Opinion
Clаrendon America Insurance Company (Clarendon) filed a complaint for declaratory relief, equitable contribution, and equitable indemnity against General Security Indemnity Company of Arizona as the attorney in fact for General Security Indemnity Company (General Security) after settling an action against Hilmor Development (Hilmor), a company that both Clarendon and General Security had insured during different timeframes. General Security cross-complained for declaratory relief and the trial court resolved competing motions for summary judgment in General Security’s
CONTENTIONS
Clarendon contends that the trial court incorrectly interpreted the “products-completed operations hazard” provision of the commercial general liability (CGL) policy issued by General Security, and that the action against Hilmor fell within the scope of General Security’s coverage under that provision. Clarendon further contends that exclusions j(5) and j(6) of the General Security policy, as well as the “claims in progress” exclusion of that policy, do not preclude coverage.
BACKGROUND
Clarendon insured Hilmor under a CGL policy effective July 1, 2000, to July 1, 2001. General Security insured Hilmor under a CGL policy effective July 1, 2001, to July 1, 2002.
On or about September 30, 1999, Hilmor entered into a written construction contract with Haim and Lucinda Revah to serve as the general contractor for the construction of the Revahs’ custom single-family home located at 705 North Alta Drive in Beverly Hills, California. The construction contract provided that Hilmor would perform “all work necessary to demolish the existing residence” and to “construct and complete the Improvements in accordance with the Contract Documents.” The “Improvements” called for in the construction contract included “construction of a new residence . . . consisting of an approximately 14,000 square foot single family home and related hardscape, landscape, fencing and other improvements.” The construction contract provided several conditions that had to be met before the Revahs’ home would be considered complete, including, among other things, the recording of a notice of completion and the Revahs’ ability to beneficially occupy the entire property.
On May 18, 2001, prior to the completion of the Revah residence, the Revahs terminated their contract with Hilmor. In June 2001, Hilmor assigned all subcontracts to the Revahs as required under the construction contract. It was undisputed that the construction of the Revah residence was not completed at the time of Hilmor’s termination from the project. Construction of the residence continued without further participation of any kind from Hilmor. A temporary certificate of occupancy for the Revahs’ residence was issued on September 24, 2001.
On November 12, 2004, the Revahs filed an action against Hilmor alleging defects in the construction of their home. (Revah v. Hilmor Development
Hilmor tendered its defense and indemnification in the Revah action to Clarendon. Clarendon accepted the tender and retained the law firm of Pierce & Weiss to defend Hilmor in the Revah action. Clarendon withdrew its defense in May 2006, then later agreed to defend after Hilmor’s counsel threatened to file an insurance bad faith lawsuit against various carriers, including Clarendon. Clarendon retained Small, Henstridge, Cabodi & Pyles, which associated in as counsel on or about January 30, 2008.
Hilmor’s defense and indemnification had been tendered to General Security on April 14, 2004, by Pierce & Weiss. At first, General Security agreed to participate in Hilmor’s defense through Pierce & Weiss. On May 15, 2006, General Security withdrew its defense on the ground that there was no coverage or potential for coverage under the General Security policy because (1) Hilmor did not complete all of the work called for in Hilmor’s contract with the Revahs prior to the inception of the General Security policy, therefore the products-completed operations hazard clause was not triggered; and (2) the faulty workmanship exclusions and other exclusions in the General Security policy operated to exclude coverage for the claims and damages asserted by the Revahs.
In October 2008, Clarendon settled with the Revahs, allegedly agreeing to pay its full policy limit of $1 million plus contributions of defense costs that it received from some of the subcontractors that worked on the Revah project. In addition, Clarendon allegedly paid defense fees in the amount of $473,463.29 to the Small, Henstridge, Cabodi & Pyles firm.
PROCEDURAL HISTORY
On February 13, 2009, Clarendon filed this action against General Security seeking contribution for the amounts Clarendon paid to defend and indemnify Hilmor in the Revah action. General Security filed a cross-complaint for declaratory relief seeking a judicial declaration regarding both its duty to defend and its duty to indemnify Hilmor in the Revаh action.
On November 19, 2009, General Security filed its motion for summary judgment, or in the alternative summary adjudication, on the ground that there was no coverage or potential for coverage of the Revahs’ claims against Hilmor under the General Security policy.
The parties’ motions were heard as cross-motions. On February 4, 2010, the trial court determined that General Security had met its burden of showing that there was no possibility of coverage under the General Security policy. First, the trial court anаlyzed the products-completed operations hazard clause in General Security’s contract. The court held that there was “no triable issue of fact as to whether the products completed operations hazard coverage under Defendant’s policy applied here. It did not.” The court next determined that exclusions j(5) and (6) of the General Security policy precluded coverage for “property damage arising out of Hilmor’s work at the Revahs’ residence during construction related to defective work and material or satisfactory work damaged by defective work and materials.” Finally, the trial court determined that the “claim(s) in progress” exclusion in Defendant’s policy clearly excludes coverage from continuing and progressive property damage that began before the inception of the policy. The trial court denied Clarendon’s motion and granted General Security’s motion.
On April 5, 2010, Clarendon filed its notice of appeal.
DISCUSSION
I. Standards of review of summary judgment
Summary judgment is properly granted when there are no triable issues of material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) A moving party is entitled to summary judgment if it establishes a complete defense to the plaintiff’s cause of action, or shows that one or more elements of each cause of action cannot be established. (§ 437c, subd. (o); Aguilar v. Atlantic Richfield Co. (2001)
Interpretation of General Security’s policy is a question of law. (Powerine Oil Co., Inc. v. Superior Court (2005)
With these principles in mind, we turn to the language of General Security’s policy.
II. There is no coverage under the “products-completed operations hazard” provision
General Security’s policy specifies that it only covers “bodily injury” or “property damage” caused by an “occurrence” that takes place in the “coverage territory” and occurs “during the policy period.” It is undisputed that Hilmor did not work on the Revah project during the time period when General Security’s policy was in effect.
The products-completed operations hazard provision in General Security’s policy is designed to cover property damage that occurs after an insured’s work is completed. Clarendon’s claims against General Security for equitable contribution and equitable indemnity were based on its argument that coverage of the claims in the Revah action exists under this provision.
A. The definition of “products-completed operations hazard”
General Security’s policy defines the “products-completed operations hazard” as follows:
*1318 “a. Includes all ‘bodily injury’ and ‘property damage’ occurring away from premises you own or rent and arising out of ‘your product’ or ‘your work’ except:
“(1) Products that are still in your physical possession; or
“(2) Wоrk that has not yet been completed or abandoned. However, ‘your work’ will be deemed completed at the earliest of the following times:
“(a) When all of the work called for in your contract has been completed.
“(b) When all of the work to be done at the job site has been completed if your contract calls for work at more than one jobsite.
“(c) When that part of the work done at a job site has been put to its intended use by any person or organization other than another contractor or subcontractor working on the same project.
“Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed.”
This definitiоn plainly includes all property damage occurring away from the insured’s premises and arising out of the insured’s work or products, with the exception of (1) products still in the insured’s possession, and (2) work that has not yet been completed or abandoned.
B. The Revah action falls under the exception for work not completed or abandoned
Hilmor’s work on the Revah residence ended on May 18, 2001, when Hilmor was fired from the job. The letter from Haim Revah to Hilmor on that date specifies that its purpose is to give Hilmor “notice of our termination of Hilmor Development as contractor” with respect to the project. The letter made it clear that work was not complete on the project, indicating that “there are several months of work remaining” which a new general contractor would need to oversee. The Revahs specifically reserved “any rights that we have under the Residential Construction Contract.”
Under these undisputed facts, the products-completed operations hazard coverage does not apply. Subdivision a(2) of that provision specifies that the coverage does not apply to work that has not yet been completed or abandoned. It was undisputed that Hilmor did not complete the work it had been hired to do, which was to oversee construction of the Revahs’ single-family home. Under the contract, Hilmor’s work could not be considered
Nor is there any triable issue as to whether Hilmor “abandoned” the job. The term “abandon” is traditionally used where “both sides to a contract expressly announce their intention to abandon it, releasing both sides from their respective duties under the contract . . . .” (Amelco Electric v. City of Thousand Oaks (2002)
Hilmor’s work had not been completed, nor had it been abandoned. Instead, Hilmor was terminated from the job before it completed its work. Under the plain language of the policy, the products-completed operations hazard does not apply.
C. Clarendon has failed to create a triable issue of fact as to whether the Revah claim was within the scope of the products-completed operations hazard
1. The work was not completed or abandoned
Clarendon’s position is that the work called for under the contract was completed. Clarendon’s theory is that regardless of the original terms of the contract, the Revahs’ termination of Hilmor terminated Hilmor’s obligations under the contract. Thus, Clarendon argues, Hilmor’s work on the project was finished for the purposes of the products-completed operations hazard provision.
Clarendon cites Hollypark Realty Co. v. MacLoane (1958)
First, Clarendon cites Allied Mutual Ins. Co. v. Hingst (D.N.D. 1973)
Here, in contrast, there was no mutual intent to abandon the contract. Instead, the uncontested facts show that Hilmor was unilaterally fired by the Revahs. In addition, the Revahs reserved their rights under the residential construction contraсt and specifically noted that Hilmor’s work on the project was not complete. These facts differentiate this matter from the facts in Allied, and the case does not persuade us that Hilmor’s work was completed or abandoned as required under the products-completed operations hazard clause in the General Security policy.
Next, Clarendon cites a South Carolina case, Laidlaw Environmental Services (TOC), Inc. v. Aetna Casualty & Surety Co. (Ct.App. 1999)
As explained above, the undisputed facts of this case do not support a finding that Hilmor abandoned its work on the Revah project. Unlike Radco, Hilmor was fired. Nor have the parties before us agreed that Hilmor abandoned the work. In fact, Clarendon’s counsel admitted at oral argument that no abandonment occurred in the present case. Laidlaw did not address the application of a products-completed operations hazard clause under the circumstances of this case, and does not convince us that such coverage is applicable here.
2. Hilmor’s work was not put to its intended use under paragraph a(2)(c) of the policy
The products-completed operation hazard provides coverage for injury and damage “arising out of ‘your product’ or ‘your work’ ” with the exception of work “that has not yet been completed or abandoned.” (Par. a(2).) However, under the policy, “your work” is “deemed completed” under three specific circumstances. Under paragraph a(2)(c), “your work” is deemed completed: “(c) When that part of the work done at a job site has been put to its intended use by any person or organization other than another contractor or subcontractor working on the same project.”
Clarendon argues that Hilmor’s work should be deemed completed under this provision. Clarendon points out that it is undisputed that a temporary certificate of occupancy was issued on September 24, 2001, at which time the house was put to its intended use as a residence. In addition, there is no evidence that the work done by Hilmor was demolished or otherwise not used in the completion of the construction. Thus, Clarendon argues, it is logical to conclude that the work of Hilmor was included in the final construction of the hоme and thus put to its intended use no later than September 24, 2001, during the term of General Security’s policy. Even though it was not “complete,” Clarendon states, Hilmor’s work was put to its intended use.
D. The foreign authority cited by General Security is relevant and persuasive
Like Clarendon, General Security relies on foreign authority to bolster its arguments. While we are not bound by these cases as precedent, we find that they provide support for our interpretation of the products-completed operations hazard provision.
In McGowan v. State Farm Fire & Casualty Co. (Colo.App. 2004)
Vintage Contracting, L.L.C. v. Dixie Building Material Co. (La.Ct.App. 2003)
Significantly, the Louisiana court rejected Vintage’s argument that the products-completed operations hazard provision was ambiguous, stating that the clause was “clear and unequivocal. In order for this coverage to apply, the work must have been completed or abandoned, neither of which occurred in this case.” (Vintage Contracting, L.L.C. v. Dixie Building Material Co., supra, 858 So.2d at pp. 29-30.) The same analysis applies to the matter before us.
Finally, in Century Indemnity Co. v. Golden Hills Builders, Inc. (2002)
The South Carolina Supreme Court determined that there was no liability under the policy because coverage was excluded under the faulty workmanship provision. (Century, supra,
Clarendon argues that “not one of the cases cited by General Security held that a contractor whose contract is terminated cannot have ‘completed operations.’ ” Although no case has made such a sweeping statement, the persuasive authority described above supports the conclusion that we reach here: when a contractor has not completed the work it was hired to do, the products-completed operations hazard provision does not apply. Hilmor did not complete the job, thus the coverage was not triggered.
The products-completed operations hazard coverage applies only where the insured’s work has been completed, as specifically described in the policy, or abandoned. Neither of those circumstances exists here, thus the products-completed operations hazard does not, as a matter of law, provide coverage.
HI. Exceptions to coverage
We have determined that the products-completed operations .hazard provision in General Security’s policy does not provide coverage for the underlying claims against Hilmor. However, General Security has set forth two alternative grounds for summary judgment: exclusions j(5) and (6) of the policy, also known as the faulty workmanship exclusions, and the claims in progress exclusion. We discuss these provisions briefly below, and agree that they support a grant of summary judgment in favor of General Security.
Exclusions j(5) and (6) provide:
“This insurance does not apply to: . . .
“ ‘Property damage’ to: [][]... [f]
“(5) That particular part of real propеrty on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations; or
“(6) That particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.”
These faulty workmanship exclusions preclude coverage for deficiencies in the insured’s work. As explained in Maryland Casualty Co. v. Reeder (1990)
The exclusion found in j(5) applies to works in progress. The insurer is not obligated to indemnify a policyholder for property damage that occurs while the insured is performing operations on that property. Thus, if the Revahs’ claims encompassed property damage that occurred while Hilmor or its subcontractors were performing operations on the property, no coverage would exist.
Clarendon argues that paragraph j(6) does not exclude coverage for damage to the work of others caused by the insured’s faulty work. Clarendon proposes that if some of the damage at issue in the Revah action constituted damage to work done by other contractors, that part of the claim would not be barred by this exclusion. We reject this argument. The list of observed defects and deficiencies that the Revahs attached to their complaint against Hilmor does not reference any damage to the work of others, it simply lists faulty work which must be repaired or replaced. In addition, Clarendon has failed to cite to any specific examples of damage to the work of others that might have been caused by Hilmor’s allegedly faulty work. In the absence of such specific evidence, Clarendon’s speculation may not create a triable issue of fact. (Roberts v. Assurance Co. of America (2008)
B. The claims in progress exclusion
The “Claim(s) in Progress Exclusion” in General Security’s policy provides:
“1. The Policy shall not apply to bodily injury or property damage, which begins or takes place before the inception date of coverage, whether such bodily injury or property damage is known to an insured, even though the nature and extent of such damage or injury may change and even though the damage may be continuous, progressive, cumulative, changing or evolving, and even thоugh the occurrence causing such bodily injury or property damage may be or involve a continuous or repeated exposure to substantially the same general harm.
“2. All property damage to units of or within a single project or development, and rising from the same general type of harm, shall be deemed to*1327 occur at the time of damage to the first such unit, even though the (existence), nature and extent of such damage or injury may change and even though the occurrence causing such property damage may be or involve a continuous or repeated exposure to substantially the same general harm which also continues or takes place (in the case of repeated exposure to substantially the samе general harm) during the policy term.” Under the terms of this exclusion, the General Security policy does not apply to property damage which began or took place before July 1, 2001, the date that General Security’s policy became effective.
There was evidence that the continuing and progressive property damage of which the Revahs complained began prior to the inception of the General Security policy. A letter dated April 27, 2006, from Clarendon’s counsel states “[t]he discovery that has transpired since the date of denial has revealed that property damage may very well have resulted prior to July 1, 2001.”
Clarendon argues that there was never a finding as to when the damage first happened, and that the letter referenced by General Security provides nothing more than speculation that the damage may have begun prior to the inception of the General Security policy. However, General Security has already shown that any damage arising after Hilmor was fired is not eligible for coverage under the products-completed operations hazard provision. The claims in progress clause strengthens General Security’s position by precluding any possibility of coverage for damage which began or took place prior to the effective date of the General Security policy: July 1, 2001.
IV. Summary judgment was properly granted
The policy issued to Hilmor by General Security covered only “bodily injury” or “property damage” arising out of Hilmor’s work caused by an “occurrence” taking place “during the policy period.” There is no question that Hilmor did not work on the Revah project during the period covered by the policy.
The products-completed operations hazard provision provides coverage for “bodily injury” or “property damage” arising out of Hilmor’s work or product, with the exception of “[wjork that has not yet been completed or abandoned.” Because Hilmor never completed or abandoned its work on the Revah project, there was no coverage under the products-completed operations hazard provision.
In addition, the faulty workmanship provisions found in paragraphs j(5) and (6) preclude coverage for poor workmanship and materials, which fоrm the basis for the Revahs’ action against Hilmor.
Whether the claims asserted against Hilmor in the Revah action arose from damage occurring while Hilmor was on the job, or after Hilmor left the job, General Security has met its burden of proving that there was no potential for coverage of the Revahs’ claims under the policy that it issued to Hilmor. General Security was therefore entitled to summary judgment as a matter of law. (Powerine Oil Co., Inc. v. Superior Court, supra,
DISPOSITION
The judgment is affirmed. General Security is entitled to its costs of appeal.
Boren, R J., and Ashmann-Gerst, J., concurred.
Notes
The policy defines “your work” as: “a. Work or operations performed by you or on your behalf; and [c|0 b. Materials, parts or equipment furnished in connection with such work or operations.”
Clarendon attempts to distinguish McGowan on the ground that “there was conclusive evidence that the damage happened while the insured’s work was on-going.” Clarendon argues that “[t]here is no evidence of any damage happening while Hilmor Development was still working on the project. There is no evidence of the property damage happening before the home was put to its intended use. There is no evidence at all of when the damage first happened. In the absence of such evidence, General Security cannot say the damage did not happen after Hilmor Development’s work was ‘completed’ as that term is used in its policy.” We are not persuaded by this argument as the uncontradicted evidence shows that Hilmor never completed the work that it contracted to perform.