Reshamwalla v. State Farm Fire and Cas. Co.

• Decision Date: 01 September 2000
• Docket Number: No. CIV.S-99-2129 FCD/JF.,CIV.S-99-2129 FCD/JF.
• Parties: HUSSEIN ALI RESHAMWALLA, et al., Plaintiffs, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of California

112 F.Supp.2d 1010

HUSSEIN ALI RESHAMWALLA, et al., Plaintiffs, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant.

No. CIV.S-99-2129 FCD/JF.

United States District Court, E.D. California.

September 1, 2000.

COPYRIGHT MATERIAL OMITTED

Steven F. Johnson, Sacramento, CA, Frank D. Bloksberg, Nevada City, CA, for Plaintiffs.

Peter H. Klee, Mark W. Hansen, Luce, Forward, Hamilton & Scripps LLP, San Diego, CA, for Defendant.

MEMORANDUM AND ORDER

DAMRELL, District Judge.

Plaintiffs Hussein Ali and Raheda Reshamwalla ("plaintiffs") bring this action against defendant State Farm Fire and Casualty Company ("State Farm") alleging that State Farm breached the covenant of good faith and fair dealing by refusing to defend and indemnify Darrel Abruzzo ("Abruzzo") in an underlying action by plaintiffs against Abruzzo. Plaintiffs bring these claims as assignees of Abruzzo's rights under a homeowner's insurance policy issued by State Farm. Plaintiffs also bring a direct action against State Farm as judgment creditors pursuant to Cal. Ins. Code § 11580(b)(2).

This matter is before the court on plaintiffs' and State Farm's cross-motions for summary judgment. Plaintiffs move for summary judgment solely on the issue of State Farm's duty to defend Abruzzo in the underlying action. State Farm moves for summary judgment as to each of plaintiffs' claims. For the reasons set forth below, plaintiffs' motion for partial summary judgment is granted in part and denied in part, and State Farm's motion is denied in its entirety.¹

BACKGROUND

1. The Incident

Sometime before 9:00 p.m. on December 21, 1992, Abruzzo and several other teenagers entered a construction site near Interstate 405. Plfs.' Stmt. Undis. Facts ("PUF"), filed Feb. 14, 2000, Nos. 1, 4. Sometime thereafter, some or all of the teenagers began throwing concrete debris into traffic. PUF No. 6. A piece of concrete thrown by the teenagers smashed through plaintiff Hussein Ali Reshamwalla's ("Mr.Reshamwalla") windshield as he drove past the construction zone, striking him in the face and causing severe injuries. PUF Nos. 7, 8.

At the time of the incident, Abruzzo was fifteen years old and was staying with his mother in Redondo Beach, California. Nucci Decl. ¶ 3, attached as Ex. A to Ex. F to PUF. Abruzzo's parents divorced in 1979. Nucci Stmt., p. 7, attached as Ex. F to PUF. Pursuant to a modified custody agreement, filed September 16, 1991, Abruzzo lived with his father and stepmother in England while school was in session and during one mid-term break and spent the remaining time with his mother in Redondo Beach. Order Amending Custody, attached as Ex. H to PUF.

2. The Underlying Action

On December 29, 1994, plaintiffs filed an action in Los Angeles Superior Court ("underlying action") against Abruzzo, his mother Tiya-B Nucci and others alleging battery, negligence and loss of consortium. Underlying Complaint ("Compl."), attached as Ex. 3 to State Farm's Stmt. Of Undis. Facts ("DUF"), filed Mar. 13, 2000. As the factual basis for his cause of action for battery, Mr. Reshamwalla alleged that: "On or about December 21, 1991[sic],² defendants NELSON, MCDONALD, PROFFITT, [ABRUZZO] AND DOES 76 through 100, conspired to throw debris onto the I-405 into the path of oncoming vehicles. In pursuit of the conspiracy, defendants NELSON, MCDONALD, PROFFITT, [ABRUZZO] AND DOES 76 through 100 did indeed throw debris onto I-405 into the path of oncoming vehicles." Compl. ¶ 27. He further alleges that: "A large piece of concrete thrown by defendants ... crashed through plaintiff [HUSSEIN ALI] RESHAMWALLA'S windshield .... str[iking] plaintiff RESHAMWALLA squarely in the face and knock[ing] him unconscious." Compl. ¶ 31. Mr. Reshamwalla's negligence cause of action expressly incorporated the above allegations and added that defendants "did negligently and with reckless disregard for the safety and rights of others throw debris into the moving traffic causing severe physical and emotional injuries to the plaintiff." Compl. ¶ 37.

3. The Policy

At the time of the incident, State Farm Fire & Casualty Homeowners Insurance Policy No. 71-EO-09775 was in full force and effect. See Policy, attached as Ex. 6 to DUF. The policy provided in pertinent part:

If a claim is made or a suit is brought against an insured for damages because of bodily injury or property damage to which this coverage applies, caused by an occurrence, we will:

1. pay up to our limit of liability for the damages for which the insured is legally liable; and

2. provide a defense at our expense by counsel of our choice.

Id. p. 13 (emphasis in original). An "insured" "means you and, if residents of your household ... your relatives." Id., p. 1. "You" and "Your" mean the "`named insured' shown in the Declarations." Id. Nucci and her fiancé Michael Beck were the named insureds. Declarations Page, attached as Ex. 6 to DUF

Abruzzo requested that State Farm indemnify him and defend him in the underlying action. State Farm refused Abruzzo's request on or about December 22, 1994, explaining that:

The policy insures our named insured and relatives ... only if residents of the insured's household. It is undisputed that Darrell [Abruzzo] was not a resident of the household of Mr. Beck and Ms. Nucci. Thus, he does not qualify as an insured under our policy.

Letter from State Farm to Frank Blocksberg, Esq., dated Dec. 22, 1994, attached as Ex. D to PUF.

4. Release And Settlement Agreement

On or about April 5, 1996, plaintiffs and Abruzzo entered into a Release and Settlement Agreement whereby:

[Plaintiffs], for valuable consideration hereinafter enumerated, do hereby forever release and discharge DARRELL ABRUZZO [ ] from any and all claims, demands, and causes of action that We have or may have, of any nature whatsoever, as a consequence of any injuries, death, property damage, expenses or other loss or detriment arising out of the concrete throwing incident which occurred on December 21, 1992 and which gave rise to Los Angeles Superior Court Case No. YC018371.

Release and Settlement Agreement, p. 1, attached as Ex. 4 to DUF.

In consideration of the Release set forth above, DARRELL ABRUZZO agrees to the following:

A. Entry of default judgment against him in Case No. YC018371. The amount, if any, of the default judgment will be determined by jury trial or the court in a default prove-up hearing;

...

D. That default was properly entered against him in Case No. YC018371; and,

E. That he waives all defenses regarding service and challenging the default judgment.

...

In consideration of the above, Plaintiffs agree to the following:

A. Plaintiffs covenant not to execute the default judgment against DARRELL ABRUZZO ....

Id. pp. 1-2.

Plaintiffs obtained an unopposed default judgment against Abruzzo on August 28, 1998. See Judgment By Court After Default, filed Aug. 28, 1998, attached as Ex. 5 to DUF.

5. Assignment of Rights

On March 14, 1999, Abruzzo assigned and transferred all of his rights against State Farm to the Reshamwallas. Specifically, Abruzzo assigned plaintiffs "all rights and causes of action I may have against any insurance carrier which owed me a duty of indemnity or defense arising out of the concrete throwing incident which occurred on December 21, 1992 and which gave rise to the [underlying action] .... [including] all rights and causes of action I may have against State Farm ... arising out of insurance policy 71-EO-0977-5." Release and Settlement Agreement executed Mar. 14, 1999, attached as Ex. 4 to DUF.

STANDARD

The Federal Rules of Civil Procedure provide for summary adjudication when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). One of the principal purposes of the rule is to dispose of factually unsupported claims or defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

In considering a motion for summary judgment, the court must examine all the evidence in the light most favorable to the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962). If the moving party does not bear the burden of proof at trial, he or she may discharge his burden of showing that no genuine issue of material fact remains by demonstrating that "there is an absence of evidence to support the non-moving party's case." Celotex, 477 U.S. at 325, 106 S.Ct. 2548. Once the moving party meets the requirements of Rule 56 by showing there is an absence of evidence to support the non-moving party's case, the burden shifts to the party resisting the motion, who "must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Genuine factual issues must exist that "can be resolved only by a finder of fact, because they may reasonably be resolved in favor of either party." Id. at 250, 106 S.Ct. 2505. In judging evidence at the summary judgment stage, the court does not make credibility determinations or weigh conflicting evidence. See T.W. Elec. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630-31 (9th Cir.1987) (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). The evidence presented by the parties must be admissible. Fed. R.Civ.P. 56(e). Conclusory, speculative testimony in affidavits and moving papers is insufficient to raise genuine issues of fact and defeat summary judgment. See Falls Riverway Realty, Inc. v. City of Niagara Falls, 754 F.2d 49, 57 (2d Cir. 1985); Thornhill Publ'g Co., Inc. v. GTE Corp., 594 F.2d 730, 738 (9th Cir.1979).

ANALYSIS

Plaintiffs argue that they are entitled to summary judgment on their claim that State Farm...