Scottsdale Ins. Co. v. Darke

424 F.Supp.3d 638

SCOTTSDALE INSURANCE COMPANY, Plaintiff,

v.Chitra DARKE, et al., Defendants.

Case No. 19-cv-02225-YGR

United States District Court, N.D. California.

Signed November 22, 2019

Rebekah Rose Shapiro, Mark Eric Inbody, Selman Breitman LLP, San Francisco, CA, for Plaintiff.

Curtis Lloyd Metzgar, Wade & Lowe, Ontario, CA, for Defendants.

ORDER GRANTING SCOTTSDALE INSURANCE COMPANY'S MOTION FOR SUMMARY JUDGMENT

Re: Dkt. No. 43

Yvonne Gonzalez Rogers, United States District Court Judge

Now before the Court is plaintiff Scottsdale Insurance Company's ("Scottsdale") motion for summary judgment against defendant State Farm General Insurance Company ("State Farm")¹ regarding the former's duty to defend in an underlying landlord-tenant action. (Dkt. No. 43.) The Court heard oral argument on the motion on November 12, 2019.

Having considered the parties' written and oral arguments, and the admissible evidence submitted, and for the reasons set forth herein, the Court GRANTS Scottsdale's motion. Specifically, the Court finds that the undisputed material facts show that there is no potential for coverage under the insurance policies at issue for claims raised in the underlying litigation. Accordingly, Scottsdale does not have a duty to defend.

I. SUMMARY OF FACTS

A. The Underlying Action

The instant complaint stems from coverage disputes arising out of three related actions filed in the Superior Court for the State of California, County of Alameda, captioned Andrea Thomas-Paul, et al. v. Prakash Darke, et al. , Case No. RG18917468; Mohmmed Alqaisi v. Prakash Darke, et al. , Case No. RG18931635; and Sandra Hendrix v. Prakash Darke, et al. , Case No. RG18926859. Per the parties' stipulation, the motion at issue addresses Scottsdale's duty to defend only with respect to the first of the three, Thomas-Paul (the "Underlying Action").² The complaint in the Underlying Action, filed August 20, 2018, concerns a property located at 3610 Enos Avenue, #A, in Oakland, California. That complaint alleges, in relevant part, as follows:³

On or about February 1, 2014, Andrea Thomas-Paul rented a two-bedroom apartment unit in a multiple-unit building from Chitra and Prakash Darke. After Thomas-Paul moved into the apartment with her minor children, she discovered that, among other issues, the heater did not work, the property was infested with mice and rats, hot water was routinely unavailable for weeks at a time, the ceiling leaked water, and the security bars on the windows were unsafe or inoperable. Despite Thomas-Paul's repeated complaints, the Darkes failed to correct the defects.

Thomas-Paul complained to the city of Oakland. The city inspected the property and notified the Darkes, in writing, about the defective condition of the property, requesting that the Darkes correct the issues within a specified period. The Darkes failed to do so and continued demanding rent from Thomas-Paul. The city eventually "red tagged" the property "because [it] was not zoned for residential use" and required that Thomas-Paul and her children relocate "because the property was not zoned for residential use and or was not habitable." The city also notified the Darkes, again in writing, that the property was not zoned for residential use, requesting that the Darkes "make appropriate modifications to the property with appropriate building permits, within a reasonable amount of time." The Darkes failed to comply. Thomas-Paul and her children were forced to vacate the apartment on or about July 1, 2018 because of "[the Darke's] harassing and unlawful conduct ... and or because the city of Oakland red tagged the property because the property was defective and or not zoned for residential use."

Thomas-Paul claims that she was displaced from the property, denied exclusive use of the property, and denied quiet enjoyment of the property from approximately July 1, 2018 through the present. The complaint alleges fourteen causes of action for, among other things, negligence, nuisance, violation of state and local habitability and zoning laws, constructive eviction, breach of contract, breach of implied warranty of habitability, and breach of employed warranty of quiet enjoyment.⁴

B. The Policies

Scottsdale issued two successive commercial general liability policies to the Darkes, with effective policy periods of January 10, 2017 to January 10, 2018, and January 10, 2018 through January 10, 2019. (IE, Exs. 1, 2 (collectively, the "Policies").)⁵ The relevant coverage sections of the policies state as follows:

SECTION I—COVERAGES

COVERAGE A—BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any ‘suit’ seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. We may, at our discretion, investigate any ‘occurrence’ and settle any claim or ‘suit’ that may result....

* * *

b. This insurance applies to "bodily injury" and "property damage" only if:

(1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory";....

* * *

SECTION V—DEFINITIONS

* * *

13. "Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

* * *

17. "Property damage" means:

a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or

b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the "occurrence’ that caused it."

(IE, Ex. 1 at 59, 62, 64, 73; IE, Ex. 2 at 61, 64, 66, 75.)⁶

II. APPLICABLE STANDARDS

A. Summary Judgment

Scottsdale has filed a motion for summary judgment on the issue of whether it has a duty to defend the Darkes in the Thomas-Paul action. Summary judgment is appropriate where "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 material issue of fact is a question a trier of fact must answer to determine the rights of the parties under the applicable substantive law. 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." Id.

The moving party bears "the initial responsibility of informing the district court of the basis for its motion[.]" Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). To satisfy this burden, the moving party must demonstrate that no genuine issue of material fact exists for trial. Id. at 322, 106 S.Ct. 2548. To survive a motion for summary judgment, the non-moving party must then show that there are genuine factual issues that can only be resolved by the trier of fact. Reese v. Jefferson Sch. Dist. No. 14J , 208 F.3d 736, 738 (9th Cir. 2000). To do so, the non-moving party must present specific facts creating a genuine issue of material fact. Fed. R. Civ. P. 56(c) ; Celotex , 477 U.S. at 324, 106 S.Ct. 2548.

B. Duty to Defend

An "insurer has a duty to defend an insured if it becomes aware of, or if [a] third party lawsuit pleads, facts giving rise to the potential for coverage under the insuring agreement." Waller v. Truck Ins. Exch., Inc. , 11 Cal.4th 1, 19, 44 Cal.Rptr.2d 370, 900 P.2d 619 (1995), as modified on denial of reh'g (Oct. 26, 1995) (internal citations omitted). Under well-established California law, "the duty to defend is broader than the duty to indemnify." Montrose Chem. Corp. v. Superior Court , 6 Cal.4th 287, 299-300, 24 Cal.Rptr.2d 467, 861 P.2d 1153 (1993) ( Montrose I ); see also Hartford Cas. Ins. Co. v. Swift Distribution, Inc. , 59 Cal.4th 277, 287, 172 Cal.Rptr.3d 653, 326 P.3d 253 (2014) (duty to defend interpreted broadly). "If any facts stated in or fairly inferable from the complaint, or otherwise known or discovered by the insurer, suggest a claim potentially covered by the policy, the insurer's duty to defend arises." Albert v. Truck Ins. Exch. , 23 Cal.App.5th 367, 377-78, 232 Cal.Rptr.3d 774 (2018) quoting McMillin Management Services, L.P. v. Financial Pacific Ins. Co. , 17 Cal.App.5th 187, 191, 225 Cal.Rptr.3d 221 (2017).

"Any doubt as to whether the facts establish the existence of the defense duty must be resolved in the insured's favor." Montrose I , 59 Cal.4th at 287, 172 Cal.Rptr.3d 653, 326 P.3d 253 ; see also Hartford Casualty , 59 Cal.4th at 287, 172 Cal.Rptr.3d 653, 326 P.3d 253 (same). The insured need only show a mere possibility of coverage under the policy to establish a duty to defend, while an insurer is entitled to summary judgment only upon a showing that no potential for coverage exists under the policy as a matter of law. Regional Steel Corp. v. Liberty Surplus Ins. Corp. , 226 Cal.App.4th 1377, 1389, 173 Cal.Rptr.3d 91 (2014) ; see also County of San Diego v. Ace Property & Casualty Ins. Co. , 37 Ca1.4th 406, 414, 33 Cal.Rptr.3d 583, 118 P.3d 607 (2005) ; Montrose I, 6 Cal.4th at 300, 24 Cal.Rptr.2d 467, 861 P.2d 1153 ; Gray v. Zurich Ins. Co., 65 Cal.2d 263, 275, 54 Cal.Rptr. 104, 419 P.2d 168 (1966). In other words, if the third-party complaint could not raise a single issue that would bring it within the policy's coverage under any conceivable theory, the insurer need not defend. Gray , 65 Cal.2d at 276, n.15, 54 Cal.Rptr. 104, 419 P.2d 168 ; see also Hyundai Motor Am. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA , 600 F.3d 1092, 1097 (9th Cir. 2010) (obligation to defend excused only when the complaint does not raise, by any conceivable theory, a...