Ironshore Specialty Ins. Co. v. Everest Ins. Co., Case No. CV 20-01652-AB (GJSx)

Decision Date21 July 2020
Docket NumberCase No. CV 20-01652-AB (GJSx)
Citation473 F.Supp.3d 1028
Parties IRONSHORE SPECIALTY INSURANCE COMPANY, individually and as an assignee of H&R Construction Surfacing Inc., Plaintiff, v. EVEREST INSURANCE COMPANY, Defendant.
CourtU.S. District Court — Central District of California

Craig G. Kline, Vogrin and Frimet LLP, Beverly Hills, CA, George J. Vogrin, Vogrin and Frimet LLP, New York, NY, for Plaintiff.

Robert W. Keaster, Chamberlin and Keaster LLP, Encino, CA, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S REQUEST FOR JUDICIAL NOTICE AND GRANTING IN FULL DEFENDANT'S MOTION TO DISMISS PLAINTIFF'S FIRST AMENDED COMPLAINT (DKT. NO. 15)

ANDRÉ BIROTTE JR., UNITED STATES DISTRICT COURT JUDGE

I. INTRODUCTION

Before the Court is Defendant Everest Insurance Company's ("Defendant") Motion to Dismiss ("MTD," Dkt. No. 15) Plaintiff's First Amended Complaint ("FAC," Dkt. No. 14) and Request for Judicial Notice. ("RJN," Dkt. No. 16). Plaintiff Ironshore Specialty Insurance Company ("Plaintiff") opposes Defendant's Motion to Dismiss and Defendant's Request for Judicial Notice. ("Opp'n," Dkt. No. 22; "RJN Opp'n," Dkt. No. 23). Defendant filed replies to both of Plaintiff's oppositions. ("Reply," Dkt. No. 24; "RJN Reply," Dkt. No. 25). The Court held a hearing on July 10, 2020. For the reasons stated below, the Court GRANTS in part and DENIES in part Defendant's Request for Judicial Notice, and GRANTS in full Defendant's Motion to Dismiss Plaintiff's FAC.

II. BACKGROUND

This action regards a dispute between two insurance companies, Plaintiff and Defendant. Here, Plaintiff seeks to recover defense costs and indemnity that it paid in connection with an insurance claim for a construction project in Beverly Hills against mutual insureds of itself and Defendant. The following facts are taken from allegations in Plaintiff's FAC and exhibits filed in support of Defendant's RJN.

A. Factual Background
i. Defendant's Original Insurance Policy

Pacific Northstar Reeves, LLC ("PNR") was the developer of a luxury condominium community located at 261 Reeves Drive, Beverly Hills, California ("the Subject Project"). (FAC ¶ 9, Ex. A (Dkt. No. 14-1)). From October 31, 2003 to October 31, 2006, Defendant insured the Subject Project under a wrap insurance policy ("Defendant's Wrap Policy"), or a blanket insurance policy designed to cover developers, general contractors, and subcontractors in major construction projects. (FAC ¶ 10, Ex. D (Dkt. No. 14-4); FAC ¶ 59). Plaintiff alleges that Defendant's Wrap Policy covered PNR and all other contractors, subcontractors, or entities involved in the Subject Project's construction. (FAC ¶ 10, Ex. D (Dkt. No. 14-4)).

Defendant's Wrap Policy provided "completed operations" coverage. (Id. ). The policy's completed operations provision specified that Defendant would cover policyholders for bodily injury and property damage that occurred during the policy period or within the "contractors products-completed operations period." (Id. at 51 of 58). The policy defined "[c]ontractors products-completed operations period" as "during the period of time allowed by the applicable law for claims or ‘suits’ to be brought against the insured." (Id. at 26 of 58).

ii. Plaintiff Takes Over as the Subject Project's Insurer

On or about September 18, 2008, a Los Angeles Superior Court judge appointed Thomas Henry Coleman ("Coleman") as Receiver to oversee the Subject Project's completion. (FAC ¶ 11, Ex. E (Dkt. No. 14-5)).

Plaintiff alleges that, at an unspecified date and upon information and belief, Defendant repudiated its insurance coverage. (FAC ¶ 12). Defendant's repudiation motivated Coleman to seek out an additional insurance policy, or "wrap" coverage, for the Subject Project. (Id. ). Accordingly, on or about August 19, 2009, Plaintiff issued Coleman a wrap insurance policy ("Plaintiff's Wrap Policy"). (Id. , Ex. F (Dkt. No. 14-6)). Plaintiff's Wrap Policy named as insureds Coleman, PNR, and Avoca USA, Inc. ("Avoca"), the Subject Project's general contractor. (Id. ). Plaintiff's Wrap Policy covered the insureds from June 23, 2009 to June 23, 2010. (Id. ). On or about October 7, 2009, Coleman purchased an excess insurance policy from Plaintiff for the Subject Project ("Plaintiff's Excess Policy"). (FAC ¶ 13, Ex. G (Dkt. No. 14-7)). Plaintiff's Excess Policy covered Coleman from June 23, 2009 to June 23, 2010. (Id. ).

iii. Plaintiff Intervenes in Litigation Between HOA and the Subject Project's Contractors

At an unspecified date in 2011, the Maison Reeves Homeowners Association ("HOA") filed a complaint in Los Angeles Superior Court, alleging several construction defect claims against Coleman. (FAC ¶ 14, Ex. H (Dkt. No. 14-8)). Thereafter, on or about September 29, 2011, Perry E. Rhoads ("Rhoads") of Robert Smylie & Associates, a law firm representing Coleman, sent a tender letter to Defendant regarding these defects. (Id. ). Rhoads requested that Defendant reimburse Coleman for losses Coleman incurred in his lawsuit against HOA in the amount of approximately $600,000. (Id. ). On or about September 19, 2013, HOA's counsel delivered a notice of claim to Attorney Peter Pritchard, Esq. ("Pritchard"), PNR's and Coleman's counsel. (FAC ¶ 15, Ex. I (Dkt. No. 14-9)). On April 8, 2014, Pritchard sent Defendant a notice of claim letter. (FAC ¶ 17, Ex. K (Dkt. No. 14-11)). On May 29, 2014, Pritchard sent Defendant correspondence concerning HOA's and Coleman's lawsuit, specifically its claim for defects in the construction of the Subject Property. (FAC ¶ 17, Ex. L (Dkt. No. 14-12)).

On or about September 26, 2014, HOA filed a complaint in Los Angeles Superior Court against Pacific Northstar Property Group, LLC ("Pacific Northstar"), PNR, Avoca, and Coleman ("the Named Defendants") seeking damages for alleged construction defects. (FAC ¶ 18, Ex. M (Dkt. No. 14-13)).

On January 20, 2015, Defendant replied to Pritchard's April and May 2014 letters, denying liability. (FAC ¶ 19, Ex. N (Dkt. No. 14-14)). Specifically, Defendant denied Coleman insurance coverage and stated that it had "no duty to defend or indemnify the insured in the Maison Reeve HOA litigation, as there is no products-completed operations coverage during the policy period." (Id. at 23). At an unspecified date following Defendant's reply, H&R Construction Surfacing, Inc. ("H&R"), a Subject Project subcontractor, sent Defendant a tender letter. (FAC ¶ 20). Plaintiff alleges that Defendant did not respond to H&R's letter. (Id. ).

On April 3, 2015, Plaintiff filed a complaint in intervention in HOA's construction defect action against the Named Defendants. (FAC ¶ 21, Ex. O (Dkt. No. 14-15)). Because PNR was a suspended corporation, Plaintiff sought to intervene on PNR's behalf. (FAC ¶ 21).

On February 18, 2016, HOA filed a separate lawsuit against Avoca, the Subject Project's general contractor, seeking damages for the same alleged construction defects as asserted against PNR, the Subject Project's developer. (FAC ¶ 24, Ex. Q (Dkt. No. 14-17)). HOA's lawsuits against the Named Defendants and Avoca were eventually consolidated into one action ("the Underlying Action"). (FAC ¶ 25). Plaintiff funded PNR's and Avoca's entire defense, despite Plaintiff's repeated requests that Defendant contribute to representation costs. (FAC ¶ 22).

iv. Plaintiff and Defendant Enter into a Standstill Agreement

In March 2016, Plaintiff filed a declaratory judgment action against Defendant in Los Angeles Superior Court which was eventually consolidated with the Underlying Action. (FAC ¶ 25, Ex. R (Dkt. No. 14-18)).

In October 2017, Plaintiff agreed to dismiss its declaratory judgment action against Defendant, without prejudice, in consideration for Defendant agreeing to a standstill agreement ("the Standstill Agreement"). (FAC ¶ 25, Ex. T (Dkt. No. 14-20)). On October 4, 2017, Plaintiff sent Defendant a draft Standstill Agreement.

(FAC ¶ 25, Ex. R (Dkt. No. 14-18)). The draft agreement specified, in part, that Defendant:

agrees that with regard to any claims made against them by [Plaintiff] relating to or arising out of the claims filed by Maison Reeves [HOA], any defense relating to the Statute of Limitations is tolled from March 22, 2016 until 90 days after any dismissal or judgment becomes final, in that all appeals have been decided or the time for appeal has passed.

(Id. , Ex. R at ¶ 4). Defendant proposed October 6, 2019 as an alternative tolling expiration date. (FAC ¶ 25, Ex. S (Dkt. No. 14-19)). On October 10, 2017, Plaintiff and Defendant executed a final Standstill Agreement that incorporated Defendant's proposal of October 6, 2019. (FAC ¶ 25, Ex. T (Dkt. No. 14-20)).

v. Plaintiff Intervenes in Litigation Between HOA and Contractors

On April 15, 2016, Plaintiff stipulated to file a complaint-in-intervention on Avoca's behalf in the Underlying Action. (RJN, Ex. C (Dkt. No. 16-3)). On May 9, 2016, Plaintiff filed a cross-complaint in the Underlying Action against twenty subcontractors whose work, Plaintiff alleged, was defective. (RJN, Ex. D (Dkt. No. 16-4)). One of the twenty subcontractor cross-defendants was H&R. (Id. ).

On or about November 17, 2017, Plaintiff entered into a settlement agreement ("the Settlement Agreement") with H&R. (FAC ¶ 28, Ex. W (Dkt. No. 14-23)). Under this settlement, H&R agreed to assign to Plaintiff:

any and all rights which H&R may have against [Defendant] arising out of [the Underlying Action] including, but not limited to, all claims arising out of or in any way related to H&R's claim for coverage under [Defendant's] policy and any and all claims, causes of action or damages flowing from [Defendant's] actions in relation to such claims, whether founded on contract or tort, to the fullest extent permitted by law.

(Id. at 2) (emphasis added). On December 13, 2017, Plaintiff obtained a judgment for property damage against H&R, an insured under Defendant's Wrap Policy, for $1,236,720.98, plus interest at due rate of 10% per year. (FAC ¶ 29, Ex. X (Dkt. No. 14-24...

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