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Gross v. Home Insurance Co. et al (11/13/92), 841 P 2d 176
Notice: This is subject to formal
correction before publication in the Pacific
Reporter. Readers are requested to bring
typographical or other formal errors to the
attention of the Clerk of the Appellate
Courts, 303 K Street, Anchorage, Alaska
99501, in order that corrections may be made
prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
JOHN SAUER, as personal )
representative of the estate ) Supreme Court File No. S-4522
of DELORES GROSS, and MAX ) Superior Court File No.
RUSH, as Court Appointed ) 3AN-88-4633 Civil
Trustee of the Bankruptcy )
Estate of Delores Gross, )
v. ) O P I N I O N
THE HOME INDEMNITY COMPANY, )
d/b/a THE HOME INSURANCE )
COMPANY; NORTHERN ADJUSTERS; )
LARRY LARSON, LEROY DARLING, )
EDWARD HELMIC, PHILLIP PARK, )
URSULA PARK, JANE MARTIN, )
CAROL GUILLORY, CHARLES )
GUILLORY, and FRANCES SCOTT, )
Appellees. ) [No. 3898, November 13, 1992]
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage, Peter A. Michalski, Judge.
Appearances: Michael W. Flanigan,
Clark, Walther & Flanigan, Anchorage, for
Appellants. Laurence Keyes, Crosby & Sisson,
Anchorage, for Appellees The Home Indemnity
Company, Northern Adjusters and Larry Larson.
Before: Rabinowitz, Chief Justice,
Burke, Matthews, Compton and Moore, Justices.
Delores Gross and Max Rush, the trustee of Gross'
bankruptcy estate, sued Gross' insurer, the Home Indemnity
Company. The bases of the suit were Home Indemnity Company's
refusal to defend or indemnify Gross against claims of residents
of her trailer park arising from a sewage leak and Home Indemnity
Company's failure to communicate to Gross its denial of a defense
or coverage. The trial court denied Gross' motions for summary
judgment and granted summary judgment in favor of Home Indemnity
Company and the insurance adjusters. John Sauer, the personal
representative of the estate of Delores Gross, and Rush appeal.
II. FACTS AND PROCEEDINGS
In January 1983, sewage backed up at a trailer park
owned by Delores Gross.1 The sewage accumulated and froze to a
depth of several inches over a portion of the park. Some
residents of the park suffered significant hardship and property
damage as a result of the spill.
After a complaint from a resident of the park on
January 17, 1983, a health official for the Municipality of
Anchorage (MOA) investigated the matter and found sewage pouring
from pipes in the ground. On January 25, the MOA brought a
public nuisance action to enjoin violations of local health
ordinances and seeking civil penalties. Residents Carol
Guillory, Charles Guillory, and Frances Scott intervened in the
action six days later. Residents Leroy Darling, Edward Helmic,
Phillip Park, Ursula Park, Kevin Scott and Jane Martin intervened
on December 14, 1983. The MOA eventually dismissed its
complaint, leaving the residents as plaintiffs.2
At the time of the incident, the trailer park was
insured under a comprehensive general liability policy issued by
the Home Indemnity Company.3 After the spill, Gross notified her
insurance agent of the sewage problem at the trailer park. The
agent in turn notified Home Indemnity of the claim on February 4.
On the same day, Home Indemnity contacted Larry Larson, an
adjuster with Northern Adjusters, and asked him to investigate
the cause and extent of the loss and to obtain a non-waiver
agreement from Gross. Home Indemnity did not ask Larson to
provide an opinion as to coverage.
During his investigation Larson spoke with Gross4 and
her attorney and took photographs of the scene. He did not speak
with any of the residents or with MOA officials who inspected the
scene, nor did he seek Home Indemnity's approval to enlist
outside help to determine the cause of the spill. From his
investigation, Larson was unable to determine the cause of the
sewage spill, but was also unable to rule out frozen pipes as a
possible cause. On February 25, Larson prepared and sent a
report to Home Indemnity. The report included copies of MOA's
complaint, the temporary restraining order, and the first
complaint in intervention (hereinafter, the Guillory complaint).
On March 22, Home Indemnity ordered Larson to close the file on
Gross' case. Larson did so two weeks later and had no further
involvement with Gross' claim. Before concluding his
investigation, Larson proffered a non-waiver agreement to Gross
through her attorney, but it was never signed. The non-waiver
agreement did not indicate any possible basis for the denial of
coverage. Home Indemnity did not assume the defense of Gross in
the residents' suit. Although a routine audit of the file by
Home Indemnity in August 1983 indicated that a reservation of
rights letter should be sent to Gross, no such letter was ever
sent. Home Indemnity did not communicate to Gross a decision to
deny coverage until nearly five years later, when it filed its
counterclaim for declaratory relief in the present action.
The residents' suit was tried on April 10, 1986.
Neither Gross nor her attorney were present for the trial.5 A
jury awarded the residents compensatory and punitive damages, and
judgment was entered against Gross. The amount of the judgment,
including costs, fees and prejudgment interest, exceeded
In May 1987, letters of inquiry from Gross' attorney to
Home Indemnity prompted Home to review the Gross file. Home
Indemnity's review indicated that Gross "submitted property
damage claim and liability claim to Home Indemnity under policy"
and that Home Indemnity "had no contact since March 83. . . .
File was closed due to inactivity." The review also stated
"there is no coverage for this loss. Analysis to follow. . . .
Refer for coverage opinion." Still no denial of coverage or any
other information was communicated to Gross or her attorney.
On April 29, 1988, after filing for bankruptcy, Gross
and her bankruptcy trustee brought the instant action against
Home Indemnity, Northern Adjusters and Larry Larson. The
complaint alleged negligent failure to investigate, adjust,
resolve or defend against the claims of the affected residents,
and breach of contractual obligations owed to Gross either
directly or as an intended third-party beneficiary. Home
Indemnity answered and counterclaimed for declaratory relief on
the issues of its duties to defend and indemnify Gross.
Gross moved for summary judgment seeking a
determination that Home Indemnity was estopped from denying
coverage because it failed to defend Gross or notify her of a
coverage dispute. Home Indemnity countered with a cross-motion
on the estoppel issue. Gross and Home Indemnity also filed cross-
motions for summary judgment on the issue of whether the policy
afforded coverage for the residents' claims. The trial court
denied Gross' motions and granted summary judgment for Home
Indemnity, concluding that Home Indemnity was not estopped from
denying coverage and that coverage did not lie. Final judgment
was entered in favor of Home Indemnity, Larson and Northern
Gross appeals, challenging the denial of her motion for
summary judgment and the grant of summary judgment for the
Gross argues that Home Indemnity breached its duty to
defend against the residents' claims and that Home Indemnity's
failure to timely advise Gross of coverage questions should estop
Home Indemnity from denying coverage in the present action.
Thus, Gross argues, the superior court erred in denying her
summary judgment motion and in granting Home's motion.
A party is entitled to summary judgment when there is
no genuine issue of material fact and the party is entitled to
judgment as a matter of law. Alaska R. Civ. Pro. 56(c). Here,
the record developed on the parties' cross-motions for summary
judgment reveals that no genuine issues of material fact exist as
to Home Indemnity's liability. Thus we need only review the
trial court's decision that Home Indemnity, Larson and Northern
Adjusters, rather than Gross, were entitled to judgment as a
matter of law. In reviewing the lower court's resolution of a
question of law, we must adopt the rule of law which is most
persuasive in light of precedent, reason and policy. CTA v.
Active Erectors, 781 P.2d 1364 (Alaska 1989).
A. Duty to Defend
An insurer's duty to defend and its obligation to
indemnify are separate and distinct contractual elements. Afcan
v. Mutual Fire, Marine and Inland Ins. Co., 595 P.2d 638, 645
(Alaska 1979). As we stated in Afcan,
Depending upon the nature of the claim
against the insured, the insurer may have an
obligation to defend although it has no
ultimate liability under the policy. We
believe that the language of the standard
duty to defend clause creates a reasonable
expectation on the part of the insured
whenever a complaint states a cause of action
within, or potentially within, the policy
coverage. . . . Thus, even though facts
extrinsic to the pleadings may show that
there will be no ultimate liability under the
policy, if the complaint on its face alleges
facts which, standing alone, give rise to a
possible finding of liability covered by the
policy, the insured has the contractual right
to a proper defense at the expense of the
There can be little doubt that Home Indemnity breached
its duty to defend Gross in the residents' action. The
allegations contained in the Guillory complaint, filed before
Home Indemnity began its investigation, clearly alleged facts
potentially within the policy coverage. The policy obligated
Home Indemnity to pay "all sums which [Gross] shall become
legally obligated to pay as damages . . . caused by an
occurrence." The policy defines an occurrence as "an accident .
. . which results in bodily injury or property damage neither
expected nor intended from the standpoint of the insured." The
Guillory complaint alleged "gross negligence"and that the sewage
leak was caused by "clogged or frozen pipes."7 Such allegations,
if proven, would have supported recovery under a negligence
theory, which clearly falls within the coverage afforded by the
policy. The presence of other allegations in the complaint which
are not within policy coverage does not relieve Home Indemnity of
its duty to defend. See Ferguson v. Birmingham Fire Ins. Co.,
460 P.2d 342, 347 (Or. 1969) (where complaint contains counts
based upon both covered and uncovered conduct, the insurer has a
duty to defend because of allegations falling within policy
Home Indemnity argues that the policy's pollution
exclusion, which excludes coverage for damages arising from a
release of pollutants unless such release is "sudden and
accidental,"absolved Home Indemnity of any duty to defend. We
disagree. Without deciding whether the pollution exclusion is
applicable to the facts of this case, the discharge of the sewage
was at least potentially "sudden and accidental,"as that phrase
has been interpreted by other courts.8 The damages suffered by
the residents were at least potentially outside the scope of the
pollution exclusion and thus potentially within policy coverage,
necessitating a duty to defend.
Home Indemnity cannot escape its contractual duty to
defend its insured merely by choosing to accept a version of the
facts or an interpretation of the policy which it finds most
favorable. Because the Guillory complaint alleges a claim
potentially within the policy coverage, Home Indemnity was
precluded as a matter of law from looking to extrinsic facts to
escape its duty to defend Gross against the residents' claims.
See Afcan, 595 P.2d at 645.
Gross contends that the trial court erroneously denied
her motion for summary judgment on the estoppel issue. Gross
argues that, because Home Indemnity breached its duty to defend
and failed to timely notify her that it was denying a defense and
coverage, Home Indemnity is estopped from contesting coverage in
this action. We agree.
An insurer is required to give the insured "such notice
of its intention to deny liability and of its refusal to defend
as will give the insured a reasonable time to protect himself."
7C John A. Appleman, Insurance Law and Practice 4686 (1979).
Such notice must not only be prompt, but it must "provide a
reasonable explanation of the basis in the insurance policy in
relation to the facts or applicable law for denial of a claim."
AS 21.36.125. Prompt notice of the basis for the denial of
coverage or a defense is necessary to avoid prejudice to the
insured which may result from delays in the insured undertaking
its own defense or from delays in gathering evidence essential to
successfully challenge the denial of coverage or a defense.
Home Indemnity points to investigator Larson's tender
of the non-waiver agreement to Gross as the only evidence of its
communication to Gross of a coverage question. It concedes that
"[o]therwise, the Home's decision that the claims were not
covered was not communicated to Gross, nor did the Home undertake
her defense in [the residents' action]." The form non-waiver
agreement tendered by Home Indemnity through Larson did not state
that Home Indemnity was denying coverage or a defense, nor did it
specify any basis for a denial of a defense or coverage. The
mere tender of such a non-waiver agreement is insufficient to
meet an insurer's obligation to the insured when the insurer
decides to deny coverage or a defense. The trial court correctly
stated that the first time Home Indemnity informed Gross in
writing that it was asserting a coverage defense was in its July
1988 counterclaim for declaratory judgment on the issue of
coverage, over five years after Gross filed her claim with Home
Indemnity!9 Home Indemnity not only breached its duty to defend,
but it failed to promptly communicate its denial of a defense and
coverage or any basis for such denial.
Where an insurer is in doubt as to either its duty to
defend or as to the scope of coverage, its legal options and
obligations are, for the most part, clear. First, it may provide
a defense unconditionally. In such case, the doctrines of waiver
and estoppel ordinarily preclude the insurance company from later
contesting coverage. 7C John A. Appleman, Insurance Law and
Practice 4692 (1979). Second, with the consent of the insured,
the insurance company may conduct the defense conditionally under
either a non-waiver agreement with its insured or pursuant to a
reservation of rights letter. See, e.g., Afcan, 595 P.2d at 642;
Aetna Casualty & Sur. Co. v. Prestige Casualty Co., 553 N.E.2d
39, 41-42 (Ill. App. 1990). Under either a non-waiver agreement
or a reservation of rights letter the insurance company can
preserve its option to later disclaim coverage after conducting
the defense. See Afcan at 642, 644-47.
However, if the insured does not consent to a non-
waiver agreement, or to a defense under a reservation of rights,
then the insurance company must choose whether it wishes to
defend unconditionally or pursue other options. One such option
is to permit the insured to exercise its right to reject the
defense offered by the insurer and to obtain substitute counsel
at the insurer's expense. In the event the defense is conducted
by substitute counsel, the insurance company retains the right to
later contest policy coverage. See Continental Ins. Co. v.
Bayless & Roberts, Inc., 608 P.2d 281, 291 n.17 (Alaska 1980).
A second option available to the insurance company is
to refuse to defend or to withdraw from the defense. If the case
involves a so-called policy defense -- such as failure of the
insured to give notice or to cooperate -- the insurance company
preserves its right to litigate such defenses when this option is
exercised. Continental, 608 P.2d at 291. When the case involves
a so-called coverage question -- typically where one or more of
the claims is excluded from coverage under the policy -- the
consequences of withdrawal on the part of the insurer are more
complex. This is because the insurer has a separate contractual
duty to defend which may apply even though the insurance company
has no ultimate liability under the policy. Afcan, 595 P.2d at
645.10 We indicated in Afcan that, in a case where the
allegations in the complaint include grounds for relief both
within and beyond policy coverage, an insurance company which
withdraws its defense in breach of its obligation to defend is
liable for the reasonable costs and attorney's fees incurred by
the insured in the defense of the claim, but it is not barred
from attempting to show in a subsequent action the loss is not
within policy coverage. In Afcan, the insurance company clearly
communicated its decision to withdraw from the defense of the
case and explained to the insured the basis of its decision.
Further, the loss in Afcan was determined by settlement, not
after a trial. Although one may legitimately question whether
this limitation is warranted, there is no occasion to do so in
this case as the liability of Gross was not established by
settlement, but by a jury verdict.
Where, as here, the insurer does not communicate its
decision to withdraw or explain the basis for its decision but
simply denies coverage, it should be precluded from later arguing
that coverage under the policy did not exist. See Bellefonte
Ins. Co. v. Wayson, 489 F. Supp. 58 (D. Alaska 1980)
(interpreting Alaska law, court held insurer who breached duty to
defend without responding to claim of insured was precluded from
contesting coverage in subsequent action on policy and was liable
for entire amount of jury verdict against insured, including
punitive damages. "It is not for [the insurer] to contest
coverage at this late date when its breach forced the [insured]
to take up its own defense and incur liability in the process.").
As noted above, an insurance company is under a duty to notify
its insured of its intention to deny liability and to state the
grounds therefore. Supra, p. 13. Such notice is essential so
that the insured may promptly undertake its own defense and
evaluate whether to contest the insurance company's decision to
The thrust of Home Indemnity's argument is that it
should be permitted to abandon its insured in the face of a
lawsuit over potentially covered claims and later, in the
insured's action on the policy, to benefit from any factual or
legal issues determined in the earlier litigation. This argument
borders on audacity. See Murray v. Feight, 741 P.2d 1148, 1153
(Alaska 1987) (non-mutual collateral estoppel not allowed where
unusual or exceptional circumstances of prior adjudication would
make it unfair to allow a person who was not a party to the first
judgment to invoke res judicata or collateral estoppel). We
hold, as a matter of law, that Home Indemnity may not contest
coverage in Gross' action on the policy, and that it is liable
for the entire amount of the judgment entered against Gross, as
well as costs and attorney's fees incurred in the defense of the
This holding is mandated on the authority of Theodore
v. Zurich Gen. Accident & Liab. Ins. Co., 364 P.2d 51 (Alaska
1961). In Theodore we stated in part:
Since Zurich had the obligation to
defend and refused to do so, the judgment
became binding against it both as to the
extent and existence of liability.
Therefore, it did not have the right, when
appellants brought this suit on the judgment,
to show that the death of Arthur Theodore was
not caused by the employee's liability
section of the policy.
Id. at 56. Thus, an insurance company which wrongfully refuses
to defend is liable for the judgment which ensues even though the
facts may ultimately demonstrate that no indemnity is due. E.g.,
St. Paul Fire & Marine Ins. Co. v. Vigilant Ins. Co., 919 F.2d
235, 240 (4th Cir. 1990); Schurgast v. Schumann, 242 A.2d 695
(Conn. 1968); Sims v. Illinois Nat'l Casualty Co., 193 N.E.2d
123, 127-30 (Ill. App. 1963). The trial court erred in denying
Gross' motion for summary judgment against Home Indemnity11 and in
granting summary judgment for Home Indemnity.12
C. Summary Judgment for Adjusters
Gross argues that the superior court erred in granting
summary judgment for Northern Adjusters and Larson. We agree.
Gross' complaint alleges that Home Indemnity and the
adjusters negligently failed to "investigate, adjust, resolve or
defend"the residents' claims. In Continental Ins., 608 P.2d at
287-88, we recognized that an insurance adjuster owes a duty of
care to the insured which is independent of any contractual
obligation arising out of the insurance policy, and that a breach
of this duty is actionable. Since there was no motion before the
court concerning the adjusters' liability, separate from that of
Home Indemnity, and the record does not otherwise demonstrate the
adjusters' right to summary judgment, the grant of summary
judgment for the adjusters was improper.
REVERSED and REMANDED for entry of judgment against
Home Indemnity and for further proceedings in accordance with
1. The cause of the spill has never been determined, but
several theories exist. Home Indemnity's case is predicated on
the theory that the spill was caused by a general deterioration
of the sewage system which Gross knew about but ignored. At the
time of the spill, Gross informed Home Indemnity's adjuster that
the lines were sabotaged by tenants putting rocks or mop heads in
the sewer lines. In her briefs on appeal, Gross relies on the
theory that the pipes froze unexpectedly during a cold snap.
Official records of the National Oceanic and Atmospheric
Administration (NOAA) show that, in the four days prior to
January 11, 1983, the average daily temperature ranged from -3 to
-10 degrees Fahrenheit, which was from 14 to 21 degrees below
normal. At her deposition, Gross theorized that the problem
arose from freezing in the sewer lines connecting the trailers to
the park sewage system and for which the tenants themselves had
responsibility. A resolution of this factual issue is not
necessary to our decision.
2. On January 26, 1983, the MOA and Gross stipulated to the
entry of a temporary restraining order requiring a cut-off of
water supply to the affected area, relocation of the affected
trailers, cleanup of the sewage, and disinfecting of contaminated
areas. MOA dismissed its complaint in June 1985, after a plan
was developed which required Gross to pay for the cleanup and
disposal of the sewage.
3. The policy, issued by Home Indemnity to Gross on June
21, 1982, provided that
[t]he company will pay on behalf of the
Insured all sums which the Insured shall
become legally obligated to pay as damages
because of bodily injury or property damage
to which this insurance applies, caused by an
occurrence, and the company shall have the
right and duty to defend any such suit
against the Insured seeking damages on
account of such bodily injury or property
damage . . . .
An "occurrence"is defined as
an accident, including continuous or
repeated exposure to conditions, which
results in bodily injury or property damage
neither expected nor intended from the
standpoint of the Insured . . . .
Under exclusion (f) of the policy, no coverage is
bodily injury or property damage arising
out of the discharge, dispersal, release, or
escape of smoke, vapors, soot, fumes, acids,
alkalis, toxic chemicals, liquids or gases,
waste materials or other irritants,
contaminants or pollutants into or upon land,
the atmosphere or any water course or body of
water; but this exclusion does not apply if
such discharge, dispersal, release, or escape
is sudden and accidental . . . .
4. Gross claimed Larson told her that "he would take care
of and resolve the claims"and that Home Indemnity "would take
care of everything."
5. Gross claims that the trial of the residents' action was
rescheduled from April 14 to April 10, 1986 without her
knowledge. Gross' briefs on appeal raise several questions
regarding the validity of the verdict in the residents' action.
However, because there was no appeal from that action, we need
not address these issues.
6. After Gross' death, John Sauer, as representative of the
estate of Delores Gross, was substituted as plaintiff. However,
we will refer to the plaintiff as "Gross."
7. The second residents' complaint, filed nearly a year
later, contained similar allegations and may have given rise to a
duty to defend. The MOA's complaint may also have given rise to
a duty to defend. It alleged violations of various provisions of
the Anchorage Municipal Code and the Alaska Administrative Code.
Such violations could potentially result from unexpected or
unintended activity, thus requiring Home Indemnity to defend
Gross in the action. However, because we conclude that the
Guillory complaint gave rise to a duty to defend, we need not
decide whether the other complaints gave rise to such a duty.
8. We have never had occasion to interpret the standard
language of the pollution exclusion, nor do we deem it necessary
to do so now. However, many other courts have done so. See
generally William B. Johnson, Construction and Application of
Pollution Exclusion Clause in Liability Insurance Policy, 39
A.L.R.4th 1047 (1985); 12 George B. Couch, Couch on Insurance
44A:122 (Mark S. Rhodes ed., 2d rev. ed. 1982); 7A John A.
Appleman and Jean Appleman, Insurance Law and Practice 4499.05
(Stephen L. Liebo ed., Supp. 1991).
Most courts which have interpreted the pollution
exclusion consider the phrase "sudden and accidental" to be
ambiguous and thus construe it against the insurer to mean
"unexpected or unintended." Hecla Mining Co. v. New Hampshire
Ins. Co., 811 P.2d 1083, 1090-92 (Colo. 1991); Jackson Township
Mun. Utils. Auth. v. Hartford Accident & Indem. Co., 451 A.2d
990, 994 (N.J. Super. 1982). But see United States Fidelity &
Guar. Co. v. Star Fire Coals, Inc., 856 F.2d 31, 34 (6th Cir.
1988) ("sudden and accidental"is clear and plain language which
"only a lawyer's ingenuity could make ambiguous"). As the
Supreme Court of Georgia noted
it is, indeed, difficult, to think of
"sudden" without a temporal connotation: a
sudden flash, a sudden burst of speed, a
sudden bang. But, on reflection one realizes
that, even in its popular usage, "sudden"
does not usually describe the duration of the
event, but rather its unexpectedness: a
sudden storm, a sudden turn in the road,
sudden death. Even when used to describe the
onset of an event, the word has an elastic
temporal connotation that varies with
expectations: Suddenly, its spring.
Claussen v. Aetna Casualty & Surety Co., 380 S.E.2d 686, 688 (Ga.
1989). A discharge of sewage over several days or a few weeks,
as occurred in the present case, can easily be seen as "sudden"
when compared to the seven or eight years of coal dust discharge
that occurred in Star Fire Coals, 856 F.2d at 35, but may not be
considered sudden when compared to an instantaneous spill.
Some cases say that the pollution exclusion "was solely
meant to deprive active polluters of coverage." See, e.g.,
United Pacific Ins. v. Van's Westlake Union, 664 P.2d 1262, 1266
(Wash. App. 1983) (quoting Niagra Cy. v. Utica Mut. Ins. Co., 427
N.Y.S.2d 171 (N.Y. Sup. Ct. 1980)). See also Star Fire Coals,
856 F.2d at 35 ("such pollution exclusion clauses apply to the
release of wastes and pollutants taking place on a regular basis
or in the ordinary course of business"). This interpretation is
lent further support by the fact that new pollution exclusion
language was drafted in 1985 which eliminated the "sudden and
accidental" language and "shifts the emphasis to industrial
sites." 1 W. Freedman, Richards on the Law of Insurance 5:2[d]
(6th ed. Supp. 1991). Though we do not decide this issue, this
interpretation would preclude application of the pollution
exclusion to Gross as a matter of law.
9. The record does not support the trial court's finding
that Home Indemnity informed Gross' attorney that it was denying
coverage and a defense.
10. The duty to defend arises "whenever a complaint states a
cause of action within, or potentially within, the policy
coverage." Afcan, 595 P.2d at 645. See also National Indemnity
Co. v. Flesher, 469 P.2d 360, 366 (Alaska 1970).
11. Because Gross' summary judgment motion on the estoppel
issue was directed only against Home and not against Northern
Adjusters and Larson, and because the adjusters were not parties
to the insurance contract, see Egan v. Mutual of Omaha Ins. Co.,
598 P.2d 452, 460 (Cal. 1979), this portion of our opinion does
not apply to the adjusters.
12. Because we conclude that Home is barred from contesting
coverage, we need not address the issue of whether the policy
provided coverage for the claims of the residents.