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)

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