San Francisco Bay Area Rapid Transit District v. National Union Fire Insurance Company

1

2

3

4 UNITED STATES DISTRICT COURT

5 NORTHERN DISTRICT OF CALIFORNIA

6

7 SAN FRANCISCO BAY AREA RAPID Case No. 20-cv-04468-EMC

TRANSIT DISTRICT,

8

Plaintiff, ORDER GRANTING DEFENDANTS’

9 MOTIONS FOR SUMMARY

v. JUDGMENT, AND DENYING

10 PLAINTIFF’S MOTION FOR

NATIONAL UNION FIRE INSURANCE SUMMARY JUDGMENT

11 COMPANY, et al.,

Docket Nos. 76-78, 80

12 Defendants.

13

14

15 I. INTRODUCTION

16 This is an insurance coverage action wherein plaintiff San Francisco Bay Area Rapid

17 Transit District (“BART”) is seeking coverage for a workers’ compensation claim filed by BART

18 employee Michael Gonsolin. Gonsolin was hired as a BART police officer in 1979, and retired in

19 2005. In 2006, he was diagnosed with myeloma, which he alleged arose from the course of his

20 employment with BART. Gonsolin filed a claim with the Worker’s Compensation Appeals Board

21 (“WCAB”) which was settled in December 2007.

22 As part of the settlement, BART and Gonsolin stipulated to a date of injury from

23 November 1, 1990 – October 31, 1991. Based on the stipulated date of injury, BART tendered the

24 claim to its excess carrier, General Reinsurance Company (“Gen Re.”). A subsequent dispute

25 arose in which Gen Re argued it was not bound by the injury date to which BART stipulated and

26 had no obligation to cover the claim; the action resolved in favor of Gen Re. See BART v. General

27 Reinsurance, Case No. 3:14-cv-01866 (N.D. Cal.).

1 (“Midwest”), National Union Fire Insurance Company (“National”), and Westport Insurance

2 Company (“Westport” or “Employers Re”) (collectively, “Defendants”). Defendants insured SF

3 BART as excess carriers for losses exceeding BART’s self-insured retention for different time

4 periods between July 1, 1992, and July 1, 2006. BART brings this action to determine coverage

5 for Gonsolin’s settlement under one or more of Defendants’ excess insurance policies.

6 Currently pending are the parties’ cross-motions for summary judgment as to threshold

7 legal issues. Docket Nos. 76 (“Midwest MSJ”), 77 (“Nat. Union MSJ”), 78 (“BART MSJ”), 80

8 (“Westport MSJ”). For the following reasons, the Court GRANTS Defendants’ motions for

9 summary judgment, DENIES Plaintiff’s motion for summary judgment, and enters judgment for

10 Defendants.

11 II. BACKGROUND

12 Joint Stipulated Facts

13 The parties jointly stipulated to facts and supporting evidence relevant to the pending

14 cross-motions for summary judgment. Docket No. 74 (“Facts”). The parties’ enumerated

15 stipulated facts are reproduced below:

16 1. Michael Gonsolin (“Gonsolin”) was employed with BART as a police officer from

17 1979 to September 11, 2005. From 1998 through 2005, Gonsolin was a K-9 officer

18 for BART.

19 2. Gonsolin retired from BART on September 11, 2005.

20 3. Gonsolin was diagnosed with multiple myeloma on October 13, 2006.

21 4. On November 20, 2006, Gonsolin served an “Application for Adjudication of

22 Claim” in the California Workers Compensation Appeals Board (“WCAB”) stating

23 in part that while he was employed at BART as a police officer he sustained

24 multiple myeloma, and also that “the injury occurred as follows”: “Cumulative

25 exposure to carcinogens.”

26 5. Athens Administrators (“Athens”) was, at all relevant times, the workers’

27 compensation claims administrator for BART.

1 Claim.

2 7. On November 7, 2007, the First District Court of Appeal denied BART’s Petition

3 for Writ of Review in in Ennis v. BART, 72 Cal. Comp. Cases 1694, after noting

4 that the WCAB decided in the underlying matter that Ennis’s “employment with

5 BART Police Department was employment by the district as a police officer at the

6 time of his injury, entitling him to the cancer presumption.” The WCAB noted that

7 “it was found on the facts that applicant as a BART policeman, was a police officer

8 within the meaning of the Labor Code, carried a weapon, and had duties of

9 enforcing the law in public places.” The WCAB further noted that “Labor Code

10 section 3212.1(a) provides in part that ‘this section also applies to peace officers, as

11 defined in section 830.1 … of the Penal Code, who are primarily engaged in active

12 law enforcement activities’” was entitled to the Labor Code §3212.1 cancer

13 presumption in his action against BART. As set forth in the November 7, 2007

14 Order, “it was undisputed that Applicant was exposed to known carcinogens and

15 developed cancer and that there was no evidence to rebut the Labor Code §3212.1

16 cancer presumption.” The Order was silent as to whether the Labor Code §3212.1

17 cancer presumption applied to an action brought by BART rather than the

18 employee.

19 8. On November 26, 2007, BART’s defense counsel in the Gonsolin case, Stephen

20 Turk, reported the Ennis decision to Athens.

21 9. On December 4, 2007, Turk sent an e-mail to Jesse Alcantara at BART stating in

22 part “BART’s general counsel, Tom Lee, felt that it would be prudent to attempt

23 settlement of this case rather than try the case on 12-14-07.” The e-mail stated in

24 further part: “Our plan of action is as follows: 1. Stipulate to AOE/COE without

25 admitting that the presumption of injury applies; 2. Obtain a supplemental report

26 from [WCAB Agreed Medical Examiner] AME Dr. Cayton addressing the issue of

27 date of injury. . . . Lastly, once we know what the date of injury is, we can

1 speaking with applicant’s attorney tomorrow to firm up a settlement.” The subject

2 email also stated in part: “Please recall we discussed [the] fact that the applicant's

3 cancer was not the result of a specific injury. Rather it was the result of a

4 cumulative exposure/ injury. As such, the date of injury would be determined based

5 on the latency for development of that type of cancer he contracted. It appears that

6 the latency could be 10 years. Hence, the date of injury would be 10 years prior to

7 the date of diagnosis of the cancer. However, the latency will need to be

8 determined by Dr. Cayton.”

9 10. On December 6, 2007, Dr. Cayton issued a letter advising Athens and BART in

10 part that “[t[he latency period for Mr. Gonsolin’s myeloma is fifteen years.

11 Therefore, looking back from the date of diagnoses in 2006, exposures prior to

12 1991 were injurious.”

13 11. On December 14, 2007, BART and Gonsolin reached an agreement. The proposed

14 terms were presented to WCAB Judge Jacqueline C. Duncan, who signed a Partial

15 Order Approving Compromise and Release (with open medical award) on the same

16 date. The Partial Order stated in part that “Defendant does not concede that the

17 cancer presumption pursuant to LC 3212.1 is applicable or was in any way

18 determinative of Defendant’s acceptance of injury.” The Partial Order attached the

19 handwritten agreement between Gonsolin, BART and Athens, which included the

20 following statement: “ . . . based upon new medical information contained within

21 Dr. Cayton’s AME report of 12/6/07, parties stipulate to a date of injury of: CT

22 [Cumulative Trauma] 11/1/90 – 10/31/91, pursuant to LC 5500.5.”

23 12. The Minutes [of the December 14, 2007 hearing] include the following statement:

24 “The applicant sustained cumulative injury described as multiple myeloma/ cancer

25 over a period of time determined by the medical expert herein, Revels M. Cayton,

26 M. D., who served in the capacity of Agreed Medical Examiner. . . . based upon the

27 recent medical information set forth by Dr. Cayton, the AME, in his December 6,

1 trauma from November 1, 1990 through October 31, 1991 pursuant to Labor Code

2 section 5500.5. Given the complexity of the issues herein, I have independently

3 reviewed the medical record in this file to determine whether the settlement is

4 adequate and whether or not the date of injury is as stipulated above. Having

5 considered the reports of Dr. Cayton, I find that the latency period for Mr.

6 Gonsolin’s myeloma is 15 years. Therefore, looking back from the date of

7 diagnosis in 2006, I am persuaded that Dr. Cayton is correct in setting forth the

8 exposures prior to 1991 as being injurious causing the injury herein.”

9 13. The December 14, 2007 agreement, and resulting Order, did not involve Loss under

10 the National Union, Employers Re, or Midwest policies at issue.

11 14. General Reinsurance Corporation (“Genesis” or “Gen Re”) issued Policy No. X-

12 6722 to BART effective July 1, 1985 to July 1,1992.

13 15. On December 21, 2007, Athens provided Gen Re with an “Initial report” of

14 Gonsolin’s claim. The Initial report gave the date of injury as October 31, 1991. It

15 advised that “[t]his claim was initially denied and now has been accepted based on

16 Dr. Cayton’s (AME) findings.” It stated that “[Gonsolin] is not expected to

17 survive.”

18 16. The date of injury encompassed by the Compromise and Release approved by

19 Judge Duncan, and stipulated to by BART and Gonsolin, was November 1, 1990 to

20 October 31, 1991; BART had a Self-Insured Retention (“SIR”) at this time under

21 the Genesis policy of $500,000.

22 17. BART’s payments for medical expenses incurred by Gonsolin were authorized by

23 Genesis up until January 27, 2012; BART did not request authority for these

24 payments from National Union, Employers Re, or Midwest.

25 18. Genesis reimbursed BART $192,535.02 on October 21, 2009; $64,422.97 on

26 December 14, 2010; and $70,112.11 on November 29, 2011. The three payments

27 by Genesis to BART totaled $327,070.10.

1 BART, which stated in part that Genesis “has determined that it has no obligation

2 under the Policy with respect to the Gonsolin Claim.”

3 20. Dr. Cayton passed away on August 13, 2014.

4 21. BART filed a Complaint against Gen Re for Breach of Contract; Breach of

5 Covenant of Good Faith and Fair Dealing; and Declaratory Relief, Case No.: RG

6 14711423, in Alameda County Superior Court, on January 24, 2014. (“BART 1”).

7 22. Gen Re filed a Notice of Removal of BART 1 to the United States District Court,

8 Northern District of California, Case No.: 4:14-cv-01866, on April 23, 2014.

9 23. True and correct copies of Stipulation of Issues, Evidence and Trial and Stipulated

10 Facts were submitted on March 19, 2015 for presentation to Magistrate Judge

11 Jacqueline Scott Corey.

12 24. Magistrate Judge Corley issued her “Opinion Re: Phase One Bench Trial” on June

13 24, 2015, concluding that the Federal District Court had jurisdiction to make a

14 factual finding about the date of injury, and that Gen Re “was not bound by the date

15 of injury that the WC Appeals Board found.” Thus, the matter was to proceed to

16 Phase Two, in which the parties would litigate the date of injury, including the

17 exchange of medical expert reports.

18 25. On July 17, 2015, counsel for BART sent a letter to the “Excess Workers

19 Compensation Claims Department” at National Union Fire Insurance Company of

20 Pittsburgh, PA (“National Union”), Westport Insurance Corporation

21 (“Westport”)/Employers Reinsurance Corporation (“Employers Re”), and Midwest.

22 This was the first notice of loss to National Union and Westport/Employers Re.

23 The letter advised that on June 24, 2015, the Hon. Magistrate Judge Jacqueline

24 Scott Corley concluded that the United States District Court had subject matter

25 jurisdiction over the case and that General Re could litigate the date of injury

26 established by WCAB Judge Jacqueline Duncan on December 14, 2007. The letter

27 also advised that the date of injury established by Judge Duncan’s Partial Order

1 10/31/91, pursuant to LC 5500.5,” a date to which the parties stipulated following

2 an opinion received from AME Dr. Cayton. The letter advised that Judge Duncan

3 independently reviewed the medical record to determine whether the date of injury

4 was as stipulated, and she concluded that it was. The letter then stated: “we are

5 putting you on notice of this claim, so that you can take whatever action you feel is

6 necessary to protect your interests.”

7 26. National Union issued reservations of rights letters (“RORs”) to BART on October

8 13, 2015 and January 28, 2016.

9 27. On December 30, 2015, and on January 22, 2016, counsel for Midwest sent an

10 acknowledgment letter / coverage position letter to counsel for BART.

11 28. Counsel for Midwest attended the MSC along with counsel for BART and counsel

12 for Gen Re.

13 29. BART stipulated to a judgment against it following the June 24, 2015 Phase One

14 Bench Trial Opinion on February 12, 2016. The Judgment was entered on February

15 12, 2016. In the Judgment, BART stipulated as follows: “BART reserves the right

16 and intends to appeal from the judgment on the ground that the Court’s decision in

17 Phase One was in error and that this case should not proceed to Phase Two. Subject

18 to its right to appeal the Phase One decision, BART agrees that if the case

19 proceeded to Phase Two, the Court would find based on the testimony of the

20 experts designated by the parties pursuant to Fed. R. Civ. P. 26 that the date of

21 injury does not fall within GRC’s policy period.”

22 30. On March 10, 2016, BART appealed the Judgment to the Ninth Circuit Court of

23 Appeals.

24 31. On March 6, 2018, the Ninth Circuit issued its opinion affirming the district court

25 ruling that Gen Re was not bound by the date of injury determined by the WCAB.

26 32. On January 17, 2020, BART filed a Complaint for Breach of Contract and

27 Declaratory Relief, Case No.: RG 20050855, in Alameda County Superior Court,

1 33. On July 6, 2020, Midwest filed a Notice of Removal of BART 2 to the United

2 States District Court, Northern District of California, Case No.: 3:20-cv-04468.

3 Paragraphs 34-47 of the joint stipulated facts authenticate supporting evidence, including

4 copies of Defendants’ respective insurance policies. National Union provided excess insurance

5 coverage to BART from 7/1/1992 to 7/1/2002; Employers Re from 7/1/2001 to 7/1/2002; and

6 Midwest from 7/1/2002 to 7/8/2008. All stipulated evidence in support of the to the stipulated

7 facts are available as exhibits to Docket No. 74 (“Stipulated Exhibits”).

8 48. National Union, Employers Re, and Midwest have not made any reimbursement

9 payments to BART since BART sent them the July 17, 2015 letter referenced

10 above.

11 49. Athens sent First Notice of Loss to Midwest on or about December 3, 2007. This

12 First Notice of Loss stated that the date of injury was October 13, 2006 (which was

13 the date of Gonsolin’s diagnosis, see stipulated fact #3). It also stated that

14 “[Gonsolin] is not expected to survive.” It advised that the amount paid to date was

15 $12,940.81 and that reserves were set at $780,000.

16 50. Midwest responded on or about December 13, 2007, thanking Athens for the timely

17 report, assigning a claim number, stating that Midwest did not expect the claim to

18 reach the $4 million retention, advising that it was closing the file, and asking

19 Athens to re-notify Midwest Employers if there was any significant change in the

20 exposure or the total incurred reached $4 million. Otherwise, it was not necessary

21 to send further updates.

22 Procedural Background

23 BART filed this action for breach of contract and declaratory relief on January 17, 2020.

24 Docket No. 1-1. Defendant Midwest timely removed the action to federal court on July 6, 2020.

25 Docket No. 1. Defendants’ respective motions to dismiss were denied on November 19, 2020.

26 Docket No. 40.

27 The Court approved the parties’ stipulation to consider three issues on summary judgment

1 1. Consent Provisions, Pre-Tender Fee and Notice Issues: Whether San Francisco Bay

2 Area Rapid Transit District is entitled to pre-tender and/or post-tender fees of any

3 or all insurance policies that it alleges may provide coverage, including whether

4 these pre-tender fees and/or the entire action are barred by “voluntary settlement”

5 provisions, “no-action” clauses, or the “Notice-Prejudice” Rule.

6 2. Statute of Limitations Issue: Whether San Francisco Bay Area Rapid Transit

7 District (“BART”) claim(s) are barred by the applicable Statue of Limitations.

8 3. Cancer Presumption Issue: Whether the cancer presumption found in Cal. Labor

9 Code § 3212.1(d) applies for purposes of insurance coverage under Defendants’

10 policies.

11 Id at 1-2. Now pending are the parties’ cross-motions for summary judgment on these issues.

12 Docket Nos. 76, 77, 78, 80.

13 III. LEGAL STANDARD

14 Motion for Summary Judgment (Rule 56)

15 Federal Rule of Civil Procedure 56 provides that a “court shall grant summary judgment

16 [to a moving party] if the movant shows that there is no genuine dispute as to any material fact and

17 the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). An issue of fact is

18 genuine only if there is sufficient evidence for a reasonable jury to find for the nonmoving party.

19 See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). “The mere existence of a

20 scintilla of evidence . . . will be insufficient; there must be evidence on which the jury could

21 reasonably find for the [nonmoving party].” Id. at 252. At the summary judgment stage, evidence

22 must be viewed in the light most favorable to the nonmoving party and all justifiable inferences

23 are to be drawn in the nonmovant’s favor. See id. at 255.

24 Where a defendant moves for summary judgment based on a claim for which the plaintiff

25 bears the burden of proof, the defendant need only point to the plaintiff’s failure “to make a

26 showing sufficient to establish the existence of an element essential to [the plaintiff's] case.”

27  Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

1 IV. ANALYSIS

2 “No Voluntary Settlements” Clauses

3 Defendants argue they are entitled to summary judgment because their insurance policies

4 include clauses barring BART from entering into a voluntary settlement without the consent of the

5 insurer, which BART failed to obtain when settling Gonsolin’s claim for benefits. See Nat. Union

6 MSJ at 9; Midwest MSJ at 8-9; Westport MSJ at 6. Plaintiff BART argues that the “no voluntary

7 settlement” clauses are ambiguous and do not apply because BART’s agreement with Gonsolin

8 constituted a partial settlement that did not involve any loss to the insurers at the time that it was

9 entered into.

10 For the reasons explained below, the Court concludes that Defendants are entitled to

11 summary judgment and that Plaintiff is barred from pursuing any of its claims for coverage against

12 Defendants.

13 1. Relevant Contract Provisions

14 National Union: Between 1994 and 2001, Nation Union’s policies provide:

15 [W]e have the right and shall be given the opportunity by you to

associate with you in the defense, investigation or settlement of any

16 claim, suit or proceeding which might involve a loss to us. . .

17 It is your responsibility to investigate, settle, defend and appeal any

claim, suit or other proceeding made against you. However, you

18 must not make any voluntary settlement involving loss to us

without our written consent.

19

20 Stipulated Exhibits, FF at 6-7; GG at 6- 7; HH at 3, 7; II at 3,7; JJ at 3, 7; KK at 3, 7; LL at 5, 8

21 (emphasis added). The policies also included a “no action” clause that states:

22 There will be no right of action against us under this insurance

unless you have complied with all the terms of this policy.

23

24 Id. National Union’s policies covering 1992-1994 provided that the company’s “limit of liability

25 shall be only for the ultimate net loss” where “Ultimate Net Loss” is defined as

26 [T]he sum actually paid in the settlement or satisfaction of losses for

which the insurer is liable, either by adjudication or compromise

27 with the written consent of [National Union]

1 Westport: Westport’s policy (as Employers Re), covering 2001-2002, provides:

2 A. Your Claims Handling Duties. It is your responsibility to

investigate, settle, defend and appeal any claim made against you. It

3 is also your responsibility to investigate, settle, defend and appeal

any suit brought or other proceeding instituted against you.

4

B. Your Claims Reporting Duties. You must give us written notice

5 as soon as you learn of:

6 1. any of the following events involving loss which exceeds

(or might in the future exceed) 50% of your retention:

7 (a) claim; (b) award; (c) verdict; (d) action; (e) suit; (f)

proceeding; (g) judgment [.] . .

8

D. Claims Participation By Us. At our own election and expense, we

9 have the right to participate with you in the settlement, defense

or appeal of any claim, suit or proceeding which might involve a

10 loss to us.

11 E. Settlements. You agree not to make any voluntary settlement

involving loss to us without our written consent.

12

13 Stipulated Exhibits, MM at 1 (emphasis added).1

14 Midwest: Midwest’s policy, covering 2002 to 2006, provides:

15 A. Your Claims Handling Duties. It is your responsibility to

investigate, settle, defend and appeal any claim made against you. It

16 is also your responsibility to investigate, settle, defend and appeal

any suit brought or other proceeding instituted against you. . .

17

D. Claims Participation By Us. At our own election and expense, we

18 have the right to participate with you in the settlement, defense

or appeal of any claim, suit or proceeding which might involve a

19 loss to us. We have no duty to investigate, handle, settle or defend

any claims, suits or proceedings against you.

20

E. Good Faith Settlements. You shall use diligence, prudence, and

21 good faith in the investigation, defense and settlement of all claims

and shall not unreasonably refuse to settle any claim which, in the

22 exercise of sound judgment, should be settled. You agree not to

make any voluntary settlement involving loss to us without our

23 written consent.

24 Stipulated Exhibits, NN at 22 (emphasis added).

25

26

1 The quoted language is included in a policy form referred to and incorporated into the Employers

27

Re policy. Although the policy form does not appear on its own as a Stipulated Exhibit, the

1 2. Analysis of No “Voluntary Settlement” Clauses

2 The parties stipulated to the fact that “BART and Gonsolin reached an agreement,” which

3 was approved in a “Partial Order Approving Compromise and Release [with open medical

4 award]” by WCAB Judge Duncan. Facts ¶¶ 11-12; Stipulated Exhibits, G (“Settlement”) at 1

5 (“The parties to the above-entitled action filed a Compromise and Release Agreement. . . settling

6 this matter as specified in the agreement. . . I conclude that the settlement amount is adequate and

7 that the Compromise and Release should be approved.”). Under the settlement, BART agreed to

8 pay Mr. Gonsolin $200,000 and to “pay all medical care that is reasonable and necessary to cure

9 or relieve the effects of the industrial injury.” Settlement at 3, 5. Nothing in the stipulated facts

10 indicates that any Defendants were notified of the agreement prior to its confirmation. Nor are

11 there any facts establishing that any Defendants provided written consent for BART to enter into

12 the agreement.

13 Defendants contend they are entitled to summary judgment because BART is precluded

14 from pursuing recovery for the losses from the settlement due to BART’s decision to settle

15 Gonsolin’s underlying claim for workers’ compensation without their consent – in violation of the

16 no “voluntary settlement” clauses of the respective policies. Notably, “California law enforces

17 such no-voluntary-payments provisions in the absence of economic necessity, insurer breach, or

18 other extraordinary circumstances. They are designed to ensure that responsible insurers that

19 promptly accept a defense tendered by their insureds thereby gain control over the defense and

20 settlement of the claim.” Jamestown Builders, Inc. v. Gen. Star Indem. Co., 77 Cal. App. 4th 341,

21 346 (1999) (citations omitted). See Faust v. Travelers, 55 F.3d 471, 472 (9th Cir. 1995)

22 (“California courts have consistently honored [no-]voluntary payment provisions”); Haskins v.

23 Emps. Ins. of Wausau, 710 F. App'x 755, 757 (9th Cir. 2018) (“The policies contained a no-

24 voluntary-payments clause that prohibited the insured from ‘voluntarily mak[ing] any payment’ or

25 ‘assum[ing] any obligation.’ . . . Summary judgment on this claim was proper.”).

26 BART makes five arguments to avoid the conclusion that it is barred from seeking

27 recovery against Defendants due to its failure to obtain Defendants’ consent before settling

1 First, BART argues that its agreement with Gonsolin is not covered by the language of

2 Defendants’ policies. BART MSJ at 14-15. Specifically, BART observes that each policy

3 requires the insurer’s consent only for “any voluntary settlement involving loss to [Defendant],”

4 Stipulated Exhibits, FF at 7; MM at 1; NN at 22. BART points to stipulated fact 13, which states,

5 “The December 14, 2007 agreement, and resulting Order, did not involve Loss under the National

6 Union, Employers Re, or Midwest policies at issue.” Facts ¶ 13. BART, thus, asserts that because

7 the agreement did not involve loss to Defendants at the time it was entered into on December 14,

8 2007, Defendants’ policies requiring consent to “any voluntary settlement involving loss to

9 [Defendant]” do not apply.

10 This is wrong. There is no dispute that the settlement with Gonsolin will require payments

11 in excess of the appliable SIRs for each policy given the open medical claims and the extensive

12 medical treatment the cost of which BART is responsible under the settlement. Indeed, BART

13 clearly accepts the premise that its agreement with Gonsolin involves losses to Defendants – as it

14 must in order to obtain recovery from Defendants through this action. BART provides no

15 authority or basis for the Court to read the no-voluntary-settlement to apply only if a settlement

16 agreement involves loss to the Defendant on the date that it was entered into when the agreement

17 further requires future payments. Further, BART’s argument conflicts with the contractual rights

18 of Defendants “to participate with [BART] in the settlement, defense or appeal of any claim, suit

19 or proceeding which might involve a loss to [Defendant].” Stipulated Exhibits, FF at 7; MM at 1;

20 NN at 22.

21 Second, BART contends that the terms “voluntary” and “settlement” are ambiguous and

22 undefined in the relevant policies, and such ambiguities must be construed against the insurer

23 under California law. BART MSJ at 15. From there, BART argues that its agreement with

24 Gonsolin does not constitute a “voluntary settlement” because “BART partially settled the claim

25 within the [retention amount], leaving medical expenses not settled” and “it was speculative

26 whether future payments would have exceeded the [retention amount] at the time of the

27 settlement.” Id. It follows, BART concludes, that the losses for which BART seeks coverage

1 “Had Gonsolin passed away, the [retention amount] would never have been exhausted” and,

2 therefore, BART would not have had to seek coverage from Defendants. Id. at 16.

3 Again, this argument lacks merit. BART fails to identify any ambiguity in the plain

4 meaning of the terms “voluntary settlement,” any ambiguity in their use in the contractual

5 language, or any ambiguity in the application of the “voluntary settlement” language to the facts

6 here. See also Bay Cities Paving & Grading v. Lawyers’ Mutual, 5 Cal. 4th 854, 866 (1993)

7 (“The absence from the policy of a definition of the term ‘related’ does not by itself render the

8 term ambiguous”); Fireman’s Fund Ins. Co. v. Superior Court., 65 Cal. App. 4th 1205, 1212–13

9 (1997) (Courts “will not strain to create an ambiguity where none exists or indulge in tortured

10 constructions to divine some theoretical ambiguity in order to find coverage where none was

11 contemplated.”) (Citations omitted). Indeed, the parties’ stipulated facts include the WCAB’s

12 order approving BART’s agreement with Gonsolin in which the agreement is referred to as

13 “settling this matter” and included a “settlement amount.” Settlement at 1. The obligation to

14 make future payments for Gonsolin’s medical treatment was part of the settlement into which

15 BART voluntarily entered.

16 Moreover, there is no basis for BART’s argument that the agreement constituted a “partial

17 settlement” removing it from the scope of the no-voluntary-settlement provisions simply because

18 the precise amount that BART owed for Gonsolin’s ongoing medical expenses was not a sum

19 certain as of the date the agreement was approved. The settlement agreement unequivocally

20 obligates BART to cover Gonsolin’s medical expenses: “Total Unpaid Medical Expenses to be

21 Paid By. . . Defendant[;]” “the employer [BART’ will pay all reasonable medical expenses

22 incurred after approval of this agreement.” Id. at 3; see also id. (“Defendant to pay all medical

23 care that is reasonable and necessary to cure or relieve the effects of the industrial injury”);

24 Stipulated Exhibit, H at 3 (“The parties further stipulate that the defendant shall pay all reasonable

25 and necessary medical care to cure or relieve from the effects of the industrial injury with any

26 dispute to be resolved by the Agreed Medical Examiner, Dr. Revels Cayton.”). Nothing in the

27 terms of the Defendants’ policies conditions the no-voluntary-settlement clause to the retention

1 in a settlement that would present a risk of exposure to the insured. See AIU Ins. Co. v. Superior

2 Court, 51 Cal.3d 807, 821-822 (1990) (“Under statutory rules of contract interpretation, the

3 mutual intention of the parties at the time the contract is formed governs interpretation … Such

4 intent is to be inferred, if possible, solely from the written provisions of the contract.”).

5 Third, BART argues that its settlement agreement with Gonsolin was not “voluntary”

6 because “[o]ther factors made it prudent for BART to partially settle” including “the Ennis

7 decision,” “Dr. Cayton’s Reporting,” and “WCAB Judge Duncan’s independent review.” Docket

8 No. 83 at 3. But these considerations are precisely the types of information that are taken into

9 account in consideration of any settlement. Under BART’s argument, no settlement made under

10 pressure of any litigation risk would be voluntary. In fact, elsewhere BART effectively concedes

11 that it chose to settle the claim. BART MSJ at 13 (“[O]nce the Ennis decision was handed down,

12 BART felt it was prudent to settle Gonsolin rather than try the case on 12/14/2007.”). BART also

13 makes a passing argument that because the settlement agreement was approved by a WCAB

14 judge, it is not a “settlement,” but rather an “adjudication” – and that Defendants’ policies require

15 them to cover claims arising from adjudications. Docket No. 84 at 3. The fact that a voluntary

16 settlement was presented to and approved by a judge does not transform the settlement into an

17 adjudication.

18 Fourth, BART observes that Defendants’ “no voluntary settlement” clauses are narrower

19 than other “no voluntary payments” clauses that California courts have enforced to preclude

20 claims for coverage from insurers that were made without the insurer’s consent. BART MSJ at

21 16-18 (citing Jamestown Builders, 77 Cal. App. 4th at 345 (no-voluntary-payments clause refers

22 to “loss expenses and legal expenses”); Faust, 55 F.3d at 472 (“no insureds will, except at their

23 own cost, voluntarily make a payment, assume any obligation, incur any expense, other than for

24 first aid, without our consent.”); Dietz Int’l Pub. Adjusters of Cal., Inc. v. Evanston Ins. Co., 796

25 F. Supp. 2d 1197 (C.D. Cal. 2011) (“The Insured shall not, except at (its) own cost, make any

26 payment, admit any liability, settle any claims, assume any obligation or incur any expense”).

27 BART concedes that it found no cases interpreting the contract language at issue here differently

1 reason why the difference between the contractual terms at issue here and the language cited in

2 other cases alters the enforceability or applicability of the clauses here. BART concedes that its

3 argument is derivative of its first contention that its settlement with Gonsolin “did not involve loss

4 [to] the defendant carriers” and therefore did not trigger the consent provisions. Id. at 18.

5 Therefore, this argument fails for the same reasons the first argument fails. BART fails to

6 demonstrate that the no-voluntary-settlement language at issue here does not apply.

7 Fifth, BART argues that even if Defendants’ no-voluntary-settlement provisions apply

8 here, the facts of this case constitute one of the extraordinary circumstances which the California

9 Court of Appeals left open as a possible exception to the applicability of a no-voluntary payment

10 provision. BART MSJ at 18-19. Specifically, in Jamestown Builders, the court noted that “an

11 insured may be able to avoid application of a no-voluntary-payments provision where the previous

12 payments were made involuntarily because of circumstances beyond its control.” 77 Cal. App. 4th

13 at 348. “This situation might occur when the insured is unaware of the identity of the insurer or

14 the contents of the policy.” Id. “Or the insured may be faced with a situation requiring immediate

15 response to protect its legal interests.” Id.

16 To invoke this exception, BART recounts the procedural history and background to this

17 case contained in the stipulated facts, and asserts that the litigation history involving the Ninth

18 Circuit’s affirmance of this District’s ruling that Gen Re is not liable for payments arising from the

19 Gonsolin settlement constitutes “circumstances beyond its control” that entitle it to escape the

20 enforcement of Defendants’ consent provisions. Such circumstances are nothing like those that

21 Jamestown Builders alluded to when considering possible circumstances that would justify

22 foregoing enforcement of insurer’s consent provisions.

23 For instance, BART contends it “did not know the identity of the carrier until Magistrate

24 Judge Corley determined that Gen Re could argue that a different date of injury applied” in

25 rendering her decision in BART I in 2015. Docket No. 83 at 3. This is not accurate. BART knew

26 who all its insurers were. It could and should have given notice to all of them. Instead, it

27 stipulated with Gonsolin the date of Gonsolin’s injury and assumed that would bind Gen Re to

1 matter of its own making. No exception under Jamestown Builders applies.

2 Accordingly, the Court finds that (1) Defendants’ no-voluntary-settlement provisions do

3 apply, and (2) BART failed to comply with the provisions by entering into a settlement agreement

4 with Gonsolin without Defendants’ consent. To determine whether Defendants are entitled to

5 summary judgment on this ground, the Court addresses BART’s argument that, even if the consent

6 provisions apply, Defendants still must prove that they were prejudiced by BART’s failure to

7 comply.

8 3. Notice-Prejudice Rule

9 BART argues that even if it failed to comply with no-voluntary-settlement clauses,

10 Defendants still must show that they were prejudiced by BART’s non-compliance in order to be

11 entitled to summary judgment. See Docket No. 84 at 4-5; Docket No. 82 at 5-6.

12 BART relies on Pitzer College v. Indian Harbor Ins. Co., in which the California Supreme

13 Court which addressed whether the notice-prejudice applies “to a consent provision in the context

14 of first party [insurance] coverage.” 8 Cal. 5th 93, 108 (2019). The Court reasoned that, “In a true

15 first party context, there is no claim of liability for the insurer to defend and hence no logical need

16 for it to retain unimpaired control over the claims handling.” Id. Importantly, Pitzer

17 acknowledged the distinction between the applicability of the notice-prejudice rule to consent

18 provisions in first party insurance policies and third-party insurance policies. Pitzer noted that,

19 “Because the insurer’s right to control the defense and settlement of claims is paramount in the

20 third-party context, California appellate courts have generally refused to find the notice-prejudice

21 rule applicable to consent provisions in third-party policies.” Id. California courts have

22 repeatedly enforced no-voluntary payments provision in cases involving third party claims. See

23 Jamestown Builders, 77 Cal. App. 4th at 346 (“California law enforces such no-voluntary-

24 payments provisions in the absence of economic necessity, insurer breach, or other extraordinary

25 circumstances.”); Insua v Scottsdale Ins. Co., 104 Cal.App.4th 737, 745 (2002) (same).

26 Therefore, whether Defendants are required to demonstrate they were prejudiced by BART’s

27 failure to comply with their consent provisions depends on whether Defendants’ policies here are

1 third party insurance policies.

2 Pitzer elucidated the difference between first- and third-party policies as follows:

3 Whereas first party coverage obligates the insurer to pay damages

claimed by the insured itself, third party coverage obligates the

4 insurer to defend, settle, and pay damages claimed by a third party

against the insured. “[A] first party insurance policy provides

5 coverage for loss or damage sustained directly by the insured (e.g.,

life, disability, health, fire, theft and casualty insurance). A third-

6 party liability policy, in contrast, provides coverage for liability of

the insured to a third party who has been injured because of the

7 insured's negligence. Examples of such coverage are typically

found in (but not limited to) commercial general liability policies, a

8 homeowner's liability policy, a directors and officers liability policy,

or an errors and omissions policy. In the usual first party policy, the

9 insurer promises to pay money to the insured upon the happening of

an event (also known as an occurrence), the risk of which has been

10 insured against. In the typical third-party liability policy, the carrier

assumes a contractual duty to pay judgments the insured becomes

11 legally obligated to pay as damages because of bodily injury or

property damage caused by the insured. . . In third-party insurance

12 policies, then, consent provisions, sometimes called “no voluntary

payment” provisions, “are designed to ensure that responsible

13 insurers that promptly accept a defense tendered by their insureds

thereby gain control over the defense and settlement of the claim.”

14

15 Pitzer, 8 Cal. 5th at 107 –108 (citations omitted).

16 Here, the policies obligate Defendants to cover “liability imposed upon [BART] by the

17 workers’ compensation law” and “liability must result from bodily injury by accident or bodily

18 injury by disease sustained by an employee [BART] normally employ[s]” – i.e., a third party.

19 Stipulated Exhibits, NN at 20 (Midwest policy); see also id. MM at 1 (Westport’s policy is a

20 “Specific Excess Workers Compensation and Employers Liability Indemnity Policy); KK at 3

21 (National Union policy “applies to losses paid by [BART] as a qualified self-insurer of Employers

22 Liability for Bodily Injury by Accident or Bodily Injury by Disease.”). Specifically, in the instant

23 action, BART is seeking coverage from Defendants to cover its liability due to bodily-injury by

24 disease sustained by a third-party, Gonsolin. Thus, Defendants’ policies are third-party policies

25 because they “provide[] coverage for liability of [BART] to a third party who has been injured

26 because of [BART’s] negligence” and “the carrier assumes a contractual duty to pay judgments

27 the insured becomes legally obligated to pay as damages because of bodily injury . . . caused by

1 BART asserts that the policies are first-party policies, such that Pitzer applies, but provides

2 no analysis or reasoning to support its assertion. See e.g., Docket No. 84 at 5 (“The subject policy

3 is a first party policy because BART pays workers compensation benefits and seeks

4 reimbursement”); Docket No. 82 at 6 (same). There is no basis for BART’s assertion. Unlike

5 first-party policies, Defendants’ policies do not obligate Defendants “to pay damages claimed by

6 the insured itself,” nor do the policies require Defendants “to pay money to the insured upon the

7 happening of an event. . . the risk of which has been insured against.” Pitzer, 8 Cal. 5th at 108. In

8 short, Defendants’ policies do not have the basic characteristics of first-party insurance policies.

9 To be sure (even though BART does not advance this argument), Defendants’ policies

10 differ from Pitzer’s description of third-party policies: Defendants’ policies do not “obligate[] the

11 insurer to defend” and “settle” the “damages claimed by a third party against the insured.” 8 Cal.

12 5th at 108 (emphases added). Defendants’ policies provide them with a right to participate in,

13 associate in the defense of, or settle a claim by a third party. “Because the insurer’s right to

14 control the defense and settlement of claims is paramount in the third-party context, California

15 appellate courts have generally refused to find the notice-prejudice rule applicable to consent

16 provisions in third-party policies.” Id. The purpose of a voluntary consent provision in a third-

17 party policy is to afford the insurers an opportunity to safeguard its interests which would be

18 affected by the resolution of the insured’s dispute with a third party. The consent clauses “mean

19 that the insureds cannot unilaterally settle a claim before the establishment of the claim against

20 them and the insurer’s refusal to defend in a lawsuit to establish liability.” Id. (citing Jamestown

21 Builders, 77 Cal. App. 4th 346). “In short, the provision protects against coverage by fait

22 accompli.” Id. That purpose applies with full force here. Even though the excess insurers may

23 not have to pay the third party directly, if there is coverage and the SIR is exceeded, they are

24 obligated to reimburse BART for any settlement made in excess of the SIR.

25 Accordingly, Pitzer does not apply to Defendants’ third-party policy consent provisions

26 and Defendants are not obligated to demonstrate prejudice2 in order to obtain summary judgment

27

1 on the basis that BART violated the consent provisions of their policies.

2 V. CONCLUSION

3 In summary, the Court finds:

4 1. Defendants’ insurance policies included clauses that prohibited BART from

5 entering into voluntary settlements involving loss to Defendants without

6 Defendants’ consent;

7 2. BART entered into a voluntary settlement with Gonsolin without Defendants’

8 consent;

9 3. BART’s voluntary settlement with Gonsolin now involved loss to Defendants (a

10 premise that BART necessarily asserts in pursing this action);

11 4. No special circumstances apply that bar the applicability of Defendants’ no-

12 voluntary-settlement provisions;

13 5. Defendants are issuers of third-party insurance policies and are not required to

14 prove they were prejudiced by BART’s failure to comply with the consent

15 provisions of their insurance policies; and, therefore,

16 6. BART is precluded from pursuing claims for coverage against Defendants because

17 BART failed to comply with the no-voluntary-settlement provisions of the policies.

18 Thus, Defendants are entitled to summary judgment on all of BART’s claims. Because

19 granting summary judgment to Defendants on this ground disposes of all issues in the case, the

20 Court need not address the other two issues that the parties briefed.

21 Accordingly, the Court GRANTS Defendants’ motions for summary judgment. Docket

22

notice of loss to Midwest in 2007 precludes Midwest from claiming it was prejudiced, Docket No.

23

82 at 5, is not relevant. Although BART provided Midwest with a notice of loss prior to

settlement of Gonsolin’s claim, Facts ¶ 49; Exhibit OO, BART did not seek or obtain Midwest’s

24

consent to settle Gonsolin’s claim as required by Midwest’s no-voluntary-settlement provision.

Indeed, BART’s notice of loss to Midwest indicated that Gonsolin’s claim has been denied and

25

that the claim would be taken to trial. Exhibit OO. Nothing in BART's notice of loss suggested or

put Midwest on notice that BART was planning to settle Gonsolin's claim, let alone did anything

26

in the notice seek Midwest’s written consent to enter into a settlement agreement as required by

Midwest’s policy. See id.; cf. Insua, 104 Cal. App. 4th at 745 (rejecting the argument that "by

27

initially denying policy coverage for reasons other than the no-voluntary-payments provision, [the

1 Nos. 76, 77, 80. The Court DENIES Plaintiff’s motion for summary judgment. Docket No. 78.

2 This order disposes of Docket Nos. 76, 77, 78, and 80.

3 The Clerk of the Court is directed to enter judgment for Defendants and to close this case.

4

5 IT IS SO ORDERED.

6

7 Dated: December 27, 2021

8

9 ______________________________________

EDWARD M. CHEN

10 United States District Judge

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27