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Navigators Specialty Insurance Co. v. St. Paul Surplus Lines Insurance Co.

United States District Court, N.D. California

July 9, 2015

NAVIGATORS SPECIALTY INSURANCE COMPANY, Plaintiff,
v.
ST. PAUL SURPLUS LINES INSURANCE COMPANY; LIBERTY SURPLUS INSURANCE CORPORATION; et al., Defendants.

ORDER GRANTING DEFENDANT ST. PAUL'S MOTION FOR SUMMARY JUDGMENT

SAMUEL CONTI, District Judge.

Now before the Court is Defendant St. Paul Surplus Lines Insurance Company's ("St. Paul") motion for summary judgment.[1] ECF No. 69 ("Mot."). The motion is fully briefed, [2] and the Court finds it suitable for disposition without oral argument pursuant to Civil Local Rule 7-1(b). The undisputed facts establish that St. Paul's underwriter and agent - Crouse and Associates ("Crouse") - did not have the authority to delegate its agency powers to insurance broker California Financial Insurance Services ("California Financial"). As a result, the Court finds that Navigator's named insured - McDevitt & McDevitt ("McDevitt") - was not an additional insured with respect to the St. Paul insurance policy held by Sunrise Windows ("Sunrise"). St. Paul therefore did not have a duty to defend or indemnify McDevitt, and Navigators is not entitled to declaratory relief, equitable contribution, or equitable subrogation as a matter of law. Accordingly, St. Paul's motion for summary judgment is GRANTED.

I. BACKGROUND AND LITIGATION HISTORY

The details of this case have been set out in multiple orders, are well known to the parties, and therefore will not be repeated in their entirety here. ECF Nos. 36, 86, 95, 100, 108. The facts pertinent to the instant motion are as follows:

This is an insurance dispute arising from two underlying construction defect lawsuits (known as the "3820 Cypress Action" and the "PRBO Action"). Both lawsuits allege that a building in Petaluma, California contains construction defects, and both lawsuits have been consolidated in state court (collectively "the Underlying Actions"). McDevitt, the general contractor for the building, was insured by Navigators. St. Paul - pursuant to a policy issued by its underwriter and agent, Crouse - insured Sunrise, a subcontractor responsible for windows. This case relates to the policies St. Paul issued to Sunrise (the "Sunrise Policies").

Navigators alleges that it is entitled to declaratory relief, equitable contribution, and equitable subrogation arising out of St. Paul's alleged breach of its duty to defend and indemnify Navigators' named insured, McDevitt, against the Underlying Actions. Navigators claims that St. Paul had a duty to defend McDevitt because McDevitt is allegedly listed as an additional insured on an additional insured endorsement to the Sunrise Policies. Importantly, California Financial, Sunrise's insurance broker, is the one that allegedly issued the additional insured endorsement. See Opp'n at 6 ("Navigators argues that the broker, California Financial, issued the endorsement with either actual or ostensible authority...."). Viewing the evidence in the light most favorably to Navigators, St. Paul's motion for summary judgment turns on whether, under the law of agency in California, California Financial had the authority to issue the additional insured endorsement on St. Paul's behalf. The Court ordered additional discovery and two rounds of supplemental briefing on this issue.

The parties' first set of supplemental briefs focused on whether California Financial was authorized by St. Paul's agent, Crouse, to issue the additional insured endorsement - in other words, whether California Financial was St. Paul's authorized sub-agent. Navigators' first supplemental brief focuses almost exclusively on a conversation between representatives of Crouse and California Financial during which Crouse allegedly gave California Financial permission to issue additional insured endorsements on St. Paul's behalf. However, because Navigators failed to address whether Crouse had the authority to delegate its agency powers to California Financial in the first place, a second round of supplemental briefing was ordered on that particular issue. ECF No. 109. The parties' briefs have been reviewed, and the Court now finds St. Paul's motion suitable for disposition.

II. LEGAL STANDARD

Entry of 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). "In order to carry its burden of production, the moving party must either produce evidence negating an essential element of the nonmoving party's claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial." Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1102 (9th Cir. 2000). "The evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Summary judgment should be entered against a party that fails to make a showing sufficient to establish the existence of an element essential to its case. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

III. DISCUSSION

The central issue in this case - whether St. Paul is bound by an alleged additional insured endorsement naming McDevitt as an additional insured - is a matter of California agency law. The principal in this case is St. Paul. See Restatement (Second) of Agency § 1 (1958) ("The one for whom action is to be taken is the principal."). There is no dispute that Crouse is St. Paul's authorized agent and that it was empowered to issue additional insured endorsements on St. Paul's behalf. See Mot. at 9. Navigators claims that Crouse delegated its authority to issue additional insured endorsements to California Financial. See Pl. First Suppl. Br. at 1-5. In other words, Navigators is arguing that California Financial was St. Paul's authorized sub-agent. See id. § 5 ("A subagent is a person appointed by an agent empowered to do so, to perform functions undertaken by the agent for the principal....").

Section 2349 of the California Civil Code governs an agent's ability to delegate its powers to a sub-agent:

An agent, unless specially forbidden by his principal to do so, can delegate his powers to another person in any of the ...

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