Planet Bingo LLC v. Burlington Ins. Co.

• Decision Date: 18 March 2021
• Docket Number: E074759
• Citation: 62 Cal.App.5th 44,276 Cal.Rptr.3d 348
• Court: California Court of Appeals Court of Appeals
• Parties: PLANET BINGO LLC, Plaintiff and Appellant, v. The BURLINGTON INSURANCE COMPANY, Defendant and Respondent.

62 Cal.App.5th 44

276 Cal.Rptr.3d 348

PLANET BINGO LLC, Plaintiff and Appellant,

v.The BURLINGTON INSURANCE COMPANY, Defendant and Respondent.

E074759

Court of Appeal, Fourth District, Division 2, California.

Filed March 18, 2021

As Modified April 12, 2021

Certified for Partial Publication.^*

Angelo & Di Monda and Joseph Di Monda, Manhattan Beach, for Plaintiff and Appellant.

Greenberg Traurig and Thomas Holden, San Francisco, for Defendant and Respondent.

OPINION

RAMIREZ, P. J.

An electronic gaming device designed and supplied by Planet Bingo, LLC (Planet Bingo) caused a fire in the United Kingdom. Several third parties made demands that Planet Bingo pay their damages resulting from the fire. However, the Burlington Insurance Company (Burlington), Planet Bingo's liability insurer, denied coverage. Planet Bingo therefore filed this action for breach of contract and bad faith against Burlington.

In a previous appeal, we held that Burlington's policy did afford coverage, though only if one of the third-party claimants filed suit against Planet Bingo in the United States or Canada. Lo and behold, just such a suit was then filed. Burlington accepted the defense and managed to settle the suit for its policy limits. In this action, the trial court granted summary judgment for Burlington; in essence, it ruled that Burlington had provided all of the benefits due under the policy.

Planet Bingo appeals. It contends that Burlington conducted an inadequate investigation. It also contends that Burlington wrongfully failed to settle the third-party claims; instead, Burlington denied coverage, in the hope that the claimants would sue Planet Bingo in the United Kingdom, which would have let Burlington off the coverage hook. Planet Bingo asserts (and, for purposes of the motion for summary judgment, Burlington did not dispute) that it lost profits because the fire claims remained pending and unsettled.

We will hold that Planet Bingo made out a prima facie case that Burlington is liable for failure to settle. (See Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 845, 107 Cal.Rptr.2d 841, 24 P.3d 493 [party can defeat summary judgment by making "a prima facie showing of the existence of a genuine issue of material fact"].) Even though none of the claimants made a formal offer to settle within the policy limits, one subrogee sent a subrogation demand letter; according to Planet Bingo's expert witness, in light of the standards of the insurance industry, this represented an opportunity to settle within the policy limits. We therefore do not address Planet Bingo's claim that Burlington conducted an inadequate investigation. We also do not decide whether lost profits are recoverable as damages, because this issue was not raised below. Finally, in the unpublished portion of this opinion, we will reject Burlington's contention that the statute of limitations had run.

ISTATEMENT OF FACTS

The following facts are taken from the separate statements of material fact and the supporting evidence filed in connection with the motion for summary judgment.

"We accept all facts listed in [Burlington's] separate statement that [Planet Bingo] did not dispute. We also accept all facts listed in [Burlington's] separate statement that [Planet Bingo] did dispute, to the extent that (1) there is evidence to support them [citation], and (2) there is no evidence to support the dispute [citation]. Finally, we accept all facts listed in [Planet Bingo's] separate statement, to the extent that there is evidence to support them. [Citation.]" ( Doe v. California Lutheran High School Assn. (2009) 170 Cal.App.4th 828, 830-831, 88 Cal.Rptr.3d 475.)

Planet Bingo supplies handheld gaming devices. It designs them, has another company manufacture them to its specifications, and ships them.

Leisure Electronics Limited (Leisure) distributed Planet Bingo's devices in the United Kingdom. The distribution agreement between them provided that any legal proceeding involving the agreement would be brought in England. Leisure leased some of the devices to Beacon Bingo, a/k/a Riva Gaming (Beacon), which operated a bingo hall in London.

Burlington insured Planet Bingo under a commercial general liability policy. The policy applied to an occurrence in the United States or Canada; it also applied to an occurrence elsewhere, but only if (among other things) Planet Bingo's liability was determined either (1) "in a ‘suit’ on the merits" in the United States or Canada, or (2) "[i]n a settlement [Burlington] agree[d] to."

On September 12, 2008, at 2:40 a.m., there was a fire in the bingo hall. On or before March 26, 2009, Planet Bingo gave Burlington notice of the fire.

Burlington started an investigation under a reservation of rights. At that time, however, it did not actually perceive any coverage issue.

Burlington's "P[lan] O[f] A[ction]" was to obtain whatever evidence Leisure and Bingo had and to determine whether any other parties were potentially liable; it added, "we will then consider having our own I[ndependent] A[djuster] investigate & get our own C[ause] & O[rigin] expert in the UK."

Accordingly, it asked Bingo and Leisure to provide proof that Planet Bingo was liable, including all forensic evidence, along with proof of their damages. It also asked them to preserve all the evidence. Meanwhile, Burlington looked into whether another party (such as Beacon, the manufacturer of the devices, or a parts supplier) might be liable.

In June 2009, Leisure notified Burlington that, in its view, Planet Bingo was liable. It cited two items of evidence:

(1) The video: Security video showed that the fire started in the racks where the devices were being charged overnight (although the actual ignition point was hidden behind a partition).

(2) The Fire Brigade report: Immediately after the fire, experts representing the London Fire Brigade, Leisure, and Beacon had conducted a joint forensic examination. They concluded that "the most likely cause of the fire" was the failure of a lithium battery in one of the devices.

Leisure noted that at that time, Beacon was not "actively pursu[ing]" its claim, probably because it was still waiting to see what its total losses were.

In response, Burlington asked Beacon to send it the video along with any forensic evidence. Again, it asked "the parties to preserve all evidence."

In November 2009,¹ Beacon notified Burlington that its damages totaled £1.6 million (approximately $2.6 million). It claimed there was "substantial evidence in support of this amount." At that point, Burlington retained a London-based independent adjuster.

In January 2010, Leisure and Beacon assured Burlington that Beacon's experts still had the device that allegedly caused the fire.

In April 2010, Burlington realized for the first time that it had possible grounds to deny coverage: Its policy applied to the fire only if suit was brought in the United States or Canada, whereas the distribution agreement between Planet Bingo and Leisure required any suit to be brought in England.²

Meanwhile, Leisure and Beacon still had not provided Burlington with any forensic evidence nor with any documentary support of their losses.

Thus, also in April 2010, Burlington hired its own cause and origin expert. In May 2010, Burlington's expert issued his report. He had reviewed the video and had spoken to one of the experts responsible for the Fire Brigade report. He conceded that "no physical evidence was found to indicate the precise cause of the fire." Nevertheless, based on the video, and after ruling out other possible causes, he concluded "that the fire started as a result of a fault with the [devices] or their charging racks."³ In June 2010, he reiterated that there was no possible ignition source other than the devices.

From its expert, Burlington learned for the first time that the London Fire Brigade had disposed of the remains of the devices back in September 2009.

In August 2010, Burlington finally received the Fire Brigade report (from its expert, not from Leisure or Beacon). The report concluded that "the balance of probabilities suggests that the fire was caused by a defective lithium ion battery pack in one of the [devices]." In September 2010, Burlington received a copy of the video (again, from its expert, not from Leisure or Beacon).

In September 2010, Burlington concluded — with no explanation — that Planet Bingo was not liable. It also noted that there were "coverage issues," and that Leisure (or its insurer) did not seem to be pursuing the claim. However, it did not communicate these conclusions to Planet Bingo.

Nine months went by, during which Leisure and Beacon did not file suit, and Burlington conducted little further investigation. During this time, Planet Bingo complained to Burlington repeatedly that it was losing business because the fire claim remained unpaid — that Planet Bingo "was getting known as a deadbeat ...."

In June 2011, Burlington notified Planet Bingo that "[t]here does not appear to be any further pursuit against you for the damages," and therefore Burlington was closing its file.

There was a three-year lull.

In July 2014, attorneys representing AIG Europe Ltd. (AIG) wrote to Planet Bingo. They reported that Leisure had settled with Beacon for £1.6 million and that AIG was Leisure's insurer. They demanded that Planet Bingo pay the £1.6 million. They also stated: "With the objective of avoiding the costs of litigation, our client is prepared to enter into alternative forms of dispute resolution.... [T]he options available ... are discussions and negotiations or mediation. Please confirm which option you agree to."⁴

Planet Bingo's expert on insurance claim handling testified that "[s]uch a letter is routine in industry practice and offers a clear invitation to negotiate a settlement for less than that amount ...." Moreover, there is a "very well[-]known industry custom in such subrogation claims of accepting policy limits for a full release o[f] the insured."

Planet Bingo...