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Bankers Insurance Co v. A-1 Air Conditioning & Heating a partnership

United States District Court, E.D. California

March 23, 2017

BANKERS INSURANCE COMPANY, a Florida corporation, Plaintiff,



         This insurance coverage dispute was sparked by a state court lawsuit over a residential fire. It heated up with a cross-complaint filed against Defendants in the state court action for which Defendants tendered their defense to Bankers Insurance Company (“Bankers”). Bankers further fanned the flames by filing this present action for declaratory relief and it now seeks summary judgment concerning its duties to defend and indemnify the Defendants in the underlying action. For the reasons described below the Court grants Bankers' Motion for Summary Judgment.


         A-1 Air Conditioning & Heating (“A-1”) is a sole proprietorship owned by Daniel Edward Michael Webb (“Webb”) that installs and services heating and air conditioning equipment. Defendants' Responses to Plaintiff's Separate Statement of Undisputed Facts (“SUF”), ECF No.42, at ¶¶ 10, 27. A-1, Webb, and Daniel Fisher (“Fisher”) applied to Bankers for general liability coverage in 2002 and held a Bankers policy from August 2003 to August 2005. SUF ¶¶ 4, 5, 6; Exh. 8. Webb and Fisher also partnered to create Homestead Installations (“Homestead”), a fireplace and stove installation business that incorporated in April 2002 and for which Webb and Fisher were the sole shareholders. Defendants' Opposition at 2; SUF at ¶¶ 8, 11. Although Homestead attempted to secure insurance from Bankers in 2004, Homestead has never been listed as a named insured on a Bankers policy. SUF at ¶¶ 7, 21; Filipoone Decl. at ¶ 6.

         In 2004, Fisher-working for Homestead-installed a wood burning stove and flue system at 9753 Ben Hall Drive in Galt, California. SUF at ¶¶ 12, 15, 25. Custom Fireside Shop, Inc. (“Custom”) contracted Homestead to perform the work and required Homestead to procure a one million dollar general liability insurance policy naming Custom as an additional insured. SUF at ¶¶ 12, 13. Homestead attempted to apply for this insurance with the Scott Alberts Insurance Agency (“Alberts”) through the Alberts' employee Linda Shook (“Shook”). Alberts and Shook then provided Defendants with an ACORD form Certificate of Liability Insurance, which names A-1 and Homestead as insureds, Custom as the certificate holder, and Alberts as the producer. SUF at ¶¶ 16, 17; Exh. 7. Around March 28, 2012, the residence in which Fisher installed the above-described stove was destroyed in a fire. SUF at ¶ 18.


         About a year and a half after the fire, Safeco Insurance Company (“Safeco”) filed a state lawsuit against several parties, including Custom, due to the fire and the money Safeco paid the insured for damage to the residence. SUF at ¶ 19; Exh. 4. Custom filed a cross-complaint naming Homestead, A-1, Webb, and Fisher, among others. SUF at ¶ 19; Exh. 5. Custom, Homestead, A-1, Webb, and Fisher each tendered their defense to Bankers and requested that Bankers defend and indemnify them in the Safeco lawsuit. SUF at ¶ 20. Bankers filed the present suit in January 2016 seeking a judicial declaration-pursuant to 28 U.S.C. § 2201-that it does not owe a duty to defend or indemnify A-1, Fisher, Webb, Homestead, or Custom in the Safeco suit. Complaint for Declaratory Relief, ECF No. 1. Bankers also named Safeco as a defendant in order for the judgment to bind Safeco. Compl. at ¶ 7. A default was entered against A-1, Homestead, Safeco and Webb on May 25, 2016. ECF No. 11. The default was set aside on June 29, 2016 as to Webb and A-1. ECF No. 14. By stipulation and Court order, Custom was not required to file any responsive pleading and dismissed from this action. ECF Nos. 5 & 6. A-1, Webb, Fisher, and Homestead[1] filed their Answer and “cross-complaint”[2] against Alberts and Shook (“Cross-Defendants”) alleging that Cross-Defendants failed to secure the requested Bankers insurance coverage and asserting related claims. See Cross-Complaint, ECF No. 15.

         Plaintiff filed its Motion for Summary Judgment on January 13, 2017. ECF No. 28. Cross-Defendants requested a continuance of the hearing on the motion, which the Court denied. ECF Nos. 29 & 33. A-1, Webb, Fisher, and Homestead (hereinafter “Defendants”) filed an opposition, as did Cross-Defendants. ECF Nos. 40 & 34. Although Plaintiff contests Cross-Defendants' standing to oppose its motion, Plaintiff replied to each opposition. ECF Nos. 43 & 44.

         III. OPINION

         A. Declaratory Relief

         In a suit seeking declaratory judgment pursuant to 28 U.S.C. § 2201, a district court must first inquire whether there is an actual case or controversy within its jurisdiction. Principal Life Ins. Co. v. Robinson, 394 F.3d 665, 669 (9th Cir. 2005). This standard is identical to Article III's constitutional case or controversy requirement and thus determines the court's jurisdiction to award relief. Am. States Ins. Co. v. Kearns, 15 F.3d 142, 143 (9th Cir. 1994).

         The Ninth Circuit has held that in a declaratory judgment action brought to determine an insurer's duty to defend and indemnify in a pending state court liability suit, the case or controversy requirement is met. Kearns, 15 F.3d at 144 (1994). In this case, the underlying state lawsuit was pending when Bankers' instigated the action and there is no indication in the record that the state case has resolved. The Defendants tendered their defense to Bankers and Bankers-as the present litigation demonstrates-contests its obligations to Defendants. Under Ninth Circuit precedent and the present facts, the case or controversy requirement is met.

         The Court must also exercise its discretion to determine whether entertaining the action is proper. Gov't Emp. Ins. Co. v. Dizol, 133 F.3d 1220, 1223 (9th Cir. 1998). Prudential guidance for retention is found in Brillhart v. Excess Ins. Co. of Am. and includes considerations of the needless determination of state law issues, forum shopping, and avoidance of duplicative litigation. Id. at 1223-25 (Citing Brillhart, 316 U.S. 491 (1942)). The Ninth Circuit has indicated that other considerations may be appropriate, such as “whether the declaratory action will settle all aspects of the controversy; whether the declaratory action will serve a useful purpose in clarifying the legal relations at issue; whether the declaratory action is being sought merely for the purposes of procedural fencing or to obtain a ‘res judicata' advantage; [] whether the use of a declaratory action will result in entanglement between the federal and state court systems[;] . . . convenience of the parties[;] and the availability and relative convenience of other remedies.” Id. at 1225 n. 5 (quoting Kearns, 15 F.3d at 145 (J. Garth, concurring)).

         The Court finds that retention is proper in this case. Defendants have not objected to this Court deciding the action. Although the case turns on state law, it is not an anticipatory lawsuit and there is no indication that Bankers is forum shopping. Bankers is not a party to the underlying litigation and, to the Court's knowledge, there are no parallel state proceedings involving the same issues between the parties. Cf. Chamberlain v. Allstate Ins. Co., 931 F.2d 1361, 1366-67 (9th Cir. 1991) (“[W]hen a party requests declaratory relief in federal court and a suit is pending in state court presenting the same state law issues, there exists a presumption that the entire suit should be heard in state court.”). Thus, the Court does not find that declaratory relief is sought for the purposes of procedural fencing, nor that a decision will entangle the ...

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