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Houston Casualty Co. v. National Union Fire Insurance Company of Pittsburgh, PA

United States District Court, N.D. California

December 18, 2019

HOUSTON CASUALTY COMPANY, Plaintiff,
v.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, et al., Defendants.

          ORDER RE MOTION FOR SUMMARY JUDGMENT, ADMINISTRATIVE MOTION TO FILE UNDER SEAL, AND VACATING HEARING

          WILLIAM ALSUP UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         In this insurance action, this order finds that the primary carrier breached its duty of good faith and fair dealing by refusing to settle within policy limits or so a reasonable jury could find based on this record.

         STATEMENT

         Defendant National Union Fire Insurance Company of Pittsburgh, Pennsylvania, was the primary insurer for Anderson Hay & Grain, an exporter of hay and straw products. Plaintiff Houston Casualty Company had the excess. National Union's primary policy had a general aggregate limit of $10 million, an each-occurrence limit of one million dollars, and an each-location aggregate sub-limit of two million dollars, effective May 2014 to May 2015. In July 2014, Bartolo Flores collapsed while delivering alfalfa to the premises of Anderson Hay. He filed suit in Los Angeles Superior Court. National Union appointed Acker & Whipple as defense counsel (Compl. ¶¶ 4, 8-11, 14, 19).

         In August 2016, Acker & Whipple evaluated the potential verdict of the case to be $250, 000 to $300, 000 with a settlement range of $30, 000 to $40, 000 (Opp. Exh. D). In early December 2016, Acker & Whipple informed National Union that the case could potentially be settled for $50, 000. Ray Adams, a representative for National Union, authorized the offer, which Flores rejected. In late December 2016, Acker & Whipple provided National Union with a pre-trial report that estimated the potential verdict of the case to be between $325, 000 to $400, 000 before certain deductions, with judgment against Anderson Hay between $165, 000 to $200, 000 (Br. Exh. 15-17). All of these amounts fell below the one million dollar policy limit.

         In March 2017, however, Acker & Whipple informed Houston Casualty of the potential for exposure in excess of the primary limits. It still estimated the potential verdict of the case to be at most between $325, 000 to $400, 000 (Opp. Exh. D). At that time, Acker & Whipple recommended making an offer of settlement to Flores of up to $100, 000. The parties attended mediation on March 27. By the end of the mediation, Flores made an offer of three million dollars. Acker & Whipple told National Union, however, that “even if liability were clear, [it] would not be worth more than $1 million.” The mediator stated the “full value of the plaintiff's case is 6 figures and not 7 figures. $500K might be full value, ” and made a proposal of $950, 0000. Acker & Whipple advised that that amount was “too high” (Br. Exh. 18, 21, 22, 25, 28).

         On July 28, Acker & Whipple took the deposition of Jennie McNulty, Flores's economic expert. Based thereon, an Acker & Whipple email dated July 31 stated it estimated the verdict range “will be as high as $3.2 million . . . At this time, we believe an offer to meet the mediator's proposal of $950, 000 would be appropriate.” The parties disagree as to whether this belief was ever communicated to National Union, but as a previous order has already found, a reasonable jury could find that it either was communicated or that the information contained therein was communicated verbally (Dkt. No. 86).

         On August 2, Acker & Whipple sent an email to National Union stating the probable verdict range would be between $325, 000 and $400, 000 (Br. Exh. 27). On August 3, a phone call took place between attorney Stephen Acker of Acker & Whipple and Ray Adams of National Union. Ray Adams, at his deposition, did not recollect the substance of the call (so the July 31 email may particular evidentiary force as to what was said) (Opp. Exh. D). That same day, National Union made an offer of $200, 000 to Flores. On or before August 8, Flores made a counteroffer of $900, 000. National Union maintained its offer of $200, 000. On August 16, Flores reduced his demand to $675, 000. National Union maintained its offer of $200, 000 (Br. Exh. 28, 39).

         In July 2018, a few weeks before trial, Acker & Whipple sent National Union a pre-trial report that estimated the verdict range to be between $200, 000 and $300, 000 with a 25% chance of a defense verdict (id. at Exh. 36). Flores reduced his offer to $600, 000 at this point, which National Union rejected (Opp. Exh. O).

         Trial began on August 13. On August 15, Flores made an offer of $300, 000. National Union rejected the offer and maintained that it would not go above $225, 000. On August 22, the jury returned a verdict against Anderson Hay for $3.5 million (Br. Exh. 39, 41, 46).

         Standing in the shoes of Anderson Hay, Houston Casualty asserts National Union unreasonably refused to settle the underlying action within its policy limits and accordingly alleges the following claims for relief: (1) equitable subrogation, (2) unjust enrichment, and (3) declaratory relief (Compl. ¶¶ 24-49). Defendants now move for summary judgment as to all claims. This order follows full briefing. Pursuant to our local civil rule 7-1(b), this order finds plaintiff's motion suitable for submission without oral argument and hereby vacates the December 26 hearing.

         ANALYSIS

         1. Motion for ...


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