American Home Assurance Company v. State Farm Mutual Automobile Insurance Company

Filing 37

ORDER by Judge Samuel Conti granting 23 Motion for Summary Judgment; denying 27 Motion for Summary Judgment (sclc1, COURT STAFF) (Filed on 4/9/2013)

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1 2 3 4 5 6 7 IN THE UNITED STATES DISTRICT COURT 8 FOR THE NORTHERN DISTRICT OF CALIFORNIA 9 For the Northern District of California United States District Court 10 AMERICAN HOME ASSURANCE COMPANY, 11 Plaintiff, 12 v. 13 14 STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, 15 Defendant. 16 ) Case No. 11-5387 SC ) ) ORDER RE: CROSS-MOTIONS FOR ) SUMMARY JUDGMENT ) ) ) ) ) ) ) ) 17 18 I. INTRODUCTION 19 This action arises out of a dispute between two insurance 20 carriers over coverage and contribution for an automobile accident. 21 Both Plaintiff American Home Assurance Company ("American Home") 22 and Defendant State Farm Mutual Automobile Insurance Company 23 ("State Farm") issued insurance policies covering one of the 24 drivers involved in the accident, but only American Home actually 25 provided coverage. 26 Farm to enforce its contribution and subrogation rights. 27 before the Court are fully briefed cross-motions for summary 28 judgment filed by both parties. American Home brings this action against State Now ECF Nos. 23 ("Pl.'s MSJ"), 27 1 (Def.'s XMSJ), 30, 31, 33, 34. These motions are appropriate for 2 determination without oral argument. 3 reasons set forth below, the Court GRANTS American Home's motion 4 for summary judgment and DENIES State Farm's. Civ. L.R. 7-1(b). For the 5 6 II. BACKGROUND Unless otherwise specified, the following facts are 7 involved in an automobile accident in San Francisco, California. 10 United States District Court undisputed. 9 For the Northern District of California 8 In July 2007, David Beatson and Young Park were Mr. Beatson was driving a rented vehicle and was in San Francisco 11 on business on behalf of his employer, Heidenhain Holding, Inc. 12 ("Heidenhain"). 13 was insured by State Farm under a personal auto policy. 14 A. 15 package policy issued to Heidenhain. 16 both policies afforded primary coverage for the July 2007 17 accident.1 Pl.'s Ex. L. At the time of the accident, Beatson Pl.'s Ex. He was also insured by American Home under a business auto State Farm now concedes that Pl.'s Ex. K at 8; Def.'s XMSJ at 8. In July 2009, Ms. Park filed a complaint against Mr. Beatson 18 19 and Heidenhain, among others, in San Francisco Superior Court 20 (hereinafter, the "Park action"). 21 subsequently tendered the Park action to American Home. American 22 Home accepted the tender and agreed to defend the suit. American 23 Home then assigned Ray Adams to manage the claim and attorney 24 Barbara Caulfield to handle the legal defense. 25 ("Caulfield Dep."), D. Mr. Beatson and Heidenhain Def.'s Exs. C On January 14, 2010, Ms. Park offered to 26 27 28 1 The State Farm policy had bodily injury policy limits of $250,000 per person, $500,000 for each accident, and property damage limits of $100,000 for each accident. Pl.'s Ex. O. The American Home policy had limits of $1 million per person and per accident. Pl.'s Ex. A. 2 1 settle the action for $1 million. 2 Pl.'s Ex. C. That offer was rejected by American Home. Mr. Beatson notified State Farm of the Park action on or about 3 4 August 13, 2010. Pls.'s Ex. J. State Farm then assigned Jerry Ho 5 to investigate and handle the claim. 6 Mr. Ho spoke with Ms. Caulfield, about the case. 7 this discussion is disputed. 8 admitted that American Home's policy was primary on the risk and 9 that State Farm's policy afforded only excess coverage and would On or about August 25, 2010, The substance of According to Mr. Ho, Ms. Caulfield United States District Court For the Northern District of California 10 likely not be triggered with respect to the Park action. Pl.'s Ex. 11 Q. 12 policies at the time she spoke with Mr. Ho. 13 22. 14 represented that she was coverage counsel for American Home or that 15 she was authorized to make coverage decisions on behalf of American 16 Home. Ms. Caulfield denies that she was even aware of the terms of Pl.'s Ex. H at 15, 16, At his deposition, Mr. Ho admitted that Ms. Caulfield never Pl.'s Ex. I at 31-32. 17 On August 27, 2010, Mr. Ho sent Ms. Caulfield a letter 18 confirming his purported understanding of their discussion: 19 20 21 22 23 24 25 26 27 28 As discussed in our conversation, we are the insurance carrier for your client, David Beatson. It is our understanding that you will be providing primary coverage to our insured for this loss. We further understand that your clients have a 1,000,000 liability policy for bodily injury. We confirmed that the Ford vehicle driven by Mr. Beatson on the date of the loss will qualify as a nonowned car under his personal State Farm policy. As such, liability limits of $250/$500,000 for bodily injury will apply as excess coverage. We further understand that a trial in this case has been continued to January 24, 2011. We request to be carbon copied on any mediation briefs, settlement conference statements, phase reports, etc. so that we can keep informed on the developments in this case. 3 1 2 Pl.'s Ex. R. 3 Home, though Mr. Adams, American Home's claims adjuster, testified 4 that he saw the letter within "a few weeks" of the date it was sent 5 to Ms. Caulfield. 6 the letter was sent to him by Ms. Caulfield. 7 indication that either Ms. Caulfield or Mr. Adams responded to Mr. 8 Ho's letter or contested his view of State Farm's obligations under 9 its policy. United States District Court For the Northern District of California 10 Mr. Ho's letter was not sent directly to American Def.'s Ex. B at 25-26. Mr. Adams presumes that Id. There is no In the fall of 2010, the parties to the Park action engaged in 11 an unsuccessful mediation. 12 settlement offer was made during the mediation. 13 Caulfield did not request that State Farm participate in the 14 mediation. 15 Def's Ex. C. at 27-28. A six-figure Id. at 28. Id. at 28-29. On January 17, 2011, the parties to the Park action agreed on 16 a settlement. Pl.'s Ex. D. Under the settlement, American Home, 17 on behalf of the defendants, agreed to pay Ms. Park $500,000 for 18 her personal injury claim. 19 complex claims director at American Home's parent company, American 20 Home also paid Ms. Park $18,684.95 to settle her property damage 21 claim. 22 that it incurred $55,296.04 in attorney's fees, Pl.'s MSJ at 6, 23 though the only evidence it has submitted in support of this 24 contention is Mr. Adam's declaration, in which he states that 25 American Home incurred $22,018.47 in legal fees between August 13, 26 2010 and March 10, 2011, Adams Decl. ¶ 11. 27 American Home through discovery shows only $5,264.38 in legal fees. 28 Def.'s Exs. W, X. Id. According to Raymond Adams, the ECF No. 25 ("Adams Decl.") ¶ 10. 4 American Home also claims Evidence produced by There is no evidence that State Farm contributed anything to 1 2 the Park settlement or to Mr. Beatson's defense. State Farm first 3 reviewed the applicable American Home policy in late January 2011, 4 after the settlement was reached with Ms. Park. 5 Apparently, State Farm did not review its own policy until early 6 2012. 7 on an out dated State Farm policy that expired several months prior 8 to the July 2007 accident. 9 that he first saw the applicable State Farm policy when it was Pl.'s Ex. K. Initially, State Farm mistakenly based its coverage position See Pl.'s Exs. M, N. Mr. Ho admitted United States District Court For the Northern District of California 10 requested by State Farm's counsel through discovery in 2012. 11 Pl.'s Ex. I at 55-56. 12 In February 21, 2011, State Farm informed American Home that 13 it would not contribute towards the defense and settlement of the 14 Park Action. 15 led to believe that the American Home policy provided primary 16 coverage in relation to the State Farm policy and that American 17 Home had made no suggestion to the contrary until January 7, 2011. 18 Id. 19 notice of the settlement or an opportunity to select defense 20 counsel or evaluate Ms. Park's claim. 21 Pl.'s Ex. E. State Farm asserted that it had been As a result, State Farm explained, it was not given adequate Id. On November 7, 2011, American Home brought this action against 22 State Farm for equitable indemnity, equitable contribution, 23 equitable subrogation, and declaratory relief. 24 ("Compl."). ECF No. 1 Now both parties move for summary judgment. 25 26 27 28 III. LEGAL STANDARD Summary judgment is proper when "the movant shows that there is no genuine dispute as to any material fact and the movant is 5 1 entitled to judgment as a matter of law." 2 fact is "material" only if it may affect the outcome of the case, 3 and a dispute about a material fact is "genuine" only "if the 4 evidence is such that a reasonable jury could return a verdict for 5 the nonmoving party." 6 242, 248–49 (1986). 7 believed, and all justifiable inferences are to be drawn in his 8 favor." 9 support are insufficient to defeat a motion for summary judgment." Id. at 255. Fed. R. Civ. P. 56. Anderson v. Liberty Lobby, Inc., 477 U.S. "The evidence of the nonmovant is to be "Conclusory statements without factual 10 United States District Court For the Northern District of California A Surrell v. Cal. Water Serv. Co., 518 F.3d 1097, 1103 (9th Cir. 11 2008). 12 13 IV. DISCUSSION 14 A. 15 Under California law, one insurer has the right to seek Liability 16 equitable contribution from another when both are obligated to 17 indemnify or defend the same claim, and the first insurer has paid 18 more than its share of the loss or has defended the action without 19 any participation from the other. 20 Maryland Cas. Co., 65 Cal. App. 4th 1279, 1293 (Cal. App. Ct. 21 1998). 22 and State Farm issued policies to Mr. Beatson and that both 23 policies operate as primary policies on the loss involved in the 24 Park action. 25 undisputed that only American Home provided coverage for Mr. 26 Beatson's claim. 27 equitable contribution from State Farm. 28 Fireman's Fund Ins. Co. v. In this case, there is no dispute that both American Home See Def.'s XMSJ at 8; Pl.'s MSJ at 5. It is also Thus, American Home would normally be entitled to While State Farm acknowledges this general principle, it 6 1 contends that equitable considerations weigh against finding for 2 American Home. 3 California courts generally refuse to find a right to equitable 4 contribution against an insurer that is not put on notice of its 5 potential contribution obligations. 6 Insurance Exchange v. Unigard Insurance Co., 79 Cal. App 4th 966, 7 970-72 (Cal. Ct. App. 2000), Truck Insurance sought contribution 8 from Unigard Insurance with respect to an underlying lawsuit that 9 Unigard had never been asked to defend and a settlement that had Def.'s XMSJ at 8. As State Farm points out, For example, in Truck United States District Court For the Northern District of California 10 concluded prior to any tender to Unigard. 11 Unigard, reasoning: "To deny Unigard control (or shared control) of 12 the defense in the [underlying] cases and then saddle it with 13 expenses about which it knew nothing strikes us as the antithesis 14 of equity." 15 is analogous because American Home failed to put State Farm on 16 notice of its contribution obligations. 17 Id. at 981. The court found for State Farm argues that the instant action Def.'s XMSJ at 10-11. But Truck alone cannot justify denying American Home's 18 contribution and subrogation rights. In Truck, the defendant 19 insurer had absolutely no notice of the underlying action until 20 after a settlement had been reached. 21 In contrast, State Farm was on notice of the Park action as early 22 as August 2010, nearly five months prior to settlement. 23 Ex. J. 24 being sued by Ms. Park. 25 diligent inquiry would have revealed that State Farm owed Mr. 26 Beatson a duty to defend and indemnify. 27 constructive notice is sufficient to trigger an insurer's right to 28 equitable contribution. 79 Cal. App. 4th at 981-82. See Pl.'s At the time, Mr. Beatson informed State Farm that he was Id. Accordingly, a reasonable and Under California law, such See OneBeacon Am. Ins. Co. v. Fireman's 7 1 Fund Ins. Co., 175 Cal. App. 4th 183, 200 (Cal. Ct. App. 2009). 2 State Farm argues that any notice was rendered moot by obligations. 5 American Home continually represented that the American Home policy 6 was the only primary on the loss, and that American Home only 7 changed its position on the eve of the settlement of the Park 8 action. 9 facts: (1) on August 26, 2010, Ms. Caulfield allegedly told Mr. Ho 10 United States District Court American Home's representations and conduct regarding State Farm's 4 For the Northern District of California 3 that the American Home policy was the only primary on the loss, (2) 11 Mr. Ho sent Ms. Caulfield a letter on August 27, 2010 confirming 12 his understanding that American Home was the only primary, (3) 13 neither Ms. Caulfied nor American Home responded to or otherwise 14 challenged Mr. Ho's August 27 letter, (4) American never forwarded 15 any reports or documents related to the Park action, other than a 16 pre-trial report and perhaps one other report, and (5) there is no 17 evidence that State Farm was aware that American Home was reserving 18 its right to seek contribution from State Farm. 19 these facts, State Farm asserts affirmative defenses of estoppel 20 and laches. 21 applies here. 22 Def.'s XMSJ at 8-11. Id. State Farm contends that Specifically, State Farm points to the following Id. Based on The Court finds that neither affirmative defense Equitable estoppel requires a showing of four elements: "(1) 23 the party to be estopped must be apprised of the facts; (2) he must 24 intend that his conduct shall be acted upon, or must so act that 25 the party asserting the estoppel had a right to believe it was so 26 intended; (3) the other party must be ignorant of the true state of 27 facts; and (4) he must rely upon the conduct to his injury." 28 Emp'rs. Mut. Cas. Co. v. Phila. Indem. Ins. Co., 169 Cal. App. 4th 8 Farm did not rely on the actions or statements of American Home. 3 Instead, it relied on the conduct of Ms. Caulfield, Mr. Beatson's 4 defense counsel. 5 Home, she did not represent it. 6 Caulfield never represented that she was coverage counsel for 7 American Home. 8 unclear why Mr. Ho and State Farm chose to rely on her purported 9 representations rather than speaking directly with American Home. 10 United States District Court 340, 350 (2008) (internal quotations omitted). 2 For the Northern District of California 1 In this case, State To the extent that Ms. Caulfield did represent American Home, and 11 the undisputed facts show that she did not, she was not apprised of 12 the facts. 13 provisions of the American Home and State Farm policies prior to 14 speaking with Mr. Ho.2 While Ms. Caulfield was appointed by American In fact, Mr. Ho admitted that Ms. Pl.'s Ex. I at 31-32. Accordingly, it is entirely Ms. Caulfield has stated that she had not reviewed the Moreover, there is no indication that State Farm was ignorant 15 16 of the true state of facts, or at least that it did not have the 17 ability to discern them. 18 asserting it is "destitute . . . of all convenient or ready means" 19 of acquiring knowledge of the true state of facts. 20 Beach v. Mansell, 3 Cal. 3d 462, 490-91 (Cal. 1970) (quotations 21 omitted). 22 issued to Mr. Beatson, but mistakenly pulled the wrong one. 23 Farm also could have easily obtained American Home's policy and 24 other relevant documents by reaching out to the insurer directly. 25 Instead, State Farm chose to contact only Ms. Caulfield, who had no Estoppel only applies where the party City of Long Here, State Farm had ready access to the policy it State 26 27 28 2 As discussed above, there is a dispute concerning what Ms. Caulfield told Mr. Ho on August 25, 2010. That dispute is not material, however, because Ms. Caulfield did not have the actual or apparent authority to bind American Home with respect to coverage determinations. 9 1 involvement in American Home's coverage decisions. 2 equity counsel against penalizing American Home for State Farm's 3 mistakes and State Farm's failure to contact the appropriate 4 persons regarding its potential contribution obligations. 5 Principles of State Farm's affirmative defense of laches fails for similar 6 reasons. "Laches is an equitable time limitation on a party's 7 right to bring suit, resting on the maxim that equity aids the 8 vigilant, not those who sleep on their rights." 9 v. Good Things Int'l Ltd., 153 Cal. App. 4th 1144, 1156 (Cal. Ct. Magic Kitchen LLC United States District Court For the Northern District of California 10 App. 2007) (quotations omitted). To prevail on a laches defense, a 11 defendant must show: (1) that the plaintiff delayed asserting a 12 right or claim, (2) the delay was not reasonable or excusable, and 13 (3) the defendant suffered prejudice as a result of the delay. 14 at 1157. 15 Home did not need to formally assert its right to contribution to 16 reserve that right. 17 of equitable contribution for defense costs arises where, after 18 notice of litigation, a diligent inquiry by the insurer would 19 reveal the potential exposure to a claim for equitable 20 contribution." 21 Farm was on notice of the Park action as early as August 2010, 22 about five months prior to the settlement of the action. 23 State Farm has failed to show that it suffered prejudice as a 24 result of American Home's purported delay. 25 of the action in August 2010, it had the opportunity to investigate 26 the claim and participate in Mr. Beatson's defense. 27 to do so. 28 inaction. Id. The flaw in State Farm's laches defense is that American Under California law, "an insurer's obligation OneBeacon, 175 Cal. App. 4th at 203. Here, State Further, As soon as it learned It chose not Any prejudice to State Farm flowed from its own 10 Accordingly, the Court finds that summary judgment is 1 2 appropriate on the issue of liability and finds for American Home 3 on its claims of equitable indemnity, equitable subrogation, 4 equitable contribution, and declaratory relief. 5 B. 6 Now that the Court has found that American Home is entitled to Damages 7 contribution from State Farm, it must determine what that 8 contribution should be. 9 among multiple insurers, a trial court must select the most In allocating defense and indemnity costs United States District Court For the Northern District of California 10 equitable allocation method. 11 Co., 182 Cal. App. 4th 1023, 1032 (Cal. Ct. App. 2010). 12 such as this, Courts have enunciated various equitable allocation 13 methods, including "apportionment based upon the relative policy 14 limits of each primary policy" (the "policy limits" method); and 15 (2) "apportionment among each carrier in equal shares" (the "equal 16 shares" method). 17 have broad discretion in choosing among the various methodologies. 18 Id. 19 Scottsdale Ins. Co. v. Century Sur. Id. (internal quotations omitted). In cases Trial courts State Farm argues for the policy limits method, which would 20 result in State Farm paying only one quarter of the indemnity and 21 defense costs in the underlying settlement. 22 American Homes endorses the equal shares method, arguing that the 23 policy limits method is inequitable because it would leave State 24 Farm in the same position as if it had met its contractual 25 obligations and accepted coverage from the beginning. 26 12-13. 27 28 Def.'s MSJ at 12. The Court adopts the policy limits method here. Pl.'s MSJ at American Home argues that State Farm engaged in bad faith because it dodged its 11 1 contractual obligations from the outset. But the evidence belies 2 this contention. 3 Park action in August 2010, there is no indication that he ever 4 tendered the action to the insurer. 5 American Home directly reached out to State Farm about its 6 contribution obligations was January 2011, the eve of the Park 7 action's settlement. 8 bad faith in handling Mr. Beatson's claim because Mr. Beatson never 9 actually tendered a claim to State Farm. Though Mr. Beatson informed State Farm of the Further, the first time Thus, State Farm could not have engaged in Under the policy limits United States District Court For the Northern District of California 10 method, American Home is entitled to recover 20 percent of the 11 indemnity and defense costs it incurred in connection with the Park 12 action. 13 The Court also finds that the undisputed evidence shows that 14 American incurred at least $500,000 in the settlement of the Park 15 action. 16 additional $18,684.19 in settling Ms. Park's property damage 17 claims, as well as $55,296.04 in legal fees and costs. 18 the settlement agreement produced by American Home makes no mention 19 of the $18,684.19 figure. 20 evidence suggesting that American Home incurred only $5,264.38 in 21 defense costs, raising a triable issue of material fact on this 22 issue. See Pl.'s Ex. D. American Home claims that it incurred an However, Further, State Farm has introduced Accordingly, the Court leaves these two issues for trial. 23 24 25 V. CONCLUSION For the foregoing reasons, the Court GRANTS Plaintiff American 26 Home Assurance Company's motion for summary judgment and DENIES 27 Defendant State Farm Mutual Automobile Insurance Company's motion 28 for summary judgment. The Court finds for American Home on its 12 1 claims for equitable indemnity, equitable subrogation, equitable 2 contribution, and declaratory relief. 3 As to damages, the Court finds that American Home is entitled 4 to equitable contribution from State Farm of $100,000 for 5 settlement of the bodily injury claim in the Park action -- that is 6 20 percent of the $500,000 settlement. 7 entitled to recover from State Farm (1) 20 percent of the amount 8 for which American Home settled Ms. Park's claim for property 9 damage, and (2) 20 percent of the total legal fees that American American Home is also United States District Court For the Northern District of California 10 Home expended in defending the Park action. However, at this stage 11 there exist triable issues of fact as to these amounts. 12 Accordingly, these two issues may be resolved at trial. 13 14 IT IS SO ORDERED. 15 16 17 Dated: April 9, 2013 UNITED STATES DISTRICT JUDGE 18 19 20 21 22 23 24 25 26 27 28 13

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