Travelers Property Casualty Company of America v. Toll Brothers, Inc.

Background

Marble Palace, Inc. subcontracted with Shapell to furnish and install bathroom tile at the Abbington at Gale Ranch housing development. Travelers issued insurance policies to Marble Palace, and the parties appeared to agree that Shapell was an additional insured under those policies.

In March 2018, the Abbington Owners’ Association notified Shapell of alleged construction defects. Shapell retained Plante Lebovic LLP and began participating in California’s pre-lawsuit construction-defect process. Shapell later tendered the matter to Travelers for coverage. Travelers eventually agreed to defend Shapell under a reservation of rights and stated that it was appointing Matthew S. Constantino of Clapp, Moroney, Vucinich, Beeman & Scheley to represent Shapell. Travelers’ letter said that Travelers would pay only the defense fees and costs incurred by Constantino and that Shapell could continue using its own counsel at its own expense.

The Abbington Owners’ Association filed its complaint in Contra Costa Superior Court on March 12, 2019. Clapp Moroney repeatedly contacted Plante Lebovic about associating in or substituting as counsel and requested information about the case. Plante Lebovic continued representing Shapell and, in February 2020, stated that it made sense to delay Clapp Moroney’s participation because the parties were close to resolving the matter through mediation. Travelers filed this insurance action on June 2, 2020.

Claims and Parties’ Positions

Travelers sought declarations or relief concerning its right to control the defense, whether Toll Brothers and Shapell could appoint independent counsel under California Civil Code section 2860, whether the defendants breached their duty to cooperate, and whether Travelers had to pay defense fees and costs incurred after Travelers selected Clapp Moroney. Both sides moved for partial summary judgment, which asks the court to decide claims when there is no genuine dispute about important facts and the law entitles one side to judgment.

The parties appeared to agree that the insurance policies gave Travelers the right to control the defense. Travelers argued that the communications showed the defendants had not allowed Clapp Moroney to defend them, while the defendants argued that Clapp Moroney had never been prevented from participating and had chosen to remain passive. The defendants also maintained that Travelers had paid submitted defense costs without objecting until this lawsuit was filed.

Summary-Judgment Ruling

The court found a genuine factual dispute about whether the defendants violated Travelers’ right to control the defense and thereby breached the insurance policy. The parties’ arguments depended on how their communications should be interpreted: Travelers viewed them as showing that it had asserted control through Clapp Moroney and that the defendants had not allowed that control, while the defendants viewed them as showing that Clapp Moroney had not attempted to control the defense.

Because at least one important factual dispute remained, the court DENIED both parties’ motions for partial summary judgment. The court did not resolve which side was correct about whether the defendants interfered with Travelers’ control of the defense.

Motions to Seal

The parties also sought to file under seal emails between defense counsel, billing records, and references to those materials. Because the materials were connected to dispositive summary-judgment motions, the court applied the higher “compelling reasons” standard. Under that standard, a party must identify specific reasons strong enough to outweigh the public’s general right of access to court records.

The court reviewed the documents and found that the communications mainly concerned whether Clapp Moroney would participate as counsel and the scheduling of court and mediation events. Although some communications sought mediation-preparation materials, those materials were not included in the exhibits. The court found that the exhibits provided little insight into the actual defense strategy. It also found that the billing records contained substantial nonprivileged information, including billing rates and hours worked, and that the request to seal the records in their entirety was too broad.

The court therefore DENIED the administrative motions to file under seal. It directed the parties to file public versions of the documents. For the billing records, the court allowed any further sealing request to be narrowly tailored and supported by a sufficient basis, to be filed within seven days.

Other Case-Management Directions

The court set a telephonic case-management conference for February 1, 2022, and stated that the existing case schedule remained in place unless the court later modified it.