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El Gallo Giro Corp v. Houston Casualty Co.

November 15, 2012


The opinion of the court was delivered by: Otis D. Wright, II United States District Judge



This case concerns a checkbox. Yet in an insurance application, a checkbox may be crucial in determining whether an insured is either entitled to a defense from its insurer or is out of luck because it did not disclose seemingly superfluous information.

The parties here bring two motions before the Court: the first motion is Defendants Houston Casualty Co. and Professional Indemnity Agency, Inc.'s ("PIA") Motion to Dismiss, which the Court converted to a motion for summary judgment; the second is Plaintiff El Gallo Giro Corp.'s Motion for Partial Summary Judgment on the Duty to Defend.*fn1 (ECF Nos. 14, 15, 34.) For the reasons explained below, the Court GRANTS Houston Casualty and PIA's Motion and DENIES El Gallo Giro's Motion.


El Gallo Giro is a California corporation that operates ten restaurants in Los Angeles County. (Mot. Partial Summ. J. 2.) Houston Casualty is a foreign insurance company that issued the insurance policy at the heart of this lawsuit. (FAC ¶ 2.) Professional Indemnity Agency is a Texas corporation and the Director of Claims that processes insurance claims for Houston Casualty. (Id. ¶ 3.)

El Gallo Giro submitted an application dated February 3, 2011, for an Employment Practices Liability Insurance policy to Houston Casualty. (Id. Ex. A 28-- 34.) After receiving the application, Houston Casualty issued a policy to El Gallo Giro. (FAC¶ 6.) The policy covered El Gallo Giro from March 28, 2011, to March 28, 2012. (Id.) The policy requires Houston Casualty to defend El Gallo Giro against any claim asserted against it and reported during the policy period that raises the possibility of coverage. (Id. ¶ 7.) A claim is defined under the policy as a written demand received by the insured alleging damages or the filing of a suit. (Id.) The policy also requires Houston Casualty to indemnify El Gallo Giro from any damages arising from a claim, subject to a $25,000 retention for each claim, up to a $1,000,000 limit of liability. (Id. ¶ 8.)

In February 2011, after El Gallo Giro submitted its insurance application, El Gallo Giro's human resources manager and chief financial officer received notice of an internal oral harassment complaint from employee Lisandra Valverde. (Mot. Partial Summ. J. 4.) Valverde alleged that her supervisor, Raul Sanchez, sexually harassed her. (Opp'n Partial Summ. J. 3.) El Gallo Giro conducted an internal investigation of these allegations through MBA Associates, its third party human resources administrator, but could not verify Valverde's claims. (Mot. Partial Summ. J. 4.) When MBA Associates interviewed Valverde during this investigation, El Gallo Giro's human resources manager was present to hear the nature of Valverde's allegations. (Sarris Decl. Ex. E ¶ 8.)

On April 27, 2011, El Gallo Giro received a written demand from Valverde that alleged damages resulting from workplace sexual harassment, battery, and retaliation. (FAC¶ 10.) This was the first time the corporation had received a written demand for damages concerning the Valverde claim. (Id.) El Gallo Giro timely submitted the claim to Houston Casualty; but Houston Casualty, "by and through" PIA, denied coverage under the policy. (Id. ¶ 12.)

On June 21, 2011, Valverde filed suit against El Gallo Giro in Los Angeles County Superior Court. (Id. ¶ 13.) The Valverde suit included not only the allegations in her written demand, but also additional causes of action for termination and retaliation resulting from El Gallo Giro's alleged wrongful conduct in June 2011. (Id.) El Gallo Giro also timely tendered the Valverde suit to Houston Casualty, including Valverde's proposed pre-trial settlement demand. (Id. ¶¶ 15, 28.) Again, Houston Casualty, via PIA, denied coverage. (Id. ¶¶ 15, 29.) As a result, Houston Casualty did not defend or indemnify El Gallo Giro in the Valverde suit. (Id. ¶¶ 16-- 17.) This refusal to defend or indemnify continues today. (Id. ¶ 16.)


Summary judgment should be granted if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The moving party bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323--24 (1986). Once the moving party has met its burden, the nonmoving party must go beyond the pleadings and identify specific facts through admissible evidence that show a genuine issue for trial. Id.; Fed. R. Civ. P. 56(c). Conclusory or speculative testimony in affidavits and moving papers is insufficient to raise genuine issues of fact and defeat summary judgment. Thornhill's Publ'g Co. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979).

A genuine issue of material fact must be more than a scintilla of evidence, or evidence that is merely colorable or not significantly probative. Addisu v. Fred Meyer, 198 F.3d 1130, 1134 (9th Cir. 2000). A disputed fact is "material" where the resolution of that fact might affect the outcome of the suit under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1968). An issue is "genuine" if the evidence is sufficient for a reasonable jury to return a verdict for the nonmoving party. Id. Where the moving and nonmoving parties' versions of events differ, courts are ...

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