Opinion
Case No. CV 19-9693-DMG (Ex)
2020-12-21
TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, Plaintiff, v. ALLWIRE, INC., et al., Defendants.
Aaron C. Agness, Wynn C. Kaneshiro, Weston and McElvain LLP, El Segundo, CA, for Plaintiff. Darryl J. Horowitt, Lawrence E. Westerlund, Coleman and Horowitt LLP, Paul J. O'Rourke, Jr., Law Office of Paul J. O'Rourke Jr., Fresno, CA, for Defendant Allwire, Inc. Stewart J. Powell, Talin V. Yacoubian, Yacoubian and Powell LLP, Los Angeles, CA, for Defendant Rising Edge Technologies California, LLC.
Aaron C. Agness, Wynn C. Kaneshiro, Weston and McElvain LLP, El Segundo, CA, for Plaintiff.
Darryl J. Horowitt, Lawrence E. Westerlund, Coleman and Horowitt LLP, Paul J. O'Rourke, Jr., Law Office of Paul J. O'Rourke Jr., Fresno, CA, for Defendant Allwire, Inc.
Stewart J. Powell, Talin V. Yacoubian, Yacoubian and Powell LLP, Los Angeles, CA, for Defendant Rising Edge Technologies California, LLC.
ORDER RE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
DOLLY M. GEE, UNITED STATES DISTRICT JUDGE This matter is before the Court on the motion for summary judgment ("MSJ") by Plaintiff Travelers Property Casualty Company of America ("Travelers") on its declaratory relief claims against Defendants Allwire, Inc. ("Allwire") and Rising Edge Technologies (California), LLC ("Rising Edge"). [Doc. # 43.] Allwire filed an Opposition, which Rising Edge joined. [Doc. ## 46, 47.] Travelers filed a Reply. [Doc. # 49.] The Court held a hearing on the MSJ on December 18, 2020. For the reasons set forth below, the Court DENIES in part and GRANTS in part Travelers' partial MSJ.
I.
FACTUAL AND PROCEDURAL BACKGROUND
Travelers submitted a Statement of Uncontroverted Facts ("SUF") [Doc. # 43-1]. Allwire does not dispute any of Travelers' facts directly, but rather submits a standalone Statement of Genuine Disputes untethered to any of Travelers' asserted facts, which contravenes the format specified in the Court's Initial Standing Order. [Doc. ## 46-1, 12 at 6-8.] Travelers objects to all of these purported disputes. [Doc. # 49-1.] Travelers' objections are OVERRULED as moot . The Court does not rely on Allwire's Statement of Genuine Disputes in reaching its conclusions. Travelers does not object, however, to the substance of the evidence presented in the Declarations of Lawrence Westerlund and Alan Hopkins [Doc. ## 46-2, 46-3], and so the Court relies on that evidence.
This is an insurance coverage dispute concerning whether Travelers owes a duty to defend or indemnify Allwire in a lawsuit brought against it by Rising Edge in the Los Angeles County Superior Court, tiled Rising Edge Technologies (California), LLC v. Allwire, Inc. , Case No. 19NWCV00544 (the "Rising Edge Action").
A. The Policy
From December 31, 2017 to December 31, 2018, Allwire was insured by a commercial liability insurance policy (the "Policy") issued by Travelers. SUF 1. The Policy's insuring agreement 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.
The Policy applies to bodily injury or property damage only "if it is caused by an ‘occurrence.’ " SUF 2. The Policy defines "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." SUF 5. It defines "property damage" as:
a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the "occurrence" that caused it.
SUF 4. The Policy also includes exclusions from coverage for property damage to "your product," for damages incurred for the "loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of" "your product," and for property "impaired" by "your product" that has not been physically injured. SUF 6-10.
During the same time period, Allwire was covered by a commercial excess liability policy (the "Umbrella Policy") issued by Travelers with substantially the same terms.
B. The Rising Edge Action and Allwire's Tenders
On October 31, 2018, Allwire tendered a claim to Travelers, seeking coverage under the Policy. SUF 24. The claim was brought by Rising Edge, a construction contractor, and related to electric cable that Allwire had manufactured and provided to Rising Edge for installation in Southern California Edison ("SCE") power substations. Upon investigating the claim, Travelers determined that Rising Edge was alleging that Allwire's cable was defective, in that the cable's insulation was shrinking such that its interior wires were becoming exposed. SUF 26-27. SCE contended that the cable was defective and needed to be removed, and Rising Edge sought reimbursement from Allwire to remove and replace the cable. SUF 28-29.
Concluding that Rising Edge's claim related only to damage to Allwire's own cables, and not to any damage caused to the SCE substations, Travelers declined to provide coverage. SUF 30-31. In a January 24, 2019 letter to Allwire, Travelers represented that Rising Edge had confirmed to Travelers that it was seeking reimbursement "solely due to the replacement of the defective cable, and not due to damage because of any accident, explosion, or energizing of the defective cable." SUF 32.
On July 3, 2019, Rising Edge filed suit against Allwire, alleging causes of action for: 1) Breach of Contract; 2) Breach of Covenant of Good Faith and Fair Dealing; 3) Breach of Implied Warranty; 4) Negligence; 5) Fraudulent Concealment; 6) Intentional Interference with Prospective Economic Advantage; 7) Negligent Interference With Prospective Economic Advantage; 8) Intentional Interference With Existing Contractual Relations; 9) Negligent Interference With Existing Contractual Relations; and 10) Unfair Competition Pursuant to Business and Professions Code § 17200. SUF 34. The initial Complaint alleged that Rising Edge had incurred "significant economic harm" due to Allwire's delivery of cable of which "1) The insulation was retracting; 2) There were insulation voids allowing moisture and oxidation; 3) Shield damage when bent around bends and into conduits," requiring Rising Edge to remove and replace the cable. SUF 36-43. Paragraph 20 of the original Complaint alleged that "[t]he additional work required to pull and replace all cable cost approximately $1.28 Million Dollars in replacement costs; $1.28 Million Dollars in service and testing costs, and delayed the project by nine months." SUF 44. Paragraph 29 also alleged that "[a]s a result of the above-described conduct, Plaintiff Rising Edge has suffered damages, including but not limited to, lost revenue, economic damages, as well as irreparable harm to its reputation and good will in its business community." SUF 45.
Allwire tendered the Rising Edge Complaint to Travelers, and again Travelers denied coverage. SUF 54-55.
On September 12, 2019, Rising Edge filed a First Amended Complaint ("FAC"). The FAC is identical to the original Complaint except in Paragraphs 20 and 29. The new Paragraph 20 reads:
As a result of the incorporation of and physical linkage of AllWire's potentially dangerous product into other tangible property and the structures at all four points, additional work was required to pull and replace all cable, including to prevent the potential dangers from materializing, at a cost of approximately $1.2 Million Dollars in replacement costs; $1.2 Million Dollars in service and testing costs. The projects were also delayed by nine months causing damages to Rising Edge.
SUF 45. The new Paragraph 29 states:
As a result of the above-described conduct, Plaintiff Rising Edge has suffered damages, including but not limited to, physical injury to tangible property, loss of use of tangible property, lost revenue, economic damages, as well as irreparable harm to its reputation and good will in its business community in excess of Fourteen Million $14,000,000 dollars. Plaintiff has lost and continues to lose business as a result of Defendant's conduct.
SUF 49. Allwire again tendered the FAC to Travelers shortly after it was filed. SUF 56. This time, Travelers agreed to provide a defense to Allwire for the Rising Edge Action, subject to a complete reservation of rights. SUF 57. To date, Travelers is continuing to defend Allwire, and has incurred $43,044.50 in costs for the defense. SUF 59-60.
On November 24, 2020, Rising Edge responded to Allwire's First Set of Special Interrogatories. Westerlund Decl. ¶ 2, Ex. A. In response to Special Interrogatory No. 2, requesting that Rising Edge "state the alleged potential dangers which allegedly existed ... as a result of the incorporation and linkage of Allwire's allegedly potentially dangerous product into other tangible property," Rising Edge stated: "Lack of insulation on the conductors was a serious concern as it could lead to Electrocution of personnel, and sparking or fire within the installation enclosures." Id. at 8.
All page references are to the page numbers inserted by the CM/ECF system.
C. The Instant Action
On November 12, 2019, Travelers filed its Complaint in this action. [Doc. # 1.] Travelers seeks three claims for declaratory relief: 1) that it owes no duty to defend Allwire in the Rising Edge Action; 2) that it owes no duty to indemnify Allwire for any judgment or settlement Allwire may incur in the Rising Edge Action; and 3) that it is entitled to reimbursement for the amount paid to defend Allwire. Id. at ¶¶ 21-32. On April 7, 2020, the Court denied Allwire's Motion to Stay Proceedings. [Doc. # 40.] Travelers filed the instant MSJ on November 13, 2020.
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 dispute 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 [his or] 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.
III.
DISCUSSION
Travelers argues that Allwire is not entitled to coverage under either the Policy or the Umbrella Policy because the Rising Edge Action does not allege property damage or bodily injury, and because the allegations are subject to the exclusions.
A. Duty to Defend
Under California law, an insurer may have a duty to defend or a duty to indemnify, or both. Buss v. Superior Court , 16 Cal. 4th 35, 45-46, 65 Cal.Rptr.2d 366, 939 P.2d 766 (1997). While the duty to indemnify "runs to claims that are actually covered" by a given policy "in light of facts proved," the duty to defend "runs to claims that are merely potentially covered, in light of facts alleged or otherwise disclosed." Id. (duty to indemnify arises "only after liability is established," but duty to defend "arises as soon as tender is made."). Thus, while insurers must indemnify insureds only for proven claims, when an insurer has a duty to defend, the broader "potential for coverage" standard applies. Manzarek v. St. Paul Fire & Marine Ins. Co. , 519 F.3d 1025, 1031 (9th Cir. 2008) ; Horace Mann Ins. Co. v. Barbara B. , 4 Cal. 4th 1076, 1081, 17 Cal.Rptr.2d 210, 846 P.2d 792 (1993) ("[T]he duty to defend is broader than the duty to indemnify; an insurer may owe a duty to defend its insured in an action in which no damages ultimately are awarded."). "To prevail [on the duty to defend], the insured must prove the existence of a potential for coverage , while the insurer must establish the absence of any such potential. In other words, the insured need only show that the underlying claim may fall within policy coverage; the insurer must prove it cannot. Montrose Chem. Corp. v. Superior Court , 6 Cal. 4th 287, 300, 24 Cal.Rptr.2d 467, 861 P.2d 1153 (1993) (emphases in original).
"The duty to defend is determined by reference to the policy, the complaint, and all facts known to the insurer from any source." Id. (emphasis in original). "The determination whether the insurer owes a duty to defend usually is made in the first instance by comparing the allegations of the complaint with the terms of the policy." Id. "Facts extrinsic to the complaint also give rise to a duty to defend when they reveal a possibility that the claim may be covered by the policy." Id. at 295, 24 Cal.Rptr.2d 467, 861 P.2d 1153.
"Any doubt as to whether the facts establish the existence of the defense duty must be resolved in the insured's favor." Id. at 299-300, 24 Cal.Rptr.2d 467, 861 P.2d 1153. "If coverage depends on an unresolved dispute over a factual question, the very existence of that dispute would establish a possibility of coverage and thus a duty to defend." Mirpad v. California Ins. Guarantee Assn. , 132 Cal. App. 4th 1058, 1068, 34 Cal.Rptr.3d 136 (2005).
B. Property Damage
Allwire contends that Rising Edge's claims are potentially covered because they allege physical injury to property, and so Travelers owes a duty to defend. The Rising Edge FAC does allege "physical injury to tangible property," SUF 49, but Travelers maintains that these "boilerplate allegations" do not automatically give rise to coverage without underlying factual allegations of physical property injury, which it insists are absent here. MSJ at 25 (citing Webcor Constr., LP v. Zurich Am. Ins. Co. , 372 F. Supp. 3d 1061, 1074 (N.D. Cal. 2019) ). According to Travelers, Rising Edge only alleges damages stemming from Allwire's own defective product and the costs incurred to remove and replace it, as well as secondary economic losses like lost profits and loss of goodwill, not from physical injury to any SCE substations or other third-party property.
Under California law, "the prevailing view is that the incorporation of a defective component or product into a larger structure does not constitute property damage unless and until the defective component causes physical injury to tangible property in at least some other part of the system." F & H Constr. v. ITT Hartford Ins. Co. , 118 Cal. App. 4th 364, 372, 12 Cal.Rptr.3d 896 (2004). In other words, there is only physical injury to property "when the insured's defective materials or work cause injury to property other than the insured's own work or products." Maryland Cas. Co. v. Reeder , 221 Cal. App. 3d 961, 967, 270 Cal.Rptr. 719 (1990).
In Armstrong World Indus., Inc. v. Aetna Cas. & Sur. Co. , 45 Cal. App. 4th 1, 52 Cal.Rptr.2d 690 (1996), the California Court of Appeal held that, by contrast, when the insured's product involves "potentially hazardous material [that] is physically touching and linked with the [property], and not merely contained within it, the injury is physical" immediately upon installation. Id. at 92, 52 Cal.Rptr.2d 690. Armstrong involved the insured's asbestos-containing materials that were installed into buildings. The court found that "[o]nce installed, the [asbestos-containing material] ... is physically linked with or physically incorporated into the building and therefore physically affects tangible property." Id. at 91, 52 Cal.Rptr.2d 690. The court further concluded that "even in such cases[ ] when there have been no releases of asbestos fibers, if Armstrong is held liable for the mere presence of [asbestos-containing materials], the injury to the buildings is a physical one." Id. See also Shade Foods, Inc. v. Innovative Prod. Sales & Mktg., Inc. , 78 Cal. App. 4th 847, 865-66, 93 Cal.Rptr.2d 364 (2000) (diced almonds contaminated with wood splinters physically injured cereal upon incorporation); Watts Indus., Inc. v. Zurich Am. Ins. Co. , 121 Cal. App. 4th 1029, 1046, 18 Cal.Rptr.3d 61 (2004) (pipes that leached lead into municipal water supply caused physical injury to property).
In F & H Construction , the court clarified that when an inferior product "merely rendered the [property] inadequate for its intended purpose," there was no physical injury. 118 Cal. App. 4th at 374, 12 Cal.Rptr.3d 896. The case involved inferior-grade steel caps that were installed onto steel piles. The court determined that " Armstrong and Shade are inapposite because they involved contamination by hazardous materials," in contrast to a product that was merely inferior or defective. Id. Similarly, in Regional Steel Corp. v. Liberty Surplus Ins. Corp. , 226 Cal. App. 4th 1377, 173 Cal.Rptr.3d 91 (2014), the court found that installation of defective steel tie hooks did not cause physical injury where the only damages arose from necessary demolition and repairs. Id. at 1393, 173 Cal.Rptr.3d 91. The court again distinguished Armstrong and Shade on the grounds that "they involved contamination by hazardous materials that were incorporated into a whole, and did not involve the incorporation of defective workmanship into a construction project." Id.
Unsurprisingly, Allwire relies heavily on Armstrong , Shade , and Watts , while Travelers emphasizes the holdings in F & H and Regional Steel . The distinction between the two lines of cases is whether the insured's product contaminates the property with hazardous materials, or if it is merely defective or inferior such that it renders the property inadequate for its intended purpose. See Watts , 121 Cal. App. 4th at 1044-45, 18 Cal.Rptr.3d 61 ("Courts ... generally agree that the incorporation of a defective component or product into a larger structure or system does not constitute physical injury to tangible property, unless and until the defective component physically injures some other tangible part of the larger system or the system as a whole.... However, where products or work containing hazardous materials have been incorporated into other products or structures, courts have found immediate harm and physical injury to other property at the moment the incorporation occurred.").
This case therefore turns on whether Allwire's cable was or contained hazardous material such that harm occurred at the moment it was installed. Is an electric cable with eroding insulation, such that its interior wires are presently exposed, more like asbestos tiles, nuts mixed with wood splinters, and lead pipes, or is it more like inferior grade steel tie hooks and pile caps? At the very least, this is a disputed question of fact in the underlying Rising Edge Action. Rising Edge asserted in its interrogatory responses that Allwire's cable presented a danger to SCE substations because "it could lead to Electrocution of personnel, and sparking or fire within the installation enclosures." Westerlund Decl., Ex. A at 8. The danger of electrocution or fire would make the cable hazardous and present an immediate risk beyond merely making the substations inadequate for their intended use. And like the asbestos fibers that have not actually been released, it does not matter that the cable did not actually cause a fire or electrocution. Because the cable's insulation was alleged to have been eroding immediately upon installation , the danger to the whole arose at once upon incorporation. The alleged injury is not merely a defective product that delays or impedes future construction—or poses some future threat to the longevity of the structure —it is a hazardous material that poses a threat to persons and property by its mere introduction into the system. Thus, the analogy to asbestos-containing materials is plausible, and the Court must view the facts in the light most favorable to Allwire. Travelers' only response to the suggestion that the defective cable might have been hazardous is the conclusory assertion, buried in a footnote, that "it is clear that the cables are not a contaminant like asbestos floor tiles." Reply at 13 n.4. But this is far from clear. And because it is not, Travelers owes a duty to defend the claims. See Mirpad , 132 Cal. App. 4th at 1068, 34 Cal.Rptr.3d 136 ("If coverage depends on an unresolved dispute over a factual question, the very existence of that dispute would establish a possibility of coverage and thus a duty to defend.").
The analysis would be different if Rising Edge had alleged the discovery of inferior grade insulation that would likely erode at some point in the future and was not of the quality it had bargained for, but had not actually begun to erode. There, the situation would be more like an inferior-grade steel cap—a defective product that may impede the completion of the project or pose a risk to the integrity of the structure long-term, but is not an immediate safety hazard.
During oral argument, Travelers noted that asbestos is an inherently dangerous contaminant that would be an immediate hazard no matter its state or how it was used. By contrast, according to Travelers, electric cables are not inherently dangerous, and the danger only arose here because Allwire's cable was defective. Travelers argued that characterizing electric cables as inherently dangerous materials would impermissibly expand the Armstrong doctrine and allow insureds to claim physical injury whenever electric cables are involved. Travelers overstates the Court's holding. It is not that all electric cables are inherently hazardous, it is that electric cables with exposed interior wires are. And Armstrong and Shade do not require over-generalizing the insured's product as dangerous in any context. To use a more apt analogy, wood splinters on their own are not particularly hazardous. But when they are mixed with nuts, and then incorporated into cereal, the danger is very real. So too with these particular cables in this context.
To put it another way, Rising Edge's allegations present at least a possibility that Allwire's cables were hazardous. Indeed, the FAC alleges—in an obvious nod to Armstrong —that Rising Edge incurred damages resulting from "the incorporation of and physical linkage of AllWire's potentially dangerous product into other tangible property and the structures at all four points." SUF 45. While merely parroting the Armstrong standard alone would not necessarily be sufficient to trigger the duty to defend, here the allegation has a plausible factual predicate. Even without Rising Edge explicitly saying so in its interrogatory response, allegations that an electric cable's insulation was eroding at least raises the possibility of a safety hazard. Because this possibility represents the potential for physical injury to property, Travelers has a duty to defend. See Montrose , 6 Cal. 4th at 300, 24 Cal.Rptr.2d 467, 861 P.2d 1153 ("the insured need only show that the underlying claim may fall within policy coverage").
C. Replacement Costs and Economic Losses
Travelers points out that Rising Edge only seeks to recover costs to replace the cables and for other secondary economic losses like loss of goodwill and lost future profits, and argues that these are not "property damages."
As for the replacement and abatement costs, Armstrong makes clear that when physical injury to property is alleged according to its hazardous-material doctrine, "the damages allegedly suffered by the building owners from the presence of [hazardous materials] cannot be considered solely economic losses." 45 Cal. App. 4th at 93, 52 Cal.Rptr.2d 690 ("Diminished market value or abatement costs or costs of inspecting, assessing, and maintaining the in-place [asbestos-containing materials] are not the ‘property damage.’ They are ‘damages because of property damage.’ That is, they are the alternative measures of the physical injury to the building."). Therefore, these damages are included in Travelers' duty to defend.
The conclusion is different, however, for solely economic losses. The law is clear that damages arising from loss of an investment, loss of goodwill, or lost profits do not have a direct nexus to "property damage" and are not covered by commercial liability policies like Allwire's. Kazi v. State Farm Fire & Cas. Co. , 24 Cal. 4th 871, 879, 103 Cal.Rptr.2d 1, 15 P.3d 223 (2001) ("[I]t is important to note that the policies are not intended to cover intangible property losses, including loss of an investment, loss of goodwill or loss of intangible property use."); Continental Cas. Co. v. Superior Court , 92 Cal. App. 4th 430, 439, 111 Cal.Rptr.2d 849 (2001) ("Damage for lost profits, loss of investment or other harm to one's economic interest constitute injuries to intangible property which by definition fall outside the scope of the policy."); Lassen Canyon Nursery, Inc. v. Royal Ins. Co. of America , 720 F.2d 1016, 1018 (9th Cir. 1983) ("It is generally accepted that economic losses such as lost profit or good will are not property damage within the coverage of [liability] policies.").
The Court concludes from the allegations in the Rising Edge Action that there is no potential for coverage of these damages under the Policy as a matter of law. Therefore, the Court GRANTS partial summary judgment in favor of Travelers on the duty to indemnify for solely economic losses.
D. Occurrence
Travelers also argues that, even if property damage was alleged, it was not caused by an "occurrence"—that is, it was not caused by "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." MSJ at 26. Travelers contends that neither the manufacture nor the installation of the cable was an accident. But of course, supplying cable that was defective was indeed accidental. See Hopkins Decl. ¶ 6 [Doc. # 46-3] ("Allwire did not know and had no knowledge at the time of shipment that any of the cabling used by Rising Edge was allegedly defective."). Travelers notes that, under California law, an "accident" refers to an unintended act, not an unintended injury, see Collin v. Am. Empire Ins. Co. , 21 Cal. App. 4th 787, 810, 26 Cal.Rptr.2d 391 (1994), but unintentionally supplying defective product is the act, not the injury. Travelers provides no authority suggesting that unknowingly supplying defective product is not an accident. Cf. Watts , 121 Cal. App. 4th at 1040 n.1, 18 Cal.Rptr.3d 61 (holding that supplying lead-contaminated pipes, which did not involve willful misconduct, constituted an "occurrence").
E. Exclusions
Because Allwire's theory of coverage is based on physical injury to another's tangible property, as discussed above, none of Travelers' cited exclusions apply.
The exclusion for damage to "your product" does not foreclose the duty to defend because Rising Edge's alleged injuries arise from property damage to SCE's substations, not merely to Allwire's own cable. See Armstrong , 45 Cal. App. 4th at 112, 52 Cal.Rptr.2d 690 ("[I]nsofar as Armstrong is held liable for the claimed damage to the buildings, the "own products" exclusion does not bar coverage.").
Similarly, the "Impaired Property Exclusion"—that is, the exclusion for damages to property that has been "impaired" by "your product"—is also inapplicable because the exclusion is only implicated when the property has not been physically injured. See SUF 9; Watts , 121 Cal. App. 4th at 1047, 18 Cal.Rptr.3d 61 ("The impaired property exclusion ‘does not apply where the other property [which incorporates the allegedly faulty work or product] has been physically injured.’ ") (citations omitted). As discussed, Rising Edge alleges that property has been physically injured.
Finally, Travelers also cannot rely on the "Product Recall Exclusion," which excludes coverage for "[d]amages claimed for any loss, cost or expense incurred by you or others for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of: (1) ‘Your product’ ...." SUF 8. As discussed in Armstrong , the recall exclusion "operates to exclude coverage for the cost of ‘preventative or curative action’ when the insured withdraws a product in situations in which a danger is merely apprehended." 45 Cal. App. 4th at 113, 52 Cal.Rptr.2d 690. As in Armstrong , here the removal of the cable was not merely preventative, but allegedly to remedy "actual damage" that had resulted from the installation of the hazardous material. Id.
IV.
CONCLUSION
For the foregoing reasons, Travelers' MSJ is DENIED as to the duty to defend and reimbursement causes of action. Because the factual questions in the Rising Edge Action introduce the potential for coverage, the duty to defend is established. See Mirpad , 132 Cal. App. 4th at 1068, 34 Cal.Rptr.3d 136 ("If coverage depends on an unresolved dispute over a factual question, the very existence of that dispute would establish a possibility of coverage and thus a duty to defend."). Therefore, the Court sua sponte grants partial summary judgment in favor of Allwire and Rising Edge on the duty to defend and reimbursement claims. See Cool Fuel, Inc. v. Connett , 685 F.2d 309, 312 (9th Cir. 1982) (the court may sua sponte grant summary judgment in favor of non-movant where the issues have been fully briefed). Travelers' partial MSJ is GRANTED as to the duty to indemnify for solely economic losses.
Because no liability has been established yet in the Rising Edge Action, the Court STAYS the remainder of this action as to the duty to indemnify for property damages and the trial date and related deadlines. The parties shall file a joint status report upon the resolution of the Rising Edge matter updating the Court on whether and how they wish to proceed in this litigation.
IT IS SO ORDERED.