1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 NAUTILUS INSURANCE COMPANY, Case No.: 23-CV-2072 JLS (SBC)
12 Plaintiff, ORDER (1) GRANTING 13 v. PLAINTIFF’S AND DEFENDANT’S REQUESTS FOR JUDICIAL 14 ACACIA MOBILE HOME PARK LLC; NOTICE, (2) DENYING and DOES 1 through 10, inclusive, 15 DEFENDANT’S MOTION FOR Defendants. STAY, AND (3) GRANTING 16 PLAINTIFF’S MOTION FOR 17 SUMMARY JUDGMENT
18 (ECF Nos. 11, 15) 19 20 Presently before the Court are Plaintiff Nautilus Insurance Company’s (“Nautilus”) 21 Motion for Summary Judgment, or Alternatively, Partial Summary Judgment (“MSJ,” ECF 22 No. 11) and Memorandum of Points and Authorities in Support thereof (“Mot. Mem., ECF 23 No. 11-1), Defendant Acacia Mobile Home Park LLC’s (“Acacia”) Opposition thereto 24 (“Opp’n,” ECF No. 15), and Plaintiff’s Reply (“Reply,” ECF No. 16). Also before the 25 Court are a Request for Judicial Notice filed by Plaintiff (“Pl.’s RJN,” ECF No. 11-2) and 26 a Request for Judicial Notice filed by Defendant (“Def.’s RJN,” ECF No. 15-2). 27 Additionally, the Court construed Acacia’s Opposition to include a Motion for Stay, which 28 the Court ordered supplemental briefing on. See Order for Supplemental Briefing (“Suppl. 1 Br. Order”), ECF No. 17. Both Parties filed Supplemental Briefs, which are also presently 2 before the Court. Plaintiff Nautilus Insurance Company’s Supplemental Reply Brief 3 (“Pl.’s Suppl. Br.”), ECF No. 20; Defendant Acacia Mobile Home Park, LLC’s 4 Supplemental Briefing (“Def.’s Suppl. Br.”), ECF No. 21. The Court heard oral argument 5 on October 15, 2024. 6 Having carefully considered the Parties’ arguments, both in their briefing and at oral 7 argument; the evidence; and the law, the Court GRANTS both Requests for Judicial 8 Notice, DENIES Defendant’s Motion for Stay, GRANTS Plaintiff’s Motion for Summary 9 Judgment as follows. 10 BACKGROUND 11 Neither Party submitted a statement of undisputed facts, but the facts that follow go 12 undisputed in the Parties’ moving papers. 13 I. Undisputed Facts 14 Nautilus, a provider of commercial insurance policies, issued Commercial Lines 15 Policy No. NC487355 (“Policy”) to Acacia, a mobile home park owner effective April 5, 16 2019, to April 5, 2020. Declaration of Jon Abood (“Abood Decl.”) ¶ 3, ECF No. 11-5. 17 The Policy provided Commercial General Liability (“CGL”) coverage to Acacia for bodily 18 injury, property damage, and personal and advertising injury related to the mobile home 19 park that Acacia owns located at 324 54th St., San Diego, CA 92114 (“Park”). Id.; Ex. C, 20 ECF No. 11-6 (“Pol.”) at 20, 25, 36. The Policy spans over 70 pages and contains various 21 declarations, common policy conditions, coverage forms, and endorsements that modify 22 the baseline coverage. See Pol. at 2. 23 On July 19, 2023, Nautilus was informed that Acacia was a named defendant in 24 multiple civil lawsuits in San Diego Superior Court—one filed in March 2017 and the other 25 filed in June 2019—that potentially implicated the Policy. Ex. D, ECF No. 11-7. On 26 September 20, 2023, Nautilus informed Acacia, through coverage counsel in connection 27 with the underlying lawsuits, that it agreed to defend Acacia “under a full and complete 28 reservation of rights.” Ex. E, ECF No. 11-9 (“Rsrv. of Rts.”) at 2. In the Reservation of 1 Rights, Nautilus specifically reserved its rights under the Habitability Exclusion, which 2 will be explained below. See id. at 12–13. The instant lawsuit followed in which Nautilus 3 seeks to invoke this reservation. See Complaint (“Compl.”), ECF No. 1. 4 A. The Policy 5 The Policy begins with a two-page “Schedule of Forms and Endorsements,” which 6 is essentially a table of contents. Id. at 4–5. Listed on page one of the Schedule, and most 7 pertinent to the instant Motion, are the “Commercial General Liability Coverage Form” 8 and the “Habitability Exclusion,” both of which are located in the “Commercial General 9 Liability” section. Id. at 4. 10 The “Commercial General Liability Coverage Form” is the heart of the Policy, with 11 Section One of the Form dividing up the general categories of coverage. Within Section 1 12 are Coverage A, which insures against “Bodily Injury and Property Damage Liability,” id. 13 at 20, Coverage B, which insures against “Personal and Advertising Injury Liability,” id. 14 at 25, and Coverage C, which insures against “Medical Payments,” id. at 27. Within each 15 Coverage are an Insuring Agreement—which defines the terms of the coverage—and 16 exclusions that modify that particular category of coverage. See generally id. 17 The endorsements begin about halfway through the Policy, and that is where the 18 “Habitability Exclusion” exists. Endorsements are modifications to the baseline coverage, 19 and they are the only means of achieving such a modification. Id. at 6 (“This policy’s terms 20 can be amended or waived only by endorsement issued by us and made a part of this 21 policy.”). The “Habitability Exclusion” is on its own page, which states in all-caps at the 22 top: “THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT 23 CAREFULLY.” Id. at 49. The Exclusion applies to all three coverage categories noted 24 above—Category A, Category B, and Category C—and it states: 25 A. 26 . . . 27 This insurance does not apply to damages or expenses due to 28 “bodily injury”, “property damage”, “personal and advertising 1 injury” or medical payments arising out of or resulting from the 2 alleged or actual: 3 1. Violation of any federal, state, county, or local laws, 4 ordinances, statutes, programs, rules, health codes, or any other 5 violation including, but not limited to, any Housing and Urban 6 Development laws, rent stabilization laws and ordinances, state 7 or local Section 8 (government subsidy) programs; any 8 administrative rules or regulations pertaining to any of the 9 foregoing including, but not limited to, those promulgated by 10 local municipalities; 11 2. Failure of any insured to maintain any premises in, or 12 restore any premises to, a safe, sanitary, healthy, habitable, or 13 tenantable condition; or 14 3. Wrongful eviction, either actual or constructive, arising 15 out of 1. or 2. above. 16 B. We will have no duty to defend or indemnify any insured 17 in any action or proceeding alleging damages arising out of the 18 above. 19 Id. 20 B. The Underlying Lawsuits 21 The Policy was implicated when a number of current and former residents of the 22 Park brought a pair of lawsuits in state court against Acacia in March 2017 and June 2019. 23 Ex. A, ECF No. 11-3 (“Delacruz I”); Ex. B, ECF No. 11-4 (“Delacruz II”). The lawsuits 24 were consolidated in the San Diego Superior Court, and the consolidated lawsuit now 25 encompasses 72 plaintiffs who lived on 48 spaces in the Park. Ex. 1, ECF No. 15-1 (“Joint 26 Rep.”) at 5. 27 The claims that remain in the consolidated action—nuisance, negligence, breach of 28 contract, breach of covenant of good faith and fair dealing, breach of quiet enjoyment, 1 intentional interference with property rights, breach of statutes, and breach of warranty of 2 habitability—closely resemble those originally alleged in Delacruz I and Delacruz II. 3 Compare id. at 81–87, with Delacruz I at 2, and Delacruz II at 2. Though lengthy, these 4 claims can be summarized as allegations “that [Acacia] ha[s] failed to maintain the Park in 5 good order and condition and/or ha[s] otherwise engaged in ‘unfair’ business conduct.” 6 Joint Rep. at 5. The Court recites several of the factual allegations from the original 7 complaints as representative of the collective whole: 8 (a) Failing to maintain, service, repair and maintain in proper 9 working condition the sewer system, causing sewage backups in 10 homes, sewage overflows or spills in the Park, streets, spaces, or 11 near homes; the smell of sewage, sewage odors, difficulty with 12 or slow flushing toilets, leaks, stoppages or back flows, and 13 failing to clean up sewage spills resulting in unsanitary 14 conditions, damage to homes and property; 15 . . . 16 (c) Failing to provide potable sanitary drinking water in 17 violation of Civil Code § 798.40, Civil Code § 798.41; Civil 18 Code § 798.42; 25 CCR § 1102, § 1116, Section 18300. 19 . . . 20 (x) Increas[ing] rent and utility fees without proper prior 21 notice . . . result[ing] in overcharges or improper billing for 22 utilities. 23 . . . 24 Entering Plaintiffs’ spaces without notice and for no legitimate 25 reason[; and] interfering with the sales of Plaintiff’s homes. 26 Delacruz I ¶¶ 35, 73, 75. 27 As mentioned above, Nautilus agreed to defend Acacia against the above claims, but 28 it did so “under a full and complete reservation of rights.” Rsrv. of Rts. at 2. In that 1 reservation of rights, Nautilus took the position that the plaintiffs in the underlying lawsuits 2 “allege[d] a multitude of habitability conditions were present at the Park during their 3 tenancies,” id. at 13, and it reserved “the right to bring a declaratory judgment action to 4 confirm there is no coverage for this matter under the [Policy],” id. at 2. Nautilus now 5 seeks to vindicate that position with the present lawsuit. 6 II. Procedural Background 7 Nautilus initiated this action on November 9, 2023, asserting two claims for 8 declaratory judgment—one disputing its duty to defend and the other disputing its duty to 9 indemnify—and two claims for reimbursement—one for defense expenses and the other 10 for indemnity payments. See Compl. ¶¶ 19–39. In addition to alleging that the insurance 11 coverage at issue is excluded by the Habitability Exclusion, Nautilus also alleges that the 12 insurance coverage at issue is excluded due to Acacia’s failure to timely inform Nautilus 13 of the underlying lawsuits. Id. Acacia answered on February 6, 2024, see ECF No. 6, and 14 the instant Motion followed on July 22, 2024, see MSJ. The Motion focuses exclusively 15 on the Habitability Exclusion. 16 REQUESTS FOR JUDICIAL NOTICE 17 Plaintiff asks the Court to take judicial notice of two documents, which are 18 associated with Delacruz I and Delacruz II, respectively. The documents at issue include: 19 (1) A Third Amended Complaint filed in the California Superior Court case 20 Monica Gonzalez Delacruz, et al. v. Acacia Mobile Home Park LLC, et al., 21 No. 37-2017-00008348-CU-BT-CTL (Cal. Super. Ct. San Diego Cnty. 22 Mar. 8, 2017). See Pl.’s RJN Ex. A, ECF No. 11-3. 23 (2) A Complaint filed in the California Superior Court case Jonathan Gonzalez 24 Delacruz v. Acacia Mobile Home Park, LLC, 25 No. 37-2019-00028715-CU-BC-CTL (Cal. Super. Ct. San Diego Cnty. 26 June 5, 2019). See Pl.’s RJN Ex. B, ECF No. 11-4. 27 Defendant asks the Court to take judicial notice of one document, which is associated 28 with Delacruz I. The document at issue includes: 1 (1) A Joint Trial Readiness Conference Report filed in the California Superior 2 Court case Monica Gonzalez Delacruz, et al. v. Acacia Mobile Home Park 3 LLC, et al., No. 37-2017-00008348-CU-BT-CTL (Cal. Super. Ct. 4 San Diego Cnty. Mar. 6, 2023). See Def.’s RJN Ex. 1, ECF No. 15-1. 5 Under Federal Rule of Evidence 201(b), “[t]he court may judicially notice a fact that 6 is not subject to reasonable dispute because it: (1) is generally known within the trial court’s 7 territorial jurisdiction; or (2) can be accurately and readily determined from sources whose 8 accuracy cannot reasonably be questioned.” “Accordingly, ‘[a] court may take judicial 9 notice of matters of public record . . . .’” Khoja v. Orexigen Therapeutics, Inc., 10 899 F.3d 988, 999 (9th Cir. 2018) (first alteration in original) (quoting Lee v. City of L.A., 11 250 F.3d 668, 689 (9th Cir. 2001)). “But a court cannot take judicial notice of disputed 12 facts contained in such public records.” Id. 13 The Court GRANTS both RJNs as to all Exhibits, as “court filings and orders from 14 other proceedings are proper subjects of judicial notice.” Sierra v. Costco Wholesale 15 Corp., 630 F. Supp. 3d 1199, 1208 (N.D. Cal. 2022). In so doing, the Court should take 16 “notice only of the authenticity and existence of” each “order or pleading.” Eidson v. 17 Medtronic, Inc., 981 F. Supp. 2d 868, 878 (N.D. Cal. 2013). Conversely, the Court should 18 not take “notice of any of these documents to establish the truth of the underlying factual 19 contention or the accuracy of the legal conclusions set forth therein.” Pac. Marine Ctr., 20 Inc. v. Philadelphia Indem. Ins. Co., No. 113CV00992DADSKO, 2016 WL 8730668, 21 at *4 (E.D. Cal. Mar. 18, 2016). 22 PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT 23 I. Legal Standard 24 Under Federal Rule of Civil Procedure 56(a), a party may move for summary 25 judgment as to a claim or defense or part of a claim or defense. Summary judgment is 26 appropriate where the Court is satisfied that there is “no genuine dispute as to any material 27 fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); 28 Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Material facts are those that may affect 1 the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A 2 genuine dispute of material fact exists only if “the evidence is such that a reasonable jury 3 could return a verdict for the nonmoving party.” Id. When the Court considers the 4 evidence presented by the parties, “[t]he evidence of the non-movant is to be believed, and 5 all justifiable inferences are to be drawn in his favor.” Id. at 255. 6 The initial burden of establishing the absence of a genuine issue of material fact falls 7 on the moving party. Celotex, 477 U.S. at 323. The moving party may meet this burden 8 by identifying the “portions of ‘the pleadings, depositions, answers to interrogatories, and 9 admissions on file, together with the affidavits, if any,’” that show an absence of dispute 10 regarding a material fact. Id. When a plaintiff seeks summary judgment as to an element 11 for which it bears the burden of proof, “it must come forward with evidence which would 12 entitle it to a directed verdict if the evidence went uncontroverted at trial.” C.A.R. Transp. 13 Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) (quoting Houghton 14 v. South, 965 F.2d 1532, 1536 (9th Cir. 1992)). 15 Once the moving party satisfies this initial burden, the nonmoving party must 16 identify specific facts showing that there is a genuine dispute for trial. Celotex, 477 U.S. 17 at 324. This requires “more than simply show[ing] that there is some metaphysical doubt 18 as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 19 586 (1986). Rather, to survive summary judgment, the nonmoving party must “by her own 20 affidavits, or by the ‘depositions, answers to interrogatories, and admissions on file,’ 21 designate ‘specific facts’” that would allow a reasonable fact finder to return a verdict for 22 the non-moving party. Celotex, 477 U.S. at 324; Anderson, 477 U.S. at 248. The 23 non-moving party cannot oppose a properly supported summary judgment motion by 24 “rest[ing] on mere allegations or denials of his pleadings.” Anderson, 477 U.S. at 256. 25 II. Analysis 26 Nautilus seeks four declarations: (1) that it has no duty to defend Acacia in the 27 underlying actions, (2) that it has no duty to indemnify Acacia in the underlying actions, 28 (3) that it is entitled to reimbursement for expenses incurred as a result of defending Acacia 1 in the underlying actions, and (4) that it is entitled to reimbursement for indemnification 2 payments incurred as a result of the underlying actions. See Compl. Nautilus moves for 3 summary judgment as to all claims, arguing that it had no duty from the outset to defend 4 Acacia under the Habitability Exclusion thereby entitling it to relief on all claims as a 5 matter of law. See MSJ. Before resolving Nautilus’s Motion, however, the Court addresses 6 Acacia’s invitation in its Opposition for the Court to stay the present matter. 7 A. Acacia’s Motion for Stay 8 In concluding its Opposition, Acacia “respectfully submits that this matter should be 9 stayed pending [the underlying trial].” Opp’n at 20. Acacia explains that “California 10 courts have expressed . . . concern regarding [the insured] litigating insurance coverage 11 simultaneously as the underlying dispute is being litigated,” including the risk that factual 12 overlap between the lawsuits might result in the insured being collaterally estopped from 13 contesting issues that are better left for the state court to decide. Id. 14 In reply, Nautilus contends that the legal issue before the Court in this matter “is 15 simply not at issue in the Underlying Actions and has no impact on the insured’s alleged 16 liability for underlying plaintiffs’ damages.” Reply at 11. Thus, according to Nautilus, 17 Acacia is not entitled to a stay. 18 Although not formally labeled as such, the Court construed Acacia’s request as a 19 Motion for Stay and ordered supplemental briefing on the issue so that the Court could 20 “properly ‘assess how judicial economy, comity and federalism are affected in [this] 21 case.’” Suppl. Br. Order at 2 (quoting Gov’t Emps. Ins. Co. v. Dizol, 133 F.3d 1220, 22 1225–26 (9th Cir. 1998)). Both Parties timely filed Supplemental Briefs with the Court. 23 See Pl.’s Suppl. Br.; Def.’s Suppl. Br. 24 The Declaratory Judgment Act provides in relevant part: “In a case of actual 25 controversy within its jurisdiction . . . any court of the United States, upon the filing of an 26 appropriate pleading, may declare the rights and other legal relations of any interested party 27 seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. 28 § 2201(a) (emphasis added). Because “the Declaratory Judgment Act is ‘deliberately cast 1 in terms of permissive, rather than mandatory, authority,’” Dizol, 133 F.3d at 1223 (quoting 2 Pub. Serv. Comm’n of Utah v. Wycoff Co., 344 U.S. 237, 250 (1952) (Reed, J., 3 concurring)), courts have discretion whether to entertain an action for a declaratory 4 judgment, Pub. Affs. Assocs., Inc. v. Rickover, 369 U.S. 111, 112 (1962); Brillhart v. Excess 5 Ins. Co. of Am., 316 U.S. 491, 494. But “this discretion is not unfettered,” and “[a] District 6 Court cannot decline to entertain such an action as a matter of whim or personal 7 disinclination.” Dizol, 133 F.3d at 1223 (quoting Pub. Affairs Assocs., Inc., 369 U.S. 8 at 112). Consequently, “[a] district court may, in its discretion, stay or dismiss a federal 9 case in favor of related state proceedings: (1) when an action seeks only declaratory 10 relief . . . , or (2) when exceptional circumstances exist.” Id. (citing Wilton v. Seven Falls 11 Co., 515 U.S. 277, 282–88 (1995); Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 12 460 U.S. 1, 14 (1983)). If an action seeking declaratory judgment presents an actual case 13 or controversy and fulfills jurisdictional prerequisites, a district court must make a 14 discretionary determination that entertaining the action is appropriate. Id. at 1222–23. 15 Though discretionary, “the court must decide whether to exercise its jurisdiction by 16 analyzing the factors set out in Brillhart v. Excess Ins[urance] Co., 316 U.S. 491 (1942), 17 and its progeny.”1 Principal Life Ins. Co. v. Robinson, 394 F.3d 665, 669 (9th Cir. 2005). 18 “Essentially, the district court ‘must balance concerns of judicial administration, comity, 19 and fairness to the litigants.’” Am. States Ins. Co. v. Kearns, 15 F.3d 142, 144 (9th Cir. 20 1994) (citing Chamberlain v. Allstate Ins. Co., 931 F.2d 1361, 1367 (9th Cir. 1991)). 21 Brillhart sets forth a non-exclusive list of factors advising that a “district court should avoid 22 needless determination of state law issues; it should discourage litigants from filing 23 declaratory actions as a means of forum shopping; and it should avoid duplicative 24 litigation.” Dizol, 133 F.3d at 1225. A number of other considerations may be relevant: 25 whether the declaratory action will settle all aspects of the controversy; whether the 26
27 1 Plaintiff’s argument that Defendant is not entitled to a stay under Federal Rule of Civil Procedure 56(d) 28 is inapplicable, see Pl.’s Suppl. Br. at 3, as the Court construes Defendant to be requesting a stay pursuant 1 declaratory action will serve a useful purpose in clarifying the legal relations at issue; 2 whether the declaratory action is being sought merely for the purposes of procedural 3 fencing or to obtain a ‘res judicata’ advantage; or whether the use of a declaratory action 4 will result in entanglement between the federal and state court systems. In addition, the 5 district court might also consider the convenience of the parties, and the availability and 6 relative convenience of other remedies. Id. 7 As an initial matter, the issues to be decided in this Court and those to be decided in 8 the underlying actions are entirely distinct. Determining Nautilus’s coverage obligations 9 under the Policy, as the Court is tasked with here, requires no factual inquiry whatsoever 10 into Acacia’s potential liability in Delacruz I and Delacruz II. It simply requires the Court 11 to establish the breadth of the Habitability Exclusion and to compare the Exclusion to the 12 allegations in the underlying lawsuits. Thus, this case requires nothing more than 13 “application of settled principles of state law,” First Mercury Ins. Co. v. Great Divide Ins. 14 Co., 203 F. Supp. 3d 1043, 1054 (N.D. Cal. 2016), and the first Brillhart factor—avoiding 15 needless determination of state law issues—weighs against granting Defendant’s Motion 16 for Stay. 17 Moreover, there is no evidence that Nautilus is engaged in forum shopping as it is 18 not “seek[ing] to avoid adverse rulings made by the state court or to gain a tactical 19 advantage from the application of federal court rules.” Travelers Indem. Co. v. Madonna, 20 914 F.2d 1364, 1371 (9th Cir. 1990). Indeed, “it is a common practice for insurers to seek 21 declaratory relief in federal court while underlying cases are proceeding in state court.” 22 Northfield Ins. Co. v. Civic Ctr. Hotel, LLC, 239 F. Supp. 3d 1163, 1172 (N.D. Cal. 2017). 23 The Court cannot identify any hint of gamesmanship here nor does Defendant suggest one, 24 so the second Brillhart factor—discouraging litigants from filing declaratory actions as a 25 means of forum shopping—weighs against granting Defendant’s Motion for Stay. 26 The Court is also not persuaded by Acacia’s argument that “resolution of the 27 declaratory action does depend upon related issues yet to be litigated in the Underlying 28 Actions.” Def.’s Suppl. Br. at 6. The only evidentiary support presented to the Court on 1 summary judgment in this case relates to the allegations in the underlying lawsuits as pled 2 in the complaints, see Delacruz I; Delacruz II, the Policy, see Pol., and Nautilus’s 3 reservation of rights, see Rsrv. of Rts. Neither Party relies on any extrinsic evidence that 4 might bear relevance to Acacia’s potential liability in the underlying lawsuits, and there is 5 simply no factual overlap between the declaratory judgment Nautilus seeks in this Court 6 and the issues to be determined in state court. Cf. Citizens Ins. Co. of Am. v. Chief Digital 7 Advisors, No. 20-cv-1075-MMA (AGS), 2020 WL 8483913, at *3 (S.D. Cal. Dec. 22, 8 2020) (granting a stay in an insurance coverage dispute where the court had to examine 9 conduct that was implicated in the underlying lawsuit). The third Brillhart 10 factor—avoiding duplicative litigation—thus also weighs against granting Defendant’s 11 Motion for Stay. 12 Beyond the Brillhart factors, the Court must also consider “the possible damage 13 which may result from the granting of a stay, the hardship or inequity which a party may 14 suffer in being required to go forward, and the orderly course of justice . . . .” CMAX, Inc. 15 v. Hall, 300 F.2d 265, 268 (9th Cir. 1962) (citing Landis v. N. Am. Co., 299 U.S. 248, 16 254–55 (1936)). 17 Beginning with the hardship that Nautilus may suffer in being required to proceed 18 in this matter, the record is inconclusive. Although Nautilus acknowledges that the Court 19 “must ‘balance[e] [sic] the insured’s interest in not fighting a two-front war against the 20 insurer’s interest in not being required to continue paying defense costs which it may not 21 owe and likely will not be able to recoup,’” Pl’s Suppl. Br. at 5 (quoting Great Am. Ins. 22 Co. v. Superior Ct., 100 Cal. Rptr. 3d 258, 271 (Ct. App. 2009), Nautilus fails to argue that 23 it has or would in fact continue to pay defense costs relating to the underlying litigation or 24 that it would be unable to seek contribution from other insurers that may be defending 25 Acacia.2 Without further explanation by Nautilus, the Court has no way of knowing 26
27 2 For the first time, Nautilus claimed at oral argument that it would be unable to recover reimbursement 28 from the other insurers that are defending Acacia in the underlying lawsuits, citing the doctrine of 1 whether Nautilus’s coverage counsel is leading the charge into the upcoming state court 2 trial, or whether they are merely standing on the sideline. This is precisely the information 3 the Court desired when it ordered supplemental briefing. See Supp. Br. Order at 2 (“[T]he 4 Court lacks critical information about the underlying state court trial that would aid in 5 understanding what hardships may ensue if a stay is not entered[.]”). On the present record, 6 Nautilus has not established that any prejudice would result from being forced to continue 7 representing Acacia as it is uncontroversial that “being required to defend a suit, without 8 more, does not constitute a ‘clear case of hardship or inequity’ within the meaning of 9 Landis.” Lockyear v. Mirant Corp., 398 F.3d 1098, 1112 (9th Cir. 2005). 10 Fortunately for the Court, Acacia filled in some of the gaps left by Nautilus. Acacia 11 disclosed that it “presently is being defended in the underlying litigation, by three insurers, 12 Toko Marine, Everest Insurance and Nautilus Insurance Company (the plaintiff in this 13 action).” Declaration of Dennis J. Wickham (“Wickham Decl.”) ¶ 3, ECF No. 20-1. 14 Acacia also confirmed, as it had represented in its Opposition, that the underlying trial “is 15 scheduled to begin on January 5, 2025[,]” and that “the trial judge has blocked out the time 16 needed for the trial,” which is scheduled to last 30 to 45 days. Id. ¶ 2. 17 The Court appreciates the forthright disclosures in Defendant’s Supplemental Brief, 18 but those disclosures confirm that Defendant has not met its “burden of showing that the 19 circumstances justify” a stay. Hoffmann v. Price, No. 1:15-cv-1527 DB P, 20
21 Co. v. J. Lamb, Inc., 123 Cal. Rptr. 2d 256, 274 (Ct. App. 2002) (“The right arises when one of two or 22 more insurers are ‘obligated to indemnify or defend’ the same loss or claim and one of those insurers has paid more than its share of the loss or defended the action without participation from the others.” (emphasis 23 in original) (quoting Fireman’s Fund Ins. Co. v. Maryland Cas. Co., 77 Cal. Rptr. 2d 296 (1998))). But 24 the Court is not satisfied that Nautilus has satisfactorily explained why the “similar [yet] distinct” doctrine of equitable subrogation would not apply, at least with respect to its defense costs. See Fireman’s Fund 25 Ins. Co. v. Md. Cas. Co., 77 Cal. Rptr. 2d 296, 302–06 (discussing the differences between equitable contribution and equitable subrogation). Considering the “confusion and headache” that these two 26 doctrines have caused the courts and the fact that the doctrines were not raised in the briefs, the Court declines to analyze them more fully at this time. Id. at 302. And in any event, putting those doctrines 27 aside, “the benefit or risk of the availability of such other coverage appears to fall equally on both the 28 insureds and [the insurer] . . . .” Great Am. Ins. Co., 100 Cal. Rptr. 3d at 272. So the Court does not 1 2019 WL 498991, at *3 (E.D. Cal. Feb. 8, 2019). As far as the Court can tell from the 2 Supplemental Briefs, resolving the litigation in the instant matter would present little to no 3 disturbance to the underlying litigation. Acacia concedes that it has other insurers’ 4 attorneys representing it in state court and concedes that the availability of alternative 5 counsel “is not a concern here.” Def.’s Suppl. Br. at 8.3 In other words, nothing that 6 happens in this Court would alter the probability of the January 2025 trial going ahead as 7 planned, allowing the state court plaintiffs—who initiated their lawsuits as early as 2017— 8 to pursue their claims without further delay. Therefore, the Court does not detect any 9 potential prejudice to Defendant—or the public at large—by resolving the instant lawsuit.4 10 Moreover, the Court rejects Defendant’s argument that it should not have “to fight a 11 two-front war, litigating not only with the underlying claimant, but also expending precious 12 resources fighting an insurer over coverage questions . . . .” Def.’s Suppl. Br. at 5. The 13 two-front war dilemma derives from the insured being put in the position of simultaneously 14 litigating the underlying lawsuit “while at the same time devoting its money and its human 15 resources to litigating coverage issues with its carriers.” Montrose Chem. Corp. v. Superior 16 Ct., 31 Cal. Rptr. 2d 38, 43 (Ct. App. 1994). The instant lawsuit was filed on November 9, 17 2023, and fact discovery closed on August 22, 2024. See ECF No. 9 at 2. Acacia did not 18 raise the prospect of a stay until its Opposition to Nautilus’s Motion for Summary 19 Judgment, which Acacia filed on August 27, 2024. See Opp’n. At this advanced stage in 20 the litigation, after fact discovery has closed, Defendant’s Motion for Stay amounts to “an 21 eleventh-hour request” that “rings glaringly hollow.” Hoffmann, 2019 WL 498991, at *5. 22 In sum, all of the Brillhart factors weigh against granting a stay, and Acacia has 23 failed to meet its burden of demonstrating that the particular circumstances in this case 24
25 3 Acacia had nothing to add when given the opportunity to comment at oral argument. 26 4 At oral argument, Acacia argued that it would be prejudiced if the Court denies the stay and grants 27 Nautilus’s summary judgment in the event that Acacia is ultimately not held liable in the underlying 28 actions for any habitability violations. But Acacia’s liability in the underlying actions is entirely distinct 1 justify the Court using its inherent discretion to order a stay. Accordingly, the Court 2 DENIES Acacia’s Motion for Stay. 3 B. Claims 1–2: Declaratory Relief of No Duty to Defend and No Duty to 4 Indemnify 5 Moving to the Motion for Summary Judgment, Nautilus raises one simple argument: 6 Under California law, which controls its insurance coverage obligations as they apply to 7 the underlying actions, it had no duty to defend or indemnify. Nautilus identifies a lengthy 8 list of habitability issues at the Park alleged in Delacruz I and Delacruz II, as well as 9 “violations of at least twelve sections of the Mobilehome Residency Law . . . at least six 10 sections of the Mobilehome Parks and Installations Regulations . . . and at least ten sections 11 of the Mobilehome Parks Act.” Mot. Mem. at 11. Because the Habitability Exclusion in 12 the Policy contains a catch-all provision that expressly precludes coverage “in any action 13 or proceeding alleging damages arising out of [habitability conditions],” Nautilus reasons 14 that coverage in the underlying actions must be excluded in its entirety. Id. at 12. It relies 15 primarily on 24th and Hoffman v. Northfield Insurance Co., 298 Cal. Rptr. 3d 816 16 (Ct. App. 2022), to demonstrate that California courts have enforced similar catch-all 17 provisions, so the Court should do the same here. Mot. Mem. at 15–16. 18 Acacia counters that “the primary thrust of the underlying plaintiffs’ claims is not 19 habitability,” so the Habitability Exclusion is widely inapplicable. Opp’n at 8. Thus, 20 according to Acacia, this case presents what California courts call a “mixed” action in 21 which insurers have a duty to defend an entire action if it includes even a single claim that 22 is possibly covered under the insurance policy. Id. at 18. Acacia distinguishes the Policy 23 from the one in 24th and Hoffman on the basis of differences in the exclusion language. 24 Id. at 17. 25 Nautilus responds that Acacia misrepresents the nature of the claims in the 26 underlying lawsuits by ignoring key facts that bring each of them within the sweep of the 27 Habitability Exclusion. Reply at 5–8. But even if each claim individually does not fall 28 within the Exclusion, then, at a minimum, the action as a whole does under the catch-all 1 provision. Id. at 8–10. Nautilus argues that the Habitability Exclusion is “plain and clear,” 2 and that Acacia has no way of evading the parallels between this case and 24th and 3 Hoffman. Id. at 9. 4 In California, “[t]he determination whether the insurer owes a duty to defend usually 5 is made in the first instance by comparing the allegations of the complaint with the terms 6 of the policy.” Horace Mann Ins. Co. v. Barbara B., 846 P.2d 792, 795 (Cal. 1993) (en 7 banc). The duty to defend “extends beyond claims that are actually covered” to include 8 those that are only potentially covered. Buss v. Superior Court, 939 P.2d 766, 773 (Cal. 9 1997). However, if the insurer can present proof “that the underlying claim cannot come 10 within the policy coverage by virtue of the scope of the insuring clause or the breadth of 11 an exclusion,” it can “escape the defense duty altogether.” Montrose Chem. Corp. v. 12 Superior Ct., 861 P.2d 1153, 1161 (Cal. 1993) (en banc) (“Montrose”). 13 As a general rule, “the insurer has a duty to defend as to the claims that are at least 14 potentially covered, but not as to those that are not.” Buss, 939 P.2d at 775. This obligation 15 does not exist “in the air,” but rather is rooted in the contractual obligations of the insurer. 16 Id. However, in Buss, the California Supreme Court went on to explain “that, in a ‘mixed’ 17 action, the insurer has a duty to defend the action in its entirety.” Id. (first citing Horace 18 Mann, 846 P.2d 792 (Cal. 1993) (en banc); and then citing Hogan v. Midland Nat’l Ins. 19 Co., 476 P.2d 825 (Cal. 1970) (en banc)). A “mixed” action is one “in which some of the 20 claims are at least potentially covered and the others are not.” Id. at 774. This broader 21 duty was justified as a prophylactic measure imposed by law to ensure that the insurer 22 would provide a meaningful defense in the case where at least some claims were potentially 23 covered. Id. 24 Although “[i]n the insurance context, [California courts] generally resolve 25 ambiguities in favor of coverage . . . [and] interpret the coverage clauses of insurance 26 policies broadly,” AIU Ins. Co. v. Superior Court, 274 Cal. Rptr. 820, 822 (1990), they “do 27 not add to, take away from, or otherwise modify a contract for ‘public policy 28 considerations.’” Aerojet-General Corp. v. Transport Indem. Co., 948 P.2d 909, 932 (Cal. 1 1997). Thus, courts interpret insurance coverage by giving the provisions their “clear and 2 explicit meaning . . . unless used by the parties in a technical sense or a special meaning is 3 given to them by usage.” 24th and Hoffman, 298 Cal. Rptr. 3d at 822 (internal quotations 4 omitted). 5 Perhaps in response to these background legal principles, insurers have sought a 6 clever workaround to avoid their duty to defend “mixed” actions. Faced with the broad 7 duty under Buss, insurers have rewritten their policies to include catch-all provisions that 8 essentially exclude the “mixed” action from coverage entirely. These catch-all provisions 9 operate to effectively render an entire lawsuit uncovered if even a single claim within the 10 lawsuit alleges damages that fall within the exclusion. 11 The case S.B.C.C. v. St. Paul Fire & Marine Insurance Co., illustrates the point. 12 112 Cal. Rptr. 3d 40 (Ct. App. 2010). There, an insurer provided general liability 13 insurance to a construction company who was sued for trade secret misappropriation, 14 intentional interference with prospective economic advantage, unfair competition, and 15 interference with contract. Id. at 42–43. The insurer denied coverage in the underlying 16 lawsuit, citing an intellectual property exclusion that disclaimed coverage for “injury or 17 damage or medical expenses that result from any actual or alleged infringement or violation 18 of [intellectual property laws].” Id. at 46. The exclusion did not stop there, however, as it 19 also contained a catch-all provision that disclaimed coverage for “any other injury or 20 damage that’s alleged in any claim or suit which also alleges any such [intellectual property 21 law violation].” Id. The court held that the policy in question did not provide coverage in 22 the underlying lawsuit because “the third party complaint can by no conceivable theory 23 raise a single issue which could bring it within the policy coverage.” Id. at 51 (emphasis 24 in original) (quoting Montrose, 861 P.2d at 1153). In other words, the single claim of trade 25 secret misappropriation triggered the catch-all provision, thereby bringing the entire 26 lawsuit within the scope of the exclusion. Id. 27 The court applied the same logic to a habitability exclusion in 24th and Hoffman, a 28 case upon which Nautilus heavily relies. 298 Cal. Rptr. 3d 816 (Ct. App. 2022). In that 1 case, a real estate developer purchased general liability insurance that covered bodily 2 injury, property damage, and personal injury, but excluded coverage for claims arising out 3 of, among other things, the alleged failure “to maintain a premises in a habitable condition.” 4 Id. at 821. The insurance policy, like the one in S.B.C.C., contained a catch-all provision 5 that excluded claims “alleged in any claim or ‘suit’ that also alleges a [habitability 6 violation].” Id. 7 The underlying lawsuit in 24th and Hoffman brought claims alleging a breach of 8 habitability, conversion, and trespass to chattels, the latter two of which the court assumed 9 for purposes of the discussion did not implicate the duty to provide habitable premises. Id. 10 at 825. Against the wishes of the insured, the court declined to categorize the lawsuit as a 11 “mixed” action under Buss because of the catch-all provision, which brought the entire 12 lawsuit within the scope of the habitability exclusion. Id. at 826–28. The court thus held 13 that “[t]he rule of Buss,” which imposed a duty to defend a “mixed” action, was 14 inapplicable due to the catch-all provision. Id. at 828. In reaching this conclusion, the 15 court “recognize[d] the oddity of an insurance contract that covers certain claims against 16 the insured if those claims are filed in a lawsuit on their own, and not if such claims are 17 brought in a suit that also alleges habitability claims,” but it could point to “no California 18 authority that prevents the parties from contracting for such coverage.” Id. 19 The Court finds that the above cases dictate the outcome here. Although the Parties 20 quibble over the extent to which some or all of the claims in the underlying lawsuits fall 21 within the exclusion for certain of the habitability conditions, an in-depth analysis of the 22 factual allegations in the underlying complaints is needless. The Parties are in agreement 23 that the underlying lawsuits allege at least some damages that arise out of Acacia’s failure 24 to maintain the Park in a habitable condition.5 See Opp’n at 6 (acknowledging that one of 25 26 5 Acacia suggests at one point in its Opposition that the Habitability Exclusion is inapplicable to all of the allegations in the underlying lawsuits because the tenant-plaintiffs own their own mobile homes and only 27 rent the exterior of their spaces from Nautilus. See Opp’n at 7. But Acacia does not cite any authority for 28 the proposition that habitability laws do not apply to a mobile park owner like Nautilus, and, in any event, 1 the causes of action is for breach of warranty of habitability, which alleges a failure to 2 maintain the Park in a safe and habitable condition).6 These allegations, then, trigger the 3 first part of the Habitability Exclusion, which excepts from coverage “damages or 4 expenses . . . arising out of or resulting from the alleged or actual . . . failure of any insured 5 to maintain any premises in, or restore any premises to, a safe, sanitary, healthy, habitable, 6 or tenantable condition.” Policy at 49. 7 The question next becomes whether this allegation unavoidably triggers the catch-all 8 provision, which eliminates Nautilus’s “duty to defend or indemnify any insured in any 9 action or proceeding alleging damages arising out of the [habitable conditions].” Id. The 10 answer is plainly yes. Acacia’s Opposition recites general principles of contract 11 interpretation such as the proposition that “exclusions are construed narrowly against the 12 insurer” and that “[w]here the exclusion is reasonably susceptible to more than one 13 meaning, the ambiguity is resolved against the insurer and in favor of coverage.” Opp’n 14 at 9 (first citing Vargas v. Athena Assurance Co., 115 Cal. Rptr. 2d 426 (Ct. App. 2001); 15 and then citing Smith Kandal Real Estate v. Cont’l Cas. Co., 79 Cal. Rptr. 2d 52 (Ct. App. 16 1998)). But Acacia does not identify any ambiguity in the catch-all provision, nor is the 17 Court able to discern any. 18 The catch-all provision applies to “any action or proceeding” and, although those 19 terms are left undefined by the Policy, the underlying lawsuits fall within the ordinary 20 meaning of those terms. See Action, Black’s Law Dictionary (12th ed. 2024) (defining an 21 “action” as “[a] civil or criminal judicial proceeding”); Proceeding, Black’s Law 22 Dictionary (12th ed. 2024) (defining a “proceeding” as “[t]he regular and orderly 23 progression of a lawsuit, including all acts and events between the time of commencement 24
25 at 6. Whether habitability laws apply to mobile park owners is a matter for the state court to take up in 26 the underlying lawsuits and has no applicability to Nautilus’s coverage obligations under the Policy.
27 6 This admission renders moot Acacia’s invocation of Green v. Superior Court of San Francisco, 28 517 P.2d 1168 (Cal. 1974), which defines “habitability” under California law. 1 and the entry of judgment”). If within said action or proceeding there exist at least some 2 damages that arise out of alleged habitability violations, then the entire action or 3 proceeding satisfies the conditions of the catch-all provision and the result is the exclusion 4 of all claims therein. 5 Though couched in slightly different language, the Habitability Exclusion effects the 6 exact same scope as the one in 24th and Hoffman, a case which the Court finds persuasive.7 7 Acacia tries to distinguish that case because the catch-all provision there excluded coverage 8 for claims “alleged in any claim or suit that also alleges any violation . . . [of the 9 habitability claims],” Opp’n at 10 (emphasis in original), but the Court fails to see how the 10 “also alleges” language could have legal significance that changes the outcome of this case. 11 The exclusion in 24th and Hoffman might operate to exclude individual claims one by one 12 as opposed to the Habitability Exclusion which operates to exclude an entire lawsuit in one 13 fell swoop, but “if the meaning a layperson would ascribe to contract language is not 14 ambiguous, we apply that meaning.” AIU, 274 Cal. Rptr. at 822. Here, there is no 15 ambiguity to be found in the catch-all provision, so the Court takes the contract language 16 as it finds it. Waller v. Truck Ins. Exch., Inc., 900 P.2d 619, 627 (Cal. 1995) (“Courts will 17 not strain to create an ambiguity where none exists.”). 18 In fact, Acacia’s reading of the catch-all provision contravenes California’s statutory 19 directive that “[c]ontracts are interpreted as a whole ‘so as to give effect to every part, if 20 reasonably practicable, each clause helping to interpret the other.’” Schertzer v. Bank of 21 Am., NA, 109 F.4th 1200, 1210 (9th Cir. 2024) (emphasis added) (quoting Cal. Civ. Code 22 § 1641). At oral argument, the Court asked Acacia what meaning it should attribute to the 23 24 25 7 Acacia argues that 24th and Hoffman is nothing more than a mere datum because the California Supreme Court has not ruled on this exact issue. Opp’n at 10 n.14. But when a federal court is sitting in diversity 26 and applying state law, the decision of an intermediate state appellate court “is not to be disregarded by a federal court unless it is convinced by other persuasive data that the highest court of the state would decide 27 otherwise.” Estrella v. Brandt, 682 F.2d 814, 817 (9th Cir. 1982) (quoting West v. Am. Tel. & Tel. Co., 28 311 U.S. 223, 237 (1940)). For the reasons explained in this Order, the Court finds 24th and Hoffman to 1 catch-all provision if not the one advocated by Nautilus. In response, Acacia urged that 2 the catch-all provision merely restates the background notion that covered claims would 3 be covered while uncovered claims would not be covered. In other words, Acacia argues 4 that the catch-all provision is superfluous, not adding anything to nor detracting anything 5 from the Policy. The Court is not persuaded that Acacia’s strained interpretation rises to 6 the level of creating an ambiguity, particularly in the face of longstanding canons of 7 interpretation that suggest otherwise. See Mickle v. Sanchez, 1 Cal. 200, 202 (1850) 8 (construing a contract “so as to give effect, if possible, to all parts of it” where an alternative 9 reading would render the clause “senseless” because “the condition would mean the same 10 without it, as it means with it”). Though not dispositive of the Court’s interpretation that 11 the catch-all provision is unambiguous, this interpretive gloss merely bolsters the reasoning 12 of the court in 24th and Hoffman and the myriad others reaching the same conclusion. 13 Acacia advances the argument that the catch-all provision would be illusory if given 14 the meaning advocated for by Nautilus, but that argument has been rejected time and time 15 again. The “also alleges” language has been interpreted to exclude entire suits from 16 coverage in a number of cases, see, e.g., Northfield Ins. Co. v. Hudani, No. 2:20-cv-01695- 17 SB (Ex), 2021 WL 3556672, at *4 (C.D. Cal. Mar. 16, 2021); Ventana Med. Sys., Inc. v. 18 St. Paul Fire & Marine Ins. Co., 709 F. Supp. 2d 744, 757–58 (D. Ariz. 2010); Molecular 19 Bioproducts, Inc. v. St. Paul Mercury Ins. Co., No. 03-0046-IEG(LSP), 20 2003 WL 23198852, at *5 (S.D. Cal. July 9, 2003), and at least one court has reached the 21 same conclusion when interpreting language nearly identical to that of the catch-all 22 provision at issue here. See Great Am. E & S Ins. Co. v. Theos Med. Sys., Inc., 23 357 F. Supp. 3d 953, 969–70 (N.D. Cal. 2019) (applying an intellectual property exclusion 24 to the entire underlying action where the catch-all provision excluded coverage for “[a]ny 25 claim or ‘suit’ that alleges [certain injuries related to intellectual property violations]”), 26 aff’d, 799 F. App’x 539 (9th Cir. 2020) (unpublished opinion). Acacia points to no 27 authority suggesting otherwise, Opp’n at 16–17, and it is a “fundamental goal of 28 contractual interpretation . . . to give effect to the mutual intention of the parties.” 1 S.B.C.C., 112 Cal. Rptr. 3d at 44. 2 Finally, Acacia argues that the Habitability Exclusion “must be ‘conspicuous, plain 3 and clear to be enforceable,’” Opp’n at 16 (citing State Farm Mut. Auto Ins. Co. v. Jacober, 4 514 P.2d 953 (Cal. 1973)), but those criteria are satisfied here. The Habitability Exclusion 5 is listed in the Schedule of Forms and Endorsements at the beginning of the Policy, Policy 6 at 4, and it is prominently displayed on its own page with the title “HABITABILITY 7 EXCLUSION” in bold and all-caps, id. at 49. The Habitability Exclusion is not buried in 8 a misleading manner or otherwise inconspicuous to the reader. Acacia does not elaborate 9 on what other features of the Habitability Exclusion might be lacking that would make the 10 provision unenforceable, so the Court declines Acacia’s invitation down that path. See 11 24th and Hoffman, Cal. Rptr. 3d at 823–24 (finding a habitability exclusion plain and clear 12 where it was contained in its own prominently labeled exclusion that applied to each form 13 of injury covered). 14 All said, the Court acknowledges the somewhat fickle state of affairs created by the 15 proliferation of broad catch-all provisions in insurance contracts, which are a tidy way to 16 avoid the duty to defend imposed by Buss and its progeny. But where “the pertinent 17 [insurance] policies provide what they provide,” it is simply the Court’s role to enforce 18 those policies. See Aerojet-General, 948 P.2d at 932. Accordingly, the Court GRANTS 19 Nautilus’s request for a declaration that Plaintiff had no duty to defend or indemnify Acacia 20 in the underlying lawsuits. 21 C. Claims 3–4: Declaratory Relief of Reimbursement for Defense Expenses 22 and Reimbursement for Indemnification Expenses 23 Nautilus’s remaining claims follow in a lockstep manner after it is decided that 24 Nautilus owed no duty to defend or indemnify Acacia in the underlying lawsuits. The 25 Court concluded above that none of the claims asserted against Acacia were potentially 26 covered by the Policy. “As to . . . claims that are not even potentially covered . . ., the 27 insurer may indeed seek reimbursement for defense costs.” Buss, 939 P.2d at 776 28 (canvassing the plethora of cases holding as much). The only prerequisite for doing so is 1 an express reservation of rights, which the insurer can effectuate “unilaterally merely by 2 giving notice to the insured.” Blue Ridge Ins. Co. v. Jacobsen, 25 Cal. 4th 489, 498 (2001). 3 Here, Nautilus expressly reserved its right to seek reimbursement in its 4 September 20, 2023, email correspondence to Acacia. In the email, Nautilus’s coverage 5 counsel for the consolidated Delacruz actions “agree[d] to defend [Acacia] under a full and 6 complete reservation of rights.” Rsrv. of Rts at 2. The memo that was included in the 7 reservation of rights thoroughly summarized the underlying litigation, the Policy, and the 8 numerous provisions under which Nautilus was reserving its rights. See generally Rsrv. of 9 Rts. Included in those provisions was the Habitability Exclusion, under which Nautilus 10 “reserve[d] all rights to deny coverage for damages sought that fall within the Habitability 11 Exclusion.” Id. at 13. 12 “By accepting [Nautilus’s] defense under these circumstances, [Acacia] is deemed 13 to have accepted this condition.” Blue Ridge, 25 Cal. 4th at 498. Acacia advances vague 14 arguments in its Opposition that Nautilus should not be allowed to withdraw after having 15 already agreed to the representation, see Opp’n at 18–19, but the Court interprets these 16 arguments to more closely track Acacia’s request for a stay than its argument that Nautilus 17 is not entitled to reimbursement. Indeed, nowhere does Acacia dispute the legitimacy of 18 Nautilus’s reservation of rights and it conceded at oral argument that if the Court were to 19 rule in Nautilus’s favor on Claims 1 and 2 that the unavoidable result was that Nautilus 20 should also prevail on Claims 3 and 4. Accordingly, the Court finds that Nautilus 21 effectively reserved its right to seek reimbursement, and the Court GRANTS Nautilus’s 22 request for a declaration that Plaintiff is entitled to reimbursement for defense and 23 indemnification expenses related to the underlying lawsuits. 24 CONCLUSION 25 In light of the foregoing, the Court GRANTS both Plaintiff and Defendant’s 26 Requests for Judicial Notice, DENIES Defendant’s Motion for Stay (ECF No. 15) and 27 / / / 28 / / / 1 || GRANTS Plaintiff's Motion for Summary Judgment (ECF No. 11) as outlined above. The 2 Clerk of Court is ordered to enter judgment in favor of Plaintiff. 3 IT IS SO ORDERED. 4 ||Dated: November 7, 2024 , tt 5 ja Janis L. Sammartino ‘ United States District Judge
7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28