Preview
18CV335946
Santa Clara — Civil I
R. Burciag
Electronically Filed
Alan L. Martini, SB No. 77316
SHEUERMAN, MARTINI, TABARI by Superior Court of CA,
ZENERE & GARVIN County of Santa Clara,
A Professional Corporation on 7/30/2020 11:34 PM
1033 Willow Street Reviewed By: R. Burciaga
San Jose, California 95125 Case #18CV335946
Telephone: 408.288.9700
Facsimile: 408.295.9900 Envelope: 4689484
Email: amartini@smtlaw.com
Attorneys for Plaintiff, PAUL ELIAS, individually and dba APEC CONSTRUCTION
SUPERIOR COURT OF CALIFORNIA
IN AND FOR THE COUNTY OF SANTA CLARA
10
ll PAUL ELIAS, individually and dba APEC )Case No. 18CV335946
CONSTRUCTION,
12 )PLAINTIFF’S MEMORANDUM OF POINTS
Plaintiff, AND AUTHORITIES IN SUPPORT OF
13 )OPPOSITION TO DEFENDANT HDI
V. )GLOBAL SPECIALTY SE’S, formerly known
14 as INTERNATIONAL INSURANCE
INTERNATIONAL INSURANCE COMPANY )COMPANY OF HANNOVER SE, MOTION
15 OF HANNOVER SE; COLONY SPECIALTY )FOR SUMMARY JUDGMENT
INSURANCE COMPANY; PREMIER CLAIMS )
16 MANAGEMENT, LLC; AND DOES 1 - 25, )Hearing Date: August 13, 2020
INCLUSIVE, )Time: 9:00 a.m.
17 )Dept: 21
) Judge: Hon. Thang N. Barrett
18 Defendants.
SComplaint Filed: October 4, 2018
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PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF OPPOSITION TO
HANNOVER’S MOTION oo SUMMARY JUDGMENT
TABLE OF CONTENTS
Page(s)
INTRODUCTION AND STATEMENT OF FACTS
I ARGUMENT
A Relevant Principles of the Duty to Defend
The Principles of Policy Interpretation
Summary of Argument 10
HDI Fails to Conclusively Prove that the Prior Completed Operations
Exclusion Precludes Coverage of the Underlying Action 13
1 The Underlying Action Did Not Assert Liability for Work
10 Performed Prior to Substantial Completion 14
11 To the Extent Relevant, the Brassfields’ Characterization of Elias’s
Work after Substantial Completion as “Repairs” Is Not Binding
12 on Elias 15
13 The Alleged “Repair” Work Performed by Elias after Substantial
Completion, and Potentially Within the HDI Policy Period Was
14 Potentially the “Repair” or “Correction” or the Work of Others,
Including Alleged Defective Design and Work by Others, Not
15 Necessarily under the Supervision and Control of Elias 15
16 HDI’s Reliance Upon the Allegations of the Complaint in the
Underlying Action to Prove There is No Potentiality of
17 Coverage is Misplaced 16
18 The “Prior Incidents” Exclusion Does Not Preclude Potentiality
of Coverage 17
19
Second Cause of Action: Declaratory Relief - Duty to Indemnify 20
20
Third Cause of Action - Breach of Contract 20
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Fourth Cause of Action - Breach of the Implied Covenant of Good
22 Faith and Fair Dealing 20
23 Ill CONCLUSION 20
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HANNOVER’S MOTION oe SUMMARY JUDGMENT
TABLE OF AUTHORITIES
Page(s)
Cases
ALU Ins. Co. v. Superior Court
(1990) 51 C.3d 807
Amato vy. Mercury Cas. Co.
(1993) 18 Cal.App.4th 7,9
Anthem Electronics, Inc. v. Pacific Employers Ins. Co.
(9" Cir. 2002) 302 F.3d 1049
Atlantic Mut. Ins. Co. v. J. Lamb, Inc.
(2002) 100 Cal.App.4th 1017 10
Bank of the West v. Superior Court
(1992) C.4th 1254
10
Bay Cities Paving & Grading, Inc. v. Lawyers Mut. Ins. Co.
11 (1993) 5 C.4th 85 10
12 Buss v. Superior Court
(1997) 16 Cal.4th 35
13
Clarendon America Ins. Co. v. North American Capacity Ins. Co.
14 (2010) 186 Cal.App.4th 556 10
15 Crane vy. State Farm Fire & Cas. Co.
(1971) 5 C.3d 112
16
Delgado v. Heritage Life Ins.
17 (1984) 157 Cal. App.3d 262 10
18 Food Pro Int'l, Inc. v. Farmers Insurance Exch.
(2008) 169 Cal.App.4th 976
19
Gray v. Zurich Ins. Co.
20 (1966) 65 C.2d 263 7,9, 15
21 Griffin Dewatering Corp. v. Northern Ins. Co. v. NY
(2009) 176 Cal.App.4th 172
22
La Jolla Beach and Tennis Club, Inc. v. Industrial Indemnity Co.
23 (1994 9 Cal.4th 27 20
24 Horace Mann Ins. Co. v. Barbara B.
(1993) 4 Cal.4th 1076 8, 20
25
Maryland Cas. Co. v. National American Ins. Co. of California
26 (1996) 48 Cal.App.4th 1822 8, 13
27
28
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HANNOVER’S MOTION or SUMMARY JUDGMENT
Mirpad, LLC v. California Ins. Guar. Ass’n
(2005) 132 Cal.App.4th 1058 8, 11,12
Montrose Chemical Corp. v. Admiral Ins. Co.
(1995) 10 Cal.4th 645 10
Montrose v. Chemical Corp. v. Superior Court
(1993) 6 Cal.4th 287 7, 8,9, 11, 16
Ortega Rock Quarry v. Golden Eagle Ins. Corp.
(2006) 141 Cal.App.4th 969 17
Palmer v. Truck Ins. Exch.
(1999) 21 C.4th 1109 10
Smith v. City and County of San Francisco
(1990) 225 Cal.App.3d 38 20
10 State Farm Gen. Ins. Co. v. Mintarish
(2009) 175 Cal.App.4th 274
11
State of California v. Continental Ins. Co.
12 (2012) 55 C.4th 186 10
13 Vann v. Travelers
(1995) 39 Cal.App.4th 161 8, 15, 16
14
White v. Western Title Ins. Co.
15 (1985) 40 C. 3d 870
16 Statutes
17 Civil Code section 641 10
18 Civil Code section 3534 17
19
20
21
22
23
24
25
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HANNOVER’S MOTION Oe SUMMARY JUDGMENT
I. INTRODUCTION AND STATEMENT OF FACTS
In the Underlying Action, the owners (“Brassfields”) of certain property brought suit against
(among others) contractor Paul Elias dba Apec Construction (“Elias”) and Does 1 through 100. Elias
brought the instant suit against defendants, Colony Insurance Company and International Insurance
Company of Hannover SE, now known as HDI Global Specialty SE (“HDI”), claiming they had a
duty to defend Elias and failed to do so.
HDI now moves for summary judgment as to the First Amended Complaint on the basis that
it has no duty to defend the Brassfield’s action against Elias (“the Underlying Action”), and therefore
has no duty to indemnify, has not breached its contract, and has not breached the covenant of good
10 faith and fair dealing.
11 The Underlying Action alleges that defendants “designed or constructed the RESIDENCE for
12 plaintiffs in a manner such that the structures contained deficiencies, including, but not limited,
13 deficiencies in the architectural and structural systems, as well as product and installation defects”
14 and “[a]s a result of the defective design and/or construction, false and misleading statements,
15 concealment, and coverup, plaintiffs have suffered physical damage to their real and personal
16 property, as well as loss of use of their property, and economic damages.” (Plaintiff's Separate
17 Statement of Undisputed Material Facts (“PL UMF”) No. 1.)
18 In addition to suing Paul Elias as the “general contractor” plaintiffs alleged causes of action
19 against “SUPPLIER DEFENDANTS” (who allegedly supplied, manufactured and/or distributed
20 materials, products or goods used in or for the construction of the RESIDENCE), and “DESIGN
21 DEFENDANTS” (who developed designed or otherwise created the construction plans, drawings,
22 and specifications upon which construction of the RESIDENCE was based). (PL UMF No. 2.)
23 The complaint specifically describes four “floods”. The first allegedly occurred in the
24 “Winter of 2007" when water allegedly intruded into the basement damaging plaintiff JO ANN’s
25 personal property as well as baseboards, drywall and floor tile. (PL UMF No. 3.)
26 The second alleged flood occurred in the “Winter of 2008” at which time, it is alleged that
27 “ELIAS told plaintiffs that the flooding had occurred due to poor engineering and that the approved
28 plans only called for one sump pump” and that ELIAS recommended and installed a second sump
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HANNOVER’S MOTION ot SUMMARY JUDGMENT
pump as well as a ‘concrete curb’ that would allow the sump area to hold additional storm water and
delay a flooding event should the two sump pumps become overwhelmed or otherwise not able to
remove storm water at an adequate pace.” (PL UMF No. 4.)
The third flood allegedly occurred “Christmas Day 2" and that Elias “purportedly spent a
significant amount of time inspecting and diagnosing the cause of the flooding” which resulted in
their agreeing to pay Elias to install a second sump pump location, outside of one of the basement
retaining walls. (PL UMF No. 5.)
The Underlying Act also alleged that on December 10, 2014, a fourth flood occurred, and
thereafter it was discovered that a “gaping saw cut hole” was discovered in the basement concrete
10 slab where raw earth was visible and “that this gaping hole as well as other specific locations around
11 the basement were sources of water intrusion and flooding.” (PL UMF No. 6.)
12 The Underlying Action also alleged that “the construction deficiencies present at and in the
13 RESIDENCE were caused by omissions of or work performed by, or on behalf of all defendants and
14 that “these defective conditions include, but are not limited to the following: (a) improperly installed,
15 inadequate, or nonexistent waterproofing resulting in water intrusion to the basement and other areas :3
16 (b) improperly installed concrete basement slab and retaining walls resulting in water intrusion to the
17 basement; (c) improperly installed sewer and storm water drainage systems resulting in water
18 intrusion to the basement in other areas; (d) basement shower defects; (e) sheet metal defects; and (f)
19 other defective building components and elements of the RESIDENCE presently unknown. (PL
20 UME No. 7.)
21 Finally, the complaint in the Underlying Action alleged that “plaintiffs are presently unaware
22 of when all the defective conditions alleged herein first occurred or manifested themselves or caused
23 damage to or destruction of tangible property, or the loss of use of such property, but assert that the
24 design and/or construction deficiencies at the RESIDENCE have developed and occurred since
25 substantial completion of the RESIDENCE and said deficiencies and resulting physical injuries
26 being continuous and progressive.” (PL UMF No. 8.)
27 The Complaint also alleged that Elias was responsible for cutting a “gaping hole” in the
28 basement concrete slab exposing raw earth which was discovered sometime after the December 2014
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HANNOVER’S MOTION 1 SUMMARY JUDGMENT
flood. (PL UMF No. 9.)
Plaintiffs’ counsel, in the Underlying Action, Steven A. Horner, wrote a letter Elias’s
counsel, Alan L. Martini, dated February 22, 2019, which Mr. Martini forwarded to HDI which
stated in part:
As you know, our clients contend that the damage to the real and personal property
identified in the complaint was caused, in part, by separate and distinct flooding
events from a ‘gaping hole’ in the slab of the basement as well as in other specific
locations throughout the basement which occurred many times since the completion
of the house and as recently as February of this year. Your client attempted repairs
multiple times to no avail. In fact, the issue appears to have worsened and each event
has resulted in additional damage. We believe that we have yet to discover all the
resultant damage which we believe is throughout the home.
Plaintiffs are currently unsure of all the details regarding the creation of the hole, but
10 contend that Elias/Apec is responsible either because Mr. Elias performed the work or
it was performed by others subject to his supervision. Regardless of how, when or by
11 whom a gaping hole was actually created, Mr. Elias/Apec is directly or vicariously
responsible for the hole and each episode of damage caused by it. Of course,
12 discovery and investigation, including obtaining the opinion of expert witnesses, is
continuing.”
13
(PL UMF No. 9; Declaration of Alan L. Martini, Exhibit B.)
14
Elias filed an answer to the Brassfield complaint in the Underlying Action, and denied each
15
and every allegation thereof, and raised several affirmative defenses. (Plaintiff's Request for Judicial
16
Notice, Exhibit A.)
17
I. ARGUMENT
18
A Relevant Principles of the Duty to Defend
19
An insurer “must defend a suit which potentially seeks damages within the coverage of the
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policy.” Gray v. Zurich Ins. Co. (1966) 65 C.2d 263, 275. In other words, the duty to defend arises
21
whenever the lawsuit against the insured seeks damages on any theory that, if proved, would be
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covered by the policy. Thus, a defense is excused only when “the third party complaint can by no
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conceivable theory raise a single issue which could bring it within the policy coverage.” Montrose
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Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 295; Amato v. Mercury Cas. Co. (1993) 18
25
Cal.App.4th 1784, 1790. “The insured need only show that the underlying claim may fall within
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policy coverage; the insurer must prove it cannot.” Montrose Chemical Corp. v. Superior Court,
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supra, 6 Cal.4th at 300. The insurer must defend any claim that would be covered if true even if the
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HANNOVER’S MOTION [Oe SUMMARY JUDGMENT
claim is in fact groundless, false or fraudulent. The insured does not have to prove the claim against
it is valid in order to obtain a defense. [See Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th
1076, 1088.]
An insurer cannot avoid its duty to defend based on a coverage defense that depends on facts
in dispute in the underlying lawsuit. “If coverage depends on an unresolved dispute over a factual
question, the very existence of that dispute would establish a possibility of coverage and thus a duty
to defend.” Mirpad, LLC v. California Ins. Guar. Ass’n (2005) 132 Cal.App.4th 1058, 1068; see
Horace Mann Ins. Co. v. Barbara B., supra, 4 Cal.4th at 1085; Montrose Chemical Corp. v. Superior
Court, supra, 6 Cal.4th at 300. It need not be shown that coverage is likely or even “reasonably”
10 likely. Montrose Chemical Corp. v. Superior Court, supra, 6 Cal.4th at 299-300. Thus, HDI’s
11 attempt to prove the absence of a potentiality of coverage based upon the disputed allegations in the
12 complaint in the Underlying Action is completed without merit. The allegations in the Underlying
13 Action are not undisputed facts and do not conclusively eliminate the potential for coverage.
14 The insurer’s duty to defend is not judged on the basis of whether the third party ultimately
15 wins its lawsuit against the insured. Rather, it “turns upon those facts known by the insurer at the
16 inception of the third party lawsuit.” Montrose Chemical Corp. of Calif. v. Superior Court, supra, 6
17 Cal.4th at 295.
18 HDI’s burden on summary judgment is to conclusively prove with undisputed facts the
19 absence of potential coverage under its policy. On a motion for summary judgment on the insurer’s
20 duty to defend, the insurer must be able to negate potential coverage as a matter of law. Maryland
21 Cas. Co. v. National American Ins. Co. of Calif. (1996) 48 Cal.App.4th 1822, 1832; Anthem
22 Electronics, Inc. v. Pacific Employers Ins. Co. (9" Cir. 2002) 302 F.3d 1049, 1060; Vann v.
23 Travelers Companies (1995) 39 Cal.App.4th 1610 at 1615 [insurer not entitled to summary judgment
24 unless evidence conclusively elements potential coverage].
25 The existence of a disputed fact relevant to the issue of coverage establishes a duty to defend.
26 Montrose Chemical Corp. v. Superior Court, supra, 6 Cal.4th at 301; Food Pro Int'l, Inc. v. Farmers
27 Insurance Exch. (2008) 169 Cal.App.4th 976, 989; State Farm Gen. Ins. Co. v. Mintarsih (2009) 175
28 Cal.App.4th 274, 284, fn. 6 - “any factual dispute affecting the existence of coverage creates a
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HANNOVER’S MOTION oe SUMMARY JUDGMENT
potential for coverage and a duty to defend.”
In a “mixed action” in which some claims are potentially covered, and others are not, the
insurer must provide and fund a defense of the entire action, including those claims for which there is
no potential for coverage under the policy. Buss v. Superior Court (1997) 16 Cal.4th 35, 48.
The insurer must consider facts from any source in determining its duty to defend. Montrose
Chemical Corp. v. Superior Court, supra, 6 Cal.4th at 298-299; Griffin Dewatering Corp. v.
Northern Ins. Co. v. NY (2009) 176 Cal.App.4th 172, 198. An insured may create a duty to defend
simply by communicating facts to the insurer that, if true, would establish the existence of coverage.
Amato y. Mercury Cas. Co., supra, 18 Cal.App.4th 1784, 1792. Thus, a defense is owed when the
10 insurer has knowledge of facts showing a potential for coverage, even if the complaint fails to allege
11 such facts. Gray v. Zurich Ins. Co., supra, 65 C.2d at 277.
12 Moreover, it is axiomatic that the third party plaintiff who drafted the complaint cannot be
13 the arbiter of the policy’s coverage. Grav v. Zurich Ins. Co., supra, 65 C.2d 263, 275-277; Montrose
14 Chemical Corp. of California v. Superior Court, supra, 6 Cal.4th at 295.
15 B. The Principles of Policy Interpretation
16 Insurance policies are contracts and therefore subject to the rules of construction governing
17 contracts. Bank of the West v. Superior Court (1992) 2 C.4th 1254, 1258. “Under statutory rules of
18 contract interpretation, the mutual intention of the parties at the time the contract is formed governs
19 interpretation. Such intent is to be inferred, if possible, solely from the written provisions of the
20 contract. AJU Ins. Co. v. Superior Court (1990) 51 C.3d 807, 821-822. “Technical or legalistic
21 interpretations cannot undermine the “plain meaning of the words used: “The policy should be read
22 as a Jayman would read it and not as it might be analyzed by an attorney or insurance expert.” Crane
23 v. State Farm Fire & Cas. Co. (1971) 5 C.3d 112, 115.
24 Matters not specifically excluded are deemed covered. “[W]hen a statute expresses certain
25 exceptions to a general rule, other exceptions are necessarily excluded... This cannon, based on
26 common patterns of usage and drafting, is equally applicable to the construction of contracts.” White
27 v. Western Title Ins. Co. (1985) 40 C. 3d 870, 881.
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PLAINTIFFS MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF OPPOSITION TO
HANNOVER’S MOTION FOR SUMMARY JUDGMENT
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“A policy provision will be considered ambiguous when it is capable of two or more
constructions, both of which are reasonable.” State of California v. Continental Ins. Co. (2012) 55
CA4th 186, 195. Any ambiguity will be construed against an insurer if the insured had an objectively
reasonable expectation that there would be coverage under the policy consistent with the ambiguity.
Clarendon America Ins. Co. v. North American Capacity Ins. Co. (2010) 186 Cal.App.4th 556, 573.
Ambiguities in coverage clauses are normally resolved by giving effect to the insured’s reasonable
expectations: “[W]e generally interpret the coverage clauses of general policies broadly, [in order to
protect] the objectively reasonable expectations of the insured.” Montrose Chemical Corp. v.
Admiral Ins. Co. (1995) 10 Cal.4th 645, 667. Conversely, exclusions and limitations on coverage in
10 an insurance policy are “strictly construed against the insurer and liberally interpreted in favor of the
11 insured.” Delgado v. Heritage Life Ins. (1984) 157 Cal.App.3d 262, 271.
12 It is axiomatic that courts should give meaning to all words in the policy and to avoid
13 constructions that would render words superfluous or a nullity. (See Civ. Code, § 641 - “the whole
14 of a contract is to be taken together, so as give effect to every part, if reasonably practicable, each
15 clause helping to interpret the other”; Palmer y. Truck Ins. Exch. (1999) 21 C.4th 1109, 1116.) Thus,
16 although each term must be read in its “ordinary and popular sense,” it must also be interpreted in
17 context and with regard to its intended function and the structure of the policy as a whole. See Bay
18 Cities Paving & Grading, Inc. v. Lawyers Mut. Ins. Co. (1993) 5 C.4th 854, 867.
19 C. Summary of Argument
20 It is undisputed that the Underlying Action alleges the occurrence of property damage
21 occurring during the HDI policy periods in the form of “Flood No. 4.” Thus, there is no doubt that
22 the underlying claims potentially fell within the insuring provisions of the policy so that in order to
23 prevail HDI must provide conclusive evidence demonstrating that an exclusion applies. Atlantic Mut.
24 Ins. Co. v. J. Lamb, Inc. (2002) 100 Cal.App.4th 1017, 1038-1039.
25 HDI asserts that two exclusions preclude coverage: the “Prior Completed Operations
26 Exclusion” “Prior Incident Exclusion.” The first exclusion, “Prior Completed Operations Exclusion”
27 precludes coverage for liability arising out of work completed before the policy incepted. The
28 second exclusion, “Prior Incident Exclusion” precludes coverage for liability for “property damage”
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HANNOVER’S MOTION FOR SUMMARY JUDGMENT
that first took place before the policy incepted and which results from an incident predating the
policy period. Thus, by operation of these two exclusions, the HDI policy does not cover property
damage arising from work that was performed by the insured prior to the inception of the policy or
property damage that first took place, first occurred, or first began or commenced before the effective
date of the policy or property damage that takes place during the policy period that resulted from an
“event, occurrence, or cause” that took place, first occurred, or began or commenced before the
effective date of the policy.
However, HDI failed to meet its burden to conclusively prove, based upon evidence that it
was aware of at the time of tender, that it was impossible for any of the alleged property damage to
10 have first occurred during the policy period or that none of the alleged defective work could have
11 possibly been performed prior to the inception of the policy.
12 For instance, HDI did not demonstrate that it was aware of undisputed evidence at the time
13 the defense was tendered showing that it was impossible for the property damage to the residence
14 and personal property which occurred in the alleged December 2014 flood (during the HDI policy
15 period) to have first occurred at that time and was the result of work performed by Mr. Elias after
16 March 2014, when the first HDI policy incepted. HDI’s efforts to prove the absence of a potentiality
17 of coverage by reference to the disputed allegations in the Underlying Action completely lack merit
18 flies in the face of longstanding California authority that if coverage depends upon allegations
19 disputed in the Underlying Action, the duty to defend arises. Mirpad, LLC v. California Ins.
20 Guarantee Ass’n., supra, 132 Cal.App.4th at 1068; Montrose Chemical Corp. v. Superior Court,
21 supra, 6 Cal.4th at 300.
22 Specifically, the complaint alleges that Elias installed the allegedly defective second sump
23 pump location on the outside of the basement retaining walls at an unspecified time, between the
24 third alleged flood in 2010 and the fourth alleged flood in December 2014, and HDI presents no
25 evidence, let alone undisputed, conclusive evidence, proving that this alleged installation occurred
26 prior to the inception of its policy in March 2014. HDI cannot do this, because the complaint does
27 not allege when this work occurred, only that it occurred sometime after the third flood in 2010 and
28 before the fourth flood in December 2014. Similarly, despite the fact that it is unknown when the
PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF OPPOSITION TO
HANNOVER’S MOTION FOR SUMMARY JUDGMEN’
11
alleged hole in the basement slab was created and notwithstanding the possibility that it was created
shortly before it was allegedly discovered in December 2014, HDI fails to present undisputed
evidence that it occurred prior to the inception of its policy.
Thus, there is a potentiality of coverage because it remains possible that some property
damage first occurred between March 2014 and March 2016 (the HDI policy period), as a result of
allegedly defective work performed by Elias after March 2014. HDI has not sustained its burden of
producing undisputed evidence that conclusively proves applicability of its exclusions.
Contrary to HDI’s arguments, the complaint in the Underlying Action does not conclusively
prove that all of the alleged property damage first occurred in the first flood in 2007 and all resulted
10 from the original construction, which was allegedly completed in January 2007. In fact, the
11 complaint alleges the opposite: that the design and/or construction deficiencies “occurred” since
12 substantial completion of the residence. (PL UMF No. 8.) Furthermore, the disputed allegations in
13 the Underlying Complaint do not serve to fulfill the insurer’s burden to conclusively prove its
14 exclusions preclude the possibility of coverage. Mirpad LLC v. California Ins. Guar. Ass’n, supra,
15 132 Cal.App.4th at 1068.
16 Furthermore, to the extent that HDI relies upon the allegation that the “deficiencies and
17 resulting physical injuries being continuous and progressive”, that allegation too is disputed, and not
18 sufficient to prove there is no potentiality of coverage. Secondly, the allegation that the deficiencies
19 and resulting physical injuries are continuous and progressive does not indicate when any particular
20 deficiency first occurred or caused damage which thereafter became continuous and progressive. In
21 other words, an alleged deficiency could have occurred after March 2014 which resulted in water
22 intrusion and property damage to the residence and personal property thereafter, which became
23 continuous and progressive from that time, which would not be excluded from coverage.
24 Here, the Underlying Complaint alleges that the damage occurred, in part, from “improperly
25 installed sewer and storm water drainage systems”, which would include the work allegedly
26 performed by Elias sometime after the Christmas 2010 flooding event and the December 2014
27 flooding event, which therefore potentially occurred during HDI’s first policy period (March 2014 -
28 March 2015). Thus, the complaint raises the possibility that at least some of the alleged property
PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF OPPOSITION TO
HANNOVER’S MOTION FOR SUMMARY JUDGMENT
damage first occurred after March 2014 as a result of allegedly defective work performed by Elias
after March 2014 as well. More importantly, HDI has not conclusively proven that this would have
been impossible. HDI has therefore not ruled out that there is a possibility of coverage under its
policies, based upon information it had at the time of tender, so its motion for summary judgment
should be denied.
D. HDI Fails to Conclusively Prove that the Prior Completed Operations Exclusion
Precludes Coverage of the Underlying Action
The Prior Completed Operations Exclusion provides that “[t]his insurance does not apply to
‘property damage’ arising out of ‘your work’ performed by you on your behalf if ‘your work’ other
than service, maintenance, correction, repair or replacement of any part of any structure, was
10
completed prior to the policy period.” This exclusion is at least ambiguous, insofar as it appears to
11
exclude “service, maintenance, correction, repair or replacement of any part of any structure” from
12
its ambit. The exclusion specifically applies to the insured’s “work” “other than service,
13
maintenance, correction, repair or replacement . . .” A reasonable insured would reasonably
14
understand that the exclusion does not apply to such work, as clearly stated. The exclusion is, at
15
least, poorly written and ambiguous, and will be construed in favor of coverage.
16
Notwithstanding this ambiguity, the exclusion does not apply to work performed by the
17
insured during the policy period. Under the allegations of the complaint in the Underlying Action it
18
was at least possible that some of Mr. Elias’s allegedly defective work occurred between March 2014
19
and the end of December 2014 when the fourth flood occurred. This includes the installation of the
20
second sump location outside the basement walls and the creation of the “gaping hole” in the
21
foundation either of which could have occurred any time up through December 2014. Since HDI has
22
failed to produce undisputed evidence that it was aware of at the time it denied coverage that
23
conclusively proved that all of the allegedly defective work was performed prior to March 2014, and
24
therefore the motion should be denied. On a motion for summary judgment on the insurer’s duty to
25
defend, the insurer must be able to negate potential coverage as a matter of law. Maryland Cas. Co.
26
v. National American Ins. Co. Calif., supra, 48 Cal.App.4th at1832.
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PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF OPPOSITION TO
HANNOVER’S MOTION FOR SUMMARY JUDGMENT
1. The Underlying Action Did Not Assert Liability for Work Performed
Prior to Substantial Completion
Contrary to HDI’s contention that the complaint seeks damages for work performed prior to
substantial completion in January 2007, the complaint asserts that the defects at the residence “have
developed and occurred since the substantial completion of the residence. (PL UMF No. 8.) The
complaint also specifically alleges that at some unspecified time after the “third flood” in January of
2010 and before the fourth flood in December of 2014 (during the HDI policy period) Elias
recommended and installed a “second sump pump location, this time on the outside of one of the
basement retaining walls.” (PL UMF No. 5) This would come within the general allegations of the
complaint that the construction deficiencies included “improperly installed sewer and storm water
10
drainage systems resulting in water intrusion in the basement and other areas.” (PL UMF No. 7.)
11
The exact date of this work is not indicated, so it could have occurred any time between the third
12
flood in December 2010 and the fourth flood December 10, 2014. Specifically, HDI provides no
13
evidence, let alone conclusive evidence that this allegedly deficient work was performed prior to the
14
inception of its policy in March 2014.
15
Similarly, the Underlying Action alleges the existence of a “gaping hole” which was
16
discovered sometime after the fourth flood in December 2014. (PL UMF No. 9.) In October of 2018,
17
HDI’s representatives, Limor Lehavi and Scott Ward were advised that Mr. Elias denies
18
responsibility for the gaping hole and contends that the hole was created by “others”, likely during
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work performed after the December 2014 flooding event, but that the complaint also alleged that
20
Elias was responsible for “supervision” of the construction activities, including “remodel,
21
construction, and inspection of the RESIDENCE,” as alleged in paragraph 9 of the Underlying
22
Action. (PL UMF No. 10; Dec. Alan L. Martini, Exhibit A.)
23
On February 22, 2019, Mr. Elias’s counsel followed up with a subsequent email containing a
24
letter he had received from the Brassfields’ counsel, Steven Horner, which confirms that the
25
Brassfields were claiming that Mr. Elias was liable for the damage caused by the hole in the slab and
26
that they were unsure as to when the hole was created, but contend that “Elias/Apec is responsible
27
for it, either because Mr. Elias performed the work or it was performed by others subject to his
28
PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF OPPOSITION TO
HANNOVER’S MOTION FOR SUMMARY JUDGMENT
supervision.” The letter goes on to indicate that plaintiffs contend, regardless of how, when or by
whom the gaping hole was actually created, that Mr. Elias/Apec is directly or vicariously responsible
for the hole and each episode of damage caused by it. (Dec. Alan L.Martini, § 3, Exh. B.)
Again, HDI fails to proffer any uncontroverted, conclusive evidence as to when the “gaping
hole” for which the Underlying Action alleged Elias was responsible occurred and that it occurred
prior to the inception of its policy. This motion for summary judgment should therefore be denied.
2 To the Extent Relevant, the Brassfields’ Characterization of Elias’s Work
after Substantial Completion as “Repairs” Is Not Binding on Elias
It does not matter whether the work performed by Elias after substantial completion
amounted to “repairs” because the policy covers Elias for liability arising out of his work causing
10
property damage during the policy period, whether the work consists of repairs, corrections, or
11
something else. There is no exclusion for “repairs”. This is especially true when the alleged
12
“repairs” are potentially of the work of others, including architects, engineers, and other contractors
13
whose work Elias did not control. Nevertheless, Elias is not bound by the factual allegations
14
characterizing the nature of the work, all of which he has denied. Gray v. Zurich Ins. Co., supra, 65
15
Cal.2d 263, 275-277.
16
Furthermore, the nature of the work can only be determined based upon a factual
17
determination of what was actually done and why, information which HDI did not possess. Again,
18
HDI has not presented any evidence, let alone undisputed conclusive evidence, that all of Elias’s
19
work after date of completion amounted to “repairs.” (See Vann y. Travelers, supra, 39 Cal.App.4th
20
at 1615 [insurer not entitled to summary judgment when the nature of the insured’s business
21
practices was vague and uncertain].)
22
3. The Alleged “Repair” Work Performed by Elias after Substantial
23 Completion, and Potentially Within the HDI Policy Period Was
Potentially the “Repair” or “Correction” or the Work of Others,
24 Including Alleged Defective Design and Work by Others, Not Necessarily
under the Supervision and Control of Elias
25
HDI also erroneously contends that Elias performed all of the alleged deficient work.
26
However, the Underlying Complaint does not support such a conclusion. The alleged deficiencies
27
included, but were not limited to, “deficiencies in the architectural and structure systems, as well as
28
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HANNOVER’S MOTION FOR SUMMARY JUDGMENT
product and installation defects.” (PL UMF No. 1.) Furthermore, defendants included “contractor
defendants” (who performed services as general contractors or subcontractors), “supplier defendants”
(who supplied, manufactured or distributed materials, products or goods used in the construction),
and “design defendants (who developed, designed or otherwise created the construction plans,
drawings and specifications upon which construction of the RESIDENCE was based.” (PL UMF 2.)
Thus, the “repairs” allegedly performed by Elias, at least potentially, were not to work
previously performed by Elias, but rather by the design professionals, suppliers, and other contractors
in direct contract with the owners, not under Elias’s supervision and control. Thus, the alleged
repairs were not necessarily to Elias’s own work, and in fact this issue is disputed in the Underlying
10 Action. The existence of a disputed fact relevant to the issue of coverage establishes a duty to
11 defend.
12 4. HDI’s Reliance Upon the Allegations of the Complaint in the Underlying
Action to Prove There is No Potentiality of Coverage is Misplaced
13
HDI’s argument that the “express and unambiguous allegations of the Underlying Complaint”
14
preclude potential coverage is entirely misplaced. To the extent any allegations, if true, would
15
preclude coverage, they do not preclude a duty to defend. Elias has filed an answer to the complaint
16
and has disputed each and every factual allegation, and has put them at issue in the Underlying
17
Action. Factual disputes as to whether the policies provide coverage for the Underlying claims a
18
fortiori create a potential for coverage, and thus require the entry for summary judgment in favor of
19
the policyholder.'
20
Given HDI’s burden to negate coverage under its policies as a matter of law, the facts that it
21
has marshaled in this regard are as weak as the insurer pointed to in the Vann case. (see 39
22
Cal.App.4th at 1616.) To the extent that HDI relies upon the allegations of the complaint concerning
23
the nature, extent, timing, or characterization of Elias’s work (including that it constituted “repairs”)
24
or that property damage, once commenced, was “continuous and progressive” these allegations are
25
26
' Montrose, 6 Cal.4th at 300 (“facts merely tending to show that the claim is not covered, or
27 may not be covered, but are insufficient to eliminate the possibility that resultant damages (or the
nature of the action) will fall within the scope of coverage, therefore add no weight to the scales” and
28 do not foreclose the potential for coverage.)
Al
HANNOVER’S MOTION FOR SUMMARY JUDGMENT
all disputed in the Underlying Action. These allegations hardly satisfy HDI’s burden of proving as a
matter of law that there is no potentiality of coverage under its policies. Virtually no discovery has
occurred in the Underlying Action. As a result, the Underlying Complaint could not possibly be
determinative on any issue regarding coverage of the applicability of HDI’s exclusions, including the
characterization of Elias’s work as “repairs” as opposed to the addition of new features not
previously in existence, such as the alleged installation of a second location outside the foundation
and sump pump, which occurred sometime between 2010 and the end of 2014.
E. The “Prior Incidents” Exclusion Does Not Preclude Potentiality of Coverage
HDI contends that its “Prior Incidents” Exclusion by its terms also eliminates potential
10 coverage for the Brassfield lawsuit. Part (a) of the exclusion eliminates coverage for the alleged
11 property damage that first took place, first occurred, or first began or commenced before the HDI
12 policy is effective. It also precludes coverage for damages because of “property damage” that takes
13 place during the HDI policy period, which results from or is caused in whole or in part by, any
14 “event, occurrence or cause” that took place, first occurred, or began or commenced before the HDI’s
15 policy’s effective period.
16 As relevant to this case, the exclusion would exclude liability for property damage such as
17 flooding or other event causing water intrusion which occurs prior to the inception of the HDI policy.
18 Performance of the allegedly defective work itself, without more (such as actual water intrusion as a
19 result of the work) would not trigger the exclusion. The phrase “event, occurrence or cause” will be
20 interpreted, giving all of the words of the phrase meaning and pursuant to general principles of
21 contract construction, including the doctrine of “ejusdem generis” (particular expressions qualify
22 those which are general. Civil Code section 3534.) In an insurance policy, specific provisions rather
23 than general provisions govern the insurance contract relating to a particular subject, even though the
24 general provision, standing alone, would be broad enough to include the subject to which the more
25 specific provision relates. Ortega Rock Quarry v. Golden Eagle Ins. Corp. (2006) 141 Cal.App.4th
26 969, 981-982. Here, the terms “event” and “occurrence” are more specific than the term “cause” and
27 therefore “cause” will be limited to situations such as “events” or “occurrences” where something
28 like a rainstorm happens and results in water intrusion and resulting damage. Otherwise, the term
Al
HANNOVER’S MOTION FOR SUMMARY JUDGMENT
“cause” would completely subsume the terms “event” and “occurrence” and render them surplusage
The mere passive creation of a construction defect, without some additional unexpected happening,
would not come within the definition of “cause”, because if it were interpreted that broadly, to
include the original poor design or workmanship, before anything untoward occurs, the terms
“event” and “occurrence” would have no effective meaning. Plus, if poor workmanship itself was
included in the term “cause” in the context of the exclusion, HDI would not have needed to include
the “Prior Completed Operations Exclusion” which does purport to exclude liability for property
damage arising out of the insured’s work performed prior to the inception of the policy.
Nevertheless, even if the court were to interpret “cause” to include performance of the
10 allegedly deficient work, there is still a potentiality that at least some of the allegedly deficient work
11 was performed during the HDI policy period. As demonstrated above, the allegations of the
12 Underlying Complaint against Elias are certainly broad enough to encompass the possibility that
13 some of the alleged defective work he performed (including, installation of the second sump pump
14 location outside of the basement retaining walls sometime between 2010 and the end of 2014 and the
15 creation of the “gaping hole” in the slab at some unknown time) causing at least some of the damage
16 to the residence and its contents after March 2014, thus precluding application of the exclusion to all
17 alleged property damage.
18 Some of the “events, occurrences or causes” of the property damage could have occurred
19 between March 2014 and March 2016. The allegations of the Underlying Complaint were certainly
20 broad enough to raise this possibility.
21 Nor does HDI’s argument that the complaint alleges that Elias completed the project in 2007
22 and the first flooding allegedly took place in 2007 preclude the possibility that new and different
23 property damage did not occur in subsequent flooding or water intrusive events. The fact that some
24 property damage was alleged to commence prior to the HDI policies incepting, does not necessarily
25 mean that there was no new property damage (for instance to personal property subsequently placed
26 in the basement after the third flood) in other flooding and/or water intrusion events, such as
27 allegedly occurred in December of 2014. Again, HDI presents no undisputed evidence that there was
28 no new property damage, either to the residence or the personal property in the residence, in the
Al
HANNOVER’S MOTION FOR SUMMARY JUDGMENT
alleged December 2014 flood. Furthermore, the nature and extent of the alleged damage to the
residence and personal property is presently unknown, and disputed and subject to discovery and trial
in the Underlying Action.
HDI’s second argument that “the cause of all such property damage, Elias’s work, also
predates the inception of either policy according to the express allegations of the Underlying
Complaint” also misses the mark. The Underlying Complaint clearly alleges liability from alleged
deficiencies that “developed and occurred” since substantial completion.
The allegation that the “resulting physical injuries being continuous and progressive”, from
the time they first o
Preview
18CV335946 Santa Clara — Civil I R. Burciag Electronically Filed Alan L. Martini, SB No. 77316 SHEUERMAN, MARTINI, TABARI by Superior Court of CA, ZENERE & GARVIN County of Santa Clara, A Professional Corporation on 7/30/2020 11:34 PM 1033 Willow Street Reviewed By: R. Burciaga San Jose, California 95125 Case #18CV335946 Telephone: 408.288.9700 Facsimile: 408.295.9900 Envelope: 4689484 Email: amartini@smtlaw.com Attorneys for Plaintiff, PAUL ELIAS, individually and dba APEC CONSTRUCTION SUPERIOR COURT OF CALIFORNIA IN AND FOR THE COUNTY OF SANTA CLARA 10 ll PAUL ELIAS, individually and dba APEC )Case No. 18CV335946 CONSTRUCTION, 12 )PLAINTIFF’S MEMORANDUM OF POINTS Plaintiff, AND AUTHORITIES IN SUPPORT OF 13 )OPPOSITION TO DEFENDANT HDI V. )GLOBAL SPECIALTY SE’S, formerly known 14 as INTERNATIONAL INSURANCE INTERNATIONAL INSURANCE COMPANY )COMPANY OF HANNOVER SE, MOTION 15 OF HANNOVER SE; COLONY SPECIALTY )FOR SUMMARY JUDGMENT INSURANCE COMPANY; PREMIER CLAIMS ) 16 MANAGEMENT, LLC; AND DOES 1 - 25, )Hearing Date: August 13, 2020 INCLUSIVE, )Time: 9:00 a.m. 17 )Dept: 21 ) Judge: Hon. Thang N. Barrett 18 Defendants. SComplaint Filed: October 4, 2018 19 20 21 22 23 24 25 26 27 28 PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF OPPOSITION TO HANNOVER’S MOTION oo SUMMARY JUDGMENT TABLE OF CONTENTS Page(s) INTRODUCTION AND STATEMENT OF FACTS I ARGUMENT A Relevant Principles of the Duty to Defend The Principles of Policy Interpretation Summary of Argument 10 HDI Fails to Conclusively Prove that the Prior Completed Operations Exclusion Precludes Coverage of the Underlying Action 13 1 The Underlying Action Did Not Assert Liability for Work 10 Performed Prior to Substantial Completion 14 11 To the Extent Relevant, the Brassfields’ Characterization of Elias’s Work after Substantial Completion as “Repairs” Is Not Binding 12 on Elias 15 13 The Alleged “Repair” Work Performed by Elias after Substantial Completion, and Potentially Within the HDI Policy Period Was 14 Potentially the “Repair” or “Correction” or the Work of Others, Including Alleged Defective Design and Work by Others, Not 15 Necessarily under the Supervision and Control of Elias 15 16 HDI’s Reliance Upon the Allegations of the Complaint in the Underlying Action to Prove There is No Potentiality of 17 Coverage is Misplaced 16 18 The “Prior Incidents” Exclusion Does Not Preclude Potentiality of Coverage 17 19 Second Cause of Action: Declaratory Relief - Duty to Indemnify 20 20 Third Cause of Action - Breach of Contract 20 21 Fourth Cause of Action - Breach of the Implied Covenant of Good 22 Faith and Fair Dealing 20 23 Ill CONCLUSION 20 24 25 26 27 28 Al HANNOVER’S MOTION oe SUMMARY JUDGMENT TABLE OF AUTHORITIES Page(s) Cases ALU Ins. Co. v. Superior Court (1990) 51 C.3d 807 Amato vy. Mercury Cas. Co. (1993) 18 Cal.App.4th 7,9 Anthem Electronics, Inc. v. Pacific Employers Ins. Co. (9" Cir. 2002) 302 F.3d 1049 Atlantic Mut. Ins. Co. v. J. Lamb, Inc. (2002) 100 Cal.App.4th 1017 10 Bank of the West v. Superior Court (1992) C.4th 1254 10 Bay Cities Paving & Grading, Inc. v. Lawyers Mut. Ins. Co. 11 (1993) 5 C.4th 85 10 12 Buss v. Superior Court (1997) 16 Cal.4th 35 13 Clarendon America Ins. Co. v. North American Capacity Ins. Co. 14 (2010) 186 Cal.App.4th 556 10 15 Crane vy. State Farm Fire & Cas. Co. (1971) 5 C.3d 112 16 Delgado v. Heritage Life Ins. 17 (1984) 157 Cal. App.3d 262 10 18 Food Pro Int'l, Inc. v. Farmers Insurance Exch. (2008) 169 Cal.App.4th 976 19 Gray v. Zurich Ins. Co. 20 (1966) 65 C.2d 263 7,9, 15 21 Griffin Dewatering Corp. v. Northern Ins. Co. v. NY (2009) 176 Cal.App.4th 172 22 La Jolla Beach and Tennis Club, Inc. v. Industrial Indemnity Co. 23 (1994 9 Cal.4th 27 20 24 Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076 8, 20 25 Maryland Cas. Co. v. National American Ins. Co. of California 26 (1996) 48 Cal.App.4th 1822 8, 13 27 28 Al HANNOVER’S MOTION or SUMMARY JUDGMENT Mirpad, LLC v. California Ins. Guar. Ass’n (2005) 132 Cal.App.4th 1058 8, 11,12 Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645 10 Montrose v. Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287 7, 8,9, 11, 16 Ortega Rock Quarry v. Golden Eagle Ins. Corp. (2006) 141 Cal.App.4th 969 17 Palmer v. Truck Ins. Exch. (1999) 21 C.4th 1109 10 Smith v. City and County of San Francisco (1990) 225 Cal.App.3d 38 20 10 State Farm Gen. Ins. Co. v. Mintarish (2009) 175 Cal.App.4th 274 11 State of California v. Continental Ins. Co. 12 (2012) 55 C.4th 186 10 13 Vann v. Travelers (1995) 39 Cal.App.4th 161 8, 15, 16 14 White v. Western Title Ins. Co. 15 (1985) 40 C. 3d 870 16 Statutes 17 Civil Code section 641 10 18 Civil Code section 3534 17 19 20 21 22 23 24 25 26 27 28 Al HANNOVER’S MOTION Oe SUMMARY JUDGMENT I. INTRODUCTION AND STATEMENT OF FACTS In the Underlying Action, the owners (“Brassfields”) of certain property brought suit against (among others) contractor Paul Elias dba Apec Construction (“Elias”) and Does 1 through 100. Elias brought the instant suit against defendants, Colony Insurance Company and International Insurance Company of Hannover SE, now known as HDI Global Specialty SE (“HDI”), claiming they had a duty to defend Elias and failed to do so. HDI now moves for summary judgment as to the First Amended Complaint on the basis that it has no duty to defend the Brassfield’s action against Elias (“the Underlying Action”), and therefore has no duty to indemnify, has not breached its contract, and has not breached the covenant of good 10 faith and fair dealing. 11 The Underlying Action alleges that defendants “designed or constructed the RESIDENCE for 12 plaintiffs in a manner such that the structures contained deficiencies, including, but not limited, 13 deficiencies in the architectural and structural systems, as well as product and installation defects” 14 and “[a]s a result of the defective design and/or construction, false and misleading statements, 15 concealment, and coverup, plaintiffs have suffered physical damage to their real and personal 16 property, as well as loss of use of their property, and economic damages.” (Plaintiff's Separate 17 Statement of Undisputed Material Facts (“PL UMF”) No. 1.) 18 In addition to suing Paul Elias as the “general contractor” plaintiffs alleged causes of action 19 against “SUPPLIER DEFENDANTS” (who allegedly supplied, manufactured and/or distributed 20 materials, products or goods used in or for the construction of the RESIDENCE), and “DESIGN 21 DEFENDANTS” (who developed designed or otherwise created the construction plans, drawings, 22 and specifications upon which construction of the RESIDENCE was based). (PL UMF No. 2.) 23 The complaint specifically describes four “floods”. The first allegedly occurred in the 24 “Winter of 2007" when water allegedly intruded into the basement damaging plaintiff JO ANN’s 25 personal property as well as baseboards, drywall and floor tile. (PL UMF No. 3.) 26 The second alleged flood occurred in the “Winter of 2008” at which time, it is alleged that 27 “ELIAS told plaintiffs that the flooding had occurred due to poor engineering and that the approved 28 plans only called for one sump pump” and that ELIAS recommended and installed a second sump Al HANNOVER’S MOTION ot SUMMARY JUDGMENT pump as well as a ‘concrete curb’ that would allow the sump area to hold additional storm water and delay a flooding event should the two sump pumps become overwhelmed or otherwise not able to remove storm water at an adequate pace.” (PL UMF No. 4.) The third flood allegedly occurred “Christmas Day 2" and that Elias “purportedly spent a significant amount of time inspecting and diagnosing the cause of the flooding” which resulted in their agreeing to pay Elias to install a second sump pump location, outside of one of the basement retaining walls. (PL UMF No. 5.) The Underlying Act also alleged that on December 10, 2014, a fourth flood occurred, and thereafter it was discovered that a “gaping saw cut hole” was discovered in the basement concrete 10 slab where raw earth was visible and “that this gaping hole as well as other specific locations around 11 the basement were sources of water intrusion and flooding.” (PL UMF No. 6.) 12 The Underlying Action also alleged that “the construction deficiencies present at and in the 13 RESIDENCE were caused by omissions of or work performed by, or on behalf of all defendants and 14 that “these defective conditions include, but are not limited to the following: (a) improperly installed, 15 inadequate, or nonexistent waterproofing resulting in water intrusion to the basement and other areas :3 16 (b) improperly installed concrete basement slab and retaining walls resulting in water intrusion to the 17 basement; (c) improperly installed sewer and storm water drainage systems resulting in water 18 intrusion to the basement in other areas; (d) basement shower defects; (e) sheet metal defects; and (f) 19 other defective building components and elements of the RESIDENCE presently unknown. (PL 20 UME No. 7.) 21 Finally, the complaint in the Underlying Action alleged that “plaintiffs are presently unaware 22 of when all the defective conditions alleged herein first occurred or manifested themselves or caused 23 damage to or destruction of tangible property, or the loss of use of such property, but assert that the 24 design and/or construction deficiencies at the RESIDENCE have developed and occurred since 25 substantial completion of the RESIDENCE and said deficiencies and resulting physical injuries 26 being continuous and progressive.” (PL UMF No. 8.) 27 The Complaint also alleged that Elias was responsible for cutting a “gaping hole” in the 28 basement concrete slab exposing raw earth which was discovered sometime after the December 2014 Al HANNOVER’S MOTION 1 SUMMARY JUDGMENT flood. (PL UMF No. 9.) Plaintiffs’ counsel, in the Underlying Action, Steven A. Horner, wrote a letter Elias’s counsel, Alan L. Martini, dated February 22, 2019, which Mr. Martini forwarded to HDI which stated in part: As you know, our clients contend that the damage to the real and personal property identified in the complaint was caused, in part, by separate and distinct flooding events from a ‘gaping hole’ in the slab of the basement as well as in other specific locations throughout the basement which occurred many times since the completion of the house and as recently as February of this year. Your client attempted repairs multiple times to no avail. In fact, the issue appears to have worsened and each event has resulted in additional damage. We believe that we have yet to discover all the resultant damage which we believe is throughout the home. Plaintiffs are currently unsure of all the details regarding the creation of the hole, but 10 contend that Elias/Apec is responsible either because Mr. Elias performed the work or it was performed by others subject to his supervision. Regardless of how, when or by 11 whom a gaping hole was actually created, Mr. Elias/Apec is directly or vicariously responsible for the hole and each episode of damage caused by it. Of course, 12 discovery and investigation, including obtaining the opinion of expert witnesses, is continuing.” 13 (PL UMF No. 9; Declaration of Alan L. Martini, Exhibit B.) 14 Elias filed an answer to the Brassfield complaint in the Underlying Action, and denied each 15 and every allegation thereof, and raised several affirmative defenses. (Plaintiff's Request for Judicial 16 Notice, Exhibit A.) 17 I. ARGUMENT 18 A Relevant Principles of the Duty to Defend 19 An insurer “must defend a suit which potentially seeks damages within the coverage of the 20 policy.” Gray v. Zurich Ins. Co. (1966) 65 C.2d 263, 275. In other words, the duty to defend arises 21 whenever the lawsuit against the insured seeks damages on any theory that, if proved, would be 22 covered by the policy. Thus, a defense is excused only when “the third party complaint can by no 23 conceivable theory raise a single issue which could bring it within the policy coverage.” Montrose 24 Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 295; Amato v. Mercury Cas. Co. (1993) 18 25 Cal.App.4th 1784, 1790. “The insured need only show that the underlying claim may fall within 26 policy coverage; the insurer must prove it cannot.” Montrose Chemical Corp. v. Superior Court, 27 supra, 6 Cal.4th at 300. The insurer must defend any claim that would be covered if true even if the 28 Al HANNOVER’S MOTION [Oe SUMMARY JUDGMENT claim is in fact groundless, false or fraudulent. The insured does not have to prove the claim against it is valid in order to obtain a defense. [See Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076, 1088.] An insurer cannot avoid its duty to defend based on a coverage defense that depends on facts in dispute in the underlying lawsuit. “If coverage depends on an unresolved dispute over a factual question, the very existence of that dispute would establish a possibility of coverage and thus a duty to defend.” Mirpad, LLC v. California Ins. Guar. Ass’n (2005) 132 Cal.App.4th 1058, 1068; see Horace Mann Ins. Co. v. Barbara B., supra, 4 Cal.4th at 1085; Montrose Chemical Corp. v. Superior Court, supra, 6 Cal.4th at 300. It need not be shown that coverage is likely or even “reasonably” 10 likely. Montrose Chemical Corp. v. Superior Court, supra, 6 Cal.4th at 299-300. Thus, HDI’s 11 attempt to prove the absence of a potentiality of coverage based upon the disputed allegations in the 12 complaint in the Underlying Action is completed without merit. The allegations in the Underlying 13 Action are not undisputed facts and do not conclusively eliminate the potential for coverage. 14 The insurer’s duty to defend is not judged on the basis of whether the third party ultimately 15 wins its lawsuit against the insured. Rather, it “turns upon those facts known by the insurer at the 16 inception of the third party lawsuit.” Montrose Chemical Corp. of Calif. v. Superior Court, supra, 6 17 Cal.4th at 295. 18 HDI’s burden on summary judgment is to conclusively prove with undisputed facts the 19 absence of potential coverage under its policy. On a motion for summary judgment on the insurer’s 20 duty to defend, the insurer must be able to negate potential coverage as a matter of law. Maryland 21 Cas. Co. v. National American Ins. Co. of Calif. (1996) 48 Cal.App.4th 1822, 1832; Anthem 22 Electronics, Inc. v. Pacific Employers Ins. Co. (9" Cir. 2002) 302 F.3d 1049, 1060; Vann v. 23 Travelers Companies (1995) 39 Cal.App.4th 1610 at 1615 [insurer not entitled to summary judgment 24 unless evidence conclusively elements potential coverage]. 25 The existence of a disputed fact relevant to the issue of coverage establishes a duty to defend. 26 Montrose Chemical Corp. v. Superior Court, supra, 6 Cal.4th at 301; Food Pro Int'l, Inc. v. Farmers 27 Insurance Exch. (2008) 169 Cal.App.4th 976, 989; State Farm Gen. Ins. Co. v. Mintarsih (2009) 175 28 Cal.App.4th 274, 284, fn. 6 - “any factual dispute affecting the existence of coverage creates a Al HANNOVER’S MOTION oe SUMMARY JUDGMENT potential for coverage and a duty to defend.” In a “mixed action” in which some claims are potentially covered, and others are not, the insurer must provide and fund a defense of the entire action, including those claims for which there is no potential for coverage under the policy. Buss v. Superior Court (1997) 16 Cal.4th 35, 48. The insurer must consider facts from any source in determining its duty to defend. Montrose Chemical Corp. v. Superior Court, supra, 6 Cal.4th at 298-299; Griffin Dewatering Corp. v. Northern Ins. Co. v. NY (2009) 176 Cal.App.4th 172, 198. An insured may create a duty to defend simply by communicating facts to the insurer that, if true, would establish the existence of coverage. Amato y. Mercury Cas. Co., supra, 18 Cal.App.4th 1784, 1792. Thus, a defense is owed when the 10 insurer has knowledge of facts showing a potential for coverage, even if the complaint fails to allege 11 such facts. Gray v. Zurich Ins. Co., supra, 65 C.2d at 277. 12 Moreover, it is axiomatic that the third party plaintiff who drafted the complaint cannot be 13 the arbiter of the policy’s coverage. Grav v. Zurich Ins. Co., supra, 65 C.2d 263, 275-277; Montrose 14 Chemical Corp. of California v. Superior Court, supra, 6 Cal.4th at 295. 15 B. The Principles of Policy Interpretation 16 Insurance policies are contracts and therefore subject to the rules of construction governing 17 contracts. Bank of the West v. Superior Court (1992) 2 C.4th 1254, 1258. “Under statutory rules of 18 contract interpretation, the mutual intention of the parties at the time the contract is formed governs 19 interpretation. Such intent is to be inferred, if possible, solely from the written provisions of the 20 contract. AJU Ins. Co. v. Superior Court (1990) 51 C.3d 807, 821-822. “Technical or legalistic 21 interpretations cannot undermine the “plain meaning of the words used: “The policy should be read 22 as a Jayman would read it and not as it might be analyzed by an attorney or insurance expert.” Crane 23 v. State Farm Fire & Cas. Co. (1971) 5 C.3d 112, 115. 24 Matters not specifically excluded are deemed covered. “[W]hen a statute expresses certain 25 exceptions to a general rule, other exceptions are necessarily excluded... This cannon, based on 26 common patterns of usage and drafting, is equally applicable to the construction of contracts.” White 27 v. Western Title Ins. Co. (1985) 40 C. 3d 870, 881. 28 PLAINTIFFS MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF OPPOSITION TO HANNOVER’S MOTION FOR SUMMARY JUDGMENT 9 “A policy provision will be considered ambiguous when it is capable of two or more constructions, both of which are reasonable.” State of California v. Continental Ins. Co. (2012) 55 CA4th 186, 195. Any ambiguity will be construed against an insurer if the insured had an objectively reasonable expectation that there would be coverage under the policy consistent with the ambiguity. Clarendon America Ins. Co. v. North American Capacity Ins. Co. (2010) 186 Cal.App.4th 556, 573. Ambiguities in coverage clauses are normally resolved by giving effect to the insured’s reasonable expectations: “[W]e generally interpret the coverage clauses of general policies broadly, [in order to protect] the objectively reasonable expectations of the insured.” Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 667. Conversely, exclusions and limitations on coverage in 10 an insurance policy are “strictly construed against the insurer and liberally interpreted in favor of the 11 insured.” Delgado v. Heritage Life Ins. (1984) 157 Cal.App.3d 262, 271. 12 It is axiomatic that courts should give meaning to all words in the policy and to avoid 13 constructions that would render words superfluous or a nullity. (See Civ. Code, § 641 - “the whole 14 of a contract is to be taken together, so as give effect to every part, if reasonably practicable, each 15 clause helping to interpret the other”; Palmer y. Truck Ins. Exch. (1999) 21 C.4th 1109, 1116.) Thus, 16 although each term must be read in its “ordinary and popular sense,” it must also be interpreted in 17 context and with regard to its intended function and the structure of the policy as a whole. See Bay 18 Cities Paving & Grading, Inc. v. Lawyers Mut. Ins. Co. (1993) 5 C.4th 854, 867. 19 C. Summary of Argument 20 It is undisputed that the Underlying Action alleges the occurrence of property damage 21 occurring during the HDI policy periods in the form of “Flood No. 4.” Thus, there is no doubt that 22 the underlying claims potentially fell within the insuring provisions of the policy so that in order to 23 prevail HDI must provide conclusive evidence demonstrating that an exclusion applies. Atlantic Mut. 24 Ins. Co. v. J. Lamb, Inc. (2002) 100 Cal.App.4th 1017, 1038-1039. 25 HDI asserts that two exclusions preclude coverage: the “Prior Completed Operations 26 Exclusion” “Prior Incident Exclusion.” The first exclusion, “Prior Completed Operations Exclusion” 27 precludes coverage for liability arising out of work completed before the policy incepted. The 28 second exclusion, “Prior Incident Exclusion” precludes coverage for liability for “property damage” Al HANNOVER’S MOTION FOR SUMMARY JUDGMENT that first took place before the policy incepted and which results from an incident predating the policy period. Thus, by operation of these two exclusions, the HDI policy does not cover property damage arising from work that was performed by the insured prior to the inception of the policy or property damage that first took place, first occurred, or first began or commenced before the effective date of the policy or property damage that takes place during the policy period that resulted from an “event, occurrence, or cause” that took place, first occurred, or began or commenced before the effective date of the policy. However, HDI failed to meet its burden to conclusively prove, based upon evidence that it was aware of at the time of tender, that it was impossible for any of the alleged property damage to 10 have first occurred during the policy period or that none of the alleged defective work could have 11 possibly been performed prior to the inception of the policy. 12 For instance, HDI did not demonstrate that it was aware of undisputed evidence at the time 13 the defense was tendered showing that it was impossible for the property damage to the residence 14 and personal property which occurred in the alleged December 2014 flood (during the HDI policy 15 period) to have first occurred at that time and was the result of work performed by Mr. Elias after 16 March 2014, when the first HDI policy incepted. HDI’s efforts to prove the absence of a potentiality 17 of coverage by reference to the disputed allegations in the Underlying Action completely lack merit 18 flies in the face of longstanding California authority that if coverage depends upon allegations 19 disputed in the Underlying Action, the duty to defend arises. Mirpad, LLC v. California Ins. 20 Guarantee Ass’n., supra, 132 Cal.App.4th at 1068; Montrose Chemical Corp. v. Superior Court, 21 supra, 6 Cal.4th at 300. 22 Specifically, the complaint alleges that Elias installed the allegedly defective second sump 23 pump location on the outside of the basement retaining walls at an unspecified time, between the 24 third alleged flood in 2010 and the fourth alleged flood in December 2014, and HDI presents no 25 evidence, let alone undisputed, conclusive evidence, proving that this alleged installation occurred 26 prior to the inception of its policy in March 2014. HDI cannot do this, because the complaint does 27 not allege when this work occurred, only that it occurred sometime after the third flood in 2010 and 28 before the fourth flood in December 2014. Similarly, despite the fact that it is unknown when the PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF OPPOSITION TO HANNOVER’S MOTION FOR SUMMARY JUDGMEN’ 11 alleged hole in the basement slab was created and notwithstanding the possibility that it was created shortly before it was allegedly discovered in December 2014, HDI fails to present undisputed evidence that it occurred prior to the inception of its policy. Thus, there is a potentiality of coverage because it remains possible that some property damage first occurred between March 2014 and March 2016 (the HDI policy period), as a result of allegedly defective work performed by Elias after March 2014. HDI has not sustained its burden of producing undisputed evidence that conclusively proves applicability of its exclusions. Contrary to HDI’s arguments, the complaint in the Underlying Action does not conclusively prove that all of the alleged property damage first occurred in the first flood in 2007 and all resulted 10 from the original construction, which was allegedly completed in January 2007. In fact, the 11 complaint alleges the opposite: that the design and/or construction deficiencies “occurred” since 12 substantial completion of the residence. (PL UMF No. 8.) Furthermore, the disputed allegations in 13 the Underlying Complaint do not serve to fulfill the insurer’s burden to conclusively prove its 14 exclusions preclude the possibility of coverage. Mirpad LLC v. California Ins. Guar. Ass’n, supra, 15 132 Cal.App.4th at 1068. 16 Furthermore, to the extent that HDI relies upon the allegation that the “deficiencies and 17 resulting physical injuries being continuous and progressive”, that allegation too is disputed, and not 18 sufficient to prove there is no potentiality of coverage. Secondly, the allegation that the deficiencies 19 and resulting physical injuries are continuous and progressive does not indicate when any particular 20 deficiency first occurred or caused damage which thereafter became continuous and progressive. In 21 other words, an alleged deficiency could have occurred after March 2014 which resulted in water 22 intrusion and property damage to the residence and personal property thereafter, which became 23 continuous and progressive from that time, which would not be excluded from coverage. 24 Here, the Underlying Complaint alleges that the damage occurred, in part, from “improperly 25 installed sewer and storm water drainage systems”, which would include the work allegedly 26 performed by Elias sometime after the Christmas 2010 flooding event and the December 2014 27 flooding event, which therefore potentially occurred during HDI’s first policy period (March 2014 - 28 March 2015). Thus, the complaint raises the possibility that at least some of the alleged property PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF OPPOSITION TO HANNOVER’S MOTION FOR SUMMARY JUDGMENT damage first occurred after March 2014 as a result of allegedly defective work performed by Elias after March 2014 as well. More importantly, HDI has not conclusively proven that this would have been impossible. HDI has therefore not ruled out that there is a possibility of coverage under its policies, based upon information it had at the time of tender, so its motion for summary judgment should be denied. D. HDI Fails to Conclusively Prove that the Prior Completed Operations Exclusion Precludes Coverage of the Underlying Action The Prior Completed Operations Exclusion provides that “[t]his insurance does not apply to ‘property damage’ arising out of ‘your work’ performed by you on your behalf if ‘your work’ other than service, maintenance, correction, repair or replacement of any part of any structure, was 10 completed prior to the policy period.” This exclusion is at least ambiguous, insofar as it appears to 11 exclude “service, maintenance, correction, repair or replacement of any part of any structure” from 12 its ambit. The exclusion specifically applies to the insured’s “work” “other than service, 13 maintenance, correction, repair or replacement . . .” A reasonable insured would reasonably 14 understand that the exclusion does not apply to such work, as clearly stated. The exclusion is, at 15 least, poorly written and ambiguous, and will be construed in favor of coverage. 16 Notwithstanding this ambiguity, the exclusion does not apply to work performed by the 17 insured during the policy period. Under the allegations of the complaint in the Underlying Action it 18 was at least possible that some of Mr. Elias’s allegedly defective work occurred between March 2014 19 and the end of December 2014 when the fourth flood occurred. This includes the installation of the 20 second sump location outside the basement walls and the creation of the “gaping hole” in the 21 foundation either of which could have occurred any time up through December 2014. Since HDI has 22 failed to produce undisputed evidence that it was aware of at the time it denied coverage that 23 conclusively proved that all of the allegedly defective work was performed prior to March 2014, and 24 therefore the motion should be denied. On a motion for summary judgment on the insurer’s duty to 25 defend, the insurer must be able to negate potential coverage as a matter of law. Maryland Cas. Co. 26 v. National American Ins. Co. Calif., supra, 48 Cal.App.4th at1832. 27 28 PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF OPPOSITION TO HANNOVER’S MOTION FOR SUMMARY JUDGMENT 1. The Underlying Action Did Not Assert Liability for Work Performed Prior to Substantial Completion Contrary to HDI’s contention that the complaint seeks damages for work performed prior to substantial completion in January 2007, the complaint asserts that the defects at the residence “have developed and occurred since the substantial completion of the residence. (PL UMF No. 8.) The complaint also specifically alleges that at some unspecified time after the “third flood” in January of 2010 and before the fourth flood in December of 2014 (during the HDI policy period) Elias recommended and installed a “second sump pump location, this time on the outside of one of the basement retaining walls.” (PL UMF No. 5) This would come within the general allegations of the complaint that the construction deficiencies included “improperly installed sewer and storm water 10 drainage systems resulting in water intrusion in the basement and other areas.” (PL UMF No. 7.) 11 The exact date of this work is not indicated, so it could have occurred any time between the third 12 flood in December 2010 and the fourth flood December 10, 2014. Specifically, HDI provides no 13 evidence, let alone conclusive evidence that this allegedly deficient work was performed prior to the 14 inception of its policy in March 2014. 15 Similarly, the Underlying Action alleges the existence of a “gaping hole” which was 16 discovered sometime after the fourth flood in December 2014. (PL UMF No. 9.) In October of 2018, 17 HDI’s representatives, Limor Lehavi and Scott Ward were advised that Mr. Elias denies 18 responsibility for the gaping hole and contends that the hole was created by “others”, likely during 19 work performed after the December 2014 flooding event, but that the complaint also alleged that 20 Elias was responsible for “supervision” of the construction activities, including “remodel, 21 construction, and inspection of the RESIDENCE,” as alleged in paragraph 9 of the Underlying 22 Action. (PL UMF No. 10; Dec. Alan L. Martini, Exhibit A.) 23 On February 22, 2019, Mr. Elias’s counsel followed up with a subsequent email containing a 24 letter he had received from the Brassfields’ counsel, Steven Horner, which confirms that the 25 Brassfields were claiming that Mr. Elias was liable for the damage caused by the hole in the slab and 26 that they were unsure as to when the hole was created, but contend that “Elias/Apec is responsible 27 for it, either because Mr. Elias performed the work or it was performed by others subject to his 28 PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF OPPOSITION TO HANNOVER’S MOTION FOR SUMMARY JUDGMENT supervision.” The letter goes on to indicate that plaintiffs contend, regardless of how, when or by whom the gaping hole was actually created, that Mr. Elias/Apec is directly or vicariously responsible for the hole and each episode of damage caused by it. (Dec. Alan L.Martini, § 3, Exh. B.) Again, HDI fails to proffer any uncontroverted, conclusive evidence as to when the “gaping hole” for which the Underlying Action alleged Elias was responsible occurred and that it occurred prior to the inception of its policy. This motion for summary judgment should therefore be denied. 2 To the Extent Relevant, the Brassfields’ Characterization of Elias’s Work after Substantial Completion as “Repairs” Is Not Binding on Elias It does not matter whether the work performed by Elias after substantial completion amounted to “repairs” because the policy covers Elias for liability arising out of his work causing 10 property damage during the policy period, whether the work consists of repairs, corrections, or 11 something else. There is no exclusion for “repairs”. This is especially true when the alleged 12 “repairs” are potentially of the work of others, including architects, engineers, and other contractors 13 whose work Elias did not control. Nevertheless, Elias is not bound by the factual allegations 14 characterizing the nature of the work, all of which he has denied. Gray v. Zurich Ins. Co., supra, 65 15 Cal.2d 263, 275-277. 16 Furthermore, the nature of the work can only be determined based upon a factual 17 determination of what was actually done and why, information which HDI did not possess. Again, 18 HDI has not presented any evidence, let alone undisputed conclusive evidence, that all of Elias’s 19 work after date of completion amounted to “repairs.” (See Vann y. Travelers, supra, 39 Cal.App.4th 20 at 1615 [insurer not entitled to summary judgment when the nature of the insured’s business 21 practices was vague and uncertain].) 22 3. The Alleged “Repair” Work Performed by Elias after Substantial 23 Completion, and Potentially Within the HDI Policy Period Was Potentially the “Repair” or “Correction” or the Work of Others, 24 Including Alleged Defective Design and Work by Others, Not Necessarily under the Supervision and Control of Elias 25 HDI also erroneously contends that Elias performed all of the alleged deficient work. 26 However, the Underlying Complaint does not support such a conclusion. The alleged deficiencies 27 included, but were not limited to, “deficiencies in the architectural and structure systems, as well as 28 Al HANNOVER’S MOTION FOR SUMMARY JUDGMENT product and installation defects.” (PL UMF No. 1.) Furthermore, defendants included “contractor defendants” (who performed services as general contractors or subcontractors), “supplier defendants” (who supplied, manufactured or distributed materials, products or goods used in the construction), and “design defendants (who developed, designed or otherwise created the construction plans, drawings and specifications upon which construction of the RESIDENCE was based.” (PL UMF 2.) Thus, the “repairs” allegedly performed by Elias, at least potentially, were not to work previously performed by Elias, but rather by the design professionals, suppliers, and other contractors in direct contract with the owners, not under Elias’s supervision and control. Thus, the alleged repairs were not necessarily to Elias’s own work, and in fact this issue is disputed in the Underlying 10 Action. The existence of a disputed fact relevant to the issue of coverage establishes a duty to 11 defend. 12 4. HDI’s Reliance Upon the Allegations of the Complaint in the Underlying Action to Prove There is No Potentiality of Coverage is Misplaced 13 HDI’s argument that the “express and unambiguous allegations of the Underlying Complaint” 14 preclude potential coverage is entirely misplaced. To the extent any allegations, if true, would 15 preclude coverage, they do not preclude a duty to defend. Elias has filed an answer to the complaint 16 and has disputed each and every factual allegation, and has put them at issue in the Underlying 17 Action. Factual disputes as to whether the policies provide coverage for the Underlying claims a 18 fortiori create a potential for coverage, and thus require the entry for summary judgment in favor of 19 the policyholder.' 20 Given HDI’s burden to negate coverage under its policies as a matter of law, the facts that it 21 has marshaled in this regard are as weak as the insurer pointed to in the Vann case. (see 39 22 Cal.App.4th at 1616.) To the extent that HDI relies upon the allegations of the complaint concerning 23 the nature, extent, timing, or characterization of Elias’s work (including that it constituted “repairs”) 24 or that property damage, once commenced, was “continuous and progressive” these allegations are 25 26 ' Montrose, 6 Cal.4th at 300 (“facts merely tending to show that the claim is not covered, or 27 may not be covered, but are insufficient to eliminate the possibility that resultant damages (or the nature of the action) will fall within the scope of coverage, therefore add no weight to the scales” and 28 do not foreclose the potential for coverage.) Al HANNOVER’S MOTION FOR SUMMARY JUDGMENT all disputed in the Underlying Action. These allegations hardly satisfy HDI’s burden of proving as a matter of law that there is no potentiality of coverage under its policies. Virtually no discovery has occurred in the Underlying Action. As a result, the Underlying Complaint could not possibly be determinative on any issue regarding coverage of the applicability of HDI’s exclusions, including the characterization of Elias’s work as “repairs” as opposed to the addition of new features not previously in existence, such as the alleged installation of a second location outside the foundation and sump pump, which occurred sometime between 2010 and the end of 2014. E. The “Prior Incidents” Exclusion Does Not Preclude Potentiality of Coverage HDI contends that its “Prior Incidents” Exclusion by its terms also eliminates potential 10 coverage for the Brassfield lawsuit. Part (a) of the exclusion eliminates coverage for the alleged 11 property damage that first took place, first occurred, or first began or commenced before the HDI 12 policy is effective. It also precludes coverage for damages because of “property damage” that takes 13 place during the HDI policy period, which results from or is caused in whole or in part by, any 14 “event, occurrence or cause” that took place, first occurred, or began or commenced before the HDI’s 15 policy’s effective period. 16 As relevant to this case, the exclusion would exclude liability for property damage such as 17 flooding or other event causing water intrusion which occurs prior to the inception of the HDI policy. 18 Performance of the allegedly defective work itself, without more (such as actual water intrusion as a 19 result of the work) would not trigger the exclusion. The phrase “event, occurrence or cause” will be 20 interpreted, giving all of the words of the phrase meaning and pursuant to general principles of 21 contract construction, including the doctrine of “ejusdem generis” (particular expressions qualify 22 those which are general. Civil Code section 3534.) In an insurance policy, specific provisions rather 23 than general provisions govern the insurance contract relating to a particular subject, even though the 24 general provision, standing alone, would be broad enough to include the subject to which the more 25 specific provision relates. Ortega Rock Quarry v. Golden Eagle Ins. Corp. (2006) 141 Cal.App.4th 26 969, 981-982. Here, the terms “event” and “occurrence” are more specific than the term “cause” and 27 therefore “cause” will be limited to situations such as “events” or “occurrences” where something 28 like a rainstorm happens and results in water intrusion and resulting damage. Otherwise, the term Al HANNOVER’S MOTION FOR SUMMARY JUDGMENT “cause” would completely subsume the terms “event” and “occurrence” and render them surplusage The mere passive creation of a construction defect, without some additional unexpected happening, would not come within the definition of “cause”, because if it were interpreted that broadly, to include the original poor design or workmanship, before anything untoward occurs, the terms “event” and “occurrence” would have no effective meaning. Plus, if poor workmanship itself was included in the term “cause” in the context of the exclusion, HDI would not have needed to include the “Prior Completed Operations Exclusion” which does purport to exclude liability for property damage arising out of the insured’s work performed prior to the inception of the policy. Nevertheless, even if the court were to interpret “cause” to include performance of the 10 allegedly deficient work, there is still a potentiality that at least some of the allegedly deficient work 11 was performed during the HDI policy period. As demonstrated above, the allegations of the 12 Underlying Complaint against Elias are certainly broad enough to encompass the possibility that 13 some of the alleged defective work he performed (including, installation of the second sump pump 14 location outside of the basement retaining walls sometime between 2010 and the end of 2014 and the 15 creation of the “gaping hole” in the slab at some unknown time) causing at least some of the damage 16 to the residence and its contents after March 2014, thus precluding application of the exclusion to all 17 alleged property damage. 18 Some of the “events, occurrences or causes” of the property damage could have occurred 19 between March 2014 and March 2016. The allegations of the Underlying Complaint were certainly 20 broad enough to raise this possibility. 21 Nor does HDI’s argument that the complaint alleges that Elias completed the project in 2007 22 and the first flooding allegedly took place in 2007 preclude the possibility that new and different 23 property damage did not occur in subsequent flooding or water intrusive events. The fact that some 24 property damage was alleged to commence prior to the HDI policies incepting, does not necessarily 25 mean that there was no new property damage (for instance to personal property subsequently placed 26 in the basement after the third flood) in other flooding and/or water intrusion events, such as 27 allegedly occurred in December of 2014. Again, HDI presents no undisputed evidence that there was 28 no new property damage, either to the residence or the personal property in the residence, in the Al HANNOVER’S MOTION FOR SUMMARY JUDGMENT alleged December 2014 flood. Furthermore, the nature and extent of the alleged damage to the residence and personal property is presently unknown, and disputed and subject to discovery and trial in the Underlying Action. HDI’s second argument that “the cause of all such property damage, Elias’s work, also predates the inception of either policy according to the express allegations of the Underlying Complaint” also misses the mark. The Underlying Complaint clearly alleges liability from alleged deficiencies that “developed and occurred” since substantial completion. The allegation that the “resulting physical injuries being continuous and progressive”, from the time they first o