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Centex Homes v. Lexington Ins. Co.

United States District Court, C.D. California, Southern Division

November 24, 2014

CENTEX HOMES, a Nevada general partnership, Plaintiff,
v.
LEXINGTON INSURANCE COMPANY, and DOES 1 through 10, inclusive, Defendants

For Centex Homes, a Nevada general partnership, Plaintiff: Joseph A Ferrentino, Rondi J Walsh, LEAD ATTORNEYS, Paul Louis Tetzloff, Newmeyer and Dillion LLP, Newport Beach, CA.

For Lexington Insurance Company, Defendant: Jennifer Yu Sacro, Thomas E Lombardi, LEAD ATTORNEYS, Heather A Hickman, Palmer, Lombardi & Donohue LLP, Los Angeles, CA; Vance Ashley Woodward, Palmer, Lombardi & Donohue LLP, Los Angeles, CA United State.

For Lexington Insurance Company, Cross Claimant: Jennifer Yu Sacro, Thomas E Lombardi, LEAD ATTORNEYS, Palmer, Lombardi & Donohue LLP, Los Angeles, CA.

For National Fire and Marine Insurance Company, Cross Defendant: Peter B Lightstone, Summers & Shives, San Diego, CA.

ORDER DENYING MOTION FOR PARTIAL SUMMARY JUDGMENT [46]

DAVID O. CARTER, UNITED STATES DISTRICT JUDGE.

Before the Court is the Motion for Partial Summary Judgment (the " Motion") (Dkt. 46) filed by Defendant, Lexington Insurance Company (" Lexington"). Oral arguments were heard on November 20, 2014. After considering the relevant briefings and oral argument, the Court hereby DENIES the Motion.

I. BACKGROUND

A. The Construction Project

This is an insurance coverage dispute. Plaintiff, Centex Homes (" Centex"), is a residential home developer. On August 12, 2004, Centex subcontracted with Gateway Concrete, Inc. (" Gateway") to install concrete foundations for the Coyote Canyon housing development in Fontana, California (the " Project"). Dkt. 46-2, Lexington's Statement of Uncontroverted Facts and Conclusions of Law (" UF") 19. Among other things, the subcontract required Gateway to purchase insurance with an endorsement naming Centex as an additional insured, to the extent available, relative to " 'property damage' occurring after all Work has been completed and [to] continue after that portion of 'your work' out of which the injury or damage arises has been put to its intended use." UF 19.

B. The Insurance Policies

Gateway obtained commercial general liability (" CGL") insurance policies from Lexington. Policy numbers 1070454 and 1070497 (the " Policies") were effective from August 19, 2005 to October 1, 2006, and October 1, 2006, to October 1, 2007, respectively. UF 1. The Policies have a $1 million " each 'occurrence' limit, " a $2 million " general aggregate limit, " and a $1 million " products-completed operation aggregate limit." UF 2.

Under the Policies, Lexington agreed, with certain exclusions, to " pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies. We will have the right and duty to defend the insured against any 'suit' seeking those damages." UF 3-4. Coverage under the Policies does not include 'bodily injury' or 'property damage' occurring outside the policy period. Id.

C. The Underlying Homeowner Action

The homes Gateway worked on were sold between August 2005 and October 2007. UF 20. On or about February 4, 2009, several individuals who purchased homes within the Project sent Centex a Notice of Claim of Violation of Functionality Standards pursuant to California Civil Code § § 895-945.5 (known as the Right to Repair law), which initiated SB 800 proceedings for alleged construction defects. UF 21. On or about November 3, 2009, the homeowners filed a lawsuit against Centex captioned Burns, et al. v. Centex Homes, et al., San Bernardino County Superior Court Case No. S915775 (the " Underlying Action"). UF 23. In the Underlying Action, the homeowners sought recovery for property damage to their homes allegedly resulting from the work of Centex and/or its subcontractors. UF 24. Centex cross-complained against its subcontractors, including Gateway. UF 27.

On September 1, 2011, Centex settled the Underlying Action with the homeowners for $1, 078, 000. UF 28. After an application for determination of good faith settlement (California Code of Civil Procedure § 877.6), the superior court allocated $160, 837 of the settlement to Gateway's work on the Project. Id. On March 23, 2012, Centex and Gateway entered into a settlement on the cross-complaint in the Underlying Action. UF 29. Upon the stipulation of the parties, the trial court entered judgment in favor of Centex in the amount of $199, 999. UF 30. Centex alleges that $50, 000 of the stipulated judgment has been paid, partly by Gateway and partly by another insurer, National Fire & Marin Insurance Company (which is a Cross-Defendant in this action). UF 31.

D. Lexington's Denial of Coverage

On February 27, 2009, Centex tendered the defense and indemnity of the SB 800 proceeding and the resulting Underlying Action to Lexington as a purported additional insured under the Policies. UF 22. On or about April 12, 2010, Lexington sent a letter to Centex stating several grounds for its decision to decline coverage. UF 32-39. On March 3, 2011, and April 2, 2012, Lexington issued two additional letters to Centex maintaining its position that it had no duty to defend or indemnify Centex in the Underlying Action. UF 40-44.

E. Procedural History

On June 4, 2013, Centex filed this action in Orange County superior court. UF 45. On July 1, 2013, Lexington removed the action to this Court. UF 47. On October 6, 2014, Lexington filed this motion for partial summary judgment. Dkt. 46. Centex filed its opposition on October 20, 2014. Dkt. 56. On November 4, 2014, Lexington filed its reply brief. Dkt. 71. On November 7, 2014, the Court issued an order requesting additional briefing. Dkt. 65.

II. LEGAL STANDARD

Summary judgment or partial summary judgment is proper if " the movant shows 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). Summary judgment is to be granted cautiously, with due respect for a party's right to have its factually grounded claims and defenses tried to a jury. Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The court must view the facts and draw inferences in the manner most favorable to the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962); Chevron Corp. v. Pennzoil Co., 974 F.2d 1156, 1161 (9th Cir. 1992). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact for trial, but it need not disprove the other party's case. Celotex, 477 U.S. at 323.

Once the moving party meets its burden, the burden shifts to the opposing party to set out specific material facts showing a genuine issue for trial. See Liberty Lobby, 477 U.S. at 248-49. A " material fact" is one which " might affect the outcome of the suit under the governing law . . . ." Id. at 248. Whether a fact is material is determined by the substantive law governing the claim or defense. T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987).

A party cannot create a genuine issue of material fact simply by making assertions in its legal papers. S.A. Empresa de Viacao Aerea Rio Grandense v. Walter Kidde & Co., Inc., 690 F.2d 1235, 1238 (9th Cir. 1982). Rather, there must be specific, admissible evidence identifying the basis for the dispute. Id. The court need not " comb the record" looking for other evidence; it is required only to consider evidence set forth in the moving and opposing papers and in the portions of the record cited therein. Fed.R.Civ.P. 56(c)(3); Carmen v. S.F. Unified Sch. Dist., 237 F.3d 1026, 1029 (9th Cir. 2001). " The mere existence of a scintilla of evidence . . . will be insufficient; there must be evidence on which the jury could reasonably find for [the opposing party]." Liberty Lobby, 477 U.S. at 252.

III. ANALYSIS

A. Claim for Breach of Contract


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