Judge: Ronald F. Frank, Case: 19TRCV00363, Date: 2022-10-28 Tentative Ruling

Case Number: 19TRCV00363    Hearing Date: October 28, 2022    Dept: 8

Superior Court of California 

County of Los Angeles – Southwest District

Department 8

  Interim Tentative Ruling for Hearings Set for Friday, October 28, 2022

Case: Plaintiffs Lesley Dunlap and Amir Ettekal vs. Kinsale Insurance Company, Stillwater Insurance Company, et al.

Case No: 19TRCV00363

Hearing Date:  October 28, 2022

Trial Date: Jan. 17, 2023

Interim Tentative Ruling:  Conduct oral argument as to the points outlined below, and potentially continue the hearing to November 15 or 17, 2022 if oral argument on October 28 on these issues does not sufficiently help the Court in deciding the pending dispositive motions.  Grant MSA to Stillwater on the punitive damages claim.

Candidly, the Court underestimated the extent of its calendar of other matters when giving itself only three additional days past October 24 in which to complete preparation of its detailed, substantive tentative ruling (which is still in process).  Several afternoon evidentiary hearings cut into the Court’s expected review and analysis time.  The instant motions and evidence present complicated issues that the Court may need to devote more time digesting.  The Court is prepared now to tentatively rule that Stillwater is entitled to summary adjudication as to the punitive damages claim.  But before issuing other tentative rulings, the Court seeks substantive oral argument as to the following three issues:

1.      The Earth Movement Exclusion

As one Court of Appeal has put it, ‘[f]or an insurer, the 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 insurer at the inception of a third-party lawsuit. [Citation.] Hence, the duty “may exist even where coverage is in doubt and ultimately does not develop.” [Citation.]’ (Saylin v. California Ins. Guarantee Assn. (1986) 179 Cal.App.3d 256, 263.)” (Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 295.)  The Court is wrestling with the arguably ambiguous language of the Earth Movement exclusion and its application to the allegations in the neighbors’ Cross-Complaint that Plaintiffs failed “to properly undertake, manage, and control their demolition and excavation activities.” (Plaintiffs’ Ex. 2, ¶ 8.) 

Stillwater asserts that any damage to the neighbors’ property was because of earth movement. However, the neighbors did not allege earth movement per se as defined in the Policy’s exclusion; instead, they alleged damages from “demolition and excavation activities.” (Cross-complaint ¶¶ 7, 8, 9, 10.)  But they did allege “earth and soil [have] subsided and slipped into the excavation, causing damage...” (Id. at ¶ 12.) The terms “subside” and “slip” can be found within Stillwater’s Policy exclusion and to the extent that excavated or adjacent earth that slipped into the excavated hole caused the alleged damage, that activity would appear to be excluded from coverage.  Further, the characterization of the cause of action as one implicating “lateral support” for the retaining wall infers that earth that had provided lateral support for the retaining wall was moved, causing a loss of lateral support thereafter. 

While the excavation process arguably constitutes the physical movement of dirt such as to excavate a hole in the ground, other of the Cross-Complaint’s characterization of the deleterious activities do not appear to fit neatly into the Policy’s “earth movement” category.  The description of “Earth Movement” in the exclusion references natural causes such as an earthquake, tremors before or after a volcanic eruption, landslides, erosion, and related forces of Mother Nature.  There are no examples in the exclusion’s litany of language that indicate an intention to include man-made activities such as pile-driving, felling of trees that transmit surface vibrations upon impact with the ground, the crash of a wrecking ball against a structure built above the ground, sub-surface vibrations generated by the demolition of a concrete foundation, etc.  The Cross-Complaint also alleges harm caused by “demolition” activities.  The damage alleged in the neighbors’ original cross-complaint includes “concrete cracking, drywall cracking and separation, door casing damage, damage to crown moldings, and damage to other building components.” (Cross-Complaint, ¶ 8.) Such damage is consistent with, and there appears to be the possibility of coverage for, the man-made vibrations created by “demolition” of above-ground or below-grade structures, or the driving of heavy machinery across the earth without any earth movement itself, which the Cross-Complaint arguably alleges to ahe caused the interior damage to the residence.

However, Stillwater raises two points to challenge the duty to defend even if the Cross-Complaint does not neatly fit within the Earth Movement package.  One is the concurrent causation language in the exclusion that bears similarity to the language in State Farm Fire and Casualty Company v. Martin (1987) 688 F.Supp.1379, 1382.  The concurrent causation language might be implicated here because one could read the Cross-Complaint as alleging that there are multiple causes of the Knieriem’s damage, including earth and soil subsiding and slipping as well and demolition which might not implicate the movement of earth.     The Court will entertain oral argument as to whether the concurrent causation language in the Earth Movement exclusion and the Martin case may require the Court to find that the exclusion does apply even if the Cross-Complaint provides no basis for determining whether some, most, or all of the damage was caused by “earth and soil [that have] subsided and slipped into the excavation” as alleged in the Cross-Complaint.  

2.      The Excess Coverage or Other Insurance Issue.

The second issue the Court seeks oral argument assistance on concerns the other insurance issue.  Section II(H) of Stillwater’s insurance policy provides, “[t]his Insurance is excess over other valid and collectible insurance except insurance written specifically to cover as excess over the limits of liability that apply in this policy.”  (AMF 30.) Plaintiffs argue that Stillwater cannot rely on Section II(H), citing to the Court’s reasoning in Dart Indus., Inc. v. Commercial Union Ins. Co. (2002) 28 Cal. 4th 1059, 1079-80.  Regarding Plaintiffs’ action against the Knieriems, both First American and Kinsale provided Plaintiffs with “other valid and collectible insurance,” and neither was “written specifically to cover excess” over the Stillwater policy. The Kinsale policy has $1,000,000 limits. (Stillwater’s AMF 33.) Neither policy was exhausted. (Id. at 34.) According to the plain and non-competing language of the policies, Stillwater is an excess insurer with no duty to defend Plaintiffs.

In Hartford Casualty Ins. Co. v. Travelers Indem. Co. (2003) 110 Cal.App.4th 710, 725-727, the Court noted that “Contractual terms of insurance coverage are honored whenever possible. The courts will therefore generally honor the language of excess ‘other insurance’ clauses when no prejudice to the interests of the insured will ensue.” However, there are many exceptions.  The Court will entertain oral argument as to whether any of the recognized exceptions to the general rule of honoring “other insurance” clauses apply here, whether there is a conflict between the Stillwater and Kinsale “other insurance” clauses, and whether the fact that the so-called “true primary” policy (the First American policy appears to have no “other insurance” clause) provided ample coverage that has not been exhausted, thus never reaching Stillwater’s arguable excess layer of potential coverage. 

3.      Plaintiff’s Pending Motion for Leave to File Second Amended Complaint.

Does the pending Second Amended Complaint alter the analysis of the MSJ or MSA?  The Court observes that Plaintiff has field and set a November 17, 2022 hearing on its motion for leave to file a revised pleading.  Because there does not appear to be a stipulation by Stillwater to allow that amendment, the inference is raised that the proposed amended pleading makes one or more material changes in the allegations a mere two months before trial.   The Court seeks oral argument as to whether Plaintiff’s 11^th-hour postposed amendment of its suit, after the dismissal of several parties and arguable narrowing of issues, has any effect on the issues raised by Stillwater or by Plaintiff in their dispositive motions.