Judge Jon R. Takasugi, Case 21STCV05355 2022-08-31 Tentative Ruling

Lexington’s motion for summary judgment as to its FAC is DENIED. Lexington’s motion for summary adjudication is GRANTED as to Liberty’s laches, volunteer, and statute of limitations affirmative defenses. Liberty’s motion for summary adjudication is DENIED in all other regards.

On 2/10/2021, Lexington Insurance Company (Lexington) initiated this action against Liberty Mutual Insurance Company (Liberty). On 1/18/2022, Lexington filed a first amended complaint (FAC) for equitable subrogation, equitable contribution, and indemnity.

Now, Lexington moves for summary judgment as to its FAC. Simultaneously, Liberty moves for summary adjudication of Lexington’s FAC.

This is an action between two insurers, Lexington and Liberty, to determine their respective liabilities arising out of the satisfaction of a judgment entered in an underlying action entitled James Peterson v. City of Long Beach, et al., Los Angeles County, Superior Court Case No. BC 645456 (the Peterson action). In that action, Mr. Peterson, a police officer employed by the City of Long Beach (the City), sought compensation for injuries which he suffered on 2/23/2016 while attempting to board a Police Department vessel (known as Big Moose) from a dock maintained by the Harbor Department.

The City tendered the Peterson action under two policies. One was issued by Lexington to the City affording coverage in the amount of $10 million per occurrence subject to a $3 million retained limit (the Lexington Policy). The other was issued by Alliant Insurance Services (Alliant) to the City and to other entities identified therein as named insureds by virtue of their membership in The California Association of Port Authorities. That Policy afforded coverage in the amount of $150 million per occurrence subject to a $1 million retained limit. It was underwritten by a number of subscribing insurers at various levels, the first $5 million of which was underwritten by Liberty (the Subscription Policy).

Upon trial of the Peterson action in which the City stipulated to its liability, the jury awarded Mr. Peterson $5,447,664.92.

In granting or denying a motion for summary judgment or summary adjudication, the court need rule only on those objections to evidence that it deems material to its disposition of the motion. Objections to evidence that are not ruled on for purposes of the motion shall be preserved for appellate review.

In light of CCP 437c, subdivision (q), the Court sustains Liberty’s objections to the introduction of police officers’ testimony from the Peterson action. The Court overrules objection to the introduction of the January 28, 2019 email from Liberty’s counsel addressed to the City’s counsel.

Liberty’s refusal to satisfy any part of the judgment above $2 million is inconsistent with its contractual obligations under the terms of the Subscription Policy. As such, Lexington argues that it is entitled to recover the entirety to the $2,635,121.87 which it paid in satisfaction of the judgment in the Peterson action, including all costs and interest. In the alternative, Lexington argues that, at a minimum, both the Lexington Policy and the Subscription Policy should share the loss above Lexington’s $3 million retained limit on a pro rata basis, making Liberty responsible for 148/158ths of the City’s liability consisting of a 93.67088607594937% share amounting to $2,468,342.

To show that the City’s liability in the Peterson action is covered under the Subscription Policy, Lexington argues: (1) the City is a Named Insured under the subscription policy; (2) the Long Beach Harbor Department is a department of the City of Long Beach and is not a separate entity; (3) to give effect to every part of the policy, the coverage provided to Long Beach is not limited to just its premises and operations; (4) none of the exclusions in the Subscription Policy preclude coverage for the City’s liability; (5) the subscription policy’s coverage is not limited to Port property, Port-owned or scheduled vessels, or Port employees and was intended to apply to injuries to employees of the City; (6) coverage is not limited to “protection and indemnity” risks; (7) coverage is not limited to what the City specifically asked the Subscription Policy’s insurer to insure; and (8) the conduct of the City and the Subscription Policy’s insurers demonstrated an understanding that the City’s liability in the Peterson action was intended to be covered under the policy.

In opposition, Liberty argues that considering the nature of the coverage, the context, and the circumstances of the case, the insuring clause in Liberty’s policy cannot reasonably be interpreted to cover the City for all purposes. More specifically, Liberty argues that: (1) the Subscription Policy specified that covered entities were insured only with respect to “work for and on behalf of the Port”; (2) the crew of the Big Moose and its supervisor were not “working for and on behalf of the Port” such that the policy covers Peterson’s injury; (3) The Port’s group policy was issued through the California Association of Port Authorities for the benefit of public commercial ports. As such, the intention was to insure California port authorities for port activities and not those of other municipal departments, such as the various local police departments, public works departments, or court systems; (4) Peterson’s claim was asserted under the Jones Act which places a non-delegable duty on the employer to provide safe ingress and egress to a vessel.

Lexington argues that the City is a Named Insured under the Subscription Policy. In support, Lexington notes that the Subscription Policy lists the Named Insured as “The City of Long Beach, a Municipal Corporation, the City of Long Beach Harbor Department, the Board of Harbor Commissions of the City of Long Beach and their Officers and Employees (“City”) while acting in said capacity or on behalf of the City in conjunction with a joint powers authority created by the City.” (UF ¶ 39.) Thus, “[a]s written, the endorsement therefore grammatically grants “Named Insured” status to the “City of Long Beach, a Municipal Corporation” as well as to the City’s “Harbor Department” and its “Board of Harbor Commissioners.” (Ibid.)

Lexington also argues that nothing in the Subscription Policy precludes coverage for liability not arising out of “Port property,” and there is not any language in the Subscription Policy limiting coverage to Port-owned vessels or to scheduled vessels. (See UFs ¶¶ 88, 90, 94–96. But see generally ¶¶ UFs 37–59.) Moreover, nothing in the Subscription Policy prevents coverage from applying to the City’s liability in the Peterson action by virtue of the fact that Mr. Peterson was not a “Port employee.” (Ibid.)

In opposition, Liberty argues that the insuring agreement states, in relevant part, that the subscribing insurers will pay on behalf of “the Insured” any amount(s) “the Insured” becomes obligated to pay by reason of their legal liability for damages on account of bodily injury caused by an occurrence. (UF ¶ 31.) The policy defines “Insured” to mean:

The Named Insured and/or subsidiary, associated, affiliated companies or owned and controlled companies, their duly elected and appointed officials, commissioners, officers, employees and volunteers while working for and on behalf of the Port, as now or hereafter constituted . . . .

As such, Liberty contends that the agreement expressly states that the subscribing insurers will provide coverage for Named Insured only while “working for and on behalf of the port.” (UF ¶ 12.)

To show that the crew of the Big Moose and its supervisor were not “working for and on behalf of the Port” such that the policy covers Peterson’s injury, Liberty submitted the following evidence:

- The purpose of the Subscription Policy was to provide insurance coverage to eleven California ports. As such, the reasonable expectation of the policy was not intended to cover liability from an accident related to the operation of a Long Beach police patrol boat that the Port did not supervise or control.

- Officer Peterson and the crew of the Big Moose were hired and supervised by the Long Beach police department and not the Port. (UF ¶¶ 60,61, 63, ; DF 807, 808, 816.)

- The vessel on which Officer Peterson was injured was owned and operated by the Long Beach police department, not the Port. (UF ¶¶ 60, 63,64; DF 809, 816.)

- Under the general maritime law and the Jones Act, an employer has a non-delegable duty to provide a seaman such as Officer Peterson safe ingress and egress to a vessel. The Long Beach police department was Officer Peterson’s employer, not the Port. (See 29 C.F.R. 1915.74(a) (OSHA regulation providing that “an employer shall not permit employees to board or leave a vessel” without a reasonable and safe means of ingress or egress); SeaBright Ins. Co. v. US Airways, Inc. (2011) 52 Cal. 4th 590, 603 (holding that employer has a non-delegable duty to provide a safe workplace for its employees).)

- Under the Jones Act only the seaman’s employer can be sued for negligence and maintenance and cure, and only the owner or operator of the boat can be sued for unseaworthiness. The Jones Act codifies the rights of injured mariners and creates a statutory cause of action in favor of seamen, solely against their employer, when they suffer an injury during the course of their employment. (46 U.S.C. § 30104. “A claim for maintenance and cure concerns the vessel owner’s obligation to provide food, lodging, and medical services to a seaman injured while serving the ship.” Lewis v. Lewis & Clark Marine, Inc., 531 U.S. 438, 441 (2001). The duty “arises from the contract of employment” and “does not rest upon negligence or culpability on the part of the owner or master.” (Ibid.)

Taken together, Liberty argues that “Peterson’s causes of action could only be made against the employer or the boat owner, and the Port was neither. Officer Peterson was not employed by the Port, was suing for injuries arising out of the use of a vessel that the Port did not own or operate, and asserted causes of action for which only the City’s police department could be held responsible. The Port’s subscription policy cannot reasonably be construed to cover that loss.” (Opp., 18: 22-16.)

Lexington argues that the Long Beach Harbor Department is a department of the City of Long Beach and is not a separate entity. As a result, the Port of Long Beach, which is governed by the Board of Harbor Commissioners, is not an entity separate from the City, and coverage for the Port is coextensive with the City. (See, Al Larson Boat Shop, Inc. v. Board of Harbor Commissioners (1993) 18 Cal.App.4th 729, 736) (“The Port of Long Beach … is governed by the Board [of Harbor Commissioners], which is a department of the city.” On this basis, Lexington argues that the Port, as a part of the City, is the same entity for purposes of determining responsibility for installing safe means of boarding the Big Moose.)

In opposition, Liberty argues that this technical distinction should not dictate coverage under the Port’s policy. The subscription policy covers insureds, including the City of Long Beach, only while “work[ing] for and on behalf of the Port.” The Police Department’s alleged negligence in the operation of a police patrol vessel owned and operated by the Long Beach Police Department did not take place while employees were working for and on behalf of the Port. Moreover, as stated, the purpose of the policy was to provide coverage to California ports, rather than to provide coverage to the City writ-large. As such, Liberty contends that liability for this act was not contemplated by the policy.

Lexington argues that the principles of contract interpretation indicate that the Subscription Policy’s coverage was not limited to just the City’s liability arising out of Port operations. “The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.” (Civ. Code § 1641.) Here, Lexington submitted evidence that under the Subscription Policy, coverage for the Port of Redwood City was extended under the named insured endorsement only as respects “the premises and operations of the Port of Redwood City, the City of Redwood City, its Officers, Agents, and Employees; all as now or hereafter constituted.” (UF ¶ 40.) By contrast, the Subscription Policy’s coverage of the Port of Long Beach does not contain a “premises and operation” clause. (UF ¶ 39.)

Lexington argues that “in order to give effect to the language limiting coverage for the City of Redwood City to just “the premises and operations of” the Port, it follows that where the Subscription Policy—as is the case with the coverage afforded for the City of Long Beach—does not similarly limit coverage to just the “premises or operations” of its Port, the Policy’s coverage is not so limited. Instead, like any other policy which is not limited to liability arising solely out of covered premises, the Subscription Policy extends to all otherwise non-excluded liability of the City.” (Motion 28:3-7.)

In opposition, Liberty argues that Lexington’s interpretation is inconsistent with the Subscription Policy’s language and with the City’s objectively reasonable expectations of coverage. The Port’s group policy was issued through the California Association of Port Authorities for the benefit of public commercial ports. As such, the intention was to insure California port authorities for port activities and not those of other municipal departments, such as the various local police departments, public works departments, or court systems. Under Lexington’s interpretation extending coverage “to all otherwise non-excluded liability of the City,” the Subscription Policy would cover liability completely unrelated to the Port’s operations, including for example a slip and fall at City Hall.

Lexington argues that the conduct of both the City and Subscription Policy’s insurers show that the City’s liability in the Peterson action was intended to be covered. In particular, Lexington points to communications between Liberty’s counsel in the City which addressed concerns about the unsafe dock area. (See UFs ¶¶ 72.) For example, the January 28, 2019 email from Liberty’s counsel addressed to the City’s counsel stated that:

the allegations in the Complaint as well as testimony adduced in discovery/depositions also indicate the claim may at least in part be based on allegations of an unsafe dock area, specifically that the gangway between the ‘big’ Moose boat police patrol boat was unsafe. Because witness testimony thus far tends to indicate that as between the Harbor Department (which owns/operates/maintains the dock at the Joint Command And Control Center) and the police department (which employs Ofc. Peterson), the Harbor Department had agreed to design and construct the gangway for use by the City police officers assigned to the City of Long Beach Police Department at the JCCC, but never actually did so. Liberty then stated that “Liberty hereby acknowledges the potential for coverage of the allegations asserted in Mr. Peterson’s complaint….”

In opposition, Liberty contends that the testimony from Long Beach police officers contending that they requested that the Port build a gangway for the boat and that the Port agreed to do so but never supplied one is inadmissible. Moreover, Liberty contends that “[e]ven if there were an evidentiary basis for the claim, those claims would not trigger coverage under the subscription policy. In the underlying action, Officer Peterson proceeded on the sole theory that the City was liable under maritime law in its capacity as Officer Peterson’s “employer.” It is undisputed that the Port authorities did not hire Officer Peterson – he was hired and supervised by the Long Beach Police Department, which had a non-delegable duty to provide safe access to the vessel.” (Opp., 7: 6-10.)

After review of the evidence and relevant case law, the Court concludes that the scope of the Subscription Policy does not “extend[] to all otherwise non-excluded liability of the City” as contended by Lexington. (Motion, 28: 9.)

The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties. (Bank of the W. v. Super. Ct. (1992) 2 Cal. 4th 1254, 1264 (citing Civ. Code § 1636). If contractual language is clear and explicit, it governs. (Ibid.) (citing § 1638). On the other hand, “‘[i]f the terms of a promise are in any respect ambiguous or uncertain, it must be interpreted in the sense in which the promisor believed, at the time of making it, that the promisee understood it.’” (Id. at p. 1264-65) (citation omitted). This rule, “as applied to a promise of coverage in an insurance policy, protects not the subjective beliefs of the insurer but, rather, ‘the objectively reasonable expectations of the insured.’ ” (Id. at p. 1265.) When determining the insured’s objectively reasonable expectations, the court must “interpret the language in context, with regard to its intended function in the policy.” (Ibid.) That is because “‘language in a contract must be construed in the context of that instrument as a whole, and in the circumstances of that case, and cannot be found ambiguous in the abstract.’ ” (Ibid.) (emphasis in original) (citation omitted).

Here, the Port’s group policy was issued through the California Association of Port Authorities for the benefit of public commercial ports. The evidence supports a reasonable inference that the intention of the policy was to insure California port authorities for port activities and not those of other municipal departments, such as the various local police departments, public works departments, or court systems. The Subscription Policy’s definition of “Insured” specified that covered entities, including the City, were insured only with respect to “work for and on behalf of the Port.”

Lexington argues that this modifier was only meant to apply to “duly elected and appointed officials, commissioners, officers, employees and volunteers” of an “Insured” entity, not to the entities themselves.” (Lexington’s Opp., 12: 17-18.)[1] However, if true, this would mean that the policy provided coverage to the City of Long Beach for all purposes, rather than just for the Port’s activities. Such an interpretation simply is not consistent with the insured’s objectively reasonable expectations. (Bank of the West, supra, 2 Cal.4th 1254, 1264.)

The Peterson action involved a claim by a police officer against the Police Department under the Jones Act which creates a statutory cause of action in favor of seaman against their employer when they suffer an injury during the course of their employment. (Lewis v. Lewis & Clark Marine, Inc. (2001) 531 U.S. 438, 441 (The duty “arises from the contract of employment” and “does not rest upon negligence or culpability on the part of the owner or master.”)

As such, Lexington’s evidence does not establish as a matter of law that the Peterson judgment falls within the scope of the Subscription Policy’s coverage.

However, the Court also concludes that Liberty has not established as a matter of law that the Peterson judgment does not fall within the scope of its coverage. Lexington submitted evidence that supports a reasonable inference that the Port was on notice that the dock area was unsafe, and that the Harbor Department had agreed to design and construct the gangway for use by the City police officers assigned to the City of Long Beach Police Department at the JCCC, but never actually did so. (UF ¶ 73.) While the Court agrees that police officer’s testimony in the Peterson action is inadmissible here, this information was also contained in a 1/28/2019 email from Liberty’s counsel to the City’s counsel, acknowledging a potential for coverage. As a letter of admission by counsel, it is admissible under Evidence Code section 1222. (See Nissel v. Certain Underwriters at Lloyds of London (1998) 62 Cal.App.4th at 1103, 1108, n. 7 [letter from insured’s counsel constituted admission under Evid. Code, § 1222]; St. Mary & St. John Coptic Orthodox Church v. SBC Ins. Servs., Inc. (2020) 57 Cal.App.5th 817, 833 [letter from coverage counsel constituted admission]; Volkswagen of America, Inc. v. Superior Court (2006) 139 Cal.App.4th 1481, 1494 [“A statement by a claimant concerning the extent of his injuries or disease, or concerning the amount of damages he or she claims to have suffered, if ‘not connected with an offer of compromise,’ may well constitute an admissible admission.”]

In sum, the Court concludes that there are triable issues of fact as to whether, and to what extent, the Port could be liable for some portion of Peterson’s injury if the Harbor Department knew the dock was unsafe and had agreed to design and construct a gangway to address it. Liberty counsel’s own email acknowledged that, if this were the case, there was “the potential for coverage of the allegations asserted in Mr. Peterson’s complaint….” (UF ¶ 73.) As such, it is not possible at this time to determine whether or not the Peterson judgment falls within the scope of the Subscription Policy’s coverage.

Moreover, there remain triable issues of material fact as to whether or not Mr. Peterson was “working for and on behalf of the Port” by virtue of his assignment by the Police Department to patrol within the Harbor District.

In light of this conclusion, the Court need not reach the remaining issues raised by Lexington as to subrogation, and equitable contribution, The Court also does not address issues now mooted by Liberty’s dismissal of its cross-complaint.

This leaves only the issue of Liberty’s affirmative defenses. In its briefing, Lexington challenges only five affirmative defenses: that Lexington was a volunteer, statute of limitations, waiver, estoppel, and laches. (See Lexington’s Opening Brief at 47-50.) Despite listing other affirmative defenses in its notice of motion, Lexington’s brief does not discuss any other affirmative defenses, and thus the Court excludes those affirmative defenses from its analysis here.

In its opposition, Liberty did not oppose the challenge to its laches defense. Moreover, Liberty acknowledges that there is no affirmative defense of “volunteer,” and that it “did not raise statute of limitations as an affirmative defense.” (Opp., 28: 25-27.) Accordingly, the Court grants Lexington’s motion for summary adjudication as to these affirmative defenses.

However, the Court concludes that there remain triable issues of fact as to the waiver and estoppel affirmative defenses. Liberty submitted evidence that Lexington never took the position that its insurance is second-level excess with the City of Liberty prior to this lawsuit. (DF ¶¶ 817-18.) Rather, it acknowledged coverage and claimed that Liberty and Lexington had concurrent duties to indemnify. (Ibid.) Moreover, Lexington not only acknowledged coverage, but actively participated in and directed the City’s defense of the Peterson lawsuit. (UF ¶ 816.) Just before trial, Lexington instructed its appointed defense counsel to stipulate to liability in the underlying action without any prior notice to Liberty. (DF ¶ 821.) As a result, the issue of the Port’s alleged liability in causing the accident was never litigated.

Taken together, there remain triable issues of material fact as to whether or not Lexington has forfeited or is estopped from arguing that Liberty’s insurance may be treated as primary insurance in relation to Lexington’s policy and from contending that the Port’s supposed negligence contributed to the injury.

Based on the foregoing, Lexington’s motion for summary judgment as to its FAC is denied. Lexington’s motion for summary adjudication is granted as to Liberty’s laches, volunteer, and statute of limitations affirmative defenses. Liberty’s motion for summary adjudication is denied in all other regards.

Parties who intend to submit on this tentative must send an email to the court at smcdept17@lacourt.org by 4 p.m. the day prior as directed by the instructions provided on the court website at www.lacourt.org. If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative. If all parties to a motion submit, the court will adopt this tentative as the final order. If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar.

Due to Covid-19, the court is strongly discouraging in-person appearances. Parties, counsel, and court reporters present are subject to temperature checks and health inquiries, and will be denied entry if admission could create a public health risk. The court encourages the parties wishing to argue to appear via L.A. Court Connect. For more information, please contact the court clerk at (213) 633-0517. Your understanding during these difficult times is appreciated.

[1] In support, Lexington cited Toledo-Lucas County Port Authority v. Axa Marine & Aviation Ins. (UK), Ltd., (6th Cir. 2004) 368 F.3d 524. As a 6^th Circuit case, the Court declines to consider it.