Opinion
NOT TO BE PUBLISHED
Contra Costa County Super. Ct. No. MSC0401128
Jenkins, J.
This is an appeal from judgment entered in favor of respondent Empire Indemnity Insurance Company (Empire) in an insurance coverage and bad faith lawsuit. Appellants The Housing Group (THG), The Housing Group-Northern California (THG-NC), and Golden State Developers, Inc. (GSD) sued Empire for failure to defend and indemnify in connection with a construction defect product liability lawsuit filed against them by a group of homeowners, entitled Mobraaten v. The Housing Group, No. C01-00542. The trial court dismissed all of appellants’ causes of action against Empire with prejudice after concluding they were not entitled to coverage under the identified insurance policies. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
On December 21, 2004, a developer, Hidden Hills Two Investors (Hidden Hills), and its affiliates, the appellants herein, filed a First Amended Complaint (complaint) naming several insurers as defendants and asserting causes of action for bad faith, breach of contract, misrepresentation, negligence, and declaratory relief. The next day, Empire was added as a Doe defendant. The complaint arose out of the insurers’ alleged failure to defend and indemnify Hidden Hills and appellants in connection with a lawsuit entitled Mobraaten v. The Housing Group, No. C01-00542 (the underlying lawsuit).
The complaint in fact alleges a failure to defend and indemnify in connection with two construction defect cases, Mobraaten v. The Housing Group, No. C01-00542, and Williams v. The Housing Group, No. C00-03976. This lawsuit, however, involves only the former case, Mobraaten v. The Housing Group, No. C01-00542.
I The Underlying Lawsuit – The Cameo Crest Project.
The underlying lawsuit involved allegations of construction defects by real property owners in a residential subdivision, Cameo Crest, which was owned and developed by Hidden Hills in Danville. Appellant THG was the managing general partner of Hidden Hills. Appellant THG, together with its subsidiary, appellant THG-NC, served as general contractors for the Cameo Crest project. In 1995, after Cameo Crest had been constructed, Hidden Hills contracted with appellant GSD to manage the subdivision.
On or about June 13, 2001, appellants filed cross-complaints in the underlying lawsuit against various subcontractors that were involved in the Cameo Crest project. One of those subcontractors was Technical Security Services (Technical). In April 1989, Hidden Hills entered into two contracts with Technical to install security alarms and intercoms at Cameo Crest (the subcontracts). The only signatories to the subcontracts were Technical, the “Contractor, ” and Hidden Hills, the “Owner.”
The two subcontracts are identical in all respects material to this appeal. We therefore treat them collectively here.
II. The Insurance Policies.
Pursuant to paragraph 11(a) of the subcontracts (paragraph 11(a)), Technical was required to procure and maintain certain types of insurance, including workers’ compensation, employers’ liability, property damage and products liability insurance, “in amounts necessary for the full and adequate protection of all parties concerned....”
Paragraph 11(b) of the subcontracts (paragraph 11(b)), in turn, required the policies covering the insurance described in paragraph 11(a) to be endorsed as follows: “It is hereby understood and agreed that HIDDEN HILLS TWO INVESTORS is included as an additional assured under this policy, but only with respect to work and/or operations arising out of the Contract between HIDDEN HILLS TWO INVESTORS and TECHNICAL SECURITY SERVICES....”
Consistent with paragraph 11, Technical procured two general liability policies from Empire, the first in 1996 and the second in 1997 (Empire policies). In doing so, Technical employed the services of Eclipse Insurance Agency, Inc. (Eclipse), an insurance broker, which in turn submitted Technical’s applications to Cover X, the managing general agent of Empire. None of the appellants is identified as an insured in the Empire policies. Each policy does contain, however, a so-called “blanket additional insured endorsement, ” by which the policies provide coverage with certain restrictions to any person or organization to which Technical is obligated by a “valid written contract” to provide such coverage. Specifically, this blanket additional insured (AI) endorsement provides as follows:
The first of the Empire policies was issued effective November 6, 1996, and the second, essentially a renewal of the first, was issued effective November 6, 1997.
“WHO IS AN INSURED (Section II) provision of the Policy is amended to include as an insured any person or organization (called ‘additional insured’) to whom you are obligated by valid written contract to provide such coverage, but only with respect to liability for ‘bodily injury’ or ‘property damage’ arising solely out of ‘your work’ on behalf of said additional insured for which coverage is provided by this policy.”
During the effective period for the Empire policies, Technical received letters from THG-NC requesting certificates of insurance “naming The Housing Group and Hidden Hills Two Investors as additional insured” in connection with work performed on the Cameo Crest project. In response, Technical contacted Eclipse, its insurance broker, to request assistance in obtaining these certificates. Complying with Technical’s request, Eclipse issued two certificates of insurance between 1996 and 1998 identifying Hidden Hills and appellants as additional insureds under the Empire policies. These certificates included the following advisement in block letters: “THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.”
III. Tender of the Defense to Empire.
After being served with complaints in the underlying lawsuit, appellants tendered a timely defense to Empire, among other insurers. However, according to appellants, Empire thereafter failed to defend or indemnify them “without substantial justification.” As such, appellants filed the operative complaint in this matter.
IV. Trial Court Proceedings in This Action.
The parties stipulated that trial would be divided into phases, the first of which would determine whether any appellant was entitled to coverage as an “additional insured” under the Empire policies. Following a bench trial, the trial court found no legal basis for such coverage. Accordingly, on February 17, 2009, the trial court entered final judgment in favor of Empire, thereby finally disposing of all issues with respect to appellants. This appeal followed shortly thereafter.
Trial continued, however, with respect to Hidden Hills, which the trial court determined was an additional insured under the Empire policies. The trial court’s ruling with respect to Hidden Hills is not the subject of this appeal.
DISCUSSION
On appeal, appellants contend they are entitled to coverage under the Empire policies on several grounds. First, appellants contend they qualify as “additional insureds” under the Empire policies based on language in the subcontracts that were entered into between Technical and Hidden Hills. Second, appellants contend they reasonably relied on the apparent authority of Eclipse, Technical’s insurance broker, to issue them insurance certificates indicating they had coverage as additional insureds under those policies. Finally, appellants contend reversal is required on public policy grounds because disallowing coverage in this case would “unsettle construction contracts and promote litigation.” We address each contention in turn below.
I. The Subcontracts.
A trial court’s interpretation of a contract, including an insurance policy, is subject to independent review on appeal. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 866.)
“ ‘While insurance contracts have special features, they are still contracts to which the ordinary rules of contractual interpretation apply.’ (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264 [10 Cal.Rptr.2d 538, 833 P.2d 545]; see AIU [Ins. Co. v. Superior Court (1990)] 51 Cal.3d [807, ] 821-822.) ‘The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties.’ (Bank of the West v. Superior Court, supra, 2 Cal.4th at p. 1264.) ‘Such intent is to be inferred, if possible, solely from the written provisions of the contract.’ (AIU, supra, 51 Cal.3d at p. 822.) ‘If contractual language is clear and explicit, it governs.’ (Bank of the West v. Superior Court, supra, 2 Cal.4th at p. 1264.)” (Foster-Gardner, Inc. v. National Union Fire Ins. Co. (1998) 18 Cal.4th 857, 868.)
“ ‘A policy provision will be considered ambiguous when it is capable of two or more constructions, both of which are reasonable.’ (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18 [44 Cal.Rptr.2d 370, 900 P.2d 619; Bay Cities Paving & Grading, Inc. v. Lawyers’ Mutual Ins. Co. (1993) 5 Cal.4th 854, 867 [21 Cal.Rptr. 691, 855 P.2d 1263].) The fact that a term is not defined in the policies does not make it ambiguous. (Bay Cities Paving & Grading, Inc. v. Lawyers’ Mutual Ins. Co., supra, 5 Cal.4th at p. 866; Bank of the West v. Superior Court, supra, 2 Cal.4th at p. 1264; Castro v. Fireman’s Fund American Life Ins. Co. (1988) 206 Cal.App.3d 1114, 1120 [253 Cal.Rptr. 833].) Nor does ‘[d]isagreement concerning the meaning of a phrase, ’ or ‘ “the fact that a word or phrase isolated from its context is susceptible of more than one meaning.” ’ (Castro v. Fireman’s Fund American Life Ins. Co., supra, 206 Cal.App.3d at p. 1120.) ‘ “[L]anguage in a contract must be construed in the context of that instrument as a whole, and in the circumstances of that case, and cannot be found to be ambiguous in the abstract.” ’ (Bank of the West v. Superior Court, supra, 2 Cal.4th at p. 1265, italics omitted.) ‘If an asserted ambiguity is not eliminated by the language and context of the policy, courts then invoke the principle that ambiguities are generally construed against the party who caused the uncertainty to exist (i.e., the insurer) in order to protect the insured’s reasonable expectation of coverage.’ (La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co. (1994) 9 Cal.4th 27, 37 [36 Cal.Rptr.2d 100, 884 P.2d 1048].)” (Foster-Gardner, Inc. v. National Union Fire Ins. Co., supra, 18 Cal.4th at p. 868.)
Here, appellants claim to qualify as “additional insureds” under the blanket AI endorsements in the Empire policies because “each was entitled to coverage under Technical’s subcontracts.” Appellants rely on paragraph 11(a) of the subcontracts, which required Technical to purchase “property damage and product liability insurance in amounts necessary for the full and adequate protection of all parties concerned..., ” and to “furnish [Hidden Hills] with certificates of said insurance... subject to approval of [Hidden Hills] as to the adequacy of coverage.”
Specifically, paragraph 11(a) provides in relevant part: “Contractor shall procure, maintain, and pay for during the entire progress of the work full and unlimited workmen’s compensation insurance, complying with the laws of the state or territory in which the work is being performed covering any employee over which Contractor takes jurisdiction and employers’ liability insurance, public liability and property damage and products liability insurance in amounts necessary for the full and adequate protection of all parties concerned.... Contractor shall furnish Owner with certificates of said insurance before commencing work hereunder which shall provide that the policies shall not be cancelled or reduced in coverage until ten (10) days after written notice shall be given to Owner of such cancellation or reduction in coverage shall establish Owner as named insured, and such certificates shall be subject to the approval of Owner as to the adequacy of coverage.”
According to appellants, paragraph 11(a)’s language requiring Technical to procure and maintain insurance “for the full and adequate protection of all parties concerned” was deliberately “left open” when the subcontracts were signed, allowing the parties to include others as “parties concerned” as the project progressed. Further, appellants claim they eventually became “parties concerned, ” and therefore entitled to insurance coverage, as evidenced by the parties’ “course of performance” under the subcontracts.
In addressing these claims, we turn first to the language of paragraph 11 to determine whether it is reasonably susceptible to the interpretation appellants ascribe to it. For reasons set forth below, we conclude it is not.
First, as the trial court noted below, the language relied upon by appellants in paragraph 11(a) contains no requirement, direct or implied, that Technical procure and maintain insurance on behalf of any of the appellants. Indeed, the first sentence of paragraph 11(a), setting forth the related duties to indemnify and to defend, identifies only the “Contractor, ” defined as Technical; the “Owner, ” defined as Hidden Hills; and the “architect, ” which, although undefined, is not invoked by appellants as a basis for coverage. The contracting parties could easily have included language in paragraph 11(a) requiring Technical to procure and maintain insurance on behalf of, or to indemnify and defend, entities other than Hidden Hills, including those related to or associated with Hidden Hills such as parent or sister corporations or their subsidiaries. Their failure to do so, we believe, runs counter to appellants’ proposed interpretation of paragraph 11. As our statutory law makes clear, “[i]n the construction of a statute or instrument, the office of the Judge is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted, or to omit what has been inserted; and where there are several provisions or particulars, such a construction is, if possible, to be adopted as will give effect to all.” (Code Civ. Proc., § 1858.)
On the other hand, paragraph 11(a) does include language identifying specific types of insurance Technical is required to procure and maintain on behalf of Hidden Hills. For example, the provision identifies workers’ compensation and employers’ liability insurance as two such types, in which case the phrase “all parties concerned” would appear to refer to employees of Hidden Hills rather than, as appellants suggest, unidentified parties that could potentially become involved in the project at some future date.
Bolstering this interpretation of paragraph 11(a), subparagraph (b) of the same provision states that the “policies covering the insurance required shall be endorsed as follows....” Paragraph 11(b), however, does not specify “the insurance required.” As such, we assume the specific types of insurance set forth in subparagraph (a) are those to which subparagraph (b) refers. (See Bank of the West v. Superior Court, supra, 2 Cal.4th at p. 1265 [“language in a contract must be construed in the context of that instrument as a whole, and in the circumstances of that case, and cannot be found to be ambiguous in the abstract”].)
With respect to the endorsement required under paragraph 11(b), a blank space is provided to allow the parties to identify those who are “included as an additional assured under this policy... with respect to work and/or operations arising out of the Contract between Hidden Hills Two Investors and Technical Security Systems.” In this space, the parties identify only “Hidden Hills Two Investors.” Had the parties been so inclined, they could have used this space to identify other entities or, at a minimum, to otherwise indicate an intent to include other entities as additional insureds under the subcontracts. Their failure to do so, we conclude, again runs counter to appellants’ interpretation. “Where one interpretation can reasonably reconcile the language of each part of a contract and another interpretation cannot, it is safe to say the contract is not reasonably susceptible to the second interpretation.” (Pacific State Bank v. Greene (2003) 110 Cal.App.4th 375, 387, citing Civ. Code, §§ 1641, 1644.)
In reaching this conclusion, we acknowledge appellants’ argument that, to determine the proper scope of coverage under the Empire policies, we must interpret the subcontracts, not in isolation, but together with addenda to the subcontracts, appellants’ written demands for evidence of coverage, and the certificates of insurance issued by Eclipse, Technical’s insurance broker, in response to those demands that identify appellants as additional insureds under the policies. In many regards, appellants are indeed correct. For example, we agree contract provisions should not be viewed in isolation. (Employers Reinsurance Co. v. Superior Court (2008) 161 Cal.App.4th 906, 919.) We also agree as a general matter that extrinsic evidence, including evidence of contracting parties’ “course of performance, ” may be relied upon to interpret the contract. (Code Civ. Proc., § 1856, subd. (c).) However, whether such evidence may be relied upon in a specific case depends on several factors.
Case law makes clear that extrinsic evidence may be offered “not only ‘where it is obvious that a contract term is ambiguous, but also to expose a latent ambiguity.’ [Citation.]” (Employers Reinsurance Co. v. Superior Court, supra, 161 Cal.App.4th at p. 920.) Moreover, “[a]s with all extrinsic evidence, course of performance evidence can be used not only to interpret an ambiguity, but also to reveal one in language otherwise thought to be clear. ([Code Civ. Proc., § 1856].)” (Employers Reinsurance Co. v. Superior Court, supra, 161 Cal.App.4th at p. 920.) However, such evidence is admissible only when ‘ “relevant to prove a meaning to which the language of the instrument is reasonably susceptible.” ’ (Ibid.; see also Pacific State Bank v. Greene, supra, 110 Cal.App.4th at p. 387.) “Courts will not strain to create an ambiguity where none exists.” (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18-19.)
In this case, we have already concluded the language in paragraph 11 of the subcontracts is not reasonably susceptible to the meaning put forward by appellants. To put simply what has already been discussed at length, paragraph 11 speaks directly to the very issue at hand – to wit, who qualifies as an “additional insured” under the Empire policies – and identifies only Hidden Hills.
In any event, even were we to find relevant extrinsic evidence relating to the parties’ course of performance, we would nonetheless find no basis in this record for naming appellants as additional insureds under the Empire policies.
First, while appellants are correct that, as the Cameo Crest project progressed, Technical signed several “addenda” to the subcontracts, as the trial court noted, these addenda make no reference at all to indemnity or to any requirement that Technical furnish insurance on behalf of appellants. Rather, the addenda operate to expand the scope of work performed by Technical to include additional lots in the Cameo Crest subdivision.
Moreover, while in some instances, the cover letters to the addenda include a request for certificates of insurance “naming The Housing Group and Hidden Hills Two Investors as additional insured, ” those letters, like the addenda themselves, are signed by representatives of THG-NC rather than of Hidden Hills. As such, allowing these cover letters to amend the subcontracts would violate paragraph 17 of the subcontracts, which mandates that “no person on behalf of Owner [defined as Hidden Hills] has any authority whatsoever to make any agreement, representation, warranty, or to modify this Contract or any part thereof, and none such has been made, unless it be in writing signed by Owner.”
Second, the other extrinsic evidence relied upon by appellants – the certificates of insurance – likewise fail to support their proposed interpretation of the subcontracts. Those certificates, issued by Eclipse at Technical’s request, indeed identify appellants as additional insureds under the Empire policies. However, on their face, the certificates could not and did not create any coverage under those policies that did not already exist as a matter of law, stating in no uncertain terms: “THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.” Thus, as the trial court found, in identifying appellants as additional insureds under the Empire policies, “the certificate is simply wrong.”
Accordingly, for all the reasons stated, we agree with Empire that the extrinsic evidence offered by appellants to show the parties’ course of performance, even if admissible, would not establish that the contracting parties – Technical and Hidden Hills – intended to include appellants as additional insureds under the terms of the subcontracts. (See Pacific State Bank v. Greene, supra, 110 Cal.App.4th at p. 387.)
II. Ostensible Authority.
We now turn to the issue of whether appellants reasonably relied on the ostensible authority of Eclipse, Technical’s insurance broker, when it issued appellants the certificates of insurance indicating they were entitled to coverage as additional insureds under the Empire policies. We begin with the relevant legal principles.
“[A] principal is bound by acts of his ostensible agent to those persons ‘who have in good faith, and without want of ordinary care, incurred a liability or parted with value, upon the faith thereof.’ Liability of the principal for the acts of an ostensible agent rests on the doctrine of ‘estoppel, ’ the essential elements of which are representations made by the principal, justifiable reliance by a third party, and a change of position from such reliance resulting in injury. [Citations.]” (Preis v. American Indemnity Co. (1990) 220 Cal.App.3d 752, 761.) “To establish ostensible authority in an agent, it must be shown the principal, intentionally or by want of ordinary care has caused or allowed a third person to believe the agent possesses such authority.” (Preis v. American Indemnity Co., supra, 220 Cal.App.3d at p. 761. See also Civ. Code, §§ 2300, 2317.)
“Ostensible authority must be established through the acts or declarations of the principal and not the acts or declarations of the agent. [Citation.] However, the doctrine of ostensible authority extends to subagents; hence the principal is similarly liable to third persons for representations made by subagents. [Citation.] Also, where the principal knows that the agent holds himself out as clothed with certain authority, and remains silent, such conduct on the part of the principal may give rise to liability. (Leavens v. Pinkham & McKevitt (1912) 164 Cal. 242, 247-248 [128 p. 399].)” (Preis v. American Indemnity Co., supra, 220 Cal.App.3d at p. 761. See also Howell v. Courtesy Chevrolet, Inc. (1971) 16 Cal.App.3d 391, 401.)
A trial court’s determination regarding whether a party acted as the ostensible agent of another party is one of fact, reviewed only for substantial evidence. (Gulf Ins. Co. v. TIG Ins. Co. (2001) 86 Cal.App.4th 422, 439.) Accordingly, we will not disturb the trial court’s determination in this case that Eclipse was not acting as Empire’s ostensible agent when it issued the relevant certificates of insurance on Technical’s behalf so long as there is substantial evidence in the record, contradicted or uncontradicted, to support it. (Id. at p. 439.)
According to appellants, ostensible authority exists on this record because Cover X, Empire’s managing general agent, “permitted Eclipse to issue certificates knowing that additional insureds (like Hidden Hills) would rely on them as evidence of coverage with Empire.” Below, the trial court disagreed, finding that appellants had failed to establish that Eclipse was an ostensible agent of Empire because “there is insufficient evidence to conclude that any act or neglect of Empire generated a believe on behalf of [appellants] that they were additional insureds.” We believe substantial evidence supports this finding.
With respect to the certificates of insurance, there is nothing in them to indicate that Empire participated in their issuance, reviewed them or in any way endorsed them. Rather, the certificates were issued on standard forms rather than Empire letterhead, and the “producer” of the certificates is identified only as Eclipse on behalf of Technical, the insured. Further, the certificates are signed only by “authorized representative” Guy Neuls, who worked for Eclipse, not Empire. Finally, the certificates clearly state on their face that “This Certificate is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not amend, extend or alter the coverage afforded below.” As such, the trial court could properly find that appellants could not have reasonably believed based on the certificates themselves that Empire was responsible, either intentionally or through lack of ordinary care, for their issuance.
Further, putting the certificates aside, there is no other evidence in the record proving that Empire knew Eclipse was holding itself out as “clothed with certain authority, ” yet remained silent. (See Preis v. American Indemnity Co., supra, 220 Cal.App.3d at p. 761.) In particular, appellants point to no evidence suggesting that Empire, intentionally or through lack of ordinary care, authorized Eclipse to add them as additional insureds under the Empire policies. And, more importantly, substantial evidence proves otherwise.
For example, Daniel Gallagher, who testified regarding Empire’s relationship with Cover X and coverage issues, acknowledged that Cover X (not Eclipse) had authority to issue certificates of insurance on Empire’s behalf, but explained that Cover X could not do so without providing notice and copies of the certificates to Empire within 21 days of issuance, which did not occur here. Further, Cover X had no authority to delegate its authority to issue certificates to any other party, including Eclipse, and particularly not without Empire’s written consent. Nor, to Gallagher’s knowledge, did Cover X ever attempt to delegate this authority to any party.
Gallagher also testified that he had no knowledge of the certificates Eclipse issued to appellants naming them as additional insureds under the Empire policies until they were produced as evidence in this case. Similarly, Dianne Parish, an underwriter for Cover X who worked on behalf of Empire, testified that she did not recall having seen the certificates prior to this case, or having any contact with Empire or appellants regarding the certificates. Parish also explained without contradiction that, even if Eclipse had authority to issue a certificate identifying an additional insured under an Empire policy, Eclipse had no authority to issue an actual additional insured endorsement or to change or alter the underlying policy in any way. And, as the applicable law makes clear, a “principal cannot be held [liable] when an actual agent acts beyond the scope of his actual or ostensible authority.” (van’t Rood v. County of Santa Clara (2003) 113 Cal.App.4th 549, 573.)
Thus, based on this record, we conclude the trial court properly found that appellants had not met their burden of proving that an act or omission by Empire, the principal, led appellants to reasonably believe the certificates of insurance were issued on the company’s behalf by one of its agents. (See Preis v. American Indemnity Co., supra, 220 Cal.App.3d at p. 761.) As the California Supreme Court explained many decades ago: “ ‘A third person... is not compelled to deal with an agent, but if he does so, he must take the risk. He takes the risk not only of ascertaining whether the person with whom he is dealing is the agent, but also of ascertaining the scope of his powers. The rule is cogently stated in 1 Mechem on Agency, second edition, section 743, page 527, as follows: “An assumption of authority to act as agent for another of itself challenges inquiry. Like a railroad crossing, it should be in itself a sign of danger and suggest the duty to ‘stop, look and listen.’ It is therefore declared to be a fundamental rule, never to be lost sight of and not easily to be overestimated, that persons dealing with an assumed agent, whether the assumed agency be a general or special one, are bound at their peril, if they would hold the principal, to ascertain not only the fact of the agency but the nature and extent of the authority, and in case either is controverted, the burden of proof is upon them to establish it.” ’ [Citation.]” (Hill v. Citizens Nat. Trust & Sav. Bk. (1937) 9 Cal.2d 172, 177.)
Accordingly, because substantial evidence supports the trial court’s decision that Eclipse was not acting as Empire’s ostensible agent when it issued the certificates of insurance naming appellants as additional insureds under the Empire policies, there is no basis for disturbing such decision on appeal.
III. Public Policy.
There remains one issue for our consideration ─ whether reversal is required on public policy grounds because, as appellants contend, disallowing coverage in this case would “unsettle construction contracts and promote litigation.”
In support of this argument, appellants note that those involved in the construction industry often rely on certificates of insurance as evidence of coverage for additional insureds. Quoting our colleagues on the Court of Appeal, Fourth District, Division One, appellants insist that “commercial reality here is that all parties fully understood the others’ intentions; but one party, the insurer, failed to draft and incorporate express coverage limitations in its policy and endorsement language.” (Pardee Construction Co. v. Insurance Co. of the West (2000) 77 Cal.App.4th 1340, 1361 (Pardee).)
Having examined our colleagues’ decision in Pardee, we conclude it iswholly distinguishable. First, unlike appellants in this case, the subcontractor in Pardee was specifically identified as an additional insured in the policies issued by the defendant insurer. (Pardee, supra, 77 Cal.App.4th at pp. 1353-1354.) Second, the legal issue in Pardee was not, as here, whether a subcontractor qualified as an additional insured under the policy issued by the defendant. Rather, the legal issue was whether coverage for the additional insured was limited to claims arising from work performed during the policy period. Applying the same principles of construction that we have here to interpret the relevant insurance policies, the court held coverage was not so limited. (Id. at p. 1358.)
Moreover, Pardee aside, we agree with the trial court in this case that, as sophisticated business entities with experience in the construction industry, appellants should have been aware that the certificates issued by Eclipse were insufficient in and of themselves to provide them coverage under the Empire policies. This is particularly true given that the certificates expressly warned that they were informational only and conferred no rights whatsoever on the holder. As Pardee itself makes clear, “ ‘a certificate of insurance is merely evidence that a policy has been issued. (Ins. Code, § 384.) It is not a contract between the insurer and the certificate holder. [Citations.]’ [Citation.]” (Pardee, supra, 77 Cal.App.4th at p. 1347, fn. 2.)
Further, and more significantly, to the extent appellants do not qualify as additional insureds under the express terms of the Empire policies, this circumstance is not the result of any wrongdoing by Empire. Rather, the blanket AI endorsements contained in the Empire policies specifically state that “a valid written contract” is required before an additional insured is entitled to coverage. The fact that the subcontracts between Technical and Hidden Hills do not constitute such a valid written contract due to the omission of any reference in them to appellants as additional insureds is not evidence that Empire engaged in negligence or fraud. As the trial court observed, limiting coverage under a blanket AI endorsement to those coming under a “valid written contract, ” like the policies here, is not only legal, it helps to prevent the insurer from becoming “deluged with ‘after the fact’ claims of insurance coverage.” This, we believe, is sound policy.
The trial court also noted that, “[u]nder the circumstances [appellants] appear to clearly have a claim of negligence against their own broker, Eclipse, which appears to have issued the certificates naming these additional parties without any justification in doing so.”
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to Empire.
We concur: McGuiness, P. J.Siggins, J.