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Osborne Development Corporation v. Firstspecialty Insurance Corporation; North American

May 11, 2011

OSBORNE DEVELOPMENT CORPORATION,
PLAINTIFF,
v.
FIRSTSPECIALTY INSURANCE CORPORATION; NORTH AMERICAN CAPACITY INSURANCE COMPANY; AND DOES 1-100, INCLUSIVE,
DEFENDANTS.



The opinion of the court was delivered by: Hon. Michael M. Anello United States District Judge

ORDER RE: DEFENDANT NORTH AMERICAN CAPACITY INSURANCE COMPANY'S MOTION FOR SUMMARY JUDGMENT; [Doc. No. 11] PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AGAINST DEFENDANT NORTH AMERICAN CAPACITY INSURANCE COMPANY; [Doc. No. 12] PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AGAINST DEFENDANT FIRST SPECIALTY INSURANCE CORPORATION;[Doc. No. 13] DEFENDANT FIRST SPECIALTY INSURANCE CORPORATION'S MOTION FOR SUMMARY JUDGMENT [Doc. No. 14]

Currently before the Court are four cross-motions for summary judgment, including: (1) Defendant North American Capacity Insurance Company's ("NAC") motion for summary judgment against Plaintiff Osborne Development Corporation ("Plaintiff" or "Osborne") [Doc. No. 11]*fn1 ; (2) Plaintiff's motion for summary judgment against Defendant NAC [Doc. No. 12]; (3) Plaintiff's motion for summary judgment against Defendant First Specialty Insurance Corporation ("FSIC") [Doc. No. 13]; and (4) Defendant FSIC's motion for summary judgment against Plaintiff [Doc. No. 14]. On January 14, 2011, the Court in its discretion found the motions suitable for determination on the papers and without oral argument, pursuant to Civil Local Rule 7.1(d)(1). For the reasons set forth below, the Court GRANTS Defendants NAC's and FSIC's motions for summary judgment, and DENIES Plaintiff Osborne's motions for summary judgment.

BACKGROUND

I. INSURANCE POLICIES

The following facts are not reasonably in dispute. Plaintiff Osborne developed and acted as the general contractor on a project known as "Park Hill," ("Project" or "Park Hill Project") located in Riverside County, California. [Doc. No. 1, Ex. A, ¶7.] In connection with the Park Hill Project, Osborne obtained insurance from Defendant NAC and later Defendant FSIC. Specifically, NAC issued Osborne four consecutive Commercial General Liability ("CGL") policies for the periods: July 30, 2001 to July 30, 2002; July 30, 2002 to July 30, 2003; July 30, 2003 to July 30, 2004; and July 30, 2004 to July 30, 2005. [Doc. No. 11-2, Nos. 1-4; see also Doc. No. 12-5, Exhs. A-D.] Thereafter, Defendant FSIC issued Osborne a CGL policy for the period from July 30, 2005 to July 30, 2006. [Doc. No. 14-2, No. 10; see also Doc. No. 12-5, Exh. E.]

The coverage dispute between Osborne and its insurers primarily focuses on the following standard provisions that appear in each policy. Sections I(1)(a) and (b) provide:

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. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. We may, at our discretion, investigate any "occurrence" and settle any claim or "suit" that may result. . .

This insurance applies to "bodily injury" and "property damage" only if: (1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory"; and (2) The "bodily injury" or "property damage" occurs during the policy period.

Sections V(13) and (17) of the policies define "occurrence" and "property damage," respectively, as follows:

"Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions. . . . "Property damage" means: (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. [See Doc. No. 12-5, Exhs. A-E.]

II. UNDERLYING STATE ACTION AGAINST INSURED

On December 28, 2007, Agri-Empire filed a complaint in state court against Osborne and other defendants not relevant to the present action, alleging seven claims for relief regarding Osborne's development and construction of the Park Hill Project, including: (1) Quiet Title; (2) Interference with Water Rights; (3) Trespass; (4) Nuisance; (5) Negligence; (6) Declaratory Relief; and (7) Injunctive Relief. [Doc. No. 12-5, Exh. F.] The scope of Agri-Empire's complaint is crucial to the action pending before this Court, specifically, whether Defendants NAC and FSIC have a duty to defend Osborne against Agri-Empire's claims. Accordingly, the Court sets forth a detailed summary of the relevant allegations in the underlying action below.

Agri-Empire asserts it "is the owner of an Easement and Water Rights on the property [] commonly known as 'Park Hill' as indicated on the Grant of Easement and Water Rights dated August 17, 2000 by San Jacinto Development, Inc. . . ." [Id. at Exh. F, ¶10.] Agri-Empire also asserts it is "the owner in fee and is in possession and control of the real property and improvements identified as Assessor's Parcel No. 438-530-020 (known as "Agri Well No. 3") as indicated on the Grant Deed signed on August 17, 2006 by Osborne Development Corporation and recorded on October 4, 2006 . . . ." [Id. at Exh. F, ¶11.] Copies of the grant deeds are attached to the complaint.

Agri-Empire alleges it "intends to use Agri Well No. 3 as a municipal water source in the future" as a source of income. [Id. at Exh. F, ¶12.] However, Osborne's development of the Park Hill Project has interfered with Agri-Empire's access to and ability to use Agri Well No. 3. Agri-Empire identifies six allegedly wrongful acts by Osborne, which Agri-Empire did not discover until approximately April 2007:

(1) Osborne tampered with Agri Well No. 3 by "removing approximately 8' to 10' of the dirt around the well, exposing a portion of the sanitary seal, thereby decreasing the depth of the annular seal from the ground service to approximately 40' to 42'."

(2) Osborne "created a vertical slope on Lot 48 located South of Agri Well No. 3 creating the potential for runoff to be directed to the well."

(3) "Osborne has caused to be constructed a block retaining wall located on Lot 48 to the South of the Agri Well No. 3 which will not allow for the creating of [the] base [required by the Department of Health] without removal of the wall and additional land from Lot 48."

(4) "Osborne has not provided to [Agri-Empire] enough property at Agri Well No. 3 to allow [Agri-Empire] proper access to the well for testing, maintenance, or usage."

(5) In developing Park Hill, Osborne "constructed a home near Agri Well No. 3 in which the home's sewer line was within 50' of Agri Well No. 3 in violation of State regulations and Health and Safety Code."

(6) Osborne "removed or caused to be removed a 4" access pipe that has cut off [AgriEmpire's] access to the Agri Well No. 3."

[Id. at Exh. F, ¶ ¶13-19.]

III. FEDERAL ACTION AGAINST ...


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