Ludgate Ins. Co. v. Lockheed Martin Corp.

• Decision Date: 28 June 2000
• Citation: 82 Cal.App.4th 592,98 Cal.Rptr.2d 277
• Court: California Court of Appeals Court of Appeals
• Parties: (Cal.App. 6 Dist. 2000) LUDGATE INSURANCE CO., Plaintiff , Cross-Defendant, and Respondent, v. LOCKHEED MARTIN CORPORATION, Defendant, Cross-Complainant, and Appellant. H018333 Filed

98 Cal.Rptr.2d 277 (Cal.App. 6 Dist. 2000)

LUDGATE INSURANCE CO., Plaintiff , Cross-Defendant, and Respondent, v. LOCKHEED MARTIN CORPORATION, Defendant, Cross-Complainant, and Appellant.

H018333

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SIXTH APPELLATE DISTRICT

Filed 6/28/00; pub. order 7/24/00 (see end of opn.)

Trial Court: Santa Clara County Superior Court Superior Court No. 731752

Trial Judge: The Honorable John F. Herlihy

(Santa Clara County Super. Ct. No. 731752)

Attorneys for Defendant, Cross-Complainant and Appellant: Troop, Steuber

PasichLockheed Martin Corporation Reddick & Tobey, LLP, David W. Steuber Curtis

D.Porterfield Clyde M. Hettrick Whitney Stein Catherine Rivard

Attorneys for Plaintiff, Cross-Complainant and Respondent: Booth Banning LLP Ludgate Insurance Co. Forrest Booth Kurt Micklow Elizabeth Palmer

CERTIFIED FOR PUBLICATION

Defendant and cross-complainant Lockheed Martin Corporation (hereafter, Lockheed) appeals from a judgment on the pleadings entered in favor of plaintiff and cross-defendant Ludgate Insurance Company, Ltd. (hereafter, Ludgate), and from an order denying Lockheed's motion to require Ludgate to post a bond pursuant to California Insurance Code sections 1616 and 1620.¹

We reverse in part, and affirm in part.

PROCEDURAL HISTORY

Ludgate is one of several plaintiffs who filed the present action for declaratory relief against Lockheed. The other plaintiffs are members of underwriting syndicates at Lloyd's, London. Ludgate and the other plaintiffs were designated below for purposes of this action as "Procter and Companies." We will retain that designation in this appeal.

Procter and Companies, as a group of individual London market insurers and syndicates, issued primary and excess liability insurance policies, "each for itself and not for any others," to Lockheed from approximately 1940 through 1985. In December 1995, while this matter was pending below, Ludgate separated itself from Procter and Companies as a plaintiff group, and pursued its claim against Lockheed on its own as a separate and independent plaintiff.

Relevantly restated to pertain to Ludgate alone as a separate and independent plaintiff, the first amended complaint for declaratory relief against Lockheed alleged in pertinent part:

"26. An actual and justiciable controversy exists between [Ludgate] and Lockheed regarding whether a defense obligation is owed by [Ludgate] to Lockheed under either the Primary Policies or the Excess Policies with respect to the Environmental Claims for defense expenses which have been or will be paid or reimbursed by the United States government.

"27. [Ludgate] desire[s] a judicial determination of the rights and duties of the parties under the Primary Policies and the Excess Policies, and a declaration that no defense obligation is owed by [Ludgate] to Lockheed under the Primary Policies or the Excess Policies with respect to the Environmental Claims for defense expenses which have been or will be paid or reimbursed by the United States government.

"28. A judicial declaration is necessary and appropriate at this time so that the parties may ascertain their rights and duties under the Primary Policies and the Excess Policies with respect to whether a defense obligation is owed by [Ludgate] to Lockheed with respect to the Environmental Claims for defense expenses which have been or will be paid or reimbursed by the United States government."

"55. An actual and justiciable controversy exists between [Ludgate] and Lockheed over the rights, duties and obligations of the . . . Primary Policies and the Excess Policies with respect to coverage for defense and indemnity for the Environmental Claims . . . set forth in . . . this First Amended Complaint.

"56. [Ludgate] desire[s] a judicial determination of the rights and duties of the parties with respect to defense and indemnity under the Primary Policies and the Excess Policies, a general declaration that there is no coverage for either defense or indemnity for Lockheed's Environmental Claims under the terms, conditions, exclusions and provisions of the Primary Policies and the Excess Policies.

"57. A judicial declaration is necessary and appropriate at this time so that the parties may ascertain their rights and duties under the Primary Policies and the Excess Policies with respect to defense and indemnity of the Environmental Claims."

In response, Lockheed filed its first amended cross-complaint for declaratory relief and breach of contract, in which it expressed agreement with Ludgate that "[e]ach cause of action asserted in this cross-complaint arises out of the same transaction, occurrence, or series of transactions or occurrences as one or more of the causes of action asserted by plaintiffs against Lockheed in this matter."

Like Ludgate's first amended complaint, Lockheed's first amended cross-complaint sought "a judgment declaring the present and future rights, duties, and liabilities of the parties under the subject insurance policies with respect to certain present and future claims by the United States, various other governmental entities, and/or private parties alleging that Lockheed is legally obligated to them for damages because of bodily injury, personal injury, and/or property damage in connection with environmental contamination." Specifically, Lockheed sought "a declaration that the terms of the subject policies obligate cross-defendant[] [Ludgate] to defend and indemnify Lockheed with respect to the claims described in paragraphs 20 through 86 of this cross-complaint . . . ."

With particular reference to the Burbank site, which is the relevant site for purposes of this appeal, Lockheed's first amended cross-complaint alleged that "[a]n actual controversy exists as to the rights and duties of the parties under the Policies in connection with the Burbank Site in that Lockheed contends, and seeks a declaratory judgment declaring that: [] (a) [Ludgate] issued one or more insurance Policies obligating it to indemnify Lockheed against those Underlying Claims concerning the Burbank Site; [] (b) [Ludgate] has wrongfully refused, failed or disclaimed any responsibility to fulfill its obligations under its respective Policies to completely indemnify Lockheed against those Underlying Claims concerning the Burbank Site; and [] (c) Lockheed is entitled to complete indemnity from [Ludgate] and to be reimbursed by and to receive payment from [Ludgate] for all sums which Lockheed becomes legally obligated to pay in connection with the Burbank Site."

In its answer to Lockheed's first amended cross-complaint, Ludgate denied "each and every allegation contained in Lockheed's unverified First Amended Cross-Complaint," and claimed a number of affirmative defenses, including the affirmative defense that "the full limits of [the] underlying policies [issued to Lockheed] have not been exhausted; therefore, no duty or obligation under the excess policies allegedly issued to Lockheed and subscribed by [Ludgate] has arisen."

Lockheed amended its first amended cross-complaint four times thereafter, the last being the fifth amended and supplemental cross-complaint for declaratory relief, breach of contract, and breach of the implied covenant of good faith and fair dealing. Throughout all the amendments, Lockheed insisted on the need for a judgment "declaring the present and future rights, duties, and liabilities of the parties under the subject insurance policies with respect to certain present and future claims by the United States, various state and local governmental entities, and/or private parties alleging that Lockheed is legally obligated to them for damages because of bodily injury, personal injury, and/or property damage in connection with environmental contamination," and that "the terms of the subject policies obligate [Ludgate] to defend and/or indemnify Lockheed with respect to the 'Underlying Claims.' "

As to the Burbank site, all the amendments stated that "[a]n actual controversy exists as to the rights and duties of the parties under the Policies in connection with the Burbank Site in that Lockheed contends, and seeks a declaratory judgment declaring that: [] (a) [Ludgate] issued one or more insurance Policies obligating it to indemnify Lockheed against those Underlying Claims concerning the Burbank Site; [] (b) [Ludgate] has wrongfully refused, failed or disclaimed any responsibility to fulfill its obligations under its respective Policies to completely indemnify Lockheed against those Underlying Claims concerning the Burbank Site; and [] (c) Lockheed is entitled to complete indemnity from [Ludgate] and to be reimbursed by and to receive payment from [Ludgate] for all sums which Lockheed becomes legally obligated to pay in connection with the Burbank Site."

On February 16, 1995, Lockheed filed a motion to compel Ludgate to post a bond pursuant to section 1616, et seq. On June 29, 1995, the trial court denied the motion. Lockheed's motion for reconsideration was also denied.

In December 1995, following the denial of Lockheed's bond motion, Ludgate separated itself from the rest of the Procter and Companies group and hired its own counsel to represent it in this action.

In its fifth amended cross-complaint, Lockheed set forth a description of two allocation schemes demonstrating how under each scheme Ludgate's excess policies would be reached. Pursuant to Lockheed's thirtieth cause of action, Lockheed's claim against Ludgate was reduced to a single claim for declaratory relief, and only with respect to the Burbank site. Lockheed's thirtieth cause of action states:

"198.Lockheed hereby incorporates by reference the allegations of paragraphs 1 through 125, inclusive, as though fully set forth herein.

"199.An actual controversy exists as to the rights and duties of the parties under the Primary and Excess Policies in connection with the Burbank Site in that Lockheed contends, and seeks a...