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Nationwide Mutual Insurance Co. v. Certain Underwriters at Lloyd's, London

United States District Court, N.D. California

July 7, 2016





         Plaintiff Nationwide Mutual Insurance Company paid $1 million dollars to settle certain personal injury claims brought against San Francisco Unified School District ("the District") arising from an automobile-pedestrian accident that occurred on District property. The District was listed as an "additional insured" on a liability policy Nationwide had issued to San Francisco Associates, a youth sports organization that contracted with the District to use its facilities.

         Nationwide now brings this action against Certain Underwriters at Lloyd's, London ("Lloyds"), seeking to recover all or part of the $1 million dollars it paid out, on the theory that Underwriters was obliged to provide coverage under a policy it issued directly to the District. Lloyds moves to dismiss the complaint, contending that as a matter of law it had no duty to indemnify the District unless and until the District satisfied a "Self Insured Retention" ("SIR") provision of the policy by paying $250, 000 out of its own pocket, a condition that the face of the complaint reveals has not been satisfied. Lloyds also argues that its policy in any event offers no coverage under the "Errors and Omissions" ("E&O") provisions, as "bodily injury" is excluded from that section. As a result, Lloyds contends, Nationwide's eighth claim for relief-seeking declaratory relief that the Lloyds policy does provide E&O coverage-fails, regardless of the outcome of the SIR issue.

         Lloyds has failed to show that its potential liability is precluded by the failure of the District to pay the SIR from its own funds. Accordingly, the motion cannot be granted in whole. Nationwide, however, does not contest Lloyd's contention that there is no E&O coverage. As a result, the eighth claim for relief will be dismissed.


         San Francisco Associates operates a youth basketball program. In September of 2011 it obtained a permit from the District to use certain school facilities, with various limitations and conditions. As, noted, in furtherance of that arrangement, San Francisco Associates obtained a Comprehensive General Liability ("CGL") insurance policy from Nationwide in which the District was named as an "additional insured."

         In December of 2011, the District hosted a "school-related evening event" at Presidio Middle school, attended by more than 200 people. Part of an outdoor "blacktop quad/playground area" was converted to a parking area for the event, but allegedly lacked adequate lighting or a "traffic control plan." Several children were injured when struck by a car in the makeshift parking lot.

         Two cases brought on behalf of the injured were filed in San Francisco Superior Court against the District, and were eventually consolidated. The District tendered that underlying litigation to Nationwide, which ultimately agreed to defend under a reservation of rights. Nationwide alleges that for several months it attempted to engage Lloyds in communication regarding the two companies' respective potential liability. Nationwide asserts that Lloyds refused to communicate, or to participate in efforts to mediate the underlying litigation.

         Nationwide ultimately settled the underlying litigation for its policy limits of $1, 000, 000.

         In this action, Nationwide asserts ten numbered claims for relief against Lloyds. The first six claims all seek declaratory relief that Nationwide had no duty to defend and indemnify the District, for various reasons arising from the language of the policy and/or the underlying circumstances. While the parties do not expressly discuss any of those claims for relief, there is no dispute that Nationwide will not be able to seek declaratory relief on those issues as against Lloyds, unless Lloyds also potentially had a duty to indemnify the District under the policy it issued. The focus of the present motion, therefore, is on the last four claims for relief.

         The seventh claim seeks declaratory relief that the Lloyds policy provides CGL coverage for the underlying litigation. The eighth claim seeks declaratory relief that the Lloyds policy provides E&O coverage that would have applied to the underlying litigation. The ninth and tenth claims seek equitable contribution, and equitable subrogation, respectively.


         A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). While "detailed factual allegations are not required, " a complaint must have sufficient factual allegations to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 566 U.S. 652, 678 (2009) (citing Bell Atlantic v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible "when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. This standard asks for "more than a sheer possibility that a defendant acted unlawfully." ...

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