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This case was last updated from Los Angeles County Superior Courts on 02/11/2021 at 00:23:48 (UTC).

CORE HEALTH & FITNESS LLC ET AL VS NATIONAL UNION FIRE I

Case Summary

On 09/22/2017 CORE HEALTH FITNESS LLC filed a Contract - Insurance lawsuit against NATIONAL UNION FIRE I. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The case status is Other.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****6824

  • Filing Date:

    09/22/2017

  • Case Status:

    Other

  • Case Type:

    Contract - Insurance

  • Court:

    Los Angeles County Superior Courts

  • Courthouse:

    Stanley Mosk Courthouse

  • County, State:

    Los Angeles, California

 

Party Details

Plaintiffs and Petitioners

CORE INDUSTRIES LLC

CORE HEALTH & FITNESS LLC

CORE FITNESS LLC

Defendants and Respondents

NATIONAL UNINO FIRE INSURANCE COMPANY OF

DOES 1 TO 10

BASSI EDLIN HUIE & BLUM LLP

NAT'L UNION FIRE INS. COMP. OF PITTS PA

Not Classified By Court

PHILADELPHIA INDEMNITY INSURANCE COMPANY

NAVIGATORS INSURANCE COMPANY

SUNDVOLD STEPHEN J.

Attorney/Law Firm Details

Plaintiff and Petitioner Attorneys

CALLAHAN DANIEL J. ESQ

CALLAHAN DANIEL J.

Defendant and Respondent Attorneys

MCCURDY MARY P. ESQ.

SAGER LINDA L.

FURMAN DANA H.

GESSIN JESSE ASHER

KELLER JENNIFER LYNN

STAMELMAN JEREMY WHITE

KAZEMI NAHAL

 

Court Documents

Notice - NOTICE OF ORDER

3/4/2020: Notice - NOTICE OF ORDER

Request for Judicial Notice

6/10/2019: Request for Judicial Notice

Substitution of Attorney

7/11/2019: Substitution of Attorney

DECLARATION OF JOHN D. VAN ACKEREN IN SUPPORT OF PLAINTIFFS' MOTION TO COMPEL DEFENDANT BASSI EDLIN HUIE & BLUM, LLP PROVIDE FURTHER RESPONSES TO REQUESTS FOR PRODUCTION, SET ONE

3/16/2018: DECLARATION OF JOHN D. VAN ACKEREN IN SUPPORT OF PLAINTIFFS' MOTION TO COMPEL DEFENDANT BASSI EDLIN HUIE & BLUM, LLP PROVIDE FURTHER RESPONSES TO REQUESTS FOR PRODUCTION, SET ONE

PLAINTIFFS' UNOPPOSED EX PARTE APPLICATION FOR AN ORDER ADVANCING THE HEARING DATE ON THEIR MOTION FOR LEAVE TO FILE A FIRST AMENDED COMPLAINT; ETC.

5/11/2018: PLAINTIFFS' UNOPPOSED EX PARTE APPLICATION FOR AN ORDER ADVANCING THE HEARING DATE ON THEIR MOTION FOR LEAVE TO FILE A FIRST AMENDED COMPLAINT; ETC.

NOTICE OF LODGMENT IN SUPPORT OF DEFENDANT BASSI EDLIN HUIE & BLUM, LLPS OPPOSITION TO PLAINTIFFS' MOTION TO COMPEL FURTHER RESPONSES TO REQUEST FOR PRODUCTION (SET ONE)

6/29/2018: NOTICE OF LODGMENT IN SUPPORT OF DEFENDANT BASSI EDLIN HUIE & BLUM, LLPS OPPOSITION TO PLAINTIFFS' MOTION TO COMPEL FURTHER RESPONSES TO REQUEST FOR PRODUCTION (SET ONE)

PLAINTIFF CORE HEALTH & FITNESS, LLC'S REPLY IN SUPPORT OF MOTION TO COMPEL DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA'S PERSON MOST QUALIFIED TO ATTEND AND TESTIFY AT DEPOSITIO

7/23/2018: PLAINTIFF CORE HEALTH & FITNESS, LLC'S REPLY IN SUPPORT OF MOTION TO COMPEL DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA'S PERSON MOST QUALIFIED TO ATTEND AND TESTIFY AT DEPOSITIO

Minute Order -

7/31/2018: Minute Order -

PROOF OF SERVICE

8/16/2018: PROOF OF SERVICE

Legacy Document - LEGACY DOCUMENT TYPE: DECLARATION

9/19/2018: Legacy Document - LEGACY DOCUMENT TYPE: DECLARATION

Legacy Document - LEGACY DOCUMENT TYPE: DECLARATION

9/19/2018: Legacy Document - LEGACY DOCUMENT TYPE: DECLARATION

Memorandum of Points & Authorities -

10/11/2018: Memorandum of Points & Authorities -

Declaration - Declaration of Samuel J. Morris, Esq. in Support of National Union Fire insurance Company of Pittsburgh, Pa.'s Motion to Compel Further Responses to Request for Production of Documents,

10/25/2018: Declaration - Declaration of Samuel J. Morris, Esq. in Support of National Union Fire insurance Company of Pittsburgh, Pa.'s Motion to Compel Further Responses to Request for Production of Documents,

Opposition - Plaintiff's Opposition to Defendant National Union Fire Insurance Company of Pittburg, PA's Motion to Compel Compliance with Subpoena and Joinder in Fitness International, LLC's Oppositio

10/26/2018: Opposition - Plaintiff's Opposition to Defendant National Union Fire Insurance Company of Pittburg, PA's Motion to Compel Compliance with Subpoena and Joinder in Fitness International, LLC's Oppositio

Order - Order Ruling Re: Defendant National Union Fire Insurance Company of Pittsburg, PA's Motion to Compel Further Responses from Plaintiff Core Health & Fitness, LLC

11/1/2018: Order - Order Ruling Re: Defendant National Union Fire Insurance Company of Pittsburg, PA's Motion to Compel Further Responses from Plaintiff Core Health & Fitness, LLC

Memorandum of Points & Authorities

3/22/2019: Memorandum of Points & Authorities

Declaration - DECLARATION OF SAMUEL J. MORRIS IN SUPPORT OF DEFENDANT NATIONAL UNION'S MOTION TO COMPEL

3/27/2019: Declaration - DECLARATION OF SAMUEL J. MORRIS IN SUPPORT OF DEFENDANT NATIONAL UNION'S MOTION TO COMPEL

NOTICE OF CASE MANAGEMENT CONFERENCE

10/18/2017: NOTICE OF CASE MANAGEMENT CONFERENCE

516 More Documents Available

 

Docket Entries

  • 08/19/2020
  • Docketat 10:30 AM in Department 78; Order to Show Cause Re: (Failure to File Judgment) - Not Held - Vacated by Court

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  • 06/05/2020
  • Docketat 08:30 AM in Department 78; Order to Show Cause Re: (Failure to File Judgment) - Not Held - Advanced and Continued - by Court

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  • 05/12/2020
  • Docketat 09:30 AM in Department 78; Jury Trial - Not Held - Vacated by Court

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  • 05/06/2020
  • DocketRequest for Dismissal (- AS TO ENTIRE ACTION); Filed by Core Fitness LLC (Plaintiff); Core Health & Fitness LLC (Plaintiff); Core Industries, LLC (Plaintiff)

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  • 04/27/2020
  • Docketat 08:30 AM in Department 78; Final Status Conference - Not Held - Vacated by Court

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  • 04/23/2020
  • Docketat 11:42 AM in Department 78; Court Order

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  • 04/23/2020
  • DocketCertificate of Mailing for ((Court Order) of 04/23/2020); Filed by Clerk

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  • 04/23/2020
  • DocketMinute Order ( (Court Order)); Filed by Clerk

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  • 04/21/2020
  • Docketat 08:30 AM in Department 78; Hearing on Motion for Determination of Good Faith Settlement (CCP 877.6) - Not Held - Taken Off Calendar by Party

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  • 04/08/2020
  • Docketat 08:30 AM in Department 78; Hearing on Motion for Summary Adjudication - Not Held - Taken Off Calendar by Party

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772 More Docket Entries
  • 10/18/2017
  • DocketNotice; Filed by Plaintiff/Petitioner

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  • 10/03/2017
  • DocketNotice of Case Management Conference; Filed by Clerk

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  • 10/03/2017
  • DocketNOTICE OF CASE MANAGEMENT CONFERENCE

    Read MoreRead Less
  • 10/02/2017
  • DocketProof-Service/Summons; Filed by Core Health & Fitness LLC (Plaintiff)

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  • 10/02/2017
  • DocketPROOF OF SERVICE SUMMONS

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  • 10/02/2017
  • DocketPROOF OF SERVICE SUMMONS

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  • 10/02/2017
  • DocketProof-Service/Summons; Filed by Core Health & Fitness LLC (Plaintiff)

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  • 09/22/2017
  • DocketCOMPLAINT FOR: 1. INSURANCE BAD FAITH; ETC

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  • 09/22/2017
  • DocketSUMMONS

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  • 09/22/2017
  • DocketComplaint; Filed by Core Fitness LLC (Plaintiff); Core Health & Fitness LLC (Plaintiff); Core Industries, LLC (Plaintiff)

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Tentative Rulings

Case Number: BC676824    Hearing Date: February 14, 2020    Dept: 78

Superior Court of California

County of Los Angeles

Department 78

core health & fitness, llc;

Plaintiffs,

vs.

national union fire ins. co. of pittsburg, pa, et al.;

Defendants.

Case No.:

BC676824

Hearing Date:

February 14, 2020

[TENTATIVE] RULING RE:

plaintiff core health & fitness, llc’s motion to seal confidential records filed conditionally under seal in support of parties’ motions for summary adjudication

non-party navigators insurance company’s motion to seal documents conditionally lodged under seal in connection with defendant national union fire insurance co. of pittsburgh, pa’s motion for summary adjudication filed on june 10, 2019

Plaintiff Core Health & Fitness, LLC’s Motion to Seal Confidential Records Filed Conditionally Under Seal is DENIED.

Non-Party Navigators Insurance Company’s Motion to Seal Documents Conditionally Lodged Under Seal in Connection with Defendant National Union Fire Insurance Co. of Pittsburgh, PA’s Motion for Summary Adjudication filed on June 10, 2019 is GRANTED.

FACTUAL BACKGROUND

The facts and general procedural history regarding this case are set forth in today’s ruling on the motions for summary judgment/summary adjudication.

PROCEDURAL HISTORY

On June 20, 2019, Core filed the instant Motion to Seal Confidential Records. 

On the same day, June 20, 2019, Non-Party Navigators Insurance Company filed the instant Motion to Seal Documents Lodged Under Seal.

On December 4, 2019, National filed an Opposition to Core’s Motion to Seal. 

On January 8, 2020, Core filed a Reply to National’s Opposition to the Motion to Seal.

Discussion

  1. REQUEST FOR JUDICIAL NOTICE

Where the motion is based on a matter of which the court may take judicial notice pursuant to Section 452 or 453 of the Evidence Code, the matter shall be specified in the notice of motion, or in the supporting points and authorities, except as the court may otherwise permit. (California Code of Civil Procedure §438(d)). Any request for judicial notice must be made in a separate document listing the items for which notice is requested. (CRC 3.1113(l)). Judicial notice may be taken of “(d) Records of (1) any court of this state or (2) any court of record of the United States or of any state of the United States […].” (Evid. Code § 452.)

National requests that this Court take judicial notice of: (1) Declaration of Todd Von Sprecken filed in support of Fitness International’s Opposition to Core’s Motion for Summary Judgment dated August 18, 2017 in the underlying action Rodriguez v. L.A. Fitness International, LLC, et al., Los Angeles County Superior Court Case No. BC532963 (“Rodriguez”). The Court GRANTS this request.

  1. MOTIONS TO SEAL

The court may order that a record be filed under seal only if it expressly finds facts that establish:

(1) There exists an overriding interest that overcomes the right of public access to the record;

(2) The overriding interest supports sealing the record;

(3) A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed;

(4) The proposed sealing is narrowly tailored; and

(5) No less restrictive means exist to achieve the overriding interest.

(California Rules of Court (“CRC”) Rule 2.550, subd. (d).)

A party moving to seal records must make a sufficient evidentiary showing to overcome the presumed right of public access to the documents. (see Huffy Corp. v. Superior Court (“Huffy”) (2003) 112 Cal.App.4th 97, 108.)

egally Ass’n

  1. Core’s Motion to Seal

Core seeks to permanently seal (1) three exhibits attached to its Compendium of Exhibits filed in support of Core’s Motion for Summary Adjudication, and (2) 32 documents filed by National in support of National’s three Motions for Summary Adjudication. (Notice Motion at pp. 1-2.) In Reply, following National’s Opposition, Core agreed to withdraw its confidential designation on many of the documents, limiting the scope to seven documents. (Reply at p. 1.)

The seven documents now sought to be permanently sealed are:

  1. Exhibit 12 to Core’s Compendium of Evidence in support of its Motion for Summary Adjudication of the Fourth Cause of Action (“Core’s MSA COE”): Declaration of Kevin Einck and exhibits attached thereto, which include customer contracts and pricing and purchasing information.

  2. Exhibit 7 to National Union’s Notice of Lodgment in support of its MSA’s (“National Union’s MSA NOL”) at CORE_0031645-CORE_0031656: Purchase Agreement.

  3. Exhibit 13 to National Union’s MSA NOL at MB 000491-MB 000492, CORE_0058564-CORE_0058568, CORE_0058569-CORE_0058586, and MB 000459-MB 000469: CPSC submissions and communications.

  4. Exhibit 21 to National Union’s MSA NOL at CORE_0021195-CORE 0021207: Purchase Agreement.

  5. Exhibit 36 to National Union’s MSA NOL at CORE_0031645-CORE_0031656, and LAF-PRIV 808-LAF-PRIV 956: Purchase Agreement.

  6. Exhibit 45 to National Union’s MSA NOL at MB 000459-MB 000469: CPSC Incident Report.

  7. Exhibit 54 to National Union’s MSA NOL at CORE_0031643-CORE_0031656: Purchase Agreement.

In its reply on its motion Core further seeks to permanently seal 35 additional documents filed in connection with both Core and National’s Oppositions to the cross Motions for Summary Adjudication. (Reply at pp. 1-3.)’

Core argues that these 42 documents contain its “confidential consumer contract terms and pricing information, as well as Core’s confidential submissions to the Consumer Product Safety Commission[.]” (Reply at p. 1.) Core argues that if the documents are not sealed, then the interests of Core and other third parties in the documents and their information will be prejudiced. (Reply at p. 4.)

Core contends that the parties stipulated to a Protective Order on February 26, 2018 which provided that “Where any Confidential Materials, or Information derived from Confidential Materials, is included in any motion or other proceeding governed by California Rules of Court, Rules 2.550 and 2.551, the party shall follow those rules.” (Motion at p. 1.) Core argues that their interest in keeping the confidential information contained in these document confidential overrides the right of the public to access such information. (Motion at p. 5.)

In Opposition National argues the following with regards to the original seven remaining documents:[1]

  1. Exhibit 12: National argues that this exhibit is already available as a public record because Core filed it on September 19, 2018 in support of Core’s Opposition to National’s Demurrer to the FAC. (Oppo. at p. 5.) The document was filed under temporary seal at the time, but Core did not obtain an order to permanently seal the document and it is currently available as a public record from the docket. (Oppo. at p. 5.)

  2. Exhibit 7 CORE_0031645-CORE_0031656: National argues that this document is a purchase agreement that does not contain any confidential financial or trade secret information and that the contract and pricing information in the attachments were previously disclosed in the Rodriguez case in L.A. Fitness’ Opposition to Core’s Motion for Summary Adjudication filed without seal. (Oppo. at p. 9; RJN ¶ 1.)

  3. Exhibit 13 MB 000491-MB 000492: National argues that this email correspondence to the Consumer Product Safety Commission regarding the recall submission is available to the public pursuant to the Freedom of Information Act (“FOIA”). (Oppo. at p. 10.)

  4. Exhibit 21 CORE_0021195-CORE 0021207: National argues that this document is a purchase agreement that does not contain any confidential financial or trade secret information and that the contract and pricing information in the attachments were previously disclosed in the Rodriguez case in L.A. Fitness’ Opposition to Core’s Motion for Summary Adjudication filed without seal as well as in Core’s opposition to demurrer in this case. (Oppo. at pp. 12-13; RJN ¶ 1.)

  5. Exhibit 36 LAF-PRIV 808-LAF-PRIV 956: National argues that these documents are internal L.A. Fitness correspondence with various attached purchase agreements between L.A. Fitness and Core that do not contain any confidential financial or trade secret information, and that the contract and pricing information in the attachments were previously disclosed in the Rodriguez case and in Core’s opposition to demurrer in this case, both filed without seal. (Oppo. at p. 13.)

  6. Exhibit 54 CORE_0031643-CORE_0031656: National argues that this exhibit pertains to a purchase agreement that does not contain any confidential financial or trade secret information and that the contract and pricing information in the attachments were previously disclosed in the Rodriguez case in L.A. Fitness’ Opposition to Core’s Motion for Summary Adjudication filed without seal as well as in Core’s opposition to demurrer in this case. (Oppo. at p. 14; RJN ¶ 1.)

In its Reply as to these documents, Core argues that the information that it seeks to protect was only made public in the Rodriguez action because Core’s counsel in the Rodriguez case, Defendant BEHB “failed to take the necessary steps to keep it confidential.” (Reply at pp. 4-5.)

While the Court agrees that the parties to the purchase agreements have an interest in the privacy of the agreements’ terms and attachments, Core has not established that it would be prejudiced if the motion to seal these documents and exhibits was denied

In Universal City Studios, Inc. v. Superior Court (2003) 110 Cal.App.4th 1273, 1286, the court found that where data had been voluntarily disclosed in unsealed documents in a separate superior court action, the documents were not entitled to be sealed in the present matter. Further, in Overstock.com, Inc. v. Goldman Sachs Group, Inc. (2014) 231 Cal.App.4th 471, 507-508, where the material in the exhibits regarding short sales had previously been publicly disclosed in Securities and Exchange Commission orders, the trial court was not required to seal the exhibits.

Here, the information sought to be sealed is either already in the public domain by way of the Rodriguez case or the instant case, or is capable of being accessed by the public by way of the Freedom of Information Act. Accordingly, Core cannot prevail on an argument for prejudice if the documents are not sealed.

Core’s Motion to Seal is DENIED.

  1. Non-Party Navigators Insurance’s Motion to Seal

Non-Party Navigators Insurance (“Navigators”) seeks to permanently seal two documents filed in connection with National’s Motions for Summary Adjudication filed on June 10, 2019:

  1. Exhibit 19 to the Motion: NAV 000161 — NAV 000176

  2. Exhibit 35 to the Motion: NAV 000161 — NAV 000176

Navigators, who was the excess general liability insurer for Core’s co-defendant Fitness International, Inc. in Rodriguez, argues that these two documents were produced in response to a subpoena from National to Navigators in this action subject to the Protective Order. (Motion at p. 2.) The documents consist of a confidential settlement agreement that Navigators argues is confidential pursuant to its terms. (Motion at p. 2.)

Navigators argues that the there is an overriding interest in maintaining the confidentiality of a settlement agreement pursuant to its own terms and that interest will be prejudiced if such agreement is not sealed. (Motion at p. 2.)

This Motion is unopposed.

The Court agrees that the parties to a confidential settlement agreement have an overriding interest in the privacy of its terms greater than the public interest therein, that this interest supports sealing the record and would be prejudiced if not ordered sealed, and that the proposed sealing is narrowly tailored such that no less restrictive means would achieve the interest.

Accordingly, Navigators’ Motion to Seal is GRANTED.

DATED: February 14, 2020

________________________________

Hon. Robert S. Draper

Judge of the Superior Court


[1] Since the remaining documents Core is seeking to have sealed were only identified in their reply, National Union has that had an opportunity to respond as to these documents.

Case Number: BC676824    Hearing Date: February 12, 2020    Dept: 78

[TENTATIVE] RULING RE:

PLAINTIFF CORE HEALTH & FITNESS LLC’S MOTION FOR SUMMARY ADJUDICATION OF FIFTH AND SIXTH CAUSES OF ACTION AGAINST DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA

PLAINTIFF CORE HEALTH & FITNESS LLC’S MOTION FOR SUMMARY ADJUDICATION OF FOURTH CAUSE OF ACTION AGAINST DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA

DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S MOTION FOR SUMMARY ADJUDICATION OF PLAINTIFF’S FIRST AND SECOND CAUSES OF ACTION OR. ALTERNATIVELY, SUMMARY JUDGMENT

DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S MOTION FOR SUMMARY ADJUDICATION OF PLAINTIFF’S FOURTH CAUSE OF ACTION

DEFENDANT NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA’S MOTION FOR SUMMARY ADJUDICATION OF PLAINTIFF’S FIFTH AND SIXTH CAUSES OF ACTION

FACTUAL framework

This is an action for breach of contract, breach of the covenant of good faith and fair dealing, and declaratory relief. The operative First Amended Complaint alleges the following causes of action on behalf of plaintiffs Core Health & Fitness, LLC, Core Fitness, LLC, and Core Industries, LLC (collectively “Core”) against with Defendant National Union Fire Insurance Company of Pittsburgh, PA (“National Union”):

  1. Breach of the Covenant of Good Faith and Fair Dealing

  2. Breach of Written Insurance Contract

  1. Declaratory Relief re: Coverage for LA Fitness

  2. Declaratory Relief re: SIR

  3. Declaratory Relief re: Duty to Advise of Rights[1]

The tort action that led to this lawsuit was filed by Manuel Rodriguez (“Rodriquez”) on January 10, 2014. The Rodriquez complaint alleged that he had suffered a traumatic brain injury on November 18, 2013, while exercising on a Core exercise machine (referred to hereafter as the “Core Cross Over Machine”) at a gym owned and operated by LA Fitness International, LLC (“LA Fitness”). The June 10, 2014 complaint named LA Fitness as a defendant but not Core.

Core had liability insurance coverage for injuries such as those suffered by Rodriguez under a primary general liability policy issued by National Union with a $1,000,000 per occurrence limit of liability after Core had paid $150,000 for defense or indemnity on a claim under a Self Insuredd Retention (“SIR”) Endorsement.[2] The Endorsement, titled “Additional Insured—When Required Under Contract or Agreement Endorsement, provided coverage to “any person or organization you become obligated to include as an additional insured under the policy as a result of any contract or agreement you enter into….but only with respect to liability arising out of your operations or premises owned by or rented to you.” .

On May 14, 2014, LA Fitness tendered defense of its defense and indemnity with respect to the Rodriquez complaint to Core. On May 29, 2014, Core accepted the tender of defense without mentioning the request for an agreement to indemnify LA Fitness. Core thereafter began to pay LA fitness’s counsel’s bills while it was still within the SIR.

On February 10, 2015, Rodriguez filed a second amended complaint, this time naming both LA Fitness and Core as defendants and Core tendered this claim to National Union. On November 11, 2015, National Union sent a letter to Core acknowledging that Core had exhausted its SIR, accepting the tender, agreeing to assume the defense of Core in the Rodriquez action. In that same letter, National Union advised Core that it was sending a letter to LA Fitness declining coverage to LA fitness as an additional insured under the policy National Union had issued to Core. On that same day, National Union did send this letter to counsel for LA Fitness. Core did not object to this decision or to the statements in the letter.

On February 8, 2016, Core’s General Counsel and Senior Vice President, Legal, Reed Brown, sent an email to counsel for LA Fitness enclosing a draft of a November 20, 2015 letter. In the email, Mr. Brown stated that he had “instructed former counsel” to send the letter in November but that it had apparently inadvertently not been sent because of the change in counsel.[3] The draft letter withdrew Core’s agreement to pay for LA Fitness’ defense in the Rodriguez action: Mr. Brown stated that the July 10, 2011 Purchase Agreement upon which LA Fitness based its claim thatCore was required to pay forto pay for LA Fitness’ defense in the Rodriquez actiononly applied when a claim against LA Fitnesswas based on a “design or manufacturing defect” in a Core product. Mr. Brown stated that a review of the February 10, 2015 complaint established that Rogriquez was not seeking recovery against LA Fitness for any design or manufacturing defect in the Core Cross over Machine but, instead was basing its claim against LA Ftness on LA Fitness’ own negligence and gross negligene under negligence and premises liability theories.

Mr. Brown’s February 6, 2016 email stated: “[T]he [November] letter correctly sets forth Core’s position with respect to the Tender of Defense and the agreement to pay fees to your firm.” The letter also stated that Core would not pay the fees and costs incurred by LA Fitness’ counsel and “This means effective immediately.” The email stated that Mr. Brown had been surprised to receive invoices from LA Fitness’ counsel after the date of the November letter, which led to the discovery that it had not been sent. But Mr. Brown stated that the bills he had recently received would nevertheless not be paid because Core’s decision was retroactive to the date of the draft letter.

On March 3, 2016 counsel for LA Fitness sent a letter to counsel for Core in response to Mr. Brown’ss February 8, 2016 email. The letter asked Mr.Brown to reconsider Core’s position,stating that he believed that under the under July 20, 2011 Purchase Agreement and broader principles Core did have an obligation to pay for the defense of LA Fitness’ in the Rodriguez action. The letter also stated that LA Fitness thought Core’s decision was unwise because: “We believe it would be far better for the defendants to present a united front than for Core to have both plaintiff and LA fitness pointing their fingers at Core.” The March 3, 2016 letter nevertheless advised Core that it did not reconsider its position LA Fitness would have no choice but to file a cross complaint against Core in the Rodriquez action, a copy of which it attached.

Mr. Brown testified that he read this letter, He did not respond to it, however or reconsider the decision to reject LA Fitness’ tender of its defense in the Rodriquez action. On March 30, 2016 LA Fitness did file its cross complaint and Core tendered its defense of this cross complaint to National Union. As it had when Core tended the defense of the Rodriquez complaint after it had exhausted its SIR, National Union immediately accepted this tender and commenced its defense of Core.AndAfrom the date Core exhausted its self-insured retention to the end of the case, National Union paid all attorneys’ fees, costs and expenses incurred in defending Core against both the Rodriguez complaint and the LA Fitness cross-complaint.

Following March 30, 2016, a variety of motions were filed, discovery requests propounded and responded to, and unsuccessful attempts were made to resolve the Rodriquez case through settlement. Before the trial began counsel for stipulated that trial would be bifurcated so the trial of the Core cross-complaint would follow the trial of the Rodriguez complaint against Core, if necessary. On November

On November 21, 2016, the jury trial against LA Fitness began. On November 26, 2016, National Union settled Rodriquez’ claims against Core for $750,000 and a full release of Core.

On December 14, 2016, the jury in the Rodriguez case returned a verdict against LA Fitness awarding $5.8 million in compensatory damages. Based on principles of comparative fault the damages were allocated 25% to Core and 75% to LA Fitness. On December 15, 2016, the jury returned a punitive damage verdict against La Fitness for $17 million.

On February 19, 2017, the parties and insurers in the Rodriguez case entered into a Global Settlement Agreement providing for the payment of $11.5 million to Rodriguez. Of this amount, $2.5 million was paid by National Union, $5,548,000 was paid by LA Fitness, and $3,416,000 was paid by the insurers for LA Fitness. The Global Settlement Agreement stated that it was not an admission of liability by any party and was subject to California evidence code section 1152. It contained a full release of Core by Rodriguez, LA Fitness and LA Fitness’ insurers. The settlement agreement also contained a full release of National Union by Rodriguez and LA Fitness insurers. It explicitly carved out the claims Core is making in this action against National Union and made clear that Core was not releasing National Union from those claims.

As a result of the above facts, Core has not paid any costs, expenses or attorney’s fees in the Rodriguez action, other than payments it made under its SIR, and has not made any indemnity payments to either Rodriquez or LA Fitness. As noted, it has received a full release of liability from all claims or cross claims in that action.

RELEVANT PROCEDURAL HISTORY

On January 25, 2019, Core filed the instant Motion for Summary Adjudication of the Fifth and Sixth Causes of Action against National.

On June 10, 2019, Core filed the instant Motion for Summary Adjudication of the Fourth Cause of Action against National.

Also on June 10, 2019, National Union filed the instant three Motions for Summary Adjudication: (1) against the Fourth Cause of Action, (2) against the Fifth and Sixth Causes of Action, and (3) against the First and Second Causes of Action in a Motion for summary judgment on the entire action and a motion for summary judgment on the entire action.

On June 20, 2019, Core filed the simultaneous Motion to Seal Confidential Records.

On December 4, 2019, National Union filed Oppositions to Core’s two Motions for Summary Adjudication and Motion to Seal.

Also on December 4, 2019, Core filed Oppositions to National Union’s three Motions for Summary Adjudication in Summary Judgment.

On January 8, 2020, National Union filed Replies to the Oppositions to its Motions for Summary Adjudication on the First, Second, Fourth, Fifth and Sixth Causes of Action and Summary Judgment.

Also on January 8, 2020, Core filed Replies to the Opposition to its Motions for Summary Adjudication on the Fourth, Fifth, and Sixth Causes of Action.

JUDICIAL NOTICE

Where a motion is based on a matter of which the court may take judicial notice pursuant to Section 452 or 453 of the Evidence Code, the matter shall be specified in the notice of motion, or in the supporting points and authorities, except as the court may otherwise permit. (California Code of Civil Procedure §438(d)). Any request for judicial notice must be made in a separate document listing the items for which notice is requested. (CRC 3.1113(l)). Judicial notice may be taken of “(a) The decisional, constitutional, and statutory law of any state of the United States and the resolutions and private acts of the Congress of the United States and of the Legislature of this state. (b) Regulations and legislative enactments issued by or under the authority of the United States or any public entity in the United States. (c) Official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States. (d) Records of (1) any court of this state or (2) any court of record of the United States or of any state of the United States. (e) Rules of court of (1) any court of this state or (2) any court of record of the United States or of any state of the United States. (f) The law of an organization of nations and of foreign nations and public entities in foreign nations. (g) Facts and propositions that are of such common knowledge within the territorial jurisdiction of the court that they cannot reasonably be the subject of dispute. (h) Facts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code § 452.)

Core requests that the Court take judicial notice of the following documents filed in connection with its Motion for Summary Adjudication of the Fourth Cause of Action: (1) conformed copy of the First Amended Complaint filed in Rodriguez v. Fitness International, LLC, et al., Los Angeles Superior Court Case No. BC532963; (2) conformed copy of the Second Amended Complaint filed in Rodriguez, Los Angeles Superior Court Case No. BC532963. The Court grants these requests.

National Union requests that the Court take judicial notice of the following documents filed in connection with its Motions for Summary Adjudication of the First, Second, Fourth, Fifth, and Sixth Causes of Action: eight documents filed in Rodriguez v. Fitness International, LLC, et al., Los Angeles Superior Court Case No. BC532963 including the Complaint, Cross-Complaint filed by LA Fitness, National Union’s Answer to the First Amended Complaint, filings in connection with LA Fitness’ Motion for Summary Adjudication, and the court’s ruling granting leave to file a Third Amended Complaint. The Court grants these requests.

Core requests that the Court take judicial notice of the following documents filed in connection with its Motion for Summary Adjudication of the Fifth and Sixth Cause of Action: (1) a conformed copy of the Second Amended Complaint filed in Rodriguez, Los Angeles Superior Court Case No. BC532963. The Court grants this request.

Core requests that the Court take judicial notice of the following documents filed in connection with its Opposition to National’s Motions for Summary Adjudication of the First, Second, Fourth, Fifth, and Sixth Causes of Action: (1) nine filings from Rodriguez v. Fitness International, LLC, et al., Los Angeles Superior Court Case No. BC532963 including five Notice of Entry of Orders dated 1/13/16, one Notice of Ruling dated 8/1/16, one order granting sanctions dated 9/6/16, one Notice of Entry of Sanctions Order dated 10/13/16, and one Notice of Entry of Judgment dated 1/4/17; (2) Declaration of Todd Von Sprecken filed in Support of LA Fitness’s Opposition to Core Industries, LLC’s Motion for Summary Adjudication filed 8/18/16 in Rodriguez v. Fitness International, LLC, et al., Los Angeles Superior Court Case No. BC532963. The Court grants these requests.

National Union requests that the Court take judicial notice of the following documents filed in connection with its Opposition to Core Health’s Motion for Summary Adjudication of the Fourth Cause of Action: (1) Reporter’s Transcript of Proceedings on September 23, 2016, in Rodriguez v. Fitness International, LLC, et al., Los Angeles Superior Court Case No. BC532963; (2) Declaration of Todd Von Sprecken filed in Support of LA Fitness’s Opposition to Core Industries, LLC’s Motion for Summary Adjudication filed 8/18/16 in Rodriguez v. Fitness International, LLC, et al., Los Angeles Superior Court Case No. BC532963. The Court grants these requests.

OBJECTIONS

In deciding these motions, the Court has reviewed the nine Separate Statements of Material Undisputed Facts and the Statements responding thereto which have been filed by the parties. The Court has also reviewed the 292 exhibits which were cited in these separate statements and submitted to the Court, which stacked on top of each other are over 5 feet high. The Court has also reviewed the numerous objections both to the Separate Statements and to the evidence as well as the responses to these objections.

There is no question that this review has revealed numerous disputes as to facts and numerous objections and responses to the objections regarding the admissibility or inadmissibility of facts offered in support of or opposition to the parties’ positions on these disputes. The question on a motion for summary judgment, however, is not whether there are disputes as to facts but whether (1) the disputed facts are material to Court’s decision, and (2) whether objections to the evidence supporting these facts should be sustained or overruled.

While the review of these motions and supporting papers has required the extra month the Court ordered for its review after all the papers were submitted by the parties, the Court’s conclusion as a result of this review is that the controlling material fact on these motions is actually easily understood, undisputable, and asserted as true by both parties. , the relevant issues straightforward, and the relevant evidence quite limited. The other evidence and counter-evidence (and the objections thereto) fall into two categories: (1) evidence and counter-evidence that address the wrong questions, and (2) assertions by Core in its memoranda that are totally unsupported by any facts and directly inconsistent with the undisputed material facts that are in the record.

In ruling on a summary judgment motion, the Court is only required to rule on objections to evidence which is material to its decision. (Code Civ. Proc., § 437c(q).) The statements contained in the Factual Framework section above are not accompanied by citations to the record because the Court believes these are the fundamental undisputed and indisputable facts which form the framework for the Court’s decision. The material facts found by the court to be undisputed and dispositive in the remainder of this ruling will be accompanied by record citations. To the extent that objections are made to these facts, they are overruled. With respect to the “background facts” recited by Core in its various memoranda, Court will sustain the objections to these “facts” to the extent they are offered as substantive evidence on these motions.

DISCUSSION

  1. THE LAW RELATING TO SUMMARY JUDGMENT

A party may move for summary judgment “if it is contended that the action has no merit or that there is no defense to the action or proceeding.” (Code Civ. Proc. § 437c, subd. (a).) “[I]f all the evidence submitted, and all inferences reasonably deducible from the evidence and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law,” the moving party will be entitled to summary judgment. (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.)

The moving party bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact, and if he or she does so, the burden shifts to the opposing party to make a prima facie showing thata a l disputed fact of material fact does exist on that issue. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850; accord Code Civ. Proc. § 437c, subd. (p)(2).)

Neither a moving or responding party may rely on the mere allegations or denials of its pleadings. A moving party must submit specific admissible fact showing that the responding party cannot establish at least one element of its cause of action or defense. The responding party, to defeat the motion, must submit specific admissible facts showing that a triable issue of material fact does exist as to that cause of action, element of that cause of action, or defense which the moving party claims cannot be proven. (Ibid.) (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.)

Additionally, since at least D’Amico v. Board of Medical Examiners (1974) 11 Cal.3rd 11, 21-22, in opposing a summary judgment motion, “A party cannot create an issue of fact by a declaration that contradicts his discovery responses” (Shin v. Hahn (2007) 42 Cal.4th 482, 502, fn. 17.)

There is another requirement on summary judgment or summary adjudication motions that is particularly applicable in this case. The “Golden Rule” on a motion for summary judgment or summary adjudication is that “if [a fact] is not set forth in the separate statement, it does not exist.” (Zimmerman, Rosenfeld, Gersh & Leeds LLP v. Larson (2005) 131 Cal.App.4th 1466, 1477, citing United Community Church v. Garcin (1991) 231 Cal.App.3d 327, 337.).

It is without question, of course, that the Court has discretion to review contentions supported by the evidence but notlisted in a separate statement and that the exercise of this discretion may be particularly appropriate in cases involving a single issue (Id., at 1478) or where one party provides evidence in an opposition to a motion that is misleading without evaluating that evidence in light of the full picture. (Id. At 1478.) In this case, the Court is exercising that discretion to consider the documents and testimony submitted by National Union in its reply to Core’s oppositions to National Union’s Motion for Summary Judgment and Summary Adjudication based on the Court’s finding that the partial evidence submitted by Core with its opposition presents a grossly distorted and false picture.

But in a case such as this, where the Court has spent approximately a month reviewing nine Separate Statements, responding Separate Statements and the 5 feet of exhibits filed in support of these Separate Statements, Core’s request that the Court consider or base its decision on “background facts” stated in its memoranda that are totally unsupported by any evidentiary citations or evidence is particularly inappropriate. While the Court does believe that Core’s recitation of these “facts” has a significance here because it highlights what Core knew it needed to prove and could not, as “evidence” of the positions Core asserts the are without value.

  1. THE UNDISPUTED MATERIAL FACTS ESTABLISH THAT CORE CANNOT MAINTAIN ITS CAUSE OF ACTION FOR BREACH OF CONTRACT AS A MATTER OF LAW

It is well settled that to maintain an action for breach of contract, the plaintiff must prove that the defendant, in fact, breached the contract and that this breach was the proximate cause of reasonably foreseeable damages to the plaintiff.[4]The policy National Union issued to Core, in this case, gave it two rights and one obligation: (1) the right but not the duty to defend Core in any action against it that was covered by the policy; (2) the right at National Union’s discretion to participate in any settlement of that claim; and (3) the obligation (in this case, in excess of the SIR) to pay on behalf of Core pay all damages Core became “legally obligated to pay” as the damages.

The undisputed evidence shows that National Union fully performed its obligations under its policy. It provided a defense to Core and paid all defense costs in excess of the self-insured retention, even though it had the discretion not to do either, and it negotiated and paid the settlements with Rodriguez, LA Fitness, and the insurers for LA Fitness even though it had the discretion not to participate in the negotiation and of or voluntary payment of these settlements. As a result, Core has received a full release of all claims by any party in the Rodriguez litigation and paid nothing except the $150,000 SIR it agreed to pay.

Core contends that National Union had an additional duty under its policy that it breached causing damage to Core. This was the duty to defend LA Fitness in the Rodriguez litigation. Core claims that by refusing to defend LA Fitness, National Union breached its contract with Core aand that this breach damaged Core because it caused Core’s to lose all ofLA Fitness’ business.

It is undisputed that the refusal to defend LA Fitness in the Rodriguez litigation directly caused the decision by LA Fitness not to purchase any further Core products. Todd Von Specken, the LA Fitness executive who made this decision, testified:

“We are not doing business with Core on any new product purchases,

Q. Do you have an understanding of why that is?

A. Because Core failed to meet its obligations to us under the purchase agreement.

Q. It failed to defend?

  1. Correct.”[5]

As Mr. Von Specken made clear, it was Core’s refusal to continue paying for LA Fitness’ defense in the Rodriguez litigation, forcefully articulated in Core’s email of February 6, 2016, enclosing the November 20, 2015 letter, and Core’s refusal to reconsider this position even after requested to do so on March 3, 2016, that caused the irreparable rupture between Core and LA fitness. Andin its response to Statement 38 of National Union’s Omnibus Separate Statement, Core clearly sets forth its contention that it was National Union, not Core who forced this decision and caused this loss:

“Core’s decision to withdraw the acceptance of LA Fitness’ contractual tender of defense and indemnity in the Rodriguez action was made after and as a result of National Union advising that it would not pay for LA Fitness’ defense by letters to both Core and LA Fitness dated November 11, 2015. [evidentiary citations] Furthermore, Reed Brown testified at his deposition in this action that Core was forced to make that decision “by National Union refusing to continue to pay the defense costs of LA Fitness.”

This statement, consistently and adamantly repeated by Mr. Brown in his deposition testimony, might be sufficient to raise a material issue of disputed fact as to National Union’s breach of contract under a typical general liability insurance policy. But we are dealing here with the general liability policy National Union issued to Core, not the typical policy.

The typically general liability insurance policies provide that the insurer has both “the “right and the duty” to defend the insured against all suits seeking covered damages, as did the National Union policy here before it was amended by the SIR Endorsement.[6] The SIR Endorsement, however, deleted this language and substituted “We will have the right but not the duty to defend any ‘suit’ [seeking those damages].”

This exact language in the SIR Endorsement in the policy National Union issued to Core has been interpreted in two cases, Powell Elec. Systems, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA. (S.D. Tex., Aug. 29, 2011, No. CIV.A. H-10-993) 2011 WL 3813278 and General Star Indemnity Company v. Superior Court (1996) 47 Cal. App. 1586, 1590-1. In Powell, the court interpreted this language as giving National Union the “right but not the duty to defend,” meaning that “National Union may, therefore, choose not to become involved in any way in the defense of even a claim that exceeds the retained limit.[7]” The General Star court was more succinct. Reversing a trial court that had held to the contrary, the court stated that under this “SIR endorsement” the insurance company “had no duty to defend.”[8]

Under the “separation of insureds” clause in the National Union policy, National Union had an absolute contractual right to make different coverage decisions between the named insured and an additional insured. (Energy Ins. Mutual Limited v. Ace America Ins. Co. (2017) 14 Cal. App. 5th 281.) It therefore also had an absolute contractual right to not provide a defense to LA Fitness, even if LA Fitness was an additional insured under the policy, as affirmed in both the Powell and in General Star, for a good reason, a bad reason, or no reason.

To maintain a cause of action for breach of contract, the first three things a plaintiff must prove are (1) there was a contract between plaintiff, (2) there was a duty imposed by that contract on the defendant to perform a specific act, and (3) that the defendant breached that duty by failing to perform the act. Proof of all three is required. One out of three does not get the job done.

For these reasons, National Union’s Motion for Summary Adjudication on Core’s Second Cause of Action for Breach of Contract is GRANTED.

If there is a question about what one material undipuable and undisputed fact the Court was referring to on page __, one might jump to Section IV. But ithere are additional issues the Court will address.

  1. THE UNDISPUTED MATERIAL EVIDENCE ESTABLISHES THAT CORE CANNOT MAINTAIN ITS CAUSE OF ACTION FOR BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING AS A MATTER OF LAW

  1. The Legal Standard

In its reply memorandum in support of its motion for summary adjudication on the Fourth Cause of Action, Core states:

“As shown in Core’s moving and opposition papers, it is indisputable that LA Fitness qualified as an additional insured under the National Union policies since it was clear that Rodriguez’s claims against LA Fitness were based on alleged defects in Core’s machines, and because there were two separate written agreements between Core and LA Fitness, the 2011 Purchase Agreement and 2012 Purchase Order, as well as a long-standing course of conduct between Core and LA Fitness, that obligated Core to procure additional insured coverage for LA Fitness. National Union’s refusal to provide the additional insured coverage Core contracted and paid for was without justification and was in bad faith.”

As a predicate for finding that Core has established any material undisputed fact in support of its motions, this statement is completely inaccurate in every possible way. But there is a more important point. In each area Core addresses, it is addressing the wrong question. And the indisputable evidence the Court has evaluated in answering the right question establishes that National Union is entitled to Summary Adjudication on the Bad Faith Cause of Action as a matter of law.

This is a first-party insurance coverage case. That is because the question was never whether there was a potential for liability of either Core or LA Fitness as to Rodriguez. As to both there clearly was. The coverage issue as to LA Fitness was not whether there was a potential for liability to Rodriguez, but whether LA Fitness was an insured under the insurance policy issued by National Union. This is a first-party question whether the alleged insured is the named insured or an additional insured.

As the Court made clear in Austero v. National Cas. Co. of Detroit Michigan (1976) 84 Cal. App. 3rd 1, 62, the test applied in third-party duty to defend cases—assessing whether there was a potential for coverage (which can be a basis for liability in third-party cases even if it is ultimately determined that there actually is no coverage)--“could never be appropriately applied in first-party cases.”

The relevant question in first-party bad faith cases is not whether a decision made by the insurer as to coverage was right, but whether it was reasonable based on the facts known by the insurer at the time.

The test, sometimes referred to as the “genuine dispute” test, was explained in Zubillaga v. Allstate Indemnity Company (2017) 12 Cal. App. 5th 1017, at 1028:

“When determining if a dispute is genuine, we do “not decide which party is ‘right’ as to the disputed matter, but only that a reasonable and legitimate dispute actually existed.” (Chateau Chamberay, supra, 90 Cal.App.4th at p. 348, fn.7, 108 Cal.Rptr.2d 776.) A dispute is legitimate, if “it is founded on a basis that is reasonable under all the circumstances.” (Wilson, supra, 42 Cal.4th at p. 724, fn. 7, 68 Cal.Rptr.3d 746, 171 P.3d 1082.) “This is an objective standard.” (Bosetti v. United States Life Ins. Co. in City of New York (2009) 175 Cal.App.4th 1208, 1237, 96 Cal.Rptr.3d 744.) “Moreover, the reasonableness of the insurer’s decisions and actions must be evaluated as of the time that they were made; the evaluation cannot fairly be made in the light of subsequent events that may provide evidence of the insurer’s errors. [Citation.]” (Chateau Chamberay, supra, at p. 347, 108 Cal.Rptr.2d 776.)”

To put it succinctly, Core does not come close to passing this test on any of its bad faith allegations.

  1. The Decision That LA Fitness Was Not Entitled to Coverage in the Rodriquez Litigation under the National Union Policy Because LA Fitness Was Not Being Sued for a Design or Manufacturing Defect in the Core Crossover Machine Was Reasonable as a Matter of Law

As noted, the Rodriguez action was filed against LA Fitness on January 1, 2014, as a result of the injury Rodriguez suffered on November 18, 2013, National Union policy covering Core for this accident provided additional insured coverage for:

“Any person or organization to whom you become obligated to include as an additional insured under this policy, as a result of any contract or agreement you entered into… Which requires you to furnish insurance to that person or organization of the type provided by this policy, but only with respect to liability arising out of your operations or premises owned or rented to you.”[9]

The LA Fitness letter tendering the Rodriguez claim to Core for defense and indemnity stated that it was being tendered under a July 20, 2011 Purchase Agreement. That Agreement provided that “CORE does hereby agree to defend and indemnify LAF for any claim or injury, including attorney’s fees, which arises from a design or manufacturing defect.”.[10]

On May 29, 2014, Core’s General Counsel Reed Brown responded to this tender. His response stated that the letter was being sent “without admitting that there is any design or manufacturing defect” with respect to the Core Crossover Machine. The letter also noted that “we will be discussing the matter with our insurance carrier.” Subject to these provisos, the letter stated that” we will accept tender of the defense.” The letter made no reference to and did not accept the request for Core to agree to indemnify LA Fitness.[11] Nor did Core ever thereafter agree to indemnify LA Fitness in the Rodriguez action.

On February 10, 2015, Rodriguez filed a second amended complaint. On November 11, 2015, National Union acknowledged that Core had exhausted its self-insured retention and assumed the defense of Core in the Rodriguez action. After reviewing the complaint and comparing it to the policy and the July 20, 2011 Purchase Agreement, however, National Union came to the conclusion that LA Fitness did not qualify as an additional insured because the complaint in the Rodriguez action as against LA Fitness was not based on any “design or manufacturing defect” in Core’s product.

On November 11, 2015, National Union notified Core that it was accepting the defense of the Rodriguez action on behalf of Core and assuming the defense of Core in the action. In the same letter, National Union notified Core that it would be rejecting the LA Fitness tender because its reading of the Rodriguez complaint indicated that Rodriguez was not basing its claim against LA Fitness on any manufacturing or design defect in a Core machine.[12] On that same day, National Union sent a letter to LA Fitness rejecting its tender of the Rodriguez action for this reason.[13]

With knowledge of this decision, Core did not raise any objection. Instead, Core’s General Counsel and Senior Legal Vice President Reed Brown instructed his staff to draft a letter for him to LA Fitness rescinding Core’s agreement to pay for LA Fitness’ defense in the Rodriguez action. Mr. Brown thought that the letter had been sent in November but discovered in February 2016 that it had not. He then wrote an email to the attorney for LA Fitness enclosing the letter and stating that although it had not been sent, “the letter correctly sets forth Core’s position with respect to the Tender of Defense and the agreement to pay fees to your firm.” [14]

It is hard to imagine a letter more forcefully setting forth a position than the Novemberv 20,2015 letter. Mr. Brown stated that Core’s obligation to defend and indemnify LA Fitness under the July 20, 2011 agreement was limited to defense and indemnification in actions where liability was being claimed against LA Fitness’ because of design and manufacturing defects” in Core products. Mr. Brown stated that his review of the recently filed complaint established that was not the basis for the alleged liability of LA Fitness to Rodriguez. Instead, Mr. Brown stated that the alleged liability of LA Fitness was for its own “premises liability and negligence.” Mr. Brown closed by stating:

“Accordingly, as plaintiff is not claiming any liability against LA Fitness based upon defect allegations, but rather LA Fitness’s handling of and response to the alleged problems with the exercise equipment at issue, Core will no longer defend or indemnify LA Fitness in this lawsuit. This means effective immediately.”

On March 3, 2016, alawyer for LA Fitness responded to the February 6, 2016 email asking Core to reconsider its position and stating that LA Fitness would be forced to file a cross-complaint against Core if it did not do so.[15] Mr. Brown testified that he read this letter but rejected any thought of reconsidering his position. On March 30, 2016, LA Fitness filed its cross-complaint.

The litigation between Rodriguez, Core, and LA fitness lasted for nine more months between March 30, 2016, and the jury verdict on January 4, 2017, and then an additional twelve and a halfmonths before the Global Settlement was reached. There is no evidence in this entire record that Core ever asked National Union to reconsider its decision that the contract between Core and LA Fitness did not qualify LA Fitness for additional insurance coverage under the National Union or tat Mr. Brown told National Union that he had been incorrect in the statements he had made to LA Fitness..

None of these facts are disputed. Rather than address the undisputed facts, however, Core sets up a straw man. It claims that “the basis for [National’ Union’s] denial of LAF’s tender was that there were no claims of a product defect in the Rodriguez Action, which it knew was not true.”[16] At other times in its papers, Core claims that this reason for noncoverage, presumably including Mr. Brown’s own assertion of this reason, was false and fraudulent.

This is a “strawman” because no one ever claimed that the Rodriguez litigation did not allege a defect in the Core Crossover Machine. Instead, the conclusion of both National Union and Mr. Brown was that liability was not being claimed against LA Fitness based on such a manufacturing or design defect. And the information available to National Union was not limited to Mr. Brown’s consistent assertion of this fact. On September 23, 2016, Brian Beecher, the attorney for Rodriguez who drafted the Rodriguez complaint, gave the following responses to the judge who was overseeing that litigation:

“The Court: In the Third Amended Complaint, do you think that the plaintiff has sued L.A. Fitness on any claim for strict liability in tort on a manufacturing defect theory?

Mr. Beecher: Not L.A. Fitness.

The Court: I understand, but --

Mr. Beecher: Not L.A. Fitness.

The Court: -- Do you think that Plaintiff has sued L.A. Fitness on a strict liability, product liability theory on design defect under either the consumer expectation or design or risk benefit theory?

Mr. Beecher: No.

The Court: What are you suing L.A. Fitness for?

Mr. Beecher: We’re suing L.A. Fitness for negligence, gross negligence, premises liability under pure negligence, and premises liability under the gross negligence standard.

The Court: Are you suing L.A. Fitness for any manufacturing or design defect in the subject -- what do we call this --

Mr. Beecher: It’s called a crossover machine.

The Court: In the subject crossover machine --

Mr. Beecher: Those claims are purely against Core.”[17]

Later, of course, the truth of Mr. Beecher’s statements was fully confirmed by the jury’s verdict. With a free shot to point the finger at Core because Core was not participating, and a finding by the jury finding that there was in fact a design and/or manufacturing defect in the Core Crossover Machine that was a substantial factor in causing Mr. Rodriguez’s injuries, the jury still found that because of LA Fitness’ “negligence, gross negligence, and products liability” was 75% responsible for those damages and also awarded, on the basis of the gross negligence finding, $17 million in punitive damages.

Based on the undisputed material facts set forth above, the Court finds as a matter of law that National Union’s decision not to provide defense or indemnity to LA Fitness in the Rodriguez action, based on its conclusion that the Rodriguez action did not allege liability for which Core was obligated by its contract with LA Fitness to provide additional insurance coverage for LA Fitnesswas reasonable as a matter of law.

  1. The Decision That LA Fitness Was not Entitled to Coverage as an Additional Insured in the Rodriquez Action Because There Was no Contract With LA Fitness Requiring Core to Provide Such Coverage Was Reasonable as a Matter of Law

The National Union insurance policy issued to Core required additional insured coverage any “person or organization” to whom Core was obligated to provide such coverage “as a result of any contract or agreement you entered into” in early 2016, in connection with interrogatories and requests for admission that had been served on Core by LA Fitness, the additional issue arose of whether there was such a contract between Core and LA Fitness covering the Rodriguez was injury.

On March 7, 2016, in connection with the preparation of the answers to these discovery requests, Mr. Brown advised BEHP that “Core did not have a contract in place with LAF for 2013, the year of Rodriguez’s accident.” He also advised them that while Core had contracts for 2011 in 2012, “each expired at the end of each applicable year.”[18] The next day Brown again stated: “There was no contract from Core industries for the relevant time period,” adding that LA Fitness was “not being honest” in making claims to the contrary.[19]

The time records of BEHB indicate that on June 10, 2016, Mr. Brown had a one-hour fifteen-minute long conversation with attorneys at BEHB concerning Core’s responses to the LA Fitness discovery responses.[20] On that same day Mr. Brown verified under penalty of perjury the response “Deny” to a Request for Admission that asked, “Admit that pursuant to the [July 20, 2011] PURCHASE AGREEMENT, CORE INDUSTRIES was to make LA FITNESS an additional insured … with a limit of $1 million for bodily injury or property damage with an insurance company that is satisfactory to LA Fitness.”[21]

At the time the answers to Requests for Admissions were served, Core and LA Fitness had cross-motions for summary judgment pending on the issue of whether Core had an obligation to provide additional insurance coverage to LA Fitness covering its liability in the Rodriguez action. In connection with these motions, BEHB have prepared a declaration for Mr. Brown consistent with the discovery responses he had verified under oath.

On the day that Mr. Brown’s declaration needed to be filed, he was at a conference out-of-state. He, therefore, directed his assistant who had the authority to sign on his behalf to sign the declaration. The declaration stated, under penalty of perjury: “There was no agreement to indemnify, defend or provide insurance between LA FITNESS and CORE regarding the machine at issue, as the [July 20, 2011] purchase agreement concluded on December 31, 2012.”[22]

In opposition to National Union’s Motions for Summary Judgment/Summary Adjudication here, Core has filed a declaration under penalty of perjury by Mr. Brown. The only two of the above facts Mr. Brown discloses in his declaration relating to the declaration he signed under penalty of perjury in the Rodriguez action is that he was out of state taking a CLE course on the day his declaration needed to be filed and that he, therefore, directed his paralegal to sign it on his behalf.[23] From this one disclosed fact Core asserts that the lawyers who sent Mr. Brown his declaration:

“[K]new Reed Browns declaration that they drafted in support of the MSA was false, at least as it related to the existence of an applicable indemnity agreement between Core and LA Fitness, and for that reason, had the declaration sent to him for the first time on the day the MSA was required to be filed.” [24]

When a witness swears to tell the truth, he or she is swearing to tell “the truth, the whole truth, and nothing but the truth.” Mr. Brown is an attorney and an officer of the Court and is presumably aware of how critical this ethical obligation is, particularly when he signs a declaration he knows will be presented to the Court with a request that the Court rely upon it as stating the truth. While the attorneys representing clients in the litigation have a wide range for advocacy, misrepresenting facts to the Court by omission is no more appropriate than knowingly making affirmative misrepresentations. This Court cannot help but believe that both Mr. Brown and Core’s counsel who drafted the above statement temporarily forgot these obligations.

But ignoring facts does not make them go away. Exhibit 99, which Core relies on to show that Mr. Brown received his declaration when he was out of town and on the day it was due, includes a transmittal email from the attorney at BEHB with whom Mr. Brown had been working in connection with the responses to discovery and the summary judgment motions. In addition to advising Mr. Brown that the declaration needed to be filed the day Mr. Brown received it, the email stated: “Please let me know if you have any questions or comments. Otherwise, please date and sign and send me a copy. I am also in the office if you would like to discuss.” Mr. Brown, of course, did not have any questions or comments or ever even discuss the accuracy of the statements in his declaration because he was the source, not the recipient, of that information.

Based on the undisputed material facts set forth above, the Court finds as a matter of law that National Union was reasonable in believing Core’s representstions to it that LA Fitness did not qualify as an additional insured under the National Union policy because there was no contract between Core and LA fitness requiring Core to provide such coverage to LA Fitness for the Rodriguez Litigation.

  1. THE UNDISPUTED MATERIAL FACTS ESTABLISH THAT CORE CANNOT ESTABLISH THAT IT WAS DAMAGED BY A NATIONAL UNION’S ALLEGED BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING AS A MATTER OF LAW

When National Union issued its policies to Core, it promised to pay “all sums the insured shall become legally obligated to pay” as a result of a a lawsuit on a covered claim. It additionally had “the right but not the duty” to provide the insured a defense in the action could if it elected to do soto participate in settlement of any covered claims.

National Union in this case actually did not have any obligation of Core as of the date of the Global Settlement. There was never any amount that Core was “legally obligated to pay” because there was no judgment against it in either the action or a cross-action as of the date of that settlement. And National Union had the right but not the duty to defend Core in the actions and the right to participate or not participate in any settlement of the action.

National Union nevertheless settled Rodriguez’s case against Core and obtained a full release of Core from him by paying various $750,000, paid to $2,500,000 in the Global Settlement to obtain a full release for Core from LA Fitness and is insurers, and along the way paid all costs and expenses and attorney’s fees incurred by Core in the defense of the action and cross-action

In these circumstances, National Union can only be liable to Core for damages for breach of an implied covenant of good faith and fair dealing if Core proves (1) tha tNational Union did what it did in bad faith, (2) that National Union had no right under the contract to do those things, and (3) that by doing them National Union knew that it was injuring Core and that it was defeating the reasonable expectations Core had when it purchased its policy from National Union. As with all other areas, these “facts” can only be proven by facts I

In an attempt to support a damage claim, Core claims that it had two reasonable expectations that were known to National Union and that were destroyed by the way in which National Union handled the Rodriguez litigation. These are the claims that:(1) Core purchased additional insurance coverage for LA Fitness specifically to avoid Core and LA Fitness becoming adversaries in litigation, pointing fingers at each other rather than working together mounting a united defense, but National Union’s acts made this a possible and (2) That Core repeatedly advised National Union that it was crucial to Core that National Union extricate Core’s additional insured, LA Fitness, from the Rodriguez action in order to preserve, and not destroy, Core's profitable relationship with LA Fitness.

The undisputed material facts establish that both of these “reasonable expectations” are fabrications.

  1. The “United Defense-No Finger Pointing” Claim

Throughout Core’s memoranda filed in support of, and in opposition to, these summary adjudication and summary judgment motions, Core claims that eliminating or denying additional insured coverage for LA Fitness was not in its interest because this caused Core and LA Fitness to become adversaries. This is perhaps most clearly articulated by Core in its memorandum in opposition to National Union’s Motion for Summary Adjudication of the Fourth Cause of Action. Core states:

“National Union’s bad faith denial of coverage for LA Fitness increased Core’s exposure on LA Fitness’ cross-complaint for indemnity and increased exposure for both Core and LA fitness in the Rodriguez Action because National Union’s[25] bad faith created the exact situation that Core purchase additional insurance coverage to avoid: namely having LA Fitness and Core point fingers at each other rather than putting up a united defense.”

The odd thing about this claim is the declaration of Core Senior Vice President of Legal and General Counsel, Reed Brown. This declaration is the only substantive declaration filed by Core in support of or opposition to these motions. Mr. Brown states in paragraph 2 of this declaration:

“During the pendency of the underlying action, Rodriquez c. L.A. Fitness International, LLC, et. al., I was the liaison for Core with regard to its dealings with Defendant National Union Fire Insurance Company of Pittsburgh, PA (“National Union”), Defendant Bassi Edlin, Huie & Blum (“BEHB”) and Fitness International, LLC (“LA Fitness”).”

Given these facts, the Court’s natural expectation was that the next paragraph would be something like “When we acquired the insurance policy from National Union and throughout the Rodriguez litigation, I consistently advised National Union that it was critically important for Core to maintain LA Fitness’s additional insured relationship status so that, in the event of litigation, we could present a united front and avoid pointing fingers at each other.”

But the declaration does not state that. Because Mr. Brown was there at the time every critical decision was made with respect to Core’s instruction to National Union that LA Fitness was not entitled to additional insured status under Core’s contract with LA Fitness.

As set forth above, on February 8, 2016, Mr. Brown sent LA Fitness an email attaching a November 20, 2015 letter which could not have been more clear in withdrawing Core’s agreement to pay LA Fitness’ defense costs, then and in the future, stating “and this means now.”[26] But what is more relevant to the present issue is Mr. Brown’s reaction to the response to that email.

LA Fitness responded to Mr. Brown’s February 6, 2016 email in a letter dated March 3, 2016.[27] That letter outlined in detail the reasons why LA Fitness believed Core should reconsider its decision, concluding: “We urge Core to reconsider its position, and continue to defend and indemnify LA Fitness. We believe it would be far better for the defendants to present a united front than for Core to have both plaintiff and LA Fitness pointing their fingers at Core.”[28]

The letter gave Mr. Brown five days to withdraw Core’s refusal to continue paying LA Fitness’s defense costs, stating that otherwise LA Fitness would be forced to file its cross-complaint against Core. Mr. Brown, apparently forgetting his critical interest in avoiding “finger-pointing,” did nothing for 27 days, resulting in LA Fitness filing its cross-complaint and becoming an adversary of Core.

Summary judgment decisions are based on facts, not inventions. Core’s litigation position that National Union destroyed its “reasonable expectation” that Core and LA Fitness would stand together in a united front, avoiding “finger-pointing,” it is entirely based on the latter and totally without evidentiary support on the former.

  1. Core’s Communication to National Union That Denying Additional Insured Coverage to LA Fitness Would Destroy Core’s Highly Profitable Business with LA Fitness

Unlike the prior claim, this assertion does have support in the record. In paragraph 25 of its July 12, 2018, First Amended Complaint filed Core claims:

“Throughout the Rodriguez litigation, Core advised National Union and BEHB that it was crucial to the reputation of Core that the Rodriguez matter be fully resolved prior to trial. Core was extremely concerned about the effect a public trial could have on its stellar reputation with the public, its great reputation in the fitness community, and its profitable relationship with LA Fitness. National Union and BEHB were also repeatedly advised that it was equally crucial to Core that National Union extricate its additional insured, LA Fitness, from the Rodriguez action in order to preserve, and not destroy, Core’s relationship with LA Fitness, a large and publicly visible client of Core.”

On June 10, 2019, after all discovery had been completed and as support for its Summary Adjudication Motion on the Fourth Cause of Action, Core repeated this claim almost verbatim:

“Throughout the course of the Rodriguez lawsuit, Core advised National Union that it was crucial to the reputation and financial wellbeing of Core that the Rodriguez lawsuit be globally resolved prior to trial. Core was extremely concerned about the effect a public trial could have on its stellar reputation with the public, its great reputation in the fitness community, and its profitable relationship with LA Fitness. Core also repeatedly advised National Union that it was equally crucial to Core that National Union extricate its additional insured, LA Fitness, from the Rodriquez lawsuit in order to preserve, and not destroy, Core’s relationship with LA Fitness, a large and publicly visible client of Core.”

The problem with the Court’s consideration of these statements as a basis for finding that National Union knowingly and in bad faith destroyed Core’s profitable relationship with LA Fitness is this: Core’s First Amended Complaint is unverified and would not be admissible anyway to support or oppose a summary judgment motion. Thee statement in Core’s memorandum is in the “background facts ” section of Core’s memorandum, without citation to any supporting evidence.

Because the Court recognizes that this one allegation is critical and essential to Core’s damage claim in this action, the Court undertook a search of the record to discover evidence establishing “that National Union ignored Core’s repeated pleas that it was critical to Core’s business relationship with LA Fitness that National Union “extricate” LA Fitness from the Rodriguez action.

The first and most obvious place to look for evidence in support of this statement was Mr. Brown’s declaration. There is no one more qualified or knowledgeable on this subject to provide the Court with the needed information. This was also the only substanive declaration filed by Core of these motions. But this turned out to be a dry hole.

The Court next read each of Core’s Separate Statements, as well as Core’s response to each of the Separate Statements filed by National Union. Unfortunately, this review also did not turn up a single reference either to Core’s concern on this front or Core’s communication of this concern to National Union.

Finally, the Court looked at the Separate Statements for any citation to evidence that might be relevant to this contention. And here the Court did find a reference. In Exhibit 85 to Core’s Compendium of Evidence in Support of its Opposition, Mr. Brown testified in his deposition that by November 18, 2015, Core had made the decision to withdraw its agreement to pay for the defense of LA Fitness in the Rodriguez litigation. Asked about that decision, he testified:

“ Q. Why did you make that decision?

A. Because we didn’t want to have to pay for this ourselves when we felt like National Union should be doing it.

Q. But you thought you had an obligation to do so?

A. I thought to protect a customer we had an obligation to do so.”[29]

in these exhibits the Court did discover one reference to Core’s consideration of the effect its acts in the Rodriguez litigation would have on its business relationship with LA fitness. Two days after Mr. Brown testified he felt he had an obligation to protect LA Fitness as a customer, Mr. Brown instructed his staff to draft and send his November 20, 2015 letter to LA Fitness, adamantly refusing to continue to pay LA Fitness’ defense costs. As When Mr. Brown discovered in February 2006 that the letter had not been sent, he forwarded it to, LA Fitness with a cover email explaining why it it had not been sent and stating the letter correctly sets forth Core’s position with respect to the Tender of Defense and the agreement to pay fees to [Manning & Kass Ellrod Ramirez Trester LLP (“Manning & Kass”)].”[30]

On March 3, 2016, LA Fitness’s attorney responded to Mr. Brown’s email, listing all the reasons he believed Core should reconsider this position and asking Mr. Brown to do so. As set forth above, Mr. Brown rejected this request. Asked at his deposition this case about this decision, Mr. Brown testified:

“Q. Did you consider again at this point in time what effect that position would have on LA Fitness’s and Core’s business relationship?

  1. No.”[31]

This is the last reference, anywhere, to any concern Core had or did not have concerning the effect the denial of additional insured status to LA Fitness might have on Core’s business relationship with LA Fitness. There is not a single reference anywhere in the record to Core advising National Union of such a concern or asking that National Union change its decision to deny National Union additional insured status in the Rodriguez litigation.

Based on the undisputed material facts Court finds as a matter of law that Core cannot maintain its claim for damages based on the allegation that National Union breached the implied covenant of good faith and fair dealing.

  1. IN ANY EVENT, CORE’S CAUSE OF ACTION FOR BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING IS BARRED AS A MATTER OF LAW FOR THE SAME REASON ITS BREACH OF CONTRACT ACTION IS BARRED

As previously noted, the reason insurance companies can be liable for bad faith breach of the implied covenant of good faith and fair dealing responding to claims under their insurance policies even when that response does not violate an express term of the policy is illustrated in cases where a policyholder’s house is insured against fire, the house is destroyed by fire, but the insurance company unreasonably delays in the payment of the claim. In cases such as these, the insurance company’s discretion is not limited by the express terms of the policy but is limited by the insurance company’s obligation to comply with the implied covenant of good faith and fair dealing in dealing with its policyholders.

A necessary predicate to a finding of liability in these cases, however, is that there is no express provision in the insurance policy that gives the insurer the discretion to act as it did, the rule is quite different when an express provision in the insurance policy gives these insurers the right to exercise the discretion, as it did.

In Baldwin v. AAA Northern California, Nevada and Utah Insurance Exchange (2016) 1 Cal. 5th 545, for example, an almost brand new truck was seriously damaged in an accident. The insurer had the discretion under its policy to either declare the truck a total loss or pay its full market value to replace it. In New Hampshire Insurance Co. v. Rideout Roofing Co.68 Cal. App. 4th 495 the policy gave the insurance company discretion to settle claims and, if the settlement exceeded the insured’s $5000 deductible, then require the insured to reimburse the insurance company for that amount.

In both Baldwin and New Hampshire, the policyholders claimed the insurer violated the implied covenant of good faith and fair dealing by injuring plaintiffs and benefiting themselves in the choice the insurer made in exercising its discretion. In the Baldwin case, this was because repairing the truck left it with the diminished value any vehicle which has been involved in a collision suffers, whereas declaring the truck a total loss would require the insurer to pay Baldwin its pre-accident fair market value. In New Hampshire, the policy gave the insurance company the discretion to settle or defend claims. The insured claimed that the choices the insurer made in exercising this discretion to settle 11 claims violated the implied covenant of good faith and fair dealing because some of the claims were clearly not covered and the insurer settled these claims just to avoid paying the cost of defense. Leaving the plaintiff stuck paying the deductible on claims that had no basis.

In both cases, the answer to the claim that the implied covenant of good faith and fair dealing had been breached was the same. In Baldwin, the Court, citing long-standing and consistent California Supreme Court and Appellate Court authority stated that “Baldwin’s] argument misunderstands the nature of the implied promise” under California law because “performance of an act specifically authorized by the policy cannot, as a matter of law, constitute bad faith.[32]New Hampshire’s holding was identical. Rejecting the plaintiff’s claim, the Court stated: “[C]ourts are not at liberty to imply a covenant directly at odds with a directed grant off discretionary power.[33]

As set forth in Section II above, the “direct grant of discretionary power” given to National Union in its insurance policy With Core gave it the express right to defend or not defend Core or LA Fitness, for good reasons that reasons or no reason. For the same reason exercising this discretion cannot supporting cause of action for breach of contract, he cannot support a cause of action for breach of the implied covenant of good faith and fair dealing.

  1. THE DECLARATORY RELIEF CAUSES OF ACTION

Core’s Fourth Cause of Action asks for a declaration that LA Fitness was entitled to coverage as an additional insured under the National Unionpolicy. As set forth above, an above, any answer to that question would be of no relevance since it is the wrong questionThe Court is, therefore, DENYING Core’s request for declaratory relief contained in the Fourth Cause of Action, dismissing National Union’s motion for summary adjudication ons this cause of action as moot, and GRANTING National Union’s Motion for Summary Judgment on this cause of action along with all the other causes of action

The Fifth and Sixth Causes of Action asks for a declaration that Core had the right to control settlement in the Rodriquez litigation and that National Union breached its duty to advise Core of this fact. Although these requests are also 4 answers also not relevant in this action because Core never accepted any indemnity obligation to Core or ever actually stated that it would not provide this indemnity,[34] in light of the importance the parties have placed on this issue, the Court will make a ruling.

In California the “Interpretation of a contract ‘must be fair and reasonable, not leading to absurd conclusions.’” (Eucasia Schools Worldwide, Inc. v. DW August Co. (2013) 218 Cal.App.4th 176, 182 citing Bill Signs Trucking, LLC v. Signs Family Limited Partnership (2007) 157 Cal.App.4th 1515, 1521; see also California Nat. Bank v. Woodbridge Plaza LLC (2008) 164 Cal.App.4th 137, 143 [“Construction cannot lead to unfair or absurd results but must be reasonable and fair”].)

California law also requires “The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.” (Civil Code Section 1641.)

If the Court were to accept the interpretation of the SIR Endorsement championed by Core, Core would have the right to tell National Union the day after the Rodriguez litigation was filed that Core had decided to settle the litigation for the $35 million policy limits using National Union’s funds because (1) it was afraid that the unreported failures of the Core Crossover Machine would come to light in the litigation and thereby stimulate both plaintiffs and the federal authorities to take action against Core, or (2) because it wanted to keep a good relationship with LA Fitness even though LA Fitness did not qualify as an additional insured under the National Union policy, or (3) because it had decided to and the reason was none of that National Union’s business.

Under Core’s requested interpretation of the SIR endorsement, all National Union had a right to know was where and when to send the check. It would, of course, have no right to object or to even discuss the wisdom of this decision with Core.

It is clear that this is not a “fair and reasonable” interpretation of the insurance policy that the interpretation would lead to “absurd results.” What is even clearer, however, is that this interpretation is totally inconsistent with the rule that contracts must be interpreted “so as to give effect to every part” with “each clause helping to interpret the other.”

A simple reading of the SIR Endorsement shows that it has three interrelated policy provisions, all on the same page. First, the Endorsement gives National Union the “right but not the duty” to defend the lawsuit, meaning it has the discretion to defend or not defend. Second, it gives LA Fitness the right “at our discretion…to participate with [the insured ]… In the settlement of any claim”, and Third, it provides that except as to its expenses not relevant to this issue, National Union will have “no other obligation or liability to pay sums or perform form acts or services.”[35]

The only way to interpret the policy “as a whole” is to interpret it so that discretion given in one sentence means the same as discretion given in another. To interpret the sentence giving National Union discretion to defend or not defend the action as not imposing a duty to defend and but interpreting the term “discretion” in the next sentence as allowing National Union not to participate in settlement negotiations but requiring it to pay would totally violate this principle. It also, standing alone, would lead to an absurd result.

If the Court were to issue a declaration to Core with respect to its rights and obligations under the SIR Endorsement, that declaration would be “you have a right to settle the Rodriguez action e but not a right to do so with National Union’s money.” That declaration will not be necessary, however, because Mr. Brown already knew that.

In interpreting insurance policies, the Courts consider the reasonable expectations of the insured. The expectations of Reed Brown, Core’s General Counsel and Senior Vice president, Legal on this subject could not be clearer. Or more reasonable. Asked about this at his deposition in this case, Mr. Brown testified

THE WITNESS: I didn’t have the authority to commit National Union’s money on this. I can only commit my SIR.

Q I – understanding that. But it was Core’s decision whether they wanted to pay their own money; right? They controlled the defense.

A Yes. Theoretically we could have paid our own money. But once you’ve brought insurance to avoid having to do that, you expect the insurance company to step up.

Q Okay. But you also understood that Core didn’t have the ability to control National Union’s money for settlement purposes, right?

A Not that this point.

Q Did that change?

A It never changed, except when we had expended the SIR, we no longer had anything to contribute, all the money would have come from National Union.

Q That’s --- that’s my point. You understood that any amounts above the SIR – the $150,000 SIR on the National Union policy – was controlled by National Union during the pendency of the Rodriguez claim; right?

A I understood that, yes.

Q Do you still have that belief today?

A Yes.”[36]

as to the declaratory relief causes of action, Core’s Fourth Cause of Action for Declaratory Relief is DISMISSED because the Court declines under Code of Civ. Proc. section 1061 to issue a declaration on an irrelevant subject. It asks for a declaration answering a question that is irrelevant. Core’s Motion for Summary Adjudication on the Fifth and Sixth Causes of Action for Declaratory Relief is DENIED and the Causes of Action are Dismissed. .

National Union’s Motion for Summary Judgment is GRANTED.

National Union to give notice and prepare a judgment.

DATED: February 12, 2020 ________________________________

Hon. Robert S. Draper

Judge of the Superior Court


[1] The third cause of action was alleged against Bassi Edlin Huie & Blum, LLP (“BEHB”), the law firm National Union hired to represent Core in the underlying tort action. That cause of action is not addressed by the present motions and in any event has been dismissed with prejudice by Core.

[2] National Union also issued Core aN excess liability policy with a $25,000,000 limit of liability. Both parties agree that this was a "following form" policy which, like the primary policy, did not include a duty to defend or to participate in settlement. Core’s Reply in support of its Motion for Summary Adjudication on its 5th and 6th Causes of Action, p. 9:12-14.

[3] “Former counsel was LeClair Ryan (“LeClair”) who Core had retained to advise it when the initial complaint was filed and it received notice from LA Fitness. The LeClair was replaced by BEHB when National Union assumed defense of Core after the SIR was exhausted..

[4] Richmond v. Hartley (2014) 224 Cal Ap. 4th 1182, 1186; Troyk v. Farmers Group. Inc. (2009) 171 Cal. App. 4th 1305, 1352.

[5] Core Exhibit 79, 52:18-2. Although LA Fitness subsequently made a decision to remove all Core Crossover machines from its Gym, Mr. Von Specken also made clear that this decision was made much later, on the night of the verdict, and because of the verdict, not because Core had refused to pay for its defense, Id., p.65:1-11.

[6] Ex. 11, page NU000082.

[7] Powell Elec. Systems, Inc. v. National Union Fire Ins. Co. of Pittsburgh, PA. (S.D. Tex., Aug. 29, 2011, No. CIV.A. H-10-993) 2011 WL 3813278, at *6

[8] General Star, 47 Cal App. 4th, supra, at 1591.

[9] Core Compendium of Exhibits in Support of is Summary Judgment Motion on the Fourth Cause of Action, Exhibit 1.

[10] Id., Exhibit 5.

[11] Id., Exhibit 6.

[12] Id., Exhibit 11.

[13] Id., Exhibit 11.

[14] Id., Exhibit 6.

[15] Id., Exhibit 8.

[16] Core Omnibus Opposition Brief, p. 21.

[17] Transcript of September 23, 2016 hearing in Rodrigues v. Fitness International, LLC' v. Core Industries LLC and Related Cross Action, Case No. BC523963, Los Angeles Superior Court (Exhibit 2 to National Union's exhibits offered in opposition to Core's Motion for Summary Adjudication of The Fourth Cause of Action, pp. PIIC 006590 – 006591), emphasis added.

[18] NUOMSUD 14

[19] Id., 105.

[20] Ex. 74 submitted with National Union's Reply to Core’s Opposition to National Union’s Motion for Summary Adjudication of Plaintiff's Fourth Cause of Action.

[21] Id., Ex. 76. Under the definitions in the Requests for Admissions, PURCHASE AGREEMENT, was defined as the same July 20, 2011 purchase agreement referred to in the LA Fitness tender letter, its cross-complaint, and addressed by Brown in his communications with BEHB.before the responses were filed.

[22] Core’s Compendium of Exhibits in Support of its Opposition to National Union's Three Motions for Summary adjudication, Ex. 99

[23] Core’s Compendium of Exhibits in Support of its Oppositions to National Union's Three Motions for Summary Adjudication, Ex. 101.

[24] Core’s Omnibus Opposition to National Union’s Separate Statements. Core response to Statement 68.(Emphasis in the original).

[25] Memorandum, page 2:1-5.

[26] National Union’s Lodgment in Support of its Opposition to Core’s Motion for the 5th and 6th Causes of Action., Exh. 18.

[27] Core’s Compendium of Evidence in Support of its Opposition to National Union’s Three Motions, Exh. 43.

[28] National Union Compendium of Exhibits, Exxhibit 8.

[29] Core Omnibus Opposition to National Union’s Separate Statements, No. 24.

[30] Core Omnibus Opposition to National Union’s Separate Statements, No. 5.

[31] Ex. 7 to NU Compendium of Exhibits, volume II of Reed Brown’s May 20, 2019, p. 500:11-16

[32] Baldwin, supra, 1 Cal. App. 5th, at 558.

[33] New Hampshire, supra, 68 Cal. App., at 504.

[34] Id,, Exhibits 3 and 6.

[35] NU Compendium of Exhibits, Exhibit 10, p. NU000062. The obligations of National Union include, of course, the obligation to "pay all sums the Insured becomes legally obligated to pay by reason of liability imposed by law," which means a judgment by a Court. Id., Exhibit 11, p. NU00082.

[36] Id., Exhibit 4, Reed Brown's testimony at his March 26, 2019 deposition, p. 235:18-236:22.

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