Opinion
No. C 04-03935 CRB.
March 16, 2005
MEMORANDUM AND ORDER GRANTING MOTION FOR SUMMARY JUDGMENT
This is a diversity jurisdiction contract action arising out of the defendant insurer's refusal to defend and indemnify plaintiff's former landlord in a lawsuit filed by plaintiff. Now pending before the Court is defendant's motion for summary judgment. After carefully considering the papers filed by the parties, and having had the benefit of oral argument, the Court GRANTS the motion.
UNDISPUTED FACTS
Plaintiff was the owner of Twist, a martini and tapas establishment located in Walnut Creek, California. Twist's landlord was Broadway Investors, and Terry Ring was a part-owner of Broadway Investors. Twist's lease required it to obtain a commercial liability insurance policy that named Ring and Broadway Investors as additional insureds. Twist did obtain such a policy from defendant, but it did not identify Ring, Broadway Investors, or anyone else as an additional insured.
A. The Policy
The commercial general liability policy ("the Policy") at issue provides coverage for "bodily damage" or "property damage" that is caused by an "occurrence" that takes place during the Policy period. Policy, Section I(A)(1)(a) (b). "Bodily injury" "means bodily injury, sickness or disease sustained by a person." Id., Section V(3). "Property damage" is defined as "[p]hysical injury to tangible property, including all resulting loss to use of that property." Id., Section V(15)(a). The Policy also provides coverage for "personal injury" "caused by an offense arising out of your business," and "advertising injury" "caused by an offense committed in the course of advertising your goods, products or services." Id., Section I(B)(1)(b)(1) (2).
B. The Underlying Complaint
In May of 2003, plaintiff sued Ring and Broadway Investors in state court for losses incurred when Twist was forced out of business (the "underlying complaint"). The underlying complaint alleges that Ring "intentionally induced" the City of Walnut Creek to require Twist to install two bathrooms, a requirement which would consume more than 50 percent of Twist's floor space. Underlying Complaint ¶¶ 18-19. The Walnut Creek Planning Commission subsequently revoked Twist's conditional use permit.Id. ¶ 21. Plaintiff appealed the revocation and a hearing was held before the Walnut Creek City Council on December 19, 2002.Id. ¶ 23. Ring appeared at the City Council hearing and "argued against the City Council allowing Twist to remain a viable business entity, by stating to the City that he would not renew Plaintiff's lease to operate as a bar." Id. "The City of Walnut Creek, gave great weight to . . . Ring['s] testimony in denying plaintiff's appeal." Id. Plaintiff alleges that as a result of Ring's conduct, Twist went out of business and plaintiff "suffered and continues to suffer, anxiety, sleeplessness, fear of complete financial ruin, humiliation, embarrassment and anger, all to Plaintiff's emotional injury." Id. ¶¶ 24-25, 34, 37, 39, 45, 46, 53, 57, 58.
C. The Demand For Coverage
Ring wrote a letter to defendant on June 25, 2004 demanding a defense of the underlying complaint. Defendant denied Ring's demand on two grounds: (1) Ring is not an insured under the Policy, and (2) even if he was an insured, he is not entitled to a defense under the Policy's plain language.
PROCEDURAL HISTORY
At around the same time defendant denied Ring's demand for a defense, plaintiff filed this action in state court against defendant for breach of contract and breach of the implied covenant of good faith and fair dealing. As plaintiff is not the insured claiming coverage, the complaint alleges that Ring assigned his rights under the Policy to plaintiff and that plaintiff thereafter "demanded surrender of the policy from defendant . . ., as tendered and assigned by defendant RING, in the underlying action" and that defendant again refused. Plaintiff claims that as a result of defendant's refusal to accept his demand, plaintiff has been damaged in the sum of $8,860,000.00.
Defendant now moves for summary judgment on the grounds that Ring is not an insured under the Policy, and even if he were, he is not entitled to defense and indemnity as a matter of law.
SUMMARY JUDGMENT STANDARD
A principle purpose of the summary judgment procedure is to isolate and dispose of factually unsupported claims. See Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). A party moving for summary judgment that does not have the ultimate burden of persuasion at trial (usually the defendant) has the initial burden of producing evidence negating an essential element of the non-moving party's claims or showing that the non-moving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial.See Nissan Fire Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000).
If the moving party does not satisfy its initial burden, the non-moving party has no obligation to produce anything and summary judgment must be denied. If, on the other hand, the moving party has satisfied its initial burden of production, then the non-moving party may not rest upon mere allegations or denials of the adverse party's evidence, but instead must produce admissible evidence that shows there is a genuine issue of material fact for trial. See Nissan Fire Marine Ins. Co., 210 F.3d at 1102. A genuine issue of fact is one that could reasonably be resolved in favor of either party. A dispute is "material" only if it could affect the outcome of the suit under the governing law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986).
DISCUSSION
In his opposition to defendant's motion for summary judgment, plaintiff concedes that Ring was not named as an additional insured under the Policy. Plaintiff's Opposition at 4 ("the commercial insurance policy issued by defendant does not contain an endorsement of [sic] naming Plaintiff Ring as additional insureds."). Ring, therefore, was not entitled to any benefits under the Policy and neither is plaintiff, Ring's alleged assignee. It is immaterial to defendant's liability that plaintiff's lease required plaintiff to obtain insurance coverage for Ring.
Plaintiff contends that summary judgment must nonetheless be denied because on plaintiff's application for the Policy (completed by an insurance broker, Brady-Harbord-Payne), some unknown person hand wrote the words "to follow" in the section listing additional insureds. No names, however, are included on the application under "additional insureds." Plaintiff speculates: "[a]pparently, either defendant or their broker, were negligent in following through on the terms and conditions of the application, and did not include either Plaintiff or Ring as additional insureds in the policy." Opposition at 4-5.
The notation on the otherwise blank "additional insureds" section of the insurance application does not create a genuine dispute as to whether defendant is liable to plaintiff under the Policy. Plaintiff has not produced any evidence that suggests that either plaintiff or the broker advised defendant that Ring should be listed as an additional insured. Moreover, plaintiff has known since before he filed this lawsuit in June 2004 that defendant was denying coverage on the ground, among others, that Ring was not an additional insured. Plaintiff has thus had ample time to develop such evidence, if it exists. As plaintiff has not produced any evidence in opposition to summary judgment that creates a genuine dispute of fact as to the claims in this lawsuit, and has he has not filed a Federal Rule of Civil Procedure 56(f) declaration, defendant's motion must be granted.
Even if Ring were an additional insured, he would not be entitled to a defense of plaintiff's lawsuit against him. An insurer must defend any action which potentially seeks damages within the coverage of the policy. See Gray v. Zurich Ins. Co., 65 Cal. 2d 263, 275 (1966). "The determination whether the insurer owes a duty to defend usually is made in the first instance by comparing the allegations of the complaint with the terms of the policy." Id. at 276. "[T]he existence of a duty to defend turns not upon the ultimate adjudication of coverage under its policy of insurance, but upon those facts known by the insurer at the inception of a third party lawsuit. . . . Hence, the duty may exist even where coverage is in doubt and ultimately may not develop." Montrose Chem. Corp. v. Superior Court, 6 Cal. 4th 287,295 (1993) ("Montrose I") (internal quotation marks and citation omitted).
The insurer's obligation to defend is excused only when "`the third party complaint can by no conceivable theory raise a single issue which could bring it within the policy coverage.'" Id. at 300 (citation omitted). Thus, when a claim against an insured makes a claim that "potentially" or "possibly" "could subject the insured to liability for covered damages, an insurer must defend unless or and until the insurer can demonstrate, by reference to `undisputed facts' that the claim cannot be covered." Vann v. Travelers Cos., 39 Cal.App. 4th 1610, 1614 (1995). This means that on a motion for summary judgment, such as the one before the Court, "`the insured need only show that the underlying claim may fall within policy coverage; the insurer must prove it cannot.'"Id. (quoting Montrose I, 6 Cal. 4th at 300).
Defendant is entitled to summary judgment because plaintiff's complaint against Ring does not raise a single issue which could potentially bring it within the Policy. First, there is no question that the underlying complaint does not allege property damage or the possibility of property damage; there is no allegation of a "tangible" injury to plaintiff's business. Second, there is also no question that the underlying complaint does not allege "advertising injury." Finally, the complaint does not allege covered "personal injury" as personal injury coverage is limited to personal injury (other than bodily injury) arising out of one of five events, none of which apply here. See Policy, Section V(13)(a)-(e) (false arrest, malicious prosecution, wrongful eviction, slander/libel, and violation of right to privacy); see also Block v. Golden Eagle Ins. Corp., 121 Cal. App. 4th 186, 200 (2004) ("In the world of liability insurance, personal injury coverage applies to injury which arises out of the commission of certain enumerated acts or offenses. Coverage is thus triggered by the offense, not the injury or damage which a plaintiff suffers.") (internal quotation marks and citation omitted).
The only issue, then, and the one upon which plaintiff appears to rely, is whether the underlying complaint potentially alleges covered "bodily injury." Plaintiff argues that he suffered "major depression" as result of Ring's conduct and that due to his depression, he became sick and incapacitated and unable to attend to the affairs of his businesses. Plaintiff's Memorandum in Opposition at 5. He contends that "depression" is a "sickness" and is therefore covered as "bodily injury."
Plaintiff's argument fails as a matter of law. First, as plaintiff's argument implicitly acknowledges, bodily injury does not encompass emotional distress unaccompanied by physical injury. See Keating v. National Union Fire Ins. Co., 995 F.2d 154, 156 (9th Cir. 1993); Chatton v. National Union Fire Ins. Co., 10 Cal. App. 4th 846, 854 (1992). The underlying complaint itself alleges only emotional distress unaccompanied by any physical injury; there is no potential of coverage for such damages.
Second, there is no evidence that defendant was ever aware that plaintiff is alleging that Ring's conduct caused depression. The complaint does not allege, or even hint, that plaintiff is alleging that Ring caused him to get sick, that is, to become clinically depressed. An insurer's duty to defend turns on facts known to the insurer at the time it declines coverage. See Hurley Const. Co. v. State Farm Fire Cas. Co., 10 Cal. App. 4th 533, 538 (1992).
Third, the Policy covers only bodily injury that arises from an "occurrence." Policy, Section I(1)(b). An "occurrence" "means an accident." Policy, Section V(12). At trial, the the burden would be on plaintiff to prove that an accident occurred. See Royal Globe Ins. Co. v. Whitaker, 181 Cal. App. 3d 532, 537 (1986). Defendant argues that plaintiff will be unable to meet this burden. See Nissan, 210 F.3d at 1102. The Court agrees. The underlying complaint does not allege an accident, or anything potentially an accident; instead, it alleges that Ring "intentionally induced" the City of Walnut Creek to impose requirements upon Twist that Ring knew plaintiff could not satisfy, and that Ring also caused the City of Walnut Creek to deny plaintiff's appeal by stating to the Walnut Creek City Council that he (Ring) would not renew plaintiff's lease to operate a bar. These circumstances cannot reasonably be considered an accident.
CONCLUSION
As there is no dispute that Ring is not an additional insured under the Policy, and as there is no potential for coverage under the Policy even if Ring is an additional insured, defendant's motion for summary judgment is GRANTED.