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Philadelphia Indemnity Insurance Co. v. SimplexGrinnell LP

United States District Court, N.D. California

March 29, 2013

PHILADELPHIA INDEMNITY INSURANCE COMPANY, et al., Plaintiffs,
v.
SIMPLEXGRINNELL LP, Defendant

Page 1114

For Philadelphia Indemnity Insurance Company, a foreign corporation, Plaintiff: Carl A Guerrieri, LEAD ATTORNEY, Scottsdale, AZ; Mark Charles Bauman, LEAD ATTORNEY, Bauman Loewe et al, Scottsdale, AZ.

For Mid-Century Insurance Company, Plaintiff: Dean A. Alper, LEAD ATTORNEY, Alper & McCulloch, Greenbrae, CA.

For Simplex Grinnell, L.P., a limited partnership, Defendant: Charles C. Eblen, LEAD ATTORNEY, PRO HAC VICE, Shook Hardy & Bacon LLP, Kansas City, MO; Colin E Schreck, LEAD ATTORNEY, Shook, Hardy Bacon LLP, San Francisco, CA; Jason R. Scott, LEAD ATTORNEY, Kansas City, MO; Kristina Leigh Burmeister, Shook Hardy and Bacon L.L.P., Kansas City, MO.

OPINION

PHYLLIS J. HAMILTON, United States District Judge.

Page 1115

ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

Defendant's motion for summary judgment came on for hearing before this court on March 6, 2013. Plaintiff Philadelphia Indemnity Insurance Company appeared by its counsel Carl Guerrieri; plaintiff Mid-Century Insurance Company appeared by its counsel Dean A. Alper; and defendant SimplexGrinnell LP appeared by its counsel Randall Haimovici. Having read the parties' papers and carefully considered their arguments and the relevant legal authority, the court hereby GRANTS defendant's motion as follows and for the reasons stated at the hearing.

BACKGROUND

This is an insurance subrogation case in which the plaintiffs seek compensation for payment on property damage claims.

Page 1116

University of Sports, LLC (" UOS" ) leased premises (" the UOS building" ), which since 2008 has been owned by El Capitan Investments, LLC (" El Capitan" ). Plaintiff Philadelphia Indemnity Insurance Company (" Philadelphia" ) issued a policy of casualty insurance to UOS, and plaintiff Mid-Century Insurance Company (" Mid-Century" ) issued a policy of casualty insurance El Capitan.

The policies insured UOS and El Capitan from loss due to water, fire, and other catastrophes to their businesses, business personal property, real property, and other resulting damages as described in the policies. The policies also provided that in the event of an insured loss, the insurers would be subrogated to any rights that the insureds might have against a third party who was responsible for the loss.

In 2002, the UOS building was owned by Bishop & Bishop Land LLC (" Bishop & Bishop" ), which retained Zak's Enterprises (" Zak's" ) to serve as general contractor on a project to remodel the building. The remodeling project, which was paid for by Bishop & Bishop, included the construction of an indoor soccer field as part of the premises to be leased to UOS. As part of the deal, William Bishop (a member of Bishop & Bishop) and Chris Dzulak (owner of Zak's) became part owners of UOS.

According to the testimony of Mr. Dzulak, Bishop & Bishop hired an architect to prepare the plans, and to coordinate with the city and the structural engineer. Bishop & Bishop did not contract directly with any of the subcontractors. Mr. Dzulak oversaw the remodeling project on a daily basis, and Zak's entered into a contract with defendant SimplexGrinnell LP (" Simplex" ) for work on the fire sprinkler system, to include expanding the existing sprinkler system and installing two-piece head guards to protect the indoor soccer facility's sprinkler heads from soccer balls.

Simplex installed approximately 200 sprinkler head guards at the building, including above the soccer field. Simplex sells one and two-piece head guards; two-piece head guards are stronger than one-piece guards. According to the product literature, both the 1-piece and the 2-piece head guards " are designed to provide protection against low level impacts to the sprinkler head." The 2-piece design " features a cage and clamping base plate" which can provide " additional protection for sprinklers that may experience greater opportunity for repeated abuse."

Mr. Dzulak testified that he had a strong understanding of sprinkler systems, although he always hired a subcontractor to do the installation. During the remodeling of the UOS building, Mr. Dzulak visited two or three other indoor soccer facilities to determine how they designed their facilities and protected their sprinkler systems. The facilities he toured used sprinkler head guards to protect their sprinkler systems from soccer balls. He did not see any that were protected with nets. Mr. Dzulak asserts that Simplex told him that the sprinkler head guards they installed would adequately protect the sprinkler heads from flying soccer balls.

On July 10, 2010, more than two years after the UOS building had been sold to El Capitan, a soccer ball struck one of the sprinkler heads above the soccer field. Although the sprinkler head was protected by a two-piece head guard, it broke from the impact and discharged a large amount of water onto the field.

Aaron Locks, who is a former owner and former president of UOS, testified that he was shocked to learn of the incident. Mr. Locks referred to the soccer ball kick at issue as a " six-in-one-million" type of a shot, because of its power and because of the way it must have ricocheted off the

Page 1117

ceiling in order to damage the sprinkler head in the way that it did.

UOS and El Capitan filed claims with the plaintiff insurers. Philadelphia paid $351,413.28 on the claim submitted by UOS, and Mid-Century paid $699,063.83 on the claim submitted by El Capitan.

In February 2012, Philadelphia and Mid-Century filed the present action seeking recovery of the amounts they had paid their insureds. In the original complaint, plaintiffs alleged a single cause of action for negligence. Simplex moved for judgment on the pleadings, arguing that plaintiffs had failed to allege any duty that could give rise to a claim of negligence. The court granted the motion, with leave to amend. Plaintiffs filed the first amended complaint (" FAC" ) on May 16, 2012.

In the FAC, plaintiffs again allege a single cause of action, for negligence. They assert that Simplex negligently " designed, constructed, supervised, inspected, manufactured, installed, assembled and/or built" the sprinkler system and its component parts; that Simplex owed a legal duty to exercise reasonable care in their " design, construction, supervision, inspection, manufacture, installation, assembly and/or building" of the sprinkler system; that Simplex breached this duty by failing to " design, construct, supervise, inspect, manufacture, install, assemble and/or build" the sprinkler system and its component parts in a " reasonably safe and prudent manner so as not to cause injury or property damage; and that Simplex's breach of these duties was the direct and/or proximate cause of the damages alleged in the complaint. See FAC ¶ ¶ 32-36.

Simplex now seeks summary judgment, arguing that plaintiffs cannot establish that Simplex owed them an independent tort duty.[1]

DISCUSSION

A. Legal Standard

A party may move for summary judgment on a " claim or defense" or " part of . . . a claim or defense." Fed.R.Civ.P. 56(a). Summary judgment is appropriate when there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Id.

A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion, and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Material facts are those that might affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute as to a material fact is " genuine" if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id.

Where the moving party will have the burden of proof at trial, it must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party. Soremekun v.Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). On an issue where the nonmoving party will bear the burden of proof at trial, the moving party can prevail merely by pointing out to the district court that there is an absence of evidence to support the nonmoving party's case. Celotex, 477 U.S. at 324-25. If the moving party meets its initial burden, the opposing

Page 1118

party must then set out specific facts showing a genuine issue for trial in order to defeat the motion. Anderson, 477 U.S. at 250; see also Fed.R.Civ.P. 56(c), (e).

When deciding a summary judgment motion, a court must view the evidence in the light most favorable to the nonmoving party and draw all justifiable inferences in its favor. Anderson, 477 U.S. at 255; Hunt v. City of Los Angeles, 638 F.3d 703, 709 (9th Cir. 2011).

B. Defendant's Motion

Simplex argues that summary judgment should be granted on the negligence claim. Simplex asserts that it owed plaintiffs no independent tort duty, and the public policy factors make clear that it owed plaintiffs no independent tort duty; and also contends that the ...


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