Century-National Insurance Company vs. Burness Flooring Inc.

Motion for Joinder

Cal. Super. - 4th Dist.October 6, 2017

NO 0 N Y nn BR W N N O N O N N O N N N N N mm e t me e m e m e m e t ee ed 00 ~~ O N W h A W N = DO YO 0 N N N n l W N N -= Oo Michael Karns, Esq. (SBN 232256) William Karns, Esq. (SBN 238599) Karns & Karns, LLP 10801 National Blvd., Suite 335 Los Angeles, CA 90064 Tel: (310) 623-9032 Fax: (310) 623-9033 Email: firm@karnsandkarns.com Attorneys for Defendant, NICHOLAS JOSTEN ELECTRONICALLY FILED Superior Court of California, County of Orange 0515/2018 at 10:23:00 Aw Clerk of the Superior Court By Warene Orellana, Deputy Clerk SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF ORANGE CENTURY-NATIONAL INSURANCE COMPANY, a California corporation, Plaintiff, vs. BURNESS FLOORING, INC., a California corporation; NICHOLAS JOSTEN, an Individual; IAN GALLUCCI, an Individual; JAKE POTVIN, an Individual; and DOES 1-10, inclusive, Defendants. Case No.: 30-2017-00948402-CU-BC-CJC Assigned to Hon. Gregory Lewis, Dept. C26 NOTICE OF MOTION AND MOTION TO COMPEL THE JOINDER OF JEFFREY BURNESS DBA BURNESS FLOORING; DECLARATION OF WILLIAM KARNS IN SUPPORT THEREOF Reservation ID: 72812176 Date: July 23, 2018 Time: 10:30am Complaint Filed: October 6, 2017 Trial Date: Not Set TO ALL PARTIES AND TO THEIR ATTORNEYS OF RECORD HEREIN: PLEASE TAKE NOTICE that on July 23, 2018 at 10:30am, or as soon thereafter as may be heard, in Department C-26 of the above-entitled Court, located at 700 Civic Center Drive West, Santa Ana, California, Defendant Nicholas Josten will move this Court to compel the joinder of Jeffrey Burness dba Burness Flooring. 1 NOTICE OF MOTION AND MOTION TO COMPEL THE JOINDER OF JEFFREY BURNESS DBA BURNESS FLOORING; DECLARATION OF WILLIAM KARNS IN SUPPORT THEREOF NO 0 NN A nn BR W N = N O N ND N N N O N N N ee e m b m e e ee e m p e e e ee 0 ~~ A N WL BR W N = O O 0 N N N R W N = OO This motion is based upon the following: 1. Jeffrey Burness dba Burness Flooring purchased and is the named insured on a policy issued by Century-National Insurance Company (hereinafter “Century-National™). This action relates exclusively to that policy. Century-National’s causes of action against Jeffrey Burness dba Burness Flooring (erroneously named as Burness Flooring, Inc.) are for Rescission, Breach of Warranty, Declaratory Relief — No Duty to Defend, Declaratory Relief — No Duty to Indemnify, Recoupment of Defense Costs, and Recoupment of Indemnity. 2. As a party to the insurance contract, Jeffrey Burness dba Burness Flooring is an indispensable party. A party to a contract is an indispensable party. (Martin v. City of Corning (1972) 25 Cal. App. 3d 165, 169.) In an action for Declaratory Relief as to liability insurance coverage, all persons who may be affected by the relief sought in a declaratory relief action should be joined as parties. It may be an abuse of discretion to grant such relief in their absence. (Aetna Cas. & Sur. Co. v. Aceves (1991) 233 Cal.App.3d 544, 554-556.) 3. Injured third parties, as well as the insured, are proper defendants in a declaratory relief action by an insurance company to determine whether the accident was covered. (State Farm Mut. Auto. Ins. Co. v. Crane (1990) 217 Cal.App.3d 1127, 1135; see also Secondary Authority The Rutter Group (August 2017) California Practice Guide: Insurance Litigation at 15:192.) 4, Jeffrey Burness is an indispensable party to this action because his ability to protect his interest in the subject of the action would be impaired or impeded if he is not joined. (Shields v. Barrow (1854) 58 U.S. 130 at 139-140; and Cal. Code of Civ. Proc. section 389(a).) This action is not a simple interpretation of an insurance contract. The basis for Century-National’s entire action relates to a statement that Jeffrey Burness made in his application for insurance, specifically the “Nonownership Liability Coverage Questionnaire: Warranties Regarding Nonownership Liability Coverage.” (Plaintiff’s Complaint at 4 10-16.) Mr. Burness did not make a misrepresentation in his application whatsoever. Century-National alleges that he did. Either way, Mr. Burness’ involvement in this action is crucial. Mr. Burness’ rights under the contact are at issue. 2 NOTICE OF MOTION AND MOTION TO COMPEL THE JOINDER OF JEFFREY BURNESS DBA BURNESS FLOORING; DECLARATION OF WILLIAM KARNS IN SUPPORT THEREOF OO 0 N N nn B R A W N N O N N N N N N N O N e e e m e m e s e e e e 00 ~~ O N WL bs W N = D O R N N O N D E R W N D = O 5. Recognizing Mr. Burness as an indispensable party, Century-National named Jeffrey Burness dba Burness Flooring (erroneously named as Burness Flooring, Inc.) in this action and served Jeffrey Burness on October 6, 2017. Century-National dismissed Mr. Burness on October 30,2017. The dismissal was without prejudice. This dismissal was done only after Century- National was advised in writing on October 8, 2017 that it was, and had been, in conflict with Mx. Burness, and was required to provide Mr. Burness with Cumis counsel. Century-National was also advised at that time that Mr. Burness would be required to cross complain for all allegations of bad faith against Century-National pursuant to Code of Civil Procedure section 426.30 and California State Auto. Ass'n Inter-Ins. Bureau v. Sup.Ct. (Sousa) (1986) 184 Cal. App.3d 1428. Rather than invite a cross complaint, Century-National dismissed Mr. Burness without prejudice. Century-National is deceitfully trying to conduct Mr. Burness’ deposition while he is unrepresented by counsel as a dismissed party. This motion is based on this Notice, the Memorandum of Points & Authorities filed herewith, the Declaration of William Karns, the records and pleadings on file herein, the records and pleadings on file in the related case Nicholas Josten v. Ian Gallucci, et al. (case no. 30-2016- 00830752), and on other such evidence or oral argument as may be presented. Dated: May 15, 2018 Karns & Karns, LLP By: Sn WILLIAM KARNS Attorney for Defendant Nicholas Josten 3 NOTICE OF MOTION AND MOTION TO COMPEL THE JOINDER OF JEFFREY BURNESS DBA BURNESS FLOORING; DECLARATION OF WILLIAM KARNS IN SUPPORT THEREOF OO 00 NN nn A W N N O N O N O N N N N N N N mm e m e s e m pe e m e m e d e d 0 ~~ ) ON Lh BA W N = O D N O N lx N D = O MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION On December 17, 2015, Nicholas Josten (hereinafter “Josten”) was involved in an automobile vs. motorcycle collision. Josten was riding a motorcycle, which was struck by a pickup truck. The driver of the pickup truck was Ian Gallucci (hereinafter “Gallucci”). The truck’s owner was Jake Potvin (hereinafter “Potvin”), who was riding in the front passenger seat of the truck at the time of the collision. Josten suffered serious bodily injuries and other damages as a result of the collision. Mr. Josten filed suit in Nicholas Josten v. Ian Gallucci, et al. (Case No. 30-2016- 00830752) (hereinafter the “related action”). Nicholas Josten brought causes of action for negligence against Gallucci and Potvin. Josten has also brought those same causes of action against Jeffrey Burness dba Burness Flooring’ (hereinafter “Jeffrey Burness™), alleging that Gallucci and Potvin were the employees, agents, partners, and/or joint venturers of Jeffrey Burness at the time of the collision, and were acting within the course and scope of their employment at the time of the collision. Jeffrey Burness is insured through Century-National Insurance Company (hereinafter “Century-National™) in the related action with a $1,000,000.00 policy. Jeffrey Burness purchased and is the named insured on a policy issued by Century-National Insurance Company. This action relates exclusively to that policy. Century-National’s causes of action against Jeffrey Burness are for Rescission, Breach of Warranty, Declaratory Relief — No Duty to Defend, Declaratory Relief — No Duty to Indemnify, Recoupment of Defense Costs, and Recoupment of Indemnity. As a party to the insurance contract, Jeffrey Burness is an indispensable party. He must be joined in this lawsuit. ! At the time of the underlying collision on December 17, 2015, the company was known as Jeffrey Burness dba Burness Flooring. At a later time, the company changed its name to Burness Flooring. At all times, the entity has been a private enterprise of Jeffrey Burness, an individual person. The parties in this action and the related action have at times referred to the party variously as Burness Flooring, Jeffrey Burness, and Jeffrey Burness dba Burness Flooring. For the purposes of this motion, they are all one and the same. 4 NOTICE OF MOTION AND MOTION TO COMPEL THE JOINDER OF JEFFREY BURNESS DBA BURNESS FLOORING; DECLARATION OF WILLIAM KARNS IN SUPPORT THEREOF OO 0 N N Re W N N O N N N N O N N O N O N m e e m e m e m e e e m e e e e ee 0 ~~ O N WL BAR W N = O VU 0 0 N N N Re W N = OO II. JEFFREY BURNESS DBA BURNESS FLOORING IS AN INDISPENSIBLE PARTY AND MUST BE JOINDED IN THIS ACTION As a party to the insurance contract, Jeffrey Burness dba Burness Flooring is an indispensable party. A party to a contract is an indispensable party. (Martin v. City of Corning (1972) 25 Cal. App. 3d 165, 169.) In an action for Declaratory Relief as to liability insurance coverage all persons who may be affected by the relief sought in a declaratory relief action should be joined as parties. It may be an abuse of discretion to grant such relief in their absence. (Aetna Cas. & Sur. Co. v. Aceves (1991) 233 Cal.App.3d 544, 554-556.) Injured third parties, as well as the insured, are proper defendants in a declaratory relief action by an insurance company to determine whether the accident was covered. (State Farm Mut. Auto. Ins. Co. v. Crane (1990) 217 Cal. App.3d 1127, 1135; see also Secondary Authority The Rutter Group (August 2017) California Practice Guide: Insurance Litigation at 15:192.) Jeffrey Burness is an indispensable party to this action because his ability to protect his interest in the subject of the action would be impaired or impeded if he is not joined. (Shields v. Barrow (1854) 58 U.S. 130 at 139-140; and Cal. Code of Civ. Proc. section 389(a).) This action is not a simple interpretation of an insurance contract. The basis for Century-National’s entire action relates to a statement that Jeffrey Burness made in his application for insurance, specifically the “Nonownership Liability Coverage Questionnaire: Warranties Regarding Nonownership Liability Coverage.” (Plaintiff's Complaint at §{ 10-16.) Mr. Burness did not make a misrepresentation in his application whatsoever. Century-National alleges that he did. Either way, Mr. Burness’ involvement in this action is crucial. Mr. Burness’ rights under the contact are at issue. Recognizing Mr. Burness as an indispensable party, Century-National named Jeffrey Burness dba Burness Flooring (erroneously named as Burness Flooring, Inc.) in this action and served Jeffrey Burness on October 6, 2017. Century-National dismissed Mr. Burness on October 30, 2017. The dismissal was without prejudice. This dismissal was done only after Century- National was advised in writing on October 8, 2017 that it was, and had been, in conflict with M1. Burness, and was required to provide Mr. Burness with Cumis counsel. Century-National was 5 NOTICE OF MOTION AND MOTION TO COMPEL THE JOINDER OF JEFFREY BURNESS DBA BURNESS FLOORING; DECLARATION OF WILLIAM KARNS IN SUPPORT THEREOF OO 0 NN S N Ln R W N O N O N N N N O N O N = mm e m e d e m e m pe e m e e NR HI B O R O B B R 8 9% = 3 38 oo 2 & 0 = o also advised at that time that Mr. Burness would be required to cross complain for all allegations of bad faith against Century-National pursuant to Code of Civil Procedure section 426.30 and California State Auto. Ass'n Inter-Ins. Bureau v. Sup.Ct. (Sousa) (1986) 184 Cal.App.3d 1428. Rather than invite a cross complaint, Century-National dismissed Mr. Burness without prejudice. Century-National is deceitfully trying to conduct Mr. Burness’s deposition while he is unrepresented by counsel as a dismissed party. III. CONCLUSION Based upon the foregoing, this Court should grant Defendant’s motion Dated: May 15, 2018 Karns & Karns, LLP By: pe?” WILLIAM KARNS Attorney for Defendant Nicholas Josten 6 NOTICE OF MOTION AND MOTION TO COMPEL THE JOINDER OF JEFFREY BURNESS DBA BURNESS FLOORING; DECLARATION OF WILLIAM KARNS IN SUPPORT THEREOF OO 00 ~~ A N nh pA W N N O N N N N N N N N =m e m e s e m e m e m e m e m e d e d 0 0 ~~ O N Wh BA W N = O OO 0 N N R W N = Oo DECLARATION OF WILLIAM KARNS I, WILLIAM KARNS, declare: 1. I am an attorney at law duly licensed to practice before all the courts of the State of California. I am a partner of Karns & Karns, attorneys of record for Defendant Nicholas Josten herein. I am also the attorney for Plaintiff Nicholas Josten in Nicholas Josten v. Ian Gallucci. et al. (Case No. 30-2016-00830752). The following facts are within my own personal knowledge and based upon the information provided to me. 2. On December 17, 2015, Nicholas Josten (hereinafter “Josten”) was involved in an automobile vs. motorcycle collision. Josten was riding a motorcycle, which was struck by a pickup truck. The driver of the pickup truck was Ian Gallucci (hereinafter “Gallucci”). The truck’s owner was Jake Potvin (hereinafter “Potvin”), who was riding in the front passenger seat of the truck at the time of the collision. Josten suffered serious bodily injuries and other damages as a result of the collision. 3 Mr. Josten filed suit in Nicholas Josten v. Ian Gallucci, et al. (Case No. 30-2016- 00830752) (hereinafter the “related action”). Nicholas Josten brought causes of action for negligence against Gallucci and Potvin. Josten has also brought those same causes of action against Jeffrey Burness dba Burness Flooring alleging that Gallucci and Potvin were the employees, agents, partners, and/or joint venturers of Jeffrey Burness at the time of the collision, and were acting within the course and scope of their employment at the time of the collision. The Nicholas Josten v. Ian Gallucci, et al. action was filed by Josten on January 19, 2016. Jeffrey Burness was added as a Defendant by way of a Doe amendment on April 26, 2016. A copy of the summons, complaint, and Doe amendment was served on Jeffrey Burness on June 24 2016. 4. Jeffrey Burness dba Burness Flooring is insured through Century-National Insurance Company in the related action with a $1,000,000.00 policy. Jeffrey Burness dba Burness Flooring purchased and is the named insured on the policy. This action relates exclusively to that policy. Century-National’s causes of action against Jeffrey Burness dba Burness Flooring (erroneously named as Burness Flooring, Inc.) are for Rescission, Breach of 7 NOTICE OF MOTION AND MOTION TO COMPEL THE JOINDER OF JEFFREY BURNESS DBA BURNESS FLOORING; DECLARATION OF WILLIAM KARNS IN SUPPORT THEREOF O© 0 NN S N Ln RA W N = N O N O N N N N N N N mm mm em e m e m ee e s e s es 00 ~~ O N Wn bh W N = OO V U 0 N N N nn R W N D —- CO Warranty, Declaratory Relief — No Duty to Defend, Declaratory Relief — No Duty to Indemnify, Recoupment of Defense Costs, and Recoupment of Indemnity. 5. This action is not a simple interpretation of an insurance contract. The basis for Century-National’s entire action relates to a statement that Jeffrey Burness made in his application for insurance, specifically the “Nonownership Liability Coverage Questionnaire: Warranties Regarding Nonownership Liability Coverage.” (See Plaintiff’s Complaint at §{ 10- 16.) Mr. Burness did not make a misrepresentation in his application whatsoever. Century- National alleges that he did. Either way, Mr. Burness’ involvement in this action is crucial because Mr. Burness’ rights under the contact are at issue. 6. Century-National named Jeffrey Burness dba Burness Flooring (erroneously named as Burness Flooring, Inc.) in this action and served Jeffrey Burness on October 6, 2017. A true and correct copy of the proof of service of the summons and complaint on Jeffrey Burness as the agent for Burness Flooring, Inc. is attached hereto as “Exhibit 1.” 7. Century-National dismissed Mr. Burness on October 30, 2017. The dismissal wag without prejudice. A true and correct copy of the request for dismissal of Burness Flooring, Inc. is attached hereto as “Exhibit 2.” 8. This dismissal was done only after Century-National was advised in writing by me on October 18, 2017 that it was, and had been, in conflict with Mr. Burness, and was required to provide Mr. Burness with Cumis counsel. Century-National was also advised by me at that time that Mr. Burness would be required to cross complain for all allegations of bad faith against Century-National pursuant to Code of Civil Procedure section 426.30 and California State Auto. Ass'n Inter-Ins. Bureau v. Sup.Ct. (Sousa) (1986) 184 Cal. App.3d 1428. A true and correct copy of the letter that I sent on October 18, 2017 to Katy Nelson, Esq., counsel for Century-National, is attached hereto as “Exhibit 3.” In the interests of space and judicial economy, 85 pages of attachments to that letter are not being included here. 8 NOTICE OF MOTION AND MOTION TO COMPEL THE JOINDER OF JEFFREY BURNESS DBA BURNESS FLOORING; DECLARATION OF WILLIAM KARNS IN SUPPORT THEREOF OO 0 NN AN Un A W N = N O N N N N N O N N N m m e m m t e m e m e e e e e s 0 ~~ AA nh bh W N = DO OO N N N N B W N = O I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed this 15" day of May, 2018, at Los Angeles, California. WILLIAM KARNS 9 NOTICE OF MOTION AND MOTION TO COMPEL THE JOINDER OF JEFFREY BURNESS DBA BURNESS FLOORING; DECLARATION OF WILLIAM KARNS IN SUPPORT THEREOF Exhibit 1 POS-010 ATTORNEY FOR (Name): PLAINTIFF, Century-National Insurance Company SUPERIOR COURT OF CALIFORNIA, COUNTY OF ORANGE sTrReeTaporess: 700 CIVIC CENTER DRIVE WEST MAILING ADDRESS: SAME AS ABOVE cyano zip cone: SANTA ANA, CA 92701 BrRANCHNAME: CENTRAL JUSTICE CENTER ATTORNEY OR PARTY WITHOUT ATTORNEY (Name, State Bar number, and address): | | JEFFREY A. DOLLINGER, ESQ. (SBN 146582); KATY A. NELSON, ESQ. (SBN 173759) ror ELECTRONICALLY FILED 'WOOLLS PEER DOLLINGER & SCHER, A Professional Corporation Superior Court of California, 624 S. GRAND AVENUE, 22ND FLOOR County of Orange LOS ANGELES, CA 90017 10/30/2017 at 01:02:00 PM TELEPHONE NO.: (213) 629-1600 FAX NO. (Optional). (213) 629-1660 Clerk of the Superior Court E-MAIL ADDRESS (Optionaty: jdollinger@wpdslaw.com; knelson@wpdslaw.com By e Clerk,Deputy Clerk PLAINTIFF/PETITIONER: CENTURY-NATIONAL INSURANCE COMPANY; et al. DEFENDANT/RESPONDENT: BURNESS FLOORING, INC,, etc., et al. 30-2017-00948402-CU-BC-CJC CASE NUMBER: PROOF OF SERVICE OF SUMMONS Ref. No. or File No.: WOOPE-0108117.GE -— . (Separate proof of service is required for each party served.) At the time of service | was at least 18 years of age and not a party to this action. Complaint for Rescission, Breach of Warranty Declaratory Relief and Recoupment Alternative Dispute Resolution (ADR) package Civil Case Cover Sheet | served copies of: a. [v] Summons b. [v] c [J d [M e. I) Cross-Complaint f. Hl Other (specify documents): a. Party served (specify name of party as shown on documents setved): BURNESS FLOORING, INC. a California corporation b. Person (other than the party in item 3a) served on behalf of an entity or as an authorized agent (and not a person under item 5b on whom substituted service was made) (specify name and relationship to the parfy named in item 3a): JEFF BURNESS, AGENT FOR SERVICE Address where the party was served: 10116 HOLBORN STREET, SANTEE, CA 92071 | served the party (check proper box) a. " by personal service. | personally delivered the documents listed item 2 to the party or person authorized to receive service of process for the party (1) on (date): 10/10/2017 (2) at (time). 6:04 PM . b. by substituted service. On(date): at (time): 1 left the documents listed in item 2 with or in the presence of (name and title or relationship to person indicated in item 3). om OJ @ [Od ® Od @ [] 6) Form Adopted for Mandatory Use Judicial Council of California POS-010 [Rev. January 1, 2007] (business) a person at least 18 years of age apparently in charge at the office or usual place of business of the person to be served. | informed him or her of the general nature of the papers. (home) a competent member of the household (at least 18 years of age) at the dwelling house or usual place of abode of the party. | informed him or her of the general nature of the papers. (physical address unknown) a person at least 18 years of age apparently in charge at the usual mailing address of the person to be served, other than a United States Postal Service post office box. 1 informed him or her of the general nature of the papers. | thereafter mailed (by first-class, postage prepaid) copies of the documents to the person to be served at the place where the copies were left (Code Civ.Proc., § 415.20). | mailed the documents on (date): from (city): or. [|] adeclaration of mailing is attached. | attach a declaration of diligence stating actions taken firstto attempt personal service. Page 10f2 PROOF OF SERVICE OF SUMMONS Cade of Ch Procedure, § 417.10 PLAINTIFF/PETITIONER: CENTURY-NATIONAL INSURANCE COMPANY; etal. | CASENUMBER DEFENDANT/RESPONDENT: BURNESS FLOORING, INC. etc. et al. 30-2017-00948402-CU-BC-CJC 5. c. O "by mail and acknowledgment of receipt of service. | mailed the documents listed in item 2 to the party, to the address shown in item 4, by first-class mail, postage prepaid, (1) on(date): . (2) from (city). (3) [J with two copies of the Notice and Acknowledgment of Receipt and a postage-paid return envelope addressed ~ to me. (Attach completed Notice and Acknowledgement of Receip)). (Code Civ. Proc., § 415.30.) 4) IN . to an address outside California with return receipt requested. (Code Civ. Proc., § 415.40.) d. [] "by other means (specify means of service and authorizing code section): [J Additional page describing service is attached. 6.The "Notice to the Person Served" (on the summons) was completed as follows: a. [] asan individual defendant. b. ] as the person sued under the fictitious name of (specify): ¢. [] asoccupant. d. On behalf of (specify): BURNESS FLOORING, INC., a California corporation under the following Code of Civil Procedure section: 416.10 (corporation) OJ 415.95 (business organization, form unknown) [] 416.20 (defunct corporation) OJ 416.60 (minor) [1416.30 (joint stock company/association). [1at6.70 (ward or conservatee) [] 416.40 (association or partnership) [1416.90 (authorized person) [1 416.50 (public entity) [[]415.46 (occupant) [] other: 7. Person who served papers Name: GRISELDA BLANCO Address: PO Box 861057, Los Angeles, California 86086 Telephone number: (213) 975-9850 The fee for service was: $ 124.91 | am: (1) [] * not a registered California process server. 2) [J = exempt from registration under Business and Professions Code section 22350(b). (3) "registered California process server: () [] owner [| employee _[¥] independent contractor. (i) Registration No.:1909 (ii) County: SAN DIEGO 8. [v] 1declare under penalty of perjury under the laws of the State of Califomia that the foregoing is true and correct. e o oo p or 9. [C]" 1am a California sheriff or marshal and | certify that the foregoing is true and correct. Date: 10/19/2017 J GRISELDA BLANCO ) {NAME OF PERSON WHO SERVED PAPERS/SHERIFF OR MARSHAL) . (STG ) Page 20f2 Fn) [esses] PROOF OF SERVICE OF SUMMONS Exhibit 2 CIvV-110 ATTORNEY OR PARTY WITHOUT ATTORNEY (Name, State Bar number, and address): Katy A. Nelson (SBN 173759) FOR COURT USE ONLY Woolls Peer Dollinger & Scher, APC 624 S. Grand Avenue 22nd Floor ELECTRONICALLY FILED Los Angeles, CA 90017 Superior Court of California, TeLePHONE NO: (213) 629-1600 FAX NO. (Optionay: (213) 629-1660 County of Orange E-MAIL ACDRESS (Optional): Knelson@wpdslaw. com 11M3/2017 at 03:15:00 PM ATTORNEY FOR (Mame): Plaintiff, Century-National Insurance Clerk of the Superior Court SUPERIOR COURT OF CALIFORNIA, COUNTY OF Orange By Nancy Strom,Deputy Clerk strReeracpress: 700 Civic Center Drive West MAILING ADDRESS: cmvanp zip cope: Santa Ana, CA 92701 eraNCHNAME: Central Justice Center PLAINTIFF/PETITIONER: Century-National Insurance Company, a California corporation, . . |DEFENDANT/RESPONDENT: Burness Flooring Inc., a California corporation; et al. : CASE NUNGER REQUEST FOR DISMISSAL 30-2017-00948402-CU-BC- cJc A conformed copy will not be returned by the clerk unless a method of return is provided with the document. This form may not be used for dismissal of a derivative action or a class action or of any party or cause of action in a class action. (Cal. Rules of Court, rules 3.760 and 3.770.) 1. TO THE CLERK: Please dismiss this action as follows: a. (1) [__] with prejudice (2) Without prejudice b. (1) [_] Complaint (2) [J Petition (3) [1 Cross-complaint filed by (name): on (date): (4) [_] Cross-complaint filed by (name): on (date): (5) (__] Entire action of all parties and all causes of action (6) (X] Other (specify)* As to Defendant, Burness Flooring, Inc. ONLY 2. (Complete in all cases except family law cases.) The court [__] did did not waive court fees and costs for a party in this the clerk. If court fees and costs were waived, the declaration on the back of Date: November 7, 2017 se. (This information may be obtained from form must ET sen e® ous a sae ees eset as eee ees eer sere ee ¥ Y {SIENATURE) . vee orPRITNAME OF [X | arrorney [party winouT arrose) Attorney or party withott attorney for: Century-National “If dismissal requested Is of specified parties only of specified causes of action Insurance Company only, or of specified cross-complaints only, so state and (dently the parties, [X] PlaintififPetitioner [|] Defendant/Respondent causes of action, or cross-complaints to be dismissed. | Cross-Complainant 3. TO THE CLERK: Consent to the above dismissal is hereby given.” Date: > (SIGNATURE) (TYPE OR PRINT NAME OF |__|] ATTORNEY [| PARTY WITHOUT ATTORNEY) Attomey or party without atiomey for: ++ [{ 3 cross-complaint=cr Response (Family Law) seeking affirmative relief — is on file, the attomsy for cross-complainant (respondent) must . sgn is consent if required by Code of Civil Procedure section 584 () (J puaintififPetitioner [_] Defendant/Respondent or {)). (7 Cross-Complainant (To be completed by clerk) 4. [x] Dismissal entered as requested on (date): 11/13/17 5. [__] Dismissal entered on (date): as to only (name): 6. [_] Dismissal not entered as requested for the following reasons (specify): 7. a. [__] Attomney or party without attorney notified on (date): b. [_] Attorney or party without attorney not notified. Filing party failed to provide a copy to be conformed means to return conformed copy N Sas, Date: 1141312017 DAVID H. YAMASAK], Clesk of the Court Clerk, by » Deputy Page 1af2 for Mandatory U Procedurc, § 581 of 90a, Fp iias Goured of Catryia REQUEST FOR DISMISSAL ng Gov.Coto.§ ean Cot Rules of Cows ne 3.1365 CIV-110{Rav. Jan. 1, 2013) S gt s Clv-110 PLAINTIFF/PETITIONER: Century-National Insurance Company, a | CASE NUMBER: California corporation, DEFENDANT/RESPONDENT: Burness Flooring Inc., a 30-2017-00948402-CU-BC- California corporation; et al. Cgc COURT'S RECOVERY OF WAIVED COURT FEES AND COSTS If a party whose court fees and costs were initially waived has recovered or will recover $10,000 or more in value by way of settlement, compromise, arbitration award, mediation settlement, or other means, the court has a statutory lien on that recovery. The court may refuse to dismiss the case until the lien is satisfied. (Gov. Code, § 68637.) Declaration Concerning Waived Court Fees 1. The court waived court fees and costs in this action for (name): 2. The person named in item 1 is (check one below): a. [1] not recovering anything of value by this action. b. [_] recovering less than $10,000 in value by this action. c. [J] recovering $10,000 or more in value by this action. (If item 2c is checked, item 3 must be completed.) 3. [J All court fees and court costs that were waived in this action have been paid to the court (check one): [__] Yes [_] No | declare under penalty of perjury under the laws of the State of California that the information above is true and correct. Date: > (TYPE OR PRINT NAME OF ] ATTORNEY J PARTY MAKING DECLARATION) (SIGNATURE) CIV-110 [Rev. January 1, 2013) REQUEST FOR DISMISSAL . Pogo2at2 OW 60 ~~ A th BA W O N b t mb w e e d p e e d p e d H O W —- Oo f— oN A Pr of es si on al Co rp or at io n Lo s An ge le s, Ca li fo rn ia 90 01 7 e a d wn On e Wi ls hi re Bu il di ng , 62 4 So ut h Gr an d Av en ue , 22 ™ Fl oo r Wo ol ls Pe er Do ll in ge r B Sc he r No bo NN N o No No No ND pt nt ot ~ aN wh + Ww No — oS \ O o o ~~ No 0 3632571 PROOF OF SERVICE Century-National Insurance Company v. Burness Flooring, Inc. Case No. 30-2017-00948402-CU-BC-CJC I, Kristy Ortega, declare: I am employed in the County of Los Angeles, State of California. I am over the age of 18 and not a party to the within action. My business address is Woolls Peer Dollinger & Scher, A Professional Corporation, One Wilshire Building, 624 South Grand Avenue, 22" Floor, Los Angeles, California 90017. On November 13, 2017, I served the document(s) described as REQUEST FOR DISMISSAL on the interested parties in this action as follows: ® By placing [J the original & a true copy thereof enclosed in a sealed envelope addressed as follows: SEE ATTACHED SERVICE LIST B® BY MAIL: [ am "readily familiar" with this firm's practice for the collection and the processing of correspondence for mailing with the United States Postal Service. In the ordinary course of business, the correspondence would be deposited with the United States Postal Service at One Wilshire Building, 624 South Grand Avenue, 22M Floor, Los Angeles, California 90017 with postage thereon fully prepaid the same day on which the correspondence was placed for collection and mailing at the firm. Following ordinary business practices, I placed for collection and mailing with the United States Postal Service such envelope at One Wilshire Building, 624 South Grand Avenue, 22" Floor, Los Angeles, California 90017. OO OVERNIGHT DELIVERY: I deposited such envelope in a facility regularly maintained by O FEDERAL EXPRESS [OO UPS 0 Overnight Delivery [specify name of service: |] with delivery fees fully provided for or delivered the envelope to a courier or driver of [J FEDERAL EXPRESS [J UPS C1 OVERNIGHT DELIVERY [specify name of service: ] authorized to receive documents at One Wilshire Building, 624 South Grand Avenue, 22" Floor, Los Angeles, California 90017 with delivery fees fully provided for. O BY E-MAIL: I sent via electronic mail a copy of said document(s) to the persons at the e-mail addresses listed on the service list in accordance with the written confirmation of counsel in this action. SEE SERVICE LIST. O BY FACSIMILE: 1 sent via facsimile a copy of said document(s) to the following addressee(s) at the following number(s) in accordance with the written confirmation of counsel in this action. BE [State] I declare under penalty of perjury under the laws of the State of California that the above is true and correct. O [Federal] I declare that I am employed in the offices of a member of the State Bar of this Court at whose direction the service was made. I declare under penalty of perjury under the laws of the United States of America that the above is true and correct. Executed on November 13, 2017, at Los Angeles, California. 7 / / - oe 1 PROOF OF SERVICE PRINTED ON RECYCLED PAPER Wo ol ls Pe er Do ll in ge r Bl Sc he r A Pr of es si on al Co rp or at io n On e Wi ls hi re Bu il di ng , 62 4 So ut h Gr an d Av en ue , 22 * Fl oo r 563257.1 OO 0 N N O N nn BAR W N Lo s An ge le s, Ca li fo rn ia 80 01 7 ND NN N D N o N o N N o nN N o — — — — — — — p— p i — o o ~ [= wn E N Ww No — oo O c o ~ 3 ON [7 3 nn w No — [= ] Ian Gallucci 9775 Highdale Road Santee, CA 92071 Burness Flooring, Inc. 10116 Holborn Street Santee, CA 92071 PRINTED ON RECYCLED PAPER SERVICE LIST PROOF OF SERVICE Exhibit 3 KARNS & KARNS A LAW PARTNERSHIP OF PROFESSIONAL CORPORATIONS 10801 NaTionaL Buvp,, Suite 338 Los AnatLes, CALIFORNIA 20064 Piles sings] TELEPHONE: (310) 623-8032 FACSIMILE: (310) 623-5033 —_— JOHN KARNS, ESQ. o 3 FIRMPKARNSANDKARNS.COM OF COUNSEL, VAWW, KARNSANDKARNS.COM October 18,2017 Via U.S. Mail and Email (knelson@wpdslaw.com) Woolls, Peer, Dollinger & Scher Attn: Katy Nelson 624 South Grand Ave., 22" Floor Los Angeles, CA 90017 Re: Century National Insurance Company v. Burness Flooring Inc. (30-207- 00948402-CU-BC-CIJC) Josten v. Burness (30-2016-00830752-CU-PA-CJC) In Re Jeffrey Allen Burness (17-05861-LT7) Dear Katy Nelson: The action for Declaratory Relief against Burness Flooring, Inc. for rescission, breach of warranty, declaratory relief, and recoupment is without merit. Century-National Insurance Company has no valid grounds to rescind Mr. Burness’ policy. Century-National Insurance Company's groundless attempt to rescind the policy is bad faith. Where there are no valid grounds for rescission, an attempt to do so breaches an insurer’s duty of good faith and fair dealing. (Fletcher v. Western Nat'l Life Ins. Co. (1970) 10 Cal.App.3d 376, 392; and Dalrymple v. United Services Auto. Ass'n (1995) 40 CA4th 497, 515.) Mr. Burness Never Made a Misrepresentation in the Insurance Application Century-National Insurance Company’s wrongful conduct goes well beyond filing the action for Declaratory Relief. Setting aside Century-National Insurance Companys other tortious conduct and true motives, Century-National Insurance Company’s action for Declaratory Relief itself is based on outright lies and unfair interpretations of the insurance contract. Mr. Burness never made any misrepresentations in the application for insurance. Century-National Insurance Company's efforts to rescind the policy and deny coverage to Mr. Burness are therefore without grounds and bad faith. Here are the relevant facts as supported by the record: e Mr. Potvin went to work for Burness as an hourly employee in June 2013. (See Deposition of Jake Potvin at page 11, lines 5-7; and at page 14, lines 20-21.) This was confirmed by Mr. Burness. OFFICES IN LOS ANGELES AND SAN FRANCISCO October 18, 2017 Page 2 e Asan hourly employee, there was absolutely no requirement that Mr. Potvin own or use his own vehicle as part of his employment with Burness Flooring. In fact, the record is clear that hourly employees would travel to and from jobsites in one of Mr. Burness’ company trucks. (Depo of Potvin at 34:19-35:1.) e On April 28, 2015, Mr. Burness completed the Nonownership Liability Coverage Questionnaire as part of his application for the Century-National policy. When Mr. Burness completed the questionnaire, he responded that he did not require employees to have their own vehicle for his business, that his employees did not drive their own vehicles for company purposes, and that employees did not drive their own vehicles on a regular basis. He also identified that he had one employee at the time he completed the questionnaire. e Mr. Potvin was not transitioned to “piecework” status with Burness Flooring until August 2015. (Depo of Potvin at 21:4-12.) It was only at this point that Mr. Potvin began driving his truck, loaded with equipment, to jobsites for Burness Flooring. (Depo of Potvin at 34:3-22; 35:19-24; 37:12-17.) e Mr. Bumness even testified that he did not require Mr. Potvin to use his own vehicle for Burness business, even after he transitioned to “piecework” status in August 2015. (Depo of Jeffrey Burness at 36:19-21.) Century-National Insurance Company’s action for Declaratory Relief is based on its allegation that Mr. Burness failed to disclose material facts in the Nonownership Liability Coverage Questionnaire regarding: 1) the number of persons employed by Burness; 2) whether employees were required to use their own vehicles to drive for Burness’ business; and 3) whether any employee drove his own vehicle for Burness’ business. Let’s address points 2 and 3 first. The record is clear that when Mr. Burness completed the questionnaire on April 28, 2015, Mr. Potvin was still an hourly employee and was not required to drive his own vehicle for business purposes. There is absolutely nothing in the record to suggest that Mr. Potvin or any other Burness employee was required to drive their own vehicle for business purposes, or drove their own vehicle on a regular basis for business purposes, at any time on or prior to April 28, 2015. Century-National’s allegations and insinuations to the contrary are blatant misrepresentations of fact. With respect to the issue of employees driving their own vehicles for business purposes, Mr. Burness’ disclosures and representations on the Nonownership Liability Coverage Questionnaire were truthful and accurate at the time he completed and signed the form on April 28, 2015. Century-National Insurance Company knows that a “material” “false representation” is required to rescind the policy. (Cal. Ins. Code §§ 331, 359.) Mr. Burness did not make any material misrepresentations. Any reasonable investigation, even if cursory, would reveal this. In fact, you confirmed that Woolls, Peer, Dollinger & Scher was in possession of depositions of Mr. Burness and Mr. Potvin well before the action for Declaratory Relief was filed. Century- National Insurance Company chose to ignore the truth and artificially created falsehoods to support a theory of misrepresentation. This conduct amounts to bad faith and is “extreme and outrageous conduct” sufficient for an action for intentional infliction of emotional distress. October 18, 2017 Page 3 Century-National Insurance Company also seems to allege that Mr. Burness was in violation of his duties under the Nonownership Liability Coverage portion of his policy because he failed to report Mr. Potvin’s change in status from hourly to “piecework” when Mr. Potvin made that transition in August 2015. But rescission of the policy on these grounds is patently improper. The policy does not require Mr. Burness to report changes in employee status after the policy inception date, but rather only to report new employees hired after the policy inception date. The language of the policy is “If you require an employee to use their own vehicle to drive on your business, you must report this employee-driver to us on the questionnaire provided to you, prior to inception of the policy, or if hired after inception, to your broker within 10 days after hiring them.” Mr. Potvin was hired in June 2013. Mr. Burness completed the questionnaire on April 28, 2015. The policy went into effect on May 1, 2015. Mr. Potvin’s status changed from hourly to “piecework” in August 2015, which gave rise to the requirement that Mr. Potvin use his own vehicle for business purposes. These facts are not in dispute. The record is clear. What is also clear under any reasonable interpretation of the English language is that a change in employee status is not the same as a new hire. Mr. Burness did not hire Mr. Potvin in August 2015, he simply changed his status from hourly to “piecework.” The policy never required Mr. Burness to inform Century-National Insurance Company of such a change in status. Mr. Burness, therefore, was never in breach of any policy provision. Century-National Insurance Company’s allegations to the contrary are false on their face. If Century-National Insurance Company’s concern was employees who were required to drive their own vehicle for business purposes, they should have been clear with Mr. Burness that they wanted him to inform them any time any employee began to use their own vehicle for business purposes. The policy required Mr. Burness to inform Century-National Insurance Company if he hired a new employee who was required to driver their own vehicle for business purposes, but it never required him to inform Century-National Insurance Company that Mr. Potvin, either a long-time current employee and/or partner, would begin driving his own vehicle for business purposes as of August 2015 due to a change in status. If the requirements of the policy were deficient in some way, that is a deficiency that is construed against Century-National Insurance Company. (Holz Rubber Co., Inc. v. American Star Ins. Co. (1975) 14 Cal.3d. 45, 59; Cal. Civ. Code § 1654; and AIU Ins. Co. v. Sup.Ct. (FMC Corp.) 51 Cal.3d at 822.) Turning to point 1, in response to the question of “How many employees do you have?” on the Nonownership Liability Coverage Questionnaire, Mr. Burness responded with “1.” Century- National Insurance Company asserts that Mr. Burness and Chillone Hikes-Burness, his wife, were officers and/or directors of the company, and that the single employee referred to in Mr. Burness’ response was Josh Burness, Mr. Burness’ son. (See action for Dec. Relief, para. 12.) Century-National alleges that Mr. Burness fraudulently concealed the existence of Mr. Potvin, his long-time employee, from Century-National Insurance Company. This assumption is totally improper, unreasonable, and self-serving. It makes no sense. The real facts are these: e The company as of April 28, 2015 was not a corporation, but rather a sole proprietorship. Specifically, Jeff Burness dba Burness Flooring. The company was incorporated as October 18, 2017 Page 4 Burness Flooring, Inc. in September 2016. (See Deposition of Jeffrey Burness at 12:22- 13:7.) e As of April 28, 2015, Chillone Hikes-Burness was not an officer and/or director of Burness Flooring, Inc. That entity did not even exist until September 2016, so it would be impossible. Ms. Hikes-Burness was the wife of Jeff Burness, the sole proprietor. It wasn’t until the company was incorporated in September 2016 that Chillone Hikes- Burness became a 50% shareholder and director of the company. (Depo of Jeffrey Burness at 13:22-14:5.) o There is nothing in the record to suggest that Chillone Hikes-Burness was an employee of Burness as of April 28, 2015. Rather, Chillone Hikes-Burness was Jeff Burness’ wife. o There is nothing in the record to suggest that Josh Burness was an employee of Burness as of April 28, 2015, and no support for Century-National’s assertion that he was. Rather, Josh Burness is Jeff Burness’ son. Chillone Hikes-Burness was listed as an “endorsed” driver on the policy. Josh Burness was also listed as an “endorsed” driver on the policy. Jeff Burness was also listed as an “endorsed” driver on the policy. It was a business auto policy, with all family members listed as “endorsed” drivers. e The record is crystal clear that Mr. Potvin was an employee of Burness Flooring as of April 28, 2015, and had been since June 2013. (See Depo of Potvin at 11:5-7.) In light of these facts, Century-National Insurance Company’s attempt to spin Mr. Bumness’ “1” answer to refer to Josh Burness is absurd. Mr. Potvin had been Mr. Burness’ employee for nearly two years by the time Mr. Burness filled out the questionnaire on April 28, 2015. His wife and son, Chillone and Josh, were both already “endorsed” drivers on the policy. Furthermore, there is nothing in the record to support the allegation that Chillone and Josh were even employees of Burness at the time, or that Mr. Burness considered them to be employees. It is clear that Mr. Burness understood the form to be asking for the number of employees who weren’t already listed on the policy, and who weren’t his immediate family members. This is a perfectly reasonable understanding of the question. In fact, it is logically the only interpretation that Mr. Burness could have had. If Century-National Insurance Company's logic was followed, and Mr. Burness considered his wife and son to be employees, then his answer would have been “2,” for Chillone and Josh. Or perhaps even “3,” for Chillone, Josh, and himself. Or perhaps even “4,” for Chillone, Josh, himself, and Mr. Potvin. But it is a stretch beyond reasonable to assume that the “1” referred to Josh, that Chillone was an officer/director of a company that wouldn’t exist for another 17 months, and that Mr. Burness was trying to fraudulently conceal the existence of his one long-term employee. Mr. Burness never made a misrepresentation in the insurance application. Even if Century- National Insurance Company’s absurd interpretation of the insurance application and timing of events is considered true, an incorrect or incomplete statement on an insurance application is excused if the result of ignorance and made in good faith. (Cal. Ins. Code § 330; and O'Riordan v. Federal Kemper Life Assur., 36 Cal.4th at 286-287.) Ultimately, the insurance application was vague as to “employees” and did not define or delineate between share-holders, family members, and employees. October 18, 2017 Page 5 Additionally, unless Century-National Insurance Company conducted a reasonable investigation as to the insurability of its insured, an insurer may not rescind an automobile insurance policy based upon the material misrepresentations of its insured after the insured injures a third party. (Barrera v. State Farm Mut. Auto. Ins. Co. (1969) 71 Cal.2d 659, 681; and United Services Auto. Ass'n v. Pegos (2003) 107 CA4th 392, 398.) The purpose is to protect the public from injury by the insured's acts rather than to reward a dishonest insured. Because of public policy considerations underlying the Financial Responsibility Law, an insurer owes a duty to the insured and to the public to conduct an investigation of insurability within a reasonable time after issuance of an automobile insurance policy. (/d.) It is assumed Century-National Insurance Company did just that, discovered that Mr. Burness was referring to Mr. Potvin as the “employee” and accepted his representations in the insurance application. If Century-National Insurance Company failed to conduct an investigation of insurability then post insurance claim rescission is barred for public policy reasons. (/d.; see also Fireman's Fund American Ins. Co. v. Escobedo (1978) 80 Cal.App.3d 610, 620.) Century-National Insurance Company Waived Any Right It Had to Rescind the Policy, and is also Estopped From Doing So Century-National Insurance Company hired Woolls, Peer, Dollinger & Sher to file an action for Declaratory Relief to rescind Mr. Burness’s policy. You confirmed that Woolls, Peer, Dollinger & Sher was retained “awhile back” and “before the claim was tendered to Geico.” That happened in approximately late 2016 or early 2017. You confirmed that you investigated coverage issues at that time and reported to Century-National Insurance Company. You, your firm, and Century-National Insurance Company knew it would seek rescission back in late 2016 or early 2017. Rather than filing the action for Declaratory Relief at that time, Century-National Insurance Company waited. Simply stated, this is a relinquishment of a known right after the knowledge of facts. This constitutes an express waiver. (Waller v. Truck Ins. Exch., Inc. (1995) 11 Cal.4th 1, 31-32.) To make matters worse, Century-National Insurance Company never identified a reservation of rights, and proceeded with one defense counsel when there were resolutions of issues in the third party lawsuit relating to employment that could possibly affect coverage. Century-National Insurance Company repeats several times in its action for Declaratory Relief that it agreed to defend Mr. Burness under a reservation of rights. This is false. There was no disclosure of a reservation of rights. On July 22, 2016, Lisa McMains, Burness’ lawyer selected and paid by Century-National Insurance Company, filed a Case Management Statement which specifically inquired if there was a reservation of rights. None was identified. On September 13, 2016, almost two months after the case management statement, Burness responded to written form interrogatories propounded by Mr. Josten. In verified responses, Burness responded to Form Interrogatory 4.1 by identifying the Century-National Insurance Company policy. In response to subpart (f) requesting information as to any reservation of rights, controversy, or coverage dispute, the response was: “None that Responding Party is aware October 18,2017 Page 6 of at this time.” Response to Form Interrogatory 1.1 confirmed that Lisa McMains assisted in the preparation of the responses along with Mr. Burness. On September 22, 2017, a full year later and less than two weeks before Century-National Insurance Company filed the action for Declaratory Relief, Mr. Burness responded to a Supplemental Interrogatory propounded by Mr. Josten. Mr. Burness responded further to Form Interrogatory 4.1 but offered no further information about the Century-National Insurance Company policy and did not identify any reservation of rights, controversy, or coverage dispute between Century-National Insurance Company and Mr. Burness. The Supplemental Response was signed by Patrick Sarkissian of Tharpe & Howell. When an insurer assumes a defense without reserving rights, it may be estopped from asserting non-coverage as a defense. (Dollinger DeAnza Assocs. v. Chicago Title Ins. Co. (2011) 199 Cal. App.4th 1132, 1154.) Even if Century-National Insurance Company sent detailed letters to Mr. Burness identifying and detailing its alleged reservation of rights, the responses to discovery in litigation prepared by counsel effectively constitute waiver, and Century-National Insurance Company is thus estopped from rescission. When Mr. Burness’ lawyers prepare discovery responses and provide them for his review without identifying the reservation of rights, it is perfectly reasonable for Mr. Burness to assume that there are no such reservations and rely on that belief. Century-National Insurance Company’s failure to immediately seek rescission precludes it from later disputing coverage. “If a liability insurer, with knowledge of a ground of forfeiture or noncoverage under the policy, assumes and conducts the defense of an action brought against the insured, without disclaiming liability and giving notice of its reservation of rights, it is thereafter precluded in an action upon the policy from setting up such ground of forfeiture or noncoverage.” (Miller v. Elite Ins. Co. (1980) 100 Cal.App.3d 739, 755; see also DeWitt v. Monterey Ins. Co. (2012) 204 Cal. App.4th 233, 245-246.) Moreover, the undertaking of a defense by Lisa McMains, even if tendered to Geico, creates the impression that Century- National Insurance Company is not disputing coverage. The insured may then rely thereon by failing to retain independent counsel to negotiate or defend the action, or to protect their rights at a time in litigation when responses to written discovery and deposition responses would affect coverage. Under such circumstances, Century-National Insurance Company is estopped from asserting a rescission of the policy. (4naheim Builders Supply, Inc. v. Lincoln Nat'l Life Ins. Co. (1965) 233 Cal.App.2d 400, 410; LA Sound USA, Inc. v. St. Paul Fire & Marine Ins. Co. (2007) 156 Cal.App.4th 1259, 1270-1271; and DuBeck v. California Physicians’ Service (2015) 234 Cal.App.4th 1254, 1267.) Century-National Insurance Company’s Failure to Provide Cumis Counsel Century-National Insurance Company was required to provide Cumis counsel for Mr. Burness pursuant to San Diego Navy Fed. Credit Union v. Cumis Ins. Society, Inc. (1984) 162 CA3d 358, and California Civil Code §2860. Many circumstances in this case created a conflict of interest for defense counsel under applicable statutes and rules of professional conduct requiring retention of Cumis counsel. For example, Cumis counsel is required when Century-National October 18, 2017 Page 7 Insurance Company take steps to deny coverage and the outcome of the coverage dispute can be affected by the manner in which the case is defended (Cal. Civ. Code § 2860(b).) Moreover, Cumis counsel is required when the insurer has commenced litigation against the insured, whether or not related to the lawsuit it is obligated to defend. (Truck Ins. Exch. v. Fireman's Fund Ins. Co. (1992) 6 Cal. App.4th 1050, 1059.) I have repeatedly asked Timothy Hodge of Tharpe & Howell to identify Cumis counsel. No Cumis counsel has been identified to date. Century-National Insurance Company never identified a reservation of rights, and proceeded with one defense counsel when there were resolutions of issues in the third party lawsuit relating to employment that would potentially affect coverage. An insurer must provide independent counsel for the insured when resolution of some issue in the lawsuit between the third party and the insured will bear directly on the outcome of the coverage dispute between insurer and insured. In such cases, the “insurer may be subject to substantial temptation to shape its defense so as to place the risk of loss entirely on the insured.” (San Diego Navy Fed. Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358, 364.) Additionally, Rule of Professional Conduct 3-310 required Timothy Hodge, Mr. Burness’s counsel, to make written disclosure to and obtain informed written consent from the insured before accepting or continuing representation under these circumstances. This is a mandatory duty. It remains to be seen whether these disclosures were ever made. Bankruptcy Proceedings Although it would be shocking if Cumis counsel has not yet been provided, out of caution the Bankruptcy Trustee has been advised to request that Cumis counsel be assigned immediately. Mr. Josten has withdrawn his motion to lift the automatic stay in the bankruptcy court. The Bankruptcy trustee has been advised of claims for bad faith, breach of contract, intentional infliction of emotional distress, conspiracy, fraud, misrepresentation, malicious prosecution, punitive damages etc., that Mr. Burness’ bankruptcy estate currently has against Century- National Insurance Company and will have in the future when there is a judgment and excess judgment. We intend to again move for relief from the stay at the appropriate time and proceed to trial against Mr. Burness and his co-Defendants Mr. Potvin and Mr. Gallucci. We intend to appear at the November 27, 2017 status conference before Judge Lewis with the stay lifted, and ready to set a new trial date. I have requested that the Bankruptcy Trustee immediately retain bad faith counsel to respond to the action for Declaratory Relief and cross complain for all current claims against Century- National Insurance Company pursuant to Code of Civil Procedure section 426.30 and California State Auto. Ass'n Inter-Ins. Bureau v. Sup.Ct. (Sousa) (1986) 184 Cal.App.3d 1428. Century-National Insurance Company’s true motivations are plainly obvious. Timothy Hodge likely sent multiple carrier reports in and around June through September 2017 to GEICO. Century-National Insurance Company was provided those carrier reports. Those carrier reports detailed the substantial evidence that showed that Mr. Burness, your insured, was directly October 18,2017 Page 8 negligent for this collision, and/or liable for the tortfeasor’s conduct as his principle. Those carrier reports undoubtedly showed that Mr. Josten’s damages were in excess of the policy limits of $1,000,000.00, especially considering the deposition of Raymond Vance, M.D., the medical expert hired by the defense, who testified: Q. So more likely than not, you believe that Nick Josten's complaints of pain that he expressed to you on September 19, 2017, the pain in the right knee, the grinding and popping, pain in the thigh, pain in the hip will continue for the rest of his life? A. Yes. . And you believe that that pain is directly related to the actual motorcycle crash and the injuries from it, right? Yes, sir. [Deposition of Raymond Vance, M.D. at 31:12-24.] Century-National Insurance Company has finally realized its exposure. Century-National Insurance Company realized Mr. Josten’s damages are well in excess of its policy, that its insured was responsible for Mr. Josten’s significant losses, and that Mr. Burness was covered for such losses pursuant to his Century-National Insurance Company policy. Rather than stand up for Mr. Burness, Century-National Insurance Company chose to abandon Mr. Burness and seek rescission. In doing so, Century-National Insurance Company deliberately misstated facts to deny coverage, ignored facts that support coverage, and unreasonably interpreted its policy and policy application to the detriment of its insured. Century-National Insurance Company’s conduct was and continues to be deplorable. Gerald Davis has advised me that he has already sought consultation with Craig McClellan to prosecute these claims of obvious bad faith. Mr. McClellan and I have already spoken as well. I have also spoken with Doug Brust, attorney for co-defendant lan Gallucci, and Daniel Walsh, attorney for Jake Potvin, and advised both of them of their clients’ rights as third party beneficiaries to the policy. No rescission is permitted to prejudice the rights of third parties: “It is of course fundamental that, where the rights of others have intervened and circumstances have so far changed that rescission may not be decreed without injury to those parties and their rights, rescission will be denied and the complaining party left to his other remedies.” (Beckwith v. Sheldon (1913) 165 Cal. 319, 324; see also Angle v. United States Fid. & Guar. Co. (1962) 201 CA2d 758, 763.) Please forward this correspondence to Mr. Burness, his Cumis counsel, his personal attorney, Mary Gordon and all other decision makers and adjusters at Century-National Insurance Company involved with this claim and/or the decision to attempt rescission. October 18, 2017 Page 9 Do not hesitate to call me if you wish to discuss this matter further. Sincerely, WILLIAM KARNS Enclosed Attachments: 1. Action for Declaratory Relief/Rescission 2. Burness CMC Statement filed by Lisa McMains, Esq. 3. Burness Response to Form Interrogatories, Set One 4. Burness Response to Supplemental Interrogatory 5. Deposition of Jeff Burness (Relevant Portions) 6. Deposition of Jake Potvin (Relevant Portions) 7. Deposition of Raymond Vance, M.D., (Relevant Portions) cc: Tharpe & Howell, LLP Attn: Timothy A. Hodge 15250 Ventura Blvd., 9th Fl. Sherman Oaks, CA 91403 Gerald H. Davis PO Box 124539 San Diego, CA 92112 (By U.S. Mail and email) Michael T. O’Halloran Law Office of Michael T. O’Halloran 110 West A Street, Suite 1100 San Diego, CA 92101 (By U.S. Mail) Konoske, Akiyama & Brust, LLP Attn.: Doug Brust, Esq. 16880 Bernardo Drive. Ste. 250 San Diego, Ca 92127 (By U.S. Mail and email) Freeman Mathis & Gary LLP Attn.: Daniel Walsh, Esq. 550 S. Hope Street, Ste. 2200 October 18,2017 Page 10 Los Angeles, Ca 90071 (By U.S. Mail and email) The McClellan Law Firm Attn.: Craig McClellan 1144 State Street San Diego, CA 92101 (By U.S. Mail and email) Davis & Madden Insurance Agency, Inc. 3810 E La Palma Ave, Suite B Anaheim, CA 92807 (By U.S. Mail) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF ORANGE I am an employee in the County of Los Angeles, State of California. I am over the age of 18 and fot a party a = within action. My business address is 10801 National Bvd., #335, Los Angeles, ifornia . On May 15, 2018, I served the foregoing documents, described as: e NOTICE OF MOTION AND MOTION TO COMPEL THE JOINDER OF JEFFREY BURNESS DBA BURNESS FLOORING; DECLARATION OF WILLIAM KARNS IN SUPPORT THEREOF on all interested parties in this action by placing a true copy thereof in a sealed envelope, addressed as follows: SEE ATTACHED SERVICE LIST ] (BY PERSONAL SERVICE) I caused such envelope to be delivered by hand to the attorney at the offices of the addressee. [1 (BY OVERNIGHT DELIVERY) 1 caused a true copy thereof to be enclosed in a sealed envelope with delivery fees provided for, and to be deposited in the box regularly maintained by UPS in Los Angeles, CA. [0 (@®BY ELECTRONIC MAIL) Based on a court order or an agreement with opposing counsel to accept service of documents electronically, I caused the documents to be sent to the persons at the e-mail address(es) listed on the above service list. I did not receive, within a reasonable time after the transmission, any electronic message or other indication that the transmission was unsuccessful. [J (BY FACSIMILE) I sent such document via facsimile mail to the number(s) noted above. The transmission was reported as complete and without error, and the transmitting facsimile machine properly issued the transmission report. XI (BY MAIL) As follows: I placed such envelope, with postage thereon prepaid, in the United States mail at Los Angeles, California. I am “readily familiar” with the firm’s practice of collecting and processing correspondence for mailing. Under that practice, it would be deposited with the U.S. Postal Service on that same day, with postage thereon fully prepaid, at Los Angeles, California, in the ordinary course of business. I am aware that, on motion of the party served, service is presumed invalid if the postal cancellation or postage meter date is more than one day after the date of deposit for mailing in this affidavit. X (STATE) 1 declare, under penalty of perjury under the laws offthe State of California, that the above is true and correct. Executed on May 15, 2018, at Los Angeles, California. PROOF OF SERVICE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE Case Name: Century-National Insurance Company v. Burness Flooring, Inc., et al. Case Number: 30-2017-00948402 SERVICE LIST Woolls, Peer, Dollinger & Scher Attn: Katy A. Nelson 624 S. Grand Ave., 22™ Floor Los Angeles, CA 90017 P: (213) 629-1600 F: (213) 629-1660 E: knelson@wpdslaw.com (Attorney for Plaintiff CENTURY- NATIONAL INSURANCE COMPANY) Konoske, Akiyama & Brust, LLP Attn.: Doug Brust, Esq. 16880 Bernardo Drive. Ste. 250 San Diego, Ca 92127 P: (858) 385- 0871 F: (858) 613- 0871 E: dbrust@konoskelaw.com (Attorney for Defendant IAN GALLUCCI) Freeman Mathis & Gary LLP Att.: Daniel Walsh, Esq. 550 S. Hope Street, Ste. 2200 Los Angeles, Ca 90071 P: (213) 615-7000 F: (213) 615-7100 E: dwalsh@fmglaw.com (Attorney for Defendant JAKE POTVIN) PROOF OF SERVICE