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Hariderpal Ahluwalia Dba Walia's Country Market v. Allied Property and Casualty Insurance Company

July 5, 2012

HARIDERPAL AHLUWALIA DBA WALIA'S COUNTRY MARKET, PLAINTIFF,
v.
ALLIED PROPERTY AND CASUALTY INSURANCE COMPANY, ET AL. DEFENDANTS.



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

MEMORANDUM AND ORDER

Before the Court is Defendants Allied Property and Casualty Insurance Company's*fn1 and AMCO Insurance Company's ("AMCO") Motion for Summary Judgment or, in the Alternative, Motion for Summary Adjudication ("MSJ") (ECF No. 17.) For the reasons set forth below, the Motion is granted.

BACKGROUND*fn2

This action arises out of an insurance claim for property damage. Plaintiff Hariderpal Ahluwalia ("Plaintiff" or "Ahluwalia") owns and operates Walia's Country Market, a mini-mart and gas station, located in Redding, California. (Declaration of Tony Barlogio ("Decl. of Barlogio") ¶ 2.)*fn3

Plaintiff's business is insured under a Premier Business Owners policy of insurance issued by AMCO, policy number ACP BPR 7831726160, with the relevant policy period being December 16, 2007 to December 16, 2008. (Id., see also Exhibit "A" thereto (the Policy). The Policy generally provided coverage for damage to the insured building and Plaintiff's business personal property caused by a Covered Cause of Loss.*fn4 (Id. at ¶ 2.)

On January 15, 2008, Plaintiff reported a loss to AMCO. (Id. ¶ 3.) Specifically, Plaintiff sought insurance coverage for water damage to the underground fuel tanks and fuel pumps at the market. (Decl. of Barlogio, ¶ 3.)

Although the parties dispute the exact cause of the damage to the underground fuel tanks and fuel pumps, it is undisputed that the damage at issue was caused by water.*fn5

See e.g., Plaintiff's Opposition, ECF No. 24 at 12-16; June 11, 2009 from J. Pickering to T. Barlogio, ECF No. 25, Ex. 12 at 3 ("Both sides agree that water somehow protruded or penetrated into the wells.").*fn6

In February 2008, AMCO retained the services of engineer, Ali Moradi, who conducted an inspection of the property and prepared a report which concluded that run off from seasonal rains occurring in January 2008 had drained toward the underground tanks and penetrated the top portion of the tank system through the gap between the inner and outer layers of the tank system. (Id. at ¶¶ 3-4; see also id., Ex. B (February 28, 2008, Report of Ali Moradi ("Moradi Report") at 2-7.*fn7

On April 18, 2008, AMCO issued a written denial of Plaintiff's claim. (Decl. of Barlogio ¶ 5, see also Ex. C (April 18, 2008 letter from Barlogio to Ahluwalia (hereinafter "the Declination Letter" or "Decl. Ltr.").) In the Declination Letter, AMCO stated that it had completed its investigation and had determined that "the below-ground wells that house the fuel pump mechanisms were partially filled with water." (Decl. Ltr. at 15.)

In addition, the letter asserted that both Rick Cottrell had Ali Moradi had determined that water was the cause of the damage to the fuel pump mechanisms, and that a company named American Leak Detection had also inspected the damage and determined that there were no pressurized pipe breaks that might provide an alternative theory to the conclusion that ground surface water was the source of the penetration. (Id.)

The Declination Letter set forth certain selected language from the Policy, in particular, specific property coverage provisions and exclusions. (Id. at 15-19.) Among the exclusions listed were ones for damage caused by surface or ground water, as well as exclusions for defects and negligent work. (Id. at 17.) The letter concluded that Ahluwalia's claim fell within the ground water exclusion, or was otherwise excluded on the basis of improper construction (of the pump mechanisms). (Id. at 15.)

On June 19, 2009, Ahluwalia filed his complaint for breach of contract and declaratory relief in the Shasta County Superior Court. (See ECF No. 1, Ex. A. (the Complaint).) Other than stating that he is bringing a cause of action for breach of contract, Ahluwalia does not explain the basis for his lawsuit in the Complaint. On March 25, 2010, Defendants removed this case to this Court on the basis of diversity jurisdiction. (ECF No. 1 (Notice of Removal).) Plaintiff did not thereafter amend his Complaint, Defendants did not file a motion to dismiss, and the parties proceeded to discovery.

After litigation commenced, Defendants retained an expert, Jeremy Ward of SW Maintenance, who investigated Ahluwalia's claim and issued a report in which he determined that the damage to the underground fuel storage system was caused by (1) elevated water tables caused water to crest the top of and fill the underground storage tanks and pumps; and (2) the underground secondary containment piping (which was defectively designed) had sustained a breach allowing either ground water or sub-surface water to enter the piping system and fill the underground storage tanks and pumps.*fn8 (Id. at 6-7; see also Decl. of Jeremy Ward (Chief Executive Officer of SW Maintenance), ECF No. 17, Ex. 4.)

After the close of discovery, Defendants filed the instant Motion for Summary Judgment, contending that there were no material issues of fact in dispute and that Ahluwalia could not succeed, as a matter of law, on his contract claims.

STANDARD FOR MOTION FOR SUMMARY JUDGMENT

The Federal Rules of Civil Procedure provide for summary judgment when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). One of the principal purposes of Rule 56 is to dispose of factually unsupported claims or defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323-324 (1986). The standard that applies to a motion for summary adjudication is the same as that which applies to a motion for summary judgment. See Fed. R. Civ. P. 56(a), 56(c); Mora v. ChemTronics, 16 F. Supp. 2d. 1192, 1200 (S.D. Cal. 1998).

A party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact.

Celotex Corp. v. Catrett, 477 U.S. at 323(quoting Rule 56(c)).

If the moving party meets its initial responsibility, the burden then shifts to the opposing party to establish that a genuine issue as to any material fact actually does exist. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986); First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968).

In attempting to establish the existence of this factual dispute, the opposing party must tender evidence of specific facts in the form of affidavits, and/or admissible discovery material, in support of its contention that the dispute exists. Fed. R. Civ. P. 56(e). The opposing party must demonstrate that the fact in contention is material, i.e., a fact that might affect the outcome of the suit under the governing law, and that the dispute is genuine, i.e., the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 251-52 (1986); Owens v. Local No. 169, Assoc. of Western Pulp and Paper Workers, 971 F.2d 347, 355 (9th Cir. 1987). Stated another way, "before the evidence is left to the jury, there is a preliminary question for the judge, not whether there is literally no evidence, but whether there is any upon which a jury could properly proceed to find a verdict for the party producing it, upon whom the onus of proof is imposed." Anderson, 477 U.S. at 251 (quoting Schuylkill and Dauphin Improvement Co. v. Munson, 81 U.S. 442, 448 (1871)).

As the Supreme Court explained, "[w]hen the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts .... Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial.'" Matsushita, 475 U.S. at 586-87 (citation omitted).

In resolving a summary judgment motion, the evidence of the opposing party is to be believed, and all reasonable inferences that may be drawn from the facts placed before the court must be drawn in favor of the opposing party. Anderson, 477 U.S. at 255. Nevertheless, inferences are not drawn out of the air, and it is the opposing party's obligation to produce a factual predicate from which the inference may be drawn. Richards v. Nielsen Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985), aff'd, 810 F.2d 898 (9th Cir. 1987).

ANALYSIS

A. Parties' Contentions

In their Motion for Summary Judgment, Defendants contend that there are no material facts in dispute: specifically, they argue that there is no material dispute that water (either ground or surface) is the cause of the damage to the underground fuel tanks. (MSJ at 5-8.)

Defendants assert that Plaintiff's breach of contract claim fails as a matter of law because any theory Ahluwalia could possibly assert as the cause of damage is precluded by the exclusions set forth in the policy. (MSJ at 5-24.) Defendants note that the original basis for their denial has, as a product of the investigation spurred by this litigation, expanded. (See MSJ at 6.)

Defendants originally denied Plaintiff's claim on the basis that surface or ground water entered the underground fuel pumps and dispensers (see MSJ at 5; Decl. Ltr. at 15.) However, during the course of the litigation, Defendants retained SW Maintenance, which determined that the damage to the underground fuel storage system was caused by (1) elevated water tables caused water to crest the top of and fill the underground storage tanks and pumps; and (2)defectively designed piping had sustained a breach allowing either ground water or sub-surface water to enter the piping system and fill the underground storage tanks and pumps. (Id. at 6-7; see also Decl. of Jeremy Ward (Chief Executive Officer of SW Maintenance), ECF No. 17, Ex. 4.)

In response, Plaintiff contends that (1) there are significant factual issues in dispute; (2) there are significant policy interpretation issues in dispute, which require resolution of disputed fact issues; (3) the reports of Ali Moradi and Jeremy Ward, which are relied on by Defendants, are unreliable; and (4) any and all reasons given by Defendants for denying Plaintiff's claim that were not included in their original denial letter should not be considered and are disputed.*fn9 (Opposition at 10; Plaintiff's Objection to Evidence, Authorities and Arguments ("P-Obj."), ECF No. 25, Ex. 2.)

In his filings, Ahluwalia does not appear to offer any alternative theory as to the nature and cause of the damage. Rather, Plaintiff essentially contends that there are discrepancies and inaccuracies in Defendants' testimony, reports, and filings that ...


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