Jack Wen-Chieh Su et al v. New Century Insurance Services Inc et al, No. 2:2012cv03894 - Document 53 (C.D. Cal. 2013)
Court Description: ORDER GRANTING DEFENDANTS MOTIONS FOR SUMMARY JUDGMENT 18 , 19 , 20 AND DENYING PLAINTIFFS MOTION FOR SUMMARY JUDGMENT 22 by Judge Dean D. Pregerson. (lc). Modified on 10/25/2013 (lc).
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Jack Wen-Chieh Su et al v. New Century Insurance Services Inc et al Doc. 53 1 2 O 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 JACK WEN-CHIEH SU and RUBY RUEY SU, 12 Plaintiff, 13 v. 14 15 16 17 18 NEW CENTURY INSURANCE SERVICES, INC.; TRAVELERS PROPERTY CASUALTY INSURANCE COMPANY OF AMERICA; THE TRAVELERS COMPANIES, INC., a corporation, Defendants. ___________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV 12-03894 DDP (SSx) ORDER GRANTING DEFENDANTS’ MOTIONS FOR SUMMARY JUDGMENT [DKT. 18, 19, 20] AND DENYING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT [DKT. 22] [Dkt. 18, 19, 20, 22] 19 20 Presently before this Court are Plaintiffs’ Motion for Summary 21 Judgment and two Motions for Summary Judgment filed by Defendants. 22 Having considered the submissions of the parties and heard oral 23 argument, the Court GRANTS Defendants’ Motions and DENIES 24 Plaintiffs’ Motion. 25 I. Background 26 A. Factual Background 27 Plaintiffs Jack Wen-Chieh Su and Ruby Ruey Su (“Plaintiffs”) 28 own a commercial property located at 928 Canada Ct., City of Dockets.Justia.com 1 Industry, CA 91784 (the “Property”). (Second Amended Complaint 2 (“SAC”) ¶ 21.) Plaintiffs purchased an “all-risk” insurance policy 3 on the Property for the period of September 1, 2010 to September 1, 4 2011 from Defendants Travelers Property Casualty Company of America 5 (“TPCCA”) and The Travelers Companies, Inc., (“TCI”) (collectively 6 “Defendants”). (Id. ¶ 15.) The policy, number I-680-7403C632-TIL- 7 10, was issued by TPCCA, through TCI. (Id.) 8 9 On June 27, 2006, Plaintiffs entered into a lease agreement for the Property with tenant BioAgri Corporation (“BioAgri”). (Id. 10 ¶ 21.) Under the terms of the lease, BioAgri was responsible for 11 the repair and maintenance of the Property. (Id. ¶ 22.) The lease 12 was to end on October 12, 2012. (Id. ¶ 21.) In February 2011, 13 however, BioAgri informed Plaintiffs that it would be moving out of 14 the Property. (Id. ¶ 23.) In March 2011, BioAgri informed 15 Plaintiffs that it would be filing for bankruptcy and would be 16 unable to make the necessary repairs to the Property required under 17 the lease. (Id. ¶ 24.) On March 21, 2011, BioAgri turned possession 18 of the Property over to Plaintiffs. (Id. ¶ 25.) 19 On March 28, 2011, Plaintiffs’ representative Tony Su 20 inspected the Property and discovered the following damage: (1) a 21 long trench dug into the floor; (2) openings in the roof, which 22 allowed water to enter the building, causing extensive water 23 damage; (3) three shower stalls installed in the lobby area; (4) a 24 raised concrete pad in the parking lot; (5) unsanitary conditions 25 and/or bio-hazardous material due to leftover chicken droppings; 26 and (6) garbage, materials, and equipment left behind in the 27 building. (Id. ¶ 26.) Plaintiffs submitted a claim to Defendants 28 regarding the damage; Defendants determined that the none of the 2 1 damage was covered under the policy. (Id. ¶¶ 27-32.) The only 2 damage still at issue in this action is the water damage to the 3 interior of the building, which was caused by the openings in the 4 roof that were not properly sealed when the climate control units 5 that BioAgri had installed were later removed. 6 Plaintiffs originally asserted that all of the damage to the 7 Property was caused by BioAgri. (Id. ¶¶ 28, 32, 34.) Plaintiffs 8 adhered to that position in their sworn interrogatory responses on 9 June 7, 2012. (Lee Decl., Exh. 5, Dkt. 18-2.) However, Plaintiffs 10 now contend that BioAgri did not remove the climate control units 11 from the roof. Plaintiffs claim that an “unidentified contractor” 12 removed the units because BioAgri told the contractor that he could 13 take them as payment for work he had previously performed for 14 BioAgri. (Chu Decl. ¶ 6, Dkt. 22-5.) 15 B. Relevant Terms of the Insurance Policy 16 Plaintiffs’ policy is an “all-risk” policy, which means that 17 any loss that is not specifically excluded is a covered loss. The 18 policy contains a limitation regarding damage to the interior of 19 the structure caused by water entering from outside, which states: 20 a. We will not pay for any loss of or damage to: 21 (1) the “interior of any building or structure” or 22 to personal property in the building or structure, 23 caused by rain, snow, sleet, ice, sand or dust, 24 whether driven by wind or not, unless: 25 (a) 26 damages by a Covered Cause of Loss to its roof 27 or walls through which the rain, snow, sleet, 28 ice, sand or dust enters. The building or structure first sustains 3 1 Two relevant covered causes of loss are vandalism and theft. Theft 2 is defined as “any act of stealing.” 3 4 The policy also contains an “entrustment exclusion,” which states: 5 1. We will not pay for loss or damage caused directly or 6 indirectly by any of the following... 7 h. Dishonest or criminal acts by ... anyone to whom 8 you entrust the property for any purpose. 9 II. Legal Standard 10 A motion for summary judgment must be granted when “the 11 pleadings, depositions, answers to interrogatories, and admissions 12 on file, together with the affidavits, if any, show that there is 13 no genuine issue as to any material fact and that the moving party 14 is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 15 56(c). 16 of informing the court of the basis for its motion and of 17 identifying those portions of the pleadings and discovery responses 18 that demonstrate the absence of a genuine issue of material fact. 19 See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). 20 A party seeking summary judgment bears the initial burden Where the moving party will have the burden of proof on an 21 issue at trial, the movant must affirmatively demonstrate that no 22 reasonable trier of fact could find other than for the moving 23 party. 24 burden of proof, however, the movant can prevail merely by pointing 25 out that there is an absence of evidence to support the nonmoving 26 party's case. 27 burden, the non-moving party must set forth, by affidavit or as 28 otherwise provided in Rule 56, “specific facts showing that On an issue as to which the nonmoving party will have the See id. If the moving party meets its initial 4 1 there is a genuine issue for trial.” Anderson v. Liberty Lobby, 2 Inc., 477 U.S. 242, 250 (1986). 3 It is not the Court's task “to scour the record in search of a 4 genuine issue of triable fact.” 5 1278 (9th Cir. 1996). Counsel have an obligation to lay out their 6 support clearly. Carmen v. San Francisco Sch. Dist., 237 F.3d 1026, 7 1031 (9th Cir. 2001). The Court “need not examine the entire file 8 for evidence establishing a genuine issue of fact, where the 9 evidence is not set forth in the opposition papers with adequate Keenan v. Allan, 91 F.3d 1275, 10 references so that it could conveniently be found.” 11 III. Discussion Id. 12 A. Unopposed Damage Claims 13 Plaintiffs do not oppose Defendants’ Motions for Summary 14 Judgment as to the following damages sustained to their property: 15 (i) the floor trench; (ii) three shower stalls in the lobby area; 16 (iii) the raised concrete pad; and (iv) the unsanitary conditions 17 resulting from leftover chicken droppings. Therefore, Defendants’ 18 Motions are GRANTED as to those unopposed damage claims. 19 B. The Climate Control Units and Interior Water Damage 20 The limitation in the policy regarding rain damage to the 21 interior of the building means that in order for the water damage 22 caused by rain entering through improperly sealed openings in the 23 roof to be covered, the damage to the Property that allowed the 24 rain to enter the building must be a covered loss. The removal of 25 the climate control units is the event that allowed the rain to 26 enter and damage the building; therefore, in order for the policy 27 to cover the damage, the removal of the units must be a covered 28 loss. 5 1 C. Simon Chu’s Declaration1 2 Plaintiffs now assert that the climate control units on the 3 ceiling were removed not by BioAgri, but by an “unidentified 4 contractor.” The only evidence Plaintiffs offer to support this 5 assertion is a declaration by Simon Chu, the broker for Plaintiffs 6 for the lease of the Property to BioAgri. Chu asserts in his 7 declaration that in March 2011, he “went to the property to check 8 on the progress of BioAgri’s removal of chicken cages from the 9 property.” (Chu Decl. ¶ 4, Dkt. 22-5.) While there, Chu claims that 10 he “spoke with a contractor who was on the site removing the 11 cages,” and that the contractor told Chu that “he had removed the 12 climate control units from the roof of the property because BioAgri 13 told him he could take the units as part of the payment for his 14 work.” (Id. ¶¶ 5-6.) 15 Chu’s report of the statement by the unidentified contractor 16 is hearsay. The contractor’s statement that BioAgri told him he 17 could remove the units is also hearsay. “[A]n affidavit’s hearsay 18 assertion that would not be admissible at trial if testified to by 19 the affiant is insufficient to create a genuine issue for trial.” 20 Patterson v. County of Oneida, N.Y., 375 F.3d 206, 219 (2d Cir. 21 2004). “[H]earsay evidence in [Rule 56] affidavits is entitled to 22 no weight.” Scosche Industries, Inc. v. Visor Gear Inc., 121 F.3d 23 675, 681 (Fed. Cir. 1997) (quoting Pan-Islamic Trade Corp. v. Exxon 24 25 26 27 28 1 Simon Chu actually submitted two declarations, one in support of Plaintiffs’ Motion and one in opposition to Defendants’ Motion. One declaration simply states that the contractor told Chu that he had removed the units as payment for the work he did for BioAgri. (Chu Decl. ¶ 6, Dkt. 36-5.) The other includes the added detail that the contractor had been told by BioAgri that he could remove the units as payment. (Chu Decl. ¶ 6, Dkt. 22-5.) 6 1 Corp., 632 F.2d 539, 556 (5th Cir. 1980)). This is because 2 affidavits must be “based on personal knowledge.” Cormier v. 3 Pennzoil Exploration & Production Co., 969 F.2d 1559, 1561 (5th 4 Cir. 1992). Therefore, the Court finds that Chu’s declaration is 5 inadmissible hearsay evidence.2 Without Chu’s declaration, 6 Plaintiffs have no evidence to contradict or call into question 7 their original assertion that BioAgri removed the units. 8 D. The Entrustment Exclusion 9 With Chu’s declaration excluded from the evidentiary record, 10 the facts, even when taken in the light most favorable to 11 Plaintiffs, indicate that BioAgri removed the climate control 12 units. Without Chu’s declaration, there is no evidence to 13 contradict Plaintiffs’ complaint and interrogatory responses, which 14 indicate that BioAgri removed the units. Therefore, there is no 15 factual dispute, looking only at the admissible evidence, as to who 16 removed the units. 17 Plaintiffs base their entire argument, both in opposition to 18 TPCCA’s motion and in support of their own motion, on the fact that 19 the removal of the units constituted vandalism or theft.3 Assuming 20 21 22 23 2 Plaintiffs assert that the statements in Chu’s declaration, though hearsay, should nevertheless be admitted under exceptions to the hearsay rule. The Court is not persuaded that any hearsay exceptions apply. 3 24 25 26 27 28 In the likely event that the acts involved here do not actually constitute vandalism or theft, Plaintiffs’ claims are excluded under the “acts or decisions” or “faulty workmanship” clauses of the contract, as BioAgri’s (or the contractor’s) removal of the units would have been, at most, a negligent act. However, as Plaintiffs have not claimed coverage under a negligence theory, but instead rely solely on the argument that the removal of the units constituted vandalism or theft, the Court does not analyze this issue, since by not opposing Defendants’ argument that these clauses would bar coverage, Plaintiffs concede that they would. 7 1 without deciding that BioAgri’s removal of the climate control 2 units constitutes either vandalism or theft, BioAgri’s action falls 3 within the “entrustment exclusion” of the policy. This exclusion 4 has been found to be unambiguous as a matter of law and 5 specifically applicable to lessees. Atlas Assurance Co. V. McCombs 6 Corp., 146 Cal. App. 3d 135, 144 (1983); Vision Financial Group v. 7 Midwest Family Mutual Ins. Co., 355 F.3d 640, 643 (7th Cir. 2004). 8 9 Vandalism and theft are both criminal acts; therefore, the entrustment exclusion applies to any such acts performed by anyone 10 to whom the property is entrusted. Even if the loss occurs after 11 the entrustment of the property has terminated, the exclusion still 12 applies so long as there is a “causal connection between the act of 13 entrustment and the resulting loss.” Bainbridge, Inc. v. Calfarm 14 Ins. Co., 2004 WL 2650892, at *6 (Cal. Ct. App. 2004); see also 15 Plaza 61 v. North River Ins. Co., 446 F. Supp. 1168, 1171 (M.D. 16 Penn. 1978). Therefore, Plaintiffs are precluded from recovering 17 for an act of vandalism or theft committed by BioAgri, to whom they 18 entrusted the Property.4 19 // 20 // 21 22 23 24 25 26 27 28 4 Even if the Court were to admit Chu’s declaration into evidence and accept as true the statement that a contractor removed the units and not BioAgri, Plaintiffs would fare no better. According to Chu’s declaration, the contractor removed the units “because BioAgri told him he could take the units.” (Chu Decl. ¶ 6, Dkt. 22-5.) Therefore, this evidence suggests that BioAgri authorized the removal of the climate control units by the contractor. BioAgri, an entity, can only act through persons authorized to act on its behalf, making the contractor’s removal of the units at the direction of BioAgri no different from BioAgri’s own removal of the units. Therefore, the entrustment exclusion would operate to bar recovery for Plaintiffs even if the Court admitted Chu’s statement. 8 1 2 IV. Conclusion For the foregoing reasons, the Court finds that there is no 3 genuine issue of material fact remaining in this case. Based on the 4 admissible evidence, no reasonable jury could conclude that 5 Plaintiffs’ losses are covered under the insurance policy; 6 therefore, Defendants have not breached their insurance contract by 7 denying coverage. Summary judgment is GRANTED in favor of 8 Defendants.5 9 10 IT IS SO ORDERED. 11 12 13 Dated: October 25, 2013 DEAN D. PREGERSON United States District Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 The Court need not reach the issues raised in TCI’s Motion for Summary Judgment regarding their liability as a parent company for the acts of TPCCA. 9
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