D.C. Cas. Co. v. Gordon Trucking Inc.

758 F.Supp.2d 909

COLUMBIA CASUALTY COMPANY, an Illinois corporation, Plaintiff,

v.GORDON TRUCKING, INC., a Washington corporation, and Does 1 through 10, Defendants.Gordon Trucking, Inc., a Washington corporation, and Does 1 through 10, Counterclaimants,

v.Columbia Casualty Company, an Illinois corporation; American International Specialty Lines Insurance Company, an Alaska corporation; Great West Casualty Company, a Nebraska corporation; and Does 1 through 10, Counterdefendants.

Case No. 09–CV–05441–LHK.

United States District Court, N.D. California,San Jose Division.

Dec. 13, 2010.

Patrick A. Cathcart, Imani Gandy, Joseph P. Collins, Mikel Allison Glavinovich, Alvaradosmith, APC, Los Angeles, CA, for Plaintiff and Counterdefendants.Frank Kaplan, Bingham McCutchen LLP, Santa Monica, CA, for Defendants and Counterclaimants.

ORDER GRANTING IN PART AND DENYING IN PART AMERICAN INTERNATIONAL SPECIALTY LINES INSURANCE COMPANY'S MOTION FOR PARTIAL SUMMARY JUDGMENT

ORDER GRANTING COLUMBIA CASUALTY COMPANY'S REQUEST FOR JUDICIAL NOTICE

LUCY H. KOH, District Judge.

On August 12, 2010, Counterdefendant and Crossclaimant American International Specialty Lines Insurance Company (“AISLIC”) moved for partial summary judgment against Plaintiff, Counterdefendant, and Crossdefendant Columbia Casualty Company (“Columbia”). Dkt. No. 53 (“Mot. for Summ. J.”). Columbia opposes the motion. Dkt. No. 68 (“Opp'n”). Along with its opposition, Columbia filed a request for judicial notice. Dkt. No. 70. On November 23, 2010, the Court held a hearing on these matters. For the foregoing reasons, AISLIC's motion is GRANTED in part and DENIED in part, and Columbia's request for judicial notice is GRANTED.

I. BACKGROUND

This dispute is fundamentally a disagreement among insurers over coverage obligations.

In its action in this Court, Columbia seeks a declaration that it has no obligation to pay $5 million in insurance coverage for liability resulting from a personal injury lawsuit against its insured, Gordon Trucking. Columbia claims that Gordon Trucking breached a provision in its policy by entering into a settlement without Columbia's consent. This provision, known as a “no voluntary payments” or NVP provision, states: “With respect to any claim or suit to which this insurance applies, no insured will, except at the insured's own cost, make any payment, assume any obligation, or incur any expense other than for first aid, without our consent.” Dkt. No. 57 (“Allison Decl.”), Ex. 2, at 16. According to Columbia, this breach releases Columbia from any obligation to contribute to the settlement.

AISLIC, also Gordon Trucking's insurer, disputes Columbia's claim and seeks to compel Columbia to furnish its share of the settlement. AISLIC claims that Columbia cannot rely on the NVP provision to avoid payment because Columbia was not prejudiced by the settlement and because Columbia breached its duty to conduct a meaningful investigation of the underlying liability claim.

A. Gordon Trucking and Its Insurance Coverage

Gordon Trucking, Inc. is a trucking company based in Seattle, Washington. Opp'n 2. In May of 2007, Gordon Trucking operated around 1,300 trucks. Dkt. No. 69 (“Collins Decl.”), Ex. A (“Gordon Dep.”), at 10. Although Gordon Trucking operates nationwide, its trucks haul primarily in the western United States. Dkt. No. 73, Ex. A (“Gordon Dep.”),¹ at 11. Around twenty-five to thirty percent of loads hauled by Gordon Trucking trucks in 2007 originated in or were destined to sites in California, id. at 12, and around twenty-five to thirty percent of Gordon Trucking's revenue in 2007 involved loads that either originated in or were delivered to sites in the state of Washington, id. at 11–12. Gordon Trucking has approximately 2,000 employees based in twenty to twenty-five states. Gordon Dep. 16. Around 800 of Gordon Trucking's employees are based in Washington, and around 300 to 350 are based in California. Id.

For the relevant policy period, Gordon Trucking possessed $50 million in liability insurance. Opp'n 2. This coverage consisted of several layers. Gordon Trucking's primary insurer was Great West Casualty Company. Mot. for Summ. J. 4. The Great West policy provided $5 million in coverage, including a $500,000 deductible. Id. For liability exceeding the Great West policy, Columbia's policy provided an additional $5 million in coverage. Id. Directly excess to Columbia was AISLIC's $20 million policy. Id. Finally, Fireman's Fund issued an additional $20 million policy that was excess to all the other policies. Id.

Gordon Trucking procured its insurance through Brown & Brown, an insurance brokerage firm located in Tacoma, Washington. Allison Decl. ¶ 3. David Allison, an account executive at Brown & Brown during the relevant period, was responsible for assisting Gordon Trucking in obtaining liability insurance. Id. ¶ 4. He negotiated and accepted such policies from his office in Tacoma, Washington. Id. In placing the Columbia policy, Allison dealt with Tri–City Brokerage, an agent and wholesaler located in Chicago, Illinois that communicated with Columbia. Id. ¶ 10; Dkt. No. 69, Ex. B, at 27. The final policy that Columbia issued to Gordon Trucking listed Gordon Trucking's address as Pacific, Washington and bore a stamp indicating that the policy complied with Washington law. Allison Decl., Ex. 2 at 8, 11.

B. The Underlying Cause of Liability and Notice to Insurers

On May 3, 2007, Drew Bianchi suffered a catastrophic brain injury in an automobile accident that occurred on a California highway. A Salazar Equipment Company truck crossed the center line of the highway, hit a Gordon Trucking truck traveling in the opposite direction, and then struck an automobile in which Bianchi was a passenger. Dkt. No. 56 (“Calladine Decl.”), at ¶ 4. Gordon Trucking's truck did not hit Bianchi's vehicle, and the California Highway Patrol report placed fault for the accident on the Salazar driver. Collins Decl., Ex. D.

On January 28, 2008, Bianchi filed suit. He named Salazar and its driver, Gordon Trucking and its driver, and the State of California as defendants. Calladine Decl. ¶ 8. Gordon Trucking notified AISLIC of the accident and the lawsuit on July 8, 2008 and again on August 5, 2008, at which time it also notified Columbia and National Union. Collins Decl., Exs. C, D. The notifying letters included copies of the California State Patrol Report and Investigation and informed AISLIC and Columbia that, based on initial discovery, Bianchi's injuries appeared severe. Id. In addition, the letters stated that Gordon Trucking's outside counsel Richard Alley, whose name and contact information were listed, would provide a more detailed description and assessment of Bianchi's claim. Id. Beginning in August of 2008, Alley began sending monthly litigation status reports to Gordon Trucking, Great West, and AISLIC. Collins Decl. ¶ 14. Alley, however, never sent further information to Columbia.

On August 14, 2008, James Hoefer, a Columbia employee, responded to Gordon Trucking's notification. After spending approximately thirty minutes reviewing Gordon Trucking's notification and without consulting any other individuals, Hoefer spent a few minutes composing a response that contained the following statements:

[Columbia Casualty] has determined that the nature of the incident alleged by [Bianchi] is unlikely to impact [Columbia Casualty's] excess policy limits should a formal claim or suit be pursued and the matter will be designated “Record Only”.

If you, your insurance broker and/or the underlying insurance carrier(s) subsequently obtain any information which indicates that [Bianchi's] injuries may impact [Columbia Casualty's] excess policy limits and/or if the underlying insurance carrier(s) disclaims coverage for this claim or their limits of coverage become eroded or exhausted, please so notify the undersigned immediately.

Collins Decl., Ex. F; Dkt. No. 55 (“Kaplan Decl.”), Ex. 2 (“Hoefer Dep.”), at 51. On September 2, 2008, Gordon Trucking's general counsel resent the notification letter to Columbia and left a voicemail for Hoefer. Dkt. No. 73 (“Kaplan Supp. Decl.”), Ex. B, at 42–45. Columbia did not respond to these communications.

On August 22, 2008, Jenna Marzorati, an AISLIC employee, responded to Gordon Trucking's notice letter. Her letter included the following statements:

Based upon the information received and the investigation performed, it is our opinion that this claim does not present an exposure to the excess policy. Therefore, we are closing our file.

Notwithstanding, if during the ongoing handling of this claim, you become aware of a change of status in one or more of the following areas, immediately notify us so we may reconsider the need to actively monitor further developments:

Venue

Plaintiff's Injury

Substitution of Plaintiff's Counsel

Punitive damage exposure

Notification of Trial Date

Collins Decl., Ex. E. Marzorati sent this letter after consulting with a claims representative at Great West. Collins Decl., Ex. G. Great West's representative had informed Marzorati that he did not believe Bianchi's claim exceeded the $5 million primary insurance layer. Id.

On September 19, 2008, Alley sent an e-mail to Marzorati confirming receipt of her August 8, 2008 response letter. In his e-mail, Alley suggested that Marzorati leave the file open until she reviewed further information that he would be forwarding. Collins Decl., Ex. J. On October 2, 2008, after she received more information from Alley, Marzorati recommended that Bianchi's claim be forwarded to the Complex Unit for further investigation and handling. Collins Decl., Ex. I. She based the claim's change in status on the serious nature of Bianchi's injuries and on the fact that Salazar only had $1,000,000 in insurance coverage. Id.

C. The Bianchi Litigation and Trial Verdict

Trial in the Bianchi action began in late August of 2009. Dkt. No. 54 (“Roberts Decl.”), at ¶ 4. Prior...