California Department of Toxic Substances Control et al v. Jim Dobbas, Inc. et al

Filing 237

ORDER signed by Senior Judge William B. Shubb on 12/3/2019 DENYING the motions to intervene and vacate default filed Continental (Docket No. 205 ), Century(Docket No. 217 ), and Allianz (Docket No. 222 ). (Becknal, R)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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CALIFORNIA DEPARTMENT OF TOXIC
SUBSTANCES CONTROL and the TOXIC
SUBSTANCES CONTROL ACCOUNT,
Plaintiffs,

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No. 2:14-CV-00595 WBS EFB

ORDER RE: MOTIONS TO
INTERVENE AND TO VACATE
DEFAULT

v.
JIM DOBBAS, INC. a California
corporation; CONTINENTAL RAIL,
INC., a Delaware corporation;
DAVID VAN OVER, individually;
PACIFIC WOOD PRESERVING, a
dissolved California
corporation; WEST COAST WOOD
PRESERVING, LLC., a Nevada
limited liability company; and
COLLINS & AIKMAN PRODUCTS, LLC,
a Delaware limited liability
company,

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Defendants.
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Plaintiffs Department of Toxic Substances Control and
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the Toxic Substances Control Account (collectively “DTSC”) sought
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recovery of costs and interest incurred during the cleanup of a
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wood preserving operation in Elmira, California against multiple

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defendants under the Comprehensive Environmental Response,

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Compensation, and Liability Act (“CERCLA”), 42 U.S.C. § 9601 et

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seq.

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entry of default against a canceled Delaware corporation,

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defendant Collins & Aikman Products, LLC (“C&A Products”) after

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it failed to respond to DTSC’s First Amended Complaint.

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No. 129.)

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and vacate C&A Products’ default filed by The Continental

(First Am. Compl. (“FAC”) at ¶ 19.)

In 2015, DTSC obtained

(Docket

Presently before the court are motions to intervene

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Insurance Company (“Continental”), Century Indemnity Company

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(“Century”), and Allianz Underwriters Insurance Company, Chicago

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Insurance Company, and Fireman’s Fund Insurance Company

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(collectively, “Allianz”), insurers of C&A Products.

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Nos. 205, 217, 222.)

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(Docket

This is not the first time an insurance company has

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moved to intervene and set aside default in this matter.

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Travelers Insurance Company (“Travelers”) previously attempted to

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do so (Docket No. 196), but this court denied the motion after

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finding that Travelers’ refusal to defend C&A Products under a

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reservation of rights forfeited its interest in the litigation

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and it could not establish good cause to set aside C&A Products’

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default.1

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3-4 (Docket No. 221).)

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offer many of the same arguments Travelers did in its motion,

The

(Order Re: Mot. to Intervene and Set Aside Default at
The moving parties before the court now

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Allstate Insurance Company filed a notice of joinder
(Docket No. 218) to Travelers’ motion to intervene and did not
file a separate motion to intervene. (Docket No. 196.)
Traveler’s motion to intervene was denied on October 22, 2019.
(Docket No. 221.) Accordingly, Allstate’s joinder fails.
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with some important differences.

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222, with Docket No. 196.)

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(Compare Docket Nos. 205, 217,

Each will be discussed in turn.

First, the court will consider Continental’s motion.

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Continental’s position is distinguishable from that of Travelers

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in that it did not become aware of this lawsuit until after C&A

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Products’ default was entered.

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indistinguishable in that Continental has neither admitted

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coverage nor agreed to defend C&A Products on a reservation of

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rights.

However, it is substantially

DTSC offered to stipulate to Continental’s intervention

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if it either (1) accepted coverage without a reservation of

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rights or (2) defended C&A Products with a reservation of rights.

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(Decl. of Laura Zuckerman (“Zuckerman Decl.”), Ex. B (Docket No.

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228).)

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before its motion was heard.

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Continental did not stipulate, although instead of affirmatively

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refusing the stipulation, it failed to respond to plaintiffs’

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offer.

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any new argument to establish good cause to set aside C&A

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Products’ default.

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196.)

This was the same stipulation DTSC offered to Travelers
Just as in Travelers’ case,

(Zuckerman Decl. ¶ 4.)

Continental also does not advance

(Compare Docket No. 205, with Docket No.

Accordingly, Continental’s motion will be denied.

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Next, the court considers Century’s motion.

Century,

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too, offers the same arguments Travelers did in its motion to

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intervene and set aside default.

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Docket No. 196.)

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coverage of any claims arising from the DTSC litigation, citing a

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settlement agreement Century purportedly signed with C&A Products

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in 2000.

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Like Continental, Century failed to respond to plaintiffs’

(Compare Docket No. 217, with

Indeed, just like Travelers, Century disclaimed

(Century Mot. to Intervene at 6 (Docket No. 217).)

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proposed stipulation, and by implication refuses to offer a

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defense under a reservation of rights.

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Because it has both disclaimed coverage and refused to defend C&A

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Products under a reservation of rights, Century’s motion to

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intervene and set aside default will also be denied.

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the court will consider Allianz’s motion.

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the insured is unable to assert its rights, an insurer who seeks

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to intervene and protect its coverage defenses may provide an

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explicit reservation of rights to its client and allege that

(Zuckerman Decl. ¶ 4.)

Finally,

In California, “where

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reservation of rights within its pleading to put the plaintiff on

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notice that the insurance company is reserving those rights and

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asserting coverage defenses.”

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v. Performance Plastering, Inc., 136 Cal. App. 4th 212, 222 (3d

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Dist. 2006).

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“reserved all rights to decline coverage on any applicable ground

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and expressly ha[s] not waived or otherwise forfeited any direct

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interest in the instant action that would serve to defeat Allianz

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Intervenors’ claim for intervention of right.”

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Intervene at 11 (Docket No. 222).)

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and Travelers, Allianz has not disclaimed coverage.

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is purportedly “gathering information regarding coverage and or

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duties” in the present action.2

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Kaufman & Broad Communities, Inc.

Allianz expressly stated in its motion that it has

(Allianz Mot. to

Furthermore, unlike Century
Instead, it

(Id.)

However, Allianz was C&A Products’ excess insurer.

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(Opp. to Mot. to Intervene and Vacate Default at 2 n.2 (Docket

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No. 227); see also Allianz Reply to Opp. to Mot. to Intervene at

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Like Continental and Century, Allianz failed to respond
to DTSC’s proposed stipulation to allow them to intervene.
(Zuckerman Decl. ¶ 4.)

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2 (Docket No. 230).)

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between primary and excess insurance coverage.

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is insurance coverage whereby, under the terms of the policy,

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liability attaches immediately upon the happening of the

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occurrence that gives rise to the liability . . . “excess” or

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“secondary” insurance is coverage whereby, under the terms of

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that policy, liability attaches only after a predetermined amount

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of primary coverage has been exhausted.”

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v. Travelers Indem. Co. of Conn., 26 F. Supp. 3d 965, 972-73

California law recognizes a distinction
“Primary coverage

Residence Mut. Ins. Co.

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(C.D. Cal. 2014) (quoting Am. Cas. Co. v. Gen. Star Indem. Co.,

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125 Cal. App. 4th 1510, 1521 (2d Dist. 2005) (emphasis omitted)).

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Normally, the policy limits of the underlying primary

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policy must be exhausted before excess insurers have the “right

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or duty to participate in the defense” of the insured.

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Title Ins. Co. v. Employers Ins. of Wausau, 40 Cal. App. 4th

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1699, 1707 (1st Dist. 1995) (citing Signal Companies, Inc. v.

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Harbor Ins. Co., 27 Cal. 3d 359, 365 (1980)).

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excess insurers may assume the obligations of the primary insurer

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before exhaustion occurs.

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could defend when the primary insurer was insolvent or refused to

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defend).

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cannot be exhausted “until a remediation plan is approved which

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clearly establishes that the costs of remediation will exceed the

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primary indemnity limits.”

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F. Supp. 274, 280 (N.D. Cal. 1994).

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Ticor

In some instances,

Id. at 1708-09 (finding excess insurer

But in the environmental context, primary coverage

Cty. of Santa Clara v. USF & G, 868

While DTSC vaguely seeks to recover cleanup costs from

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C&A Products’ “historic insurers” (Docket No. 197-4), DTSC has

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yet to obtain judicial approval for C&A Products’ portion of the
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remediation plan3 and failed to determine “which of C&A Products’

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insurers, if any, to proceed against.”

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Intervene and Vacate Default at 6 n.5.)

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DTSC has yet to determine which primary insurer, if any, will be

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responsible for C&A Products’ damages, the parties and the court

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do not know what the “primary indemnity limits” are.

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information, the court cannot conclude that primary coverage is

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exhausted and that excess insurers can properly intervene.

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Cty. of Santa Clara, 868 F. Supp. at 280.

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(Opp. to Mot. to
Consequently, because

Absent this

See

Accordingly, Allianz’s

motion to intervene and set aside default will also be denied.

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IT IS THEREFORE ORDERED that the motions to intervene

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and vacate default filed Continental (Docket No. 205), Century

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(Docket No. 217), and Allianz (Docket No. 222), be, and the same

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thereby are, DENIED.

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Dated:

December 3, 2019

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Plaintiffs did not include the amount they sought to
recover in their First Amended Complaint, but have since asserted
C&A Products owes them $3,219,449.85 in their motion for default
judgment. (Mot. for Default J. ¶ 5(a) (Docket No. 184).) This
court expresses no opinion as to the merit of that determination
and may hold a “prove-up” hearing in the future.

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