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Ruffin Road Venture Lot Iv, A Nevada Corporation v. Travelers Property Casualty Company of America

June 20, 2011


The opinion of the court was delivered by: Hon. Jeffrey T. Miller United States District Judge


Plaintiff Ruffin Road Venture Lot IV ("Ruffin Road") brought the above-entitled action against Defendant Travelers Property Casualty Company of America ("Travelers"), alleging causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing.*fn1 (Doc. No. 1, "Complaint.") Ruffin Road and Travelers now each move for summary judgment. (Doc. Nos. 26 & 33.)

Pursuant to CivLR 7.1(d)(1), the court has determined that this matter is appropriate for resolution without oral argument. For the reasons set forth below, the court GRANTS IN PART and DENIES IN PART both motions.


Ruffin Road is a Nevada corporation that owns a commercial office building (the "Building") located at 3635 Ruffin Road, San Diego, California 92121 (the "Property"). (Complaint ¶¶ 2 & 7.) On or around February 2, 2008, Ruffin Road purchased insurance policy number I-680-1639L744-TIL-08 from Travelers (the "Policy"), which provided coverage of risk of loss to the Property, including physical damage to the Building and any attached machinery and equipment as well as certain losses of business income. (Id. ¶ 7.)

On or around May 25, 2008, Ruffin Road discovered that a pipe running beneath the Property had burst. (Id. ¶ 8.) The pipe provided water to a closed air conditioning ("HVAC") system permanently attached to the Building. (Id.) As a result of the rupture, mud, rocks, and other debris were sucked into the pipe and circulated through the HVAC system, resulting in extensive damage. (Id.) Following the incident, Ruffin Road filed a claim with Travelers. (Id. ¶ 9.) Travelers issued a check to Ruffin Road in the amount of $19,054.45 to cover the cost of excavating and repairing the broken water pipe. (Id. ¶ 10.) However, Travelers subsequently refused to pay the balance of Ruffin Road's claim, including the cost of repairing the HVAC system itself; the cleaning expenses for the interior of the Building, which was damaged in the process of excavating the broken pipe; and the business income Ruffin Road claims it lost as a result of the incident. (Id. ¶ 11.)

Ruffin Road brought the instant action to recover the unpaid amounts allegedly owed it under the Policy, as well as for attorneys' fees and punitive damages based on its claim that Travelers acted in bad faith in refusing payment. Federal jurisdiction is based on the diversity of the parties pursuant to 28 U.S.C. § 1332(a)(1).*fn2 Ruffin Road now moves for partial summary judgment on the issue of liability as to both its claims against Travelers. (Doc. No. 26.) Travelers in turn has moved for summary judgment as to the entirety of the action. (Doc. No. 33.) Both motions are opposed. (Doc. Nos. 44 & 47.)


A motion for summary judgment shall be granted where "there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c); Prison Legal News v. Lehman, 397 F.3d 692, 698 (9th Cir. 2005). The moving party bears the initial burden of informing the court of the basis for its motion and identifying those portions of the file that it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). There is "no express or implied requirement in Rule 56 that the moving party support its motion with affidavits or other similar materials negating the opponent's claim." Id. (emphasis in original). The opposing party cannot rest on the mere allegations or denials of a pleading, but must "go beyond the pleadings and by [the party's] own affidavits, or by the 'depositions, answers to interrogatories, and admissions on file' designate 'specific facts showing that there is a genuine issue for trial.'" Id. at 324 (citation omitted). The opposing party also may not rely solely on conclusory allegations unsupported by factual data. Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989).

The court must examine the evidence in the light most favorable to the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962). Any doubt as to the existence of any issue of material fact requires denial of the motion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). On a motion for summary judgment, when "'the moving party bears the burden of proof at trial, it must come forward with evidence which would entitle it to a directed verdict if the evidence were uncontroverted at trial.'" Houghton v. South, 965 F.2d 1532, 1536 (9th Cir. 1992) (emphasis in original) (quoting Int'l Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1264-65 (5th Cir. 1991), cert. denied, 502 U.S. 1059 (1992)).

Where the dispute centers on the existence of coverage under an insurance policy, interpretation of that policy "is a question of law and follows the general rules of contract interpretation." MacKinnon v. Truck Ins. Exchange, 31 Cal. 4th 635, 647 (2003). This means that the court "must give effect to the 'mutual intention' of the parties," which should be "inferred, if possible, solely from the written provisions of the contract." Id. These provisions should be given their "'clear and explicit' meaning" and interpreted "in their 'ordinary and popular sense,' unless 'used by the parties in a technical sense or a special meaning is given to them by usage.'" Id. at 647-48 (quoting CAL. CIV. PRO. CODE § 1644). However, if the provision is capable of more than one reasonable construction, it will be considered ambiguous. Id. at 648. Ambiguous language must be "interpreted broadly so as to afford the greatest possible protection to the insured." Id.(quoting White v. Western Title Ins. Co., 40 Cal. 3d 870, 881 (1985)).


A. Ability to Sue

At the outset, Travelers has raised the threshold question of whether Ruffin Road has the capacity to bring the instant action. Specifically, Travelers argues that Ruffin Road is unable to pursue litigation in California based on its status as a forfeited corporation. (Doc. No. 33-1 pp. 6-7.) In addition, Travelers asserts that the Policy is itself voidable because Ruffin Road was a forfeited corporation at the time it entered into the contract. (Id. at pp. 8-9.) Both these issues have been addressed in a previous order. (Doc. No. 57.) Because Ruffin Road has both revived its previously forfeited corporate status and obtained retroactive relief from contract voidability from the California Franchise Tax Board, any barriers to its ability to bring suit against Travelers based on the Policy have been resolved. (See Doc. Nos. 56 & 60.) Therefore, Travelers' motion for summary judgment on these grounds is DENIED.

B. Breach of Contract

Each party has moved for summary judgment on Ruffin Road's breach of contract claim, which turns on the issue of whether the damages and losses claimed by Ruffin Road are covered under the Policy. Specifically, Ruffin Road asserts three categories of expenses for which it claims it is entitled to reimbursement from Travelers: (1) the cost of repairing the damage to the Building caused in the process of excavating and repairing the broken pipe; (2) the cost of removing the contaminants from the HVAC system; and (3) lost rental income from prospective tenants due to the Building's lack of a functioning HVAC system. Travelers contests liability for each of these claimed expenses.

1) Damage to Building

According to Ruffin Road, a significant amount of damage was done to the drywall, floor coverings, paint, and carpet inside the Building during the process of excavating and repairing the broken pipe. (Complaint ¶ 21.) Although Travelers did cover most of the cost of the excavation and repair itself, it refused to pay for the necessary repairs to the interior of the Building. (Id. ¶ 11.)

Ruffin Road contends that the cost of repairing this damage clearly qualifies as part of the "Additional Coverages" provided by the Policy, specifically under the provision for "Water Damage, Other Liquids, Powder or Molten Material Damage." ...

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