United States District Court, N.D. California, San Jose Division
ORDER GRANTING ZENITH'S MOTION FOR SUMMARY
JUDGMENT; DENYING OLD REPUBLIC INSURANCE COMPANY'S MOTION
FOR SUMMARY JUDGMENT; SETTING STATUS CONFERENCE RE: DKT. NOS.
J. DAVILA, UNITED STATES DISTRICT JUDGE
Zenith Insurance Company (“Zenith”) and Defendant
Old Republic Insurance Company (“ORIC”) each
contributed $1.5 million to settle a personal injury lawsuit
arising out of an automobile accident. The payments were made
subject to a reservation of rights by the insurers to seek
reimbursement and re-allocation of the settlement payments
and the costs of defending against the personal injury
lawsuit. Zenith initiated this action to seek reimbursement
of the entire $1.5 million it paid towards the settlement
plus all defense fees and costs incurred in defending the
personal injury lawsuit. The parties' competing motions
for summary judgment ask the court to resolve a dispute over
the priority of insurance policies pursuant to California
Insurance Code section 11580.9(d). Based upon all pleadings
filed to date, the undisputed evidence, and the comments
of counsel at the hearing, the court will grant Zenith's
motion and deny ORIC's motion.
The Personal Injury Lawsuit
of 2013, Rafael Resendiz, an employee of Ramirez Harvest
Company, Inc. (“Ramirez Harvest”), was driving a
2008 Chevrolet Silverado pickup truck owned by Taylor Farms
Retail, Inc. (“Taylor Farms”) when he rear-ended
another vehicle occupied by John K. Grant. ORIC's Mem. of
P. & A. in Supp. of Mot. for Summ. J. at 2 (Dkt. No. 47).
Mr. Grant sustained injuries in the accident and filed suit
against Taylor Farms, Ramirez Harvest and Rafael Resendiz.
Id. At the time of the accident, the pickup truck
(hereinafter “accident vehicle”) was owned by
Taylor Farms and insured under an ORIC policy. Id.
at 3. Ramirez Harvest was insured on policies issued by
Zenith. Id. Mr. Grant's lawsuit settled for $3
million with equal contributions from ORIC and Zenith.
Id. A third insurer paid nothing. Id.
The ORIC Policy- MWTB 22027
accident vehicle was insured under ORIC policy MWTB 22027
(“ORIC Policy”), which was issued to Taylor Fresh
Foods, Inc. (“TFFI”) with a policy period of May
1, 2013 through May 1, 2014. Id. This ORIC Policy
was fronted by ORIC through Terra Group, a member-owned
“agri-business captive insurance company which provides
specified lines of insurance coverage to members of the
captive, including automobile liability coverage.”
Wachtler Decl. ¶ 3 (Dkt. No. 51). TFFI joined the
Terra Group in 2011 and remained a member until May of 2015.
Id. ¶¶ 5, 6. TFFI participated in the
general liability and auto liability coverages provided
through the Terra Group captive. Id. ¶ 6. The
ORIC Policy was one of a series of renewal policies TFFI had
with ORIC. Id.
Terra Group's captive insurance was administered by a
separate entity, Associated Risk Underwriting
(“ARU”). Id. ¶ 4. The Terra Group
captive was “generally underwritten as a whole, and
premiums [were] developed between ARU and ORIC for the
captive, generally, as a whole.” Id. ¶ 6.
ARU developed the premium for the ORIC Policy using a
multiplicity of factors, none of which had anything to do
with the unique features or value of any particular TFFI
vehicle. Moore Decl. ¶¶ 14, 15 (Dkt. No. 52).
ARU and ORIC developed a premium for the Terra Group captive,
ARU assigned premium and expense components among the captive
members. Wachtler Decl. ¶ 7. Members of the Terra Group
captive paid premiums to ARU and ARU paid ORIC. Id.
auto policies in the Terra Group captive, including the ORIC
Policy issued to TFFI, were written as a “Symbol
1” policy that provided coverage for “any
auto” used by TFFI, irrespective of whether or not TFFI
owned the vehicle. Id. ¶ 8; see also
Moore Decl. ¶ 6. The premium charged at the inception of
the ORIC Policy was a “composite rate charged against
the initial number of vehicles reported” by the
insured. Moore Decl. Ex. 2. The composite rate was based upon
a number of factors including, but not limited to, each Terra
Group member's loss history, number of vehicles to be
insured, amount of deductible, type of vehicle, and garage
location. Uno Decl. Ex. C; Wachtler Decl. ¶¶ 15-16.
The ORIC Policy included “all new vehicles throughout
the year with no need to report or endorsements being
issued.” Id. The Composite Rate Endorsement of
the ORIC Policy provided that “[a]t the conclusion of
the policy year, a final vehicle total will be reported. The
final premium will be determined by totaling the beginning
and ending counts, dividing this by two (averaging) and
multiplying this by the composite rate.” Id.
The Terra Group captive renewed annually on an aggregate
basis for all insureds and their policies on May 1st of every
year. Id. ¶ 5.
was a “Business Auto Declarations” form for the
ORIC Policy. Moore Decl. Ex. 1 at 20. Item Three of the 2013
Business Auto Declarations form, entitled “Schedule of
Covered Autos You Own, ” was formatted as a table with
columns to fill in the year, model, trade name, body type,
serial number and vehicle ID number for each covered auto.
Id. The columns were not filled in. Id. at
3. Instead, across all of the columns there was a typed
notation that read “ON FILE WITH THE COMPANY.”
Id. The accident vehicle was not initially on the
list of vehicles on file with ORIC as of June of 2013. Moore
Decl. ¶ 22, Ex. 5. Eventually, however, ORIC's
underwriting files included a spreadsheet dated January 8,
2014 (“January 8, 2014 vehicle list”) that listed
the accident vehicle as a “Light Truck” and
identified the accident vehicle by year, make, model, vehicle
ID number and other information. Uno Decl. Ex. B at ORIC
hired a third party company, Pyramid Audit Solutions
(“Pyramid”), to conduct an audit to determine the
“ending count” for the ORIC Policy as of May 1,
2014. Id. Among the information Pyramid reviewed for
the audit was a list of vehicles provided by TFFI. Uno Decl.
Ex. E. Pyramid sent ORIC an Audit Report specifying an
“ending count” of 344 vehicles and a Vehicle
Schedule identifying all of the vehicles. Id. Ex. D.
The accident vehicle was among the vehicles listed in the
Vehicle Schedule and was identified by VIN number, year,
make, model and other information, just as it had been in the
January 8, 2014 vehicle list. Id. In accordance with
Composite Rate Endorsement, ORIC calculated TFFI's
additional premium by taking the average of the initial
vehicle count and the ending vehicle count and multiplying
that number by the composite rate per vehicle. Id.
Exs. B, C. ORIC charged TFFI an additional premium after the
audit was completed.