                                                                           FILED
                           NOT FOR PUBLICATION                              AUG 30 2012

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS




                            FOR THE NINTH CIRCUIT



GHILOTTI BROS., INC.,                            No. 10-17231

              Plaintiff - Appellee,              D.C. No. 3:09-cv-02735-VRW

  v.
                                                 MEMORANDUM *
AMERICAN SAFETY INDEMNITY
COMPANY,

              Defendant - Appellant.



                    Appeal from the United States District Court
                      for the Northern District of California
                    Vaughn R. Walker, District Judge, Presiding

                    Argued and Submitted November 15, 2011
                            San Francisco, California

Before: THOMAS, GOULD, and BYBEE, Circuit Judges.

       American Safety Indemnity Company (“ASIC”) appeals the district court’s

order granting summary judgment in favor of Ghilotti Bros., Inc. (“Ghilotti”). The

district court found that ASIC, as Ghilotti’s insurer under a commercial general




        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
liability insurance policy, has a duty to defend Ghilotti in the underlying suit filed

against Ghilotti in California court.

      As an initial matter, ASIC claims that Ghilotti lacks standing under Article

III of the Constitution to pursue this action because there is no “case” or

“controversy.” It argues that because other insurers are fully defending Ghilotti

and because Ghilotti was found to have no liability in the underlying litigation in

California trial court, the only harm Ghilotti has alleged from ASIC’s failure to

defend it is speculative. Yet “we have consistently held that a dispute between an

insurer and its insureds over the duties imposed by an insurance contract satisfies

Article III’s case and controversy requirement,” Gov’t Emps. Ins. Co. v. Dizol, 133

F.3d 1220, 1222 n.2 (9th Cir. 1998) (en banc), regardless of whether there is an

active underlying suit, Aetna Cas. & Sur. Co. v. Merritt, 974 F.2d 1196, 1199 (9th

Cir. 1992). Here, the underlying litigation has not terminated,1 and there remains

the possibility that the other insurers may withdraw their defense or seek




      1
       We grant Ghilotti’s request for judicial notice contained in its motion filed
October 5, 2011, and we take notice that the underlying litigation continues in the
California Court of Appeal, though it does not change our holding.

                                           2
reimbursement from Ghilotti for the expenses of defending it. Ghilotti has

standing to pursue this appeal.2

      With regard to ASIC’s duty to defend, the district court found that there was

at least one potential occurrence covered by the insurance contract and that no

policy exclusions unambiguously barred coverage. ASIC claims, inter alia, that the

district court erred in finding that the Total Prior Work Exclusion (“TPWE”) in the

insurance contract did not preclude indemnity for the claims against Ghilotti.

Under California law, “[t]he duty to defend arises if the facts known to the insurer

indicate a potential or possibility for indemnity.” Nat’l Steel Corp. v. Golden

Eagle Ins. Co., 121 F.3d 496, 499 (9th Cir. 1997) (citing Montrose Chem. Corp. of

Cal. v. Superior Court, 861 P.2d 1153, 1157 (Cal. 1993)). Ambiguities in

exclusionary clauses are to be interpreted in favor of coverage, and to be effectual

an exclusionary clause must be phrased in language that is “conspicuous, plain and


      2
       If the litigation were complete, our answer on standing might be different.
An insured is entitled to only one full defense. San Gabriel Valley Water Co. v.
Hartford Accident & Indem. Co., 82 Cal. App.4th 1230, 1241, 98 Cal. Rptr. 2d 807
(2000). An insurer's refusal to defend “is of no consequence to an insured whose
representation is provided by another insurer: under such circumstances, the
insured [is] not faced with an undue financial burden or deprived of the expertise
and resources available to insurance carriers in making prompt and competent
investigations as to the merits of lawsuits filed against their insureds.” Horace
Mann Ins. Co. v. Barbara B., 61 Cal. App. 4th 158, 164, 71 Cal. Rptr. 2d 350
(1998) (quoting Ceresino v. Fire Ins. Exch., 215 Cal. App. 3d 814, 823, 264 Cal.
Rptr. 30 (1989)) (internal quotation marks omitted).

                                          3
clear.” State Farm Mut. Auto. Ins. Co. v. Jacober, 514 P.2d 953, 958 (Cal. 1973)

(quoting Steven v. Fid. & Cas. Co., 377 P.2d 284, 294 (Cal. 1962) (emphasis

removed).

      The TPWE is a separate endorsement that provides in part that “[t]he

‘occurrence’ and resulting injury or damage must result, in its entirety, from ‘your

work’ performed during the policy period of this policy.” It then states

      If “your work” was performed in part during the policy period of this
      policy and in part before the policy period of this policy, any
      “occurrence” and resulting injury or damage claimed to result from
      “your work” will be deemed to have resulted, in its entirety, solely
      from ‘your work’ prior to the policy period of this policy . . . .

We find the meaning of this exclusion to be unambiguous. If work occurs in part

prior to the policy period and some damage results from such work, that damage

will not be covered by the policy. Here, the Second Amended Cross-Complaint

filed in the underlying litigation alleges that Ghilotti performed work and

destroyed trees on the property of the project site, Drake’s Cove, “[o]n or about

September 2, 2003.” Nothing in the materials available to ASIC at the time

Ghilotti tendered its request for a defense contradicts that Ghilotti performed work

on the property then. Because the policy period of the insurance contract did not

begin until October 1, 2003, Ghilotti clearly performed work at Drake’s Cove

prior to the policy period, and any resulting damage is not covered by the policy.


                                          4
That some work and damage may have occurred due to work at Drake’s Cove

within the policy period does not alter the fact that, under the TPWE, all work and

damage is deemed to have occurred prior to the beginning of the policy. The

TPWE precludes coverage for all of the claims against Ghilotti under its contract

with ASIC. ASIC therefore has no duty to defend Ghilotti in the underlying suit.

      Because the TPWE precludes all coverage under the policy, we do not reach

ASIC’s other challenges to the district court’s order.

      REVERSED AND REMANDED.




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