Hallmark Insurance v. Superior Court

Opinion

KLEIN, P. J. Hallmark Insurance Company, is petitioning for an order reversing the denial of its motion for summary judgment in a bad faith insurance action, contending the Hallmark policy in conspicuous and clear language unambiguously limits coverage to injuries occurring within the policy period. We agree and grant the writ.

Discussion

Hallmark issued a general liability policy to Delta Wing Kites and Gliders, Inc. (hereafter Delta), which corporation manufactured hang gliders. On June 18, 1978, Richard Wohlgemuth was killed while using a Delta hang glider. Wohlgemuth’s hang glider was manufactured in July 1974, within the time period covered by the policy. However, the policy was discontinued in March 1975, over three years before the accident which caused Wohlgemuth’s death.

When Wohlgemuth’s heirs filed a wrongful death action against Delta, Hallmark refused to defend or indemnify Delta. After Wohlgemuth’s heirs received a $1.75 million judgment against Delta, both the heirs and Delta filed this bad faith insurance action against Hallmark.

[1017]In denying the motion for summary judgment, the respondent court found “The Hallmark policy is ambiguous and does not present non-coverage in clear, conspicuous language and fact questions remain as to construction of the policy in relation to the declaration of William Bennett [the president of Delta].” In the declaration, Bennett states, “No one from the insurance company ever made any issue of dates or policy periods to me. As far as I am concerned, I paid premiums for insurance to cover me for all claims of any sort, at any time, concerning any goods I manufactured, sold, handled or distributed.”

I. The “insuring provisions” of the policy are stated in conspicuous, clear and unambiguous language.

Hallmark’s defense is based upon the definitions set forth in the “insuring provisions” of the policy. Delta contends the definitions are ambiguous and the “exclusion section” should have expressly limited coverage to an accident happening within the policy period. However, before even considering exclusions, a court must examine the coverage provisions to determine whether a claim falls within the potential ambit of the insurance. (Giddings v. Industrial Indemnity Co. (1980) 112 Cal.App.3d 213, 218 [169 Cal.Rptr. 278]; Fresno Economy Import Used Cars, Inc. v. United States Fid. & Guar. Co. (1977) 76 Cal.App.3d 272, 280 [142 Cal.Rptr. 681].) Where the scope of the basic coverage itself clearly creates no potential liability under the policy, a court may not give it a “strained construction” to impose on an insurer a liability the insurer has not assumed. (Giddings v. Industrial Indemnity Co., supra, 112 Cal.App.3d at pp. 217-218.) The burden is on the insured to prove that an event is a claim which falls within the basic coverage of the insurance. (Royal Globe Ins. Co. v. Whitaker (1986) 181 Cal.App.3d 532, 537 [226 Cal.Rptr. 435].)