Travelers Prop. Cas. Co. of Am. v. Allwire, Inc.

508 F.Supp.3d 736

TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, Plaintiff,

v.ALLWIRE, INC., et al., Defendants.

Case No. CV 19-9693-DMG (Ex)

United States District Court, C.D. California.

Signed December 21, 2020

Aaron C. Agness, Wynn C. Kaneshiro, Weston and McElvain LLP, El Segundo, CA, for Plaintiff.

Darryl J. Horowitt, Lawrence E. Westerlund, Coleman and Horowitt LLP, Paul J. O'Rourke, Jr., Law Office of Paul J. O'Rourke Jr., Fresno, CA, for Defendant Allwire, Inc.

Stewart J. Powell, Talin V. Yacoubian, Yacoubian and Powell LLP, Los Angeles, CA, for Defendant Rising Edge Technologies California, LLC.

ORDER RE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

DOLLY M. GEE, UNITED STATES DISTRICT JUDGE

This matter is before the Court on the motion for summary judgment ("MSJ") by Plaintiff Travelers Property Casualty Company of America ("Travelers") on its declaratory relief claims against Defendants Allwire, Inc. ("Allwire") and Rising Edge Technologies (California), LLC ("Rising Edge"). [Doc. # 43.] Allwire filed an Opposition, which Rising Edge joined. [Doc. ## 46, 47.] Travelers filed a Reply. [Doc. # 49.] The Court held a hearing on the MSJ on December 18, 2020. For the reasons set forth below, the Court DENIES in part and GRANTS in part Travelers' partial MSJ.

I.FACTUAL AND PROCEDURAL BACKGROUND¹

This is an insurance coverage dispute concerning whether Travelers owes a duty to defend or indemnify Allwire in a lawsuit brought against it by Rising Edge in the Los Angeles County Superior Court, tiled Rising Edge Technologies (California), LLC v. Allwire, Inc. , Case No. 19NWCV00544 (the "Rising Edge Action").

A. The Policy

From December 31, 2017 to December 31, 2018, Allwire was insured by a commercial liability insurance policy (the "Policy") issued by Travelers. SUF 1. The Policy's insuring agreement provides:

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.

The Policy applies to bodily injury or property damage only "if it is caused by an ‘occurrence.’ " SUF 2. The Policy defines "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." SUF 5. It defines "property damage" as:

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.

SUF 4. The Policy also includes exclusions from coverage for property damage to "your product," for damages incurred for the "loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of" "your product," and for property "impaired" by "your product" that has not been physically injured. SUF 6-10.

During the same time period, Allwire was covered by a commercial excess liability policy (the "Umbrella Policy") issued by Travelers with substantially the same terms.

B. The Rising Edge Action and Allwire's Tenders

On October 31, 2018, Allwire tendered a claim to Travelers, seeking coverage under the Policy. SUF 24. The claim was brought by Rising Edge, a construction contractor, and related to electric cable that Allwire had manufactured and provided to Rising Edge for installation in Southern California Edison ("SCE") power substations. Upon investigating the claim, Travelers determined that Rising Edge was alleging that Allwire's cable was defective, in that the cable's insulation was shrinking such that its interior wires were becoming exposed. SUF 26-27. SCE contended that the cable was defective and needed to be removed, and Rising Edge sought reimbursement from Allwire to remove and replace the cable. SUF 28-29.

Concluding that Rising Edge's claim related only to damage to Allwire's own cables, and not to any damage caused to the SCE substations, Travelers declined to provide coverage. SUF 30-31. In a January 24, 2019 letter to Allwire, Travelers represented that Rising Edge had confirmed to Travelers that it was seeking reimbursement "solely due to the replacement of the defective cable, and not due to damage because of any accident, explosion, or energizing of the defective cable." SUF 32.

On July 3, 2019, Rising Edge filed suit against Allwire, alleging causes of action for: 1) Breach of Contract; 2) Breach of Covenant of Good Faith and Fair Dealing; 3) Breach of Implied Warranty; 4) Negligence; 5) Fraudulent Concealment; 6) Intentional Interference with Prospective Economic Advantage; 7) Negligent Interference With Prospective Economic Advantage; 8) Intentional Interference With Existing Contractual Relations; 9) Negligent Interference With Existing Contractual Relations; and 10) Unfair Competition Pursuant to Business and Professions Code § 17200. SUF 34. The initial Complaint alleged that Rising Edge had incurred "significant economic harm" due to Allwire's delivery of cable of which "1) The insulation was retracting; 2) There were insulation voids allowing moisture and oxidation; 3) Shield damage when bent around bends and into conduits," requiring Rising Edge to remove and replace the cable. SUF 36-43. Paragraph 20 of the original Complaint alleged that "[t]he additional work required to pull and replace all cable cost approximately $1.28 Million Dollars in replacement costs; $1.28 Million Dollars in service and testing costs, and delayed the project by nine months." SUF 44. Paragraph 29 also alleged that "[a]s a result of the above-described conduct, Plaintiff Rising Edge has suffered damages, including but not limited to, lost revenue, economic damages, as well as irreparable harm to its reputation and good will in its business community." SUF 45.

Allwire tendered the Rising Edge Complaint to Travelers, and again Travelers denied coverage. SUF 54-55.

On September 12, 2019, Rising Edge filed a First Amended Complaint ("FAC"). The FAC is identical to the original Complaint except in Paragraphs 20 and 29. The new Paragraph 20 reads:

As a result of the incorporation of and physical linkage of AllWire's potentially dangerous product into other tangible property and the structures at all four points, additional work was required to pull and replace all cable, including to prevent the potential dangers from materializing, at a cost of approximately $1.2 Million Dollars in replacement costs; $1.2 Million Dollars in service and testing costs. The projects were also delayed by nine months causing damages to Rising Edge.

SUF 45. The new Paragraph 29 states:

As a result of the above-described conduct, Plaintiff Rising Edge has suffered damages, including but not limited to, physical injury to tangible property, loss of use of tangible property, lost revenue, economic damages, as well as irreparable harm to its reputation and good will in its business community in excess of Fourteen Million $14,000,000 dollars. Plaintiff has lost and continues to lose business as a result of Defendant's conduct.

SUF 49. Allwire again tendered the FAC to Travelers shortly after it was filed. SUF 56. This time, Travelers agreed to provide a defense to Allwire for the Rising Edge Action, subject to a complete reservation of rights. SUF 57. To date, Travelers is continuing to defend Allwire, and has incurred $43,044.50 in costs for the defense. SUF 59-60.

On November 24, 2020, Rising Edge responded to Allwire's First Set of Special Interrogatories. Westerlund Decl. ¶ 2, Ex. A. In response to Special Interrogatory No. 2, requesting that Rising Edge "state the alleged potential dangers which allegedly existed ... as a result of the incorporation and linkage of Allwire's allegedly potentially dangerous product into other tangible property," Rising Edge stated: "Lack of insulation on the conductors was a serious concern as it could lead to Electrocution of personnel, and sparking or fire within the installation enclosures." Id. at 8.²

C. The Instant Action

On November 12, 2019, Travelers filed its Complaint in this action. [Doc. # 1.] Travelers seeks three claims for declaratory relief: 1) that it owes no duty to defend Allwire in the Rising Edge Action; 2) that it owes no duty to indemnify Allwire for any judgment or settlement Allwire may incur in the Rising Edge Action; and 3) that it is entitled to reimbursement for the amount paid to defend Allwire. Id. at ¶¶ 21-32. On April 7, 2020, the Court denied Allwire's Motion to Stay Proceedings. [Doc. # 40.] Travelers filed the instant MSJ on November 13, 2020.

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.

The moving party bears the initial burden of establishing the absence of a genuine dispute of material fact.

Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met its initial burden, Rule 56(c) requires the nonmoving party to "go beyond the pleadings and by [his or] her own affidavits, or by the ‘depositions, answers to interrogatories, and admissions on file,’ designate ‘specific facts showing that there is a genuine issue for trial.’ " Id. at 324, 106...