United States District Court, E.D. California
CALIFORNIA DEPARTMENT OF TOXIC SUBSTANCES CONTROL and the TOXIC SUBSTANCES CONTROL ACCOUNT, Plaintiffs,
JIM DOBBAS, INC. a California corporation; CONTINENTAL RAIL, INC., a Delaware corporation; DAVID VAN OVER, individually; PACIFIC WOOD PRESERVING, a dissolved California corporation; WEST COAST WOOD PRESERVING, LLC., a Nevada limited liability company; and COLLINS & AIKMAN PRODUCTS, LLC, a Delaware limited liability company, Defendants.
ORDER RE: MOTIONS TO INTERVENE AND TO VACATE
WILLIAM B. SHUBB UNITED STATES DISTRICT JUDGE
Department of Toxic Substances Control and the Toxic
Substances Control Account (collectively “DTSC”)
sought recovery of costs and interest incurred during the
cleanup of a wood preserving operation in Elmira, California
against multiple defendants under the Comprehensive
Environmental Response, Compensation, and Liability Act
(“CERCLA”), 42 U.S.C. § 9601 et
seq. (First Am. Compl. (“FAC”) at ¶
19.) In 2015, DTSC obtained entry of default against a
canceled Delaware corporation, defendant Collins & Aikman
Products, LLC (“C&A Products”) after it
failed to respond to DTSC's First Amended Complaint.
(Docket No. 129.) Presently before the court are motions to
intervene and vacate C&A Products' default filed by
The Continental Insurance Company
(“Continental”), Century Indemnity Company
(“Century”), and Allianz Underwriters Insurance
Company, Chicago Insurance Company, and Fireman's Fund
Insurance Company (collectively, “Allianz”),
insurers of C&A Products. (Docket Nos. 205, 217, 222.)
not the first time an insurance company has moved to
intervene and set aside default in this matter. The Travelers
Insurance Company (“Travelers”) previously
attempted to do so (Docket No. 196), but this court denied
the motion after finding that Travelers' refusal to
defend C&A Products under a reservation of rights
forfeited its interest in the litigation and it could not
establish good cause to set aside C&A Products'
default. (Order Re: Mot. to Intervene and Set Aside
Default at 3-4 (Docket No. 221).) The moving parties before
the court now offer many of the same arguments Travelers did
in its motion, with some important differences.
(Compare Docket Nos. 205, 217, 222, with
Docket No. 196.) Each will be discussed in turn.
the court will consider Continental's motion.
Continental's position is distinguishable from that of
Travelers in that it did not become aware of this lawsuit
until after C&A Products' default was entered.
However, it is substantially indistinguishable in that
Continental has neither admitted coverage nor agreed to
defend C&A Products on a reservation of rights. DTSC
offered to stipulate to Continental's intervention if it
either (1) accepted coverage without a reservation of rights
or (2) defended C&A Products with a reservation of
rights. (Decl. of Laura Zuckerman (“Zuckerman
Decl.”), Ex. B (Docket No. 228).) This was the same
stipulation DTSC offered to Travelers before its motion was
heard. Just as in Travelers' case, Continental did not
stipulate, although instead of affirmatively refusing the
stipulation, it failed to respond to plaintiffs' offer.
(Zuckerman Decl. ¶ 4.) Continental also does not advance
any new argument to establish good cause to set aside C&A
Products' default. (Compare Docket No. 205,
with Docket No. 196.) Accordingly, Continental's
motion will be denied.
the court considers Century's motion. Century, too,
offers the same arguments Travelers did in its motion to
intervene and set aside default. (Compare Docket No.
217, with Docket No. 196.) Indeed, just like
Travelers, Century disclaimed coverage of any claims arising
from the DTSC litigation, citing a settlement agreement
Century purportedly signed with C&A Products in 2000.
(Century Mot. to Intervene at 6 (Docket No. 217).) Like
Continental, Century failed to respond to plaintiffs'
proposed stipulation, and by implication refuses to offer a
defense under a reservation of rights. (Zuckerman Decl.
¶ 4.) Because it has both disclaimed coverage and
refused to defend C&A Products under a reservation of
rights, Century's motion to intervene and set aside
default will also be denied. Finally, the court will consider
Allianz's motion. In California, “where the insured
is unable to assert its rights, an insurer who seeks to
intervene and protect its coverage defenses may provide an
explicit reservation of rights to its client and allege that
reservation of rights within its pleading to put the
plaintiff on notice that the insurance company is reserving
those rights and asserting coverage defenses.”
Kaufman & Broad Communities, Inc. v. Performance
Plastering, Inc., 136 Cal.App.4th 212, 222 (3d Dist.
2006). Allianz expressly stated in its motion that it has
“reserved all rights to decline coverage on any
applicable ground and expressly ha[s] not waived or otherwise
forfeited any direct interest in the instant action that
would serve to defeat Allianz Intervenors' claim for
intervention of right.” (Allianz Mot. to Intervene at
11 (Docket No. 222).) Furthermore, unlike Century and
Travelers, Allianz has not disclaimed coverage. Instead, it
is purportedly “gathering information regarding
coverage and or duties” in the present
Allianz was C&A Products' excess insurer. (Opp. to
Mot. to Intervene and Vacate Default at 2 n.2 (Docket No.
227); see also Allianz Reply to Opp. to Mot. to
Intervene at 2 (Docket No. 230).) California law recognizes a
distinction between primary and excess insurance coverage.
“Primary coverage is insurance coverage whereby, under
the terms of the policy, liability attaches immediately upon
the happening of the occurrence that gives rise to the
liability . . . “excess” or
“secondary” insurance is coverage whereby, under
the terms of that policy, liability attaches only after a
predetermined amount of primary coverage has been
exhausted.” Residence Mut. Ins. Co. v. Travelers
Indem. Co. of Conn., 26 F.Supp.3d 965, 972-73 (C.D. Cal.
2014) (quoting Am. Cas. Co. v. Gen. Star Indem. Co.,
125 Cal.App.4th 1510, 1521 (2d Dist. 2005) (emphasis
the policy limits of the underlying primary policy must be
exhausted before excess insurers have the “right or
duty to participate in the defense” of the insured.
Ticor Title Ins. Co. v. Employers Ins. of Wausau, 40
Cal.App.4th 1699, 1707 (1st Dist. 1995) (citing Signal
Companies, Inc. v. Harbor Ins. Co., 27 Cal.3d 359, 365
(1980)). In some instances, excess insurers may assume the
obligations of the primary insurer before exhaustion occurs.
Id. at 1708-09 (finding excess insurer could defend
when the primary insurer was insolvent or refused to defend).
But in the environmental context, primary coverage cannot be
exhausted “until a remediation plan is approved which
clearly establishes that the costs of remediation will exceed
the primary indemnity limits.” Cty. of Santa Clara
v. USF & G, 868 F.Supp. 274, 280 (N.D. Cal. 1994).
DTSC vaguely seeks to recover cleanup costs from C&A
Products' “historic insurers” (Docket No.
197-4), DTSC has yet to obtain judicial approval for C&A
Products' portion of the remediation plan and failed
to determine “which of C&A Products' insurers,
if any, to proceed against.” (Opp. to Mot. to Intervene
and Vacate Default at 6 n.5.) Consequently, because DTSC has
yet to determine which primary insurer, if any, will be
responsible for C&A Products' damages, the parties
and the court do not know what the “primary indemnity
limits” are. Absent this information, the court cannot
conclude that primary coverage is exhausted and that excess
insurers can properly intervene. See Cty. of Santa
Clara, 868 F.Supp. at 280. Accordingly, Allianz's
motion to intervene and set aside default will also be
THEREFORE ORDERED that the motions to intervene and vacate
default filed Continental (Docket No. 205), Century (Docket
No. 217), and Allianz (Docket No. 222), be, and the same
thereby are, DENIED.
 Allstate Insurance Company filed a
notice of joinder (Docket No. 218) to Travelers' motion
to intervene and did not file a separate motion to intervene.
(Docket No. 196.) Traveler's motion to intervene was
denied on October 22, 2019. (Docket No. 221.) Accordingly,
Allstate's joinder fails.
 Like Continental and Century, Allianz
failed to respond to DTSC's proposed stipulation to allow
them to intervene. (Zuckerman Decl. ¶ 4.)
Plaintiffs did not include the
amount they sought to recover in their First Amended
Complaint, but have since asserted C&A Products owes them
$3, 219, 449.85 in their motion for default judgment. (Mot.
for Default J. ¶ 5(a) (Docket No. 184).) This court
expresses no opinion as to the merit of that determination