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American Alternative Ins. Corp. v. Hudson Specialty Ins. Co.

United States District Court, C.D. California

April 3, 2013

AMERICAN ALTERNATIVE INSURANCE CORPORATION, Plaintiff,
v.
HUDSON SPECIALTY INSURANCE COMPANY, and DOES 1-10, Defendant

Page 909

For American Alternative Insurance Corporation, also known as American Alternative Insurance Company, Plaintiff, Counter Defendant: Jennifer Michelle Kokes, LEAD ATTORNEY, Musick Peeler and Garrett LLP, Costa Mesa, CA; Lawrence A Tabb, Musick Peeler & Garrett, Los Angeles, CA.

For Hudson Specialty Insurance Company, also known as Hudson Insurance Company, Defendant, Counter Claimant: Gary A Hamblet, Morris Polich & Purdy LLP, Los Angeles, CA; Jeffrey S Barron, Pamela Annette Palmer, Morris Polich & Purdy, Los Angeles, CA.

Page 910

ORDER GRANTING IN PART AND DENYING IN PART AAIC'S MOTION FOR SUMMARY JUDGMENT ON HUDSON'S COUNTERCLAIMS

Jesus G. Bernal, United States District Judge.

Before the Court is a Motion for Summary Judgment or, in the alternative, Partial Summary Judgment on Hudson's Counterclaims filed by Plaintiff and Counter-Defendant American Alternative Insurance Corporation.

After considering all papers submitted in support of and in opposition to the motions, as well as the arguments advanced by counsel at the April 1, 2013 hearing, the Court GRANTS IN PART AND DENIES IN PART American Alternative's Motion for Summary Judgment.

I. BACKGROUND

A. Procedural Background

On March 26, 2012, Plaintiff American Alternative Insurance Company (" AAIC" ) filed its Amended Complaint against Hudson Insurance Company (" Hudson" ) in the California Superior Court for the County of Riverside, alleging three claims for declaratory relief. (See Not. of Removal (" Not." ), Ex. A, Compl., Doc. No. 1.) Hudson removed the action to this Court on April 24, 2012. (Not.) On May 15, 2012, Hudson answered and asserted three counterclaims for declaratory relief, equitable indemnity, and equitable subrogation. (" Counterclaim," Doc. No. 15.) AAIC answered the Counterclaim on June 8, 2012. (Doc. No. 16.)

AAIC filed its Motion for Summary Judgment or Partial Summary Judgment as to Hudson's counterclaims on January 14, 2013. (" MSJ," Doc. No. 32.) AAIC included the following documents in support of its MSJ: Statement of Uncontroverted Facts and Conclusions of Law (" SUF," Doc. No. 32-1); Request for Judicial Notice (" RJN," Doc. No. 32-3) [1]; Declaration of Wayne Falsetto (Doc. No. 32-10) attaching the AAIC's excess liability insurance policy covering Minuteman Parking Company (" Minuteman" ) (" AAIC Excess Policy" or " Excess Policy," Exh. 4, Doc. No. 32-10); Declaration of Jennifer

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M. Kokes (Doc. No. 32-12) attaching AAIC's requests for admission served on Hudson (" RFA," Exh. 5, Doc. No. 32-13), Hudson's primary insurance policy covering Minuteman (" Hudson Primary Policy" or " Primary Policy," RFA Exh. 1, Doc. No. 32-13); Hudson's responses to AAIC's requests for admission, (" Rsp. to RFA," Exh. 6, Doc. No. 32-14), and Hudson's responses to interrogatories (" Rsp. to Inter.," Exh. 7, Doc. No. 32-15).

On January 22, 2013, Hudson filed its Opposition (" Opp'n," Doc. No. 34), along with its Statement of Genuine Issues of Material Fact and Additional Material Facts (" SGI," Doc. No. 34-3), a Declaration of Gary Hamblet (Doc. No. 34-1) attaching eight exhibits (Exhs. 8-14, 19), and a Declaration of Greg Edwards (Doc. No. 34-2) attaching seven exhibits (Exh. 15-18, 20-22). On March 11, 2013, Hudson supplemented its opposition with a Declaration of Edward J. McKinnon attaching his Rule 26 Expert Report. (Doc. No. 38.) AAIC filed its Reply on January 18, 2013 (" Reply," Doc. No. 39), along with its Response to Hudson's Statement of Additional Facts (" Reply SUF," Doc. No. 39-1), Objections to the McKinnon Declaration (" Obj.," Doc. No. 39-2), and a Reply Declaration of Jennifer Kokes (Doc. No. 39-3) attaching several exhibits (Exhs. 23-25).

B. AAIC's Complaint

AAIC's Complaint arises from an underlying personal injury judgment against Minuteman. (Compl., ¶ 1.) Hudson insured Minuteman under a primary policy and AAIC covered Minuteman under an excess policy. (Compl., ¶ 1.) AAIC alleges tat Hudson is obligated to pay the entire judgment against Minuteman as well as prejudgment interest and costs because Hudson (1) breached its duty to timely communicate pretrial settlement offers to AAIC (Compl., ¶ ¶ 56-59) and (2) unreasonably failed to settle the underlying action for an amount less than AAIC's policy limits in violation of Hudson's implied covenant of good faith and fair dealing (Compl., ¶ ¶ 50-55).

C. Hudson's Counterclaim

Hudson counterclaims that AAIC unreasonably failed to settle the underlying action when it was presented with pretrial settlement offers that were within its coverage limits. (Counterclaim, ¶ 13.) Due to this breach, Hudson claims that AAIC is responsible for (1) the defense costs Hudson incurred after AAIC failed to settle and (2) $219,289.18 in judgment costs and interest Hudson paid as part of the final judgment. (Counterclaim, ¶ 13.) Hudson brings three claims for declaratory relief, equitable indemnity, and equitable subrogation. (Counterclaim, ¶ ¶ 11-20.)

II. LEGAL STANDARD[2]

A motion for partial summary adjudication is governed by the same standard as a motion for summary judgment. Green v. Sun Life Assur. Co. of Canada, 383 F.Supp.2d 1224, 1226 (C.D. Cal. 2005). A court shall grant a motion for summary judgment when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party must show that " under the governing law, there can be but one reasonable conclusion as to the verdict." Anderson, 477 U.S. at 250.

Generally, the burden is on the moving party to demonstrate that it is entitled to

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summary judgment. See Margolis v. Ryan, 140 F.3d 850, 852 (9th Cir. 1998) (citing Anderson, 477 U.S. at 256-57); Retail Clerks Union Local 648 v. Hub Pharmacy, Inc., 707 F.2d 1030, 1033 (9th Cir. 1983). The moving party bears the initial burden of identifying the elements of the claim or defense and evidence that it believes demonstrates the absence of an issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Because summary judgment is a " drastic device" that cuts off a party's right to present its case to a jury, the moving party bears a " heavy burden" of demonstrating the absence of any genuine issue of material fact. See Avalos v. Baca, No. 05-CV-07602-DDP, 2006 WL 2294878 (C.D. Cal. Aug. 7, 2006) (quoting Nationwide Life Ins. Co. v. Bankers Leasing Ass'n, Inc., 182 F.3d 157, 160 (2d Cir. 1999)).

Where the non-moving party has the burden at trial, however, the moving party need not produce evidence negating or disproving every essential element of the non-moving party's case. Celotex, 477 U.S. at 325. Instead, the moving party's burden is met by pointing out that there is an absence of evidence supporting the non-moving party's case. Id.; Horphag Research Ltd. v. Garcia, 475 F.3d 1029, 1035 (9th Cir. 2007). " [A] summary judgment motion may properly be made in reliance solely on the 'pleadings, depositions, answers to interrogatories, and admissions on file.'" Celotex, 477 U.S. at 324 (quoting Fed.R.Civ.P. 56(c)).

The burden then shifts to the non-moving party to show that there is a genuine issue of material fact that must be resolved at trial. Fed.R.Civ.P. 56(c); Celotex, 477 U.S. at 324; Anderson, 477 U.S. at 256. The non-moving party must make an affirmative showing on all matters placed in issue by the motion as to which it has the burden of proof at trial. Celotex, 477 U.S. at 322; Anderson, 477 U.S. at 252. See also William W. Schwarzer, A. Wallace Tashima & James M. Wagstaffe, Federal Civil Procedure Before Trial ยง 14:144. A genuine issue of material fact ...


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