Opinion
Case No. CV 18-2487-DMG (Ex)
2019-09-06
J&J HOLDINGS, INC., Plaintiff, v. GREAT AMERICAN E&S INSURANCE COMPANY, Defendant.
Steven E. Young, Anthony F. Witteman, Theodora Oringher PC, Los Angeles, CA, for Plaintiff. Joshua D. Mountain, Tom Sihao Xu, Linda Bondi Morrison, Tressler LLP, Irvine, CA, for Defendant.
Steven E. Young, Anthony F. Witteman, Theodora Oringher PC, Los Angeles, CA, for Plaintiff.
Joshua D. Mountain, Tom Sihao Xu, Linda Bondi Morrison, Tressler LLP, Irvine, CA, for Defendant.
ORDER RE DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
DOLLY M. GEE, UNITED STATES DISTRICT JUDGE This matter is before the Court on Defendant Great American E&S Insurance Company's Motion for Summary Judgment. [Doc. # 26 ("MSJ").] The motion is fully briefed. [Doc. ## 42 ("Opp."), 46 ("Reply").] The Court held a hearing on the motion on September 9, 2019. For the following reasons, the Court GRANTS the MSJ.
I.
FACTUAL BACKGROUND
Plaintiff J&J Holdings, Inc. is the owner and operator of a lot located at 43120 Venture Street, Lancaster, California. It rents the lot to Lance Campers Manufacturing Corporation ("Lance") for Lance's employees' to use as a parking lot. Souleles Decl. [Doc. # 42-3], at ¶¶ 1, 3; MSJ at 2; Opp. at 2. Before the events giving rise to this action, Defendant issued a "Businesspro General Liability Policy" ("the Policy") to Lance and Plaintiff that covered the period from August 1, 2014 to February 1, 2016. SUF 1.
The parties argue about the significance of multiple discrepancies in the way that Plaintiff's name appears on various important documents. The Court will address these arguments below, but will refer to Plaintiff simply as "Plaintiff" for the purpose of establishing the basic facts of the case.
References to "SUF" are to Defendant's Response to Plaintiff's Statement of Genuine Issues of Material Fact, which includes Defendant's statements of undisputed fact, Plaintiff's statement of genuine issues of fact, and Defendant's responses thereto. [Doc. # 47.] Unless otherwise indicated, the Court cites to only those SUF statements that the parties designate as undisputed or those for which the parties' responses indicate no factual controversy.
The Policy contains the following pertinent provisions:
SECTION I—COVERAGES Coverage A Bodily Injury and Property
Damage Liability 1. Insuring Agreement
a. 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 ....
* * *
SECTION IV—COMMERCIAL GENERAL LIABILITY CONDITIONS
* * *
7. Separation of Insureds
Except with respect to the Limits of Insurance, and any rights or duties specifically assigned in this Coverage Part to the first Named Insured, this insurance applies:
a. as if each named insured were the only named insured; and
b. separately to each insured against whom claim is made or "suit" is brought.
* * *
SECTION V - DEFINITIONS
* * *
3. "Bodily injury " means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.
* * *
5. "Employee " includes a leased worker. "Employee" does not include a temporary worker.
* * *
10. "Leased worker " means a person leased to you by a labor leasing firm under an agreement between you and the labor leasing firm, to perform duties related to the conduct of your business. "Leased worker" does not include a "temporary worker.
* * *
19. "Temporary worker " means a person who is furnished to you to substitute for a permanent employee on leave or to meet seasonal or short-term workload conditions.
* * *
SUF 2; Hugues Decl. [Doc. # 26-3], Ex. A ("Policy") at GA000018, GA000028-GA000029, GA000032-GA000036.
The Policy also contains an "Employers Liability Exclusion Endorsement," which eliminates coverage for "[b]odily injury to: (1) an ‘employee’ of any insured arising out of and in the course of: (a) employment by any insured ...." Policy at GA000072 ("the Exclusion"). The Exclusion also states that it "applies (1) whether the Insured may be liable as an employer or in any other capacity. Id.
On April 13, 2015, Manuel Vega, Jr., who worked for Lance at the time, filed a lawsuit in Los Angeles County Superior Court ("the Vega Action") alleging "injuries resulting from being struck by a car while walking in the Lance parking lot in the early morning of December 3, 2014." SUF 4. The operative complaint in that proceeding alleges that Vega was walking through the parking lot owned by Plaintiff, when a Lance employee struck him and caused serious injuries. SUF 7. Vega sued Lance and Plaintiff for his resulting damages under several theories of liability. SUF 8, 9.
The parties dispute whether Vega was a Lance "employee" as defined in the Policy. The Court will discuss the scope of Vega's employment relationship with Lance below.
Lance "tendered the defense and indemnity of the Vega Action to Defendant on August 6, 2015." SUF 10. On September 30, 2015, Defendant "denied any obligation to defend or indemnify Lance in the Vega Action on the grounds that Vega's claims for ‘bodily injury’ were barred by the Exclusion." SUF 21. On September 6, 2017, Lance tendered "the defense and indemnity of the Vega Action to [Defendant] on behalf of [Plaintiff]." SUF 22. On October 24, 2017, Defendant denied any "duty to defend or indemnify [Plaintiff] in the Vega Action on the grounds that the plain terms of the Exclusion bar coverage for ‘bodily injury’ sustained by an ‘employee’ of ‘any insured’ arising out of and in the course of his or her employment." SUF 23.
Plaintiff then filed its Complaint in this action on March 28, 2018. [Doc. # 1.] Its operative First Amended Complaint ("FAC") alleges claims for breach of contract, breach of the covenant of good faith and fair dealing, and declaratory relief. [Doc. # 9 at ¶¶ 25-41.]
II.
LEGAL STANDARD
Summary judgment should be granted "if the movant 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) ; accord Wash. Mut. Inc. v. United States , 636 F.3d 1207, 1216 (9th Cir. 2011). Material facts are those that may affect the outcome of the case. Nat'l Ass'n of Optometrists & Opticians v. Harris , 682 F.3d 1144, 1147 (9th Cir. 2012) (citing Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). A dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Liberty Lobby , 477 U.S. at 248, 106 S.Ct. 2505.
The moving party bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met its initial burden, Rule 56(c) requires the nonmoving party to "go beyond the pleadings and by her own affidavits, or by the ‘depositions, answers to interrogatories, and admissions on file,’ designate ‘specific facts showing that there is a genuine issue for trial.’ " Id. at 324, 106 S.Ct. 2548 (quoting Fed. R. Civ. P. 56(c), (e) ); see also Norse v. City of Santa Cruz , 629 F.3d 966, 973 (9th Cir. 2010) (en banc ) (" Rule 56 requires the parties to set out facts they will be able to prove at trial."). "In judging evidence at the summary judgment stage, the court does not make credibility determinations or weigh conflicting evidence." Soremekun v. Thrifty Payless, Inc. , 509 F.3d 978, 984 (9th Cir. 2007). "Rather, it draws all inferences in the light most favorable to the nonmoving party." Id.
Where the issues before the Court are questions of law, the case is particularly "well suited" for summary judgment. Del Real, LLC v. Harris , 966 F. Supp. 2d 1047, 1051 (E.D. Cal. 2013) ; see also Asuncion v. Dist. Dir. Of U.S. Immigration & Naturalization Serv. , 427 F.2d 523, 524 (9th Cir. 1970) (district court properly resolved motion for summary judgment where issues presented were comprised solely of questions of law).
III.
DISCUSSION
Defendant moves for summary judgment under two principal theories. First, Defendant argues that Plaintiff has no standing to pursue its claims because, due to some confusion about the names of certain similarly-named entities, Plaintiff is not an insured under the Policy and has no privity of contract with Defendant. MSJ at 2. Second, it argues that the Policy's plain language eliminates the possibility of coverage for Plaintiff and compels the conclusion that Defendant had no duty to defend or indemnify Plaintiff. That reality, Defendant contends, dooms Plaintiff's breach of contract, bad faith, and declaratory relief claims. MSJ at 3-4. Plaintiff opposes those arguments and requests a Rule 56(d) continuance of the MSJ proceedings to permit additional discovery. The Court first addresses the parties' Rule 56(d) arguments and the background necessary to understand them.
A. The Court Denies Plaintiff's Second Request for a Rule 56(d) Extension
Defendant filed its MSJ on June 14, 2019. Shortly thereafter, the Court granted the parties' stipulation to continue the remaining pretrial dates and deadlines so that the parties could complete additional discovery, such that the discovery and motion cut-offs in this case are not until January and February 2020, respectively. [Doc. ## 27, 33, 33-1.] Then, two days before Plaintiff's deadline to oppose the MSJ, Plaintiff filed an ex parte application requesting an emergency continuance of the MSJ proceedings from August 9, 2019 to September 6, 2019 under Federal Rule of Civil Procedure 56(d). [Doc. # 39 ("Application").]
The Court granted Plaintiff's Application despite Plaintiff's failure to "explicitly engage with the Rule 56(d) requirements" as the Ninth Circuit has described them. [Doc. # 41 ("July 11 Order") at 2.] Specifically, Plaintiff did not: attest to or explain (1) "the specific facts it hopes to elicit from further discovery;" (2) demonstrate that "the facts sought exist;" or (3) explain how the "sought-after facts are essential to oppose summary judgment." Id. at 2-3 (citing Midbrook Flowerbulbs Holland B.V. v. Holland Am. Bulb Farms, Inc. , 874 F.3d 604, 619 (9th Cir. 2017) ). Nonetheless, the Court reasoned that no prejudice would result from continuing the MSJ proceedings to allow for Plaintiff to depose Defendant's "sole fact declarant," Heather Hugues, and obtain written discovery responses given that the discovery and motion cut-offs were still months away. See id.
As of September 6, 2019, however, it appears that Plaintiff still has not deposed Ms. Hugues or obtained the written discovery it wanted. Plaintiff's failure to depose Ms. Hugues is puzzling, since it appears that the parties agreed upon a deposition date in August 2019 before Plaintiff's counsel called the deposition off without rescheduling it. Morrison Decl. [Doc. # 51] at ¶¶ 4-7. An ongoing discovery dispute appears to have prevented Plaintiff from obtaining the written discovery it seeks. See Reply at 6. Plaintiff has now included in its Opposition another request that the Court continue summary judgment proceedings under Rule 56(d) so that it can obtain the same discovery it sought before.
Now that the Court has the benefit of full briefing on Defendant's MSJ and has had the chance to consider the parties' arguments outside of the emergency ex parte circumstances under which Plaintiff filed its original Rule 56(d) request, the Court concludes that no further continuance is necessary. Defendant's MSJ presents, first and foremost, a purely legal question of contract interpretation, the answer to which will necessitate several outcomes as a matter of law. The few facts that are required to resolve that question appear to be undisputed or uncontroverted and Plaintiff has not explained how any additional undiscovered facts may change the Court's understanding of the case. Indeed, despite citing the legal standard governing Rule 56(d) requests that the Court identified in its July 11 Order, see Opp. at 9-10, Plaintiff, once again, has failed to submit a declaration that identifies the existing facts that Plaintiff hopes to discover or explain why those facts are essential to defeating Defendant's MSJ. Since Plaintiff has not justified another Rule 56(d) extension, the Court DENIES its Rule 56(d) request.
Additionally, the Court notes that Plaintiff did not timely file its Opposition, which contains its Rule 56(d) request. Compare July 11 Order at 3 (requiring Plaintiff to file its Opposition by August 16, 2019) with Opp. (filed on August 17, 2019). The July 11, 2019 Order admonished Plaintiff that "[f]uture violations of the Court's orders will result in the summary denial of the request and/or the imposition of monetary sanctions." July 11 Order at 3. Accordingly, the untimeliness of Plaintiff's Rule 56(d) request provides a basis for denial independent of the request's substantive deficiencies.
B. Plaintiff Does Not Lack Standing to Bring Its Claims
Defendant first argues that Plaintiff lacks standing to bring its claims because it is not the real party in interest to the Policy. MSJ at 10-12. Defendant's theory stems from an apparently pervasive confusion as to what Plaintiff's name actually is. According to Plaintiff, its proper name is "J&J Realty Holdings." Souleles Decl. at ¶ 1. J&J Realty Holdings is the entity that owns the parking lot that Lance rented at the time of Vega's injury. Id. at ¶¶ 1, 4. The Policy, however, identifies Lance and "J&J Holdings" as the two named insureds. See Policy at GA000002. And the FAC in this action lists "J&J Holdings, Inc." as the sole Plaintiff. See FAC.
Plaintiff claims that "there has never been a J&J Holdings or a J&J Holdings, Inc. related to J&J Realty Holdings or the principals of J&J Realty Holdings at any point in time." Souleles Decl. at ¶ 7. The parties agree that that "J&J Holdings, Inc." is an existing entity, but it has no affiliation with Plaintiff and is "completely unrelated to this matter." SUF 31. According to Plaintiff, Defendant incorrectly listed the Policy's second named insured as J&J Holdings "when it should have been J&J Realty Holdings." Souleles Decl. at ¶ 5. Based on this nominal confusion, Defendant argues that Plaintiff has filed suit as an incorrect entity—J&J Holdings, Inc.—that is not an insured under the Policy and cannot sue to enforce it. MSJ at 11; see Alex Robertson Co. v. Imperial Cas. & Indem. Co. , 8 Cal. App. 4th 338, 343, 10 Cal.Rptr.2d 165 (1992).
To grant Defendant's MSJ on this basis would be to elevate form over substance. Even though Plaintiff has inexplicably failed to seek the Court's leave to amend its pleadings to cure this apparent error in the named plaintiff, see MSJ at 12; Opp. at 11, there appears to be no dispute as to the following two facts: (1) the Policy covers the owner of the property located at 43120 Venture St., Lancaster, California 92525-4510; and (2) J&J Realty Holdings is the owner of that property. Policy at GA000004; Souleles Decl. at ¶ 3; SUF 29. Although the deadline for amending pleadings has passed [Doc. # 24-1 (March 15, 2019 deadline) ], the interests of justice and the Court's strong preference for adjudicating disputes on the merits counsel in favor of permitting an amendment to the FAC to ensure that this dispute names the correct parties. The Court therefore DENIES Defendant's MSJ as it relates to Plaintiff's standing.
The Court does not read Defendant's papers to squarely address the issue of whether J&J Realty Holdings qualifies as an insured under the Policy—it only argues that J&J Holdings, Inc. is not an insured. MSJ at 11 ("Regardless of whether J&J Realty may qualify as an insured under the Policy ... the uncontroverted facts show that ‘J&J Holdings, Inc.’ is not an insured under the Policy ...."); Reply at 7 ("Irrespective of whether J&J Realty Holdings qualifies as an insured under the Policy, it is clear that J&J Holdings, Inc. is not an insured ....). Even if Defendant had expressly argued that J&J Realty Holdings is not an insured, however, the Court is skeptical of the argument that Defendant simply never insured J&J Realty Holdings given that the policy identifies the property that J&J Realty Holdings undisputedly owns and Defendant willingly accepted insurance premiums from J&J Realty Holdings throughout the life of the Policy.
C. The Policy Permitted Defendants to Deny Coverage to Plaintiff
1. Insurance Policy Interpretation Principles
Insurance policies, such as the Policy in this case, "are contracts and, therefore, are governed in the first instance by the rules of construction applicable to contracts." Montrose Chem. Corp. v. Admiral Ins. Co. , 10 Cal. 4th 645, 666, 42 Cal.Rptr.2d 324, 913 P.2d 878 (1995). Accordingly, "the mutual intention of the parties at the time the contract is formed governs its interpretation" and that "intent is to be inferred, if possible, solely from the written provisions of the contract." Id. In other words, "[i]f the meaning a layperson would ascribe to the language of a contract of insurance is clear and unambiguous, a court will apply that meaning." Id. at 666-667, 42 Cal.Rptr.2d 324, 913 P.2d 878. Insurance "coverage is interpreted broadly so as to afford the greatest possible protection to the insured," while "exclusionary clauses are interpreted narrowly against the insurer." MacKinnon v. Truck Ins. Exch. , 31 Cal. 4th 635, 648, 3 Cal.Rptr.3d 228, 73 P.3d 1205 (2003) (internal punctuation excluded). Accordingly, insurers must "phrase exceptions and exclusions in clear and unmistakable language." Id. Whereas the insured has the burden to establish that the claims fall within the basic scope of coverage, the insurer must demonstrate that the claim is specifically excluded. Id.
With respect to liability insurance, insurers have a duty to defend insureds if they "become[ ] aware of, or if [a] third party lawsuit pleads, facts giving rise to the potential for coverage under the insuring agreement." Waller v. Truck Ins. Exch., Inc. , 11 Cal. 4th 1, 19, 44 Cal.Rptr.2d 370, 900 P.2d 619 (1995). Both the allegations in the underlying complaint and extrinsic facts "give rise to a duty to defend when they reveal a possibility that the claim may be covered by the policy." Id. But, "where the extrinsic facts eliminate the potential for coverage, the insurer may decline to defend even when the bare allegations in the complaint suggest potential liability." Id. Ultimately, "the duty to defend, although broad, is not unlimited." Id.
Additionally, the duty to defend is broader than, and separate from, the duty to indemnify, but "where there is no possibility of coverage, there is no duty to defend." Id. In the absence of a duty to defend, no duty to indemnify exists. Certain Underwriters at Lloyd's of London v. Superior Court , 24 Cal. 4th 945, 958, 103 Cal.Rptr.2d 672, 16 P.3d 94 (2001). Per force, when there is no "potential for coverage and, hence, no duty to defend under the terms of the policy, there can be no action for breach of the implied covenant of good faith and fair dealing." Waller , 11 Cal. 4th at 36, 44 Cal.Rptr.2d 370, 900 P.2d 619.
2. The Exclusion Operates to Bar Coverage of the Vega Action
According to Defendant, the Policy eliminates any potential for coverage for liability resulting from the Vega Action. MSJ at 12. It argues that the Exclusion plainly "bars coverage" for "bodily injury" to an "employee" (as defined by the policy) of "any insured arising out of and in the course of employment by any insured." Id. at 13. The Court addresses the parties' arguments about these various terms seriatim. Furthermore, Defendant contends that because the Policy does not cover Plaintiff's liability in the Vega Action, the Court must grant summary judgment on each of Plaintiff's three causes of action.
The Court understands this argument to be slightly, but meaningfully, different from the argument Defendant made in its earlier Motion to Dismiss Plaintiff's bad faith claim. There, Defendant argued that the existence of a "genuine dispute as to its liability under the Policy" at the pleading stage precluded a finding of bad faith because California law prevents bad faith liability when an insurer's "denial or delayed payment of policy benefits is based on a genuine dispute with the insured as to the existence or amount of coverage." [Doc. # 17 ("MTD Order").] Here, at the summary judgment stage, Defendant argues that there can be no genuine dispute as to the absence of liability on the breach of contract claim under the Policy and, as a result, no liability for bad faith.
i. Vega Qualifies as an "Employee" Under the Policy
The facts relating to Vega's employment are as follows. Vega alleged that he "applied for employment with ... Aerotek, Inc.," and Aerotek hired him in August 2014. SUF 7. Vega alleges that, on the same day he was hired, Aerotek "assigned" him to be a "general assembler" at Lance. Id. Vega also claims to have been provided "employee manuals from" both Aerotek and Lance. Id.
These allegations are consistent with Vega's deposition testimony in the Vega Action. There, Vega testified that he understood that he would be "hired by Aerotek," but would be "outsourced to Lance." Vega Depo. [Doc. # 26-2], Ex. B at 36:3-10. Indeed, Defendant has submitted a "Services Agreement" between Aerotek and Lance that governed Vega's employment with Lance through Aerotek. See Hugues Decl. [Doc. # 26-3], Ex. D. Vega also understood that he "was going to work for Aerotek until which time Lance ... decided that [he] was a good enough worker and they would take [him] on directly." Id. While Vega worked eight hours per day and five days per week at Lance, he received his paycheck from Aerotek. Id. at 40:9-16, 42:21-23.
Plaintiff objects to Defendant's use of Vega's deposition testimony. [Doc. # 49.] As a threshold matter, Plaintiff makes its evidentiary objections in two places: in a separate document dedicated to evidentiary objections and within its responses to Defendant's statements of undisputed facts. These objections are, at times, inconsistent. Rather than attempt to determine which objections Plaintiff actually meant to interpose, the Court will address only those objections in Plaintiff's separate document containing objections because the Court's Initial Standing Order directs litigants to state objections "in a separate statement of evidentiary objections in a two-column format." [Doc. # 7 ("Initial Standing Order") at 8.] To the extent any of Plaintiff's objections in response to Defendant's statements of undisputed fact conflict with those objections, they are OVERRULED as procedurally improper.
Plaintiff objects to this portion Vega's deposition testimony for lack of personal knowledge, foundation, and authentication, and as hearsay. [Doc. # 44 at 2.] These objections all pertain to the form of the evidence, not its substance. In the Ninth Circuit, courts may consider evidence at the summary judgment stage whose form renders its inadmissible, including evidence presented as hearsay, "so long as the underlying evidence could be provided in an admissible form at trial." See JL Beverage Co., LLC v. Jim Beam Brands Co. , 828 F.3d 1098, 1110 (9th Cir. 2016). Since a Lance representative likely could testify or submit a declaration to this effect in this case, Plaintiff's objections are OVERRULED .
Plaintiff objects to the Services Agreement for lack of personal knowledge, lack of foundation and authentication, and as hearsay. [Doc. # 43 at 2.] Ms. Hugues, the declarant who authenticated the document, attests that she has personal knowledge of the Services Agreement's existence and purpose because she is a Senior Claims Specialist at Defendant with a personal knowledge of Defendant's records. Hugues Decl. at ¶¶ 1, 6. Her declaration also states that the documents she attached are a "true and correct copy" of the Services Agreement and an email from Lance to Defendant. Id. at ¶ 6. The Services Agreement itself is not hearsay at all. See Stuart v. UNUM Life Ins. Co. of Am. , 217 F.3d 1145, 1154 (9th Cir. 2000) (contracts are not hearsay because, as "legally operative document[s], they are "verbal acts" rather than out of court statements). In addition, the email correspondence between Lance and Defendant describing the Services Agreement is admissible under Federal Rule of Evidence 801(d)(2) because Lance acted as Plaintiff's agent in tendering its defense to Defendant. SUF 22. The email is also admissible at this stage despite any hearsay objection under JL Beverage , as discussed above. Plaintiff's objections are OVERRULED.
As discussed above, the Exclusion applies to "employees," which the Policy defines to include "leased workers," but excludes "temporary workers." A "leased worker" is "a person leased to [an insured] by a labor leasing firm under an agreement between [an insured] and the labor leasing firm, to perform duties related to the conduct of [the insured's] business." A "temporary worker" is "a person who is furnished to [the insured] to substitute for a permanent employee on leave or to meet seasonal or short-term workload conditions." The conditions of Vega's employment indicate that he was a leased worker, not a temporary worker. Aerotek contracted his employment to Lance under an agreement between the two companies. As a general assembler, Vega performed duties related to the core conduct of Lance's business—the manufacture and assembly of recreational vehicles. See Vega Depo. at 40:1-8 (describing job duties). There is no indication in the record that Vega worked at Lance as a substitute for another permanent employee or as a seasonal laborer. Nor is there any indication that Lance or Aerotek intended Vega's employment to be "short-term." In fact, Vega testified that he understood that his employment would last indefinitely. Vega Depo. at 36:3-6 (Vega's understanding was that he "was going to work for Aerotek until which time Lance Camper decided that [he] was a good enough worker and they would take me on directly.") The Services Agreement itself also states that its term shall "continue for an initial term of one (1) year, and shall continue thereafter on a month-to-month basis" subject to termination. It provides no end date. Services Agreement at § 1. Plaintiff's only argument that Vega was a temporary worker is that Vega's pleadings in the Vega Action describe him as a "temporary employee." But the Court's inquiry is focused on whether Vega qualified as a leased or temporary worker under the Policy , not according to Vega's loosely worded allegations in his personal injury lawsuit.
It appears that no California court has discussed the distinctions between a "leased worker" and a "temporary worker" as the terms appear in similar insurance policies, but Defendant cites to two other courts that have. The First Circuit concluded that materially identical contract language meant that a similarly situated employee was a leased worker because the employee "was ‘leased by a labor leasing firm under an agreement’ between [the insured] and [the labor leasing firm] ‘to perform duties related to the conduct of [the insured's] business." Scottsdale Ins. Co. v. Torres , 561 F.3d 74, 78 (1st Cir. 2009). A Florida district court also determined that a similarly-situated employee who was "hired indefinitely" was a "leased worker" rather than a "temporary worker" even though the injury that ended the employee's employment occurred "only three months into his work." Pac. Employers Ins. Co. v. Wausau Bus. Ins. Co. , 2007 WL 2900452, at *10 (M.D. Fla. Oct. 2, 2007) ("Whether the injury occurred three days, three months or even three years into [the employee's] engagement with [the business] is of no moment. It is the understanding of the [parties to the employment agreement] at the beginning that [the employee's] employment term would be indefinite (and possibly prolonged) that is important."). Plaintiff does not attempt to counter or distinguish these cases. It states only, in conclusory fashion, that "Defendant's citation[s] to these cases ... are wholly inapplicable and have absolutely no bearing on the merits of this case." Opp. at 19.
Torres treated "leased workers" as a category of workers who fell within the exclusion at issue and treated "temporary workers" as a subcategory of workers who were excepted from the definition of "leased workers." The court ultimately concluded that, while the employee was a "leased worker," factual questions remained as to whether the employee was a "short-term," and therefore temporary, worker because the insured argued that the employee may have been expected to fill a need that would be understood as "short-term" according to the norms of the "fiber blending and recycling" industry. Id. at 75, 80. Plaintiff has made no such argument and raised no such factual questions here.
To the contrary, though these cases are not binding, the Court finds Torres and Wausau Business Insurance Company persuasive. Like in Torres , Vega was a leased worker because Aerotek leased Vega's employment to Lance under an agreement to perform core business duties. Like in Wausau Business Insurance Company , Vega was not a temporary worker because his period of employment was indefinite according to both his own understanding of his employers' intentions and the Service Agreement's express language. He therefore qualifies as a "leased worker" and an "employee" under the Policy.
ii. Vega Suffered Bodily Injury Arising Out of and in the Course of Employment
Vega alleges that being struck by a vehicle in Lance's parking lot "caused [him] to suffer severe, serious and potentially permanent injuries and damages." SUF 7. Neither side disputes that Vega's injuries qualify as "bodily injur[ies]" under the Policy. Additionally, under California law, an "employee who enters upon the parking lot simultaneously enters into the course of the employment." Lewis v. Workers' Comp. Appeals Bd. , 15 Cal. 3d 559, 563, 125 Cal.Rptr. 353, 542 P.2d 225 (1975) ("Once the employee steps into the premises of the employer, be it parking lot, plant or office, the relationship of the employer and employee begins ...."); Schultz v. Workers' Comp. Appeals Bd. , 232 Cal. App. 4th 1126, 1135, 181 Cal.Rptr.3d 891 (2015) (the employment relationship begins when "an employee enters the employer's premises," which "include [the employer's] parking lot."). Since Vega claims that he suffered his injuries in Lance's parking lot shortly after his shift, he suffered "bodily injuries" during the "course of his employment" under the Policy.
iii. The Policy's "Separation of Insureds" Provision Does Not Negate the Exclusion's "Any Insured" Language
Plaintiff claims that the Policy provides coverage despite the Exclusion's language because Vega was Lance's employee , but never Plaintiff's employee. FAC at ¶ 20. Conversely, Defendant argues that the Exclusion's plain language eliminates any possibility of coverage for the Vega Action because it eliminates coverage for bodily injury to employees of "any insured." MSJ at 17-23. Defendant also maintains that the Policy's "separation of insureds" provision does not change that outcome. Relevant here, the separation of insureds provision states that "this insurance applies as if each named insured were the only named insured; and separately to each insured against whom claim is made or ‘suit’ is brought." Id. at GA000032.
In full, the Exclusion states that "[t]his insurance does not apply to ‘[b]odily injury’ to an ‘employee’ of any insured arising out of and in the course of employment by any insured[.]" Policy at GA000019, GA000072 (internal punctuation and paragraph numbers omitted). It also specifies that it applies "whether the insured may be liable as an employer or in any other capacity."
Plaintiff does not engage in any textual or structural analysis of these provisions and does not cite to any cases interpreting similar language. Instead, Plaintiff makes only bald, conclusory assertions that Defendant's arguments are "self-serving," "unfounded," and "make no sense." Opp. at 12, 18. The Court disagrees.
Beginning with the Exclusion's text, the phrase "to an employee of any insured arising out of and in the course of employment by any insured" indicates the Policy eliminates liability coverage for bodily injury suffered during the course of employment by an employee of either Lance or Plaintiff, regardless of whether Lance or Plaintiff employed the injured individual. Indeed, California courts recognize that there is a meaningful distinction between "the insured" and "any insured" in the context of insurance policy coverage exclusions. As the California Supreme Court has explained, "California decisions uniformly have held that, viewed in isolation, a clause excluding coverage for particular conduct by ‘an’ or ‘any’ insured, as opposed to ‘the’ insured, means that such conduct by one insured will bar coverage for all other insureds under the same policy on claims arising from the same occurrence." See Minkler v. Safeco Ins. Co. of Am. , 49 Cal. 4th 315, 322–23, 110 Cal.Rptr.3d 612, 232 P.3d 612 (2010). In this context, therefore, Minkler stands for the proposition that a policy which excludes coverage for bodily injury of an employee of "any" insured, as opposed to "the" insured, means that an injury to the employee of one insured will eliminate coverage for all other insureds under the same policy on claims arising from the same occurrence.
Minkler concerned a homeowner's insurance policy that excluded coverage for certain intentional conduct by the insured. See id. at 318, 110 Cal.Rptr.3d 612, 232 P.3d 612. Despite that policy's slightly different scope, the Court still finds instructive Minkler 's treatment of the difference between the words "the" and "any," in the context of a multiple-insured insurance policy's exclusionary provisions.
Accordingly, if the parties had intended to limit the Exclusion such that it eliminated coverage only for the employer of the injured employee, it could have stated that the insurance does not apply to injuries suffered by "an employee of the insured arising out of and in the course of employment by the insured." Indeed, the original text of the Exclusion, which the operative endorsement replaced and superseded, included that exact language. See Policy at GA000019 (excluding coverage for " ‘[b]odily injury’ to an ‘employee of the insured arising out of and in the course of employment by the insured[.] ) (internal punctuation and paragraph numbering omitted) (emphasis added).
But Minkler did not view the exclusion at issue in that case "in isolation"—it examined the exclusion alongside a "separation of insureds" clause like the one in the Policy here. See id. at 323, 110 Cal.Rptr.3d 612, 232 P.3d 612. The policy in Minkler excluded coverage "for injury that was ‘expected or intended’ by ‘an’ insured, or was the foreseeable result of ‘an’ insured's intentional act" and the separation of insureds clause stated that "[t]his insurance applies separately to each insured." Id. at 318, 110 Cal.Rptr.3d 612, 232 P.3d 612. After weighing these clauses' effects, the court held that "an exclusion of coverage for the intentional acts of ‘an insured,’ read in conjunction with a severability or ‘separate insurance’ clause like the one at issue here, creates an ambiguity which must be construed in favor of coverage that a lay policyholder would reasonably expect." Id. But the court expressly limited its "conclusion and reasoning" to "the specific circumstances of th[at] case, which involve[d] the interplay between a severability clause and an exclusion for the intentional acts of ‘an’ insured." Id. at 329 n.5, 110 Cal.Rptr.3d 612, 232 P.3d 612. It clarified that its holding "does not mean a severability clause necessarily affects all exclusions framed in terms of ‘an’ or ‘any’ insured," and instructed that "each exclusion applicable to ‘an’ or ‘any’ insured must be examined individually, and in context, to determine the effect a severability clause like the one at issue here might have on its operation." Id.
Additionally, Minkler recognized that many other states follow the rule that "the use of ‘any’ clearly conveys that the excluded activity of one insured will bar coverage for all others, regardless of a severability clause." Id. at 332, 110 Cal.Rptr.3d 612, 232 P.3d 612 n.7. Indeed, this approach represents the majority view. See Nautilus Ins. Co. v. K. Smith Builders, Ltd. , 725 F. Supp. 2d 1219, 1229 (D. Haw. 2010) ("The majority opinion holds that a separation of insureds clause does not prevent an exclusion from barring coverage to any insured, even when the particular insured seeking coverage is not himself the employer.") (collecting cases). But Minkler refused to either accept or reject the majority rule relating to exclusions containing "any insured" provisions because the court in that case "confront[ed] a policy that excluded coverage for injuries caused by ‘an’ insured's intentional acts." Id. Because of those explicit limitations, Minkler 's "conclusion and reasoning" are meaningfully distinguishable.
In the absence of on-point California Supreme Court authority, the Court concludes that the majority rule squarely fits this case and this context. Reading the separation of insureds clause to limit the Exclusion such that it applies only to those insureds who employ the injured employee would eliminate the well-recognized legal distinction between "any insured" and "the insured" and make the Exclusion endorsement, which replaced "the insured" with "any insured," essentially inoperative. Doing so would run counter to the well-established California rule that courts "must interpret contractual language in a manner which gives force and effect to every provision, and not in a way which renders some clauses nugatory, inoperative or meaningless." City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. , 68 Cal. App. 4th 445, 473, 80 Cal.Rptr.2d 329 (1998). Such a reading would also violate well-settled California contract interpretation rules by prioritizing the more general separation of insureds provision over the more specific language in the Exclusion. See California Cas. Ins. Co. v. Northland Ins. Co. , 48 Cal. App. 4th 1682, 1697, 56 Cal.Rptr.2d 434 (1996) (applying that canon of contract interpretation to enforce an exclusion despite the existence of a separation of insureds provision).
The traditional purpose of separation of insured clauses also counsels in favor of reading it to coexist with, rather than nullify, the "any insured" language. Separation of insureds clauses became part of the standard insurance contract in the 1950s when insurance companies intended to clarify that "the term ‘the insured’ in an exclusion refers merely to the insured claiming coverage." Michael Carbone, Inc. v. Gen. Acc. Ins. Co. , 937 F. Supp. 413, 419 (E.D. Pa. 1996) (citing Alaska Department of Transportation and Public Facilities v. Houston Casualty Co. , 797 P.2d 1200 (Alaska 1990) (Matthews, J. concurring)). After companies began including the separation of insureds clause, the "majority of reported decisions" interpreted exclusions applicable to "any insured" to permit insurers to deny coverage to an insured when another employer's employee sued for injuries. See id ; see also Northland , 48 Cal. App. 4th at 1697, 56 Cal.Rptr.2d 434 ("[T]he purpose of severability clauses is to afford each insured a full measure of coverage up to the policy limits, not to negate bargained-for and plainly worded exclusions.").
Additionally, reading the "any insured" language to relieve Defendant of its obligation to cover Plaintiff in the current situation also makes another of the Exclusion's provisions fit perfectly into the Policy's structure. The Exclusion states that it applies "whether the insured may be liable as an employer or in any other capacity." Policy at GA000072 (emphasis added). Read in that context, that provision indicates that, even though the Exclusion applies to "any insured" (meaning either Lance or Plaintiff, regardless of which insured employed the employee suing for damages), "the insured" (meaning the insured claiming coverage) may be liable in its capacity as an employer or in any other non-employer capacity. Reading the Exclusion to eliminate coverage only for employers of injured employees would render the "in any other capacity" language practically meaningless. If the Exclusion applied only to the employer of employees that sustain injuries during the course of employment, the employer's liability would, of course, be in its capacity as an employer and not in "any other capacity." On the other hand, non-employers of a co-insured's injured employee could, just as in this case, be threatened with liability for the employee's injuries in a non-employer capacity. Thus, the "in any other capacity" language further supports the argument that the Exclusion applies to eliminate the possibility of coverage even though Vega did not work for Plaintiff and seeks to hold Plaintiff liable in a non-employer capacity.
In sum, Defendant's reading of the Exclusion and the separation of insureds provision adheres to California's general contract interpretation principles and insurance law (to the extent California courts have spoken on the issue), allows the two provisions to coexist without stripping either of its legal effect, and makes sense within the context of the Exclusion's other terms. Plaintiff has suggested no other reasonable or plausible alternative reading. See Foster-Gardner, Inc. v. Nat'l Union Fire Ins. Co. , 18 Cal. 4th 857, 868, 77 Cal.Rptr.2d 107, 959 P.2d 265 (1998) (a contract provision is ambiguous only when "it is capable of two or more constructions, both of which are reasonable"). The Court therefore concludes that the Exclusion operates to eliminate the potential for coverage for Plaintiff in the Vega Action.
D. Plaintiff's Bad Faith and Declaratory Relief Claims Fail
Since Defendant justifiably denied coverage to Plaintiff under the Policy's terms, Plaintiff's bad faith and declaratory relief claims cannot succeed. See Waller , 11 Cal. 4th at 36, 44 Cal.Rptr.2d 370, 900 P.2d 619. This is true even with respect to Plaintiff's theory that Defendant engaged in bad faith behavior by failing to properly investigate Plaintiff's claim before denying it. See Opp. at 13. An insurer does "not have a continuing duty to investigate whether there is a potential for coverage. If it has made an informed decision on the basis of the third party complaint and the extrinsic facts known to it at the time of tender that there is no potential for coverage, the insurer may refuse to defend the lawsuit." Safeco Ins. Co. of Am. v. Parks , 122 Cal. App. 4th 779, 794, 19 Cal.Rptr.3d 17 (2004) ; Cont'l Cas. Co. v. City of Richmond , 763 F.2d 1076, 1083-84 (9th Cir. 1985) (there is no duty to investigate under California law where there is no duty to defend). Defendant's MSJ is therefore GRANTED as to Plaintiff's bad faith claim. Furthermore, since the Court has determined that the Policy does not give rise to a duty to defend or indemnify, Defendant's MSJ as to Plaintiff's declaratory relief claim is GRANTED .
As a result, Plaintiff's claims for Brandt fees and punitive damages fail. Under Brandt v. Superior Court , 37 Cal. 3d 813, 817, 210 Cal.Rptr. 211, 693 P.2d 796 (1985), where an insurer has breached the implied covenant of good faith and fair dealing, the insured is entitled to reasonable attorneys' fees associated with the recovery of the amounts due under the policy. See Teleflex Med. Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh , 851 F.3d 976, 989 (9th Cir. 2017). Since Plaintiff cannot show that Defendant breached the covenant of good faith and fair dealing, it cannot recover Brandt fees. Similarly, while California permits plaintiffs to recover punitive damages "when the defendant breaches the implied covenant of good faith and fair dealing and is guilty of oppression, fraud or malice," Plaintiff cannot recover any damages for its unsuccessful bad faith claim. Tibbs v. Great Am. Ins. Co. , 755 F.2d 1370, 1375 (9th Cir. 1985).
IV.
CONCLUSION
In light of the foregoing, the Court DENIES Plaintiff's request for a continuance under Rule 56(d) and GRANTS Defendant's MSJ in its entirety. The Court sua sponte orders that the Clerk of the Court change Plaintiff's name on the docket to reflect its accurate name, i.e., from J&J Holdings, Inc. to J&J Realty Holdings.