Court Opinion

ID: 4115698
Source: CourtListenerOpinion
Date Created: 2017-01-13 18:01:10.920347+00
Date Added: 2024-06-11T14:13:26.651022
License: Public Domain

FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

PITZER COLLEGE,                     No. 14-56017
       Plaintiff-Appellant,
                                       D.C. No.
            v.                   2:13-cv-05863-GW-E

INDIAN HARBOR
INSURANCE COMPANY,             ORDER CERTIFYING
      Defendant-Appellee.      QUESTIONS TO THE
                              CALIFORNIA SUPREME
                                    COURT

                 Filed January 13, 2017

       Before: Harry Pregerson, Richard A. Paez,
        and Andrew D. Hurwitz, Circuit Judges.

                         Order
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 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-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.
       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 following information 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.
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-party claim insurance policy be interpreted
as a notice provision such that the notice-prejudice rule
applies?
         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
by the California Supreme Court’s interpretation of California
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).”
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
unreasonably withheld. 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.”
       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 notice-
prejudice 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
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
         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.
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
        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.