United States District Court, E.D. California
INTEGON NATIONAL INSURANCE COMPANY, Plaintiff; Counter-Defendants,
v.
BILLY REECE; AMBER REECE; AND C.N, a minor, by and through his guardian ad litem Callie Nielsen, Defendants; Counter-Claimants.
MEMORANDUM DECISION AND ORDER RE MOTIONS FOR SUMMARY
JUDGMENT (ECF NOS. 24, 25)
LAWRENCE J. O'NEILL UNITED STATES CHIEF DISTRICT JUDGE
I.
INTRODUCTION
This is
an insurance coverage dispute between Plaintiff Integon
National Insurance Company (“Integon”) and
Defendants Billy Reece, Amber Reece (the
“Reeces”), and C.N., a minor, by and through his
guardian ad-litem Callie Nielsen (“C.N.”)
(collectively “Defendants”). The dispute concerns
coverage for claims asserted against the Reeces by C.N. in an
action filed in March 2018 and currently pending in
California Superior Court for the County of Kern. On
September 4, 2018, Integon brought this diversity
jurisdiction action pursuant to 28 U.S.C. § 1332 against
the Reeces, and also named C.N., who is the plaintiff in the
state court action. ECF No. 1. Integon alleges one claim
against Defendants seeking declaratory relief, asking the
Court to find that Integon has no duty to defend and no duty
to indemnify the Reeces in the state court action based on
the homeowner's insurance policy's motor vehicle
exclusion. The Reeces filed a counterclaim for (1)
declaratory relief as to whether the state court action
against the Reeces is covered by the policy and whether
Integon is required to provide them with independent counsel
at Integon's expense; (2) for breach of written contract;
and (3) for breach of the covenant of good faith and fair
dealing. ECF No. 11.
On July
8, 2019, Integon and the Reeces both filed motions for
summary judgment pursuant to Federal Rule of Civil Procedure
56. ECF Nos. 24-25. Oppositions were filed on July 22, 2019.
ECF No. 5.[1] Replies were filed on July 29, 2019. ECF
Nos. 29-30. The issue presented on these summary judgment
motions is whether a motor vehicle exclusion in the
Reeces' homeowner's insurance policy excludes
coverage for the Reeces' liability in the underlying
state court litigation. Additionally, the Reeces claim they
are entitled to summary judgment on the issue of whether
Integon should be required to pay for independent counsel in
the state court action. The Court finds it appropriate to
rule on the motions without oral argument. See Local
Rule 230(g). Having considered the parties' briefing and
the relevant law, the Court issues the following order.
II.
FACTUAL BACKGROUND
The
parties agree on all material facts as submitted in the joint
statement of undisputed facts. ECF No. 25-3,
(“UMF”).[2]
On
March 28, 2018, C.N. filed a complaint in Kern County
Superior Court, Case No. BCV-18-100719, in connection with
injuries that C.N. suffered in an accident involving a golf
cart owned by the Reeces (the “Underlying Action”
or “C.N. Action”). UMF 14; ECF No. 11 at Ex. B.
The Underlying Action alleges that on December 22, 2017, C.N.
was injured when he fell off the golf cart that was driven by
K.R., [3] an unlicensed minor. UMF 17. K.R. is the
Reeces' niece. UMF 47(d). The Underlying Action alleges
various causes of action against the Reeces including that
they:
• “did negligently and carelessly own, rent,
lease, bail, operate, control, repair, maintain and
entrust” the golf cart
• “did negligently and carelessly fail to properly
supervise, protect, and control minor children at [the
Property], including [C.N.], by providing Defendant, [K.R.],
an unlicensed minor, with [the golf cart].”
• were negligent in “allowing and permitting
[K.R.], an unlicensed minor, to operate [the golf cart] on a
public roadway with other minor children as passengers,
including [C.N.].”
• “had actual and/or constructive knowledge, and
knew and/or reasonably should have known, that Defendant,
[K.R.], an unlicensed minor, would not and could not safely
drive, operate, control, possess, and manage [the golf cart]
on a public roadway, and negligently and carelessly failed to
prevent Defendant, [K.R.], from operating [the golf cart]
with minor passengers on a public roadway.”
• were negligent in failing to prevent an unlicensed
minor from operating the golf cart in violation of Vehicle
Code §12500(a)
• were negligent in failing comply with Vehicle Code
§27360.5 by ensuring C.N. was transported in the golf
cart using appropriate child passenger restraint system or
safety belt
• were negligent in failing to register the golf cart in
violation of Vehicle Code §§4000 and 21251.
UMF 18-24. C.N. alleges that he suffered damages resulting
from the accident in the amount of $20, 000, 000. UMF 25.
Integon
issued a homeowner's insurance policy to the Reeces,
Policy No. 2004464223, effective for the policy period
December 19, 2017 to December 19, 2018 (“Integon
Policy” or the “Policy”). UMF 5; ECF No.
11, Ex. A. The Policy was in effect on the date of the
subject accident and all premiums were paid. UMF 9-10. The
Policy has personal liability limits of $300, 000 per
occurrence and $5, 000, for medical payments to others. ECF
No. 11, Ex. B at 12.[4] The Policy's “Coverage E”
provides personal liability coverage “[i]f a claim is
made or a suit is brought against an ‘insured' for
damages because of ‘bodily injury' or
‘property damage' caused by an
‘occurrence' to which this coverage applies.”
UMF 34; ECF No. 11, Ex. B at 69. The Policy's
“Coverage F” provides coverage for medical
payments to others when the medical expenses are
“incurred or medically ascertained within three years
from the date of an accident causing ‘bodily
injury.'” UMF 35; ECF No. 11, Ex. B at 69. As it
pertains to Coverage E and F, the Policy has an exclusion for
“Motor Vehicle Liability.” Id.; UMF 36.
“Motor Vehicle Liability” is defined under the
Policy as:
Liability
for “bodily injury” or “property
damage” arising out of the:
(1) Ownership of such vehicle or craft by an
“insured”;
(2) Maintenance, occupancy, operation, use, loading or
unloading of such vehicle or craft by any person;
(3) Entrustment of such vehicle or craft by an
“insured” to any person;
(4) Failure to supervise or negligent supervision of any
person involving such vehicle or craft by an
“insured”; or
(5) Vicarious liability, whether or not imposed by law, for
the actions of a child or minor involving such vehicle or
craft.
UMF 28; ECF No. 11, Ex. B at 55.
The
motor vehicle exclusion under Section II - A.1 in part states
that:
Coverages E [personal liability] and F [medical payments to
others] do not apply to any “motor vehicle
liability” if, at the time and place of an
“occurrence”, the involved “motor
vehicle”:
a. Is registered for use on public roads or property;
b. Is not registered for use on public roads or property, but
such registration is required by a law, or regulation issued
by a government agency, for it to be used at the place of the
‘occurrence'; …
UMF 36; ECF No. 11, Ex. B at 69.
The
Policy further provides under ...