PROBUILDERS SPECIALTY INSURANCE COMPANY, RRG, a Washington DC corporation v. YARBROUGH PLASTERING, INC., a California corporation; RICKY LEE YARBROUGH, an individual

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PROBUILDERS SPECIALTY
INSURANCE COMPANY, RRG, a
Washington DC corporation,
Plaintiff-Appellant,
v.
YARBROUGH PLASTERING, INC., a
California corporation; RICKY LEE
YARBROUGH, an individual,
Defendants-Appellees.
and
DIBUDUO & DEFENDIS INSURANCE
BROKERS, LLC, a California limited
liability company,
Counter-defendant,
No. 16-16952
D.C. No. 1:15-cv-01811-JLT
MEMORANDUM*
PROBUILDERS SPECIALTY
INSURANCE COMPANY, RRG, a
Washington DC corporation,
Plaintiff-counter-
defendant-Appellant,
No. 16-17141
D.C. No. 1:15-cv-01811-JLT
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
FILED
JUN 25 2018
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

-- 1 of 5 --

2 16-16952
and
DIBUDUO & DEFENDIS INSURANCE
BROKERS, LLC, a California limited
liability company,
Counter-defendant,
v.
YARBROUGH PLASTERING, INC., a
California corporation and RICKY LEE
YARBROUGH, an individual,
Defendants-counter-
claimants-Appellees.
Appeal from the United States District Court
for the Eastern District of California
Jennifer L. Thurston, Magistrate Judge, Presiding
Argued and Submitted June 11, 2018
San Francisco, California
Before: SILER,** PAEZ, and IKUTA, Circuit Judges.
ProBuilders Specialty Insurance Company appeals the district court’s grant
of summary judgment in favor of Yarbrough Plastering, Inc., and its owner, Ricky
Lee Yarbrough. Beginning in 2003, ProBuilders issued five insurance policies to
Yarbrough, a drywall and stucco contractor. The policies covered, among other
** The Honorable Eugene E. Siler, United States Circuit Judge for the
U.S. Court of Appeals for the Sixth Circuit, sitting by designation.

-- 2 of 5 --

3 16-16952
things, claims for indemnity made against Yarbrough. The policies also required
that Yarbrough pay a separate deductible for “each and every claim . . . irrespective
of the number of claims which may be joined in any one suit.”
During the policy periods, Lenox Homes hired Yarbrough to perform stucco
and drywall work on several large residential developments in Bakersfield,
California. Lenox paid Yarbrough at least $6,000 for its work on each home.
Eventually, 636 homeowners filed three separate lawsuits against Lenox in state
court, alleging a litany of construction defects, including defects in the stucco
work. By way of three cross-complaints for indemnity, Lenox impleaded its
subcontractors, including Yarbrough.
Yarbrough tendered the cross-complaints to ProBuilders, which eventually
settled the claims against Yarbrough for $1.4 million—about $2,000 per home.
ProBuilders then filed this declaratory judgment action, seeking reimbursement of
the entire settlement amount from Yarbrough. ProBuilders alleges that, under the
“per-claim” deductible policies, Yarbrough owes a separate deductible for each of
the 636 homes at issue in the three homeowners’ suits. Because the $2,000 per-
home settlement falls below the deductible—either $4,000 or $10,000, depending
on the applicable policy—ProBuilders says Yarbrough is obligated to reimburse it
for the entire $1.4 million settlement.

-- 3 of 5 --

4 16-16952
We agree with Yarbrough and the district court that only three deductibles
are due—one corresponding to each of ProBuilders’ cross-complaints for
indemnity. The policies specify that a separate deductible is due for each claim
and contemplate that multiple claims can be joined in a suit. However, the policies
do not specify whether, when an indemnity claim is made against the insured, the
operative “claim” is the homeowner's claim against the general contractor or the
general contractor's claim against the subcontractor. Both constructions are
reasonable and are supported by the policy language. The policies are therefore
ambiguous on this point. See In re K F Dairies, Inc. & Affiliates, 224 F.3d 922,
926 (9th Cir. 2000) (citing Bay Cities Paving & Grading, Inc. v. Lawyers’ Mut.
Ins. Co., 855 P.2d 1263, 1271 (Cal. 1993)).
When confronted with an ambiguous policy provision, courts applying
California law must resolve the ambiguity “by looking to the expectations of a
reasonable insured”; if ambiguity still remains, courts then construe the policy
against the insurer. See id. (citing Bay Cities, 855 P.2d at 1276 (Kennard, J.
concurring); AIU Ins. Co. v. Superior Ct. of Santa Clara Cty., 799 P.2d 1253, 1264
(Cal. 1990)). Here, the district court correctly concluded that, in the specific
scenario where Yarbrough was sued only by Lenox for indemnity, it was not
unreasonable for Yarbrough to believe that only three deductibles would be due.
Although the homeowners made 636 claims against Lenox, Lenox made only three

-- 4 of 5 --

5 16-16952
claims against Yarbrough. Nor is it of any consequence, as ProBuilders suggests,
that Yarbrough would be obligated to pay 636 deductibles if the homeowners had
sued Yarbrough directly. Under California law, “[t]he proper question is whether
the provision or word is ambiguous in the context of this policy and the
circumstances of this case.” E.M.M.I. Inc. v. Zurich Am. Ins. Co., 84 P.3d 385, 389
(Cal. 2004) (citation and brackets omitted); see also Clarendon Am. Ins. Co. v. N.
Am. Capacity Ins. Co., 112 Cal. Rptr. 3d 339, 353 (Ct. App. 2010).
AFFIRMED.

-- 5 of 5 --