Esparza v. Burlington Ins. Co.

• Citation: 866 F.Supp.2d 1185
• Decision Date: 08 August 2011
• Docket Number: Case No. CV F 10–1079 LJO JLT.
• Court: U.S. District Court — Eastern District of California
• Parties: Luis M. ESPARZA, et al., Plaintiffs, v. The BURLINGTON INSURANCE COMPANY, Defendant.

866 F.Supp.2d 1185

Luis M. ESPARZA, et al., Plaintiffs,

v.The BURLINGTON INSURANCE COMPANY, Defendant.

Case No. CV F 10–1079 LJO JLT.

United States District Court, E.D. California.

Aug. 8, 2011.

James H. Wilkins, Wilkins Drolshagen and Czeshinski, Fresno, CA, for Plaintiffs.

Aaron C. Agness, Patricia Ann Daza, Weston & McElvain LLP, Los Angeles, CA, for Defendant.

SUMMARY JUDGMENT DECISION (Doc. 20.)

LAWRENCE J. O'NEILL, District Judge.

INTRODUCTION

Defendant Burlington Insurance Company (“Burlington”) seeks summary judgment on plaintiffs' Luis M. Esparza (“Mr. Esparza”) and Esparza Enterprises, Inc. (“Esparza Enterprises”) breach of insurance contract and bad faith claims in the absence of Burlington's duty to defend Mr. Esparza and Esparza Enterprises (collectively “plaintiffs”) in an underlying action arising from death of an Esparza Enterprises employee. Plaintiffs contend that Burlington improperly applied a commercial general liability policy endorsement to deny their claim arising from Esparza Enterprises' agreement to indemnify its customer. This Court considered Burlington's summary judgment motion on the record ¹ without a hearing, pursuant to Local Rule 230(g). For the reasons discussed below, this Court GRANTS Burlington summary judgment.

BACKGROUND²

Summary

Burlington issued Esparza Enterprises a commercial general liability policy (“Burlington policy”), effective during 2008, and denied as specifically excluded coverage for an underlying action arising from the death of an Esparza Enterprises employee. Plaintiffs claim that they were not properly alerted to an endorsement upon which Burlington relies and reasonably expected coverage for the underlying action. As such, plaintiffs pursue breach of insurance contract and bad faith claims, and Burlington contends that the claims fail in the absence of its duty to defend plaintiffs.

Underlying Action

Jorge Herrera (“Mr. Herrera”) was an employee of Esparza Enterprises, a farm labor contractor. On July 10, 2008, when working for Esparza Enterprises at Vignolo Farms, Inc. (“Vignolo Farms”), Mr. Herrera suffered heat stroke which caused his death. Burlington notes that Mr. Herrera suffered heat stroke when loading boxes of grapes onto a truck. Plaintiffs agree that Mr. Herrera “was involved with loading grapes onto a truck” on the day he suffered heat stroke but contend that other factors contributed to his death, including inadequate precautions or equipment for timely medical care or to summon emergency medical care.

On March 11, 2009, Mr. Herrera's wife, for herself and their two sons, filed a Kern County Superior Court action against Vignolo Farms (“underlying action”) to allege claims for personal injury, property damage, wrongful death, general negligence, and negligent entrustment of trucks and equipment to Esparza Enterprises in conscious disregard of Mr. Herrera's safety. In the underlying action, Mr. Herrera's widow and sons sought recovery for hospital and medical expenses, loss of consortium and support, and compensatory, general and punitive damages.

On August 25, 2009, Vignolo Farms filed in the underlying action a cross-complaint against Mr. Esparza dba Esparza Enterprises for express contractual indemnity in that Esparza Enterprises was a subcontractor and supplier of labor, services and equipment to Vignolo Farms, pursuant to a Farm Labor Contractor Services Agreement (“contractor agreement”). Vignolo Farms claimed that the contractor agreement bound Esparza Enterprises to defend and indemnify Vignolo Farms against the claims of Mr. Herrera's widow and sons in the underlying action.

On September 2, 2010, Vignolo Farms' cross-complaint proceeded to a bench trial. On September 15, 2010, the court ruled in Vignolo Farms' favor on its cross-complaint for express contractual indemnity. On January 7, 2011, the underlying action proceeded to a bench trial, and judgment was entered for nearly $735,000 in favor of Mr. Herrera's widow and sons.

Denial Of Plaintiffs' Claim For Coverage

On September 22, 2009, Burlington received the Vignolo Farms' cross-complaint against Esparza Enterprises and contends that it investigated Esparza Enterprises' claim for coverage. Burlington's October 21, 2009 letter denied Esparza Enterprises' tender of its defense and indemnity of the underlying action.

The Prior Admiral Insurance Policy And Plaintiffs' Claims

Admiral Insurance Company had issued Esparza Enterprises a commercial general liability policy (“Admiral policy”), effective during 2007. Plaintiffs' operative complaint (“complaint”) in this action notes that the Admiral policy included an exclusion for “contractual liability” but that there was an express exception to the contractual liability exclusion for claims arising out of liability “assumed in a contract or agreement that was defined as ‘an insured contract.’ ” The complaint further notes that the Admiral policy defined “insured contract” as “that part of any contract or agreement pertaining to your business ... under which you assume the tort liability of another to pay for ‘bodily injury’ or ‘property damage’ to a third person or organization.” According to the complaint, the Admiral policy contained an exclusion for “bodily injury” to employees to which there was an exception for “liability assumed by the insured under an ‘insured contract.’ ” The complaint alleges that plaintiffs understood that based on the Admiral policy, plaintiffs would be covered for a claim arising from Esparza Enterprises' agreement to indemnify a customer, even if the claim involved injuries to an Esparza Enterprises employee.

The complaint alleges that when Esparza Enterprises entertained Burlington's quote for the Burlington policy, Burlington never alerted Esparza Enterprises to an absence of coverage for indemnity claims against Esparza Enterprises although Burlington was obliged to do so. The complaint alleges that Esparza Enterprises reasonably expected that the Burlington policy would include coverage for express indemnity claims arising out of injuries to Esparza Enterprises' employees. The complaint concludes that since claims against plaintiffs in the underlying action arise out of an express indemnity agreement which qualified as an “insured contract” under the Burlington policy, plaintiffs are entitled to defense and indemnification under the Burlington policy.

The complaint's (first) breach of written contract claim alleges that Burlington breached the Burlington policy by refusing to defend and indemnify plaintiffs in the underlying action. The complaint's (second) breach of implied covenant of good faith and fair dealing claim alleges that Burlington engaged in insurance bad faith by:

1. Failing properly to investigate the underlying action and plaintiffs' coverage claim;

2. Denying plaintiffs a defense without proper interpretation of the Burlington policy; and

3. Making a coverage determination based on an unreasonable and erroneous interpretation of the Burlington policy.

The complaint further alleges that Burlington acted with fraud, malice and oppression to subject Burlington to punitive damages under California Civil Code section 3294. The complaint seeks to recover plaintiffs' legal expenses incurred in the underlying action and for Mr. Esparza's emotional distress.

DISCUSSION

Summary Judgment Standards

Burlington seeks summary judgment in that a Burlington policy endorsement and exclusions, discussed below, preclude coverage to plaintiffs for the underlying action. Burlington further takes issue that the Admiral policy would have provided plaintiffs coverage for the underlying action. Plaintiffs fault Burlington's reliance on an ambiguous and inconspicuous Burlington policy endorsement to deny coverage.

F.R.Civ.P. 56(a) permits a party to seek summary judgment “identifying each claim or defense—or the part of each claim or defense—on which summary judgment is sought.” “A district court may dispose of a particular claim or defense by summary judgment when one of the parties is entitled to judgment as a matter of law on that claim or defense.” Beal Bank, SSB v. Pittorino, 177 F.3d 65, 68 (1st Cir.1999).

Summary judgment is appropriate when the movant shows “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” F.R.Civ.P. 56(a); Matsushita Elec. Indus. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Assn., 809 F.2d 626, 630 (9th Cir.1987). The purpose of summary judgment is to “pierce the pleadings and assess the proof in order to see whether there is a genuine need for trial.” Matsushita Elec., 475 U.S. at 586, n. 11, 106 S.Ct. 1348;International Union of Bricklayers v. Martin Jaska, Inc., 752 F.2d 1401, 1405 (9th Cir.1985).

On summary judgment, a court must decide whether there is a “genuine issue as to any material fact,” not weigh the evidence or determine the truth of contested matters. F.R.Civ.P. 56(a), (c); Covey v. Hollydale Mobilehome Estates, 116 F.3d 830, 834 (9th Cir.1997); see Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Poller v. Columbia Broadcasting System, 368 U.S. 464, 467, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962); Loehr v. Ventura County Community College Dist., 743 F.2d 1310, 1313 (9th Cir.1984). “Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, whether he is ruling on a motion for summary judgment or for a directed verdict.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)

The evidence of the party opposing summary judgment is to be believed and all reasonable inferences that may be drawn from the facts before the court must be drawn in favor of the opposing party. Anderson, 477 U.S. at 255, 106 S.Ct. 2505;Matsushita, 475 U.S. at 587, 106...