Cnty. of Sacramento v. Everest Nat'l Ins. Co.

COUNTY OF SACRAMENTO, Plaintiff, v. EVEREST NATIONAL INSURANCE COMPANY, Defendant.

No. 2:19-cv-00263-MCE-DB

United States District Court, E.D. California

January 19, 2022

MEMORANDUM AND ORDER

MORRISON C. ENGLAND, SENIOR UNITED STATES DISTRICT JUDGE

Through the present action, Plaintiff County of Sacramento (“Plaintiff”) asserts the following causes of action against Defendant Everest National Insurance Company (“Defendant”) arising out of Defendant's failure to indemnify Plaintiff in an underlying state court action: (1) Breach of Contract, (2) Breach of the Implied Covenant of Good Faith and Fair Dealing, and (3) Declaratory Relief. Compl., ECF No. 1. Presently before the Court are two motions: (1) Defendant's Motion for Summary Judgment, or alternatively, Partial Summary Judgment, ECF No. 52 (“Def.'s Mot.”), and (2) Plaintiff's Motion for Partial Summary Judgment, ECF No. 53 (“Pl.'s Mot.”). Both matters have been fully briefed. ECF Nos. 58 (“Def.'s Opp'n”), 60 (“Pl.'s Opp'n”), 61 (“Def.'s Reply”) 62 (“Pl.'s Reply”). For the reasons set forth below, Defendant's Motion is GRANTED, and Plaintiff's Motion is DENIED.^[1]

BACKGROUND^[2]

A. The Insurance Policies

Defendant issued three public entity excess liability insurance policies to the named insured Plaintiff (the “Policies”). See generally Exs. 81-83, ECF No. 52-11, at 6- 162. The Policies further define the named insured to include, in part, “‘employees' but only for acts within the scope of their employment by [Plaintiff] or while performing duties related to the conduct of the Named Insured.” See, e.g., Ex. 81, id., at 17.

Under the Policies, Defendant agreed to “pay on [Plaintiff's] behalf, the ‘ultimate net loss', in excess of the ‘retained limit', that the insured becomes legally obligated to compensate others for loss arising out of [Plaintiff's] ‘employment practice liability wrongful act' that takes place in the ‘coverage territory' during the Policy Period.” See, e.g., id., at 10. The retained limit is $2 million for “[a]ny one ‘employment practice liability wrongful act' or series of continuous, repeated, or related ‘employment practice liability wrongful acts.'” Id. at 8-9. However, Defendant does not owe a duty to defend until “the limits of . . . [Plaintiff's] self-insured retention of the ‘retained limit' [has] been exhausted by payment to a third party of judgments, settlements, or defense costs . . .” Id. at 11.

B. The Underlying Hagadorn Action^[3]

On November 12, 2010, Annica Hagadorn, Tracie Keillor, Jodi Mendonca, and Dawn Douglas (collectively, “Hagadorn Plaintiffs”) sued their employer, the Sacramento County Sheriff's Department (“Sheriff's Department”), in the Superior Court of California, County of Sacramento, in an action entitled Annica Hagadorn et al. v. Sacramento County Sheriff's Department, Case No. 34-2010-00091514 (“Hagadorn Action”). See generally Ex. 10, ECF No. 52-7, at 249-99. The Hagadorn Plaintiffs asserted various causes of action pursuant to California's Fair Employment and Housing Act (“FEHA”). Id. at 249-60.

Defense counsel notified counsel for the Hagadorn Plaintiffs that the County of Sacramento (Plaintiff) was the proper defendant, not the Sheriff's Department.^[4] See Ex. 12, id., at 327 (“The [Sheriff's Department] is simply a department within the County structure.”). As a result, the Hagadorn Plaintiffs agreed to amend their complaint so long as Plaintiff agreed to “not challenge FEHA statutory jurisdiction, specifically all of the plaintiff's right to sue letters nam[ing] only the Sacramento Sheriff Department as defendant.” Ex. 13, id., at 330. On January 13, 2011, the Hagadorn Plaintiffs filed their first amended complaint, naming Plaintiff as the defendant. See generally Ex. 14, id., at 332-84 (“Plaintiffs are, and have been for many years, employed by Defendant

COUNTY OF SACRAMENTO AT THE SACRAMENTO COUNTY SHERIFF'S DEPARTMENT as Deputies.”).

Three years later, on February 4, 2014, the Hagadorn Plaintiffs filed a second amended complaint, but only named the Sheriff's Department as defendant. See generally Ex. 15, id., at 386-447. Plaintiff answered the second amended complaint as “COUNTY OF SACRAMENTO (erroneously sued as SACRAMENTO COUNTY SHERIFF'S DEPARTMENT).” Ex. 16, id., at 449. In any event, the second amended complaint asserted six causes of action pursuant to FEHA, including retaliation in violation of California Government Code § 12940(h) (“§ 12940(h)”) on behalf of all Hagadorn Plaintiffs. Ex. 15, id., at 386-401.

Plaintiff subsequently moved for summary judgment against each Hagadorn Plaintiff, and the state court granted summary adjudication as to all causes of action against all plaintiffs except for the retaliation claim pursuant to § 12940(h). See Exs. 29- 32, ECF No. 52-8, at 134-326. On March 4, 2016, Defendant sent its first reservation of rights letter to Plaintiff. Ex. 32, ECF No. 53-11, at 108-12.

Between March 28 and May 17, 2016, the Hagadorn Action went to trial on the retaliation claim. See Ex. 36, ECF No. 52-8, at 358-59. The jury was instructed that Plaintiff is a party in the lawsuit, not the Sheriff's Department. Ex. 47, ECF No. 52-9, at 141. Ultimately, the jury returned a verdict in favor of each Hagadorn Plaintiff, finding that they each engaged in a protected activity (i.e., the reporting of what they reasonably believed was preferential treatment or complaining about alleged racial and gender discrimination in the Sheriff's Department), and that such reporting was a substantial motivating reason for removal from their positions (Douglas and Keillor), the initiation of Internal Affairs investigations (Hagadorn and Keillor), and removal from the opportunity to earn overtime pay (Mendonca). See Ex. 48, id., at 160-61 (awarding Douglas $120, 000 for emotional distress and mental suffering); Ex. 49, id., at 163-65 (awarding Hagadorn $100, 000 for emotional distress and mental suffering); Ex. 50, id., at 167-69 (awarding Keillor $306, 591 in past economic loss; $1, 416, 449 in future economic loss; $1, 000, 000 for emotional stress, and $500, 000 for physical pain and suffering); Ex. 51, id., at 171-72 (awarding Mendonca $66, 240 for past economic loss). On July 20, 2016, Defendant sent Plaintiff a second reservation of rights letter. Ex. 43, ECF No. 53-12, at 2-8.

Following post-trial motions, the state court awarded the Hagadorn Plaintiffs $5, 321, 071.88 in attorneys' fees; $55, 336.33 in costs; and $71, 196.58 in additional costs. Ex. 60, ECF No. 52-9, at 234; Ex. 61, ECF No. 52-10, at 7; Ex. 62, id., at 12. In a letter dated August 2, 2016, Defendant refused to indemnify Plaintiff for “any of the damages awarded at trial or the attorneys' fees sought by [the Hagadorn Plaintiffs]” because “the jury verdicts did not result in any liability subject to coverage under the [Policies].” Ex. 84, ECF No. 52-11, at 164-74. Plaintiff appealed all four judgments, and the Hagadorn Plaintiffs cross-appealed, but while those appeals were pending, Plaintiff and the Hagadorn Plaintiffs settled. See Exs. 64-69, ECF No. 52-10, at 25-44 (settlement filed under seal); Ex. 93, ECF No. 52-11, at 327 (stating Plaintiff incurred $1, 246, 746.37 in attorneys' fees and costs in defending the Hagadorn Action).

STANDARD

The Federal Rules of Civil Procedure provide for summary judgment when “the 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); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). One of the principal purposes of Rule 56 is to dispose of factually unsupported claims or defenses. Celotex, 477 U.S. at 325.

Rule 56 also allows a court to grant summary judgment on part of a claim or defense, known as partial summary judgment. See Fed.R.Civ.P. 56(a) (“A party may move for summary judgment, identifying each claim or defense-or the part of each claim or defense-on which summary judgment is sought.”); see also Allstate Ins. Co. v Madan, 889 F.Supp. 374, 378-79 (C.D. Cal. 1995). The standard that applies to a motion for partial summary judgment is the same as that which applies to a motion for summary judgment. See Fed.R.Civ.P. 56(a); State of Cal. ex rel. Cal. Dep't of Toxic Substances Control v. Campbell, 138 F.3d 772, 780 (9th Cir. 1998) (applying summary judgment standard to motion for summary adjudication).

In a summary judgment motion, the moving party always bears the initial responsibility of informing the court of the basis for the motion and identifying the portions in the record “which it believes demonstrate the absence of a genuine issue of material fact.” Celotex, 477 U.S. at 323. If the moving party meets its initial responsibility, the burden then shifts to the opposing party to establish that a genuine issue as to any material fact actually does exist. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968).

In attempting to establish the existence or non-existence of a genuine factual dispute, the party must support its assertion by “citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits[, ] or declarations . . . or other materials; or showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.” Fed.R.Civ.P. 56(c)(1). The opposing party must demonstrate that the fact in contention is material, i.e., a fact that might affect the outcome of the suit under the governing law. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248, 251-52 (1986); Owens v. Local No. 169, Assoc. of W....