[Only part of the original document is included in this sample.]
JOHN WHITE,
Plaintiff,
vs,
RED, WHITE & BLUE INSURANCE CO.,
Defendant.
________________________________/
Case No.:
PLAINTIFF'S MEMORANDUM OF POINTS AND
AUTHORITIES IN SUPPORT OF
MOTION FOR SUMMARY
ADJUDICATION
This lawsuit concerns plaintiff John White's claim against his insurer--defendant Red, White & Blue Insurance Co. ("RWB")--to provide him legal defense under the insurance policy against a claim by Heather Brown and Joe Brown. White and RWB entered into a contract of insurance in February 2000.(1) In May 2001 the Browns sued plaintiff for damages suffered after Heather Brown fell from a horse in plaintiff's care. Plaintiff tendered his timely defense of the lawsuit to RWB under the insurance policy, and RWB denied plaintiff's claim positing that the policy excluded such a claim.
On March 12, 2003, RWB filed a motion for summary adjudication seeking a declaratory judgment that it was not obligated to provide a defense to the Browns' lawsuit. On April 22, 2003, this court denied RWB's motion on the grounds that there were disputed issues of fact.
By the present motion for summary adjudication, plaintiff requests this court to declare, as a matter of law, that defendant RWB had a duty to defend him against the Browns' lawsuit.
Although the general summary judgment/adjudication rules place the burden on the moving party to establish there is no triable issue of material fact before he can be entitled to judgment as a matter of law (Code Civ. Proc. §§437c(c), (f)), the burden of proof is changed when the issue on summary judgment involves a "duty to defend" provision in an insurance policy. The law on the duty to defend is that the insurer must provide legal defense to a claim against its insured as long as there is merely a potential for liability under the policy. Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076, 1083. Thus, where an insurer seeks a declaration on summary judgment that it is not required to provide legal defense to its insured, the insurer's burden is to produce undisputed evidence that there is no potential for coverage under the policy, while the insured's burden is only to prove the existence of the potential for coverage. Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 299-300. Furthermore, "the existence of a disputed fact determinative of coverage establishes the duty to defend." Amato v. Mercury Casualty Co. (1993) 18 Cal.App 4th 1784, 1790 (emphasis in original, citing Horace Mann, supra, at 1081).
In denying RWB's motion for summary adjudication, this court found disputed issues of fact regarding the potential for coverage in light of the policy's "business pursuits" exclusion. Accordingly, plaintiff requests this court to find that RWB had a duty to defend the Browns' suit as a matter of law.
ARGUMENT
1. Summary judgment/summary adjudication should be granted where there are no triable issues of material fact.Code of Civil Procedure §473c(c) provides that "the motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law." "Summary judgment is proper, if and only if, the affidavits in support of the motion , strictly construed, contain facts sufficient to entitle the moving party to a judgment, and those of the opposing party, liberally construed, fail to show there is a material issue of fact." Eott Energy Corp. v. Storebrand Internat. Ins. Co. (1996) 45 Cal.App.4th 565, 572 (citing Corwin v. Los Angeles Newspaper Service Bureau, Inc. (1971) 4 Cal.3d 842, 851). A motion for summary adjudication shall be granted if it completely disposes of an issue of duty, and shall proceed in all aspects as a motion for summary judgment. Code Civ. Proc. §§437c(f)(1), (2).
2. On summary judgment the insured need only establish that there is a potential for coverage under the policy to give rise to the insurer's duty to defend. A. The law governing an insurer's duty to provide a
defense changes
the burden
of proof.
As long as the policy has the potential to provide coverage for the damages claimed against the insured, an insurer must provide its insured with a legal defense under the policy's relevant provision. Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 299. Montrose was a summary adjudication/declaratory relief action the insured brought for a court declaration that its liability insurance carrier was liable for Montrose's legal defense of environmental contamination claims. The court reiterated the earlier holdings in Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, and Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076, 1083:
[A] liability insurer owes a broad duty to defend its insured against claims that create a potential for indemnity. [Citation.] . . . . Implicit in this rule is the principle that the duty to defend is broader than the duty to indemnify; an insurer may owe a duty to defend its insured in an action in which no damages are ultimately awarded. [Citation.][T]he existence of a duty to defend turns not upon the ultimate adjudication of coverage under its policy of insurance, but upon those facts known by the insured at the inception of a third party lawsuit. Hence, the duty "may exist even where coverage is in doubt and ultimately does not develop." [Citation.]
Montrose, supra, at 295.
B. The law of the duty to defend lessens the insured's burden of proof on summary judgment for declaratory relief.
The duty to defend changes the general burden of proof rules for summary judgment. "To prevail, . . . the insured need only show that the underlying claim may fall within policy coverage; the insurer must prove it cannot." Montrose, supra, at 300 (emphasis in original). See also, Maryland Casualty Co. v. National American Ins. Co. (1996) 48 Cal.App.4th 1822, 1832 (once a prima facie showing is made that the claim falls within policy coverage provisions the burden shifts, and the insurer can only defeat the motion by producing evidence to eliminate conclusively the potential for coverage under the policy).
Furthermore, consistent with the rule that the duty to defend is broader than the duty to indemnify, any doubt as to whether the facts support a duty to defend must be resolved in the insured's favor. Id., at 299-300 (citations omitted).
3. Because plaintiff had established the potential for coverage under the policy's terms in his successful defense of RWB's previous summary adjudication motion, RWB had a duty to provide a legal defense.Plaintiff has already established RWB's duty to defend by overcoming its motion for summary adjudication, since the logical inverse of RWB's failure to prove no possibility of coverage is the conclusion that there is a possibility of coverage, and thus a duty to defend. "[W]hen the evidence adduced in the declaratory relief action does not permit the court to eliminate the possibility that the insured's conduct falls within the coverage of the policy, 'the duty to defend is then established, absent additional evidence bearing on the issue'." Montrose, 6 Cal.4th at 301 (citing Horace Mann, supra, at 1085).
The thrust of RWB's summary adjudication motion was that the policy's "business pursuits" exclusion justified RWB's denial of a legal defense coverage because, as a factual matter, the horse from which Heather Brown fell was used in John White's equestrian business. RWB's March 12, 2003 summary adjudication motion was denied because it did not meet its burden of proving that there were no issues of material undisputed fact. The logical deduction, according to Montrose, supra, is that because there were disputed facts as to whether the business exclusion applied, RWB did have a duty to defend.
4. RWB had a duty to defend based on undisputed facts in the record.Even if RWB had not previously been denied its motion for summary adjudication, the undisputed facts show no triable issue as to the potential for coverage under the policy. Plaintiff's claim sounds in contract, which requires an agreement to do or not do a certain thing (Civ. Code §1549), giving rise to an obligation or legal duty enforceable in an action at law (Civ. Code §§1427, 1428), and requiring mutually consenting parties and sufficient consideration (Civ. Code §1550). Breach of contract is generally defined as an unjustified failure to perform a material promise or covenant. Sterling v. Gregory (1906) 149 Cal. 117, 121.
There is no dispute as to any of the material facts necessary for a judgment in plaintiff's favor. His Second Amended Complaint, filed on February 4, 2003, alleges that there was a contract of insurance between plaintiff and RWB and that RWB breached the contract by denying his legal defense claim. There is no dispute that there was such a contract and that such a contract was in effect at the time of Heather Brown's fall from the horse. (There is no issue that the policy was not mutually consented to nor that consideration was given). The policy provided coverage at Section III--Liability, Coverage C--Personal Liability, as follows:
We pay those damages which an insured becomes legally obligated to pay because of bodily injury or property damage resulting from an occurrence to which this coverage applies.At our expense and with attorneys of our choice, we will defend an insured against any covered claim or suit . . . .
Liability Coverage D under the Policy provides further that:
This coverage applies to:(a) Persons on the insured location with permission of an insured; or(b) Persons off the insured location if the bodily injury: . . .
(2) Is caused by the activities of an insured;
(4) Is caused by an animal owned by or in the care of the insured . . . .
On or about May 5, 2001, Heather Brown was injured while riding a horse in plaintiff's care. Plaintiff was served with a lawsuit by the Browns and requested a defense and indemnity from RWB in a timely fashion. RWB denied all coverage, both defense and indemnity, related to the Brown claim.
Because there is no dispute as to the existence of the insurance policy or the policy provision which, on its face, would provide coverage for the Brown claim, and because plaintiff made a timely tender of his claim to RWB, he is entitled to a judgment that RWB breached its duty to defend.
CONCLUSION
Plaintiff satisfied his prima facie burden supporting his claim for coverage for a legal defense of the Brown claim under his policy with RWB. RWB denied the claim, citing the policy's "business pursuits" exclusion. This court has already found that resolution of the "business pursuits" provision depends on triable issues of fact. An insurer has a duty to defend unless there is no possibility of coverage. There is no disputed issue of fact that there is the possibility for coverage under RWB's policy. RWB therefore had an affirmative duty to provide plaintiff with a defense to the Brown claim, and RWB breached that duty by denying his claim and by failing to provide him with a defense.
If plaintiff had brought a cross-motion for summary adjudication in response to RWB's motion, his cross-motion would most likely have been granted under authority of Montrose, Amato, and Horace Mann, supra. Under the local rules, the court could have granted a cross-motion in plaintiff's favor on its own volition to resolve this issue but did not do so. Plaintiff respectfully requests this court to grant his motion for summary adjudication now.
Dated:
JOHN WHITE,
Plaintiff,
vs,
RED, WHITE & BLUE INSURANCE CO.,
Defendant.
________________________________/
Case No.:
PLAINTIFF'S REPLY MEMORANDUM IN SUPPORT OF MOTION FOR SUMMARY ADJUDICATION
Date:
Time:
Dept:
This court has already heard defendant Red, White & Blue Insurance Co.'s arguments that it had no duty to provide defense coverage to plaintiff John White, and on April 22, 2003, the court denied defendant's motion for summary adjudication on this issue. White brings the present motion simply to establish his rights implicit in the court's earlier decision.
Defendant is back before this court to re-assert the same arguments it presented in April. At the hearing on its summary adjudication motion, this court rejected defendant's arguments that the court should consider evidence gathered after defendant's denial of coverage, yet defendant's opposition to White's present motion is replete with arguments against its duty to defend based on evidence defendant developed in the course of this litigation.
Insurers have a duty to defend whenever there is a possibility for coverage. Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076, 1083. Where an insurer doubts the existence of coverage, its sole remedies are to bring a declaratory relief action or to tender the defense with a reservation of rights. An insurer cannot justify its earlier decision in hindsight--yet that behavior is precisely what defendant is requesting this court to approve.
There are two distinct issues here. One is whether there is coverage under White's insurance policy with defendant. The other is whether, at the time defendant denied White's defense claim, it had a duty to defend regardless of the ultimate determination of whether there is coverage. White's present motion addresses the latter. By raising issues of fact developed after defendant's denial of coverage, defendant is addressing the ultimate coverage issue, thereby presenting irrelevant arguments in an attempt to obscure the issue presently at bar.
ARGUMENT
1. Defendant's duty to defend was established in effect by the court's denial of its summary adjudication motion.
Defendant characterizes White's position to be that defendant's duty to defend was "automatically established" by the court's denial of defendant's earlier summary adjudication motion. Although "automatic" is not entirely accurate, White's interpretation of recent, relevant case law is that a denial of the insurer's summary adjudication motion on this issue of the duty to defend has the effect of establishing its duty to defend as a matter of law because the standard is the potential for coverage. Horace Mann Ins. Co., supra, at 1083. This court found earlier that there were disputed issues as to the potential for coverage: "I don't see how I can grant summary adjudication of issues based upon subsequently discovered investigation on a coverage denial claim. Now, I don't know what the facts are going to be at trial, but I don't see how I can grant that and I'm not going to." As White argued in his opening memorandum, "the existence of a disputed fact determinative of coverage establishes the duty to defend." Amato v. Mercury Casualty Co. (1993) 18 Cal.App.4th 1784, 1790 (emphasis in original, citing Horace Mann, supra, at 1081).
2. Defendant confuses the "duty to defend" issue presented here with arguments concerning the coverage issue, which should properly be left for trial.
Before the April 22, 2003 hearing on its summary adjudication motion, defendant submitted a supplementary memorandum, declarations and exhibits setting forth additional evidence it allegedly had when it denied White's defense claim. Defendant again spends significant time setting forth these same facts as the basis for its decision. In presenting these facts defendant attempts to bypass the pre-trial duty-to-defend issue by arguing there was no coverage in the first place, and characterizing the present motion as "premature." At first glance there may be good reason for this strategy because it would seem illogical for defendant to provide defense coverage only for the court ultimately to find it never had a duty in the first place.
But this is exactly what the law requires; "otherwise an insurance carrier could refuse to defend its insured on the slightest provocation and then resort to hindsight justification." Amato v. Mercury Casualty Co. (1997) 53 Cal.App.4th 825, 832 (emphasis in original, citing Mullen v. Glens Falls Ins. Co. (1977) 73 Cal.App.3d 163, 173). One court has even stated in dicta that "[a]n insurer's wrongful refusal to defend will automatically subject it to liability for both the costs of defense and any adverse judgment the insured suffers, even when the judgment was rendered on a theory not within the policy coverage." Kapelus v. United Title Guaranty Co. (1971) 15 Cal.App.3d 648, 653 (emphasis added) (cited as authority in Amato, supra). See also, Montrose, supra, at 295 ("[T]he existence of a duty to defend turns not upon the ultimate adjudication of coverage under its policy of insurance, but upon those facts known by the insured at the inception of a third party lawsuit. Hence, the duty 'may exist even where coverage is in doubt and ultimately does not develop.'" (citing Saylin v. California Ins. Guarantee Assn. (1986) 179 Cal.App.3d 256, 263).
This court has already found that the only facts relevant to defendant's duty to defend are the ones known at the time it denied the claim, which was the complaint in the Brown v. White action and White's recorded statement taken by defendant's claims agent. Plaintiff respectfully requests this court to make the same findings here.
A. The court need not consider all of the evidence to
determine defendant's duty to defend as a matter of law.
Defendant persists in arguing that the court must consider all of the evidence presented in order to rule on whether there was a duty to defend, and actually cites Montrose for the proposition that "the duty to defend is only established when all evidence has been considered." Defendant misinterprets and incorrectly paraphrases Montrose's discussion, which says that if the insurer loses on summary-adjudication-of-the-duty-to-defend issue, it has a duty to defend until the issue can be resolved at trial:
[A]n unfavorable ruling on the insured's motion does not establish the absence of a defense duty; it merely means that the question whether the insurer must defend is not susceptible of resolution by undisputed facts, but instead must go to trial. In the interim, presumably there continues to exist potential for coverage and thus a duty to defend.Montrose, supra, at 310.
Defendant also cites B. & E. Convalescent Center v. State Comp. Ins. Fund (1992) 8 Cal.App.4th 78, 92, for the proposition that the "duty to defend is determined from all of the information available to the insurer at the time of the tender of the defense." But defendant selectively quoted from B. & E., omitting the pertinent language: "this is a question which is not based on hindsight but, rather, determined from all of the information available to the insurer at the time of the tender of the defense." B. & E., supra, at 92 (emphasis added).
Contrary to defendant's representation that its (pre-trial) duty to defend is established only when all evidence is considered, nothing in Montrose nor any other authority to which defendant can cite states such a rule.
B. Defendant mischaracterizes Dolinar and
cannot establish conclusively that there was no potential for coverage at the time plaintiff's claim
was denied.
The final substantive issue defendant raises in opposition to White's motion is that statements of fact made in White's answer to the complaint in the Brown v. White case "conclusively precluded" the potential for coverage. Again, defendant mischaracterizes the authority on which it relies: Dolinar v. Pedone (1944) 63 Cal.App.2d 169, 176-177. Dolinar did not say that statements in a party's pleading created a conclusive presumption. The issue in Dolinar was admissibility. The court held that statements made by a party or his/her attorney in the pleadings were admissible, noting that the party can always argue that statements made in pleadings were made inadvertently or under a mistake of fact, where to do so would simply affect credibility. Id., at 166-167. See also, Fuentez v. Tucker (1947) 31 Cal.2d 1 (party is conclusively bound only by allegations made in his or her pleadings in the current litigation).
3. This court can rely on its prior ruling by taking judicial notice thereof or by issuing its own notice of decision.
By filing a Notice of Ruling on August 6, 2003, plaintiff attempted a practical, if not technically correct, solution to the fact that the court never issued a written order. Defendant objects to this Notice of Ruling because it does not conform to the requirements of Code of Civil Procedure §437c(g). But the specific requirement of a written order set forth in §437c(g) does not apply to plaintiff because it is directed to the court, not to the party. Moreover, plaintiff inadvertently failed to send a proposed order to defendant within five days after the hearing as required by Rule 391 of the California Rules of Court. Finally, White was prevented from submitting a proposed order to defendant under Rule 391 because at the April 22 hearing the court failed to specify expressly one or more material facts in controversy, nor did it clearly specify the reasons for its decision as required by §437c(g).
Nonetheless, nothing in the Code of Civil Procedure, the California Rules of Court, or the Local Rules prevents this court from issuing a written order now, and then taking judicial notice of that decision for the purpose of the present motion. White respectfully requests the court to do so. The particular issues decided and the disputed facts found at the April 22 hearing are not clear from the transcript, and the court is best situated to clarify its findings.
4. Defendant's statements contained in its statement of undisputed facts are admissible.
Defendant objects to White's reliance on defendant's own statements made in its Separate Statement of Undisputed Material Facts in Support of Motion for Summary Adjudication of Issues, filed March 12, 2003, because these statements were based on White's complaint. Since a party cannot rely on facts alleged in its own complaint to support a summary judgment motion, defendant argues White's reliance is improper. But White is not relying on facts alleged in his own complaint. He is relying on facts defendant presented to the court as undisputed. For this purpose, the basis for defendant's admissions is irrelevant.
Defendant then argues that the statements relied on are inadmissible hearsay and lack authentication. The "party admission" exception to the hearsay rule states:
Evidence of a statement is not made inadmissible by the hearsay rule when offered against the declarant in an action to which he is a party in either his individual or representative capacity, regardless of whether the statement was made in his individual of representative capacity.Evid. Code §1220.
Regarding statements of party agents, the Evidence Code further provides:
Evidence of a statement offered against a party is not made inadmissible by the hearsay rule if: (a) The statement was made by a person authorized by the party to make a statement of statements from him concerning the subject matter of the statement; . . . ."Evid. Code §1222.
The statements White relies on would be exempt from the hearsay rule if they were made by defendant itself, and are thus exempt from the hearsay rule because they were made by defendant's attorney, "a person authorized by the party."
Finally, defendant argues that, even if the statements are admissible, the documents themselves are inadmissible because they were not properly authenticated. The authentication problem is easy to remedy. Because these statements come from documents in the court's files for this case, their authenticity may be established by judicial notice under Evidence Code §452(d) (Court Records). White therefore requests this court to take judicial notice that defendant's Separate Statement of Undisputed Material Facts in Support of Motion for Summary Adjudication of Issues, filed in the present case on March 12, 2003, is what it purports to be. See, Wegner, Fairbank, Epstein & Chernow, Cal. Prac. Guide: Civ. Trials & Evidence, §8:323 (The Rutter Group 1996).
CONCLUSION
This court denied defendant's motion for summary adjudication that it had no duty to defend plaintiff against the Browns' claim: there were disputed issues of fact. The existence of a disputed fact that would determine coverage establishes the duty to defend. This court should therefore grant plaintiff's Motion for Summary Adjudication.
Dated:
1. All references to the separate statement have been deleted.