Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Northrop Grumman Corporation v. Factory Mutual Insurance Company

September 28, 2011

NORTHROP GRUMMAN CORPORATION, PLAINTIFF,
v.
FACTORY MUTUAL INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Dean D. Pregerson United States District Judge

ORDER GRANTING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO NORTHROP GRUMMAN'S THIRD, FOURTH, FIFTH, SIXTH, SEVENTH, EIGHTH, AND NINTH CAUSES OF ACTION [Motion filed on April 29, 2011]

Presently before the court is Factory Mutual Insurance Company's ("Factory Mutual"'s) Motion for Partial Summary Judgment on Northrop Grumman Corporation's ("Northrop"'s) Third, Fourth, Fifth, Sixth, Seventh, Eighth, and Ninth Causes of Action. (Dkt. No. 289.) After reviewing the materials submitted by the parties, considering the arguments therein, and hearing oral argument, the court GRANTS Defendants' motion and adopts the following order.

I. Background

For the April 1, 2005, to April 1, 2006, policy year, Northrop purchased approximately $20 billion in all risk property insurance. During this period, Aon Risk Services, Inc. of Southern California Insurance Services ("Aon") represented Northrop in the insurance marketplace.

In preparation for the renewal of Northrop's insurance for the 2005-06 coverage year, Aon prepared a binder of materials entitled "Underwriting Detail" for consideration by Northrop and the other potential insurers. (Compl. ¶ 17.) The Underwriting Detail included a review of Northrop's objectives, probable loss scenarios, risk assessments by Factory Mutual, and location information. (Id.) The Underwriting Detail identified Northrop's "Renewal Objectives" as including protection against catastrophic earthquake, flood, and wind damage, and the Underwriting Detail defined "storm surge" as "[q]uickly rising ocean water levels associated with windstorms . . . ." (Compl. ¶ 17a-d.)

Ultimately, Northrop's 2005-2006 property insurance program consisted of two layers. The first layer provided for $500 million of primary coverage (the "Primary Layer"). The Primary Layer was comprised of approximately 30 policies. Factory Mutual issued one of the Primary Layer's policies (the "Factory Mutual Primary Policy" or "Primary Policy"). The second layer was the excess layer (the "Excess Policy"). The Excess Policy was one all risk policy sold to Northrop by Factory Mutual. The Excess Policy provided for approximately $20 billion worth of coverage for losses in excess of $500 million. The Excess Policy contained an exclusion for flood damage (the "Flood Exclusion").

In August 2005, Hurricane Katrina hit the Gulf Coast and caused significant damage to Northrop properties. Northrop estimates that it has sustained almost $940 million in property damage and other loss as a result of the Hurricane.

On November 4, 2005, Northrop filed suit against Factory Mutual in California state court, claiming coverage for "storm surge" damage under the Excess Policy. Factory Mutual removed the case to this court, and the parties filed cross-motions for summary judgment on whether the Excess Policy's Flood Exclusion barred coverage for storm surge damage from Hurricane Katrina. On August 16, 2007, this court entered partial summary judgment for Northrop, and on April 2, 2009, the Ninth Circuit reversed, holding that the Excess Policy's Flood Exclusion encompassed storm surge damage. See Northrop Grumman Corp. v. Factory Mut. Ins. Co., 563 F.3d 777, 788 (9th Cir. 2009). Specifically, the court concluded that "the plain language of the Flood Exclusion unambiguously bars coverage for the water damage [i.e. storm surge damage] to Northrop's shipyards." Id. at 784.

Presently before the court is Factory Mutual's Motion for Partial Summary Judgment as to Northrop's Third, Fourth, Fifth, Sixth, Seventh, Eighth, and Ninth Causes of Action. Northrop opposes the motion.

II. Legal Standard

Summary judgment and summary adjudication are appropriate where "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett , 477 U.S. 317, 324 (1986). In deciding a motion for summary judgment, the evidence is viewed in the light most favorable to the non-moving party, and all justifiable inferences are to be drawn in its favor. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 255 (1986).

A genuine issue exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party," and material facts are those "that might affect the outcome of the suit under the governing law." Id. at 248. No genuine issue of fact exists "[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

It is not enough for a party opposing summary judgment to "rest on mere allegations or denials of his pleadings." Anderson, 477 U.S. at 259. Instead, the nonmoving party must go beyond the pleadings to designate specific facts showing that there is a genuine issue for trial. Celotex, 477 U.S. at 325. The "mere existence of a scintilla of evidence" in support of the nonmoving party's claim is insufficient to defeat summary judgment. Anderson, 477 U.S. at 252.

III. Discussion

Factory Mutual moves this court for summary adjudication in its favor of Northrop's Third Cause of Action for tortious breach of the implied covenant of good faith and fair dealing; Fourth Cause of Action for fraud based upon an alleged promise made without intent to perform; Fifth Cause of Action for fraud based on misrepresentation; Sixth Cause of Action for fraud based upon concealment; Seventh Cause of Action for negligent misrepresentation; and Eight and Ninth Causes of Action for reformation based upon fraud and mistake. The court considers the causes of action in turn.

A. Tortious Breach of the Implied Covenant of Good Faith and Fair Dealing

Following Hurricane Katrina, Factory Mutual informed Northrop that the insurer was taking the position that the damage caused by the Hurricane was attributable to the two separate perils of flood and wind, and that flood damage, which is excluded under the Excess Policy, includes storm surge and flood-related time element loss. (Compl. ¶ 53.) Northrop contests Factory Mutual's interpretation of the Excess Policy. Northrop contends that all damage arising from a Named Windstorm is covered by the Excess Policy, including storm surge and flood-related time element loss. Accordingly, Northrop argues that Factory Mutual has withheld coverage benefits in bad faith, thereby committing the tort of breach of the implied covenant of good faith and fair dealing. (Compl. ¶ 71.) Northrop seeks to recover punitive damages.

In California, "[i]n addition to the right to sue an insurer in contract, if the insurer acts unreasonably and without proper cause in failing to investigate a claim, refusing to provide a defense, or either delaying or failing to pay benefits due under the policy, the insured can sue in tort for breach of the covenant of good faith and fair dealing." Richards v. Sequoia Ins. Co., 195 Cal. App. 4th 431, 438 (2011) (citing Emerald Bay Community Assn. v. Golden Eagle Ins. Corp., 130 Cal. App. 4th 1078, 1093 (2005)). To recover on Northrop's cause of action for breach of the implied covenant of good faith and fair dealing, Northrop must establish ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.