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Evanston Insurance Co. v. Atain Specialty Insurance Co.

United States District Court, N.D. California, San Jose Division

May 26, 2017



          LUCY H. KOH United States District Judge.

         Plaintiff Evanston Insurance Company (formerly, Markel Service Incorporated) (“Plaintiff) brings this insurance coverage action against Defendant Atain Specialty Insurance Company (“Defendant”) seeking declaratory relief. ECF No. 55 (Second Amended Complaint, or “SAC”). Before the Court is Defendant's Motion for Summary Judgment. ECF No. 49 (“Mot.”). Having considered the parties' submissions, the relevant law, and the record in this case, the Court GRANTS Defendant's Motion for Summary Judgment.

         I. BACKGROUND

         A. Factual Background

         Plaintiff and Defendant agree that the facts in the instant suit are undisputed. Plaintiff and Defendant both insure Norcal Motor Escort, LLC (“Norcal”), a motorcycle escort business. SAC ¶ 7. Specifically, Norcal has an Automobile Insurance Policy with Plaintiff, ECF No. 49-2 at 20-64 (“Pl. Auto Policy”), and Norcal has a Commercial General Liability Coverage Policy with Defendant (“Defendant's CGL policy”), ECF No. 49-1 (Def CGL Policy).

         The instant dispute arises out of an automobile collision that involved Norcal's employees. SAC ¶ 3. On November 2, 2012, Norcal employees Mario Hernandez (“Hernandez”) and Robert Keyarts (“Keyarts”) were serving as motorcycle escorts for a funeral procession in San Jose, California. Id. ¶¶ 2-3. Hernandez and Keyarts were both acting within the scope of their employment for Norcal. ECF No. 49-2 at 5-13 (“Pl. Admissions”). Hernandez approached an intersection and began directing traffic and pedestrians through the intersection. SAC ¶ 3. A pedestrian, Brittany Cohen (“Cohen”), entered the intersection on a bicycle. Id. Keyarts, rode a motorcycle from the back of the funeral procession towards the intersection and attempted to brake, but “fell and slid into Cohen and Hernandez.” Id.

         On October 31, 2014, Cohen sued Norcal, Hernandez, and Keyarts for negligence in the Superior Court of Santa Clara County (the “underlying action”). ECF No. 49-3 Ex. A (“State Court Compl.”).[1] In the underlying action, Cohen's State Court Complaint asserted causes of action for motor vehicle negligence and general negligence. With respect to Hernandez, Cohen alleged the following facts:

[Hernandez] was directing traffic and pedestrians as an escort for a funeral procession. He directed pedestrians, including [Cohen], to cross 10th Street from west to east, while the funeral procession was stopped facing southbound. The procession was negligently allowed to stop with vehicles in the intersection. After [Hernandez] initially directed pedestrians to stop and wait on the west side of 10th Street, he then directed them to proceed to cross eastbound in the marked crosswalk, while the funeral procession remained stopped. The pedestrians, including [Cohen], were crossing following the instruction of Defendant, who appeared to be a police officer. Plaintiff was walking her bicycle and had cleared the closest southbound lane of traffic. The next lane had no vehicles in it. As she crossed, she was struck by a motorcycle that was part of the funeral escort, driven by Defendant Robert Keyarts. Unbeknownst to Plaintiff, Keyarts had left the rear of the procession and was driving southbound in the next lane. He approached the intersection without warning. Defendant Hernandez did not warn [Cohen] or other pedestrians of the approaching motorcycle driven by Robert Keyarts. He did not warn Robert Keyarts of the pedestrians he had directed to cross 10th Street.

         State Court Compl. at 8. With respect to Keyarts, Cohen alleged the following facts:

[Keyarts] was working as an escort for a funeral procession. He negligently operated the motorcycle he was riding, negligently failed to communicate with Defendant Hernandez as to pedestrians in the area, and failed to warn [Cohen] and other pedestrians that [Keyarts] was approaching the intersection, while the funeral procession vehicles were stopped.

Id. at 9.

         On June 24, 2015, pursuant to Defendant's CGL policy, Plaintiff tendered to Defendant the defense and indemnity of Norcal and Hernandez. SAC ¶ 7. On August 25, 2015, Defendant declined Plaintiffs tender, refused to provide a defense or indemnity to Norcal, and argued that the funeral procession collision was excluded from Defendant's CGL policy under an “Auto Exclusion.” Id. ¶ 8.

         Upon Defendant's denial of the tender of defense and indemnity, Plaintiff “provided a defense and indemnified [Norcal] by paying $105, 000.00 to Cohen for bodily injury damages” under the terms of Norcal's Automobile Insurance Policy with Plaintiff. Id. ¶ 10. Plaintiff asserts in its opposition to the instant motion that it spent $28, 531.77 on the defense of the underlying action. ECF No. 50 (Opposition to the instant motion).

         B. Procedural History

         On May 13, 2016, Plaintiff sued Defendant in the Superior Court for Santa Clara County. Plaintiffs original complaint alleged causes of action for subrogation and indebtedness and demanded monetary damages in the sum of $105, 000. See ECF No. 1 at 7-8.

         On July 29, 2016, Defendant filed a notice of removal and removed this action to the United States District Court for the Northern District of California on the basis of diversity jurisdiction. ECF No. 1 at 1.

         On August 25, 2016, Plaintiff filed a motion to remand this action to state court. ECF No. 15. On September 8, 2016, Defendant filed an opposition to Plaintiffs motion to remand. ECF No. 18. Plaintiff did not file a reply.

         On August 29, 2016, Defendant filed a motion to dismiss Plaintiffs Complaint under Federal Rule of Civil Procedure 12(b)(6). ECF No. 17. On October 4, 2016, Plaintiff filed an opposition to Defendant's motion to dismiss, ECF No. 23, and on October 11, 2016, Defendant filed a reply, ECF No. 31.

         Plaintiff filed a First Amended Complaint (“FAC”) on October 12, 2016. ECF No. 34. Plaintiffs FAC stated that “[t]his is an action for declaratory judgment pursuant to the Federal Declaratory Judgment Act, 28 U.S.C. § 2201.” Id. at 1. Plaintiff alleged four causes of action: (1) duty to defend, (2) duty to indemnify, (3) declaratory judgment that defendant owed Norcal a duty to defend, and (4) declaratory judgment that Defendant owed Norcal a duty to indemnify. Id. at ¶¶ 18-31.

         On October 12, 2016, in light of Plaintiff s FAC, the Court denied Defendant's motion to dismiss the original complaint as moot. ECF No. 33. On October 25, 2016, Defendant answered the FAC. ECF No. 36.

         On November 10, 2016, the Court denied Plaintiffs motion to remand. ECF No. 37.

         On February 22, 2017, Defendant filed the instant motion for summary judgment. ECF No. 49 (“Mot.”). On March 8, 2017, Plaintiffs filed an opposition in which Plaintiff requested summary judgment pursuant to Federal Rule of Civil Procedure 56(f)(1). ECF No. 50 (“Opp'n”). On March 15, 2017, Defendant filed a reply. ECF No. 53 (“Reply”).

         On March 20, 2017, the Court granted the parties' stipulation to file a second amended complaint (“SAC”) that changed the name of Markel Service Incorporated to Evanston Insurance Company because of a recent merger. ECF No. 54. On March 21, 2017, Plaintiff filed an SAC with Plaintiffs name changed to Evanston Insurance Company. See SAC.

         On March 21, 2017, Plaintiff filed a Supplemental Brief in Reply to Defendant's Opposition to Plaintiffs F.R.C.P. 56(f)(1) Request for Summary Judgment. ECF No. 56 (“Pl. Supp. Brief). On March 24, 2017, Defendant filed an Administrative Motion to Strike Plaintiffs Supplemental Brief. ECF No. 57 (“Strike Mot.”). On March 29, 2017, Plaintiff filed an opposition to the administrative motion to strike. ECF No. 60 (“Strike Opp'n”).


         A. Summary Judgment

         Summary judgment is proper where the pleadings, discovery and affidavits demonstrate that there is “no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). Material facts are those which may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id.

         The party moving for summary judgment bears the initial burden of identifying those portions of the pleadings, discovery and affidavits which demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Cattrett, 477 U.S. 317, 323 (1986). Where the moving party will have the burden of proof on an issue at trial, it must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party. However, on an issue for which the opposing party will have the burden of proof at trial, the moving party need only point out “that there is an absence of evidence to support the nonmoving party's case.” Id. at 325.

         Once the moving party meets its initial burden, the nonmoving party must go beyond the pleadings and, by its own affidavits or discovery, “set forth specific facts showing that there is a genuine issue for trial.” Fed.R.Civ.P. 56(e). The court is only concerned with disputes over material facts and “factual disputes that are irrelevant or unnecessary will not be counted.” Anderson, 477 U.S. at 248. It is not the task of the court to scour the record in search of a genuine issue of triable fact. Keenan v. Allen, 91 F.3d 1275, 1279 (9th Cir. 1996). The nonmoving party has the burden of identifying, with reasonable particularity, the evidence that precludes summary judgment. Id. If the nonmoving party fails to make this showing, “the moving party is entitled to judgment as a matter of law.” Celotex Corp., 477 U.S. at 323.

         At the summary judgment stage, the court must view the evidence in the light most favorable to the nonmoving party: if evidence produced by the moving party conflicts with evidence produced by the nonmoving party, the judge must assume the truth of the evidence set forth by the nonmoving party with respect to that fact. See Leslie v. Grupo ICA, 198 F.3d 1152, 1158 (9th Cir. 1999).

         B. State Law in Diversity Cases

         “In determining the law of the state for purposes of diversity, a federal court is bound by the decisions of the highest state court.” Albano v. Shea Homes Ltd. P'ship,634 F.3d 524, 530 (9th Cir. 2011). If the state's highest court has not decided an issue, it is the responsibility of the federal courts sitting in diversity to predict “how the state high court would resolve it.” Id; Air-Sea Forwarders, Inc. v. Air Asia Co., Ltd.,880 F.2d 176, 186 (9th Cir. 1989) (internal quotation marks omitted). In the absence of clear authority, the Court looks for guidance from decisions of the state appellate courts and other ...

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