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Century Surety Co. v. Gene Pira Inc.

United States District Court, Central District of California

November 19, 2014

CENTURY SURETY COMPANY, Plaintiff,
v.
GENE PIRA, INC.; LEXINGTON INSURANCE COMPANY; CHARTIS PROPERTY CASUALTY COMPANY, Defendants.

[Dkt. Nos. 36, 44, 50]

ORDER RE: MOTIONS FOR SUMMARY JUDGMENT

DEAN D. PREGERSON, United States District Judge

Presently before the court are cross motions for summary judgment filed by Plaintiff Century Surety Company ("Century" or "Plaintiff"), Defendant Gene Pira, Inc. ("Pira"), and Defendants Lexington Insurance Company ("Lexington") and Chartis Property Casualty Company ("Chartis").[1] Having considered the submissions of the parties and heard oral argument, the court denies Plaintiff Century's motion, grants Pira's motion and Chartis and Lexington's motion, and adopts the following order.

I. Background

The facts underlying this insurance coverage action are largely undisputed, and arise from state court proceedings in Lexington, et al. v. Gene Pira, Inc., Los Angeles Superior Court Case No. BC507142.

Pira is a commercial plumbing contractor. (Plaintiff's Ex. 1 at 1). Century issued Pira a commercial general liability policy ("the Policy") for a one-year period beginning on December 11, 2009. Century issued the Policy under classification "98482 -Plumbing - commercial and industrial." (Ex. 1 at 9.)

The Policy included several endorsements, each of which excluded certain types of claims from coverage. One such endorsement was a "Testing or Consulting Errors and Omissions" exclusion, which stated that the Policy did not apply to injuries "arising out of [] an error, omission, defect, or deficiency in [] any test performed . . . ." (Id. at 41.) A separate, "Professional" exclusion disclaimed coverage for injuries "which would not have occurred . . . but for the rendering or failure to render any of the following professional services . . . [, including] [i]nspection, construction management, or engineering services." (Id. at 51.)

The Policy also contained an integration clause, which stated, "This policy contains all the agreements between [Pira] and [Century] concerning the insurance afforded. . . . This policy's terms can be amended or waved only be endorsement issued by [Century] and made a part of this policy.] (Plaintiff's Ex. 1 at 8.)

On July 27, 2010, over seven months after Century issued the Policy, Pira's independent insurance broker, Andrew Breckenridge, contacted Century's agent, Dan Cullinan, by e-mail, writing "Please have the 'testing' exclusion removed from the policy as we stated clearly . . . that as a plumber they do some 'backflow testing.' If this is two different things we are talking about and they are covered let me know either way." (Plaintiff's Ex. 27.) In response, Century's agent, Cullinan, wrote, "This is just excluding E[rror] & 0[mission] coverage, " and attached the testing exclusion once more. (Plaintiff's Ex. 28.) Cullinan did not issue an endorsement removing the testing provision. Pira's agent replied, "I take your response as E&O isn[']t covered but [b]ackflow testing is and its [sic] ok . . . ." (Plaintiff's Ex. 29.)

As alleged in the underlying state action, approximately two months later, on September 21, 2010, Pira conducted a fire pump test on sprinkler lines at a Four Seasons Hotel in Los Angeles. (Plaintiff's Ex. 3.) During the test, the formation of a water hammer caused sprinkler heads in the hotel owners' penthouse residences to activate. (Id. ¶¶ 7-8.) The state complaint alleges that the water hammer formed when Pira re-pressurized the sprinkler system too quickly. (Id. ¶ 9.) The fire sprinkler discharge caused over $2 million in damage. (Id. ¶ 10.) A result of the water damage, the hotel made a claim to its insurer, Lexington, and the hotel owners, whose residences were damaged, made separate claims to their insurer, Chartis. (Id. ¶¶ 14-16.) Chartis and Lexington subrogated to their respective insureds' rights, and brought the underlying state suit against Pira. (Id. ¶¶ 16-17.)

Century defended Pira against the state suit under a reservation of rights, and filed this action for a declaratory judgment that, as a result of either the Policy's testing or professional exclusions, or both, Century has no duty to defend or indemnify Pira. Century, Pira, and Lexington and Chartis all now move for summary judgment.

II. Legal Standard

Summary judgment is appropriate where the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). 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. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) . All reasonable inferences from the evidence must be drawn in favor of the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 242 (1986) . If the moving party does not bear the burden of proof at trial, it is entitled to summary judgment if it can demonstrate that "there is an absence of evidence to support the nonmoving party's case." Celotex, 477 U.S. at 323.

Once the moving party meets its burden, the burden shifts to the nonmoving party opposing the motion, who must "set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256. Summary judgment is warranted if a party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322. A genuine issue exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party, " and material facts are those "that might affect the outcome of the suit under the governing law." Anderson, 477 U.S. at 248. There is no genuine issue of fact "[w]here the record taken as a whole ...


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