Opinion ID: 613119
Heading Depth: 3
Heading Rank: 1

Heading: The Vulcan Action

Text: In January 2005, Transport filed a lawsuit in the Los Angeles County Superior Court seeking a declaration of its coverage obligations to Vulcan under four consecutive insurance policies, including the 1981 Policy. In August 2006, two other insurance carriers filed similar actions against Vulcan and its primary insurers in the same court. In January 2007, these cases were consolidated into a single complex proceeding (the Vulcan Action) in Los Angeles County Superior Court. In the meantime, Street sought reimbursement from Vulcan for defense costs and damages in the Tort Actions. In February 2008, Street and its insurer, National Union Fire Insurance Company of Pittsburgh, PA (National Union), filed a breach of contract and indemnity action against Vulcan in the Northern District of Illinois to recover these amounts (the Illinois Action). See R.R. Street & Co. v. Vulcan Materials Co., 569 F.3d 711 (7th Cir.2009). (We refer to Street and National Union collectively as Street/National Union.) In the Illinois Action, Street/National Union claimed that Vulcan was liable to Street based on an indemnification provision in the parties' distribution contract. Id. at 713. In April 2008, Vulcan filed the state court equivalent of a third-party complaint against Street/National Union in the Vulcan Action; Vulcan hoped to resolve all indemnification claims related to the Tort Actions in a single proceeding. Vulcan's complaint against Street/National Union mirrored the Illinois Action; in addition, Vulcan sought a declaration that its insurers were liable for any obligation Vulcan owed to Street/National Union. With the same claims pending in an Illinois federal court and a California state court, Vulcan and Street/National Union waged a battle to determine which court would hear the claims between them. [2] The state court agreed to stay the claims against Street/National Union in the Vulcan Action and decide them at a later stage of the litigation. At no point did Transport intervene in the Illinois Action, and prior to the cases on appeal, no claims had been filed between Street and Transport in the Vulcan Action or elsewhere. [3] Nevertheless, the parties and the court were aware of the dormant claims between Street and Transport. In a January 2009 supplemental brief on preliminary issues in the Vulcan Action, National Union argued that the superior court's initial determinations would not apply to any of Street's potential claims under the 1981 Policy because Street was in a different position than Vulcan. At a March 2009 status hearing, the parties discussed Street's status as an additional insured under the 1981 Policy. Street indicated that it had made a demand for coverage under the 1981 Policy, which Transport had rejected, but it had not yet filed any claims against Transport in court because the underlying Tort Actions were still pending. Street argued that any coverage decisions regarding Vulcan should not apply to Street because Street was covered by different primary insurance policies, was in a different position than Vulcan in relation to the Tort Actions and had not participated in discovery or case management related to Transport's claims against Vulcan. The state court postponed this issue, stating that it would decide later whether Street would be bound by a decision regarding Vulcan's coverage under the 1981 Policy. In April 2009, the state court issued an order in the Vulcan Action deciding three preliminary legal issues concerning the scope of Transport's liability to Vulcan under the 1981 Policy. The court determined the scope of Transport's duty to defend under the policy, interpreted the phrase underlying insurance, and addressed whether horizontal exhaustion applied to Vulcan's claims under the policy. The court's interpretation of the 1981 Policy favored Transport's position, so Vulcan appealed the decision to the California Court of Appeals.