Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_04-cv-00886/USCOURTS-cand-5_04-cv-00886-4/pdf.json

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

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ORDER GRANTING IN PART DEFENDANT'S MOTION FOR RECONSIDERATION—C-04-00886 RMW

MAG

E-FILED on 9/17/07

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

ROYAL INDEMNITY GROUP, THE

GREYSTONE GROUP, INC.,

Plaintiffs,

v.

THE TRAVELERS INDEMNITY COMPANY

OF RHODE ISLAND, STEDMAN

CONSTRUCTION COMPANY, DOES 1-100,

Defendants.

No. C-04-00886 RMW

ORDER GRANTING IN PART

DEFENDANT'S MOTION FOR

RECONSIDERATION

[Re Docket No. 108]

Plaintiffs Royal Indemnity Group ("Royal") and Greystone Group, Inc. ("Greystone") and

defendant Travelers Indemnity Company ("Travelers") cross-moved for reconsideration of aspects

of this court's Order Re: Cross motions for Summary Judgment and Adjudication dated September 6,

2005, Docket No. 84 ("9/6/05 Order"). 

The 9/6/05 Order held that Travelers had a duty to defend Stedman under Texas law and that

the coverage under the subject policies was triggered by the occurrence of property damage without

regard to when the damage was discovered or when the property was acquired by the claimant. 

9/6/05 Order at 18. In that order, the court also denied Travelers' motion on plaintiffs' breach of

contract claim and Royal's equitable indemnity claim, determining that there remained a material

question of fact as to whether Greystone group was an insured under the applicable Travelers

Case 5:04-cv-00886-RMW Document 116 Filed 09/17/07 Page 1 of 7
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ORDER GRANTING IN PART DEFENDANT'S MOTION FOR RECONSIDERATION—C-04-00886 RMW

MAG 2

policies. This determination was based in part upon the submission of three certificates of insurance

that purportedly demonstrated that Stedman had added Greystone's predecessor in interest,

Worthing, to the applicable Travelers insurance policies as an additional insured through Stedman's

insurance agent, James Harper of Fort Bend Insurance Agency. Id. at 14. 

The court granted in part and denied in part the parties' cross-motions for reconsideration. 

The court sua sponte clarified certain aspects of the order, thereby mooting plaintiffs' motion for

reconsideration. See Order Re: Cross-Motions for Leave to File Motions for Reconsideration dated

Sept. 28, 2006, Docket No. 107 ("9/28/06 Order"). Travelers moved for reconsideration on the

grounds that the court should grant summary judgment on plaintiffs' breach of contract and equitable

contribution claims, contending that the certificates and assignment upon which those claims were

necessarily based were not properly authenticated and were thus inadmissible. Because the court

agreed that the foundation for the admissibility the documents appeared to be lacking, the court

granted Travelers' motion for reconsideration to review whether it had properly considered (1) three

certificates of insurance purporting to name Greystone as an additional insured to the Travelers

insurance contracts; and (2) the purported assignment to Greystone of Stedman's rights. The court

asked the parties to discuss the impact of the purportedly erroneous admission of these documents

on its summary judgment ruling.

The court has reviewed the submissions of the parties. Plaintiffs' opposition to Travelers'

motion for reconsideration argues only that the court's consideration of the certificates of insurance

had no effect on the ruling because the admissibility of those documents was not placed at issue by

the cross-motions for summary adjudication before the court. Plaintiffs are correct that only two

issues were presented to the court in plaintiffs' motion for summary adjudication: (1) whether

Travelers had a duty to defend Stedman and (2) how the occurrence of "property damage" would

trigger coverage under the liability insurance policies. See Plfs. Mot. Summ. Adjudication of Issues

at 1-2, Docket No. 21 (moving the court to "summarily adjudicate two issues within the action"). 

However, Travelers' motion for summary judgment went further and sought summary judgment

inter alia on (3) Greystone's claims on the alternative ground that Greystone's claims are barred

because "it is not an insured under any contract of insurance with Travelers" and (4) Royal's

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ORDER GRANTING IN PART DEFENDANT'S MOTION FOR RECONSIDERATION—C-04-00886 RMW

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equitable contribution claim on the ground that Greystone is not a Traveler's insured. Def.'s Mot.

Summ. J. at 1; see also id. at 10 ("No additional insured endorsement was ever authorized, issued or

attached to the Travelers policies."); id. at 11 (even if Stedman's insurance broker issued a certificate

of insurance indicating that a predecessor of Greystone's was an additional insured "there is no

evidence that Travelers ever approved or issued an 'additional insured endorsement'. . . ."). Plaintiffs

responded to this issue raised by Travelers in section VIII of their opposition to Travelers' Motion

for Summary Judgment, acknowledging that certificates of insurance do not of themselves confer

insured status on the assured party but stating that plaintiffs "mean to try" to prove that Stedman's

insurance broker acted as an ostensible agent of Travelers. Opp'n Def.'s Mot. Summ. J. at 24-25.

Satisfied that Travelers raised the issue of whether there was evidence that Greystone was

insured by Travelers, the court now considers whether the three certificates of insurance were

sufficiently authenticated for purposes of the summary judgment ruling set forth in its 9/6/05 Order. 

The certificates of insurance were purportedly authenticated by the Declaration of Walter Eeds, an

employee of both Greystone and its predecessor Worthing. Eeds Decl. Supp. Mot. Summ.

Adjudication of Issues at 2, Docket No. 22 ("During the course of the construction of The Fountains,

Greystone and Worthing received between them a total of three certificates of insurance issued by

Stedman’s insurance agent. True copies of those certificates are attached hereto as Exhibits 2, 3 and

4."). In its 9/6/05 Order, the court overruled Travelers' objections to the certificates, stating that

Eeds' declaration was sufficient to establish authenticity.

Although Travelers argued that there was no evidence that Greystone or its predecessor

Worthing were insured under the Travelers policy, the court found there was sufficient evidence to

preclude summary judgment on plaintiffs' claims for breach of contract and equitable indemnity on

an ostensible agency theory. The court concluded that based on the evidence on record, taken in the

light most favorable to plaintiffs, it might be possible to demonstrate that James Harper at Fort Bend

Insurance Agency acted as Travelers' ostensible agent. This conclusion was based on (1) the three

certificates of insurance and (2) a declaration submitted by Travelers establishing that Travelers

account manager William Floyd communicated with James Harper at Fort Bend Insurance Agency

and handled business brought in by Fort Bend Insurance. 9/6/05 Order at 13-14. In its motion for

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ORDER GRANTING IN PART DEFENDANT'S MOTION FOR RECONSIDERATION—C-04-00886 RMW

MAG 4

reconsideration, however, Travelers asserts that the court failed to consider that Travelers'

subsequent deposition of Eeds established that Eeds could not properly authenticate the certificates

of insurance and that Eeds had no idea who James Harper was, had never communicated with him,

and had never heard of Fort Bend Insurance Agency. See Decl. of Philip Witte Supp. Mot.

Reconsideration, Ex. A, Dep. of Walter Eeds ("Eeds Dep.") at 57:11-60:24. The court finds this

argument persuasive: Eeds does not have sufficient knowledge to authenticate the certificates of

insurance. Eeds Dep. at 97:1-24. Without the certificates of insurance, the fact that a Travelers

agent communicated with James Harper at Fort Bend does not suffice to raise a material question of

fact as to ostensible agency.

Furthermore, Eeds' testimony appears to be insufficient to establish ostensible agency, even

viewing the evidence in the light most favorable to plaintiffs. "An agency is ostensible when the

principal intentionally, or by want of ordinary care, causes a third person to believe another to be his

agent who is not really employed by him." Cal. Civ. Code § 2300. "The burden of proving

ostensible agency is upon the party asserting that relationship", Ermoian v. Desert Hosp., 152 Cal.

App. 4th 475, 502-503 (2007). There are three requirements necessary for recovery against a

principal for the act of an ostensible agent: "The person dealing with the agent must do so with

belief in the agent's authority and this belief must be a reasonable one; such belief must be generated

by some act or neglect of the principal sought to be charged; and the third person in relying on the

agent's apparent authority must not be guilty of negligence." Hill v. Citizens Nat. Trust & Sav. Bk., 9

Cal. 2d 172, 176 (1937). Here, there is no evidence that Stedman, Worthing or Greystone had any

belief as to whether Harper or Fort Bend Insurance Agency had any affiliation with Travelers. This

is fatal to any ostensible agency theory because there must be some proof that the person dealing

with the agent have some belief in the agent's authority. Based on the record before the court (a

record that plaintiffs failed to supplement in any way in opposition to Travelers' motion for

reconsideration), there is no evidence upon which plaintiffs may establish ostensible agency, which

appears to be the only way that they could establish that they were insureds under any Stedman

insurance policy with Travelers. Thus, without any evidence that Greystone was an insured under

the Travelers insurance policies, Greystone's breach of contract claim against Travelers fails, as does

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ORDER GRANTING IN PART DEFENDANT'S MOTION FOR RECONSIDERATION—C-04-00886 RMW

MAG 5

Royal's equitable contribution claim, as that claim relies upon Greystone's status as Travelers'

insured.

Travelers also asserts that it is entitled to summary adjudication as to Greystone's breach of

contract claim to the extent that the claim is predicated on an assignment of rights from Stedman to

Greystone. The 9/6/05 Order did not address the admissibility of the assignment from Stedman to

Greystone, nor was that issue raised in Travelers' original motion for summary judgment. Travelers'

argument that the assigned breach of contract claim from Stedman fails was based solely on

Travelers' contention that it owed no duty to defend Stedman. The court therefore declines to grant

summary judgment on plaintiffs' assigned breach of contract claim based on the lack of

authentication of the document assigning Stedman's rights to Greystone. This denial is without

prejudice to Travelers subsequently seeking summary judgment as to that claim on such grounds.

In addition to its challenge as to the sufficiency of the three certificates of insurance,

Travelers asks this court to reconsider its 9/6/05 Order as to its ruling regarding Cal. Ins. Code §

11580. As plaintiffs point out, the court did not authorize further briefing on § 11580 and stated in

its Order Re: Cross-Motions for Leave to File Motions for Reconsideration that it had "not yet ruled

on whether plaintiffs may assert a claim against Travelers" under that section. 9/28/06 Order at 2. 

Notwithstanding Travelers' arguments that the issue has been briefed, the court will not now rule on

the issue of plaintiffs' ability to proceed under § 11580.

ORDER

For the foregoing reasons, Travelers' motion for reconsideration is granted in part and denied

in part as follows:

1. The court grants Travelers' motion for summary adjudication as to Greystone's claim

for breach of contract under the Travelers insurance policy and Royal's equitable

contribution claim based on Greystone's status as an insured. Greystone was not an

insured under the relevant Travelers insurance policies.

2. The court denies without prejudice Travelers' motion for summary adjudication as to

Greystone's claim for breach of contract under the rights assigned to it by Stedman.

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ORDER GRANTING IN PART DEFENDANT'S MOTION FOR RECONSIDERATION—C-04-00886 RMW

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3. The court denies without prejudice Travelers' motion for reconsideration of the

court's ruling regarding Cal. Ins. Code § 11580.

The parties shall appear for a case management conference on Friday, October 19, 2007 at 10:30

a.m.

DATED: 9/17/07

RONALD M. WHYTE

United States District Judge

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ORDER GRANTING IN PART DEFENDANT'S MOTION FOR RECONSIDERATION—C-04-00886 RMW

MAG 7

Notice of this document has been electronically sent to:

Counsel for Plaintiff(s):

Michael Mathews mathewsesq@earthlink.net 

Counsel for Defendant(s):

Robert John Romero rromero@hinshawlaw.com 

Anne D. O'Niell aoniell@hinshawlaw.com 

Counsel are responsible for distributing copies of this document to co-counsel that have not

registered for e-filing under the court's CM/ECF program.

Dated: 9/17/07 /s/ MAG

Chambers of Judge Whyte

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