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Peerless Insurance Co. v. St. Paul Surplus Lines Insurance Co.

June 15, 2010

PEERLESS INSURANCE COMPANY, PLAINTIFF,
v.
ST. PAUL SURPLUS LINES INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Honorable Janis L. Sammartino United States District Judge

ORDER: (1) GRANTING ST. PAUL SURPLUS LINES INSURANCE COMPANY'S MOTION FOR SUMMARY JUDGMENT; and (2) DENYING PEERLESS INSURANCE COMPANY'S MOTION FOR SUMMARY JUDGMENT (Doc. Nos. 18, 20)

Presently before the Court are two cross-motions for summary judgment or, in the alternative, partial summary judgment. Plaintiff and Counter-Defendant Peerless Insurance Company ("Peerless") filed its motion for summary judgment or partial summary judgment on January 19, 2010. (Doc. No. 18.) A day later, Defendant and Counter-Claimant St. Paul Surplus Lines Insurance Company ("St. Paul") filed a separate motion for summary judgment or partial summary judgment. (Doc. No. 20.) Also before the Court are both parties' oppositions and replies. For the reasons stated below, the Court HEREBY GRANTS St. Paul's motion for summary judgment in its entirety and DENIES Peerless' motion for summary judgment in its entirety.

BACKGROUND*fn1

This action is an insurance coverage dispute between Peerless and St. Paul arising from the underlying action entitled Rodriguez v. EMK Products, et al, in Monterey Superior Court (the "Rodriguez action"). On January 11, 2004, Mr. Rodriguez suffered an industrial accident while in the course and scope of his employment with Carvalho Fisheries ("Carvalho"). The accident ultimately resulted in the amputation of Mr. Rodriguez's left leg below the knee. Mr. Rodriguez filed a personal injury law suit against EMK Products ("EMK"). EMK was the owner of the property where Mr. Rodriguez was injured and had leased the property to Carvalho.

EMK had insurance coverage by both Peerless and St. Paul. EMK was St. Paul's named insured under a Commercial General Liability Policy ("CGL") for the February 11, 2003 to February 11, 2004 time period. (See Fitts Decl. ISO St. Paul MSJ, Ex. 1 ("St. Paul Policy").) Further, EMK was added by endorsement as an additional insured on a policy issued by Peerless to Carvalho, pursuant to the terms of the lease agreement between Carvalho and EMK. (See Halferty Decl. ISO Peerless MSJ, ¶ 2 & Ex. A ("Peerless Policy"); see also id., Ex. B ("Lease Agreement").) Both policies were in effect at the time of Mr. Rodriguez's injury.

The St. Paul Policy provides that the agreement covers "bodily injury and property damage liability that: happens while this agreement is in effect; and is caused by an event." (St. Paul Policy at 37-38.) The St. Paul Policy further provides that St. Paul will "have the right and duty to defend any protected person against a claim or suit for injury or damage covered by this agreement." (Id. at 40-41.) The St. Paul Policy, however, contains an "other insurance" provision, which reads in pertinent part:

This agreement is primary insurance. If there is any valid and collectible other insurance for injury or damage covered by this agreement, the following applies in connection with that other insurance:...

Primary or excess other insurance. When there is primary other insurance, we'll share with that other insurance any damages for injury or damage covered by this agreement. We'll do so with one of the methods of sharing described in the Methods of sharing section. However, we'll apply this agreement as excess insurance over the part or parts of any primary or excess other insurance that provide:

* property or similar coverage for property damage to your work;

* property or similar coverage for property damage to premises that you rent, lease, or borrow from others...

* aircraft, auto, or watercraft bodily injury or property damage coverage; or

* protection for you as an additional insured or additional protected person.

(Id. at 62 (emphasis added).) The St. Paul Policy goes on to assert that, when the policy is excess insurance, St. Paul "won't have a duty to defend the protected person..." except for in excess of the amount of damages that all other insurances would pay. (Id.).

The Peerless Policy contains two provisions at issue in this matter. First, the Peerless Policy contains a so-called "employee exclusion provision." The Peerless Policy provides that Peerless: will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damages" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages... (Peerless Policy at 75.) The Policy, however, further provides that the insurance does not apply to "Employer's Liability":

"Bodily injury" to (1) An "employee" of the insured arising out of an in the course of: (a) Employment by the insured; or (b) Performing duties related to the conduct of the insured's business......

This exclusion applies: (1) Whether the insured may be liable as an employer or in any other capacity; and (2) To any obligation to share damages with or repay someone else who must pay damages because of the injury. (Id. at 76.)

Second, the Peerless Policy contains an "other insurance" provision similar to the St. Paul Policy. The Peerless Policy provides, in pertinent part:

If other valid and collectible insurance is available to the insured for a loss we cover... our obligations are limited as follows:

a. Primary Insurance

This insurance is primary except when b. below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary. Then, we will share with all that other insurance by the method described in c. below.

b. Excess Insurance

This insurance is ...


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