Great America Insurance Company et al v. Chang et al

Filing 86

Order by Hon. Samuel Conti granting in part and denying in part 81 Motion for Summary Judgment.(sclc2, COURT STAFF) (Filed on 11/6/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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For the Northern District of California

United States District Court

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GREAT AMERICAN INSURANCE COMPANY,
and GREAT AMERICAN INSURANCE
COMPANY OF NEW YORK,
Plaintiffs,

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v.
MICHAEL CHANG, d/b/a SUNRISE
CLEANERS, INC, and ROXANNE CHANG,
an individual,

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Defendants.

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Case No. 12-0833-SC
ORDER GRANTING IN PART AND
DENYING IN PART MOTION FOR
SUMMARY JUDGMENT

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I.

INTRODUCTION
Now before the Court is Plaintiffs Great American Insurance

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Company and Great American Insurance Company of New York's

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(collectively, "Great American") motion for summary judgment.

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No. 81 ("MSJ").

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(collectively, "the Changs") have opposed the motion, and Great

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American has filed a reply in support of the motion.

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("Opp'n"), 83 ("Reply").

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for resolution without oral argument per Civil Local Rule 7-1(b).

ECF

Defendants Michael and Roxanne Chang

ECF Nos. 82

The Court finds this matter appropriate

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For the reasons set forth below, Great American's motion is GRANTED

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in part and DENIED in part.

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II.

BACKGROUND

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The Court has already recounted most of the relevant facts in

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a number of prior orders, including a June 19, 2013 Order granting

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Great American's prior motion for partial summary judgment.

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No. 77 ("June 19 Order").

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insurance coverage dispute arising from underlying state court

ECF

In short, this case involves an

United States District Court

For the Northern District of California

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actions and government orders concerning the alleged contamination

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of a San Mateo, California property owned by Michael Chang.

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Changs operated a dry cleaner business on the property from 1977

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through 1981.

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insurance to Michael Chang for policy periods running from 1977

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through 1983.

The

Great American issued third-party liability

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Several years after the Great American policies expired, the

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Changs leased the property to Bilal Kartal ("Kartal"), who opened

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an Italian restaurant on the premises.

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nuisance action against the Changs in connection with an alleged

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solvent leak on the property (hereinafter, the "Kartal Action").

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In the Kartal action, the Changs filed cross-complaints against

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various third parties who operated dry cleaners on the property

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before and after the Changs.

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cross-complaints against the Changs.

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In 2006, Kartal brought a

These third parties have also filed

In 2009, Great American agreed to defend the Changs against

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the cross-complaints filed against them in the Kartal Action.

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Great American's agreement was subject to a complete reservation of

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rights, including a reservation of the right to seek reimbursement

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of any claimed defense expense or other amounts Great American

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advanced.

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paid a total of $692,416.13 for attorneys' fees, costs, and other

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expenses claimed by the Changs with respect to the Kartal Action.

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In connection with the Kartal Action, Great American has also

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advanced the Changs $121,259.06 related to site investigation on

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the property, also subject to a full reservation of rights.
Sometime after the Kartal Action was filed, the Changs applied

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Subject to its reservation of rights, Great American

to the California Regional Water Quality Control Board (the

United States District Court

For the Northern District of California

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"Board") for funding from the Underground Tank Storage Fund ("Tank

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Fund") for pollution clean-up on the property.

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denied the Changs' application, the Changs asked Great American to

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pay certain legal fees and costs incurred in challenging the

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decision.

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complete reservation of rights, including the right to seek

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reimbursement of amounts paid.

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rights, Great American has paid a total of $70,426.59 for

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attorneys' fees, costs, and other expenses claimed by the Changs

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with respect to the Tank Fund litigation.

After the Board

Great American agreed to advance costs subject to a

Subject to its reservation of

The Changs have also sought coverage from other insurers in

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connection with this underlying litigation, including Fireman's

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Fund Insurance Company ("Fireman's Fund") and Farmers Insurance

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Company ("Farmers").

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in connection with the Tank fund Litigation, subject to a full

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reservation of rights.

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Fireman's Fund has agreed to provide coverage

Farmers has agreed to provide coverage with

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respect to the Kartal Action, also subject to a full reservation of

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rights. 1
Great American brought this action against the Changs in

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February 2012.

Great American's amended complaint asserts nine

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causes of action for, inter alia, declaratory relief, reimbursement

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of money paid, and breach of contract.

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seeks (1) a declaration that it does not owe the Changs a duty to

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defend or indemnify them as to the Kartal Action, the Tank Fund

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litigation, or clean-up on the property; and (2) reimbursement of

Great American essentially

United States District Court

For the Northern District of California

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the amounts that it has paid on behalf of the Changs in connection

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with contamination on the property.
The first issue was settled by the Court's June 19, 2013 Order

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granting Great American's motion for partial summary judgment.

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that order, the Court found that Great American had no duty to

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defend or indemnify the Changs as to the Tank Fund litigation or

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the complaint and cross-complaints filed in the Kartal Action. 2

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In

June 19 Order at 23.
Great American now moves for summary judgment on the second

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issue, arguing that it is entitled to reimbursement from the Changs

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of $884,101.59, the total amount Great American advanced to the

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Changs in connection with the Kartal Action, the Tank Fund

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litigation, and site investigation on the property.

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also seeks prejudgment interest.

Great American

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The Changs' opposition brief indicates that the Changs brought a
coverage action against Farmers in San Mateo Superior Court.
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The Changs filed a counterclaim against Great American for breach
of contract and breach of the covenant of good faith and fair
dealing. The Court found, as a matter of law, that the Changs
could not prevail on these claims because they were not entitled to
coverage under the Great American policies. June 19 Order at 23.

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III. LEGAL STANDARD

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Entry of summary judgment is proper "if the movant shows that

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there is no genuine dispute as to any material fact and the movant

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is entitled to judgment as a matter of law."

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56(a).

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require a directed verdict for the moving party.

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Liberty Lobby, Inc., 477 U.S. 242, 251 (1986).

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mandates the entry of summary judgment . . . against a party who

Fed. R. Civ. P.

Summary judgment should be granted if the evidence would
Anderson v.
Thus, "Rule 56[]

United States District Court

For the Northern District of California

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fails to make a showing sufficient to establish the existence of an

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element essential to that party's case, and on which that party

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will bear the burden of proof at trial."

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477 U.S. 317, 322 (1986).

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believed, and all justifiable inferences are to be drawn in his

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favor."

Celotex Corp. v. Catrett,

"The evidence of the nonmovant is to be

Anderson, 477 U.S. at 255.

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IV.

DISCUSSION

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A.

Amounts Advanced by Great American

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The Changs do not dispute that Great American advanced

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$884,101.59 in costs in connection with the Kartal Action, the Tank

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Fund litigation, and site investigation on the property.

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they argue that the Court should deny Great American's motion

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because: (1) the Changs are entitled to coverage under the Great

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American policy, (2) the Great American policy does not include

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express language permitting reimbursement from the insured, (3)

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Great American must seek reimbursement from the Changs' other

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insurers before seeking reimbursement from the Changs.

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However,

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The Changs' first argument -- that they are entitled to

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coverage under the Great American policies -- was addressed and

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rejected in the Court's June 19 Order granting Great American's

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prior motion for partial summary judgment.

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moved for reconsideration of the June 19 Order.

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motion was denied.

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issue now, especially since the Changs do not raise any new facts

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or legal authority.

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ECF No. 80.

The Changs have already
ECF No. 77.

That

The Court declines to revisit the

The Changs' second argument -- that the Great American policy

United States District Court

For the Northern District of California

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does not provide for reimbursement from the insured -- is also

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unavailing.

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Buss v. Superior Court, 16 Cal. 4th 35 (Cal. 1997).

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court held that an insurer may seek reimbursement for defense costs

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that are not even potentially covered under the insured's policy.

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16 Cal. 4th at 50.

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reimbursement is "is implied in law as quasi-contractual, whether

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or not it has one that is implied in fact in the policy as

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contractual."

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reimbursement as to claims that are not even potentially covered

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under the insurance policy, regardless of whether the insurance

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contract expressly provides for reimbursement.

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The California Supreme Court addressed this issue in
In Buss, the

The court also held that the insurer's right to

Id. at 51.

Thus, an insurer has a right to seek

The Changs' third argument is that Great American should seek

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reimbursement from the Changs' other insurers -- Farmers and

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Fireman's Fund -- before seeking reimbursement from the Changs.

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The Changs have offered no authority to support this proposition.

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Moreover, Farmers and Fireman's Fund have already reserved their

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rights under the Changs' policies, and it is unclear whether these

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insurers are required to provide coverage for the costs that have

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already been advanced by Great American.

Great American should not

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have to seek reimbursement from third-party insurers, and

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potentially file another coverage action against those insurers, to

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recover costs that it advanced to the Changs.

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consistent with another decision rendered by the Court.

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Burlington Ins. Co. v. Alan, No. C 12-03372 SI, 2013 U.S. Dist.

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Lexis 31051, at *7 (N.D. Cal. March 5, 2013) (expressing skepticism

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of insured's argument that "contribution from a co-insurer, not

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reimbursement from its insured, is the correct vehicle by which

This reasoning is
See

United States District Court

For the Northern District of California

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Burlington should seek recovery of costs incurred in defending

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Alan."). 3

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In sum, the Court finds that Great American is entitled to

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reimbursement from the Changs for the $884,101.59 in costs advanced

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in connection with the underlying litigation and clean-up on the

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property.

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B.

Prejudgment Interest

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Great American also seeks prejudgment interest.

California

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Civil Code 3287(a) provides: "Every person who is entitled to

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recover damages certain, or capable of being made certain by

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calculation, and the right to recover which is vested in him upon a

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particular day, is entitled also to recover interest thereon from

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that day."

"While a factual dispute respecting damages will

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The Changs also argue that the timing of the instant motion
constitutes a violation of the Great American insurance policy, as
well as a breach of the covenant of good faith and fair dealing.
They reason that the trials in the Kartal Acton and the Changs'
coverage action against Farmers are set to commence in October and
November 2013, respectively, and that an adverse judgment in this
case will prejudice the Changs' prosecution of those trials. This
argument is unpersuasive. The pertinent question is whether Great
American is entitled to reimbursement, not what impact
reimbursement will have on the Changs.

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preclude a grant of prejudgment interest under § 3287(a), a legal

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dispute will not."

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514, 521 (9th Cir. 1995).

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interpreted the ‘vesting’ requirement as being satisfied at the

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time that the amount of damages becomes certain or capable of being

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made certain, not the time liability to pay those amounts is

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determined."

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(9th Cir. 2009).

Highlands Ins. Co. v. Cont'l Cas. Co., 64 F.3d
"California cases uniformly have

Evanston Ins. Co. v. OEA, Inc., 566 F.3d 915, 921

Here, there is no factual dispute about the amount of damages.

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United States District Court

For the Northern District of California

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The Changs do not contest that Great American advanced $884,101.59

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in connection with the underlying litigation and clean-up on the

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property.

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the amount of damages became certain at the time Great American

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advanced the sums to the Changs.

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to specify exactly when the funds were advanced.

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referenced in Great American’s motion for summary judgment indicate

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that the $884,101.59 was distributed over a number of years.

Moreover, the vesting requirement is satisfied because

However, Great American has yet
The exhibits

Accordingly, Great American's request for prejudgment interest

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is DENIED without prejudice, pending supplemental briefing on when

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Great American’s right to damages vested.

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V.

CONCLUSION
For the foregoing reasons, Great American's motion for summary

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judgment is GRANTED in part and DENIED in part.

The Court finds

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that Great American is entitled to reimbursement from the Changs in

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the amount of $884,101.59.

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prejudgment interest is denied pending supplemental briefing.

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Great American shall file supplemental briefing on this issue

Great American's request for

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within seven (7) days of the signature date of this Order.

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Court also grants the Changs seven (7) days to respond to Great

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American's supplemental briefing.

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9, 2013 is hereby VACATED.

The jury trial set for December

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IT IS SO ORDERED.

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November 6, 2013
UNITED STATES DISTRICT JUDGE

United States District Court

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For the Northern District of California

The

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