from failure to locate/mark pipelines — specialized, professional services — so the exclusion applies | Court held the exclusion applies: locating/marking pipelines and inspector duties are professional services and claims arise from their failure to perform those services, so exclusion bars coverage |
| Whether separation‑of‑insureds / additional insured status permits Kinder Morgan coverage despite exclusion applying to Comforce | Separation of insureds requires separate application of exclusions, so Kinder Morgan (additional insured) could be covered if it did not perform professional services | Both Comforce and Kinder Morgan performed or were responsible for the professional services (Kinder Morgan employed a line rider, trained/supervised inspectors), so separation does not create coverage here | Court held separation clause does not expand coverage: Kinder Morgan’s conduct was professional in nature and the same facts exclude coverage for both parties |
| Whether applying the exclusion renders the ACE umbrella coverage illusory | Excluding professional‑service claims from umbrella coverage leaves Kinder Morgan with no reasonable expectation of coverage as an additional insured | The policy is a CGL/umbrella, not an E&O policy; professional‑service risks are properly excluded and EIM could have purchased professional malpractice coverage separately | Court held exclusion does not make policy illusory: CGL is not intended to cover professional malpractice and exclusion is consistent with insureds’ reasonable expectations |
| Whether EIM can pursue equitable subrogation/contribution/indemnity given exclusion | EIM contends ACE should reimburse under equitable remedies because coverage existed for Kinder Morgan as additional insured | ACE argues exclusion precludes liability so equitable claims fail; statute of limitations defenses also raised | Court found exclusion dispositive and did not reach equitable subrogation/contribution/indemnity merits; summary judgment for ACE affirmed |
Key Cases Cited
- Gray v. Zurich Ins. Co., 65 Cal.2d 263 (explains insuring language connoting general protection for bodily injury)
- Waller v. Truck Ins. Exchange, Inc., 11 Cal.4th 1 (describes purpose and structure of CGL policies)
- MacKinnon v. Truck Ins. Exchange, 31 Cal.4th 635 (rules on interpreting exclusions against insurer and insured expectations)
- Powerine Oil Co. Inc. v. Superior Court, 37 Cal.4th 377 (contract interpretation and insurer/insured expectations)
- Tradewinds Escrow, Inc. v. Truck Ins. Exchange, 97 Cal.App.4th 704 (applies professional services exclusion to exclude professional negligence claims)
- Food Pro Internat., Inc. v. Farmers Ins. Exchange, 169 Cal.App.4th 976 (limits professional services exclusion where injury did not arise out of rendering professional services)
- North Counties Engineering, Inc. v. State Farm Gen. Ins. Co., 224 Cal.App.4th 902 (distinguishes cases where insured performed both professional and nonprofessional work for exclusion analysis)
- Safeco Ins. Co. v. Robert S., 26 Cal.4th 758 (on severability clauses and insureds’ reasonable expectations)