Niguel Ridge Homeowners Assn. v. American International Specialty Lines Ins. Co.

Filed 1/29/07 Niguel Ridge Homeowners Assn. v. American International Specialty Lines Ins. Co. CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment of the Superior Court of Orange County, David C. Velasquez, Judge. Affirmed in part and reversed in part.

Law Office of Herb Fox, Herb Fox; Daniel J. Perwich; Donahoo & Associates and Richard E. Donahoo for Plaintiffs and Appellants.

Horvitz & Levy, Peter Abrahams, Daniel J. Gonzalez; Branson, Brinkop, Griffith & Strong and John R. Campo for Defendants and Respondents American International Specialty Lines Insurance Company and National Union Fire Insurance Company of Pittsburgh, PA.

Michelman & Robinson, Carol Boyd, Lydia E. Hachmeister and Melinda W. Ebelhar for Defendant and Respondent Participating London Underwriters.

* * *

Plaintiffs, a homeowners association and several of its individual members, filed several lawsuits seeking damages for construction defects. The lawsuits, including cross-complaints filed by the defendants, were consolidated and ultimately settled. The parties involved in that litigation included the Buie Corporation (Buie), a licensed general contractor, and Altifillisch Contractors, Inc. (ACI), a grading subcontractor. The liability insurance carriers for both Buie and ACI contributed to the payment made to plaintiffs.

In the present action, plaintiffs jointly sued three insurance companies that provided liability insurance to ACI seeking equitable subrogation, contribution, and declaratory relief. They allege Buie was either a named insured or an additional insured under ACIs policies, the settlement payments by Buies carriers in the construction defect litigation arose from ACIs grading work, and both Buie and its carriers assigned their contribution and subrogation rights against defendants to plaintiffs.

The trial court entered judgment for defendants after granting their motions for summary judgment. First, as to the insurance policies that included additional insured endorsements extending the named insureds liability insurance coverage to others where the named insured was contractually obligated to do so, the court found plaintiffs had failed to present admissible evidence establishing a triable issue of fact as to whether ACI had agreed to name Buie as an additional insured on its liability insurance policies. Second, the court found the partnership exclusion clause contained in the policies issued by one defendant excluded coverage.

We conclude plaintiffs presented sufficient admissible evidence creating a triable issue of fact as to whether the contracts between Buie and ACI obligated ACI to include Buie as an additional insured on ACIs liability policies and reverse the judgment as to two insurers. However, we conclude the court properly found the partnership/joint venture exclusion in the third carriers policies barred plaintiffs right to recover from it.

FACTUAL AND PROCEDURAL BACKGROUND

Buie was the general partner of Buie Area M Ltd. The latter entity was the general partner of Area M Development Company (Area M), the partnership which originally owned the Niguel Ridge property. In June 1987, Buie entered into two written contracts with ACI to perform rough grading and to construct a storm drain on Area M[s] property. ACI completed its work on the project by June 1988. Area M later transferred the property to a company, then named Fieldstone, which contracted with others to build the homes. Buie did not perform any work on the project after January 1989.

When ACI signed the contracts with Buie and worked on the Niguel Ridge project in 1987, it was covered by the first of two successive one-year commercial general liability insurance policies issued to it by defendant National Union Fire Insurance Company of Pittsburgh, PA (National Union). Neither of National Unions policies expressly named Buie as an additional insured. But the second policy included an endorsement declaring additional insureds are covered under this policy as required by written contract, but only with respect[] to operations performed by or for the named insured. (Capitalization omitted.)

In November 1989, defendant Participating London Underwriters (Underwriters) issued the first of three successive one-year commercial general liability insurance policies to ACI and its related entities. Each of Underwriters policies contained the following clause: This insurance does not apply to bodily injury or property damage arising out of the conduct of any partnership or joint venture of which the insured is a partner or member and which is not designated in this policy as a named insured.

At ACIs request, the first of Underwriterss policies included a January 10, 1990 endorsement, GL 20 09, that listed Buie as an additional insured. But endorsement GL 20 09 also had a paragraph that excluded coverage for bodily injury and property damage occurring after [] (1) all work on the project . . . to be performed by or on behalf of the additional insured at the site of the covered operations has been completed or [] (2) that portion of the named insureds work out of which the injury or damage arises has been put to its intended use by any person or organization other than another contractor or subcontractor engaged in performing operations for a principal as a part of the same project . . . .

After receiving a December 1989 facsimile from ACIs United States insurance broker that stated the named insured on our application was incomplete, Mark Shreeve, a director with London Special Risks Ltd., the British brokerage handling ACIs policy, claimed he issued Endorsement No. 1 to the first Underwriterss policy. This endorsement, dated February 20, 1990, included a schedule that listed ACI, its related entities, Buie, and 25 other businesses as named insureds under the policy. In April, ACIs United States broker sent Shreeve a letter identifying the ACI entities that should be named insureds, and explaining that Buie and the other unaffiliated businesses should be Additional Insureds only. In response, Shreeve prepared and signed Endorsement No. 2 which listed Buie as an additional insured under the November 1989 Underwriterss policy.

Underwriters issued two more one-year policies to ACI in November 1990 and November 1991. These policies did not expressly name Buie. But each policys certificate of insurance noted it [i]nclud[ed] [a]dditional [i]nsureds [sic] . . . as may be required by written contract . . . .

Defendant American International Specialty Lines Insurance Company (AISLIC) issued five commercial general liability policies to ACI that provided coverage between November 1993 and March 1999. The first policy did not contain an additional insured clause. Each of AISLICs four subsequent policies contained a blanket additional insured endorsement.

In 1996, the first of 10 construction defect lawsuits by plaintiff Niguel Ridge Homeowners Association and individual homeowners was filed against Fieldstone. These lawsuits, along with cross-complaints adding Buie, ACI, and other parties involved in the development project, were later consolidated.

In August 2001, the parties entered into a settlement of the construction defect litigation. As part of the settlement, plaintiffs received over $6.5 million, with $2.5 million paid by Buies carriers, and $1.5 million paid by ACIs carriers. As additional consideration, Buie and its insurance carriers assign[ed] all of their right, title, and interest, if any, in regard to the . . . indemnity payment being made to [p]laintiffs under the settlement . . . to seek indemnity from ACIs carriers pursuant to additional insured endorsements issued by ACIs carriers in favor of . . . Buie. . . .

Plaintiffs then filed the current action against AISLIC, National Union, and Underwriters. The verified first amended complaint attached and incorporated by reference copies of the grading contract and the storm drain contract between ACI and Buie for the Niguel Ridge project. Each contract contains a single-page preprinted form with the signatures of each partys representative. Neither contract expressly requires ACI to provide insurance for Buie. But section 5 of each document provides, General Subcontract Provisions on back of this page are an integral part of this Contract unless specifically amended or deleted in Sections 3 and 6 hereof. Section 3 of each instrument contains a typewritten addition relating to payment of the contract price. Section 6 of each exhibit, which is entitled [s]pecial provisions is blank.

As to AISLIC and National Union, the amended complaint alleged on information and belief that their policies contained additional insured endorsements for the beneficial interest of [Buie] . . . . Concerning Underwriters, plaintiffs alleged on information and belief that it issued liability insurance covering Buie as a Named Insured and/or . . . Additional Insured . . . .

AISLIC and National Union jointly moved for summary judgment. Underwriters filed a separate motion. One argument common to both motions asserted plaintiffs could not show Buie was an additional insured under their policies. Underwriterss motion presented other arguments, including plaintiffs allegation that Buie was a named insured under the 1989 policy failed because it was based on an obvious mistake that was promptly corrected, and since the Niguel Ridge project was developed by Area M, a partnership that had not been named in any of the policies, the partnership exclusion clause applied.

In response, plaintiffs successfully moved to file a verified second amended complaint. This pleading described the copies of the Buie-ACI subcontracts attached to it as only the front page[] of each agreement and alleged, on information and belief, each of these written agreements required ACI to name Buie as an Additional Insured as respects work performed for the Contractor by ACI . . . . (Bold & capitalization omitted.) The parties stipulated that the summary judgment motions would apply to the second amended complaint with an opportunity to file supplemental briefs if necessary.

Plaintiffs opposition to the summary judgment motions included declarations from Richard D. Hauser, a former Buie employee, and Barry M. Vrevich, the attorney representing Buie in the underlying construction defect litigation. Hauser claimed that, during the 1980s, Buie used a standard form subcontract agreement and [i]t was Buies custom and practice . . . that . . . Additional Insured . . . requirements were included in all subcontracts as a minimum obligation imposed on the

subcontractor . . . . (Capitalization omitted.) He attached copies of other written agreements between Buie and ACI during the same general time period and in the same general location to illustrate the Additional Insured and Indemnity obligations agreed to by Buie and ACI in the Construction Subcontract agreements for the Niguel Ridge Project . . . . (Capitalization omitted.)

Hauser also attached a copy of the general subcontract provisions (capitalization omitted) to his declaration. Paragraph D thereof, entitled Insurance, declared: Subcontractor will . . . provide comprehensive liability insurance . . . including completed operations coverage . . . for all claims arising out of any single occurrence . . . fully covering and indemnifying contractor and subcontractor . . . to the satisfaction of the [c]ontractor, against any loss because of injury or damage to persons or property during the performance of this subcontract, said coverage to include all operations and subcontract work performed hereunder . . . .  Subcontractor will at [s]ubcontractors expense add [c]ontractor as an additional insured under [s]ubcontractors comprehensive liability insurance policy . . . .

Vrevichs declaration asserted he contacted defendants in writing and unsuccessfully requested that each of these carriers agree to defend Buie and also to indemnify Buie. (Capitalization omitted.) As to National Union, Vrevich alleged his letter [i]ncluded . . . a copy of a Certificate of Insurance issued to Buie by National Union indicating Buies status as an Additional Insured of ACI under the latters policy which became effective November 1, 1987. (Capitalization omitted.) The faint and admittedly somewhat difficult to read document states, in part, that Buie, Area M, and two other entities are included as . . . Additional Insureds, but solely as respects work performed by or on behalf of the named insured in connection with the above described project. The project description box contains an entry stating: Area M, Niguel Ranch. (Capitalization omitted.)

Plaintiffs later filed four more declarations, one from Jeffrey Stoddard, Buies general manager for its Orange County division, supplemental declarations by Hauser and Vrevich, and a second, last-minute declaration by Stoddard. The first three declarations contained general statements that Buie did not have complete versions of its subcontracts with ACI in the underlying construction defect litigation, efforts to locate the originals or complete copies were unsuccessful, and the missing portions of these agreements had been inadvertently lost, destroyed, or misplaced. The trial court later sustained defendants conclusory and lack of personal knowledge objections to these portions of the declarations. The second Stoddard declaration, which contained a more detailed explanation of his efforts to locate the missing portions of the Buie-ACI subcontracts at issue, was excluded in its entirety because it was untimely.

The trial court granted defendants motions. In support of these rulings, the court issued a 19 page order explaining the reasons for its decision.

DISCUSSION

1. Introduction

Summary judgment is appropriate if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. (Code Civ. Proc.,  437c, subd. (c); see alsoBrinton v. Bankers Pension Services, Inc. (1999) 76 Cal.App.4th 550, 555.) The party seeking summary judgment has the burden of persuading the court that the foregoing standard has been met. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850; Susag v. City of Lake Forest (2002) 94 Cal.App.4th 1401, 1407.)

When a defendant moves for summary judgment, it must produce evidence showing one or more of the elements of the cause of action cannot be established or a complete defense exists to it. (Kline v. Turner (2001) 87 Cal.App.4th 1369, 1373.) If the defendant succeeds in doing so, the burden of production shifts to the plaintiff to present evidence showing the existence of a triable issue of material fact as to that cause of action or defense. [Citation.] (Ibid.; see also Brinton v. Bankers Pension Services, Inc.,

supra, 76 Cal.App.4th at p. 555.) In ruling on the motion, the court must consider all of the evidence and all of the inferences reasonably drawn therefrom, and must view such evidence and such inferences in the light most favorable to the opposing party. [Citation.] (LLP Mortgage v. Bizar (2005) 126 Cal.App.4th 773, 776.) All doubts as

to whether any material, triable issues of fact exist are to be resolved in favor of the party opposing summary judgment. [Citation.] [Citation.] (Ibid.)

In granting the summary judgment motions, the court acknowledged that one basis for its ruling was plaintiffs inability to present admissible oral evidence of the provisions of the written subcontracts between . . . ACI and . . . Buie, which plaintiffs contend required ACI to name Buie as an additional insured. While an order granting summary judgment is reviewed de novo (Susag v. City of Lake Forest, supra,

94 Cal.App.4th at p. 1408), the weight of authority holds that an appellate court reviews a courts final rulings on evidentiary objections by applying an abuse of discretion standard. [Citations.] (Carnes v. Superior Court (2005) 126 Cal.App.4th 688, 694; see also In re Lockheed Litigation Cases (2004) 115 Cal.App.4th 558, 564 [upholding trial court exercise of discretion to exclude an opinion contained in the plaintiffs expert witnesss declaration in opposition to summary judgment motion because no reasonable basis for opinion].)

2. Plaintiffs Judicial Admissions

In part, the trial court granted summary judgment because the provisions of the subcontracts alleged in the Verified First Amended Complaint which contain no reference to the additional insured status of Buie . . . constitute judicial admissions of the terms of the subcontracts that are binding on plaintiffs. Citing section 5 of the subcontracts attached to the first amended complaint, which they argue on its

face . . . refers to the existence of additional contract terms, plaintiffs challenge this finding.

The trial courts reliance on the judicial admissions doctrine was error. First, it is inapplicable because the court based its ruling on the allegations of a superseded pleading, plaintiffs first amended complaint. (1 Witkin, Cal. Evidence (4th ed. 2000) Hearsay,  97, p. 800.) Plaintiffs had already filed a verified second amended complaint expressly alleging the copies of the subcontracts attached to it as exhibits were incomplete versions of the parties agreement. It is well established that an amendatory pleading supersedes the original one, which ceases to perform any function as a pleading. [Citations.] (Meyer v. State Bd. of Equalization (1954) 42 Cal.2d 376, 384; see also Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 884.) The right of a party to amend to correct a misstatement of facts when it appears the error was a result of a mistake or inadvertence cannot be denied. . . .  [A] party should be allowed to correct a misstatement of fact in a verified complaint when it appears that error was the result of mistake or inadvertence. (Freidberg v. Freidberg (1970) 9 Cal.App.3d 754, 761.) At best, the allegations of the first amended complaint constituted only evidentiary admissions. (1 Witkin, Cal. Evidence, supra, Hearsay,  97, at p. 800.)

Second, even if the judicial admissions doctrine were applicable to this case, it would not support the courts ruling. An admission in the pleadings is not treated procedurally as evidence  . . . .  It is a waiver of proof of a fact by conceding its truth, and it has the effect of removing the matter from the issues. Under the doctrine of conclusiveness of pleadings, a pleader is bound by well pleaded material allegations or by failure to deny well pleaded material allegations. [Citations.] [Citation.] (Valerio v. Andrew Youngquist Construction (2002) 103 Cal.App.4th 1264, 1271; see also 4 Witkin, Cal. Procedure (4th ed. 1997) Pleading, 413, pp. 510-511.)

The first amended complaint not only did not allege the attached exhibits constituted the entire agreement between Buie and ACI as to each subcontract, it incorporated these exhibits by reference into its allegations, including section 5 which mentioned the existence of additional contract terms not appearing on the first page of each subcontract. Where written documents are the foundation of an action and are attached to the complaint and incorporated therein by reference, they become a part of the complaint . . . .  [Citations.] [Citation.] (Stoops v. Abbassi (2002)

100 Cal.App.4th 644, 650; see also Dodd v. Citizens Bank of Costa Mesa (1990)

222 Cal.App.3d 1624, 1626-1627.) This reference to additional terms eliminated any possible suggestion the plaintiffs judicially admitted the front page of the Buie-ACI subcontracts constituted the parties entire agreement.

3. Evidence Code sections 1521 and 1523

a. Introduction

Plaintiffs sought recovery against all three defendants on the theory ACIs liability insurance policies obligated defendants to defend and indemnify Buie because the Buie-ACI subcontracts contained a clause contractually obligating ACI to provide insurance coverage to Buie. In support of this theory, Hausers declaration asserted he negotiated and signed the subcontracts between Buie and ACI and those agreements included the standard general subcontract provisions among which was an

obligation . . . that ACI name Buie as an Additional Insured as respects all work and operations performed . . . by ACI. (Capitalization omitted.) Plaintiffs also submitted declarations by Stoddard and supplemental declarations from Hauser and Vrevich summarizing each persons unsuccessful efforts to locate the original subcontracts or complete copies of them.

The court sustained conclusory and lack of personal knowledge objections to three of plaintiffs declarations, and it excluded Stoddards second declaration because they failed to timely file it. As a result, the court concluded plaintiffs failed to establish the requisite preliminary facts for the admission of oral testimony as to the contents of those subcontracts. Plaintiffs contend the trial court erred in excluding this evidence.

b. Oral Testimony on the Contents of a Writing

Evidence Code section 1521 declares that generally, The content of a writing may be proved by otherwise admissible secondary evidence. (Evid. Code,  1521, subd. (a).) However, the statute contains exceptions to this rule, including a proviso that [n]othing in this section makes admissible oral testimony to prove the content of a writing if the testimony is inadmissible under Section 1523 (oral testimony of the content of a writing). (Evid. Code,  1521, subd. (b).)

Under Evidence Code section 1523, oral testimony is [generally] not admissible to prove the content of a writing. (Evid. Code,  1523, subd. (a).) But section 1523 contains exceptions to the general rule of exclusion. Subdivision (b) declares [o]ral testimony of the content of a writing is not made inadmissible by subdivision (a) if the proponent does not have possession or control of a copy of the writing and the original is lost or has been destroyed without fraudulent intent on the part of the proponent of the evidence. (Evid. Code,  1523, subd. (b).) Subdivision (c)(1) allows [o]ral testimony of the content of a writing . . . if the proponent does not have possession or control of the original or a copy of the writing and . . . [n]either the writing nor a copy of the writing was reasonably procurable by the proponent by use of the courts process or by other available means. (Evid. Code,  1523, subd (c)(1).)

As for the trial courts rejection of Hausers assertion the Buie-ACI subcontracts obligated ACI to include Buie as an additional insured on its liability policies, no error occurred. The issue of whether a party has presented a satisfactory foundation to introduce oral testimony of the contents of a writing is addressed to the discretion of the trial court, and will not be disturbed on appeal absent abuse of discretion. [Citations.] (Dart Industries, Inc. v. Commercial Union Ins. Co. (2002)

28 Cal.4th 1059, 1069.) If any suspicion hangs over the instrument, or that it is designedly withheld, a rigid inquiry should be made into the reasons for its non-production. (Ibid.)

The evidence presented by the parties reflected ACIs copies of the subcontracts had been lost in a flood. But plaintiffs evidence concerning the whereabouts of Buies copy of the agreements was, as the trial court found, either conclusory or lacking the foundation of the declarants personal knowledge. Even had the trial court accepted Stoddards second declaration, its ruling would not have amounted to an abuse of discretion. In that declaration, Stoddard admitted he was the Buie employee with the authority to approve purg[ing] Subcontract agreements on finished projects and that he never gave approval to do so. But while acknowledging Buie had every reason to maintain the originals and/or complete copies of all our Agreements with our Subcontractors because all of those Agreements include indemnity rights and insurance rights, Stoddard inexplicably claimed he believe[d] that portions of our files were disposed in the ordinary course of our business and in the course of consolidating our records for storage. (Capitalization omitted.) Thus, the trial court did not abuse its discretion in concluding plaintiffs failed to make a sufficient showing to permit the admission of oral testimony as to the missing portions of the Buie-ACI subcontracts.

c. Evidence of Custom and Practice

Hauser also claimed Buie had the custom and practice of including additional insured clauses in all subcontracts. He attached to his declaration a document which he described as a copy of the general subcontract provisions. The court apparently excluded this evidence on the ground it constituted oral testimony subject to the foregoing foundational requirements. In this respect, the court erred.

As noted, under the secondary evidence rule, The content of a writing may be proved by otherwise admissible secondary evidence. (Evid. Code,  1521, subds. (a) & (d).) Even Evidence Code section 1523s general prohibition against admitting oral testimony is subject to the proviso [e]xcept as otherwise provided by

statute . . . . (Evid. Code,  1523, subd. (a).) Evidence Code section 1105 authorizes the use of [a]ny otherwise admissible evidence of habit or custom . . . to prove conduct on a specified occasion in conformity with the habit or custom. In Dart, the Supreme Court recognized the other types of secondary evidence admissible to prove the contents of a missing instrument, include the use of a standard form of the lost document [citation], as well as evidence of a routine practice of a party [citation]. (Dart Industries, Inc. v. Commercial Union Ins. Co., supra, 28 Cal.4th at p. 1070.) Hausers assertions as to Buies custom and practice and his presentation of a copy of the standard subcontract conditions sufficed to create a triable issue of fact as to the existence of an additional insured contractual obligation imposed on ACI.

Defendants attack these evidentiary items on several grounds. AISLIC claims the exemplars attached to Hausers declaration were bogus because the record shows they were not the back side of the grading and storm drain contracts, but in fact copies of the front side of another pre-printed form, captioned General Subcontract Provisions[] . . . . They also claim these exemplars did not demonstrate the consistent pattern of contract formation that would prove the Niguel Ridge contracts contained the additional insured requirement . . . . Underwriters echoes this argument, contending the various [Buie] subcontracts offered [by plaintiffs] are so very different from each other that it is clear Buie had no custom and practice in its subcontracts . . . and never had a standard form subcontract . . . . Another claim by AISLIC is that, contrary to Hausers assertion, the additional insured clauses purportedly contained in Buies standard subcontracts were narrowly drawn. All of defendants arguments go to either the weight to be given this evidence or the scope of the purported additional insured clauses. However, the focus of this appeal is whether plaintiffs presented admissible evidence creating a triable issue of fact concerning the existence of an additional insured clause in the Buie-ACI subcontracts.

In addition, as to National Union, Vrevich submitted a copy of a certificate of insurance it purportedly issued that stated Buie and Area M were additional insureds under ACIs 1987-1988 policy. This also constituted secondary evidence as to the Buies additional insured status in particular with respect to the Niguel Ridge Project. While National Union filed objections to this document, the trial court overruled them. On appeal, it fails to present any legal authority supporting a conclusion the trial court erred in overruling the objections.

Therefore, to the extent the court granted defendants motions on the ground plaintiffs failed to present admissible evidence creating a triable issue of fact as to whether ACI was contractually obligated to include Buie as an additional insured on its liability insurance policies, its ruling was erroneous.

4. The Completed Operations Coverage Argument

For the first time on appeal, AISLIC and Underwriters argue that, even if the subcontracts contained clauses contractually obligating ACI to provide coverage to Buie, plaintiffs cannot prevail because ACI had completed its work under the subcontracts long before the inception of their policies. AISLIC and Underwriters claim the Buie-ACI subcontracts required insurance coverage only during ACIs performance of its work in 1987 and 1988, and their policies covered only injury or damage occurring during the terms of its policies the first of which became effective in November 1989. Plaintiffs respond the policies issued by AISLIC and Underwriters extended each insurers coverage to injury or damage arising from work completed before inception of their policies. The appellate record and legal authority support plaintiffs factual claims.

Except for Endorsement GL 20 09 attached to Underwriterss first policy, all of the remaining policies issued by defendants included completed operations hazard coverage. The AISLIC and National Union policies defined completed operations hazard as all bodily injury and property damage occurring away from premises you own or rent and arising out of . . . your work except: [] . . . [] (2) Work that has not yet been completed or abandoned. [] b. Your work will be deemed completed at the earliest of the following times: [] (1) When all of the work called for in your contract has been completed. [] (2) When all of the work to be done at the site has been completed if your contract calls for work at more than one site. [] (3) When that part of the work done at a job site has been put to its intended use . . . . Although Underwriterss policies used slightly different language, its second and third policies contained essentially the same definition of completed operations.

In Pardee Construction Co. v. Insurance Co. of the West (2000)

77 Cal.App.4th 1340, Pardee, a general contractor hired several subcontractors to construct a residential development between late 1985 and mid-1987. The project was completed in March 1988. Each subcontract required the named subcontractor to name Pardee as an additional insured on its liability insurance policy. The defendant insurers issued policies to the subcontractors naming Pardee as an additional insured, but none of the policies was in effect at the time the subcontracts were executed or the respective subcontractor performed its work on the development. When sued for construction defects, Pardee tendered its defense to the subcontractors insurers, but they declined to defend it. After settling the underlying litigation, Pardee sued the subcontractors insurers.

The trial court granted the insurers motions for judgment on the pleadings, but the appellate court reversed. The unambiguous language of the policies and endorsements provides Pardee with coverage for the completed operations of the named insured subcontractors. It is undisputed that Pardee is an additional insured under the terms of the subject policies and that these policies do cover the named insured for completed operations. . . .  [] The endorsements adding Pardee as an insured combined with the insuring clauses of the policies provide the general grant of coverage for completed projects or operations to Pardee. The . . . endorsements issued by [the insurers] provide coverage limited only by the phrase, liability arising out of your [the named insureds] work for [the additional insured] by or for you. Given the products-completed operations hazard definition specifically utilizes the language arising out

of . . . your work and that your work is defined as meaning [w]ork or operations performed by you or on your behalf, it is apparent that completed operations as referred to in these policies was intended to be included in the type of liability referred to in

the . . . endorsements. The insurers . . . suggest the aforementioned clear language demonstrates an intent to cover Pardee for the subcontractors work for only the Pardee project that subcontractor was about to work on when it obtained the insurance. To the contrary, there is no language in th[e] . . . endorsement[s] expressly limiting the time frame of the additional insured coverage to the time of the ongoing operations of the named insured. [Citation.] Had the insurers wished to limit coverage to work in progress, they could have easily done so by defining your work as work now being performed or to be performed during the term of this policy. . . . Simply stated, the insurers failed to expressly limit covered completed operations as to time or particular project in their policy and endorsement language. (Pardee Construction Co. v. Insurance Co. of the West, supra, 77 Cal.App.4th at pp. 1355-1357, fn. omitted.)

The language of defendants policies is similar to that at issue in Pardee. Consequently, if plaintiffs establish Buie was an additional insured under defendants policies, the fact that defendants issued the policies to ACI after it completed its two subcontracts on the Niguel Ridge project will not preclude their recovery from defendants.

5. Underwriterss Policies

a. Introduction

Underwriters asserted two additional claims based on the terms of its policies. First, the applicability of endorsement GL 20 09, concerned only its November 1989 policy. Plaintiffs presented documentary evidence challenging Underwriterss claim this endorsement was part of the policy that raised a triable issue of material fact on this contention. In addition, the parties presented conflicting evidence on whether Buie was actually a named insured under that policy.

Second, Underwriters also asserted a partnership exclusion clause contained in all three of its policies barred plaintiffs recovery. The clause declared: This insurance does not apply to bodily injury or property damage arising out of the conduct of any partnership or joint venture of which the insured is a partner or member and which is not designated in this policy as a named insured. The trial court agreed with Underwriters.

Plaintiffs contend the court erred by applying the partnership exclusion to this case because there is no evidence Buie required insurance coverage or claimed coverage in its capacity as a member of a partnership, nor that Buies participation in a joint venture that developed the partnership increased the risk bargained for by [Underwriters].

b. Analysis

The applicable principles are well settled. The rules governing policy interpretation require us to look first to the language of the contract in order to ascertain its plain meaning or the meaning a layperson would ordinarily attach to it.

[Citations.] . . .  [] The fundamental rules of contract interpretation are based on the premise that the interpretation of a contract must give effect to the mutual intention of the parties. Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation. [Citation.] Such intent is to be inferred, if possible, solely from the written provisions of the contract. [Citation.] The clear and explicit meaning of these provisions, interpreted in their ordinary and popular sense, unless used by the parties in a technical sense or a special meaning is given to them by usage [citation], controls judicial interpretation. [Citation.] [Citations.] (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18.) These principles apply when construing an insurance policy clause excluding coverage. (Westoil Terminals Co. v. Industrial Indemnity Co. (2003) 110 Cal.App.4th 139, 146.) Furthermore, the interpretation of an insurance policy is a question of law. [Citation.] (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at p. 18.)

The record supports the courts conclusion that the partnership exclusion applies. The construction defect claims arose out of the development of the Niguel Ridge property by a partnership named Area M. Assuming Buie was an additional insured on Underwriterss polices, as the general partner of Buie Area M Ltd., Area Ms general partner, Buie participated in the development on Area Ms behalf, not for its own benefit. No claim is made that Area M was identified as a named insured in Underwriterss policies.

California courts have consistently given a broad interpretation to the terms arising out of or arising from in various kinds of insurance provisions. (Acceptance Ins. Co. v. Syufy Enterprises (1999) 69 Cal.App.4th 321, 328.) Arising out of is a broad concept requiring only a slight connection or an incidental relationship between the injury and the excluded risk. [Citation.] (Century Transit Systems v. American Empire Surplus Lines Ins. Co. (1996) 42 Cal.App.4th 121, 127, fn. 4.) Although insuring clauses normally are interpreted broadly [citation] and exclusions strictly are construed [citation], where an exclusion is clear and unambiguous, it is given its literal effect. [Citation.] (Westoil Terminals Co. v. Industrial Indemnity Co., supra,

110 Cal.App.4th 139, 146.)

Plaintiffs contend Area M merely owned the Niguel Ridge property, and Underwriters presented no evidence that Area M participated in the parcels development. This argument is incorrect. A pleading in a prior civil proceeding may be offered as an evidentiary admission against the pleader. [Citations.] (Magnolia Square Homeowners Assn. v. Safeco Ins. Co. (1990) 221 Cal.App.3d 1049, 1061; see also Dolinar v. Pedone (1944) 63 Cal.App.2d 169, 176; 4 Witkin, Cal. Procedure, supra, Pleadings,  414, p. 511.)

One document Underwriters submitted in support of its motion was a cross-complaint filed by Area M, Buie, Buie Area M Ltd., and their related entities in the underlying construction defect litigation. This pleading described Area M as a California limited partnership created to acquire the property which is the subject matter of this litigation, . . . obtain the necessary entitlements and thereafter . . . subdivide the property, . . . grade the property and install off-site improvements and ultimately sell separate . . . parcels to builders of residential housing. In part, the cross-complainants sought indemnification from ACI, alleging the June 1987 Buie-ACI subcontracts specifically identified [Area M] as the owner of the real property.

Plaintiffs claim California cases applying the partnership/joint venture exclusion recognize its purpose . . . is to protect the insurer from hidden risks it did not consider in calculating an appropriate premium (Maryland Casualty Co. v. Reeder (1990) 221 Cal.App.3d 961, 979), and thus the exclusion is enforceable only when a failure to designate the partnership or joint venture materially alters the risk assumed by the insurer. (Scottsdale Ins. Co. v. Essex Ins. Co. (2002) 98 Cal.App.4th 86, 93.) In Scottsdale, Conrad, a general contractor, built a home with financial assistance from Boris. Subsequently, Conrad and Boris sold the house to the Operas. Several years later, the Operas filed a claim with Conrads insurance carriers for construction defects. Scottsdale, one of Conrads insurers, paid the Operas $225,000 to settle the case and then sued Essex, another Conrad carrier, seeking equitable contribution. Essex unsuccessfully defended, in part, relying on its policys partnership/joint venture exclusion.

While reversing on other grounds, the Court of Appeal upheld the rejection of the partnership/joint venture exclusion. The purpose of the joint venture exclusion is to protect the insurer from hidden risks it did not consider in calculating an appropriate premium. [Citation.] As the trial court noted, Essex agreed to insure Conrads contracting business. The Operas claim arose from defects in the construction of their house. The evidence supports the trial courts finding that Boris was not involved in the design or construction aspects of the venture. Thus, whether Conrad and Boris were involved in a joint venture did not materially alter Essexs risk. Conrad would be individually liable for damages arising from the claimed defects. [Citation.] (Scottsdale Ins. Co. v. Essex Ins. Co., supra, 98 Cal.App.4th at p. 93.)

Underwriters contends Scottsdale was wrongly decided, noting courts in other states have found the language of the exclusion clear and unambiguous and applied it without additional proof of a material change in the insurers risk. (Austin P. Keller Const. Co., Inc. v. Commercial Union Ins. Co. (Minn. 1986) 379 N.W.2d 533, 536.) Indeed, California cases hold that where the the policy language is clear and explicit, it governs. [Citation.] (Firemans Fund Ins. Cos. v. Atlantic Richfield Co. (2001) 94 Cal.App.4th 842, 847.)

But even if Scottsdale correctly states California law, it is distinguishable. Scottsdale found the exclusion inapplicable because Essexs policy covered Conrads construction business and Boris, as the financier of the project, had no involvement in the design or construction activities. Here, the admissions by Area M and Buie in the prior action show that Area M was involved in developing the Niguel Ridge property, including the grading and storm drain work.

Thus, the trial court properly relied on this exclusion to grant summary judgment in favor of Underwriters.

DISPOSITION

The judgment is affirmed as to respondent Participating London Underwriters. The judgment is reversed as to respondents National Union Fire Insurance Company of Pittsburgh, Pennsylvania and American International Specialty Lines Insurance Company and the matter is remanded to the superior court for further proceedings. Only respondent Participating London Underwriters shall be entitled to its costs on appeal.

RYLAARSDAM, J.

WE CONCUR:

SILLS, P. J.

ARONSON, J.

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