Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-01876/USCOURTS-cand-3_06-cv-01876-3/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1441 Petition for Removal- Breach of Contract

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United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

GALLETTI & SONS, INC., dba 

GALLETTI CONCRETE PUMPING, INC., a

California corporation,

Plaintiff,

v.

VALLEY FORGE INSURANCE COMPANY, a

Pennsylvania corporation, and DOES

1 through 20, inclusive, 

Defendants. 

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No. C-06-1876 SC

ORDER GRANTING

PLAINTIFF'S PARTIAL

MOTION FOR 

SUMMARY JUDGMENT

I. INTRODUCTION

This case arises out of efforts by Plaintiff Galletti & Sons,

Inc. ("Plaintiff" or "Galletti & Sons, Inc.") to gain

reimbursement from Defendant Valley Forge Insurance Company

("Defendant") for the costs Plaintiff incurred defending a lawsuit

by a former employee. Before the Court is Plaintiff's Motion for

Partial Summary Judgment ("Plaintiff's Motion") and Defendant's

Cross-Motion for Summary Judgment. For the following reasons, the

Court GRANTS Plaintiff's Motion and DENIES Defendant's Motion. 

II. BACKGROUND

The following facts are undisputed:

During the period beginning December 19, 2000 through

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December 19, 2001, Plaintiff was insured by Defendant under a

commercial general liability policy ("CGL Policy" or "Policy"). 

See Declaration of Ann K. Johnston in Support of Defendant's

Motion ("Johnston Decl."), Ex. B. The CGL Policy identifies the

insured as "Galletti & Sons, Inc. dba Galletti Concrete Pumping." 

Id. at GALLE-00066. The Policy states:

We will pay those sums that the Insured becomes legally

obligated to pay as damages because of "bodily injury"

or "property damage" to which this Insurance applies. 

We will have the right and duty to defend the Insured

against any "suit" seeking those damages. However, we

will have no duty to defend the insured against any

"suit" for "bodily injury" or "property damage" to

which this insurance does not apply.

Id. at GALLE-00073. Among the Policy's exclusions is one for

"'bodily injury' to . . . an employee of the Insured arising out

of: (a) Employment by the insured; or (b) Performing duties

related to the conduct of the Insured's business." Id.

 On May 20, 2002, Plaintiff's former employee Billy Davis

filed a lawsuit in Alameda County Superior Court seeking damages

under a negligence theory for injuries he allegedly suffered when

he was struck by a concrete pump truck on May 21, 2001 ("Davis

Lawsuit"). Id., Ex. A. The suit named, among others, "Galletti

Concrete Pumping, Inc." as a defendant. Id. The complaint

alleged that Mr. Davis was employed at the time of the injury by

"Galletti Concrete, Inc.," and that the concrete pumping truck

which injured him was owned and operated by "Galletti Concrete

Pumping, Inc." Id. 

On four separate occasions, Plaintiff tendered the Davis

Lawsuit to Defendant, and on all four occasions Defendant denied

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the tender. The tenders occurred on July 30, 2002, August 13,

2003, March 21, 2005, and May 3, 2005. See id., Exs. C, L, N.

On April 22, 2003 and January 25, 2005, Plaintiffs made

motions for summary judgment in the Davis Lawsuit on the grounds

that Mr. Davis's claims against Galletti Concrete Pumping, Inc.

were barred by worker compensation exclusivity. See id., Exs. D,

E. The court denied both motions on the ground that there was a

triable issue of fact whether Galletti & Sons, Inc., Mr. Davis's

employer, was the same legal entity as Galletti Concrete Pumping,

Inc., which owned and operated the pump truck involved in the

incident. See id., Exs. H, K. Attached to Plaintiff's April 2005

moving papers is a certificate of filing from the California

Secretary of State showing that, on December 29, 1989, Galletti

Concrete Pumping, Inc. merged into Galletti & Sons, Inc. and

ceased to exist as a separate corporate entity. See id., Ex. I. 

On July 12, 2005, a jury rendered a four-part special verdict

in favor of Plaintiff, finding: that Galletti & Sons, Inc. and

Galletti Concrete Pumping, Inc. were the same legal entity; that

Mr. Davis was an employee of Galletti & Sons, Inc. at the time of

his injury; that Mr. Davis was injured while working for Galletti

& Sons; and that Galletti & Sons, Inc. had workers compensation

insurance at the time which covered Mr. Davis. Id., Ex. M.

On January 30, 2006, Plaintiff filed the Complaint in the

instant action, alleging breach of contract and tortious breach of

the covenant of good faith and fair dealing arising out of

Defendant's tender denials. See Docket No. 1, Ex. A Pt-2. 

Plaintiff now moves the Court for an order of partial summary

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judgment whether Defendant owed Plaintiff a duty to defend in the

Davis Lawsuit and whether Defendant breached that duty. See

Plaintiff's Motion at 3. Defendants move the Court for an order

of summary judgment dismissing the Complaint in its entirety. See

Defendant's Motion.

III. STANDARD OF REVIEW

Summary judgment is proper "if the pleadings, depositions,

answers to interrogatories, and admissions on file, together with

the affidavits, if any, 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." F.R.C.P. 56(c). A material fact is

one "that might affect the outcome of the suit under the governing

law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48

(1986). Ultimately, "summary judgment will not lie if the dispute

about a material fact is 'genuine,' that is, if the evidence is

such that a reasonable jury could return a verdict for the

nonmoving party." Id. at 248. 

IV. DISCUSSION

It is Hornbook law that an insurer's duty to defend is

broader than its duty to indemnify. Waller v. Truck Ins.

Exchange, Inc., 11 Cal. 4th 1, 19 (1995). The duty to defend

accrues if an insurer "becomes aware of, or if the third party

lawsuit pleads, facts giving rise to the potential for coverage

under the insuring agreement." Id. This is so, even if the the

claims in question are "groundless, false, or fraudulent." Id.

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(quotations omitted). What's more, any doubts as to whether a

duty to defend has accrued "must be resolved in favor of the

insured," and, in fact, "the existence of a disputed fact

determinative of coverage, establishes the duty to defend." Amato

v. Mercury Casualty Co., 18 Cal. App. 4th 1784, 1785 (1993).

In accordance with this standard, whether a duty to defend

has accrued is "usually made in the first instance by comparing

the allegations of the complaint with the terms of the policy." 

Waller, 11 Cal. 4th at 19. However, extrinsic facts can give rise

to a duty to defend "when they reveal the possibility that the

claim may be covered by the policy." Id. "Conversely, where the

extrinsic facts eliminate the potential for coverage, the insurer

may decline to defend even when the bare allegations in the

complaint suggest potential liability." Id. (emphasis added).

Defendant argues that no duty to defend accrued in the Davis

Lawsuit on two related grounds. First, Defendant argues that Mr.

Davis's injuries fell within the Policy's exclusion for injuries

suffered by employees in the course of employment, regardless of

how the Alameda County Court ruled when Plaintiff made its motions

for summary judgement based on the same ground. Defendant's

Motion at 10. Second, and alternatively, if Mr. Davis was the

employee of an entity distinct from Plaintiff-in other words, if

Galletti Concrete Pumping was a distinct entity from Plaintiff-the

Davis Lawsuit "sought to impose liability on an entity Valley

Forge did not insure, and which was not named as an insured under

the Valley Forge policy." Id. at 12.

The problem with this two-part argument is that it seeks to

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conflate too closely Defendant's duty to defend with its duty to

indemnify. If the jury in the Davis Lawsuit had answered any one

of the four parts of the special verdict differently, Plaintiff

would have had a judgment rendered against them. Assuming it was

not overturned on appeal, if Plaintiff tried to seek

indemnification for such a hypothetical judgment from Defendant,

it seems likely that Defendant could have successfully refused to

pay. That, however, is not the test. 

The test is whether there was any "potential for coverage,"

Waller, 11 Cal. 4th at 1, and here there was such a potential. 

For example, the jury in the Davis Lawsuit could have found,

answering one question on the special verdict differently, that

while Mr. Davis was an employee of Plaintiff, he was not injured

while working for Plaintiff, and a Court in a subsequent

indemnification suit by Plaintiff against Defendant could agree. 

That's enough. As the law makes very clear, there need not be a

strong potential for coverage or even a reasonable potential for

coverage, but rather any potential for coverage, with any doubts

in that regarded resolved in favor of the insured. See Amato, 18

Cal. App. 4th at 1785. 

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The possibility that the jury in the Davis Lawsuit could have

rendered its verdict in way which would have given Plaintiff at

least prima facie grounds for demanding indemnification from

Defendant meets this low standard. 

V. CONCLUSION

For the foregoing reasons, Plaintiff's Motion for Partial

Summary Judgment is GRANTED: the Court finds that Defendant owed

Plaintiff a duty to defend in the Davis Lawsuit and Defendant

breached that duty. Accordingly, Defendants Motion for Summary

Judgment is DENIED. 

IT IS SO ORDERED.

Dated: January 18, 2007.

 UNITED STATES DISTRICT JUDGE

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