Opinion
Case No. 19-cv-01302-LB
2020-04-23
GOVERNMENT EMPLOYEES INSURANCE COMPANY, Plaintiff, v. Anshuman S. NADKARNI, et al., Defendants.
James P. Wagoner, Aaron T. Knapp, McComick Barstow Sheppard Wayte & Carruth LLP, Fresno, CA, for Plaintiff. John R. Campo, Attorney at Law, Redwood City, CA, for Defendants.
James P. Wagoner, Aaron T. Knapp, McComick Barstow Sheppard Wayte & Carruth LLP, Fresno, CA, for Plaintiff.
John R. Campo, Attorney at Law, Redwood City, CA, for Defendants.
ORDER GRANTING GEICO'S MOTION FOR SUMMARY JUDGMENT
Re: ECF No. 55
LAUREL BEELER, United States Magistrate Judge
INTRODUCTION
The plaintiff, Government Employees Insurance Company ("GEICO"), filed this declaratory-relief action to determine whether its umbrella insurance policy — issued to the defendants Anshuman and Renuka Nadkarni, who are former landlords who defended a state-court wrongful-eviction lawsuit brought by their former tenants — requires it to defend and indemnify the defendants. The complaint has three claims: (1) a claim for declaratory relief regarding GEICO's duty to defend; (2) a claim for declaratory relief regarding GEICO's duty to indemnify; and (3) a claim for reimbursement for the attorney's fees and costs that GEICO paid in the wrongful-eviction lawsuit. On November 22, 2019, the court granted summary judgment to GEICO on claim one and held that GEICO had no duty to defend because the eviction occurrence happened before the defendants bought the policy. The defendants then settled the wrongful-eviction lawsuit with the former tenants. GEICO then moved for summary judgment on claims two and three. The court grants the motion for summary judgment because (1) the duty to defend is broader than the duty to indemnify, which means that — based on the earlier summary-judgment order — there is no duty to indemnify, and (2) GEICO reserved its rights to seek reimbursement, and the facts in the defendants' initial tender to GEICO foreclosed any possibility of coverage.
First Amend. Compl. ("FAC") – ECF No. 7. Citations refer to material in the Electronic Case File ("ECF"); pinpoint citations are to the ECF-generated page numbers at the top of documents.
FAC – ECF No. 7 at 9–13 (¶¶ 38–53).
Order – ECF No. 50.
Wagoner Decl. – ECF No. 55-1 at 2 (¶ 3).
Mot. – ECF No. 55.
STATEMENT
1. The Eviction and the Tender to GEICO
The court's early summary-judgment order recounts the key dates about the eviction: (1) the defendants served their tenants with a 60-day notice of the termination of the tenancy on March 13, 2018 to allow an owner move-in; (2) the tenants surrendered their keys, vacated the property, and received their security deposit and relocation expenses on April 29, 2018; and (3) the defendants (in statements filed under penalty of perjury with the San Francisco Rent Board on June 11, 2018 and November 8, 2018) said that they obtained possession of the property on May 1, 2018.
Order – ECF No. 50 at 2–4 (citing the relevant underlying evidence). The court incorporates the fact summaries and legal analysis in its previous summary-judgment order by this reference.
The defendants bought the GEICO policy on May 7, 2018 for the policy period May 8, 2018 to May 8, 2019. It is an occurrence policy and covers wrongful evictions.
Id. at 6 (citing Policy, Ex. A to Trumpower Decl. – ECF No. 34-2 at 13 (Pt. II)).
Id. (citing Policy, Ex. A to Trumpower Decl. – ECF No. 34-2 at 12 (Pt. I, § 9), 13 (Pt. II)).
The former tenants sued the defendants for wrongful eviction on November 7, 2018. On November 12, 2018, the defendants tendered the tenants' unlawful-eviction lawsuit to GEICO for a defense and indemnity under the GEICO policy. On December 4, 2018, GEICO declined the defendants' tender. On January 15, 2019, GEICO said that it would provide a defense to the state lawsuit through independent counsel with a full reservation rights (as follows):
Id. at 4.
Id. at 7 (citing Renuka Nadkarni Email, Ex. B to Trumpower Decl. – ECF No. 34-2 at 29).
Id. (citing Letter, Ex. D to FAC – ECF No. 7 at 91–96).
a. The "right to disclaim coverage" for the allegations and claims raised by the Venegas action on the grounds that no "personal injury" or "property damage" took place "during the time [the GEICO policy was] in force....;"
d. The "right to withdraw from th[e] defense [of the Nadkarni defendants] upon reasonable notice....;" and
e. The "right to seek recovery from [the Nadkarni defendants] for all defense costs incurred in defending [them] in the Venegas action."
Id. (citing Letter, Ex. F to FAC – ECF No. 7 at 102–109). GEICO sent a second letter on February 4, 2019 reiterating its reservation of rights. 2/4/2019 Letter, Ex. B to Wagoner Decl. – ECF No. 34-1 at 9.
2. Other Relevant Procedural History
GEICO filed its initial complaint on March 11, 2019 and an amended complaint on April 5, 2019. The defendants moved for judgment on the pleadings on the ground that GEICO had a duty to defend them. In its opposition, GEICO asked for judgment in its favor on the ground that it had no duty to defend or indemnify the defendants because they bought the policy after the eviction. On July 11, 2019, the court denied the defendants' motion, holding that there was no duty to defend because the defendants bought the policy after the eviction. The court denied GEICO's motion for judgment without prejudice to GEICO's moving for summary judgment.
Compl. – ECF No. 1; FAC – ECF No. 7.
Mot. – ECF No. 8.
Opp'n – ECF No. 18.
Order – ECF No. 26 at 10–13.
Id. at 13.
GEICO then moved for partial summary judgment on the duty-to-defend claim, and on November 22, 2019, the court granted the motion because all eviction occurrences happened before the defendants bought the policy. On November 26, 2019, the defendants settled the state-court unlawful-eviction lawsuit for $550,000. GEICO did not contribute to the settlement but consented to it, subject to its continuing full reservation of rights.
Order – ECF No. 50.
Wagoner Decl. – ECF No. 55-1 at 2 (¶ 3).
12/3/2019–12/17/2019 Emails, Exs. A–B to Wagoner Decl. – ECF No. 55-1 at 4, 7–8.
GEICO then moved for summary judgment on claims two, its duty to indemnify, and three, its claim for reimbursement for the $44,172.17 it paid to the defendants' counsel for attorney's fees and costs in the wrongful-eviction lawsuit. It submitted its invoices demonstrating that it paid the $44,116.17, and it calculated its prejudgment interest through April 23, 2020 (the date of the hearing) as $1,447.61. The court held a hearing on April 23, 2020.
Mot. – ECF No. 55; Invoices and Proofs of Payment, Exs. A–H to Trumpower Decl. – ECF No. 55-2 at 4–73; Invoice and Proof of Payment, Exs. A–B to Trumpower Suppl. Decl. – ECF No. 58-1 at 4–10.
Trumpower Suppl. Decl. – ECF No. 58-1 at 2 (¶ 5); Invoices and Proofs of Payment, Exs. A–H to Trumpower Decl. – ECF No. 55-2 at 4–73; Invoice and Proof of Payment, Exs. A–B to Trumpower Suppl. Decl. – ECF No. 58-1 at 4–10; Computation of Prejudgment Interest – ECF No. 58-1.
Minute Entry – ECF No. 59.
SUMMARY-JUDGMENT STANDARD
The court must grant a motion for summary judgment if the movant shows that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a) ; Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Material facts are those that may affect the outcome of the case. Anderson , 477 U.S. at 248, 106 S.Ct. 2505. A dispute about a material fact is genuine if there is enough evidence for a reasonable jury to return a verdict for the non-moving party. Id. at 248–49, 106 S.Ct. 2505.
The party moving for summary judgment has the initial burden of informing the court of the basis for the motion, and identifying portions of the pleadings, depositions, answers to interrogatories, admissions, or affidavits that demonstrate the absence of a triable issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). To meet its burden, "the moving party must either produce evidence negating an essential element of the nonmoving party's claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial." Nissan Fire & Marine Ins. Co. v. Fritz Cos. , 210 F.3d 1099, 1102 (9th Cir. 2000) ; see Devereaux v. Abbey , 263 F.3d 1070, 1076 (9th Cir. 2001) ("When the nonmoving party has the burden of proof at trial, the moving party need only point out ‘that there is an absence of evidence to support the nonmoving party's case.’ ") (quoting Celotex , 477 U.S. at 325, 106 S.Ct. 2548 ).
If the moving party meets its initial burden, the burden shifts to the non-moving party to produce evidence supporting its claims or defenses. Nissan Fire & Marine , 210 F.3d at 1103. 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. Devereaux , 263 F.3d at 1076. If the non-moving party does not produce evidence to show a genuine issue of material fact, the moving party is entitled to summary judgment. Celotex , 477 U.S. at 323, 106 S.Ct. 2548.
In ruling on a motion for summary judgment, inferences drawn from the underlying facts are viewed in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
ANALYSIS
An insurer's duty to defend is broader than its duty to indemnify. Buss v. Superior Court , 16 Cal. 4th 35, 46, 65 Cal.Rptr.2d 366, 939 P.2d 766 (1997). The court held previously that GEICO had no duty to defend the defendants in the wrongful-eviction lawsuit because the eviction occurrence happened after the defendants bought the policy. GEICO thus has no duty to indemnify the defendants.
See Order – ECF No. 50 at 9–10 (synopsizing case law).
Id. at 10–13.
The defendants ask the court to revisit its previous order as interlocutory. Opp'n – ECF No. 57 at 3–6. The court does not reconsider its order.
The remaining is GEICO's right to reimbursement of the attorney's fees and costs that it paid in the wrongful-eviction lawsuit.
"An insurer may agree to defend a suit subject to a reservation of rights.... In this manner, an insurer meets its obligation to furnish a defense without waiving its right to assert coverage defenses against the insured at a later time." Blue Ridge Ins. Co. v. Jacobsen , 25 Cal. 4th 489, 497, 106 Cal.Rptr.2d 535, 22 P.3d 313 (2001) (citations and quotation omitted). "As to the claims that are at least potentially covered, the insurer may not seek reimbursement for defense costs." Buss , 16 Cal. 4th at 49, 65 Cal.Rptr.2d 366, 939 P.2d 766. As to the claims that are not potentially covered, the insurer may seek reimbursement for defense costs. Id. at 50, 65 Cal.Rptr.2d 366, 939 P.2d 766. "California law clearly allows insurers to be reimbursed for attorney's fees and other expenses paid in defending insureds against claims for which there was no obligation to defend." Id. (citation and quotation marks omitted).
"An insurer can reserve its right to assert noncoverage unilaterally merely by giving notice to the insured.... By accepting the insurer's defense under these circumstances, the insured is deemed to have accepted this condition." Blue Ridge Ins. , 25 Cal. 4th at 498, 106 Cal.Rptr.2d 535, 22 P.3d 313 (citations omitted).
The defendants do not dispute that GEICO tendered the defense with a full reservation of rights. Instead, they argue that until the court issued its summary-judgment order on November 22, 2019, there were claims that were potentially covered, thereby triggering the duty to defend and precluding reimbursement of defense costs under Buss . That argument does not persuade. The undisputed facts raised no potential for coverage because the defendants bought the policy after they regained possession of the property. Those facts were part of the defendants' tender to GEICO in November 2018. The court denied the defendants' motion for judgment on the pleadings in July 2019 based on those facts. It did not grant GEICO's motion for judgment in its favor (in its opposition to the defendants' motion) primarily to ensure that it had a good fact record. See Fed. R. Civ. P. 56(d). But from the inception of the case, there was no possibility of coverage and no duty to defend, and GEICO reserved its rights. It thus is entitled to reimbursement of its fees and costs.
Id. at 6–10.
Id. at 8–9.
The final issue is whether GEICO is entitled to prejudgment interest of 7%. See Cal. Civ. Code § 3287. The defendants contend that the amounts that GEICO paid were not certain at any time, which is a requirement for prejudgment interest, and they contend that the interest rate is too high. Under Cal. Civ. Code § 3287(a),
Mot. – ECF No. 55 at 26, 28.
Opp'n – ECF No. 57 at 10–11.
A person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested upon the person upon a particular day, is entitled also to recover interest thereon from that day, except when the debtor is prevented by law, or by the act of the creditor from paying the debt.
Here, as GEICO points out, when it paid the invoices for legal fees, the amounts were certain. See e.g., Hartford Accident & Indem. Co. v. Sequoia Ins. Co. , 211 Cal. App. 3d 1285, 1306–07, 260 Cal.Rptr. 190 (1989) (awarding Hartford prejudgment interest from the date it exhausted its primary policy limit and first paid out money under its umbrella policy, even though the amount of damages ultimately was determined by the trial court's prioritization of the policies under one of two approaches, a legal question that subsequently resulted in damages readily ascertainable by mathematical calculation); Overholser v. Glynn , 267 Cal. App. 2d 800, 809–10, 73 Cal.Rptr. 628 (1968) (awarding prejudgment interest from the date the bank sold the plaintiff's securities and applied the proceeds to the co-guarantors' indebtedness); accord Westport Ins. Corp. v. Ca. Casualty Mgmt. Co. , No. 3:16-cv-01246-WHO, 2017 WL 2335374, at *3 (N.D. Cal. May 30, 2017) (the insurer was "entitled to recover prejudgment interest from the date it paid the settlements in the underlying actions ...."). GEICO is entitled to prejudgment interest.
Reply – ECF No. 58 at 17.
The court awards prejudgment interest of 7%. See In re Air West Securities Litigation , 436 F. Supp. 1281, 1286 (N.D. Cal. 1977) ("Under California law, a litigant is entitled to prejudgment interest (at 7%), as a matter of law when his claim is for a liquidated sum or for a sum which is ‘capable of being made certain by calculation.’ ") (quoting Cal. Civ. Code § 3287(a) ); accord Odyssey Reinsurance Co. v. Nagby , No. 16-CV-03038-BTM-WVG, 2019 WL 2868928, at *12 (S.D. Cal. July 2, 2019) ; Kanematsu Corp. v. Multimedia Access & Retrival Corp. , No. C-02-1543-SC, 2002 WL 31268388, at *7 (N.D. Cal. Oct. 7, 2002) ; see also Kiaz v. Kubler , 785 F.3d 1326, 1329 (9th Cir. 2015) (prejudgment interest under § 3287(a) is a matter of right).
CONCLUSION
The court grants GEICO summary judgment. It is entitled to $44,172.17 for attorney's fees and costs and prejudgment interest at 7%, which is $1,447.61 through April 23, 2020, the date of judgment calculated as follows:
Check Date of Amount Daily Days Amount Due No. Payment Paid Interest32 Through Through 4/23/20 4/23/2033 504634 4/3/2019 $282.00 .05 387 $19.35 504670 4/22/2019 $1,833.00 .35 368 $128.80 504756 6/10/2019 $1,324.08 .25 319 $79.75 504768 6/17/2019 $1,467.86 .28 312 $87.36 504868 8/19/2019 $1,207.56 .23 249 $57.27 504937 9/23/2019 $8,951.00 1.72 214 $368.08 505069 11/29/2019 $2,645.00 .51 147 $74.97 505121 12/20/2019 $26,072.57 5.00 126 $630.00 505297 3/26/2020 $389.10 .07 29 $2.03 Total Principal $44,172.17 Total Interest $1,447.61
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Calculated as (principal balance) x (interest rate) divided by 365.
Calculated as daily interest x days elapsed since date of payment to 4/23/2020.