General Star Nat. Ins. Corp. v. World Oil Co.

• Decision Date: 25 July 1997
• Docket Number: No. CV 96-4497 DDP (Ex).,CV 96-4497 DDP (Ex).
• Citation: 973 F.Supp. 943
• Court: U.S. District Court — Central District of California
• Parties: GENERAL STAR NATIONAL INS. CORP., a corporation, Plaintiff, v. WORLD OIL COMPANY, a corporation, Defendant.

973 F.Supp. 943

GENERAL STAR NATIONAL INS. CORP., a corporation, Plaintiff, v. WORLD OIL COMPANY, a corporation, Defendant.

No. CV 96-4497 DDP (Ex).

United States District Court. C.D. California.

July 25, 1997.

Michael L. Boli, Moeller Boli Caspari & Walsh, Alameda, CA, for General Star Nat. Ins.Co.

Michael G. Romey, Assaf Joshua Henig, Latham & Watkins, Los Angeles, CA, for World Oil Corp.

PREGERSON, District Judge.

Order Granting Summary Judgment In Favor Of Defendant World Oil Corporation

Defendant's motion for summary judgment and Plaintiff's cross-motion for summary judgment came before the Court on June 16, 1997. After reviewing and considering the materials submitted by the parties and hearing oral argument, the Court grants summary judgment in favor of Defendant.

I. Background

Plaintiff General Star National Insurance Company ("General Star") insured the business automobiles, including certain private passenger automobiles, of defendant World Oil Corporation ("World Oil") from the Spring of 1993 to the Spring of 1994. Genesis Underwriting Management Company ("Genesis") provided underwriting and claims management services for policies written by General Star, including the policy written for World Oil.

In the Winter and Spring of 1994, World Oil and General Star negotiated the renewal of the policy. Kathy Housel of Willis Corroon, World Oil's broker, negotiated on behalf of World Oil. Peter Gorin of Sherwood Insurance, General Star's broker, negotiated on behalf of General Star. Genesis employees dealt only with Gorin, not with Housel or any other person representing World Oil.

World Oil and General Star agreed to renew the General Star policy for one year effective April 1, 1994. The policy had a "per accident" limit of $1,200,000 ("limit of insurance"). The policy had a "per accident" deductible of $100,000 and an "annual aggregate" deductible of $150,000 (collectively "deductible"). The policy provided that the limit of insurance would not apply until the amount of a given loss was reduced by the amount of the deductible.

World Oil and General Star also entered into a "Claims Service Agreement" ("Claims Agreement") to clarify the parties' obligations under the policy. The Claims Agreement applied to the original policy and to the renewed policy. The Claims Agreement provided that World Oil would defend all claims that fell within the $100,000 "per accident" deductible. General Star retained the right, but not the duty, to "associate in the handling" or "take complete control at any time of the handling" of such claims. (Claims Agreement § 1.)

The Claims Agreement also required World Oil to provide a "clean, irrevocable and unconditional letter of credit" that General Star could draw down to satisfy payment of the deductible in the event that World Oil refused or was unable to pay all or part of the deductible. The letter of credit was $700,000 for the original policy and $800,000 for the renewed policy. (Id. at § 2.)

During the time that World Oil and General Star were negotiating the renewal of the original policy, World Oil also sought to purchase coverage for the deductible through Willis Corroon. (Housel Depo. at 79:5-9.) World Oil asserts that it wanted to purchase deductible coverage because certain of its employees were concerned that they might be putting World Oil at risk when they drove their World Oil cars because of the deductible provision. (Housel Depo. at 79:10 to 80:24.) Gorin, General Star's broker, was involved in World Oil's efforts to obtain coverage for the deductible. (Gorin Depo. at 52:12-17, 64:19-22, 66:5-11, 94:19-95:1; Housel Depo. at 89:1.6-24, 100:8-21.)

World Oil ultimately purchased a second policy from Hartford Fire Insurance Company ("Hartford"), which was effective from April 27, 1994 to April 1, 1995 ("Hartford policy"). The limit of coverage under the Hartford policy was $250,000, an amount equal to the maximum deductible that could result from a single accident under the General Star policy. The Hartford policy had no deductible.

On or about June 23, 1994, one of World Oil's cars was involved in an accident. A person injured in that accident brought an action in state court against World Oil and others. World Oil tendered its defense to General Star and Hartford, both of which accepted the tender of defense. The plaintiff ultimately settled with World Oil for $775,000 ("Ruspoli settlement"). Hartford paid its full policy limit of $250,000 and General Star contributed the remaining $525,000. General Star then filed this action seeking reimbursement of $133,688, which is the difference between what General Star paid ($525,000) and what General Star would have paid ($391,312) if World Oil had paid the $250,000 deductible.

World Oil filed a motion for summary judgment seeking a determination that the Hartford contribution fulfilled World Oil's deductible obligation under the General Star policy. General Star filed a cross-motion seeking a determination that under the terms of the General Star policy, World Oil could not purchase insurance coverage for the deductible, and thus World Oil should have contributed $250,000 of its own money to the Ruspoli settlement.

The Court finds that the General Star policy did not prohibit World Oil from obtaining insurance coverage for the deductible. In addition, the Court finds that the "other insurance" clause in the General Star policy did not require a pro rata sharing of the Ruspoli settlement.

II. Discussion

A. Standard On Summary Judgment.

Summary judgment is appropriate when there "is no genuine issue of material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

In order to defeat a motion for summary judgment, there must be facts in dispute that are both genuine and material, i.e., there must be facts upon which a fact finder could "reasonably find" for the non-moving party. See Anderson v. Liberty Lobby, 477 U.S. 242, 252, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986). The court does not weigh the evidence or make credibility determinations; rather, the court only determines whether there are any disputed issues and, if so, whether those issues are both genuine and material. Id.

The initial burden of establishing that there is no genuine issue of material fact lies with the moving party. Fed.R.Civ.P. 56(c); Celotex, 477 U.S. at 323, 106 S.Ct. at 2552-53; British Airways Board v. Boeing Co., 585 F.2d 946, 951 (9th Cir.1978), cert. denied, 440 U.S. 981, 99 S.Ct. 1790, 60 L.Ed.2d 241 (1979). Once the movant has met this burden by producing evidence that, if left uncontroverted, would entitle the moving party to a directed verdict at trial, the burden shifts to the non-movant to present specific facts showing that there is a genuine issue of material fact. See Fed.R.Civ.P. 56(e); Celotex, 477 U.S. at 324, 106 S.Ct. at 2553; Lake Nacimiento Ranch Co. v. San Luis Obispo, 841 F.2d 872, 876 (9th Cir.1987), cert. denied, 488 U.S. 827, 109 S.Ct. 79, 102 L.Ed.2d 55 (1988).

B. The General Star Policy Did Not Prohibit World Oil From Acquiring Insurance to Cover the Amount of the "Deductible".

General Star asserts that its underwriting and marketing "philosophy" was to accept liability risks only when the insured shared the risk of loss by means of a substantial deductible or a self-insured retention. General Star asserts that its policy makes the insured its "partner" and motivates the insured to "take seriously" General Star's loss control and safety programs. General Star asserts that it would not have renewed World Oil's policy if it had known that World Oil was seeking to eliminate its "personal" responsibility for the deductible. (Aspell Decl. at ¶ 10; Hanuschak Decl. at ¶ 13.)

General Star further asserts that World Oil and General Star both intended that World Oil share the risk of loss with General Star and that World Oil understood that a "deductible buy-back" policy (a policy covering the General Star deductible) would violate General Star's risk-sharing principle. However, General Star has not presented evidence sufficient to raise a genuine issue of material fact regarding whether World Oil intended to share the risk of loss with General Star or whether World Oil understood that it could not seek coverage for the amount of the General Star deductible under the terms of the General Star policy.

General Star asserts that World Oil understood that it could not purchase deductible insurance because World Oil did not ask General Star's permission before obtaining the Hartford policy, World Oil did not notify General Star that it had purchased the Hartford policy, and World Oil "still did not report to [General Star] about the existence of the Hartford policy" even after it had reported its loss to General Star. (Plaintiff's Motion at 12 (emphasis in original).) From these failures, General Star concludes that "World [Oil] knew: (1) that [General Star] required that its insureds share the risk by means of the deductibles or a retention; (2) that the `deductible buy back' policy was contrary to [General Star's] risk sharing approach to insurance; and (3) that if World Oil reported the Hartford policy to [General Star], the [General Star] underwriter would insist that the [General Star] policy be endorsed to exclude coverage for the private passenger autos." (Id.) However, World Oil's conduct is equally consistent with the actions of an insured who acted without knowledge that its actions were impermissible. Nothing in the General Star policy expressly prohibits World Oil from acquiring insurance to cover the cost of the deductible.

General Star offered the declaration of Hanuschak, an Assistant Vice President of Genesis, who declared that during the renewal negotiations for the General Star policy, Gorin, the broker from Sherwood, told him that World Oil was interested in a...