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Fireman's Fund Insurance Company v. Nationwide Mutual Fire Insurance Company

June 4, 2012


The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

Order Granting Rubio's Motion for Partial Summary Adjudication of Duty to Defend


Presently before the Court is the Motion for Partial Summary Judgment filed by Rubio's Restaurant regarding Nationwide's duty to defend*fn1 on an underlying state court matter. Following full briefing and oral argument, for the reasons set forth herein, the Court GRANTS Rubio's motion.

Factual Background

Rubio's is a restaurant headquartered in San Diego, California, with approximately 200 restaurants located in and around Southern California. [Declaration of Heidi Bastien ("Bastien Decl.") (Doc. 67-3), ¶ 3.] Alfa Seafood International, Inc. ("Alfa") is a Florida based seafood wholesaler with customers around the United States, including Rubio's. [Declaration of Santiago Alvarez ("Alvarez Decl.") (Doc. 72-2), ¶ 6.] Nationwide ("NW") issued a general liability policy of insurance ("Policy") to Alfa which was in effect from July 14, 2008 to July 14, 2009. [Alvarez Decl., ¶ 3; Declaration of Louis Randall Iten ("Iten Decl.") (Doc. 72-3), ¶ 4; Declaration of Dan Johnson ("Johnson Decl.") (Doc. 73-4), ¶ 2; Bastien Decl., Exhibit 2.]

As part of the business relationship between Alfa and Rubio's, Rubio's requested it be named an additional insured ("AI") under the Policy, and Alfa in fact requested that Nationwide add Rubio's as an AI. [Bastien Decl., Exhibits 1 and 2.] Rubio's also maintained general commercial and umbrella insurance policies. Fireman's Fund ("FF") issued to Rubio's a primary commercial general liability policy for the period July 21, 2008 to July 21, 2009 (the "Fireman's Fund Policy"). [Declaration of Heidi Bastien in Support of Insurer Plaintiffs' Motion for Summary Adjudication ("Bastien Insurer Decl.") (Doc. 47-4), ¶ 10; Declaration of Mark Peck ("Peck Decl.") (Doc. 49-4), ¶ 11; Insurer Plaintiffs' Exhibit 27 (Doc. 54-1).] National Union Fire Insurance Company ("NUFIC") issued to Rubio's a commercial umbrella liability policy for the same time period. [Bastien Decl., ¶ 30; Declaration of Sara Thorpe ("Thorpe Decl.") (Doc. 49-6), ¶ 1; Insurer Plaintiffs' Exhibit 30 (Doc. 60-2).]

On March 4, 2009, Timothy and Tracie Sayre filed suit against Rubio's in San Diego County Superior Court, alleging Mr. Sayre suffered personal injury as a result of eating a mahimahi taco from Rubio's on November 20, 2008.*fn2 [Rubio's Request for Judicial Notice ("Rubio's RJN") (Doc. 67-5), Exhibit 1.] On January 29, 2010, Rubio's filed a cross-complaint against Alfa for equitable indemnity, comparative contribution, declaratory relief, and breach of contract, seeking recovery from Alfa in the event the Sayres recovered any damages on their complaint. [Rubio's RJN, Exhibit 2.] On February 18, 2010, without adding any substantive allegations to its complaint, the Sayres filed a "Doe" amendment naming Alfa as a defendant. [Insurer Plaintiffs' Exhibit 5 (Doc. 47-10).] On May 24, 2010, Alfa filed a cross-complaint against Red Chambers, another supplier of fish to Rubio's, seeking indemnity, apportionment of fault, and declaratory relief. [Insurer Plaintiffs' Exhibit 25 (Doc. 47-19).] On January 13, 2011, Rubio's amended the cross-complaint against Alfa to allege with particularity that Alfa supplied the fish consumed by Timothy Sayre, and that Alfa breached its duty to indemnify Rubio's for injuries caused by its fish product. [Insurer Plaintiffs' Exhibit 24 (Doc. 47-18), ¶¶ 49-50.] The Superior Court on April 1, 2011 denied Rubio's and Alfa's motions for summary judgment on the Sayres' claims. [Rubio's RJN, Exhibit 5 (Doc. 67-5) (court's 4/1/11 memorandum).] The court found there was a triable issue of material fact regarding whether Rubio's served Mr. Sayre a defective mahi-mahi burrito, whether Rubio's was negligent in selecting its fish supplier, whether Mr. Sayre's neurological injuries were caused by fish poisoning, and whether the mahi-mahi Alfa sold to Rubio's was consumed by Mr. Sayre.

Rubio's first tendered this claim to Nationwide ("NW") on January 11, 2010 under the Policy. [Bastein Insurer Decl., ¶ 14; Johnson Decl., ¶ 4; Insurer Plaintiffs' Exhibit 4 (Doc. 47-9) (1/11/10 tender letter).] On January 15, 2010, NW acknowledged receipt of the claim and noted Rubio's had provided "very little in support of your demand that Nationwide assume your ... defense." [Insurer Plaintiffs' Exhibit 8 (Doc. 47-12) (NW letter dated 1/15/10).] NW's claim consultant in California, Dan Johnson, denied the tender on behalf of NW, because "[i]t remains unclear whether the bodily injury alleged by plaintiffs in this instance arises out of our named insured's product and/or whether any of the potentially applicable exclusions apply." [Id.; see also Johnson Decl., ¶ 5.] NW asked that Rubio's provide "all discovery to date" stating it would "then review the documentation and reconsider your request for defense and indemnification." [Id.]

On September 14, 2010, Rubio's responded to NW's request for information. [Insurer Plaintiffs' Exhibit 9 (Doc. 47-13) (9/14/10 letter from Rubio's counsel to NW).] Rubio's counsel stated there was ample evidence the fish consumed by Mr. Sayre came from Alfa:

[D]efense counsel for Alfa has received over two thousand pages of documents through written discovery and obtained deposition testimony spanning the course of six days ... from Rubio's mostly in an effort to determine the identity of the supplier of the fish Plaintiff consumed. The evidence amassed as a result of this painstakingly comprehensive discovery campaign initiated by Alfa's defense counsel has left no reasonable doubt that the fish consumed by Plaintiff was indeed supplied by Alfa. I have no doubt you have been competently informed of the recent developments in this regard by Alfa's counsel and will therefore forego attaching the various volumes of deposition transcripts and myriad documents pinpointing the subject fish as Alfa's.

[Id., p.2.] Rubio's counsel requested NW immediately undertake Rubio's defense and indemnify Rubio's in the Sayre action*fn3 . [Id., p.3.]

On October 28, 2010, NW responded, again denying the tender. [Insurer Plaintiffs' Exhibit 10 (Doc. 47-14) (10/28/10 letter from NW to Rubio's counsel).] NW stated:

It is our opinion that Rubio's has not yet met its burden of proof in establishing that the fish consumed by plaintiff was actually supplied by Alfa International. Alfa was not Rubio's exclusive supplier, and discovery has shown that the fish could have just as likely come from another source. It is Rubio's burden to prove that the subject claim is within the basic scope of coverage afforded by the Additional Insured - Vendor endorsement. Rubio's has not been able to meet that burden based in part on its poor record keeping.

Moreover, questions remain as to the cause of plaintiff's illness and whether or not it stems from consumption of the fish and, if so, whether the fish was contaminated after Rubio's had taken possession. Records produced to date reveal a series of Health Department violations related to improper temperatures and employees not following proper sanitation practices.

In conclusion, it is Nationwide's position that, based upon Rubio's inability to prove that the product at issue was in fact that of our Named Insured, Rubio's is not an additional insured under the Nationwide policy as concerns this litigation. [Id., pp. 1-2.] NW did not rely on any other policy exclusion to deny Rubio's tender. [Johnson Depo., pp. 69-70.]

Alfa also tendered the Sayre Lawsuit to NW, and NW agreed to defend Alfa on the Sayre action without reservation of rights. [Johnson Depo., pp. 26-27, 94.] Rubio's also tendered the claim to its primary carrier, Fireman's Fund ("FF"), and its umbrella carrier, National Union ("NUFIC"), both of which agreed to defend. [Bastien Insurer Decl., ¶¶ 11 and 13.]

The parties ultimately reached a confidential settlement in the Sayre action. Although NW paid monies in settlement of the Sayres' action against Alfa, it did not participate in the settlement discussion on behalf of Rubio's. [Johnson Depo., p. 153.]

Procedural History

Fireman's Fund initially filed suit against Nationwide on December 16, 2010, in San Diego County Superior Court, seeking declaratory relief and equitable contribution with regard to the Sayre action. [Doc. 1 (Notice of Removal), Exhibit A.] Nationwide answered the complaint and filed a cross-complaint against Fireman's Fund. [Doc. 1, Exhibits C and D.] Nationwide thereafter removed the case to this Court on January 20, 2011 pursuant to 28 U.S.C. §§ 1332 and 1441(b).

On April 11, 2011, National Union filed suit against Nationwide*fn4 and Fireman's Fund in this Court, seeking declaratory relief regarding Nationwide's duty to indemnify Rubio's as an additional insured on the Alfa primary and umbrella policies, and the priority in coverage of Rubio's Fireman's Fund policy. [Case No. 11cv755, Doc. 1.] On February 13, 2011, Rubio's also filed suit against Nationwide for breach of contract and breach of the implied covenant of good faith and fair dealing based upon NW's failure to defend and indemnify in the Sayre action. [Case No. 778, Doc. 1.] The three actions were consolidated by stipulation of the parties on September 6, 2011.

On October 24, 2011, the parties filed amended pleadings. Rubio's and Fireman's Fund each filed a First Amended Complaint against NW. [Docs. 28 and 30.] National Union also filed a First Amended Complaint against NW and Fireman's Fund. [Doc. 31.] Finally, NW filed a First Amended Counterclaim against Fireman's Fund. [Doc. 29.] These are the operative pleadings in the case.

Both Rubio's and the Insurer Plaintiffs moved for summary adjudication of NW's duty to defend Rubio's on the Sayre action, and duty to participate in the settlement on behalf of Rubio's. The day before these motions were scheduled to be heard, however, the Insurer Plaintiffs entered into a settlement with NW, and withdrew its motions. [Doc. No. 83.] ...

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