CA Dept. of Toxic Substances Control v. Jim Dobbas, Inc. ( 2019 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 CALIFORNIA DEPARTMENT OF TOXIC No. 2:14-CV-00595 WBS EFB SUBSTANCES CONTROL and the TOXIC 13 SUBSTANCES CONTROL ACCOUNT, 14 Plaintiffs, ORDER RE: MOTIONS TO INTERVENE AND TO VACATE 15 v. DEFAULT 16 JIM DOBBAS, INC. a California corporation; CONTINENTAL RAIL, 17 INC., a Delaware corporation; DAVID VAN OVER, individually; 18 PACIFIC WOOD PRESERVING, a dissolved California 19 corporation; WEST COAST WOOD PRESERVING, LLC., a Nevada 20 limited liability company; and COLLINS & AIKMAN PRODUCTS, LLC, 21 a Delaware limited liability company, 22 Defendants. 23 24 ----oo0oo---- 25 Plaintiffs Department of Toxic Substances Control and 26 the Toxic Substances Control Account (collectively “DTSC”) sought 27 recovery of costs and interest incurred during the cleanup of a 28 1 wood preserving operation in Elmira, California against multiple 2 defendants under the Comprehensive Environmental Response, 3 Compensation, and Liability Act (“CERCLA”), 42 U.S.C. § 9601 et 4 seq. (First Am. Compl. (“FAC”) at ¶ 19.) In 2015, DTSC obtained 5 entry of default against a canceled Delaware corporation, 6 defendant Collins & Aikman Products, LLC (“C&A Products”) after 7 it failed to respond to DTSC’s First Amended Complaint. (Docket 8 No. 129.) Presently before the court are motions to intervene 9 and vacate C&A Products’ default filed by The Continental 10 Insurance Company (“Continental”), Century Indemnity Company 11 (“Century”), and Allianz Underwriters Insurance Company, Chicago 12 Insurance Company, and Fireman’s Fund Insurance Company 13 (collectively, “Allianz”), insurers of C&A Products. (Docket 14 Nos. 205, 217, 222.) 15 This is not the first time an insurance company has 16 moved to intervene and set aside default in this matter. The 17 Travelers Insurance Company (“Travelers”) previously attempted to 18 do so (Docket No. 196), but this court denied the motion after 19 finding that Travelers’ refusal to defend C&A Products under a 20 reservation of rights forfeited its interest in the litigation 21 and it could not establish good cause to set aside C&A Products’ 22 default.1 (Order Re: Mot. to Intervene and Set Aside Default at 23 3-4 (Docket No. 221).) The moving parties before the court now 24 offer many of the same arguments Travelers did in its motion, 25 1 Allstate Insurance Company filed a notice of joinder 26 (Docket No. 218) to Travelers’ motion to intervene and did not 27 file a separate motion to intervene. (Docket No. 196.) Traveler’s motion to intervene was denied on October 22, 2019. 28 (Docket No. 221.) Accordingly, Allstate’s joinder fails. 1 with some important differences. (Compare Docket Nos. 205, 217, 2 222, with Docket No. 196.) Each will be discussed in turn. 3 First, the court will consider Continental’s motion. 4 Continental’s position is distinguishable from that of Travelers 5 in that it did not become aware of this lawsuit until after C&A 6 Products’ default was entered. However, it is substantially 7 indistinguishable in that Continental has neither admitted 8 coverage nor agreed to defend C&A Products on a reservation of 9 rights. DTSC offered to stipulate to Continental’s intervention 10 if it either (1) accepted coverage without a reservation of 11 rights or (2) defended C&A Products with a reservation of rights. 12 (Decl. of Laura Zuckerman (“Zuckerman Decl.”), Ex. B (Docket No. 13 228).) This was the same stipulation DTSC offered to Travelers 14 before its motion was heard. Just as in Travelers’ case, 15 Continental did not stipulate, although instead of affirmatively 16 refusing the stipulation, it failed to respond to plaintiffs’ 17 offer. (Zuckerman Decl. ¶ 4.) Continental also does not advance 18 any new argument to establish good cause to set aside C&A 19 Products’ default. (Compare Docket No. 205, with Docket No. 20 196.) Accordingly, Continental’s motion will be denied. 21 Next, the court considers Century’s motion. Century, 22 too, offers the same arguments Travelers did in its motion to 23 intervene and set aside default. (Compare Docket No. 217, with 24 Docket No. 196.) Indeed, just like Travelers, Century disclaimed 25 coverage of any claims arising from the DTSC litigation, citing a 26 settlement agreement Century purportedly signed with C&A Products 27 in 2000. (Century Mot. to Intervene at 6 (Docket No. 217).) 28 Like Continental, Century failed to respond to plaintiffs’ 1 proposed stipulation, and by implication refuses to offer a 2 defense under a reservation of rights. (Zuckerman Decl. ¶ 4.) 3 Because it has both disclaimed coverage and refused to defend C&A 4 Products under a reservation of rights, Century’s motion to 5 intervene and set aside default will also be denied. Finally, 6 the court will consider Allianz’s motion. In California, “where 7 the insured is unable to assert its rights, an insurer who seeks 8 to intervene and protect its coverage defenses may provide an 9 explicit reservation of rights to its client and allege that 10 reservation of rights within its pleading to put the plaintiff on 11 notice that the insurance company is reserving those rights and 12 asserting coverage defenses.” Kaufman & Broad Communities, Inc. 13 v. Performance Plastering, Inc., 136 Cal. App. 4th 212, 222 (3d 14 Dist. 2006). Allianz expressly stated in its motion that it has 15 “reserved all rights to decline coverage on any applicable ground 16 and expressly ha[s] not waived or otherwise forfeited any direct 17 interest in the instant action that would serve to defeat Allianz 18 Intervenors’ claim for intervention of right.” (Allianz Mot. to 19 Intervene at 11 (Docket No. 222).) Furthermore, unlike Century 20 and Travelers, Allianz has not disclaimed coverage. Instead, it 21 is purportedly “gathering information regarding coverage and or 22 duties” in the present action.2 (Id.) 23 However, Allianz was C&A Products’ excess insurer. 24 (Opp. to Mot. to Intervene and Vacate Default at 2 n.2 (Docket 25 No. 227); see also Allianz Reply to Opp. to Mot. to Intervene at 26 2 Like Continental and Century, Allianz failed to respond 27 to DTSC’s proposed stipulation to allow them to intervene. (Zuckerman Decl. ¶ 4.) 28 1 2 (Docket No. 230).) California law recognizes a distinction 2 between primary and excess insurance coverage. “Primary coverage 3 is insurance coverage whereby, under the terms of the policy, 4 liability attaches immediately upon the happening of the 5 occurrence that gives rise to the liability . . . “excess” or 6 “secondary” insurance is coverage whereby, under the terms of 7 that policy, liability attaches only after a predetermined amount 8 of primary coverage has been exhausted.” Residence Mut. Ins. Co. 9 v. Travelers Indem. Co. of Conn., 26 F. Supp. 3d 965, 972-73 10 (C.D. Cal. 2014) (quoting Am. Cas. Co. v. Gen. Star Indem. Co., 11 125 Cal. App. 4th 1510, 1521 (2d Dist. 2005) (emphasis omitted)). 12 Normally, the policy limits of the underlying primary 13 policy must be exhausted before excess insurers have the “right 14 or duty to participate in the defense” of the insured. Ticor 15 Title Ins. Co. v. Employers Ins. of Wausau, 40 Cal. App. 4th 16 1699, 1707 (1st Dist. 1995) (citing Signal Companies, Inc. v. 17 Harbor Ins. Co., 27 Cal. 3d 359, 365 (1980)). In some instances, 18 excess insurers may assume the obligations of the primary insurer 19 before exhaustion occurs. Id. at 1708-09 (finding excess insurer 20 could defend when the primary insurer was insolvent or refused to 21 defend). But in the environmental context, primary coverage 22 cannot be exhausted “until a remediation plan is approved which 23 clearly establishes that the costs of remediation will exceed the 24 primary indemnity limits.” Cty. of Santa Clara v. USF & G, 868 25 F. Supp. 274, 280 (N.D. Cal. 1994). 26 While DTSC vaguely seeks to recover cleanup costs from 27 C&A Products’ “historic insurers” (Docket No. 197-4), DTSC has 28 yet to obtain judicial approval for C&A Products’ portion of the 1 | remediation plan? and failed to determine “which of C&A Products’ 2 insurers, if any, to proceed against.” (Opp. to Mot. to 3 Intervene and Vacate Default at 6 n.5.) Consequently, because 4 DTSC has yet to determine which primary insurer, if any, will be 5 responsible for C&A Products’ damages, the parties and the court 6 | do not know what the “primary indemnity limits” are. Absent this 7 information, the court cannot conclude that primary coverage is 8 exhausted and that excess insurers can properly intervene. See 9 Cty. of Santa Clara, 868 F. Supp. at 280. Accordingly, Allianz’s 10 | motion to intervene and set aside default will also be denied. 11 IT IS THEREFORE ORDERED that the motions to intervene 12 | and vacate default filed Continental (Docket No. 205), Century 13 (Docket No. 217), and Allianz (Docket No. 222), be, and the same 14 thereby are, DENIED. 15 Dated: December 3, 2019 . 16 ai thew th hb be— WILLIAM B. SHUBB 17 UNITED STATES DISTRICT JUDGE 18 19 20 21 22 23 24 □ 3 Plaintiffs did not include the amount they sought to 25 recover in their First Amended Complaint, but have since asserted 26 C&A Products owes them $3,219,449.85 in their motion for default judgment. (Mot. for Default J. 4 5(a) (Docket No. 184).) This 27 court expresses no opinion as to the merit of that determination and may hold a “prove-up” hearing in the future. 28