Assurance Company of America et al v. Lexington Ins. Co. et al
Filing
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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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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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ASSURANCE COMPANY OF AMERICA
and MARYLAND CASUALTY
COMPANY,
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Plaintiffs,
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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
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Defendants.
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This matter is before the Court on Plaintiffs’ Assurance
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Company of America and Maryland Casualty Company’s (collectively
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“Plaintiffs”) Motion for Partial Summary Judgment (Doc. #16).
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Defendant Lexington Insurance Company (“Defendant”) opposes the
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motion (Doc. #20) and Plaintiffs replied (Doc. #21).1
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following reasons, Plaintiffs’ motion is granted.
For the
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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.
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I.
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PROCEDURAL BACKGROUND
Plaintiffs originally filed this action August 8, 2011, in
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Sacramento County Superior Court against Defendant and North
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American Specialty Insurance Company (“NAC”) (Doc. #2).
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Defendants removed the case on November 18, 2011.
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September 19, 2012, Plaintiffs filed the instant motion for
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partial summary judgment on the issue of whether Defendant had a
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duty to defend its named insured, Criner Construction Company
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(“Criner”), and its additional insured, Swinerton Builders, Inc.
Id.
On
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fka Swinerton & Walberg Co. (“Swinerton”), in the underlying
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action (Doc. #16).
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with prejudice (Doc. #17), leaving Lexington as the sole
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Defendant in this case.
On September 26, 2012, NAC was dismissed
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II.
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FACTUAL BACKGROUND
On or about February 7, 2005, Sacramento Hotel Partners,
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LLC, filed the underlying action against Swinerton alleging
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construction defects at the Embassy Suite Hotel in Sacramento,
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California.
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(“PSUF”) at ¶ 1.2
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filed in the underlying action, Sacramento Hotel Partners alleged
Pl.’s Statement of Undisputed Facts (Doc. #15),
In the “Amended Final Statement of Claims”
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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).
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among other things, “misaligned doors.”
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Id. at ¶ 2.
Criner was a subcontractor involved in the project hired by
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Swinerton, the general contractor, to install doors and hardware.
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Id. at ¶ 2.
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Criner included a subcontract indemnity clause.
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Swinerton tendered its defense to Criner and Criner’s insurance
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broker through letters dated July 14, 2006.
The subcontract agreement between Swinerton and
Id. at ¶ 2.
Id. at ¶¶ 6, 7.
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On or about November 19, 2007, Swinerton filed a First
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Amended Cross-Complaint (“FACC”), referencing Criner in the Tenth
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Cause of Action for Declaratory Relief asking the court in the
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underlying action to find that the subcontract agreement’s
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indemnity clause obligated Criner to provide defense and
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indemnity to Swinerton.
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Id. at ¶ 5.
Plaintiffs agreed to and defended Criner, and shared in the
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defense of Swinerton as an additional insured.
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As mentioned above, Plaintiffs now seek contribution from
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Defendant for the cost of defending and indemnifying Criner and
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Swinerton in the underlying lawsuit.
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Id. at ¶¶ 11, 12.
A. Tender History
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On December 11, 2008, Plaintiffs sent a letter to Defendant,
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among others, requesting all of Criner’s insurers to agree to
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defend and indemnify Criner.
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Plaintiffs sent follow-up letters on February 10, 2009, and
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February 21, 2009.
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received from Defendant.
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Defendant through a letter dated November 20, 2008.
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Defendant acknowledged receipt of this letter on November 26,
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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
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Defendant.
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B. Insurance Policy
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Defendant issued to Criner policy number 11143601, effective
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August 9, 2004 through August 9, 2005.
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provides the following insurance agreement:
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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.
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“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
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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:
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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
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dangerous condition in “your product” or
“your work”; or . . . .
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III. OPINION
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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
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the non-moving party’s position is insufficient: “There must be
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evidence on which the jury could reasonably find for [the non-
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moving party].”
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applies to either a defendant’s or plaintiff’s motion for
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summary judgment the same standard as for a motion for directed
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verdict, which is “whether the evidence presents a sufficient
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disagreement to require submission to a jury or whether it is so
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one-sided that one party must prevail as a matter of law.”
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B.
Anderson, 477 U.S. at 252.
This Court thus
Id.
Evidentiary Objections
Defendant’s evidentiary objections (Doc. #20-4) to portions
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of Shira Jefferson’s Declaration (Doc. #16-7) and two exhibits
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attached thereto, filed in support of Plaintiffs’ motion are
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overruled.
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respect to the evidence in question.
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declaration states that she was responsible for handling the
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claims files established by Plaintiffs in connection with the
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claims against Criner and Swinerton and as part of her
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responsibility, she has personal knowledge of the facts in her
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declaration and the attached exhibits.
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Jefferson, Doc. #16 (“Jefferson Dec.”) at ¶ 1.
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the objection is not based on evidence’s authenticity, a court
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may still consider the evidence.
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California, 433 F. Supp. 2d 1110, 1120-21 (E.D. Cal. 2006).
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Finally, Defendant’s objections based on when Defendant received
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the evidence are relevance objections and therefore redundant.
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Id. at 1119 (“A court can award summary judgment only when there
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is no genuine dispute of material fact. It cannot rely on
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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
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C.
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Discussion
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Duty to Defend
Plaintiffs claim that Defendant had a duty to defend Criner
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and Swinerton because the complaint, along with extrinsic
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evidence, created a potential for coverage.
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that no duty to defend existed because there are no facts to
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show that Criner could have been held liable in the underlying
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action for consequential property damage.
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Defendant has only raised disputed facts relevant to coverage
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and that such facts create, not eliminate, a duty to defend.
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Defendant argues
Plaintiffs reply that
To seek equitable contribution from a coinsurer, the party
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claiming coverage “must prove the existence of a potential for
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coverage” under the policy terms.
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v. Super. Ct., 6 Cal.4th 287, 300 (1993).
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potentially covered raise the nonparticipating coinsurer’s duty
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to defend.
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878 n.2 (2006).
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duty to defend, courts compare the allegations of the complaint
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and extrinsic evidence with the terms of the policy.
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Cas. Co. v. Nat’l Am. Ins. Co. of Cal., 48 Cal.App.4th 1822,
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1829 (1996).
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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
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coverage under the coinsurer’s policy, the coinsurer must
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conclusively prove with undisputed evidence that no coverage
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existed under the policy.
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triable issue of material fact will not defeat summary judgment
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in this instance.
Id. at 1832.
Id. at 1831.
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Merely raising a
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a.
Criner
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Defendant contends it had no duty to defend Criner.
It
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argues that any damage to the door frames by the doors is not
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covered property damage under the insurance policy because
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Criner installed both the doors and the frames.
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Defendant contends that even if Criner only installed the doors,
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there are no facts to suggest that the doors caused damage to
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the door frames or caused any other consequential damage.
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Plaintiffs argue that facts known or easily obtained at the time
Moreover,
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of tender suggest that the installation of the doors caused
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consequential damage.
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Whether Criner installed the door frames is a disputed
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fact.
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installation of the door frames, Attachment C of the subcontract
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indicates that “hollow metal frame installation” is excluded
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from Criner’s scope of work, and Attachment D does not include
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door frame installation as part of the subcontract price.
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Subcontract Agreement, Exhibit 2 to Jefferson Dec. ¶ 3.
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result, the subcontract agreement raises a disputed fact and
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Defendant could not deny coverage by simply assuming that Criner
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installed the door frames.
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Plaintiffs’ motion for summary judgment in this case on this
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ground.
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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
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policies, such as the policy Defendant issued Criner, apply when
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an insured’s work or defective materials “cause injury to
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property other than the insured’s own work or products.”
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Electronics, Inc. v. Pac. Employers Ins. Co., 302 F.3d 1049 (9th
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Anthem
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Cir. 2002) (citing Maryland Cas. Co., 221 Cal.App.3d at 967)
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(emphasis in original).
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depends on whether at the time of tender, allegations in the
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underlying complaint or other facts known to Defendant indicated
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a potential for covered consequential damage caused by the
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doors.
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Therefore, Defendant’s duty to defend
In this case, most of the extrinsic facts known to
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Defendant at the time of tender do not necessarily demonstrate a
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potential for coverage because at most, the evidence indicates
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that the underlying action referred to repairs and damage to
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Criner’s own work.
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Claims” in the underlying lawsuit included an allegation of
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“misaligned doors.” Amended Final Statement of Claims, Exhibit 1
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to Jefferson Dec. ¶ 2, at 3.
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Criner’s work in hanging the doors and does not refer to damage
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caused by the doors.
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First, the “Amended Final Statement of
The allegation, however, refers to
Second, the Jon Mohle report, assuming Defendant knew of
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the report, includes no statement that the doors caused any
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consequential damage.
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¶ 4, at 8, 21.
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doors, it does not mention that the doors caused the sticking or
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that the sticking caused property damage.
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Mohle report provides that movement in the walls caused the
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sticking and that the doors themselves would have to be
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repaired.
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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
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Criner dated July 14, 2006, states that “many of the doors
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within the hotel do not close properly, and that the door-frames
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are apparently askew.”
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Dec. ¶ 6, at 1.
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are askew, but it does not state or even imply that the doors
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caused the door frames to be askew.
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Letter to Criner, Exhibit 5 to Jefferson
The letter to Criner mentions that door frames
Unlike the previous letter, the letter from Swinerton’s
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defense counsel to Criner’s insurance broker provides that
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“faulty construction of the doors and door-frames has caused
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consequential damages.”
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Exhibit 6 to Jefferson Dec. ¶ 7, at 1.
Letter to Criner’s insurance broker,
Defendant argues that
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there is no evidence to suggest that Defendant knew of this
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letter at the time of tender.
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14, 2006, two years before Plaintiffs tendered Criner’s defense
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to Defendant, and the letter was part of the underlying action.
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Jefferson Dec. ¶ 7.
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in the letter alleging Criner caused damage to the door frames,
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but the letter mentions that the construction of the doors and
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the door frames caused consequential damages.
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letter from Swinerton’s defense counsel to Criner’s insurance
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broker created a potential for coverage.
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However, the letter is dated July
Defendant also argues that there is nothing
Therefore, the
Moreover, the FACC, which references Criner in the Tenth
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Cause of Action for Declaratory Relief, broadly alleged that the
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cross-defendants are liable for damages Swinerton may be
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compelled to pay as a result of the underlying action.
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Exhibit 2 to Plaintiffs’ Request for Judicial Notice (Doc. #16),
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at ¶¶ 56-63.
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any facts related to Criner’s work or damage caused thereby, but
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Swinerton’s request was broad enough to encompass consequential
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damages.
FACC,
Defendant argues that the FACC failed to allege
Arguing that the FACC does not specify Criner’s work
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even though it could potentially be included does not
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conclusively refute that potential. Anthem Electronics, 302 F.3d
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at 1054 (holding that the “the insurer must assume its duty to
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defend unless and until it can conclusively refute that
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potential”) (citation omitted).
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created a potential for liability.
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undisputed evidence that no potential for coverage existed under
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the policy.
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Consequently, the FACC also
Defendant fails to provide
Accordingly, the Court finds that Defendant had a duty to
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defend Criner and Plaintiffs are entitled to partial summary
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judgment on this issue.
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time Plaintiffs’ argument that Defendant did not satisfy its
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duty to investigate.
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b.
The Court need not address at this
Swinerton
Plaintiffs also argue that Swinerton is an additional
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insured under Criner’s policy.
Defendant does not dispute that
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Swinerton qualifies.
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Swinerton is an additional insured under Criner’s policy and
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Defendant also had a duty to defend Swinerton.
Accordingly, the Court finds that
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III. ORDER
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For the reasons set forth above, Plaintiffs’ Motion for
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Partial Summary Judgment is GRANTED.
IT IS SO ORDERED.
Dated: November 19, 2012
____________________________
JOHN A. MENDEZ,
UNITED STATES DISTRICT JUDGE
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