Opinion
Case No.: 2:23-cv-00095-AB-MAR
06-27-2023
BROOKFIELD PROPERTY GROUP, LLC, et al. v. LIBERTY MUTUAL FIRE INSURANCE CO.
James B. Glennon, S. Alex Webb, Foran Glennon Palandech Ponzi and Rudloff PC, Irvine, CA, Beth A. Cook, Pro Hac Vice, Foran Glennon Palandedch Ponzi and Rudloff PC, Las Vegas, NV, for Brookfield Property Group, LLC, et al. Patricia Anne Daza-Luu, Kyle J. Clawson, Nicolaides Fink Thorpe Michaelides Sullivan LLP, Los Angeles, CA, for Liberty Mutual Fire Insurance Co.
James B. Glennon, S. Alex Webb, Foran Glennon Palandech Ponzi and Rudloff PC, Irvine, CA, Beth A. Cook, Pro Hac Vice, Foran Glennon Palandedch Ponzi and Rudloff PC, Las Vegas, NV, for Brookfield Property Group, LLC, et al. Patricia Anne Daza-Luu, Kyle J. Clawson, Nicolaides Fink Thorpe Michaelides Sullivan LLP, Los Angeles, CA, for Liberty Mutual Fire Insurance Co.
Proceedings: ORDER GRANTING DEFENDANT'S MOTION TO DISMISS
ANDRÉ BIROTTE JR., United States District Judge
Before the Court is Defendant Liberty Mutual Fire Insurance Company ("Liberty Mutual" or "Defendant")'s Motion to Dismiss (Dkt. No. 15, 15-1, the "Motion"). Liberty Mutual filed its motion on February 16, 2023, as well as a Request for Judicial Notice ("RJN"). (Dkt. Nos. 15-3, (RJN), 15-4 (Ex. A to RJN).) Plaintiffs Brookfield Property Group, LLC ("Brookfield"), and Starr Specialty Lines Insurance Agency LLC (acting on behalf of Lloyd's Syndicate CVS 1919) ("Starr") (collectively, "Plaintiffs") filed their Opposition on April 7, 2023, (Dkt. No. 19, "Opp."), and Liberty Mutual filed its reply on April 14, 2023 (Dkt. No. 14, "Reply"). The Court heard oral argument on Defendant's Motion on May 26, 2023, at 10:00 AM. (Dkt. No. 21) after which it took this matter under submission.
For the reasons set forth below, Liberty Mutual's Motion to Dismiss is GRANTED and Plaintiff's Complaint is DISMISSED.
I. BACKGROUND
Plaintiffs filed their Complaint ("Compl.") on January 6, 2023, against Liberty Mutual for breach of contract, express indemnification, equitable contribution, and declaratory relief. (See Compl.) The equitable contribution claim is asserted solely by Starr. (Id. at 9.)
The following factual allegations are taken from Plaintiffs' Complaint. Brookfield is the owner of the property known as 110 East 9th Street, Los Angeles, California (the "Property"). (Compl. ¶ 1.)
In 2018, "Turner entered into a Construction Management Agreement ("CMA") with Brookfield entity Calmart Sub I, LLC," where Turner was to perform construction management services for the Calmart Property Redevelopment Project (the "Project"). (Compl. ¶ 8, Ex. A at 19.) Turner is not a party to this suit. (See id. ¶¶ 1-3.)
"Starr provided property insurance to Brookfield" under Policy of Insurance No. WC 4416. (Compl. ¶ 2.) Pursuant to Exhibit J of the CMA, Turner was required to procure a Commercial General Liability insurance policy. (Id. ¶ 9 (emphasis added), see also Ex. A at 664.) Plaintiffs cite the language in Exhibit J of the CMA (id. ¶¶ 9-10) and attached the CMA to the complaint. (Ex. A to Compl.)
On December 28, 2020, a significant rainstorm occurred at the Property and rainwater flowed into the Property at several locations. (Compl. ¶¶ 11-12.) Turner allegedly "attempted to block the water's flow and impact" by using "ground-based barriers and tarps placed over electrical equipment. However, these mitigation attempts failed" and affected "electrical cabinets and elevators." (Id. ¶ 13.) As a result, Brookfield allegedly incurred damages in excess of $800,000. (Id. ¶¶ 14, 31, 34.)
Plaintiffs first claim is for breach of contract. "Liberty Mutual provided general liability insurance to Turner, under which Brookfield is an additional insured." (Compl. ¶ 15.) On March 1, 2021, Liberty Mutual Senior Claims Specialist Nicole Doherty issued a coverage denial to Brookfield for the claim Brookfield submitted contending that Brookfield's All Risk policy is primary. (Id. ¶¶ 18-20, see also Ex. B.) Plaintiffs allege that Liberty Mutual breached the implied covenant of good faith and fair dealing by refusing to pay policy benefits. Plaintiffs assert that "Ms. Doherty's coverage position letter identifies that coverage is available to Brookfield under the Liberty Mutual policy and, in fact, does provide coverage with respect to some or all of Brookfield's claimed losses." (Id. ¶ 25.) The Liberty Mutual Policy is allegedly primary under the terms of the CMA. (Id. ¶ 26.) Plaintiffs allege "[b]y reason of the failure and/or refusal of Liberty Mutual to provide coverage to Brookfield for its losses in connection with the underlying loss, despite its express obligation to do so under the terms of the Policy and applicable law, Liberty Mutual has breached the written contract of insurance under which Brookfield is entitled to coverage as an additional insured." (Id. ¶ 28.) Plaintiffs assert, "[b]y reason of the failure and/or refusal of Liberty Mutual to indemnify Brookfield and Starr for their respective losses in connection with the underlying loss, despite its express obligation to do so under the terms of the Liberty Mutual policy and applicable law, Liberty Mutual has breached the written contract of insurance under which Brookfield and Starr are entitled to indemnification." (Id. ¶ 29.)
The Court notes that Plaintiffs allege this despite stating in the complaint that they have requested but have not yet received a copy of the insurance policy. (Compl. ¶ 24.) The Court ponders how Plaintiffs can assert what the express terms of the policy are when they admit that they did not have a copy of the insurance policy. (Id.)
With respect to Plaintiffs' express indemnification claim, Plaintiffs allege that the Liberty Mutual Policy is primary and that they are entitled to indemnification under the express terms of the Liberty Mutual Policy. (Compl. ¶¶ 34, 37.)
Starr seeks equitable contribution against Liberty Mutual through the CMA. (See Compl. ¶¶ 44-45.) Plaintiffs allege Starr paid $619,392.20 to Brookfield under its insurance policy as a result of the damage sustained to the Property and that Liberty Mutual has not paid anything in connection with the loss. (Id. ¶ 42-43.)
Finally, as to Plaintiffs declaratory relief claim, Plaintiffs contend that a controversy exists between Plaintiffs and Liberty Mutual and seeks a judicial declaration so that Plaintiffs "may ascertain their respective rights, and Liberty Mutual's rights and duties with respect to Liberty Mutual's contractual obligations to both Turner and Brookfield, as an additional insured under the Liberty Mutual policy." (Compl. ¶ 47.) Plaintiffs assert that under the CMA "the Liberty Mutual policy was intended by the parties to be the primary policy for a loss such as is the subject of this litigation." (Id. ¶ 47.) "Liberty Mutual contends that its policy of insurance is triggered only in the event that Liberty Mutual receives 'something in writing from the All Risk underwriter and/or carrier disclaiming coverage for this loss'[.]" (Id. ¶ 48.)
II. LEGAL STANDARDS
Federal Rule of Civil Procedure ("Rule") 8 requires a plaintiff to present a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The statement must provide enough detail to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). The complaint must be "plausible on its face," that is, the "complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). The plausibility standard is not equivalent to a probability requirement, but it does require that "[f]actual allegations . . . be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555, 127 S.Ct. 1955.
Rule 12(b)(1) permits a party to seek dismissal of a complaint for lack of subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). A Rule 12(b)(1) challenge may be either facial or factual. Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). In a facial attack, the court may dismiss a complaint when the allegations of and documents attached to the complaint are insufficient to confer subject-matter jurisdiction. See Savage v. Glendale Union High Sch. Dist. No. 205, 343 F.3d 1036, 1039 n.2 (9th Cir. 2003). In this context, all allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. Fed'n of African Am. Contractors v. City of Oakland, 96 F.3d 1204, 1207 (9th Cir. 1996). In contrast, when a court evaluates a factual challenge to jurisdiction, a court is "free to weigh the evidence and satisfy itself as to the existence of its power to hear the case." Safe Air for Everyone, 373 F.3d at 1039 ("In resolving a factual attack on jurisdiction, the district court may review evidence beyond the complaint without converting the motion to dismiss into a motion for summary judgment.").
Under Rule 12, a defendant may move to dismiss a pleading for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Generally, the court is limited to the allegations in the complaint and documents attached. In re NVIDIA Corp. Sec. Litig., 768 F.3d 1046, 1051 (9th Cir. 2014). When ruling on the motion, "a judge must accept as true all of the factual allegations contained in the complaint." Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007). However, a court is "not bound to accept as true a legal conclusion couched as a factual allegation." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (2009) (internal quotation marks omitted). Nor does it "accept as true allegations that contradict matters properly subject to judicial notice or by exhibit." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.) (citing Mullis v. U.S. Bankr. Ct., 828 F.2d 1385, 1388 (9th Cir. 1987), opinion amended in part on denial of reh'g, 275 F.3d 1187 (9th Cir. 2001)).
Even if the court concludes that a 12(b)(6) motion should be granted, the "court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (quotation omitted).
III. REQUEST FOR JUDICIAL NOTICE
Pursuant to Federal Rule of Evidence 201, a court "must take judicial notice if a party requests it and the court is supplied with the necessary information." Fed. R. Evid. 201(c)(2). Judicial notice permits a court to consider an adjudicative fact "that is not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b)(1)-(2); see Fed. R. Evid. 201(b) advisory committee's note ("With respect to judicial notice of adjudicative facts, the tradition has been one of caution in requiring that the matter be beyond reasonable controversy."). The Ninth Circuit has made clear that "[a] court must also consider—and identify—which fact or facts it is noticing from . . . [a document]. Simply because the document itself is susceptible to judicial notice does not mean that every assertion of fact within that document is judicially noticeable for its truth." Khoja v. Orexigen Therapeutics, 899 F.3d 988, 999 (9th Cir. 2018).
Unattached documents referred to in the complaint may be considered by the court if: "(1) the complaint refers to the document; (2) the document is central to plaintiff's claim; and (3) no party questions the authenticity of the document." United States v. Corinthian Colls., 655 F.3d 984, 999 (9th Cir. 2011) (citing Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006); Lee, 250 F.3d at 688). In addition, under the "incorporation by reference" doctrine, courts look beyond the pleadings without converting the motion to dismiss into a motion for summary judgment. Knievel v. ESPN, 393 F.3d 1068, 1076-1077 (9th Cir. 2005).
Liberty Mutual requests judicial notice of Exhibit A, The Declarations Pages and CGL coverage form for Liberty Mutual Insurance Policy, Policy No. TB2-625-092815-040, for the policy period of November 1, 2020 to November 1, 2021. (Dkt. No. 15-3, 15-4.) Liberty argues that the excerpts are judicially noticeable because this Court can consider documents referenced in the complaint, but not attached to the complaint citing Galbraith v. County of Santa Clara, 307 F.3d 1119, 1127 (9th Cir. 2002) and United States v. Corinthian Colls., 655 F.3d 984, 999 (9th Cir. 2011). Liberty Mutual also contends that the complaint refers to the attached policy throughout and that the policy is central to Plaintiffs' claims. Plaintiffs oppose the request arguing that Exhibit A is not subject to judicial notice because Liberty Mutual only provided excerpts of the policy instead of a complete copy and so the policy is subject to a reasonable dispute. (Dkt. 19-1.) On reply, Liberty Mutual provides a complete copy of the policy. (Dkt. Nos. 20-1, 20-2.)
Here, Plaintiffs refer to the Liberty Mutual policy throughout the complaint. (See Compl. ¶¶ 3, 7, 16, 22-29, 34, 37, 44, 47-48.) The Liberty Mutual policy is central to Plaintiffs' claims because Plaintiffs base their breach of contract, express indemnification, equitable contribution and declaratory relief claims on the express terms of the insurance policy and seek relief based on the alleged breaches of the policy. (See id. ¶¶ 16, 22-31, 34, 36-39, 44-45, 49.) Since Plaintiffs only objected based on completeness, and since Defendant provided the complete contract, the Court GRANTS Defendant's request for judicial notice. The Court takes judicial notice of the terms of the Liberty Mutual Policy.
IV. DISCUSSION
Liberty Mutual argues that the motion to dismiss Plaintiffs' complaint should be granted because Plaintiffs fail to state claims for which relief can be granted. Specifically, Liberty Mutual contends it did not breach the insurance contract at issue. Liberty Mutual further argues absent any coverage obligations under the Liberty Mutual policy, Plaintiffs cannot maintain any of their causes of action as a matter of law. Moreover, Liberty Mutual argues that the declaratory relief is not ripe for adjudication.
The Court first addresses the Rule 12(b)(1) motion and then addresses the Rule 12(b)(6) motion.
A. Rule 12(b)(1) Motion
Liberty Mutual argues that the declaratory relief is subject to dismissal under both Rule 12(b)(6) and 12(b)(1) but only makes specific arguments as to Rule 12(b)(1). Liberty Mutual challenges the declaratory relief claim as unripe because there are no rights for the court to declare. (Motion at 18-19.) Liberty Mutual contends that it has no present duty to defend or indemnify anyone with respect to the Incident. (Id. at 19.)
In opposition, Plaintiffs argue that their claim involves a controversy that exists between these two insurance carriers, specifically whether the CGL policy issued by Liberty is responsible for the loss. (Opp. at 10.) Plaintiffs further argue that they plead that, pursuant to the CMA between a Brookfield entity and Turner, that agreement expressly and unambiguously states that Liberty's policy is intended by the parties to be the primary policy for this loss. (Id.)
In reply, Liberty Mutual contends that there is no actual controversy between Plaintiffs and itself with respect to the Liberty Mutual Policy. (Reply at 8.)
"Because standing and ripeness pertain to federal courts' subject matter jurisdiction, they are properly raised in a Rule 12(b)(1) motion to dismiss." Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th Cir. 2010) (citations omitted).) An "unripe" claim may be dismissed under Rule 12(b)(1) for lack of subject matter jurisdiction. Association of American Med. Colleges v. United States, 217 F. 3d 770, 784, fn. 9 (9th Cir. 2000) ("Whether statutory or constitutional in origin, an unripe claim is not justiciable.").
A "controversy that is the subject of declaratory relief must be of a character which admits of specific and conclusive relief by judgment within the field of judicial determination, as distinguished from an advisory opinion upon a particular or hypothetical set of facts. The judgment must decree, not suggest, what the parties may or may not do."
Park Townsend, LLC v. Clarendon Am. Ins. Co., 916 F. Supp. 2d 1045, 1050 (N.D. Cal. 2013) (quoting Gafcon, Inc. v. Ponsor & Associates, 98 Cal. App. 4th 1388, 1403, 120 Cal.Rptr.2d 392 (Ct. App. 2002)). Moreover, declaratory relief "operates prospectively, and not merely for the redress of past wrongs." Id.
Here, the dispute that Plaintiffs identified relates to the applicability of the Liberty Mutual Policy to the incident due to the CMA. (See Opp. at 10, Compl. ¶ 48.) However, Plaintiffs request a judicial declaration so "that Starr and Brookfield may ascertain their respective rights, and Liberty Mutual's rights and duties with respect to Liberty Mutual's contractual obligations to both Turner and Brookfield, as an additional insured under the Liberty Mutual policy." Compl. ¶ 49 (double emphasis added). Liberty Mutual has pointed out that Starr is not a party the insurance policy and is not in contractual privity with Liberty Mutual. (See Motion at 7-8, 18.) Accordingly, there is no controversy between Starr and Liberty Mutual under the Liberty Mutual Policy.
Likewise, to the extent that Plaintiffs are seeking a declaration of rights under the CMA, Plaintiffs have not requested such a declaration in the complaint. (See Compl. ¶¶ 45-49.) Here too, Plaintiffs have not explained why or how the CMA would impose contractual duties on Liberty Mutual, when Liberty Mutual is not a party to that agreement.
Finally, to the extent that Brookfield's claim for Declaratory Relief is seeking a declaration of rights under the Liberty Mutual policy, such a claim is not ripe. The Liberty Mutual Policy provides, in part, "We will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies. We will have the right and duty to defend the insured against any 'suit' seeking those damages." (RJN, Reply Ex. A, Common Policy Form CG 00 01 04 13, LM000029.) Here, there is no allegation of a suit against Brookfield, an alleged insured, requiring the Court to clarify the scope of the duty to defend or indemnify under the Liberty Mutual Policy. (See generally Compl.)
Since Brookfield's claim is unripe and since Starr does not assert a case or controversy under the Liberty Mutual Insurance Policy, the court lacks subject matter jurisdiction as to Plaintiffs' declaratory relief claim. Therefore, Defendants' motion to the declaratory relief claim is GRANTED without prejudice.
B. Rule 12(b)(6) Motion
1. Breach of Contract
Liberty Mutual argues that Plaintiffs' breach of contract, and therefore all claims, fail because the contract at issue is a third-party liability insurance contract and not a first-party property insurance contract. (Motion at 6:22-7:22.) Liberty Mutual contends that since its policy is a third-party liability insurance, the insurance is not implicated. (Id. 7:12-22, 9:8-15.) Furthermore, with respect to Brookfield, Liberty Mutual contends there is no coverage under the Liberty Mutual Policy because the incident does not implicate Liberty Mutual's duty to defend or indemnify under the express terms of the policy. (See id. 9:8-15.) Liberty Mutual argues that a "claim" is not a "suit" and such that the filing of a claim also does not trigger the duty to defend or indemnify under the Liberty Mutual Policy. (Id. at 12:8-14:3.) Finally, Liberty Mutual argues that there is no allegation of a court or arbitrator finding that Plaintiffs are legally obligated to pay any sum as damages as a result of the incident. (See id. at 14:22-15:24.)
With respect to Starr, Liberty Mutual contends that Plaintiffs cannot maintain a breach of contract claim against it because Starr is not alleged to be a party to the insurance contract. (Motion at 7:25-27, 8:25-27.)
Plaintiffs appear to argue that the complaint is sufficient because Liberty Mutual's comprehensive general liability policy was implicated once the insurer received notice of a claim such that the insurer has the obligation to investigate the claim and make a determination as to the insurer's defense and indemnity obligations. Specifically, Plaintiffs contend that Liberty Mutual's CGL policy is implicated once the insurer receives notice of a claim such that the insurer has an obligation to investigate and determine the insurers obligations. (Opp. at 4:14-5:2, citing Safeco Ins. Co. of America v. Parks, 170 Cal. App. 4th 992, 1003-1004, 88 Cal.Rptr.3d 730 (Ct. App. 2009); Mariscal v. Old Republic Life Ins. Co., 42 Cal. App. 4th 1617, 1624, 50 Cal.Rptr.2d 224 (Ct. App. 1996); and Jordan v. Allstate Ins. Co., 148 Cal. App. 4th 1062, 1073-1074, 56 Cal.Rptr.3d 312 (Ct. App. 2007).) Plaintiffs contend that Liberty Mutual did not deny that it received notice and that its policy provided coverage. (Id. 5:15-17.) In reply, Liberty Mutual argues that its policy is a third-party liability policy and that the Incident is not covered under the Liberty policy, citing Montrose Chemical Corp. of Cal. v. Admiral Ins. Co., 10 Cal. 4th 645, 663-666, 42 Cal.Rptr.2d 324, 913 P.2d 878 (1995).
Plaintiffs define CGL as comprehensive general liability policy in their papers. (Opp. at 1:16.) This appears to be a typographical error since Plaintiffs define CGL as commercial general liability policy in the complaint.
Plaintiffs' opposition does not address the difference between first-party property insurance and third-party liability insurance, nor did it address Liberty Mutual's arguments. Instead, as noted above, Plaintiffs cite a series of California appellate cases, specifically, Safeco Ins., 170 Cal. App. 4th at 1003-1004, 88 Cal.Rptr.3d 730, Mariscal, 42 Cal. App. 4th at 1624, 50 Cal.Rptr.2d 224, and Jordan, 148 Cal. App. 4th at 1073-74, 56 Cal.Rptr.3d 312. The California Supreme Court explained the differences between first-party insurance and third-party insurance policies, specifically,
a first party insurance policy provides coverage for loss or damage sustained directly by the insured (e.g., life, disability, health, fire, theft and casualty insurance). A third party [sic] liability policy, in contrast, provides coverage for liability of the insured to a "third party" (e.g., a CGL policy, a directors' and officers' liability policy, or an errors and omissions policy). In the usual first party policy, the insurer promises to pay money to the insured upon the happening of an event, the risk of which has been insured against. In the typical third party [sic] liability policy, the carrier assumes a contractual duty to pay judgments the insured becomes legally obligated to pay as damages because of bodily injury or property damage caused by the insured.Montrose Chem. Corp., 10 Cal. 4th at 663, 42 Cal.Rptr.2d 324, 913 P.2d 878 (citing Garvey v. State Farm Fire & Cas. Co., 48 Cal. 3d 395, 399 n. 2, 407, 257 Cal.Rptr. 292, 770 P.2d 704 (1989); Prudential-LMI Com. Insurance v. Superior Court, 51 Cal. 3d 674, 698-699, 274 Cal.Rptr. 387, 798 P.2d 1230 (1990)).
The cases cited by Plaintiffs all concern first-party insurance policies and are distinguishable. Mariscal concerned a first-party accidental death insurance and whether the insurance company breached the covenant of good faith and fair dealing when failing to pay bay benefits due. Mariscal, 42 Cal. App. 4th at 1619-1622, 50 Cal.Rptr.2d 224. There, the insurance company claimed that an "illness" exclusion precluded payment of benefits due. See id. at 1624, 50 Cal.Rptr.2d 224. Jordan also involved a first-party insurance policy, specifically a homeowner's policy subject to certain exclusions. Jordan, 148 Cal. App. 4th at 1067, 56 Cal.Rptr.3d 312. There too, the insurance company denied the claim asserting that coverage was barred due to an exclusion. Id. at 1068, 56 Cal.Rptr.3d 312. Finally, while Safeco involved whether the insurance company breached the covenant of good faith and fair dealing when it failed to defend and indemnify a minor who was potentially covered under that insurance policy, those duties stemmed from a first-party renter's insurance not a third-party commercial general liability insurance policy. See generally Safeco, 170 Cal. App. 4th at 997-998, 1002-1005, 88 Cal.Rptr.3d 730. While Plaintiffs allege that they presented a claim to Liberty Mutual, Plaintiffs have not shown that the claim is covered under the express terms of the policy.
The Court took judicial notice of the Liberty Mutual Policy underlying the majority of Plaintiffs' claims against Defendant Liberty Mutual. The Liberty Mutual Policy provides:
We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. We may, at our discretion, investigate any "occurrence" and settle any claim or "suit" that may result. But:
(1) The amount we will pay for damages is limited as described in Section III - Limits Of Insurance; and
. . . .
No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Supplementary Payments - Coverages A and B.
(RJN, Reply Ex. A, Common Policy Form, CG 00 01 04 13, LM000029.) The Liberty Mutual insurance policy is a third-party liability policy since it provides coverage for liability of the insured to a third party. Montrose Chem. Corp., 10 Cal. 4th at 663, 42 Cal.Rptr.2d 324, 913 P.2d 878. Here, the insurance policy provides a "right and duty to defend the insured against any 'suit' seeking . . . damages." (RJN, Reply Ex. A, Common Policy Form, CG 00 01 04 13, LM000029.) "[B]y specifying that only a 'suit,' and not a 'claim' triggers the duty to defend, insurers have drawn an unambiguous line to define and limit their contractual obligation." Foster-Gardner, Inc. v. Nat'l Union Fire Ins. Co., 18 Cal. 4th 857, 882, 77 Cal.Rptr.2d 107, 959 P.2d 265 (1998), as modified (Sept. 23, 1998). The Liberty Mutual Insurance policy applies to suits defines and defines suit broadly. "Suit" includes a "civil proceeding in which damages are being claimed as a result of property damages" as well as arbitration or "other alternative dispute resolution proceeding in which such damages are being claimed." (RJN, Reply Ex. A, Common Policy Form, CG 00 01 04 13, LM000044.) Here, however, Plaintiffs have only alleged that Brookfield filed a claim. (See Compl. ¶¶ 18-19.) Plaintiffs have not alleged that Brookfield, as an additional insured, is facing a suit seeking damages arising from the incident. Since Plaintiffs only alleged that Brookfield filed a claim, Plaintiffs have not alleged facts in the complaint that trigger Liberty Mutual's duty to defend.
The Liberty Mutual Policy provides its insured indemnification for sums of money the insured "becomes legally obligated to pay as damages because of . . . 'property damage' to which this insurance applies." (RJN, Reply Ex. A, Common Policy Form, CG 00 01 04 13, LM000029.) While interpreting a similar provision, the California Supreme Court in Certain Underwriters at Lloyd's of London v. Superior Ct., 24 Cal. 4th 945, 962-63, 103 Cal.Rptr.2d 672, 16 P.3d 94 (2001) differentiated between the words "damages" and "harm" and found that, while they are related to each other, "harm outside of court may result in damages inside of court and damages inside of court result from harm outside of court." Id. (internal quotation marks omitted) (citations omitted). The California Supreme Court also distinguished between the phrases "sum that the insured becomes legally obligated to pay" and "sum that the insured becomes legally obligated to pay as damages" such that without the phrase "as damages," individuals were invoking a general abstract legal rule. Id. at 963, 103 Cal.Rptr.2d 672, 16 P.3d 94. The California Supreme Court explained:
one would not speak of any "sum that the insured becomes legally obligated to pay as damages" apart from any order by a court. For one would not say that the insured is legally obligated to pay some such sum as damages under abstract rules alone. That is because, as a sum that the insured becomes legally obligated to pay, "damages" presuppose an institution for their ordering, traditionally a court, albeit no longer exclusively.Id. at 963, 103 Cal.Rptr.2d 672, 16 P.3d 94 (emphasis in original) (footnote omitted) (citations omitted). The Court concluded that "[t]he duty to indemnify runs to 'all sums that the insured becomes legally obligated to pay as damages' " is limited to money ordered by a court. Id. at 964, 103 Cal.Rptr.2d 672, 16 P.3d 94 (emphasis in original).
While Plaintiffs allege that Brookfield is an additional insured and that Brookfield incurred $800,000 in damages, Plaintiffs have not alleged that Plaintiffs, either Brookfield or Starr, had a legal obligation through some court order to pay any sum as damages. (Compl. ¶¶ 14, 29, 31.) Since Plaintiffs have not alleged that they have been legally obligated to pay damages by a court, Plaintiffs have failed to allege sufficient facts to invoke Defendant's duty to indemnify under the Liberty Mutual Policy.
Finally, Plaintiffs' opposition does not address the argument raised by Liberty Mutual that Starr is not alleged to be a party to the underlying insurance contract. "As a general matter, a non-party, or nonsignatory, to a contract is not liable for a breach of that contract." Int'l Union of Operating Eng'rs., Loc. 3 v. Zurich N. Am., No. S06-0957 WBSKJM, 2006 WL 2791156, at *3 (E.D. Cal. Sept. 27, 2006); Henry v. Assoc. Indem. Corp., 217 Cal. App. 3d 1405,1416-1417, 266 Cal.Rptr. 578 (1990) (concluding that "[t]here was no direct contractual relationship between [the parties] from which either a breach of the covenant of good faith and fair dealing or a breach of contract action could properly spring"). Here, Plaintiffs have not alleged that Starr was a party to the insurance policy and have not alleged that there is privity of contract between Starr and Liberty Mutual. Since there is no contractual relationship alleged between Starr and Liberty Mutual, Starr cannot maintain its breach of contract claim against Liberty Mutual.
For the reasons explained above, Plaintiffs have failed to allege sufficient facts to state a claim for breach of contract against Liberty Mutual. Accordingly, the motion to dismiss the breach of contract claim is GRANTED with prejudice.
2. Express Indemnity
Liberty Mutual argues that that Plaintiffs' express indemnity claim fails for the same reasons as their breach of contract claim. (Motion at 16:19-20.) In addition, Liberty Mutual argues that it is not a party to the Construction Management Agreement and owes no indemnity obligations pursuant to that contract, (id. at 16:21-17:2) and points out that while Plaintiffs allege that the Liberty Mutual policy is primary policy for this loss, Plaintiffs also allege that Liberty Mutual's indemnity obligations stem from the "terms of the Liberty Mutual [P]olicy." (Compl. ¶ 37).
In opposition, Plaintiffs recite the elements for an equitable indemnification claim but fail to respond to Defendant's argument. Plaintiffs argue that the right to indemnity arises when one party pays the joint legal obligation on behalf of another, citing Expressions at Rancho Niguel Ass'n v. Ahmanson Devs., Inc., 86 Cal. App. 4th 1135, 1139, 103 Cal.Rptr.2d 895 (2001). Plaintiffs also cite the language in the Construction Management Agreement requiring the Construction Manager to carry certain types of insurance policies, and that the Construction Manager's insurance policy be primary. (Opp. at 5:28-6:20.)
In reply, Defendants argue that the cases on which Plaintiffs rely are premised on there being a legal obligation owed by the defendant insurer to the plaintiff. (Reply at 6.)
"The right to indemnity flows from payment of a joint legal obligation on another's behalf." Expressions at Rancho Niguel Ass'n, 86 Cal. App. 4th at 1139, 103 Cal.Rptr.2d 895 (citing Cal. Civ. Code § 1432; Western Steamship Lines, Inc. v. San Pedro Peninsula Hosp. (1994) 8 Cal. 4th 100, 114, 32 Cal.Rptr.2d 263, 876 P.2d 1062). "The elements of a cause of action for indemnity are (1) a showing of fault on the part of the indemnitor and (2) resulting damages to the indemnitee for which the indemnitor is contractually . . . responsible." Id. (emphasis in original) (citing Gouvis Eng'g v. Superior Court, 37 Cal. App. 4th 642, 646, 43 Cal.Rptr.2d 785 (Ct. App. 1995)).
Plaintiffs have not shown that the alleged indemnitor, Liberty Mutual, is contractually responsible for the alleged loss. As explained above, Plaintiffs have not alleged facts that trigger coverage under the Liberty Mutual Policy. Liberty Mutual is not a party to the CMA and Plaintiffs have not explained why the terms of the CMA would give rise to a claim for express indemnification against Liberty Mutual.
Accordingly, the motion to dismiss the express indemnification claim is GRANTED with prejudice.
3. Equitable contribution
Starr is the only plaintiff asserting the equitable contribution claim. Liberty Mutual argues that this claim fails for two reasons. Liberty Mutual argues that the claim fails because there is no coverage under the Liberty Mutual Policy. (Motion at 17.) The claim also fails because Starr and Liberty provide different types of insurance such that there is no overlapping coverage. (Motion. at 17.) Plaintiffs argue that Starr may seek to recover from Liberty as a co-obligor who is responsible for the loss incurred as a result of Turner's negligence. (Opp. at 7.) In reply, Defendant notes that a claim of equitable contribution is based on a shared obligation between co-insurers, and the complaint does not allege facts showing that there is a mutual insured because there is no allegation of a lawsuit triggering a duty to defend or indemnify. (Reply at 6-7.)
"California follows the general rule that an insurer that discharges a common obligation of another insurer may seek contribution from the second insurer." N. Ins. Co. of New York v. Allied Mut. Ins. Co., 955 F.2d 1353, 1360 (9th Cir. 1992) (citing CNA Casualty of Cal. v. Seaboard Surety Co., 176 Cal. App. 3d 598, 222 Cal.Rptr. 276, rev. denied (1986).)
In the insurance context, the right to contribution arises when several insurers are obligated to indemnify or defend the same loss or claim, and one insurer has paid more than its share of the loss or defended the action without any participation by the others. Where multiple insurance carriers insure the same insured and cover the same risk, each insurer has independent standing to assert a cause of action against its coinsurers for equitable contribution when it has undertaken the defense or indemnification of the common insured.
Fireman's Fund Ins. Co. v. Maryland Cas. Co., 65 Cal. App. 4th 1279, 1293, 77 Cal.Rptr.2d 296 (1998) (double emphasis added). Here, Plaintiffs alleged that Starr was a property insurer and that Liberty Mutual provided commercial general liability insurance. (See Compl. ¶¶ 2-3.) Plaintiffs further alleged that Starr provided property insurance to Brookfield and that Starr paid $619,392.20 to Brookfield under its insurance policy as a result of the damage sustained to the Property. (Compl. ¶ 42.) The terms of the Liberty Mutual policy provides that Liberty Mutual has "the right and duty to defend the insured against any 'suit' seeking" damages to which the insurance policy applies. (RJN, Reply Ex. A, Common Policy Form, CG 00 01 04 13, LM000029.) While Plaintiffs cite the CMA in their complaint, Plaintiffs have not alleged facts showing that the Liberty Mutual Policy covered the same type of risk as the Starr policy. (Compl. ¶ 44.) Since there are no allegations of coverage for the same risk, (i.e., both insurance policies cover property damage, or both insurance policies cover liability) and since the Liberty Mutual Policy is a third-party liability policy that does not cover the same risk as a first-party insurance policy, Starr's equitable contribution claims fail as a matter of law.
Accordingly, the motion to dismiss the equitable contribution claim is GRANTED with prejudice.
V. CONCLUSION
For the reasons explained above, the court lacks subject matter jurisdiction of Plaintiffs' declaratory relief claim. Accordingly, the motion to dismiss that claim is GRANTED WITHOUT PREJUDICE. In addition, Plaintiffs have failed to allege sufficient facts to state a claim for breach of contract, express indemnity, and equitable contribution against Liberty Mutual. Plaintiffs have not explained how they can amend the complaint to state a claim against Defendant. Accordingly, the motion to dismiss those claims is GRANTED WITH PREJUDICE.
For the foregoing reasons, Defendant's Motion to Dismiss is GRANTED. The complaint is dismissed.
IT IS SO ORDERED.