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Scottsdale Insurance Co. v. Hudson Specialty Insurance Co.

United States District Court, N.D. California

March 21, 2017

SCOTTSDALE INSURANCE COMPANY, Plaintiff,
v.
HUDSON SPECIALTY INSURANCE COMPANY, Defendant.

          ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT RE: DKT. NOS. 57, 63

          HAYWOOD S. GILLIAM, JR. United States District Judge

         Before the Court are Plaintiff Scottsdale Insurance Company's (“Scottsdale”) and Defendant Hudson Specialty Insurance Company's (“Hudson”) cross-motions for summary judgment. See Dkt. Nos. 57, 63. Scottsdale, an excess insurance provider, asserts claims for equitable indemnification and subrogation against Hudson, a primary insurance provider, for allegedly failing to contribute the full amount required under the primary policy. Hudson contends that it made a complete payment under the terms of the primary policy.

         Under Civil Local Rule 7-1(b) and Federal Rule of Civil Procedure 78(b), this motion was deemed suitable for disposition without oral argument. Having carefully considered the parties' arguments, the Court DENIES Scottsdale's motion for summary judgment, and GRANTS Hudson's cross-motion for summary judgment for the reasons set forth below.

         I. BACKGROUND

         A. Undisputed Facts

         This is a dispute between an excess and a primary insurance carrier regarding the amount of their obligations to resolve a claim settled with the insured. The Court first discusses the terms of the primary and excess policies, before discussing the underlying lawsuit, its settlement, and the structure of the insurance payments under that claim. Unless otherwise stated, the following facts are undisputed. See Dkt. Nos. 1 (“Compl.”), 25 (“Answ.”).[1]

         1. The Primary Insurance Policy

         Priority Parking Services, CA, LLC (“Priority Parking”) leased a parking garage located at 1040 Sacramento Street in San Francisco, California (“Brocklebank Garage”) from Nob Hill Properties (“Nob Hill”) on or about May 2, 2005. Compl. ¶¶ 10-11. Nob Hill assigned its leasehold interest to Fritz Property Group, Inc. (“Fritz”) on or about July 31, 2008. Id. ¶ 12.

         Hudson provided primary liability insurance to Priority Parking for the period from May 1, 2011, to May 1, 2012 (“Primary Policy”). Id. ¶ 13; Dkt. No. 60, Ex. 1. The Primary Policy included commercial general liability coverage. Dkt. No. 60, Ex. 1 at POLICY0014-28. Section I of the commercial general liability coverage form within the Primary Policy set forth three separate and distinct types of coverage: (1) Coverage A Bodily Injury and Property Damage Liability (“Coverage A”); (2) Coverage B Personal and Advertising Injury Liability; and (3) Coverage C Medical Payments. Id., Ex. 1 at POLICY0014-20. Of these coverage agreements, only Coverage A is now at issue.

         Coverage A covered bodily injury claims as follows: “[Hudson] will pay those sums that [Priority Parking] becomes legally obligated to pay as damages because of ‘bodily injury' . . . to which this insurance applies.” Compl. ¶ 14. Coverage A applied only if the bodily injury was caused by an “occurrence” that took place in the “coverage territory” during the policy period. Id. ¶ 15. “Bodily injury” included “bodily injury . . . sustained by a person[.]” Id. ¶ 16. “Occurrence” included “an accident.” Id. ¶ 17. The Brocklebank Garage was in covered territory. Id. ¶ 22.

         By endorsement, [2] the Primary Policy included an additional provision entitled “Parking Operations Errors and Omissions Liability” (“Parking Operations E&O”). Dkt. No. 60, Ex. 1 at POLICY0042. Its preamble stated:

         “This endorsement modifies insurance provided under the following:

COMMERCIAL GENERAL LIABILITY COVERAGE PART
Under SECTION I - COVERAGES
COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY[.]”

Id., Ex. 1 at POLICY0042. Beneath that preamble, the endorsement stated: “Insuring Agreement is amended to include: [subpart] e. [Hudson] will pay those sums [Priority Parking] becomes legally obligated to pay as damages because of any negligent act, error or omission during the policy period arising out of [Priority Parking's] parking operations.” Compl. ¶ 18. The terms “negligent act, ” “error, ” and “omission” were left undefined. Id. ¶¶ 19-21.

         The Primary Policy also included a set of “Common Policy Declarations” that preceded the commercial general liability form discussed above. Dkt. No. 60, Ex. 1 at POLICY0002-06. On the “Liability Coverage” declarations page, there were four tables set forth under different headings. Id., Ex. 1 at POLICY0005. Under the heading “Commercial General Liability” and the subheading “Limits of Insurance, ” the declaration set a coverage limit of $1, 000, 000 for “each occurrence.” Id., Ex. 1 at POLICY0005. Under the heading “Parking Operations Errors and Omissions” and the subheading “Limits of Insurance, ” the declaration set a coverage limit of $1, 000, 000 for “each claim.” Id., Ex. 1 at POLICY0005.

         Section III of the commercial general liability agreement provided that the “Limits of Insurance shown in the Declarations and the rules below fix the most [Hudson] will pay regardless of the number of: (a) Insureds; (b) Claims made or ‘suits' brought; or (c) Persons or organizations making claims or bringing ‘suits.'” Id., Ex. 1 at POLICY0022. The rules below that clause provided two terms relevant to this dispute. First: “The General Aggregate Limit is the most [Hudson] will pay for the sum of: Medical expenses under Coverage C; Damages under Coverage A[;] and Damages under Coverage B.” Id., Ex. 1 at POLICY0023. Second, as actually formatted:

Subject to [the General Aggregate Limit], the Each Occurrence Limit is the most [Hudson] ...

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