Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-14-56017/USCOURTS-ca9-14-56017-0/pdf.json

Parties Involved:
Indian Harbor Insurance Company
Appellee
Pitzer College
Appellant

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

PITZER COLLEGE,

Plaintiff-Appellant,

v.

INDIAN HARBOR

INSURANCE COMPANY,

Defendant-Appellee.

No. 14-56017

D.C. No.

2:13-cv-05863-GW-E

ORDER CERTIFYING

QUESTIONS TO THE

CALIFORNIA SUPREME

COURT

Filed January 13, 2017

Before: Harry Pregerson, Richard A. Paez,

and Andrew D. Hurwitz, Circuit Judges.

Order

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2 PITZER COLLEGE V. INDIAN HARBOR INS. CO.

SUMMARY*

Certification to California Supreme Court 

The panel certified the following questions of state law to

the California Supreme Court:

1. Is California’s common law notice-prejudice rule a

fundamental public policy for the purpose of choiceof-law analysis? May common law rules other than

unconscionability not enshrined in statute, regulation,

or the constitution, be fundamental public policies for

the purpose of choice-of-law analysis?

2. If the notice-prejudice rule is a fundamental public

policy for the purpose of choice-of-law analysis, can

a consent provision in a first-party claim insurance

policy be interpreted as a notice provision such that

the notice-prejudice rule applies?

COUNSEL

Michael J. Murtaugh, Lawrence J. DiPinto, and Thomas N.

Fay, Murtaugh Meyer Nelson & Treglia LLP, Irvine,

California, for Plaintiff-Appellant.

Max H. Stern and Jessica E. La Londe, Duane Morris LLP,

San Francisco, California; Katherine Nichols, Duane Morris

LLP, Los Angeles, California; for Defendant-Appellee.

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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PITZER COLLEGE V. INDIAN HARBOR INS. CO. 3

ORDER

We certify the questions set forth in Part II of this order to

the California Supreme Court. The answers to these

questions are dispositive of the case, without clear California

precedent, and important to protections for California

insureds. See Cal. R. Ct. 8.548. We therefore respectfully

request that the California Supreme Court exercise its

discretion to decide the certified questions presented below. 

Absent certification, we will “predict as best we can what the

California Supreme Court would do in these circumstances.” 

Pacheco v. United States, 220 F.3d 1126, 1131 (9th Cir.

2000).

I. Administrative Information

We provide the followinginformation in accordance

with California Rule of Court 8.548(b)(1).

The caption of this case is:

No. 14-56017

PITZER COLLEGE,

Plaintiff and Appellant,

v.

INDIAN HARBOR INSURANCE COMPANY,

Defendant and Appellee.

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4 PITZER COLLEGE V. INDIAN HARBOR INS. CO.

The names and addresses of counsel are:

For Plaintiff-Apellant Pitzer College: Michael J. Murtaugh,

Lawrence J. DiPinto, Thomas N. Fay, Murtaugh Meyer

Nelson & Treglia LLP, 2603 Main Street, 9th Floor, Irvine,

California, 92614.

For Defendant-Appellee Indian Harbor Insurance

Company: Max H. Stern, Duane Morris LLP, One Market

Plaza, Suite 2200, San Francisco, California, 94105;

Katherine Nichols, Duane Morris LLP, 865 South Figueroa

Street, Suite 3100, Los Angeles, California, 90017.

If the request for certification is granted, Plaintiff-Appellant

Pitzer College should be deemed the petitioner in the

California Supreme Court.

II. Certified Questions

Pursuant to California Rule of Court 8.548(b)(2), we certify

the following questions of state law before us:

1. Is California’s common law notice-prejudice rule a

fundamental public policy for the purpose of choice-of-law

analysis? May common law rules other than

unconscionability not enshrined in statute, regulation, or the

constitution, be fundamental public policies for the purpose

of choice-of-law analysis?

2. If the notice-prejudice rule is a fundamental public policy

for the purpose of choice-of-law analysis, can a consent

provision in a first-partyclaim insurance policy be interpreted

as a notice provision such that the notice-prejudice rule

applies?

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PITZER COLLEGE V. INDIAN HARBOR INS. CO. 5

Our phrasing of the questions should not restrict the

California Supreme Court’s consideration of the issues

involved. Cal. R. Ct. 8.548(f)(5). We agree to accept and

follow the decision of the California Supreme Court. Cal. R.

Ct. 8.548(b)(2); see Klein v. United States, 537 F.3d 1027,

1029 (9th Cir. 2008) (holding that “the Ninth Circuit is bound

bythe California Supreme Court’s interpretation ofCalifornia

law” with respect to a certified question).

III. Statement of Facts

Pitzer College (“Pitzer”) is one of the Claremont Colleges

in Southern California. The Claremont University

Consortium (“CUC”) is an umbrella entity that enters into

insurance contracts on behalf of the Claremont Colleges. 

CUC purchased an insurance policy (the “Policy”) from

Indian Harbor Insurance Company (“Indian Harbor”) to cover

Pitzer for remediation expenses caused by pollution-related

damage. New York law governs any issues arising under the

Policy.

1

On January 10, 2011, Pitzer became aware of darkened

soils at the construction site for a new dormitory. By January

21, 2011, Pitzer determined that remediation would be

required. After assessing its options, Pitzer secured one of

two Transportable Treatment Units (“TTU”) located in

Southern California to remediate the soils. The remediation

1

 The Policy provides that: “All matters arising hereunder including

questions related to the validity[,] interpretation, performance and

enforcement of this Policy shall be determined in accordance with the law

and practice of the State of New York (notwithstanding New York’s

conflicts of law rules).”

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6 PITZER COLLEGE V. INDIAN HARBOR INS. CO.

treatment was successful, and Pitzer completed the dormitory

a few days before the students’ move-in date.

In its section describing coverage for remediation expenses

(Section I.B.), the Policy contained a notice provision

requiring Pitzer to provide Indian Harbor with notice of any

condition requiring remediation.2

In its section describing

reporting (Section VII.B.), the Policy contained a consent

provision stating that Indian Harbor would not cover any

expenses Pitzer incurred for remediation without first

obtaining Indian Harbor’s consent.3 The consent provision

included an exception for emergencies, but required Pitzer to

notify Indian Harbor “immediately thereafter” it incurred any

emergency expenses.

Pitzer did not inform Indian Harbor of the remediation until

July 11, 2011, approximately three months after it completed

remediation and six months after it discovered the darkened

soils. Nor did Pitzer obtain Indian Harbor’s consent before

commencing remediation or paying remediation costs. On

August 10, 2011, Indian Harbor acknowledged receipt of

Pitzer’s notice of remediation. On March 16, 2012, Indian

2 The provision states that Indian Harbor would cover Pitzer’s

remediation expenses “provided that the INSURED reports such CLAIM

. . . to the company, in writing, during the POLICY PERIOD.”

3 The provision states: “No costs, charges or expenses shall be

incurred, nor payments made, obligations assumed or remediation

commenced without the Company’s written consent which shall not be

unreasonablywithheld. This provision does not apply to costs incurred by

the INSURED on an emergency basis, where any delay on the part of the

INSURED would cause injury to persons or damage to property, or

increase significantly the cost of responding to any POLLUTION

CONDITION. If such emergency occurs, the INSURED shall notify the

Company immediately thereafter.”

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PITZER COLLEGE V. INDIAN HARBOR INS. CO. 7

Harbor denied coverage on the basis of Pitzer’s late notice

and its failure to obtain Indian Harbor’s consent.

Pitzer sued Indian Harbor in Los Angeles County Superior

Court, alleging that the insurer breached the Policy by failing

to indemnify Pitzer for the remediation costs. Indian Harbor

removed the case to federal court on the basis of diversity

jurisdiction and moved for summary judgment.

The district court granted Indian Harbor summary

judgment. The district court applied New York law, finding

that Pitzer failed to establish that the California noticeprejudice rule was a fundamental public policy that overrode

the Policy’s choice of law provision. The district court

determined that summary judgment was warranted because

Pitzer failed to notify Indian Harbor. The district court also

concluded that summary judgment was separately warranted

because Pitzer failed to comply with the Policy’s consent

provision. The district court further concluded that Pitzer’s

remediation work did not fall within the emergency

exception, but that, even if it did, Pitzer was not entitled to

rely on the exception because it failed to “immediately

thereafter” notify Indian Harbor of the emergency.

Pitzer timely appealed.

IV. Explanation of Certification

Resolution of this appeal turns on whether California’s

notice-prejudice rule is a fundamental public policy for the

purpose of choice-of-law analysis. If the California Supreme

Court determines that the notice-prejudice rule is

fundamental, the appeal then turns on whether, in a first-party

policy like Pitzer’s, a consent provision operates as a notice

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8 PITZER COLLEGE V. INDIAN HARBOR INS. CO.

requirement subject to the notice-prejudice rule. No

controlling California precedent answers either question. See

Cal. R. Ct. 8.548(a). Because the district court determined

that “[i]f prejudice is required, [Indian Harbor] would not be

able to prevail at summary judgment,” these questions are

dispositive. Cal. R. Ct. 8.548(a).

These questions involve issues of significant importance to

the state. Kremen v. Cohen, 325 F.3d 1035, 1037 (9th Cir.

2003). In an amicus brief to the United States Supreme

Court, the Council of State Governments emphasized the

“integral” policy behind California’s notice-prejudice rule. 

Br. for Council of State Governments, et al. as Amici Curiae

Supporting Respondents, UNUM Life Ins. Co. of Am. v.

Ward, 526 U.S. 358 (1999) (No. 97-1868), 1999 WL 9773,

at*3. Moreover, numerous California insurance contracts

contain choice-of-law decisions and the resolution of these

questions will apply to insureds throughout the state.

The following is a summary of the relevant case law and the

parties’ arguments with respect to these questions.

Under California common law, the notice-prejudice rule

provides that an insurer must show that it was prejudiced by

late notice in order for a notice clause in the policy to bar

coverage. Clemmer v. Hartford Ins. Co., 587 P.2d 1098,

1106 (Cal. 1978). Under California choice-of-law analysis,

the parties’ contractual choice of law governs unless it

conflicts with a fundamental public policy of California, and

California has a greater interest than the chosen state in the

determination of the particular issue. Nedlloyd Lines B.V. v.

Super. Ct., 834 P.2d 1148, 1151, 1155 (Cal. 1992) (citing

Restatement (Second) of Conflict of Laws § 187 (Am. Law

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PITZER COLLEGE V. INDIAN HARBOR INS. CO. 9

Inst. 1971)).4 The California Supreme Court has not yet

stated whether the notice-prejudice rule is a fundamental

public policy.

Pitzer argues that the notice-prejudice rule is a fundamental

public policy.

5 California and federal courts have generally

recognized the importance of the notice-prejudice rule. See,

e.g., Ward, 526 U.S. at 372; Campbell v. Allstate Ins. Co.,

384 P.2d 155, 157 (Cal. 1963). But none have done so in the

choice of law context.

Indian Harbor argues that the notice-prejudice rule is not a

fundamental public policy of California. First, citing

Nedlloyd, Indian Harbor argues that a rule cannot be

fundamental public policy unless established by the

constitution, a statute, or it is related to a “principle of

contractual unconscionability.” 834 P.2d at 1153, 1155. It is

unclear whether California law requires that a rule be

statutory, constitutional, or related to unconcsionability in

order to constitute a fundamental public policy. See, e.g,

Clemmer, 587 P.2d at 1106; Restatement (Second) of

Conflicts of Law § 187 cmt. g.

Indian Harbor also argues that the notice-prejudice rule

cannot be fundamental because California law recognizes

4 The parties agree that California has a materially greater interest in

the determination of this issue.

5 Pitzer emphasized that applying New York Law would be

particularly unfair because under New York law, the notice-prejudice rule

applies to policies “issued or delivered” inside of the state, but not those

“issued or delivered” outside of the state, such as the Policy at issue in this

case. See N.Y. Ins. Law § 3420(a)(5). There is no dispute that under New

York law the notice-prejudice rule would not apply to the Policy.

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10 PITZER COLLEGE V. INDIAN HARBOR INS. CO.

exceptions for claims-made policies, time-limited reporting

policies, policies with statutes of limitations, and policies

with consent provisions. See Burns v. Int’l Ins. Co., 929 F.2d

1422, 1425 (9th Cir. 1991) (explaining that California’s

notice-prejudice rule does not apply to claims-made policies

which “reduce[] the potential exposure of the insurer and

[are] therefore less expensive to the insured”); Venoco, Inc.

v. Gulf Underwriters Ins. Co., 96 Cal. Rptr. 3d 409, 417 (Ct.

App. 2009) (explaining that the notice-prejudice rule does not

apply to time-limited reporting requirements because the rule

“would expose [the insurer] to a risk broader than the risk

expressly insured against in the policy” (emphasis omitted));

State Farm Fire & Cas. Co. v. Super. Ct., 258 Cal. Rptr. 413,

418 (Ct. App. 1989) (explaining the purposes behind statutes

of limitations); Insua v. Scottsdale Ins. Co., 129 Cal. Rptr. 2d

138, 141 (Ct. App. 2002) (explaining that the notice-prejudice

rule does not apply to consent provisions as their purpose is

to provide the insurer the opportunity to control expenses).

With respect to the consent provision, Pitzer argues that its

remediation fell under the emergency exception because it

operated on a tight schedule and had a time-limited

opportunity to utilize the only available TTU machine. Pitzer

also argues that the consent provision should be interpreted

as a notice provision because the Policy covers first-party

claims. See Howard v. Am. Nat’l Fire Ins. Co., 115 Cal. Rptr.

3d 42, 70 (Ct. App. 2010) (explaining that first-party policies

“obligate the insurer to pay damages claimed by the insured

itself,” while third-party policies “obligate the insurer to

defend, settle, and pay damages claimed by a third party

against the insured”).

According to Indian Harbor, Pitzer’s actions did not fall

under the emergency exception to the consent provision, and

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PITZER COLLEGE V. INDIAN HARBOR INS. CO. 11

even if they did, Pitzer failed to “immediately” notify the

insurer of any emergency. In Jamestown Builders, Inc. v.

General Star Indemnity Co., the California Court of Appeal

held that the notice-prejudice rule does not apply to consent

provisions. 91 Cal. Rptr. 2d 514, 519 (Ct. App. 1999). The

Jamestown court, however, did not consider whether a

consent provision in a first-party policy is analogous to a

notice provision in a third-party policy, and therefore subject

to the notice-prejudice rule.

Finally, Indian Harbor argues that the consent provision

should not be interpreted as a notice provision because such

an interpretation would render the provision redundant in

violation of contract interpretation principles.

V. Accompanying Materials

The clerk of this court is hereby directed to file in the

California Supreme Court, under official seal of the United

States Court of Appeals for the Ninth Circuit, copies of all

relevant briefs and excerpts of record, and an original and ten

copies of this order and request for certification, along with

a certification of service on the parties, pursuant to California

Rule of Court 8.548(c) and (d).

This case is withdrawn from submission. Further

proceedings before us are stayed pending final action by the

California Supreme Court. The panel will resume control and

jurisdiction of this case upon receiving a decision from the

California Supreme Court or upon that court’s decision to

decline to answer the certified question.

IT IS SO ORDERED.

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