Associated Indus. Ins. Co. v. Ategrity Specialty Ins. Co.

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ASSOCIATED INDUSTRIES INSURANCE COMPANY, INC., Plaintiff, v. ATEGRITY SPECIALTY INSURANCE CO., INC., Defendant.

No. 22-cv-04008-HSG

United States District Court, N.D. California

June 6, 2023

ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT RE: DKT. NO. 23

HAYWOOD S. GILLIAM, JR. UNITED STATES DISTRICT JUDGE

Before the Court is Plaintiff's motion for partial summary judgment as to Defendant's duty to defend in an underlying lawsuit. Dkt. No. 23 (“Mot.”). The Court finds this matter appropriate for disposition without oral argument and the matter is deemed submitted. See Civil L.R. 7-1(b). The Court GRANTS the motion.

I. INTRODUCTION

This is an insurance coverage dispute. The parties are insurance companies that mutually insure Veritas Investments, Inc. which was sued in an underlying case filed in state court called Evander v. Veritas Investments, Inc.^[1] In Evander, residential tenants alleged various habitability violations at properties owned by Veritas, asserting that the defendants attempted to drive tenants out of their units.^[2] See Dkt. No. 24-1. Plaintiff participated in the defense of Veritas, paying legal fees to the law firm Lubin Olson & Niewiadomski LLP for its work in Evander. See Dkt. No. 25-16; see also Dkt. No. 41 (“Bracy Decl.”) ¶¶ 6-9, 11. In its motion for partial summary judgment, Plaintiff seeks a declaration that Defendant has owed a duty to defend Veritas in Evander since Plaintiff officially tendered the case on May 20, 2022, “or such earlier time as it received notice.” See Mot. at 1; Dkt. No. 25-19.

Defendant issued three relevant policies of commercial general liability insurance to Veritas, collectively effective December 2019 through December 2022.^[3] See Dkt. No. 25-17; Dkt. No. 25-18; Dkt No. 14 (“Counterclaim”) ¶ 11. The policies include two standard coverages: Coverage A and Coverage B. Coverage A creates a duty to defend in a suit seeking damages for “bodily injury” or “property damage” caused by an “occurrence.” See Dkt. No. 25-17 at 9; Dkt. No. 25-18 at 10; Counterclaim ¶ 12. “Occurrence” in turn is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Dkt. No. 25-17 at 23; Dkt. No. 25-18 at 24. Coverage B creates a duty to defend in a suit seeking damages for “personal and advertising injury” (meaning injury, including bodily injury) caused by an “offense.” Dkt. No. 25-17 at 14, 23; Dkt. No. 25-18 at 15, 24. The injury must arise out of one or more listed “offenses,” which includes “wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premise that a person occupies, committed by or on behalf of its owner, landlord, or lessor.” Id. The policies exclude coverage of “continuous or progressive” injuries that arose before the policy started. Dkt. No. 25-17 at 34; Dkt. No. 25-18 at 39; Counterclaim ¶ 13.

Coverage under each policy is also subject to satisfaction of a self-insured retention (“SIR”), “a specific sum or percentage of loss that is the insured's initial responsibility and must be satisfied before there is any coverage under the policy.” Forecast Homes, Inc. v. Steadfast Ins. Co., 181 Cal.App.4th 1466, 1474 (2010) (quotation omitted). The 2019-2020 and 2020-2021 policies describe the SIR as follows:

SIR

BODILY INJURY AND/OR PROPERTY DAMAGE LIABILITY SIR COMBINED

■ $100,000 Per Occ

SIR Aggregate

NA

HABITABILITY / UN-INHABITABILITY SIR

Self-Insured Retention

$ 500,000

Each Occurrence

              â€œPolicy Term Aggregate†
            

$ N/A

ALL OTHER

Self-Insured Retention

$100,000

Each Occurrence

              â€œPolicy Term Aggregate†
            

$ N/A

Dkt. No. 25-17 at 3, 28; Dkt. No. 25-18 at 3, 33; Counterclaim ¶ 14. The SIR language in the 2021-2022 policy is different. See Counterclaim ¶ 15; Mot. at 22. For example, the SIR section specifies that the SIR is “per-claim,” adds that the SIR applies to personal and advertising injuries “as the result of any one ‘occurrence' or offense,” and states the insured is “solely responsible” for SIR amounts. See id.

II. LEGAL STANDARD

A. Summary Judgment

Summary judgment is proper when a “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A fact is “material” if it “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). And a dispute is “genuine” if there is evidence in the record sufficient for a reasonable trier of fact to decide in favor of the nonmoving party. Id. But in deciding if a dispute is genuine, the court must view the inferences reasonably drawn from the materials in the record in the light most favorable to the nonmoving party, Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986), and “may not weigh the evidence or make credibility determinations,” Freeman v. Arpaio, 125 F.3d 732, 735 (9th Cir. 1997), overruled on other grounds by Shakur v. Schriro, 514 F.3d 878, 884-85 (9th Cir. 2008). If a court finds that there is no genuine dispute of material fact as to only a single claim or defense or as to part of a claim or defense, it may enter partial summary judgment. Fed.R.Civ.P. 56(a).

B. Duty to Defend

“An insurer has a very broad duty to defend its insured under California law.” Anthem Elecs., Inc. v. Pac. Emp'rsIns. Co., 302 F.3d 1049, 1054 (9th Cir. 2002). As the Supreme Court of California has explained, “the insured is entitled to a defense if the underlying complaint alleges the insured's liability for damages potentially covered under the policy, or if the complaint might be amended to give rise to a liability that would be covered under the policy.” Montrose Chem. Corp. v. Superior Court, 6 Cal.4th 287, 299 (Cal. 1993). “Even if it is ultimately determined no coverage existed, the insurer refusing to defend is liable for defense costs if there was any potential of coverage under the policy during pendency of the action.” Md. Cas. Co. v. Nat'lAm. Ins. Co., 48 Cal.App.4th 1822, 1828 (Cal.Ct.App. 1996).

To determine whether the insurer owes a duty to defend, courts first “compare the allegations of the complaint-and facts extrinsic to the complaint-with the policy terms to see if they reveal a possibility that the claim may be covered by the policy.” Pension Tr. Fund for Operating Eng'rs v. Fed. Ins. Co., 307 F.3d 944, 949 (9th Cir. 2002) (internal quotation marks and brackets omitted). “[U]nder California law the insurer's duty is not measured by the technical legal cause of action pleaded in the underlying third party complaint, but rather by the potential for liability under the policy's coverage as revealed by the facts alleged in the complaint or otherwise known to the insurer.” Hudson Ins. Co. v. Colony Ins. Co., 624 F.3d 1264, 1267 (9th Cir. 2010) (internal quotation marks omitted). “It only matters whether the facts alleged or otherwise known by the insurer suggest potential liability or whether they do not.” Id. at 1269. “Any doubt as to whether these facts trigger a duty to defend is resolved in favor of the insured.” Pension Tr. Fund, 307 F.3d at 949. Further, “[i]f any of the claims in the underlying complaint are covered, the insurer has a duty to defend the entire action.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008).

The insurer bears a heavy burden to show that it does not have a duty to defend. While the “insured need only show that the underlying claim may fall within policy coverage[,] the insurer must prove it cannot .” Montrose Chem., 6 Cal.4th at 300. “California courts have repeatedly found that remote facts buried within causes of action that may potentially give rise to coverage are sufficient to invoke the defense duty.” Pension Tr. Fund, 307 F.3d at 951. “Once the insured makes a showing of potential coverage, the insurer may be relieved of its duty only when the facts alleged in the underlying suit can by no conceivable theory raise a single issue that could bring it within the policy coverage.” Id. at 949 (internal quotation marks and brackets omitted). An insurer's duty to defend can generally be resolved at the summary judgment stage. See Butler v. Clarendon Am. Ins. Co., 494 F.Supp.2d 1112, 1122 (N.D. Cal. 2007).

III. EVIDENTIARY ISSUES

Defendant's response to Plaintiff's motion consists almost entirely of evidentiary objections. See Dkt. No. 28 (“Opp.”); Dkt. No. 44. The Court largely overrules the objections.

Under Federal Rule of Civil Procedure 56(c)(2), “[a] party may object that the material cited to support or dispute a fact cannot be presented in a form that would be admissible in evidence.” As the Ninth Circuit has noted “Rule 56 was amended in 2010 to eliminate the unequivocal requirement that evidence submitted at summary judgment must be authenticated[.]” Romero v. Nev. Dep't of Corr., 673 Fed.Appx. 641, 644 (9th Cir. 2016); see also Harlow v. Chaffey Cmty. Coll. Dist., No. 21-55349, 2022 WL 4077103, at *1 (9th Cir. Sept. 6, 2022) (“Courts must now consider unauthenticated evidence at summary judgment if the evidence can ‘be presented in a form that would be admissible' at trial.” (quoting Fed.R.Civ.P. 56(c)(2))). Similarly, “[i]f the contents of a document can be presented in a form that would be admissible at trial-for example, through live testimony by the author of the document-the mere fact that the document itself might be excludable hearsay provides no basis for refusing to consider it on summary judgment.” Sandoval v. Cnty. of San Diego, 985 F.3d 657, 666 (9th Cir. 2021). “Accordingly, district courts in this circuit have routinely overruled authentication and...