Associated Industries Insurance Company v. Ategrity Specialty Insurance Co.

Background

This was an insurance-coverage dispute between two insurance companies that mutually insured Veritas Investments, Inc. In the underlying state-court case, Evander v. Veritas Investments, Inc., residential tenants alleged habitability violations at properties owned by Veritas and claimed that the defendants tried to drive tenants out of their units.

Associated Industries participated in Veritas’s defense and paid legal fees to Lubin Olson & Niewiadomski LLP. Associated Industries sought partial summary judgment—a ruling that no genuine dispute of material fact required a trial—on whether Ategrity owed Veritas a duty to defend in Evander. Associated Industries sought a declaration that the duty began when it formally tendered the case to Ategrity on May 20, 2022, or earlier when Ategrity received notice.

Ategrity had issued three commercial general liability policies to Veritas covering periods from December 2019 through December 2022. The policies provided coverage for certain bodily injury and property damage caused by an “occurrence,” and for certain “personal and advertising injury,” including wrongful eviction, wrongful entry, or invasion of the right of private occupancy. The policies also included self-insured retentions, meaning amounts that had to be paid before coverage applied.

Evidentiary rulings

The court largely overruled Ategrity’s evidentiary objections. It overruled Ategrity’s objection to copies of two policies because the documents’ policy numbers, insureds, effective dates, coverage amounts, and attachments matched Ategrity’s own descriptions and excerpts of the policies. The court also overruled objections to a payment spreadsheet because the underlying information could be presented in admissible form through testimony from people with knowledge of the payments.

The court struck additional evidence that Associated Industries submitted after the deadline without seeking permission. It also overruled as moot an objection to part of the declaration of Lauren Bracy because the court did not rely on that portion.

Court’s analysis

Under California law, an insurer has a broad duty to defend. The duty exists when the underlying complaint alleges liability that could potentially be covered by the policy, or when the known facts suggest a possibility of covered liability. If any claim in the underlying complaint is covered, the insurer must defend the entire action. The insurer must show that no possible theory could bring the claim within coverage.

The court found no genuine dispute that the Evander claims could potentially fall within Ategrity’s coverage. The allegations included bodily injury and property damage arising from occurrences during the policy periods, as well as wrongful eviction, wrongful entry, and invasions of private occupancy rights during those periods. Ategrity did not provide a substantive response or establish that an exclusion applied.

The court also found no genuine dispute that the self-insured retention had been satisfied. The parties disagreed about whether the retention applied to the policies’ coverage for personal and advertising injury, but the court did not need to decide that contract-interpretation issue. The court found that the retention had been satisfied even assuming it applied: payments by Associated Industries exceeded the $500,000 threshold under the first two policies, and payments by Veritas itself exceeded that threshold under the third policy.

Disposition

Judge Haywood S. Gilliam, Jr. granted Associated Industries’ motion for partial summary judgment. The court held that Ategrity had owed Veritas a duty to defend in Evander since no later than May 20, 2022, when Associated Industries formally tendered the case. The court also set a case-management conference and directed the parties to meet and confer and submit a revised joint case-management statement.