Travelers Cas. v. American Intern. Surplus Lines
| Decision Date | 29 March 2006 |
| Docket Number | No. 05CV0076-LAB (BLM).,05CV0076-LAB (BLM). |
| Citation | 465 F.Supp.2d 1005 |
| Parties | TRAVELERS CASUALTY AND SURETY COMPANY, formerly known as The Aetna Casualty and Surety Company, Plaintiff, v. AMERICAN INTERNATIONAL SURPLUS LINES INSURANCE COMPANY, and Does 1 through 10, inclusive, Defendants. |
| Court | U.S. District Court — Southern District of California |
Sandra P. Llaneta, Summers and Shives, San Diego, CA, for Plaintiff.
Mary P. McCurdy, McCurdy and Fuller, Menlo Park, CA, for Defendants.
This matter is before the court on the cross-motions for summary judgment of plaintiff Travelers Casualty and Surety Company ("Travelers") and of defendant American International Surplus Lines Insurance Company ("AISLIC"). AISLIC removed Travelers' action for subrogation and equitable contribution from state to federal court in November 2005 on the basis of diversity jurisdiction. Pursuant to Civil Local Rule 7.1(d)(1), the court finds the issues appropriate for decision on the papers and without oral argument. For the reasons discussed below, AISLIC's motion is DENIED, and Travelers' motion is GRANTED.
AISLIC issued two primary Commercial General Liability ("CGL") policies to Daley Corporation ("Daley"), as its named insured, one for the period May 1, 1991 to May 1, 1992 and one for the period May 1, 1992 to May 1, 1993, to cover third party claims of property damage as a result of an occurrence during the policy period.1 A policy endorsement committed Daley to a $25,000 per occurrence self-insured retention ("SIR"). Daley performed grading operations for a condominium construction project ("the Project") under a contract with 4S Investment Partners ("4S"). AISLIC added an endorsement to each of the Daley policies naming 4S as an "Additional Insured" for liability arising out of Daley's work.
In about March 2001, the Project's homeowners' association filed a lawsuit in San Diego County Superior Court, 17161 Alva Road Owners Ass'n v. Anderson, Inc., Case No. 763422, alleging various construction defects (the "Underlying Action"). 4S was named as a defendant in that suit on March 19, 2002. 4S named Daley, among others, in a cross-complaint. Daley had filed for Chapter 11 bankruptcy relief in about April 1998 and could not pay the AISLIC policies' SIR. AISLIC nevertheless defended Daley in the Underlying Action and paid for settlement of the cross-claims against Daley, taking an SIR-equivalent $25,000 "credit" in lieu of Daley's actual payment of the $25,000 SIR, by deducting that amount from Daley's $52,500 settlement obligation.
Travelers had issued a "Commercial Excess Liability (Umbrella)" policy to 4S for the period November 30, 1995 to November 30, 1996 ("Travelers' Policy"). 4S tendered its defense to Travelers when it was served with the complaint in the Underlying Action. Travelers accepted the tender, under a reservation of rights,2 and defended 4S through a settlement and dismissal of the Underlying Action.3 No later than January 29, 2003, 4S also tendered its defense in the Underlying Action to AISLIC as an additional insured under Daley's policies. In correspondence dated July 22, 2003, AISLIC acknowledged 4S was an additional insured, but declined to participate in 4S's defense on the grounds that the unsatisfied SIR and certain policy exclusions purportedly precluded coverage. Compl. Exh. C. Despite having defended Daley, AISLIC takes the position that inasmuch as Daley was unable to pay from its own assets the $25,000 SIR prerequisite to triggering coverage obligations, and by its terms the SIR endorsement prohibited other insurance from satisfying the SIR, no duty to defend or indemnify 4S was triggered.
Travelers initiated this lawsuit seeking subrogation or equitable contribution for expenses it incurred to defend 4S in the Underlying Action, on grounds AISLIC was "solely responsible and obligated to pay, by virtue of the terms of [its primary] policies and the Travelers' umbrella policy, for the defense of 4S Partners in the underlying action," entitling Travelers' to shift to AISLIC the legal expenses it incurred. Compl.¶¶ 18-20. Alternatively, Travelers contends it was compelled to pay a disproportionate share of 4S's defense as a consequence of AISLIC's refusal to participate, entitling it to equitable contribution from AISLIC. Compl. ¶¶ 22-24-20.
Travelers moves for summary judgment on grounds: the Travelers' umbrella policy contains a provision that it has no duty to defend 4S in a "suit" if any other insurer has a duty to defend; AISLIC had a duty to defend 4Sunder the AISLIC policy and wrongfully refused to participate in 4S's defense primarily because Daley was unable to satisfy the AISLIC policies' $25,000 SIR while in Chapter 11 bankruptcy; AISLIC owed 4S the same $25,000 SIR "credit" it gave Daley; the SIR endorsement does not apply to defense costs; AISLIC's position violates CAL. INS. CODE § 11580; AISLIC's interpretation of the SIR makes it impossible to satisfy and therefore unenforceable and a disfavored "escape clause"; and the "owned property" exclusion (also cited by AISLIC in rejecting 4S's defense) does not apply.
AISLIC moves for summary judgment on grounds: Travelers' cannot establish AISLIC had a duty to defend 4S under its policies; the SIR endorsement is enforceable; Daley did not satisfy the SIR; no "waiver" argument can override the plain language of its policies; and the amount of damages Travelers seeks is a factual determination inappropriate for summary adjudication.
Summary judgment is appropriate if the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is 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(c) (emphasis added); see Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 919 (9th Cir.2001). "At this stage of the proceeding, the court is not permitted to weigh the evidence, pass on credibility, or speculate as to the ultimate findings of fact." Time Oil Co. v. Cigna Property & Cas. Ins. Co., 743 F.Supp. 1400, 1416 (W.D.Wa.1990), citing Aronsen v. Crown Zellerbach, 662 F.2d 584, 591 (9th Cir.1981).
Merely because the parties file cross-motions "does not necessarily mean that there are no disputed issues of material fact and does not necessarily permit the judge to render judgment in favor of one side or the other." Starsky v. Williams, 512 F.2d 109, 112 (9th Cir.1975). "[E]ach motion must be considered on its own merits." Fair Housing Council of Riverside County, Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir.2001) (citation omitted). The moving party bears the initial burden of demonstrating the absence of a "genuine issue of material fact for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A defendant seeking summary judgment carries its burden to show that a cause of action has no merit if that party demonstrates one or more elements of the cause of action cannot be established or there is a complete defense to that cause of action. Hartford Cas. Ins. Co. v. ML Hawley Ins. Co., 123 Cal.App.4th 278, 286, 20 Cal.Rptr.3d 128 (2004), rev. den (Jan 12, 2005).
The threshold issue here is whether AISLIC had a duty to defend 4S in the Underlying Action. The facts material to that issue are generally not disputed. Each side relies on differing interpretations of policy language and its legal effect to urge summary judgment in its favor.
Contract interpretation is a legal issue to be resolved by the court.4 When a contract is not ambiguous, summary judgment may be entered based on the court's interpretation of clear and unambiguous provisions which present only questions of law.5 See United States v. Sacramento Municipal Utility District, 652 F.2d 1341, 1344 (9th Cir.1981). The rules of contract interpretation apply equally to coverage provisions and endorsement provisions.
When determining whether a particular policy provides a potential for coverage and a duty to defend, we are guided by the principle that interpretation of an insurance policy is a question of law. The rules governing policy interpretation require us to look first to the language of the contact in order to ascertain its plain meaning or the meaning a layperson would ordinarily attach to it. Thus, in determining whether allegations in a particular complaint give rise to coverage under a CGL policy, courts must consider both the occurrence language in the policy and the endorsements broadening coverage, if any....
Waller v. Truck Ins. Exchange Inc., 11 Cal.4th 1, 18, 44 Cal.Rptr.2d 370, 900 P.2d 619 (1995) (citations omitted).
Liability policies are presumed to include a defense obligation unless the duty is excluded by clear and unambiguous language. Maryland Cas. Co. v. Nationwide Ins. Co., 65 Cal.App.4th 21, 30-31, 76 Cal.Rptr.2d 113 (1998). An insurer's duty to defend is broader than its duty to indemnify. Horace Mann Ins. Co. v. Barbara B., 4 Cal.4th 1076, 1081, 17 Cal. Rptr.2d 210, 846 P.2d 792 (1993); Certain Underwriters at Lloyd's of London v. Sup. Ct., 24 Cal.4th 945, 958, 103 Cal.Rptr.2d 672, 16 P.3d 94 (2001) () (citations omitted). The insurer's defense duty applies to the defined "insured(s)" as well as to "additional insureds" added by endorsement. Maryland Cas., 65 Cal.App.4th at 29-30, 76 Cal.Rptr.2d 113.
The defense obligation is not affected by policy language that limits indemnification...
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