Judge: Anne Hwang, Case: 19STCV29485, Date: 2023-09-13 Tentative Ruling

Case Number: 19STCV29485    Hearing Date: September 13, 2023    Dept: 32

PLEASE NOTE:   Parties are encouraged to meet and confer concerning this tentative ruling to determine if a resolution may be reached.  If the parties are unable to reach a resolution and a party intends to submit on this tentative ruling, the party must send an email to the Court at sscdept32@lacourt.org indicating that party’s intention to submit.  The email shall include the case number, date and time of the hearing, counsel’s contact information (if applicable), and the identity of the party submitting on this tentative ruling.  If the Court does not receive an email indicating the parties are submitting on this tentative ruling and there are no appearances at the hearing, the Court may place the motion off calendar or adopt the tentative ruling as the order of the Court.  If all parties do not submit on this tentative ruling, they should arrange to appear in-person or remotely.  Further, after the Court has posted/issued a tentative ruling, the Court has the inherent authority to prohibit the withdrawal of the subject motion and adopt the tentative ruling as the order of the Court. 

TENTATIVE RULING

MOVING PAPERS

1.      Notice of Motion and Motion for Summary Adjudication on Cross Complaint

2.      Memorandum of Points and Authorities

3.      Declaration of Jeffrey Tsao

4.      Separate Statement of Undisputed Facts

5.      Compendium of Exhibits in Support

OPPOSITION PAPERS

1.      Opposition to Motion for Summary Adjudication; Memorandum of Points and Authorities

2.      Cross-Defendant’s Response to Defendant’s Separate Statement of Undisputed Facts

3.      Declaration of Frederick J. Ufkes with Attached Exhibits

REPLY PAPERS

1.      Reply Brief

2.      Request for Judicial Notice

BACKGROUND

On August 20, 2019, Plaintiffs Winnie Cheung and Michael Cheung (Plaintiffs) filed a motor vehicle/pedestrian wrongful death action against Vanna Phung, Van Ngan Phung, and Does 1 to 50. The incident took place on February 7, 2019 and Vanna Phung (Phung) was the driver of the vehicle.

On February 8, 2021, Plaintiffs added Navigators Real Estate Inc. (Navigators) as Doe 1, alleging that as Phung’s employer, they were vicariously liable. Phung denied she was acting within the scope of her employment. Navigators then filed a cross-complaint and eventually a second amended cross-complaint (SACC) against Phung on December 28, 2021, which is the operative pleading. In Navigator’s SACC, they alleged breach of contract and express indemnity stemming from an Independent Contractor Agreement (Agreement) they entered into in January 2019 with Phung.

Later, Navigators moved for Summary Judgment against Plaintiffs, arguing there was no evidence that Phung was acting within the scope of her employment when the incident occurred. On September 20, 2023, the Court granted Navigator’s motion, finding as a matter of law, Navigators could not be held vicariously liable for Phung’s conduct. (Minute Order, September 20, 2022.)

Now, Navigators moves for summary adjudication against Phung arguing that Phung owed a contractual duty to indemnify and defend Plaintiff’s action on Navigator’s behalf. They argue this duty began on February 8, 2021 and ended on September 20, 2022; or in the alternative, began on August 4, 2021 and ended on September 20, 2022. Phung opposes and Navigators replies.  

JUDICIAL NOTICE

In their Reply, Navigators requests the Court to take judicial notice of exhibits attached to Plaintiffs’ opposition to Navigators’ motion for summary judgment. The Court declines to take judicial notice of the documents because the Court relies instead on the September 20, 2022 minute order granting summary judgment.

LEGAL STANDARD

“[T]he party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law[.] There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.)  “[T]he party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact.” (Ibid.; Smith v. Wells Fargo Bank, N.A. (2005) 135 Cal.App.4th 1463, 1474 [summary judgment standards held by Aguilar apply to summary adjudication motions].)  Further, in line with Aguilar v. Atlantic Richfield Co., “[o]n a motion for summary adjudication, the trial court has no discretion to exercise.  If a triable issue of material fact exists as to the challenged causes of action, the motion must be denied. If there is no triable issue of fact, the motion must be granted.” (Fisherman's Wharf Bay Cruise Corp. v. Superior Court (2003) 114 Cal.App.4th 309, 320.)

“On a summary judgment motion, the court must therefore consider what inferences favoring the opposing party a factfinder could reasonably draw from the evidence. While viewing the evidence in this manner, the court must bear in mind that its primary function is to identify issues rather than to determine issues.  Only when the inferences are indisputable may the court decide the issues as a matter of law. If the evidence is in conflict, the factual issues must be resolved by trial.” (Binder v. Aetna Life Ins. Co. (1999) 75 Cal.App.4th 832, 839 [cleaned up].)  Further, “the trial court may not weigh the evidence in the manner of a factfinder to determine whose version is more likely true.  Nor may the trial court grant summary judgment based on the court's evaluation of credibility.” (Id. at p. 840 [cleaned up]; see also Weiss v. People ex rel. Department of Transportation (2020) 9 Cal.5th 840, 864 [“Courts deciding motions for summary judgment or summary adjudication may not weigh the evidence but must instead view it in the light most favorable to the opposing party and draw all reasonable inferences in favor of that party”].) 

DISCUSSION

Navigators’ main argument is that under the Agreement, when Navigators sent their tender to Phung, she owed a duty to defend them from Plaintiff’s suit. They argue that even though Phung thought the vicarious liability theory had no merit, she was still obligated to defend the action because the claim could have resulted in liability.

“Parties to a contract, . . . , may define therein their duties toward one another in the event of a third party claim against one or both arising out of their relationship.  Terms of this kind may require one party to indemnify the other, under specified circumstances, for moneys paid or expenses incurred by the latter as a result of such claims. (Citation omitted.) They may also assign one party, pursuant to the contract's language, responsibility for the other's legal defense when a third party claim is made against the latter.”  (Crawford v. Weather Shield Mfg., Inc. (2008) 44 Cal.4th 541, 551 [citation omitted, emphasis in original] [hereafter, Crawford].)   

“[T]he [indemnitor’s] duty to defend is broader than its duty to indemnify.  The latter duty runs only to claims that are actually covered by the [agreement], while the duty to defend extends to claims that are merely potentially covered.  The [indemnitor’s] defense duty is a continuing one, arising on tender of defense and lasting until the underlying lawsuit is concluded, or until it has been shown that there is no potential for coverage.”  (Crawford, supra, 44 Cal.4th at p. 547 [citations and quotations omitted, emphasis in original].)  Further, “a contractual promise to “defend” another against specified claims clearly connotes an obligation of active responsibility, from the outset, for the promisee’s defense against such claims.  The duty promised is to render, or fund, the service of providing a defense on the promisee’s behalf — a duty that necessarily arises as soon as such claims are made against the promisee, and may continue until they have been resolved.”  (Id. at pp. 553–554.)   

Equally important, “If not forbidden by other, more specific, statutes, the obligations set forth in [Civil Code] section 2778 thus are deemed included in every indemnity agreement unless the parties indicate otherwise.”  (Crawford, supra, 44 Cal.4th at p. 553.)  Civil Code section 2778 provides, in pertinent part:  

4. The person indemnifying is bound, on request of the person indemnified, to defend actions or proceedings brought against the latter in respect to the matters embraced by the indemnity, but the person indemnified has the right to conduct such defenses, if he chooses to do so; 

5. If, after request, the person indemnifying neglects to defend the person indemnified, a recovery against the latter suffered by him in good faith, is conclusive in his favor against the former 

(Civ. Code § 2778, subds. (4)–(5).)  “By virtue of these statutory provisions, the case law has long confirmed that, unless the parties' agreement expressly provides otherwise, a contractual indemnitor has the obligation, upon proper tender by the indemnitee, to accept and assume the indemnitee's active defense against claims encompassed by the indemnity provision. Where the indemnitor has breached this obligation, an indemnitee who was thereby forced, against its wishes, to defend itself is entitled to reimbursement of the costs of doing so.” (Crawford, supra, 44 Cal.4th at p. 555.)  Moreover,

Implicit in this understanding of the duty to defend an indemnitee against all claims “embraced by the indemnity,” as specified in subdivision 4 of section 2778, is that the duty arises immediately upon a proper tender of defense by the indemnitee, and thus before the litigation to be defended has determined whether indemnity is actually owed.  This duty, as described in the statute, therefore cannot depend on the outcome of that litigation.  It follows that, under subdivision 4 of section 2778, claims “embraced by the indemnity,” as to which the duty to defend is owed, include those which, at the time of tender, allege facts that would give rise to a duty of indemnity.  Unless the indemnity agreement states otherwise, the statutorily described duty “to defend” the indemnitee upon tender of the defense thus extends to all such claims.”  (Id. at p. 558.) 

Whether a duty to defend arises from an indemnity agreement is question of law for a court.  (See Centex Homes v. R-Help Construction Co., Inc. (2019) 32 Cal.App.5th 1230 (“the duty to defend was not a question of fact for the jury; the trial court was compelled to determine [that issue of duty] as a matter of law”].) In Centex Homes, the court rejected the promisee’s argument that “the question of scope of work under the subcontract may be resolved independently of the underlying tort action,” because the court found that the scope of work was an issue in the underlying tort action, and therefore, the duty to defend arose “as a matter of law from the mere allegation in the underlying tort action that plaintiff’s injuries arose out of R-Help’s work.” (Id. at 1236.)  

The duty to defend continues until the underlying lawsuit is concluded “or until it has been shown that there is no potential for coverage.” (Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 295 (emphasis in original).) “To prevail, the insured must prove the existence of a potential for coverage, while the insurer must establish the absence of any such potential. In other words, the insured need only show that the underlying claim may fall within policy coverage; the insurer must prove it cannot.” (Id. at 300 (emphasis in original).) Doubt about an insurer’s duty to defend generally must be resolved in the insured’s favor. (Id.)

Navigators offers the following undisputed material facts:

-          On February 8, 2021 Navigators were brought into a wrongful death action by Plaintiffs. (UMF 1, 3, Nav. Exh. 1.)

-          Plaintiffs alleged that Navigators was liable because Phung was acting within the scope of her employment with Navigators. (UMF 4; Nav. Exh. 2, 3 (Plaintiff’s Discovery Responses).)

-          On January 23, 2019, Phung entered into an Independent Contractor Agreement (Agreement) with Navigators dba US National Realty to be a real estate agent. (UMF 5; Nav. Exh. 4.)

-          On August 4, 2021, Navigators tendered a defense to Phung which was rejected on August 19, 2021 and September 8, 2021. (UMF 8, 9; Exh. 5, 6, 7.)

-          Phung argued the tender was being rejected because Phung disagreed with Plaintiff’s contention that Phung was working within the course and scope of her employment at the time of the incident. (UMF 10, 11; Exh. 6, 7.)

-          Phung further argued that the tender could be rejected solely because Plaintiffs’ allegations were contrary to the facts. (UMF 11; Exh. 7.)

The Agreement indemnity clause signed by Navigators and Phung stated:

Regarding any action taken or omitted by Associate-Licensee, or others working through, or on behalf of Associate- Licensee in connection with services rendered or to be rendered pursuant to this Agreement or real estate licensed activity prohibited by this agreement: (i) Associate-Licensee agrees to indemnify, defend and hold Broker harmless from all claims, disputes, litigation, judgments, awards, costs and attorney fees, arising therefrom.

(Nav. Exh. 4 ¶ 14A.)  

Phung argues that “[i]t was conclusively established that Navigators could not be liable to Plaintiffs under the Complaint on December 17, 2020, when Ms. Phung’s deposition testimony demonstrated that Plaintiffs’ claim was not a covered event under the indemnity agreement. (Phung’s Resp. to UMF 12.) “Additionally, even assuming that Ms. Phung’s duty to defend Navigators was triggered on the date of Navigators’ tender of the defense (August 4, 2021), that duty ended shortly thereafter as a result of the findings from additional discovery conducted after the date of tender through September 27, 2021.” (Id.)

The Court finds based on the evidence and the law that Phung’s duty to defend Navigators under the Agreement arose as a matter of law from the mere allegation in the underlying action that Plaintiffs’ injuries arose out of Phung’s work, and immediately upon the tender of defense of a claim. Phung does not dispute that Plaintiffs alleged that Navigators was liable because Phung was acting within the scope of her employment with Navigators. The vicarious liability theory was therefore within the scope of the indemnity agreement, because the indemnity provision specifically related to “services rendered or to be rendered pursuant to this Agreement.” (Exh. 4, ¶ 14A.) Navigators tendered a defense to Phung on August 4, 2021, giving rise to the duty to defend.

The Court further finds that the duty to defend did not expire until the Court granted Plaintiffs’ motion for summary judgment in favor of Navigators. Phung has not established the absence of any potential for coverage prior to the Court’s granting of the motion for summary judgment. This case does not involve, for example, a coverage exclusion under the plain language of a contract. (See, e.g., All Green Electric, Inc. v. Security National Ins. Co. (2018) 22 Cal.App.5th 407, 413.) Rather, this case involves facts that were disputed by Plaintiffs under a potential theory of liability covered by the indemnity agreement.

Accordingly, the Court finds that Phung owed a contractual duty to defend Navigators from the time of the tender, August 4, 2021, to the Court’s granting of Navigators’ motion for summary judgment against Plaintiffs on September 20, 2022.

CONCLUSION AND ORDER

            Based on the foregoing, Navigators Real Estate Inc.’s Motion for Summary Adjudication on its cross complaint is GRANTED.

            Defendant Navigators Real Estate Inc. shall provide notice of this ruling and file a proof of service of such.