Miller Marital Deduction Trust v. Zurich American Ins. Co.

CourtCalifornia Court of Appeal
DecidedOctober 21, 2019
DocketA155398
StatusPublished

This text of Miller Marital Deduction Trust v. Zurich American Ins. Co. (Miller Marital Deduction Trust v. Zurich American Ins. Co.) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Miller Marital Deduction Trust v. Zurich American Ins. Co., (Cal. Ct. App. 2019).

Opinion

Filed 10/21/19 CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

MILLER MARITAL DEDUCTION TRUST et al., Plaintiffs and Respondents, A155398

v. (City and County of San Francisco ZURICH AMERICAN INSURANCE Super. Ct. No. CGC18564521) COMPANY, Defendant and Appellant.

In this insurance coverage action, defendant Zurich American Insurance Company (Zurich) appeals from a June 22, 2018 order denying its special motion to strike the complaint pursuant to Code of Civil Procedure 1 section 425.16 as a strategic lawsuit against public participation (anti-SLAPP motion). We affirm. FACTUAL AND PROCEDURAL BACKGROUND The operative facts are taken from the complaint filed by plaintiffs Miller Marital Deduction Trust, by and through its trustees Helen Miller and James Morris (Miller Marital Trust) and Helen Miller, an individual (hereinafter also collectively referred to as “Millers”), and the declarations and exhibits submitted in connection with Zurich’s anti- SLAPP motion. A. Underlying Federal Action The Miller Marital Trust is the successor owner of certain real property previously owned by spouses Jack Miller (now deceased) and Helen Miller, and then owned by the

1 All further unspecified statutory sections refer to the Code of Civil Procedure.

1 Miller Family Trust. According to the Millers, the property is held in the Miller Marital Trust and is owned by Helen Miller and James Morris as trustees of that trust. Helen Miller, individually, does not own any interest in the property. In August 2016, the Millers commenced an action in federal court against various previous owners including the Estate of Jack Miller, Deceased 2 (hereinafter referred to as the Miller Estate) and previous lessees including Mary DuBois (DuBois). The operative pleading, the first amended complaint filed in September 2017, sought redress for past environmental contamination that originated from a dry cleaning business that was in operation on the property from approximately 1956 to 1985. According to the Millers, releases of dry cleaning solvent from the business had polluted the property and that pollution had migrated, and was continuing to migrate, off the property, creating a growing plume of contamination. By their action, the Millers sought to avoid or minimize their alleged liability associated with certain directives issued by the California Regional Water Quality Control Board related to the environmental contamination on the property. DuBois filed a counterclaim against the Millers, alleging they had intentionally and negligently caused and contributed to the sudden and accidental releases of dry cleaning solvent into the property. The counterclaim sought contribution under the common law and the Comprehensive Environmental Response, Compensation & Liability Act (42 U.S.C. § 9613) and damages for nuisance. In their federal action, the Millers were represented by Bret Stone of the Paladin Law Group ® LLP. Zurich determined it had a duty to appear and defend the named

2 While named as a defendant, the Miller Estate “is a legal fiction – the defendant[s] [are] actually the insurers, Zurich and Allianz [Insurance Company]. [Citation.] Because . . . an ‘estate’ may not be sued . . . , [u]nder Probate Code § 550 . . . a plaintiff may directly sue an insurance company by naming [as defendant] . . . ‘Estate of [Insured]’ and then serving the insurer directly. Judgment against an estate under this section is enforced directly against the insurer. [(See Prob. Code § 554.)]”

2 defendant the Miller Estate under insurance policies issued from 1977 to 1984. To that end, Zurich retained counsel to represent the Miller Estate. The Millers tendered the Dubois counterclaim for defense to Zurich on the theory that they were additional insureds under the Zurich insurance policies issued to the Miller Estate. Zurich agreed to represent and defend the Millers against the DuBois counterclaim subject to an extensive reservation of rights. The Millers asked Zurich to allow the Paladin Law Group ® LLP to represent them because of Zurich’s reservations of rights as well as its appointment of separate counsel to defend the Miller Estate, an adverse party to the Millers, which situation the Millers alleged created conflicts of interest requiring the appointment of independent (Cumis 3) counsel. Zurich refused the

3 “San Diego Federal Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358 [208 Cal.Rptr. 494]. When the insurer disputes liability for indemnification but continues to provide a defense for the insured against the claim, a potential conflict of interest arises. Assertions made to defeat the liability of the insurer under the policy may promote the claim of the third party against the insured. To remedy the conflict, Cumis held that the insurer is obligated to provide separate counsel for the insured in representation of the liability case, independent of the counsel utilized by the insurer in its coverage case.” (State Farm Fire & Casualty Co. v. Superior Court (1989) 216 Cal.App.3d 1222, 1225, fn. 1.) “In 1987, the Legislature enacted Civil Code section 2860, which codified the right to independent or Cumis counsel but ‘clarifi[ed]’ and ‘limit[ed]’ Cumis’s stated rights and responsibilities of insurer and insured. [Citations.] Under the statute, an insurer having a duty to defend its insured must provide its insured independent counsel when a ‘conflict of interest arises which creates a duty on the part of the insurer to provide independent counsel to the insured’ unless ‘at the time the insured is informed that a possible conflict may arise or does exist, the insured expressly waives, in writing, the right to independent counsel.’ (Civ. Code, § 2680, subd. (a).) Subdivision (b) of the statute further explains when such a conflict might arise. It provides: ‘For purposes of this section, a conflict of interest does not exist as to allegations or facts in the litigation for which the insurer denies coverage; however, when an insurer reserves its rights on a given issue and the outcome of that coverage issue can be controlled by counsel first retained by the insurer for the defense of the claim, a conflict of interest may exist. No conflict shall be deemed to exist as to allegations of punitive damages or be deemed to exist solely because an insured is sued for an amount in excess of the insurance policy limits.’ . . . [¶] But Civil Code section 2860 does not purport to address any and all conflicts that might arise: ‘It does not clearly state when the right to independent counsel

3 Millers’ request and refused to pay Cumis counsel fees. Instead, Zurich retained an attorney (hereinafter referred to as panel counsel) to represent Helen Miller individually and as trustee of the Miller Marital Trust; Zurich did not appoint counsel to represent James Morris, the other trustee of the Miller Marital Trust. B. Current State Action In February 2018, while the federal action was pending, the Millers commenced this lawsuit against Zurich. 4 The Millers did not name any attorney as a defendant. Their complaint alleged, in pertinent part, that Zurich was in breach of its contractual duties under its insurance policies by refusing to pay for independent Cumis counsel to represent the Millers in defending against the DuBois counterclaim; refusing to pay reasonable and necessary site investigation, regulatory oversight, attorney fees, and other defense costs; and failing to deal in good faith with the Millers.

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Bluebook (online)
Miller Marital Deduction Trust v. Zurich American Ins. Co., Counsel Stack Legal Research, https://law.counselstack.com/opinion/miller-marital-deduction-trust-v-zurich-american-ins-co-calctapp-2019.