Travelers Property Casualty Company of America v. Salesforce.com, Inc.

Background

Travelers sought declaratory relief concerning its insurance obligations to Salesforce in litigation pending in Texas state court. The claims addressed Travelers’ alleged duty to defend Salesforce, as well as indemnification and reimbursement.

Duty to Defend

The court granted Salesforce’s motion to dismiss Travelers’ claim seeking a declaration that Travelers had no duty to defend. Under the governing California law discussed in the opinion, an insurer must defend when the factual allegations in the underlying lawsuit create a potential for liability covered by the policy. That duty continues until the insurer can conclusively establish that the lawsuit and possible claims fall outside the policy’s coverage.

The parties agreed that Salesforce’s negligent conduct was covered by the policy. Because the Texas litigation was still at an early stage, Travelers could not show that there was no potential for coverage. The facts could support negligence claims, and Salesforce might establish in the Texas case that it acted negligently rather than intentionally or knowingly. The court therefore concluded that Travelers had a continuing duty to defend Salesforce. The dismissal of this claim was without prejudice to Travelers seeking reimbursement of defense costs after the Texas litigation ends.

Indemnification and Reimbursement Claims

The court determined that Travelers’ claims concerning indemnification and reimbursement were premature because the Texas litigation had not concluded. Whether Salesforce acted negligently, which would be covered, or intentionally and knowingly, which would not be covered, was a factual issue central to both proceedings. The court stated that Salesforce would be entitled to a stay of the indemnification claim, but dismissed both the indemnification and reimbursement claims without prejudice because they were not yet ripe. Travelers may renew those claims at the close of the Texas litigation.

Disposition

The court dismissed the case without prejudice. It also granted Salesforce’s request for judicial notice. Judge Vince Chhabria entered the order on April 13, 2021.