Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_14-cv-01671/USCOURTS-cand-3_14-cv-01671-2/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

RICHARD E. HASKINS, et al.,

Plaintiffs,

v.

EMPLOYERS INSURANCE OF 

WAUSAU, et al.,

Defendants.

Case No. 14-cv-01671-JST 

ORDER GRANTING MOTION FOR 

SUMMARY JUDGMENT

Re: ECF No. 46

Before the Court is Plaintiffs Richard E. Haskins, Arthur L. Haskins, and the estate of 

Arthur “Buzz” Haskins, Jr. (collectively, “Plaintiffs”) motion for partial summary judgment that 

the liability insurer for their property, Employers Insurance of Wassau (“Wassau”), owed them a 

duty to defend against a counterclaim filed against them in an underlying environmental cleanup 

action.

I. BACKGROUND

A. Factual Background

Plaintiffs own commercial property in South San Francisco. Wassau provided Plaintiffs 

with policies covering comprehensive general liability insurance for this property from 1958 to 

1986 (“the policy”).

1

 Cherokee Acquisition Corp., Cherokee San Francisco LLC, and Cherokee 

Grand Avenue LLC (“Cherokee”) purchased property adjoining Plaintiffs’ in 1999, at which time 

they performed an environmental cleanup before selling the property in 2000. Cherokee failed to 

complete the cleanup prior to the sale and entered into a workplan with Plaintiffs to address 

 

1 Although the parties agreed to multiple policies during this period, several of which are attached 

as Exhibit 1 to Plaintiffs’ motion, ECF Nos. 36-1 through 36-7, neither party contends that the 

policy language regarding the duty to defend varies meaningfully. Accordingly, the policies will 

be referred to collectively throughout this order. 

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remaining contamination at the Site. 

When Cherokee failed to perform as Plaintiffs expected under the plan, Plaintiffs brought a 

lawsuit against them in this District on October 20, 2011. Haskins v. Cherokee Grand Avenue 

LLC, Case No. 3:11-cv-05142-JST (“Haskins I”) at ECF No. 1. Cherokee answered and filed a 

“counterclaim for cost recovery and contribution” on January 30, 2012, seeking declaratory relief 

under 42 U.S.C. Section 9613(g)(2) and cost recovery under 42 U.S.C. 9607(a). Haskins I at ECF 

No. 18. 

Plaintiffs tendered the counterclaim to Wassau and requested a defense. Wassau did not 

agree to defend Plaintiffs against the counterclaim, but offered to pay to settle the counterclaim.

B. Jurisdiction

The Court has jurisdiction under 28 U.S.C.§ 1332(a)(1) as the parties are citizens of 

different states and the amount in controversy exceeds $75,000. 

C. Legal Standard

Summary judgment is proper when “there is no genuine dispute as to any material fact and 

the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). See Celotex Corp. v. 

Catrett, 477 U.S. 317, 323-24 (1986). A dispute is genuine only if there is sufficient evidence for 

a reasonable fact finder to find for the non-moving party, and material only if the disputed fact 

might affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 

(1986). The court must draw all reasonable inferences in the light most favorable to the nonmoving party. Johnson v. Rancho Santiago Cmt. Coll. Dist., 623 F.3d 1011, 1018 (9th Cir. 2010). 

II. ANALYSIS

The only issue currently before the Court is whether Wassau owed Plaintiffs a duty under 

the policy to defend them against Cherokee’s counterclaim in the underlying litigation. 2 Wassau 

 

2

The parties’ briefing discusses at length the negotiations surrounding the settlement ultimately 

reached between Plaintiffs and Cherokee, which Wassau alleges was collusive. These details are 

not relevant to resolution of the instant partial summary judgment motion, which Plaintiffs insist 

concerns only the issue of whether, once Cherokee filed a counterclaim in the underlying action, 

Wassau had a duty to defend Plaintiffs against that counterclaim. ECF No. 46 at 4 (Plaintiffs state 

that the motion “presents only one issue for the Court to decide: whether Defendants had a duty to 

defend Plaintiffs against a counterclaim filed against them in an underlying suit.”) Plaintiffs do 

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does not dispute that the policy contained a provision requiring Wassau to “defend any suit against 

the insured seeking damages” on account of property damage. See, e.g., ECF No. 36-3 at 0025. 

The main dispute between the parties is whether, under California law, a counterclaim is defined 

as a “suit” for the purposes of an insurer’s duty to defend. Plaintiffs argue that Cherokee’s 

counterclaim was an affirmative suit for damages that triggered Wassau’s duty to defend under the 

policy. Wassau contends that the counterclaim was filed by Cherokee “purely for defensive 

purposes” in order to seek an offset against Plaintiffs’ affirmative claim, making it functionally 

equivalent to an affirmative defense rather than a lawsuit. ECF No. 40 at 9. 

Under California law, “[a] liability insurer owes a broad duty to defend its insured against 

claims that create a potential for indemnity.” Montrose Chem. Corp. v. Superior Court, 861 P.2d 

1153, 1157 (Cal. 1993) (internal quotations and citation omitted). Thus, “the carrier must defend a

suit which potentially seeks damages within the coverage of the policy.” Id. “Any doubt as to 

whether the facts establish the existence of the defense duty must be resolved in the insured's 

favor.” Id. at 1160.

The Court observes initially that in Foster-Gardner, Inc. v. Nat'l Union Fire Ins. Co., 959 

P.2d 265, 286 (Cal. 1998), as modified (Sept. 23, 1998), the California Supreme Court announced 

the “bright-line rule” that, for the purposes of the duty to defend, “a ‘suit’ is a court proceeding 

initiated by the filing of a complaint.” Because Cherokee’s counterclaim took the form of a court 

proceeding in which Cherokee filed a two-count complaint in addition to its answer, FosterGardner indicates that the counterclaim potentially sought damages within the coverage of the 

policy, triggering Cherokee’s duty to defend. 

In support of the notion that insurers need not defend an insured against a counterclaim

under these circumstances, Defendants rely largely on Great American Ins. Co. v. Chang, No. 12-

00833-SC, 2013 WL 3153279, at *1 (N.D. Cal. June 19, 2013) reconsideration denied sub nom. 

 

not seek summary judgment as to the question of whether Wassau breached its alleged duty. 

Although Wassau argues that Plaintiffs’ actions in rejecting a settlement that Wassau reached with 

Cherokee violated the policy’s cooperation clause, resulting in Plaintiffs’ assumption of 

responsibility for their own defense, this argument goes to the question of breach, an issue not 

currently before the Court. Id. at 10. 

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Great Am. Ins. Co. v. Chang, No. 12-00833-SC, 2013 WL 3965420 (N.D. Cal. July 31, 2013). In 

that case, insured plaintiffs owned a property that was contaminated with chemicals leaking from 

underground storage tanks. Id. at *1. After a lessee brought a nuisance suit against the plaintiffs, 

the plaintiffs filed a cross-complaint against other parties who had used the property, alleging that 

those parties were responsible for the contamination. Id. at *2. Those parties then filed crosscomplaints against the insured plaintiffs, “seeking indemnity and contribution for any damages for 

which they were held liable.” Id. The plaintiffs sought to recover from the insurer for costs 

relating to the defense of these cross-complaints. Id. at *9. The insurer argued that the duty to 

defend under the policy, which required the insurer to defend “any suits against the [insured] 

seeking damages,” was not triggered by the cross-complaints, as they merely sought “to reduce 

any liability the cross-complainants may be found to have to the [plaintiffs]” and did not “seek 

affirmative recovery.” Id. The court agreed with the insurer, finding that the “cross-complaints in 

this action are almost exclusively defensive.” Id. at *10. 

In reaching this conclusion, the court relied on the California Court of Appeal’s decision in 

CDM Investors v. Travelers Casualty and Surety Co., 139 Cal.App.4th 1251 (2006). The 

plaintiffs in that case, who owned commercial property, sued former tenants under CERCLA3to 

apportion liability for response costs the State Water Board had ordered them to pay. “The tenants 

raised affirmative defenses seeking to apportion responsibility to plaintiffs.” Great American, 

2013 WL 3965420 at *9. Although the plaintiffs claimed that the affirmative defenses were the 

“functional equivalent of a counterclaim,” the court concluded that “an affirmative defense would 

only constitute a suit seeking damages for the purposes of the policy if the affirmative defense 

‘would unquestionably have been a suit for damages if asserted in a court of law.’” Id. (quoting 

CDM, 139 Cal.App.4th at 1269). The court concluded that the tenants “had no independent suit 

against plaintiffs that they sought to reduce to a monetary value by asserting it as a setoff payment 

for the liability that plaintiffs was [sic] alleging against them.” Id. (internal alterations omitted). 

Because the tenants “could not have sued plaintiffs for anything” in the absence of the CERCLA 

 

3

The Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 

§§ 9601–9675. 

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proceeding, the tenants’ indemnity claim was purely defensive—it sought and functioned only to 

reimpose upon plaintiffs what plaintiffs were already legally obligated for.” Id. (internal 

alterations omitted).

Importantly, CDM concluded that under California Supreme Court precedent, “a setoff 

affirmative defense could constitute a suit seeking damages for purposes of” the duty to defend 

under a comprehensive general liability policy “if the affirmative defense (1) would 

unquestionably have been a suit for damages if asserted in a court of law, and (2) fell within the 

scope of the contractual obligation.” CDM, 139 Cal. App. 4th at 1269 (citing Construction 

Protective Services, Inc. v. TIG Speciality Ins. Co., 29 Cal. 4th 189 (2002)). The CDM court 

found that the plaintiffs had failed to satisfy the first prong, as the tenants could not have brought 

an “independent suit” against plaintiffs because the tenants did not have any obligations imposed 

upon them by the State Water Board related to the contamination for which they could have 

brought suit against the property owners. Id. The tenants’ affirmative defenses arose only after 

the property owners had sought contribution from the tenants for litigation that had been brought 

against the property owners. Therefore, in the absence of the property owners’ affirmative claim 

against the tenants, the tenants would not have had an “independent suit” against the property 

owners relating to the contamination and the counterclaims were not covered under the duty to 

defend. Id. Great American similarly involved counterclaims brought by former tenants against 

property owners. The former tenants in both of these cases could not have pursued affirmative 

claims against the property owners relating to the contamination of the property in question, but 

could only seek to offset their damages by bringing counterclaims or affirmative defenses against 

those property owners’ suits. 

Therefore, the critical question in resolving whether that duty to defend was triggered by

Cherokee’s counterclaim is whether that counterclaim “would unquestionably have been a suit for 

damages if asserted in a court of law” within the meaning of CDM. Id.

4

 Looking to the crosscomplaint filed by Cherokee in the underlying action, Haskins I at ECF No. 18, Cherokee alleged 

 

4

It is undisputed that a duty to defend fell within the scope of the policy under the first prong of 

CDM. 

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that it had “incurred necessary costs of response at the San Bruno Channel Site consistent with the 

National Contingency Plan under CERCLA, 42 U.S.C. Section 9601 et seq.,” for which it was 

“entitled to recover from” Plaintiffs pursuant to 42 U.S.C. 9607(a). Id. Cherokee thus alleged that 

it had already incurred costs for which Plaintiffs were liable pursuant to a statute. Unlike in CDM

and Great American, where the formers tenants had no claim against the insured until the insured 

brought a claim against them, Cherokee could have brought the counterclaim as an “independent 

suit” even in the absence of the insured’s prosecution of the underlying suit. The Court therefore 

concludes that the counterclaim triggered Wassau’s duty to defend under the policy. 

III. CONCLUSION

The Court hereby grants Plaintiffs’ motion for summary judgment that Wassau owed a 

duty to defend them against Cherokee’s counterclaims in the underlying litigation. The Court 

again notes that Plaintiffs have not requested summary judgment on any other issue, including the 

questions of whether Wassau breached that duty or whether Plaintiffs took action that resulted in 

the forfeiture of that duty. 

IT IS SO ORDERED.

Dated: February 23, 2015

______________________________________

JON S. TIGAR

United States District Judge

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