Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-02803/USCOURTS-cand-3_05-cv-02803-5/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

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

NATIONAL UNION FIRE INSURANCE

COMPANY OF PITTSBURGH, PA, a

Pennsylvania corporation,

Plaintiff,

 v.

LANDMARK AMERICAN INSURANCE

COMPANY, an Oklahoma corporation, and

DOES 1 through 10, 

Defendants. /

No. C 05-02803 WHA

ORDER GRANTING NATIONAL

UNION’S PARTIAL MOTION

FOR SUMMARY JUDGMENT

AND VACATING HEARING

INTRODUCTION

In this dispute between insurers, plaintiff National Union Fire Insurance Company of

Pittsburgh, Pennsylvania moves for partial summary judgment pursuant to Federal Rule of Civil

Procedure 56 on the issue of whether defendant Landmark American Insurance Company’s

insurance obligation is primary to the obligation of National Union. This order holds that

Landmark’s primary policy must be exhausted prior to any obligation accruing under National

Union’s excess policy. Accordingly, National Union’s motion is GRANTED.

STATEMENT

The factual background of this dispute was set forth in greater detail in this Court’s

order issued on May 22, 2006, regarding an earlier motion for partial summary judgment

brought by National Union. Briefly, on June 30, 2003, Matamoros Pipeline, Inc., a pipelineCase 3:05-cv-02803-WHA Document 78 Filed 09/13/06 Page 1 of 7
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welding company, entered into an agreement with Mountain Cascade, Inc., a general contractor. 

Pursuant to this agreement, Matamoros was to provide subcontracting work on upcoming

projects for Mountain Cascade. The agreement was subsequently modified on September 21,

2004, and November 21, 2004.

Section VI of the agreement provided indemnification for Mountain Cascade by

Matamoros (Williamson Decl. Exh. A):

To the greatest extent permitted by law, SUBCONTRACTOR

shall defend, indemnify and hold harmless CONTRACTOR . . .

from and against all actions, penalties, assessments, fines actions

by governmental authorities, demands, liabilities, claims,

damages, costs, losses, and expenses, including but not limited to

attorney’s fees and costs, which arise out of or are in any way

related (i) to this AGREEMENT, (ii) to actual or alleged actions

or omissions by SUBCONTRACTOR or any of its

subcontractors, suppliers, vendors, employees, or persons for

whom it is responsible, or (iii) to the project(s) to which the

AGREEMENT relates . . . of any kind whatsoever.

Section VII imposed certain insurance requirements on Matamoros (ibid.):

SUBCONTRACTOR shall carry primary Commercial General

Liability Insurance covering all operations by or on behalf of

SUBCONTRACTOR, and actions or omissions by

SUBCONTRACTOR, providing insurance for bodily injury and

property damage liability.

Section VII further provided (ibid.) (emphasis added):

CONTRACTOR, its officers, directors, and employees, and

OWNER shall be named as additional insureds under the

Commercial General Liability policy and Excess Liability policy

and such insurance afforded the additional insureds shall apply

as primary insurance. Coverage for CONTRACTOR or OWNER

shall not be called upon to contribute with this insurance.

Defendant Landmark issued a general-liability policy to Matamoros. Pursuant to the

above agreement between Matamoros and Mountain Cascade, Matamoros’ policy with

Landmark included Mountain Cascade as an additional insured. The Landmark policy provided

(Ruetggers Decl. Exh. C) (emphasis added):

WHO IS AN INSURED is amended to include as an insured the

person or organization shown in the SCHEDULE, but only with

respect to liability arising out of ‘your work’ for that insured by or

for you.

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 Both parties seek judicial notice of documents from the underlying state litigation. Such public

records are proper subjects for judicial notice under Federal Rule of Evidence 201. This order does not,

however, judicially notice these pleadings and briefs for the truth of the allegations or arguments contained

therein.

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If you are required by a written contract to provide primary

insurance, this policy shall be primary as respects your

negligence.

In 2004, Mountain Cascade was retained by the East Bay Municipal Utilities District to

construct a water-supply line in Walnut Creek, California. The project called for Mountain

Cascade to dig a trench on the side of a roadway and install a 5’ diameter water pipe. 

Matamoros’ workers were to follow behind the Mountain Cascade crew and weld the pipe

sections as they were laid down. The water line was being laid down parallel to a highpressure-petroleum-fuel pipeline owned by Kinder Morgan Energy Partners, L.P. That pipeline

was demarcated by warning signs, but apparently inadequately so (Ruettgers Exh. A).

On November 9, 2004, the petroleum-fuel pipeline was punctured, apparently by an

excavator operated by Mountain Cascade. It is undisputed that because of the puncture,

pressurized petroleum was released into the trench. The parties, however, dispute what

happened next. At least according to a report prepared by the Department of Forestry and Fire

Protection, Office of the State Fire Marshal, “[s]everal seconds after the line was hit, the

gasoline streaming out of the line was ignited by welders employed by Matamoros

Pipelines, Inc. who were also working on the new water supply pipeline” (Ruettgers Exh. A). 

In any event, somehow the pressurized petroleum ignited, thus leading to an explosion and fire. 

Five workers, three from Matamoros and two from Mountain Cascade, were killed by the

explosion. Four others were badly injured. There was also extensive property damage.

Shortly after the explosion, nine complaints and one cross-complaint were filed in the

Superior Court of California for the County of Contra Costa seeking to recover for the injuries

and damages relating to the Walnut Creek explosion.1

 The Contra Costa Superior Court

subsequently coordinated the actions under the title “Gas Pipeline Explosion Cases.” 

Mountain Cascade was named as a defendant in all ten actions. Matamoros was named as a

defendant in two of the actions. Settlements relating to two of the complaints are pending

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review, as Mountain Cascade has apparently challenged whether the settlements are in “good

faith.” None of the ten actions have reached a final disposition.

Mountain Cascade’s own insurance company was National Union. Mountain Cascade

had both primary and excess policies with National Union. On behalf of Mountain Cascade,

National Union tendered Mountain Cascade’s defense for all of the actions against it. 

Landmark, despite the implications of its policy with Matamoros, initially refused requests to

assist National Union in the defense of Mountain Cascade, contending that Mountain Cascade

was not covered under the Matamoros policy.

On July 8, 2005, National Union brought this action against Landmark, seeking

declaratory relief, equitable indemnity and equitable contribution. On May 22, 2006, this Court

issued an order on National Union’s earlier partial motion for summary judgment as to the issue

of whether Landmark had and continues to have a duty to defend Mountain Cascade for claims

against Mountain Cascade relating to the explosion. The May 22 order found, as a matter of

California law, that Landmark had a duty to defend Mountain Cascade given the potential that

the damages from the explosion arose out of Matamoros’ work (May 22 Order at 9). The order,

however, declined to rule on the issue of which insurer’s duty to Mountain Cascade was

primary, explaining (id. at 9–10):

[A] determination of which insurer is primary is premature at this

juncture. Resolution of the ultimate issues of negligence and

culpability will be necessary for a proper determination of this

question. This order leaves to the parties the determination as to

how to apportion the costs of defending Mountain Cascade in the

underlying actions in the interim.

National Union partially renews its request for determination of which insurer bears

primary responsibility for Mountain Cascade’s defense, and for payment of the potential

settlements. Landmark, relying on the above language from the May 22 order, argues that this

issue is still not ripe for review given that no final dispositions have been reached in the

underlying Gas Pipeline Explosion Cases. National Union explains, however, that its instant

motion is more limited than its earlier one. The instant motion only involves an analysis of the

responsibility of National Union with respect to its excess policy for Mountain Cascade as

compared with the responsibility of Landmark under its primary policy for Matamoros. The

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question of the relative responsibilities of National Union and Landmark on the policies they

provided at the same level — primary — is not at issue in this motion.

ANALYSIS

Summary judgment is proper where the pleadings, discovery and affidavits show “that

there is no genuine issue as to any material fact and that the moving party is entitled to

judgment as a matter of law.” Fed. R. Civ. Proc. 56(c). “A party seeking to recover upon a

claim, counterclaim, or cross-claim or to obtain a declaratory judgment may . . . move with or

without supporting affidavits for a summary judgment in the party’s favor upon all or any part

thereof.” Fed. R. Civ. Proc. 56(a) (emphasis added). The moving party has the initial burden of

production to demonstrate the absence of any genuine issue of material fact. Playboy

Enterprises, Inc. v. Netscape Communications Corp., 354 F.3d 1020, 1023–24 (9th Cir. 2004). 

Once the moving party meets its initial burden, the nonmoving party must “designate specific

facts showing there is a genuine issue for trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 323–24

(1986).

Under California law, there are two levels of insurance coverage — primary and excess. 

“Primary coverage is insurance coverage whereby, under the terms of the policy, liability

attaches immediately upon the happening of the occurrence that gives rise to liability.” 

Olympic Ins. Co. v. Employers Surplus Lines Ins. Co., 126 Cal. App. 3d 593, 597 (1981);

see also Hartford Cas. Ins. Co. v. Mt. Hawley Ins. Co., 123 Cal. App. 4th 278, 284 n. 2 (2004). 

In contrast, “‘[e]xcess’ or secondary coverage is coverage whereby, under the terms of the

policy, liability attaches only after a predetermined amount of primary coverage has been

exhausted.” Olympic, 126 Cal. App. 3d at 598. “It is settled under California law that an excess

or secondary policy does not cover a loss, nor does any duty to defend the insured arise, until all

of the primary insurance has been exhausted.” Community Redevelopment Agency v. Aetna

Cas. & Sur. Co., 50 Cal. App. 4th 329, 339 (1996) (emphasis in original). “A secondary insurer

thus greatly reduces his risk of loss.” Olympic, 126 Cal. App. 3d at 598 n. 2.

These principles are not novel. Nor is the application of these principles to the instant

motion complex. The language of Matamoros’ agreement with Moutain Cascade clearly

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 Landmark also complains that it has been “shut out” of the settlement negotiations in the Gas Pipeline

Explosion Cases. Had Landmark been willing to participate in Mountain Cascade’s defense at an earlier stage

in the state litigation, without fighting National Union’s request in this Court, there would never have been an

issue of Landmark being left out. Landmark has only itself to blame.

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indicated that it would cover “CONTRACTOR . . . under the Commercial General Liability

policy and Excess Liability policy and such insurance afforded the additional insureds shall

apply as primary insurance” (Williamson Decl. Exh. A) (emphasis added). Accordingly,

Matamoros’ policy with Landmark indicated “[i]f you are required by a written contract to

provide primary insurance, this policy shall be primary as respects your negligence”

(Ruetggers Decl. Exh. C) (emphasis added). The May 22 order already ruled that the above

language from Landmark’s policy applied to Mountain Cascade as the general contractor and

thereby covered Mountain Cascade as an additional insured. The plain language of the policy

indicated that Landmark’s coverage of the contractor would be primary. Under the

well-established legal principles cited above, therefore, any excess coverage provided by

National Union is not implicated until Landmark’s primary coverage has been exhausted. 

Community Redevelopment, 50 Cal. App. 4th at 339.

Rather than challenge these straightforward principles, Landmark attempts to cast

National Union’s motivation for bringing this motion in a bad light. Contrary to Landmark’s

depiction, National Union is not seeking to shirk its duty to defend Mountain Cascade. On the

contrary, as the May 22 order demonstrated, Landmark itself was the insurer that sought to

avoid participation in Mountain Cascade’s defense, despite clear precedent dictating that

Mountain Cascade was an additional insured under Landmark’s policy for Matamoros.2

Moreover, National Union acknowledges that it may ultimately bear some responsibility

for the damages incurred by Mountain Cascade, even under its excess policy. National Union

recognizes that it will be on the hook for the portion of the total damages levied against

Mountain Cascade in the Gas Pipeline Explosion Cases that exceed the limits of the Landmark

and National Union primary policies. Once primary coverage is exhausted, National Union’s

burden under its excess policy will onset, and may potentially be significant. For now,

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however, it is sufficient to rule that Landmark’s primary coverage must be exhausted prior to

any obligation accrues to National Union under its excess policy.

CONCLUSION

For the foregoing reasons, plaintiff’s motion for partial summary judgment is GRANTED. 

Finding no further argument necessary, the hearing scheduled on this motion is hereby

VACATED.

IT IS SO ORDERED.

Dated: September 13, 2006. WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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