Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_10-cv-03172/USCOURTS-caed-2_10-cv-03172-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

GEMINI INSURANCE COMPANY,

a corporation,

Plaintiff, No. CIV S-10-3172 KJM JFM

vs.

WESTERN MARINE INSURANCE

SERVICES CORPORATION, a 

California corporation,

Defendant.

 /

WESTERN MARINE INSURANCE

SERVICES CORPORATION, a 

California corporation,

Third-party Plaintiff,

vs. ORDER

ALLIANT INSURANCE SERVICES,

INC., a corporation, DAVID CRANMER,

an individual, and RESEARCH 

SPECIALISTS, INC., a corporation

Third-party Defendants.

_________________________________/

1

Case 2:10-cv-03172-KJM-DB Document 53 Filed 03/01/13 Page 1 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

Scottsdale Indemnity Company (“Scottsdale”) filed a motion to intervene in the

above-captioned case on January 8, 2013. (ECF 45.) For the reasons set forth below,

Scottsdale’s motion is GRANTED.

I. BACKGROUND

On November 23, 2010, Gemini Insurance Company (“Gemini”) filed a

complaint against Western Marine Insurance Services Corporation (“Westmar”), an insurance

brokerage specializing in marine insurance, alleging causes of action for breach of contract and

negligence. (ECF 1.) On February 17, 2011, Westmar answered Gemini’s complaint and filed a

Third Party Complaint against Alliant Insurance Services, Inc. (“Alliant”), David Cranmer, and

Research Specialists, Inc. (“RSI”), alleging causes of action for indemnity and breach of

contract. (ECF 9, 10.) The court granted RSI’s motion to dismiss and denied Alliant’s and

Cranmer’s motion to dismiss or stay on July 17, 2012. (ECF 43.) In the same order, the court

denied without prejudice Scottsdale’s motion to intervene as a fourth party plaintiff against

Gemini, Alliant, Cranmer, RSI and Marine Claims Services, Inc (“MCS”), because Scottsdale

did not address the Ninth Circuit’s standard for intervention as of right or permissive

intervention. (Id.) 

As the factual allegations are detailed in the court’s previous order, the court

addresses only those facts relevant to Scottsdale’s current motion to intervene. Gemini and

Westmar entered into a Program Administrator Agreement (“PAA”), through which Westmar

had the authority to issue Gemini’s insurance policies. (ECF 1 ¶ 7.) Westmar issued a Gemini

policy to Wesco providing property and business interruption coverage for Wesco’s marinas in

southern California, which Wesco obtained through its insurance broker, Alliant and its agent

Cranmer. (Id. ¶¶ 8-12; ECF 10 ¶¶ 5, 9.) In or around December 2006, Wesco submitted a claim

under its Gemini policy through third-party administrator MCS. (ECF 1 ¶ 14; ECF 10 ¶ 17.) 

Wesco sought compensation for storm damage to two marinas, claiming a total loss and seeking

replacement coverage in the amount of $2,340,000 and business interruption coverage in the

2

Case 2:10-cv-03172-KJM-DB Document 53 Filed 03/01/13 Page 2 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

amount of $500,000. (Proposed Fourth-Party Compl. ¶ 18, ECF 45-1.) In or around March

2008, Gemini paid Wesco $510,000 as replacement coverage and $140,000 as business

interruption coverage. (Id. ¶ 20.)

On February 4, 2009, Wesco filed suit against Gemini in state court seeking the

maximum coverage allowed under the policy. (ECF 1 ¶ 16.) Westmar agreed to defend and

indemnify Gemini in the action, as provided by the terms of the PAA. (Id. ¶ 17.) The state court

suit settled, with Gemini paying $950,000 toward settlement and $28,000 in attorneys’ fees. (Id.

¶¶ 18-19.) Scottsdale paid for Westmar’s defense of Gemini under the terms of an insurance

brokerage errors and omissions policy between Westmar and Scottsdale. (ECF 45-1 ¶ 24.) 

Scottsdale now moves to intervene, to file claims for common law

indemnification against Gemini, Alliant, Cranmer and MCS, claims for breach of contract

against Gemini, Alliant and Cranmer, claims for breach of the duty of good faith and fair dealing

against Gemini, Alliant and Cranmer, and claims for negligence against Gemini, Alliant,

Cranmer and MCS. (Id. ¶¶ 29-69.) Scottsdale’s proposed complaint states it is “a contractual

and equitable subrogee to the rights of [Westmar].” (Id. ¶ 3.)

Westmar filed a statement of non-opposition to Scottsdale’s motion. (ECF 47.) 

Gemini filed an opposition to the motion “to the extent that the Proposed Complaint alleges

counts against Gemini for breach of contract and breach of the covenant of faith and fair

dealing.” (ECF 46 at 2.) Gemini does not oppose Scottsdale’s intervention to allege common

law indemnification and negligence claims. (Id.)

/////

/////

/////

/////

/////

/////

3

Case 2:10-cv-03172-KJM-DB Document 53 Filed 03/01/13 Page 3 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

I. ANALYSIS

A. Standard

Federal Rule of Civil Procedure 24(a) provides in pertinent part:

On timely motion, the court must permit anyone to intervene who

. . . claims an interest relating to the property or transaction that is

the subject of the action, and is so situated that disposing of the

action may as a practical matter impair or impede the movant’s

ability to protect its interest, unless existing parties adequately

represent that interest.

FED. R. CIV. P. 24(a). The court applies a four-part test to determine whether intervention of

right is proper under Rule 24(a): “(1) the application for intervention must be timely; (2) the

applicant must have a ‘significantly protectable’ interest relating to the property or transaction

that is the subject of the action; (3) the applicant must be so situated that the disposition of the

action may, as a practical matter, impair or impede the applicant’s ability to protect that interest;

and (4) the applicant’s interest must not be adequately represented by the existing parties in the

lawsuit.” Southwest Ctr. for Biological Diversity v. Berg, 268 F.3d 810, 817 (9th Cir. 2001). 

Rule 24(a) is construed “liberally in favor of potential intervenors.” Id. at 818. 

B. Analysis

1. Protectable Interest Prong

Scottsdale asserts that its desire to protect its subrogation rights gives it a

protectable interest in the litigation. (Mem. of P. &A., ECF 45-1 at 8.) In the context of

reversing the denial of an insurance company’s motion to intervene, the Ninth Circuit has stated

that “[b]ecause the insurance company as subrogee stands in the shoes of the insured, it is the

real party in interest in the insured's suit to the extent of the subrogation.” Cummings v. United

States, 704 F.2d 437, 439 (9th Cir. 1983). Gemini urges the court to deny Scottsdale’s motion to

intervene to make claims for breach of contract and breach of the covenant of good faith and fair

dealing, asserting “each of the counts is a sham and is frivolous.” (Opp’n, ECF 46 at 2.) 

Specifically, Gemini argues that Scottsdale cannot assert the claim for breach because it was not

4

Case 2:10-cv-03172-KJM-DB Document 53 Filed 03/01/13 Page 4 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

a party to the PAA and cannot assert the claim for tortious bad faith because the contract at issue

is not an insurance contract. (Id. at 3-4.) 

In reviewing whether proposed intervenors have a protectable interest, “[c]ourts

are to take all well-pleaded, nonconclusory allegations in the motion to intervene, the proposed

complaint or answer in intervention, and declarations supporting the motion as true absent sham,

frivolity or other objections.” Berg, 268 F.3d at 820. In Berg, a group of building trade

associations moved to intervene in a conservation group’s challenge to the City of San Diego’s

land management plan for protecting endangered species. Id. at 817. The plan gave the City the

power to designate “Third Party Beneficiary status” to projects that meet certain criteria for

protecting biological resources, which would give those projects authority to conduct incidental

takes of endangered species. Id. at 816. The district court denied the motion to intervene on the

grounds that the building trade associations had failed to demonstrate that they had Third Party

Beneficiary status or would be otherwise affected by the outcome of the action, meaning they did

not meet the protectable interest prong, although the associations had alleged these interests and

provided evidence in support in moving to intervene. Id. at 818-19. The Ninth Circuit reversed,

explaining that “a district court is required to accept as true the non-conclusory allegations made

in support of an intervention motion.” Id. at 819. 

The rule articulated in Berg does not require the court to assess whether

Scottsdale’s claims will succeed, only whether Scottsdale has misrepresented the facts showing

it has some protectable interest related to the litigation. Here, Gemini does not contest

Scottsdale’s factual assertions showing that Scottsdale’s interests would be affected by the

outcome of the litigation. Gemini’s claim that Scottsdale’s anticipated causes of actions are

sham or fraud is therefore not a reason to deny Scottsdale’s motion to intervene. Moreover, as

Scottsdale argues, courts do not consider the merits of proposed intervenors’ claims when

resolving motions to intervene. (ECF 51 at 3); Zurich Am. Ins. Co. v. ACE Am. Ins. Co., No.

CIV-S-11-0881 KJM-DAD, 2012 WL 3884695, at *3 (E.D. Cal. Sept. 6, 2012); E.E.O.C. v.

5

Case 2:10-cv-03172-KJM-DB Document 53 Filed 03/01/13 Page 5 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

Giumarra Vineyards Corp., No. 1:09-CV-02255-OWW-SKO, 2010 WL 3220387, at *7 (E.D.

Cal. Aug. 13, 2010). In sum, Scottsdale has shown it has a protectable interest in the litigation.

2. Remaining Prongs

Scottsdale has filed its motion to intervene before the status conference and no

party has asserted that it is prejudiced by the motion to intervene. In terms of potential

impairment of Scottsdale’s interests, Scottsdale argues that it “may ultimately bear responsibility

for any judgment obtained by Gemini,” which the other parties do not dispute. (ECF 45-1 at 11.) 

Scottsdale has satisfied these factors of the intervention of right test. 

Regarding adequacy of representation by existing parties, the court must consider

three factors when evaluating the adequacy of representation: (1) whether the present parties will

“undoubtedly make all of the intervenor's arguments;” (2) whether the present parties can and

will make those arguments; and (3) whether the proposed intervenor “offers a necessary element

to the proceedings that would be neglected.” Sagebrush Rebellion, Inc. v. Watt, 713 F.2d 525,

528 (9th Cir. 1983). The most important factor is “how the interest compares with the interest of

existing parties,” Arakaki v. Cayetano, 324 F.3d 1078, 1086 (9th Cir. 2003), because “[i]f an

applicant for intervention and an existing party share the same ultimate objective, a presumption

of adequacy of representation arises,” Citizens for Balanced Use v. Montana Wilderness Ass’n,

647 F.3d 893, 898 (9th Cir. 2011). To rebut this presumption, the proposed intervenor must

make a “compelling showing” of inadequacy. Id. (citing Arakaki, 324 F.3d at 1086). 

Scottsdale concedes that Westmar’s interests and Scottsdale’s interests are largely

aligned. (ECF 45-1 at 10.) However, as Scottsdale argues, Westmar does not make the same

claims that Scottsdale plans to make. (Id.) Westmar has not alleged claims against Gemini or

MCS. (See ECF 10.) This element of the intervention of right test is met.

/////

/////

/////

6

Case 2:10-cv-03172-KJM-DB Document 53 Filed 03/01/13 Page 6 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

In conclusion, Scottsdale has shown that it meets the requirements to intervene

under Rule 24(a). Accordingly, Scottsdale’s motion to intervene is GRANTED.

DATED: February 28, 2013.

7

Case 2:10-cv-03172-KJM-DB Document 53 Filed 03/01/13 Page 7 of 7