The Burlington Insurance Company v. Bay One Security, Inc.
4:17-cv-04734
N.D. Cal.Apr 10, 2018Background
- Bay One Security contracted to provide licensed, trained security guards and patrol/surveillance services at German Motors (BMW of San Francisco) dealership during overnight hours.
- On June 1, 2015, an intruder broke into the showroom, stole vehicles (driving through glass), and caused property damage; the guard allegedly recognized and reported the crime only after a vehicle crash.
- German Motors and Federated sued Bay One in state court for breach of contract and negligence; Bay One tendered defense to Burlington Insurance under a commercial general liability (CGL) policy (Dec. 5, 2014–Jan. 5, 2016).
- Burlington agreed base CGL coverage would apply but invoked three policy exclusions to deny the duty to defend: (1) Professional Services Exclusion; (2) Property Entrusted Exclusion; (3) Auto Amendment (broad auto exclusion).
- The district court framed the duty to defend standard: insurer must show exclusions eliminate any potential for coverage; any doubt resolved for insured.
- Court granted Burlington’s motion and denied defendants’ cross-motion, holding the Professional Services Exclusion bars coverage; it did not reach Entrusted ambiguity and rejected the Auto Amendment as inapplicable.
Issues
| Issue | Plaintiff's Argument (Burlington) | Defendant's Argument (German Motors / Federated) | Held |
|---|---|---|---|
| Whether CGL covers claims arising from Bay One’s security services or is barred by Professional Services Exclusion | Security services are "professional services" (licensed, trained, require mental judgment); exclusion therefore precludes coverage for alleged negligent performance | Security guard duties are non-professional (routine monitoring); exclusion should be construed narrowly to preserve coverage | Held: Exclusion applies; security services are professional -> no duty to defend |
| Whether damage to German Motors’ cars/dealership is excluded by Property Entrusted Exclusion | Exclusion covers property "entrusted" to security/patrol agencies as listed in schedule -> excludes coverage | Cars were not placed in Bay One’s possession/custody; "entrusted" requires bailment-type control; exclusion ambiguous | Court did not decide (found ambiguity) because Professional Services Exclusion was dispositive |
| Whether the Auto Amendment bars coverage because damage involved automobiles | Auto Amendment broadly excludes damage caused by or arising out of autos, superseding standard auto exclusion | Under facts, damages arose from Bay One’s negligent security services, not caused by or arising out of an auto; autos were instrumentality, not proximate triggering cause | Held: Auto Amendment does not apply; damages alleged arose from alleged negligent security performance, not from autos |
| Duty to defend standard/application | Burlington must show an exclusion eliminates all potential coverage | Defendants: Any possibility of coverage requires duty to defend | Held: Because Professional Services Exclusion applies in all conceivable theories, Burlington has no duty to defend |
Key Cases Cited
- Montrose Chem. Corp. v. Superior Court, 6 Cal.4th 287 (Insurer owes broad duty to defend; any doubt resolved for insured)
- Horace Mann Ins. Co. v. Barbara B., 4 Cal.4th 1076 (duty-to-defend scope and test)
- MacKinnon v. Truck Ins. Exchange, 31 Cal.4th 635 (coverage interpreted broadly for insured)
- Energy Ins. Mut. Ltd. v. Ace Am. Ins. Co., 14 Cal. App. 5th 281 (professional services exclusion can bar coverage for security services)
- Tradewinds Escrow, Inc. v. Truck Ins. Exch., 97 Cal. App. 4th 702 (definition of professional services)
- Hollingsworth v. Commercial Union Ins. Co., 208 Cal. App. 3d 800 (professional services scope; not limited to learned professions)
- F & H Constr. v. ITT Hartford Ins. Co., 118 Cal. App. 4th 364 (liability policies are not performance bonds)