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Northfield Insurance Co. v. Civic Center Hotel, LLC

United States District Court, N.D. California

March 8, 2017

NORTHFIELD INSURANCE COMPANY, Plaintiff,
v.
CIVIC CENTER HOTEL, LLC, et al., Defendants.

          ORDER GRANTING MOTION TO STAY RE: DKT. NO. 26

          WILLIAM H. ORRICK UNITED STATES DISTRICT JUDGE.

         INTRODUCTION

         Northfield Insurance Company (“Northfield”) brought this action for declaratory relief against defendants Civic Center Hotel, LLC; Balvantsinh “Bill” Thakor; and U.A. Local 38 Pension Trust Fund (collectively, “Civic Center Defendants”) concerning its obligation to provide insurance coverage for certain types of damages in two underlying state court actions in which tenants of the Civic Center Hotel allege inhabitable conditions. The underlying actions are ongoing and Northfield does not deny its duty to defend. However, it seeks a declaration that certain damages are not covered under Northfield Insurance Policies (2012/2013 Policy, 2013/2014 Renewal, and 2014/2015 Renewal), and now moves for summary judgment that attorneys' fees, restitution, and penalties are not covered under the policies. Concurrently, defendant U.A. Local 38 moves to dismiss this action because it is not ripe, or to stay pending resolution of the underlying actions. Additionally, defendants Civic Center Hotel and Bill Thakor move for summary judgment on plaintiffs' fifth cause of action that the “habitability of premises” exclusion is unenforceable as a matter of law.

         Northfield's justification for proceeding now is that a resolution on coverage for the three categories of damages will help facilitate settlement negotiations. That is not a persuasive reason for the Court to exercise jurisdiction. While this action satisfies constitutional and statutory jurisdictional prerequisites, I will STAY it pending resolution of the underlying actions in Superior Court. I do not reach the merits of the pending motions for summary judgment.

         BACKGROUND

         I. FACTUAL BACKGROUND

         A. The Northfield Insurance Policies

         Northfield Insurance Company (“Northfield) is a surplus lines insurer that uses Coastal Brokers Insurance Services, Inc. (“Coastal Brokers”) as its California agent. Northfield's Opp'n to Defs.' Mot. for P. Summ. J. at 1 (Dkt. No. 61). Northfield provided the defendants with insurance from 2012 to 2015. Compl. ¶¶ 10-13 (Dkt. No. 1). The initial insurance policy includes general commercial liability (“GCL”) and covers a period of March 31, 2012 to March 31, 2013 (“Northfield 2012/2013 policy”), Compl., Ex. A (Dkt. No. 1-1); see also Tucker Decl., Ex. A (Dkt. No. 24-1). This policy was renewed for a coverage period of March 31, 2013 to March 31, 2014 (“Northfield 2013/2014 policy”), Compl., Ex. B (Dkt. No. 1-2); see also Tucker Decl., Ex. B; and again from March 31, 2014 to March 31, 2015 (“Northfield 2014/2015 policy”), Compl., Ex. C (Dkt. No. 1-3); see also Tucker Decl., Ex. C. Aside from one critical difference described below, the Northfield Policies, naming as insured “Civic Center Hotel, LLC. DBA: Civic Center Hotel, ” are “materially identical in all relevant respects.” Compl. ¶ 13. Under each of the policies, Local 38 Trust, owner of the property, is named as an additional insured, “but only with respect to liability for ‘bodily injury, ' ‘property damage' or ‘personal and advertising injury' caused, in whole or in part, by the acts and omissions of Civic Center Hotel… .” Id. ¶ 14.

         The policies cover “Bodily Injury and Property Damage Liability” under Coverage A and “Personal and Advertising Injury Liability” under Coverage B, and provide that Northfield “will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury' or ‘property damage' [or ‘personal and advertising injury'] to which this insurance applies.” Compl. ¶ 15 (quoting policies); see also Pl.'s Mot. for Summ. J. at 2 (“Pl.'s MSJ”)(Dkt. No. 23); Local 38's Mot. to Dismiss or Stay at 5 (“MTDS”)(Dkt. No. 26). The “bodily injury” or “property damage” must be caused by an “occurrence, ” defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Compl. ¶ 15-16 (quoting policies). “Bodily injury” is defined as “bodily injury, sickness or disease sustained by a person… .” Id. ¶ 16.

         Northfield alleges that the provision entitled “Supplementary Payments” expressly excludes attorneys' fees.

1. [The insurer] will pay, with respect to any claim we investigate or settle, or any “suit” against an insured we defend:
e. All court costs taxed against the insured in the “suit.” However, these payments do not include attorneys' fees or attorneys' expenses taxed against the insured.

Tucker Decl., Exs. A, B, C (Dkt. No. 24-1). It also contends that each of the Northfield Policies excludes coverage for “punitive or exemplary damages, fines, penalties or multiplied damages. Compl. ¶ 21; Tucker Decl. ¶¶ 2-4; Ex. A; Ex. B; Ex. C.

         The 2014/2015 Northfield Policy differs from the prior policies in that it includes an additional exclusion for both Coverage A and Coverage B, entitled “Habitability of Premises.” Defs.' Cross-Motion for Partial Summ. J. at 6 (“Defs.' MPSJ”)(Dkt. No. 50).

Exclusion - Habitability of Premises
The following exclusion is added to Paragraph 2., Exclusions, of SECTION I - COVERAGES - COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY [and] COVERAGE B PERSONAL AND ADVERTISING INJURY LIABILITY:
"Bodily injury" or "property damage" [or] “Personal and advertising injury”:
(1) Arising out of the:
(a) Actual or alleged violation of any federal, state or local law, code, regulation, ordinance or rule relating to the habitability of any premises;
(b) Breach of any lease, rental agreement, warranty or covenant to maintain a premises in a ...

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