Brosamer & Wall, Inc. v. Indian Harbor Insurance Company

• Court: District Court, N.D. California
• Decided: September 26, 2019
• Docket: 3:19-cv-01872
• Status: Unknown

Opinion

1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 BROSAMER & WALL, INC., 10 Plaintiff, No. C 19-01872 WHA 11 v. 12 INDIAN HARBOR INSURANCE ORDER GRANTING 13 COMPANY; and ZURICH AMERICAN DEFENDANT INDIAN INSURANCE COMPANY, HARBOR’S MOTION 14 FOR LEAVE TO FILE Defendants. AMENDED ANSWER 15 / 16 INTRODUCTION 17 In this insurance action, defendant insurer moves for leave to amend its answer to 18 19 plaintiff’s first amended complaint. To the extent stated below, the motion is GRANTED. STATEMENT 20 The Santa Clara Valley Water District hired plaintiff Brosamer & Wall, Inc. to be its 21 general contractor for portions of the Lower Berryessa Creek Flood Protection Project in Santa 22 Clara County, California. Defendant Zurich American Insurance Company insured Brosamer 23 against builders risk. Defendant Indian Harbor Insurance Company insured Brosamer against 24 professional and contractor pollution legal liability, covering Brosamer for two separate periods, 25 2017–18 and 2018–19 (Dkt. No. 13 ¶¶ 16, 17, 21, 30). 26 In November 2018, the District accused Brosamer of using deficient materials on some of 27 the levees within the project. Specifically, a pavement maintenance path and levees 11–14 side 28 1 slopes developed cracks. The District had previously rejected those levees in July 2018. 2 The District demanded remediation. Ten days later, Brosamer filed an insurance claim with 3 Indian Harbor under its 2018–19 policy (Dkt. No. 40-1). The operative complaint does not state 4 when Brosamer filed an insurance claim with Zurich. In March 2019, Indian Harbor denied 5 Brosamer coverage. In April 2019, Zurich also denied Brosamer coverage. Brosamer sent 6 letters to both contesting their denials as improper. This action soon followed (Dkt. No. 13 7 ¶¶ 39, 40, 47, 48). 8 In June 2019, Indian Harbor conducted an examination under oath of a Brosamer 9 representative. The examination showed that the person who filled out the 2018–19 policy 10 application in August 2018 had previously known about the District’s rejection (Dkt. No. 37-3). 11 In July 2019, all parties agreed on a joint discovery plan (Dkt No. 30-1). The initial case 12 management conference occurred eight days later. The case management conference permitted 13 the parties to move for leave to amend pleadings by October 31, 2019, and the fact discovery 14 deadline became February 14, 2020 (Dkt. No. 32). At the end of July 2019, Indian Harbor sent 15 Brosamer a supplemental coverage letter after reevaluating its position. The letter again denied 16 Brosamer coverage (Dkt. 41-5 at 1–13). 17 Defendant Indian Harbor now seeks leave to amend its answer (Dkt. No. 37). Brosamer 18 contests three of those amendments. First, Indian Harbor proposes adding an affirmative 19 defense about a misstatement and omission in the 2018–19 policy application. The proposed 20 amendment states in full: “Indian Harbor has no liability to Brosamer & Wall under the 21 2018–2019 policy because of a misstatement or omission in the application for that policy” 22 (Dkt. No. 37-2 ¶ 111). Second, in a general allegation admission paragraph, Indian Harbor 23 proposes adding the specific policy number that Brosamer tendered. The admission states in 24 full: “Indian Harbor admits that Brosamer & Wall tendered to Indian Harbor a claim for 25 insurance benefits under policy number PEC004186705 with respect to the Project (the ‘Claim’). 26 Indian Harbor has neither knowledge nor information sufficient to form a belief about the 27 remaining allegations contained in Paragraph 10, and therefore denies the allegations therein” 28 (id. ¶ 10). Third, Indian Harbor added “Professional Loss” to one of its existing affirmative 1 defenses. The proposed amendment states in full: “Indian Harbor has no liability to Brosamer & 2 Wall to the extent the claim does not involve ‘Professional Service’ or ‘Professional Loss’ under 3 the policies” (id. ¶ 109). This order follows full briefing and oral argument (Dkt. Nos. 37, 39, 4 41). 5 ANALYSIS 6 Rule 15(a)(2) permits a party to amend its pleadings with the court’s leave, advising that 7 “[t]he court should freely give leave when justice so requires.” In ruling on a motion for leave to 8 amend, four factors are considered: (1) prejudice to the opposing party; (2) undue delay; 9 (3) futility of amendment; and (4) bad faith. DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 10 186 (9th Cir. 1987). This order holds that the proposed amendments are permitted, for the below 11 reasons. 12 1. AN AFFIRMATIVE DEFENSE ABOUT A MISSTATEMENT OR OMISSION ON THE 2018–19 POLICY APPLICATION. 13 Indian Harbor proposes adding an affirmative defense that Brosamer misstated or omitted 14 information in its 2018–19 policy application. Brosamer argues that Indian Harbor should have 15 raised this defense earlier because it knew the facts beforehand. Brosamer also contends that the 16 amendment contradicts Indian Harbor’s prior legal theory. Here, the proposed amendment 17 comes early in the case, and plenty of time remains to conduct discovery thereon. 18 During oral arguments, Brosamer cited to Jackson v. Bank of Hawaii. In Jackson, our 19 court of appeals affirmed a district court’s denial of the plaintiffs’ motion to amend their 20 complaint because the plaintiffs filed the motion nearly a year after discovery had concluded, 21 which would have required the defendants to relitigate and caused them prejudice. 902 F.2d 22 1385, 1387–89 (9th Cir. 1990). In contrast to Jackson, nearly six months of the discovery period 23 remained from when Indian Harbor moved to amend its answer. Brosamer has ample time for 24 discovery and will not be prejudiced. 25 Furthermore, this amendment does not contradict Indian Harbor’s earlier position. 26 Brosamer cited to AmerisourceBergen Corp. v. Dialysist West, Inc., another fact pattern that 27 vastly differs from our situation. In AmerisourceBergen, the plaintiff wanted to completely 28 1 contradict its claim in its amendment after knowing the relevant facts for fifteen months. 2 465 F.3d 946, 953 (9th Cir. 2006). Here, however, Indian Harbor’s position has remained 3 consistent throughout this lawsuit. Indian Harbor already raised this affirmative defense as part 4 of its “known circumstances or conditions” defense in its original answer. Indian Harbor 5 reiterated this defense in its supplemental coverage letter. The amendment simply conforms the 6 pleadings to the denial letter sent the previous month. 7 2. IDENTIFY THE TENDERED 2018–19 POLICY NUMBER IN A GENERAL ALLEGATIONS PARAGRAPH. 8 Indian Harbor’s proposed amendment further identifies the tendered 2018–19 policy 9 number in a general allegations paragraph. Brosamer argues that Indian Harbor knew Brosamer 10 intended to claim under its 2017–18 policy because Brosamer stated so in its original and 11 operative complaints and in an email dated March 2019. Brosamer contends that this 12 amendment contradicts Indian Harbor’s earlier position. 13 Without blessing the idea that an insurer can so easily deny coverage by seizing on an 14 error in policy number by the insured, the amendment will be allowed. Conceivably, Brosamer 15 misled Indian Harbor by putting down the wrong policy number. Discovery will develop the 16 facts, and we are early in the process. 17 3. ADD “PROFESSIONAL LOSS” AS TO AN AFFIRMATIVE DEFENSE. 18 Indian Harbor seeks to add “Professional Loss” as to one of its existing affirmative 19 defenses. Brosamer does not provide any support for why it opposes this amendment. It merely 20 states that Indian Harbor should have asserted this defense earlier. As explained above, adding 21 this minor clarification now does not make this amendment untimely or in bad faith. 22 “Professional Loss” also falls under the “known circumstances or conditions” paragraph in its 23 policy coverage. Indian Harbor already asserted its “known circumstances or conditions” 24 defense in its original answer and in its July 2019 supplemental coverage letter. Therefore, this 25 amendment is not new or inconsistent. 26 27 28 1 CONCLUSION 2 To the extent above stated, defendant Indian Harbor’s motion for leave to file its 3 || amended answer is GRANTED. In light of the facts considered in this order, Brosamer’s evidentiary objection is OVERRULED (Dkt. Nos. 37, 39, 41). Defendant Indian Harbor must file 5 || its amended answer within SEVEN CALENDAR DAYS. 6 7 IT IS SO ORDERED. 8 9|| Dated: September 26, 2019. A ~ Pree LIAM ALSUP 10 UNITED STATES DISTRICT JUDGE 1] E 12 5 15 5 16

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