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Landmark Insurance Company v. Pacific Indemnity Company

July 12, 2012

LANDMARK INSURANCE COMPANY,
PLAINTIFF,
v.
PACIFIC INDEMNITY COMPANY; TRAVELERS INDEMNITY COMPANY; AND NORTHWESTERN NATIONAL INSURANCE COMPANY, DEFENDANTS.



The opinion of the court was delivered by: Honorable Larry Alan Burns United States District Judge

ORDER RE: SUMMARY JUDGMENT

In 2006, owners of bayfront property in Coronado sued the San Diego Unified Port District and the Army Corps of Engineers over the erosion of their property, which they alleged was caused or exacerbated by dredging activities in the San Diego Bay. (AOE 36.) Plaintiff Landmark Insurance Company paid for the Port District's defense. Now, Landmark seeks indemnification from Defendants who insured the Port District before it did. Landmark's theory of recovery, in essence, is that the erosion was caused by historical dredging activities that took place during the Defendants' policy periods. Now before the Court are cross-motions for summary judgment.

BACKGROUND

I. SLPR, LLC v. San Diego Unified Port District

The underlying case between the property owners and Port District has a long history. And that history is critically important here, because Defendants' duty to defend the Port District turns entirely on what it was sued for. See Horace Mann Ins. Co. v. Barbara B., 4 Cal.4th 1076, 1081 (1993) ("The determination whether the insurer owes a duty to defend usually is made in the first instance by comparing the allegations of the complaint with the terms of the policy."). The Court will therefore survey in substantial detail the nature and scope of SLPR's claims against the Port District - how those claims were pled, how SLPR argued them, and how they were ultimately resolved.

A. SLPR's Original Complaint in California Superior Court - January 2006

SLPR, LLC originally sued the Port District-and only the Port District-in January 2006, in California Superior Court. (AOE 36.) It alleged that the Port District knew as early as December 2000 that the shoreline of the San Diego Bay was eroding because of dredging and shipping activities, and also that a 2004--2005 dredging project caused further erosion and property damage. (Id. at 1036--37.) SLPR asserted two causes of action, one for inverse condemnation and another under California Civil Code § 832. With respect to the first, it alleged that "Defendant's dredging activity is the actual cause of the permanent and substantial damage to Plaintiff's property." (Id. at 1045.) With respect to the second, it alleged that Defendants "failed to use ordinary care and reasonable precautions during Defendant's dredging operation" and "denied Plaintiff its lawful right to take necessary measures to protect Plaintiff's property prior to the commencement of Defendant's dredging activities." (Id. at 1046.) In context, it's clear that the dredging activity being referred to is the 2004--2005 project. It is the only dredging activity specifically identified in the complaint. (Id. at 1037.)

B. SLPR's Amended Complaint in California Superior Court - May 2006

SLPR amended its complaint in May 2006, adding the Army Corps of Engineers as a defendant. (AOE 37.) This complaint identified an additional dredging project that took place in 1998 and 2002. (Id. at 1051.) The two causes of action remained the same, with perhaps the only difference being the implied attribution of erosion to the 1998 and 2002 dredging activity in addition tothe 2004-2005 dredging activity. (Id. at 1061--62.) With the Army Corps of Engineers added to the case, it was removed to this Court in June 2006. See 6-CV-1327-MMA-POR.

C. SLPR's Second Amended Complaint in Federal Court - December 2007

Once in federal court, and joined by other bayfront property owners, SLPR filed a second amended complaint in December 2007. (AOE 56.) This complaint also added the United States Navy as a defendant.

The second amended complaint, like the first amended complaint, specifically identified two dredging projects, one in 1998 and 2002 and another in 2004.

In order to facilitate the home-porting of additional nuclear aircraft carriers at NASNI, Defendants proposed, planned and implemented a dredging operation in the Turning Basin. Plaintiffs believe that the first dredging operation occurred in or about 1998, and a second dredging operation occurred in or about 2002 . . . .

Following the issuance of the December 7, 2000 Army Corps report, in order to improve the efficiency of commercial shipping operations in San Diego Bay, Defendants the Port and Army Corps also proposed and planned a dredging operation in the Channel. On or about October 25, 2004, the Defendants commenced dredging of the Channel. The dredging project ended in or about February 2005.

(Id. at 1681--82.) The inverse condemnation and § 832 claims remained, and the plaintiffs added a nuisance claim. (The claims against the Army Corps of Engineers and the Navy were brought under the Administrative Procedures Act.) Again, in context, it is abundantly clear that each of the claims against the Port District was based upon dredging activity beginning in 1998 and ending in 2005.

[Nuisance] The Defendant Port has authorized and implemented dredging operations by the Navy and Army Corps to allow for increased shipping traffic. These dredging operations have resulted in erosion and continuing damage to Plaintiffs' properties. Such erosion and damage to Plaintiffs' properties are obstructing Plaintiffs' free use of their properties and has interfered, and continues to interfere, with the comfortable enjoyment of their lives and properties. [§ 832] Defendants' dredging activities have deprived Plaintiffs' properties of such lateral support and as a result have damaged Plaintiffs' properties. [Inverse Condemnation] Dredging authorized by the Port and/or performed on behalf of the Port is the actual cause of permanent and substantial damages to Plaintiffs' properties.

(Id. at 1688--90.) In fact, SLPR's claims were based substantially on a December 2000 report by the Army Corps of Engineers "evaluating the impact of the dredging activities on the Coronado shoreline," and according to SLPR the report documented that "the 1998 and 2002 dredging activities resulted in the ongoing erosion of the Plaintiffs' properties." (Id. at 1681, 1691.)

D. SLPR's Parallel California Superior Court Case - March 2008

In March 2008 SLPR filed a second case in California Superior Court. (AOE 38.) This case re-asserted nuisance, § 832, and inverse condemnation claims against the State of California. It also added a quiet title claim against California and the Port District. As with the claims in its previous case, SLPR's claims in this case were clearly premised upon dredging activities that began in 1998. (Id. at 1072--74.)

E. Severance of SLPR's Federal Case - October 2009

In October 2009 SLPR's claims against the Port District were severed from the case and remanded to California Superior Court, while their claims against the Corps of Engineers and the Navy remained in this Court. (AOE 59.) To be clear, the claims against the Port District were essentially tort claims arising under California law, while the claims against the Corps of Engineers and the Navy were federal claims arising under the Administrative Procedures Act.

F. SLPR's Third Amended Complaint in Federal Court - April 2010

After SLPR's claims against the Port District were remanded to California Superior Court, it filed a third amended complaint against the Army Corps of Engineers and the Navy in this Court in April 2010, reasserting its claims under the Administrative Procedures Act. Although these claims aren't implicated in this case, it's worth noting that SLPR again attributed the property erosion at issue to dredging activities from 1998 to 2005. For example:

As documented by the December 2000 report prepared by the Army Corps, the 1998 and 2002 dredging activities resulted in the ongoing erosion of the Plaintiffs' properties, likely resulting in the total loss of use of their properties if corrective action is not performed . . . .

In or about the mid-1990s Defendant Army Corps issued a permit to the Navy to dredge the Turning Basin. In or about 2004-2005, Defendant Army Corps performed dredging of the Navigation Channel. These acts by the Army Corps were in an official capacity on behalf of the Army Corps.

As documented by the December 2000 report prepared by the Army Corps, these dredging activities resulted in the ongoing erosion of the Plaintiffs' properties, likely resulting in the total loss of use of their properties if corrective action is not performed. (6-CV-1327, Doc. No. 217 at 21, 23.)

G. SLPR's Summary Judgment Brief in California Superior Court -November 2010

The parties filed cross-motions for summary judgment in California Superior Court. SLPR's motion, filed in November 2010, confirms that SLPR was suing the Port District over dredging activities that began in 1998. SLPR opened its supporting brief with the proposition that dredging of the San Diego Bay dated back 150 years and had proven detrimental to its property. (AOE 43 at 1282.) But this is just historical background and has nothing to do with its claims. ...


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