Victory I, Inc. v. Federal Insurance

MEMORANDUM

The central issue in this case is the interpretation of paragraph 3.1(C) of the policy between Federal and Victory, which excludes coverage of claims:

(E.R. Tab 1 at 29, 39.) Federal contends that the language “based on or attributable to, arising out of, resulting from or in any manner related to” (hereafter, the “arising out of’ clause) renders the exclusion applicable to Victory’s claim, which arises out of an event involving property damage, although the claim itself is for negligent misrepresentation.

Victory argues that the “arising out of’ clause does not modify the exclusion’s reference to property damage, primarily because the word “for” preceding the “property damage” phrase sets the property damage phrase off from the personal injury phrase which is the true object of the “arising out of’ preposition. *716 Victory presents other rules of construction in support of its interpretation, including the nearest antecedent rule and the rule against surplusage. The language of an insurance policy will be given its plain meaning and there will be no resort to rules of construction unless an ambiguity exists. AIU Ins. Co. v. Superior Court (FMC Corp), 51 Cal.3d…

Concurring and Dissenting.

I agree that Federal loses the paragraph 3.1(C) agon, but it seems plain to me that the construction of that provision was subject to a good faith dispute. See, e.g., Board of Managers of Yardarm Condominium II v. Federal Ins. Co., 247 A.D.2d 499 , 669 N.Y.S.2d 332, 333 (N.Y.App.Div.1998). Therefore, I dissent on the tort issue because I would hold that as a matter of law Federal did not commit a tortious breach of the covenant of good faith and fair dealing by taking the position it did. See Guebara v. Allstate Ins. Co., 237 F.3d 987, 992 (9th Cir.2001); Congleton v. Nat’l Union Fire Ins. Co., 189 Cal.App.3d 51, 59 , 234 Cal.Rptr. 218, 222 (1987).