Travelers Indem. Co. of Conn. v. Newlin
| Citation | 498 F.Supp.3d 1262 |
| Decision Date | 02 November 2020 |
| Docket Number | Case No.: 20cv765-GPC(DEB) |
| Court | U.S. District Court — Southern District of California |
| Parties | TRAVELERS INDEMNITY COMPANY OF CONNECTICUT, Plaintiff, v. Anthony and Blythe NEWLIN, as individuals; Quade & Associates, PLC, a California professional liability company; AIG Property Casualty Company, a Pennsylvania corporation, and Does 1 through 10, inclusive, Defendants and Related Counterclaims and Third-Party Complaints. |
A. Eric Aguilera, Raymond E. Brown, The Aguilera Law Group, APLCP, Ryan C. Kossler, Bohm Matsen, LLP, Costa Mesa, CA, for Plaintiff.
Michael W. Quade, Quade & Associates, APLC, San Diego, CA, for Defendants Anthony Newlin, Blythe Newlin, Quade & Associates, PLC.
James P. Wagoner, McCormick Barstow Sheppard Wayte and Carruth, Fresno, CA, for Defendant AIG Property Casualty Company.
1) GRANTING TRAVELERS’ MOTIONS TO DISMISS THE COUNTERCLAIMS BY THE NEWLINS AND QUADE WITH LEAVE TO AMEND; AND
2) DENYING CCL'S MOTIONS TO DIMISS THE THIRD PARTY COMPLAINTS BY THE NEWLINS, QUADE AND AIG
Before the Court are Plaintiff and Counterdefendant Travelers Indemnity Company of Connecticut's ("Travelers") motions to dismiss counterclaims filed by Anthony and Blythe Newlin (the "Newlins"), and Quade & Associates, PLC ("Quade") pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6). (Dkt. Nos. 32, 33.) The Newlins and Quade jointly filed an opposition. (Dkt. No. 46.) Travelers filed a reply to the joint opposition. (Dkt. No. 49.) Before the Court are also Third-Party Defendant CCL Contracting, Inc.’s ("CCL") motions to dismiss the third-party complaints pursuant to Rule 12(b)(6) filed by the Newlins, Quade and AIG Property Casualty Company, ("AIG"). (Dkt. Nos. 50, 51, 52.) AIG filed an opposition. (Dkt. No. 58.) The Newlins and Quade filed a motion for joinder to AIG's opposition. (Dkt. Nos. 61, 62.) CCL filed a joint reply. (Dkt. No. 70.)
Based on the reasoning below, the Court GRANTS Travelers’ motion to dismiss the Newlins’ and Quade's counterclaims with leave to amend and DENIES CCL's motion to dismiss the third-party complaints.
On April 22, 2020, Plaintiff Travelers filed a complaint alleging counts for declaratory relief against Defendants the Newlins, Quade and AIG, as well as a breach of contract claim against the Newlins based on facts arising from an underlying state court complaint in San Diego County Superior Court, Case No. 37-2017-00006963-CU-OR-NC entitled Hamadeh et al. v. Newlins, et al. , ("Hamadeh Litigation"). (Dkt. No. 1, Compl.) The declaratory relief claims ask the Court to clarify Travelers’ defense and indemnity obligations to the Newlins, Quade and AIG in the Hamadeh Litigation. (Id. ) Travelers then filed a first amended complaint on May 1, 2020. (Dkt. No. 5, FAC.) On June 11, 2020, the Newlins and Quade filed a motion to dismiss pursuant to Rule 12(b)(1) and Rule 12(b)(6), (Dkt. No. 15), and AIG filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1). (Dkt. No. 13.) On September 14, 2020, the Court granted the Newlins’ motion to dismiss the breach of contract claims under Rule 12(b)(6) and granted the Defendants’ motion to dismiss pursuant to Rule 12(b)(1) with leave to amend.1 (Dkt. No. 55.) On September 24, 2020, Travelers filed a second amended complaint ("SAC"). (Dkt. No. 56.) On October 13, 2020, the Newlins, Quade and AIG filed motions to dismiss the SAC which is not yet fully briefed. (Dkt. Nos. 66, 67.)
On June 11, 2020, the Newlins, AIG and Quade each separately filed a counterclaim against Travelers and each separately filed a third-party complaint against CCL ("collectively counterclaim/TPC"). (Dkt. Nos. 14, 16, 17.) While Travelers filed an answer to AIG's counterclaim, (Dkt. No. 31), it filed the instant fully briefed motions to dismiss the Newlins and Quade's counterclaims. (Dkt. Nos. 32, 33, 46, 49.) CCL also filed the instant motions to dismiss the third-party complaints filed by the Newlins, AIG and Quade which are fully briefed. (Dkt. Nos. 50, 51, 52, 58, 59, 60, 70.)
According to the Newlins’ counterclaim/TPC, the Newlins were the owners of real property located at 16350 Via Del Alba, Rancho Santa Fe, California 92067 from late 2012 until February 2015. (Dkt. No. 16, Newlins’ Counterclaim/TPC ¶¶ 1, 7.) During that time, the Newlins remodeled, repaired and/or modified two residences on the property as well as made repairs and improvements to the landscape, hardscape and irrigation system. (Id. ¶ 8.) In addition, CCL was contracted by the Santa Fe Irrigation District to perform certain work on the water infrastructure on the property and to move/install a new fire hydrant and to perform certain related site work. (Id. ¶ 8.)
Around October 18, 2013, CCL submitted a bid to the Santa Fe Irrigation District for the "Group 2 Pipelines Project (J-1202)" which included work to be performed on the property while the Newlins were the owners. (Id. ¶¶ 16-18.) CCL was awarded the contract and on December 2, 2013, CCL signed the Santa Fe Irrigation District Contract. (Id. ¶ 18.) The Santa Fe Irrigation District Contract required CCL to procure certain insurance. (Id. ¶¶ 19-21.) As such, CCL purchased Commercial General Liability policies of insurance from Travelers for dates of coverage from April 1, 2014 – April 1, 2018 ("CCL Policies"). (Id. ¶ 29.) Per the Santa Fe Irrigation District Contract, CCL named the Newlins as additional insureds on the CCL Policies. (Id. ¶¶ 21, 31.) The Contract required CCL to "defend ... indemnify and hold District, its officials, officers, agents, employees, owners of property upon which Contractor will perform Work ... free and harmless from any claims ... arising out of or incident to any acts, omissions or willful misconduct of Contractor ..." (Id. ¶ 22.) Per the Santa Fe Irrigation District project, the Newlins entered into an "Agreement Regarding Modifications to Property Owner's Water Facilities" ("Property Owner Contract") with the Santa Fe Irrigation District around October 8, 2013 concerning certain work on the water infrastructure systems that was located on the property. (Id. ¶ 24.) The Property Owner Contract also stated that CCL is to defend and hold harmless any claims arising out of the acts, omission or willful misconduct of the contractor. (Id. ¶ 26.) Around April 2014, CCL submitted a change order, approved by the Santa Fe Irrigation District, to relocate the fire hydrant to the end of the cul-de-sac on Via Del Alba. (Id. ¶ 28.)
Around February 18, 2015, the Newlins sold the property to Bassim Hamadeh, Seidy Hamadeh and the Ravello Trust (collectively "Hamadeh plaintiffs"). (Id. ¶ 9.) On February 24, 2017, the Hamadeh plaintiffs filed a complaint in San Diego Superior Court against the Newlins and others for negligent misrepresentation, negligence and breach of contract. (Id. ¶ 10.) On October 12, 2017, the Hamadeh plaintiffs filed a first amended complaint adding claims for fraud by concealment, intentional misrepresentation, negligence per se under California Business & Professions Code section 7028 et seq. , fraudulent inducement and negligence per se under California Civil Code section 1102 et seq. (Id. ) The Hamadeh Litigation arose from the Newlins’ alleged intentional/negligent misrepresentation and/or concealment relied upon by the Hamadeh plaintiffs when they purchased the property concerning alleged defects with the modification and remodel work performed by the Newlins and/or on behalf of the Newlins. (Id. )
AIG issued a homeowner policy to the Newlins for the policy period, November 29, 2014 to November 29, 2015, which provided liability coverage, including defense, for qualifying damages for property damage caused by an occurrence and subject to limitations and exclusions. (Id. ¶ 7.) The Newlins tendered their defense in the Hamadeh Litigation to AIG, its insurer, and it provided a full defense to the Newlins under a reservation of rights. (Id. ¶ 11.) After the tender, AIG assigned panel counsel, Patrick J. Mendes, Esq. of Tyson & Mendes, LLP to defend the Newlins. (Id. ¶ 12.) In addition, AIG also agreed to fund the Newlins’ retention of Michael W. Quade, Esq. of Quade & Associates, a PLC as independent counsel under California Civil Code section 2860. (Id. )
Around May 23, 2017, after Quade transmitted to CCL a Notice of Tender of Defense and Demand for Indemnification and Notice of Claim demanding that CCL defend and indemnify the Newlins for claims made by the Hamadeh plaintiffs related to CCL's scope of work, CCL's counsel began communicating with Quade. (Id. ¶ 32.) On June 14, 2017, Quade received an email from "Ms. Barnes" of Travelers acknowledging receipt of the tender to CCL. (Id. ¶ 33.) On July 14, 2017, Ms. Donna Moore of the firm Diederich & Associates emailed Quade indicating she had been retained by Travelers to represent CCL. (Id. ¶ 35.)
On August 3, 2017, Quade tendered the Newlins’ defense directly to Travelers based on Newlins’ status as additional insureds under the CCL policies. (Id. ¶ 36.) On October 6, 2017, Travelers sent a letter to Quade representing that Travelers would defend the Newlins in the Hamadeh Litigation under a full reservation of rights and defenses under the CCL policies. (Id. ¶ 37.) The rights reserved included the issue of "(1) whether the damages resulted from an ‘occurrence,’ a term defined in the CCL policies to mean, in pertinent part, ‘an accident’, and (2) the extent to which coverage is afforded under the Blanket Additional Insured Endorsements in the CCL policies which limit coverage to ‘injury or damage ... caused by acts or omissions’ of CCL." (Id. ) Further, the October 6, 2017 letter represented that coverage under the CCL policies to the Newlins as additional insureds was "excess." (Id. ¶ 38.) Travelers also identified Bohm Wildish LLP ("Bohm Wildish") as its chosen defense counsel and indicated that ...
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