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Sierra Pacific Industries v. American States Insurance Company

June 21, 2012


The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge


Plaintiff Sierra Pacific Industries, Inc. ("SPI") instituted the present action against American States Insurance Company ("American") to determine the rights and obligations attendant to a policy of liability insurance issued by American with respect to which Sierra claims coverage as a result of the so-called Moonlight Fire which ignited on September 3, 2009 in Plumas County, California. Through the present motion, SPI seeks to stay the very action it commenced on grounds that at least one trial in the numerous actions spawned by the fire is scheduled to start shortly.

SPI argues that having to defend that action, along with responding to discovery propounded in the present coverage case, would force it to fight a so-called "two front war" that would improperly deflect its resources from being squarely directed towards prevailing in the underlying case. SPI consequently seeks a six-month stay of the instant coverage lawsuit.

For the reasons set forth below, SPI's Motion to Stay will be denied.*fn1


As a result of the aforementioned September 2007 Moonlight Fire, a total of seven lawsuits were brought against SPI by various public and private entities, including both the United States and the State of California, for damages stemming from the fire. According to SPI, those seven suits seek some one billion dollars in total aggregate claims.

Prior to the fire, SPI entered into timber harvest contracts with multiple Plumas County landowners. Under the terms of those contracts, SPI agreed to defend, indemnify and hold harmless the landowners from and against any and all claims arising from the timber harvest operations on the landowners' property. SPI then subcontracted the actual harvest operations to Howell's Forest Harvesting ("Howell").

Pursuant to Howell's contract with SPI, Howell agreed to defend and indemnify SPI from all liability and damages arising from the timber harvest. Howell accordingly obtained a policy of commercial general liability insurance from American that named Plaintiff as an additional insured. Although that policy had aggregate limits of $1,000,000, it did not cover any liability and damages arising from SPI's own independent negligence in causing or contributing to the fire.

Several of the lawsuits filed following the fire, including the action filed by the United States, contend there was indeed independent negligence on the part of SPI. The United States, for example, alleges that SPI should have had an independent monitor on site to help guard against fire hazards, and in fact had a non-delegable duty to do so. The United States also asserts theories of negligent hiring and supervision against SPI.

SPI alleges that American failed to acknowledge Plaintiff's tender of defense with respect to the lawsuits, and also failed to acknowledge that tender before the date SPI's responsive pleadings were due in the lawsuit filed on behalf of the government. Because no defense counsel had been assigned by that time, SPI claims it was forced to hire its own counsel to appear and protect its interest by avoiding a default judgment.

While American did ultimately acknowledge SPI's tender of defense, SPI claims that it proposed transferring the defense of the lawsuit away from the counsel selected by SPI and to a panel defense firm with lower rates.

SPI alleges that the firm proposed by American lacked the needed experience in defending lawsuits of the type and magnitude being asserted against SPI in the wake of the fire. Given those concerns, SPI continued to have the counsel they retained, the Downey Brand firm in Sacramento, represent their interests. American has refused to pay Downey any more than the hourly rate of American's selected defense firm, leaving SPI to shoulder the difference. SPI filed this lawsuit in order to obtain a judicial determination that American should be required to indemnify it for those additional costs.

The United States' lawsuit against SPI is presently set to go to trial before another judge of this Court on July 2, 2012. No information has been provided to this Court as to when the remaining six lawsuits, which are pending in various state courts, are scheduled to be tried. At any rate, SPI argues that its counsel in the underlying case will be forced to become involved in the preparation of discovery responses coming due in the instant coverage action, and that accordingly this action should be stayed during the pendency of the underlying lawsuits. SPI's stay request is limited, however, inasmuch as it proposes that the present ...

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