Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_18-cv-03372/USCOURTS-cand-3_18-cv-03372-2/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Injunctive &amp; Declaratory Relief

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

GENERAL INSURANCE COMPANY OF 

AMERICA,

Plaintiff,

v.

INB INSURANCE SERVICES 

CORPORATION,

Defendant.

Case No. 18-cv-03372-JST 

ORDER GRANTING PLAINTIFF’S 

MOTION FOR SUMMARY 

JUDGMENT

Re: ECF No. 18

Before the Court is Plaintiff General Insurance Company of America’s motion for 

summary judgment. ECF No. 18. The Court will grant the motion.

I. BACKGROUND

Plaintiff General Insurance Company of America (“General” or “GICA”) seeks a 

declaratory judgment regarding the limits of its liability under insurance policies it issued to 

Defendant INB Insurance Services. The following facts are not in dispute:

General issued “Insurance Professionals Errors and Omissions Liability Insurance” 

policies to INB for the 2016 and 2017 calendar years. ECF No. 18-2 (policy period of January 1, 

2016, to January 1, 2017); ECF No. 18-3 (policy period of January 1, 2017, to January 1, 2018). 

The 2016 policy includes a per-claim limit of liability of $1,000,000, and the 2017 policy includes 

a per-claim limit of liability of $2,000,000. ECF No. 18-2 at 2; ECF No. 18-3 at 1. Both policies 

provide that:

Two or more covered claims arising out of a single wrongful act or 

arising out of any series of related wrongful acts will be considered 

a single claim. The single claim will be subject to the “Limit of 

Liability – Each Claim” in effect at the time such claim was first 

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made against the Insured. Only one deductible will apply to such 

single claim. If the first of such claims is made prior to the effective 

date of this policy, no coverage shall apply to any subsequent claims

made during this policy period which are based upon the same or 

related wrongful acts.

ECF No. 18-2 at 10; ECF No. 18-3 at 9 (emphasis in original). Neither policy defines “related.”

INB filed claims under these policies to defend against a state court complaint filed by 

West Overland, LLC. West Overland’s operative complaint alleges the following: In 2009, INB 

obtained property insurance for West Overland through Travelers Casualty Insurance Company of 

America, for property located at 1000-1036 West Agpar Street, Oakland, California. ECF No. 

35-1 at 5-7. When applying for coverage on West Overland’s behalf, INB used an online quote 

system that included a question asking whether the property was sprinklered. Id. at 6. INB 

checked the box indicating that all four buildings were sprinklered, “even though only two units 

out of four buildings had sprinklers. Notably there was no way to indicate in this system whether 

a building was only partially sprinklered or what percent.” Id. at 6-7. As a result, the Travelers 

policy included a “PROTECTIVE SAFEGUARDS ENDORSEMENT FOR SPRINKLERED 

LOCATIONS AND RESTAURANTS” (“PSE”), which provided that West Overland was 

required to maintain an “automatic fire protective or extinguishing system” and that Travelers 

would “not pay for loss or damage caused by or resulting from fire” if the system was not 

maintained in working order prior to the fire. Id. at 8-10; ECF No. 18-8 at 6-7. The policy “was 

set to auto-renew every year, [and] WEST OVERLAND was not asked to submit new information 

at each renewal.” Id. at 11. At the time of fires that occurred on July 6, 2016, and May 13, 2017, 

West Overland was covered by the same Travelers policy, which ran from June 29, 2016, to June 

29, 2017.1 Id. at 14; ECF No. 18-8 at 1. Citing the PSE and the lack of sprinklers at the property, 

Travelers denied West Overland’s claims based on both fires. ECF No. 35-1 at 13-15.

West Overland sued both Travelers and INB on November 3, 2016, after the denial of its 

claim based on the July 2016 fire. ECF No. 18-9. The complaint alleged that “INB breached its 

duty of care to Plaintiff when, knowing Plaintiff sought a policy that would cover a fire loss at [the 

 

1 The complaint does not allege the date of the second fire, but the parties do not dispute that it 

occurred on May 13, 2017.

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property], INB procured the Policy pursuant to which Travelers effectively denied coverage for 

the loss.” Id. at 3-4. West Overland amended its complaint on December 29, 2016, to allege more 

specifically that “INB breached its duty of care to PLAINTIFF when, knowing PLAINTIFF 

sought a policy that would cover property damage at the PROPERTY, including caused by fire, 

INB procured PLAINTIFF a policy with an endorsement that lead [sic] to the denial of coverage.” 

ECF No. 18-10 at 9. General accepted INB’s tender of defense of West Overland’s lawsuit under 

the 2016 General policy. ECF No. 18-1 ¶ 3.

West Overland amended its complaint following the second fire. ECF No. 35-1 at 4-34. 

The second amended complaint adds allegations that, “[a]ccording to TRAVELERS, INB 

breached its duty of care to WEST OVERLAND when, after the first fire claim, it failed to 

properly and correctly request that TRAVELERS remove the PSE immediately,” and that, “[b]ut 

for said breach, WEST OVERLAND would have had insurance coverage for the second loss.” Id.

at 16. General continues to defend INB under the 2016 policy but contends that “[n]o coverage is 

afforded under the 2017 GICA Policy, because the claims made during that policy period are 

based on the same or related wrongful acts giving rise to the claims made during the policy period 

of the 2016 GICA Policy.” ECF No. 18-7 at 7 (emphasis omitted).

General seeks a declaratory judgment that “the allegations made against INB in the West 

Overland action represent a single ‘claim,’ subject to the $1,000,000 Each Claim limit of the 2016 

General policy” and “that no coverage is afforded under the 2017 General policy.” ECF No. 1 at 

9. INB has filed counterclaims for breach of contract and breach of the covenant of good faith and 

fair dealing based on General’s refusal to provide coverage under the 2017 policy. ECF No. 33 at 

7-12.

General now moves for summary judgment on its declaratory relief claim. ECF No. 18. 

INB initially opposed the motion by requesting relief under Federal Rule of Civil Procedure 56(d), 

which allows a court to deny or defer ruling on a summary judgment motion “[i]f a nonmovant 

shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to 

justify its opposition.” ECF No. 20. The Court denied that request and ordered supplemental 

briefing on the merits of General’s motion. ECF No. 32 at 7. Both parties filed timely 

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supplemental briefs, and General’s motion is now ripe for adjudication. ECF Nos. 35, 36.

II. LEGAL STANDARD

Summary judgment is proper when a “movant shows that 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). 

A dispute is genuine only if there is sufficient evidence “such that a reasonable jury could return a 

verdict for the nonmoving party,” and a fact is material only if it might affect the outcome of the 

case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When deciding a motion for 

summary judgment, the court must draw “all justifiable inferences” in the nonmoving party’s 

favor and may not weigh evidence or make credibility determinations. Id. at 255.

Where the party moving for summary judgment would bear the burden of proof at trial, 

that party “has the initial burden of establishing the absence of a genuine issue of fact on each 

issue material to its case.” C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 

480 (9th Cir. 2000). Where the party moving for summary judgment would not bear the burden of 

proof at trial, that party “must either produce evidence negating an essential element of the 

nonmoving party’s claim or defense or show that the nonmoving party does not have enough 

evidence of an essential element to carry its ultimate burden of persuasion at trial.” Nissan Fire & 

Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000). If the moving party satisfies 

its initial burden of production, the nonmoving party must produce admissible evidence to show 

that a genuine issue of material fact exists. Id. at 1102-03. If the nonmoving party fails to make 

this showing, the moving party is entitled to summary judgment. Celotex Corp. v. Catrett, 477 

U.S. 317, 322-23 (1986).

III. DISCUSSION

“In an action seeking declaratory relief concerning a duty to defend, ‘the insured must 

prove the existence of a potential for coverage, while the insurer must establish the absence of any 

such potential. In other words, the insured need only show that the underlying claim may fall 

within policy coverage; the insurer must prove it cannot.’” Hartford Cas. Ins. Co. v. Swift 

Distribution, Inc., 59 Cal. 4th 277, 288 (2014) (quoting Montrose Chem. Corp. v. Superior Court, 

6 Cal. 4th 287, 300 (1993) (emphasis in original)). “The determination whether the insurer owes a 

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duty to defend usually is made in the first instance by comparing the allegations of the complaint 

with the terms of the policy. Facts extrinsic to the complaint also give rise to a duty to defend 

when they reveal a possibility that the claim may be covered by the policy.” Horace Mann Ins. 

Co. v. Barbara B., 4 Cal. 4th 1076, 1081 (1993). Whether an insurance policy “provides a 

potential for coverage and a duty to defend . . . is a question of law.” Waller v. Truck Ins. Exch., 

Inc., 11 Cal. 4th 1, 18 (1995). “[O]rdinary rules of contractual interpretation apply. The 

fundamental goal of contractual interpretation is to give effect to the mutual intention of the 

parties. Such intent is to be inferred, if possible, solely from the written provisions of the contract. 

If contractual language is clear and explicit, it governs.” Powerine Oil Co. v. Superior Court, 37 

Cal. 4th 377, 390 (2005) (internal quotation marks and citations omitted).

General concedes that coverage is appropriate under the 2016 policy. The question is 

whether West Overland’s complaint “can by [any] conceivable theory raise a single issue which 

could bring it within the policy coverage” of the 2017 policy. Montrose, 6 Cal. 4th at 300 (citation 

and emphasis omitted). This requires the Court to decide whether there is any way in which 

INB’s alleged action (or inaction) regarding the first and second fires might not be deemed a 

“series of related wrongful acts” under the 2017 policy. ECF No. 18-3 at 9 (emphasis omitted).

In Bay Cities Paving & Grading, Inc. v. Lawyers’ Mutual Insurance Company, the 

California Supreme Court interpreted language similar to the clause at issue here: “Two or more 

claims arising out of a single act, error or omission or a series of related acts, errors or omissions

shall be treated as a single claim.” 5 Cal. 4th 854, 866 (1993) (emphasis in original). The court 

concluded that “‘[r]elated’ is a broad word” but, in this context, “is not ambiguous and is not 

limited only to causally related acts.” Id. at 873. To the contrary, “the term ‘related’ as it is 

commonly understood and used encompasses both logical and causal connections.”2 Id. Thus, 

errors are “related” if one “error causes one or more other errors.” Id.at 868. But even if two 

 

2 The court further explained that it was “not suggest[ing] however, that, in determining the 

amount of coverage, the term ‘related’ would encompass every conceivable logical relationship. 

At some point, a relationship between two claims, though perhaps ‘logical,’ might be so attenuated 

or unusual that an objectively reasonable insured could not have expected they would be treated as 

a single claim under the policy.” Bay Cities, 5 Cal. 4th at 873.

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errors are not causally related, they are logically related if, for example, they lead to the same 

injury, such as two independent errors by an attorney at trial that both result in an adverse 

judgment against the attorney’s client. Id. 

In this case, West Overland contends that INB was negligent as to claims based on the first 

fire because INB erroneously checked a box that led to inclusion of the PSE in the 2009 Travelers 

policy, which was set up for automatic annual renewal. It contends that INB was negligent as to 

claims based on the second fire because INB did not remove the PSE after Travelers denied 

coverage to West Overland for damages caused by the first fire. INB argues that there can be no 

causal relationship because the alleged negligence occurred years apart and involved different INB 

staff. However, these distinctions do not change the fact that it is INB’s alleged negligence in 

2009 that allegedly caused the PSE to be placed in the Travelers policy – and, critically, that but 

for that alleged negligence, the PSE would not have been part of the Travelers policy at all, and 

there would have been nothing for INB to have removed after the first fire. West Overland’s

claims based on the two fires are therefore causally related.3 See Friedman Prof’l Mgmt. Co. v. 

Norcal Mutual Ins. Co., 120 Cal. App. 4th 17, 22, 33 (2004) (finding a “clear causal relationship”

between a malpractice claim and sexual battery and invasion of privacy claims where, “[b]ut for

the earlier malpractice causing the bleeding in the first place, the owner of the center would never 

have touched [the plaintiff’s] vaginal area in the effort to save her life, precipitating both 

claims”).4 This is true even though, as General acknowledges, West Overland seeks separate 

damages for its claims based on each fire. See id. at 31-33.

INB speculates that “[t]he PSE could have been added by Travelers at any time during 

 

3 Because the Court finds that the claims are causally related, it does not reach the question of 

whether they might also be logically related.

4 The issue in Friedman was “whether allegations of sexual battery and invasion of privacy arising 

out of the fact that the owner of a surgery center tried to stop a patient’s vaginal bleeding are 

‘related’ to the prior allegation of medical malpractice against the center itself for having supplied 

the wrong pump and fluids which caused the bleeding in the first place.” Freidman, 120 Cal. App. 

4th at 21. Friedman was not alleged to have engaged in any inappropriate touching; “the theory of 

the [second] suit was that Friedman had no business being in the operating room and touching her 

at all. Thus when he touched [the patient] during and after the operation that went awry, it was 

ipso facto battery, regardless of whether he had a good reason for doing so at the time.” Id. at 24 

(emphasis in original).

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prior renewals, and neither its attachment to the 2017 policy nor West Overland’s request for its 

removal was dependent on the initial alleged error of misrepresenting the sprinkler status of 

portions of the property in the application for the 2009 policy.” ECF No. 35 at 18. But these are 

not the facts of this case. The Travelers policy included a PSE only because a box was checked in 

2009 indicating that the property was sprinklered. No other basis for the existence of the PSE is 

asserted in West Overland’s complaint or suggested by facts extrinsic to that complaint, and “[a]n 

insured is not entitled to a defense just because one can imagine some additional facts which 

would create the potential for coverage.” Friedman, 120 Cal. App. 4th at 35.

General has met its burden of demonstrating conclusively that there is no potential for 

coverage under the 2017 policy. There is no dispute that INB first claimed coverage based on 

West Overland’s claims arising out of the 2016 fire while the 2016 policy was in effect. Because

the claims based on the 2016 and 2017 fires arise out of a “series of related wrongful acts,” the 

2017 policy provides no coverage. ECF No. 18-3 at 9 (emphasis omitted). INB argues that 

summary judgment should be denied pending final adjudication in West Overland’s state court 

action, but it identifies no factual disputes to be resolved in that action that are material to the 

coverage question before this Court. 

CONCLUSION

General’s motion for summary judgment is granted. INB’s request that the Court grant 

summary judgment in its favor under Federal Rule of Civil Procedure 56(f) is denied.

This ruling appears to resolve all issues in this case, including INB’s counterclaims. If the 

parties agree, then General shall provide a proposed form of judgment to INB within five court 

days of the date of this order. Within five court days thereafter, INB shall either sign the proposed 

judgment, indicating its agreement only as to form, or provide to General written objections to the 

form of judgment. Within five court days of receiving INB’s response, General shall file either 

(1) an approved form of judgment or (2) a proposed form of judgment, a copy of INB’s objections, 

and a written response to the objections. The objections and response may not exceed three pages 

each.

/ / /

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If the parties believe that further proceedings are necessary, they shall file a joint case 

management statement within fourteen calendar days of the date of this order.

IT IS SO ORDERED.

Dated: March 22, 2019

______________________________________

JON S. TIGAR

United States District Judge

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