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Travelers Property Casualty Company of America v. Kaufman & Broad Monterey Bay, Inc.

United States District Court, N.D. California, San Jose Division

February 11, 2015

TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, Plaintiff,
v.
KAUFMAN & BROAD MONTEREY BAY, INC.; K&B BAKEWELL SEASIDE VENTURE, LLC; AND KB SOUTH BAY, INC., Defendants.

ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT; DENYING DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT RE: DKT. NOS. 52, 54

EDWARD J. DAVILA, District Judge.

Presently before the court are Plaintiff Travelers Property Casualty Company of America's ("Plaintiff") and Defendants Kaufman & Broad Monterey Bay, Inc., K&B Bakewell Seaside Venture, LLC, and KB Home South Bay, Inc.'s (collectively, "Defendants") Motions for Partial Summary Judgment. The court found these matters suitable for decision without oral argument pursuant to Civil Local Rule 7-1(b) and previously vacated the hearing. Having fully reviewed the parties' briefing, the court GRANTS Plaintiff's Motion for Partial Summary Judgment and DENIES Defendants' Motion for Partial Summary Judgment.

I. BACKGROUND

Plaintiff issued nine commercial general liability policies to Norcraft Companies, LLC (later Norcraft Companies, L.P.) ("Norcraft") covering the policy periods between December 2002 and November 2011. Dkt. No. 1, Compl. at ¶ 8. Under the terms of the policies, Plaintiff committed to defend Norcraft or an additional insured against lawsuits for bodily injury or property damage. Id. at ¶¶ 10-12. The policies also reserved Plaintiff's right to retain counsel of its choosing for the insured's defense, and the insured was bound to cooperate with Plaintiff. Id. at ¶ 9.

Defendants hired Norcraft as a subcontractor to perform cabinet work for a residential development project in Monterey County, California. Dkt. No. 8-3, Counterclaim at ¶¶ 9, 15. Norcraft provided Defendants with certificates of insurance, including two policies that named Defendants as an additional insured, to demonstrate that it had obtained comprehensive general liability insurance from Plaintiff. Id. at ¶¶ 15, 24.

In February 2012, homeowners of the Monterey residential development project filed a lawsuit in Monterey County Superior Court against Defendants alleging strict product liability, breach of contract, and tort causes of action: Davis, et al. v. Kaufman & Broad Monterey Bay, Inc., et al., No. M116168 (the "Davis action"). Compl. at ¶ 15; Counterclaim at ¶ 10. In July 2012, Defendants, through its legal representative Glaspy & Glaspy (the "Glaspy Firm"), tendered the Davis action to Plaintiff because it was an additional insured under the Norcraft policies. Compl. at ¶ 16; Counterclaim at ¶ 16. Plaintiff agreed to defend Defendants in the Davis action, and retained Jennifer Wilhelmi ("Counsel Wilhelmi") of Clapp, Moroney, Bellagamba, Vucinich, Beeman & Scheley (the "Clapp Firm"). Compl. at ¶ 17; Counterclaim at ¶ 17. Defendants opposed the appointment of the Clapp Firm because the firm was ethically conflicted from representing Defendants since it had represented parties adverse to Defendants in other cases pertaining to similar issues as the Davis action. Id. at ¶ 20.

Plaintiff commenced the instant action in October 2013, alleging that Defendants' refusal of appointed counsel is a material breach of the Norcraft policies and of the implied covenant of good faith and fair dealing. Compl. at ¶ 18. Its claims include: (1) declaratory relief-right to independent counsel; (2) declaratory relief-duty to defend; (3) breach of contract; and (4) unjust enrichment. See Compl. Defendants filed a counterclaim in November 2013, alleging that Plaintiff did not intend to provide Defendants with an immediate, full, complete, and conflict-free defense because Plaintiff knew about the Clapp Firm's ethical conflicts. Counterclaim at ¶¶ 20-21. Its claims include: (1) declaratory relief; (2) breach of contract; and (3) breach of the implied covenant of good faith and fair dealing. See Counterclaim. In November 2014, the parties filed the instant cross-motions for partial summary judgment, which have been fully briefed. See Dkt. Nos. 52, 54, 86, 87, 102, 103.[1]

II. LEGAL STANDARD

A motion for summary judgment or partial summary judgment should be granted if "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); Addisu v. Fred Meyer, Inc. , 198 F.3d 1130, 1134 (9th Cir. 2000). The moving party bears the initial burden of informing the court of the basis for the motion and identifying the portions of the pleadings, depositions, answers to interrogatories, admissions, or affidavits that demonstrate the absence of a triable issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323 (1986). If the moving party meets this initial burden, the burden then shifts to the non-moving party to go beyond the pleadings and designate specific materials in the record to show that there is a genuinely disputed fact. Fed.R.Civ.P. 56(c); Celotex , 477 U.S. at 324. The court must draw all reasonable inferences in favor of the party against whom summary judgment is sought. Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587 (1986).

However, the mere suggestion that facts are in controversy, as well as conclusory or speculative testimony in affidavits and moving papers, is not sufficient to defeat summary judgment. See Thornhill Publ'g Co. v. GTE Corp. , 594 F.2d 730, 738 (9th Cir. 1979). Instead, the non-moving party must come forward with admissible evidence to satisfy the burden. Fed.R.Civ.P. 56(c); see Hal Roach Studios, Inc. v. Feiner & Co., Inc. , 896 F.2d 1542, 1550 (9th Cir. 1990).

A genuine issue for trial exists if the non-moving party presents evidence from which a reasonable jury, viewing the evidence in the light most favorable to that party, could resolve the material issue in his or her favor. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248-49 (1986); Barlow v. Ground , 943 F.2d 1132, 1134-36 (9th Cir. 1991). Conversely, summary judgment must be granted where a party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, on which that party will bear the burden of proof at trial." Celotex , 477 U.S. at 322.

III. DISCUSSION

Due to the parties exceeding the page limitation on the motion briefs, the court notified the parties that it would not review any material contained in the motions past the 25th page of text.[2] See Dkt. No. 77, Order. Consequently, only the following issues will be addressed: (1) whether Plaintiff breached its duty to defend for failing to provide an immediate defense; (2) whether Plaintiff breached its duty to defend for failing to provide a complete defense; and (3) whether Plaintiff had the right to appoint ...


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