Zenith Insurance Company v. St. Paul Fire & Marine Insurance Company
5:16-cv-07219
N.D. Cal.Jul 5, 2017Background
- Zenith and Old Republic are liability insurers who both contributed to a $3 million settlement in a state-court auto-accident case and now dispute which insurer bears primary responsibility for payment or reimbursement.
- Zenith seeks a declaratory ruling that Old Republic is the primary insurer under California Insurance Code § 11580.9(d) and thus must reimburse Zenith for settlement payments; Old Republic asserts contract-based indemnity claims against Zenith and the insureds.
- Jurisdiction is diversity under 28 U.S.C. § 1332; the present motion asks to bifurcate the single legal issue of § 11580.9(d)’s applicability from all other issues and to stay discovery on non-bifurcated matters.
- Zenith argues bifurcation will conserve resources because the § 11580.9(d) determination is potentially dispositive, legally/factually distinct, and requires minimal discovery (policy declarations, underwriting file, single corporate deposition).
- Old Republic opposes, contending § 11580.9(d) is inapplicable because the vehicle is not “described or rated” in its policy, that bifurcation won’t resolve its contract indemnity claims, and that a stay would delay and impair its ability to develop evidence.
- The court found the § 11580.9(d) issue legally and factually separable, likely to require limited discovery, potentially dispositive or settlement-promoting, and not unduly prejudicial if other discovery is temporarily stayed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether to bifurcate and stay discovery on all issues except whether Cal. Ins. Code § 11580.9(d) controls priority of the policies | Bifurcation will promote efficiency: the § 11580.9(d) question is separable, minimal discovery, potentially dispositive, and conserves resources | Bifurcation is unnecessary because § 11580.9(d) is inapplicable here; it won’t resolve contract indemnity claims; and a stay would delay the case and impair evidence gathering | Granted: court bifurcated the § 11580.9(d) issue and stayed other discovery pending resolution of that issue |
| Whether § 11580.9(d) applies to make Old Republic primary (substantive coverage question) | § 11580.9(d) likely applies to determine primary/excess status based on vehicle being “described or rated” in a policy | The vehicle is not “described or rated” in Old Republic’s policy, so § 11580.9(d) doesn’t apply; indemnity issues remain | Court did not decide the substantive applicability on the motion but found the issue sufficiently pivotal and separable to warrant early, isolated resolution |
| Whether discovery should be limited to issues relevant to § 11580.9(d) | Discovery limited to policy declarations, underwriting file, and a corporate rep deposition suffices | Limiting discovery would prejudice Old Republic and risk loss of evidence for indemnity claims | Court concluded limited, temporary stay would not unduly prejudice Old Republic and allowed focused discovery on § 11580.9(d) |
| Whether early resolution of § 11580.9(d) will conserve judicial resources | Early resolution may be dispositive or facilitate settlement, saving time and costs | Bifurcation could prolong litigation and won’t eliminate need to try indemnity claims | Court agreed with Zenith that early resolution promotes efficiency and economy |
Key Cases Cited
- Zivkovic v. S. Cal. Edison Co., 302 F.3d 1080 (9th Cir. 2002) (district court has broad discretion to bifurcate trials under Rule 42(b))
- Ellingson Timber Co. v. Great N. Ry. Co., 424 F.2d 497 (9th Cir. 1970) (district court may limit discovery to bifurcated issues)
- MySpace, Inc. v. Graphon Corp., 732 F. Supp. 2d 915 (N.D. Cal. 2010) (factors relevant to bifurcation include complexity, jury confusion, discovery economy, and potential dispositiveness)
- Mission Ins. Co. v. Hartford Ins. Co., 155 Cal. App. 3d 1199 (Cal. Ct. App. 1984) (discussing statute addressing "double insurance")
- Hartford Accident & Indem. Co. v. Sequoia Ins. Co., 211 Cal. App. 3d 1285 (Cal. Ct. App. 1989) (statute conclusively presumes primary/excess liability in specified situations)
- Ohio Cas. Ins. Co. v. Aetna Ins. Co., 85 Cal. App. 3d 521 (Cal. Ct. App. 1978) (interpretation of "described or rated" as particularization of the vehicle)