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Scottsdale Insurance Co. v. David and Betty Kaplan Family Trust

United States District Court, N.D. California

June 1, 2015

SCOTTSDALE INSURANCE COMPANY, Plaintiff,
v.
DAVID AND BETTY KAPLAN FAMILY TRUST, DAVID KAPLAN AND BETTY KAPLAN, individually and as trustees for DAVID AND BETTY KAPLAN FAMILY TRUST, LALEH ZELINSKY FAMILY TRUST, LALEH ZELINSKY, individually and as trustee for LALEH ZELINSKY FAMILY TRUST, ASM INVESTMENTS, INC., a California corporation, AND DOES 1-50, Defendants.

ORDER DENYING MOTION TO DISMISS AND DENYING REQUEST FOR JUDICIAL NOTICE

WILLIAM ALSUP, District Judge.

INTRODUCTION

Defendants move to dismiss, or in the alternative, stay the complaint for declaratory relief in this insurance-coverage action. For the following reasons, the motion is DENIED.

STATEMENT

This is an insurance-coverage action brought by plaintiff insurer against defendants, the insureds, to determine the parties' rights and obligations under defendants' commercial general-liability policy, effective May 1, 2013 to June 4, 2014. Defendants David and Betty Kaplan, individually and as trustees for co-defendant David and Betty Kaplan Family Trust; Laleh Zelinsky, individually and as trustee for co-defendant Laleh Zelinsky Family Trust; and ASM Investments, Inc. are landlords. Defendants own the Warfield Hotel, a single-resident-occupancy hotel ("SRO") located at 118 Taylor Street in San Francisco's Tenderloin neighborhood. Since 2008, defendants have been sued repeatedly by residents of the Warfield as well as by the City and County of San Francisco due to the uninhabitable conditions maintained at the SRO (Compl. ¶¶ 9-12).

Most recently, and relevant to our case, is Toliver v. Shaikh, et al., No. CGC 14-542085. The Toliver action is currently pending in San Francisco Superior Court and is set to go to trial in June 2016. There, the plaintiff Roy Toliver, not a party to our case, brought suit for (1) negligence; (2) breach of the warranty of habitability; (3) breach of the warranty of quiet enjoyment; (4) violation of the San Francisco Rent Ordinance; (5) intentional infliction of emotional distress; (6) violation of California Civil Code Section 1941.1; and (7) violation of California Civil Code Section 1940.1. The named defendants in the Toliver action include David and Betty Kaplan, as trustees; Laleh Zelinsky, individually and as trustee; and ASM Investments, Inc., all defendants in this federal action. Neither the David and Betty Kaplan Trust nor the Laleh Zelinsky Family Trust is a named defendant in the Toliver action (Compl. ¶¶ 11-27).

Plaintiff Scottsdale Insurance Company undertook the defense of the Toliver action, pursuant to a reservation of rights, and filed the instant complaint for declaratory relief. Scottsdale alleges that the Toliver action is not covered based on the known-loss provision in the insurance policy, which reads, in relevant part:

This insurance applies to "bodily injury" and "property damage" only if:
* * *
Prior to the policy period, no insured listed under Paragraph 1. of Section II - Who Is An Insured and no "employee" authorized by you to give or receive notice of an "occurrence" or claim, knew that the "bodily injury" or "property damage" had occurred, in whole or in part. If such a listed insured or authorized "employee" knew, prior to the policy period, that the "bodily injury" or "property damage" occurred, then any continuation, change or resumption of such "bodily injury" or "property damage" during or after the policy period will be deemed to have been known prior to the policy period.
* * *
"Bodily injury" or "property damage" will be deemed to have been known to have occurred at the earliest time when any insured listed under Paragraph 1. of Section II - Who Is An Insured or any "employee" authorized by you to give or receive notice of an "occurrence" or claim:
(1) Reports all, or any part, of the "bodily injury" or "property damage" to us or any other insurer;
(2) Receives a written or verbal demand or claim for damages because of the "bodily injury" ...

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