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Berkshire Hathaway Specialty Insurance Co. v. City of Phoenix

United States District Court, D. Arizona

November 8, 2016

Berkshire Hathaway Specialty Insurance Company, Plaintiff,
v.
City of Phoenix, et al., Defendants.

          ORDER GRANTING DEFENDANT CITY OF PHOENIX'S MOTION TO DISMISS

          James A. Teilbrarg, Senior United States District Judge

         Pending before the Court is Defendant City of Phoenix's Motion to Dismiss Plaintiffs complaint (Doc. 31) and Motions to Dismiss Crossclaims by various Defendants (Docs. 66, 77) and Defendants TIG Insurance and North River Insurance Company's Motion to Dismiss Plaintiffs complaint (Doc. 53) and Motions to Dismiss Crossclaims by various defendants (Docs. 70, 71). The Court now rules on the motions.

         I. Background[1]

         Plaintiff Berkshire Hathaway, formerly known as Stonewall Insurance Company, issued two insurance policies to the City, both effective from July 1, 1976 through July 1, 1977. Policy 13556 is an umbrella policy providing $300, 000 of coverage for net losses exceeding a self-insured retention of $300, 000. (Doc. 1 at 2) Policy 13710 is an excess policy providing $2, 750, 000 of coverage for net losses exceeding a self-insured retention of $1, 000, 000. (Id.) Under the terms of both policies, the City is required to exhaust all applicable underlying insurance coverage before coverage may be triggered under Plaintiff s policies. (Doc. 1 at 10)

         A. The Tarazon Action

         In 2013, the City was named as a defendant in a lawsuit filed by Carlos Tarazon and his wife, Soledad Tarazon ("the Tarazon action"). The suit alleged the City was liable for injuries Mr. Tarazon developed through exposure to asbestos while he was employed by the City. The City ultimately settled the Tarazon action for $500, 000 without Plaintiffs knowledge or consent. (Doc. 1 at 11)

         During the course of the Tarazon action, the City demanded coverage from Plaintiff under both Policy 13556 and Policy 13710. (Doc. 1 at 7, 24) In response to the City's demands, Plaintiff requested additional information with which to evaluate the claim and establish whether the City had met its self-insured retention under Policy 13556. Plaintiff also requested documentation showing the likelihood that the City's coverage from its additional underlying insurance policies was or was likely to be exhausted. (Doc. 1 at 10) The City responded to Plaintiff, but did not provide Plaintiff with all of the requested documentation or adequate information for Plaintiff to make a determination regarding the availability of coverage.

         After the settlement, the City filed suit in state court demanding coverage from four of its insurance carriers, not including Plaintiff: First State Insurance Company, Twin City Fire Insurance Company, New England Reinsurance Company, and the Nutmeg Insurance Company (collectively, "the Hartford insurers"). (See Doc. 94) The case was removed to federal court wherein the Honorable Judge Neil V. Wake entered judgment against the City. City of Phoenix v. First State Ins. Co., et ah, No. CV-15-00511, 2016 WL 4591906 (D. Ariz. Sept. 2, 2016) ("the Hartford case"). The Court held that, under the terms of the excess and umbrella policies, the Hartford insurers had no duty to indemnify the City because the settlement amount was less than the City's self-insured retention limits. Id. Although the City is appealing the ruling in the Hartford case, it has not filed suit against Plaintiff seeking coverage for its liability in the Tarazon action.

         B. The Herrera Action

         In May 2015, the City was named as a defendant in a second asbestos injury suit filed against it in state court. (Doc. 1 at 13) That action alleges that the City is liable for the injuries and death of Francisco Herrera, who was allegedly exposed to asbestos while he was employed by the City. This action is still pending in Maricopa County Superior Court as Francisco Herrera, et al. v. Certainteed Corp., et ah, Cause No. CV2014-009632 ("the Herrera action").

         After it learned of the Herrera action, the City again demanded coverage from Plaintiff under Policy 13556 and 13710. (Doc. 1 at 13) Plaintiff responded with a formal request for additional information from the City. The City did not respond to Plaintiffs request, and has taken no further action in seeking coverage from Plaintiff relating to the Herrera action.

         C. Procedural History

         On April 18, 2016, Plaintiff filed a Complaint in this Court, naming the City and several of the City's insurers as defendants. The Complaint alleges six claims for relief seeking declaratory judgments that: (1) the City breached its duty to cooperate with Plaintiff such that Plaintiff has no duty to indemnify, (2) the City breached its duty to inform Plaintiff of ongoing settlement negotiations such that Plaintiff has no duty to indemnify, (3) the Tarazon and Herrera actions constitute "separate occurrences" requiring the exhaustion of two self-insured retentions before the City's policies are triggered, (4) the City's decision to seek coverage from the Hartford precludes it from seeking coverage under its Berkshire policies until its Hartford coverage is exhausted, (5) any coverage available to the City under its Berkshire policies should be allocated pro rata among all relevant insurers, and (6) Berkshire is entitled to reimbursement of any excess payments it may make in excess of its pro rata share of liability.

         The City responded with a motion to dismiss under Federal Rule of Civil Procedure 12(b) (without specifying which subsection), arguing Plaintiff has not shown that this Court should exercise its discretion to decide these claims under ...


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