Opinion
E032304
Filed July 11, 2003
Appeal from the Superior Court of San Bernardino County, No. SCVSS78194, Cynthia Ludvigsen and John P. Wade, Judges. Affirmed.
Judge Ludvigsen signed the ruling on motions for summary judgment and summary adjudication which was filed on February 4, 2002. Judge Wade signed the judgments which were filed on June 18, 2002.
Gladych Associates, Inc. and John A. Gladych for Defendants and Appellants.
Walsh Furcolo, John H. Walsh, Timothy M. Twomey and Regan Furcolo for Plaintiff and Respondent.
OPINION
Plaintiff Admiral Insurance Company brought this declaratory relief action to establish that it does not have a duty to defend its insureds, North American Arms, Inc. and Phoenix Arms, Inc. in three consolidated underlying actions.
The trial court agreed that there was no duty to defend because the comprehensive general liability policies only provide protection from litigation seeking damages for bodily injury and property damage. Since the trial court found no such damages claims in the underlying litigation, it granted Admiral's motions for summary judgment.
North American Arms, Inc. and Phoenix Arms, Inc. (herein, appellants) appeal, contending that Admiral has a duty to defend them in the underlying actions as a matter of law.
THE DUTY TO DEFEND
In the leading case of Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, our Supreme Court held the insurance company had a duty, under a comprehensive general liability policy, to defend its insured when the underlying action alleged an intentional assault by the insured. In that case, a comprehensive personal liability endorsement excluded coverage for intentional acts. The court found that "the language of the policy does not clearly define the application of the exclusionary clause to the duty to defend. Since in that event we test the meaning of the policy according to the insured's reasonable expectation of coverage and since the language of the policy would lead the insured here to expect defense of the third party suit, we cannot exonerate the carrier from the rendition of such protection." ( Id. at p. 267.) Specifically, the court said: "`The very first paragraph as to coverage, however, provides that `the company shall defend any such suit against the insured alleging such bodily injury' although the allegations of the suit are groundless, false or fraudulent. This language, in its broad sweep, would lead the insured reasonably to expect defense of any suit regardless of merit or cause." ( Id. at p. 273.) Thus, "[w]e look to the nature and kind of risk covered by the policy as a limitation upon the duty to defend; we cannot absolve the carrier from the duty to defend an insured for loss of the nature and kind against which it insured." ( Id. at p. 275, fn. omitted.)
Subsequently, our Supreme Court defined the duty to defend as follows: "Recently we had occasion to restate the familiar principles governing adjudication of the insurer's duty to defend. In Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076 . . . we observed: `[A] liability insurer owes a broad duty to defend its insured against claims that create a potential for indemnity. [Citation.] As we said in Gray, "the carrier must defend a suit which potentially seeks damages within the coverage of the policy." [Citation.] Implicit in this rule is the principle that the duty to defend is broader than the duty to indemnify; an insurer may owe a duty to defend its insured in an action in which no damages ultimately are awarded. [Citations.]' [Citation.] [¶] `The determination whether the insurer owes a duty to defend usually is made in the first instance by comparing the allegations of the complaint with the terms of the policy. Facts extrinsic to the complaint also give rise to a duty to defend when they reveal a possibility that the claim may be covered by the policy. [Citation.]' [Citation.] As one Court of Appeal has put it, `[f]or an insurer, the existence of a duty to defend turns not upon the ultimate adjudication of coverage under its policy of insurance, but upon those facts known by the insurer at the inception of a third party lawsuit. [Citation.] Hence, the duty "may exist even where coverage is in doubt and ultimately does not develop." [Citation.]'" ( Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 295.)
In Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, our Supreme Court cited Gray and Montrose and said: "It has long been a fundamental rule of law that an insurer has a duty to defend an insured if it becomes aware of, or if the third party lawsuit pleads, facts giving rise to the potential for coverage under the insuring agreement. [Citations.] This duty, which applies even to claims that are `groundless, false, or fraudulent,' is separate from and broader than the insurer's duty to indemnify. [Citation.] However, `"where there is no possibility of coverage, there is no duty to defend. . . ."' [Citation.] Gray and its progeny have made it clear that the determination whether the insurer owes a duty to defend usually is made in the first instance by comparing the allegations of the complaint with the terms of the policy. Facts extrinsic to the complaint give rise to a duty to defend when they reveal a possibility that the claim may be covered by the policy. [Citation.]" ( Waller v. Truck Ins. Exchange, Inc., supra, at p. 19.)
In the recent case of Atlantic Mutual Ins. Co. v. J. Lamb, Inc. (2002) 100 Cal.App.4th 1017, our colleagues in Division Three quoted from Montrose and then stated: "`An insurer has a duty to defend an insured if it becomes aware of, or if the third party lawsuit pleads, facts giving rise to the potential for coverage under the insuring agreement. [Citations.] This duty, which applies even to claims that are "groundless, false, or fraudulent," is separate from and broader than the insurer's duty to indemnify. [Citation.]' [Citation.] The scope of the duty does not depend on the labels given to the causes of action in the third party complaint; instead it rests on whether the alleged facts or known extrinsic facts reveal a possibility that the claim may be covered by the policy. [Citation.]" ( Id. at pp. 1033-1034.)
The basic principles were well summarized in Michaelian v. State Comp. Ins. Fund (1996) 50 Cal.App.4th 1093: "A liability insurer owes a broad duty to defend its insured against claims that create a potential for indemnity. [Citation.] The determination whether the insurer owes a duty to defend is usually made in the first instance by comparing the allegations of the complaint with the terms of the policy. [Citation.] Facts extrinsic to the complaint also give rise to a duty to defend when they reveal a possibility that the claim may be covered by the policy. [Citation.] The obligation to defend, however, is not without limits. Rather, such a duty is limited by the nature and kind of risk covered by the policy. [Citation.] The insurer does not need to defend if the third party complaint can by no conceivable theory raise a single issue which could bring it within the policy coverage. [Citation.]" ( Id. at p. 1106.)
We apply these principles in deciding the issue presented in this case. (See generally, 14 Couch on Insurance 3d (1999) ch. 200, p. 200-1 et seq.; Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2002) ¶ 7B, pp. 7B-1-7B-28.) Although 12 insurance policies are involved, the parties generally agree that they provide comprehensive general liability coverage for bodily injury and property damage, including coverage for product liability and completed operations. The dispute between the parties is whether or not the complaints in the three underlying actions seek damages which are potentially within the coverage of the policies. We therefore begin with a review of the complaints in the underlying actions.
A standard comprehensive general liability policy is described in Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th 1, 16-18. The court described the property damage coverage as focusing on "the property itself, and does not include intangible economic losses, violation of antitrust laws or nonperformance of contractual obligations. [Citations.]" ( Id. at p. 17.)
THE COMPLAINTS IN THE UNDERLYING ACTIONS
On July 16, 1999, a first amended complaint was filed in a San Francisco Superior Court action brought in the name of the People by the San Francisco city attorney and attorneys for Berkeley, Sacramento, San Mateo County, Oakland and East Palo Alto (herein, the San Francisco action). Also listed as plaintiffs are the mayor of Sacramento, the Cities of Berkeley, Oakland and East Palo Alto, and the County of Alameda. Defendants are 28 handgun manufacturers, six handgun distributors, and three trade associations. Appellants are named as defendants.
After 28 pages of general allegations, discussed below, the complaint purports to assert causes of action for public nuisance, deceptive advertising in violation of Business and Professions Code section 17500, and unlawful business practices within the meaning of section 17200 et seq. The prayer seeks injunctive and declaratory relief, prejudgment and postjudgment interest, civil penalties, restitution of wrongfully obtained monies pursuant to sections 17203 and 17535, costs of suit, attorney fees and "such further relief as the Court deems equitable and just."
Unless otherwise indicated, all further statutory references are to the Business and Professions Code.
On the same day, a first amended complaint was filed in Los Angeles Superior Court in the name of the People by the city attorneys of Los Angeles, Compton, Inglewood, and West Hollywood (herein, the Los Angeles City action). Also named as plaintiff representatives of the general public were the city attorney of Compton and the mayors of Inglewood and West Hollywood. Defendants are 28 handgun manufacturers, five handgun distributors, five handgun dealers and three trade associations. Appellants are named as defendants.
After 34 pages of general allegations, the complaint purports to state causes of action for public nuisance and unfair competition in violation of section 17200 et seq. The prayer seeks injunctive and declaratory relief, prejudgment and postjudgment interest, civil penalties, restitution of wrongfully obtained monies pursuant to section 17203, costs of suit, attorney fees and "such further relief as the Court deems equitable and just."
On August 6, 1999, the third complaint was filed in Los Angeles Superior Court in the name of the People ex rel. the County of Los Angeles and three county supervisors on behalf of the general public (herein, the Los Angeles County action). The county purports to sue on behalf of itself and the general public. This is the only complaint that mentions nonrepresentative causes of action. Again, defendants are 28 handgun manufacturers, six distributors of handguns, six handgun dealers, and three trade associations. Appellants are named as defendants.
After 30 pages of general allegations, the complaint purports to state causes of action for public nuisance, unlawful business practices within the meaning of section 17200 et seq., and deceptive advertising in violation of section 17500. Again, the prayer seeks injunctive and declaratory relief, prejudgment and postjudgment interest, restitution of wrongfully obtained monies pursuant to sections 17203 and 17535, civil penalties pursuant to section 17500, costs of suit, attorney fees and "such further relief as the Court deems equitable and just."
The general allegations in the three complaints may be summarized by the allegation in the Los Angeles City action that defendants "design, manufacture, market, distribute, advertise, promote, supply and sell handguns in a manner that facilitates the easy availability of handguns to juveniles and criminals for their use in crime . . . with the resulting yearly toll of injury and loss of life in . . . California."
The headings in the Los Angeles City action elaborate on this theme: "Handgun-related crime is a national problem that victimizes thousands of Californians"; "The high levels of firearm crime in California is fueled by the easy availability of handguns to illegitimate users"; "Defendants have created a distribution system that facilitates and supplies an illegitimate secondary market of handguns"; "Defendants have designed handguns to appeal to criminals and have increased production to meet demand from the illegal market"; "Defendants' conduct undermines the public policy embodied in local, state and federal laws"; "Defendants' have failed to incorporate feasible and existing safety technology into the design and distribution of firearms"; "Defendants' unfair, false, deceptive and misleading statements undermine minimum warnings on proper storage of handguns"; and "Defendants have profited from their unfair, unlawful, or fraudulent business practices at the expense of California and its residents."
Admiral summarizes the purpose of the underlying actions clearly: "The plaintiffs in the underlying suits allege that the conduct of the defendant gun manufacturers and distributors creates a public nuisance, that their marketing practices are deceitful and that their business practices are unfair. They seek injunctive relief in an effort to change the way the defendants' business practices are conducted."
The three cases were consolidated for decision in the Superior Court of the County of San Diego.
On March 10, 2003, a legal newspaper reported that the three consolidated cases had been dismissed by the trial court on grounds that there was no link between handgun manufacturers' sales practices and gun-related crime. (L.A. Daily Journal, 3/10/03, p. 1.) According to the news report, the judge "dismissed the gun manufacturers' trade associations from the suits, saying that no causal connection had been proved between their actions and gun violence." ( Ibid.) However, "the judge allowed the lawsuits to continue against several privately owned gun distributors scattered around the nation and against certain gun dealers in California. In those instances, the judge said, a trial is needed to determine the dealers' and distributors' level of responsibility." ( Ibid.) A written ruling and a possible appeal lie in the future. ( Ibid.)
THE TRIAL COURT'S DECISION
The trial court observed that the general allegations of the three complaints in the underlying action are "replete with the language of negligence. They talk about duties, standards of the arms-making industry, safety standards and marketing practices of which the manufacturers `knew or should have known,' failure to supervise dealers, and failure to use available technology to prevent accidental discharges or obliteration of serial numbers. [¶] Nonetheless, none of the three complaints asserts a cause of action for negligence, nor do any of them seek negligence damages. They assert only claims for public nuisance and unfair business practices."Appellants focus their attack on the following portion of the trial court's decision: "The County of Los Angeles case presents itself slightly differently. While that case too is brought in the name of the People of the State of California through their representative, County of Los Angeles, the complaint also contains an allegation that it is being brought by the County individually as well. Regardless, the complaint does not allege any damage to the County itself, in other than its representative capacity. It does contain a general allegation that the presence of illegitimately possessed and used handguns in the County proximately results in `significant costs' for the Sheriff's Department and to treat victims of handgun crimes. However, it does not seek damages for these costs, but rather limits its prayer and claim for `damages' to injunctive and declaratory relief and to the monetary relief (penalties) authorized under Business and Professions Code § 17200."
The trial court goes on to hold that "the possibility of the County [seeking monetary damages for negligence or public nuisance] strikes this court as so highly speculative as to preclude requiring Admiral to defend this lawsuit." The court thus found: "Given that none of the other complaints contains [ sic] this language one can infer a drafting error or oversight rather than an intent to assert a claim different from those asserted in the companion complaints. The prayers for relief do not seek damages in the sense of those covered by the policies but seek only damages authorized under Business and Professions Code § 17200, for which there can be no insurance by statute."
The trial court concluded: "[T]he damages which the County of Los Angeles could claim for increased sheriff or hospital charges are so difficult to prove, speculative and nearly impossible to separate from costs for those services not related to any conduct which could potentially be alleged against the insured here that it would be speculative to assume it will amend its complaint to seek such damages in its own capacity."
APPELLANTS' ARGUMENTS
The basic argument of the appellants is that the claims of the complaints, regardless of the labels attached to the causes of action, are negligence-based claims which are clearly possibly or potentially covered under Admiral's comprehensive liability policy. Appellants therefore contend Admiral had a duty to defend against any such claims, even if they were false or groundless. We focus on this claim in the context of the Los Angeles City and San Francisco actions.
The second argument of the appellants is that the allegations in the County of Los Angeles action that the county is suing on its own behalf is a claim which falls within the ambit of the policy coverage, even though the county does not directly assert a monetary claim for bodily injury or property damages in its prayer. They therefore conclude that the insurance company had a duty to provide a defense for this claim.
Similar cases have been brought across the United States. Appellants argue that a duty to defend has been found in several of those cases. In the first case cited by appellants, Sig Arms Inc. v. Employers Insurance of Wausau, et al. (D.C.N.H. 2000) 122 F.Supp.2d 255, the municipalities did assert specific claims for costs of providing increased police protection, emergency services, police pension benefits, medical care, health care, social services and correction and rehabilitation services. The court held there was a duty to defend the litigation. In Brazas Sporting Arms v. American Empire Surplus (1st Cir. 2000) 220 F.3d 1, the policy had a products-completed operations hazard exclusion and the court relied on that fact to find no duty to defend. The remaining case cited by appellants was unpublished. ( Beretta U.S.A. Corporation v. The Federal Insurance Co. (4th Cir. (Md.) Sept. 6, 2001, No. 00-2387) 17 Fed.Appx. 250 [ 2001 WL 1019745].) These cases do not bolster appellants' contentions.
THE CITY OF LOS ANGELES AND SAN FRANCISCO ACTIONS
Appellants' first contention is that, having found that the complaints were "replete" with negligence claims, the trial court should have found a potential for damages within the coverage of the policies. For convenience, we divide the argument into the questions of whether the stated causes of action seek damages and whether damages are available under an unpled negligence cause of action.As noted above, the complaints contain purported causes of action for public nuisance, deceptive advertising, and unlawful business practices. A public nuisance may be abated by an action brought in the name of the People. (Code Civ. Proc., § 731; Civ. Code, §§ 3480, 3494.) However, damages may not be recovered in an abatement action brought under Code of Civil Procedure section 731. ( People ex rel. Van de Kamp v. American Art Enterprises, Inc. (1983) 33 Cal.3d 328, 330, 333, fn. 11; County of San Luis Obispo v. Abalone Alliance (1986) 178 Cal.App.3d 848, 860-861; People ex rel. Gow v. Mitchell Brothers' Santa Ana Theater (1981) 114 Cal.App.3d 923, 930.) As discussed below, however, the statute limits only actions brought in a representative capacity. The public entity may obtain damages if its own property is injured by the nuisance. ( Selma Pressure Treating Co. v. Osmose Wood Preserving Co. (1990) 221 Cal.App.3d 1601, 1614.) But when the public nuisance cause of action is asserted solely in a representative capacity, no damages award can be made.
Although this section focuses on the San Francisco action and the Los Angeles City action, the discussion also applies to the representative allegations in the Los Angeles County action.
The subsequent history of the Mitchell Brothers case is explained in County of San Luis Obispo v. Abalone Alliance, supra, 178 Cal.App.3d 848, 860, footnote 4.
The deceptive advertising and unfair competition causes of action do not seek damages. Nor could they, as Insurance Code section 533.5 provides: "(b) No policy of insurance shall provide, or be construed to provide, any duty to defend, as defined in subdivision (c), any claim in any . . . proceeding brought pursuant to Chapter 5 (commencing with Section 17200) of Part 2 of, or Chapter 1 (commencing with Section 17500) of Part 3 of, Division 7 of the Business and Professions Code in which the recovery of a fine, penalty, or restitution is sought by the Attorney General, any district attorney, any city prosecutor, or any county counsel, notwithstanding whether the exclusion or exception regarding the duty to defend this type of claim is expressly stated in the policy." (See generally Korea Supply Company v. Lockheed Martin Corporation et al. (2003) 29 Cal.4th 1134.)
In accordance with these limitations, the prayers of the complaints seek declaratory and injunctive relief, and abatement of the alleged public nuisance. We agree with Admiral that there is no duty to defend these causes of action because there is no insurable claim for damages alleged in these causes of action.
Although appellants' contention is not clear, their secondary argument appears to be based on their contention that neither the trial court nor this court are bound by the causes of action alleged but rather we should find a potential for coverage if the facts alleged in the complaint support any possible claim for damages covered by the policy. In support of this argument, appellants rely on Vandenberg v. Superior Court (1999) 21 Cal.4th 815. In that case, although contractual claims were submitted to arbitration, our Supreme Court held that "the coverage phrase `legally obligated to pay as damages,' as used in a CGL insurance policy, may provide an insured defendant with coverage for losses pleaded as contractual damages." ( Id. at pp. 824-825.) The court stated: "Coverage under a CGL insurance policy is not based upon the fortuity of the form of action chosen by the injured party. Thus, as the Court of Appeal stated, determination of coverage must be made individually by considering `the nature of [the] property, the injury, and the risk that caused the injury, in light of the particular provisions of each applicable insurance policy.'" ( Id. at p. 838.)
The court cited AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807: "[C]ourts must focus on the nature of the risk and the injury, in light of the policy provisions, to make that [coverage] determination. In AIU, for example, in rejecting a `form of remedy' approach to a determination of coverage, we focused on the nature of the injury and the specific policy language to decide whether there was coverage under the general liability policy for cleanup and other response costs under the Comprehensive Environmental Response, Compensation and Liability Act . . . and related state and federal laws. [Citations.] [¶] Insurance treatises concur with this approach. `[W]hether a particular claim falls within the coverage afforded by a liability policy is not affected by the form of the legal proceeding. Accordingly, the legal theory asserted by the claimant is immaterial to the determination of whether the risk is covered.' [Citation.]" ( Vandenberg v. Superior Court, supra, 21 Cal.4th 815, 840-841.)
While we agree with appellants that we are not limited to the causes of action asserted by plaintiffs, the fact remains that none of the underlying actions seek damages for a loss which is within the comprehensive general liability coverage, i.e., a monetary loss due to bodily injury or property damage. The policies require a claim for damages and do not provide coverage for claims for declaratory and injunctive relief because such coverage is not permitted by law. (Ins. Code, § 533.5.) Although it is conceivable, as the trial court found, that a cause of action for damages due to negligence could have been alleged, it was not. We agree with the trial court that it is mere speculation that plaintiffs are making, or will make, a negligence claim in the underlying actions. Speculation is not enough. "An insured may not trigger the duty to defend by speculating about extraneous `facts' regarding potential liability or ways in which the third party claimant might amend its complaint at some future date." ( Gunderson v. Fire Ins. Exchange (1995) 37 Cal.App.4th 1106, 1114; Low v. Golden Eagle Ins. Co. (2002) 99 Cal.App.4th 109, 113.) Appellants must show a claim for damages which is potentially within the coverage of the policies by demonstrating that the underlying litigation exposes them to the possibility that they be legally obligated to pay monetary damages. ( Bullock v. Maryland Casualty Co. (2001) 85 Cal.App.4th 1435, 1442.) We agree with the trial court that they have not done so. Accordingly, there is no duty to defend the allegations made in the underlying actions by the public entities as representatives of the People.
THE COUNTY OF LOS ANGELES ACTION
Appellants focus on the County of Los Angeles action. They point out that, in addition to allegations made in a representative capacity, the county alleges, in three places, that the action is brought "on behalf of itself and the general public. . . ."
The county could sue, on its own behalf, for damages to its property. (Gov. Code, § 53069.6.) "Where the State has a property interest which has been injuriously affected by a nuisance, the State can, like any property owner, seek damages." ( Selma Pressure Treating Co. v. Osmose Wood Preserving Co., supra, 221 Cal.App.3d 1601, 1614.)
Since the county can sue on its own behalf, the issue is whether it has done so, i.e., whether it has sued for damages to its property. The only allegation in the complaint which comes close is an allegation in the public nuisance cause of action: "The presence of illegitimately possessed and used handguns in Los Angeles County proximately results in significant costs in order to enforce the law, arm the Sheriff's Department and treat the victims of handgun crime." Although these are specific allegations that the county itself has incurred costs as a result of appellants' alleged actions, they are not allegations that any physical property of the county was damaged by defendants.
Nevertheless, appellants rely on such allegations, coupled with the general prayer for "such further relief as the Court deems equitable and just," to argue that there was a potential for coverage.
With regard to the general prayer for appropriate relief, appellants cite Ludka v. Memory Magnetics International (1972) 25 Cal.App.3d 316, 323, which quotes from Thorson v. Western Development Corp. (1967) 251 Cal.App.2d 206, 213. In Thorson, a default judgment was upheld against a contention that it violated Code of Civil Procedure section 580, which states that the relief granted cannot exceed the amount demanded in the complaint. Some authority held that this rule applied to the amount stated in the prayer to the complaint. In Thorson, $10,000 was requested in the body of the complaint but the prayer only sought damages according to proof. The court therefore held: "The allegations of the complaint herein combined with the demand, contained in the prayer, for `damages according to proof' gave sufficient notice to defendant that in addition to the restitutional relief demanded, plaintiffs also requested relief in the form of monetary damages. [Citations.]" ( Id. at p. 213.) Ludka distinguishes Thorson because, in Ludka, "[n]o amount of damages is directly alleged. Such a pleading read in conjunction with the prayer does not insure adequate notice of the demands made upon defendant." ( Ludka v. Memory Magnetics International, supra, 25 Cal.App.3d 316, 323.) Notice was therefore insufficient under Code of Civil Procedure section 580. ( Ludka, at p. 322.)
The complaints here fall within the Ludka category. No specific amount of damages is mentioned in the body of the complaint or the prayer. Our case is even more extreme as there is no specific indication the county is seeking damages at all. "In a default case (where no answer is filed), relief in excess of that specifically demanded is in excess of the court's jurisdiction, irrespective of a prayer for general relief. [Citations.]" (4 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 459, pp. 555-556.) This limitation is of no consequence in a contested case because the statute provides that, in such a case, "the court may grant the plaintiff any relief consistent with the case made by the complaint and embraced within the issue." (Code Civ. Proc., § 580, subd. (a); 4 Witkin, supra, Pleading, § 458, p. 555.)
But the issue here is not notice under the default judgment statutes, but rather whether the allegations support a conclusion that there is a possibility of coverage. "`The subject matter of an action and the issues involved are determinable from the facts pleaded, rather than from the title or prayer for relief.' [Citations.]" ( Weber v. Superior Court (1945) 26 Cal.2d 144, 148.) "Under a prayer for general relief in an equitable proceeding [including a declaratory relief action], after an answer has been filed, the court may grant any relief conformable to the case made by the pleadings and the evidence although it may not be the relief asked by special prayer." ( Knox v. Wolfe (1946) 73 Cal.App.2d 494, 505.) Thus, examination of the relief requested in the prayer does not aid appellants.
The trial court inferred that the allegations that the county was suing directly were merely drafting errors. It found that any damages which might be recovered by the county were "so difficult to prove, speculative and nearly impossible to separate from costs for those services not related to any conduct which could potentially be alleged against the insured here that it would be speculative to assume it will amend its complaint to seek such damages in its own capacity."
There is no support for the trial court's inference that a drafting error occurred. Since the issue is an issue of law, and our review is de novo, we are not bound by the trial court's conclusion. ( Lomes v. Hartford Financial Services Group, Inc. (2001) 88 Cal.App.4th 127, 131.) Instead, we decline to make any such inference because our Supreme Court has instructed us to compare the allegations of the complaint to the terms of the policy to determine the potential for coverage. As noted above, we consider the facts alleged in the complaint, not the specific causes of action, and measure those facts against the terms of the policies. ( Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th 1, 19.)
We also find the second reason given by the trial court equally untenable. The fact that damages claimed are speculative or uncertain or even nonexistent does not negate the duty to defend a covered claim. As noted above, it is well established that the duty to defend extends to false or groundless claims. Even if the county's claims are meritless, a duty to defend would nevertheless be created by an action brought by the county in its own name that alleged the appellants had damaged county property. ( Selma Pressure Treating Co. v. Osmose Wood Preserving Co., supra, 221 Cal.App.3d 1601, 1614.)
Since our review is de novo, our rejection of the trial court's reasoning does not mean automatic rejection of the trial court's conclusions. Appellants' basic contention is that, because Los Angeles County has filed suit for itself, in addition to suing in a representative capacity, and because the law allows a public agency to sue to recover damages for injury to its own property, and because a general prayer for further relief was included in the prayer, there is a potential for indemnity. When considered with the principle which requires coverage in the case of ambiguity or doubt, and the principle that even meritless claims must be defended, appellants have a good argument.
However, as shown above, Los Angeles County has not made any such claim. It does not allege that any of its tangible property was damaged as a result of any actions of appellants. This is not an action to recover the costs of patching bullet holes in sheriff's cars.
"To prevail, the insured must prove the existence of a potential for coverage, while the insurer must establish the absence of any such potential. In other words, 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, supra, 6 Cal.4th 287, 300.) The factual allegations of the complaint all refer to injuries to the People generally. No award of damages is sought in the prayer. Appellants have not shown that either the factual allegations of the complaint or the extrinsic facts existing at the time the complaint was filed establish a potential for indemnity coverage under the policies.
Although it is possible that the complaints could be amended, or new complaints filed, to allege that appellants damaged plaintiffs' tangible property, such a change would allow appellants to again tender coverage to Admiral. ( Low v. Golden Eagle Ins. Co., supra, 99 Cal.App.4th 109, 114, fn. 5.) The same opportunity would arise if the public agency asserted such claims in this action at a later date. But, so far, no such allegations have been made.
In short, damages are not allowable under the representative causes of action pled by plaintiffs: "The inclusion of a prayer for such relief in the complaint was therefore an exercise in legal futility. . . . In addition, the voting rights plaintiffs did not allege in their complaints any facts which, if proven, would have entitled them to compensation for bodily injury or property damage. Assertions of potential coverage which are based entirely on speculation do not give rise to a duty to defend. [Citations.] The same is true about the conjectural possibility of a judgment for damages based upon the inherent power of a court of equity to award money damages. [Citations.] If such surmise were sufficient to impose a duty to defend upon an insurer, it would become obligated to defend all suits regardless of the policy provisions or the allegations of the relevant complaint. [Citation.]" ( Cutler-Orosi Unified School Dist. v. Tulare County School etc. Authority (1994) 31 Cal.App.4th 617, 633.)
We therefore conclude that appellants have not met their burden of showing a potential for coverage.
DISPOSITION
Since we have found that neither the allegations of the complaints nor extrinsic facts show a potential for coverage under the comprehensive general liability policies, the trial court correctly found that Admiral did not have a duty to defend appellants in the underlying actions. Accordingly, the trial court's judgments are affirmed.
We Concur:
RICHLI, J.
KING, J.