M.B.L., Inc. v. Federal Insurance Co.
675 F. App'x 731
| 9th Cir. | 2017Background
- M.B.L., Inc. (MBL), a dry-cleaning products company, was sued in an environmental action; MBL sought coverage from several insurers (Federal, Great American, Utica).
- MBL did not formally tender the environmental lawsuit to those insurers; it had previously tendered a related administrative proceeding to one insurer.
- The insurers’ policies imposed a duty to defend only for “suits,” which the California Supreme Court has construed to mean civil actions in court, not administrative agency proceedings.
- MBL argued insurers had constructive notice of the lawsuit (through prior tender of an administrative matter and correspondence from another insurer) and therefore had a duty to defend.
- MBL received a defense from other insurers (Nationwide and ACE); ACE paid $950,000 under a settlement agreement stating the sum was payment in full of defense costs through February 2012 and continued paying thereafter at a capped rate.
- The district court granted summary judgment for Federal, Great American, and Utica, holding they had no duty to defend and that California law (including Civ. Code § 2860(c) as interpreted in San Gabriel) limited any additional defense cost recovery.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insurers had a duty to defend based on MBL’s tender of an administrative proceeding | MBL: prior tender of an administrative matter should trigger duty to defend the lawsuit | Insurers: duty to defend limited to “suits” (court actions); administrative proceedings do not trigger duty | Held: No duty — administrative proceeding is not a “suit” under policy (Powerine) |
| Whether insurers had constructive notice such that formal tender was unnecessary | MBL: insurers had constructive notice via prior tender and other insurer’s correspondence | Insurers: constructive notice requires an attempted tender of the covered lawsuit; none here | Held: No constructive notice — MBL never tendered the lawsuit, so no duty to defend |
| Whether notice from another insurer (Nationwide) created obligation to defend or contribute | MBL: Nationwide’s notice of potential contribution implicates Appellees | Insurers: contribution/indemnity doctrines and constructive notice among insurers are distinct from insurer–insured duty to defend | Held: Notice to insurers by another carrier did not trigger duty to defend by Appellees |
| Whether MBL can recover additional defense costs after ACE’s payments and settlement | MBL: seeks additional fees beyond ACE’s settlement payments | Insurers: ACE’s settlement paid full defense costs through Feb 2012; § 2860(c) and San Gabriel limit recovery to a single full defense and a single rate thereafter | Held: MBL cannot recover additional fees from Appellees; ACE’s payments and § 2860(c) preclude further recovery |
Key Cases Cited
- Powerine Oil Co. v. Superior Court, 37 Cal. 4th 377 (California Supreme Court) (administrative proceedings are not “suits” that trigger duty to defend)
- OneBeacon American Insurance Co. v. Fireman’s Fund Insurance Co., 175 Cal. App. 4th 183 (Cal. Ct. App.) (tender may be formal or constructive; equitable contribution context distinguished)
- Cal. Shoppers, Inc. v. Royal Globe Insurance Co., 175 Cal. App. 3d 1 (Cal. Ct. App.) (constructive notice can suffice when insured attempts tender but misses formalities)
- Truck Insurance Exchange v. Unigard Insurance Co., 79 Cal. App. 4th 966 (Cal. Ct. App.) (distinguishing insurer–insured contractual duties from insurer–insurer equitable obligations)
- Cravens, Dargan & Co. v. Pacific Indemnity Co., Inc., 29 Cal. App. 3d 594 (Cal. Ct. App.) (actual notice alone does not create duty to defend absent attempted tender)
- San Gabriel Valley Water Co. v. Hartford Accident & Indemnity Co., 82 Cal. App. 4th 1230 (Cal. Ct. App.) (insured entitled to a single full defense; § 2860(c) rate limitation applies)
- Janopaul Block Cos., LLC v. Superior Court, 200 Cal. App. 4th 1239 (Cal. Ct. App.) (addressing interplay of reservation of rights and insurer defenses)
- Barboza v. California Ass’n of Professional Firefighters, 799 F.3d 1257 (9th Cir.) (summary judgment factual-crediting standard)
AFFIRMED.