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Lexington Insurance Co. v. Maxum Casualty Insurance Co.

United States District Court, E.D. California

June 19, 2017

LEXINGTON INSURANCE COMPANY, Plaintiff,
v.
MAXUM CASUALTY INSURANCE COMPANY, et al., Defendant.

          ORDER REGARDING DEFENDANT'S MOTION TO TRANSFER ACTION TO CENTRAL DISTRICT OF CALIFORNIA PURSUANT TO 28 U.S.C. § 1404 (DOC. 5)

          BARBARA A. MCAULIFFE, UNITED STATES MAGISTRATE JUDGE.

         Presently before the Court is Defendant Maxum Casualty Insurance Company's (“Maxum” or “Defendant”) motion to transfer this action to the Central District of California pursuant to 28 U.S.C. § 1404. (Doc. 5). Plaintiff Lexington Insurance Company (“Lexington” or “Plaintiff”) opposed the motion on May 26, 2017 (Doc. 9-11), and Maxum replied on June 2, 2017. (Doc. 12). The Court took the matter under submission without oral argument pursuant to Local Rule 230(g), and vacated the hearing set for June 9, 2017. Having considered the moving, opposition and reply papers, Maxum's motion to transfer this action to the Central District of California shall be GRANTED.

         BACKGROUND

         Plaintiff Lexington Insurance Company (“Plaintiff”) filed this action on February 14, 2017, in the Fresno County Superior Court against Defendant Maxum. On March 22, 2017, Maxum filed an answer in the Fresno County Superior Court. Thereafter, on March 23, 2017, Maxum removed the action to this Court on the basis of diversity. (Doc. 1).

         Plaintiff Lexington, an excess liability insurer, is incorporated in Delaware with its principal place of business in Boston, Massachusetts. Defendant Maxum Casualty Insurance Company, a primary insurer, is a Connecticut Corporation[1] with its principal place of business in Atlanta, Georgia. (Doc. 1). This insurance coverage case claims that primary insurer Maxum unreasonably failed to settle an underlying wrongful death case-Clark v. Castillo (“Clark Case”)-which involved a fatal motor vehicle collision occurring in Riverside County, California. Plaintiff Lexington alleges that Defendant's failure to settle that case within its policy limits resulted in a jury award in excess of the primary policy limits.

         The parties do not dispute that, based on the current allegations of Plaintiff's Complaint, no party or fact witness resides in the Eastern District of California, and no relevant events occurred in this district.

         Plaintiff's Allegations

         In the complaint, Plaintiff alleges that Maxum accepted the defense of its insured Omar Castillo (“Castillo”) in the Clark v. Castillo action in Riverside County Superior Court, case no. INC 1204305. Plaintiff's Complaint (“Compl.”), ¶ 9, 13. The underlying action was brought by the family and heirs of Ernest Clark who was struck and killed by a tractor trailer operated by Castillo on March 13, 2012 while Castillo was hauling a trailer owned by Gardner Trucking, Inc. Compl. ¶ 11.

         Castillo was insured under a Commercial Auto Policy issued by Maxum to Omar Castillo DBA Omar Castillo Trucking, policy no. TRK 60177898-01, with a $1, 000, 000 per occurrence policy limit. Compl. ¶ 6. Castillo was also insured under a Commercial Auto Policy issued by National Interstate Insurance Company (“National Interstate”) to Gardner Trucking, with a per occurrence limit of $1, 000, 000. Compl. ¶ 7. National Interstate was notified of the underlying action and took a position as an excess insurer to Castillo above Maxum's position and monitored that action on an ongoing basis. Compl. ¶ 15.

         Plaintiff Lexington also insured Castillo under a Follow Form Excess Liability policy issued to Gardner Trucking, policy no. 048883243, with a per occurrence limit of $10, 000, 000. Lexington was not notified of the underlying action until after a judgment was entered against Castillo. Compl. ¶ 8.

         According to Plaintiff Lexington, as primary insurer, Defendant Maxum controlled the defense of and responded to settlement demands from the plaintiffs in the underlying action. Compl. ¶ 15. Initial reports from Maxum's selected defense counsel indicated a potentially favorable outcome; however as the action proceeded several adverse factual discoveries were made about the veracity of Castillo's statements. Compl. ¶ 16. During discovery, the underlying Plaintiffs learned that Castillo had falsified logbook entries regarding rest or sleep breaks which were contradicted by the black box of the truck Castillo was driving. Compl. ¶ 17. It was also discovered that Castillo made untruthful statements about talking on the phone with his mistress at the time of the accident. Compl. ¶ 19.

         On three occasions during the underlying action, Maxum was offered an opportunity to settle the Clark case for its policy limits. Compl. ¶¶ 34-36. However, each time, Maxum refused to do so. Compl. ¶ 37. The matter ultimately proceeded to trial and a judgment of $4, 440, 000.00 was entered against Castillo. Compl. ¶ 32. Lexington paid $2, 440, 000.00 to the underlying plaintiffs to protect Castillo and reserved rights to seek reimbursement from Maxum for improper handling of the underlying action. Compl. ¶ 42. Lexington alleges that Maxum's refusal to settle the underlying action within its policy limits resulted in damage to Plaintiff Lexington of $2, 440, 000.00 which would not have been paid but for Maxum's failures to accept reasonable settlement offers and other improper handling. Compl. ¶ 46-47.

         Plaintiff Lexington brings a single claim for equitable subrogation against Defendant Maxum for relief including: damages according to proof, reasonable attorney fees, prejudgment interest according to proof, costs of this suit, and other relief as the Court deems just and proper.

         LEGAL ...


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