Travelers Property Casulaty Co. v.
Computer Sciences Corp.
Filed 2/27/12 The Travelers Property Casulaty Co. v.
Computer Sciences Corp. CA2/8
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND
APPELLATE DISTRICT
DIVISION
EIGHT
THE TRAVELERS PROPERTY CASUALTY
COMPANY OF AMERICA et al.,
Plaintiffs and Respondents,
v.
COMPUTER SCIENCES CORPORATION,
Defendant and Appellant.
B229033
(Los Angeles
County
Super. Ct.
No. BC379446)
APPEAL from
a judgment of the Superior Court
of
County. James R.
Dunn, Judge. Affirmed.
Anderson
Kill Wood & Bender, David E. Wood, John L. Corbett and Eric R. Reed for
Defendant and Appellant.
Sedgwick, Bruce D. Celebrezze,
Matthew C. Lovell and Nicholas J. Boos for Plaintiffs and Respondents.
__________________________
Defendant and appellant Computer Sciences Corporation
(Computer Sciences) appeals from the summary judgment entered against it and in
favor of plaintiffs and respondents The Travelers Property Casualty Company of
America and St. Paul Fire and Marine Insurance Co. (collectively Travelers),
declaring that Travelers had no duty to defend Computer Sciences in a class
action suit. Computer Sciences
contends: (1) Travelers’ duty
to defend does not depend on there being a claim in the underlying complaint
that Computer Sciences caused the alleged bodily
(2) the allegations of the underlying complaint can be construed as
alleging Computer Sciences was negligent.
We affirm.
FACTUAL AND
PROCEDURAL BACKGROUND
Computer
Sciences licenses “Colossus,” a software program used by insurance companies to
evaluate bodily injury claims. From August 1, 1996, through August 1, 2000, Computer Sciences
was the insured under three commercial general liability policies (the CGL policies)
and three umbrella policies purchased from Travelers. Each policy included coverage for “amounts
any protected person is legally required to pay as damages for covered bodily
injury . . . [¶] . . .
[¶] . . . caused by an event;”
the policies define an “event” as an “accident.”
and others. The Right and Duty to Defend
provisions of the policies require Travelers to defend against a claim or suit
“covered by this agreement.”
Computer Sciences and a number of
insurance companies were named as defendants in Hensley v. Computer Sciences Corporation (W.D. Ark. Mar. 15, 2006,
05-CV-4081 2006 U.S. Dist. Lexis 14651), a class action brought in the Arkansas
State Court by a number of automobile insurance policy holders (the
2005, alleged that the class members sustained bodily injuries in automobile
accidents involving uninsured or underinsured motorists starting July 1996, and
that the named insurers – the class action plaintiffs’ own insurance carriers –
undervalued their claims using the Colossus program. The Hensley
complaint alleged that Computer Sciences fraudulently conspired with the
named insurers to conceal errors in the program that caused the bodily injury
claims to be undervalued; the complaint sought damages in the amount of the
unreimbursed bodily injury damages under theories of
and constructive fraud. Computer
Sciences tendered its defense to the Hensley
complaint to Travelers in July 2007.
Travelers accepted the defense pursuant to a full reservation of rights;
after further investigation, Travelers denied coverage and filed this action
for declaratory relief.
The parties
filed cross-motions for summary adjudication of the duty to defend issue. Computer Sciences took the position that
Travelers had a duty to defend it in the Hensley
litigation because the Hensley complaint
sought to impose liability on Computer Sciences for the “bodily injuries” the
“accidents.” Travelers countered that it
had no duty to defend because the Hensley
complaint sought damages for economic loss, not bodily injury; and coverage
was limited to “accidents” and the Hensley
complaint sought damages for intentional acts (conspiracy, fraud, and
unjust enrichment), not “accidents.”
The
competing motions for summary adjudication were heard on September 3,
2010. Travelers argued that the basis of
the claims against Computer Sciences in the Hensley
complaint were fraud and conspiracy, not any “accident” causing bodily injury
to the Hensley plaintiffs. Further, that the measure of damages urged by
the Hensley plaintiffs was the
difference between what they were paid for their bodily injuries, and what they
should have received absent the conspiracy to reduce their damages, did not
transform the claim into one for bodily injury.
Computer Sciences argued that Travelers’ duty to defend was predicated
on the Hensley complaint’s claim that
Computer Science was “legally liab[le] for bodily injury” damages suffered by
the Hensley plaintiffs; it was
irrelevant that Computer Sciences had not caused the accident that resulted in
the bodily injury. The trial court agreed with Travelers, finding it had no
duty to defend Computer Sciences in the Hensley
litigation. Judgment was entered on
October 7, 2010; Notice of Entry of Judgment was served on October 18, 2010,
and Computer Sciences timely appealed.
DISCUSSION
Standard
of Review
The standard of review from summary
judgment is well settled. “ ‘We
review an order denying a motion for summary judgment de novo. [Citation.]
Summary judgment is properly granted when the papers show there is no
triable issue of material fact, and the moving party is entitled to judgment as
a matter of law. [Citation.]’ [Citation.]
The interpretation and application of an insurance policy to undisputed
facts presents a question of law subject to this court’s
Farm General Ins. Co. v. Frake (2011) 197 Cal.App.4th 568, 577 (
Coverage
Does Not Extend to Damages for Accidents Caused by Third Parties and Not by
Computer Sciences
Computer
Sciences contends Travelers had a duty to defend it in the Hensley litigation because the Hensley
complaint sought damages against Computer Sciences for “bodily injuries”
the Hensley plaintiffs suffered in
car “accidents.” It argues that whether
Computer Sciences caused the car accidents that resulted in the plaintiffs’
bodily injuries is irrelevant to the duty to defend under the clear and
unambiguous language of the coverage provisions. We disagree.
In construing an insurance
contract, our goal is to give effect to the parties’ mutual intentions. If the contract language is clear, it
governs. If the terms are ambiguous, we
interpret them to protect the reasonable expectations of the insured. If the ambiguity cannot be resolved in this
manner, we construe the ambiguity against the insurer who drafted the policy
and received premiums to provide the agreed protection. (Minkler
v. Safeco Ins. Co. of America (2010) 49 Cal.4th 315, 321.) The insured has the burden of proving that a
claim is within basic coverage. (
The duty to defend is broader than
the obligation to indemnify and it arises whenever an insurer ascertains facts
that give rise to the possibility or potential of liability to indemnify. (Total
Call Internat., Inc. v. Peerless Ins. Co. (2010) 181 Cal.App.4th 161,
167; see also Frake, supra,
197 Cal.App.4th at p. 577.)
The duty is limited by the nature and kind of risk covered by the
policy. (Quan v. Truck Ins. Exchange (1998) 67 Cal.App.4th 583,
591.) If the underlying claim was not a
risk within the policy coverage, there is no duty to defend. (Ibid.)
The first step in determining
whether the insurer owes a duty to defend is to compare the allegations of the
complaint with the terms of the policy.
(Frake, supra,
197 Cal.App.4th at p. 578.) In
Delgado v. Interinsurance Exchange of
Automobile Club of Southern California (2009) 47 Cal.4th 302, 311 (
“[u]nder California law, the word ‘accident’ in the coverage clause of a
liability policy refers to the conduct of
the insured for which liability is sought to be imposed on the
insured.” (Italics added; see also
In Horsemen’s Benevolent & Protective Assn. v. Insurance Co. of North
America (1990) 222 Cal.App.3d 816 (Horsemen’s),
Horsemen’s obtained an insurance policy from Bellefonte that excluded accidents
happening to any person while racing, exercising or training any horse. Nevertheless, Horsemen’s advertised to its
members that the policy included such coverage.
A jockey injured during a training session filed an action for personal
injuries against three members of Horsemen’s; the member-defendants tendered
the claim to Bellefonte, which filed a declaratory relief action against
Horsemen’s and the member-defendants. (
filed three separate cross-complaints against Horsemen’s for misrepresenting
the extent of coverage under the Bellefonte policy. Horsemen’s tendered defense of those
cross-complaints to its general liability carrier, Insurance Company of North
America (INA). INA denied coverage and
refused to defend Horsemen’s against the cross-complaints. Horsemen’s filed suit against INA for, among
other things, bad faith breach of contract.
The appellate court affirmed summary judgment entered in favor of INA,
reasoning that INA had no duty to defend or indemnify Horsemen’s: While “the claim against the [Horsemen’s
member-defendants] was because of personal injury, [the member-defendants’]
cross-complaints against Horsemen’s was because of misrepresentation and
fraud. These claims cannot be considered
as constituting claims for personal injury or property damage as contemplated
by the INA general liability policy.” (
Our
analysis begins with a comparison of the allegations of the underlying
complaint with the coverage provisions of the insurance policies. First, the complaint: the conduct for which the
liability on Computer Sciences is marketing a software program that undervalued
the plaintiffs’ bodily injury claims; it does not allege that the plaintiffs’
bodily injuries were caused by any conduct of Computer Sciences. On the contrary, there is no dispute that the
accidents resulting in the bodily injuries were caused by third parties. Next, we turn to the coverage
provisions: the policies provide
coverage for “bodily injury . . . [¶] . . . [¶] . . . caused by an event,” defined by the
policy as “an accident.” Under
caused by conduct of the insured for which liability is sought to be imposed on
the insured.” Thus, under
the Hensley complaint because those
claims do not seek to impose liability on Computer Sciences for conduct that
caused bodily injury. Accordingly,
Travelers has no duty to defend Computer Sciences against those claims.
Our conclusion
under Delgado and
someone suffering bodily injury. But in
both cases, the action against the insured was not for causing that bodily
injury, but for fraud (and in this case, conspiracy and unjust enrichment,
too). That damages for bodily injury was
a measure of the plaintiffs’ economic loss in both cases (in
the jockey and here the Hensley plaintiffs
sought the difference between what they received as damages and what they
believed they should have received), did not transform either action into one
for bodily injury under the insurance policies.
We are not
persuaded otherwise by Computer Sciences’s argument that Delgado and Frake are
inapposite because the issue in those cases was whether a physical assault was
an “accident” within the meaning of the coverage clause, not whether the
insured could be held “liable for bodily injury or property damage caused by
the conduct of someone else, as is the case here.” Here, there is nothing to suggest that the
parties intended the policies to extend coverage for conduct, here causing an
accident, of other than “protected persons.”
We do not agree with Computer
Sciences that Horsemen’s was
implicitly disapproved by our Supreme Court in Vandenberg v. Superior Court (1999) 21 Cal.4th 815. In that case, the insured (Vandenberg) was
the subject of a lawsuit alleging that underground oil storage tanks he
installed on property he leased for 30 years had caused property damage by
contaminating the property. The various
tort claims were settled, but the breach of lease cause of action was submitted
to binding arbitration. The insurance
companies refused to indemnify Vandenberg for the $4 million arbitration
award because it was based on breach of lease contract, which the insurers
argued was not covered under the policies.
Our Supreme Court concluded coverage was not precluded for losses
pleaded as contractual damages. (
would understand the term “legally obligated to pay as damages” to refer to any
obligation, whether pursuant to tort or contractual
liability. (Id. at p. 840.) There
was no dispute in Vandenberg that
conduct by the insured caused the property damage that was the basis of the
underlying litigation. The holding of
of the action (e.g., tort or breach of contract) but the injury caused by the
insured that governs. (
having contaminated land owned by Boyd, its lessor. The court held that since the contamination
was a covered event, it did not matter whether the plaintiff’s legal theories
were tort or breach of lease contract.
Either way, the insurer could be liable for indemnification.
contrary to Computer Sciences’s assertion, Vandenberg
did not implicitly disapprove the holding in Horsemen’s that fraud claims cannot be construed as claims for
bodily injury.
Nor are the out-of-state cases
relied on by Computer Sciences for a contrary result persuasive. We do find one federal case helpful. In Holman
Enterprises v. Fidelity and Guaranty Insurance Company (D.N.J. 2008) 556
F.Supp.2d 466, the Holman parties rented a passenger van to Clinton, who also
purchased a supplemental insurance policy with $1 million of coverage for
bodily injury; but, the policy excluded coverage for bodily injury to relatives
of the insured. Clinton was driving the
van and the plaintiffs, all of whom were related to Clinton, were passengers
when there was an accident and the plaintiffs were seriously injured. The plaintiffs brought the underlying action
against the Holman parties, alleging they were negligent and, alternatively,
intentionally fraudulent in leading the plaintiffs to believe that the scope of
coverage of the policy purchased by Clinton was broader than the actual
coverage provided by the policy. The
plaintiffs sought as damages the $1 million that they were unable to recover
under the policy purchased by Clinton.
The Holman parties tendered the underlying action to their insurer, who
denied coverage under the Holman parties’ umbrella policy. The Holman parties filed suit against their
insurer seeking a declaratory judgment that its umbrella policy provided
coverage of the claims in the underlying action. The federal district court entered summary
judgment in favor of the insurer, reasoning that there was no direct causal
connection between the bodily injury suffered by the plaintiffs, and their
economic loss claims for fraud against the Holman parties. (Id.
at pp. 471-472.) As was the case in
Holman, there is no causal connection
between the injuries suffered by the Hensley
plaintiffs and the claims against Computer Sciences.
Finally, we observe that Computer
Sciences’s efforts to find coverage in their CGL policies for the claims made
by the Hensley plaintiffs conflates
two different kinds of insurance: errors
and omissions insurance or directors and officers liability insurance
(D&O), and CGL insurance. As
explained in Croskey et al., California Practice Guide: Insurance Litigation (The Rutter Group)
paragraph 7:1555, page 7F-2 (rev. #1, 2011): “CGL policies cover the insured’s liability
for bodily injury and property damage to third parties. D&O policies generally cover loss
resulting from wrongful acts of officers and directors and specifically
claims against Computer Sciences is the company’s wrongful acts of conspiracy
and fraud, which interfered with those plaintiffs’ ability to receive fair
compensation from plaintiffs’ insurers.
Indeed, the record shows that Computer Sciences’s errors and omissions
policy paid $45 million to Computer Services in settlement of these claims
The Hensley
Conduct by Computer Sciences
Recognizing that a policy holder is
not entitled to coverage for liability caused by his or her willful acts,
Computer Sciences contends the Hensley
complaint alleges conduct by it that could be characterized as negligent. For example, Computer Sciences argues, the
complaint alleges Computer Sciences marketed the software without modifying its
design with the intent to defraud the Hensley
plaintiffs, but the failure to modify could be found to have been
negligent. We disagree.
Computer Sciences relies on
4 Cal.4th 1076, 1078 (Horace Mann)
for the proposition that there is a duty to defend when a policy holder’s
allegedly intentional conduct could be found to be merely negligent. That is not the holding in
her teacher alleging injuries caused by the teacher’s intentional and negligent
misconduct towards her. The teacher, who
previously pled no contest to one count of sexual molestation, was covered
by an educator’s liability policy that “covered damages ‘which the insured
shall become legally obligated to pay as a result of any claim arising out of
an occurrence in the course of the insured’s educational employment activities,
and caused by any acts or omissions of the insured . . . .’ ” (Id.
at pp. 1079-1080.) The insurer
filed a declaratory relief action, alleging that there was no coverage under
the policy because the teacher’s alleged conduct was intentional and was not in
the course of the teacher’s educational activities. In opposition to the insurer’s motion for
summary judgment, the student introduced a letter written by her lawyer to the
insurance company, listing 25 acts of misconduct, including giving the student
tardy notes at the student’s request, pulling her out of classes and allowing
her to be in the band room alone. Our
Supreme Court reversed summary judgment in favor of the insurer reasoning that,
on its face, the student’s complaint alleged negligent conduct. Although there had been one act of excluded
sexual molestation, “there remained unresolved factual disputes concerning [the
teacher’s] conduct apart from his molestation of [the student], and, with those
disputes, the potential for liability under the policy.” (Id.
at p. 1083.)
Horace
Mann is inapposite to this case because unlike in Horace Mann, here there was no allegation that Computer Sciences
was negligent. The argument that the
alleged intentional conduct may have been merely negligent does not create a
negligence claim where none is pled.
Finally, Computer Sciences argues
that our holding would seriously undermine coverage in vicarious liability
cases. The present case does not involve
vicarious liability and we see no application here.
DISPOSITION
The judgment is affirmed.
Travelers shall recover its costs on appeal.
RUBIN,
J.
WE CONCUR:
BIGELOW,
P. J.
FLIER,
J.
title="">[1]
In full, the coverage provisions
read:
“Bodily
injury and property damage liability.
“We’ll pay amounts any protected person is legally required to pay as
damages for covered bodily injury, property damage, or premises damage that:
·
“happens while this agreement is in effect; and
·
“is caused by an event.”
“Protected person means any
person or organization who qualifies as a protected person under the Who is
Protected Under This Agreement section.”
“Bodily Injury means any
physical harm, including sickness or other disease, to the physical health of
other persons. It includes any of the
following that results at any time from such physical harm, sickness or
disease:
·
“Mental anguish, injury or illness.
·
“Emotional distress.
·
“Care, loss of services, or death.”
“Event means an accident, including continuous or repeated exposure
to substantially the same general harmful conditions.”
