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Truck Insurance Exchange v. Pacificare Health Systems3/30/2005
and seek restitution and compensation in quantum meruit.
PacifiCare Tenders the Underlying Lawsuits to Its Insurers
Respondents Truck Insurance Exchange (Truck) and Texas Farmers Insurance Company issued comprehensive hospital and professional liability (CHPL) policies to PacifiCare starting in 1989. Truck's authorized agent informed PacifiCare that the CHPL policy covered all risks and that coverage would only be limited by specified exclusions. The agent further advised PacifiCare that the policy "covered not only claims involving direct patient care by medical care providers but claims involving PacifiCare's own business practices of providing health insurance programs and health care management services." In 1994, while the CHPL policy was in effect, Truck attempted to switch PacifiCare to a narrower "Health Care Provider Policy" because, in the words of Truck's underwriter, it "does not desire to provide coverage in those instances where it is alleged that [PacifiCare], as an insurer, has failed to perform under its contract of insurance." PacifiCare refused to accept the proposed reduction in coverage.
PacifiCare tendered the subscribers' and the providers' lawsuits to respondents. The insurers denied any duty to defend or indemnify PacifiCare.
PacifiCare and the Insurers Sue Each Other
In 2001, Truck sought declaratory relief, claiming it has no duty to defend or indemnify PacifiCare. Texas Farmers Insurance was joined in the action through PacifiCare's cross-complaint. The trial court granted summary judgment in favor of the insurers, finding that economic injuries to third parties occasioned by PacifiCare's business practices are not covered by the CHPL policies. This timely appeal followed.
DISCUSSION
1. Appeal and Review
The judgment is appealable. (Code Civ. Proc., ยง 437c, subd. (m)(1).) Review is de novo. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768; Walker v. Countrywide Home Loans, Inc. (2002) 98 Cal.App.4th 1158, 1168.) The interpretation of insurance contracts presents a question of law. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18.) Insurance coverage is "`"interpreted broadly so as to afford the greatest possible protection to the insured . . . ."'" (White v. Western Title Ins. Co. (1985) 40 Cal.3d 870, 881.) The plain meaning of an insurance policy is how a reasonable layperson would interpret it. (Crane v. State Farm Fire & Cas. Co. (1971) 5 Cal.3d 112, 115.) This remains the rule even when the insured is sophisticated and itself engages in the insurance business. (AIU Ins. Co. v. Superior Court. (1990) 51 Cal.3d 807, 823.)
To prevail in an action seeking declaratory relief on the issue of a duty to defend, "the insured need only show that the underlying claim may fall within policy coverage; the insurer must prove it cannot." (Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 300.) Any ambiguity in the policy or doubt as to whether there is a duty to defend must be resolved in favor of the insured. (Id. at pp. 299-300; Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 269.) The issue is whether the third party claim potentially falls within the policy coverage, depending on the nature and kind of risk covered by the policy. (Montrose Chemical Corp. v. Superior Court, supra, 6 Cal.4th at p. 295; Lebas Fashion Imports of USA, Inc. v. ITT Hartford Ins. Group (1996) 50 Cal.App.4th 548, 556.)
2. The CHPL Policy Coverage
PacifiCare argues that the insurers' CHPL policies contain two potentially applicable coverage clauses. One clause covers "personal injury liability"; the other covers "hospital and prof
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