Interstate Fire & Cas. Ins. Co. v. First Specialty Ins. Co.

• Decision Date: 28 August 2020
• Docket Number: No. 2:17-cv-01795-KJM-AC,2:17-cv-01795-KJM-AC
• Citation: 482 F.Supp.3d 1060
• Court: U.S. District Court — Eastern District of California
• Parties: INTERSTATE FIRE & CASUALTY INSURANCE COMPANY, Plaintiff, v. FIRST SPECIALTY INSURANCE COMPANY et al., Defendants.

482 F.Supp.3d 1060

INTERSTATE FIRE & CASUALTY INSURANCE COMPANY, Plaintiff,

v.FIRST SPECIALTY INSURANCE COMPANY et al., Defendants.

No. 2:17-cv-01795-KJM-AC

United States District Court, E.D. California.

Signed August 28, 2020

Filed August 31, 2020

David Seth Blau, Ronald Laurence Nelson, Blau | Keane Law Group, P.C., El Segundo, CA, for Plaintiff.

Gregory D. Stephan, Grimm Vranjes & Greer, San Diego, CA, Matthew S. Harvey, Clyde & Co US LLP, San Francisco, CA, Ronald D. Echeguren, Cresswell Echeguren Rodgers & Harvey, Oakland, CA, Sharon Ruth Lewis, Sinnott, Puebla, Campgne & Curet, Emeryville, CA, for Defendants.

ORDER

Kimberly J. Mueller, CHIEF UNITED STATES DISTRICT JUDGE

In this insurance coverage dispute, plaintiff Interstate Fire & Casualty Insurance Company ("Interstate") and defendant First Specialty Insurance Company ("First Specialty") both move for summary judgment on Interstate's claims with respect to six of the underlying construction defect cases at issue. For the foregoing reasons, the court GRANTS Interstate's motion in part and DENIES it in part, and also GRANTS First Specialty's motion in part and DENIES it in part.

I. BACKGROUND

This case arises out of 15 underlying construction defect actions in Nevada and California. See First Am. Compl. ("FAC"), ECF No. 19-1. Due to the number of underlying cases and issues, the court bifurcated discovery into two phases. ECF No. 28 at 2. Phase I, relevant here, is limited to six underlying cases involving subcontractors insured by commercial general liability (CGL) policies issued by both plaintiff Interstate Fire & Casualty Insurance Company ("Interstate") and First Specialty Insurance Company ("First Specialty" or "FS"). Id. The six cases are:

(1) Allred v. Ranchwood Homes Corp., Merced County Superior Court, Case No. CVM 019667 ("Allred ");

(2) Alstatt v. Centex Homes , District Court of Clark County, Nevada, Case No. A-13-683173-D ("Alstatt ");

(3) Baker v. Mello, Merced County Superior Court, California, Case No. CVM014943 ("Baker ");

(4) Ceccarelli Living Trust v. Centex Homes, District Court of Clark County, Nevada, Case No. A-15-722350-D ("Ceccarelli ");

(5) Paradise Court HOA v. DR Horton, Inc. , District Court of Clark County, Nevada, Case No. A-09-590365 ("Paradise Court "); and

(6) Wigwam Ranch East Twilight HOA v. DR Horton, District Court of Clark County, Nevada, Case No. A-14-710333-D ("Wigwam Ranch ").

See generally Interstate Mot. for Summ. J. ("Interstate MSJ"), ECF No. 40. It is undisputed that the relevant provisions of the insured's First Specialty CGL policy in the six underlying actions are the same. Specifically, all of the First Specialty CGL policies at issue included the following provisions:

1.a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages.

1.b. This insurance applies to ... "property damage" only if: .... [t]he ... "property damage" occurs during the policy period[.]

First Specialty Statement of Undisputed Material Facts ("FSUMF") 2, ECF No. 43-2. Each First Specialty policy includes the following definitions of "property damage" and "occurrence":

17. "Property damage" means:

a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or

b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the "occurrence" that caused it.

Interstate Fire Statement of Undisputed Material Facts ("IUMF") 46, ECF No. 40-2.

13. "Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

Id. "Physical injury to tangible property," a standard definition in the insurance industry, is generally interpreted to cover damage caused "when the insured's defective materials or work cause injury to property other than the insured's own work or products," and not the cost associated with the defective or inferior work itself. F & H Constr. v. ITT Hartford Ins. Co. , 118 Cal. App. 4th 364, 371–73, 12 Cal.Rptr.3d 896 (2004) (citing, inter alia , Aetna Cas. & Sur. Co. v. McIbs, Inc. , 684 F. Supp. 246, 248 (D. Nev. 1988), aff'd sub nom. Aetna Cas. & Sur. Co. v. Arc Materials , 878 F.2d 385 (9th Cir. 1989) ).

The First Specialty policies at issue in the Paradise Court and Wigwam Ranch cases included the following Prior Completed Work Exclusion and Condominium Exclusions:

[Prior Completed Work Exclusion: ]

This insurance does not apply to

... "Bodily injury," "property damage," or "personal and advertising injury" arising out of your work that,

a. is completed prior to the date shown in the schedule of this endorsement; or

b. is abandoned by the insured prior to the date reflected in the schedule of this endorsement.

....

[Condominium Exclusion: ]

This policy does not apply to "property damage", "bodily injury", or "personal and advertising injury" arising out of, or related in any way to "your work" or "your product" within the "products-completed operation hazard" when "your work" or "your product" are part of or incorporated into the following:

a. a condominium or condominium project; or

b. a townhouse or townhouse project.

This endorsement does not apply if "your work" occurs or "your project" is supplied or incorporated after such condominium or townhouse was certified for occupancy, except if "your work" or "your product" is performed or installed after the certificate of occupancy is effective in order to repair or replace "your work" or "your product" that was completed or incorporated prior to the effective date of the certificate of occupancy.

IUMF 47.

Though the parties pointed to other provisions of the First Specialty policies at hearing, the court only addresses those that were raised in the parties’ briefing.¹

As to each of the six underlying actions, Interstate Fire moves for summary judgment on its declaratory relief claims that (1) First Specialty owed a duty to defend the insured and/or² (2) First Specialty owed the insured a duty to indemnify the insured. Interstate further claims First Specialty is liable for equitable contribution for the amount Interstate paid for defense costs and indemnification upon settlement in each of the underlying cases. See Interstate MSJ at 2. First Specialty opposes, FS Opp'n, ECF No. 46, and Interstate filed a reply, Interstate Reply, ECF No. 51. First Specialty also moves for summary judgment on Interstate's duty to defend and duty to indemnify declaratory relief claims in the six underlying actions. First Specialty Mot. for Summ. J. ("FS MSJ"), ECF No. 43. Interstate Fire opposes, Interstate Opp'n, ECF No. 47, and First Specialty filed a reply, FS Reply, ECF No. 50.

The court heard oral argument on both motions on July 17, 2019, and resolves them here.

II. INTERSTATE'S REQUEST FOR JUDICIAL NOTICE

In conjunction with its motion for summary judgment, Interstate also filed a request for judicial notice of the following documents filed in the underlying cases: the complaint filed in Allred , Req. for Judicial Not., ECF No. 42, Ex. 1; the amended complaint and amended third-party complaint filed in Alstatt , id. , Exs. 2–3; the first amended complaint and cross-complaint filed in Baker , id. , Exs. 4–5; the complaint and Centex Homes’ answer to the first amended complaint and third-party complaint, filed in Ceccarelli , id. , Exs. 6–7; the complaint and third-party complaint filed in Paradise Court , id. , Ex. 8–9; and the complaint and D.R. Horton's answer to the complaint and third-party complaint filed in Wigwam Ranch, id. Exs. 10–11. First Specialty does not oppose this request. Each document covered by Interstate's request is a court document and a matter of public record subject to ready determination of its accuracy. See Reyn's Pasta Bella, LLC v. Visa USA, Inc. , 442 F.3d 741, 746 n.6 (9th Cir. 2006). Accordingly, the request for judicial notice is GRANTED, with the limitation that the judicially noticed fact in each instance is the existence of a document, not the truth of the matters asserted in the documents. See Rowland v. Paris Las Vegas , No. 3:13-CV-02630, 2014 WL 769393, at *3 (S.D. Cal. Feb. 25, 2014).

III. LEGAL STANDARD

A court will grant summary judgment "if ... there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The "threshold inquiry" is whether "there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

As a general matter, the moving party bears the initial burden of showing the district court "that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett , 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The burden then shifts to the nonmoving party, which "must establish that there is a genuine issue of material fact ...." Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 585, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). In carrying their burdens, both parties must "cit[e] to particular parts of materials in the record ...; or show[ ] that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c)(1) ; see also Matsushita , 475 U.S. at 586, 106 S.Ct. 1348 ("[The nonmoving party] must do more than simply show that there is some metaphysical doubt as to the material facts."). Moreover, "the requirement is that there be no genuine issue of material fact .... Only disputes over facts...