Burgett, Inc. v. Am. Zurich Ins. Co., 2:11–cv–01554–MCE–JFM.

• Court: United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
• Writing for the Court: MORRISON C. ENGLAND
• Citation: 875 F.Supp.2d 1125
• Parties: BURGETT, INC., Plaintiff, v. AMERICAN ZURICH INSURANCE COMPANY, Defendant.
• Docket Number: No. 2:11–cv–01554–MCE–JFM.,2:11–cv–01554–MCE–JFM.
• Decision Date: 24 August 2012

875 F.Supp.2d 1125

BURGETT, INC., Plaintiff,
v.
AMERICAN ZURICH INSURANCE COMPANY, Defendant.

No. 2:11–cv–01554–MCE–JFM.

United States District Court,
E.D. California.

Aug. 6, 2012.
As Corrected Aug. 24, 2012.

[875 F.Supp.2d 1126]

David A. Gauntlett, Gauntlett & Associates, Irvine, CA, for Plaintiff.

Jordon Edward Harriman, Lewis Brisbois Bisgaard & Smith LLP, Lane John Ashley, Los Angeles, CA, for Defendant.

MEMORANDUM AND ORDER
MORRISON C. ENGLAND, JR., District Judge.

This matter arises out of Plaintiff Burgett, Inc.'s (“Plaintiff”) motion for partial summary judgment for payment of attorneys' fees plaintiff incurred prior to November 23, 2010, the date plaintiff tendered to Defendant the defense of the underlying action brought against it by Persis International Inc.¹ and Edward F. Richards (collectively, “Persis”). Defendant, American Zurich Insurance, Inc. (“Defendant”), Plaintiff's general liability insurance carrier, opposes the motion. For the reasons set forth below, Plaintiff's motion is DENIED.

On November 23, 2011, the court issued an order granting Plaintiff's motion for partial summary judgment. ( See Order, ECF No. 22.) Specifically, the court held that Defendant breached its duty to defend Plaintiff in the underlying Persis action. ( Id. at 22:26–28.) The court also held that Plaintiff should be “awarded reasonable attorneys' fees for breach of its duty to defend the underlying Persis action.” ( Id. at 23:1–2.)

Since the court issued its order, Defendant has paid Plaintiff $68,388.85 for expenses, fees and prejudgment interest Plaintiff has incurred defending the Persis² action.³ (Pl.'s Stmt. of Uncontroverted Facts (“UF”), ECF No. 28–4, ¶ 8.) Defendant, however, refused to pay any fees Plaintiff incurred prior to tendering defense of the Persis action to Defendant. ( Id. ¶ 17.)

Plaintiff filed its motion on March 22, 2012, asking the court to order Defendant to pay Plaintiff for those fees it incurred defending the Persis action prior to tendering defense of that action to Defendant. The sole issue before the court, therefore, is purely a legal question: under California law, is an insurer who previously breached its duty to defend required to pay fees incurred by the insured prior to tendering defense of the underlying action?

Plaintiff's central argument in support of its motion is that, because Defendant originally declined to defend the Persis action, and Plaintiff had to seek a court order to invoke Defendant's duty to defend, the date Plaintiff tendered defense of the Persis action is irrelevant. More specifically, while Plaintiff concedes that the duty to

[875 F.Supp.2d 1127]

defend does not arise until tender, Plaintiff asserts that the duty to reimburse is broader and requires a Defendant who has breached its duty to defend to pay all fees incurred by the insured, both pre-and post-tender. According to Plaintiff, “[i]n addition to Zurich's undisputed duty to defend post-tender, there is an additional implied-in-law duty which requires Zurich to reimburse Burgett for its expenses incurred in defending the Persis ... action[ ] which predated the date of tender in” the Persis action. (MSJ at 10:26–11:2.) Plaintiff maintains that “[s]uch rules of law, even when not squarely articulated, are properly deduced from the courts' decisional logic.” (Reply at 2:23–3:1.)

Defendant argues that California case law has long held that “no duty to defend can arise before the insured tenders the defense of the third party lawsuit to the insurer.” (Opp'n to MSJ, ECF 29 at 3:18–19.) Defendant asserts that “[t]ender of defense is a condition precedent to the insured's right to be indemnified. Thus, whatever a carrier might do after tender cannot create a duty to reimburse fees incurred prior to tender, since no duty exists until tender.” ( Id. at 4:1–3.) (Emphasis in original.) Therefore, Defendant maintains, it has no duty to reimburse Plaintiff for fees and costs it incurred prior to tendering defense of the action.

The court finds that Plaintiff is only entitled to those fees it would have incurred had Defendant initially accepted defense of the Persis action, and thus, Plaintiff's motion should be denied. While Plaintiff asks the court to impose an “implied-in-law” obligation...