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December 2011

Barry Wallman et al. v. Benjamin Suddock - Insurance Policy Terms Not Subject To Unreasonable Interpretation

A Schedule of Underlying Insurance that Failed to Identify a Specific General Liability Policy Did Not Create an Ambiguity and Did Not Provide an Unreasonable Expectation of Coverage

(November 17, 2011) __ Cal.App.2nd __; 11 C.D.O.S. 13980

The California Court of Appeal, Second Appellate District, affirmed the granting of defendants' motions for summary judgment and denying plaintiffs' motions for summary judgment pursuant to a reasonable interpretation of an umbrella policy's schedule of underlying insurance and finding that an insurance agent did not breach a duty owed.  The Court of Appeal held the trial court had not erred in interpreting the schedule of underlying insurance to include only underlying insurance issued by the identified carrier and policy period.  The Court rejected plaintiffs' contention that the policy's schedule of underlying insurance was ambiguous for stating "TBD" under "policy no" and thus applied to a policy issued by another carrier covering a previously owned property.  Applying the material facts, the Court found no ambiguity and no reasonable expectation of coverage.  The Court also found no material facts that the agent breached a duty owed plaintiffs.
Plaintiffs/appellants Barry, Stan, and Nancy Wallman  (the "Wallmans") owned several real properties, including an apartment building located at 1325 Ingraham Street, Los Angeles, California (the "Ingraham Property"), which the Wallmans sold in 2001.  The Ingraham Property was insured by Crusader Insurance Company ("Crusader").

In 2004, the Wallmans formed RTG Investments, Inc. ("RTG"), a California corporation which owned 23 Limited Liability Companies, each holding the Wallmans' real property. 

In 2004, RTG retained defendant insurance agent Benjamin Suddock ("Suddock") to procure general liability and excess insurance coverage for the Wallmans' properties.  Suddock placed general liability policies issued by Capital Insurance Group ("Capital) to each of RTG's LLC's and the LLC's respective property.  The Capital polices covered policy period 7/15/05-7/15/06 and had limits of $1M per occurrence and $2M aggregate. 

Suddock placed an excess/umbrella policy issued by defendant/respondent American Guarantee & Liability Insurance Company ("American Guarantee") to RTG for the policy period 7/15/05-7/15/06.  Coverage A of the American Guarantee policy provides:  "we will pay on behalf of the insured, those damages covered by this insurance in excess of the total applicable limits of underlying insurance."

The American Guarantee policy's Schedule of Underlying Insurance identified the underlying primary insurance as follows: 
"Company: Capital Insurance Group
"Policy No.: TBD
"Term: 07/15/05 to 07/15/06
"Coverage: Commercial General Liability
"Applicable Limits: $2,000,000 Each Occurrence"

Endorsement No. 2 identified 25 properties covered by the American Guarantee policy.  The Ingraham policy was not a covered property.

In 2006, Anthony Rodriguez, a tenant of the Ingraham, through his guardian ad litem, filed a lawsuit against Barry Wallman for injuries he suffered when he fell out a window at the Ingraham in 1994.  The Wallmans' tendered the claim to Crusader, which had provided coverage for the 1993-1994 policy years with limits of $500K per occurrence.  The Wallmans also tendered the claim to American Guarantee with the expectation that potential liability exceeded the Crusader policy limits.  American Guarantee denied coverage.  The Rodriguez case settled for $1M.  Crusader contributed its policy limits and Barry Wallman contributed the balance.  

RTG and Barry Wallman then filed a lawsuit against American Guarantee and Suddock for negligence breach of contract, bad faith. 

Suddock filed a motion for summary judgment on the grounds that no triable issues of material fact existed proving that he breached any duty owed to the Wallmans and therefore plaintiffs could not prove causation or damages.  The trial court granted Suddock's motion.  Plaintiffs appealed the order. 

American Guarantee also filed a motion for summary judgment on the grounds that no coverage was owed for the Rodriguez claim.  Plaintiffs filed a cross motion for summary judgment.  The trial court granted American Guarantee's motion and denied plaintiffs' motion.  Plaintiffs appealed both orders.
On appeal, the Appellate Court held that the plain language of the American Guarantee's policy could not be reasonably interpreted to cover the Rodriguez claim, because (1) the American Guarantee policy's schedule of underlying insurance did not reference the Crusader policy for the term 1993-1994, and (2) the Rodriguez claim was not in excess of $1M. 

The Appellate Court rejected plaintiff's contention that the schedule's inclusion of the acronym "TBD" under "policy no." created an ambiguity per se that should result in American Guarantee's coverage over "any or all" general liability policies held by plaintiff.  The Court held that in application of "TBD" to the material facts at issue, "TBD" did not create an ambiguity, because the schedule provided the name of the carrier, Capital, and the policy term, 2005-2006.  Therefore, plaintiffs had no reasonable objective expectation that the Crusader policy for the period 1993-1994 was included in the schedule.  On these grounds, the Court affirmed the trial court granting American Guarantee's motion for summary judgment and denial of plaintiffs' motion.

With regard to Suddock's motion, the Appellate Court agreed with Suddock that plaintiffs' statement that the Wallmans needed "higher insurance limits to adequately protect us should another substantial claim be made" was insufficient to create a duty for Suddock to place coverage for past owned properties.  The Court held that plaintiffs presented no triable issues of fact establishing the breach of a duty owed by Suddock.

The Appellate Court further held that plaintiffs failed to present triable issues of material facts that Suddock held himself out as an "expert" creating a higher standard of care.  The Court found the evidence failed to establish what Suddock did to give rise to the Wallmans' belief that he was an expert and thus was conclusory and insufficient to create a higher standard of care.

Finally, the Appellate Court held that no evidence existed establishing that Suddock misrepresented the scope of excess/umbrella coverage issued by American Guarantee.  The Court found Suddock's statements "that he could not imagine a claim for which plaintiff would not be covered" insufficient to establish misrepresentation because the statement was general and responsive to plaintiffs' general and unspecific inquiry about coverage.  The Court affirmed the trial court granting Suddock's motion. 

This opinion is not final. It may be withdrawn from publication, modified on rehearing, or review may be granted by the California Supreme Court. These events would render the opinion unavailable for use as legal authority.

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David L. Jones