United States District Court, S.D. California
ORDER: (1) DENYING NATIONAL UNION'S FIRST MOTION
FOR PARTIAL SUMMARY JUDGMENT (2) GRANTING PORT'S MOTION
FOR PARTIAL SUMMARY JUDGMENT (3) GRANTING NATIONAL
UNION'S SECOND MOTION FOR PARTIAL SUMMARY JUDGMENT
[Docket Nos. 33, 34, 47.]
ROBEERT T. BENITEZ, United States District Court Judge
before the Court is Plaintiff San Diego Unified Port District
("Port"), a California public entity, and Defendant
National Union Fire Insurance Company of Pittsburgh,
("National Union"). This case arises from a
disagreement between the Port and National Union, one of its
liability insurance companies.
AND PROCEDURAL HISTORY
National Union, successor-in-interest to Landmark Insurance
Company ("Landmark") sold the Port both primary
liability and umbrella liability insurance
policies, promising to defend and indemnify the Port against
certain property damage liability claims or lawsuits.
National Union issued four primary policies to the
Port.National Union also sold the Port "the
first layer of liability insurance directly above the
Unexhausted Primary Policies and Exhausted Primary Policies
in the form of umbrella insurance policies. Coverage under
the four Umbrella Policies is triggered once the Primary
Policies are exhausted.
to the First Amended Complaint ("FAC"), the Port
tendered, and National Union agreed to provide a defense
under the Unexhausted Primary Policies to certain claims
(“Claims") and lawsuits
("Suits") asserted against the
Port. Subsequently, National Union informed the
Port that it "unilaterally would be assigning payments
for one of the Port's defense experts to [National
Union's] indemnity obligation against the Unexhausted
Primary Policies' limits." National Union then
tendered the asserted remaining policy limits to the Port and
informed the Port that "[National Union] considered the
Unexhausted Primary Policies to be exhausted and that it
would cease defending the Port in the Claims and
Suits" National Union did not seek a judicial
determination concerning exhaustion.
Port contested National Union's assertion that the
Unexhausted Primary Policies were exhausted. The Port also
asserted that even if the Unexhausted Primary Policies were
exhausted, "the terms of the Umbrella Policies would
require National Union to drop down and defend the Port in
the Claims and Suits, " National Union
"repeatedly disputed" having a defense obligation
under the Umbrella Policies. But on September 15, 2015,
between the filing of the original complaint and the
operative FAC, National Union acknowledged through a letter
from counsel that it "has a defense obligation to defend
[S]uits in accordance with the terms of its [U]mbrella
Policies." As a result of National Union's
failure to defend, the Port incurred its own defense costs.
Port commenced the present action on June 25, 2015, and
subsequently filed the FAC on November 20, 2015, asserting
five causes of action. On December 14, 2015, National Union
filed a Motion to Dismiss, Sever and Stay which was denied.
On July 20, 2016, National Union submitted its Answer to the
Port's FAC. The Port seeks a determination that the
Primary Policies have not been exhausted as claimed by
National Union and that it should have continued defending
the Port until the Court or the Port agreed that the
remaining two Primary Policies were exhausted. National Union
disagrees with the Port's claims, contends that it has
reimbursed all accrued defense fees and costs, and it
maintains its actions have been both reasonable and correct.
National Union also believes that the Port failed to
cooperate as required under the policies because the Port
withheld information and deprived National Union of the right
to participate in the settlement of certain lawsuits.
parties have filed three cross-motions for summary judgment.
(Doc. Nos. 33, 34, 47.) II. Cross-motions for Summary
National Union's Motion for Partial Summary Judgment
on the Third Cause of Action.
Union moved for partial summary judgment of the third cause
of action in the FAC. This motion requests the Court to
dismiss the third cause of action in the FAC which seeks a
judicial declaration that the Port is entitled to a defense
of Claims under the Umbrella Policies if the Primary
Policies are exhausted and find that the Umbrella Policies do
not cover Claims. (Doc. No. 34 at 2.)
disputes National Union's position arguing the only
reasonable interpretation of the policies support that the
Claims coverage provided at the primary level was
intended to continue at the excess/umbrella level.
Alternatively, interpretation of the scope of coverage
creates an ambiguity that must be resolved in favor of the
Port. (Doc. No. 38 at 3.)
Port's Motion for Partial Summary Judgment on the
Second and Third Cause of Actions.
moved for partial summary judgment of the second and third
causes of action in the FAC. This motion seeks judicial
declarations that National Union must defend and indemnify
the Port against Suits and Claims under
Umbrella Policies 'UMB-6000046, ' 'UMB-6000116,
' and 'UMB-6000145' immediately upon exhaustion
of the underlying Primary Policies. (Doc. No. 34 at 2.)
Union disputes the Port's argument as to the second and
third causes of action asserting the Port's
interpretation disregards proper contract interpretation;
ignores policy terms, conditions, and endorsements and
ultimately seeks the benefits of umbrella policy protections
before those protections have been triggered. (Doc. No. 39 at
National Union's Second Motion for Partial Summary
Judgment on the Second Cause of Action.
Union moved for partial summary judgment of the second cause
of action in the FAC. This motion seeks a judicial
declaration that 'horizontal exhaustion' of all the
primary policies is required before the Umbrella Policies are
triggered and that the 1985 Umbrella Policy excludes coverage
under the absolute pollution exclusion. (Doc. No. 47 at 2.)
disputes National Union's position because the policy
"endorsement and declarations confirm the AIG
excess/umbrella policies to be specific excess, they are
obligated to cover the District immediately upon the
exhaustion of the identified underlying AIG primary
policy." (Doc. No. 48 at 8.)
OF REVIEW I. Summary Judgment
judgment is appropriate under Rule 56(c) where the moving
party demonstrates the absence of a genuine issue of material
fact and entitlement to judgment as a matter of law.
See Fed.R.Civ.P. 56(c); Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986). A fact is material
when, under the governing substantive law, it could affect
the outcome of the case. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). A dispute about a
material fact is genuine if "the evidence is such that a
reasonable jury could return a verdict for the nonmoving
party." (Id. at 248.)
moving party bears the initial burden of showing there are no
genuine issues of material fact. Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). It can do so by
negating an essential element of the non-moving party's
case, or by showing that the non-moving party failed to make
a showing sufficient to establish an element essential to
that party's case, and on which the party will bear the
burden of proof at trial. (Id.) The burden then
shifts to the non-moving party to show that there is a
genuine issue for trial. (Id.)
disputes over facts that might affect the outcome of the suit
under the governing law will properly preclude the entry of
summary judgment. Factual disputes that are irrelevant or
unnecessary will not be counted." Anderson, 477
U.S. at 248. As a general rule, the "mere existence of a
scintilla of evidence" will be insufficient to raise a
genuine issue of material fact; there must be evidence on
which the jury could reasonably find for the non-moving
party. (Id. at 252.)
moving party is only entitled to summary judgment where it
has shown that there are no genuine issues of material fact,
even if the nonmoving party does not offer materials in
support of its opposition. Henry v. Gill Indus.
Inc., 983 F.2d 943, 950 (9th Cir. 1993). Summary
judgment is inappropriate where the movant's papers are
insufficient to support that motion or on their face reveal a
genuine issue of material fact. See (Id.) "The
filing of cross-motions for summary judgment 'does not
necessarily mean that there are no disputed issues of
material fact and does not necessarily permit the judge to
render judgment in favor of one side or the other.'"
Hahn v. Massage Envy Franchising, LLC, No. 12cvl53,
2014 WL 5100220, at *3 (S.D. Cal. Sept. 25, 2014) (citation
omitted); see Halbert v. Cray, of S.D., No.
07cv1607, 2010 WL 1292163, at * 6 (S.D. Cal. Mar. 30, 2010).
Court's subject matter jurisdiction over this case is
based upon diversity jurisdiction under 28 U.S.C. §
1332(a). Under Erie R.R. Co. v. Tompkins, 304 U.S.
64 (1938), a federal court sitting in diversity jurisdiction
applies state substantive law and federal procedural law.
When addressing Plaintiffs' and Defendants' claims,
the Court will, therefore, apply California Law.
California Insurance Law
law obligates an insurer to defend the insured when the facts
alleged in the complaint create a potential for coverage.
Scottsdale Ins. Co. v. MV. Tramp.,36 Cal.4th 643,
654 (2005). However, in evaluating the duty to defend, the
insurer may also consider facts outside those alleged in the
complaint. (Id.) "If any facts stated or fairly
inferable in the complaint, or otherwise known or discovered
by the insurer, suggest a claim potentially covered by the
policy, the insurer's duty to defend arises and is not
extinguished until the insurer negates all facts suggesting
potential coverage." Horace Mann Ins. Co. v. Barbara
B.,4 Cal.4th 1076, 1081 (1993). Thus, [i]n a
declaratory relief action to determine the duty to defend,