Northfield Ins. Co. v. Tilted Turtle Entm't, LLC, CASE NO. 1:19-cv-01583-AWI-SKO
| Decision Date | 18 March 2021 |
| Docket Number | CASE NO. 1:19-cv-01583-AWI-SKO |
| Parties | NORTHFIELD INSURANCE COMPANY, Plaintiff, v. TILTED TURTLE ENTERTAINMENT, LLC, et al., Defendants. |
| Court | U.S. District Court — Eastern District of California |
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
Plaintiff Northfield Insurance Company ("Northfield") filed this action on November 5, 2019 seeking rescission and declaratory relief in connection with insurance coverage for a bar and grill owned and operated by Tilted Turtle Entertainment LLC ("Tilted Turtle") and Marianne Magana ("Defendants"). Doc. No. 1. Through this motion, Northfield seeks summary judgment—or partial summary judgment—on the four causes of action set forth in the Second Amended Complaint ("2AC"), which is the operative pleading in this action. The motion was deemed suitable for decision without oral argument pursuant to Local Rule 230(g) and taken under submission on January 7, 2021. Doc. No. 31. For the reasons set forth below, the motion will be granted in part and denied in part.
In January 2019, Defendant Tilted Turtle applied for a commercial insurance policy for the Titled Turtle Bar and Grill (the "Bar and Grill") from Northfield. Doc. No. 29-1 (Undisputed Fact ("UF") No. 1). The application was submitted by Tilted Turtle's insurance agent, Johnny Garcia of the Garcia Insurance Agency, to Scottish American Insurance General Agency, Inc. ("Scottish American"), an agent authorized to underwrite and reinstate insurance policies on Northfield's behalf. Id. (UF Nos. 1-2). After Scottish American bound coverage, Northfield issued Commercial Insurance Policy No. WS379737 for the Bar and Grill to Tilted Turtle for the period from January 24, 2019 to January 24, 2020 (the "Policy"). Id. (UF No. 5).
The premium for the Policy was financed through a lender, Pacific Coast Premium Finance Corp. ("Pacific Coast"). Doc. No. 29-1 (UF No. 7.) The financing agreement between Pacific Coast and Tilted Turtle (the "Financing Agreement") stated that Pacific Coast had power of attorney with respect to the Policy and could cancel the Policy on Tilted Turtle's behalf if Tilted Turtle missed an installment payment for the premium due under the Financing Agreement. Id. (UF No. 8); Doc. No. 28-16 at 2.2
Tilted Turtle missed an installment payment in March 2019 and on April 15, 2019, Pacific Coast sent a Notice of Cancellation to Northfield, Scottish American, Tilted Turtle and the Garcia Insurance Agency stating that the Policy was cancelled effective April 15, 2019. Doc. No. 29-1 (UF Nos. 9-11); Doc. No. 28-10.
Magana is the current owner of the Bar and Grill.3 Doc. No. 29-1 (UF No. 3). On April 21, 2019, Magana witnessed a shooting at the Bar and Grill in which two people were injured. Id. (UF Nos. 15-16, 18-22). Magana realized there was a possibility she could be sued in connection withthe shooting, and thus contacted an attorney for legal advice and Garcia for information regarding insurance coverage for the Bar and Grill. Id. (UF Nos. 25-27). Magana did not tell Garcia about the shooting, but Garcia told Magana that a payment was required to maintain insurance for the Bar and Grill with Northfield. Id. (UF Nos. 27-29).
In addition, Scottish American required Magana to execute a Statement of No Loss to reinstate coverage. Doc. No. 29-1 (UF No. 29). Magana executed a Statement of No Loss on April 24, 2019, certifying that she was not aware of any losses, accidents or circumstances that might give rise to a claim under the Policy, "FROM 12:01 AM ON 4-15-19 TO 4-24-19." Id. (UF No. 31). Garcia sent an executed copy of the Statement of No Loss to Scottish American the same day Id. (UF No. 32).
Pacific Coast sent a Reinstatement Request to Northfield and Scottish American requesting reinstatement of coverage on April 25, 2019, and Scottish American agreed to reinstate coverage on Northfield's behalf. Doc. No. 29-1 (UF No. 36-37).
On November 20, 2019, the two people injured in the April 21, 2019 shooting at the Bar filed an action, Miranda, et al. v. Tilted Turtle, Case No. CV-19-006990, against Tilted Turtle in Stanislaus County Court for negligence and premises liability (the "State Court Action"). Doc. Nos. 28-4, 28-5; see also, Doc. No. 29-1 (UF No. 18).4
Northfield filed this action on November 5, 2019. Doc. No. 1. The 2AC, which was filed on April 17, 2020 and remains the operative pleading, adds the plaintiffs in the State Court Action as defendants5 and seeks rescission of the Policy (First Cause of Action), Doc. No. 19 at 7:22-8:26, as well as various other forms of relief (First, Second and Third Causes of Action), including declarations that Northfield is not obligated to defend or indemnify Defendants in connection with the shooting. Id. at 5:15-7:21. The instant motion seeks judgment as to each of the four causes ofaction set forth in the 2AC,6 Doc. No. 28, and the plaintiffs in the State Court Action have agreed to be bound by any judgment in this case. Doc. No. 29-1 ¶ 50; Doc. Nos. 20, 21.
Pursuant to Rule 56, summary judgment is appropriate when it is demonstrated that there exists no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed .R. Civ. P. 56(a); see Fortyune v. Am. Multi-Cinema, Inc., 364 F.3d 1075, 1079-80 (9th Cir. 2004). The moving party bears the burden of establishing the absence of a genuine issue of material fact, generally by "citing to particular parts of materials in the record" such as depositions, interrogatory answers, declarations, and documents. Fed. R. Civ. P. 56(c); see also, Cline v. Indus. Maint. Eng'g & Contracting Co., 200 F.3d 1223, 1229 (9th Cir. 2000) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986)). If the moving party does not meet this burden, "[s]ummary judgment may be resisted and must be denied on no other grounds than that the movant has failed to meet its burden of demonstrating the absence of triable issues." Henry v. Gill Indus., 983 F.2d 943, 950 (9th Cir. 1993).
If the moving party meets its initial burden of production, the burden then shifts to the opposing party to show a genuine issue of material fact. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Companies, 210 F.3d 1099, 1103 (9th Cir. 2000). "[A] party opposing a properly supported motion for summary judgment may not rest upon the mere allegations or denials of his pleadings, but ... must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (quoting First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 288-89 (1968)) (internal quotation marks omitted). If the nonmoving party does not produce enough evidence to create a genuine issue of material fact after the burdenhas shifted, the moving party is entitled to summary judgment. Fritz, 210 F.3d at 1103. In other words, "[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no 'genuine issue for trial.' " Matsushita, 475 U.S. at 587 (citing Cities Service, 391 U.S. at 289).
For the reasons set forth below, the Court will order rescission as to insurance coverage for the Bar and Grill and deny summary judgment as to Northfield's other causes of action as moot.
The California Insurance Code requires that "[e]ach party to a contract of insurance communicate to the other, in good faith, all facts within his knowledge which are or which he believes to be material to the contract ...." Cal. Ins. Code § 332. "Concealment," which the California Insurance Code defines as "[n]eglect to communicate that which a party knows, and ought to communicate," id. § 330, "entitles the injured party to rescind insurance." Id. § 331. Similarly, "[i]f a representation is false in a material point, ... the injured party is entitled to rescind [an insurance] contract from the time the representation becomes false." Id. § 359.
In other words, California law "permits an insurer to rescind a policy when the insured has misrepresented or concealed material information in connection with obtaining insurance." TIG, Ins. Co. of Mich. v. Homestore, Inc., 137 Cal. App. 4th 749, 755-56 (2006); L.A. Sound USA, Inc. v. St. Paul Fire & Marine Insurance Company, 156 Cal. App. 4th 1259, 1266 (2007) (). Rescission "effectively renders the policy totally unenforceable from the outset, so that there never was any coverage, and therefore no benefits are payable." Atmel Corp. v. St. Paul Fire & Marine, 426 F. Supp. 2d 1039, 1044 (N.D. Cal. 2005); see also, Imperial Cas. & Indem. Co. v. Sogomonian, 198 Cal. App. 3d 169, 182 (1988). Further, "[t]he consequence of rescission is not only termination of liability, but also restoration of the parties to their former positions by requiring each to return whatever consideration has been received." Sogomonian, 198 Cal. App. 3d at 184 (citing 1 Witkin, Summary of Cal. Law (9th ed. 1987)Contracts, § 869, p. 781).
The following series of events is undisputed: Pacific Coast provided Tilted Turtle a loan for the Policy premium, pursuant to the Financing Agreement. Doc. No. 29-1 (UF No. 7). The Financing Agreement states that Pacific Coast had the right to cancel the Policy on Tilted Turtle's behalf if Tilted Turtle missed an installment payment to Pacific Coast under the Financing Agreement. Id. (UF No. 8). Tilted Turtle missed an installment payment in March 2019, and on April 15, 2019, Pacific Coast mailed a Notice of Cancellation for the Policy to Northfield, Scottish American, Tilted Turtle and the ...
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