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Clarendon America Ins. Co. v. Steadfast Ins. Co.

January 29, 2010

CLARENDON AMERICA INS. CO., PLAINTIFF,
v.
STEADFAST INS. CO., DEFENDANT.



The opinion of the court was delivered by: Hayes, Judge

ORDER

The matter before the Court is Defendant's Ex Parte Motion to Continue Plaintiff's Motion for Summary Adjudication. (Doc. # 32).

BACKGROUND

This action concerns a dispute between two insurance companies about coverage of insureds. On August 6, 2008, Plaintiff initiated this action by filing its complaint. (Doc. # 1). The complaint alleges that both Plaintiff and Defendant issued commercial general liability policies to eight insured construction companies (the "Mutual Insureds"). Id. The complaint alleges that the Plaintiff's policies for the Mutual Insureds contains an "'other insurance clause' which calls for an equal or pro-rata share of the sums expended on behalf of an insured with other insurance." Id. at ¶ 32. The complaint alleges that Defendant's policies with the Mutual Insureds "contain a self insured retention endorsement" whereby Defendant's "duty to defend and/or indemnify the insured for a potentially covered claim is triggered when the self insured retention amount has been satisfied by payment of defense costs or settlement." Id. at ¶ 30. The complaint alleges that "[t]he terms of the endorsement [in Defendant's policies] do not limit the source of the self insured retention in any way and do not require that the self insured retention be paid only from the insured's own pocket." Id. The complaint alleges "that retention can be and has been satisfied by payments made by [Plaintiff] on behalf of the insured" because Defendant's "self insured retention endorsement does not have specific wording requiring that the payment must be personally satisfied by the insured." Id. at ¶ 31.

The complaint alleges that each of the Mutual Insureds has been named as a defendant or cross-defendant in multiple construction defect actions which allege, "among other things, the potential for an occurrence of property damage during the" Defendant's policy coverage periods. Id. at ¶ 33-34. The complaint alleges Plaintiff has indemnified the Mutual Insureds and has depleted the aggregate limits for the insureds. Id. at ¶ 35. The complaint alleges that Plaintiff's payment of defense and/or settlement costs has satisfied the self insured retention amount and has triggered a right of contribution by Defendant. Id. at ¶ 36. The complaint alleges Defendant has failed to meet this obligation despite Plaintiff's demands that it do so. Id. at ¶ 37. The complaint alleges Defendant has refused to pay on the grounds that the self insured retention must be payed by the Mutual Insureds themselves, and not by another insurance company. Id. at ¶ 38.

The complaint alleges causes of action for: (1) declaratory relief, (2) equitable indemnity, (3) equitable contribution, and (4) equitable subrogation. The Court dismissed the fourth cause of action on December 12, 2008. (Doc. # 14).

On September 18, 2009, Plaintiff filed a Motion for Summary Adjudication of Issues seeking a ruling from the Court determining the meaning of the self insured retention clause in Defendant's contracts with the Mutual Insureds. (Doc. # 29). On September 25, 2009, Defendant filed its Ex Parte Motion to Continue Plaintiff's Motion for Summary Adjudication. (Doc. # 32).

ANALYSIS

I. Contentions of the Parties

In its Motion for Summary Adjudication, Plaintiff contends that one of the types of Self Insured Retention forms, "SIR Endorsement Form A," does not require that the Mutual Insureds pay the amount of the SIR out of pocket before Defendant's duty to defend and indemnify is triggered. (Doc. # 29 at 2). Plaintiff seeks a ruling from the Court that SIR Endorsement Form A does not require the Mutual Insureds covered by this type of SIR policy to personally pay the SIR amount and that Plaintiff's payment pursuant to their contracts with the mutual insureds satisfies the SIR amounts. (Doc. # 29 -1 at 2). Plaintiff contends that California courts have held that "the policy must make clear . . . that the named insured alone, and not other insurers, must pay the stated amount of the SIR." Id. at 18 (citing The Vons Companies v. U.S. Fire Insurance Co., 78 Cal. App. 4th 52, 64 (2000)). Plaintiff contends that "if a policy's terms [are] ambiguous" as to whether an insured could use other insurance, California law allows other insurance coverage to fulfill a SIR requirement. Id. at 14. Plaintiff contends that the Mutual Insureds can satisfy the SIR obligation with money from Plaintiff, because the language of the SIR Endorsement Form A does not specifically state that other insurance cannot be used to fulfill the SIR obligation. (Doc. # 29-2 at 12).

Defendant's Ex Parte Motion to Continue Motion for Summary Adjudication contends that summary adjudication of the meaning of SIR Endorsement Form A is premature because the parties have not yet conducted discovery. (Doc. # 32). Defendant contends that discovery is necessary to uncover "course of performance" evidence which will be admissible to show the meaning of the form. (Doc. # 32-1 at 3). Defendant contends that Plaintiff's motion implicitly argues that the contract clauses at issue are ambiguous, which requires looking to extrinsic evidence to determine the parties' mutual understanding of the meaning of the clauses under California law. Id. at 6.

Plaintiff contends that it is not raising ambiguity, rather it is arguing "that the endorsement is silent on the subject." (Doc. # 35 at 5). Therefore, Plaintiff contends "the proposed discovery concerning course of performance is of no consequence with respect to the issues raised by [Plaintiff's] motion." Id. at 9. Plaintiff further contends that even if some discovery might be relevant, Defendant has failed to carry its burden to establish that "the facts it seeks to discover actually exist." Id.

II. Applicable Legal Standard

Pursuant to Federal Rule of Civil Procedure 56(f), "If a party opposing the motion shows by affidavit that, for specified reasons, it cannot present facts essential to justify its opposition, the court may: (1) deny the motion; (2) order a continuance to enable affidavits to be obtained, depositions to be taken, or other discovery to be undertaken; or (3) issue any other just order." Rule 56(f) "provides a device for litigants to avoid summary judgment when they have not had sufficient time to develop affirmative evidence." United States v. Kitsap Physicians Serv., 314 F.3d 995, 1000 (9th Cir. 2002). A Rule 56(f) "'continuance of a motion for summary judgment for purposes of conducting discovery should be granted almost as a matter of course unless the non-moving party has not diligently pursued discovery of evidence.'" Burlington N. Santa Fe R.R. Co. v. The Assiniboine and Souix Tribes of the Ft. Peck Reservation, 323 F.3d 767, 773-74 (9th Cir. 2003) (citing Wichita Falls Assoc. v. Banc One Corp. 978 F.2d 915, 919 n.4 (5th Cir. 1992)). "Where . . . no discovery whatsoever has taken place, the party making a Rule 56(f) motion cannot be expected to frame its motion with great specificity as to the kind of discovery likely to turn up useful information, as the ground for such specificity has not yet been laid." Id. at 774. "Although Rule 56(f) facially gives judges discretion to disallow discovery when the non-moving party cannot yet submit evidence supporting ...


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