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Williamsburg Nat’l Ins. Co. v. New York Marine & Gen. Ins. Co.

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United States District Court for the Central District of California

August 12, 2022, Decided; August 12, 2022, Filed

CV 21-04377-RSWL-JDEx

Reporter

2022 U.S. Dist. LEXIS 144658 *; 2022 WL 3348935

WILLIAMSBURG NATIONAL INSURANCE COMPANY, Plaintiff, v. NEW YORK MARINE AND GENERAL INSURANCE COMPANY, Defendant.

Core Terms

notice, insured, indemnity, endorsement, subrogation, equitable, alleges, declaratory relief, carrier, claim for contribution, reconsideration motion, amended complaint, default judgment, judicial notice, leave to amend, requests, tractor

Counsel:  [*1] For Williamsburg National Insurance Company, Plaintiff: Ira D Goldberg, Woolls Peer Dolinger and Scher APC, Los Angeles, CA; John E Peer, Woolls Peer Dollinger and Scher, Los Angeles, CA.

For New York Marine and General Insurance Company, Defendant: Christian D Jinkerson, Nicholas H Rasmussen, LEAD ATTORNEYS, James P Wagoner, McCormick Barstow Sheppard Wayte and Carruth LLP, Fresno, CA; Maria E. Valencia Camberos, LEAD ATTORNEY, McCormick Barstow, Fresno, CA.

Judges: HONORABLE RONALD S.W. LEW, Senior United States District Judge.

Opinion by: RONALD S.W. LEW

Opinion


ORDER re: Defendant’s Motion to Dismiss Plaintiff’s First Amended Complaint [41]

Plaintiff Williamsburg National Insurance Company (“Plaintiff”) brings this Action against Defendant New York Marine and General Insurance Company (“Defendant”). In its First Amended Complaint, Plaintiff alleges eleven causes of action involving contribution, indemnity, and other various tort claims. Currently before the Court is Defendant’s Motion to Dismiss Plaintiff’s First Amended Complaint [41] (the “Motion”). Having reviewed all papers submitted pertaining to this Motion, the Court NOW FINDS AND RULES AS FOLLOWS: the Court GRANTS in part and DENIES in part Defendant’s [*2]  Motion.


I. BACKGROUND


A. Factual Background

Plaintiff, a Michigan-based insurance corporation, issued a motor carrier liability policy to DLR Express, Inc. (“DLR”) that provides a $1,000,000 combined single limit for covered accidents. First Am. Compl. (“FAC”) ¶¶ 3, 5, ECF No. 37. Attached to the policy is the MCS-90 endorsement, which is a standardized form that requires an insurer to pay up to its policy limit to members of the public for liability arising from its insured’s operations even where the policy itself provides no coverage. Id. ¶ 5.

Defendant, a New York-based insurance corporation, issued a motor carrier liability policy (“Defendant Policy”) to Intermodal Contractor’s Association of North America. Id. ¶¶ 4, 6. Arthur Trimble, Jr. (“Trimble”) was later added as a certificate holder under this policy. Id. ¶ 6. Defendant Policy similarly provides a $1,000,000 combined single limit and includes the MCS-90 endorsement. Id. ¶¶ 6, 31.

DLR leased a tractor with an attached trailer to Trimble pursuant to an Equipment Lease Agreement and a sub-haul agreement (collectively, the “Agreement”). Id. ¶ 8. Under the Agreement, Trimble agreed to indemnify and release DLR against all liability [*3]  arising out of Trimble’s use of the tractor. Id. ¶ 9. Pursuant to the Agreement, Trimble also added DLR to Defendant Policy as an additional insured with respect to the tractor. Id. ¶ 11. The Policy obligates Defendant to pay all sums Trimble is liable for related to any accident involving the tractor. Id. ¶ 29.

On March 5, 2015, Trimble was driving the tractor pulling a loaded trailer when he rear-ended a truck being driven by Ronald Foster, Jr. Id. ¶ 7. Foster, along with the truck’s passenger and the truck’s owner (collectively, the “Foster plaintiffs”), filed a complaint against Trimble in Los Angeles Superior Court on March 3, 2017, alleging injuries and damages related to the accident. Id. ¶ 12. DLR was later added to the action as a defendant. Id. ¶ 15. Defendant provided a defense for Trimble in the Foster litigation, and all claims against Trimble were settled for $155,000. Id. ¶ 13. Plaintiff alleges that Defendant “was aware, via its retained defense counsel for Trimble, that its additional insured DLR was named as a defendant in the Foster litigation.” Id. ¶ 16. However, neither Plaintiff nor Defendant provided a defense for DLR in the Foster litigation initially, and consequently [*4]  DLR never appeared in the case. Id. ¶¶ 17, 18.

A default judgment of $6,085,702 was entered against DLR. Id. ¶ 18. DLR moved to set aside the default judgment, and subsequently filed an appeal when that motion was denied. Id. DLR then tendered its defense to Plaintiff, and Plaintiff agreed to defend DLR in the Foster litigation under a reservation of rights.1 Id. ¶ 19. A month later, DLR tendered its defense and request for indemnity to Defendant as an additional insured under Defendant Policy. Id. ¶ 21.

The Foster plaintiffs then agreed to settle all claims against DLR for $1,000,000. Id. ¶ 22. Both DLR and Plaintiff demanded that Defendant contribute its remaining policy limit to settle the claim, but Defendant refused. Id. ¶¶ 23-25. Ultimately, Plaintiff paid the entire settlement amount on behalf of DLR. Id. ¶¶ 22, 26. Plaintiff alleges that Defendant had the primary duty to defend and indemnify DLR in the Foster litigation because DLR is an additional insured under Defendant Policy. Id. ¶ 34.


B. Procedural Background

Plaintiff filed its initial Complaint [1] on May 26, 2021, alleging claims for declaratory relief, equitable contribution, and equitable subrogation. Defendant filed [*5]  a Motion to Dismiss (“Initial Motion”) [12] on July 16, 2021, and this Court subsequently entered an Order [18] granting in part and denying in part Defendant’s Motion. Specifically, the Court dismissed Plaintiff’s subrogation claims with leave to amend but denied Defendant’s Motion as to the declaratory relief and contribution claims. See Order re: Mot. to Dismiss (“Order”) 18:2-8, ECF No. 18.

Plaintiff then filed its First Amended Complaint (“FAC”) [37] on March 30, 2022. The FAC includes the previous claims for contribution and declaratory relief, as well as additional claims for equitable and implied indemnity, negligence, and common law and statutory tort of another. Defendant filed the instant Motion to Dismiss (“Second Motion”) [41] on April 28, 2022. On June 21, 2022, Plaintiff filed its Opposition [42]. Defendant replied [43] on June 28, 2022.


II. DISCUSSION


A. Legal Standard

Rule 12(b)(6) of the Federal Rules of Civil Procedure allows a party to move for dismissal of one or more claims if the pleading fails to state a claim upon which relief can be granted. A complaint must “contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (quotation omitted). Dismissal is warranted [*6]  for a “lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988) (citation omitted).

In ruling on a 12(b)(6) motion, a court may generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice. Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). A court must presume all factual allegations of the complaint to be true and draw all reasonable inferences in favor of the non-moving party. Klarfeld v. United States, 944 F.2d 583, 585 (9th Cir. 1991). The question is not whether the plaintiff will ultimately prevail, but whether the plaintiff is entitled to present evidence to support its claims. Jackson v. Birmingham Bd. of Educ., 544 U.S. 167, 184, 125 S. Ct. 1497, 161 L. Ed. 2d 361 (2005) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 40 L. Ed. 2d 90 (1974)). While a complaint need not contain detailed factual allegations, a plaintiff must provide more than “labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007).


B. Analysis

1. Preliminary Matters

a. Local Rule 7-3

Defendant argues that Plaintiff failed to comply with Local Rule 7-3 because Plaintiff never informed Defendant of its objection to Defendant’s reassertion of certain arguments. Reply 25:18-22, ECF No. 43. However, Local Rule 7-3 sets forth the meet and confer obligations of the moving party only. C.D. Cal. L.R. 7-3 (requiring that “counsel contemplating the filing of any motion shall [*7]  first contact opposing counsel” to discuss the motion’s substance) (emphasis added). Therefore, Plaintiff did not violate Local Rule 7-3 in failing to raise its objection during the meet and confer session. The Court accordingly considers the arguments raised in Plaintiff’s Opposition.

b. Defendant’s Requests for Judicial Notice

Pursuant to Federal Rule of Evidence 201, “[a] court may judicially notice a fact that is not subject to reasonable dispute because it . . . can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Thus, while a court may take judicial notice of matters of public record, a court may not take judicial notice of the substance of such records if subject to reasonable dispute. Lee v. City of Los Angeles, 250 F.3d 668, 689-90 (9th Cir. 2001) (stating that a court may take judicial notice of the fact that certain court records were filed but not of the truth of any facts stated therein).

Defendant requests the Court judicially notice the following records from the Foster litigation: (1) the proof of service of the amended complaint substituting DLR for a Doe defendant; (2) the order granting default judgment against DLR; (3) DLR’s motion to set aside default and default judgment; (4) the order denying DLR’s motion to set aside [*8]  default and default judgment; and (5) the Superior Court’s entry of a $6,085,702 judgment against DLR. See generally Def.’s Req. for Judicial Notice, ECF No. 41-1. Defendant also requests that the Court judicially notice: (6) an excerpt from the Federal Motor Carrier Administration’s (“FMCA”) Regulatory Guidance; and (7) the “About Us” information from the FMCA’s website. Id.

The Court GRANTS Defendant’s first through fifth requests because they pertain to court documents, the existence of which is not subject to reasonable dispute. See Selane Prods. v. Cont’l Cas. Co., No. 2:20-cv-07834-MCS-AFM, 2020 U.S. Dist. LEXIS 233753, 2020 WL 7253378, at *3 (C.D. Cal. Nov. 24, 2020). However, the Court DENIES Defendant’s sixth and seventh requests. While these documents may qualify as judicially noticeable materials, they are not relevant to the resolution of this Motion and therefore need not be considered by this Court. See Santa Monica Food Not Bombs v. City of Santa Monica, 450 F.3d 1022, 1025 n.2 (9th Cir. 2006).

2. The Motion

Defendant argues that all of Plaintiff’s claims should be dismissed because Defendant had no duty to indemnify and defend DLR. See Mot. to Dismiss FAC (“Second Mot.”) 3:7-14, ECF No. 37. For the following reasons, the Court DENIES Defendant’s Motion as to Plaintiff’s claims for contribution, indemnity, and declaratory relief. The Court [*9]  GRANTS Defendant’s Motion as to Plaintiff’s claims for negligence and both common law and statutory tort of another.

a. Contribution and Indemnity

i. Notice

Defendant’s Motion repeats a central argument that the Court previously rejected — namely, that Defendant cannot be liable for contribution because Defendant lacked sufficient notice of DLR’s potential claims. See generally Second Mot. In its prior Order, the Court rejected Defendant’s argument that Plaintiff failed to state a claim for contribution due to lack of notice. Order 13:19-15:16. The Court found that Plaintiff adequately alleged that Defendant had sufficient inquiry notice of the potential for a contribution claim. Id. Nevertheless, Defendant’s current Motion restates the same notice argument, contending that Defendant did not have constructive notice and thus that Plaintiff cannot state “any claim” against Defendant. See Second Mot. 3:15-4:11.

Although Defendant does not expressly ask the Court to reconsider the conclusions it reached in the prior Order, Defendant’s Motion functions as a motion for reconsideration and should be analyzed as such. See Laub v. Horbaczewski, No. CV 17-6210-JAK (KSX), 2020 U.S. Dist. LEXIS 247102, 2020 WL 7978227 at *4 (C.D. Cal. Nov. 17, 2020) (analyzing a motion to compel and for sanctions as a motion for reconsideration [*10]  where it “essentially request[ed] that the [c]ourt revisit its [prior] ruling”).2

Local Rule 7-18 allows reconsideration “of the decision on any motion,” which includes interlocutory orders such as an order denying a motion to dismiss or granting a motion to dismiss without prejudice. C.D. Cal. L.R. 7-18; see also United States v. Curiel, No. 2:05-cr-00889-RSWL, 2015 U.S. Dist. LEXIS 3346, 2015 WL 143897, at *1 (C.D. Cal. Jan. 12, 2015).

A motion for reconsideration pursuant to Local Rule 7-18 may be made only on the following grounds:

(a) a material difference in fact or law from that presented to the Court before such decision that in the exercise of reasonable diligence could not have been known to the party moving for reconsideration at the time of such decision, or

(b) the emergence of new material facts or a change of law occurring after the time of such decision, or

(c) a manifest showing of a failure to consider material facts presented to the Court before such decision.

C.D. Cal. L.R. 7-18; see In re Countrywide Fin. Corp. Mortg.-Backed Sec. Litig., 966 F. Supp. 2d 1031, 1036 (C.D. Cal. 2013). Additionally, a motion for reconsideration must not “repeat any oral or written argument made in support of or in opposition to the original motion.” C.D. Cal. L.R. 7-18.

Defendant has not demonstrated that the Court’s prior decision was erroneous, nor that any of the limited circumstances for reconsideration apply here. Defendant appears to confuse [*11]  two distinct notice requirements. As the Court explained in its prior Order, the notice required for a contribution claim is distinct from the notice that an insured must give its insurer to trigger the insurer’s duty to indemnify and defend. This is because a coinsurer’s right to contribution is not governed by the terms of either insurance policy. Therefore, “an insured’s lack of tender or compliance with a policy provision is not fatal to a coinsurer’s right of equitable contribution; rather, adequate notice of the potential for contribution and the opportunity for investigation and participation in the defense in the underlying litigation will suffice.” OneBeacon Am. Ins. Co. v. Fireman’s Fund Ins. Co., 175 Cal. App. 4th 183, 95 Cal. Rptr. 3d 808, 822 (Cal. Ct. App. 2009). The Court carefully considered Plaintiff’s allegations regarding Defendant’s notice of DLR’s involvement in the Foster litigation, and it determined that Plaintiff had pled notice sufficient to state a claim for contribution against Defendant. The Court declines to revisit that conclusion here.3

As such, Defendant may not repeat its prior arguments about its lack of notice simply because it is dissatisfied with the Court’s prior conclusions. See Rhodes v. Pfeiffer, No. CV 14-7687, 2017 U.S. Dist. LEXIS 223588, 2017 WL 10519635, at *1 (C.D. Cal. June 30, 2017) (noting that litigants may not use motions for reconsideration to get a “proverbial [*12]  second bite at the apple”) (internal quotation marks and citation omitted); Laub v. Horbaczewski, No. CV 17-6210-JAK (KSX), 2020 U.S. Dist. LEXIS 247102, 2020 WL 7978227 at *4 (C.D. Cal. Nov. 17, 2020) (denying reconsideration where movant failed to show court error or material difference in fact or law).

ii. MCS-90 Endorsement

Because the Court finds that Plaintiff’s contribution and indemnity claims survive Defendant’s Motion based on adequate notice, the Court need not address whether the MCS-90 endorsement attached to Defendant Policy provides an alternative basis for these claims. Nevertheless, the Court briefly notes its previous finding that the public protection purpose of the MCS-90 endorsement has been fulfilled in this case “[b]ecause Trimble, the injured member of the public, has already been compensated for his injuries.” Order 11:8-12. Thus, as with Plaintiff’s prior claims for subrogation, the MCS-90 is irrelevant to Plaintiff’s claims for contribution and indemnity.4

This is not to say that declining to apply the MCS-90 endorsement here in any way precludes Plaintiff’s claims for contribution and indemnity. As the Court has explained, claims for equitable contribution and indemnity do not arise out of a contract between two insurers and thus are not controlled by the language of either [*13]  policy. See Fireman’s Fund Ins. Co. v. Md. Cas. Co., 65 Cal. App. 4th 1279, 77 Cal. Rptr. 2d 296, 313 (Cal. Ct. App. 1998); Travelers, 285 Cal. Rptr. 3d at 308. Plaintiff has pled facts sufficient to plausibly allege that Defendant had notice of DLR’s addition to the Foster litigation. Plaintiff can therefore state claims for contribution and indemnity regardless of the protections afforded by the MCS-90 endorsement.

In sum, the FAC alleges notice sufficient to state claims for contribution and indemnity. The Court therefore DENIES Defendant’s Motion as to Plaintiff’s first through eighth claims for contribution, indemnity, and declaratory relief.

b. Negligence and Tort of Another

Plaintiff’s FAC fails to state claims for negligence and common law and statutory tort of another. To state a claim for either negligence or tort of another, Plaintiff must establish that Defendant owed it a duty of due care. Artiglio v. Corning, Inc., 18 Cal. 4th 604, 614, 76 Cal. Rptr. 2d 479, 957 P.2d 1313 (1998); Zahnleuter v. Lenhart, No. 2:20-CV-02492-KJM-KJN, 2021 U.S. Dist. LEXIS 83529, 2021 WL 1721812, at *4 (E.D. Cal. Apr. 30, 2021) (internal citations omitted). In a dispute between insurers like the one here, a primary insurer owes an excess insurer a duty of good faith identical to that owed to the insured. Diamond Heights Homeowners’ Ass’n v. Nat’l Am. Ins. Co., 227 Cal. App. 3d 563, 579, 277 Cal. Rptr. 906 (1991). As such, the excess carrier may recover in tort against the primary insurer only through equitable subrogation, by subrogating to the rights of the insured.5 Id.; see also Signal Cos., Inc. v. Harbor Ins. Co., 27 Cal. 3d. 359, 365, 165 Cal. Rptr. 799, 612 P.2d 889 (1980) (“[T]he primary carrier, in settling [*14]  an action, owes a duty of good faith to the excess carrier based on the theory of equitable subrogation.”).

As the Court has previously held, Plaintiff cannot state a claim for subrogation because Plaintiff has not alleged facts establishing that DLR itself has an existing, assignable cause of action against Defendant. Indeed, any duty Defendant owed to DLR was extinguished because DLR failed to timely tender its defense to Defendant. See Order 10:5-14. Because Defendant owed no duty to DLR, Defendant likewise owed no duty to Plaintiff. Plaintiff’s claims for negligence and tort of another therefore fail.

The MCS-90 endorsement is no help to Plaintiff’s claims for negligence and tort of another. As explained above, the MCS-90 does not apply in this dispute between insurers. While the MCS-90 endorsement creates a suretyship relationship, the insurer becomes a surety to protect the public only. See Harco Nat. Ins. Co. v. Bobac Trucking Inc., 107 F.3d 733, 736 (9th Cir. 1997). Because the injured members of the public — the Foster plaintiffs — have been compensated in this case, the MCS-90 endorsement does not give rise to a duty on the part of Defendant, and therefore it does not create any rights which Plaintiff may be subrogated to.

Because Defendant owed no duty [*15]  to Plaintiff based either on subrogation or on its suretyship obligations under the MCS-90 endorsement, Plaintiff cannot state claims for negligence or for common law or statutory tort of another. As such, the Court GRANTS Defendant’s Motion as to Plaintiff’s ninth through eleventh claims for negligence and tort of another.

c. Leave to Amend

“The Court should give leave [to amend] freely when justice so requires.” Fed. R. Civ. P. 15(a)(2). While the Ninth Circuit has “stressed Rule 15‘s policy of favoring amendments,” leave need not be granted where amendment would be “an exercise in futility.” Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989).

Here, allowing Plaintiff to amend the FAC would be futile because Plaintiff has not indicated the existence of any additional facts that would establish the duty required for negligence or tort of another. The Court previously afforded Plaintiff an opportunity to amend its subrogation claims to allege that Defendant owed a duty to DLR, and Plaintiff declined to do so. Plaintiff has not indicated that it could allege any additional facts to establish such a duty. The Court therefore finds that amendment of these claims would be futile and dismisses Plaintiff’s negligence and tort of another claims without leave to amend. See [*16]  Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 339 (9th Cir. 1996) (holding that district court did not abuse discretion in denying leave to amend where amendment would be futile).


III. CONCLUSION

Based on the foregoing, the Court GRANTS in part and DENIES in part Defendant’s Motion. The Court DENIES the Motion as to Plaintiff’s first through eighth claims for contribution, indemnity, and declaratory relief. The Court GRANTS the Motion as to Plaintiff’s ninth through eleventh claims for negligence and tort of another without leave to amend.

IT IS SO ORDERED.

DATED: August 12, 2022

/s/ Ronald S.W. Lew

HONORABLE RONALD S.W. LEW

Senior U.S. District Judge


End of Document


The MCS-90 endorsement included in the policy that Plaintiff issued to DLR required Plaintiff to cover DLR’s claim despite DLR’s failure to provide Plaintiff with timely notice of the Foster litigation. Pl.’s Opp’n to Mot. to Dismiss (“Opp’n”) 16:27-17:3, ECF No. 15.

Defendant contends that it may repeat its constructive notice argument because the filing of an amended complaint allows the Court to alter its prior judgment. Reply 22:19-24:4. However, Defendant provides no authority for the proposition that the filing of an amended complaint authorizes a court to revisit previously rejected arguments attacking claims that remain identical in the amended complaint. Cf. Askins v. U.S. Dep’t of Homeland Sec., 899 F.3d 1035, 1043 (9th Cir. 2018) (discussing the standard for evaluating an amended complaint itself rather than the standard for reconsideration of previously rejected arguments in a motion to dismiss). Even if the standard for reconsideration were somehow lower in this procedural context, the Court declines to alter its previous rulings for the reasons stated below.

Defendant provides no authority holding that the notice standard for indemnity is different from that for contribution, and the Court could find none. A claim for indemnity lies where “one party pays a debt for which another is primarily liable and which in equity and good conscience should have been paid by the latter party.” Travelers Indem. Co. of Conn. v. Navigators Specialty Ins. Co., 70 Cal. App. 5th 341, 285 Cal. Rptr. 3d 289, 308 (Cal. Ct. App. 2021). Like contribution, equitable and implied indemnity are “premised on a joint legal obligation to another” and are not governed by the language of the insurers’ respective policies. Prince v. Pac. Gas & Elec. Co., 45 Cal. 4th 1151, 90 Cal. Rptr. 3d 732, 202 P.3d 1115, 1120 (2009). Thus, Plaintiff’s indemnity claims similarly survive Defendant’s arguments concerning lack of notice.

This holding is consistent with the majority view that the MCS-90 endorsement applies only “when necessary to protect injured members of the public” and does not control the allocation of loss among insurers. Canal Ins. Co. v. Distrib. Servs., Inc., 320 F.3d 488, 492-93 (9th Cir. 2003) (collecting cases); see also John Deere Ins. Co. v. Nueva, 229 F.3d 853, 858 (9th Cir. 2000).

Plaintiff argues that duty is established because California Civil Code section 1714 imposes liability on any person for “an injury occasioned to another by his or her want of ordinary care or skill in the management of his or her property or person.” However, this general provision cannot be relied upon to establish the legal duty of a defendant in a particular case. Lundy v. California Realty, 170 Cal. App. 3d 813, 216 Cal. Rptr. 575, 577-78 (Cal. Ct. App. 1985). Rather, the duty owed by Defendant in this particular insurance context has been defined through the case law cited above.

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