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Sell v. Nationwide Mutual Insurance Co.

November 16, 2010


The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge


Defendant National Mutual Insurance Company ("National") moves for summary judgment on Plaintiff Wanda A. Sell's ("Sell") breach of contract and breach of the implied covenant of good faith and fair dealing claims, and on Sell's request for punitive damages. These claims concern an insurance coverage dispute between Sell and National.

I. Legal Standard

A party seeking summary judgment bears the initial burden of demonstrating that there is no genuine issue as to any material fact concerning issues on which summary judgment is sought. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If this burden is satisfied, "the non-moving party must set forth, by affidavit or as otherwise provided in [Federal] Rule [of Civil Procedure] 56, specific facts showing that there is a genuine issue for trial." T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (quotations and citation omitted)(emphasis omitted). Defendant "must either produce evidence negating an essential element of the [plaintiff's claim] or show that the [plaintiff] does not have enough evidence of an essential element to carry [her] ultimate burden of persuasion at trial." Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1102 (9th Cir. 2000)(citations omitted). "Where disputed issues of material fact exist, we assume the version of the material facts asserted by the non-moving party. All reasonable inferences must be drawn in favor of the non-moving party." Bryan v. McPherson, 608 F.3d 614, 619 (9th Cir. 2010)(citations omitted).

Since jurisdiction over this action is based on diversity, "California law is the governing substantive law." See Burns v. Int'l Ins. Co., 929 F.2d 1422, 1424 (9th Cir. 1991) ("Where a federal court has jurisdiction by virtue of diversity of citizenship of the parties, the court must follow state law."). Under California law governing insurance coverage:

Determination of the duty to defend depends, in the first instance, on a comparison between the allegations of the [third-party] complaint and the terms of the policy. But the duty also exists where extrinsic facts known to the insurer suggest that the claim may be covered.

Scottsdale Ins. Co. v. MV Transp., 36 Cal. 4th 643, 654 (2005) (citation omitted). "Conversely, where the extrinsic facts eliminate the potential for coverage, the insurer may decline to defend even where the bare allegations in the complaint suggest potential liability." Food Pro Int'l Inc. v. Farmers Ins. Exch., 169 Cal. App. 4th 976, 986 (2008) (quotation and citations omitted). "Any doubt as to whether the facts give rise to a duty to defend is resolved in the insured's favor." Horace Mann Ins. Co. v. Barbara B., 4 Cal. 4th 1076, 1081 (1993) (emphasis added). Further, an insurer moving for summary judgment "'must establish the absence of any . . . potential' for coverage, i.e., that the underlying complaint 'can by no conceivable theory raise a single issue which could bring it within the policy coverage.'" Cunningham v. Univ. Underwriters, 98 Cal. App. 4th 1141, 1147 (2002) (citing Montrose Chem. Corp. v. Superior Court, 6 Cal. 4th 287, 300 (1993)) (emphasis in original).

II. Summary Judgment Factual Record

Sell "is a trustee and beneficiary under the Trust of Nancy A. Muhs ("Trust")." (Def.'s SUF ¶ 6.) The Trust corpus includes real property located at 13091 Willow Glen Road, Stockton, California (the "Property"). Id. ¶ 7. As a beneficiary, Sell was entitled to reside at the Property and to eventually own the Property free of the Trust if she complied with certain Trust terms. Id. Specifically, the Trust terms state before Sell could own the Property, Plaintiff had to "commence residing on the [Property] within ninety days of being offered possession," and to reside and maintain her principal residence at the Property for a "five year period . . . ." Id. The Trust also states: "[i]n the event that [Sell] fails to commence residing on the [Property] within ninety days of being offered possession, or vacates the residence prior to the expiration of the five year period, then and in either of such events, [Sell's] rights . . . shall cease and terminate . . . ." Id. A subsequent beneficiary would then have the right to reside at the Property and eventually take sole ownership upon meeting the same conditions. Id.

One of the subsequent beneficiaries listed in the trust named Rigoberto Ocegueda argues Sell has not satisfied the occupancy condition precedent. Ocegueda "filed a Petition for Order against [Sell] in San Joaquin County Superior Court" in March of 2007, in which he alleges: "(1) [Sell] had the right to possession and control of the Property since June 26, 2005," but never occupied the Property as her residence; (2) "on December 26, 2006, [Ocegueda], as a residual beneficiary under the Trust, demanded to be provided possession of the Property; (3) after [Ocegueda's] demand to occupy the premises, [Sell] responded that she was going to occupy the Property and not allow [Ocegueda] to reside on the Property; (4)[Ocegueda] sought an order that [Sell] provide him possession and control of the Property and allow him to occupy it, and for an accounting of rent proceeds from the property as to which he alleged he would be entitled, as the beneficiary entitled to occupy, possess and reside on the property." Id. ¶¶ 8,9; (Def.'s Req. for Judicial Notice in Supp. of its Mot. for Summ. J. ("Def.'s Judicial Notice") Ex. 6B.)

On March 16, 2007, Sell tendered defense of Ocegueda's Petition to National, which insured the Property under a Farmowner's Policy ("Policy"). (Def.'s SUF ¶¶ 1, 17.) The insurance coverage dispute concerns two provisions in the Policy. The first provision covers "personal and advertising injury." Id. ¶ 3. The policy definition of "personal and advertising injury" includes "[t]he wrongful eviction from, wrongful entry into, or invasion of the right of private occupation of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor; . . ." Id. The second provision concerns property damage caused by an "occurrence," which is defined in the policy as an "accident." Id.

"On April 11, 2007, [National] issued a written denial" of Sell's tendered claim. Id. ¶ 19. Sell requested reconsideration of the denial on April 17, 2007. Id. ¶ 20. National reasserted its denial of coverage on April 27, 2007. Id. ¶ 25.

III. Discussion

A. Breach of ...

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