Genesis Ins. Co. v. BRE Props.

916 F.Supp.2d 1058

GENESIS INS. CO., Plaintiff,

v.BRE PROPERTIES, et al., Defendants.

No. C –12–00368 EDL.

United States District Court, N.D. California.

Jan. 3, 2013.

Stephen David Treuer, Alan H. Barbanel, Nancy Joy Brown, Barbanel & Treuer, P.C., Los Angeles, CA, for Plaintiff.

Thomas Edward Gibbs, Brian Robert Bauer, Allen Matkins Leck Gamble Mallory & Natsis LLP, Irvine, CA, David C. Capell, Donald J. Verfurth, Shannon Wodnik, Gordon & Rees LLP, Seattle, WA, for Defendants.

ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AGAINST DEFENDANT BRE PROPERTIES, GRANTING DEFENDANT LEXINGTON'S MOTION FOR SUMMARY JUDGMENT AGAINST DEFENDANT BRE PROPERTIES, AND DENYING DEFENDANT BRE PROPERTIES' MOTIONS FOR SUMMARY JUDGMENT AGAINST PLAINTIFF AND DEFENDANT LEXINGTON

ELIZABETH D. LAPORTE, United States Magistrate Judge.

In this insurance coverage action, the parties have filed four summary judgment motions. For the reasons stated at the December 18, 2012 hearing and in this Order, Plaintiff's Motion for Summary Judgment against Defendant BRE Properties is granted, Defendant Lexington Insurance Company's Motion for Summary Judgment against Defendant BRE Properties is granted, and Defendant BRE Properties' Motions for Summary Judgment against Plaintiff and Defendant Lexington are denied.

Background

Defendant BRE alleges that it “is in the business of acquiring, developing, operating and selling apartment communities.” Counterclaim (docket 9) at ¶ 7. In 1996, BRE purchased Berkshire Court, a group of 26 apartment buildings in Oregon. Counterclaim (docket 9) at ¶¶ 9–10. The apartments were occupied or held for rent or rented by BRE. Treuer Decl. Ex. C at 32. BRE collected annual rents of approximately $2,000,000 for the 266 Berkshire units. Treuer Decl. Ex. D.

After it purchased Berkshire, BRE discovered water intrusion and damage in the areas of the project's balconies and siding, and hired American Building & Property Maintenance & Construction Company (“ABC”) as the general contractor to make the repairs. Treuer Decl. Ex. E at ¶ 3. The repair work occurred between 1999 and 2001 and included the replacement of exterior unit decks and siding, and the repair of all property damage. Treuer Decl. Ex. E at ¶¶ 3–4.

Beginning in October 1999, BRE purchased a series of comprehensive general liability (“CGL”) insurance policies from Plaintiff Genesis. Treuer Decl. Ex. S, T, U. The last Genesis policy was in effect from October 31, 2001 to October 31, 2002. Treuer Decl. Ex. U. Defendant Lexington issued six consecutive Commercial General Liability policies to BRE that were in effect from October 31, 2002 to October 31, 2008. Wodnik Decl. Ex. G–L.

In 2003, BRE sold Berkshire to Oakmont, LLC and others. Treuer Decl. Ex. A at ¶ 11. On November 21, 2008, Oakmont sued BRE and others, including BRE's general contractor, ABC, in the Oakmont Actions in state court in Oregon ( Oakmont I ). Treuer Decl. Ex. A at ¶ 12. Oakmont alleged that: (1) ABC performed inadequate repairs to Berkshire between 1999 and 2001; (2) BRE directed and authorized the repairs; (3) BRE misrepresented the condition of Berkshire and failed to disclose defects; and (4) BRE sold Berkshire to Oakmont on February 18, 2003. Treuer Decl. Ex. E. Oakmont asserted claims against BRE for negligence and misrepresentation. Treuer Decl. Ex. E at 9–10. Oakmont alleged that BRE was negligent in failing to properly maintain, investigate and repair the construction defects and other related property damage. Treuer Decl. Ex. E at 10. Oakmont alleged that BRE misrepresented facts to Oakmont, including failing to disclose defects and stating that the property defects were properly repaired. Treuer Decl. Ex. E at 10–11.

BRE moved to dismiss Oakmont's claims against it, and on March 16, 2009, the state court granted BRE's motion with leave to amend. Treuer Decl. Ex. G. On July 27, 2009, Oakmont and BRE stipulated to a dismissal of BRE without prejudice. Treuer Decl. Ex. H. BRE litigated this case without tendering the defense to Genesis because the Genesis policies contained a Self–Insured Retained Endorsement with a retained limit of $50,000. Treuer Decl. Ex. S, T, U. Lexington's policies also had a Self–Insured Retention Endorsement with a retained limit of $200,000. Wodnik Decl. Ex. G–L.

In early 2010, BRE provided notice of the 2008 lawsuit to Lexington. Gibbs Decl. ¶¶ 2, 3, 16, 23, Ex. A, B, U. Lexington responded with an acknowledgment of the litigation, which BRE argues conceded coverage: “The purpose of this letter is to confirm the liability coverage afforded BRE.” Gibbs Decl. ¶¶ 2, 3, 16, 24, Ex. A, B, V. BRE argues that it kept Lexington apprised of the litigation and advised it that BRE was about to reach the Retained Limit stated in the policy, after which Lexington would have to pay for BRE's defense.Gibbs Decl. ¶¶ 2, 3, 16, 25, 26. Ex. A, B, W, X.

On March 22, 2010, ABC filed a second amended third party complaint against BRE for indemnity and contribution in Oakmont I in Oregon state court. Treuer Decl. Ex. I. ABC alleged that its liability to Oakmont arose, if at all, because BRE negligently defined the scope of work for the project, and negligently supervised and managed it. Treuer Decl. Ex. I at ¶ 18. BRE moved to dismiss ABC's claim, and on July 22, 2010, the state court dismissed ABC's complaint against BRE with leave to amend. Treuer Decl. Ex. K. ABC did not file an amended complaint. Treuer Decl. Ex. B.

On December 8, 2010, Oakmont filed a complaint for misrepresentation against BRE in Oregon state court ( Oakmont II ). Treuer Decl. Ex. L. BRE filed a motion to dismiss, arguing that Oakmont I was still pending, and on June 7, 2011, Oakmont II was dismissed without prejudice. Treuer Decl. Ex. N.

On October 6, 2011, the Oregon state court in Oakmont I granted Oakmont's motion to file a third amended complaint. Treuer Decl. Ex. P. The third amended complaint alleges a single claim for fraudulent misrepresentation against various defendants, including BRE, based on conduct occurring before the 2003 sale of Berkshire to Oakmont. Treuer Decl. Ex. P. Among other things, the third amended complaint alleges that the limited information provided by BRE about the condition of Berkshire misled Oakmont regarding the true condition of the property. Treuer Decl. Ex. Q at ¶¶ 32–34, 40; Gibbs Decl. Ex. N at ¶¶ 32–34, 40. The complaint alleges that BRE falsely represented the true history and condition of the property. Id. ¶ 35. Oakmont alleged that “BRE intentionally or recklessly failed to provide to Oakmont the voluminous records which documented,” among other things, the physical condition of the property. Id. ¶ 38. Oakmont alleged that BRE provided only limited disclosures to Oakmont with the intent that Oakmont would rely on BRE's limited disclosures to purchase Berkshire. Id. ¶ 40. In reliance on BRE's representations, Oakmont alleges that it purchased the property. Id. ¶ 39. Oakmont alleges that in 2008, it discovered extensive construction defects and property damage at Berkshire. Id. ¶ 29. Oakmont alleges that as a direct result of BRE's misrepresentations and failures to disclose, Oakmont has been damaged in the amount of $8,509,680, which includes the cost of repairs to the property, the cost to move and store fixtures and furniture during the repairs, costs in prosecuting an earlier construction defect lawsuit against repair contractors, the decrease in value of the property, and the lost revenue and increased expenses. Id. ¶ 41. The third amended complaint is still pending.

Legal Standard

Summary judgment shall be granted if “the pleadings, discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. Pro. 56(c). Material facts are those which may affect the outcome of the case. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id. The court must view the facts in the light most favorable to the non-moving party and give it the benefit of all reasonable inferences to be drawn from those facts. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The court must not weigh the evidence or determinethe truth of the matter, but only determine whether there is a genuine issue for trial. Balint v. Carson City, 180 F.3d 1047, 1054 (9th Cir.1999).

A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion, and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Where the moving party will have the burden of proof at trial, it must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party. On an issue where the nonmoving party will bear the burden of proof at trial, the moving party can prevail merely by pointing out to the district court that there is an absence of evidence to support the nonmoving party's case. Id. If the moving party meets its initial burden, the opposing party “may not rely merely on allegations or denials in its own pleading;” rather, it must set forth “specific facts showing a genuine issue for trial.” SeeFed.R.Civ.P. 56(e)(2); Anderson, 477 U.S. at 250, 106 S.Ct. 2505. If the nonmoving party fails to show that there is a genuine issue for trial, “the moving party is entitled to judgment as a matter of law.” Celotex, 477 U.S. at 323, 106 S.Ct. 2548.

Discussion

Liability insurance imposes on the insurer the obligation both to indemnify the insured against third party claims covered by the policy...