Assurance Company of America et al v. Lexington Ins. Co. et al, No. 2:2011cv02928 - Document 25 (E.D. Cal. 2012)
Court Description: ORDER granting 16 Plaintiffs' Motion for Partial Summary Judgment, signed by Judge John A. Mendez on 11/19/12. (Kastilahn, A)
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Assurance Company of America et al v. Lexington Ins. Co. et al Doc. 25 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 12 ASSURANCE COMPANY OF AMERICA and MARYLAND CASUALTY COMPANY, 13 Plaintiffs, 14 15 16 17 v. No. 2:11-cv-02928 JAM JFM ORDER GRANTING PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT LEXINGTON INSURANCE COMPANY; NORTH AMERICAN SPECIALTY INSURANCE COMPANY; and DOES 1-10, Defendants. 18 This matter is before the Court on Plaintiffs’ Assurance 19 20 Company of America and Maryland Casualty Company’s (collectively 21 “Plaintiffs”) Motion for Partial Summary Judgment (Doc. #16). 22 Defendant Lexington Insurance Company (“Defendant”) opposes the 23 motion (Doc. #20) and Plaintiffs replied (Doc. #21).1 24 following reasons, Plaintiffs’ motion is granted. For the 25 26 27 28 1 This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled for October 17, 2012. 1 Dockets.Justia.com 1 I. 2 PROCEDURAL BACKGROUND Plaintiffs originally filed this action August 8, 2011, in 3 Sacramento County Superior Court against Defendant and North 4 American Specialty Insurance Company (“NAC”) (Doc. #2). 5 Defendants removed the case on November 18, 2011. 6 September 19, 2012, Plaintiffs filed the instant motion for 7 partial summary judgment on the issue of whether Defendant had a 8 duty to defend its named insured, Criner Construction Company 9 (“Criner”), and its additional insured, Swinerton Builders, Inc. Id. On 10 fka Swinerton & Walberg Co. (“Swinerton”), in the underlying 11 action (Doc. #16). 12 with prejudice (Doc. #17), leaving Lexington as the sole 13 Defendant in this case. On September 26, 2012, NAC was dismissed 14 15 II. 16 FACTUAL BACKGROUND On or about February 7, 2005, Sacramento Hotel Partners, 17 LLC, filed the underlying action against Swinerton alleging 18 construction defects at the Embassy Suite Hotel in Sacramento, 19 California. 20 (“PSUF”) at ¶ 1.2 21 filed in the underlying action, Sacramento Hotel Partners alleged Pl.’s Statement of Undisputed Facts (Doc. #15), In the “Amended Final Statement of Claims” 22 23 24 25 26 27 28 2 Plaintiffs seek judicial notice of the complaint and the First Amended Cross-Complaint filed in the underlying action, Sacramento Hotel Partners, LLC v. Swinerton Builders, Inc. fka Swinerton & Walberg Co, Sacramento County Superior Court Action No. 05 AS 00595 (Doc. #16). The filings are the proper subject of judicial notice because under Federal Rules of Evidence Rule 201, a court may take judicial notice of “matters of public record.” Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001) (citation omitted). 2 1 among other things, “misaligned doors.” 2 Id. at ¶ 2. Criner was a subcontractor involved in the project hired by 3 Swinerton, the general contractor, to install doors and hardware. 4 Id. at ¶ 2. 5 Criner included a subcontract indemnity clause. 6 Swinerton tendered its defense to Criner and Criner’s insurance 7 broker through letters dated July 14, 2006. 8 9 The subcontract agreement between Swinerton and Id. at ¶ 2. Id. at ¶¶ 6, 7. On or about November 19, 2007, Swinerton filed a First Amended Cross-Complaint (“FACC”), referencing Criner in the Tenth 10 Cause of Action for Declaratory Relief asking the court in the 11 underlying action to find that the subcontract agreement’s 12 indemnity clause obligated Criner to provide defense and 13 indemnity to Swinerton. 14 Id. at ¶ 5. Plaintiffs agreed to and defended Criner, and shared in the 15 defense of Swinerton as an additional insured. 16 As mentioned above, Plaintiffs now seek contribution from 17 Defendant for the cost of defending and indemnifying Criner and 18 Swinerton in the underlying lawsuit. 19 Id. at ¶¶ 11, 12. A. Tender History 20 On December 11, 2008, Plaintiffs sent a letter to Defendant, 21 among others, requesting all of Criner’s insurers to agree to 22 defend and indemnify Criner. 23 Plaintiffs sent follow-up letters on February 10, 2009, and 24 February 21, 2009. 25 received from Defendant. 26 Defendant through a letter dated November 20, 2008. 27 Defendant acknowledged receipt of this letter on November 26, 28 2008. Id. Id. Id. at ¶ 8. Receiving no response, No response to these letters was Plaintiffs tendered directly to Id. at ¶ 9. No coverage position letter was ever issued by 3 1 Defendant. 2 B. Insurance Policy 3 Defendant issued to Criner policy number 11143601, effective 4 August 9, 2004 through August 9, 2005. 5 provides the following insurance agreement: 6 7 8 Id. at ¶ 13. The policy We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. 9 10 11 12 “Property damage” is defined as follows: a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or 13 14 15 16 b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the “occurrence” that caused it. The insurance policy also has the following exclusions: 17 18 19 20 21 22 23 24 25 26 27 28 k. Damage to Your Product “Property damage” to “your product” arising out of it or any part of it. l. Damage to Your Work “Property damage” to “your work” arising out of it or any part of it and included in the “product-completed operations hazard.” This exclusion does not apply if the damaged work or the work out which the damage arises was performed on your behalf by a subcontractor. m. Damage to Impaired Property or Property Not Physically Injured “Property damage” to “impaired property” or property that has not been physically injured arising out of: (1) A defect, deficiency, inadequacy or 4 1 dangerous condition in “your product” or “your work”; or . . . . 2 III. OPINION 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 A. Legal Standard Summary judgment is proper “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). The purpose of summary judgment “is to isolate and dispose of factually unsupported claims or defenses.” Celotex v. Catrett, 477 U.S. 317, 323-324 (1986). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). If the moving party meets its burden, the burden of production then shifts so that “the non-moving party must set forth, by affidavit or as otherwise provided in Rule 56, ‘specific facts showing that there is a genuine issue for trial.’” T.W. Electrical Services, Inc. v. Pacific Electric Contractors Ass’n, 809 F.2d 626, 630 (9th Cir. 1987) (quoting Fed. R. Civ. P. 56(e)). The Court must view the facts and draw inferences in the manner most favorable to the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962). “[M]ere disagreement or bald assertion that a genuine issue of material fact exists will not preclude the grant of summary judgment”. Harper v. Wallingford, 877 F. 2d 728, 731 (9th Cir. 1987). The mere existence of a scintilla of evidence in support of 5 1 the non-moving party’s position is insufficient: “There must be 2 evidence on which the jury could reasonably find for [the non- 3 moving party].” 4 applies to either a defendant’s or plaintiff’s motion for 5 summary judgment the same standard as for a motion for directed 6 verdict, which is “whether the evidence presents a sufficient 7 disagreement to require submission to a jury or whether it is so 8 one-sided that one party must prevail as a matter of law.” 9 10 B. Anderson, 477 U.S. at 252. This Court thus Id. Evidentiary Objections Defendant’s evidentiary objections (Doc. #20-4) to portions 11 of Shira Jefferson’s Declaration (Doc. #16-7) and two exhibits 12 attached thereto, filed in support of Plaintiffs’ motion are 13 overruled. 14 respect to the evidence in question. 15 declaration states that she was responsible for handling the 16 claims files established by Plaintiffs in connection with the 17 claims against Criner and Swinerton and as part of her 18 responsibility, she has personal knowledge of the facts in her 19 declaration and the attached exhibits. 20 Jefferson, Doc. #16 (“Jefferson Dec.”) at ¶ 1. 21 the objection is not based on evidence’s authenticity, a court 22 may still consider the evidence. 23 California, 433 F. Supp. 2d 1110, 1120-21 (E.D. Cal. 2006). 24 Finally, Defendant’s objections based on when Defendant received 25 the evidence are relevance objections and therefore redundant. 26 Id. at 1119 (“A court can award summary judgment only when there 27 is no genuine dispute of material fact. It cannot rely on 28 irrelevant facts, and thus relevance objections are redundant.”) Plaintiffs have provided sufficient foundation with Shira Jefferson in her Declaration of Shira Moreover, when Burch v. Regents of Univ. of 6 1 C. 2 3 Discussion 1. Duty to Defend Plaintiffs claim that Defendant had a duty to defend Criner 4 and Swinerton because the complaint, along with extrinsic 5 evidence, created a potential for coverage. 6 that no duty to defend existed because there are no facts to 7 show that Criner could have been held liable in the underlying 8 action for consequential property damage. 9 Defendant has only raised disputed facts relevant to coverage 10 11 Defendant argues Plaintiffs reply that and that such facts create, not eliminate, a duty to defend. To seek equitable contribution from a coinsurer, the party 12 claiming coverage “must prove the existence of a potential for 13 coverage” under the policy terms. 14 v. Super. Ct., 6 Cal.4th 287, 300 (1993). 15 potentially covered raise the nonparticipating coinsurer’s duty 16 to defend. 17 878 n.2 (2006). 18 duty to defend, courts compare the allegations of the complaint 19 and extrinsic evidence with the terms of the policy. 20 Cas. Co. v. Nat’l Am. Ins. Co. of Cal., 48 Cal.App.4th 1822, 21 1829 (1996). 22 Montrose Chem. Corp. of Cal. Thus, claims that are Safeco Ins. Co. v. Super. Ct., 140 Cal.App.4th 874, In determining whether the coinsurer owes a Maryland Once the party claiming coverage shows a potential for 23 coverage under the coinsurer’s policy, the coinsurer must 24 conclusively prove with undisputed evidence that no coverage 25 existed under the policy. 26 triable issue of material fact will not defeat summary judgment 27 in this instance. Id. at 1832. Id. at 1831. 28 7 Merely raising a 1 a. Criner 2 Defendant contends it had no duty to defend Criner. It 3 argues that any damage to the door frames by the doors is not 4 covered property damage under the insurance policy because 5 Criner installed both the doors and the frames. 6 Defendant contends that even if Criner only installed the doors, 7 there are no facts to suggest that the doors caused damage to 8 the door frames or caused any other consequential damage. 9 Plaintiffs argue that facts known or easily obtained at the time Moreover, 10 of tender suggest that the installation of the doors caused 11 consequential damage. 12 Whether Criner installed the door frames is a disputed 13 fact. 14 installation of the door frames, Attachment C of the subcontract 15 indicates that “hollow metal frame installation” is excluded 16 from Criner’s scope of work, and Attachment D does not include 17 door frame installation as part of the subcontract price. 18 Subcontract Agreement, Exhibit 2 to Jefferson Dec. ¶ 3. 19 result, the subcontract agreement raises a disputed fact and 20 Defendant could not deny coverage by simply assuming that Criner 21 installed the door frames. 22 Plaintiffs’ motion for summary judgment in this case on this 23 ground. 24 Although the subcontract agreement mentions the As a Accordingly, Defendant cannot defeat Maryland Cas. Co., 48 Cal.App.4th at 1829. Nonetheless, Defendant is correct that general liability 25 policies, such as the policy Defendant issued Criner, apply when 26 an insured’s work or defective materials “cause injury to 27 property other than the insured’s own work or products.” 28 Electronics, Inc. v. Pac. Employers Ins. Co., 302 F.3d 1049 (9th 8 Anthem 1 Cir. 2002) (citing Maryland Cas. Co., 221 Cal.App.3d at 967) 2 (emphasis in original). 3 depends on whether at the time of tender, allegations in the 4 underlying complaint or other facts known to Defendant indicated 5 a potential for covered consequential damage caused by the 6 doors. 7 Therefore, Defendant’s duty to defend In this case, most of the extrinsic facts known to 8 Defendant at the time of tender do not necessarily demonstrate a 9 potential for coverage because at most, the evidence indicates 10 that the underlying action referred to repairs and damage to 11 Criner’s own work. 12 Claims” in the underlying lawsuit included an allegation of 13 “misaligned doors.” Amended Final Statement of Claims, Exhibit 1 14 to Jefferson Dec. ¶ 2, at 3. 15 Criner’s work in hanging the doors and does not refer to damage 16 caused by the doors. 17 First, the “Amended Final Statement of The allegation, however, refers to Second, the Jon Mohle report, assuming Defendant knew of 18 the report, includes no statement that the doors caused any 19 consequential damage. 20 ¶ 4, at 8, 21. 21 doors, it does not mention that the doors caused the sticking or 22 that the sticking caused property damage. 23 Mohle report provides that movement in the walls caused the 24 sticking and that the doors themselves would have to be 25 repaired. 26 Mohle report, Exhibit 3 to Jefferson Dec. Although the Mohle report refers to sticking Id. Instead, the Id. Finally, the letter from Swinerton’s defense counsel to 27 Criner dated July 14, 2006, states that “many of the doors 28 within the hotel do not close properly, and that the door-frames 9 1 are apparently askew.” 2 Dec. ¶ 6, at 1. 3 are askew, but it does not state or even imply that the doors 4 caused the door frames to be askew. 5 Letter to Criner, Exhibit 5 to Jefferson The letter to Criner mentions that door frames Unlike the previous letter, the letter from Swinerton’s 6 defense counsel to Criner’s insurance broker provides that 7 “faulty construction of the doors and door-frames has caused 8 consequential damages.” 9 Exhibit 6 to Jefferson Dec. ¶ 7, at 1. Letter to Criner’s insurance broker, Defendant argues that 10 there is no evidence to suggest that Defendant knew of this 11 letter at the time of tender. 12 14, 2006, two years before Plaintiffs tendered Criner’s defense 13 to Defendant, and the letter was part of the underlying action. 14 Jefferson Dec. ¶ 7. 15 in the letter alleging Criner caused damage to the door frames, 16 but the letter mentions that the construction of the doors and 17 the door frames caused consequential damages. 18 letter from Swinerton’s defense counsel to Criner’s insurance 19 broker created a potential for coverage. 20 However, the letter is dated July Defendant also argues that there is nothing Therefore, the Moreover, the FACC, which references Criner in the Tenth 21 Cause of Action for Declaratory Relief, broadly alleged that the 22 cross-defendants are liable for damages Swinerton may be 23 compelled to pay as a result of the underlying action. 24 Exhibit 2 to Plaintiffs’ Request for Judicial Notice (Doc. #16), 25 at ¶¶ 56-63. 26 any facts related to Criner’s work or damage caused thereby, but 27 Swinerton’s request was broad enough to encompass consequential 28 damages. FACC, Defendant argues that the FACC failed to allege Arguing that the FACC does not specify Criner’s work 10 1 even though it could potentially be included does not 2 conclusively refute that potential. Anthem Electronics, 302 F.3d 3 at 1054 (holding that the “the insurer must assume its duty to 4 defend unless and until it can conclusively refute that 5 potential”) (citation omitted). 6 created a potential for liability. 7 undisputed evidence that no potential for coverage existed under 8 the policy. 9 Consequently, the FACC also Defendant fails to provide Accordingly, the Court finds that Defendant had a duty to 10 defend Criner and Plaintiffs are entitled to partial summary 11 judgment on this issue. 12 time Plaintiffs’ argument that Defendant did not satisfy its 13 duty to investigate. 14 15 b. The Court need not address at this Swinerton Plaintiffs also argue that Swinerton is an additional 16 insured under Criner’s policy. Defendant does not dispute that 17 Swinerton qualifies. 18 Swinerton is an additional insured under Criner’s policy and 19 Defendant also had a duty to defend Swinerton. Accordingly, the Court finds that 20 21 III. ORDER 22 For the reasons set forth above, Plaintiffs’ Motion for 23 24 25 Partial Summary Judgment is GRANTED. IT IS SO ORDERED. Dated: November 19, 2012 ____________________________ JOHN A. MENDEZ, UNITED STATES DISTRICT JUDGE 26 27 28 11
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