Integon Nat'l Ins. Co. v. Reece, 1:18-cv-01192-LJO-JLT

• Decision Date: 19 November 2019
• Docket Number: 1:18-cv-01192-LJO-JLT
• Parties: INTEGON NATIONAL INSURANCE COMPANY, Plaintiff; Counter-Defendants, v. Billy REECE ; Amber Reece; and C.N, a minor, by and through his guardian ad litem Callie Nielsen, Defendants; Counter-Claimants.
• Court: U.S. District Court — Eastern District of California

423 F.Supp.3d 831

INTEGON NATIONAL INSURANCE COMPANY, Plaintiff; Counter-Defendants,

v.Billy REECE ; Amber Reece; and C.N, a minor, by and through his guardian ad litem Callie Nielsen, Defendants; Counter-Claimants.

1:18-cv-01192-LJO-JLT

United States District Court, E.D. California.

Signed November 19, 2019

Filed November 20, 2019

Hugh Douglas Galt, Jeffrey Allan Dollinger, Woolls Peer Dollinger & Scher, APC, Jean M. Daly, Murchison & Cumming LLP, Los Angeles, CA, for Plaintiff; Counter-Defendants.

William L. Alexander, Alexander & Associates, PLC, David K. Cohn, Chain Cohn Stiles, Bakersfield, CA, for Defendants; Counter-Claimants.

MEMORANDUM DECISION AND ORDER RE MOTIONS FOR SUMMARY JUDGMENT

(ECF Nos. 24, 25)

Lawrence J. O'Neill, UNITED STATES CHIEF DISTRICT JUDGE

I. INTRODUCTION

This is an insurance coverage dispute between Plaintiff Integon National Insurance Company ("Integon") and Defendants Billy Reece, Amber Reece (the "Reeces"), and C.N., a minor, by and through his guardian ad-litem Callie Nielsen ("C.N.") (collectively "Defendants"). The dispute concerns coverage for claims asserted against the Reeces by C.N. in an action filed in March 2018 and currently pending in California Superior Court for the County of Kern. On September 4, 2018, Integon brought this diversity jurisdiction action pursuant to 28 U.S.C. § 1332 against the Reeces, and also named C.N., who is the plaintiff in the state court action. ECF No. 1. Integon alleges one claim against Defendants seeking declaratory relief, asking the Court to find that Integon has no duty to defend and no duty to indemnify the Reeces in the state court action based on the homeowner's insurance policy's motor vehicle exclusion. The Reeces filed a counterclaim for (1) declaratory relief as to whether the state court action against the Reeces is covered by the policy and whether Integon is required to provide them with independent counsel at Integon's expense; (2) for breach of written contract; and (3) for breach of the covenant of good faith and fair dealing. ECF No. 11.

On July 8, 2019, Integon and the Reeces both filed motions for summary judgment pursuant to Federal Rule of Civil Procedure 56. ECF Nos. 24-25. Oppositions were filed on July 22, 2019. ECF No. 5.¹ Replies were filed on July 29, 2019. ECF Nos. 29-30. The issue presented on these summary judgment motions is whether a motor vehicle exclusion in the Reeces' homeowner's insurance policy excludes coverage for the Reeces' liability in the underlying state court litigation. Additionally, the Reeces claim they are entitled to summary judgment on the issue of whether Integon should be required to pay for independent counsel in the state court action. The Court finds it appropriate to rule on the motions without oral argument. See Local Rule 230(g). Having considered the parties' briefing and the relevant law, the Court issues the following order.

II. FACTUAL BACKGROUND

The parties agree on all material facts as submitted in the joint statement of undisputed facts. ECF No. 25-3, ("UMF").²

On March 28, 2018, C.N. filed a complaint in Kern County Superior Court, Case No. BCV-18-100719, in connection with injuries that C.N. suffered in an accident involving a golf cart owned by the Reeces (the "Underlying Action" or "C.N. Action"). UMF 14; ECF No. 11 at Ex. B. The Underlying Action alleges that on December 22, 2017, C.N. was injured when he fell off the golf cart that was driven by K.R.,³ an unlicensed minor. UMF 17. K.R. is the Reeces' niece. UMF 47(d). The Underlying Action alleges various causes of action against the Reeces including that they:

• "did negligently and carelessly own, rent, lease, bail, operate, control, repair, maintain and entrust" the golf cart

• "did negligently and carelessly fail to properly supervise, protect, and control minor children at [the Property], including [C.N.], by providing Defendant, [K.R.], an unlicensed minor, with [the golf cart]."

• were negligent in "allowing and permitting [K.R.], an unlicensed minor, to operate [the golf cart] on a public roadway with other minor children as passengers, including [C.N.]."

• "had actual and/or constructive knowledge, and knew and/or reasonably should have known, that Defendant, [K.R.], an unlicensed minor, would not and could not safely drive, operate, control, possess, and manage [the golf cart] on a public roadway, and negligently and carelessly failed to prevent Defendant, [K.R.], from operating [the golf cart] with minor passengers on a public roadway."

• were negligent in failing to prevent an unlicensed minor from operating the golf cart in violation of Vehicle Code § 12500(a)

• were negligent in failing comply with Vehicle Code § 27360.5 by ensuring C.N. was transported in the golf cart using appropriate child passenger restraint system or safety belt

• were negligent in failing to register the golf cart in violation of Vehicle Code §§ 4000 and 21251.

UMF 18-24. C.N. alleges that he suffered damages resulting from the accident in the amount of $20,000,000. UMF 25.

Integon issued a homeowner's insurance policy to the Reeces, Policy No. 2004464223, effective for the policy period December 19, 2017 to December 19, 2018 ("Integon Policy" or the "Policy"). UMF 5; ECF No. 11, Ex. A. The Policy was in effect on the date of the subject accident and all premiums were paid. UMF 9-10. The Policy has personal liability limits of $300,000 per occurrence and $5,000, for medical payments to others. ECF No. 11, Ex. B at 12.⁴ The Policy's "Coverage E" provides personal liability coverage "[i]f a claim is made or a suit is brought against an ‘insured’ for damages because of ‘bodily injury’ or ‘property damage’ caused by an ‘occurrence’ to which this coverage applies." UMF 34; ECF No. 11, Ex. B at 69. The Policy's "Coverage F" provides coverage for medical payments to others when the medical expenses are "incurred or medically ascertained within three years from the date of an accident causing ‘bodily injury.’ " UMF 35; ECF No. 11, Ex. B at 69. As it pertains to Coverage E and F, the Policy has an exclusion for "Motor Vehicle Liability." Id. ; UMF 36. "Motor Vehicle Liability" is defined under the Policy as:

Liability for "bodily injury" or "property damage" arising out of the:

(1) Ownership of such vehicle or craft by an "insured";

(2) Maintenance, occupancy, operation, use, loading or unloading of such vehicle or craft by any person;

(3) Entrustment of such vehicle or craft by an "insured" to any person;

(4) Failure to supervise or negligent supervision of any person involving such vehicle or craft by an "insured"; or

(5) Vicarious liability, whether or not imposed by law, for the actions of a child or minor involving such vehicle or craft.

UMF 28; ECF No. 11, Ex. B at 55.

The motor vehicle exclusion under Section II – A.1 in part states that:

Coverages E [personal liability] and F [medical payments to others] do not apply to any "motor vehicle liability" if, at the time and place of an "occurrence", the involved "motor vehicle":

a. Is registered for use on public roads or property; b. Is not registered for use on public roads or property, but such registration is required by a law, or regulation issued by a government agency, for it to be used at the place of the ‘occurrence’; ...

UMF 36; ECF No. 11, Ex. B at 69.

The Policy further provides under Section II – A.2 that:

If Exclusion A.1. does not apply, there is still no coverage for ‘motor vehicle liability’ unless the ‘motor vehicle’ is:"

a. In dead storage on an "insured location";

b. Used to service an "insured's" residence;

c. Designed to assist the handicapped and, at the time of an "occurrence", it is:

(1) Being used to assist a handicapped person; or

(2) Parked on an "insured location";

d. Designed for recreational use off public roads and:

(1) Not owned by an "insured"; or

(2) Owned by an "insured" provided the "occurrence" takes place on an "insured location" as defined in Definitions B. 6.a., b., d., e. or h .; or

e. A motorized golf cart that is owned by an "insured", designed to carry up to 4 persons, not built or modified after manufacture to exceed speed of 25 miles per hour on level ground and, at the time of the "occurrence", is within the legal boundaries of a golfing facility and is parked or stored there, or being used by an "insured" to:

(1) Play the game of golf or for other recreational or leisure activity allowed by the facility;

(2) Travel to or from an area where "motor vehicles" or golf carts are parked or stored; or

(3) Cross public roads at designated points to access other parts of the golfing facility.

UMF 36; ECF No. 11, Ex. B at 69-70 (emphasis added).⁵

Billy and Amber Reece are the named insureds under the Policy. UMF 5. The Reeces are also the owners of a single-family residence located at 9362 Brunello Court in Bakersfield, California, which is the "insured location" under the Policy terms. UMF 3, 6. As defined in the Policy, "occurrence" means "an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in: a. ‘Bodily injury’; or b. ‘Property damage’." UMF 33; ECF No. 11, Ex. B at 56. The parties agree that the alleged injuries suffered by C.N. constitute "bodily injury" as defined in the Policy. UMF 7. The parties also agree that the golf cart involved in the underlying action is a "motor vehicle" as defined in the Policy. UMF 8.

In March 2018, Integon initially denied coverage for the Reeces' claim for coverage under the Policy exclusion for motor vehicle liability and refused to defend or indemnify the Reeces in the C.N. Action. UMF 40-42. A few months later, the Reeces insisted Integon reevaluate its coverage position and demanded that Integon defend and indemnify them in Underlying Action since the Reeces' conduct giving rise to potential liability occurred at their Property, i.e. an "insured location." UMF 43. Several months after Integon's initial denial, the Reeces indicated that Integon...