the Insurance Company of the State of Pennsylvania v. County of San Bernardino

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
THE INSURANCE COMPANY OF THE
STATE OF PENNSYLVANIA,
Plaintiff-counter-
defendant-Appellee,
v.
COUNTY OF SAN BERNARDINO,
Defendant-counter-claimant-
Appellant.
No. 17-56825
D.C. No.
5:16-cv-00128-PSG-SS
MEMORANDUM*
Appeal from the United States District Court
for the Central District of California
Philip S. Gutierrez, District Judge, Presiding
Argued and Submitted May 14, 2019
Pasadena, California
Before: LIPEZ,** WARDLAW, and HURWITZ, Circuit Judges.
The question in this diversity case is whether certain language (“Condition
C”) in three policies issued by the Insurance Company of the State of Pennsylvania
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
** The Honorable Kermit V. Lipez, United States Circuit Judge for the
First Circuit, sitting by designation.
FILED
JUN 10 2019
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

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(“ICSOP”) to the County of San Bernardino (“the County”) is an enforceable
antistacking provision that precludes the County from aggregating the per-
occurrence policy limits in the three policies. Reviewing the district court’s
summary judgment decision in favor of ICSOP de novo, Rocky Mountain Farmers
Union v. Corey, 730 F.3d 1070, 1086 (9th Cir. 2013), and applying California
substantive law, Karen Kane Inc. v. Reliance Ins. Co., 202 F.3d 1180, 1183 (9th Cir.
2000), we conclude that Condition C is an enforceable antistacking provision, and
affirm.
1. Under California law, the plain language of an insurance contract governs.
State v. Cont’l Ins. Co., 281 P.3d 1000, 1004 (Cal. 2012). Like the majority of courts
to interpret Condition C, we conclude that its plain language unambiguously
precludes stacking. See, e.g., Olin Corp. v. OneBeacon Am. Ins. Co., 864 F.3d 130,
147–48 (2d Cir. 2017); Plantation Pipeline Co. v. Cont’l Cas. Co.,
No. 1:03-CV-2811-WBH, 2008 WL 10884027, at *3 (N.D. Ga. July 9, 2008);
Stonewall Ins. Co. v. E.I. du Pont de Nemours & Co., 996 A.2d 1254, 1259 (Del.
2010).1 The County relies on cases that found ambiguity in contractual language
that differed from Condition C and involved disputes about the definition of
1 We do not rely on the unpublished section of Fuller-Austin Insulation
Company v. Highlands Insurance Company, No. B170079, at 65–66 (Cal. Ct. App.
Jan. 19, 2006), which both parties contended at oral argument supports their
respective positions.

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“occurrence” as applied to a highly specific factual scenario. See A.B.S. Clothing
Collection, Inc. v. Home Ins. Co., 41 Cal. Rptr. 2d 166, 170–74 (Cal. Ct. App. 1995);
Karen Kane Inc., 202 F.3d at 1183–88.
2. California “[c]ourts will not strain to create an ambiguity where none
exists.” Waller v. Truck Ins. Exch., Inc., 900 P.2d 619, 627 (Cal. 1995). The
County’s various attempts to create ambiguity are ineffectual. In particular, the
County’s alternative reading of Condition C—that its purpose is to prevent double
recovery of specific expenses—would render other language in the contract
superfluous. See Mirpad, LLC v. Cal. Ins. Guar. Ass’n, 34 Cal. Rptr. 3d 136, 147
(Cal. Ct. App. 2005) (“An interpretation of the policy that creates an ambiguity
where none existed by rendering words redundant or superfluous violates all rules
of construction.”). The County’s proffered interpretation of “any amounts due”
would lead to the potentially absurd conclusion that policy limits are reduced so long
as the prior insurer has not paid its policy limits but are not reduced once the limits
are paid. The County’s arguments based on the use of the term “loss” in the policies
are also unpersuasive. Condition C applies to any “covered” loss, and courts have
typically rejected any interpretation of “covered” in an insurance contract as
meaning something other than “within the scope of coverage.” See, e.g., Wells
Fargo Bank, N.A. v. Cal. Ins. Guar. Ass’n, 45 Cal. Rptr. 2d 537, 544–45 (Cal. Ct.
App. 1995).

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3. The ICSOP policies are “excess policies” within the scope of Condition C.
The policies are labelled as “umbrella liability” policies, and umbrella policies
ordinarily “are excess policies in the sense they afford coverage that is excess over
underlying insurance.” CSE Ins. Grp. v. Northbrook Prop. & Cas. Co., 29 Cal. Rptr.
2d 120, 122 n.1 (Cal. Ct. App. 1994). The ICSOP policies also exhibit the hallmarks
of excess policies: they include a schedule of underlying insurance and are not
ordinarily triggered until the underlying policies are exhausted.2 See H. Walter
Croskey, et al., California Practice Guide: Insurance Litigation, Ch. 8-C, § 8:177
(Aug. 2018). Finally, the language of Condition C— “any other excess policy”—
suggests that each ICSOP policy is itself an excess policy for purposes of Condition
C.
4. The County’s suggestion that reading Condition C as an antistacking
provision is antithetical to their reasonable expectations of coverage is unavailing.
By purchasing the second and third policies, the County did receive additional
coverage—the first policy would not cover claims for property damage resulting
2 The County’s argument that the ICSOP policies sometimes act as primary
insurance, and thus cannot be considered to be “excess policies,” depends on
accepting the proposition that the self-insured retention is not technically equivalent
to an underlying insurance policy. Courts, however, have generally treated policies
that are only triggered once self-insurance is exhausted as excess policies, at least in
the context of indemnification. See, e.g., Pac. Emp’rs Ins. Co. v. Domino’s Pizza,
Inc., 144 F.3d 1270, 1276–77 (9th Cir. 1998). The cases cited by the County are
distinguishable because they involve the specific question of an insurer’s duty to
defend when a policy includes a self-insured retention.

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from an occurrence that developed after the expiration of the first policy period.
Furthermore, the promise in Condition C’s second paragraph of continuing coverage
after the policy period’s expiration is entirely consistent with interpreting Condition
C as an antistacking provision. The second paragraph simply memorializes the
principle under California law that insurers are “liable to indemnify the insured,”
subject to policy limits, “against all claims that resulted from some triggering harm
during the respective policy periods, even if the claims arose after the policy period
expired.” Cont’l Ins., 281 P.3d at 1006 (emphasis omitted).
5. Condition C is not an unenforceable “escape clause.” California law makes
clear that insurance provisions should be interpreted in their context, including as
they are applied to the facts underlying the coverage dispute. See, e.g., Bay Cities
Paving & Grading, Inc. v. Lawyers’ Mut. Ins. Co., 855 P.2d 1263, 1271 (Cal. 1993);
Cont’l Ins., 281 P.3d at 1004-05 (“[L]anguage in a contract must be construed . . . in
the circumstances of that case, and cannot be found to be ambiguous in the abstract.”
(alteration in original) (internal quotation marks omitted)). To the extent Condition
C precludes the County from stacking the per-occurrence limits of the three ICSOP
policies, it is not an unenforceable escape clause because it neither reduces ICSOP’s
coverage obligations to zero nor shifts liability wholly or largely to another insurer.
See Dart Indus., Inc. v. Commercial Union Ins. Co., 52 P.3d 79, 93 (Cal. 2002). The
County’s reliance on cases suggesting that all antistacking provisions are escape

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clauses is unavailing given the California Supreme Court’s recognition that
antistacking provisions are enforceable. See Cont’l Ins., 281 P.3d at 1009.
AFFIRMED.

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