United States District Court,

C.D. California.

ESSEX INSURANCE COMPANY, Plaintiff,

v.

HARTFORD FIRE INSURANCE COMPANY, et al., Defendants.

 

No. CV 12–05067 DMG (DTBx).

July 8, 2013.

 

John Gerard Burgee, Burgee & Abramoff, Woodland Hills, CA, for Plaintiff.

 

Garret Farrell Smith, Robert W. Nelms, Cannon & Nelms PC, Anaheim, CA, for Defendants.

 

ORDER RE CROSS–MOTIONS FOR SUMMARY JUDGMENT [DOC.21, 22]

DOLLY M. GEE, District Judge.

*1 This matter is before the Court on the Motions for Summary Judgment filed by Defendant Hartford Fire Insurance Company (“Hartford”) [Doc. # 21 ] and Plaintiff Essex Insurance Company (“Essex”) [Doc. # 22] on May 9 and 10, 2013, respectively. The parties appeared for oral argument on June 14, 2013, and they submitted supplemental briefing following the hearing as instructed by the Court. For the reasons discussed below, the Court GRANTS Hartford’s Motion for Summary Judgment and DENIES Essex’s Motion for Summary Judgment.

 

I.

PROCEDURAL HISTORY

On June 11, 2012, Essex filed a Complaint in this Court against Hartford. [Doc. # 1.] Essex is the assignee of all rights and choses in action under a cargo liability insurance policy issued by Hartford to KPL Trucking, Inc. (See Third Decl. of Garret Smith ¶ 3, Ex. 17 [Doc. # 33–2].) As assignee, Essex seeks damages for (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) indemnity/contribution; and (4) declaratory relief. Hartford filed an Answer on July 6, 2012 [Doc. # 5] and an Amended Answer on May 20, 2013 [Doc. # 32]. The parties filed cross-motions for summary judgment on May 9 and 10, 2013. [Doc.21, 22.]

 

I.

FACTUAL BACKGROUND

The following facts are taken from the Statement of Genuine Issues in Opposition to Hartford’s Motion filed by Essex (“Essex Disputes”) [Doc. # 28] and the Statement of Genuine Disputes in Opposition to Essex’s Motion filed by Hartford (“Hartford Disputes”) [Doc. # 26–18].FN1 Facts are undisputed unless otherwise noted.

 

FN1. Essex and Hartford ask the Court to take judicial notice of certain documents and evidence in support of their respective motions, including the Policy itself. [Doc.21–19, 24.] Because these documents already appear elsewhere in the record and are otherwise admissible, the Court denies the requests for judicial notice as moot.

 

A. The Policy

On August 20, 2013, KPL Trucking, Inc. (“KPL”), a California company, took out a Commercial Inland Marina Policy with Hartford, policy number 72MSNK2564 (“the Policy”), covering the period of August 20, 2010 to August 20, 2011. (Essex Disputes ¶ 15.) The Policy contained the following relevant provisions:

 

A. COVERAGE

1. We will pay those sums that you become legally obligated to pay as a transportation carrier, or any bill of lading or shipping receipt issued by you, for direct physical “loss” to “Covered Property”, owned by others in your care, custody or control, while in the “due course of transit”, caused by a Covered Cause of Loss.

(Policy at 251.)

 

“Covered Property” is lawful goods and merchandise of every description not otherwise excluded.

 

“Due Course of Transit” means in motion; or stopped or stored for less than 120 hours.

 

“Specified causes of loss” means … theft….

 

(Id. at 255–56.) The Policy excludes coverage as follows:

We will not pay for ‘loss’ or expenses you become legally liable to pay for the following: (c) Property at terminals you own, lease or operate which are not listed in the Schedule and which are not newly acquired.

 

(Id. at 251.) The Policy clarifies that this “Newly Acquired Terminals Limit” applies “to property at a terminal … acquire[d] after the effective date of” the Policy for 30 days after acquisition. (Id. at 252.) The Policy also contains a California Changes Endorsement which lists the following additional exclusion:

*2 “This Coverage Part is void if any insured … whether before or after a loss …, has committed fraud or intentionally concealed or misrepresented any material fact or circumstance concerning: (1) This Coverage Part; (2) The Covered Property; (3) An insured’s … interest in the Covered Property; or (4) a claim under this Coverage Part or Coverage Form.

 

(Id. at 240.)

 

The Policy does not define the term “terminal.” The Policy schedules did not list any terminals owned, leased, or operated by KPL.

 

B. The Claim

KPL is a trucking company operating in California and owned by Joseph Kim. (Hartford Disputes ¶ 1.) MSFW, Inc. is a broker of shipping services whose operations are insured by Essex. (Id. ¶ 2.)

 

15771 Slover Avenue, Fontana, California 92337 (the “Slover Property”) is a property owned by Brenda Huie and managed by her son, David Huie (“Huie”), since 2007. (Essex Disputes ¶ 4.) On or about April 1, 2010, KPL, through its employee Mark Kang, contacted Huie seeking information regarding the lease of the Slover Property.FN2 (Id. ¶ 5.) On or about April 5, 2010, Joseph Kim sent to Huie a lease application for the Slover Property. (Id. ¶ 6.) On or about April 15, 2010, Kim, acting on behalf of KPL, entered into a “Trailer Lot Lease Agreement” for the Slover Property with Brenda Huie (“the April Lease”). (Id. ¶ 8.) The April Lease described the property as an “approximate 2.4 acre industrial yard.” (Decl. of David Huie ¶ 3(e), Ex. 5 [Doc. # 26–9].) KPL took possession of the Slover Property on April 15, 2010 when Huie gave a padlock and key to Kim and Kang to access and secure the lot. (Essex Disputes ¶ 9.) KPL continued to lease the Slover Property from April 15, 2010 through December 2011. (Id. ¶ 9.) KPL began parking trucks at the Slover Property in May 2010. (Id. ¶ 21.) KPL never disclosed the existence of the April Lease to Hartford. (Essex Disputes ¶ 23.)

 

FN2. On April 30, 2013, Kang was deposed by Hartford (“Kang Deposition”). (See Not. of Lodging [Doc. # 34–1].) Both parties submit portions of the Kang Deposition in support of their motions. (See Second Decl. of Garret F. Smith ¶ 2, Ex. 10 [Doc. # 26–14]; Suppl. Decl. of John G. Burgee ¶ 3, Ex. A [Doc. # 37].) For ease of reference, citations to the Kang Deposition are to “Kang Depo.” according to the original pagination of the deposition transcript. Hartford notes, but does not explain, several objections to portions of the Kang Depo. relied upon by Essex. The Court addresses these objections only to the extent they are material to its decision.

 

On or about August 2010, MFSW arranged for KPL to transport a shipment of automotive tires from California to Minnesota. (Essex Disputes ¶¶ 12–13.) On August 20, 2010, KPL picked up the shipment from Kumho Tires in Rancho Cucamonga, California. (Id. ¶ 14.) On the same day, KPL took out the Policy with Hartford. (Id. ¶ 15.) After picking up the tires, KPL took the shipment to the Slover Property and parked the tractor, trailer, and tires at the facility overnight. (Id. ¶ 16.) Early in the morning on August 21, 2010, the tractor and trailer containing the tires was stolen from the Slover Property. (Id. ¶ 17.) Although the tractor and trailer were recovered approximately one week later, the tires were not recovered. (Hartford Disputes ¶ 8.)

 

A claim was made on KPL for the loss of the tires. (Hartford Disputes ¶ 9.) KPL tendered the claim to Hartford on August 27, 2010 (“the Claim”). (Id. ¶ 9.) On December 1, 2010, Hartford denied the Claim. (Id. ¶ 10.) The denial letter characterized the Slover Property as a “terminal” that was “not scheduled on the policy.” (Decl. of Jami Blanton ¶ 7, Ex. 12 [Doc. # 26–16].) Hartford denied coverage based on the Policy’s exclusion of losses that occur at “terminals [the insured] own[s], lease[s] or operate[s] which are not listed in the Schedule and which are not newly acquired.” (Id.)

 

*3 On January 20, 2011, Kim responded to Hartford’s denial and asserted that the Slover Property was in fact a “newly acquired terminal” because KPL entered into a “truck parking space lease” for the Slover Property on August 1, 2010. (Blanton Decl. ¶ 8, Ex. 13.) Kim’s letter attached a “Truck Parking Space Lease Agreement,” signed on August 1, 2010 by himself and Brenda Huie, which purported to grant KPL a three-year lease of “Truck & Trailer Parking Spaces” at the Slover Property (“the August Lease”). (Id.) According to Huie, Kang gave him the August Lease on an unknown date and requested that Brenda Huie sign it. (Huie Decl. ¶ 3(f).) KPL agreed to pay the same monthly rent, $3500.00, under the August Lease as it had under the April Lease. (Id. ¶¶ 3(e), 3(f), Exs. 5, 6.) The August Lease describes the property as “Total 15 Truck & Trailer Spaces.” (Id., Ex. 6.) Huie states that he does not recall when he was presented with the August Lease, does not have a signed copy in his files, and does not personally recall whether it was ever signed. (Id. ¶ 3(f).) Kim’s letter of January 20, 2011 did not disclose the April Lease to Hartford. (Blanton Decl. ¶ 8, Ex. 13.) KPL assigned its rights and choses in action under the Policy to Essex on August 3, 2011. (Third Smith Decl. ¶ 3, Ex. 17.)

 

When it opened the Policy, KPL provided an address in Rancho Cucamonga, California. (Policy at 233.) On December 14, 2010, the Policy changed to list the Slover Property as KPL’s mailing address. (See id. at 260.)

 

III.

STANDARD GOVERNING MOTIONS FOR SUMMARY JUDGMENT

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, 2510, 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.” Anderson, 477 U.S. at 248.

 

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 (quoting Fed.R.Civ.P. 56(c), (e) (1986)); 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.”). “[T]he inferences to be drawn from the underlying facts … must be viewed in the light most favorable to the party opposing the motion.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

 

*4 A court presented with cross-motions for summary judgment should review each motion separately, giving the nonmoving party for each motion the benefit of all reasonable inferences from the record. Center for Bio–Ethical Reform, Inc. v. Los Angeles County Sheriff Dep’t, 533 F.3d 780, 786 (9th Cir.2008), cert. denied, 129 S.Ct. 903, 173 L.Ed.2d 108 (2009). The Court must consider all evidence submitted by both parties when ruling on cross-motions for summary judgment. Fair Hous. Council of Riverside Cnty., Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir.2001).

 

IV.

DISCUSSION

Hartford seeks a determination that the Claim is not covered under the Policy because (1) the Slover Property is a terminal that was not disclosed and not newly acquired and (2) KPL materially misrepresented the status of the Slover Property and thus the Coverage Part of the Policy is void. Essex seeks a determination that the Claim falls squarely within the Policy’s coverage terms and that neither exclusion applies. As assignee, Essex stands in the shoes of KPL, has the same rights under the Policy as would KPL, and is subject to any defenses that Hartford could have raised against KPL. See Essex Ins. Co. v. Five Star Dye House, Inc., 38 Cal.4th 1252, 1264, 45 Cal.Rptr.3d 362, 137 P.3d 192 (2006); see also Searles Valley Minerals Operations, Inc. v. Ralph M. Parson Serv. Co., 191 Cal.App.4th 1394, 1402, 120 Cal.Rptr.3d 487 (2011). Alternatively, Essex argues that it is entitled to contribution or indemnity from Hartford under equitable principles.

 

A. Standards Governing Interpretation of Insurance Contracts

“Construction of an insurance policy is governed by state law.” Humboldt Bank v. Gulf Ins. Co., 323 F.Supp.2d 1027, 1032 (N.D.Cal.2004). Where there is no dispute of material facts, interpretation of an insurance policy is purely a question of law. Carson v. Mercury Ins. Co., 210 Cal.App.4th 409, 426, 148 Cal.Rptr.3d 518 (2012) (quoting Hauser v. State Farm Mut. Auto. Ins. Co., 205 Cal.App.3d 843, 846, 252 Cal.Rptr. 569 (1989)). California courts apply a three-step process for interpreting insurance contracts which is aimed at “giving effect to the mutual intent of the parties.” Esparza v. Burlington Ins. Co., 866 F.Supp.2d 1185, 1194 (E.D.Cal.2011) (quoting In re K F Dairies, Inc. & Affiliates v. Fireman’s Fund Ins., 224 F.3d 922, 925 (9th Cir.2000)). First, courts examine the “clear and explicit” meanings of the terms as used in their “ordinary and popular sense.” AIU Ins. Co. v. Sup.Ct., 51 Cal.3d 807, 822, 274 Cal.Rptr. 820, 799 P.2d 1253 (1990). If the language of the policy is not ambiguous, then the court determines coverage by applying its terms to the claim tendered. See Baker v. Nat’l Interstate Ins. Co., 180 Cal.App.4th 1319, 1327, 103 Cal.Rptr.3d 565 (2009). If a term is ambiguous, the court “proceeds to the second step and resolves the ambiguity ‘by looking to the expectations of a reasonable insured.’ ” K F Dairies, 224 F.3d at 926 (quoting Bay Cities Paving & Grading, Inc. v. Lawyers’ Mut. Ins. Co., 5 Cal.4th 854, 875, 21 Cal.Rptr.2d 691, 855 P.2d 1263 (1993)). A term is ambiguous if it is capable of two or more reasonable constructions. Id. Third, if the ambiguity remains, it is construed against the party who caused the ambiguity to exist. Id. at 926. In the insurance context, this is almost always the insurer. Id.

 

*5 Insurance coverage is interpreted broadly, but exclusions 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). The insured bears the burden of establishing that a claim is within the basic scope of coverage. Id. Once the insured has made this showing, the burden is on the insurer to establish that the claim is specifically excluded. Id. (citing Aydin Corp. v. First State Ins. Co., 18 Cal.4th 1183, 1188, 77 Cal.Rptr.2d 537, 959 P.2d 1213 (1998)).

 

B. Because the Claim Tendered by KPL to Hartford is Excluded Under the Policy, Essex May Not Recover as KPL’s Subrogee

 

1. The Claim is Within the Basic Scope of Coverage

 

The parties do not dispute that the Claim falls within the general Coverage provision. The Policy covers “loss” to “Covered Property” while in the “due course of transit,” and it includes “theft” as a specified covered loss. (Policy at 251, 255.) The tires were “lawful goods” not otherwise excluded under the Policy and are therefore “Covered.” (See id. at 255, 77 Cal.Rptr.2d 537, 959 P.2d 1213.) Finally, the Policy defines “due course of transit” as including periods when the shipment is “stopped or stored for less than 120 hours.” (Id. at 256, 77 Cal.Rptr.2d 537, 959 P.2d 1213.) The tires were stolen after being delivered to KPL and while stopped for less than 120 hours, and therefore the Claim falls within the basic scope of coverage.

 

2. The “Terminal” Exclusion

Both parties move for summary judgment as to whether the Claim is excluded from coverage under the “terminal” exclusion. That exclusion bars coverage for losses of “[p]roperty at terminals [the insured] own[s], lease[s], or operate [s] which are not listed in the Schedule and which are not newly acquired.” (Policy at 251.) The Policy does not define “terminal.” That the term is not defined does not automatically make it ambiguous. Carson, 210 Cal.App.4th at 426–27, 148 Cal.Rptr.3d 518. Rather, the Court looks to the “common sense” meaning of the word. Ray v. Farmers Ins. Exchange, 200 Cal.App.3d 1411, 1416, 246 Cal.Rptr. 593 (1988).

 

The April Lease describes the Slover Property as an “approximate 2.4 acre industrial yard,” rented to KPL “for the purpose of parking [KPL’s] vehicles including trailers or any other use related thereto.” (Huie Decl. ¶ 3(e), Ex. 5.) According to Kang, KPL kept a trailer on the lot which Kim used as an “office,” and the lot also contained “a little space for change the oil, maybe tire replace [sic].” (Kang Depo 42:17–23.) Kang testified that Kim originally wanted to build a “container office” at the Slover Property, but that the permitting and construction costs were too high so Kim installed a trailer instead shortly after signing the lease. (Id. at 18:24–19:5, 246 Cal.Rptr. 593.) Although it could accommodate up to 100 trailers, much of the lot remained empty. (Id. at 42:12–23, 246 Cal.Rptr. 593.) KPL parked its own small fleet of trucks, and it allowed approximately five other companies to park their trucks as well, although Kang testified that he did not know if these companies paid Kim rent for the spots. (Id. at 30:14–23, 246 Cal.Rptr. 593.)

 

*6 Essex urges the Court to adopt the definition set forth in Merriam Webster’s dictionary, which defines “terminal” as “either end of a carrier line having facilities for the handling of freight and passengers”; “a freight or passenger station that is central to a considerable area or serves as a junction at any point with other lines”; or “a town or city at the end of a carrier line.” (Essex Mot. at 14 (citingwww.merriam-webster.com).) Alternatively, Essex suggests the definition on Princeton University’s “WordNet,” which defines a terminal as a “station where transport vehicles load or unload passengers or goods.” (Essex Mot. at 14 (citingwordnetweb.princeton.edu).) Similarly, the Cambridge Dictionary Online defines terminal as “the place where a train, bus, aircraft, or ship begins or ends a trip, or the building used by passengers who are arriving or leaving.” Dictionary.cambridge.org (last visited June 5, 2013). These definitions are not specific to the trucking industry and thus have questionable bearing on the understanding of the parties in this specific case. See Am. Alternative Ins. Corp. v. Sup.Ct., 135 Cal.App.4th 1239, 1245, 37 Cal.Rptr.3d 918 (2006) (“We ascertain [the parties’] intention solely from the written contract if possible, but also consider the circumstances under which the contract was made and the matter to which it relates.”).

 

Finally, Essex points to several definitions set forth in the municipal codes of Carson, California; Easthampton, Massachusetts; Blaine, Minnesota; Cheboygan County, Michigan; and Turlock, California.FN3 (Essex Reply at 10.) Although Essex does not include it, San Bernardino County, California, the county in which the Claim arose, has adopted a definition of the term “truck terminal.” In San Bernardino County, a “truck terminal” is

 

FN3. Essex asks the Court to take judicial notice of the relevant zoning ordinances for each of these municipalities. [Doc. # 38]. Such ordinances are proper subjects for judicial notice. Tollis, Inc. v. Cnty. of San Diego, 505 F.3d 935, 938 (9th Cir.2007). Accordingly, the Court takes judicial notice of these ordinances.

 

[a] lot, lot area or parcel of land used, designed or maintained for the purpose of storing, parking, refueling, repairing, dispatching, servicing or keeping motor trucks and associated equipment, together with those facilities necessary to service, dispatch, store or maintain aforementioned vehicles, and their cargos and crews.

San Bernardino Cnty. Mun.Code § 810.01.170(hh) (2012). For purposes of safety regulations, the California Vehicle Code defines “terminal” as “a place where a vehicle of a type listed in Section 34500 is regularly garaged or maintained, or from which it is operated or dispatched.” Cal. Veh.Code § 34515. Section 34500 includes shipping trucks. Both of these definitions are more relevant to the common sense meaning of the word in this context than are the other municipal definitions offered by Essex. While the Slover Property would appear to fall squarely within the Vehicle Code’s definition of “terminal,” it is not quite as clear whether it falls within the dictionary definitions provided by Essex or the San Bernardino County Municipal Code’s definition. In short, because the term is reasonably subject to more than one interpretation, it is ambiguous on its face. K F Dairies, 224 F.3d at 926.

 

*7 The record also sheds little light on the reasonable expectations of KPL as to the definition of “terminal.” First, Essex points out that neither party referred to the Slover Property as a terminal until December 10, 2010, when Hartford designated it as such in its letter denying coverage. (Blanton Decl. ¶ 7, Ex. 12.) Thus, although KPL responded to Hartford’s denial by arguing that the Slover Property was a “newly acquired terminal,” this “admission” is of limited value because KPL was responding to Hartford’s own characterization. Essex also argues that KPL’s failure to designate the Slover Property as a terminal in the Policy’s schedules shows that it did not believe the lot to be a terminal in the first place. But there are many motives that may have justified KPL’s nondisclosure of the Slover Property, including the fact that disclosure may have increased its premiums. In the context of these cross-motions for summary judgment, the Court declines to speculate as to why KPL did not list the Slover Property in the Policy’s schedules, and viewing the evidence in the light most favorable to Essex, it finds that the omission says little about KPL’s actual understanding of that term. Finally, Hartford submits an email communication between Kang and Huie, dated April 19, 2010, in which Huie informed Kang that the City of Fontana approved the Slover Property for two uses: “storage yards for commercial and recreational vehicles” and “trucking yards and terminals.” (Huie Decl. ¶ 3(d), Ex. 4.) Again, this email does little to assist the Court—the Slover Property was approved for two uses, only one of which would likely constitute a “terminal,” and Huie’s communication to Kang reveals nothing about how KPL decided to use the lot or whether KPL believed it to be a terminal or a storage yard. Accordingly, the undisputed facts do not establish that the parties intended for the word “terminal” to either include or exclude the Slover Property. See K F Dairies, 224 F.3d at 926.

 

Because the ambiguity remains even after examination of the reasonable expectations of the parties, the Court construes the word “terminal” against Hartford, which drafted the Policy and thus “caused the ambiguity to exist.”   K F Dairies, 224 F.3d at 926. Therefore, the “terminal” exclusion does not preclude coverage. (See Policy at 251.)

 

3. The Concealment, Misrepresentation, or Fraud Exclusion

Next, Hartford moves for summary judgment based on application of the Policy’s exclusion for concealment, misrepresentation, or fraud. As noted above, the Policy provides that the coverage provision is void if “any insured … whether before or after a loss … has committed fraud or intentionally concealed or misrepresented any material fact or circumstance concerning” coverage. (Policy at 240.)

 

In the insurance context, a misrepresentation is a “false answer as to any matter of fact, material to the inquiry, knowingly and willfully made, with intent to deceive the insurer.” Cummings v. Fire Ins. Exch., 202 Cal.App.3d 1407, 1416–17, 249 Cal.Rptr. 568 (1988). Intent to defraud is “necessarily implied when the misrepresentation is material and the insured willfully makes it with knowledge of its falsity.” Ram v. Infinity Select Ins., 807 F.Supp.2d 843, 853 (N.D.Cal.2011) (quoting Cummings, 202 Cal.App.3d at 1418, 249 Cal.Rptr. 568).

 

*8 Materiality is a mixed question of law and fact, but it may be decided as a matter of law if reasonable minds could not differ on the materiality of the misrepresentations. Cummings, 202 Cal.App.3d at 1417, 249 Cal.Rptr. 568. In California, whether a fact is “material” is determined by its “prospective reasonable relevance to the insurer’s inquiry.” Id. (emphasis added). A statement need not relate only “to a matter which ultimately proves to be significant in the ultimate disposition of the claim. Rather, if the misrepresentation concerns a subject reasonably relevant to the insured’s investigation, and if a reasonable insurer would attach importance to the fact misrepresented, then it is material.” FN4 Id.; see also Ram, 807 F.Supp.2d at 853 (quoting Cummings, 202 Cal.App.3d at 1417, 249 Cal.Rptr. 568).

 

FN4. Cummings relies chiefly on Claflin v. Commonwealth Ins. Co., 110 U.S. 81, 3 S.Ct. 507, 28 L.Ed. 76 (1884), the seminal case defining “materiality” in insurance fraud cases. Other circuits interpreting Claflin have adopted a similarly broad definition of “materiality” that extends even to misrepresentations that are not subjectively significant to an insurer’s ultimate determination. See, e.g., Wagnon v. State Farm Fire & Cas. Co., 146 F.3d 764, 768 (10th Cir.1998) (noting that “the subject of the misrepresentation need not ultimately prove to be significant to the disposition of the claim, so long as it was reasonably relevant to the insurer’s investigation at the time”); Fine v. Bellefonte Underwriters Ins. Co., 725 F.2d 179, 184 (2d Cir.1984), aff’d on reh ‘g en banc, 758 F.2d 50 (2d Cir.1985) (false statements are “material if they might have affected the attitude and action of the insurer” or if “they may be said to have been calculated either to discourage, mislead or deflect the company’s investigation in any area that might seem to the company, at that time, a relevant or productive area to investigate”).

 

Here, KPL tendered the Claim to Hartford on August 27, 2010. (Hartford Disputes ¶ 9.) On December 1, 2010, Hartford wrote to KPL denying the Claim based on the undisclosed terminal exclusion. (Blanton Decl. ¶ 7, Ex. 12.) The letter advised KPL: “[W]e invite you to provide us with any further information and/or documentation that may be relevant to this claim. We will review that information and/or documentation as it may relate to our position regarding coverage of this claim.” (Id.) In response, Kim responded on behalf of KPL, stating that the Slover Property was a “newly acquired terminal” because KPL signed the lease for that lot on August 1, 2010. (Blanton Decl. ¶ 8, Ex. 13.) The letter specifically stated, “[W]e did not in need [sic] of parking spaces in early part of 2010…. We have entered into a truck parking space lease contract on August 1, 2010.” (Id.) The August Lease differed from its April predecessor not only in timing but in the nature of the property allegedly leased: the August Lease described the Slover Property as merely “Total 15 Truck & Trailer Spaces,” not the 2.4 acre industrial site previously described. (Id.) Kim attached the August Lease, signed by Brenda Huie and dated August 1, 2010.FN5 (Burgee Decl. ¶ 3.)

 

FN5. The signed version of the August Lease was first presented in this action as an exhibit during the Kang Deposition. Joseph Kim failed to appear for his deposition despite the fact that it was renoticed after his initial non-appearance. (See First Decl. of Garret F. Smith ¶¶ 5–6 [Doc. # 21].)

 

First, KPL’s misrepresentations as to the date on which it obtained the Slover Property and the nature of that property are material. There is no dispute that KPL signed a lease for the Slover Property on April 15, 2010, not August 1, 2010, and that it occupied the premises from May 2010 through November or December 2011. (Essex Disputes ¶ 21; Huie Decl. ¶ 4.) There is also no dispute that KPL did not disclose the April Lease to Hartford either at the time it obtained the Policy or when it challenged the denial in January 2011. That the misrepresentation as to the lease date was ultimately of no consequence because KPL misunderstood the term “newly acquired terminal” does not render the misrepresentation immaterial. The fact that the changed property description was (by virtue of this Court’s ruling) not necessary to advance KPL’s position vis à vis Hartford also does not render the misrepresentation immaterial. See Cummings, 202 Cal.App.3d at 416, 248 Cal.Rptr. 375 (explaining that materiality is “not defined … by the effect it has on the outcome of the investigation”). Rather, these facts were reasonably relevant to Hartford’s investigation because they may have influenced Hartford’s determination that the lot was a terminal which was not timely disclosed. See id. at 1417, 248 Cal.Rptr. 375 (explaining that a misrepresentation is material if a reasonable insurer would attach importance to the fact misrepresented). Indeed, KPL believed the misrepresentation to be material because it specifically referred to the August Lease as proof that the Slover Property was a “newly acquired terminal.” (Blanton Decl. ¶ 8, Ex. 13.) Thus, even drawing all reasonable inferences in favor of Essex, the undisputed facts show that KPL’s misrepresentation was material as a matter of law.FN6 See Cummings, 202 Cal.App.3d at 1416–17, 249 Cal.Rptr. 568.

 

FN6. At oral argument, Essex contended that the misrepresentations were not material because Hartford did not actually consider or rely on them in denying coverage. This is not the standard set forth in Claflin and Cummings. Those cases specifically hold that the subjective understanding of the insurer is not determinative of the materiality question, and a false statement need not ultimately prove significant to the outcome of a claim to be material. Cummings, 202 Cal.App.3d at 1417, 249 Cal.Rptr. 568. Rather, it is sufficient that Hartford could reasonably have considered the facts relevant to its investigation, even if it actually did not.

 

*9 The record also shows that KPL knew that its misrepresentation was both false and material, and that it made this misrepresentation willfully. It is undisputed that KPL knew that it had leased and occupied the Slover Property from April 15, 2010, not August 1, 2010, and that its original lease granted it possession of the entire 2.4 acres of industrial property, not merely the 15 parking spaces described in the August Lease. As stated above, “the intent to defraud the insurer is necessarily implied when the misrepresentation is material and the insured willfully makes it with knowledge of its falsity.”   Cummings, 202 Cal.App.3d at 1418, 249 Cal.Rptr. 568 (citing generally Claflin v. Commonwealth Ins. Co., 110 U.S. 81, 3 S.Ct. 507, 28 L.Ed. 76 (1884)). Essex asserts that KPL obtained the August Lease in order to seek insurance coverage from a different company.FN7 (See Kang Depo. 26:22–27:14.) Regardless of the purpose for which KPL obtained the August Lease, it is clear that KPL actually used it in an attempt to influence Hartford’s assessment of the Claim by mischaracterizing the date on which KPL obtained the lease. See Cummings, 202 Cal.App.3d at 1418, 249 Cal.Rptr. 568 (holding that “an insured’s ulterior motive in misrepresenting material facts to the insurer is simply irrelevant in determining whether a fraud and concealment provision provides a defense to the insured’s claim”). Kim signed both the April and the August Lease and described the August Lease to Hartford in his January letter. Even construing the letter and the August Lease in the light most favorable to Essex, no jury could reasonably find that Kim did not know that his statements were false or that Hartford would not find the misrepresentations relevant. Accordingly, KPL “intentionally concealed or misrepresented” a “material fact or circumstance concerning” its coverage under the Policy. By the terms of the Policy, this misrepresentation renders the Coverage Part of the Policy void.

 

FN7. Hartford objects to this portion of the Kang Depo. based on lack of foundation, irrelevance, speculation, and lack of personal knowledge. Because the Court finds that the purpose for which KPL originally obtained the August Lease is irrelevant to the purpose for which it was proffered to Hartford, the Court does not rely on Kang’s statements about the August Lease and need not resolve these objections.

 

Essex argues that, under Watts v. Farmers Ins. Exch., 98 Cal.App.4th 1246, 120 Cal.Rptr.2d 694 (2002), the Court should not prevent Essex from recovering under the Policy due to KPL’s fraud. In Watts, the court examined whether a co-insured spouse could recover under an insurance policy where his wife had committed fraud that triggered an exclusion under the policy. 98 Cal.App.4th at 1252, 120 Cal.Rptr.2d 694. The court concluded that, because the policy precluded recovery as a result of fraud on the part of “the” insured, the acts of each insured were considered separately for purposes of voiding the contract for fraud. Id. at 1260, 120 Cal.Rptr.2d 694. In contrast, under policies that void coverage based on the fraudulent acts of “any insured,” the acts of any insured may preclude recovery as to all insureds, even innocent ones.   Id. at 1258, 120 Cal.Rptr.2d 694.

 

Essex’s reliance on Watts is thus flawed for two reasons. First, Essex is not a coinsured on the Policy. It is the assignee of KPL’s rights and claims under the Policy, and as such it is subject to the same defenses as would be KPL.FN8 See Searles Valley, 191 Cal.App.4th at 1402, 120 Cal.Rptr.3d 487. Thus, Essex’s “innocence” is irrelevant to whether KPL violated the terms of the Policy and thereby voided its coverage prior to the assignment. Second, even if Essex were entitled to treatment as a co-insured, the language of the Policy differs from the Watts policy. The Policy voids coverage based on the misrepresentation or fraud of “any insured,” not “the insured.” (Policy at 240.) Thus, under the reasoning of Watts, the Policy would preclude coverage for any insured, regardless of innocence, based on the acts of any other insured. See 98 Cal.App.4th at 1261, 120 Cal.Rptr.2d 694.

 

FN8. In Searles Valley, the court explained that “[t]he assignee “stands in the shoes” of the assignor, taking his rights and remedies, subject to any defenses which the obligor has against the assignor prior to notice of the assignment.” 191 Cal.App.4th at 1402, 120 Cal.Rptr.3d 487 (emphasis in original). Although Hartford did not learn of the fraud defense until 2013, the misrepresentation occurred prior to the assignment of rights to Essex and therefore Hartford may assert it against Essex.

 

*10 As a matter of law, KPL’s misrepresentation to Hartford during the course of Hartford’s coverage determination voided the Policy’s coverage provisions. Even drawing all reasonable inferences in favor of Essex, reasonable minds cannot differ as to whether Hartford would have found the misrepresented facts relevant to determining coverage. Moreover, the undisputed facts demonstrate that Kim, on behalf of KPL, knew that he misrepresented what he believed to be material information in both his letter and the August Lease. Accordingly, because Essex is subject to the same defenses as could be raised against KPL, coverage for the Claim is excluded under the Policy.

 

C. Hartford Did Not Breach the Implied Covenant of Good Faith and Fair Dealing

“[T]here is an implied covenant of good faith and fair dealing in every contract that neither party will do anything which will injure the right of the other to receive the benefits of the agreement.” Kransco v. Am. Empire Surplus Lines Ins. Co., 23 Cal.4th 390, 400, 97 Cal.Rptr.2d 151, 2 P.3d 1 (2000). Where the insurer “unreasonably and in bad faith withholds payment of the claim of its insured, it is subject to liability in tort.” Wilson v. 21st Century Ins. Co., 42 Cal.4th 713, 720, 68 Cal.Rptr.3d 746, 171 P.3d 1082 (2007). “Mere negligence or mistaken judgment is insufficient” to establish a breach of this implied covenant. Nieto v. Blue Shield of Cal. Life & Health Ins. Co., 181 Cal.App.4th 60, 86, 103 Cal.Rptr.3d 906 (2010). Here, there are no facts to suggest that Hartford’s denial of the Claim was in bad faith or unreasonable. Indeed, the Court has found that “terminal” as used in the Policy is ambiguous and thus has construed the term against Hartford as a matter of contract interpretation. By definition, the finding of an ambiguity means that reasonable minds can, and did, differ as to the meaning of the word “terminal.” Accordingly, there is no triable issue as to Essex’s claim under the implied covenant of good faith and fair dealing.

 

D. Hartford Owes Essex No Duty to Indemnify/Contribute

Essex’s Third Cause of Action is for “Indemnity/Contribution.” Essex alleges that “[t]he loss of the tires was primarily or solely caused by the primary, active or positive negligent acts and omissions of KPL, whereas the acts, if any, of MFSW were secondary, passive, and derivative in nature only.” (Compl.¶ 21.) Accordingly, in addition to recovery as the subrogee of KPL, Essex seeks contribution from Hartford based on “principles of equitable indemnity and apportionment of liability based upon comparative fault.” (Id.) Notwithstanding that the contribution claim is an independent claim in its Complaint, the parties failed to address this basis for recovery in their motion papers. Upon the Court’s request, both parties submitted additional briefing on the contribution question following oral argument.

 

First, although Essex references “equitable indemnity” in its Complaint, it fails to expound on this theory even in its supplemental briefing. Equitable indemnity allows “a concurrent tortfeasor to obtain partial indemnity from other concurrent tortfeasors on a comparative fault basis.” Gen. Motors Corp. v. Doupnik, 1 F.3d 862, 866 (9th Cir.1993). In the insurance context, “an insurer may settle a claim against its insured without prejudice to its right to seek equitable indemnity from other insurers potentially liable on the same risk on the ground that, although the settling insurer’s policy does not provide coverage, there is coverage under the other policies.” Mt. Hawley Ins. Co. v. Golden Eagle Ins. Corp., 645 F.Supp.2d 878, 886 (C.D.Cal.2009) (quoting Mitchell, Silberberg & Knupp v. Yosemite Ins. Co., 58 Cal.App.4th 389, 394–95, 67 Cal.Rptr.2d 906 (1997)) (emphasis in original). Thus, for Essex to recover under equitable indemnity, there must be coverage under Hartford’s Policy. As discussed above, the Claim is excluded from the Policy under the Concealment, Misrepresentation, and Fraud Exclusion, and therefore Essex cannot seek indemnity from Hartford.

 

*11 In its supplemental briefing, Essex argues that it is entitled to relief under the theory of “equitable contribution,” relying chiefly on Fireman’s Fund Ins. Co. v. Maryland Cas. Co., 65 Cal.App.4th 1279, 77 Cal.Rptr.2d 296 (1998). In Fireman’s Fund, the plaintiff and defendant, both insurers, issued policies to a single insured, a construction company that was sued for construction defects in one of its projects. Id. at 1287, 77 Cal.Rptr.2d 296. The plaintiff agreed to defend the suit and settled the action for $100,000. Id. The defendant declined tender, but ultimately paid the insured a partial reimbursement. Rather than intervene in that suit, the plaintiff brought a separate action against the defendant for equitable contribution. Id. at 1288, 77 Cal.Rptr.2d 296. The Fireman’s Fund court held that “where two or more insurers independently provide primary insurance on the same risk for which they are both liable for any loss to the same insured, the insurance carrier who pays the loss or defends a lawsuit against the insured is entitled to equitable contribution from the other insurer or insurers, without regard to principles of equitable subrogation.” 65 Cal.App.4th at 1289, 77 Cal.Rptr.2d 296 (emphasis added). Essex argues that this principle applies here because both Essex and Hartford issued policies to insure the loss at issue-the theft of the tires. Yet, Essex fails to reconcile its own facts with the requirement in Fireman’s Fund that the parties agreed to cover the same insured, not two different entities.

 

That the multiple insurers issued policies to the same insured appears central to the Fireman’s Fund ruling-the order repeats this requirement several times. See 65 Cal.App.4th at 1293, 77 Cal.Rptr.2d 296 (“Where multiple insurance carriers insure the same insured and cover the same risk, each insurer has independent standing to assert a cause of action against its coinsurers for equitable contribution when it has undertaken the defense or indemnification of the common insured.”) (emphasis added). This is so in light of “the equitable principle that the burden of indemnifying or defending the insured with whom each has independently contracted should be borne by all the insurance carriers together.” Id. at 1294, 77 Cal.Rptr.2d 296. Where two insurers have agreed to insure two distinct entities, both of whom share the burden of a loss, no such equitable principle operates to create an independent cause of action between the two unrelated insurers.

 

Essex cites no case law, and the Court can find none, to support extension of the equitable contribution doctrine to cases where, as here, multiple insurers are not “coinsurers” but rather are obligated to insure the same risk based on independent contracts with independent insureds. See, e.g., Maryland Cas. Co. v. Nationwide Mut. Ins. Co., 81 Cal.App.4th 1082, 1089, 97 Cal.Rptr.2d 374, 377–78 (2000) (“Equitable contribution, on the other hand, applies to apportion costs among insurers that share the same level of liability on the same risk as to the same insured.”) (citing Fireman’s Fund ); Reliance Nat. Indem. Co. v. Gen. Star Indem. Co., 72 Cal.App.4th 1063, 1080, 85 Cal.Rptr.2d 627, 637 (1999) (“[B]ased upon equitable principles, the duty to contribute applies to insurers that share the same level of obligation on the risk as to the same insured.”) (citing Fireman’s Fund ).

 

*12 Accordingly, the Court concludes that there is no triable issue as to Essex’s claim for equitable indemnity or contribution from Hartford.

 

V.

CONCLUSION

In light of the foregoing, Essex’s Motion for Summary Judgment is DENIED and Hartford’s Motion for Summary Judgment is GRANTED.

 

IT IS SO ORDERED.