United States District Court, E.D. California
TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, a Connecticut corporation, Plaintiff,
LIBERTY SURPLUS INSURANCE CO., a Massachusetts corporation; and DOES 1 through 10 inclusive, Defendants.
MEMORANDUM AND ORDER RE: MOTION FOR SUMMARY
WILLIAM B. SHUBB, UNITED STATES DISTRICT JUDGE
Travelers Property Casualty Company of America
(“Travelers”) seeks to compel defendant Liberty
Surplus Insurance Company (“Liberty”) to
reimburse plaintiff for half of the attorney's fees
plaintiff allegedly incurred while intervening in a lawsuit
on behalf of nonparty Dura Art Stone, Inc.
(“Dura”). Presently before the court is
defendant's Motion for Summary Judgment (Docket No. 11).
Factual and Procedural Background
September 11, 2012, the Regents of the University of
California initiated a lawsuit (“the Regents
Action”) against Howard S. Wright Construction Co.
(“Wright Construction”) for alleged defects and
damages to buildings on the University of California--Davis
campus. (Compl. (Docket No. 1) ¶ 11.) On October 31,
2012, Wright Construction filed a cross-complaint against
Dura and various other subcontractors alleging claims for
breach of contract and declaratory relief. (Id.)
After receiving notice of the Regents Action, plaintiff
agreed to intervene on behalf of Dura in the action.
(Id. ¶ 12.) The Regents Action is now settled
and has been dismissed. (Pl.'s Mot. for Leave at 5.)
and defendant had both issued Dura a Commercial General
Liability insurance policy. (Decl. of Evan H. Stoller
(“Stoller Decl.”) (Docket No. 11-4) ¶ 4;
Decl. of David H. Waters (“Waters Decl.”) (Docket
No. 11-3) ¶ 5.) Dura was suspended by the California
Secretary of State on May 28, 2009 for failure to comply with
its obligations under the California Corporations Code.
(Waters Decl. ¶ 7.) Dura was also suspended by the
California Franchise Tax Board on August 1, 2011, for failure
to comply with its tax obligations. (Id.) Dura
remained suspended throughout the duration of the Regents
Action, and was still suspended at the time this lawsuit was
filed. (Id. ¶ 8.)
November 21, 2016, Travelers filed this complaint against
Liberty asserting claims for (1) Declaratory Relief Re: Duty
to Defend; (2) Declaratory Relief Re: Duty to Indemnify; and
(3) Declaratory Relief Re: Allocation of Fees and Costs.
contends that it is entitled to summary judgment on the issue
of whether it had a duty to defend and indemnify Dura, or an
equitable duty and responsibility to pay fees and costs
incurred by plaintiff on behalf of Dura.
the Regents Action, Dura was suspended by the California
Secretary of State and the Franchise Tax Board. Under the
California Revenue and Taxation Code § 23301, a
suspended company is barred from exercising its corporate
powers, rights, and privileges. See Cal. Rev. & T. Code
§ 23301. The phrase “powers, rights, and
privileges” has been interpreted to include a
corporation's right to engage in litigation activities
and defend itself. See, e.g., Palm Valley Homeowners
Ass'n Inc. v. Design MTC, 85 Cal.App.4th 553, 560
(4th Dist. 2000) (when a corporation is suspended, it is
“disabled from participating in any litigation
California Revenue and Taxation Code § 19719(a) makes it
a crime for any person “to exercise the powers, rights,
and privileges of a corporation that has been suspended,
” § 19719(b) specifically excludes “any
insurer, or counsel retained by an insurer on behalf of the
suspended corporation, who provides a defense for a suspended
corporation” from coming within the scope of this
statute. Cal. Rev. & T. Code § 19719; see also
Kaufman & Broad Cmtys., Inc. v. Performance
Plastering, Inc., 136 Cal.App.4th 212, 219 (3d Dist.
2006). Accordingly, while the suspended corporation is
legally barred from defending itself, an insurance company
may provide a defense for said corporation, so long as the
insurer does so “in its own name,  not in the name of
the suspended corporation.” El Escorial Owners'
Ass'n v. DLC Plastering, Inc., 154 Cal.App.4th 1337,
1350 (2d Dist. 2007), as modified on denial of reh'g
(Oct. 3, 2007). In fact, the purpose of this exemption is to
“protect insurers that are obligated to defend
suspended corporations.” Id.
although Dura was unable to defend itself, both plaintiff and
defendant could have defended Dura, albeit not in Dura's
name. Therefore, because doing so was not illegal, the court
turns to the language of the insurance policy to see if such
defense was obligated. When analyzing the policy, there is no
indication that defendant's duties were to be
extinguished or modified in any way if the insured
corporation were to become suspended. The California Supreme
Court has stated that “any provision that takes away or
limits coverage reasonably expected by an insured must be
conspicuous, plain and clear.” Haynes v. Farmers
Ins. Exch., 32 Cal.4th 1198, 1204 (2004). In
defendant's policy, no limitations related to a
corporation's suspension are addressed at all. Thus the
court cannot conclude as a matter of law that Dura's
suspension relieved defendant of its duty to defend, and
defendant's Motion for Summary Judgment on that ground
must be denied.
and Responsibility to Pay Fees and Costs
California law, an insurer's right of equitable
contribution arises when several insurers are obligated to
indemnify or defend the same insured. Fireman's Fund
Ins. Co. v. Maryland Cas. Co.,65 Cal.App.4th 1279, 1293
(1st Dist. 1988). “One of the firm principles
undergirding the doctrine of equitable contribution is that
two or more insurers share an obligation to the common
insured.” Am. Cont'l Ins. Co. v. Am. Cas.
Co.,86 Cal.App.4th 929, 937 (2d Dist. 2001). California
courts have noted that “[i]t would be wholly capricious
if some insurers could avoid liability for contribution by
exploiting the corporate suspension of an insured . . .