Coregis Ins. Co. v. Camico Mut. Ins. Co.

• Decision Date: 10 February 1997
• Docket Number: No. CV 96-2706 ABC (BQRx).,CV 96-2706 ABC (BQRx).
• Citation: 959 F.Supp. 1213
• Court: U.S. District Court — Central District of California
• Parties: COREGIS INSURANCE COMPANY, an Indiana corporation, Plaintiff, v. CAMICO MUTUAL INSURANCE COMPANY, a California corporation, and Urbach, Kahn & Werlin, P.C., a New York professional corporation, Defendants. and Related Claims

Page 1213

959 F.Supp. 1213

COREGIS INSURANCE COMPANY, an Indiana corporation, Plaintiff, v. CAMICO MUTUAL INSURANCE COMPANY, a California corporation, and Urbach, Kahn & Werlin, P.C., a New York professional corporation, Defendants and Related Claims

No. CV 96-2706 ABC (BQRx).

United States District Court, C.D. California.

February 10, 1997.

Jeffrey Charlston, Robert Hoffman, Charlston, Revich & Williams, Los Angeles, CA, for plaintiff.

Andrew Waxler, Christina Bull Arndt, Luce, Forward, Hamilton & Scripps, Los Angeles, CA, for defendant Urbach, Kahn & Werlin, P.C.

Michael Kerr, Jacqueline Brady, Mayer, Brown & Platt, Los Angeles, CA, for third party defendant Accountants Liability Assurance Co.

Scott Kolod, Stephen Lindsley, Kolod & Wager, San Diego, CA, for defendant Camico Mut. Ins. Co.

ORDER RE: (1) CAMICO'S MOTION FOR PARTIAL SUMMARY

(2) COREGIS'S MOTION FOR SUMMARY JUDGMENT

COLLINS, District Judge.

Camico's motion for partial summary judgment and Coregis's motion for summary judgment came on regularly for hearing before this Court on February 10, 1997. After reviewing the materials submitted by the parties, argument of counsel, and the case file, it is hereby ORDERED that Camico's motion for partial summary judgment is DENIED and Coregis's motion for summary judgment is GRANTED.

I. Background

A. Procedural Background

Plaintiff COREGIS INSURANCE COMPANY ("Coregis") filed a Complaint against Defendants CAMICO MUTUAL INSURANCE COMPANY ("Camico") and URBACH, KAHN & WERLIN, P.C. ("UKW") for declaratory relief on April 16, 1996. Coregis seeks a judicial determination that it is not liable to Camico for amounts Camico expended in defending and settling the claims asserted in a now dismissed action entitled Gindi v. London¹ under a policy of Accountants' Professional Liability Insurance Policy issued by Mt. Airy Insurance Company ("Mt.Airy") (a predecessor to Coregis) to the accounting firm of UKW. Coregis seeks a judicial declaration that Camico was and is the only insurance carrier obligated to provide accountant Edward London ("London"), a partner of UKW, with coverage for the claims asserted against him in the Gindi Action.

In response to this Court's Order to Show Cause, Coregis filed a First Amended Complaint, also seeking declaratory relief, on April 30, 1996. On June 10, 1996, Camico filed a Counterclaim against Coregis for equitable indemnity, express indemnity, equitable contribution, breach of the implied covenant of good faith and fair dealing, declaratory relief, and negligence. On the same date, Camico also filed a Third Party Complaint against Accountants Liability Assurance Company² ("ALAC") and a Crossclaim against UKW. Camico's Third Party Complaint and Cross-claim allege the same causes of action asserted in its Counterclaim against Coregis.

On July 1, 1996, Coregis filed a motion to dismiss Camico's counterclaims for express indemnity, breach of the implied covenant of good faith and fair dealing, and negligence, as well as to strike Camico's counterclaim for punitive damages. In an August 9, 1996 Order, the Court GRANTED Coregis' motion to dismiss Camico's counterclaims for express indemnity and negligence, DENIED Coregis's motion to dismiss Camico's counterclaim for breach of the implied covenant of good faith and fair dealing, and DENIED, without prejudice, Coregis's motion to strike Camico's prayer for punitive damages.

On October 18, 1996 ALAC filed a motion to compel arbitration of Camico's subrogation claims and to dismiss or stay Camico's remaining third-party complaint claims. In a November 18, 1996 Order, the Court DENIED ALAC's motion.

On January 7, 1997, Camico filed a motion for partial summary judgment in which it sought to have the Court issue an order finding that Coregis had a duty to provide a defense to London in the Gindi Action. On January 17, 1997, Coregis filed an opposition. On February 3, 1997, Camico filed a reply.

On January 17, 1997, Coregis filed a motion for summary judgment in which it sought to have the Court issue an order finding that Coregis has no obligation to reimburse Camico for any sums expended by Camico in defending and/or settling claims asserted against London in the Gindi Action. On January 27, 1997, Camico filed an opposition. On January 31, 1997, Coregis filed a reply.

B. Factual Background

In essence, this case revolves around whether or not Coregis had a duty to provide a defense to London in the Gindi Action. Most of the facts relevant to the two instant motions are not subject to dispute.

Beginning in or about January 1, 1984, London began providing accounting services to Jack E. Gindi ("Gindi") and his various partnerships. At that time, London was working through the accounting offices of London & Heisman. According to Gindi, between the period of January 1, 1984 and July 31, 1988, he relied completely on London to provide competent accounting services. In 1988, the London & Heisman firm dissolved, and London joined the firm of UKW.

On July 9, 1993, Gindi filed a Complaint against London alleging causes of action for negligence, intentional misrepresentation, fraudulent concealment, breach of fiduciary duty, conspiracy and negligent misrepresentation ("Original Gindi Complaint").³ See Gindi Action Complaint, attached as Exhibit A to both parties' motions for summary judgment. Gindi alleged that from 1984 through November 15, 1991, he and Joseph Dabby ("Dabby") were partners in seven California partnerships, and that between January 1, 1984 and January 31, 1988, London provided accounting services to the partnerships.⁴ See Original Gindi Complaint at ¶ 8, 9. Gindi further alleged that his partner Dabby converted monies from the real estate partnerships, improperly used partnership assets to pay for personal liabilities and paid himself excessive compensation from partnership funds. Gindi Action Complaint at ¶¶ 11, 16, 17. Gindi also alleged that London fraudulently concealed Dabby's purported conversion of partnership assets through misrepresentations to Gindi and improper bookkeeping entries in partnership books and records. Id. In addition, Gindi alleged that London conspired with Dabby to defraud Gindi. Gindi further alleged that he would not have continued to invest in the partnerships if he had known of the conversion of funds by Dabby and London's purported fraud in concealing the conversion of funds. Gindi Action Complaint at § 19. Gindi claimed that if London had acted properly and disclosed Dabby's purported misconduct, Gindi would not have invested significant funds in the partnerships and would not have lost significant sums.

In July 1993, London tendered the Gindi Action to Camico for defense and indemnification costs. Camico issued professional liability coverage to London & Heisman between July, 1, 1986 to October 31, 1988. The Camico policy was a "claims made" policy. London had also purchased "tail" coverage which covered him for "claims made" in 1993 that were premised upon acts, errors and omissions which occurred between 1986 and 1988. See Camico policy, attached to Camicols motion for summary judgment as Exhibit B. Camico assumed defense and indemnification obligations for the claims asserted in the Original Gindi Complaint.

At the time the Gindi Action was filed on July 9, 1993, London was also insured under an Accountants' Professional Liability Policy issued to UKW by International Insurance Company ("International") which was in effect for the policy period November 1, 1992 through November 1, 1993. See International Policy, attached to Coregis's motion as Exhibit D. The International Policy provided coverage for claims made against those who were insured under the policy, provided that the claim was both made against the insured and reported to International during the November 1, 1992 to November 1, 1993 policy period or sixty (60) days thereafter. Id. London was an insured person under the International Policy for acts, errors and omissions committed by him prior to joining UKW, including the time period alleged in the Gindi Action, subject to the policy's terms, conditions, and exclusions. Id. In order for London to have obtained insurance benefits under the International Policy for the claims asserted in the Gindi Action, he was required to report the claim to International during the November 1, 1992 to November 1, 1993 policy period or sixty (60) days thereafter. London never tendered the Gindi Action to International for defense and indemnification during this period or at any time. See Declaration of Rick Andrews, filed with Coregis's motion. London did not tender the Gindi claim to International even though on September 15, 1993, London served a verified response to Gindi's form interrogatories which stated that he "was a partner during the time periods alleged in the complaint at both London & Heisman and Urbach, Kahn & Werlin." See London's Interrogatory Response No. 2.11, filed with Coregis's motion as Exhibit E.

On January 1, 1993, Mt. Airy Insurance Company ("Mt.Airy") assumed the role of International under the International Policy pursuant to a novation of the insurance contract. See Andrews Decl. at ¶ 3. On November 14, 1994, Mt. Airy issued its own policy of Accountants' Liability Insurance to UKW for the policy period November 1, 1994 to November 1, 1995 ("Mt. Airy Policy"). See Exhibit H, filed with Coregis's motion. Like the International Policy, the Mt. Airy Policy provided coverage, subject to conditions and exclusions, for claims that were both first made and reported to the insurance carrier during the policy period. Id.

After pursuing litigation on the Original Gindi Complaint for some time, Gindi chose to substitute attorney Christopher Wilson ("Wilson") as his new attorney. On or about June 10, 1994, Wilson substituted into the Gindi Action. Wilson Declaration at ¶ 3, filed with Camico motion as Supplemental Exhibit G.

On April 5, 1995, sixty (60) days...