The central question was whether the phrase “occurrence not covered” in the Defense Settlement provision refers to indemnity coverage or defense coverage under the underlying Centennial policies. The distinction matters because the duty to defend is broader than the duty to indemnify and may exist even where coverage is in doubt.

The court concluded that “occurrence not covered” refers to indemnity coverage, not defense coverage. Judge Almadani reasoned that under California law, “coverage” refers to the scope of insurance—the types of injuries and claims actually indemnified—rather than the broader universe of claims for which a defense duty may arise. The court further held that any ambiguity in the term must be resolved in favor of the insured.

The court then found that the CCVA Actions allege occurrences falling within the Umbrella Policies’ broader definitions—including “shock, mental anguish and mental injury” and “invasion of the rights of privacy”—but outside the Centennial policies’ narrower coverage for “accidents” causing “bodily injury”. This coverage gap triggered Westchester’s obligation to drop down as a primary insurer.