Global Hawk Ins. Co. v. WESCO Ins. Co.

424 F.Supp.3d 848

GLOBAL HAWK INSURANCE COMPANY (RRG), Plaintiff,

v.WESCO INSURANCE COMPANY, Defendant.

Case No. CV 18-6805-DMG (MRWx)

United States District Court, C.D. California.

Signed December 9, 2019

Jeffrey S. Bolender, Daniel Y. An, Bolender Law Firm PC, Torrance, CA, for Plaintiff.

Jordon Edward Harriman, Lane J. Ashley, Lewis Brisbois Bisgaard and Smith LLP, Los Angeles, CA, for Defendant.

ORDER RE CROSS-MOTIONS FOR SUMMARY JUDGMENT [60, 62]

DOLLY M. GEE, UNITED STATES DISTRICT JUDGE

This matter is before the Court on the Cross-Motions for Summary Judgment ("MSJs") filed by Plaintiff Global Hawk Insurance Company and Defendant Wesco Insurance Company. [Doc. ## 60 ("Pl.'s MSJ"), 62 ("Def.'s MSJ and Opp").] The MSJs are fully briefed. [Doc. ## 63 ("Pl.'s Opp. and Reply"), 64 ("Def.'s Reply").] For the following reasons, the Court GRANTS Wesco's MSJ and DENIES Global Hawk's MSJ.

I.FACTUAL AND PROCEDURAL BACKGROUND

The Court set out this action's general factual background in its Order Denying Wesco's Motion for Summary Judgment. [Doc. # 39 ("MSJ 1 Order").] Because the previous round of MSJ briefing dealt primarily with choice of law issues, and the instant MSJs pertain to Global Hawk's claims' merits, it is necessary to repeat some of that background to provide a complete factual timeline.

After Marco Martinez, a truck driver employed by O&G Logistics, was involved in a car crash that killed two people in Texas, the decedents' heirs filed suit in 2014 against Martinez and O&G in Texas (the "Smith Lawsuit"). MSJ 1 Order at 2.¹ Wesco, O&G's insurer, hired Wade Quinn to defend O&G and Martinez shortly before the Smith Lawsuit was filed. Stipulated Fact ("SF") 11 [Doc. # 60-8].

The Smith plaintiffs sent a letter to Quinn on May 13, 2015 offering to settle the action and release their claims against O&G and Martinez in exchange for the $1 million policy limits of Wesco's insurance policy with O&G (the "Wesco Policy"). MSJ 1 Order at 2-3.² Wesco accepted that offer on behalf of both O&G and Martinez on May 27, 2015. Id. at 3. The Smith Plaintiffs then sent another letter to Quinn on July 9, 2015 demanding the $1 million limits of a liability policy issued by Global Hawk (the "Global Hawk Policy") to K&K Transportation, Inc., the owner of the truck that Martinez was driving, in exchange for a release of their claims against Martinez and K&K.³ SF 23. On October 12, 2015, the Smith Plaintiffs sent a third letter to Quinn purporting to adjust their May 13 demand such that Wesco's $1 million policy-limits payment would release only O&G, and not Martinez. SF 37-38. The Smith Plaintiffs claimed that they needed to "revise" their initial demand because they had only recently discovered the "previously unknown" Global Hawk Policy. MSJ 1 Order at 3.

Wesco then consulted with Quinn and other counsel to determine whether the Wesco Policy's terms and governing law allowed them (or required them) to settle without obtaining a release of the Smith plaintiffs' claims against Martinez. SF 39-49. Wesco eventually determined that it could enter into such a settlement under Texas law and executed an agreement with the Smith Plaintiffs in December 2015 whereby Wesco gave them $1 million and the Smith Plaintiffs released their claims against O&G, but not against Martinez or K&K Transportation. SF 57.

The parties agree that "Wesco defended O&G and Martinez" in the Smith Lawsuit until the date of that settlement. SF 59. After "paying its policy limits" per the settlement's terms on December 2, 2015, "Wesco withdrew from all further defense of Martinez in the Smith [L]awsuit." SF 60.

On December 22, 2015, counsel for Global Hawk contacted Quinn and represented that Global Hawk's "analysis is that [the Global Hawk Policy] does not apply" to the Smith Plaintiffs' claims, but that, nonetheless, "Global Hawk will pick up the defense of the O&G driver, Mr. Martinez." SF 61-62.

On December 23, 2015, Global Hawk filed a "complaint for rescission and declaratory relief" in Los Angeles County Superior Court against Martinez, K&K, and others (the "Reimbursement Action"). SF 73.

Quinn and his firm continued to represent Martinez and bill Wesco for their services until "late January 2016," WUF 131, at which point Global Hawk, on behalf of Martinez and K&K, reached an agreement with the Smith Plaintiffs whereby it would pay them the Global Hawk Policy's $1 million limits in exchange for a release of their claims against Martinez and K&K. SF 63-64. Global Hawk and the Smith Plaintiffs memorialized that agreement in writing on March 15, 2016, SF 65-66, and Global Hawk issued payment on March 30, 2016. SF 67.

On April 1, 2016, Global Hawk's counsel sent Martinez a letter stating:

Global Hawk reserves the right to seek an allocation and reimbursement of defense costs paid (if any) to defend the subject suit should it be established that the suit never presented a potential for covered liability ... Global Hawk reserves the right to seek reimbursement and/or allocation from any other insurers that have a duty to defend and/or indemnify the insureds.... Global Hawk hereby provides you with notice under Blue Ridge Ins. Co. v. Jacobsen , 25 Cal. 4th 489, 506, 106 Cal.Rptr.2d 535, 22 P.3d 313 [ (2001) ] that (1) it is informing you of its reservation of rights under the policy; (2) it intends to make a potentially non-covered payment in settlement of the Smith action in the amount of $1 million; and (3) it expressly offers you the ability to assume your own defense of the Smith action if you object to this payment. Global Hawk further notifies you that if you accept the settlement, Global Hawk is entitled and intends to seek full reimbursement of the non-covered settlement amounts paid under Blue Ridge.

SF 69-70.

Global Hawk then amended its complaint in the Reimbursement Action to include a cause of action for reimbursement on April 5, 2016. SF 73. Global Hawk served Martinez with the amended complaint on April 17, 2016, but he did not timely answer or otherwise respond. Hobbs Decl. [Doc. # 60-1] at ¶¶ 3-4. Global Hawk requested that the Superior Court enter Martinez's default on August 4, 2016, WUF 112, and the court entered a default judgment against Martinez on October 4, 2016. SF 73. The judgment included a judicial declaration that Global Hawk has no duty under the Global Hawk Policy to defend or indemnify Martinez in the Smith Lawsuit and ordered Martinez to reimburse Global Hawk in the amount of $1,000,933.60. SF 73.

Global Hawk and Martinez then entered into an "Assignment and Covenant Not to Execute" whereby Global Hawk agreed "not to execute its judgment against Martinez" and Martinez assigned "all of his rights, claims, and causes of action against Wesco ... arising out of any applicable insurance policies, the SUBJECT ACCIDENT, the UNDERLYING ACTION, and the DEFAULT JUDGMENT." Assignment and Covenant Not to Execute, Plaintiff's Appendix, Ex. 23 [Doc. # 62-4]; SF 76. The parties finally executed that agreement on October 17, 2016. WUF 16.

Wesco and Global Hawk agree that Martinez did not pay "any portion of the defense fees and costs [that] Wade Quinn's firm generated in defending the Smith [L]awsuit on behalf of Martinez." SF 91. They also agree that Martinez "did not pay any portion of the defense fees and costs [that] Global Hawk incurred in defending Martinez in the Smith [L]awsuit." SF 94. And they agree that Martinez paid no portion of Wesco's settlement on behalf of O&G or Global Hawk's settlement on behalf of K&K and Martinez. SF 91, 94. Indeed, there is no evidence in the record that Martinez has paid any money out of pocket as a result of the car crash in Texas, the Smith Lawsuit, or the resulting insurance disputes.

Global Hawk filed the instant action in Los Angeles County Superior Court on June 29, 2018. [Doc. # 1-2 ("Compl.").] The Complaint seeks to vindicate Martinez's rights against Wesco—it alleges claims for breach of contract and breach of the implied covenant of good faith and fair dealing based on Wesco's conduct with respect to Martinez. Global Hawk does not assert that Wesco violated any of its own rights or pursue any claims based on Wesco's conduct with respect to Global Hawk. See Compl.

Wesco removed the action to this Court on August 8, 2018 [Doc. # 1], and the parties filed no merits motions until Wesco's June 21, 2019 MSJ. That MSJ concerned Wesco's argument that Texas law operated to absolve it of any liability for its decision to deny coverage to Martinez. See MSJ 1 Order. The Court denied that MSJ and determined that California law governs the parties' dispute, but did not decide whether Global Hawk's claims for breach of contract and breach of the implied covenant of good faith and fair dealing can succeed as a matter of California law. See id. at 8-19. The instant MSJs address that question.

II. LEGAL STANDARD

Summary judgment should be granted "if 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) ; accord Wash. Mut. Inc. v. United States , 636 F.3d 1207, 1216 (9th Cir. 2011). Material facts are those that may affect the outcome of the case. Nat'l Ass'n of Optometrists & Opticians v. Harris , 682 F.3d 1144, 1147 (9th Cir. 2012) (citing Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). A dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Liberty Lobby , 477 U.S. at 248, 106 S.Ct. 2505.

Where the issues before the Court are questions of law, the case is particularly "well suited" for summary judgment. Del Real, LLC v. Harris , 966 F. Supp. 2d 1047, 1051 (E.D. Cal. 2013) ; see also Asuncion v. Dist. Dir. Of U.S. Immigration & Naturalization Serv. , 427 F.2d 523, 524 (9th Cir. 1970) (district court properly resolved motion for summary judgment where issues presented were comprised solely of questions of law).

III.DISCUS...