Judge: Christopher K. Lui, Case: 25STCV00434, Date: 2025-05-14 Tentative Ruling
Case Number: 25STCV00434 Hearing Date: May 14, 2025 Dept: 76
Defendant City of San Diego’s demurrer to the First Amended Complaint is SUSTAINED with leave to amend as to the first cause of action.
Plaintiff is given 30 days’ leave to amend where indicated.
ANALYSIS
Demurrer
Requests For Judicial Notice
Defendant’s request that the Court take judicial notice of the First Amended Complaint filed in this action is GRANTED per Evid. Code, § 452(d)(court records).
Meet and Confer
The Declaration of Ryan C. Caplan reflects that Defendant’s counsel satisfied the meet and confer requirement set forth in Civ. Proc. Code, § 430.41.
Discussion
Defendant City of San Diego demurs to the First Amended Complaint as follows:
1. First
Cause of Action (Declaratory Relief – Breach of the Cooperation Condition (No Duty
to Defend or Indemnify Superpedestrian in Four of the Underlying Actions Under each
of the Policies)
Defendant
demurs to the first cause of action on the following grounds:
First, Underwriters
cannot avoid their duties to defend and/or indemnify the City because of a separate
insured’s (Superpedestrian’s) alleged breach of a duty to cooperate. The City’s rights are separate and independent
from those of Superpedestrian under the insurance policies at issue in Underwriters’
claim against the City.
Second, the
FAC pleads no facts or allegations that the City breached any duty to cooperate
that could otherwise excuse Underwriters’ coverage obligations owed to the City.
Finally, the
FAC does not, and cannot, plead any facts supporting a claim to avoid
Underwriters’ coverage obligations
based on alleged non-cooperation because Underwriters do not, and cannot, plead
facts demonstrating they are “substantially prejudiced”—a necessary element of their
claim. As Underwriters are incapable of seeking
relief for alleged non-cooperation until the underlying lawsuit is concluded, any
requested further amendment would be futile.
Plaintiff argues that New York law applies per the policy’s choice of law provisions, and New York law does not required a showing of “substantial prejudice.” Plaintiff also argues that a breach by one insured can affect the coverage for others.
The Court first considers which state’s law applies:
If the parties state their intention in an express choice-of-law
clause, California courts ordinarily will enforce the parties’ stated intention
unless (1) the chosen state has no substantial relationship to the parties or their
transaction, and there is no other reasonable basis for the parties’ choice, or
(2) the chosen state’s law is contrary to a fundamental policy of the state whose
law otherwise would apply, and the latter state has a materially greater interest
in the matter than does the chosen state. (Nedlloyd Lines B.V. v. Superior Court
(1992) 3 Cal.4th 459, 464–466 & fns. 5 & 6 [11 Cal. Rptr. 2d 330, 834 P.2d
1148].)
(Frontier Oil Corp. v. RLI Ins.
Co. (2007) 153 Cal. App. 4th 1436, 1450 n.7 [bold emphasis added].)
Here, the Court finds that New York has no substantial relationship to the parties or their transaction, and there is no other reasonable basis for the parties’ choice. The Court accepts Defendant’s argument that none of the parties are domiciled in New York. Underwriters are London-based; Superpedestrian is a Massachusetts company; and the City is a California municipality. (See FAC ¶¶ 16-18], 31, 32, 98, & 100.) Indeed, the 1AC does not allege any factual basis to find that there is a substantial relationship to the parties or their transaction, nor another reasonable basis for the parties’ choice. Plaintiff had an opportunity to articulate this in the opposition but failed to do so.
As such, the Court finds that California law applies to the parties’ dispute.
Per
United Services Automobile Assn.
v. Martin (1981) 120 Cal.App.3d 963, the declaratory relief cause of action
is not yet ripe because the underlying lawsuit has not been fully adjudicated, so
Plaintiff cannot demonstrate prejudice in order
to assert the insured’s (here, Superpedestrian’s) lack of cooperation as a defense
against the injured persons:
Plaintiff contends that it has alleged a proper cause of action
for declaratory relief and that the trial court erred in sustaining the demurrer.
We find this contention without merit.
As against the injured person an insurer may assert a defense
based on breach by the insured of the cooperation clause of the policy. (Citations
omitted.)
However, in order to prevail
on such a defense, the insurer must satisfy its burden of showing that it has been
prejudiced by the failure to cooperate. (Citation omitted.) That is, the insurer
“must establish at the very least that if the cooperation clause had not been breached
there was a substantial likelihood the trier of fact would [*966]
have found in the insured’s favor.” (Citations omitted.)
Logically, the required
showing of prejudice cannot be made while the main tort action is still pending,
its outcome uncertain, and therefore declaratory relief against the injured persons
at this stage is inappropriate. (Citation omitted.) To permit speculation at this
stage as to whether the insurer may or will be prejudiced in the main tort action
would be inconsistent with the requirement laid down by our Supreme Court that the
insurer must prove prejudice in order to assert the insured’s lack of cooperation
as a defense against the injured persons. (Citation omitted.)
The order of dismissal is affirmed.
(United Services Automobile Assn. v. Martin (1981) 120 Cal. App. 3d 963, 965-966.)
The Court need not address the parties’ other arguments, as they go to the merits of the coverage dispute.
As such, the demurrer to the first cause of action is SUSTAINED with leave to amend.
Plaintiff
is given 30 days’ leave to amend where indicated.