Source: http://ace-insurance-litigation.com/document/malcolm-drilling-company-inc-v-illinois-union-insurance-company-complaint
Timestamp: 2019-04-25 18:36:45
Document Index: 398655558

Matched Legal Cases: ['§ 17200', '§ 1332', '§ 1391', '§ 17200', '§ 1801', '§ 17200', '§ 790', '§ 17200']

MALCOLM DRILLING COMPANY, INC. v. ILLINOIS UNION INSURANCE COMPANY complaint | ACE Insurance Litigation Watch
MALCOLM DRILLING COMPANY, INC. v. ILLINOIS UNION INSURANCE COMPANY complaint
10933739.1
MALCOLM DRILLING COMPANY, INC.'S COMPLAINT
AGAINST ILLINOIS UNION INSURANCE COMPANY
LINDA E. KLAMM, SBN 71506
MILES C. HOLDEN, SBN 263342
mholden@hansonbridgett.com
Telephone: (415) 777-3200
Facsimile: (415) 541-9366
Attorneys for Plaintiff MALCOLM
DRILLING COMPANY, INC.
MALCOLM DRILLING COMPANY,
COMPANY, INC.'S COMPLAINT
AGAINST ILLINOIS UNION
INSURANCE COMPANY FOR:
(1) DECLARATORY RELIEF –
SATISFACTION OF SELF-
INSURED RETENTION;
(2) DECLARATORY RELIEF –
DUTY TO PAY FOR "LEGAL
DEFENSE EXPENSES";
(3) DECLARATORY RELIEF –
MALCOLM FOR
"PROFESSIONAL LOSS" AND/OR
"LOSS" REGARDING THE
ALLEGED POLLUTION CLAIMS
AND/OR IN CONNECTION WITH
SETTLEMENT OF THE ALLEGED
POLLUTION CLAIMS;
(5) BREACH OF THE IMPLIED
AND FAIR DEALING; AND
(6) UNFAIR BUSINESS
PRACTICES (VIOLATION OF
CALIFORNIA BUS. & PROF.
CODE § 17200, ET SEQ.)
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page1 of 23
Plaintiff MALCOLM DRILLING COMPANY, INC. ("MALCOLM") hereby
complains against Defendant ILLINOIS UNION INSURANCE COMPANY
("ACE") and alleges as follows:
1. MALCOLM is and was at all relevant times a corporation duly
organized under the laws of California with its principal place of business in the
City and County of San Francisco, California and at all relevant times was and is
authorized to transact business in California.
2. MALCOLM alleges on information and belief that ACE is and was at
all times an insurer domiciled in Illinois with its principal place of business in
Illinois that is and was at all relevant times authorized to transact business in
California as an insurer.
3. This Court has jurisdiction under 28 U.S.C. § 1332 because this is a
civil action between citizens of different states and the amount in controversy
exceeds $75,000, exclusive of interest and costs.
4. The amount in controversy includes, but is not limited to, the sums that
MALCOLM contends ACE owes MALCOLM for "legal defense expenses", as that
term is defined in the insurance policy at issue in this case, incurred in connection
with claims against MALCOLM for alleged wrongful acts and alleged pollution
5. Venue is proper in this District under 28 U.S.C. § 1391 because a
substantial part of the alleged events and/or omissions giving right to the claims
occurred here, including but not limited to the insurance policy at issue being
entered into, negotiated, paid for, and delivered to MALCOLM here, and ACE
breaching its obligations to pay sums owed to MALCOLM here.
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page2 of 23
6. Pursuant to Local Rule 3-2, assignment of this case to the San
Francisco Division or the Oakland Division is proper because the action arises in
San Francisco County due to the insurance policy at issue being entered into,
negotiated, paid for, and delivered to MALCOLM here, and ACE being obligated to
provide coverage benefits to MALCOLM here.
I. NATURE OF THE CLAIM AND RELIEF SOUGHT
7. This Complaint concerns insurance-coverage issues between
MALCOLM and ACE arising out of claims for alleged wrongful acts and alleged
pollution conditions (collectively, "Alleged Pollution Claims"), including but not
limited to arbitration styled Central Florida Equipment Rentals, Inc. v. Malcolm
Drilling Company, Inc., et al.; J AMS Reference No. 1460001403 ("CFER
8. Upon being notified of the Alleged Pollution Claims, MALCOLM
promptly tendered notice of the Alleged Pollution Claims to ACE and a claim for all
9. Thereafter, in connection with its claim for insurance coverage,
MALCOLM provided ACE with additional information about the Alleged Pollution
Claims, including but not limited to the CFER Arbitration.
10. ACE has failed to comply with its obligations to MALCOLM in
connection with MALCOLM's tender of the Alleged Pollution Claims.
11. MALCOLM now seeks declarations of rights, obligations, duties, and
liability under the insurance policy issued by ACE.
12. MALCOLM also seeks damages, fees, and costs against ACE for
breaching the policy and the implied covenant of good faith and fair dealing by
unreasonably taking coverage positions contrary to established insurance law and
interpreting the policy in a manner so as to deny MALCOLM the coverage to which
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page3 of 23
13. MALCOLM further seeks relief under California Business and
Professions Code § 17200, et seq.
II. THE UNDERLYING PROJECT AND USE OF THE MATERIAL
14. This insurance-coverage dispute arises out of a construction project
commonly known as Brickell City Centre located in Miami, Florida ("Project").
15. In or around J uly 2012, MALCOLM contracted with Turner
Construction Company ("Turner") to perform, among other things, foundation-
related engineering, land surveying, and other work at the Project, such as:
a. designing and installing a deep soil mix ("DSM") plug below the
plan bottom of the excavation with perimeter sheet piling for the
composite wall system to facilitate "dry excavation";
b. designing and installing augercast piling; and
c. dewatering and excavating the site and loading/off-hauling
excavated materials and drill spoils from the DSM and augercast
16. In or around September 2012, MALCOLM subcontracted with Central
Florida Equipment Rental, Inc. ("CFER") to perform, among other things,
excavation and loading/off-hauling work on the Project.
17. CFER arranged for relocating the excavated material from the Project
("Material") for the Odebrecht-CFER J oint Venture ("OCJ V") to use as fill at a
runway-expansion project at Fort Lauderdale-Hollywood International Airport in
Broward County, Florida ("Airport") and for lake fill at a future development site at
Biscayne Landing in North Miami, Florida ("Biscayne Landing").
III. THE ALLEGED POLLUTION CLAIMS
18. The Miami-Dade County Department of Environmental Resources
Management ("DERM") initially approved the Material for reuse as lake fill at
Biscayne Landing. But DERM then withdrew that approval on or about J une 27,
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page4 of 23
2013, thus restricting reuse of the Material, after determining that aluminum in the
Material exceeded the allowable levels for surface water and groundwater and
qualified as "ground pollution" under the Miami-Dade County Code.
19. Because of the alleged aluminum content in the Material, the following
claimants made the following additional Alleged Pollution Claims:
a. the City of North Miami demanded the removal of the Material
from Biscayne Landing and rejected additional Material from
being delivered to Biscayne Landing;
b. OCJ V demanded the removal of the Material delivered to the
c. CFER asserted that it was precluded from handling and
disposing of allegedly contaminated soil based upon a provision
in the MALCOLM-CFER subcontract and CFER refused to
handle any additional Material;
d. Turner demanded that MALCOLM immediately remove the
Material from the Project and inform it of the details of
MALCOLM's disposal plans; and
e. CFER commenced the CFER Arbitration against MALCOLM.
20. As relevant to this Complaint, ACE issued Global Contractors
Pollution Liability and Errors & Omissions Insurance Policy No. COO G27058024
002, effective December 31, 2012 to December 31, 2013 ("Policy"). A true and
correct copy of the Policy (with the premium amount redacted) is attached hereto as
Exhibit A, the contents of which MALCOLM incorporates herein by reference.
21. The Policy contains an insuring agreement for "Errors & Omissions
Coverage" ("E&O Coverage") and another insuring agreement for "Contractors
Pollution and Emergency Response Coverage" ("Pollution Coverage").
22. The Policy's insuring agreement for E&O Coverage provides:
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page5 of 23
The Insurer agrees to pay on behalf of the "insured", or in
jurisdictions outside of the United States of America, the Insurer
agrees to indemnify the relevant "insured" pursuant to Coverage
C., below, for:
A. ERRORS AND OMISSIONS COVERAGE (Coverage A.)
"Professional loss", in excess of the "self-insured retention",
which the "insured" becomes legally obligated to pay because of
"claims" arising out of an actual or alleged "wrongful act" in the
performance of "covered professional services".
It is a condition precedent to coverage afforded pursuant to this
Coverage A. that:
1. The "claim" is first made against the "insured" and
reported by the "insured" to the Insurer, in writing, during
the "policy period" or "extended reporting period", if
2. The "wrongful act" which results in a "claim" arises out of
the performance of "covered professional services" that
first commence on or after the Retroactive Date, if any,
identified in Item 3. of the Declarations and before the end
of the "policy period". If no Retroactive Date is identified
in the Declarations, the "covered professional services"
must first commence during the "policy period".
23. The Policy's insuring agreement for Pollution Coverage provides:
B. CONTRACTORS POLLUTION AND EMERGENCY
RESPONSE COVERAGE (Coverage B.)
1. "Loss", in excess of the "self-insured retention", which the
"insured" becomes legally obligated to pay because of a
"claim"; and
2. "Emergency response costs", in excess of the "self-insured
retention",
arising out of a "pollution condition" resulting from "covered
operations" or "transportation", provided the "claim" is first
made, or the "insured" first discovers the "pollution condition"
resulting in "emergency response costs", during the "policy
Coverage B. that:
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page6 of 23
1. The "covered operations" or "transportation" that result in
the "claim" or "emergency response costs" first commence
on or after the Retroactive Date, if any, identified in Item
3. of the Declarations and before the end of the "policy
period". If no Retroactive Date is identified in the
Declarations, the "covered professional services" must first
commence during the "policy period"; and
2. Any such:
a. "Claim" is reported by the "insured" to the Insurer,
in writing, during the "policy period", or "extended
reporting period", if applicable; or
b. Discovery of a "pollution condition" resulting in
"emergency response" is reported by the "insured" to
the Insurer during the "policy period["], but in no
event later than seven (7) days following any such
discovery by the "insured", or the expiration of the
"policy period", whichever occurs first.
24. The Policy defines terms that appear in quotations in the insuring
agreements (and/or within those defined terms themselves) as follows:
 "Claim" means:
[T]he assertion of a legal right received by an "insured" from a
third-party, including, but not limited to, suits or other actions
alleging responsibility or liability on the part of the "insured" for
"professional loss" or "loss" arising out of:
1. An actual or alleged "wrongful act" in the performance of
"covered professional services"; or
2. A "pollution condition" resulting from "covered
operations" or "transportation",
to which this insurance applies, respectively.
 "Covered operations" means "those operations specifically identified in
Item 8.a. of the Declarations that are performed at a 'work site' by or on
behalf of a 'named insured' or 'foreign subsidiary', including any
attendant coordination, facilitation or effectuation of the disposal and/or
recycling of waste materials generated from such operations at a 'non-
owned disposal site'", which Item 8.a. of the Declarations list as "All
drilling and related operations performed by or on behalf of the Named
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page7 of 23
 "Covered professional services" means "those services that: 1. A
'named insured' or 'foreign subsidiary' is qualified to perform; and 2.
Are specifically identified in Item 8.b. of the Declarations", which Item
8.b. of the Declarations list as "Professional services rendered by or on
behalf of the named insured in the practices of engineering,
architecture, and land surveying."
 "Insured" means (in part) "the 'first named insured'", which Item 1. of
the Declarations lists as "Malcolm Drilling Company, Inc."
 "Legal defense expenses" means "reasonable legal costs, charges, and
expenses, including expert charges incurred by the 'insured' in the
investigation, adjustment, or defense of 'claims', 'foreign claims' or
underlying matters upon which 'foreign subsidiary claims' are
premised."
 "Loss" means "'bodily injury', 'property damage', and 'remediation
costs', including any related 'legal defense expenses'."
 "Named Insured" means (in part) "the 'first named insured'", which
Item 1. of the Declarations lists as "Malcolm Drilling Company, Inc."
 "Natural resource damage" means:
[I]njury to, destruction of, or loss of, including the resulting loss
of value of fish, wildlife, biota, land, air, water, groundwater,
drinking water supplies, and other such resources belonging to,
managed by, held in trust by, appertaining to, or otherwise
controlled by the United States of America (including the fishery
conservation zone established by the Magnuson-Stevens Fishery
Conservation and Management Act (16 U.S.C. § 1801 et. seq.)),
any state, provincial or local government, any foreign
government, or any First Nation or Native American Tribe, or, if
such resources are subject to a trust restriction on expropriation
or alienation , any members of any First Nation or Native
American Tribe, including the reasonable costs of assessing such
injury, destruction or loss resulting therefrom.
 "Non-owned disposal site" means:
1. Any disposal site or recycling facility located within the
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page8 of 23
United States of America that has not at any time been
owned or operated, in whole or in part, by any "insured" or
"foreign subsidiary", which receives or has received waste
resulting from "covered operations", provided that the
disposal site or recycling facility:
a. Was properly licensed by federal and/or state
regulators with applicable jurisdiction to accept
wastes at the time of such disposal;
b. Was not owned or operated by any person,
corporation or incorporated association that was in
bankruptcy at the time the waste was received for
c. Has not, at any time prior to the inception date of
this Policy, been identified on the United States EPA
(CERCLA) National Priorities List or CERCLIS list,
or pursuant to any functional equivalent of those
listings made by a state regulatory agency pursuant
to state law; and
d. Was not undergoing voluntary or regulatory-
required remediation activities at the time the waste
was received for disposal; and
2. Any disposal site or recycling facility that is specifically
identified on a Schedule of Disposal Sites attached to this
 "Policy period" means "the period identified in Item 2. of the
Declarations, or any shorter period resulting from the cancellation of
this Policy", which Item 2. of the Declarations lists as "December 31,
2012 12:01 A.M." to "December 31, 2013 12:01 A.M."
 "Pollution condition" means:
The discharge, dispersal, release, escape, migration, or seepage of
any solid, liquid, gaseous or thermal irritant, contaminant or
pollutant, including soil, sedimentation, silt, smoke, soot, vapors,
fumes, acids, alkalis, chemicals, hazardous substances, hazardous
materials, or waste materials, on, in, into, or upon land and
structures thereupon , the atmosphere, surface water or
groundwater. For the purpose of this definition, waste materials
includes, but is not limited to, "low-level radioactive waste",
"mixed waste" and medical, infectious or pathological wastes.
 "Professional loss" means "monetary awards or settlements of
compensatory damages, including any related 'legal defense expenses'."
 "Property damage" means (in part):
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page9 of 23
[A]ny of the following:
1. Physical injury to, or destruction of, tangible property
owned by third-parties, including all resulting loss of use
2. Loss of use of tangible property owned by third-parties
that is not physically injured or destroyed;
3. Diminished value of property owned by third-parties;
4. "Natural resource damages" . . . .
 "Remediation costs" means:
[R]easonable expenses incurred to investigate, quantify, monitor,
mitigate, abate, remove, dispose, treat, neutralize, or immobilize
"pollution conditions" to the extent required by applicable law.
"Remediation costs" shall also include:
1. Reasonable legal cost, where such cost has been incurred
by an "insured" or "foreign subsidiary" with the prior
written consent of the Insurer; and
2. Reasonable expenses required to restore, repair or replace
real or personal property, owned by third-parties, to
substantially the same condition it was in prior to being
damaged during the course of responding to a "pollution
 "Self-insured retention" means "the dollar amount identified in Item 5.
of the Declarations or as otherwise designated by endorsement, if any",
which Item 5. of the Declarations lists as "$100,000 Per Wrongful Act
or Pollution Condition".
 "Transportation" means:
[M]ovement via automobile, watercraft or rolling stock, by or on
behalf of an "insured" or "foreign subsidiary", of waste derived
from "covered operations" or materials reasonably related to
"covered operations", including the loading and unloading of
such waste or material, provided that such movement is:
1. Within the boundaries of a "work site";
2. To or from a "work site"; or
3. From a "work site" to any "non-owned disposal site".
 "Work site" means "a location where 'covered operations' are being
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page10 of 23
performed, including real property rented or leased by the 'named
insured' or 'foreign subsidiary' on a temporary basis for the purpose of
providing 'covered operations' for a client." "'Work site' does not
mean: 1. A 'non-owned disposal site'; or, 2. To the extent that Premises
Pollution Liability Coverage is added to the Policy by endorsement, a
'covered location'."
 "Wrongful act" means "any act, error, omission, misstatement,
misleading statement or breach of duty actually or allegedly committed
or attempted while performing 'covered professional services' as
identified in Item 8.b. of the Declarations of this Policy", which Item
8.b. of the Declarations lists as "Professional services rendered by or on
25. The Policy provides at Section II.F.:
If the Insurer or an affiliate has issued claims-made and reported
based professional liability and/or pollution liability coverage to
the "insured" over successive policy periods, then all
"professional loss", "loss", "emergency response costs", and any
corresponding "foreign loss", "ownership loss" and "foreign
subsidiary loss", if any, resulting from multiple "claims",
"foreign claims" or "foreign subsidiary claims", which: arise out
of the same, continuous, repeated or related "wrongful act" or
"pollution condition"; and are reported to the Insurer over
multiple policy periods, shall be treated as a single "claim",
"foreign claim" or "foreign subsidiary claim" arising out of a
single "wrongful act" or "pollution condition" pursuant to a
single policy. Said "claim", "foreign claim" or "foreign
subsidiary claim" shall be subject to the Limits of Liability and
"self-insured retention" of the policy in effect at the time that the
"wrongful act" or "pollution condition" was first reported to the
Insurer, and no other policy shall respond.
26. The Policy provides at Section III.D.: "'Legal defense expenses' reduce
the Limits of Liability identified in Item 4. of the Declarations and shall be applied
to the 'self-insured retention'."
27. The Policy provides at Section IX.O.: "Where the consent of the
Insurer, or an "insured", is required pursuant to this Policy, such consent shall not be
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page11 of 23
unreasonably withheld, delayed, conditioned, or denied."
28. The Policy contains a "Service of Suit Endorsement" at Endorsement
No. 009 that provides:
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE
Information about service of suits upon the company is given
below. Service of process of suits against the company may be
made upon the following person, or another person the company
may designate:
Saverio Rocca, Assistant General Counsel
ACE USA Companies
The person named above is authorized and directed to accept
service of process on the company's behalf in any action, suit or
proceeding instituted against the company. If the insured
requests, the company will give the insured a written promise that
a general appearance will be entered on the company's behalf if a
suit is brought.
If the insured requests, the company will submit to the
jurisdiction of any court of competent jurisdiction. The company
will accept the final decision of that court or any Appellate Court
The law of some jurisdictions of the United States of America
require that the Superintendent, Commissioner or Director of
Insurance (or their successor in office) be designated as the
company's agent for service of process. In these jurisdictions, the
company designates the Director of Insurance as the company's
true and lawful attorney upon whom service of process on the
company's behalf may be made. The company also authorizes
the Director of Insurance to mail process received on the
company's behalf to the company person named above.
If the insured is a resident of Canada, the insured may also serve
suit upon the company by serving the government official
designated by the law of the insured's province.
NOTHING HEREIN CONTAINED SHALL BE HELD TO
VARY, ALTER, WAIVE OR EXTEND ANY OF THE TERMS,
CONDITIONS, OR LIMITATIONS OF THE POLICY TO
WHICH THIS ENDORSEMENT IS ATTACHED OTHER
THAN AS ABOVE STATED.
29. MALCOLM timely tendered notice of and claim for the Alleged
Pollution Claims to ACE, and has satisfied all terms and conditions of the Policy
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page12 of 23
that apply to it, except to the extent that ACE prevented MALCOLM from
performing and/or MALCOLM was excused from performing.
V. ACE'S WRONGFUL HANDLING OF MALCOLM'S CLAIM
30. MALCOLM first tendered notice of and claim to ACE for insurance
coverage in connection with the Alleged Pollution Claims to ACE on or about J uly
10, 2013. ACE generated and sent a notification acknowledging receipt of
MALCOLM's notice and claim the same day.
31. ACE sent a letter to MALCOLM on or about August 23, 2013,
requesting further information about the Alleged Pollution Claims.
32. Thereafter, MALCOLM sent further information about the Alleged
Pollution Claims to ACE, including on or about September 19, 2013 and October 7,
33. ACE sent a letter to MALCOLM on or about November 11, 2013,
stating: "This shall advise that we remain unable to approve reimbursement of the
costs identified in the September 19, 2013 Basis for Claim and Cost Documentation
since, as explained below, we do not find them to be covered costs under the
Policy."; and "Notwithstanding the foregoing, the Insurer agrees that there may be
some covered costs associated with this incident. Your letter addresses a potential
claim by CFE[R] against Malcolm to remove soils from the Ft. Lauderdale airport."
34. MALCOLM, through counsel, argued to ACE on or about December
13, 2013, that in connection with the Alleged Pollution Claims, MALCOLM had
satisfied the Policy's self-insured retention ("SIR") and was entitled to
reimbursement from ACE.
35. ACE, through counsel, wrote to counsel for MALCOLM on or about
J anuary 7, 2014, denying coverage for "Malcolm's costs associated with removing
the stockpiled soils from the Brickell CityCentre Project site", and also stating:
"While ILU [(ACE)] acknowledges that OCJ V and CFE[R] may have asserted
claims against Malcolm with respect to placing soils at the Biscayne site and the Ft.
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page13 of 23
Lauderdale airport, ILU continues to investigate this issue as discussed above."
36. After MALCOLM informed ACE of the CFER Arbitration, ACE,
through counsel, wrote to a letter to counsel for MALCOLM on or about November
20, 2014 ("ROR Letter"), purporting to reserve certain rights and stating: "The
purpose of this letter is to advise that ILU [(ACE)] will provide Malcolm with a
defense in this matter."
37. In the ROR Letter, ACE also stated:
ILU [(ACE)] was previously provided with various
correspondence exchanged between CFER and Malcolm during
mid-2013. Among these are letters from J uly 2013 in which
CFER asserts a claim against Malcolm for the costs associated
with removing the soils from the Airport site. ILU therefore
agrees that for the purpose of triggering the Policy's Contractor's
Pollution Liability ("CPL") coverage, a claim was first made and
reported to ILU during the period December 31, 2012 to
December 31, 2013. Likewise, while ILU maintains its position
that Malcolm was not performing "covered professional services"
in connection with the Project (see below), ILU acknowledges
that prior correspondence from CFER contains many similar
allegations concerning Malcolm's soil mixing processes, such
that to the extent that this matter can be considered a professional
liability claim, it was first made during the policy period.
38. In response to the ROR Letter, MALCOLM, through counsel, wrote a
letter to counsel for ACE on or about J anuary 22, 2015, enclosing 72 pages of
invoices for "legal defense expenses" incurred by MALCOLM in connection with
the Alleged Pollution Claims after MALCOLM's J uly 10, 2013 notice and claim to
ACE and exceeding the amount of the SIR.
39. ACE, through counsel, wrote to a letter to counsel for MALCOLM on
or about February 9, 2015, stating: "ILU [(ACE)] does not agree that Malcolm has
yet fully and properly fulfilled its self-insured retention obligation."
40. By improperly denying that MALCOLM has satisfied the SIR, ACE
has caused MALCOLM to bear the burden of "legal defense expenses" in
connection with the Alleged Pollution Claims in excess of the SIR without
agreement by ACE to reimburse MALCOLM for such "legal defense expenses".
41. ACE's disclaimer of MALCOLM's satisfaction of the SIR and of
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page14 of 23
MALCOLM's entitlement to reimbursement of "legal defense expenses" already
incurred in connection with the Alleged Pollution Claims is in material breach of the
Policy and the implied covenant of good faith and fair dealing, and in violation of
California's unfair business practices law.
DECLARATORY RELIEF – SATISFACTION OF SELF-INSURED
RETENTION (AGAINST ACE)
42. MALCOLM realleges and incorporates by reference each and every
allegation set forth above in this Complaint.
43. A dispute and actual, justiciable controversy has arisen and now exists
between MALCOLM and ACE concerning their respective rights, obligations,
duties, and liabilities under the Policy in connection with the Alleged Pollution
Claims. MALCOLM asserts, and states on information and belief that ACE
disputes, among other things, that:
a. Under the Policy, MALCOLM has satisfied the SIR through
MALCOLM incurring "legal defense expenses" and/or otherwise
in connection with the Alleged Pollution Claims; and
b. ACE has breached its obligations to MALCOLM under the
Policy by wrongfully denying that MALCOLM satisfied the SIR
through MALCOLM incurring "legal defense expenses" and/or
otherwise in connection with the Alleged Pollution Claims.
44. MALCOLM desires a judicial determination and declaration of the
parties' respective rights, obligation, duties, and liabilities under the Policy in
connection with the Alleged Pollution Claims.
45. Declaratory relief is appropriate and necessary at this time so that the
parties may ascertain their respective rights, obligations, duties, and liabilities under
the Policy in connection with the Alleged Pollution Claims.
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page15 of 23
DECLARATORY RELIEF – DUTY TO PAY FOR
"LEGAL DEFENSE EXPENSES" (AGAINST ACE)
46. MALCOLM realleges and incorporates by reference each and every
47. A dispute and actual, justiciable controversy has arisen and now exists
a. Under the Policy, ACE was and is obligated to comply with
ACE's present and immediate duty to pay for MALCOLM's
"legal defense expenses" incurred in connection with the Alleged
Pollution Claims upon MALCOLM's satisfaction of the SIR; and
b. ACE has breached that obligation by wrongfully denying that
ACE has a present and immediate duty to pay for MALCOLM's
48. MALCOLM desires a judicial determination and declaration of the
49. Declaratory relief is appropriate and necessary at this time so that the
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page16 of 23
DECLARATORY RELIEF – DUTY TO INDEMNIFY MALCOLM FOR
"PROFESSIONAL LOSS" AND/OR "LOSS" REGARDING THE ALLEGED
POLLUTION CLAIMS AND/OR IN CONNECTION WITH SETTLEMENT
OF THE ALLEGED POLLUTION CLAIMS
(AGAINST ACE)
50. MALCOLM realleges and incorporates by reference each and every
51. A dispute and actual, justiciable controversy has arisen and now exists
disputes, among other things, that under the Policy, ACE is obligated to indemnify
MALCOLM for certain "professional loss" and/or "loss" regarding the Alleged
Pollution Claims and/or in connection with settlement of the Alleged Pollution
52. MALCOLM desires a judicial determination and declaration of the
53. Declaratory relief is appropriate and necessary at this time so that the
BREACH OF CONTRACT (AGAINST ACE)
54. MALCOLM realleges and incorporates by reference each and every
55. The Policy is a valid and enforceable written contract (though not all
provisions of the Policy are valid and enforceable) that affords MALCOLM
insurance coverage for the Alleged Pollution Claims.
56. MALCOLM has made written demands that ACE acknowledge its
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page17 of 23
obligations to provide coverage under the Policy in connection with the Alleged
Pollution Claims and that ACE pay for "legal defense expenses" and other
"professional loss" and/or "loss" in connection with the Alleged Pollution Claims.
57. MALCOLM has satisfied all terms and conditions of the Policy that
apply to it, except to the extent ACE prevented MALCOLM from performing under
the Policy and/or MALCOLM was excused from performing under the Policy.
58. Though acknowledging its duty and agreeing to pay for some "legal
defense expenses" incurred by MALCOLM in connection with the CFER
Arbitration upon MALCOLM's satisfaction of the SIR, ACE has breached the
Policy by, among other things, wrongfully:
a. Denying that MALCOLM satisfied the SIR;
b. Not honoring its obligation to promptly pay MALCOLM's "legal
defense expenses" as they are incurred;
c. Asserting that it is not required to pay for certain "legal defense
expenses" and other "professional loss" and/or "loss" in
connection with the Alleged Pollution Claims;
d. Denying MALCOLM the right to benefits to which MALCOLM
is entitled under the Policy; and
e. Taking coverage positions contrary to controlling law.
59. By breaching the Policy, ACE waived its rights under the Policy.
60. As a direct and proximate result of ACE's breaches, MALCOLM has
been damaged in an amount to be proven at trial.
BREACH OF THE IMPLIED COVENANT OF GOOD
FAITH AND FAIR DEALING (AGAINST ACE)
61. MALCOLM realleges and incorporates by reference each and every
62. The Policy contains an implied covenant of good faith and fair dealing
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page18 of 23
under which ACE agreed not to take any action that would deprive MALCOLM of
MALCOLM's rights and benefits under the Policy.
63. ACE has breached this implied covenant of good faith and fair dealing
by engaging in a course of conduct intentionally designed to deprive MALCOLM of
64. ACE breached the implied covenant of good faith and fair dealing by
asserting unreasonable interpretations of the Policy with the intention of depriving
MALCOLM of rights and benefits due to MALCOLM under the Policy. ACE's
breaches of the implied covenant of good faith and fair dealing include, but are not
limited to intentionally, wrongfully, and maliciously:
d. Basing its claims-handling decisions on the desire to reduce or
avoid its obligations to MALCOLM;
e. Preferring its own interests over the interests of MALCOLM;
f. Denying MALCOLM the right to benefits to which MALCOLM
is entitled under the Policy, with the intention of coercing
MALCOLM to forgo these rights and benefits; and
g. Taking coverage positions contrary to controlling law.
65. By breaching the implied covenant of good faith and fair dealing, ACE
waived its rights under the Policy.
66. As a direct and proximate result of ACE's breaches of the implied
covenant of good faith and fair dealing, MALCOLM has been damaged in an
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page19 of 23
67. As a direct and proximate result of ACE's breaches of the implied
covenant of good faith and fair dealing, MALCOLM is entitled to recover its
attorneys' fees and costs incurred in establishing its rights to obtain benefits under
UNFAIR BUSINESS PRACTICES (VIOLATION OF CALIFORNIA
BUS. & PROF. CODE § 17200, ET SEQ.) (AGAINST ACE)
68. MALCOLM realleges and incorporates by reference each and every
allegation set forth about in this Complaint.
69. MALCOLM alleges on information and belief that ACE has engaged in
unlawful, unfair, wrongful, and/or fraudulent business practices, including with
respect to MALCOLM's claims to ACE under the Policy in connection with the
Alleged Pollution Claims. Such practices include but are not limited to the acts and
omissions set forth above, as well as violations of California Insurance Code
§ 790.03(h), such as knowingly committing or performing with such frequency as to
indicate a general business practice the following unfair claims and settlement
a. Misrepresenting to claimants pertinent facts or insurance policy
provisions relating to any coverages at issue;
b. Failing to acknowledge and act reasonably promptly upon
communications with respect to claims arising under insurance
c. Failing to adopt and implement reasonable standards for the
prompt investigation and processing of claims arising under
d. Failing to affirm or deny coverage of claims within a reasonable
time after proof of loss requirements have been completed and
submitted by the insured; and
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page20 of 23
e. Failing to provide promptly a reasonable explanation of the basis
relied on in the insurance policy, in relation to the facts or
applicable law, for the denial of a claim or for the offer of a
compromise settlement.
ACE's unlawful, unfair, wrongful, and/or fraudulent business practices set forth
above in this paragraph and throughout this Complaint, including the fourth and
fifth causes of action were and are unfair business practices in violation of
California Business and Professions Code § 17200, et seq., and California common
law. (See, e.g., Zhang v. Superior Court (2013) 57 Cal.4th 364.)
70. As a direct and proximate result of ACE's unlawful, unfair, wrongful,
and/or fraudulent business practices, MALCOLM has suffered and will continue to
suffer substantial damage and irreparable injury. As such, MALCOLM is entitled to
temporary, preliminary, and permanent injunctive relief against ACE and its
unlawful, unfair, wrongful, and/or fraudulent business practices, as well as
restitution and attorneys' fees.
WHEREFORE, MALCOLM prays for relief as follows:
1. As to the first cause of action, a declaration that:
otherwise in connection with the Alleged Pollution Claims;
2. As to the second cause of action, a declaration that:
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page21 of 23
3. As to the third cause of action, a declaration that under the Policy, ACE
is obligated to indemnify MALCOLM for certain "professional loss" and/or "loss"
regarding the Alleged Pollution Claims and/or in connection with settlement of the
Alleged Pollution Claims;
4. As to the fourth cause of action, general, consequential, and
compensatory damages according to proof;
5. As to the fifth cause of action, attorneys' fees, costs, and consequential
damages according to proof;
6. As to the sixth cause of action, temporary, preliminary and permanent
injunctive relief, as well as restitution and attorneys' fees;
7. Pre-judgment interest according to proof;
8. Costs of suit and attorneys' fees according to proof;
9. Punitive damages according to proof; and
10. Such other and further relief as the Court may deem just and proper.
DATED: March 4, 2015 HANSON BRIDGETT LLP
By: /s/ Miles C. Holden
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page22 of 23
MALCOLM DRILLING COMPANY, INC. hereby demands a jury trial.
Case4:15-cv-01011-DMR Document1 Filed03/04/15 Page23 of 23
D.E. 1 Complaint.pdf 106.32 KB