United States District Court, E.D. California
related motions are before the court. First, respondent
National Union Fire Insurance Company of Pittsburgh, PA
(“National Union”) moves to dismiss
petitioners' petition to compel arbitration. Mot. to
Dismiss, ECF No. 6-1. Relatedly, petitioners Timothy and
Lesly Cross move to compel arbitration of the underlying
coverage dispute involving National Union. Mot. to Compel,
ECF No. 7-1. For the following reasons, National Union's
motion to dismiss is GRANTED, petitioners' motion to
compel is DENIED, and this matter is dismissed without leave
Factual and Procedural History
matter involves an insurance dispute emanating from a
September 30, 2015 automobile accident involving petitioner
Timothy Cross and a third party, Laurel Bane. Opp'n to
Mot. to Dismiss, ECF No. 16, at 2. At the time of the
collision, Mr. Cross was driving a vehicle owned by his
employer Hilbers Construction. Because of this, the
underinsured motorist policy National Union issued to Hilbers
Construction applies to Mr. Cross's involvement in the
collision. Opp'n to Mot. to Dismiss at 3 n.2. Petitioners
ultimately settled with Ms. Bane's insurer, USAA, for the
$50, 000 policy limit; however, the events giving rise to
petitioners' acceptance of the settlement offer inform
the arbitration dispute here. Id. at 2-5; Mot. to
Dismiss at 3.
to settlement, petitioners engaged in protracted litigation
in Sacramento County Superior Court against Bane, and
consequently USAA as her insurer, for her alleged failure to
timely tender policy limits. Opp'n to Mot. to Dismiss at
3; Mot. to Dismiss at 2; Not. of Removal, Ex. 6, ECF No. 1-3.
Petitioners contend their commencement of the state court
suit rendered the USAA policy “open, ” thus
making USAA responsible for any jury verdict levied against
Bane. Opp'n to Mot. to Dismiss at 3. On July 25, 2016,
USAA, through counsel, offered to settle the matter for the
$50, 000 policy limit; petitioners refused the offer.
October 5, 2016, USAA made a second policy-limit offer to
petitioners. Id. On October 10, 2016, with the
second USAA offer outstanding, petitioners' counsel
informed American International Group (“AIG”)
claims representative Marie Lynne Lezeau of the pending
offer. Id. AIG Claims, Inc. is the claims
administrator for respondent National Union, who insured the
Hilbers Construction vehicle Mr. Cross drove during the
accident. Mot. to Dismiss at 3; Not. of Removal, Ex. D, ECF
No. 1-4, Murphy Decl. ¶ 7, Ex. 5. Over the course of
their communications, petitioners' counsel asked Lezeau
to “please provide . . . the limits on the
UM/UIM policy.” Opp'n to Mot. to
Dismiss at 3; Roussas Decl. ¶ 6, Ex. E, ECF No. 16-6, at
¶ 003. Lezeau responded: “This is a $1M
policy.” Opp'n to Mot. to Dismiss at 3; Roussas
Decl. ¶ 6, Ex. E at ¶ 003. Additionally,
petitioners' counsel inquired if “AIG [intended to]
assert any type of exclusions, ” because petitioners
wanted to “make sure that if Tim accepts the offer of
policy limits that he is not stepping into a coverage
mess.” Opp'n to Mot. to Dismiss at 4; Roussas Decl.
¶ 6, Ex. E at ¶ 002-3. To that, Lezeau replied,
“I don't believe that we are but I will discuss
with our inhouse sounsel [sic].” Opp'n to Mot. to
Dismiss at 4; Roussas Decl. ¶ 6, Ex. E at ¶ 002.
November 17, 2016, in further communication with Lezeau,
petitioners' counsel wrote:
[W]e have a trial setting conference on December 5, and I
would rather not dedicate the resources to this if there are
no impediments to my settling with the defendant for policy
limits and proceeding under the UIM coverage in the
Hilbers' auto policy. Please do advise whether AIG is
asserting any exclusive remedy/coverage defenses. From my
understanding it will not.
Opp'n to Mot. to Dismiss at 4; Roussas Decl., Ex. E at
¶ 001. Then, on November 22, 2016, petitioners'
counsel sent the following, repeating his request and
Please advise if there are any coverage defenses that your
company is asserting to an underinsured motorist claim by
Tim. If we do not hear to the contrary from your company in
the next 14 days we will accept Laurel Bane's offer of
policy limits in consideration for a release as a settlement
and proceed with the underinsured motorist claim under
Hilber's [sic] automobile policy.
Opp'n to Mot. to Dismiss at 4; Roussas Decl., Ex. E at
contend this series of communications led them to accept
Bane's $50, 000 policy-limit settlement, believing they
“could recover their losses against the ‘$1M
policy' issued by National Union without having to first
secure a jury verdict against Ms. Bane and then pursue a bad
faith case against USAA for failing to timely tender its
policy limits.” Opp'n to Mot. to Dismiss at 5.
December 10, 2018, petitioners tendered a demand letter to
National Union under the “$1, 000, 000.00 Underinsured
Motorist Limits applicable to AIG policy number 657-92-27
issued to Hilbers, Inc. for the benefit of its former
employee Tim Cross . . . .” Murphy Decl. ¶ 5, Ex.
3. On January 21, 2019, National Union sent the following
[N]o Underinsured motorist coverage is available to your
client for this accident.
The tortfeasor had limits [sic] $50, 000.00, which have been
tendered. The tortfeasor limit is more than the $30, 000
Underinsured Motorist limit for the Policy. Accordingly, the
claim does not involve an “uninsured motor
vehicle” as defined by the Policy. Thus, there is no
uninsured/underinsured motorist coverage available for your
client, and we must decline any request for benefits under
Uninsured/Underinsured Motorist coverage.
Murphy Decl. ¶ 7, Ex. 5.
March 6, 2019, in response to National Union's rejection
letter, petitioners filed a petition to compel arbitration in
Placer County Superior Court. Not. of Removal, ECF No. 1-1,
Ex. A. On May 3, 2019, National Union timely removed the
matter to this court. Not. of Removal, ECF No. 1. On May 21,
2019, National Union moved to dismiss the underlying petition
to compel arbitration arguing, inter alia, the
dispute over uninsured motorist coverage is not arbitrable
under the terms of the policy. Mot. to Dismiss at 4-7.
Petitioners oppose the motion, Opp'n to Mot. to Dismiss,
and National Union has replied, Resp't's Reply, ECF
No. 18. On June 11, 2019, petitioners moved to compel
arbitration, largely replicating the underlying petition
filed in Placer County Superior Court. Mot. to Compel.
National Union has opposed, Opp'n to Mot. to Compel, ECF
No. 8, and petitioners have replied, Pet'rs' Reply,
ECF No. 17. On August 23, 2019, the court heard oral argument
on the motion. Counsel John Roussas appeared on behalf of
petitioners and counsel Rebecca Weinreich appeared on behalf
of respondent National Union.
The Policy The National Union Business Auto policy,
policy number 657-92-27, issued to Hilbers, Inc. for the