Mesa Underwriters Specialty Ins. Co. v. First Mercury Ins. Co.
| Decision Date | 16 August 2019 |
| Docket Number | Case No. 18-cv-03592-HSG |
| Citation | 411 F.Supp.3d 607 |
| Parties | MESA UNDERWRITERS SPECIALTY INSURANCE COMPANY, Plaintiff, v. FIRST MERCURY INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Northern District of California |
James Christian Nielsen, Sarah Christine Young, Nielsen Haley & Abbott LLP, San Rafael, CA, for Plaintiff.
Blaise S. Curet, Sinnott Puebla Campagne & Curet, APLC, Emeryville, CA, Randy Mark Marmor, Sinnott Puebla Campaign & Curet, APLC, San Francisco, CA, for Defendant.
ORDER DENYING MOTION FOR PARTIAL SUMMARY JUDGMENT
Re: Dkt. No. 26
Pending before the Court is Plaintiff Mesa Underwriters Specialty Insurance Company ("Mesa")'s motion for partial summary judgment against Defendant First Mercury Insurance Company ("First Mercury"), briefing for which is complete. Dkt. Nos. 26 ("Mot."), 29 ("Opp."), 30 ("Reply"). After carefully considering the parties' arguments, the Court DENIES Plaintiff's motion.1
On September 30, 2014, Borrego Solar Systems, Inc. ("Borrego"), filed a complaint against Campbell Certified, Inc. ("Campbell"), Reno Contracting, Inc. ("Reno"), and others employed by Borrego to help construct seven solar carports ("Subject Projects"). Dkt. No. 27 ("Young Decl.") Ex. 1 ("Borrego Compl."). Construction of the Subject Projects was completed by 2012. Mot. at 1; Opp. at 1. Borrego's complaint alleged that:
During recent wind events, certain aspects of the Subject Projects failed to perform as intended and expected, resulting in property damage. Investigation of the cause of these failures revealed that the structures were deficiently designed and constructed in that, among other things, they failed to meet applicable building codes, failed to comply with contractual requirements, were not fit for their intended purpose and were not designed and constructed according to proper practices, the applicable standard of care or in a workmanlike manner.
Borrego Compl. ¶ 43. Mesa alleges the wind events referenced in the complaint took place in 2014, well after the completion of construction. See Mot. at 1.
Mesa issued general liability insurance policies covering Campbell and Reno (collectively "the common insureds") between November 12, 2010 and November 12, 2012. Young Decl. Exs. 9–10. The common insureds then had two general liability insurance policies from First Mercury, which collectively covered the period between November 12, 2012 and March 12, 2015, the second of which provided property damage coverage at the time when the alleged wind events took place. Id. Ex. 13, Ex. 14 ("Mercury Policy").
The Borrego complaint was ultimately tendered to both Mesa and First Mercury. Mesa defended Campbell and Reno in the Borrego action subject to a reservation of rights, and claims to have incurred over $1 million in fees and costs related to that defense. Young Decl. ¶ 11, Exs. 11–12. And in or around August 2018, Borrego reached a settlement with Campbell and Reno, which was funded by Mesa. Id. ¶ 24. First Mercury, on the other hand, denied coverage on several occasions, citing—among other reasons—a "Continuous or Progressive Injury and Damage Exclusion" in the Mercury Policy. Id. Ex. 18 (), Ex. 20 (February 2018 denial citing same), Ex. 23 (). This exclusion provides:
Mercury Policy at MUSIC003257 (emphasis added).
On June 15, 2018, Mesa filed this action against First Mercury, seeking a declaratory judgment that First Mercury has a duty to defend and indemnify the common insureds, as well as contribution reimbursing Mesa for its expenses related to the Borrego action. Dkt. No. 1 ¶¶ 15–19; see also Dkt. No. 15 ¶¶ 24–28 ().
Summary judgment is proper when a "movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A fact is "material" if it "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute is "genuine" if there is evidence in the record sufficient for a reasonable trier of fact to decide in favor of the nonmoving party. Id. The Court views the inferences reasonably drawn from the materials in the record in the light most favorable to the nonmoving party, Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587–88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), and "may not weigh the evidence or make credibility determinations," Freeman v. Arpaio , 125 F.3d 732, 735 (9th Cir. 1997), overruled on other grounds by Shakur v. Schriro , 514 F.3d 878, 884–85 (9th Cir. 2008).
The moving party bears both the ultimate burden of persuasion and the initial burden of producing those portions of the pleadings, discovery, and affidavits that show the absence of a genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Where the moving party will not bear the burden of proof on an issue at trial, it "must either produce evidence negating an essential element of the nonmoving party's claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial." Nissan Fire & Marine Ins. Co. v. Fritz Cos. , 210 F.3d 1099, 1102 (9th Cir. 2000). Where the moving party will bear the burden of proof on an issue at trial, it must also show that no reasonable trier of fact could not find in its favor. Celotex Corp. , 477 U.S. at 325, 106 S.Ct. 2548. In either case, the movant "may not require the nonmoving party to produce evidence supporting its claim or defense simply by saying that the nonmoving party has no such evidence." Nissan Fire & Marine Ins. Co. , 210 F.3d at 1105. "If a moving party fails to carry its initial burden of production, the nonmoving party has no obligation to produce anything, even if the nonmoving party would have the ultimate burden of persuasion at trial." Id. at 1102–03.
"If, however, a moving party carries its burden of production, the nonmoving party must produce evidence to support its claim or defense." Id. at 1103. In doing so, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. , 475 U.S. at 586, 106 S.Ct. 1348. A nonmoving party must also "identify with reasonable particularity the evidence that precludes summary judgment." Keenan v. Allan , 91 F.3d 1275, 1279 (9th Cir. 1996). If a nonmoving party fails to produce evidence that supports its claim or defense, courts enter summary judgment in favor of the movant. Celotex Corp. , 477 U.S. at 323, 106 S.Ct. 2548.
The only dispute before the Court concerns whether First Mercury had a duty to defend the common insureds against claims asserted in the Borrego action. And the dispositive issue is whether the Continuous or Progressive Injury and Damage Exclusion justifies First Mercury's denial of coverage.
"An insurer has a very broad duty to defend its insured under California law." Anthem Elecs., Inc. v. Pac. Emp'rs Ins. Co. , 302 F.3d 1049, 1054 (9th Cir. 2002). As the Supreme Court of California has explained, "the insured is entitled to a defense if the underlying complaint alleges the insured's liability for damages potentially covered under the policy, or if the complaint might be amended to give rise to a liability that would be covered under the policy." Montrose Chem. Corp. v. Superior Court , 6 Cal.4th 287, 24 Cal.Rptr.2d 467, 861 P.2d 1153, 1160 (Cal. 1993). "Even if it is ultimately determined no coverage existed, the insurer refusing to defend is liable for defense costs if there was any potential of coverage under the policy during pendency of the action." Md. Cas. Co. v. Nat'l Am. Ins. Co. , 48 Cal.App.4th 1822, 56 Cal. Rptr. 2d 498, 501 (1996) (internal brackets omitted).
To determine whether the insurer owes a duty to defend, courts first "compare the allegations of the complaint—and facts extrinsic to the complaint—with the policy terms to see if they reveal a possibility that the claim may be covered by the policy." Pension Tr. Fund for Operating Eng'rs v. Fed. Ins. Co. , 307 F.3d 944, 949 (9th Cir. 2002) (internal quotation marks and brackets omitted). "[U]nder California law, the insurer's duty is not measured by the technical legal cause of action pleaded in the underlying third party complaint, but rather by the potential for liability under the policy's coverage as revealed by the facts alleged in the complaint or otherwise known to the insurer." Hudson Ins. Co. v. Colony Ins. Co. , 624 F.3d 1264, 1267 (9th Cir. 2010) (internal quotation marks omitted). "It only matters whether the facts alleged or...
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