United States District Court, S.D. California
ORDER DENYING MOTION TO STAY
JEFFREY T. MILLER, District Judge.
Defendant Cal-Regent Insurance Services Corporation ("Cal-Regent") moves to stay this action pending resolution of a related arbitration on-going in Phoenix, Arizona. Defendant State National Insurance Company, Inc. ("State National") does not oppose the motion. (Ct. Dkt. 34). Plaintiff Century Surety Company ("Century") opposes the motion. Pursuant to Local Rule 7.1, the matters presented are appropriately resolved without oral argument. For the reasons set forth below, the court denies the motion to stay.
On June 27, 2013, Century commenced this diversity action for rescission and declaratory relief. "Cal-Regent provides insurance-related services and, at all relevant times, acted as a managing general agent for State National, including with respect to the issuance of liability insurance policies underwritten by State National and the handling of claims arising under those policies." (Compl. ¶6). On May 25, 2011, Cal-Regent submitted to Century an Application for Agents and Brokers Errors and Omissions Insurance (the "Application") to obtain insurance covering potential errors or omissions arising in the course of Cal-Regent's business as a managing general agent. (Compl. ¶7). Based upon representations by Cal-Regent in the Application, (Compl. Exh. B), Century issued Commercial Lines Policy CCP 707046 (the "Policy") to Cal-Regent for the policy period of June 22, 2011 to June 22, 2012. (Compl. ¶ 10). One provision in the Application represented, in effect, that Cal-Regent was unaware of any fact, circumstance, situation, incident, or allegation "which might afford grounds for any claim such as would fall under the proposed insurance." (Compl. ¶8). At the heart of Century's complaint is the allegation that the Application contains material misrepresentations.
In the Complaint, Century seeks a declaration that it has no obligation to defend or indemnify Cal-Regent in connection with State National's indemnity claims in the Arizona arbitration proceeding. Century also seeks to rescind the Policy based upon the alleged misrepresentations contained in the Application.
The Underlying Claim and the Bad Faith Action
On December 30, 2010, a bad faith lawsuit was filed against State National in the Superior Court for Maricopa County, Arizona (the "Bad Faith Action"). The Bad Faith Action arose out of a single-vehicle accident that occurred in Sonora, Mexico on February 9, 2007. A passenger in the vehicle, Brian Walderson, was seriously injured. Walderson and his parents (the "Waldersons") sued the owner of the vehicle, Sullivan Car Company, and the driver, Heath Sullivan (the "Sullivans"), for Brian's injuries.
The Sullivans sought coverage for the claims asserted under an insurance policy issued to Sullivan Car Company by State National through its managing general agent, Cal-Regent. (Compl. ¶ 14). Notice of the Waldersons' claim was provided to State National, Cal-Regent, and Vista Claims Services ("Vista"), the agent handling claims for policies issued by State National and Cal-Regent. Defendants denied coverage because the policy purported to exclude coverage for accidents occurring outside the United States. The following is the pertinent provision:
B. General Conditions
7. Policy Period, Coverage Territory
Under this Coverage Form, we cover:
a. "Bodily injury", "property damage" and "losses" occurring; and
b. "Covered pollution costs or expense" arising out of "accidents" occurring during the policy period shown in the Declarations ...