Foster Poultry Farms v. Contractors Bonding and Ins. Co. ( 2022 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 FOSTER POULTRY FARMS, No. 1:20-cv-01628-DAD-SKO 12 Plaintiff, 13 v. ORDER DENYING DEFENDANT’S MOTION TO DISMISS 14 CONTRACTORS BONDING AND INSURANCE COMPANY, (Doc. No. 8) 15 Defendant. 16 17 18 This matter is before the court on the motion to dismiss filed by defendant on January 29, 19 2021. (Doc. No. 8.) Pursuant to General Order No. 617 addressing the public health emergency 20 posed by the COVID-19 pandemic, defendant’s motion was taken under submission on the 21 papers. (Doc. No. 11.) For the reasons explained below, the court will deny the pending motion 22 to dismiss.1 23 1 The undersigned apologizes for the excessive delay in the issuance of this order. This court’s 24 overwhelming caseload has been well publicized and the long-standing lack of judicial resources in this district long-ago reached crisis proportion. That situation has now been partially addressed 25 by the U.S. Senate’s confirmation of a new district judge for this court on December 17, 2021. Nonetheless, for over twenty-two months the undersigned was left presiding over approximately 26 1,300 civil cases and criminal matters involving 735 defendants. Unfortunately, that situation 27 sometimes results in the court not being able to issue orders in submitted civil matters within an acceptable period of time. This has been frustrating to the court, which fully realizes how 28 incredibly frustrating it is to the parties and their counsel. 1 BACKGROUND 2 This is a diversity action involving an insurance coverage dispute between plaintiff Foster 3 Poultry Farms (“Foster Farms”) and defendant Contractors Bonding and Insurance Company 4 (“CBIC”), in which Foster Farms alleges that CBIC failed to defend and indemnify it in a 5 personal injury action brought by an individual who allegedly tripped and fell while on Foster 6 Farms’s premises. (See Doc. No. 1.) 7 A. The Underlying Action Against Foster Farms in State Court 8 On February 21, 2019, Bobby Rathi filed a personal injury complaint in Merced County 9 Superior Court against Foster Farms and twenty unnamed doe defendants, Does 1–10 (“agents or 10 employees of other named defendants [who] acted within the scope of that agency or 11 employment”) and Does 11–20 (“persons whose capacities are unknown to plaintiff”), Case No. 12 19CV00788 (“the underlying action”). (Doc. No. 1 at 27–28.) Therein, Mr. Rathi asserted two 13 causes of action—general negligence and premises liability. (Id. at 29.) As to his negligence 14 claim, Mr. Rathi alleged as follows: 15 On February 27, 2017, [Mr. Rathi] was employed with Try-Us Transportation and was in the course and scope of his job duties 16 picking up a load when he tripped over a door stopper causing injury to his back, left shoulder, left knee, neck and left hip. The 17 door stopper was mounted directly in a walk-way, which [Mr. Rathi] was using to go into the building. Defendants owed a duty 18 of care to [Mr. Rathi] to maintain the property it owned in a reasonable safe condition. Defendants breached their duty of care 19 to [Mr. Rathi] by negligently maintaining its property in such a dangerous condition as to cause [Mr. Rathi’s] injuries and damages. 20 As a result of Defendants’ negligence, [Mr. Rathi] sustained severe injuries, which have required medical treatment and which has 21 caused [Mr. Rathi] to suffer general/special damages all in an amount according to proof. 22 23 (Doc. No. 1 at 30.) As to his premises liability claim, Mr. Rathi further alleged that “[d]efendants 24 owed a duty of care to [Mr. Rathi] to maintain the property it owned, maintained, managed and 25 controlled in a reasonably safe condition as to the door stopper in question,” and that defendants 26 breached that duty “by negligently maintaining its property in such a dangerous condition as to 27 cause [Mr. Rathi’s] injuries and damages.” (Id. at 31.) 28 ///// 1 Mr. Rathi did not name his employer, Try-Us Transportation, Inc. (“Try-Us”) as a 2 defendant in the underlying state court action. 3 B. Plaintiff Foster Farms’s Claims in this Action Against Defendant CBIC 4 On November 16, 2020, plaintiff Foster Farms filed its complaint initiating this action, 5 alleging that defendant CBIC had a duty to defend and indemnify it in the underlying action 6 because Foster Farms is an “additional insured” under the commercial general liability policy that 7 CBIC had issued Try-Us. (Doc. No. 1 at ¶ 8.) 8 Plaintiff alleges the following in its complaint. Foster Farms entered into an independent 9 contractor agreement with Try-Us, in which Try-Us agreed to provide hauling services to 10 transport Foster Farms’s processed goods. (Doc. No. 1 at ¶ 10; id. at 33.) Under that agreement, 11 Try-Us was obligated to obtain personal injury liability insurance and to name Foster Farms as an 12 additional insured under that policy. (Id. at ¶ 11.) Try-Us obtained commercial general liability 13 insurance from defendant CBIC, policy number A31ACV226, for the period July 29, 2016 14 through July 29, 2017 (“the Policy”), which included coverage for bodily injury and property 15 damage liability. (Id. at ¶ 12.) Foster Farms contends that it is entitled to coverage under the 16 Policy because it is an “additional insured,” as provided by the Policy’s “blanket additional 17 insured” endorsement (“the Endorsement”). (Doc. Nos. 1 at ¶¶ 12, 13; 10 at 58.) In relevant part, 18 the Endorsement provides as follows: 19 A. Section II - Who Is An Insured is amended to include as an additional insured any person or organization for whom you are 20 performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person 21 or organization be added as an additional insured on your policy. Such person or organization is an additional insured only with 22 respect to liability for “bodily injury”, “property damage” or “personal and advertising injury” caused by your negligence in the 23 performance of your ongoing operations performed for that additional insured. 24 25 ///// 26 ///// 27 ///// 28 ///// 1 (Doc. No. 10 at 58.)2 The Policy specifies that its use of “you” and “your” refers to the named 2 insured—here, that is Try-Us. (See Doc. No. 10 at 5–6, 31.) 3 According to Foster Farms, beginning on April 14, 2019 and continuing through August 4 21, 2020, it “repeatedly tendered and requested that CBIC defend and indemnify it” in the 5 underlying action, but CBIC allegedly wrongfully denied those requests and refused to reconsider 6 its denial. (Doc. No. 1 at ¶¶ 16–25.) Plaintiff does attach as exhibits to its complaint copies of 7 the tender letters and correspondence, in which plaintiff informed CBIC that it believed it was 8 entitled to coverage as an “additional insured” because Mr. Rathi was comparatively negligent 9 (for not looking where he was going when he tripped and fell) and that Try-Us was negligent (for 10 not adequately training and supervising Mr. Rathi in safety procedures and protocols). (Id. at 51– 11 52, 92.) Plaintiff alleges that as a result of CBIC’s failure to defend and indemnify it in the 12 underlying state court action, plaintiff “has been compelled to and will continue to incur losses, 13 including, but not limited to, defense, settlement, and investigative costs, as well as attorneys’ 14 fees, expert fees and other expenses.” (Id. at 26.) 15 In its complaint, plaintiff asserts the following five claims against defendant CBIC: (1) 16 breach of contract for failing to defend; (2) breach of contract for failing to indemnify; (3) breach 17 of the implied covenant of good faith and fair dealing for failing to defend; (4) breach of the 18 implied covenant of good faith and fair dealing for failing to indemnify; and (5) declaratory relief. 19 (Doc. No. 1.) Plaintiff “seeks to recover the costs of defending the underlying action and any 20 amounts paid in association with settlement of that litigation or any judgment entered in that 21 litigation.” (Id. at ¶ 1.). 22 2 Although plaintiff refers to the Policy throughout its complaint it did not attach a copy of the 23 Policy to the complaint. A certified copy of the Policy is attached as an exhibit to the declaration of Scott R. Ostericher, the Assistant Vice President of Claims Operations for CBIC’s parent 24 company, which defendant filed in support of its pending motion to dismiss. (Doc. No. 10.) In opposing the pending motion, plaintiff did not contest the authenticity of this copy of the Policy. 25 Thus, the court deems the Policy incorporated by reference into the complaint and considers the provisions of the Policy in ruling on the pending motion. See Knievel v. ESPN, 393 F.3d 1068, 26 1076 (9th Cir. 2005) (finding that the “incorporation by reference” doctrine extends to situations 27 in which “the plaintiff’s claim depends on the contents of a document, the defendant attaches the document to its motion to dismiss, and the parties do not dispute the authenticity of the 28 document”). 1 On January 29, 2021, defendant filed the pending motion to dismiss plaintiff’s complaint, 2 contending that plaintiff does not and cannot state cognizable claims against it as a matter of law 3 because Foster Farms does not qualify as an “additional insured” under the Policy. (Doc. Nos. 8, 4 9.) On February 16, 2021, plaintiff filed an opposition to the pending motion, and on February 5 23, 2021, defendant filed a reply thereto. (Doc. Nos. 12, 13.) 6 LEGAL STANDARD 7 The purpose of a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) 8 is to test the legal sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 9 2001). A dismissal may be warranted where there is “the lack of a cognizable legal theory or the 10 absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police 11 Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). A claim for relief must contain “a short and plain 12 statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). 13 Though Rule 8(a) does not require detailed factual allegations, a plaintiff is required to allege 14 “enough facts to state a claim for relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 15 550 U.S. 544, 570 (2007). A claim is plausible on its face “when the plaintiff pleads factual 16 content that allows the court to draw the reasonable inference that the defendant is liable for the 17 misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 18 In determining whether a complaint states a claim on which relief may be granted, the 19 court accepts as true the allegations in the complaint and construes the allegations in the light 20 most favorable to the plaintiff. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); Love v. 21 United States, 915 F.2d 1242, 1245 (9th Cir. 1989). However, the court need not assume the truth 22 of legal conclusions cast in the form of factual allegations. U.S. ex rel. Chunie v. Ringrose, 788 23 F.2d 638, 643 n.2 (9th Cir. 1986). While Rule 8(a) does not require detailed factual allegations, 24 “it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation.” Iqbal, 25 556 U.S. at 678. A pleading is insufficient if it offers mere “labels and conclusions” or “a 26 formulaic recitation of the elements of a cause of action.” Twombly, 550 U.S. at 555; see also 27 Iqbal, 556 U.S. at 676 (“Threadbare recitals of the elements of a cause of action, supported by 28 mere conclusory statements, do not suffice.”). Moreover, it is inappropriate to assume that the 1 plaintiff “can prove facts which it has not alleged or that the defendants have violated the . . . laws 2 in ways that have not been alleged.” Associated Gen. Contractors of Cal., Inc. v. Cal. State 3 Council of Carpenters, 459 U.S. 519, 526 (1983). 4 ANALYSIS 5 A. The Duty to Defend and Duty to Indemnify under California Law 6 As an initial matter, the court notes that the Policy does not contain a choice of law 7 provision. Nonetheless, the parties do not dispute that California law governs the substantive 8 issues in this case. (See Doc. Nos. 1 at ¶ 42; 9 at 5–6; 12 at 5.) Indeed, plaintiff’s claims and 9 both parties’ arguments are based on application of California law, and neither party suggests that 10 the laws of any foreign state should govern. (Id.) “In an ordinary diversity case, federal courts 11 apply the substantive law of the forum in which the court is located, including the forum’s choice 12 of law rules.” Ins. Co. of N. Am. v. Fed. Exp. Corp., 189 F.3d 914, 919 (9th Cir. 1999). 13 “California law applies where no party has ‘suggested that the law of a foreign state should 14 furnish the rule of decision.’” W. Int’l Syndication Corp. v. Gulf Ins. Co., 222 F. App’x 589, 591 15 (9th Cir. 2007)3 (citing Hurtado v. Superior Court, 11 Cal. 3d 574, 581 (1974) (noting that 16 “generally speaking the forum will apply its own rule of decision unless a party litigant timely 17 invokes the law of a foreign state”). Accordingly, the court will apply California substantive law 18 in determining whether plaintiff’s complaint sufficiently states cognizable claims. 19 Under California law, “a liability insurer owes a broad duty to defend its insured against 20 claims that create a potential for indemnity.” Horace Mann Ins. Co. v. Barbara B., 4 Cal. 4th 21 1076, 1081 (1993). “[T]he [insurer] must defend a suit which potentially seeks damages within 22 the coverage of the policy.” Gray v. Zurich Ins. Co., 65 Cal. 2d 263, 275 (1966). “The 23 determination [of] whether the insurer owes a duty to defend usually is made in the first instance 24 by comparing the allegations of the complaint with the terms of the policy.” Horace Mann, 4 25 Cal. 4th at 1081. In analyzing the policy, “courts must consider both the [] language in the 26 policy, and the endorsements or exclusions affecting coverage, if any, included in the policy 27 3 Citation to this unpublished Ninth Circuit opinion is appropriate pursuant to Ninth Circuit Rule 28 36-3(b). 1 terms.” Modern Dev. Co. v. Navigators Ins. Co., 111 Cal. App. 4th 932, 939 (2003). “Facts 2 known to the insurer and extrinsic to the third party complaint can generate a duty to defend, even 3 though the face of the complaint does not reflect a potential for liability under the policy.” 4 Montrose Chem. Corp. v. Superior Court, 6 Cal. 4th 287, 296 (1993). “This is so because current 5 pleading rules liberally allow amendment; the third party plaintiff cannot be the arbiter of 6 coverage.” Id.; see also Gunderson v. Fire Ins. Exch., 37 Cal. App. 4th 1106, 1114 (1995) (“Our 7 Supreme Court, anticipating imaginative counsel and the likelihood of artful drafting, has 8 indicated that a third party is not the arbiter of the policy’s coverage. A corollary to this rule is 9 that the insured may not speculate about unpled third party claims to manufacture coverage.”). 10 “[E]xtrinsic facts cannot trigger a duty to defend when they relate only to claims that have not 11 been pleaded in the third-party claimant’s complaint.” Burlington Ins. Co. v. CHWC, Inc., 559 F. 12 App’x 639, 640 (9th Cir. 2014).4 Thus, “[a]n insured may not trigger the duty to defend by 13 speculating about extraneous ‘facts’ regarding potential liability or ways in which the third party 14 claimant might amend its complaint at some future date.” Gunderson, 37 Cal. App. at 1114. 15 “Doubts as to whether particular facts give rise to a duty to defend are resolved in an insured’s 16 favor.” AIG Prop. Cas. Co. v. Cosby, No. 2:15-cv-04842-BRO-RAO, 2015 WL 9700994, at *3 17 (C.D. Cal. Nov. 13, 2015) (citing Gray, 65 Cal. 2d at 269). 18 An “insurer’s duty to defend is broader than its duty to indemnify.” Buss v. Superior 19 Court, 16 Cal. 4th 35, 46 (1997). Under California law, an “insurer’s duty to indemnify runs to 20 claims that are actually covered, in light of the facts proved,” and “arises only after liability is 21 established.” Id. at 45. Thus, the duty to defend and the duty to indemnify are “correlative” but 22 not “coterminous.” Certain Underwriters at Lloyd’s of London v. Superior Court, 24 Cal. 4th 23 945, 958 (2001). “Where there is a duty to defend, there may be a duty to indemnify; but where 24 there is no duty to defend, there cannot be a duty to indemnify.” Id. 25 ///// 26 ///// 27 4 Citation to this unpublished Ninth Circuit opinion is appropriate pursuant to Ninth Circuit Rule 28 36-3(b). 1 B. Whether Plaintiff’s Complaint States Cognizable Claims 2 Defendant CBIC contends that all of Foster Farms’s claims in this action turn on whether 3 Foster Farms qualifies as an “additional insured” under the Policy, thereby entitling Foster Farms 4 to coverage in the underlying state court action and triggering CBIC’s duty to defend and possibly 5 indemnify. (Doc. No. 9 at 6–8.) According to CBIC, all of plaintiff’s claims should be dismissed 6 without leave to amend because Foster Farms is not an additional insured under the Policy as a 7 matter of law and is therefore not entitled to coverage under the Policy. (Id. at 6–7.) 8 As noted above, the Endorsement sets forth two requirements for a person or organization 9 (like Foster Farms) to be deemed an additional insured on Try-Us’s Policy. First, Try-Us must be 10 performing operations for that person or organization and have a written agreement that such 11 person or organization be added as an additional insured. (Doc. No. 10 at 58.) The parties do not 12 contest that plaintiff has sufficiently alleged facts to satisfy this first requirement; notably, 13 plaintiff alleges that it entered into an independent contractor agreement with Try-Us for hauling 14 services, which states in pertinent part that “Hauler [Try-Us] shall name the Company [Foster 15 Farms] as an additional insured on all liability and property damage policies,” and plaintiff has 16 attached a copy of that agreement to its complaint. (See Doc. No. 1 at ¶ 10; id. at 33, 39.) The 17 parties contest only the second requirement for coverage as an additional insured under the 18 Endorsement, which states that “[s]uch person or organization is an additional insured only with 19 respect to liability for “bodily injury”, “property damage” or “personal and advertising injury” 20 caused by your negligence in the performance of your ongoing operations performed for that 21 additional insured.” (Doc. No. 10 at 58) (emphasis added). 22 In the pending motion, CBIC emphasizes that applying the plain text of the Endorsement 23 to Mr. Rathi’s bodily injury claim in the underlying state court action results in the conclusion 24 that “Foster Farms qualifies as an Additional Insured under the [P]olicy only with respect to 25 liability for bodily injury caused by Try-Us Transportation’s negligence in the performance of 26 Try-Us Transportation’s ongoing operations performed for Foster Farms.” (Doc. No. 9 at 7.) 27 CBIC argues that it does not have a duty to defend or a duty to indemnify Foster Farms as an 28 additional insured because the Policy provides “coverage to Foster Farms only where Foster 1 Farms is sued because of the alleged negligence of Try-Us,” which CBIC contends is not the case 2 here. (Doc. Nos. 8 at 1–2; 9 at 2.) According to CBIC, in the underlying action brought in state 3 court, Mr. Rathi “alleges only that Foster Farms itself was negligent for its own premises 4 liability,” not “that his employer Try-Us [] was negligent in any way or that any act of Try-Us [] 5 caused his injury.” (Doc. No. 9 at 2.) 6 In its opposition to the pending motion, plaintiff essentially argues that it is an additional 7 insured under the Policy because a central issue as to its affirmative defenses in the underlying 8 state court action is whether Mr. Rathi and Try-Us were “comparatively and/or contributorily 9 negligent in regard to the accident.” (Doc. No. 12 at 4.) Specifically, Foster Farms has argued in 10 the underlying state court action that Mr. Rathi “tripped and fell because he was not looking 11 where he was walking.” (Id. at 5–6.) Foster Farms also contends that to the extent Mr. Rathi 12 claims that he could not see the door stop because it was dark, Try-Us “should have provided him 13 with a flash light or other means to work in the dark.” (Id.) In light of these affirmative defenses 14 and allegations, plaintiff contends that the trier of fact in the underlying state court action may 15 find that non-parties Mr. Rathi and Try-Us were comparatively or contributorily negligent and 16 may apportion fault among them, even though Foster Farms is the only named defendant in that 17 action. (Id. at 4.) Plaintiff argues that the fact that Mr. Rathi did not name Try-Us as a defendant 18 in the underlying action is not outcome determinative here. (Id. at 7, 9.) Because of Foster 19 Farms’s affirmative defenses, it contends that Try-Us will nevertheless be on the verdict form for 20 apportionment of fault by a nonparty tortfeasor. (Id. at 7); see also CACI No. 406 (“If you find 21 that the [negligence/fault] of more than one person including [name of defendant] [and] [[name of 22 plaintiff]/ [and] [name(s) or description(s) of nonparty tortfeasor(s)]] was a substantial factor in 23 causing [name of plaintiff]’s harm, you must then decide how much responsibility each has by 24 assigning percentages of responsibility to each person listed on the verdict form.”). Further, 25 because Mr. Rathi was injured during the course and scope of his employment with Try-Us, 26 plaintiff emphasizes that “[Mr.] Rathi was barred from asserting any claims against his employer 27 Try-Us [under California’s workers’ compensation laws], even if he believes Try-Us [] was 28 negligent.” (Id. at 9.) 1 In reply, defendant argues that Foster Farms’s affirmative defenses and assertions of 2 negligence by Mr. Rathi or Try-Us are legally irrelevant because “[i]t is not the putative insured’s 3 claims or assertions that matter for purposes of determining additional insured status”—it is the 4 plaintiff’s claims in the underlying action that are relevant to that determination. (Doc. No. 13 at 5 2–3.) Defendant cites the decision in Monticello Ins. Co. v. Essex Ins. Co., 162 Cal. App. 4th 6 1376 (2008) in support of its argument in this regard. Defendant contends that Foster Farms 7 ignores the holding of Monticello by focusing on the allegations of Try-Us’s negligence that 8 Foster Farms itself has raised in its answer to Mr. Rathi’s complaint in his state court action, 9 rather than on Mr. Rathi’s allegations—of which, there are none alleging that Try-Us was 10 negligent. (Doc. No. 13 at 2.) However, the decision in Monticello does not stand for the broad 11 proposition that assertions or allegations made by the putative insured are wholly irrelevant to the 12 determination of whether the insurer has a duty to defend. As explained below, the court in 13 Monticello found that such allegations were simply unavailing to establish the insurer’s duty to 14 defend in that particular case. 15 In Monticello, a state appellate court affirmed the denial of summary judgment in an 16 equitable contribution action brought by a general contractor’s insurer against a drywall 17 subcontractor’s insurer. Monticello, 162 Cal. App. 4th at 1378. The general contractor was an 18 additional insured on the drywall subcontractor’s insurance policy but “only as respects negligent 19 acts or omissions of the [drywall subcontractor] and only for occurrences, claims or coverage not 20 otherwise excluded in the policy.” Id. at 1386, n.4. Under the policy, coverage was limited to 21 consequential or resultant property damage caused by defective drywall work, and the additional 22 insured endorsement provided that “no coverage nor defense shall be afforded to” additional 23 insureds where no coverage exists for the drywall subcontractor. Id. at 1379, n.1, 1386, n.4. The 24 court concluded that the drywall subcontractor’s insurer did not owe a duty to defend the general 25 contractor in an action brought by homeowners for construction defects “because neither the 26 pleadings nor the extrinsic evidence in the underlying action revealed a possibility that the 27 homeowners’ claims against [the general contractor] might be covered by the drywall 28 subcontractor’s policy.” Id. at 1378. As for the pleadings, the court found that the homeowners 1 did not allege any damages related to drywall work at all, let alone consequential damages caused 2 by defective drywall work—the only damages covered by the policy. Id. at 1387. The court next 3 considered whether facts extrinsic to the complaint triggered the insurer’s duty to defend but 4 concluded that the only extrinsic fact offered by the general contractor’s insurer (a “defects list” 5 of construction deficiencies) “play[ed] no role in [its] duty to defend analysis” because the 6 general contractor’s insurer did not tender the defects list to the drywall subcontractor’s insurer 7 during the pendency of the underlying action when it still had an opportunity to participate. Id. at 8 1388–89. Lastly, the court considered and rejected the argument that the duty to defend was 9 created by the general contractor’s cross-complaint against the drywall subcontractor for 10 indemnity, in which the general contractor alleged that the drywall subcontractor was negligent. 11 Id. at 1389. In this regard, the court explained that “[t]he cross-complaint for indemnity does 12 nothing to alter the fact that the [homeowners], the plaintiffs in the main action, the action for 13 which a defense is sought, did not allege covered damages against [the drywall subcontractor],” 14 and the allegations in the cross-complaint “cannot substitute for the absence of such allegations 15 by the [homeowners].” Id. Importantly, the court had analyzed the text of the insurance policy, 16 the additional insured endorsement, and the exclusions set forth therein—which not only limited 17 coverage to negligent acts by the drywall subcontractor, but also specifically limited the type of 18 covered damages. Id. at 1386–89. With these specific limits in mind, the court in Monticello 19 concluded that although the general contractor’s cross-complaint for indemnity alleged the 20 drywall subcontractor’s negligence, the general contractor’s cross-complaint did not allege 21 covered damages. Id. at 1389. Accordingly, in the undersigned’s view, defendant CBIC 22 inaccurately characterizes the court’s opinion in Monticello by stating in its pending motion that 23 “[t]he court held that only the allegations in the complaint for which coverage is sought matter in 24 determining whether there is a duty to defend that complaint.” (Doc. No. 9 at 7.) For this reason, 25 defendant’s reliance on Monticello is unpersuasive. 26 Defendant also relies on the decision in Gunderson v. Fire Ins. Exch., 37 Cal. App. 4th 27 1106 (1995) to support its argument that “Foster Farms may not create additional insured 28 coverage by speculating as to whether Rathi could have alleged negligence against Try-Us 1 Transportation.” (Doc. No. 9 at 8.) However, Gunderson is readily distinguished from this case 2 and does not serve to advance defendant’s argument. In Gunderson, the California Court of 3 Appeal affirmed the granting of summary judgment in favor of a defendant insurer on the insured 4 homeowners’ duty to defend claim because the third party lawsuit brought by a neighbor against 5 the homeowners alleged only equitable claims related to an easement and adverse possession on 6 their property—not claims for “tangible property damage or bodily injury,” which were the only 7 types of claims covered by the homeowners’ liability policy. 37 Cal. App. 4th at 1110–15. The 8 homeowners argued that because the neighbor “could have made a claim for ‘physical injury to or 9 destruction of tangible property’ in connection with the fence across a portion of the easement 10 which [the homeowners] removed at the outset of the dispute,” there was a potential for liability, 11 thereby triggering the duty to defend. Id. at 1115. The court rejected this argument and 12 explained that the potential for liability cannot come from the homeowners’ speculation about 13 how the neighbor might amend her complaint at some future date to allege new claims that would 14 be covered. Id. at 1115–17 (“Just as a third party complainant is not the arbiter of the coverage of 15 an insurance policy, so is it also the rule that insureds themselves may not manufacture coverage 16 by speculating about unpled third party claims.”). 17 Unlike the homeowners in Gunderson, Foster Farms is not speculating about whether Mr. 18 Rathi will amend his complaint to assert a negligence claim against Try-Us. Notably, in arguing 19 that the potential for coverage already exists, Foster Farms does not depend on Mr. Rathi bringing 20 such a negligence claim against Try-Us at some future date. Indeed, according to Foster Farms, 21 Mr. Rathi is precluded by workers’ compensation laws from asserting such a claim against his 22 employer. (Doc. No. 12 at 9.) The court agrees with Foster Farms that the questions of whether 23 Try-Us was negligent and the extent to which such negligence caused Mr. Rathi’s alleged injuries 24 are already at issue in the underlying state court action due to Foster Farms’s asserted affirmative 25 defenses. Simply put, the potential for coverage in the underlying action does not hinge on 26 whether Mr. Rathi might amend his complaint to plead a negligence claim against Try-Us as a 27 named defendant in that action. 28 ///// 1 Indeed, to conclude otherwise would require either reading additional limiting language 2 into the Policy or construing ambiguities in the Policy against the insured, which would run afoul 3 of the “principle that ambiguities are generally construed against the party who caused the 4 uncertainty to exist (i.e., the insurer) in order to protect the insured’s reasonable expectation of 5 coverage.” Foster-Gardner, Inc. v. Nat’l Union Fire Ins. Co., 18 Cal. 4th 857, 868 (1998). By 6 the Policy’s terms, coverage extends to the additional insured “only with respect to liability for 7 “bodily injury” . . . caused by [Try-Us’s] negligence in the performance of [Try-Us’s] ongoing 8 operations performed for that additional insured.” (Doc. No. 10 at 58) (emphasis added). The 9 Policy does not state, for example, “caused solely by” or “caused exclusively by” Try-Us’s 10 negligence, or “caused by Try-Us’s sole negligence”—yet that is how CBIC implicitly urges the 11 court to interpret and apply the Policy’s terms. The court declines to adopt such a narrow and 12 unsupported interpretation of the Policy’s phrase “caused by” and instead interprets the provision 13 to include coverage for bodily injury caused in whole or in part by Try-Us’s negligence. 14 Given the affirmative defenses asserted by Foster Farms in the underlying state court 15 action, it is possible that the trier of fact, in apportioning comparative fault, may determine that 16 Mr. Rathi’s bodily injury was caused (in whole or in part) by Try-Us’s negligence. That 17 possibility—which was known to CBIC at the time Foster Farms tendered its defense—is 18 sufficient to trigger CBIC’s duty to defend. Unlike the extrinsic fact of the “defects list” that was 19 not considered by the court in Monticello because it was not provided to the insurer during the 20 pendency of that underlying action, 162 Cal. App. 4th at 1388–89, here Foster Farms informed 21 CBIC of its affirmative defenses and the factual basis for Try-Us’s and Mr. Rathi’s alleged 22 negligence while the underlying action was pending and there was still an opportunity for CBIC 23 to participate. Specifically, in correspondence tendering its defense to CBIC, Foster Farms 24 described the factual basis for its affirmative defenses and quoted an excerpt from what appears to 25 be a transcript of Mr. Rathi’s deposition to support its contention that Mr. Rathi “admits that he 26 was not paying attention to where he was walking when he tripped and fell.” (Doc. No. 1 at 92.) 27 In sum, plaintiff’s allegations in this action are sufficient to support its claim that there is 28 the possibility of coverage in the underlying action, triggering the CBIC’s duty to defend Foster 1 | Farms as an additional insured under the Policy. See Scottsdale Ins. Co. v. MV Transp., 36 Cal. 2 | 4th 643, 655 (2005) (“If any facts stated or fairly inferable in the complaint, or otherwise known 3 | or discovered by the insurer, suggest a claim potentially covered by the policy, the insurer’s duty 4 | to defend arises and is not extinguished until the insurer negates all facts suggesting potential 5 || coverage.”). Because defendant moved to dismiss all of plaintiff's claims as a matter of law 6 | based solely on its argument that Foster Farms has not sufficiently alleged that it is an additional 7 | insured—an argument the court rejects—the court will deny defendant’s motion to dismiss. 8 CONCLUSION 9 For all of the reasons set forth above, defendant’s motion to dismiss (Doc. No. 8) is 10 | denied. 11 | IT IS SO ORDERED. si am 2 Dated: _ February 9, 2022 i aL, Al ¢ a 13 UNITED STATES DISTRICT JUDGE 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 14