1 'O' 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 CV 21-4377-RSWL-JDEx 12 WILLIAMSBURG NATIONAL INSURANCE COMPANY, ORDER re: Defendant’s 13 Motion to Dismiss [12] Plaintiff, 14 v. 15 16 NEW YORK MARINE AND GENERAL INSURANCE COMPANY, 17 Defendant. 18 19 20 Currently before the Court is Defendant New York 21 Marine and General Insurance Company’s (“Defendant”) 22 Motion to Dismiss (the “Motion”) [12]. Having reviewed 23 all papers submitted pertaining to this Motion, the 24 Court NOW FINDS AND RULES AS FOLLOWS: the Court GRANTS 25 in part and DENIES in part the Motion. 26 27 28 1 I. BACKGROUND 2 A. Factual Background
3 Plaintiff Williamsburg National Insurance Company 4 (“Plaintiff”), a Michigan-based insurance corporation, 5 issued a motor carrier liability policy to DLR Express, 6 Inc. (“DLR”) that provides a $1,000,000 combined single 7 limit for covered accidents. Compl. ¶¶ 3, 5, ECF No. 1. 8 Attached to the policy is the MCS-90 endorsement, which 9 is a standardized form that requires an insurer to pay 10 up to its policy limit to members of the public for 11 liability arising from its insured’s operations even 12 where the policy itself provides no coverage. Id. ¶ 5. 13 Defendant, a New York-based insurance corporation, 14 issued a motor carrier liability policy (“Defendant 15 Policy”) to Intermodal Contractor’s Association of North 16 America. Id. ¶¶ 4,6. Arthur Trimble, Jr. (“Trimble”) 17 was later added as a certificate holder under this 18 policy. Id. ¶ 6. Defendant Policy similarly provides a 19 $1,000,000 combined single limit and includes the MCS-90 20 endorsement. Id. ¶¶ 6, 31. 21 DLR leased a tractor with an attached trailer to 22 Trimble pursuant to an Equipment Lease Agreement and a 23 sub-haul agreement (collectively, “Agreement”). Id. 24 ¶ 8. Under the Agreement, Trimble agreed to indemnify 25 and release DLR against all liability arising out of 26 Trimble’s use of the tractor as follows: 27 Lessee hereby releases and agrees to indemnify 28 lessor, its officers, agents and employees 1 afgianienss,t feaelsl, lpeevniaelst,i efso,r fteaixteusr,e s,l elgoasls , edxapmeangsee,,
2 expense and liability arising directly or indirectly out of the existence, condition, 3 use, custody or operation of the Equipment 4 . . . received by the Lessee until it is returned by the Lessor. 5
6 Id. ¶ 9. 7 Pursuant to the Agreement, Trimble also added DLR 8 to Defendant Policy as an additional insured with 9 respect to the tractor. Id. ¶ 11. The Policy obligates 10 Defendant to pay all sums Trimble is liable for related 11 to any accident involving the tractor. Id. ¶ 29. 12 On March 5, 2015, Trimble was driving the tractor 13 pulling a loaded trailer when he rear-ended a truck 14 being driven by Ronald Foster, Jr. Id. ¶ 7. On March 15 3, 2017, Foster, along with a passenger and the truck’s 16 owner, filed a complaint against Trimble in Los Angeles 17 Superior Court, alleging injuries and damages related to 18 the accident. Id. ¶ 12. DLR was later named as a Doe 19 defendant. Id. ¶ 15. Defendant defended and 20 indemnified Trimble in the Foster litigation, and all 21 claims against Trimble were settled for $155,000. Id. 22 ¶ 13. Plaintiff alleges that Defendant “was aware, via 23 its retained defense counsel for Trimble, that its 24 additional insured DLR was named as a defendant in the 25 Foster litigation.” Id. ¶ 14. However, neither 26 Plaintiff nor Defendant provided a defense for DLR in 27 the Foster litigation initially, and consequently DLR 28 1 never appeared in the case. Id. ¶¶ 17, 18. 2 A default judgment of $6,085,702 was entered
3 against DLR. Id. ¶ 18. DLR moved to set aside the 4 default judgment, and subsequently filed an appeal when 5 that motion was denied. Id. DLR then tendered its 6 defense to Plaintiff, and Plaintiff agreed to defend DLR 7 in the Foster litigation under a reservation of rights.1 8 Id. ¶ 19. A month later, DLR tendered its defense and 9 request for indemnity to Defendant as an additional 10 insured under Defendant Policy. Id. ¶ 21. 11 Foster and the other plaintiffs then agreed to 12 settle all claims against DLR for $1,000,000. Id. ¶ 22. 13 Both DLR and Plaintiff demanded that Defendant 14 contribute its remaining policy limit to settle the 15 claim, but Defendant refused. Id. ¶¶ 23-25. 16 Ultimately, Plaintiff paid the entire settlement amount 17 on behalf of DLR. Id. ¶¶ 22, 26. Plaintiff alleges 18 that Defendant had the primary duty to defend and 19 indemnify DLR in the Foster litigation because DLR 20 qualifies as an additional insured under Defendant 21 Policy. Id. ¶ 34. 22 B. Procedural Background 23 On May 26, 2021, Plaintiff filed its Complaint [1] 24 25 1 Though not mentioned in the Complaint, Plaintiff explains in its Opposition to the Motion that it was required to provide 26 coverage for DLR’s claim despite DLR’s lack of timely notice of the Foster litigation under the MCS-90 included in its own 27 policy. Pl.’s Opp. to Mot. to Dismiss (“Opp.”) 16:27-17:3, ECF 28 No. 15. 1 alleging six causes of action: (1) declaratory relief
2 re: Defendant’s duty to indemnify, (2) declaratory
3 relief re: Defendant’s duty to defend, (3) equitable 4 contribution for sums paid to indemnify, (4) equitable 5 contribution for sums paid to defend, (5) equitable 6 subrogation for sums paid to indemnify, and 7 (6) equitable subrogation for sums paid to defend. 8 Defendant filed this Motion [12] on July 16, 2021. 9 Plaintiff then filed its Opposition [15] on August 3, 10 2021. Defendant replied [16] on August 10, 2021. 11 II. DISCUSSION 12 A. Legal Standard 13 Federal Rule of Civil Procedure (“Rule”) 12(b)(6) 14 allows a party to move for dismissal of one or more 15 claims if the pleading fails to state a claim upon which 16 relief can be granted. A complaint must “contain 17 sufficient factual matter, accepted as true, to state a 18 claim to relief that is plausible on its face.” 19 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotation 20 omitted). Dismissal is warranted for a “lack of a 21 cognizable legal theory or the absence of sufficient 22 facts alleged under a cognizable legal theory.” 23 Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 24 (9th Cir. 1988) (citation omitted). 25 In ruling on a 12(b)(6) motion, a court may 26 generally consider only allegations contained in the 27 pleadings, exhibits attached to the complaint, and 28 matters properly subject to judicial notice. Swartz v. 1 KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). A court
2 must presume all factual allegations of the complaint to
3 be true and draw all reasonable inferences in favor of 4 the non-moving party. Klarfeld v. United States, 944 5 F.2d 583, 585 (9th Cir. 1991). The question is not 6 whether the plaintiff will ultimately prevail, but 7 whether the plaintiff is entitled to present evidence to 8 support its claims. Jackson v. Birmingham Bd. of Educ., 9 544 U.S. 167, 184 (2005) (quoting Scheuer v. Rhodes, 416 10 U.S. 232, 236 (1974)). While a complaint need not 11 contain detailed factual allegations, a plaintiff must 12 provide more than “labels and conclusions” or “a 13 formulaic recitation of the elements of a cause of 14 action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 15 (2007).
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1 'O' 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 CV 21-4377-RSWL-JDEx 12 WILLIAMSBURG NATIONAL INSURANCE COMPANY, ORDER re: Defendant’s 13 Motion to Dismiss [12] Plaintiff, 14 v. 15 16 NEW YORK MARINE AND GENERAL INSURANCE COMPANY, 17 Defendant. 18 19 20 Currently before the Court is Defendant New York 21 Marine and General Insurance Company’s (“Defendant”) 22 Motion to Dismiss (the “Motion”) [12]. Having reviewed 23 all papers submitted pertaining to this Motion, the 24 Court NOW FINDS AND RULES AS FOLLOWS: the Court GRANTS 25 in part and DENIES in part the Motion. 26 27 28 1 I. BACKGROUND 2 A. Factual Background
3 Plaintiff Williamsburg National Insurance Company 4 (“Plaintiff”), a Michigan-based insurance corporation, 5 issued a motor carrier liability policy to DLR Express, 6 Inc. (“DLR”) that provides a $1,000,000 combined single 7 limit for covered accidents. Compl. ¶¶ 3, 5, ECF No. 1. 8 Attached to the policy is the MCS-90 endorsement, which 9 is a standardized form that requires an insurer to pay 10 up to its policy limit to members of the public for 11 liability arising from its insured’s operations even 12 where the policy itself provides no coverage. Id. ¶ 5. 13 Defendant, a New York-based insurance corporation, 14 issued a motor carrier liability policy (“Defendant 15 Policy”) to Intermodal Contractor’s Association of North 16 America. Id. ¶¶ 4,6. Arthur Trimble, Jr. (“Trimble”) 17 was later added as a certificate holder under this 18 policy. Id. ¶ 6. Defendant Policy similarly provides a 19 $1,000,000 combined single limit and includes the MCS-90 20 endorsement. Id. ¶¶ 6, 31. 21 DLR leased a tractor with an attached trailer to 22 Trimble pursuant to an Equipment Lease Agreement and a 23 sub-haul agreement (collectively, “Agreement”). Id. 24 ¶ 8. Under the Agreement, Trimble agreed to indemnify 25 and release DLR against all liability arising out of 26 Trimble’s use of the tractor as follows: 27 Lessee hereby releases and agrees to indemnify 28 lessor, its officers, agents and employees 1 afgianienss,t feaelsl, lpeevniaelst,i efso,r fteaixteusr,e s,l elgoasls , edxapmeangsee,,
2 expense and liability arising directly or indirectly out of the existence, condition, 3 use, custody or operation of the Equipment 4 . . . received by the Lessee until it is returned by the Lessor. 5
6 Id. ¶ 9. 7 Pursuant to the Agreement, Trimble also added DLR 8 to Defendant Policy as an additional insured with 9 respect to the tractor. Id. ¶ 11. The Policy obligates 10 Defendant to pay all sums Trimble is liable for related 11 to any accident involving the tractor. Id. ¶ 29. 12 On March 5, 2015, Trimble was driving the tractor 13 pulling a loaded trailer when he rear-ended a truck 14 being driven by Ronald Foster, Jr. Id. ¶ 7. On March 15 3, 2017, Foster, along with a passenger and the truck’s 16 owner, filed a complaint against Trimble in Los Angeles 17 Superior Court, alleging injuries and damages related to 18 the accident. Id. ¶ 12. DLR was later named as a Doe 19 defendant. Id. ¶ 15. Defendant defended and 20 indemnified Trimble in the Foster litigation, and all 21 claims against Trimble were settled for $155,000. Id. 22 ¶ 13. Plaintiff alleges that Defendant “was aware, via 23 its retained defense counsel for Trimble, that its 24 additional insured DLR was named as a defendant in the 25 Foster litigation.” Id. ¶ 14. However, neither 26 Plaintiff nor Defendant provided a defense for DLR in 27 the Foster litigation initially, and consequently DLR 28 1 never appeared in the case. Id. ¶¶ 17, 18. 2 A default judgment of $6,085,702 was entered
3 against DLR. Id. ¶ 18. DLR moved to set aside the 4 default judgment, and subsequently filed an appeal when 5 that motion was denied. Id. DLR then tendered its 6 defense to Plaintiff, and Plaintiff agreed to defend DLR 7 in the Foster litigation under a reservation of rights.1 8 Id. ¶ 19. A month later, DLR tendered its defense and 9 request for indemnity to Defendant as an additional 10 insured under Defendant Policy. Id. ¶ 21. 11 Foster and the other plaintiffs then agreed to 12 settle all claims against DLR for $1,000,000. Id. ¶ 22. 13 Both DLR and Plaintiff demanded that Defendant 14 contribute its remaining policy limit to settle the 15 claim, but Defendant refused. Id. ¶¶ 23-25. 16 Ultimately, Plaintiff paid the entire settlement amount 17 on behalf of DLR. Id. ¶¶ 22, 26. Plaintiff alleges 18 that Defendant had the primary duty to defend and 19 indemnify DLR in the Foster litigation because DLR 20 qualifies as an additional insured under Defendant 21 Policy. Id. ¶ 34. 22 B. Procedural Background 23 On May 26, 2021, Plaintiff filed its Complaint [1] 24 25 1 Though not mentioned in the Complaint, Plaintiff explains in its Opposition to the Motion that it was required to provide 26 coverage for DLR’s claim despite DLR’s lack of timely notice of the Foster litigation under the MCS-90 included in its own 27 policy. Pl.’s Opp. to Mot. to Dismiss (“Opp.”) 16:27-17:3, ECF 28 No. 15. 1 alleging six causes of action: (1) declaratory relief
2 re: Defendant’s duty to indemnify, (2) declaratory
3 relief re: Defendant’s duty to defend, (3) equitable 4 contribution for sums paid to indemnify, (4) equitable 5 contribution for sums paid to defend, (5) equitable 6 subrogation for sums paid to indemnify, and 7 (6) equitable subrogation for sums paid to defend. 8 Defendant filed this Motion [12] on July 16, 2021. 9 Plaintiff then filed its Opposition [15] on August 3, 10 2021. Defendant replied [16] on August 10, 2021. 11 II. DISCUSSION 12 A. Legal Standard 13 Federal Rule of Civil Procedure (“Rule”) 12(b)(6) 14 allows a party to move for dismissal of one or more 15 claims if the pleading fails to state a claim upon which 16 relief can be granted. A complaint must “contain 17 sufficient factual matter, accepted as true, to state a 18 claim to relief that is plausible on its face.” 19 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotation 20 omitted). Dismissal is warranted for a “lack of a 21 cognizable legal theory or the absence of sufficient 22 facts alleged under a cognizable legal theory.” 23 Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 24 (9th Cir. 1988) (citation omitted). 25 In ruling on a 12(b)(6) motion, a court may 26 generally consider only allegations contained in the 27 pleadings, exhibits attached to the complaint, and 28 matters properly subject to judicial notice. Swartz v. 1 KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). A court
2 must presume all factual allegations of the complaint to
3 be true and draw all reasonable inferences in favor of 4 the non-moving party. Klarfeld v. United States, 944 5 F.2d 583, 585 (9th Cir. 1991). The question is not 6 whether the plaintiff will ultimately prevail, but 7 whether the plaintiff is entitled to present evidence to 8 support its claims. Jackson v. Birmingham Bd. of Educ., 9 544 U.S. 167, 184 (2005) (quoting Scheuer v. Rhodes, 416 10 U.S. 232, 236 (1974)). While a complaint need not 11 contain detailed factual allegations, a plaintiff must 12 provide more than “labels and conclusions” or “a 13 formulaic recitation of the elements of a cause of 14 action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 15 (2007). However, “a well-pleaded complaint may proceed 16 even if it strikes a savvy judge that actual proof of 17 those facts is improbable, and ‘that a recovery is very 18 remote and unlikely.’” Id. at 556 (quoting Scheuer v. 19 Rhodes, 416 U.S. 232, 236 (1974)). 20 B. Analysis 21 1. Judicial Notice 22 Pursuant to Federal Rule of Evidence 201, “[a] 23 court may judicially notice a fact that is not subject 24 to reasonable dispute because it . . . can be accurately 25 and readily determined from sources whose accuracy 26 cannot reasonably be questioned.” Accordingly, while a 27 court may take judicial notice of matters of public 28 record, a court may not take judicial notice of the 1 substance of such records if subject to reasonable
2 dispute. Lee v. City of Los Angeles, 250 F.3d 668, 689-
3 90 (9th Cir. 2001) (stating that a court may take 4 judicial notice of the fact that certain court records 5 were filed but not of the truth of any facts stated 6 therein). 7 a. Defendant’s Request 8 Defendant requests the Court take judicial notice 9 of ten court records and pleadings from the Foster 10 litigation: (1) the docket, (2) the complaint, 11 (3) Trimble’s answer, (4) the amendment to the complaint 12 substituting DLR for a Doe defendant, (5) the proof of 13 service of the amendment, (6) the default entered 14 against DLR, (7) the order granting default judgment, 15 (8) DLR’s motion to set aside default and default 16 judgment, (9) the order denying DLR’s motion to set 17 aside default and default judgment, and (10) the Los 18 Angeles Superior Court’s entry of default judgment 19 against DLR. See generally Def.’s Req. for Judicial 20 Notice, ECF No. 12-1. 21 Because these documents are all court records and 22 consequently their existence is not subject to 23 reasonable dispute, the Court GRANTS Defendant’s 24 request. However, the Court does not take judicial 25 notice of any reasonably disputed facts within these 26 filings. See Selane Prods., Inc. v. Cont’l Cas. Co., 27 No. 2:20-cv-07834-MCS-AFM, 2020 WL 7253378, at *3 (C.D. 28 Cal. Nov. 24, 2020). 1 b. Plaintiff’s Request 2 Plaintiff requests the Court take judicial notice
3 of Trimble’s opposition to the plaintiff’s ex parte 4 motion to continue trial and reopen discovery in the 5 Foster litigation. See generally Pl.’s Req. for 6 Judicial Notice, ECF No. 15-1. Because this document is 7 a court record and therefore its existence is not 8 subject to reasonable dispute, the Court similarly 9 GRANTS Plaintiff’s request. However, the Court does not 10 take judicial notice of any reasonably disputed facts 11 within the opposition. 12 2. The Motion 13 Defendant moves to dismiss all six causes of action 14 against it, asserting that each claim is “predicated on 15 the premise that [Defendant] had a duty to defend and 16 indemnify [Plaintiff]’s insured.” Def.’s Mem. P. & A. 17 in Supp. of Mot. to Dismiss (“Mot.”) 1:4-5, ECF No. 12- 18 2. Defendant argues primarily that because DLR failed 19 to provide Defendant with pre-judgment notice of the 20 claim against it, Defendant was not obligated to defend 21 or indemnify DLR under Defendant Policy. Id. at 2:8-23. 22 a. Equitable Subrogation 23 In the insurance context, subrogation is defined as 24 “an insurer’s right to be put in the position of the 25 insured in order to pursue recovery from third parties 26 legally responsible to the insured for a loss which the 27 insurer has both insured and paid.” Fireman’s Fund Ins. 28 Co. v. Md. Cas. Co., 77 Cal. Rptr. 2d 296, 302 (Cal. Ct. 1 App. 1998). In other words, “[t]he right of subrogation
2 is purely derivative” because it requires the insurer to
3 “stand in the shoes” of its insured. Id. at 303. 4 Accordingly, an essential element of a claim for 5 subrogation is that “the insured has an existing, 6 assignable cause of action against the defendant which 7 the insured could have asserted for its own benefit had 8 it not been compensated for its loss by the insurer.” 9 Id. at 303. 10 Under California law, an insurer’s duty to defend 11 and subsequently indemnify an insured arises “on tender 12 of defense” of a third-party lawsuit by the insured to 13 the insurer. Foster-Gardner, Inc. v. Nat’l Union Fire 14 Ins. Co., 959 P.2d 265, 273 (1998) (citations omitted). 15 “[T]ender occurs when an insurance company is provided 16 with the complaint, at which point the insurance company 17 can make a proper determination whether policy coverage 18 applies.” City of L.A. v. Nat’l Union Fire Ins. Co., 19 Case No. 12-cv-07662-BRO-AGRx, 2013 WL 12121974, at *4 20 (C.D. Cal. Dec. 26, 2013). As between the insured and 21 its insurer:
22 [m]ere knowledge that an insured is sued does 23 not constitute tender of a claim. What is required is knowledge that the suit is 24 potentially within the policy's coverage 25 coupled with knowledge that the insurer's assistance is desired. An insurance company is 26 not required to intermeddle officiously where 27 its services have not been requested.
28 1 M.B.L., Inc. v. Fed. Ins. Co., Case No. CV 13-03951 BRO 2 (AGRx), 2014 WL 12584437, at *7 (May 30, 2014) (quoting
3 Hartford Accident & Indem. Co. v. Gulf Ins. Co., 776 4 F.2d 1380, 1383 (7th Cir. 1985)). 5 Defendant argues that because DLR failed to timely 6 tender defense to Defendant and therefore has no direct 7 claim against Defendant, Plaintiff’s claims for 8 subrogation must also fail. Mot. 19:2-4. The Court 9 agrees. While the Complaint alleges that DLR qualifies 10 as an additional insured under Defendant Policy and that 11 Defendant thus “owes the primary duty” to indemnify and 12 defend DLR, Compl. ¶¶ 55, 60, Plaintiff does not allege 13 that DLR itself has an existing, assignable cause of 14 action against Defendant. Without establishing this 15 necessary element, Plaintiff fails to state a claim for 16 equitable subrogation. Moreover, Plaintiff itself 17 relies on the distinction between its own position and 18 that of DLR, suggesting that its claim is not predicated 19 on stepping into DLR’s shoes. Opp. 15:17-28 (arguing 20 that cases cited by Defendant are distinguishable 21 because they involved “insureds suing insurers,” while 22 the standard for notice is different when one insurer is 23 suing another). 24 The MCS-90 endorsement form attached to Defendant 25 Policy is no help to Plaintiff with respect to its 26 subrogation claim. It is true that this form requires 27 an insurer to pay members of the public for final 28 judgments obtained against the insured regardless of the 1 insured’s failure to comply with policy conditions.
2 Global Hawk Ins. Co. v. Le, 170 Cal. Rptr. 403, 411
3 (Cal. Ct. App. 2014) (citing 49 C.F.R. § 387.15 (2013)). 4 However, the MCS-90 form does not apply here because 5 “the integral purpose of the MCS-90, to protect third 6 party members of the public, is not implicated in a 7 dispute between two insurers.” John Deere Ins. Co. v. 8 Nueva, 229 F.3d 853, 858 (9th Cir. 2000).2 Because 9 Trimble, the injured member of the public, has already 10 been compensated for his injuries, Plaintiff cannot rely 11 on the MCS-90 form to assert a claim against Defendant 12 for subrogation. 13 Accordingly, the Court GRANTS the Motion as to the 14 fifth and sixth causes of action for equitable 15 subrogation for defense and indemnity costs. 16 b. Equitable Contribution 17 Unlike subrogation, “the right to contribution 18 arises when several insurers are obligated to indemnify 19 or defend the same loss or claim, and one insurer has 20 paid more than its share of the loss or defended the 21 2 To the extent the parties dispute whether John Deere is 22 still because binding precedent on this Court of recent Regulatory Guidance published by the Federal Motor Carrier Safety 23 Administration that contradicts John Deere’s holding, those 24 arguments are inapplicable to the portion of the holding cited above. The parties seem to agree on this point. See Mot. 23:8- 25 11 (citing John Deere as binding authority on this point); See Opp. 18:11-17 (acknowledging that the entirety of John Deere is 26 still binding authority). Moreover, regulatory guidance does not overrule previous Ninth Circuit authority because such agency 27 interpretations do not carry the force of law. United States v. 28 Mead Corp., 533 U.S. 218, 226-27 (2001). 1 action without any participation by the others.”
2 Fireman’s Fund, 77 Cal. Rptr. 2d at 303. Rather than
3 standing in the shoes of the insured, contribution 4 affords an insurer “independent standing to assert a 5 cause of action against its coinsurers . . . when it has 6 undertaken the defense or indemnification of the common 7 insured.” Id. at 303. Further, because the right to 8 equitable contribution does not stem from any contract 9 between the insurers, an action for contribution is not 10 controlled by the language of any policies between the 11 insurers and their insureds. Id. at 313 (quoting Signal 12 Companies, Inc. v. Harbor Ins. Co., 612 P.2d 889, 895 13 (1980)). Thus, while an insurer’s duty to defend only 14 arises upon tender of defense by the insured, “an 15 insured’s lack of tender or compliance with a policy 16 provision is not fatal to a coinsurer’s right of 17 equitable contribution; rather, adequate notice of the 18 potential for contribution and the opportunity for 19 investigation and participation in the defense in the 20 underlying litigation will suffice.” OneBeacon Am. Ins. 21 Co. v. Fireman’s Fund Ins. Co., 95 Cal. Rptr. 3d 808, 22 822 (Cal. Ct. App. 2009). 23 Defendant argues that Plaintiff has failed to state 24 a claim for contribution because DLR failed to tender 25 defense to Defendant and thus was not covered under 26 Defendant Policy. Mot. 9:4-11:23. Accordingly, 27 Plaintiff is not entitled to contribution because 28 Plaintiff and Defendant “did not afford coverage for the 1 same risk.” Id. at 21:2-4. But whether DLR properly
2 tendered defense or otherwise complied with the terms of
3 Defendant Policy is irrelevant to Plaintiff’s claim for 4 equitable contribution, as this claim does not hinge on 5 any contract between DLR and Defendant. Rather, 6 contribution requires only that Defendant had 7 constructive notice of a claim that would be covered by 8 Defendant Policy had DLR tendered defense. See 9 OneBeacon, 95 Cal. Rptr. 3d at 823. 10 Defendant further argues that it should not be 11 subject to contribution because it suffered prejudice by 12 DLR’s lack of tender, namely because DLR could have 13 joined in the settlement that Defendant reached on 14 behalf of Trimble. Mot. 18:6-9. However, such 15 prejudice is mitigated where the insurer had sufficient 16 notice and the opportunity to investigate and 17 participate in the defense of DLR but nevertheless chose 18 not to. See OneBeacon, 95 Cal. Rptr. 3d at 823. 19 The Court next considers whether Plaintiff has 20 adequately alleged that Defendant had sufficient inquiry 21 notice of the potential for a contribution claim by DLR. 22 “[A]n insurer’s obligation of equitable contribution for 23 defense costs arises where, after notice of litigation, 24 a diligent inquiry by the insurer would reveal the 25 potential exposure to a claim for equitable 26 contribution.” Id. A party is charged with notice of 27 “all those facts which he might have ascertained had he 28 diligently pursued the requisite inquiry.” Cal. 1 Shoppers, Inc. v. Royal Globe Ins. Co., 221 Cal. Rptr.
2 171, 189 (Cal. Ct. App. 1985) (finding that insurer had
3 inquiry notice where insured tendered the summons and 4 complaint for defense in an envelope marked with the 5 wrong insured’s name); see also OneBeacon, 95 Cal. Rptr. 6 3d at 824-25 (finding that insurer had inquiry notice 7 where insureds notified insurer of lawsuit against them, 8 and numerous insurer documents contained the policy 9 numbers of policies issued to named and additional 10 insureds). 11 Plaintiff alleges that Defendant “was aware, via 12 its retained defense counsel for Trimble, that its 13 additional insured DLR was named as a defendant in the 14 Foster litigation.” Compl. ¶ 16. Plaintiff further 15 alleges that Trimble had added DLR as an additional 16 insured under Defendant Policy pursuant to a Certificate 17 of Liability Insurance (“Certificate”). These facts, 18 taken as true, are sufficient to plausibly allege that 19 Defendant had notice to inquire further as to DLR’s 20 coverage under Defendant Policy. Like OneBeacon, where 21 the insurer had documents indicating policy coverage for 22 the insureds, Defendant’s execution of the Certificate 23 identifying DLR as an additional insured should have 24 caused Defendant to inquire further once DLR was named 25 as a Doe defendant in the Foster litigation. 26 Defendant asserts that it did not have constructive 27 notice of DLR’s addition to the litigation because the 28 knowledge of Trimble’s defense counsel should not be 1 imputed to Defendant. Mot. 16:4-7. The Court disagrees.
2 In the tripartite relationship between insurer, insured,
3 and counsel, counsel’s goal is to eliminate liability to 4 third parties. San Diego Navy Fed. Credit Union v. 5 Cumis Ins. Society, Inc., 208 Cal. Rptr. 494, 498 (Cal. 6 Ct. App. 1984). DLR’s addition to the case made it 7 likely that DLR would assert a claim against Trimble and 8 his insurer as an additional insured under Defendant 9 Policy. Because defense counsel would have been 10 obligated to inform his clients of this possibility, 11 defense counsel’s knowledge of DLR’s presence in the 12 action is imputed to Defendant. See Cal. Civ. Code 13 § 2332 (stating that a principal has notice of anything 14 an agent has notice of and “ought, in good faith and the 15 exercise of ordinary care and diligence, to communicate 16 to the other”).3 17 Defendant also argues that the Certificate naming 18 DLR as an additional insured fails to show that 19 Defendant had notice of DLR’s status because it does not 20 show that Defendant Policy was ever actually amended. 21 See Def.’s Reply Brief (“Reply”) 8:27-9:1, ECF No. 16. 22 This argument is similarly unavailing. Plaintiff need 23 not prove at this stage that Defendant Policy was 24
25 3 In any event, Plaintiff’s statement that Defendant had notice via defense counsel must be accepted as true. See Iqbal, 26 556 U.S. at 678. The allegation that defense counsel informed Defendant of DLR’s addition to the litigation, presumably because 27 of Defendant’s potential liability to it, is at the very least 28 plausible for the reasons stated above. 1 amended to name DLR as an additional insured. Rather,
2 Plaintiff need only assert that Defendant had notice of
3 DLR’s status as an additional insured and of DLR’s 4 potential claim for indemnification under Defendant 5 Policy. Plaintiff has pled as much, and it is plausible 6 that the Certificate put Defendant on notice of DLR’s 7 status as an additional insured. See Compl. ¶¶ 11, 16. 8 In sum, Plaintiff has sufficiently pled that 9 Defendant had inquiry notice of DLR’s involvement in the 10 Foster litigation and the potential for a claim for 11 equitable contribution. Accordingly, the Court DENIES 12 the Motion as to the equitable contribution claims. 13 3. Declaratory Relief 14 The Declaratory Judgment Act provides that “any 15 court of the United States, upon the filing of the 16 appropriate pleading, may declare the rights and other 17 legal relations of any interested party seeking such 18 declaration, whether or not further relief is or could 19 be sought.” 28 U.S.C § 2201. A court has jurisdiction 20 to issue a declaratory judgment if “there is a 21 substantial controversy, between parties having adverse 22 legal interests, of sufficient immediacy and reality.” 23 Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 24 (1941). 25 Defendant argues that declaratory relief in this 26 case is inappropriate because declaratory relief is not 27 designed to address past wrongs, and courts have 28 dismissed claims for declaratory judgment that accompany 1 breach of contract claims as duplicative. Mot. 24:5-
2 25:4. However, Defendant cites no authority, and the
3 Court has found none, to support the proposition that 4 declaratory relief is inappropriate when accompanying a 5 claim for equitable relief. Indeed, courts have 6 repeatedly allowed for claims of both declaratory relief 7 and equitable contribution in similar circumstances. 8 See, e.g., Ironshore Spec.Ins. Co. v. Everest Indem. 9 Ins. Co., No. 20-55860, 2021 WL 3878592, at *3 (9th Cir. 10 Aug. 31, 2021); Westport Ins. Corp. v. California Cas. 11 Mgmt. Co., 916 F.3d 769 (9th Cir. 2019); Axis Surplus 12 Ins. Co. v. Glencoe Ins. Ltd., 139 Cal. Rptr. 3d 578 13 (Cal. Ct. App. 2012). 14 Defendant further argues that because Plaintiff has 15 not stated a claim for either contribution or 16 subrogation, Plaintiff’s declaratory relief claims must 17 be dismissed. Mot. 25:9-12. However, because the Court 18 holds that Plaintiff sufficiently alleged the inquiry 19 notice required for a contribution claim, the 20 accompanying declaratory relief claims similarly survive 21 a motion to dismiss. 22 Accordingly, the Court DENIES the Motion as to 23 Plaintiff’s claims for declaratory relief. 24 25 26 27 28 1 III. CONCLUSION
2 Based on the foregoing, the Court GRANTS in part and
3 DENIES in part Defendant’s Motion to Dismiss. 4 Plaintiff’s fifth and sixth causes of action are 5 dismissed with leave to amend within twenty-one (21) 6 days of this Order. Defendant’s Motion is DENIED as to 7 Plaintiff’s first, second, third, and fourth causes of 8 action. 9 IT IS SO ORDERED. 10 DATED: September 29, 2021 11 12 _______/s_/ _R_o_n_al_d _S_.W__. L_e_w________ HONORABLE RONALD S.W. LEW 13 Senior U.S. District Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28