NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAY 24 2021
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
EVANSTON INSURANCE COMPANY, No. 19-56375
Plaintiff-Appellee, D.C. No.
2:18-cv-07740-R-KES
v.
WINSTAR PROPERTIES, INC., a MEMORANDUM*
California Corporation; MANHATTAN
MANOR, LLC., a limited liability company,
Defendants-Appellants.
Appeal from the United States District Court
for the Central District of California
R. Gary Klausner, District Judge, Presiding
Argued and Submitted March 19, 2021
San Francisco, California
Before: MURGUIA and CHRISTEN, Circuit Judges, and LYNN,** District Judge.
Defendants Winstar Properties, Inc. (“Winstar”) and Manhattan Manor, LLC
(“Manhattan”) appeal the district court’s grant of summary judgment to Plaintiff
Evanston Insurance Company (“Evanston”). We have jurisdiction under 28 U.S.C.
*
This disposition is not appropriate for publication and is not precedent except as
provided by Ninth Circuit Rule 36-3.
**
The Honorable Barbara M. G. Lynn, Chief United States District Judge for the
Northern District of Texas, sitting by designation.
§ 1291, and we review de novo the district court’s ruling on a motion for summary
judgment. Universal Cable Prods., LLC v. Atl. Specialty Ins. Co., 929 F.3d 1143,
1151 (9th Cir. 2019). We view the evidence in the light most favorable to the party
against whom summary judgment is granted. Frudden v. Pilling, 877 F.3d 821, 828
(9th Cir. 2017). We affirm in part, reverse in part, and remand.1
In this insurance coverage dispute, Evanston sought declaratory relief that the
Tenant Discrimination Liability Insurance Policy (the “Policy”) it issued to Winstar
did not require Evanston to defend or indemnify Winstar or Manhattan in a third-
party lawsuit filed against them, Adela Hernandez, et al. v. Winstar Properties, Inc.,
et al., Case No. 2:16-cv-04697-ODW-KS (C.D. Cal. 2016). Evanston also claimed
that it was entitled to recover the costs it incurred in defending Winstar and
Manhattan in the Hernandez action.
Under California law, a liability insurer has a broad duty to defend against
claims that create a potential for indemnity. Montrose Chem. Corp. of Cal. v.
Superior Ct., 861 P.2d 1153, 1157 (Cal. 1993). The insurer has a “duty to defend
where, under the facts alleged, reasonably inferable, or otherwise known, the
complaint could fairly be amended to state a covered liability.” Scottsdale Ins. Co.
v. MV Transp., 115 P.3d 460, 466 (Cal. 2005). Because the duty to defend is broader
1
The parties are familiar with the facts and we recount them only as necessary to resolve the issues
on appeal.
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than the duty to indemnify, “a determination that there is no duty to defend
automatically means that there is no duty to indemnify.” Certain Underwriters at
Lloyd’s of London v. Superior Ct., 16 P.3d 94, 104 (Cal. 2001) (internal citation and
quotations omitted).
The district court correctly determined that Evanston did not have a duty to
defend or indemnify Winstar or Manhattan in the Hernandez action. The Policy
covered wrongful discrimination claims if “[t]he entirety of the Wrongful
Discrimination happens during the Policy Period or on or after the Retroactive
Date . . . and before the end of the Policy Period[.]” Under the facts alleged and
those reasonably inferable, the First Amended Complaint in the Hernandez action
could not be fairly amended to state a liability covered by the Policy, since at least
part of the claim predated the Policy Period.2
However, fact issues exist as to whether Evanston is entitled to recover the
costs it incurred in defending Winstar and Manhattan in the Hernandez action. If an
insurer has reserved its rights, it “may recover from its insured the costs it expended
to provide a defense which, under its contract of insurance, it was never obliged to
furnish.” Scottsdale Ins. Co., 115 P.3d at 468. “An insurer can reserve its right to
2
Winstar and Manhattan request that the panel take judicial notice of the special verdict form
completed by the jury in the Hernandez action. Their Request for Judicial Notice is GRANTED.
See Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006) (The court
“may take judicial notice of court filings and other matters of public record.”).
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assert noncoverage unilaterally merely by giving notice to the insured. . . .” Blue
Ridge Ins. Co. v. Jacobsen, 22 P.3d 313, 317 (Cal. 2001) (internal citation omitted);
see also Val’s Painting & Drywall, Inc. v. Allstate Ins. Co., 126 Cal. Rptr. 267, 273
(Ct. App. 1975) (“The insurer need only notify, or attempt to notify, the [in]sured
that it is conducting the investigation and defense of the [ ] claim under a reservation
of the right to assert policy defenses at a later time. . . .).
Evanston maintains that on July 20, 2017, it sent Winstar and Manhattan a
letter containing a reservation of rights (the “July 2017 Letter”) and that its
reservation of rights remained in effect on September 12, 2017, when Evanston
agreed to participate in Winstar and Manhattan’s defense in the Hernandez action.
Evanston argues that the July 2017 Letter is presumed to have been sent and received
under the common law mailbox rule. Evanston relies on internal notes of an
Evanston claim director, and the Answer to the Complaint, which did not deny that
Evanston acknowledged receipt of the Hernandez action on July 20, 2017.
Winstar and Manhattan respond that Evanston did not send them the July 2017
Letter.3 Winstar and Manhattan submit a declaration by Rachel Teller, a managing
3
Winstar and Manhattan also argue that, even if Evanston sent the July 2017 Letter, it is not an
adequate reservation of rights. The July 2017 Letter states in pertinent part:
This letter does not address the availability, if any, of insurance coverage or benefits
under the above-referenced policy or any other policy. Nothing in this letter shall
be construed as a waiver of any of the rights or defenses that Evanston Insurance
Company may have under the policy, nor as an admission of any liability
whatsoever of Evanston Insurance Company. Evanston Insurance Company
4 19-56375
member of Winstar, stating that “[t]he first time anyone from Evanston
communicated with Winstar or Manhattan directly regarding Winstar and
Manhattan’s claim for defense and indemnity in the [Hernandez] Action was on or
about September 11, 2017.”
Based on the record, fact issues exist as to whether Evanston sent the July
2017 Letter. Evanston’s reliance on the mailbox rule is unfounded, because
Evanston has not provided direct evidence that the July 2017 Letter was actually sent
nor circumstantial evidence of its customary mailing practices. See, e.g., Mahon v.
Credit Bureau of Placer Cnty. Inc., 171 F.3d 1197, 1199–1201 (9th Cir. 1999)
(applying the mailbox rule where defendant presented evidence that as part of its
regular course of business a standardized collection letter had been printed and, in
accordance with standard practice, mailed to the plaintiffs). Further, Winstar and
Manhattan’s Answer to Evanston’s Complaint puts in issue the question of whether
Evanston sent them the July 2017 Letter.
Evanston claims that, even if the July 2017 Letter was not sent, it reserved its
rights in a letter sent on February 16, 2018 (the “February 2018 Letter”). Winstar
reserves all rights under the policy, at law, and in equity, including the right to
disclaim coverage in whole or part.
Based on the plain language of the July 2017 Letter, we determine that it constitutes an adequate
reservation of rights as a matter of law. See State Farm Fire & Cas. Co. v. Jioras, 29 Cal. Rptr.2d
840, 844 (Ct. App. 1994) (“[A] generalized reservation of rights has been deemed adequate by the
courts.”).
5 19-56375
and Manhattan admit to receiving the February 2018 Letter, but argue that the
doctrines of waiver and estoppel prevent Evanston from asserting coverage defenses.
It is a well-settled general rule that waiver and estoppel do not apply to create
coverage for losses that a policy, by its terms, does not cover. Komorsky v. Farmers
Ins. Exch., 245 Cal. Rptr.3d 623, 634 (Ct. App. 2019). However, there is an
exception to this rule when a third-party liability insurer defends an action against
the insured without reserving the right to deny coverage:
[I]f a liability insurer, with knowledge of a ground of forfeiture or
noncoverage under the policy, assumes and conducts the defense of an
action brought against the insured, without disclaiming liability and
giving notice of its reservation of rights, it is thereafter precluded in an
action upon the policy from setting up such ground of forfeiture or
noncoverage. In other words, the insurer’s unconditional defense of an
action brought against its insured constitutes a waiver of the terms of
the policy and an estoppel of the insurer to assert such grounds.
Dollinger DeAnza Assocs. v. Chicago Title Ins. Co., 131 Cal. Rptr.3d 596, 612 (Ct.
App. 2011) (citing Miller v. Elite Ins. Co., 161 Cal. Rptr. 322, 331 (Ct. App. 1980)).
If at trial it were determined that the July 2017 Letter was not sent, the district
court would be obliged to consider Winstar and Manhattan’s waiver and estoppel
arguments, because in that scenario, Evanston would have undertaken an
unconditional defense of the Hernandez action on September 12, 2017, at least until
February 16, 2018.
We see no error in the district court’s summary judgment ruling that the Policy
does not cover the claims against Winstar and Manhattan. But we reverse and
6 19-56375
remand for a determination of whether the July 2017 Letter was sent and, depending
on the outcome of that question, any further proceedings necessary to resolve the
defenses of waiver and estoppel.
AFFIRMED in part, REVERSED in part, and REMANDED. The parties
shall bear their own costs on appeal.
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