VierraMoore, Inc. v. Cont'l Cas. Co.

Decision Date15 April 2013
Docket NumberNo. 2:12–cv–01926–MCE–EFB.,2:12–cv–01926–MCE–EFB.
Citation940 F.Supp.2d 1270
PartiesVIERRAMOORE, INC., Plaintiff, v. CONTINENTAL CASUALTY COMPANY, and Does 1 through 10, Defendants.
CourtU.S. District Court — Eastern District of California

OPINION TEXT STARTS HERE

Gregory L. Maxim, Thomas G. Trost, Sproul Trust, LLP, Roseville, CA, for Plaintiff.

John Eduard Barry, Wiley Rein LLP, Washington, DC, John Hoppock Feeney, Murphy Pearson Bradley and Feeney, San Francisco, CA, for Defendants.

MEMORANDUM AND ORDER

MORRISON C. ENGLAND, JR., Chief Judge.

This matter arises out of Defendant Continental Casualty Company's (Defendant or “Continental”) motion for summary judgment against Plaintiff VierraMoore, Inc. (Plaintiff or “VierraMoore”). (ECF No. 14.) Plaintiff opposes the motion. (ECF No. 21.) For the reasons set forth below, Defendant's motion is GRANTED.1

BACKGROUND2
A. Factual Background

VierraMoore is a management and consulting firm which provided property managementservices to Linwood Owners Association (“Linwood”). (First Amended Complaint (“FAC”), ECF No. 12 ¶ 6.) In 2010, Linwood filed a lawsuit, captioned Linwood Owners Association v. Bond Safeguard Insurance Company, et al, Case No. SCV 248701, against VierraMoore and a number of other defendants in the Superior Court of California for the Sonoma County (“the Underlying Action”). (SUF ¶ 15.) Subsequently, VierraMoore tendered the defense and indemnity of the claims, which were brought against it by Linwood, to Continental under two insurance policies: (1) EPack for Private Companies, Policy No. 169874280, issued to VierraMoore for the claims policy period of May 16, 2010 to May 16, 2011 (“VierraMoore Policy”); and (2) Community Association, Policy No. 0251202670, issued to Linwood for the claims period of March 24, 2010 to March 24, 2011 (Linwood Policy). (SUF ¶¶ 1–2, 16–23.) In the instant action, VierraMoore alleges that Continental had a duty to defend and a duty to indemnify VierraMoore in connection with the Underlying Action based on both insurance policies. (FAC ¶¶ 12–20, 22–30.)

1. The VierraMoore Policy

The VierraMoore Policy, which Continental issued to Plaintiff, contains only one coverage part—the Miscellaneous Professional Liability (“MPL”) Coverage Part. (ECF No. 19–1; SUF ¶ 3.) Subject to its terms, conditions and exclusions, the MPL Coverage Part in the VierraMoore Policy affords coverage for “Loss resulting from any Claim first made against Named Company Insured for a Wrongful Act by such Named Company Insured or by someone for whom the Named Company Insured is legally responsible.” (ECF No. 19–1 at 14; SUF ¶ 4.) As used in the MPL Coverage Part, “Wrongful Act is defined to mean “any actual or alleged error, misstatement, misleading statement, act, omission, neglect or breach of duty committed or attempted by a Named Company Insured in its performance of Professional Services.” (ECF No. 19–1 at 15; SUF ¶ 5.) “Professional Services” is defined to mean Community Association Manager or Property Manager Services” performed by a Named Company Insured for others for a fee. (ECF No. 19–1 at 19; SUF ¶ 6.)

The VierraMoore Policy defines Community Association Manager or Property Manager Services” as follows:

Community Association Manager or Property Manager Services means the following services provided by a person, other than a Construction Manager, in connection with the management of commercial or residential property for others for a fee:

a. development and implementation of management plans and budget;

b. oversight of physical maintenance of property;

c. solicitation, evaluation and securing of tenants and management of tenant relations, collection of rent and processing evictions;

d. development, implementation and management of loss control and risk management plans for real property;

e. development, implementation and management of contracts and subcontracts (excluding insurance contracts) necessary to the daily functioning of the property;

f. feasibility studies and recommendations regarding maintenance, repairs, renovations or alterations of managed premises, provided said maintenance, repairs, renovations or alterations do not involve the services of an architect; and

g. personnel administration and record keeping, including tax filings, in connection with a managed property.

(ECF No. 19–1 at 19; SUF ¶ 7.)

Further, as relevant for the purposes of Defendant's instant motion for summary judgment, the MPL Coverage Part in the VierraMoore Policy contains a “Bond Exclusion,” which provides as follows:

The Insurer shall not be liable to pay any loss under this Coverage Part in connection with any Claim made against a Named Company Insured ... based upon, directly or indirectly arising out of, or in any way involving the failure to effect or maintain any insurance or bond, or to any failure to cover certain perils or to purchase an adequate amount or type of insurance.

(ECF No. 19–1 at 15, 20.)

2. The Linwood Policy

The Linwood Policy names Linwood as the “Name d Entity Insured.” (ECF No. 19–2; SUF ¶ 14.) The Linwood Policy contains only one coverage part—the Association Liability Coverage Part, and affords coverage for “Loss resulting from any Claim first made against any Named Entity, Subsidiary, Insured Person or Property Manager for a Wrongful Act committed, attempted, or allegedly committed or attempted, by such Named Entity Insured before or during the Policy Period.” (ECF No. 19–2 at 14; SUF ¶¶ 10–11.) The Linwood Policy defines “Insured Persons” to mean, inter alia, “all past, present or future duly elected or appointed directors ... of Named Entity ...” (ECF No. 19–2 at 14.)

Relevant for the purposes of this litigation, the Linwood Policy contains two “Insured v. Insured” exclusions, which state as follows:

1. Exclusions Applicable to all Loss

The Insurer shall not be liable to pay any Loss in connection with any Claim:

...

j. by or derivatively on behalf of the Named Entity or any Subsidiary;

...

3. Exclusions Applicable to Property Manager

The Insurer shall not be liable to pay any Loss of the Property Manager based upon, directly or indirectly arising out of, or in any way involving:

...

g. any Claim brought by or derivatively on behalf of the Named Entity Insured against a Property Manager or a Property Manager Employee.

(ECF No. 19–2 at 16, 18, 19.)

3. The Underlying Action

The Underlying Action was commenced by Linwood in the Superior Court of California for the Sonoma County in January 2010. (SUF ¶ 15.) The Underlying Action arose out of the two Common Area Completion Security Agreements (“Development Agreements”), pursuant to which Linwood Village Investors, LLC (“LVI”) agreed to complete all common area improvements within a housing community subdivision, known as “Linwood at Ragle Ranch,” located in Santa Rosa, California (“the Subdivision). ( See Declaration of Jerome Huang in Support of Defendant's Motion for Summary Judgment (“Huang Decl.”), ECF No. 19 ¶ 11; ECF No. 19–11 at 6.) Linwood is, and at all relevant times was, a homeowners association responsible for maintenance and operation of the Subdivision. (ECF No. 19–11 at 4–5.) During the relevant time period, VierraMoore provided property management services to Linwood pursuant to the Association Management Services Agreements dated February 17, 2006, and March 5, 2008. (Declaration of George W. Moore in Support of Plaintiff's Opposition to Defendant's Motion for Summary Judgment (“Moore Decl.”), ECF No. 22 ¶ 7; ECF Nos. 22–2, 22–3.)

The Subdivision project was divided into two phases: (1) Phase I with the initial completion date of May 2006, and (2) Phase II with the initial completion date of December 2006. (ECF No. 19–11 at 6.) To protect Linwood in the event that LVI could not fulfill its obligations under the Development Agreements, including timely delivery of the common area improvements, LVI obtained two surety bonds (“Bonds”) from Bond Safeguard Insurance Company (“Bond Safeguard”). ( Id.)

As alleged in the Second Amended Complaint filed in the Underlying Action, neither the Phase I nor Phase II common area improvements have been completed by LVI. ( Id. at 7.) When Linwood made a demand on Bond Safeguard under the Bonds obtained by LVI, Bond Safeguard refused to perform on the ground that the claim period for filing a claim under the Bonds had expired. ( Id. at 9.) In the Underlying Action, Linwood alleged that VierraMoore entered into an agreement with LVI to extend the deadlines for LVI to complete the Subdivision project but failed to obtain the approval of Bond Safeguard for such extensions, which ultimately led to Linwood's inability to obtain payments under the Bonds.3 ( Id. at 10–14.) According to Linwood, it was VierraMoore's responsibility to make sure that the Bonds remained enforceable when the Subdivision project's completion deadlines were extended to 2008. ( Id.)

For its part, VierraMoore filed a cross-claim in the Underlying Action against four of Linwood's former directors claiming that, to the extent VierraMoore was liable to Linwood, Linwood's directors should be found liable to VierraMoore under the theories of tort of another, negligence and equitable estoppel. (Declaration of Gregory L. Maxim in Support of Plaintiff's Opposition to Defendant's Motion for Summary Judgment (“Maxim Decl.”), ECF No. 21–1 ¶ 5; ECF No. 21–9.) More specifically, VierraMoore alleged in its cross-claim that Linwood's former directors had a duty to provide VierraMoore with instructions as to VierraMoore's specific tasks and duties as Linwood's property manager. (ECF No. 21–9 at 4–8.)

Despite being aware of the existence and nature of the Bonds, Linwood's former directors allegedly failed to direct VierraMoore to seek an extension from Bond Safeguard or to file an action against Bond Safeguard, which allowed the purported limitations period to pass on pursuing a claim against Bond Safeguard. ( Id.)

In April and then in May of 2011, VierraMoore tendered Linwood's claims in the Underlying Action for...

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2 books & journal articles
  • CHAPTER 10 Directors and Officers Liability and Professional Liability Insurance
    • United States
    • Full Court Press Insurance for Real Estate-Related Entities
    • Invalid date
    ...Associates, L.L.C. v. Twin City Fire Insurance Co., 572 F.3d 663 (9th Cir. 2009); VierraMoore, Inc. v. Continental Casualty Co., 940 F. Supp.2d 1270 (E.D. Cal. 2013); Chartrand v. Illinois Union Insurance Co., 2009 WL 2776484 (N.D. Cal. Aug. 28, 2009); Megavail v. Illinois Union Insurance C......
  • Chapter 9
    • United States
    • Full Court Press Business Insurance
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    ...Associates, L.L.C. v. Twin City Fire Insurance Co., 572 F.3d 663 (9th Cir. 2009); VierraMoore, Inc. v. Continental Casualty Co., 940 F. Supp.2d 1270 (E.D. Cal. 2013); Chartrand v. Illinois Union Insurance Co., 2009 WL 2776484 (N.D. Cal. Aug. 28, 2009); Megavail v. Illinois Union Insurance C......

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