M.B.L., Inc. v. Federal Insurance Co.

FILED
NOT FOR PUBLICATION
JAN 13 2017
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

M.B.L., INC., No. 14-56107

Plaintiff - Appellant, D.C. No. 2:13-cv-03951-BRO-
AGR
v.

FEDERAL INSURANCE COMPANY; MEMORANDUM*
GREAT AMERICAN INSURANCE
COMPANY; UTICA MUTUAL
INSURANCE COMPANY,

Defendants - Appellees.

Appeal from the United States District Court
for the Central District of California
Beverly Reid O’Connell, District Judge, Presiding

Argued and Submitted June 8, 2016
Pasadena, California
Before: RAWLINSON and BEA, Circuit Judges and EATON, Judge**

Appellant M.B.L., Inc. (MBL) appeals from an order of the district court

granting summary judgment in favor of Appellees Federal Insurance (Federal),

*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
Richard K. Eaton, Judge of the United States Court of International
Trade, sitting by designation.
Great American Insurance (Great American), and Utica Mutual Insurance (Utica)

(collectively, Apellees).

MBL, a now-defunct dry cleaning products company, asserts that the district

court erred in holding that Federal, Great American, and Utica did not have a duty

to defend MBL in an environmental lawsuit. MBL maintains that its failure to

tender the environmental lawsuit to the insurers was not fatal to its coverage claim

because Federal, Great American, and Utica had constructive knowledge of the

lawsuit due to its previous tender of a potential administrative proceeding, and due

to correspondence from a different insurer to Appellees.

MBL’s insurance policy with each Appellee imposed a duty to defend only

“suits” against the insured. The California Supreme Court has interpreted

analagous policy language as “limit[ing]” the duty to defend to “a civil action

prosecuted in a court.” Powerine Oil Co. v. Super. Ct., 37 Cal. 4th 377, 382,

391-92 (2005), as modified (citation omitted). The California Supreme Court

clarified that “a proceeding conducted before an administrative agency pursuant to

an environmental statute” is not considered a “suit” within the meaning of an

insurance policy. Id. at 392 (citation omitted). Accordingly, MBL’s tender of the

pending agency proceeding did not trigger a duty to defend. See id.

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 California law recognizes that “tender can be either formal or constructive.”

OneBeacon Am. Ins. Co. v. Fireman’s Fund Ins. Co., 175 Cal. App. 4th 183, 200

(2009) (citation omitted). And insurers have been found to possess constructive

notice when an insured attempts to tender a covered lawsuit, but fails to conform

precisely to the required formalities. See e.g., Cal. Shoppers, Inc. v. Royal Globe

Ins. Co., 175 Cal. App. 3d 1, 17, 37 (1985). However, this case is unlike

California Shoppers, where the insured tendered a potentially covered lawsuit to

the insurers, but failed to specify the covered party. See id. at 37. Here, MBL

completely failed to tender any potentially covered lawsuit “due to mistake and

inadvertency.”1 Nor is this a case involving “equitable contribution” between co-

insurers, where constructive notice of the suit is sufficient to impose a duty of

contribution or indemnity on Appellees because equitable considerations govern.

Compare OneBeacon, 175 Cal. App 4th at 203-04; Truck Ins. Exch. v. Unigard

Ins. Co., 79 Cal. App. 4th 966, 982-83 (2000) (distinguishing the contractual

relationship between an insurer and an insured from the equitable relationship

between insurance carriers); with Cravens, Dargan & Co. v. Pac. Indem. Co., Inc.,

1
Or at least we must credit MBL’s proffered reason for failing to tender
the lawsuit as true for purposes of ruling on Appellees’ motions for summary
judgment. See Barboza v. Cal. Ass’n of Prof’l Firefighters, 799 F.3d 1257, 1263
(9th Cir. 2015).

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29 Cal. App. 3d 594, 602 (1972) (holding that actual notice does not give rise to a

duty to defend absent an attempted tender of a potentially covered action by the

insured). Therefore, contrary to MBL’s arguments, Nationwide’s notice to

Appellees of a potential for contribution had no bearing on Appellees’ duty to

defend MBL, which could be triggered only by a tender of the environmental

lawsuit to Appellees. See id.

In any event, MBL also received a full defense in the environmental lawsuit.

MBL exercised its rights under California law to select an insurer, and tendered the

environmental lawsuit to Nationwide and ACE Insurance (ACE). ACE

subsequently paid $950,000 to MBL pursuant to a settlement agreement which

provided that such payments “shall constitute payment in full of all defense costs,

fees and expenses” for this (and two other) environmental lawsuits “through

February 2012.” The settlement agreement was unambiguous on its face that the

sum received constituted “full” payment of defense costs, and thus the district

court correctly refused to consider MBL’s proffered extrinsic evidence (which

would not support MBL’s position in any event).

As to costs incurred after February 2012, ACE continued to pay for MBL’s

defense in the environmental lawsuit pursuant to a rate structure set forth in the

settlement agreement. California Civil Code § 2860(c) therefore forecloses MBL

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from seeking any additional fees from Appellees. See San Gabriel Valley Water

Co. v. Hartford Acc. & Indem. Co., 82 Cal. App. 4th 1230, 1239-41 (2000)

(explaining that when multiple insurers . . . are obligated to provide independent

counsel for the insured,” section 2860(c) provides a “single rate limitation”). We

reject MBL’s argument that Janopaul Block Cos., LLC v. Sup. Ct., 200 Cal. App.

4th 1239, 1248 (2011), precludes Appellees from invoking the benefits of § 2860

because they did not offer to defend MBL under a reservation of rights (as the

defendants in San Gabriel did). This distinction is inapposite given our conclusion

that, as a matter of law, Appellees were under no obligation to offer MBL a

defense of either the administrative proceedings or the lawsuit and therefore did

not breach any duty to defend MBL. Thus, San Gabriel—not Janopaul—applies

here, and Appellees are entitled to summary judgment because “an insured is

entitled to only a single full defense.” San Gabriel, 82 Cal. App. 4th at 1241.

AFFIRMED.

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