Cincinnati Insurance Company v. All Plumbing, Inc. Service, Parts, Installation
64 F. Supp. 3d 69
D.D.C.2014Background
- Cincinnati Insurance issued a commercial policy (3/3/06–3/3/07) to All Plumbing with primary and excess liability parts; Coverage A of Primary has a $1,000 per-claimant deductible.
- Two separate putative-class TCPA suits alleging unsolicited faxes were filed against All Plumbing and its owner: Love the Beer (served Nov. 2010) and FDS Restaurant (filed Dec. 2, 2011).
- Cincinnati sent a reservation-of-rights letter and assumed defense in Love the Beer (Dec. 2, 2011). Cincinnati retained counsel and defended FDS but did not send a separate reservation-of-rights to the insureds for FDS.
- FDS removed its case to federal court; Cincinnati defended in federal court for several months (answer, removal, opposition to remand, opposition to class certification) and then filed this declaratory-judgment action seeking a ruling that it has no duty to defend FDS.
- The court previously held Cincinnati failed to properly reserve rights as to FDS and therefore did not address other arguments; Cincinnati moved for reconsideration and clarification.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a reservation of rights in the earlier putative-class (Love the Beer) covers a later separate suit by another putative class member (FDS) | Reservation in Love the Beer should be treated as reserving rights for all putative class members, so no new reservation needed for FDS | The actions are distinct; because Love the Beer was never certified and FDS was not a party, a separate reservation was required | Denied: separate lawsuit requires separate reservation of rights when class never certified; Love the Beer reservation did not cover FDS |
| Whether insurer’s assumption of defense without a proper reservation to FDS is presumptively prejudicial and whether Cincinnati rebutted that prejudice | Prejudice absent; alternatively, any presumed prejudice was rebutted because the case was in its infancy and there was no harm | FDS: presumption of prejudice attached and insurer failed to rebut it given defense counsel’s tactical choices during the period of control | Denied relief: presumption of prejudice applied and Cincinnati failed to rebut at summary judgment |
| Whether insurer may still assert the Primary Coverage $1,000 deductible despite failing to reserve rights | Deductible is not a coverage defense but a contractual allocation of loss; it survives even if defense was assumed without reservation | FDS contends failure to reserve precludes coverage defenses including deductible | Granted clarification: insurer may assert the $1,000 per-claimant deductible under Coverage A |
| Whether insurer is precluded from asserting defenses under the Excess Coverage part because it failed to reserve rights under Primary | Reservation re: primary not required for excess because excess duty to defend is triggered only after primary exhausted; no present duty to defend excess | FDS argues single-policy structure should not permit post-hoc excess defenses | Granted clarification: insurer not precluded from asserting coverage defenses under Excess Coverage part |
Key Cases Cited
- Athridge v. Aetna Cas. & Sur. Co., 604 F.3d 625 (D.C. Cir.) (insurer’s control of defense can create rebuttable presumption of prejudice)
- Nat’l Union Fire Ins. Co. of Pittsburgh v. Aetna Cas. & Sur. Co., 384 F.2d 316 (D.C. Cir.) (presumption of prejudice where insurer assumes defense without demonstrating nonprejudice)
- Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (class action tolling of statute of limitations for putative class members)
- American Pipe & Const. Co. v. Utah, 414 U.S. 538 (class action tolling principles)
- Exxon Shipping Co. v. Baker, 554 U.S. 471 (Rule 59(e) not for relitigation of previously considered matters)
- Salazar ex rel. Salazar v. Dist. of Columbia, 633 F.3d 1110 (D.C. Cir.) (Rule 60(b)(6) requires extraordinary circumstances)
- Gonzalez v. Crosby, 545 U.S. 524 (limits on relitigation via Rule 60(b)(6))
- Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847 (Rule 60(b)(6) cannot be used to relitigate other enumerated grounds)
- Kramer v. Gates, 481 F.3d 788 (D.C. Cir.) (Rule 60(b)(6) should be sparingly used)
- Good Luck Nursing Home, Inc. v. Harris, 636 F.2d 572 (D.C. Cir.) (examples of limited Rule 60(b)(6) relief)
- Nat’l Elec. Mfrs. Ass’n v. Gulf Underwriters Ins. Co., 162 F.3d 821 (4th Cir.) (excess insurer’s duty to defend may not be triggered until primary exhausted)
- Liberty Mut. Ins. Co. v. Travelers Indem. Co., 78 F.3d 639 (D.C. Cir.) (discusses primary vs excess duties to defend)
- Chemstar, Inc. v. Liberty Mut. Ins. Co., 42 F.3d 1399 (9th Cir.) (defending without reservation does not waive policy limits or deductible defenses)