The opinion of the court was delivered by: Frank C. Damrell, Jr. United States District Judge
Plaintiff Michael D. McGranahan ("McGranahan" or "plaintiff"), bankruptcy trustee for Jeff Stewart Drywall, Inc. ("JSD"), moves for partial summary judgment regarding the resolution of certain insurance coverage issues. Defendant The Insurance Corporation of New York ("INSCORP" or "defendant") moves for summary adjudication of its duty to indemnify JSD.*fn1
For the reasons set for below, plaintiff's motion is GRANTED and defendant's motion is DENIED.
In April 2006, plaintiff brought action against defendant for breach of the duty to defend, breach of the duty to indemnify, breach of the covenant of good faith and fair dealing, and declaratory relief. In January 2008, plaintiff moved for summary judgment on his claims for breach of the duty to defend and breach of the duty to indemnify. Defendant also moved for summary judgment, or in the alternative, for partial summary adjudication on all of plaintiff's claims. (Ct.'s Mem. & Order, filed Feb. 13, 2008).
The court granted plaintiff's motion for summary judgment on his claim for breach of the duty to defend. However, the court denied both parties' motions for summary judgment on plaintiff's claim for breach of the duty to indemnify because "triable issues of material fact exist[ed] regarding whether JSD acted with intent in installing drywall exposed to mold, and whether an exception covered all damages in the arbitration." (Id. at 20:18-22). Finally, regarding plaintiff's claim for breach of the covenant of good faith and fair dealing, the court denied defendant's motion for summary judgment, rejecting the argument that plaintiff's claim was barred by a two-year statute of limitations.*fn3
INSCORP issued a Commercial General Liability insurance policy ("CGL policy") to JSD effective from August 1, 2002 to August 1, 2003. (DUF ¶ 1). The policy coverage provides that INSCORP will "pay those sums that the insurance [sic] becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies." (Def.'s Ex. A, filed Sept 5, 2008). The policy applies to "property damage" only if: (1) the "property damage" is caused by an "occurrence" that takes place in the "coverage territory" and (2) the "property damage" occurs during the policy period. (Id.) "Property damage" is defined by the policy 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 shall be deemed to occur at the time of the "occurrence" that caused it. (Id.) "Occurrence" is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." (Id.) The CGL policy also provides that defendant will pay, with respect to any claim or suit it defends: "all costs taxed against the insured in the 'suit.'" (Id.) "Suit" is defined as "a civil proceeding in which damage because of bodily injury, property damage . . . to which this insurance applies are alleged. 'Suit' includes an arbitration proceeding in which such damages are claimed . . . ." (Id.)
On or about August 27, 2003, Dunmore initiated binding arbitration proceedings against JSD. (DUF ¶ 5). On January 19, 2004, JSD answered Dunmore's demand for arbitration, and also asserted a counterclaim based on Dunmore's refusal to pay JSD for work performed on other projects. (DUF ¶ 6). On April 14, 2004, the arbitrator issued the following damages for Dunmore: $242,893.77 for remediation; $69,325 for lot discounts and concessions; $38,365.91 for carrying costs; and $51,936.85 for attorneys' fees and costs. (DRUF ¶ 26). In sum, the arbitrator found JSD liable for damages totaling $402,521.53. (Id.) However, Dunmore's damages were offset by $218,847.38 awarded to JSD for contract amounts withheld by Dunmore including interest, resulting in a net award to Dunmore of $183,646.85. (Id.)
On or about July 27, 2004, the Sacramento County Superior Court confirmed the arbitration award and entered judgment in favor of Dunmore and against JSD for $183,646.85, plus costs of $1,762.50. (Pl.'s Ex. A, filed Aug. 29, 2008).
On May 31, 2005, Dunmore sued INSCORP pursuant to California Insurance Code § 11580(b) seeking payment of the judgment against JSD. (DUF ¶ 9). Dunmore did not seek any portion of the set-off awarded to JSD in the arbitration proceedings. (PRUF ¶ 24). Indeed, in opposition to plaintiff's motion to intervene in the lawsuit between Dunmore and INSCORP, Dunmore stated "[it] claims no rights to obtain the amount of setoff for payments previously withheld as determined in the arbitration. Those amounts may, if proven, belong to the estate." (PRUF ¶ 25). Dunmore's lawsuit against INSCORP was dismissed with prejudice on January 31, 2007 following a settlement between the parties whereby INSCORP satisfied the judgment rendered against JSD. (DUF ¶ 10).
In January 2008, plaintiff and defendant filed motions for summary judgment. The court denied both plaintiff's and defendant's motions for summary judgment on the claim for breach of the duty to indemnify, finding that triable issues of material fact existed. After engaging in two unsuccessful settlement conferences, plaintiff has now filed a motion for partial summary judgment and defendant has filed a motion for ...