RLI Insurance Company v. Engineering

Background

RLI Insurance Company sued Langan Engineering, Environmental, Surveying and Landscape Architecture, D.P.C., and Langan Engineering and Environmental Services, Inc., which the court collectively called “Langan.” RLI’s amended complaint sought rescission of four excess insurance policies issued for 2014, 2015, 2016, and 2017; damages for alleged misrepresentation or concealment; declaratory relief; and repayment of insurance payments.

The dispute involved claims concerning Langan’s alleged successor liability for work connected to the Millennium Tower project. Langan was named in lawsuits in August 2016, and those cases were consolidated in the Millennium Tower Actions. RLI alleged that Langan first informed RLI of a potential claim at that time. Langan later requested that RLI fund settlements, and RLI agreed to make payments while reserving the right to seek repayment if it was ultimately found not to owe coverage.

After RLI filed this action and amended its complaint, Langan answered and asserted a counterclaim with two causes of action: one seeking damages for breach of the covenant of good faith and fair dealing, and another seeking declaratory relief. RLI’s motion targeted only the first cause of action.

Legal Standard

California’s anti-SLAPP statute allows a party to seek dismissal of a claim that arises from acts in furtherance of petitioning or free-speech rights concerning a public issue. The analysis has two steps. First, the moving party must show that the challenged claim arises from protected activity. If that showing is made, the opposing party must show a probability of prevailing on the claim.

The court explained that anti-SLAPP motions may be brought in federal court against state-law claims. It also relied on the distinction between a claim arising from the underlying dispute and a claim arising from the filing of an earlier lawsuit.

Court’s Analysis

RLI argued that Langan had effectively sued RLI for filing its complaint and that the complaint was a protected statement made in a judicial proceeding. The court rejected that characterization. It found that Langan’s counterclaim arose from the underlying insurance contracts and the dispute over whether RLI had acted in bad faith. According to the counterclaim, that dispute had existed for years before RLI filed this action.

The court noted Langan’s allegations that it gave timely notice of the Millennium Tower litigation in August 2016, that RLI did not respond for nearly three years, that RLI waited to see whether Langan could successfully defend the successor-liability claim, that RLI continued collecting premiums without committing to coverage, and that RLI filed the rescission action after Langan appeared likely to lose a summary-adjudication motion.

Applying the California Supreme Court’s reasoning in City of Cotati v. Cashman, the court concluded that RLI’s complaint informed Langan of an existing controversy but did not itself constitute the controversy underlying Langan’s counterclaim. Because RLI failed to satisfy the first step of the anti-SLAPP analysis, the court did not consider whether Langan had shown a probability of prevailing on the counterclaim.

Disposition

The court denied RLI’s special motion to strike. It vacated the December 6, 2019 hearing because the matter could be resolved without oral argument. The court also denied the parties’ evidentiary objections as moot.