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Imperium Insurance v. Unigard Insurance
Citations: 16 F. Supp. 3d 1104; 2014 U.S. Dist. LEXIS 58789; 2014 WL 1671806Docket: Case No. 1:13-cv-01707-JLT
Court: District Court, E.D. California; April 28, 2014; Federal District Court
The court granted Imperium Insurance Company's motion for summary adjudication and denied Unigard Insurance Company's cross-motion for summary judgment. The dispute involves insurance policies issued to Juarez Brothers Tucking, Inc. and Juarez Agri Mix Transport, Inc. for the period from March 1, 2010, to March 1, 2011. Imperium's policy provided commercial auto liability insurance, while Unigard's policy offered commercial general liability insurance. The case arose from an underlying action, Fernando Sanchez v. Seaco Technologies, Inc. et al., where Juarez is a defendant. The complaint alleges that employees of Juarez negligently created a dangerous condition that led to Sanchez being injured by a pole gate. Imperium is currently defending Juarez but contends it has no duty to do so, as the injuries stem from actions related to the pole gate. Juarez formally requested defense and indemnity from Unigard on May 20, 2013, but Unigard has not provided a clear response. Imperium's complaint seeks declaratory relief on multiple points, including that it has no duty to defend or indemnify Juarez, while asserting that Unigard does have such duties and should reimburse Imperium for its defense costs. On November 14, 2013, Unigard responded to a complaint, denying any obligation under its insurance policy and asserting that Imperium was not entitled to the requested relief. Unigard filed counterclaims seeking judicial declarations that Imperium has a duty to defend in an underlying action and that Imperium's policy is primary over Unigard's. Cross-motions for summary judgment were filed by both parties on March 19, 2014, with Imperium seeking a ruling that it has no duty to defend or indemnify in the underlying action, while Unigard argued that it owes no duties to Agri-Mix or any other insureds, contending those responsibilities lie with Imperium. Subsequent oppositions and replies to the motions were submitted on various dates in March 2014. The excerpt also discusses the Declaratory Judgment Act, which permits federal courts to declare the rights of parties in cases of actual controversy. The Act does not mandate courts to provide such declarations but grants them the discretion to do so. The Ninth Circuit has established that declaratory relief is appropriate when it clarifies legal relations and alleviates uncertainty or controversy. In this case, such relief is deemed suitable to clarify the insurance coverage pertinent to the underlying claim, and the issue of indemnification is considered ripe for determination, despite the underlying state action not reaching a judgment. The Ninth Circuit has reinforced that disputes over insurance coverage obligations may be ripe for declaratory judgment, as demonstrated in relevant case law. Merritt establishes that a case or controversy existed when American States filed a declaratory judgment action to determine its duty to defend and indemnify Tahoe Boat. This conclusion is supported by the Supreme Court's ruling in Maryland Casualty v. Pacific Coal, which affirmed that an insurer's declaratory judgment action is ripe even if the underlying liability case has not concluded. The court interpreted Merritt to affirm that there is no absolute prohibition against federal jurisdiction in insurance coverage disputes while an underlying state case is pending. The factors from Brillhart v. Excess Ins. Co., which advise caution in declaring rights in actual controversies, are not applicable here. The state law issues concerning the duty to defend are identical to those regarding the duty to indemnify, meaning that avoiding the indemnity issue would not mitigate state law questions. Additionally, there is no evidence of forum shopping, as the parties in the current litigation are not involved in the state case and are not attempting to undermine any state court decisions. The outcome of this case will not affect the state court's proceedings, as the remedies, liability theories, and defenses in the underlying action remain unchanged, making this case distinct. The court concludes that addressing the indemnification obligation now is justified for judicial efficiency. Regarding summary judgment standards, it aims to evaluate whether any genuine dispute exists over material facts, allowing judgment as a matter of law if the movant demonstrates the absence of such disputes. Summary judgment may also be granted for specific claims or portions of claims when no genuine issues of material fact exist. The standards for motions for summary judgment and partial summary judgment are equivalent, and the party requesting summary judgment carries the initial burden of proving the absence of a genuine issue of material fact. A genuine issue of fact exists when sufficient evidence allows a reasonable fact finder to rule for the non-moving party, while a material fact can influence the case's outcome under applicable law. The moving party must inform the court of the grounds for summary judgment and identify relevant evidence demonstrating no genuine issue of material fact exists. If the moving party meets this burden, the opposing party must present specific facts that indicate a genuine issue remains. Merely showing some doubt about material facts is insufficient; the opposing party must provide admissible evidence, such as affidavits or discovery materials, supporting its claims. It is not necessary for the opposing party to conclusively prove its case—establishing that a factual dispute requires resolution at trial is adequate. However, if the non-moving party fails to prove an essential element of its case, other facts become immaterial. The court evaluates the evidence and applies Rule 56 standards to determine if summary judgment is warranted, considering only admissible evidence and viewing it favorably towards the non-moving party. In the underlying state action, Fernando Sanchez filed a suit against Agri-Mix Transport, Inc. (formerly Juarez Brothers Trucking, Inc.) and Juarez Brothers Trucking, Inc. for injuries sustained on December 8, 2010, when he was impaled by an open gate while operating a forklift at Grimmway Farms. The accident involved the west gate, which was closed but had two portable barricades in front of it. Opening the gate required removing a locking pin, and without reinserting it, the gate could move freely. After the incident, safety manager Lola Marie Rameriz reviewed evidence and noted that the gate might have been improperly pinned. Vicente Pena, an employee of Juarez who was at Grimmway Farms on the day of the accident, testified he drove through the gate multiple times that morning and checked to ensure it had not moved. The parties concur that the truck driven by Pena on the day of the accident qualifies as an "auto" under the definitions provided in both Unigard and Imperium insurance policies, which were active at the time Sanchez was injured. Unigard's Commercial Multi-Line Policy No. CM004237 covers Juarez Brothers Trucking, Inc., Juarez Brothers Agri-Mix Transport Inc., and Juarez Brothers Investments LLC, offering Commercial General Liability coverage for bodily injury or property damage, along with a duty to defend against relevant lawsuits. However, Unigard's policy excludes coverage for bodily injury or property damage related to the ownership, maintenance, use, or entrustment of any auto owned or operated by the insured, even in cases alleging negligence in supervision or training. Imperium’s Truckers Policy, effective from March 1, 2010, to March 1, 2011, provides liability coverage for damages resulting from the ownership, maintenance, or use of a covered auto, also including a duty to defend insureds against applicable claims. Insureds under this policy include anyone using an auto owned, hired, or borrowed with the company’s permission. Definitions in Imperium's policy specify "auto" as any land vehicle designated for travel on public roads and clarify "bodily injury" similarly to Unigard's policy. The Imperium insurance policy stipulates that its coverage is primary for any covered auto used exclusively for business by the insured, and excess for any covered auto borrowed by another trucker. Under California law, the interpretation of insurance policies is a legal matter, requiring courts to assess the policy's language based on its plain meaning, unless specified otherwise. Clear and explicit policy language prevails, while coverage is interpreted broadly to favor the insured, and exclusionary clauses are construed against the insurer. An insurer has a duty to defend if the policy is ambiguous or if the underlying lawsuit could potentially fall within the coverage. This duty is determined by examining the policy, the complaint, and any relevant facts known to the insurer. A duty to defend arises if the insurer, upon becoming aware of claims, finds facts suggesting potential coverage. The California Supreme Court has established that assessing the duty to defend typically involves comparing the complaint's allegations with the policy's terms, while extrinsic facts can also indicate a duty to defend if they suggest that the claim might be covered. Under California law, the duty to defend is extensive, encompassing claims that may be groundless, false, or fraudulent. An insurer's obligation to defend is distinct from its duty to indemnify, which only arises if liability is established and damages are awarded in the underlying action. When seeking summary judgment, the insurer must demonstrate no potential for coverage exists and must bear the burden of proving that a claim falls within an exclusion. Any ambiguity regarding the duty to defend is resolved in favor of the insured. In the case at hand, the court will assume that Vicente Pena opened a gate at Grimmway Farms, resulting in Fernando Sanchez's injury. The dispute involves determining which insurer, Imperium or Unigard, has the responsibilities to defend and indemnify. Imperium's policy covers bodily injury from the use of an auto, while Unigard's policy explicitly excludes such coverage. Under California law, the term "use" in an insurance policy is interpreted broadly, encompassing activities like loading and unloading, even when not explicitly mentioned in the policy. A provision extending the term "use" to include loading and unloading means that coverage applies from the start of loading to the end of unloading, potentially encompassing actions where the vehicle is not directly involved. Imperium contends that actions related to operating a gate do not constitute vehicle use, arguing that stopping the truck and getting out to manipulate the gate is separate from using the auto. Conversely, Unigard maintains that the term "use" applies even when the vehicle is stationary and includes activities intended by the insured, asserting that Pena's actions of opening the gate were necessary for the truck's operation to load and transport products. The court recognizes that the purpose of opening the gate was to facilitate the truck's loading, linking Pena's actions to the vehicle's use. For coverage or exclusion to apply, there must be a causal connection between the truck's use and the bodily injury. California case law indicates that "arising out of" and "resulting from" are similar, with the former being broadly interpreted to mean connected to the use. The court concludes that Pena's actions related to the truck's use implicate coverage under the Imperium policy and exclusion under the Unigard policy, emphasizing the necessity of a causal link between the truck's use and the injury. The term "arising out of" is interpreted broadly in California insurance law, indicating a connection with or origin from the use of a vehicle. The California Supreme Court has established that this language in insurance policies allows coverage for injuries with various causal relations to the vehicle. There is debate between parties regarding the necessary causal connection: Imperium advocates for the predominating cause/substantial factor test, emphasizing that a mere "but for" connection is inadequate for coverage. Conversely, Unigard argues that coverage only requires the injury to be incident to or connected with the vehicle's use. In State Farm Mutual Auto. Ins. Co. v. Partridge, the court highlighted that the use of a vehicle does not need to be the proximate cause of an accident for coverage to apply. The court noted that injuries must relate to the vehicle's use, without specifying the required level of causal connection. Although subsequent California cases have often applied the predominating cause/substantial factor test to insurance coverage determinations, the Ninth Circuit has interpreted Partridge as necessitating only a minimal causal connection between the vehicle and the injury for coverage to be warranted. The Court clarifies that under California law, the use of an automobile does not need to be the proximate cause of an injury to require coverage, but rather a minimal cause is sufficient. However, the Ninth Circuit's decision in Oregon Mutual Ins. Co. v. Nat’l Gen. Ins. Co. establishes that the vehicle's operation or movement must be a substantial factor in the injury. The Court prefers the latter approach, aligning with the majority of California courts. It notes that Sanchez's injury did not arise from the truck’s use, referencing legal precedents where mere transportation to a tort scene does not establish causation for insurance coverage. In cases like Travelers Prop. Cas. Co. of Am. v. LK Transp. Inc., the policy did not cover an accident occurring while en route to retrieve a vehicle that hadn’t been moved yet. Similarly, in Webb, the court found that the destruction caused by ignited boxes was not linked to the use of the truck, emphasizing that not every incident involving an automobile establishes a causal connection for insurance purposes. The court found that there was insufficient causal connection between the use of a truck and the resulting injuries. It held that while the truck was involved in the sequence of events, the destruction of buildings did not arise from its use. The actions of Smith, who ignited boxes and left the fire unattended, were deemed independent of the truck's use. Similarly, in the current case, although Pena drove the truck to Grimmway Farms, the act of opening a gate was considered an independent action that did not require the truck's presence, despite the truck benefiting from the gate being open. The precedent set in the case of *Julie R.*, where a woman was assaulted in a vehicle, reinforced this principle. The court ruled that the use of the vehicle for transportation was incidental and not a substantial factor in causing the injury. This reasoning was applied in *Oregon Mutual Ins. Co. v. Nat'l Gen. Ins. Co.*, where an injury occurred when an individual leaned into a truck and was bitten by a dog; the truck was merely the location of the incident. The court concluded that the proximity of the truck was coincidental and not a necessary condition for the injury to occur. Unigard's arguments that Pena's actions were essential to the truck's use were countered by the court's assessment that the gate opening was not dependent on the truck's operation. The Northern District court determined that a prior case involving a bus, which was designed for social activity and had features that aided in a rape, established a causal connection between the vehicle's use and the assault. In contrast, in the current case regarding Sanchez, the truck’s features did not contribute to the injury; it served merely as a means of transportation to a gate where the alleged negligence occurred. Unigard referenced a Mississippi case (Merchants Co. v. Hartford Acci. Indem. Co.) where an accident was linked to the operation of a vehicle through a direct causal connection, but this was distinguished in the current context. The California law, as interpreted in Webb, requires a more substantial causal connection than mere involvement in a chain of events, and the truck's operation did not relate to the act of opening the gate. The court concluded that the act of opening the gate was independent of the truck’s use, and the injury could have occurred without the vehicle's involvement. Thus, the injury lacked a sufficient causal connection to the truck. In a legal determination regarding insurance coverage, it was concluded that the injury sustained by Sanchez did not arise from the use of a truck, thus precluding the application of an exclusion in Unigard's commercial general liability policy. Consequently, Unigard is obligated to defend and indemnify Agri-Mix Transport, Inc. and Juarez Brothers Trucking, Inc. in the underlying action. In contrast, Imperium is not required to defend or indemnify in this case, as it has been established that Sanchez’s injury was not caused by an accident resulting from the truck's use. Under California law, an insurer's duty to defend is ongoing until the conclusion of litigation or proof of no coverage potential. Imperium's motion for summary adjudication was granted, while Unigard's motion for summary judgment was denied. The court also noted the admissibility of judicial notice for the allegations in the related complaint. The court has granted the parties’ joint request regarding case No. S-1500-CV-2773330-WDP. The parties submitted stipulated facts and joint evidence in support of their cross motions for summary judgment, including Unigard's and Imperium’s insurance policies. They agree that the “bodily injuries” arose from an “accident.” Imperium's counsel confirmed there is no dispute about this causation aspect. The excerpt references the U.S. Supreme Court case Paroline v. United States, which emphasizes that "as a result of" indicates a need for causation. The Court, citing Pacific Operators Offshore, LLP v. Valladolid, found that a mere "but for" causation is insufficient for coverage under the Outer Continental Shelf Lands Act (OCSLA), as it could extend benefits too broadly. Instead, a "substantial nexus" to operations on the continental shelf is required, aligning with California Court of Appeal standards that necessitate a causal connection exceeding a "but for" relationship to prevent auto policies from becoming general liability policies. The court indicated that while the use of a vehicle need not be the direct cause of injury, it must be a "predominating cause or a substantial factor." However, case law demonstrates variability in outcomes related to these standards. The evidence suggests that the individual in question, Pena, did not need to use the specific path through an open gate to exit the area, indicating a choice rather than a necessity in his actions.