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Rizzo v. Insurance Co. of Pennsylvania

United States District Court, C.D. California

August 30, 2013

ROBERT A. RIZZO, Plaintiff,
v.
THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, et al., Defendant

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For Robert A Rizzo, an individual, Plaintiff: Amy Michele Flint Hinkley, Ezra D Landes, James W Spertus, Spertus Landes and Umhofer LLP, Los Angeles, CA.

For Insurance Company of the State of Pennsylvania, The, Defendant: Vanessa O Beary, Sara M Thorpe, Gordon and Rees LLP, San Francisco, CA.

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ORDER RE DEFENDANT'S MOTION FOR SUMMARY JUDGMENT AND PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT [DOC. ## 17, 18]

DOLLY M. GEE, UNITED STATES DISTRICT JUDGE.

This matter is before the Court on the Motion for Summary Judgment filed by Defendant, the Insurance Company of the State of Pennsylvania (" ICSOP" ) [Doc. # 17], and the Motion for Partial Summary Judgment filed by Plaintiff Robert A. Rizzo [Doc. # 18]. The Court has duly considered the parties' arguments and evidence in support of and in opposition to the cross-motions. For the reasons discussed below, ICSOP's motion for summary judgment is GRANTED in full. Rizzo's motion for partial summary judgment is DENIED.

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I.

PROCEDURAL HISTORY

On May 18, 2012, Rizzo filed a Complaint in this Court against Defendants ICSOP and Chartis Claims, Inc. [Doc. # 1.] The Complaint raises the following claims: (1) breach of the duty to defend under an insurance contract; (2) breach of the duty to indemnify under an insurance contract; (3) breach of the implied covenant of good faith and fair dealing; and (4) a request for declaratory relief as to Defendants' legal obligations to pay for attorney's fees in connection with several civil and criminal lawsuits to which Rizzo is a party.

On June 13, 2012, Defendants filed an Answer to the Complaint. [Doc. # 8.] On June 27, 2012, the Court ordered the dismissal of Defendant Chartis Claims pursuant to the parties' stipulation. [Doc. # 14.] On August 24, 2012, the parties filed the instant motions. ICSOP seeks a determination that it has no duty to defend Rizzo in any of the actions, and that it therefore has no duty to indemnify, has not breached the contract or the implied covenant of good faith and fair dealing, and owes Rizzo no punitive damages. (ICSOP Mot. at 23-25.) Rizzo seeks a determination that ICSOP must defend him against the State Attorney General's civil suit and the City of Bell's Cross-Complaint, and that ICSOP must also pay costs associated with the criminal actions against Rizzo and his own Cross-Complaint against the City of Bell. (Rizzo Mot. at 2-3.) On October 15, 2012, March 24, 2013, and August 18, 2013, Rizzo filed supplemental briefing in support of his motion for partial summary judgment. [Doc. ## 39, 45, 48, 51.] ICSOP filed responses to each of these filings. [1] [Doc. ## 40, 47, 50.]

II.

FACTUAL BACKGROUND

The parties agree that there are no disputed facts. The following facts are taken from the Stipulation of Undisputed Material Facts (" SUF" ) [Doc. # 20] and the Requests for Judicial Notice (" RJN" ) filed by both parties [Doc. ## 17-3, 38]. [2]

A. The City's Insurance Policy with ICSOP

ICSOP issued to the City of Bell (" City" ) an insurance policy dated July 1, 2010 to July 1, 2011 (" Policy" ), a valid and enforceable insurance contract between the City and ICSOP. (SUF ¶ 2 Ex. A

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(" Policy" ).) Under the Policy, ICSOP agreed to pay defense costs as follows, in relevant part: " We shall have the right and duty to defend, investigate, and settle any claim or suit seeking damages covered by the terms and conditions of this Policy . . . ." ( Id. at 1.) The policy also provides, " We will defend any claim or suit against you seeking damages under this Policy even if such claim or suit is groundless, false, or fraudulent, but we have the right to investigate, defend, and settle the claim or suit as we deem necessary." ( Id. at 2.)

In addition to the City itself, the Policy defines " Insured" to include individuals who are " elected or appointed officials of the Named Insured . . . while acting on behalf of the Named Insured," and " employees." " Employee" is further defined as " a leased worker . . . while acting within the scope of his/her duties as such." ( Id. at 3.) The Policy also contains the following relevant definitions:

" Claim(s)" means a demand for money.
" Suit" means a civil proceeding in which damages are alleged because of bodily injury or property damage, wrongful act or employee benefit wrongful act to which this insurance applies. . . .
" Wrongful act" means: Any actual or alleged error or misstatement, omission, negligent act, or breach of duty . . . .

(Policy at 3-10.)

The Policy also contains several Exclusions, three of which are relevant here. First, Exclusion EE excludes coverage " [f]or injunctions, equitable relief, or any other form of relief other than the payment of money damages." ( Id. at 18.) Exclusion O states that ICSOP will not cover any cost related to the defense of a claim or suit " [a]rising out of an alleged willful commission of a crime by [an Insured] or other dishonest, fraudulent, or malicious act." (Policy at 16.) Finally, Exclusion P excludes suits or claims " [a]rising out of [an Insured's] wrongful act for gain, profit, or advantage to which [the Insured is] not legally entitled." ( Id. ) Exclusions O and P both allow ICSOP to pay for defense costs of such claims or suits in its discretion, provided that the Insured will reimburse ICSOP in the event of an adverse judgment. ( Id. )

B. Plaintiff Rizzo's Alleged Official Misconduct and State Court Proceedings

In 1993, Rizzo became the Chief Administrative Officer for the City, and he held that position until July 2010. (SUF ¶ 1.) At all relevant times, Rizzo was an appointed official and an employee of the City. ( Id. )

On September 15, 2010, the Attorney General of the State of California (" AG" ) filed a civil action against Rizzo styled People of the State of California ex rel Edmund G. Brown Jr. v. Robert Rizzo, LASC Case No. BC445497 (" AG's Civil Action" ). (SUF ¶ 3.) After the Los Angeles County Superior Court sustained Rizzo's demurrer with leave to amend, the AG filed a First Amended Complaint (" AG FAC" ) on November 10, 2010. ( Id. ) The AG FAC, the operative pleading in that action, seeks relief against Rizzo, seven other City employees and officials, and the City itself under the following theories: (1) waste of public funds under Cal. Civ. Proc. Code § 526a; (2) negligence; (3) and (4) fraudulent deceit; (5) conflict of interest under Cal. Gov't Code § 1090; and (6) breach of fiduciary duty and violation of public trust. ( Id. Ex. C.) On May 2, 2011, the Superior Court dismissed the AG's FAC without leave to amend with respect to claims (1) through (4) and (6), and it granted leave to amend as to claim (5).

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( Id. ¶ 20.) The AG elected not to amend its FAC, and the court dismissed the AG's FAC in its entirety on July 26, 2011. ( Id. ) On March 20, 2013, a California Court of Appeal reversed the Superior Court's dismissal and remanded the case with instructions to grant leave to amend as to all claims except claim (5). [3] See People ex rel. Harris v. Rizzo, 214 Cal.App.4th 921, 951, 154 Cal.Rptr.3d 443 (2013).

On October 15, 2010, Rizzo filed a Cross-Complaint against the City (" Rizzo's Cross-Complaint" ). (SUF ¶ 7.) Rizzo's Cross-Complaint seeks declaratory relief against the City for: (1) contractual indemnification; (2) statutory indemnification under Cal. Gov't Code § 995; and (3) statutory indemnification under Cal. Labor Code § 2802. ( Id. Ex. H.)

On November 24, 2010, the City filed a Cross-Complaint in the AG's Civil Action against Rizzo, styled City of Bell v. Robert Rizzo, LASC Case No. BC 445497. (SUF ¶ 5.) The City's Cross-Complaint was amended several times. ( Id. ) The operative Third Amended Cross-Complaint (" City's Cross-Complaint" ) seeks relief from Rizzo under the following theories: (1) intentional misrepresentation; (2) breach of the covenant of good faith and fair dealing; (3) conflict of interest under Cal. Gov't Code § 1090; (4) rescission and restitution of money wrongfully obtained; (5) declaratory relief under Cal. Civ. Proc. Code § 1060. ( Id. Ex. G.)

On September 10, 2010, the Los Angeles District Attorney's Office (" DA" ) filed a criminal complaint against Rizzo captioned People of the State of California v. Robert Rizzo, LASC Case No. BA376026. (SUF ¶ 9.) The complaint in the Criminal Action was amended on February 4, 2011. ( Id. ¶ 11.) The DA filed two additional criminal complaints against Rizzo on October 20, 2010 and March 29, 2011 (the three criminal complaints are collectively referred to as " the Criminal Actions" ). ( Id. ¶ ¶ 12-13.) Together, the Criminal Actions charge Rizzo, along with several other former City officials and employees, with the following offenses: (1) three counts of misappropriation of public funds under Cal. Penal Code § 424(a); (2) one count of conspiracy to violate Cal. Penal Code § 424(a); (3) three counts of conflict of interest under Cal. Gov't Code § 1090; (4) two counts of conflict of interest under Cal. Gov't Code § 1097; (5) two counts of secretion of an official record under Cal. Gov't Code § 6200; (6) and two counts of falsification of an official record under Cal. Gov't Code § 6200. ( Id. Exs. J, K, L.)

On or about November 16, 2010, Rizzo tendered the AG's Civil Action, the City's Cross-Complaint, his own Cross-Complaint, and the Criminal Actions to ICSOP for defense under the Policy. (SUF ¶ ¶ 4, 6, 8, 10; Compl. ¶ ¶ 29, 31.) On December 16, 2010, ICSOP agreed to defend the three civil actions under a full reservation of rights, but it declined to defend the criminal actions. ( Id. ΒΆ 15.) On April 28, 2011, prior to the Superior Court's order ...


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