North American Capacity Insurance Company v Spiess Construction Co., Inc.

Filing 73

ORDER signed by Judge Garland E. Burrell, Jr on 9/22/2011 re 47 48 55 ORDERING that Plaintiff's declaratory relief claims are dismissed against all Defendants with prejudice. Judgment shall be entered in favor of Defendants and this action shall be closed. CASE CLOSED. (Duong, D)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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NORTH AMERICAN CAPACITY
INSURANCE COMPANY,

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Plaintiff,

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v.

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SPIESS CONSTRUCTION CO., INC.;
TRAVELERS CASUALTY AND SURETY
COMPANY OF AMERICA; GOOD VALUE
CONSTRUCTION, INC; STARWOOD
CAPITAL GROUP GLOBAL I, LLC;
MAMMOTH MOUNTAIN SKI AREA, LLC;
LEXINGTON INSURANCE COMPANY;
TOWN OF MAMMOTH LAKES;
TRIAD/HOLMES ASSOCIATES; PSOMAS;
SIERRA GEOTECHNICAL SERVICES,
INC.; and DOES 1 through 100,
inclusive,

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Defendants.
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2:11-cv-00521-GEB-EFB
ORDER*

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Defendant Town of Mammoth Lakes (“Mammoth”) moves, inter alia,

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for an order dismissing Plaintiff’s declaratory relief claims under

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Federal Rule of Civil Procedure (“Rule”) 12(b)(6) for the reasons stated

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below.

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Construction, Inc. (“Good Value”) join Mammoth’s dismissal motion.

Defendants

Defendant

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Psomas,

Spiess

Triad/Holmes

Construction

Associates,

Co.

and

(“Spiess”)

Good

moves

Value

for

dismissal of Plaintiff’s declaratory relief claims under Rule 12(b)(6)

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*

argument.

This matter is deemed suitable for decision without oral
E.D. Cal. R. 230(g).
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for the reasons stated below. Defendants Good Value and Mammoth join

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Spiess’

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Company of America (“Travelers”) also moves for dismissal under Rule

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12(b)(6). Defendants Good Value and Mammoth join Travelers’ dismissal

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motion.

dismissal

motion.

Defendant

Travelers

Casualty

and

Surety

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The crux of the dismissal motion is the parties’ disagreement

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concerning how the following language in Plaintiff’s insurance policy

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(the “Exclusion”) should be interpreted:

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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. However, we will have no duty to
defend the insured against any “suit” seeking
damages for “bodily injury” or “property damage” to
which this insurance does not apply. . . .
This insurance does not apply to “bodily injury”,
“property damage”, or “personal and advertising
injury” caused directly or indirectly by, based on
or attributed to, arising out of, resulting from,
or in any manner related to “land or soil
movement”. Such “bodily injury”, “property damage”,
or “personal and advertising injury” is excluded
regardless of any other cause or event contributing
concurrently or in any sequence or manner to the
loss. . . .

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“Land or soil movement” means all earth or soil
movement of any kind including, but not limited to,
the
settling,
bulging,
shrinkage,
expansion,
extension,
slippage,
erosion,
mud
flow
or
subsidence of land or soils.

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(First Amended Complaint (“FAC”) ¶ 21, Ex. A.)
Based

upon

the

Exclusion,

Plaintiff

“seeks

a

judicial

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declaration that, in the absence of a potential for coverage, [it] owes

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no duty to defend [and no duty to indemnify] Defendants in connection

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with the Underlying Action” currently pending in California state court.

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Id. ¶¶ 33, 38. Further, Plaintiff argues the Exclusion applies to
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Defendants’ alleged negligence: “that on or about October 10, 2008, as

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part of the construction of the Bike Path, [Good Value] was moving earth

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in the area of the Tunnel and during this procedure, soils movement

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caused severe damage to the Tunnel.” Id. ¶ 25. Plaintiff relies upon

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City of Carlsbad v. Insurance Co. of the State of Pennsylvania, 180 Cal.

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App. 4th 176 (2009), arguing “[a]s written, the [E]xclusion is not

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limited to only ‘natural phenomena[.]’” (Pl.’s Opp’n to Travelers’ Mot.

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17:9-10.) In Carlsbad, the language “for any reason whatsoever” was held

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to apply “to any causes, man-made or otherwise.” Carlsbad, 180 Cal. App.

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4th at 179, 182. But see Blackhawk Corp. v. Gotham Insurance Co., 54

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Cal. App. 4th 1090, 1094-95 (1997) (holding an exclusion clause applied

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to man-made causes when the exclusion specifically included that which

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arises out of “any act, error or omission on the part of the insured,

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including but not limited to improper grading or site preparation, error

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in design, faulty materials or faulty workmanship”).

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Defendants rely upon Davis v. United Services Automobile

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Ass’n, 223 Cal. App. 3d 1322 (1990), and Opsal v. United Services

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Automobile Ass’n, 2 Cal. App. 4th 1197 (1991), arguing the Exclusion

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“defines ‘land and soil movement’ as something that occurs naturally

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and/or unintentionally . . . . It does not apply to the intentional

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movement of soil.” (Def. Travelers’ Mot. 2:14-17.) In Davis, the court

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held an exclusion clause did not apply to contractor negligence, since:

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earth movement and contractor negligence present
different risks; one results from an act of nature,
the other from acts of individuals. . . . The risk
a contractor will fail to adequately prepare the
soils and foundations involves a wholly different
set of factors than those involved in determining
whether to insure against a naturally occurring,
difficult to predict earth movement.

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///

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///
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Davis, 223 Cal. App. 3d at 1330. The Opsal court similarly held an

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exclusion clause to “apply only to naturally occurring earth movement”

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since there is a “distinction between natural or unpredictable earth

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movement—an excluded risk under the policy—and that sort of earth

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movement

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parties[.]” Opsal, 2 Cal. App. 4th at 1203.

which

would

not

occur

but

for

the

negligence

of

third

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“When interpreting state law, federal courts are bound by

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decisions of the state’s highest court.” Vestar Dev. II, LLC v. Gen.

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Dynamics Corp., 249 F.3d 958, 960 (9th Cir. 2001). In State Farm &

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Casualty Co. v. Von Der Lieth, 54 Cal. 3d 1123 (1991), the California

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Supreme Court “approve[d]” the “[California] Court of Appeals decision

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in [Davis]” and reiterated the distinction between contractor negligence

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and natural causes as follows: “Here, there was ample evidence that the

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third party negligence leading to the landslide was negligence in

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planning, approving and building . . . and not negligence in acting to

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prevent landslides resulting from natural causes.” Von Der Lieth, 54

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Cal. 3d at 1128, 1135; see also B.E. Witkin, Summary of California Law

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§ 132 (2008)(referencing Opsal and concluding the “exclusion applies

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only to naturally occurring earth movement”); Stephen E. Smith, Property

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Insurance Coverage for Soil Movement: Understanding the Basics, Orange

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County Lawyer, Feb. 2007, at 12 (“Exclusions for soil movement . . .,

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when read in isolation, eliminate coverage only for naturally-occurring

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soil movement, not soil movement caused by negligent grading, filling

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and compaction.”).

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Since

the

California

Supreme

Court

has

held

that

such

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exclusion clauses do not apply to third-party or contractor negligence,

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Plaintiff’s

allegations

that

“the

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alleged

property

damage

in

the

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Underlying Action is excluded based upon . . . the [Exclusion]” are

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without merit. (FAC ¶¶ 32, 36.)

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Therefore, Plaintiff’s declaratory relief claims are dismissed

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against all Defendants with prejudice. See Omar v. Sea-Land Serv., Inc.,

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813 F.2d 986, 991 (9th Cir. 1987) (“A trial court may dismiss a claim sua

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sponte under [Rule] 12(b)(6) . . . without notice where the claimant

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cannot possibly win relief.”); see also Silverton v. Dep’t of Treasury,

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644 F.2d 1341, 1345 (9th Cir. 1981) (stating court may enter sua sponte

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dismissal as to defendants who have not moved to dismiss where such

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defendants are in a position similar to that of moving defendants).

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Judgment shall be entered in favor of Defendants and this action shall

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be closed.

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Dated:

September 22, 2011

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GARLAND E. BURRELL, JR.
United States District Judge

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