Everest National Insurance Company v. Jeffrey Novak General Contractor Inc.

Filing 36

ORDER RE SUMMARY JUDGMENT. Case Management Statement due by 2/22/2018. Case Management Conference set for 3/1/2018 at 10:00 AM in Courtroom 11, 19th Floor, San Francisco. Signed by Judge James Donato on 1/2/2018. (jdlc2S, COURT STAFF) (Filed on 1/2/2018)

1
2
3
4

UNITED STATES DISTRICT COURT

5

NORTHERN DISTRICT OF CALIFORNIA

6
7

EVEREST NATIONAL INSURANCE
COMPANY,

8

Plaintiff,

9
10

United States District Court
Northern District of California

11
12
13

v.

Case No. 16-cv-04814-JD
ORDER RE SUMMARY JUDGMENT
Re: Dkt. No. 14

JEFFREY NOVAK GENERAL
CONTRACTOR, INC.,
Defendant.
In this insurance coverage dispute, plaintiff Everest National Insurance Company seeks

14

summary judgment on its first claim for declaratory relief against Jeffrey Novak General

15

Contractor, Inc. Dkt. No. 14. The Court denies the motion.

16

Everest has failed to meet its burden of establishing that the earth movement exclusion in

17

its policy applies here and eliminates coverage. The earth movement exclusion provides that the

18

commercial general liability insurance coverage promised by Everest to Novak “does not apply to

19

bodily injury, property damage or personal and advertising injury caused by, resulting from,

20

attributable or contributed to [sic], or aggravated by earth movement . . . .” Dkt. No. 1-1, Ex. 1 at

21

ECF p. 52. But the underlying complaint in this case, Dkt. No. 1-1, Ex. 2, does not allege any

22

earth movement at all. It alleges only that the Sadoffs’ property, for which Jeffrey Novak General

23

Contractor, Inc. served as the general contractor, suffered “differential settlement” due to

24

“inadequate structural support and inadequate foundation depth and integrity.” Id. ¶¶ 5, 62.

25

Critically, “differential settlement” and “earth movement” are not one and the same. See Davis v.

26

United Servs. Auto. Ass’n, 223 Cal. App. 3d 1322, 1329 (1990) (differentiating between grading

27

and foundation work on the one hand and “anti-earth movement devices” on the other, and

28

explaining that “grading is performed for a variety of reasons including providing an area on

1

which it is cheaper and quicker to build and which may provide a lot more desirable to the final

2

buyer, a foundation also provides support for the structure.”).

3

The main cases Everest relies on are inapposite because earth movement was either
specifically alleged or stipulated to. See City of Carlsbad v. Ins. Co. of the State of Pa., 180 Cal.

5

App. 4th 176, 179 (2009) (parties stipulated that “a landslide . . . damaged or destroyed a total of

6

15 units and caused damage to the common areas”); Blackhawk Corp. v. Gotham Ins. Co., 54 Cal.

7

App. 4th 1090, 1093 (1997) (“seven home buyers sued Blackhawk and others, asserting defective

8

lot claims based on settlement of their homes, earth movement, water intrusion and defective

9

drainage”); Probuilders Specialty Ins. Co. v. Double M. Constr., 116 F. Supp. 3d 1173, 1176 (D.

10

Nev. 2015) (in underlying complaint, “[o]ne of the underlying theories is that the affected homes

11
United States District Court
Northern District of California

4

are being damaged due to earth movement, specifically differential settlement”). The reference to

12

“differential settlement” in Double M does not establish that differential settlement can only be

13

caused by earth movement. Nor do the other two cases support Everest’s position that “earth

14

movement” and “differential settlement” must be one and the same.

15

To prevail on the duty to defend at summary judgment, the insurer must negate any

16

possibility of coverage. Gonzalez v. Fire Ins. Exchange, 234 Cal. App. 4th 1220, 1230 (2015).

17

And “[w]hen an insurer seeks summary judgment on the ground the claim is excluded, the burden

18

is on the insurer to prove that the claim falls within an exclusion.” Id. Everest has failed to meet

19

that burden. The underlying complaint alleges only “differential settlement,” and the evidence

20

Everest points to in support of its motion also speaks only of “settling.” Dkt. No. 14 at 10-11.

21

Everest has not shown that that “settling” could only have been caused by, or that it must be

22

treated as synonymous with, “earth movement.” The Court consequently denies summary

23

judgment on the basis of the earth movement exclusion.

24

Everest’s request for summary judgment on the basis of the general contractors warranty

25

endorsement is also denied. Everest says that “[s]ince all of the damages relate to the work of

26

Novak’s independent contractors, no coverage applies.” Dkt. No. 26 at 11; see also Dkt. No. 14 at

27

13 (“Since the alleged damages in this case relate to work performed by the independent

28

contractors, all of the alleged damages are excluded from coverage and Everest has no obligation
2

to defend and/or indemnify Novak relating to the FAC.”). But the premise of the argument is

2

faulty. The underlying complaint alleges that “Jeffrey Novak General Contractor, Inc. and DOES

3

1 through 30 . . . failed to meet th[e] general standard of care, constructing the property with

4

inadequate structural support and inadequate foundation depth and integrity, causing the property

5

to suffer differential settlement.” Dkt. No. 1-1, Ex. 2 ¶¶ 61-62. Defendant DOES 1 through 30

6

are alleged to have been “contractors, subcontractors, materialsmen, suppliers and/or developers

7

who materially participated in the initial and defective construction of the property.” Id. ¶ 6

8

(emphasis added). The complaint clearly does not state, and Everest has not submitted any

9

undisputed evidence to show, that the alleged injury in the underlying case was caused only by the

10

work of Novak’s independent contractors. There is a meaningful possibility that Novak has some

11
United States District Court
Northern District of California

1

responsibility and liability to plaintiffs in the underlying case, aside and apart from any work done

12

by independent contractors. Even assuming that Everest is right about Novak’s failure to satisfy

13

the general contractors warranty endorsement, Everest still would not be entitled to a declaration

14

that that failure “excludes any claim for coverage.” Dkt. No. 14, Notice of Motion at 2.

15

Consequently, Everest’s motion is denied in its entirety. Dkt. No. 14. A further case

16

management conference is set for March 1, 2018, at 10:00 a.m., and a joint case management

17

statement is due by February 22, 2018.

18
19

IT IS SO ORDERED.
Dated: January 2, 2018

20
21
JAMES DONATO
United States District Judge

22
23
24
25
26
27
28
3