Genesis Insurance Co. v. Magma Design Automation, Inc. , 705 F. App'x 505 ( 2017 )

FILED
NOT FOR PUBLICATION
JUL 7 2017
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
GENESIS INSURANCE COMPANY, No. 15-16999
Plaintiff-counter-claim- D.C. No. 5:06-cv-05526-EJD
defendant-Appellee,
v. MEMORANDUM*
MAGMA DESIGN AUTOMATION,
INC.,
Defendant-counter-claim-
3rd-party-plaintiff-
Appellee,
v.
NATIONAL UNION FIRE INSURANCE
COMPANY, of Pittsburgh, PA,
Third-party-defendant-
Appellant,
and
EXECUTIVE RISK INDEMNITY, INC.,
Third-party-defendant.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Appeal from the United States District Court
for the Northern District of California
Edward J. Davila, District Judge, Presiding
Argued and Submitted June 16, 2017
San Francisco, California
Before: SCHROEDER, FISHER,** and N.R. SMITH, Circuit Judges.
National Union Fire Insurance Company (“National Union”) appeals the
district court’s order granting partial summary judgment in favor of Genesis
Insurance Company (“Genesis”) and Magma Design Automation, Inc. (“Magma”).
We have jurisdiction under 28 U.S.C. § 1291, and we affirm.
1.1 Under the law of the case doctrine, “a court is generally precluded from
reconsidering an issue previously decided by the same court, or a higher court in
the identical case.” United States v. Lummi Nation, 763 F.3d 1180, 1185 (9th Cir.
2014) (citation omitted). “For the doctrine to apply, the issue in question must have
been decided explicitly or by necessary implication in the previous disposition.”
Id. (citation omitted).
**
The Honorable D. Michael Fisher, United States Circuit Judge for the
U.S. Court of Appeals for the Third Circuit, sitting by designation.
1
Judge Fisher would resolve this first issue on summary judgment, rather
than law of the case, grounds.
2
The issue presented in this case is whether the information Magma provided
to Executive Risk Indemnity, Inc. (“ERII”) is sufficient to constitute a “notice of
circumstances” under ERII’s 2003-04 Policy (“2003-04 Policy”). In Genesis I, this
court held that the information Magma provided to Genesis was not sufficient to
constitute a “notice of circumstances.” Genesis Ins. Co. v. Magma Design
Automation, Inc. (“Genesis I”), 386 F. App’x 728, 730 (9th Cir. 2010) (mem.).
Because Magma provided the same material information to ERII as it provided to
Genesis, the law of the case doctrine applies and our prior holding that the
information was not sufficient to constitute a “notice of circumstances” is
applicable here.
Even if the law of the case doctrine did not apply, the district court properly
entered partial summary judgment against National Union when it held that the
2003-04 Policy was not triggered, because no reasonable jury could find that the
information Magma provided to ERII was sufficient to constitute a “notice of
circumstances” under the terms of the insurance policy. The parties agree that the
only information Magma provided to ERII that it did not provide to Genesis was a
phone call whereby Magma explained how the patent litigation could morph into a
directors and officers lawsuit. However, this “additional information” is not
relevant under the “notice of circumstances” provision, because it is not “a
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description of the Claim [or] circumstances,” it does not involve “the nature of the
alleged or potential damage,” it does not include “the names of all actual or
potential claimants,” and it does not include “the manner in which [the] Insured
first became aware of the Claim [or] circumstances.” And even if the information
provided during the phone call were relevant, no reasonable jury could find this
information constitutes a “notice of circumstances” or corrects the deficiencies of
the earlier written information, because the policy requires that a “notice of
circumstances” be in writing.
Because we now hold that ERII was not provided a “notice of
circumstances” under the 2003-04 Policy, ERII can properly “adjust its records” to
reflect exhaustion of its 2004-06 Policy. Since ERII’s 2004-06 Policy is deemed
exhausted, National Union is now liable for providing first-layer excess insurance
coverage pursuant to the National Union 2004-06 Policy. Therefore, Genesis is
entitled to recover its $5 million settlement payment from National Union.
2. The district court used the correct date of accrual in calculating the
prejudgment interest award. California courts have “uniformly . . . interpreted the
‘vesting’ requirement as being satisfied at the time that the amount of damages
become certain or capable of being made certain, not the time liability to pay those
amounts is determined.” Evanston Ins. Co. v. OEA, Inc., 566 F.3d 915, 921 (9th
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Cir. 2009) (listing cases). It is the “amount [that] must be vested, not . . . the legal
entitlement to that amount.” Id.The amount of damages became certain on July 21, 2008, when Genesis
made the $5 million payment to the settlement of the securities litigation. Thus, the
district court properly held that July 21, 2008, was the date of accrual.
3. The district court applied the correct interest rate in calculating the
prejudgment interest award. “In the insurance context, [equitable subrogation]
permits the paying insurer to be placed in the shoes of the insured and to pursue
recovery from third parties responsible to the insured for the loss for which the
insurer was liable and paid.” Fireman’s Fund Ins. Co. v. Md. Cas. Co., 26 Cal.
Rptr. 2d 762, 767-68 (Cal. Ct. App. 1994). Equitable subrogation rights are “purely
derivative.” State Bar of Cal. v. Statile, 86 Cal. Rptr. 3d 72, 81 (Cal. Ct. App.
2008).
Because the right to which Genesis has become subrogated is the right to
coverage defined by the insurance policy between Magma and National Union, it is
a contractual right to which Genesis has succeeded and which defines the
obligation in question. In contract cases, the applicable rate of prejudgment interest
is “10 percent per annum” after the breach. Cal. Civ. Code § 3289(b). Therefore,
the district court applied the correct interest rate.
5
AFFIRMED.
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