“In conducting this review, we accept the factual 27 28 1 allegations of the complaint as true and construe them in the light most favorable to the 2 plaintiff.”
How later courts described this case
- “In conducting this review, we accept the factual 27 28 1 allegations of the complaint as true and construe them in the light most favorable to the 2 plaintiff.”
Written by the judges who cited it.
The opinion
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8 UNITED STATES DISTRICT COURT
9 SOUTHERN DISTRICT OF CALIFORNIA
10
11 CERTAIN UNDERWRITERS AT Case No.: 23-cv-02157-AJB-DDL
LLOYD’S LONDON,
12
Plaintiff, ORDER RE: DEFENDANTS’
13 MOTIONS TO DISMISS
v.
14
(Doc. Nos. 34; 35)
15 COLUMBIA CASUALTY COMPANY
and ADMIRAL INSURANCE
16
COMPANY,
17 Defendants.
18
19 Before the Court are two motions seeking to dismiss plaintiff Certain Underwriters
20 at Lloyd’s, London’s (“Underwriters”) first amended complaint filed by Admiral Insurance
21 Company (“Admiral”) (see Doc. No. 34) and Columbia Casualty Company (“Columbia”)
22 (see Doc. No. 35). For the reasons set forth herein, the Court GRANTS Admiral’s motion
23 to dismiss and GRANTS in part and DENIES in part Columbia’s motion to dismiss.
24 I. BACKGROUND
25 This action concerns a dispute between three insurers—Underwriters, Columbia,
26 and Admiral—over their obligations to Sharp Healthcare (“Sharp”), whom all three insure.
27 (First Am. Compl. (“FAC”), Doc. No. 33 ¶¶ 20–53.) From 2017 through 2021, Sharp was
28 sued in eighteen lawsuits by patients who believed Sharp had intentionally failed to
1 disclose that hidden cameras were installed in operating rooms and were recording their
2 procedures in order to investigate drug theft (“Patient Video Actions”). (FAC ¶¶ 13–15.)
3 The consolidated suits brought claims of fraudulent concealment, breach of fiduciary duty,
4 invasion of privacy, negligence, negligent infliction of emotional distress, and unlawful
5 recording of confidential information. (Id. ¶ 14; see also Doc. No. 33-1 (first amended
6 complaint in consolidated state court action against Sharp).) Sharp tendered defense of the
7 actions to Underwriters and Columbia, the former of which accepted Sharp’s defense and
8 tendered payment both for defense and for funding of settlements. (FAC ¶¶ 54–58.)
9 Underwriters commenced this action to seek equitable contribution and indemnification
10 from Columbia, and declaratory relief regarding both Columbia and Admiral. (Doc. No. 1.)
11 A. Sharp’s Self Insurance
12 At the time of the incidents, Sharp self-insured through a captive insurer1 (“CQI
13 Policy”) to pay claims asserted against it. (FAC ¶ 17.) According to Underwriters, the CQI
14 Policy covered the self-insured retention required by the “Healthy Facilities Umbrella
15 Policy” issued by Columbia (see CNA Healthcare Facilities Umbrella Pol’y (“Columbia
16 Umbrella Pol’y”), Doc. No. 33-2). (FAC ¶ 19.)
17 B. Policies Issued by Underwriters
18 Underwriters allege issuing four policies to Sharp—the Cyber Liability Primary
19 Policy (Cyber Liab. Ins. (“Cyber Liab. Pol’y”), Doc. No. 33-3; see also FAC ¶¶ 7, 33–40)
20 and three excess policies (FAC ¶¶ 8–10, 41–48, 53).
21 1. “Cyber Liability Primary Policy”
22 The Cyber Liability Policy provides that Underwriters agree to pay on Sharp’s behalf
23 “any Damages including Costs which You become legally required to pay arising out of
24 Claims brought by a Third Party, or Your Employees, directors or officers resulting from
25 an actual or alleged Breach of Network Security or Privacy.”2 (Cyber Liab. Pol’y at 12.)
26
27 1 A “captive insurer” is “one owned by the company or companies it insures.” JORDAN R. PLITT ET
28
AL., COUCH ON INSURANCE § 1:4 (3d ed., updated Dec. 2024).
1 A “breach of network security or privacy” is defined as:
2 i. Any alleged violation of local, state, federal or foreign law or regulation
governing the collection, storage, use, disclosure, disposal of, or
3
transmission of Personally Identifiable Information; or
4
ii. The actual or suspected theft, loss, failure to protect or the unauthorized
5 disclosure of Personally Identifiable Information or any Third
6 Party’s information that is not available to the general public[.]
7 (Id. at 18; FAC ¶ 36.) “Personally identifiable information” is defined as “personal
8 information not available to the general public,” which includes but is not limited to
9 “individual’s names, addresses, telephone numbers, social security numbers, drivers’
10 licenses, national identification numbers, IP addresses, Vehicle Registration plate numbers,
11 facial prints, fingerprints or handwriting prints, credit card numbers, dates of birth, account
12 relationships, account numbers, account balances, and account histories.” (Cyber Liab.
13 Pol’y at 22–23.)
14 Finally, the Cyber Liability Policy is to “apply in excess of any other valid and
15 collectible insurance available to You, including any self-insured Retention or deductible
16 portion thereof unless such Other Insurance is written only as specific excess insurance
17 over the Limit of Liability of this Policy, or in respect of coverage afforded under Section
18 111.3.” (Id. at 28; FAC ¶ 37.)
19 2. Excess Policies
20 Underwriters also issued three excess policies to Sharp. (FAC ¶¶ 8–10, 41–48, 53.)
21 The First Layer Excess Policy follows the form of the Cyber Liability Policy and provides
22 $5 million of coverage. (Id. ¶¶ 8, 41–42.) Underwriters’ Second Layer Excess Policy
23 provides $10 million of coverage. (Id. ¶¶ 9, 46–47.) The First Layer Excess Policy states
24 that “[t]his insurance shall apply in excess of any other valid and collectible insurance
25 available” to Sharp.3 (Id. ¶¶ 43.) The Third Layer Excess Policy has a $15 million limit.
26
27 defined by the applicable policy.
3 The Court notes that allegations regarding Underwriters’ Second Layer Excess Policy appear to
28
1 (Id. ¶¶ 10, 53.) Underwriters provide no further contractual language for any of the excess
2 policies.
3 C. “Healthcare Facilities Umbrella Policy” Issued by Columbia
4 Columbia issued a Healthcare Facilities Umbrella Policy for Sharp that agreed:
5
[s]ubject to the section entitled LIMITS OF INSURANCE, the Insurer will
6 pay on behalf of an Insured those damages in excess of the applicable
underlying limit that an Insured becomes legally obligated to pay as a result
7
of a claim, including a professional liability claim, alleging injury and
8 caused by an incident. The Insurer will pay such damages only upon
exhaustion of the applicable underlying limit.
9
10 (CNA Healthcare Facilities Umbrella Pol’y (“Columbia Umbrella Pol’y”), Doc. No. 33-2,
11 at 14; FAC ¶ 22.)
12 The “applicable underlying limit” is “the total available Limits of Insurance
13 applicable to any claim or all claims in the aggregate, as stated in the underlying
14 insurance or as provided in any unscheduled underlying insurance.” (Columbia
15 Umbrella Pol’y at 36; FAC ¶ 24.) “Underlying insurance” is defined as “the self-insured
16 retentions and the policies of insurance listed in the Schedule of underlying insurance
17 including renewal or replacement of such insurance which is not more restrictive than those
18 listed in the aforementioned Schedule of Underlying Insurance.” (Columbia Umbrella
19 Pol’y at 46; FAC ¶ 24.) The policy further defines “unscheduled underlying insurance” as
20 “insurance policies available to an Insured but solely to the extent such policies cover
21 incidents covered under this policy (whether such policies are primary, excess, excess-
22 contingent or otherwise) except the policies listed in the Schedule of underlying
23 insurance” but it does “not include insurance purchased specifically to be excess of
24 [Columbia’s] policy.” (Columbia Umbrella Pol’y at 46; FAC ¶ 24.)
25 ///
26
¶ 46.) Underwriters thus twice allege that “[t]he ‘Other Insurance’ provision in the Underwriters First
27 Layer Excess Liability policy states ‘This insurance shall apply in excess of any other valid and collectible
insurance available to you[,]’” but nowhere provide factual allegations regarding the “Other Insurance”
28
1 “Where there is no underlying insurance applicable to a claim covered under
2 [Columbia’s] policy, this policy applies as primary insurance on a claims made basis
3 pursuant to all other terms and conditions of coverage.” (Columbia Umbrella Pol’y at 15;
4 FAC ¶ 23.)
5 Finally, the Schedule of Underlying Insurance identifies inter alia the CQI Policy as
6 providing professional liability and general liability coverage to Sharp as self-insured
7 retention in the amount of $3 million per each claim and $16 million in the aggregate.
8 (Columbia Umbrella Pol’y at 13; see also FAC ¶ 26.) However, elsewhere the policy states
9 “self-insured retention is not a primary policy.” (Columbia Umbrella Pol’y at 44; see also
10 FAC ¶ 29.)
11 D. “Healthcare Facility Follow Form Excess Liability Insurance Policy”
12 from Admiral
13 Finally, Admiral issued the “Healthcare Facility Follow Form Excess Liability
14 Insurance Policy” to Sharp that agreed “to indemnify the Insured for Loss covered by the
15 Underlying Insurance” and incorporated the provisions of the “Underlying Insurance”
16 with the following exceptions: “1. any provision which applies to or imposes an obligation
17 or duty to defend; 2. the Limit of Liability; and 3. any other term or condition which is
18 inconsistent with any term or condition of this Policy.” (Healthcare Facility Follow Form
19 Excess Liab. Ins. (“Admiral Excess Pol’y”), Doc. No. 33-4, at 7; see also FAC ¶¶ 49–50.)
20 Admiral’s obligation to “indemnify the Insured for Loss covered by the Underlying
21 Insurance and this insuring agreement[ arises] only after the Underlying Limits of
22 Liability and any applicable Continuing Underlying Amount have been actually paid.”
23 (Admiral Excess Pol’y at 7; FAC ¶ 50.)
24 E. Procedural History
25 On February 26, 2024, Columbia filed a motion to dismiss for failure to state a claim.
26 (Doc. No. 16.) In granting Columbia’s motion, the Court found that Columbia was not a
27 co-primary insurer in this action because the CQI Policy met the Columbia Umbrella
28 Policy’s definition of underlying insurance and Underwriters made no argument the
1 contractual language was ambiguous. (Doc. No. 24 at 6.) Additionally, the Court found
2 that Underwriters failed to state a claim for equitable contribution and indemnification
3 against Columbia as an excess insurer because Underwriters made no allegations that their
4 policy limits were exhausted. (Id. at 7–8.)
5 After the Court granted leave, Underwriters filed a first amended complaint, raising
6 claims for equitable contribution and indemnification against Columbia as a co-primary
7 insurer and against both Columbia and Admiral as co-excess insurers and for declaratory
8 relief against both defendants. (See generally FAC.) In the First Amended Complaint,
9 Underwriters include allegations that they have exhausted the $10 million limit of the
10 Cyber Liability Policy, the $5 million limit of the First Layer Excess Policy, and the $10
11 million limit of the Second Layer Excess Policy. (Id. ¶¶ 3, 40, 42, 46–47.)
12 Admiral and Columbia then filed the instant motions to dismiss. (Doc. Nos. 34; 35,
13 respectively.)
14 II. LEGAL STANDARD
15 A. Rule 12(b)(6)4 Motion to Dismiss
16 “A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to
17 state a claim upon which relief can be granted ‘tests the legal sufficiency of a claim.’”
18 Conservation Force v. Salazar, 646 F.3d 1240, 1241–42 (9th Cir. 2011) (quoting Navarro
19 v. Block, 250 F.3d 729, 732 (9th Cir. 2001)). Dismissal is proper “where there is no
20 cognizable legal theory or an absence of sufficient facts alleged to support a cognizable
21 legal theory.” L.A. Lakers, Inc. v. Fed. Ins. Co., 869 F.3d 795, 800 (9th Cir. 2017) (quoting
22 Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010)). “To
23 survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted
24 as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S.
25 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also
26 L.A. Lakers, Inc., 869 F.3d at 800 (“In conducting this review, we accept the factual
27
28
1 allegations of the complaint as true and construe them in the light most favorable to the
2 plaintiff.”).
3 B. California Law Governing Insurance Contract Interpretation
4 “Interpretation of an insurance policy is a question of law and follows the general
5 rules of contract interpretation.” MacKinnon v. Truck Ins. Exch., 31 Cal. 4th 635, 647
6 (2003), as modified on denial of reh’g (Sept. 17, 2003). “The fundamental goal of contract
7 interpretation is to give effect to the parties’ mutual intentions, which, if possible, should
8 be inferred solely from the written terms of the policy.” Vons Co. v. U.S. Fire Ins. Co., 78
9 Cal. App. 4th 52, 58 (2000), as modified, (Mar. 6, 2000). “Policies must be interpreted as
10 a whole, giving force and effect to every provision where possible.” Id. “The clear and
11 explicit meaning of these provisions, interpreted in their ordinary and popular sense, unless
12 used by the parties in a technical sense or a special meaning is given to them by usage
13 controls judicial interpretation.” Bay Cities Paving & Grading, Inc. v. Lawyers’ Mut. Ins.
14 Co. (“Bay Cities”), 5 Cal. 4th 854, 868 (1993) (internal punctuation and citations omitted).
15 “Under California law, ‘resolution of contractual claims on a motion to dismiss is
16 proper if the terms of the contract are unambiguous[;]’ [b]ut where a contract is ambiguous,
17 the motion to dismiss must be denied.” Fine v. Kansas City Life Ins. Co., 627 F. Supp. 3d
18 1153, 1157 (C.D. Cal. 2022) (quoting Bedrosian v. Tenet Healthcare Corp., 208 F.3d 220
19 (9th Cir. 2000) (unpublished table decision)). “An insurance policy provision is ambiguous
20 when it is capable of two or more constructions both of which are reasonable.” Bay Cities,
21 5 Cal. 4th at 868 (emphasis omitted).
22 III. DISCUSSION
23 Underwriters’ amended complaint is premised on the assertion Columbia’s
24 Umbrella Policy provides coverage at either (1) the same tier as Underwriters’ Cyber
25 Liability Policy, making Columbia a co-primary insurer, or (2) the same tier as
26 Underwriters’ First Layer Excess Policy, making Columbia a co-excess insurer. (See
27 generally FAC.)
28 ///
1 In its motion to dismiss, Columbia argues that its obligations are triggered only after
2 the total applicable limits of all policies issued by Underwriters are fully exhausted because
3 the Underwriters policies as a whole constitute “unscheduled underlying insurance” within
4 the meaning of the Columbia Umbrella Policy. (Doc. No. 35-1 at 13–15.) Specifically,
5 Columbia asserts that the “incidents” at the heart of the Patient Video Actions that trigger
6 coverage under the Underwriters Policies are the same as those triggering coverage under
7 Columbia’s policy. (Id. at 14–15.)
8 As the Admiral Excess Policy is a specific excess policy that follows form to the
9 Columbia Umbrella Policy, Admiral argues that its obligations are triggered only once the
10 Columbia Umbrella Policy is exhausted. (Doc. No. 34-1 at 5–6, 10–14.) To that end,
11 Admiral proffers similar arguments as Columbia to demonstrate that neither policy has
12 been triggered yet. (See generally id.)
13 A. Equitable Contribution and Indemnification
14 “In the insurance context, the right to contribution arises when several insurers are
15 obligated to indemnify or defend the same loss or claim, and one insurer has paid more
16 than its share of the loss or defended the action without any participation by the others.”
17 Fireman’s Fund Ins. Co. v. Maryland Cas. Co., 65 Cal. App. 4th 1279, 1293 (1998). “[T]he
18 purpose of contribution . . . is to equalize the common burden shared by coinsurers that
19 share the same level of liability on the same risk as to the same insured.”5 Truck Ins. Exch.,
20
21 5 Depending on the terms, an insurance policy typically provides either primary or secondary, often
referred to as “excess,” coverage. Powerine Oil Co. v. Super. Ct., 37 Cal. 4th 377, 398–99, as modified
22 (Oct. 26, 2005). “Primary insurance refers to the first layer of coverage, whereby liability attaches
immediately upon the happening of the occurrence that gives rise to liability.” Montrose Chem. Corp. of
23 Cal. v. Super. Ct. (“Montrose III”), 9 Cal. 5th 215, 222 (2020), as modified (May 27, 2020) (citation
omitted) (emphasis in original). “Excess insurance, by contrast, refers to indemnity coverage that attaches
24
upon the exhaustion of underlying insurance coverage for a claim.” Truck Ins. Exch. v. Kaiser Cement &
25 Gypsum Corp., 16 Cal. 5th 67, 79 (2024) (citation omitted). “Umbrella insurance refers to coverage that
‘drops down’ to cover occurrences that are not covered by underlying policies of insurance,” thereby
26 functioning as either primary or excess insurance depending on the circumstances. Powerine Oil Co., 37
Cal. 4th at 399 n.9. “An excess insurer’s coverage obligation begins once a certain level of loss or liability
27 is reached; that level is generally referred to as the ‘attachment point’ of the excess policy.” Montrose III,
9 Cal. 5th at 222–23. As “[i]t is not uncommon to have several layers of secondary insurance,” Olympic
28
1 16 Cal. 5th at 85 (internal citation and punctuation omitted). “Equitable contribution
2 permits reimbursement to the insurer that paid on the loss for the excess it paid over its
3 proportionate share of the obligation, on the theory that the debt it paid was equally and
4 concurrently owed by the other insurers and should be shared by them pro rata in
5 proportion to their respective coverage of the risk.” Fireman’s Fund Ins. Co., 65 Cal. App.
6 4th at 1293 (emphasis in original).
7 “Equitable indemnification . . . enables an insurer that has paid an obligation which
8 was entirely the responsibility of a co-insurer to place the complete burden for the loss on
9 that other party[.]” Travelers Indem. Co. of Conn. v. Hudson Ins. Co., 442 F. Supp. 3d
10 1259, 1269 (E.D. Cal. 2020) (quoting Fireman’s Fund Ins. Co. v. Commerce & Indus. Ins.
11 Co., No. C-98-1060VRW, 2000 WL 1721080, at *3 (N.D. Cal. Nov. 7, 2000)).
12 “[E]quitable contribution and equitable indemnity are not equivalent because whereas
13 contribution requires two parties to equally share a burden, equitable indemnity requires
14 only that one insurer pay a liability that another insurer should have discharged.” Travelers
15 Indem. Co. of Conn., 442 F. Supp. 3d at 1270 (quoting St. Paul Fire & Marine Ins. Co. v.
16 Ins. Co. of Pa., No. 15-cv-02744-LHK, 2016 WL 1191808, at *7 (N.D. Cal. Mar. 28,
17 2016)).
18 1. Claims Against Columbia
19 Based on the First Amended Complaint, Underwriters sufficiently allege claims for
20 equitable contribution and indemnification against Columbia as a co-primary insurer but
21 fail to state a claim for either against Columbia as a co-excess insurer.
22 i. Columbia as a Co-Primary Insurer
23 In support of the first and second causes of action, Underwriters allege that their
24 Cyber Liability Policy shares the same level of obligation to Sharp as the Columbia
25 Umbrella Policy with regard to the Patient Video Actions because both policies were
26 triggered by specific acts or omissions that led to liability and there is no underlying
27
upon, as is here, to determine relative order of secondary insurance based on scope, attachment point, and
28
1 insurance that must be exhausted prior to triggering the Columbia Umbrella Policy.
2 First, Underwriters assert that the Patient Video Actions seek damages because of
3 alleged violations of privacy regulations and the allegedly negligent “way in which Sharp
4 organized, directed and controlled its medical operations,” (Doc. No. 38 at 8), the former
5 triggering Underwriters’ Cyber Liability Policy (FAC ¶ 36) and the latter triggering the
6 Columbia Umbrella Policy (id ¶ 24). The needle Underwriters seek to thread with this
7 distinction is narrow, but in construing all facts in Underwriters’ favor—as required at this
8 stage—the basis for such potential distinction exists. (See FAC ¶¶ 24 (Columbia Umbrella
9 Policy’s definition of incident stemming from professional services injury), 27 (Patient
10 Video Actions are Professional Liability Claims within the scope of Columbia Umbrella
11 Policy’s coverage), 36 (Cyber Liability Policy’s definition of breach of network security
12 or privacy), 38 (“The Cyber Select Policy does not cover the same incidents as covered by
13 the Columbia policy and thus is not ‘unscheduled underlying insurance’ as that term is
14 defined by the Columbia policy.”), 55 (Columbia acknowledged its coverage “was
15 potentially implicated” by the Patient Video Actions as a result of a “professional services
16 injury” or “personal and advertising injury”).) If the Court were to find Underwriters’
17 interpretation correct, then the Cyber Liability Policy would not constitute “unscheduled
18 underlying insurance” that would have to be exhausted to trigger the Columbia Umbrella
19 Policy. (FAC ¶¶ 22, 24, 38.)
20 Second, Underwriters allege the Columbia Umbrella Policy provisions conflict with
21 regard to the definition of self-insured retention as capable of providing primary insurance
22 and expressly excluded from the definition of primary insurance. (FAC ¶¶ 28–30, 39.) This
23 ambiguity raises the question of whether the Columbia Umbrella Policy would be
24 considered primary insurance for the Patient Video Actions, despite the existence of the
25 CQI Policy. (See FAC ¶¶ 28, 32, 39.) Columbia asserts that “the Court already rejected”
26 Underwriters’ “attempt to create the appearance of ambiguity by redefining the term
27 ‘underlying insurance’.” (Doc. No. 41 at 5.) This is not accurate. Analyzing the initial
28 complaint, the Court noted “Underwriters points to no ambiguity in the Umbrella Policy’s
1 definition of underlying insurance.” (Doc. No. 24 at 6.) However, Underwriters do allege
2 ambiguity pointing to specific provisions and language in the amended complaint. As “[a]n
3 amended complaint supersedes the original complaint and renders it without legal effect,”
4 Brown v. Stored Value Cards, Inc., 953 F.3d 567, 573 (9th Cir. 2020), the Court’s prior
5 analysis has little bearing on its analysis of this wholly different complaint.
6 Additionally, Columbia argues in its reply that to read both provisions together is
7 nonsensical and thus not a “reasonable interpretation.” (Doc. No. 41 at 4–5 (quoting John’s
8 Grill, Inc. v. The Hartford Fin. Servs. Grp., 16 Cal. 5th 1003, 1015 (2024)).) However, the
9 case upon which Columbia relies does not address interpretation of expressly defined
10 terms, but rather the interpretation of the phrase “resulting from” considering its ordinary
11 usage. See John’s Grill, 16 Cal. 5th at 1014–15. The ambiguity raised by Underwriters is
12 based on expressly defined terms—as defined by the Columbia Umbrella Policy itself. At
13 this stage of the proceedings, Underwriters have sufficiently pled that the terms are capable
14 of more than one reasonable construction. See Bay Cities, 5 Cal. 4th at 868. As such,
15 interpreting the ambiguity to resolve the contractual claims on a motion to dismiss would
16 be improper. See Fine, 627 F. Supp. 3d at 1157.
17 Based on the above, Underwriters have alleged sufficient facts, if taken as true, and
18 presented reasonable ambiguity to support the theory that the Columbia Umbrella Policy
19 and the Cyber Liability Policy could be co-primary insurance for the Patient Video Actions.
20 Coupled with Underwriters’ allegations that the Cyber Liability Policy and First Layer
21 Excess Policy have been exhausted in defense of the Patient Video Actions (FAC ¶¶ 40,
22 42) while Columbia has paid nothing (FAC ¶¶ 54–67), Underwriters have stated a claim
23 for both contribution and indemnification against Columbia as a co-primary insurer.
24 Accordingly, Columbia’s motion to dismiss is DENIED with regard to Underwriters’ first
25 and second causes of action.
26 ii. Columbia As a Co-Excess Insurer
27 In the alternative, Underwriters allege that the Columbia Umbrella Policy and
28 Underwriters’ First Layer Excess Policy “provide coverage at the same level for the claims
1 asserted against Sharp in the Patient Video Actions.” (FAC ¶ 87; see also id. ¶ 45.) To
2 support this conclusion, Underwriters point to the “Other Insurance” provisions of both
3 policies, each of which states it applies in excess of other available insurance. (Id. ¶¶ 43,
4 44.) Beyond stating that the First Layer Excess Policy “follows the form of the Cyber
5 Liability Policy,” Underwriters provide no factual allegations regarding the applicable
6 insuring provision.
7 Columbia asserts that, by nature of its policy being an umbrella policy, its duty is
8 only triggered upon exhaustion of all other applicable insurance, except those that sit
9 specifically in excess to the Columbia Umbrella Policy. (Doc. No. 35-1 at 12–16.)
10 Columbia cites California Court of Appeal case Carmel Development Company,6 for the
11 proposition that “umbrella coverage is generally regarded “as true excess over and above
12 any type of primary coverage, excess provisions arising in any manner, or escape clauses.”
13 (Doc. No. 41 at 4 (quoting Carmel Dev. Co., 126 Cal. App. 4th at 513–14); see also Doc.
14 No. 35-1 at 14 (“California courts have repeatedly held that similar policy language has
15 the effect of making the subject policy excess over all other available coverage, including
16 excess policies, other than coverage written specifically as excess of the subject policy.”)
17 (collecting cases).)
18 Carmel is instructive—not for the proposition relied upon by Columbia, but for the
19 process the court engages in to determine relative coverage position. In Carmel, the
20 superior court found at trial that both RLI and Fireman’s Fund provided the same level of
21 secondary coverage to their respective insureds, with mutually repugnant “other insurance”
22 clauses “purporting to be excess over other available insurance.” Carmel Dev. Co., 126
23 Cal. App. 4th at 507, 509. The Court of Appeal noted that if the “other insurance” clauses
24
25 6 Carmel Dev. Co. v. RLI Ins. Co. (“Carmel”), 126 Cal. App. 4th 502 (2005). The underlying lawsuit
upon which the Carmel insurance action was based involved a workplace injury by a subcontracted
26 employee. Carmel Dev. Co., 126 Cal. App. 4th at 506. The employee sued the general contractor Carmel
Development Company—who was insured primarily by Reliance Insurance Company and in excess by
27 Fireman’s Fund Insurance Company—and the subcontractor Largo Concrete Company—who was insured
primarily by Acceptance Insurance Company and through an umbrella policy with RLI Insurance
28
1 were compared in isolation, the superior court’s decision would be upheld; however, the
2 court turned “first [to] address the underlying premise that the parties provided the same
3 level of coverage,” which required “a broader examination of each policy[.]” Id. at 509.
4 Analyzing the insuring clauses instead, the Court of Appeal reversed, holding that it was
5 “apparent from the language of these basic insuring provisions that RLI and Fireman’s
6 Fund did not place themselves in the same position with respect to other carriers.” Id. at
7 509–11. Specifically, the Court of Appeal noted that “Fireman’s Fund undertook to provide
8 coverage immediately upon exhaustion of Reliance’s policy limits, [Carmel’s primary
9 insurance,] whereas RLI obligated itself to step in only when the limits of both the
10 Acceptance policy and all other available coverage—primary and excess—were
11 exceeded[ for Largo].” Id. at 511. Thus, a key principle in Carmel—as in many of the cases
12 cited by Columbia—is that the courts must analyze insurance policies as a whole to
13 determine attachment points and the relation between layers of excess of insurance. See,
14 e.g., Advent, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 6 Cal. App. 5th 443, 446,
15 467 (2016).
16 Here, Underwriters do not provide any factual allegations about the First Layer
17 Excess Policy’s insuring provisions or attachment point beyond that the policy follows the
18 form of the Cyber Liability Policy and that the “Other Insurance” provisions are both
19 drafted as laying in excess of all other available insurance. As noted by Columbia, the
20 Court only turns to the “Other Insurance” provisions after determining multiple policies
21 insure the same risk at the same level. See Dart Indus., Inc. v. Com. Union Ins. Co., 28 Cal.
22 4th 1059, 1079 (2002) (“‘Other insurance’ clauses become relevant only where several
23 insurers insure the same risk at the same level of coverage.”) (emphasis in original). The
24 Court is not persuaded at this time, however, by Columbia’s argument that its policy is
25 inherently excess over all other excess provisions by virtue of it being an umbrella policy.
26 Rather, comparative analysis of the competing policies would be required.
27 Without factual allegations supporting Underwriters’ assertion that the First Layer
28 Excess Policy shares the same level of liability as the Columbia Umbrella Policy,
1 Underwriters fail to state a claim for contribution or indemnification against Columbia as
2 a co-excess insurer. Accordingly, Columbia’s motion to dismiss is GRANTED with regard
3 to Underwriters’ third and fourth causes of action. The Court DISMISSES the third and
4 fourth causes of action without prejudice and GRANTS Underwriters leave to amend to
5 the extent they can provide sufficient factual allegations to support the conclusion that the
6 First Layer Excess Policy shares the same level of liability as the Columbia Umbrella
7 Policy.
8 2. Claims Against Admiral
9 With regard to the fifth and sixth causes of action, Underwriters’ theory is that if the
10 Court deems the Columbia Umbrella Policy to be at the same level as the First Layer Excess
11 Policy, then the Admiral Excess Policy would be the same level as the Second Layer Excess
12 Policy. However, Underwriters’ allegations regarding the Second Layer Excess Policy
13 suffer from the same defects as those pertaining to the First Layer Excess Policy, except to
14 a more severe degree. Underwriters allege they issued the policy to Sharp as “a second
15 layer of excess coverage” in the amount of $10 million that has “been exhausted by
16 payments of the settlements reached in the Patient Video Action[s].” (FAC ¶¶ 3, 46.) The
17 rest of Underwriters’ references to the Second Layer Excess Policy are conclusions rather
18 than factual allegations. (See, e.g., FAC ¶¶ 53, 92, 98, 100–01, 104, 107–08, 111, 114,
19 119.) Fatally, Underwriters do not provide any factual allegations about the Second Layer
20 Excess Policy’s insuring provisions, attachment point, or even its “Other Insurance”
21 provision.7 Moreover, because Admiral’s policy is a specific excess to the Columbia
22 Umbrella Policy and Underwriters fail to allege sufficient facts to support that Columbia’s
23 obligations have been triggered, Underwriters fail to make such a showing with regard to
24 Admiral.
25 Without factual allegations supporting Underwriters’ assertion that the Second
26 Layer Excess Policy shares the same level of liability as the Admiral Excess Policy,
27
28
1 Underwriters fail to state a claim for contribution or indemnification against Admiral as a
2 co-excess insurer.8 Accordingly, Admiral’s motion to dismiss is GRANTED with regard
3 to Underwriters’ fifth and sixth causes of action. The Court DISMISSES the fifth and sixth
4 causes of action without prejudice and GRANTS Underwriters leave to amend to the
5 extent they can provide sufficient factual allegations to support the conclusion that the
6 Second Layer Excess Policy shares the same level of liability as the Admiral Excess Policy.
7 B. Declaratory Relief
8 “In a case of actual controversy within its jurisdiction,” with limited exceptions
9 inapplicable to the instant action, “any court of the United States, upon the filing of an
10 appropriate pleading, may declare the rights and other legal relations of any interested party
11 seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. §
12 2201(a); see also Cal. Civ. Proc. Code § 1060 (“Any person interested . . . under a
13 contract . . . may, in cases of actual controversy relating to the legal rights and duties of the
14 respective parties, bring an original action . . . ask[ing] for a declaration of rights or duties,
15 either alone or with other relief; and the court may make a binding declaration of these
16 rights or duties, whether or not further relief is or could be claimed at the time.”).
17 Here, Underwriters state a claim for declaratory relief against Columbia for the same
18 reasons Underwriters state a claim for the first and second causes of action. See supra §
19 III.A.1.i. Columbia and Admiral assert Underwriters’ declaratory relief claims should be
20 dismissed because providing declaratory relief would be “unnecessary” or serves “[n]o
21 purpose” because sufficient remedy, if any is available, may be pursued through
22 Underwriters’ claims for equitable contribution and indemnification. (Doc. Nos. 34-1 at
23 14; 35-1 at 19.) Although “[d]eclaratory relief should be denied when it will neither serve
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25 8 Admiral also argues that Underwriters appear to seek indemnification for payments made pursuant
to the Second Layer Excess Policy beyond their fair share. (Doc. No. 34-1 at 10–11; see also FAC ¶¶ 106–
26 12.) The Court agrees that taken alone this appears to be a contribution argument; however, Underwriters
also allege that they exhausted the Second Layer Excess Policy and continue to fund settlements, and that
27 they seek judgment that Admiral must contribute to exhaustion before the Third Layer Excess Policy is
triggered. (FAC ¶¶ 2–3, 53, 105, 112, 119.) Admiral does not address these allegations, but the Court need
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1 useful purpose in clarifying and settling the legal relations in issue nor terminate the
2 || proceedings and afford relief from the uncertainty and controversy faced by the parties[,]”
3 || United States v. State of Wash., 759 F.2d 1353, 1357 (9th Cir. 1985), such an issue is not
4 || appropriate to decide on a motion to dismiss. Having found Underwriters state a claim for
5 || declaratory relief against Columbia, the Court DENIES Columbia’s motion to dismiss the
6 seventh cause of action.
7 However, because the Court has dismissed all other claims against Admiral
8 ||commensurate with the claim for declaratory relief, there is no longer an actual controversy
9 existing to support a claim for declaratory relief against Admiral. As such, the Court
10 || GRANTS Admiral’s motion to dismiss the eighth cause of action. The Court DISMISSES
11 || the eighth cause of action without prejudice.
12 |}V. CONCLUSION
13 Accordingly, for the reasons stated herein, the Court GRANTS Admiral’s motion
14 dismiss (Doc. No. 34) and GRANTS in part and DENIES in part Columbia’s motion
15 || to dismiss (Doc. No. 35). Any amended complaint, if Underwriters intend to file one, must
16 filed no later than May 16, 2025. Responses must be filed by Admiral and Columbia
17 later than May 30, 2025.
18 IT IS SO ORDERED.
19 || Dated: May 2, 2025 ©
20 Hon. Anthony J.Battaglia
21 United States District Judge
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