A commercial excess liability policy did not cover an insured’s alleged liability for an injury which occurred before the policy was issued .(Wallman v. Suddock ( 2011) 200 Cal.App.4th 1288.)
Facts
In 1994, Barry Wallman and other members of his family (Wallmans) owned an apartment building on Ingraham Street in Los Angeles (Ingraham property). The Wallmans obtained a general liability on the Ingraham property through Crusader Insurance Company (Crusader) with effective dates of December 4, 1993 to December 4, 1994 and limits of $500,000 per occurrence. In February 1994, while the Crusader policy was in effect, a child named Anthony Rodriguez (Rodriguez) fell from a third story window of the Ingraham property and suffered a serious injury. However, Rodriguez did not immediately sue the Wallmans.
In 2001, approximately seven years after Rodriguez’ injury, the Wallmans sold the Ingraham property.
Later, in 2004, the Wallmans formed RTG Investments, Inc. (RTG), which became the owner of 25 separate pieces of property. RTG obtained general liability insurance policies for its properties through Capital Insurance Group (Capital) with effective dates of July 15, 2005 to July 15, 2006 and limits of $1 million each occurrence. RTG also obtained an excess liability policy for its properties through American Guarantee & Liability Insurance Company (American Guarantee) with effective dates of July 15, 2005 to July 15, 2006 and limits of $2 million each occurrence. The American Guarantee policy’s “Schedule of Underlying Insurance” identified the underlying insurer as “Capital Insurance Group,” the policy term as “July 15, 2005, to July 15, 2006” and the policy number as “TBD.” The American Guarantee policy also contained an endorsement which identified 25 properties covered by the American Guarantee policy, but which did not list the previously-sold Ingraham property.
In 2006, Rodriguez sued the Wallmans for the injuries Rodriguez had suffered at the Ingraham property in 1994. The Wallmans sought coverage under both the Crusader general liability policy in effect during 1993-1994 and the American Guarantee excess policy in effect during 2005-2006. Although Crusader acknowledged coverage for the Wallmans, American Guarantee disclaimed coverage. Rodriguez ultimately settled his lawsuit against the Wallmans for $1 million, which consisted of Crusader’s policy limit of $500,000 plus a payment by the Wallmans of $500,000.
The Wallmans then sued American Guarantee for breach of contract and bad faith. The Wallmans alleged that because the American Guarantee policy did not specifically list the primary policies to which it was excess, but rather indicated that such primary policies were “TBD,” the American Guarantee policy should be interpreted to provide excess coverage above all primary policies in any year , including the Crusader policy that was in effect in 1993-1994. The trial court disagreed and ruled in favor of American Guarantee. The Wallmans appealed.
Holding
The Court of Appeal affirmed. The appellate court held that the plain language of the American Guarantee policy could not reasonably be interpreted to cover the Wallmans’ alleged liability to Rodriguez in the underlying tort action. The appellate court cited three reasons. First, the American Guarantee policy’s schedule of underlying insurance did not refer to the Crusader policy for the 1993-1994 policy term during which Rodriguez had been injured. Second, Rodriguez had settled his claim against the Wallmans for exactly $1 million, and thus Rodriguez’ claim against the Wallmans did not exceed the $1 million underlying limit that was required by the American Guarantee excess policy. Third, the American Guarantee policy was issued to RTG as opposed to the Wallmans, and the policy identified 25 covered locations but did not mention the Ingraham property where the accident happened. The appellate court held that under such circumstances, the Wallmans could not reasonably have expected that the American Guarantee policy would cover the Wallmans’ alleged liability to Rodriguez in the underlying action.
Comment
This case does not really present even a close call. The insureds could not reasonably have expected the excess liability policy to cover an injury that occurred before issuance of the policy, that did not exceed the amount of required underlying insurance, and that arose from a property that was never listed on the policy. The real problem here was that the insureds simply did not carry enough insurance at the time of the accident in 1994. That is what set off the insureds’ scramble for insurance coverage once the minor plaintiff finally sued the insureds in 2006.