Rli Ins. Co. v. City of Visalia

• Decision Date: 19 March 2018
• Docket Number: 1:17–cv–01205–LJO–EPG
• Citation: 297 F.Supp.3d 1038
• Parties: RLI INSURANCE COMPANY, Plaintiff, v. CITY OF VISALIA, Defendant.
• Court: U.S. District Court — Eastern District of California

297 F.Supp.3d 1038

RLI INSURANCE COMPANY, Plaintiff,

v.CITY OF VISALIA, Defendant.

1:17–cv–01205–LJO–EPG

United States District Court, E.D. California.

Signed March 19, 2018

Jasmin Velarde Lombardi, Steven M. Crane, Berkes Crane Robinson & Seal LLP, Los Angeles, CA, for Plaintiff.

Leonard Charles Herr, Herr Pedersen & Berglund, LLP, Visalia, CA, for Defendant.

MEMORANDUM DECISION AND ORDER GRANTING MOTION FOR JUDGMENT ON THE PLEADINGS

(ECF Nos. 12, 13, 17, 18, 21, 22, 39–42)

Lawrence J. O'Neill, UNITED STATES CHIEF DISTRICT JUDGE

I. PRELIMINARY STATEMENT TO PARTIES AND COUNSEL

Judges in the Eastern District of California carry the heaviest caseloads in the nation, and this Court is unable to devote inordinate time and resources to individual cases and matters. Given the shortage of district judges and staff, this Court addresses only the arguments, evidence, and matters necessary to reach the decision in this order. The parties and counsel are encouraged to contact the offices of United States Senators Feinstein and Harris to address this Court's inability to accommodate the parties and this action. The parties are required to reconsider consent to conduct all further proceedings before a Magistrate Judge, whose schedules are far more realistic and accommodating to parties than that of U.S. Chief District Judge Lawrence J. O'Neill, who must prioritize criminal and older civil cases.

Civil trials set before Chief Judge O'Neill trail until he becomes available and are subject to suspension mid-trial to accommodate criminal matters. Civil trials are no longer reset to a later date if Chief Judge O'Neill is unavailable on the original date set for trial. Moreover, this Court's Fresno Division randomly and without advance notice reassigns civil actions to U.S. District Judges throughout the nation to serve as visiting judges. In the absence of Magistrate Judge consent, this action is subject to reassignment to a U.S. District Judge from inside or outside the Eastern District of California.

II. INTRODUCTION

This is an insurance coverage dispute between Plaintiff/Counter–Defendant RLI Insurance Company ("RLI") and Defendant/Counter–Claimant, City of Visalia ("Visalia") regarding coverage for claims asserted against Visalia in an action pending before a different judge in this district. RLI brought this action for declaratory relief pursuant to 28 U.S.C. §§ 2201 and 2202 on September 7, 2017. (ECF No. 1). Visalia filed an answer along with a counter-claim for declaratory relief against RLI on September 29, 2017. (ECF No. 9).¹ The parties submit that there is jurisdiction pursuant to 28 U.S.C § 1332(a)(1) and that venue is proper.

On October 11, 2017, RLI filed a motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) against Visalia. (ECF No. 12) ("Motion"). Visalia filed an opposition on October 25, 2017 (ECF No. 17) ("Opp.") and RLI filed a reply on November 1, 2017. (ECF No. 21) ("Reply"). While the motion for judgment was pending, Visalia requested to amend its answer and counter-claim. (ECF No. 19). The Court granted Visalia leave to amend and Visalia filed an amended answer and counter-claim on December 11, 2017. (ECF Nos. 29–31). The Court also allowed supplemental briefing on the limited issue of the impact of the amended pleading on the pending motion for judgment on the pleadings. (ECF Nos. 36–38).

RLI and Visalia then filed supplemental briefs. (ECF Nos. 39 ("Supp. Br."), 41 ("Supp. Opp."), 42 ("Supp. Reply") ). The parties' briefs were also accompanied by multiple requests for judicial notice which are addressed below. (ECF Nos. 13 ("RJN 1"), 18 ("RJN 2"), 40 ("RJN 3") ).

The issue presented on the Rule 12(c) motion is whether a policy exclusion contained in the RLI insurance policy precludes insurance coverage in an underlying litigation brought against Visalia as a matter of law. The Court finds it appropriate to rule on the motion without oral argument. See Local Rule 230(g). Having considered the parties' briefing and the relevant law, the Court issues the following order.

III. BACKGROUND AND FACTUAL ALLEGATIONS

RLI issued Policy No. R20040U, an umbrella liability insurance policy, to Visalia for the policy period March 8, 1978–1979 ("RLI Policy" or the "Policy"). (ECF No. 1, "Compl." at ¶ 10); (ECF No. 31, "Am. Answer" at ¶ 1). The Policy was attached to RLI's Complaint and to the Amended Answer.² The Policy provides that RLI will indemnify Visalia for sums it is obligated to pay by reason of liability "for damages, direct or consequential and expenses, all as more fully defined by the term ‘ultimate net loss’³ on account of: (i) Personal injuries, including death at any time resulting therefrom, (ii) Property Damage,⁴ (iii) Advertising liability, caused by or arising out of each occurrence⁵ happening anywhere in the world." (ECF No. 1–1). Additionally, the Policy also provides that RLI must "defend against any suit ... alleging such injury or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent," if such suit is not covered by underlying policies listed in an appended Schedule or by other underlying insurance, but covered by the terms and conditions of the RLI Policy. (Id. ). The RLI Policy contains certain Policy exclusions. The Policy exclusion at issue here provides:

THIS POLICY IS SUBJECT TO THE FOLLOWING EXCLUSIONS:

The policy shall not apply:

...

(f) as respects all operations,

(1) to the discharge, dispersal, release or escape of smoke, vapors, soot, acids, alkalis, toxic chemicals, solids, liquids or gases, waste materials, or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water unless such discharge, dispersal, release or escape is sudden and accidental.

(2) for the cost of removing, nullifying or cleaning up substances described in (1) above.

(ECF No. 1–1).

The Policy is also subject to certain Policy conditions including a "prior insurance non-cumulation of liability" clause which provides that if any loss is covered in whole or in part under any other excess policy that is issued prior to the RLI Policy, the limit of liability under the Policy will be reduced by the amount due under the prior insurance. (Id. ). Additionally, the policy has an "Other Insurance" clause which provides that if other collectible insurance with any other insurer is available that covers a loss covered by the RLI Policy, the insurance afforded by the RLI Policy will be in excess of and shall not contribute to such other insurance. (Id. ).

Visalia claims that it is entitled to insurance coverage under RLI's Policy for an underlying lawsuit where Visalia was sued, Mission Linen Supply v. City of Visalia , Case No. 1:15–cv–00672–AWI–EPG, filed in the U.S. District Court Eastern District of California (the "Mission Linen Action" or "Underlying Action").⁶ Mission Linen Supply ("Mission Linen"), a corporation that operated a commercial laundry facility, including dry cleaning, sued Visalia in relation to environmental contamination at and around property Mission Linen owned. (ML Compl. ¶¶ 1–2). The Underlying Action arises under the federal Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et seq. (Id. ¶ 2). Mission Linen was identified by the Department of Toxic Substance Control ("DTSC") as a responsible party for contamination in soil and ground water at and around its property by chlorinated solvents, primarily tetrachloroethylene also known as perchloroethylene ("PCE"). (Id. ¶¶ 8–9). On February 3, 2010, DTSC issued an Imminent and Substantial Endangerment Order ("2010 ISE Order") to Mission Linen indicating PCE is present in soil and groundwater at its property and required Mission Linen to "perform response actions and activities." (Id. ¶ 9). Specifically, "[t]he 2010 ISE Order requires [Mission Linen's] implementation of any appropriate removal actions, completion of a Remedial Investigation/Feasibility Study, preparation of a Remedial Action Plan or Removal Action Workplan, preparation of a California Environmental Quality Act document, and Design and Implementation of the remedial actions approved in the Remedial Action Plan." (Id. ¶ 13). The Mission Linen Action presents ten causes of action against Visalia including state law-based claims for nuisance in various forms, dangerous condition of public property, claims for declaratory relief under state and federal law, equitable indemnity, and for cost recovery and allocation under CERCLA. (Id. ¶¶ 34–115). The Mission Linen Action alleges that Visalia is liable for the environmental contamination (at least in part) due to Visalia's failure to maintain and repair its sewer system while accepting PCE for transport via the City's sewers. (Id. ¶¶ 21–25). More specifically, the Underlying Action alleges that the holes, cracks, and leaks in Visalia's sewer system and its failure to maintain and operate its sewers caused or contributed to the release of PCE resulting in the contamination of soil and groundwater at or around the Plaintiff's property since at least 1978. (Id. ¶¶ 24–25, 30–31). The Mission Linen Action correspondingly seeks damages pursuant to CERCLA for "all response costs incurred, and to be incurred by [Mission Linen], in response to the alleged release of PCE and other hazardous substances, in and around the Plaintiffs Property, and the environment..." (Id. at p. 20–21).

IV. LEGAL STANDARD

Federal Rule of Civil Procedure 12(c) permits a party to seek judgment on the pleadings "after the pleadings are closed—but early enough not to delay trial." Fed. R. Civ. P. 12(c). A motion for judgment on the pleadings "challenges the legal sufficiency of the opposing party's pleadings." Morgan v. County of Yolo , 436 F.Supp.2d 1152, 1154–55 (E.D. Cal. 2006), aff'd , 277 Fed.Appx. 734 (9th Cir. 2008). Correspondingly, a Rule 12(c) motion operates in the same way as a motion to dismiss...