Bankers Insurance Company v. A-1 Air Conditioning & Heating et al

Filing 46

ORDER signed by District Judge John A. Mendez on 3/23/2017 GRANTING Bankers' 28 Motion for Summary Judgment. (Zignago, K.)

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1 2 3 4 5 6 7 8 9 UNITED STATES DISTRICT COURT 10 EASTERN DISTRICT OF CALIFORNIA 11 12 BANKERS INSURANCE COMPANY, a Florida corporation, No. 2:16-cv-00177-JAM-CKD ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT 13 Plaintiff, 14 v. 15 16 17 18 19 A-1 AIR CONDITIONING & HEATING, a partnership; et al., Defendants. AND RELATED THIRD PARTY COMPLAINT This insurance coverage dispute was sparked by a state 20 court lawsuit over a residential fire. It heated up with a 21 cross-complaint filed against Defendants in the state court 22 action for which Defendants tendered their defense to Bankers 23 Insurance Company (“Bankers”). 24 flames by filing this present action for declaratory relief and 25 it now seeks summary judgment concerning its duties to defend 26 and indemnify the Defendants in the underlying action. 27 reasons described below the Court grants Bankers’ Motion for 28 Summary Judgment. Bankers further fanned the 1 For the 1 2 I. FACTUAL BACKGROUND A-1 Air Conditioning & Heating (“A-1”) is a sole 3 proprietorship owned by Daniel Edward Michael Webb (“Webb”) that 4 installs and services heating and air conditioning equipment. 5 Defendants’ Responses to Plaintiff’s Separate Statement of 6 Undisputed Facts (“SUF”), ECF No.42, at ¶¶ 10, 27. 7 and Daniel Fisher (“Fisher”) applied to Bankers for general 8 liability coverage in 2002 and held a Bankers policy from August 9 2003 to August 2005. SUF ¶¶ 4, 5, 6; Exh. 8. A-1, Webb, Webb and Fisher 10 also partnered to create Homestead Installations (“Homestead”), 11 a fireplace and stove installation business that incorporated in 12 April 2002 and for which Webb and Fisher were the sole 13 shareholders. 14 Although Homestead attempted to secure insurance from Bankers in 15 2004, Homestead has never been listed as a named insured on a 16 Bankers policy. 17 Defendants’ Opposition at 2; SUF at ¶¶ 8, 11. SUF at ¶¶ 7, 21; Filipoone Decl. at ¶ 6. In 2004, Fisher—working for Homestead—installed a wood 18 burning stove and flue system at 9753 Ben Hall Drive in Galt, 19 California. 20 (“Custom”) contracted Homestead to perform the work and required 21 Homestead to procure a one million dollar general liability 22 insurance policy naming Custom as an additional insured. 23 ¶¶ 12, 13. 24 the Scott Alberts Insurance Agency (“Alberts”) through the 25 Alberts’ employee Linda Shook (“Shook”). 26 provided Defendants with an ACORD form Certificate of Liability 27 Insurance, which names A-1 and Homestead as insureds, Custom as 28 the certificate holder, and Alberts as the producer. SUF at ¶¶ 12, 15, 25. Custom Fireside Shop, Inc. SUF at Homestead attempted to apply for this insurance with 2 Alberts and Shook then SUF at 1 ¶¶ 16, 17; Exh. 7. Around March 28, 2012, the residence in which 2 Fisher installed the above-described stove was destroyed in a 3 fire. SUF at ¶ 18. 4 II. 5 PROCEDURAL BACKGROUND About a year and a half after the fire, Safeco Insurance 6 Company (“Safeco”) filed a state lawsuit against several 7 parties, including Custom, due to the fire and the money Safeco 8 paid the insured for damage to the residence. 9 4. SUF at ¶ 19; Exh. Custom filed a cross-complaint naming Homestead, A-1, Webb, 10 and Fisher, among others. 11 Homestead, A-1, Webb, and Fisher each tendered their defense to 12 Bankers and requested that Bankers defend and indemnify them in 13 the Safeco lawsuit. 14 suit in January 2016 seeking a judicial declaration—pursuant to 15 28 U.S.C. § 2201—that it does not owe a duty to defend or 16 indemnify A-1, Fisher, Webb, Homestead, or Custom in the Safeco 17 suit. 18 also named Safeco as a defendant in order for the judgment to 19 bind Safeco. 20 Homestead, Safeco and Webb on May 25, 2016. 21 default was set aside on June 29, 2016 as to Webb and A-1. ECF 22 No. 14. 23 to file any responsive pleading and dismissed from this action. 24 ECF Nos. 5 & 6. SUF at ¶ 19; Exh. 5. SUF at ¶ 20. Custom, Bankers filed the present Complaint for Declaratory Relief, ECF No. 1. Compl. at ¶ 7. Bankers A default was entered against A-1, ECF No. 11. The By stipulation and Court order, Custom was not required A-1, Webb, Fisher, and Homestead 1 filed their 25 1 26 27 28 The default against Homestead was never set aside. Homestead is also admittedly a “dissolved California Corporation.” Homestead has no legal basis to oppose this motion for summary judgment and it was not necessary for Bankers to include Homestead as a party in its summary judgment motion. 3 1 Answer and “cross-complaint” 2 against Alberts and Shook (“Cross- 2 Defendants”) alleging that Cross-Defendants failed to secure the 3 requested Bankers insurance coverage and asserting related 4 claims. 5 See Cross-Complaint, ECF No. 15. Plaintiff filed its Motion for Summary Judgment on January 6 13, 2017. ECF No. 28. Cross-Defendants requested a continuance 7 of the hearing on the motion, which the Court denied. 8 29 & 33. 9 “Defendants”) filed an opposition, as did Cross-Defendants. ECF Nos. A-1, Webb, Fisher, and Homestead (hereinafter 10 Nos. 40 & 34. 11 standing to oppose its motion, Plaintiff replied to each 12 opposition. ECF Although Plaintiff contests Cross-Defendants’ ECF Nos. 43 & 44. 13 14 III. OPINION 15 A. Declaratory Relief 16 In a suit seeking declaratory judgment pursuant to 28 17 U.S.C. § 2201, a district court must first inquire whether there 18 is an actual case or controversy within its jurisdiction. 19 Principal Life Ins. Co. v. Robinson, 394 F.3d 665, 669 (9th Cir. 20 2005). 21 constitutional case or controversy requirement and thus 22 determines the court’s jurisdiction to award relief. This standard is identical to Article III’s Am. States 23 24 25 26 27 28 2 Defendants named their pleading a “cross-complaint” and assert claims against Alberts and Shook, who are third parties. In federal court, this pleading is a “third-party complaint” under Federal Rule of Civil Procedure 14. A “crossclaim” is a claim asserted by one party against a co-party. Fed. R. Civ. P. 13(g). Throughout this order, all references to the “cross-complaint” are to the “third-party complaint” and reference to “crossdefendants” are to the “third-party defendants.” 4 1 2 Ins. Co. v. Kearns, 15 F.3d 142, 143 (9th Cir. 1994). The Ninth Circuit has held that in a declaratory judgment 3 action brought to determine an insurer’s duty to defend and 4 indemnify in a pending state court liability suit, the case or 5 controversy requirement is met. 6 In this case, the underlying state lawsuit was pending when 7 Bankers’ instigated the action and there is no indication in the 8 record that the state case has resolved. 9 tendered their defense to Bankers and Bankers—as the present Kearns, 15 F.3d at 144 (1994). The Defendants 10 litigation demonstrates—contests its obligations to Defendants. 11 Under Ninth Circuit precedent and the present facts, the case or 12 controversy requirement is met. 13 The Court must also exercise its discretion to determine 14 whether entertaining the action is proper. Gov’t Emp. Ins. Co. 15 v. Dizol, 133 F.3d 1220, 1223 (9th Cir. 1998). 16 guidance for retention is found in Brillhart v. Excess Ins. Co. 17 of Am. and includes considerations of the needless determination 18 of state law issues, forum shopping, and avoidance of 19 duplicative litigation. 20 U.S. 491 (1942)). 21 considerations may be appropriate, such as “whether the 22 declaratory action will settle all aspects of the controversy; 23 whether the declaratory action will serve a useful purpose in 24 clarifying the legal relations at issue; whether the declaratory 25 action is being sought merely for the purposes of procedural 26 fencing or to obtain a ‘res judicata’ advantage; [] whether the 27 use of a declaratory action will result in entanglement between 28 the federal and state court systems[;] . . . convenience of the Prudential Id. at 1223–25 (Citing Brillhart, 316 The Ninth Circuit has indicated that other 5 1 parties[;] and the availability and relative convenience of 2 other remedies.” 3 145 (J. Garth, concurring)). Id. at 1225 n. 5 (quoting Kearns, 15 F.3d at 4 The Court finds that retention is proper in this case. 5 Defendants have not objected to this Court deciding the action. 6 Although the case turns on state law, it is not an anticipatory 7 lawsuit and there is no indication that Bankers is forum 8 shopping. 9 and, to the Court’s knowledge, there are no parallel state 10 proceedings involving the same issues between the parties. 11 Chamberlain v. Allstate Ins. Co., 931 F.2d 1361, 1366–67 (9th 12 Cir. 1991) (“[W]hen a party requests declaratory relief in 13 federal court and a suit is pending in state court presenting 14 the same state law issues, there exists a presumption that the 15 entire suit should be heard in state court.”). 16 does not find that declaratory relief is sought for the purposes 17 of procedural fencing, nor that a decision will entangle the 18 federal and state court systems. 19 action will settle the controversy and clarify the legal 20 relations between Bankers and Defendants. 21 the Court turns to the merits of the declaratory action. Bankers is not a party to the underlying litigation Cf. Thus, the Court Further, the declaratory For these reasons, 22 B. Summary of Parties’ Arguments 23 Bankers’ motion provides several grounds on which this 24 Court might grant summary judgment or adjudication. 25 argues that Homestead was never a Bankers’ insured, that Webb 26 and Fisher were not insured for work they did for Homestead, 27 that A-1 has no coverage apart from Webb because A-1 is a sole 28 proprietorship, that the certificate does not confer coverage to 6 Bankers 1 Custom or the other defendants, and that, even assuming the 2 policies applied, the fire at issue was not an “occurrence” 3 within the policy period. See generally MSJ. 4 Defendants concede that Homestead was never insured under a 5 Bankers policy, but seem to argue—though it is not at all clear— 6 that Bankers may still owe Defendants a duty to defend and 7 indemnify due to Alberts’ ostensible authority to provide them 8 with a Bankers insurance policy. 9 do not counter the substantive legal arguments in Bankers’ Def. Opp. at 4–5. 10 motion and admit that most facts are undisputed. 11 Defendants SUF. 12 See Def. Opp.; Cross-Defendants launch a more substantial attack. First, 13 they argue that the allegation in the underlying cross-complaint 14 (Custom’s cross-complaint against A-1, Homestead, Webb, and 15 Fisher in the Safeco lawsuit) that A-1 and Homestead are alter 16 egos creates potential liability on the part of A-1, Fisher, and 17 Webb and thus confers a continuing duty on Bankers. 18 Opp. at 9. 19 ambiguous as to who is an “insured.” 20 contests Cross-Defendant’s standing to oppose its motion herein 21 against the Defendants because this lawsuit does not include a 22 claim or cross-claim between Bankers and Cross-Defendants. 23 to Cross Def. at 2–4. 24 Cross Def. Second, they argue that Bankers’ policy language is Id. at 10–11. Bankers Rep. As explained below, the undisputed facts show that the 25 Bankers policies do not cover the fire at issue in the 26 underlying lawsuit. 27 challenge Bankers’ argument that the fire is not an “occurrence” 28 covered by the policies. Neither Defendants nor Cross-Defendants The relevant material facts on this 7 1 question are undisputed. 2 Response to Plaintiff’s Separate Statement of Undisputed Facts, 3 ¶¶ 34–36. 4 not address the arguments raised in the oppositions or whether 5 Cross-Defendants have standing to contest the motion. SUF ¶¶ 34–36; Cross-Defendants’ As this determination is dispositive, the Court need 6 C. The Fire is Not an Occurrence Under the Policy 7 This declaratory action concerns the duty to defend and the 8 duty to indemnify. “The insurer’s duty to indemnify runs to 9 claims that are actually covered, in light of the facts proved.” 10 Buss v. Super. Ct., 16 Cal.4th 35, 45 (1997). 11 insurer’s duty to defend runs to claims that are merely 12 potentially covered, in light of facts alleged or otherwise 13 disclosed.” 14 extends beyond claims that are actually covered to those that 15 are merely potentially so—but no further.” 16 Id. at 46. “By contrast, the This duty is not unlimited; “[i]t Id. Insurance policies are interpreted by the rules of 17 construction applicable to contracts. Borg v. Transamerica Ins. 18 Co., 47 Cal. App. 4th 448, 456 (1996). The mutual intention of 19 the parties at the time the contract was formed governs its 20 interpretation and such intent is to be inferred, if possible, 21 solely from the written provisions of the contract. 22 Chem. Corp. v. Admiral Ins. Co., 10 Cal.4th 645, 666 (1995). 23 “The ‘clear and explicit’ meaning of these provisions, 24 interpreted in their ‘ordinary and popular sense,’ controls 25 judicial interpretation unless ‘used by the parties in a 26 technical sense, or unless a special meaning is given to them by 27 usage.’” 28 meaning a layperson would ascribe to the language of a contract Id. (citing Cal. Civ. Code §§ 1638, 1644). 8 Montrose “If the 1 of insurance is clear and unambiguous, a court will apply that 2 meaning.” 3 “the language of an insurance policy must be interpreted broadly 4 in order to protect the objectively reasonable expectations of 5 the insured.” 6 Id. at 666–67. Where there is ambiguity, however, Borg, 47 Cal. App. 4th at 456. Bankers issued Commercial General Liability Coverage 7 Policies covering policy periods from August 2, 2003, to August 8 2, 2004, and August 2, 2004, to August 2, 2005, listing A-1 9 Heating and Air Conditioning, Edward Webb, and Daniel Fisher as 10 the insured. Exh. 2 & 3. 11 thus Bankers’ duties, if any, would arise from these contracts 12 (i.e. if Homestead had been added onto the policies or the 13 policies otherwise extended to Fisher’s installation work). Fisher installed the stove in 2004 and 14 The “Insuring Agreement” of the policies state: 15 [The insurer] 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. . . . b. This insurance applies to “bodily injury” and “property damage” only if: . . . (2) The “bodily injury” or “property damage” occurs during the policy period. 16 17 18 19 20 21 22 Exh. 2 at BIC000238; Exh. 3 at BIC000281. 23 Each policy contains an “Amendatory Endorsement” modifying 24 the policy’s definitions. 25 BIC000268. 26 /// 27 /// 28 Exh. 2 at BIC000225; Exh. 3 at /// The definitions of “occurrence” and “property 9 1 damage” are modified as follows (emphasis added): 2 “Occurrence” means an accident which results in “bodily injury” or “property damage” that first occurs during the policy period and is neither expected nor intended by an insured. “Bodily injury” or “property damage” first occurs during the policy period only if: a. The “bodily injury” or “property damage” is first sustained by a person or entity during the policy period as a direct result of an accident that first occurs during the policy period; or b. The “bodily injury” or “property damage” actually is or reasonably should be first apparent during the policy period to an “insured”. . . . 3 4 5 6 7 8 9 “Property damage” means: a. Physical injury to tangible property which is caused by an “occurrence”, including all resulting loss of use of that property. All loss of use shall be deemed to occur at the time of the physical injury that caused it; or b. Loss of use of tangible property that is not physical injury, provided such loss of use is caused by an occurrence during the policy period. All such loss of use shall be deemed to occur at the time of the occurrence that caused it. 10 11 12 13 14 15 Id. 16 states that Bankers does not have a duty to defend unless a suit 17 seeks damages from the insured for an accident that occurred 18 during the policy period that caused property damage first 19 sustained during the policy period. 20 Taking these paragraphs together, the policy unambiguously The underlying suit does not meet these requirements. It 21 is undisputed that the fire and resulting damage occurred in 22 2012 and the insurance policies expired in 2005. 23 against Custom does not allege any property damage prior to that 24 fire. 25 Defendants does not allege any property damage beyond Safeco’s 26 alleged injuries. 27 allegations in the underlying suit and the unambiguous text of 28 the insurance contracts, the 2012 fire is not covered under the See Exh. 4 at ¶¶ 8, 22. Safeco’s suit Custom’s cross-complaint against See, e.g., Exh. 5 at ¶ 29. 10 Based on the 1 2 policies. The contrast between the facts of this case and those in 3 Borg v. Transamerica Ins. Co. is instructive. 4 policy at issue defined “occurrence” as “an accident, including 5 exposure to conditions, which results, during the policy period, 6 in . . . property damage,” which, in turn, was defined as 7 “physical injury to, destruction of, or loss of use of tangible 8 property.” 9 Transamerica owed Borg a duty to defend for damage to his 47 Cal. App. 4th at 456. In Borg, the The case turned on whether 10 neighbor’s property even though the damage was attributable to 11 an occurrence predating the Transamerica policy period. 12 Borg court concluded that the policy only required “the property 13 damage itself [to] take place during the policy period to 14 trigger coverage; the ‘occurrence’ that was the ultimate cause 15 of this damage need not have taken place during the term of the 16 policy.” 17 requiring that the damage first appear during the policy term in 18 order for it to be covered.” 19 in the underlying lawsuit alleged continuous property damage, 20 the damage fell within the ambit of the policy and triggered the 21 duty to defend. 22 Id. The It noted: “[T]here is nothing in the policy Id. Thus, because the complaint Here, the Bankers’ policies are clear that the damage must 23 first be sustained during the policy period. Likewise, the 24 occurrence causing the damage must first occur during the policy 25 period. 26 allegations, there is no potential for coverage and the duty to 27 defend does not arise. 28 that Bankers has no duty to indemnify Defendants in the Because the underlying suit contains no such On this reasoning it further follows 11 1 underlying lawsuit. 2 3 4 IV. ORDER For the reasons set forth above, Bankers’ Motion for 5 Summary Judgment on all its claims is GRANTED. 6 Dated: March 23, 2017 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12

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