No Extrinsic Evidence Allowed Where Policy Language is Unambiguous

The United States District Court for the Northern District of California, applying California law, has held that, where the language of a reinstatement of limits endorsement is unambiguous, extrinsic evidence to show a contrary intent of the parties cannot be introduced to contradict the policy’s plain language. Mayer Hoffman McCann P.C. v. Camico Mutual Ins. Co., 2016 WL 631946 (N.D. Cal. Feb. 17, 2016).

The insurer issued a professional liability policy providing $5 million in coverage as part of a $25 million coverage tower. After exhausting the entire tower, the insured sought coverage under a reinstatement endorsement of the primary policy, which provided an additional $5 million in coverage after exhaustion of the coverage tower, provided that “the reinstated Limit of Liability-Policy Aggregate shall not apply to any Claim for which Claim Expenses and/or Damages have been or are paid in whole or in part by the Policy’s original Limit of Liability-Policy Aggregate.” The insurer denied coverage under the endorsement because it had previously provided coverage under the original limit of liability for the same claim. The insured sought summary judgment for coverage under the endorsement and for reformation, arguing that, despite the plain language of the endorsement, extrinsic evidence demonstrated that the parties had intended for the endorsement to provide an additional $5 million in coverage regardless whether the insurer had already provided coverage for the claim.

The court denied the insured’s motion for summary judgment, holding that coverage under the reinstatement endorsement was unavailable under the clear terms of the endorsement. The court concluded that the reinstatement provision was “not reasonably susceptible” to the insured’s interpretation that coverage was available regardless of prior coverage for the claim because such an interpretation was “directly contrary to the terms of the Reinstatement Endorsement.” Because the policy language of the endorsement was unambiguous and not “reasonably susceptible” to the insured’s interpretation, extrinsic evidence to demonstrate the parties’ contrary intent could not be introduced to contradict the policy terms.