Filed 11/21/17; pub. order 12/12/17 (see end of opn.)




                   COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                               DIVISION ONE

                                        STATE OF CALIFORNIA



ADMIRAL INSURANCE COMPANY,                              D072267

        Petitioner,                                     (Super. Ct. No.
                                                         37-2016-00016722-IC-CTL)
        v.

THE SUPERIOR COURT OF
SAN DIEGO COUNTY,

        Respondent;


A PERFECT MATCH, INC.,

        Real Party in Interest.



        ORIGINAL PROCEEDING in mandate challenging an order of the Superior

Court of San Diego County. Ronald L. Styn, Judge. Petition granted.

        Walsh McKean Furcolo, John H. Walsh, and Laura E. Stewart for Petitioner.

        No appearance for Respondent.

        Law Offices of Craig A. Miller, and Craig A. Miller for Real Party in Interest.
       This is a case about the meaning of a professional liability insurance policy. The

policy in question was issued by petitioner Admiral Insurance Company (Admiral) to the

real party in interest, A Perfect Match, Incorporated (Perfect Match), a company that

"match[es] surrogates and egg donors with infertile families." On the first page of the

policy Admiral promised to provide coverage for certain claims made during the policy

period arising from a "professional incident, . . . provided that prior to the inception date

of the policy, no insured knew, nor could have reasonably foreseen, that the professional

incident might result in a claim." In other words, Admiral was excluding coverage for

potential claims that Perfect Match knew or reasonably should have known about, but

failed to disclose.

       In this case, prior to purchasing the Admiral policy, there is no question Perfect

Match knew about a potential claim former clients Monica Ghersi and Carlos Arango

intended to file arising from the birth of their daughter with a rare form of eye cancer. A

lawyer representing Ghersi and Arango sent a letter to Perfect Match in June 2012 giving

notice of their intent to file a complaint alleging professional negligence. After

consulting with its insurance broker, Perfect Match made the decision not to disclose the

potential Ghersi/Arango claim to its current insurer out of concern it would result in a

higher premium. When it applied for the Admiral policy in October 2012, Perfect Match

likewise did not mention the potential Ghersi/Arango claim. But once the Ghersi/Arango

complaint was filed and ultimately served in March 2013, Perfect Match claimed

potential coverage under the Admiral policy based on a "professional incident" and

asserted its right to a defense. Admiral denied coverage and refused to defend, citing the

                                              2
policy language that excluded coverage for claims the insured reasonably should have

foreseen prior to inception of the policy. Perfect Match responded with this lawsuit

alleging breach of contract and bad faith.

       The interpretation of a written contract, such as an insurance policy, is a question

of law for the court where the foundational facts are not in dispute. There are no material

factual disputes in this case. Admiral was entitled to insist that Perfect Match disclose all

potential claims of which it was, or should have been, aware; it could and did exclude

from coverage any such claim that was not disclosed. The superior court therefore erred

in failing to grant summary judgment in favor of Admiral. Accordingly, we will issue a

writ of mandate directing the superior court to vacate its order denying Admiral's motion

for summary judgment and instead enter an order granting the motion.

                   FACTUAL AND PROCEDURAL BACKGROUND

       In 2011, Monica Ghersi and Carlos Arango utilized the services of Perfect Match

to locate an egg donor and gestational surrogate. The surrogate gave birth to a baby girl

who developed a retinoblastoma, a rare cancer of the eye. Following an investigation,

Ghersi and Arango retained counsel who sent Perfect Match three letters in June 2012,

one on behalf of each parent and one on behalf of their infant daughter. Each letter

referenced Code of Civil Procedure section 364 and announced an intent to file a

complaint against Perfect Match alleging "negligent and unprofessional . . . conduct,

while in the performance of professional duties, intentionally or recklessly causing

physical and emotional harm. . . ." The letters on behalf of Ghersi and Arango stated the

complaint would be based on "medical negligence and lack of informed consent." The

                                              3
daughter's letter said the complaint would be based on "medical negligence, lack of

informed consent and any other applicable causes of action."

       Upon receiving the letters, Perfect Match consulted with its insurance broker.

Interpreting the letters as something less than an actual "claim" and concerned about a

possible increase in premiums, it decided not to notify its current insurer.

       In October 2012, Perfect Match applied to Admiral for a new commercial liability

policy. The application inquired, among other things, whether the applicant was "aware

of any act, error, omission, fact, circumstance, or records request from any attorney

which may result in a malpractice claim or suit?" Perfect Match responded, "No." Nor

did Perfect Match disclose anything about the potential Ghersi/Arango claim anywhere

else on the application or otherwise to Admiral.

       Admiral issued a commercial liability policy to Perfect Match covering claims

made during the period from December 5, 2012 through December 5, 2013. It agreed to

pay amounts that Perfect Match was "legally obligated to pay as damages caused by a

professional incident . . . for which a claim is first made against the insured during the

policy period." "Professional incident" was defined elsewhere in the policy as "a

negligent act, error or omission in the rendering of or failure to render professional

services by the insured." There was one critical limitation. Admiral was obligated to pay

only if "prior to the inception date of the policy, no insured knew, nor could have

reasonably foreseen, that the professional incident might result in a claim."

       Ghersi and Arango filed suit against Perfect Match alleging professional

negligence, and a first amended complaint was ultimately served on the company in

                                              4
March 2013. Perfect Match notified Admiral, which refused to defend or indemnify.

Perfect Match responded with this lawsuit against Admiral alleging breach of the

insurance contract and bad faith. Admiral moved for summary judgment, arguing there

was no possibility of coverage under the policy because prior to the inception of the

policy Perfect Match knew or reasonably could have foreseen that the professional

services it provided to Ghersi and Arango might result in a claim. It also contended that

Perfect Match made material misrepresentations in its application for insurance. In its

response, Perfect Match focused on its assertion that the application for insurance it was

directed to complete was "wholly inappropriate for the kind of business" it operates. It

emphasized that it was not a licensed health care provider and did not employ doctors,

nurses, or other health care professionals.

       In denying Admiral's summary judgment motion, the superior court determined

that triable issues of fact were created by Admiral's reliance on an application form that

was designed for "medical laboratories, medical imaging centers and blood

plasmapheresis centers." As a result, it concluded there was a disputed question whether

Perfect Match could truthfully answer "no" to the question whether it was aware of

anything that might result in a malpractice claim, since it was not a health care provider

that rendered professional medical services. The court also found an issue of fact "as to

whether Admiral may rely on the 'prior notice' condition to deny coverage. . . ."

                                       DISCUSSION

       The interpretation of a written contract such as an insurance policy is generally a

question of law for the court unless the foundational extrinsic evidence is in conflict.

                                              5
(Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865–866; Maryland Casualty

Co. v. Nationwide Ins. Co. (1998) 65 Cal.App.4th 21, 29.) Here, although the parties

"dispute the inferences to be drawn from [the] extrinsic evidence, the evidentiary facts

themselves are not in conflict." (Medical Operations Management, Inc. v. National

Health Laboratories, Inc. (1986) 176 Cal.App.3d 886, 892.) With no conflict in the

foundational extrinsic evidence, it is left to the court to decide the question of law by

determining the meaning of the contract in light of the undisputed evidence and the

objectively reasonable expectations of the insured. (Maryland Casualty Co., at p. 29.)

       Perfect Match's opposition to Admiral's summary judgment motion focused on the

uncertainties created by Admiral's reliance on an application form that was ill-suited to

the type of business it operated. The form was plainly designed for medical laboratories,

imaging centers, and similar health care facilities. Because Perfect Match was not a

health care provider, we can assume for purposes of argument that it was not being

untruthful when it represented on the application form that it was unaware of any existing

basis for a "malpractice claim."

       But the application form and the responses to the questions on it are largely a red

herring because the policy (i.e., the parties' agreement) itself explains there is no coverage

for a claim arising from a "professional incident" if, prior to the inception of the policy,

the insured "knew" or "could have reasonably foreseen, that the professional incident

might result in a claim." Relying on the letters sent by the lawyer representing Ghersi

and Arango, Admiral persuasively argues that the plain meaning of this "prior notice"

provision precludes any coverage.

                                              6
       Perfect Match responds that the "prior notice" language of the policy must be read

in conjunction with the application, which provides "context" for understanding the

policy. Read in proper context, Perfect Match suggests, the policy excludes coverage

only if, prior to the inception date, an insured health care professional knew or could

have reasonably foreseen that its actions might result in a medical malpractice claim. To

be sure, the language of a contract must be construed in the context of the instrument as a

whole and all the surrounding circumstances.1 (Producers Dairy Delivery Co. v. Sentry

Ins. Co. (1986) 41 Cal.3d 903, 916; Pacific Gas & E. Co. v. G. W. Thomas Drayage etc.

Co. (1968) 69 Cal.2d 33, 38.) The ultimate question, however, is whether the document

and surrounding context will support "a meaning to which the language of the instrument

is reasonably susceptible." (Pacific Gas & E. Co., at p. 37.)

       Perfect Match's argument fails to offer a reasonable meaning for the language of

the policy. The "prior notice" provision is an integral part of the insuring agreement

itself. It specifies there is no coverage if the insured knew or reasonably could have

foreseen that the professional incident might result in a claim. Coverage is tied to a

"professional incident." The policy provides coverage for amounts the insured is

required to pay as damages "caused by a professional incident." If "professional

incident" were construed to mean "medical malpractice," Perfect Match (which is




1      In this regard, however, the policy itself emphasizes that "[t]he policy applied for
is SOLELY AS STATED IN THE POLICY." Thus, while the application may provide
context to assist in interpreting the policy, the language of the policy controls over any
conflicting inference that might be drawn from the application.
                                             7
concededly not a licensed health care provider) would have no coverage for anything.

Such a result would be inconsistent with the reasonable expectations of all the parties.

       Here, the undisputed facts demonstrate that Perfect Match had notice prior to the

inception of the policy that Ghersi and Arango intended to file a lawsuit for breach of

contract and negligence. Even if there was some confusion as to whether Ghersi and

Arango properly labeled their claim as a "medical negligence" action or invoked the

appropriate code section, the policy only requires that the insured be able to foresee that a

claim "might" be made. Counsel's June 2012 letters provided indisputable notice to

Perfect Match that its professional services rendered to Ghersi and Arango "might result

in a claim." Accordingly, by the clear terms of the policy, there was no coverage. (See

Phoenix Ins. Co. v. Sukut Construction Co. (1982) 136 Cal.App.3d 673, 676–677.)




                                              8
                                      DISPOSITION

       Let a writ of mandate issue directing the superior court to vacate its order dated

May 5, 2017 denying Admiral's motion for summary judgment and instead issue an order

granting the motion. This court's order staying proceedings in the superior court is

vacated. Admiral is awarded costs incurred in this proceeding. (Cal. Rules of Court, rule

8.493(a)(1)(A), (2).)


                                                                                  DATO, J.

WE CONCUR:



McCONNELL, P. J.



HALLER, J.




                                             9
Filed 12/12/17
                             CERTIFIED FOR PUBLICATION

                 COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                     DIVISION ONE

                                  STATE OF CALIFORNIA

ADMIRAL INSURANCE COMPANY,                    D072267

        Petitioner,

        v.                                    (Super. Ct. No.
                                               37-2016-00016722-IC-CTL)
THE SUPERIOR COURT OF
SAN DIEGO COUNTY,

        Respondent;


A PERFECT MATCH, INC.,

        Real Party in Interest.


THE COURT:

       The opinion in this case filed November 21, 2017 was not certified for publication.
It appearing the opinion meets the standards for publication specified in California Rules
of Court, rule 8.1105(c), the request pursuant to California Rules of Court, rule 8.1120(a),
for publication is GRANTED.

       IT IS HEREBY CERTIFIED that the opinion meets the standards for publication
specified in California Rules of Court, rule 8.1105(c); and

      ORDERED that the words "Not to Be Published in the Official Reports" appearing
on page one of said opinion be deleted and the opinion herein be published in the Official
Reports.


                                                                       McCONNELL, P. J.
Copies to: All parties
