Opinion
CV 20-00672-RSWL-E
2021-11-05
CAPITOL SPECIALTY INSURANCE CORPORATION, Plaintiff, v. GEICO GENERAL INSURANCE COMPANY; and Does 1-5, Defendants.
David C. Capell, Lyndy Chang Stewart, Christopher J. Lee, Gordon Rees Scully Mansukhani LLP, San Francisco, CA, James L. Ellison, Gordon Rees Scully Mansukhani LLP, Portland, OR, for Plaintiff. John T. Brooks, Thomas R. Proctor, Benjamin D. Brooks, Jeffrey Vincent Commisso, Sheppard Mullin Richter and Hampton LLP, San Diego, CA, Lejf Edwin Knutson, Patrick D. Hale, James P. Wagoner, McCormick Barstow Sheppard Wayte and Carruth LLP, Fresno, CA, for Defendant Geico General Insurance Company. James P. Wagoner, McCormick Barstow Sheppard Wayte and Carruth LLP, Fresno, CA, for Defendant Does.
David C. Capell, Lyndy Chang Stewart, Christopher J. Lee, Gordon Rees Scully Mansukhani LLP, San Francisco, CA, James L. Ellison, Gordon Rees Scully Mansukhani LLP, Portland, OR, for Plaintiff.
John T. Brooks, Thomas R. Proctor, Benjamin D. Brooks, Jeffrey Vincent Commisso, Sheppard Mullin Richter and Hampton LLP, San Diego, CA, Lejf Edwin Knutson, Patrick D. Hale, James P. Wagoner, McCormick Barstow Sheppard Wayte and Carruth LLP, Fresno, CA, for Defendant Geico General Insurance Company.
James P. Wagoner, McCormick Barstow Sheppard Wayte and Carruth LLP, Fresno, CA, for Defendant Does.
ORDER re: Defendant's Motion for Summary Judgment [61] and Plaintiff's Motion for Summary Judgment [62]
RONALD S.W. LEW, Senior United States District Judge
Currently before the Court are Defendant GEICO General Insurance Company's ("Defendant") Motion for Summary Judgment [61] and Plaintiff Capitol Specialty Insurance Corporation's ("Plaintiff") Motion for Summary Judgment [62]. Having reviewed all papers submitted pertaining to these Motions, the Court NOW FINDS AND RULES AS FOLLOWS: the Court GRANTS Defendant's Motion and DENIES Plaintiff's Motion. I. BACKGROUND
A. Factual Background
This insurance coverage dispute stems from a settlement in an underlying personal injury action, Martinez v. Collins, et al., Case No. BC645398 (the "Underlying Lawsuit"), in the Superior Court of California, County of Los Angeles, which relates to an automobile accident between June Collins ("Collins") and Juan Martinez ("Martinez"). See Notice of Removal Ex. A ("Compl.") ¶ 4, ECF No. 1-1. In this Action, Plaintiff alleges that it suffered damages due to Defendant's failure to initially settle the Underlying Lawsuit and Defendant's subsequent refusal to fully fund the eventual settlement of the Underlying Lawsuit. Id. ¶ 23. The undisputed facts concerning the Underlying Lawsuit that are pertinent to this Action are as follows.
On September 18, 2015, Collins collided with a motorcycle operated by Juan Martinez while driving her own car. See Pl.'s Statement of Uncontroverted Facts in Supp. of MSJ ("Pl.'s SUF") No. 3, ECF No. 88-1; Def.'s Statement of Uncontroverted Facts in Supp. of MSJ ("Def.'s SUF") No. 4, ECF No. 61-2. Defendant had issued an auto liability policy to Collins that provided a limit of $50,000 for bodily injury coverage that was effective at the time of the accident. Pl.'s SUF No. 1; Def.'s SUF No. 2. Collins reported the accident to Defendant and provided a description of the accident, and thereafter Defendant assigned 80% liability to Collins and 20% liability to Martinez. Pl.'s SUF No. 5; Def.'s SUF No. 5.
At the time of the accident, Collins was employed by Nu-Era Home Health Agency, Inc. ("Nu-Era") as a home health care nurse and was driving home from a client visit. Def.'s SUF Nos. 1, 5. Plaintiff insured Nu-Era under both a primary and an umbrella policy, each of which had a $1 million limit of liability. Pl.'s SUF No. 2; Def.'s SUF No. 3. These policies were in effect at the time of the accident and would cover both Collins and Nu-Era if Collins was acting in the course and scope of employment at the time of the accident. Def.'s SUF No. 3.
Between September 2015 and November 2016, Defendant made requests to Martinez's counsel for proof of Martinez's liability insurance and medical bills and records. Def.'s SUF Nos. 7-8; Albrecht Decl., Ex. 182 at 286-300, ECF No. 63-6. On or around December 5, 2016, Martinez sent a letter to Defendant that stated in part: "I was seriously hurt, my lawyer told me that there is $50,000 policy. So I am asking you to pay the policy maximum of your insured driver.... Please let me know by December 19, 2016 by mail." Pl.'s SUF No. 13; Def.'s SUF No. 11. Included with the letter were the police report for the accident and eight pages of medical records from late 2015, which indicated that Martinez was paralyzed as of October 2015. Pl.'s SUF No. 13; Def.'s SUF No. 11. At the time of this demand, Martinez did not know that Collins was employed by Nu-Era or that Plaintiff had issued a policy to Nu-Era that may provide coverage for Martinez's claim. Pl.'s SUF No. 21; Def.'s SUF No. 12.
Between December 7, 2016, and December 13, 2016, Defendant attempted to contact Martinez about his letter, and on December 13, 2016, Defendant sent Martinez a letter asking him to provide medical bills and insurance information and stating that Defendant wanted to resolve the claim "as soon as possible." Pl.'s SUF Nos. 17; Def.'s SUF No. 14-15. Martinez did not respond to this letter. Def.'s SUF No. 15.
Defendant responded to Martinez's demand in a letter dated December 16, 2016. Pl.'s SUF No. 19; Def.'s SUF No. 16. The letter stated:
At this time we are unable to meet your demand because it is our understanding that the owner of the motorcycle you were operating at the time of loss did not have liability insurance in effect for the date of this loss. We have made inquiries of you to determine whether you had your own liability insurance for this loss, but have not had a response from you to date. At this time we are considering you an uninsured motorist.... To date, you have not submitted evidence of any pecuniary damages, nor proof of liability coverage in effect for this loss.... If you have either of these items, we ask that you forward them to us for review as soon as possible.
Albrecht Decl., Ex. 8, ECF No. 63-3; see also Pl.'s SUF No. 19; Def.'s SUF No. 16.
On January 6, 2017, Martinez filed the Underlying Lawsuit against Collins in state court. Pl.'s SUF No. 24; Def.'s SUF No. 17. On March 18, 2018, Martinez amended his complaint to substitute Nu-Era as a defendant. Pl.'s SUF No. 25; Def.'s SUF No. 21. The Underlying Lawsuit settled in March 2019, with Plaintiff contributing its $2 million policy limits to the settlement amount. Pl.'s SUF No. 37; Def.'s SUF No. 22.
B. Procedural Background
On December 17, 2019, Plaintiff filed its Complaint [1-1] in the Superior Court of California, County of Los Angeles, alleging breach of the implied covenant of good faith and fair dealing caused by Defendant's failure to accept Martinez's December 2016 settlement demand. Defendant filed its Answer [1-9] on January 21, 2020, and then removed [1] the Action to this Court on January 22, 2020.
Plaintiff [62] and Defendant [61] each filed a motion for summary judgment on March 16, 2021. The parties opposed [72, 76] each other's motions on April 5, 2021, and thereafter filed timely replies [82, 83].
II. DISCUSSION
A. Legal Standard
Summary judgment is appropriate when the moving party "shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A fact is "material" if it might affect the outcome of the suit, and the dispute is "genuine" if the evidence is such that a reasonable factfinder could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
The moving party bears the initial burden of proving the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Where the nonmoving party bears the burden of proof at trial, the moving party need only show "an absence of evidence to support the nonmoving party's case." Id. at 325, 106 S.Ct. 2548. If the moving party meets its burden, the burden then shifts to the nonmoving party to present "specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 250, 106 S.Ct. 2505. The nonmoving party "must show more than the mere existence of a scintilla of evidence ... or some ‘metaphysical doubt’ as to the material facts at issue." In re Oracle Corp. Sec. Litig., 627 F.3d 376, 387 (9th Cir. 2010).
The evidence, and all reasonable inferences based on underlying facts, must be construed in the light most favorable to the nonmoving party. Scott v. Harris, 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). In reviewing the record, the court's function is not to weigh the evidence but only to determine if a genuine issue of material fact exists. Anderson, 477 U.S. at 255, 106 S.Ct. 2505. "A district court's ruling on a motion for summary judgment may only be based on admissible evidence." In re Oracle Corp. Sec. Litig., 627 F.3d at 385. "While the evidence presented at the summary judgment stage does not yet need to be in a form that would be admissible at trial, the proponent must set out facts that it will be able to prove through admissible evidence." Norse v. City of Santa Cruz, 629 F.3d 966, 973 (9th Cir. 2010).
"[W]hen parties submit cross-motions for summary judgment, [e]ach motion must be considered on its own merits." Fair Hous. Council of Riverside Cnty., Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001) (internal quotation marks and citation omitted). The court must consider the evidence submitted in support of each cross-motion before ruling on either one. See id. at 1135-36.
B. Analysis
1. Preliminary Matters
a. Request for Judicial Notice
Plaintiff asks the Court to take judicial notice of two documents filed in the Underlying Lawsuit: (1) the complaint, filed January 6, 2017, and (2) the amendment to complaint, filed March 13, 2018, identifying Nu-Era as defendant Doe 1. See generally Pl.'s Req. for Judicial Notice in Supp. of Pl.'s MSJ, ECF No. 68; Pl.'s Req. for Judicial Notice in Supp. of Opp'n to Def.'s MSJ, ECF No. 76-3. Court filings are properly subject to judicial notice to establish the fact of their filing, see Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006), and Defendant does not object. The Court GRANTS Plaintiff's request.
b. Evidentiary Objections
Plaintiff lodged numerous evidentiary objections — a combined total of 104 objections — to evidence relied on in Defendant's briefs. See generally Pl.'s Objs to Def.'s Evid. in Supp. of MSJ, ECF No. 82-1; Pl.'s Objs. to Evid. Submitted by Def. in Supp. of its MSJ, ECF No. 89-2. Many of Plaintiff's objections read as a continuation or reiteration of Plaintiff's arguments in its briefs. The Court has considered the admissibility of the evidence and has not considered facts that are irrelevant or that could not be in a form that would be admissible at trial. See Norse, 629 F.3d at 973. The objections are therefore OVERRULED .
Plaintiff also "disputes" several facts in its Statement of Genuine Disputes on the basis that they are irrelevant. See generally Pl.'s SGD. Such disputes are unnecessary and improper, however, particularly in light of Plaintiff's numerous evidentiary objections. A factual dispute is only "genuine" where there is evidence to support a finding in favor of the nonmoving party, regardless of whether that fact is material. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The Court will consider the materiality of facts under the proper legal standards.
2. Defendant's Motion for Summary Judgment
Plaintiff asserts only one cause of action against Defendant: that Defendant breached its duty of good faith and fair dealing to its insureds by rejecting Martinez's settlement offer, causing Plaintiff to contribute $2 million to the eventual settlement. Defendant asserts that because Plaintiff's claim requires it to step into the shoes of its insureds, Plaintiff must additionally prove the elements of equitable subrogation. Id. at 7:6-10. Consequently, Defendant argues that it is entitled to summary judgment because Plaintiff has failed to establish that justice requires shifting Plaintiff's $2 million payment to Defendant. Id. at 7:23-8:13. The Court agrees with Defendant. Because this conclusion is dispositive, the Court need not address Defendant's other arguments.
First, Defendant is correct in asserting that Plaintiff must establish the elements of equitable subrogation in order to recover for the underlying tort. In the insurance context, subrogation is defined as "an insurer's right to be put in the position of the insured in order to pursue recovery from third parties legally responsible to the insured for a loss which the insurer has both insured and paid." Fireman's Fund Ins. Co. v. Md. Cas. Co., 65 Cal.App.4th 1279, 77 Cal. Rptr. 2d 296, 302 (1998). Here, Plaintiff itself acknowledges that its right to recover depends on its subrogation to the rights of its insureds, Collins and Nu-Era, for Defendant's alleged failure to accept Martinez's demand within policy limits. Compl. ¶ 22. Thus, in order to prevail in its suit, Plaintiff must establish the elements of equitable subrogation.
The seventh "essential element of an insurer's cause of action for equitable subrogation" is that "justice requires that the loss be entirely shifted from the insurer to the defendant, whose equitable position is inferior to that of the insurer." Fireman's Fund, 65 Cal. App. 4th at 1292, 77 Cal.Rptr.2d 296 ; see also State Farm Gen. Ins. Co. v. Wells Fargo Bank, N.A., 143 Cal. App. 4th 1098, 1108, 49 Cal.Rptr.3d 785 (Cal. Ct. App. 2006). Otherwise known as the doctrine of superior equities, this restrictive requirement "derives in part from the fact that the insurer has been paid a premium to assume the risk of loss" created by its insureds. Sompo Japan Ins. Co. of Am. v. Action Express, LLC, 19 F. Supp. 3d 954, 958 (C.D. Cal. 2014). Thus, for an insurer to succeed in a subrogation action against another insurer, the defendant insurer "must always be ‘guilty of some wrongful conduct which makes his equity inferior’ to that of the [plaintiff] insurer." Id. (quoting Golden Eagle Ins. Co. v. First Nationwide Fin. Corp., 26 Cal.App.4th 160, 31 Cal. Rptr. 2d 815, 822-23 (1994) ). Because Defendant's equitable position is not inferior to Plaintiff's equitable position, Plaintiff cannot meet the seventh element of equitable subrogation and its claim necessarily fails as a matter of law.
a. Equitable Position of Defendant
The only alleged wrongful conduct on the part of Defendant is its failure to accept Martinez's demand in December 2016. In Plaintiff's view, Defendant's failure to accept the demand was wrongful because at the time of the demand, Defendant knew Martinez's injuries were serious, Collins was determined to be 80% at fault, and an excess judgment was likely. Pl.'s Opp'n to Def.'s MSJ 30:10-13, ECF No. 76. Determining whether Defendant is guilty of any wrongful conduct therefore requires examination of Plaintiff's underlying tort claim.
In each liability insurance policy, California law implies a covenant of good faith and fair dealing, which includes "an obligation to accept a reasonable offer of settlement." McDaniel v. Gov't Emps. Ins. Co., 681 F. App'x 614, 615 (9th Cir. 2017) (quoting PPG Indus., Inc. v. Transamerica Ins. Co., 20 Cal. 4th 310, 314-15, 84 Cal.Rptr.2d 455, 975 P.2d 652 (1999) ). A claim for breach of this implied duty to settle has two elements: (1) a third party made a reasonable offer to settle the claims against the insured, and (2) the insurer unreasonably failed to accept the offer. Id. (citing Graciano v. Mercury Gen. Corp., 231 Cal.App.4th 414, 179 Cal. Rptr. 3d 717, 725 (2014) ).
Plaintiff cites to Johansen v. Cal. State Auto. Ass'n Inter-Ins. Bureau, 15 Cal. 3d 9, 16, 123 Cal.Rptr. 288, 538 P.2d 744 (1975), for the proposition that the "only considerations" when evaluating the reasonableness of a settlement offer are: (1) the victim's injuries, (2) the probable liability of the insured, and (3) whether the ultimate judgment is likely to exceed the amount of the settlement offer. See Pl.'s MSJ 21:2-12, ECF No. 88. Plaintiff fails to acknowledge, however, that a claim for breach of the duty to settle includes proof of two elements: first, that the offer was reasonable; second, that the insurer unreasonably denied the offer. McDaniel, 681 F. App'x at 615. While Johansen establishes the factors to consider when evaluating the first prong, its holding does not restrict courts from considering other factors when determining whether an insurer acted reasonably in denying a demand. It is on this second prong that Plaintiff's claim fails because Defendant did not commit a "conscious and deliberate act" to neglect its duty to its insured. Id.
Whether an insurer unreasonably failed to accept a settlement offer turns on whether the insurer acted in bad faith. "While an insurer's conduct need not rise to the level of actual dishonesty, fraud, or concealment to constitute bad faith, an insurer's conduct must nevertheless be prompted not by an honest mistake, bad judgment or negligence but rather by a conscious and deliberate act." Id. at 615-16 (internal quotation marks and citation omitted). Ordinarily, whether an insurer has acted "in bad faith in rejecting a settlement offer is a question of fact to be determined by the jury," but "the reasonableness of an insurer's conduct ‘becomes a question of law only when, because there are no conflicting inferences, reasonable minds could not differ.’ " Id. at 616 (quoting Walbrook Ins. Co. v. Liberty Mutual Ins. Co., 5 Cal.App.4th 1445, 7 Cal. Rptr. 2d 513, 517 (1992) ).
Here, Defendant did not act in bad faith in rejecting Martinez's settlement offer. The undisputed facts show that Defendant requested medical bills and records from Martinez for fourteen months before receiving Martinez's December 6, 2016 demand, which included eight pages of medical records from late 2015 and no medical bills. Def.'s SUF Nos. 8, 11. Martinez's demand asked for a response by December 19, 2016. Def.'s SUF No. 11. Defendant also attempted to contact Martinez about his letter between December 7 to 13, 2016, to no avail. Def.'s SUF No. 14. On or around December 13, 2016, Defendant sent Martinez a letter saying that it wanted to resolve his claim "as timely as possible" and asking Martinez to provide "any medical bills, medical liens, and/or explanation of benefits for the dates of service related to th[e] loss," and "any liability insurance information that would have provided coverage for [Martinez] for th[e] loss." Def.'s SUF No. 15. Martinez did not respond to this letter. Id.
Thereafter, on or around December 19, 2016 — the date by which Martinez requested a response — Defendant sent Martinez a letter explaining that it was "unable to issue any payment at this time" because Martinez had "not submitted evidence of pecuniary damages, nor proof of liability coverage in effect for this loss." Def.'s SUF No. 16. The letter further stated, "[i]f you have either of these items, we ask that you forward them to us for review as soon as possible." Id.
Based on these facts, no reasonable jury could conclude that Defendant acted in bad faith in rejecting this settlement offer. While the implied duty to settle is intended to protect the insured from excess exposure, "the doctrine conversely does not exist to require insurers to denigrate their own interests by settling for the policy limits in the absence of sufficient evidence supporting the conclusion that the claim against the insured would exceed policy limits." Spradlin v. GEICO Indem. Co., No. 2:18-cv-10299-SVW-KES, 2019 WL 6481304, at *20 (C.D. Cal. Aug. 1, 2019). While the police report and medical records provided with the settlement demand establish that Martinez was badly injured, these documents provided "no quantifiable medical costs associated with the [injury]." See id. at *23.
For example, Defendant had no information regarding the existence of any pre-existing injuries, an estimation of future medical expenses, or whether Martinez's condition had improved in the year between the accident and the settlement demand. Without more information, Defendant was not required to accept the settlement demand simply because it was within the policy limits. See id. at *20 (granting summary judgment for insurer because no reasonable insurer would have concluded that "settling for the policy limit was the prudent choice" without corroborating information to confirm medical expenses, even if it was clear that the claimant suffered a serious injury and that its insured was at fault); see also Du v. Allstate Ins. Co., 697 F.3d 753, 759 (9th Cir. 2012) (stating that an insurance company could not base a settlement offer on the representations of claimant or claimant's lawyer absent corroborating proof of claimant's medical expenses); Gellis v. Allstate Ins. Co., No. CV-99-03049LGB, 1999 WL 1074817, at *5-6 (C.D. Cal. Sept. 27, 1999) (granting summary judgment to the insurer because the insurer had "proper cause" to deny paying benefits to the insured due to the absence of medical documentation regarding any pre-existing injuries of the insured).
Nor was Defendant's lack of sufficient information to accept the offer its "own doing as a result of an unreasonable investigation." Spradlin, 2019 WL 6481304, at *22. Plaintiff does not dispute that Defendant made several attempts to contact Martinez about the settlement demand and requested information about Martinez's medical costs both before and after the demand was made. See Def.'s SUF Nos. 8, 14-15. Defendant communicated to Martinez that it wanted to resolve the matter "as timely as possible," but Martinez was radio silent from the day he made the offer until he filed his complaint against Collins. Given Martinez's unresponsiveness and Defendant's lack of access to Martinez's medical costs through other sources, Defendant did not breach its duty to conduct a reasonable investigation. See Pureco v. Allstate Indem. Co., No. 2:18-cv-02079-SVW-FFM, 2018 WL 7143624, at *9 (C.D. Cal. Nov. 27, 2018) (determining that insurer acted reasonably by declining to tender policy limits to claimant after making several requests for medical records that were "denied or ignored altogether" by claimant's counsel).
Plaintiff argues that Defendant's decision to set its reserves for policy limits indicates a reasonable likelihood that an excess verdict would result. Pl.'s MSJ 19:5-10. While a loss reserve "might have some relevance to the question of whether" such a reasonable likelihood existed, it cannot "accurately or fairly be equated with an admission of liability or the value of any particular claim." Lipton v. Superior Court, 48 Cal.App.4th 1599, 56 Cal. Rptr. 2d 341, 349 (1996). At most, the reserve here establishes that Defendant recognized that the claim could potentially exceed the policy limits. It cannot reasonably follow, however, that this fact alone creates a triable issue as to Defendant's bad faith where Defendant lacked any information indicating what Martinez's medical expenses actually were. See Spradlin, 2019 WL 6481304, at *21 (holding that defendant's setting a reserve did not create a triable issue because "it did not amount to a concession that [d]efendant actually believed [claimant's] damages claim to be accurately asserted in the parties' infrequent communications").
In sum, no reasonable juror could conclude that Defendant acted in bad faith by refusing to accept Martinez's December 2016 settlement demand. It follows that Defendant is not guilty of any wrongful conduct, and the Court now examines Plaintiff's equitable position to determine whether any factors make it superior to Defendant's position.
b. Equitable Position of Plaintiff
Defendant argues that Plaintiff is not in a superior equitable position because Plaintiff's entire argument is based on speculation that Martinez would not have discovered Plaintiff's $2 million in coverage or Nu-Era's respondeat superior liability if Defendant had accepted Martinez's December 2016 demand. Def.'s MSJ 24:21-26:13. The Court agrees.
Defendant cites to Dobbas v. Vitas, 191 Cal. App. 4th 1442, 119 Cal.Rptr.3d 798 (2011), and Travelers Indem. Co. v. Arch Specialty Ins. Co., No. 2:11-CV-1601-JLQ, 2013 WL 6198966 (E.D. Cal. Nov. 27, 2013), in support. In both cases, the court rejected the excess insurers' claims of superior equities where the excess insurers' arguments were based on assumptions that no one would have discovered the excess insurer's policies absent the defendant insurer's tortious conduct. See Dobbas, 191 Cal. App. 4th at 1453, 119 Cal.Rptr.3d 798 (rejecting the "erroneous argument ... based upon the apparent assumption that no one would have discovered the [excess insurer]'s policy" where the excess insurer still would have been legally responsible for its share of damages); see also Travelers Indem., 2013 WL 6198966, at *7 (rejecting the excess insurer's claim of superior equities where its theory "relie[d] on an injured nine-year old girl being fraudulently or negligently misled as to the amount of insurance coverage" and "on [its] policy not being discovered" before the settlement was finalized).
Similarly, the gravamen of Plaintiff's subrogation claim in this case is that Defendant's failure to settle for its policy limits is the proximate cause of Plaintiff having to contribute $2 million towards settlement of Martinez's claims because, if Defendant had settled with Martinez on behalf of Collins, the seriously injured Martinez would have never discovered Nu-Era's potential liability and Plaintiff's coverage. Pl.'s Opp'n to Def.'s MSJ 30:5-8. But "[t]he fact that [Plaintiff] can point to various factual possibilities under which through inadvertence or malfeasance its policy may have gone undiscovered in the [Underlying Lawsuit] does not change Plaintiff's legal obligation." Travelers Indem., 2013 WL 6198966, at *7. The undisputed facts reveal that Plaintiff contracted to provide excess coverage and was obligated to perform under its contract.
Plaintiff argues that it is in a superior equitable position to Defendant because it has "an unblemished equitable record": it accepted tenders from Collins and Nu-Era under reservation of rights and "was prepared to pay its limits long before there was any chance to do so and then did so when the chance to settle arose." Pl.'s Opp'n to Def.'s MSJ 26:20-24. But Plaintiff's ability to invoke the right of subrogation depends on a showing that Defendant "is guilty of some wrongful conduct which makes [its] equity inferior to that of [Plaintiff]." State Farm Gen. Ins., 143 Cal. App. 4th at 1112, 49 Cal.Rptr.3d 785. Thus, Plaintiff cannot establish a superior equitable position by simply asserting that it has done nothing wrong.
Plaintiff's argument relies on the assumption that the injured Martinez would have never discovered additional insurance coverage that would have been accessible to him. Meanwhile, Defendant acted in good faith in rejecting Martinez's December 2016 settlement demand because it lacked sufficient information to determine his medical expenses. Because equity does not support the shifting of settlement costs from Plaintiff to Defendant, Defendant is entitled to summary judgment. The Court therefore GRANTS Defendant's Motion.
3. Plaintiff's Motion for Summary Judgment
Plaintiff also moves for summary judgment, arguing that the undisputed facts establish as a matter of law that Defendant acted in bad faith by rejecting Martinez's December 2016 settlement demand. For the reasons stated above, this argument lacks merit. Indeed, the record establishes that Defendant's decision to reject the demand at that time was reasonable.
Plaintiff additionally argues that Defendant's failure to inform Collins of its intent to reject Martinez's settlement offer establishes bad faith. Pl.'s MSJ 28:21-22. However, this is a new theory of liability for breach of the implied duty of good faith and fair dealing that was not alleged in the Complaint. See generally Compl., ECF No. 1-1. Therefore, "Defendant was not given fair notice that [Plaintiff] sought to hold Defendant liable for bad faith in this [manner], and it would be improper to allow [Plaintiff] to maintain such a theory moving forward without it being incorporated in the [Complaint]." Spradlin, 2019 WL 6481304, at *24 (citing Pickern v. Pier 1 Imports (U.S.), Inc., 457 F.3d 963, 968-69 (9th Cir. 2006) ).
Because Plaintiff has failed to establish that it is entitled equitable subrogation for damages associated with the underlying tort claim, and because summary judgment for Defendant is indeed proper, the Court DENIES Plaintiff's Motion.
III. CONCLUSION
Based on the foregoing, the Court GRANTS Defendant's Motion for Summary Judgment and DENIES Plaintiff's Motion for Summary Judgment.