A.B.S. Clothing Collection, Inc. v. Home Insurance

Contrary to the majority opinion, I do not view this appeal as presenting an issue of first impression. For decades, courts, including those in California, have consistently held that insurance contracts are subject to the ordinary rules of interpretation. (See e.g., Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264 [ 10 Cal.Rptr.2d 538 , 833 P.2d 545 ].) If contractual language is clear, it governs without regard to the insured’s subjective understanding about the terms of coverage. (Id.., at p. 1265; Bettis Rubber Co. v. Kleaver (1951) 104 Cal.App.2d 821 [ 233 P.2d 82 ].)

The Home Insurance Company (Home) policy in this case clearly and unambiguously provides that regardless of the number of years a policy is renewed, “no Limit of Insurance cumulates from year to year.”

Accordingly, I conclude that the language of the policy is imperative and, for the reasons hereafter stated, I would affirm the judgment in favor of Home.

While I do not discern any relevant factual dispute in the record, for continuity in reading the dissent, I restate the facts in different format from that used in the majority opinion.

*1486 This action involves the terms of coverage of a…

Introduction

This breach of contract action by a policyholder against its insurance company raises the following question. When an employee embezzles funds from an employer over a period of years during which the employer carries insurance against employee dishonesty from the same insurer, may the employer recover up to the insurer’s limit of liability for each year in which the embezzlement occurs?

This is a question of first impression in California. Courts in other jurisdictions have generally held if coverage is based on a series of separate, independent contracts, then the employer is entitled to recover up to the limit of liability for each policy period in which a loss occurs. On the other hand, if there is but one continuous contract, then the employer’s recovery cannot *1474 exceed the limit of liability stated in the contract regardless of the number of years the coverage has been in force, the number of policies issued or the number of premiums the employer has paid.

In this action the trial court determined in summary judgment proceedings the policies issued to the employer over a period of years constituted one continuous contract under which the insurer’s…

This breach of contract action by a policyholder against its insurance company raises the following question. When an employee embezzles funds from an employer over a period of years during which the employer carries insurance against employee dishonesty from the same insurer, may the employer recover up to the insurer's limit of liability for each year in which the embezzlement occurs?

This is a question of first impression in California. Courts in other jurisdictions have generally held if coverage is based on a series of separate, independent contracts, then the employer is entitled to recover up to the limit of liability for each policy period in which a loss occurs. On the other hand, if there is but one continuous contract, then the employer's recovery cannot exceed the limit of liability stated in the contract regardless of the number of years the coverage has been in force, the number of policies issued or the number of premiums the employer has paid.

In this action the trial court determined in summary judgment proceedings the policies issued to the employer over a period of years constituted one continuous contract under which the insurer's…