Judge Ralph C. Hofer, Case EC065130 2022-12-16 Tentative Ruling

Plaintiff Navigators Specialty Insurance Company (Navigators) alleges that it paid more than $1 million to defend and settle an action brought against its insured, Professional Builders, Inc. (Professional Builders), which plaintiff paid under a full reservation of rights. Plaintiff now seeks to recover from defendant reimbursement of defense expenses and settlement payments attributable to non-covered claims.

The motion was denied in part and granted in part. The court found that the fifth cause of action arose out of protected activity, deposition testimony. The court also found that plaintiff had met its burden of establishing a probability of prevailing on the claim as to defendant Professional Builders, so the motion was denied as to that defendant. The court also found that plaintiff had not met its burden of establishing a probability of prevailing on the cause of action as to defendant Eyal Knafo, as an individual, who was sued on an alter ego theory. The court accordingly granted the motion as to that defendant and ordered the fifth cause of action stricken as to defendant Knafo. The court also awarded fees to defendant Knafo for having prevailed on the motion in the sum of $10,000.

On January 26, 2018, defendant Professional Builders filed a Notice of Appeal, indicating it was appealing from the trial court’s order denying Professional Builder’s anti-SLAPP motion (but that the granting of defendant Knafo’s motion and attorneys’ fees was not being appealed).

The court of appeal’s unpublished opinion was filed on January 9, 2019. The trial court order was reversed and remanded with directions to the trial court to enter an order granting the motion and striking Navigator’s fifth cause of action, and to determine the appropriate attorney fees and costs to be awarded to Professional Builders as the prevailing party on the motion.

Under CCP § 437c(p)(1) a plaintiff “has met his or her burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on that cause of action. Once the plaintiff…has met that burden, the burden shifts to the defendant… to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.”

Issue No. 1: Navigators is entitled to summary adjudication of its first cause of action against Professional Builders for a judicial declaration that Navigators had no duty to defend Professional Builders in DiRosario and Daughter, LLC v. Professional Builders, Los Angeles County Superior Court Case No. BC498787.

Issue No. 2: Navigators is entitled to summary adjudication of its second cause of action against Professional Builders for a judicial declaration that Navigators had no duty to settle or indemnify Professional Builders for the claims against it in DiRosario and Daughter, LLC v. Professional Builders, Los Angeles County Superior Court Case No. BC498787.

“Any person interested under a written instrument, excluding a will or a trust, or under a contract, or who desires a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property, or with respect to the location of the natural channel of a watercourse, may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract. He or she may ask for a declaration of rights or duties, either alone or with other relief; and the court may make a binding declaration of these rights or duties, whether or not further relief is or could be claimed at the time. The declaration may be either affirmative or negative in form and effect, and the declaration shall have the force of a final judgment. The declaration may be had before there has been any breach of the obligation in respect to which said declaration is sought.”

Plaintiff apparently argues that there is a current controversy between the parties regarding whether there is coverage for the DiRosario matter, and plaintiff is taking the position that there was no coverage because defendant Professional Builders misrepresented representations and warranties in its application for renewal of the Navigator’s insurance policy, on which Navigators relied in renewing the policy. Plaintiff is also taking the position that there was no coverage for the claims in DiRosario because defendant failed to satisfy the representations and warranties in the Independent Contractors Endorsement to the Navigators policy, based on which Navigators issued its policy.

The argument is rather vague as to a declaration that plaintiff is entitled to reimbursement of all costs and fees incurred in defending the DiRosario matter, in connection with Issue No. 1. There is little legal analysis, for example, indicating why the alleged lack of coverage would eliminate any duty to defend, and the defense provision is not set forth in the moving papers for the court’s interpretation. There is no documentary evidence supporting the amount of expenses sought; only a figure stated in a declaration. This situation calls into question whether plaintiff has met the initial burden of a plaintiff on such a motion, as without certainty as to the amount of defense expenses the court is to declare belong to moving party, this issue is still to be determined, and the motion as brought by plaintiff would not dispose of the entire cause of action.

Plaintiff indicates in the Declaration of Ralph Woodard, who was responsible for supervising the claims handling, defense, and settlement of the claims against Professional Builders in the DiRosario case, that Navigators incurred $95,497.00 to defend Professional Builders against the complaints filed by Travelers and DiRosario, and settled DiRosario’s claim for a settlement payment by Navigators of $1 million. [Amended Woodard Decl., paras. 1, 5, 6].

There is no documentation referenced in the Woodard Declaration which would support the $95,497.00 number sought in defense expenses, which, as discussed above, could support a finding that plaintiff has failed to meet its initial burden on this issue.

In any case, even if the initial burden is considered met, defendant in opposition submits a Large Loss Report from Navigators produced in discovery as part of its claims file, dated August 17, 2016, which indicates that the “Net Paid” for the Loss was $1,000,000, with “Expense” listed at “$92,766”. [Blanchard Decl., para. 12, Ex. 11 (p. 343, NAV 0816)]. This figure does not match the figure in the Woodard Declaration, which is the figure evidently sought to be declared due by the court on summary adjudication, raising triable issues to the amount to be declared owed for expenses for defense of the matter.

In addition, defendant in the opposition has submitted an expert declaration of Terry McNeil, who has had significant experience in the insurance industry in the handling and settlement of fire claims and is aware of, and is an expert in, the practices and standards of care in the insurance claims handling industry. [McNeil Decl., paras. 3, 5, Ex. A]. McNeil has reviewed the appropriate documentation, deposition transcripts, policies, certificates and contracts, as well as the claims file in this matter. [McNeil Decl., para. 6].

“As stated above, Navigators and defense counsel did not properly investigate, pursue and manage the claim on behalf of Professional Builders. This raises questions regarding whether or not the defense costs for which Navigators seeks reimbursement were unreasonable and should have been discounted. That is particularly true considering that Navigators seems to have consistently put its interests above those of the insured. Under the customs and practices of the insurance claims handling industry, billing adjustments are common practice when there are questions or disputes regarding the amount or appropriateness of defense costs. Because defense counsel preparation of this claim fell below what should have occurred under the customs and practices of and standards of care in the insurance claims handling industry, billing adjustments could have been pursued by Navigators for the benefit of its insured.”

Triable issues of fact have been raised with respect to the declaration sought in connection with the expenses of defense, and the motion as to the defense expenses is denied, on this ground, along with the other grounds discussed below.

With respect to Issue No. 2, concerning plaintiff’s claimed entitlement to a declaration that it had no duty to settle or indemnify defendant and is entitled to return of the amount paid to settle the loss, the $1 million policy limits, plaintiff relies on case law under which it is held that insurance coverage is properly precluded by misrepresentations in an insurance application.

“Statutes governing the relationship between an insurer and its insured require that “[e]ach party to a contract of insurance shall communicate to the other, in good faith, all facts within his knowledge which are or which he believes to be material to the contract and as to which he makes no warranty, and which the other has not the means of ascertaining.” (Ins.Code, § 332.) “Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed contract, or in making his inquiries.” (Ins.Code, § 334.)

“Neglect to communicate that which a party knows, and ought to communicate, is concealment.” (Ins.Code, § 330.) “Concealment, whether intentional or unintentional, entitles the injured party to rescind insurance.” (Ins.Code, § 331.) “If a representation is false in a material point, whether affirmative or promissory, the injured party is entitled to rescind the contract from the time the representation becomes false.” (Ins.Code, § 359.) Other remedies also are available where an insured has misrepresented or concealed material facts. (Resure, Inc. v. Superior Court (1996) 42 Cal.App.4th 156, 161, 49 Cal.Rptr.2d 354.)

Plaintiff submits evidence that this insurance dispute arose when DiRosario and Daughter, LLC and Daniel DiRosario filed a complaint in intervention against defendant Professional Builders in the DiRosario action, the DiRosario parties filed their complaint in intervention in a subrogation action previously initiated by Travelers Casualty Insurance Company of America, and that in that matter, Navigators defended Professional Builders under a policy of insurance issued to Professional Builders effective from November 16, 2011 to November 16, 2012, and retained counsel to defend Professional Builders against both the complaint filed by Travelers and the complaint in intervention filed by DiRosario. [UMF Nos. 1-3, and evidence cited].

Plaintiff argues that because defendant made material misrepresentations on its application for renewal of the insurance in connection with its practices with respect to requiring insurance on the part of subcontractor, plaintiff’s obligations under the insurance policy became invalid, and plaintiff had no obligation to defend or pay policy benefits.

Plaintiff relies on evidence that Professional Builders submitted an Application for Insurance dated November 9, 2011 to Builders & Tradesmen’s Insurance Services, seeking insurance from Navigators, and that Professional builders represented that it requires all subcontractors to name Professional Builders as an additional insured and requires and maintains proof of general liability and workers compensation insurance of subcontractors. [UMF Nos. 20, 21, and evidence cited, Cox Decl., Ex. A, Knafo Depo., Ex. 2, p. 236]. Specifically, the application (the copy provided to the court of which is borderline illegible) asks,

Plaintiff argues that the evidence establishes that from 2007 until the fire in March of 2012, Professional Builders did not require subcontractors to have general liability insurance and did not require the naming of Professional Builders as an additional insured. [UMF Nos. 22-33, and evidence cited].

1. Commercial general liability insurance coverage for “bodily injury" and “property damage” will be required for all contractors and sub-contractors performing work or operations on behalf of any insured; and the insured shall obtain certificates of insurance from all contractors and sub-contractors performing work or operations on behalf of any insured. Such insurance will be in effect during the duration of the time work is being performed on behalf of any insured; and that

4. Any coverage that might otherwise exist under this policy for claims against any insured based on work done for or on behalf of any insured by a contractor or subcontractor is expressly excess over and will not contribute with the insurance required under this endorsement. No duty to defend or indemnify any insured under this policy for any claims that are or should be covered under the policies required of contractors and subcontractors under this endorsement will exist absent exhaustion of all such contractors' and subcontractors' policies.

Plaintiff argues that defendant did not in fact require such insurance of subcontractor South West Roofing, as the subcontract did not require the naming of Professional Builders as an additional insured, or require that South West Roofing indemnify Professional Builders. [UMF No. 34, and evidence cited, Basile Decl., para. 5, Knafo Depo., Ex. 5, p. 40].

However, the moving papers also show that United Contractors Insurance Company issued an insurance policy to South West Roofing effective May 10, 2012, through May 10, 2012, during the period of the work. [See UMF No. 35, and evidence cited, Basile Decl., para. 6, Ex. E, Rojo, Depo. Ex. 5, 6].

It accordingly appears that the moving papers themselves raise competing reasonable inferences with respect to whether there was a breach of the Endorsement sufficient to support a finding that coverage does not apply. CCP § 437c(c) provides that “summary judgment shall not be granted by the court based on inferences reasonably deducible from the evidence if contradicted by other inferences or evidence that raise a triable issue as to any material fact.” See also Hepp v. Lockheed-California Co. (1978) 86 Cal.App.3d 714, 718.

Defendant in opposition submits further evidence suggesting that Professional Builders in fact complied with the requirements of the Independent Contractors’ Endorsement. [Response to UMF No. 35, and evidence cited]. Specifically, defendant relies on the copy of the Southwest Roofing insurance policy, and the Accord certificate in defendants’ possession, and submits testimony of Giovanni Knafo, Professional Builder’s President, explaining the issuance and significance of the insurance documentation and certificate, and defendant’s unawareness of any ultimate limitations which were included in the Southwest Roofing policy, which were buried in the later pages of the policy, and never called to the attention of defendant. [Response to UMF No. 35, and evidence cited, Knafo Decl., para. 6-15]. Defendant’s expert, based on these facts, also testifies in his declaration, citing specific facts and reasons, that “it is my opinion that Professional Builders complied with the Independent Contractors endorsement.” [McNeil Decl., para. 17].

“• In paragraph 1, the endorsement requires that subcontractors have “property damage”.” For the roofing project, South West Roofing in fact had “Commercial general liability insurance coverage for “bodily injury” and “property damage” for the policy period 5/10/11 through 5/10/12.

• Also, in paragraph 1, the endorsement requires that the insured obtain a certificate of insurance for its subcontractor. At the time of the roofing project, Professional Builders had an Accord certificate of insurance in its possession from United Contractors Insurance Company.

• In paragraph 2, the endorsement requires that the insured be named as an additional insured. The South West Roofing Accord insurance certificate dated 5/16/11 clearly states on its face: “Certificate Holder is also listed as Additional Insured.” At the time of the Dirosario roofing project, Professional Builders was in possession of that certificate and in fact the “Holder” of that certificate.

• In paragraph 3, the endorsement requires that subcontractors have the following coverages: $1,000,000 General Aggregate, $1,000,000 Products/Completed Operations Aggregate and $1,000,000 Each Occurrence. In terms of compliance, the South West Roofing Accord insurance certificate dated 5/16/11 on its face shows the following coverages: $2,000,000 General Aggregate; $1,000,000 PRODUCTS - COMP/OP AGG; and $1,000,000 EACH OCCURRENCE. Also, the South West Roofing United Contractors Insurance policy’s declaration page (page 2 and 3 of the policy entitled COMMERCIAL GENERAL LIABILITY COVERAGE PART SUPPLEMENTAL DECLARATIONS) shows the following coverages: GENERAL AGGREGATE LIMIT $2 million; PRODUCT/COMPLETED OPERATIONS $1,000,000; and EACH OCCURRENCE LIMIT $1,000,000. It is important to note that the United Contractors Insurance Company declarations pages do not state any sublimits or exclusions of any kind related to torch down roofing.”

“18. In my opinion, because the Navigators Independent Contractors endorsement does not specifically state that the insured must obtain, read and analyze the insurance policies of subcontractors, the endorsement is ambiguous. It was unrealistic for Navigators to expect this insured (or any other insured) obtain, read and analyze the insurance policies of the subcontractors. That is one the reasons that the customs and practices of the insurance industry issue and require Accord certificates of insurance. Under the customs and practices of the insurance industry, Accord insurance certificates are issued for people and entities to rely upon so that the insurance policies themselves do not have to be analyzed. As a result, if the Accord certificate of insurance failed to properly represent the sublimits of coverage, the responsibility lies with the entity that produced the certificate, not the insured.

19. In my opinion, because the Navigators Independent Contractors endorsement does not specifically require that the insured must verify that the subcontractor insurance policies do not contain sublimits or exclusions, the endorsement is ambiguous.

20. Because the torch down sublimit was not included on the Accord insurance certificate or the declarations page of the United Contractors Insurance policy, the torch down sublimit was not conspicuous, and, in my opinion, a reasonable insured would not have discovered it.”

With respect to the alleged misrepresentations on the policy application, defendant in opposition argues that this does not relieve plaintiff of its obligations under the policy because there are facts supporting an argument that plaintiff did not effectively reserve its rights to argue that the misrepresentations invalidate the policy.

Defendant argues that a reservation of rights letter that is limited to only certain grounds waives the insurer’s right to contest coverage on other grounds known to the insurer at the time the letter was written. Canadian Ins. Co. v. Rusty’s Island Chip Co. (1995) 36 Cal.App.4th 491, 498. In Canadian Insurance, the Second District found that the trial court had not erred in finding that a reservation of rights letter in that case, which failed to reserve the insurer’s right to contest coverage for willful acts or trademark infringement, waived the insurers right to assert those known exclusions as a basis for denying coverage. Canadian Insurance, at 498. The Second District noted:

“As noted above…, the trial court expressly found that Canadian's reservation of rights letter is limited to the points listed in that letter and it “did not properly advise its insured of the reservation of rights” as to any point not mentioned in the letter. This factual finding is binding on this appeal.”

The California Supreme Court in Waller did not overrule or address Canadian Insurance but did cite to various cases in which it is held that whether waiver occurred depends on the intent of the insurer to relinquish contract rights. The Court held that, “California courts will find waiver when a party intentionally relinquishes a right or when that party's acts are so inconsistent with an intent to enforce the right as to induce a reasonable belief that such right has been relinquished.” Waller, at 33-34, quoting Intel Corp. v. Hartford Acc. & Indem. Co. (1991) 952 F.2d 1551, 1559. This conclusion does not appear wholly inconsistent with Canadian Insurance with respect to known defenses where facts support an intentional failure to reserve.

The California Supreme Court in Colony Insurance, supra, a misrepresentation case, indicated that there had been no waiver in that case under Waller because the insurer did not learn of the alleged misrepresentations until they received a first amended complaint in the litigation being defended, and denied the claim, “shortly thereafter.” Colony Insurance, at 753.

Here, the letters sent to defendant never made any reference to any misrepresentations in defendant’s applications, or any misrepresentations at all, but focused on several issues, including the alleged failure to submit proof of compliance with the Endorsement, and did not in the reservation of rights make any recognizable reference to the reservation of rights based on misrepresentation or a reservation of rights with respect to defense expenses.

A letter sent by Navigators to Professional Builders, Inc. on May 10, 2012, quoted the endorsement language, and indicated that to date, the insurer had not received a copy of an insurance contract confirming coverage, and that “We have no proof of the subcontractor exhaustion of any subcontractor policy.” [Amended Woodard Decl., Ex. A, p. 4].

“There are provisions contained in your liability policy with Navigators that may ultimately affect whether you are entit1ed to have Navigators pay for this claim. Navigator's participation in this case will be conducted under a Reservation of Rights to deny indemnity because some or all of the potential claims being made against you are not covered under the terms of your policy.”

A letter sent on July 28, 2014 from Navigators to defendant repeated the endorsement language, and indicated that the current information indicated that the Southwest Roofing policy was subject to a limit of only $100,000 and there was no evidence that Professional Builders was named as an additional insured. [Woodard Decl., Ex. B]. The letter does not mention any misrepresentations in the insurance application. The letter includes a broad statement that “Navigators reserves the right to rely upon any other forms, endorsements, definitions, conditions, terms and exclusions in its Policy, whether or not cited in this letter, to the extent there is evidence that shows such forms, endorsements, definitions, condition, terms and exclusions may apply.” [Woodard Decl., Ex. B, p. 8].

Significantly, this last letter is dated July 28, 2014. This letter was a date after the date of a Large Loss Report submitted by defendant which was produced in discovery from plaintiff’s claims file. The Report is dated July 13, 2014, and in it Navigators states:

“This matter involves a claim for property damage caused by an occurrence during the effective dates of the policy. Thus, the basis requirements of the insuring agreement have been met. The policy, however, contains an Independent Contractors Warranty and we have reserved our rights accordingly. We are also reviewing whether any misrepresentations may have been made to obtain the policy. Our reservations of rights letter will be updated and sent to the insured.”

This supports a reasonable inference that Navigators knew of the misrepresentation at issue by July 13, 2014 but did not take action to reserve its rights on this issue by mentioning it in the July 28, 2014 letter, which could be interpreted by a trier of fact as an intent to relinquish a known ground for denying coverage.

“21. Under the customs and practices of the insurance claims handling industry, an insurance company has a duty to list, for the benefit of the insured, the complete list of specific coverage defenses or reimbursement disputes in its reservation of rights letters about which it is aware and that it intends to assert against its insured.

22. Under the customs and practices of the insurance handling industry, insurance companies intend for insured to rely on what is stated in the reservation of rights letters and rely upon the specific coverage and reimbursement disputes that are stated in the reservation of rights letters.”

Issue No. 3: Navigators is entitled to summary adjudication of its third cause of action against Professional Builders for reimbursement of amounts Navigator’s paid to defend Professional Builders in DiRosario and Daughter, LLC v. Professional Builders, Los Angeles County Superior Court Case No. BC498787.

Issue No. 4: Navigators is entitled to summary adjudication of its fourth cause of action against Professional Builders for reimbursement of amounts Navigator’s paid to settle the claims against Professional Builders in DiRosario and Daughter, LLC v. Professional Builders, Los Angeles County Superior Court Case No. BC498787.

The opposition sets forth the elements of a claim for reimbursement from an insured as set forth in the California Supreme Court case of Blue Ridge Ins. Co. v. Jacobsen (2001) 25 Cal.4th 489, 502 (opinion after certified question answered (9th Cir. 2001) 10 Fed.Appx. 563), in which the Court concluded that the insurer in that case had:

“satisfied the prerequisites for seeking reimbursement for noncovered claims included in a reasonable settlement payment: (1) a timely and express reservation of rights; (2) an express notification to the insureds of the insurer's intent to accept a proposed settlement offer; and (3) an express offer to the insureds that they may assume their own defense when the insurer and insureds disagree whether to accept the proposed settlement.”

In Blue Ridge, also relied upon by plaintiff, the Court expressly did not address the question of whether the settlement in that case involved covered claims or the “reasonableness” of the settlement, as the district court had already found the settlement to be reasonable, and the Ninth Circuit had affirmed the district court’s findings regarding coverage and the reasonableness of the settlement. Blue Ridge, at 497. Accordingly, the reimbursement elements as set forth would also include an element that there are uncovered claims, and that the settlement payment was “reasonable.”

As discussed above, there are triable issues of fact with respect to whether the claims in the DiRosario case are not covered claims under the subject policy, as there are triable issues of fact with respect to whether the basis for plaintiff arguing coverage is not available are valid. Specifically, there are triable issues of fact with respect to whether defendant did not in fact comply with the Independent Contractors’ Endorsement, and triable issues of fact with respect to whether plaintiff through the reservations of rights process and claims investigation intentionally relinquished a known defense based on alleged misrepresentation in the application.

In addition to these grounds, and also as discussed above, triable issues of fact have been raised with respect to the amount of reimbursement to be ordered with respect to the provision of a defense as well as the reasonableness of such claimed expenses which would be awarded on summary adjudication in connection with Issue No. 3.

With respect to reimbursement of the policy limits settlement paid in DeRosario, defendant argues in opposition that additionally there are triable issue of material fact with respect to whether the settlement entered into by the insurer was reasonable.

“[I]n deciding whether or not to compromise the claim, the insurer must conduct itself as though it alone were liable for the entire amount of the judgment. ( Crisci v. Security Ins. Co., supra, 66 Cal.2d at p. 429.) Thus, the only permissible consideration in evaluating the reasonableness of the settlement offer becomes whether, in light of the victim's injuries and the probable liability of the insured, the ultimate judgment is likely to exceed the amount of the settlement offer. Such factors as the limits imposed by the policy, a desire to reduce the amount of future settlements, or a belief that the policy does not provide coverage, should not affect a decision as to whether the settlement offer in question is a reasonable one.”

In Blue Ridge, discussed above, the California Supreme Court cited Johansen for this standard, specifically stating, “Moreover, the insurer may not consider the issue of coverage in determining whether the settlement is reasonable.” Blue Ridge, at 502, citing Johansen, at 15, 16.

Defendant points out that generally, “The reasonableness of an insurer’s conduct is typically a question of fact but can be decided as a matter ‘of law where the evidence is undisputed and only one reasonable inference can be drawn from the evidence.’” Ghazarian v. Magellan Health, Inc. (2020) 53 Cal.App.5th 171, 186-187, quoting Chateau Chamberay Homeowners Assn v. Association Internat. Ins. Co. (2001) 90 Cal.App.4th 335, 346.

Here, defendant argues that at the time of the settlement meetings with Marina Barg, Navigator’s Chief Claims Officer, Ralph Woodard, Navigator’s claims manager for the claim, was aware that Navigators was making claims against Professional Builders that there was not insurance coverage and discussed the right to reimbursement with Barg as a “factor” in the settlement meeting discussions. [Additional Fact No. 401, and evidence cited].

It was also confirmed at deposition that the reimbursement fact was discussed with Barg during the meetings, and that Barg “was aware, we made her aware of that. Yes. We made her aware of that issue and the reservation of rights issue that was outstanding.” [Blanchard Decl., Ex. 3 Woodard Depo., pp. 123-124].

The fact of these discussions specifically of “a belief that the policy does not provide coverage,” in connection with the settlement appear, under Johansen and Blue Ridge, alone to support a reasonable inference that the settlement was not reasonable, so the reasonableness element to support a causes of action is not supported.

In addition, defendant in opposition relies on evidence that Navigators did not consider or pursue the limitation of liability provision in the roofing contract between Professional Builders and the DiRosarios that reduced total liability exposure to $25,000. [Additional Facts Nos. 1-82, 299-307, and evidence cited]. There is also evidence that the claims handler for Navigators at the time the settlement decision was made, Ron Kojima, had been indicating that there was insufficient information to evaluate damages resulting from the fire, that Navigators failed to hire experts or obtain reports of experts necessary to investigate and evaluate the claim, and then excluded the claims handler and assigned defense counsel from settlement negotiations, and that Navigators at the time of settlement was facing the situation where trial was two weeks away, assigned defense counsel was viewed as unprepared for trial, and had also failed to obtain expert reports and permitted the discovery cut off to lapse, and the trial judge had denied a request to continue the trial date. [Additional Facts Nos. 52, 102-104, 228-407, 504-507, and evidence cited].

Based on these facts, deposition testimony, documentation and claims file, and detailed express reasons, defendant’s expert states, “It is my opinion that the $1 million settlement imposed on Professional Builders by Navigators was not reasonable and was excessive.” [McNeil Decl., para. 8, emphasis in original.].

“12. Based upon my review of the materials related to this claim, Ralph Woodard (the claims manager) and Marina Barg (the chief claims officer who made the settlement decision) also did not adequately prepare to make a settlement decision and therefore, did not have sufficient information before them to make a reasonable settlement decision. In the insurance claims handling industry, thorough investigation and preparation related to a claim are critical to protecting the interests of an insured and making reasonable settlement decisions. By failing to adequately prepare for the settlement decision-making meeting, it is my opinion that Navigators actions were contrary to the customs and practices of the insurance claims handling industry and Navigators duties to its insured. Without adequate preparation and sufficient information for them to consider, neither the Ralph Woodard (the claims manager) nor Marina Barg (the chief claims officer) could make a reasonable settlement decision or determine a reasonable magnitude for the settlement in order to protect the insured.

13. To make matters even worse, Navigators engaged in self-serving, biased and unfair behavior in the settlement process because it was afraid of being sued for bad faith insurance practices and because it intended to seek reimbursement from the insured for the settlement.

14. In my opinion, from my review of the claims file, it appears that the motivation for making this settlement was Navigators failure to adequately investigate and prepare to defend the claim in preparation for trial. It appears that Navigators made the decision to settle this case for the policy limits without regard to the actual fair value of the claim in order to justify a Blue Ridge settlement reimbursement claim with no regard for the interests of the insured. In my opinion, the magnitude of the settlement was based more on protecting the interests of Navigators than protecting the interests of the insured.

15. In summary, it is my opinion that the claims handling practices of Navigators for this claim fell far short of what should have occurred under the customs and practices of and standards of care in the insurance claims handling industry. 16. It is my opinion, that because Navigators so poorly investigated and managed this claim that it was unrealistic for them to expect that Professional Builders could take over the claim with only the 2 to 3 weeks before trial to prepare. It was unreasonable of Navigators to expect that Professional Builders (or any other insured) could have taken over the claim and taken it to trial under those time constraints.

The opinions of the expert are sufficient to further raise triable issues of material fact with respect to the reasonableness of the settlement, providing another ground for denying the motion as to the reimbursement causes of action. The motion accordingly is denied.

Specifically, to the extent plaintiff argues that the coverage is excluded due to the failure of defendant to comply with the Independent Contractors’ Endorsement, triable issues of fact have been raised, by both the moving papers and the opposition, with respect to whether this Endorsement was actually breached by the insured, when there is a reasonable inference that defendant did obtain insurance coverage from its subcontractor. [See UMF No. 35, and evidence cited, Basile Decl., para. 6, Exs. E, D, Rojo, Depo. Exs. 5, 6; Response to UMF No. 35, and evidence cited, Knafo Decl., para. 6-15; McNeil Decl., paras. 17-20].

To the extent plaintiff argues that the coverage is excluded due to misrepresentations in the application for insurance, triable issues of fact have been raised with respect to whether this defense when it became known to the insurer was appropriately preserved or is subject to waiver. [Amended Woodard Decl., Ex. A, pp. 2, 4; Ex. B, p. 8; Additional Fact No. 486, and evidence cited, Blanchard Decl., para. 22, Ex. 21; McNeil Decl., paras. 21-22].

To the extent this cause of action involves the duty to defend, the court also notes that the duty analysis in connection with the duty to defend, as opposed to the duty to indemnify, is not satisfactorily briefed in the moving papers, and that triable issues of fact have also been raised with respect to the sum of defense expenses sought to be subject to declaration or return, as there is inconsistency between the Woodard Declaration and the documentation in the claims file, and expert evidence questioning the reasonableness of the sum sought. [Compare [Amended Woodard Decl., para. 5, with Blanchard Decl., para. 12, Ex. 11 (p. 343, NAV 0816); See also, McNeil Decl., paras. 3-6].

In addition, as the cause of action involved is one for reimbursement, triable issues of fact have been raised with respect to whether plaintiff can satisfy the essential element of the reasonableness of the settlement, particularly in light of the consideration by the insurer of the potential for denial of coverage, and the circumstances under which and information upon which the settlement was reached. [Additional Fact No. 401, and evidence cited, Blanchard Decl., para. 6, Ex. 3 (not Ex. 5) Woodard Depo., pp. 120-122; Additional Facts Nos. 1-82, 102-104, 228-407, 504-507, and evidence cited; McNeil Decl., paras. 8-15].

Specifically, to the extent plaintiff argues that the coverage is excluded due to the failure of defendant to comply with the Independent Contractors’ Endorsement, triable issues of fact have been raised, by both the moving papers and the opposition, with respect to whether this Endorsement was actually breached by the insured, which did obtain insurance coverage from its subcontractor. [See UMF No. 35, and evidence cited, Basile Decl., para. 6, Exs. E, D, Rojo, Depo. Exs. 5, 6; Response to UMF No. 35, and evidence cited, Knafo Decl., para. 6-15; McNeil Decl., paraa. 17-20].

Professional Builders Evidentiary Objections to Declarations Submitted by Navigators Specialty Insurance Company in Support of its Motion for Summary Judgment, or in the Alternative, Summary Adjudication Against Professional Builders, Inc. are OVERRULED.

Response and Objections to Professional Builders’ Separate Statement of Additional Material Facts in Opposition to Navigators Motion for Summary Judgment: To the extent objections are made to the Separate Statement of Additional Facts, the Court does not consider a Separate Statement as evidence in the matter. Moreover, CRC Rule 3.1354(b) requires that “[a]ll written objections to evidence must be served and filed separately from the other papers in support of or in opposition to the motion…” (Emphasis added). Objections are accordingly OVERRULED.

Objections to Professional Builders’ Evidence in Opposition to Navigators Specialty Insurance Company’s Motion for Summary Judgment or in the Alternative Summary Adjudication Against Professional Builders, Inc. are OVERRULED as not in proper format. CRC Rule 3.1354 (b).

Please make arrangement in advance if you wish to appear via LACourtConnect/Microsoft Teams by visiting www.lacourt.org to schedule a remote appearance. Please note that LACourtConnect/Microsoft Teams offers free audio and video appearance. Counsel and parties (including self-represented litigants) are encouraged not to personally appear. With respect to the wearing of face masks, Department D recognizes that currently, the Los Angeles Department of Public Health strongly recommends masks indoors, especially when interacting with individuals whose vaccination status is unknown; for individuals who have a health condition that puts them at higher risk for severe illness; individuals who live with someone who is at higher risk; and for individuals who are around children who are not yet eligible for vaccines. In accordance with this guidance, it is strongly recommended that anyone personally appearing in Department D wear a face mask. The Department D Judge and court staff will continue to wear face masks. If no appearance is set up through LACourtConnect/Microsoft Teams, or otherwise, then the Court will assume the parties are submitting on the tentative.