Clarendon Nat. Ins. v. Insurance Co. of the West
| Decision Date | 07 July 2006 |
| Docket Number | No. 1:99-cv-5461-SMS.,1:99-cv-5461-SMS. |
| Citation | 442 F.Supp.2d 914 |
| Court | U.S. District Court — Eastern District of California |
| Parties | CLARENDON NATIONAL INSUANCE COMPANY, a New Jersey Corporation, Plaintiff, v. INSURANCE COMPANY OF THE WEST, a Texas Corporation, et al., Defendants. Insurance Company of the West, Counter-Claimant, v. Clarendon National Insurance Company, Counter-Defendant. |
Andrew Karonis, Schindel Farman And Lipsius, New York, NY, Michael John Czeshinski, Wilkins Drolshagen and Czeshinski, Fresno, CA, for Plaintiff.
James Patrick Wagoner, McCormick Barstow Sheppard Wayte and Carruth, Fresno, CA, for Defendants.
Andrew Karonis, Ira S. Lipsius, Lorienton Palmer, Schindel Farman and Lipsius, New York, NY, Michael John Czeshinski, Wilkins Drolshagen and Czeshinski, Fresno, CA, for Counter-Defendant.
James Patrick Wagoner, McCormick Barstow Sheppard Wayte And Carruth, Fresno, CA, for Counter-Claimant.
MEMORANDUM OF LAW, FINDINGS OF FACT, AND CONCLUSIONS OF LAW FOLLOWING COURT TRIAL
This matter was tried to the Court on September 20 and 21, 2004. Ira S. Lipsius and Andrew Karonis of Shindel, Farman & Lipsius, LLP, appeared and argued on behalf of Plaintiff Clarendon National Insurance Company (Clarendon); and James P. Wagoner and Dana E. Denno of McCormick, Barstow, Sheppard, Wayte & Carruth, LLP, appeared and argued on behalf of Defendant Insurance Company of the West (ICW). The joint pretrial statement filed on May 14, 2004, was adopted in place of the earlier pretrial order as the order governing the trial. (R.T. at 6.) Transcripts of the trial were filed in this Court on November 2, 2004; by February 8, 2005, the parties had submitted Defendant's post-trial brief, both parties' proposed findings of fact and conclusions of law and replies thereto, and Defendant's reply to Plaintiff's Appendix. On August 23, 2005, each party filed supplemental briefing as directed by the Court. The Court has considered these matters as well as all the briefing submitted before the trial, and the matter has been submitted to the Court. The matter has been referred to the Magistrate Judge for all proceedings, including the entry of final judgment, pursuant to 28 U.S.C. § 636(c), Fed. R.Civ.P. 73(b), and Local Rule 73-301.
The parties have stipulated that all legal issues resolved by the Court's order of June 30, 2000, with the sole exception of the Court's determination regarding the materiality of G & P's alleged misrepresentation which is set forth at II.C. of the June 30, 2000 order, are deemed the law of the case. (Joint Pretrial Statement and Pretrial Order filed May 14, 2004 at 28.)
In the order of June 30, 2000, Judge Coyle determined that the ICW policy's coverage of G & P under the base policy is primary over the Clarendon policy; the Clarendon policy's MCS-90 endorsement provides no coverage for purposes of disputes among insurers over ultimate liability and thus provides no coverage as against ICW; and Clarendon is entitled to indemnity/reimbursement of legal fees Clarendon paid in defending H & G because Clarendon's liability arises only from the MCS-90, a governmentally required filing.
In the order of January 16, 2001, Judge Coyle granted Defendant's motion for a new trial or to alter and amend judgment, determining that there was a dispute of material fact regarding whether G & P engaged in material misrepresentation and/or concealment in applying for the ICW policy which had not been waived or lost by estoppel because neither waiver nor estoppel had been established on the evidence submitted by Clarendon, the subrogee of G & P, ICW's insured.
At the trial, the Court determined that Judge Coyle had thus already decided that the ICW base policy covering G & P was primary and that the truck, which included the trailer, was a specifically described auto. (R.T. at 10-11.) The Court further concluded that in addition to the misrepresentation defense to ICW's coverage, the trial would also cover the issues of waiver and/or estoppel against denying coverage on the ground of misrepresentation. (Id. at 11-12.)
The parties reserved the right to stipulate to the amounts expended by the parties in defending underlying legal actions that were filed as a result of the accident in which the insured was involved. (Id. at 18-19.)
Therefore, the issues tried at the bench trial in September 2004 are whether or not material misrepresentation or concealment rendered the ICW insurance contract void or otherwise provided a defense to ICW, and whether or not this defense was waived, or ICW is estopped to raise it.
In his order of June 30, 2000, Judge Coyle determined that the law governing the interpretation of the policies and the insurer's obligations was the substantive law of California. Id. at 10-12. Neither party seeks to reopen that issue or argues that any other law should govern the issues remaining in dispute. Thus, California law governs.
Defendant has the burden of proof by a preponderance of the evidence of each fact the existence or nonexistence of which is essential to the affirmative defense of misrepresentation. Cal. Evid.Code §§ 115, 500; Thompson v. Occidental Life Ins. Co. of California, 9 Cal.3d 904, 915-916, 919, 109 Cal.Rptr. 473, 513 P.2d 353 (1973); see, Liodas v. Sahadi, 19 Cal.3d 278, 286-90, 137 Cal.Rptr. 635, 562 P.2d 316 (1977). The elements in the present case1 are intentionally false material misrepresentation or concealment of facts with the intent to defraud and in order to obtain insurance coverage; a mere mistake or negligence is not sufficient. Leasure v. MSI Insurance Co., 65 Cal.App.4th 244, 247-48, 75 Cal. Rptr.2d 900 (1998); Hyland v. Millers Nat. Ins. Co. 91 F.2d 735, 743 (9th Cir. 1937), rehg. denied, 92 F.2d 462, cert. denied, 303 U.S. 645, 58 S.Ct. 644, 82 L.Ed. 1107. "Preponderance of the evidence" means that the trier of fact is only required to believe that the existence of a fact is more probable or reasonable than its nonexistence, Kennedy v. Southern California Edison Co., 268 F.3d 763, 770 (9th Cir.2001) (applying California law), and that in terms of the probability of truth of evidence, when weighed with that opposed to it, the evidence has more convincing force and greater probability of truth, Leslie G. v. Perry & Associates, 43 Cal.App.4th 472, 482-83, 50 Cal.Rptr.2d 785 (1996).
Under California statutory law, neglect to communicate that which a party knows, and ought to communicate, is concealment. Cal. Ins.Code § 330. Each party to a contract of insurance shall communicate to the other, in good faith, all facts within his knowledge which are or which he believes to be material to the contract as to which he makes no warranty, and which the other has not the means of ascertaining. Cal. Ins.Code § 332.
California statutory law provides that concealment, whether intentional or unintentional, entitles the injured party to rescind the contract. Cal. Ins.Code § 331. Thus, under the statute, negligent or even innocent concealment warrants rescission. Barrera v. State Farm Mut. Auto. Ins. Co., 71 Cal.2d 659, 666 n. 4, 79 Cal.Rptr. 106, 456 P.2d 674 (1969); Mirich v. Underwriters at Lloyd's London, 64 Cal.App.2d 522, 529-30, 149 P.2d 19 (1944).
The completion of the contract of insurance is the time to which a representation must be presumed to refer. Cal. Ins.Code § 356.
The provisions of the contract before the Court must be considered.
Unless it turns on the credibility of conflicting extrinsic evidence or on underlying facts that are in dispute, the interpretation of an insurance policy is solely a question of law. Waller v. Truck Ins. Exchange Inc., 11 Cal.4th 1, 18, 44 Cal. Rptr.2d 370, 900 P.2d 619 (1995); Parsons v. Bristol Development Co., 62 Cal.2d 861, 865-66, 44 Cal.Rptr. 767, 402 P.2d 839 (1965); Merced Mutual Ins. Co. v. Mendez, 213 Cal.App.3d 41, 45, 261 Cal.Rptr. 273 (1989).
Pursuant to California law, the first consideration is to look at the language of the contract in order to ascertain the plain meaning or the meaning that a layperson would ordinarily attach to the language. Waller v. Ins. Exchange, Inc., 11 Cal.4th at 18, 44 Cal.Rptr.2d 370, 900 P.2d 619. This is in furtherance of the general principle that the mutual intent of the parties at the time of contracting is to be given effect, Cal. Civ.Code § 1636, and is to be inferred, if possible, solely from the words of the contract, Waller, 11 Cal.4th at 18, 44 Cal.Rptr.2d 370, 900 P.2d 619. It is the clear and explicit meaning of the contractual provisions, interpreted in their ordinary and popular sense, that is to govern unless words are used by the parties in a technical sense or are given a special meaning by usage. Id.; Cal. Civ. Code §§ 1636, 1638-39, 1644. Dictionary meanings, the context of the entire policy, and a commonsense view to avoiding absurd results may be useful to put the Court in the position of a layperson and understand how he or she might reasonably interpret the exclusionary language. MacKinnon v. Truck Ins. Exchange, 31 Cal.4th 635, 649-50, 3 Cal.Rptr.3d 228, 73 P.3d 1205 (2003).
1. Two References to Fraud
The principal contractual provision in question, and the only one adverted to by the parties, is as follows:
2. CONCEALMENT, MISREPRSENTATION OR FRAUD
This Coverage Form is void in any case of fraud by you at any time as it relates to this Coverage Form. It is also void if you or any other "insured," at any time, intentionally conceal or misrepresent a material fact concerning:
a. This Coverage Form;
b. The covered "auto";
c. Your interest in the covered "auto", or
d. A claim under this Coverage Form.
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