U.S. Specialty Insurance Company v. Hard Rock Tile & Stone et al
Filing
56
ORDER on 43 Motion for Partial Summary Judgment; 45 Motion for Partial Summary Judgment; 53 Motion to Join Necessary Party and Request for Additional Briefing. Signed by Judge Jeffrey T. Miller on 9/7/2021. (sjt)
Case 3:20-cv-01009-JM-BLM Document 56 Filed 09/07/21 PageID.1617 Page 1 of 15
1
2
3
4
5
6
7
8
UNITED STATES DISTRICT COURT
9
SOUTHERN DISTRICT OF CALIFORNIA
10
11
12
13
14
15
ORDER ON MOTIONS FOR
SUMMARY JUDGMENT, MOTION
TO JOIN NECESSARY PARTY, AND
REQUEST FOR ADDITIONAL
BRIEFING
Plaintiff,
v.
HARD ROCK TILE & STONE,
Defendant.
16
17
Case No.: 20cv1009 JM (BLM)
U.S. SPECIALTY INSURANCE
COMPANY,
HARD ROCK TILE & STONE,
18
Third-Party Plaintiff,
19
v.
20
PRIMESTATE INSURANCE AGENCY,
INC., dba WESTERN UNITED
COMMERCIAL INSURANCE
SERVICES,
Third-Party Defendant.
21
22
23
24
25
Presently before the court is Plaintiff U.S. Specialty Insurance Company
26
(“USSIC”)’s Motion for Partial Summary Judgment (Doc. No. 43), Third-Party
27
Defendant Primestate Insurance Agency, Inc. dba Western United Insurance Services
28
(“Western United”)’s Motion for Summary Judgment, or in the alternative, Partial
1
20cv1009 JM (BLM)
Case 3:20-cv-01009-JM-BLM Document 56 Filed 09/07/21 PageID.1618 Page 2 of 15
1
Summary Judgment (Doc. No. 45), and Defendant Hard Rock Tile & Stone (“Hard
2
Rock”)’s Motion to Join Necessary Party (Doc. No. 53). The motions have been fully
3
briefed and the court finds them suitable for submission without oral argument in
4
accordance with Civil Local Rule 7.1(d)(1). For the reasons set forth below, the court
5
GRANTS USSIC’s Motion and DEFERS consideration of Western United’s Motion for
6
Summary Judgment and Hard Rock’s Motion to Join Necessary Party pending the
7
resolution of questions regarding the court’s subject matter jurisdiction.
8
9
BACKGROUND
I.
Factual Background
10
This action arises out of USSIC’s rescission of Hard Rock’s Artisan Contractors
11
Liability Insurance policy, based on Hard Rock’s alleged failure to accurately disclose
12
whether it operates a “store front.”
13
A.
14
Hard Rock is a “retail seller of tile and stone and also an installer of these
15
products.” (Doc. No. 10 at ¶ 5). Hard Rock is owned solely by Tom Cruse. (Doc. No.
16
47-2 at ¶ 24). Since January 2016, Hard Rock has operated a “retail store” that is staffed
17
seven days a week with a salesperson, where a customer can purchase tile. (Doc. Nos.
18
47-2 at ¶ 9; 52-1 at ¶ 11). Retail sales make up approximately half of Hard Rock’s sales.
19
Id.
Hard Rock’s Application for Artisan Contractors Liability Insurance
20
On or about November 2016, Hard Rock sought a proposal from Western United
21
for insurance coverage. Id. at ¶ 1. On or about December 5, 2016, Western United
22
prepared and submitted an HCC Artisan Application for Artisan Contractors Liability
23
Insurance (“Artisan Application”), on behalf of Hard Rock, to USSIC. (Doc. Nos. 47-2
24
at ¶ 1; 43-4 at 2-5). The Application contains the following question and answer:
25
26
27
16) Has or will the applicant operate a store front?
No.
(Doc. No. 43-4 at 3).
28
2
20cv1009 JM (BLM)
Case 3:20-cv-01009-JM-BLM Document 56 Filed 09/07/21 PageID.1619 Page 3 of 15
1
2
The Application states 100% of Hard Rock’s business is as a “Tile and Stone
Installation Contractor.” Id. at 2. The Application was signed by Mr. Cruse. Id. at 4-5.
3
The Application contains the following language:
4
BY SIGNING THIS APPLICATION, THE APPLICANT
WARRANTS AND REPRESENTS THAT EACH OF THE
FACTS AND REPRESENTATIONS CONTAINED IN THIS
APPLICATION,
ALONG
WITH
ALL
OTHER
INFORMATION SUPPLIED BY OR ON BEHALF OF THE
APPLICANT, ARE TRUE, COMPLETE AND ACCURATE.
IT IS FURTHER UNDERSTOOD THAT THE APPLICANT’S
SIGNATURE IS BINDING WITH RESPECT TO ALL
FUTURE APPLICATIONS AND/OR RENEWALS.
5
6
7
8
9
10
…
11
THE
APPLICANT
UNDERSTANDS
THAT
ANY
MISREPRESENTATIONS
OR
OMISSIONS
SHALL
CONSTITUTE
GROUNDS
FOR
RECISSION
OF
COVERAGE AND DENIAL OF CLAIMS.
12
13
14
Id. at 4.
15
USSIC
subsequently
issued
Commercial
General
Liability
Policy
No.
16
U16AC95298-00, effective December 7, 2016, through December 7, 2017, to Hard Rock.
17
(Doc. No. 43-5). The policy was renewed three times.1 (Doc. Nos. 47-2 at ¶ 7; 43-6, 43-
18
7; 43-8).
19
B.
20
On or about March 29, 2020, Hard Rock submitted a General Liability Notice of
21
Occurrence/Claim to USSIC for injuries and damages claimed by a customer, Fouzia
22
Jami, at Hard Rock’s retail store. (Doc. Nos. 43-2 at 4; 47-2 at ¶ 9). Ms. Jami was
23
allegedly injured while shopping at Hard Rock’s store. Id.
Hard Rock Submits a Claim
24
25
26
27
28
1
Policy No. U17AC95298-01, effective December 7, 2017, through December 7, 2018,
Policy No. U18AC95298-02, effective December 7, 2018, through December 7, 2019,
and Policy No. U19AC95298-03, effective December 7, 2019 through December 7, 2020.
3
20cv1009 JM (BLM)
Case 3:20-cv-01009-JM-BLM Document 56 Filed 09/07/21 PageID.1620 Page 4 of 15
1
A general adjustor, Nikki Bardell, was assigned to investigate Hard Rock’s claim.
2
(Doc. No. 43-2 at 1-2 (“Bardell Decl.”) at ¶ 1). During her investigation, Ms. Bardell
3
exchanged a number of e-mails with Mr. Cruse. Of relevance, in an April 21, 2020
4
e-mail correspondence, Ms. Bardell asked Mr. Cruse “[w]hen did you open the store front
5
for Hard Rock Tile & Stone?” and indicated she needed “to confirm with USSIC
6
Underwriting if the policy was intended to cover the store front.” (Doc. No. 43-2 at 8).
7
Mr. Cruse responded on April 22, 2020 that “[i]t was January 1st, 2016.” Id.
8
On May 14, 2020, Ms. Bardell sent a follow-up e-mail to “confirm a few details
9
about the store front so coverage can be finalized.” Id. at 7. Ms. Bardell specifically
10
asked whether Hard Rock’s “showroom” was “always present from the day” the store
11
was opened. Id. Mr. Cruse responded, via email on the same day, that “[t]he showroom
12
has always been present from the day [the store] opened.” Id.
13
C.
14
On June 1, 2020, USSIC sent a letter to Hard Rock rescinding Hard Rock’s
15
insurance policy and denying coverage of Ms. Jami’s claim. (Doc. Nos. 47-2 at ¶ 12; 43-
16
9 at 41-44). As the basis for its decision, USSIC’s letter provided that:
17
18
19
20
21
22
23
24
25
26
27
USSIC Rescinds the Policy
Prior to U.S. Specialty issuing its first policy of insurance to
Hard Rock Tile & Stone, Tom Cruse signed an Artisan
Application for insurance which answered “'No” to the question
of whether Hard Rock Tile & Stone would be operating a
storefront. By way of email from Mr. Cruse on May 14, 2020,
it has been confirmed that the Storefront was in fact open and
operational at the time the Artisan Application was submitted
and at all times since then.
Accordingly, the originating U.S. Specialty policy and all
renewals thereof were issued based on material
misrepresentations contained in the Artisan Application. On
that basis, U.S. Specialty denies coverage for the claim relating
to injuries suffered by Ms. Fouvia, and hereby provides notice
of the Rescission Action to rescind all policies of insurance
issued to Hard Rock Tile & Stone.
28
4
20cv1009 JM (BLM)
Case 3:20-cv-01009-JM-BLM Document 56 Filed 09/07/21 PageID.1621 Page 5 of 15
1
(Doc. No. 43-9 at 42).
2
USSIC enclosed with this correspondence a check in the amount of $3,330.00,
3
representing all premiums paid by Hard Rock not previously returned. (Doc. No. 47-2 at
4
¶ 13). The correspondence also included a copy of USSIC’s Complaint in the instant
5
action to enforce the rescission. (Id. at ¶ 14).
6
II.
Procedural Background
7
On June 1, 2020, USSIC filed a Complaint against Hard Rock asserting causes of
8
action for rescission and declaratory judgment. (Doc. No. 1). On July 10, 2020, Hard
9
Rork filed counterclaims against USSIC for breach of contract, breach of the implied
10
covenant of good faith and fair dealing, and declaratory relief. (Doc. No. 9).
11
same day, Hard Rock filed a Third-Party Complaint against Western United asserting
12
causes of action for professional negligence and negligent misrepresentation. (Doc. No.
13
10).
On the
14
On August 11, 2020, USSIC filed an Amended Complaint asserting causes of
15
action for rescission and declaratory judgment against Hard Rock and causes of action for
16
equitable indemnity and equitable contribution against Western United. (Doc. No. 17).
17
On November 18, 2020, Western United filed counterclaims against USSIC, also for
18
equitable indemnity and equitable contribution. (Doc. No. 30).
19
On June 22, 2021, USSIC filed its Motion for Partial Summary Judgment against
20
Hard Rock. (Doc. No. 43). Hard Rock filed a Response (Doc. No. 47) and USSIC filed a
21
Reply (Doc. No. 49).
22
On June 28, 2021, Western United filed its Motion for Summary Judgment against
23
Hard Rock. (Doc. No. 45). Hard Rock filed a Response (Doc. No. 48) and Western
24
United filed a Reply (Doc. No. 52).
25
On August 3, 2021, Hard Rock filed a Motion to Join Necessary Party (Doc. No.
26
53).
27
///
28
///
5
20cv1009 JM (BLM)
Case 3:20-cv-01009-JM-BLM Document 56 Filed 09/07/21 PageID.1622 Page 6 of 15
1
LEGAL STANDARD
2
Rule 56 of the Federal Rules of Civil Procedure provides that “[t]he court shall
3
grant summary judgment if the movant shows there is no genuine dispute as to any
4
material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
5
56(a). Material facts are those that may affect the outcome of the case. See Anderson v.
6
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is
7
“genuine” if the evidence “is such that a reasonable jury could return a verdict for the
8
nonmoving party.” See id. “[I]n ruling on a motion for summary judgment, the judge
9
must view the evidence presented through the prism of the substantive evidentiary
10
burden.” Id. at 254. The question is “whether a jury could reasonably find either that the
11
[moving party] proved [it’s] case by the quality and quantity of evidence required by the
12
governing law or that [it] did not.” Id. “[A]ll justifiable inferences must be drawn in [the
13
nonmovant’s] favor.” Id. at 255. “The mere existence of some alleged factual dispute
14
between the parties will not defeat an otherwise properly supported motion for summary
15
judgment.” Id. at 247-248.
16
17
ANALYSIS
I.
USSIC’s Motion for Partial Summary Judgment
18
A.
19
A rescission is affected under California law “by giving notice of rescission and
20
restoring, or offering to restore, everything of value received under the contract.” S. Ins.
21
Co. v. Workers’ Comp. Appeals Bd., 11 Cal. App. 5th 961, 971 (2017) (citing Cal. Civ.
22
Code § 1691). Once a contract has been rescinded, “any party to the contract may seek
23
legal or equitable relief based upon the rescission.” Id.
Rescission of an Insurance Contract
24
Under the California Insurance Code, an insurer is entitled to rescind a policy if the
25
insured has concealed or misrepresented material facts in its insurance application.
26
See Cal. Ins. Code § 331 (“Concealment, whether intentional or unintentional, entitles the
27
injured party to rescind insurance.”); § 359 (“If a representation is false in a material
28
point, whether affirmative or promissory, the injured party is entitled to rescind the
6
20cv1009 JM (BLM)
Case 3:20-cv-01009-JM-BLM Document 56 Filed 09/07/21 PageID.1623 Page 7 of 15
1
contract from the time the representation becomes false.”); LA Sound USA, Inc. v. St.
2
Paul Fire & Marine Ins. Co., 156 Cal. App. 4th 1259, 1266-67 (2007) (“When a
3
policyholder conceals or misrepresents a material fact on an insurance application, the
4
insurer is entitled to rescind the policy.”). “The burden of proof is on the insurer to
5
establish misrepresentation or concealment.” Atmel Corp. v. St. Paul Fire & Marine Ins.
6
Co., 416 F. Supp. 2d 802, 810 (N.D. Cal. 2006) (citing Thompson v. Occidental Life Ins.
7
Co., 9 Cal. 3d 904, 909, 919 (1973)).
8
B.
9
“Construction of an insurance policy is governed by state law.” Humboldt Bank v.
10
Gulf Ins. Co., 323 F. Supp. 2d 1027, 1032 (N.D. Cal. 2004). Under California law,
11
“[i]nterpretation of an insurance policy is a question of law and follows the general rules
12
of contract interpretation.” TRB Invs., Inc. v. Fireman’s Fund Ins. Co., 40 Cal. 4th 19, 27
13
(2006).
14
meaning that a layperson would attach to them.” Blue Ridge Ins. Co. v. Stanewich,
15
142 F.3d 1145, 1147 (9th Cir. 1998) (citing Reserve Ins. Co. v. Pisciotta, 30 Cal. 3d 800,
16
807 (1982)).
Principles of Contractual Interpretation
A court is to interpret words in an insurance policy “according to the plain
17
C.
18
To prevail on its rescission claim, USSIC must prove that Hard Rock, “whether
19
intentionally or not, made a misrepresentation” in its insurance application and USSIC
20
“would not have issued the policy” if Hard Rock “had not made that misrepresentation.”
21
Duarte v. Pac. Specialty Ins. Co., 13 Cal. App. 5th 45, 57 (2017).2
22
23
24
25
26
27
28
Did Hard Rock Make a Material Misrepresentation?
Although Hard Rock maintains it was Western United that prepared and submitted the
Artisan Application on Hard Rock’s behalf, for the purposes of USSIC’s rescission
action, this fact is irrelevant. “Representations in an insurance application prepared by an
insurance broker on behalf of an insured are attributed to the insured as a matter of law.”
Superior Dispatch, Inc. v. Ins. Corp. of N.Y., 181 Cal. App. 4th 175, 192 (2010); LA
Sound, 156 Cal. App. 4th at 1268 (“As a matter of law, ‘if [an insurance] application was
prepared by an insurance broker (the agent of the insured), the application’s contents are
the insured’s responsibility[.]”).
7
2
20cv1009 JM (BLM)
Case 3:20-cv-01009-JM-BLM Document 56 Filed 09/07/21 PageID.1624 Page 8 of 15
1
USSIC argues Hard Rock made a material misrepresentation by answering “no” to
2
Question No. 16 of the Artisan Application—which asks: “[h]as or will the applicant
3
operate a store front?” (Doc. No. 43 at 10). In response, Hard Rock argues the term
4
“store front” as used in Question No. 16 is ambiguous in that an applicant could have
5
interpreted it as asking about “the front or entryway of a store,” “the front or side of a
6
store facing a street,” “the front or side of a store with display windows” or “the front or
7
side of a store with display windows facing a street.” (Doc. No. 47 at 12).
8
Whether the language in a contract is ambiguous is a question of law. Castro v.
9
Fireman's Fund Am. Life Ins. Co., 206 Cal. App. 3d 1114, 1119 (1988). “A contract term
10
will be considered ambiguous when it is capable of two or more constructions, both of
11
which are reasonable.” Westport Ins. Corp. v. N. Cal. Relief, 76 F. Supp. 3d 869, 879
12
(N.D. Cal. 2014). However, courts should not “strain to create am ambiguity where none
13
exists.” Id. (quotations omitted). Rather, the language at issue “must be construed in the
14
context of that instrument as a whole, and in the circumstances of that case, and cannot be
15
found to be ambiguous in the abstract.” Producers Dairy Delivery Co. v. Sentry Ins. Co.,
16
41 Cal. 3d 903, 916 n.7 (1986). If the policy is ambiguous, the ambiguity is generally
17
resolved “in accordance with the objectively reasonable expectations of the insured.”
18
Farmers Ins. Exch. v. Knopp, 50 Cal. App. 4th 1415, 1417 (1996). “These principles
19
apply likewise to the questions in an application prepared by an insurer.” Duarte, 13 Cal.
20
App. 5th at 54.
21
Here, it is undisputed Hard Rock has operated a “retail store” since January 2016,
22
that is staffed with a salesperson seven days a week, where a customer can select and
23
purchase tile. (Doc. Nos. 47-1, Ex. 1 at 16:1-3, 16:23-17:4; 48-1 at ¶ 11). The issue
24
before the court is whether the term “store front” is susceptible to more than one
25
reasonable interpretation such that Hard Rock could have concluded its “retail store” or
26
“showroom” did not qualify. This question “must be answered through the eyes of a
27
28
8
20cv1009 JM (BLM)
Case 3:20-cv-01009-JM-BLM Document 56 Filed 09/07/21 PageID.1625 Page 9 of 15
1
reasonable person in the position of the insured.” Jordan v. Allstate Ins. Co., 116 Cal.
2
App. 4th 1206, 1214 (2004).
3
Applying the principles of contractual interpretation, the court perceives no
4
ambiguity in the term “store front” as it is used in the Artisan Application.
5
Question No. 16 clearly calls for a “yes” response if the applicant maintains a location
6
where customers may enter and purchase goods.
7
Hard Rock fails to delineate any other reasonable interpretation of this term.
8
Instead, relying on various dictionary definitions of “store front,” Hard Rock argues it is
9
reasonable Hard Rock’s “retail store” would not qualify because it: (1) does not face a
10
road or street; (2) does not have frontage on a street or thoroughfare; and/or (3) does not
11
have display windows. (Doc. No. 47 at 11).
12
“In looking to dictionary definitions, however, courts must take care to consider
13
the policy context in which the word or term was used and attempt to put itself in the
14
position of a layperson and understand how he or she might reasonably interpret the
15
particular language.” Jordan, 116 Cal. App. 4th at 1216. In this case, the potential
16
meanings Hard Rock ascribes to “store front” are not within “the objectively reasonable
17
expectations of the insured.”
18
encompasses retail stores with certain specific physical characteristic—but not others—
19
defies common sense. Mitroff v. United Servs. Auto. Ass’n, 72 Cal. App. 4th 1230, 1239
20
(1999) (the court “does not abandon common sense when reading an insurance policy.”).
21
At a minimum, Hard Rock’s interpretation relies on hyper-technical distinctions between
22
a “retail store” and a “store front” that emphasizes form over substance.
Instead, Hard Rock’s argument that a “store front”
23
The unwieldiness of Hard Rock’s interpretation becomes even more clear when its
24
full implications are considered. Under Hard Rock’s proposed construction, any retail
25
store located within a mall or other interior space is not a “store front” because it does not
26
directly face a road or street. However, a retail store located outside might qualify, but
27
only so long as the store faces a street. Hard Rock’s definition further excludes any retail
28
9
20cv1009 JM (BLM)
Case 3:20-cv-01009-JM-BLM Document 56 Filed 09/07/21 PageID.1626 Page 10 of 15
1
stores that do not have windows. A store with windows would nevertheless qualify, but
2
only so long as those windows act as “display windows.”
3
Hard Rock does not cite to any legal authority allowing the court to make these
4
narrow distinctions and the court declines to engage in a strained interpretation of this
5
term to fabricate an ambiguity where none exists. See Yoshida v. Liberty Mut. Ins. Co.,
6
240 F.2d 824, 827 (9th Cir. 1957) (“[A] court cannot and should not do violence to the
7
plain terms of a contract by artificially creating ambiguity where none exists. In situations
8
in which reasonable interpretation favors the insurer and any other would be strained and
9
tenuous, no compulsion exists to torture or twist the language of the contract.”). The
10
“mere assertion” by Hard Rock of an interpretation that is different from USSIC’s “does
11
not give rise to an ambiguity; rather, [Hard Rock]’s proffered interpretation must be
12
acceptable by reasonable people.” Sully-Jones Contractors, Inc. v. Am. Safety Indem.
13
Co., No. 08-CV-1976 BEN AJB, 2010 WL 1839114, at *3 (S.D. Cal. May 6, 2010).
14
Indeed, Hard Rock’s claim the term “store front” is ambiguous is not supported by
15
the evidence. On April 21, 2020, during the investigation of Hard Rock’s claim, Ms.
16
Bardell e-mailed Hard Rock’s owner, Mr. Cruse, the following inquiry:
17
When did you open the store front for Hard Rock Tile & Stone?
I will need to confirm with USSIC Underwriting if the policy
was intended to cover the store front.
18
19
20
(Doc. No. 43-2 at 8). Mr. Cruse did not ask Ms. Bardell to clarify the meaning of “store
21
front” in her e-mail. Instead, he simply responded: “[i]t was January 1, 2016.” Id. Mr.
22
Cruse further testified it was his understanding a “store front” meant the “front of a store”
23
and a “store” is “where items can be purchased.” (Doc. No. 47-1, Ex. 1 at 141:20-
24
142:1).3 Al Feke, the broker at Western United who filled out Hard Rock’s application,
25
26
27
28
Although Mr. Cruse also submitted a declaration stating he “considers the Miramar
Road property to be a showroom rather than a storefront” (Doc. No. 47-1 at ¶ 6), as
USSIC correctly notes, “[a] party's subjective intent cannot be used to create an
10
3
20cv1009 JM (BLM)
Case 3:20-cv-01009-JM-BLM Document 56 Filed 09/07/21 PageID.1627 Page 11 of 15
1
also testified it was his understanding a “store front” is a “retail location.” (Doc. No. 47-
2
1, Ex. 2 at 24:20-25:1).
3
Hard Rock’s interpretation of “showroom” is further strained given the full context
4
of the Artisan Application. For example, Question No. 9 of the Application asks: “[h]as
5
or will the applicant perform any work other than work as a Tile and Stone Installation
6
Contractor?” to which Hard Rock responded in the negative. (Doc. No. 43-4 at 3). Hard
7
Rock also reported that 100% of its operation was as a “Tile and Stone Installation
8
Contractor,” despite the fact it is undisputed it operated a retail store. (Doc. Nos. 43-4 at
9
2; 48-1 at ¶ 11). It is evident these questions were designed to determine if Hard Rock
10
performed any operation other than as an installation contractor (such as a retail store), as
11
the Artisan Contractors Liability Insurance program “is designed for installation
12
contractors and not designed for companies that work out of a retail storefront.” (Doc.
13
No. 43-9, Ex. 2 at 12:9-12).
14
In its Opposition, Hard Rock argues Question No. 16 could have simply inquired
15
whether the applicant operated a “store” or “retail store.” (Doc. No. 47 at 12). This
16
proposal is irrelevant. The only relevant inquiry is whether Question No. 16, as drafted,
17
is unambiguous. The court concludes that it is. And although it is true, as Hard Rock
18
suggests, that any ambiguities must be resolved against USSIC, “[t]his rule of
19
construction is applicable only when the policy language is found to be unclear.” Am.
20
Inernat. Underwriters Ins. Co. v. Am. Guarantee & Liab. Ins. Co., 181 Cal. App. 4th 616,
21
629 (2010).
22
There is no triable dispute Hard Rock’s response to Question No. 16 was material.
23
It is undisputed USSIC relied on Hard Rock’s response in issuing Hard Rock’s policies.
24
(Doc. No. 47-2 at ¶ 8). There is also no genuine dispute that if Hard Rock had answered
25
26
27
28
ambiguity or a material factual issue.” Havstad v. Fid. Nat'l Title Ins. Co., 58 Cal. App.
4th 654, 661 (1997)
11
20cv1009 JM (BLM)
Case 3:20-cv-01009-JM-BLM Document 56 Filed 09/07/21 PageID.1628 Page 12 of 15
1
“yes” during the application process, the Application would have been rejected. In
2
support of this fact, USSIC proffered the declaration of David Boatman, who oversaw the
3
division responsible for underwriting the policies issued to Hard Rock. (Doc. No. 43-3 at
4
1-4 (“Boatman Decl.”) at ¶ 1). Mr. Boatman declared that had USSIC been made aware
5
of Hard Rock’s retail store front operation, USSIC would not have issued the policies to
6
Hard Rock because: (1) a store front is an ineligible operation under the Artisan
7
Contractors Liability Insurance program; and (2) USSIC is precluded from issuing
8
insurance policies covering store front operations. Boatman Decl. at ¶ 9. Indeed, Hard
9
Rock does not dispute USSIC cannot issue insurance coverage for store front operations.
10
(Doc. No. 47-2 at ¶ 18).
11
For these reasons, the court GRANTS USSIC’s motion for partial summary
12
judgment.4
13
III.
Jurisdictional Issues
14
Before addressing Western United’s Motion for Summary Judgment and Hard
15
Rock’s Motion to Join Necessary Party, the court must first consider whether it has
16
subject matter jurisdiction to address the Parties’ remaining claims in light of its decision
17
above. See Dittman v. California, 191 F.3d 1020, 1025 (9th Cir. 1999) (the court has an
18
independent obligation to address whether it has subject matter jurisdiction); Fed. R. Civ.
19
P. 12(h)(3) (“If the court determines at any time that it lacks subject matter jurisdiction,
20
the court must dismiss the action.”).
21
A.
22
In this jurisdictional inquiry, the court first considers USSIC’s second cause of
23
action for declaratory relief. In its second cause of action, “[USSIC] seeks a declaration
24
that it is not obligated to provide coverage to Hard Rock for the claims being made by
25
Ms. Fouvia.” (Doc. No. 17 at ¶ 25 (emphasis added)).
26
27
28
USSIC’s Request for Declaratory Relief
Having found a sufficient ground for relief, the court does not discuss the other alleged
misrepresentations USSIC identifies in its Motion.
12
4
20cv1009 JM (BLM)
Case 3:20-cv-01009-JM-BLM Document 56 Filed 09/07/21 PageID.1629 Page 13 of 15
1
Article III of the United States Constitution “restricts federal courts to the
2
resolution of cases and controversies,” Davis v. FEC, 554 U.S. 724, 732 (2008), and
3
requires that “a justiciable case or controversy must remain extant at all stages of
4
review,” United States v. Juvenile Male, 564 U.S. 932, 936 (2011).
5
becomes moot at any point during the proceedings is 'no longer a ‘Case’ or ‘Controversy’
6
for purposes of Article III,’ and is outside the jurisdiction of the federal courts.” United
7
States v. Sanchez-Gomez, 138 S. Ct. 1532, 1537 (2018).
“A case that
8
Because the court has already decided the merits of USSIC’s rescission action,
9
USSIC’s request for declaratory judgment appears moot and the court appears to lack
10
jurisdiction over this claim.
11
unenforceable from the outset so that there was never any coverage and no benefits are
12
payable.” LA Sound USA, Inc., 156 Cal. App. 4th at 1267. The Declaratory Judgment
13
Act “is not an independent source of federal jurisdiction; the availability of such relief
14
presupposes the existence of a judicially remediable right.”
15
363 U.S. 666, 677 (1960); see Bartlett v. Overslaugh, 169 F. Supp. 3d 99, 110 (D.D.C.
16
2016) (“[A] court may dismiss as moot a claim for declaratory relief where . . . the claim
17
duplicates or is wholly subsumed by another claim that has been dismissed.”).
18
B.
“[A] rescission effectively renders the policy totally
Schilling v. Rogers,
19
Hard Rock’s Counterclaims against USSIC and USSIC and Western
United’s Claims for Equitable Indemnity and Equitable Contribution
20
The court has similar jurisdictional concerns over Hard Rock’s counterclaims
21
against USSIC.
22
(1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing;
23
and (3) declaratory relief. (Doc. No. 9).
Here, Hard Rock has asserted counterclaims against USSIC for:
24
However, Hard Rock cannot maintain an action for breach of contract, breach of
25
the implied covenant of good faith or fair dealing, or declaratory relief, in the absence of
26
a contractual relationship. See LA Sound USA, Inc., 156 Cal. App. 4th at 1266 (“A policy
27
void ab initio [] cannot be breached.”); Am. Gen. Life Ins. Co. v. Valentine, No.
28
LACV1608097JAKJCX, 2017 WL 5635014, at *8 (C.D. Cal. Apr. 13, 2017) (“[A]
13
20cv1009 JM (BLM)
Case 3:20-cv-01009-JM-BLM Document 56 Filed 09/07/21 PageID.1630 Page 14 of 15
1
breach of the covenant of good faith and fair dealing cannot arise in the absence of a
2
contractual relationship[.]”). Likewise, USSIC and Western United’s claims against one
3
another for equitable indemnity and equitable contribution are closely tied to Hard
4
Rock’s counterclaims.
5
counterclaims.
6
claims also appear moot, and the court now lacks jurisdiction over them.
Both appear dependent on Hard Rock prevailing on its
(Doc. Nos. 17 at ¶¶ 28-31; 30 at ¶¶ 16-19). For these reasons, these
7
C.
8
The crux of the remaining dispute between the Parties is Hard Rock’s Third-Party
9
Complaint against Western United for professional negligence and negligent
10
misrepresentation. Here, Hard Rock is a sole proprietorship with its principal place of
11
business in San Diego, California. (Doc. No. 10 at ¶ 1). Western United is a California
12
corporation with its principal place of business in San Clemente, California. Id. at ¶ 2.
13
Because all Parties to the Third-Party Complaint are California citizens, the court lacks
14
diversity jurisdiction. Hard Rock’s Third-Party Complaint instead asserts the court has
15
supplemental jurisdiction. Id. at ¶ 3.
Hard Rock’s Third-Party Complaint
16
However, having granted partial summary judgment in favor of USSIC on
17
USSIC’s rescission claim, the court has effectively disposed of all claims over which it
18
had original jurisdiction and may decline to exercise supplemental jurisdiction.
19
See 28 U.S.C. § 1367(c)(3) (“The district courts may decline to exercise supplemental
20
jurisdiction over a claim [if] . . . the district court has dismissed all claims over which it
21
has original jurisdiction . . . .”); Pa. Manufacturers' Ass'n Ins. Co. v. Trans Am., LLC, No.
22
EDCV 18-989 DSF (SPx), 2019 U.S. Dist. LEXIS 98847, at *2 (C.D. Cal. June 12, 2019)
23
(declining supplemental jurisdiction after having granted summary judgment and
24
dismissing all claims over which the court had original jurisdiction).
25
Here, the court is mindful the “primary responsibility for developing and applying
26
state law rests with the state courts.” Curiel v. Barclays Cap. Real Est. Inc., No.
27
CIVS093074 FCD/KJM, 2010 WL 729499, at *1 (E.D. Cal. Mar. 2, 2010) (declining to
28
exercise supplemental jurisdiction after dismissal of federal claims). And “[i]n the usual
14
20cv1009 JM (BLM)
Case 3:20-cv-01009-JM-BLM Document 56 Filed 09/07/21 PageID.1631 Page 15 of 15
1
case in which federal-law claims are eliminated before trial, the balance of factors . . .
2
will point toward declining to exercise jurisdiction over the remaining state law claims.”
3
Gini v. Las Vegas Metro. Police Dep’t, 40 F.3d 1041, 1046 (9th Cir. 1994). There is
4
nothing in the record to suggest that this case is unusual. For these reasons, at this stage
5
of the proceedings, the court is not inclined to exercise supplemental jurisdiction over
6
Hard Rock’s Third-Party Complaint.
7
CONCLUSION
8
For the above stated reasons, the court GRANTS USSIC’s Motion for Partial
9
Summary Judgment. The Parties are ORDERED to meet and confer and file a joint brief
10
no more than fifteen pages in length or separate briefs no more than five pages in length
11
addressing the court’s jurisdictional concerns by no later than September 20, 2021.
12
The court DEFERS consideration of Western United’s Motion for Summary
13
Judgment (Doc. No. 45) and Hard Rock’s Motion to Join Ms. Jami as a Necessary Party
14
(Doc. No. 53) until questions regarding the court’s subject matter jurisdiction are
15
resolved. For these reasons, the court VACATES all remaining pre-trial deadlines and
16
hearings in this case subject to resetting.
17
18
19
IT IS SO ORDERED.
DATED: September 7, 2021
JEFFREY T. MILLER
United States District Judge
20
21
22
23
24
25
26
27
28
15
20cv1009 JM (BLM)
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?