ARROWOOD INDEMNITY COMPANYv.BEL AIR MART

United States District Court, E.D. California, Sacramento DivisionSep 7, 2011
CASE NO. 2:11-CV-00976-JAM-DAD (E.D. Cal. Sep. 7, 2011)

CASE NO. 2:11-CV-00976-JAM-DAD.

September 7, 2011


ORDER GRANTING BEL AIR MART'S MOTION FOR PARTIAL SUMMARY JUDGMENT


JOHN MENDEZ, District JudgePage 2

The motion of defendant and counterclaim-plaintiff Bel Air Mart ("Bel Air") for partial summary judgment regarding its right to be represented in an underlying lawsuit by independent counsel pursuant to California Civil Code section 2860 came on regularly for hearing on the 9:30 a.m. calendar on September 7, 2011, in Courtroom 6 of the above-entitled court, located at 501 I Street, Sacramento, CA 95814, the Honorable John A. Mendez presiding. Gary W. Osborne of Osborne Nesbitt, LLP appeared for Bel Air and MR. B. Celebrezze of Sedgwick LLP appeared on behalf of Arrowood Indemnity Company ("Arrowood").

Having considered the arguments of counsel, both written and oral, and good cause appearing, the Court hereby grants Bel Air's Motion for Partial Summary Judgment and hereby orders and declares that Bel Air is entitled to be defended in the underlying CERCLA lawsuit by independent counsel pursuant to California Civil Code section 2860. This ruling is based on the fact that several conflicts of interest exist between Arrowood and Bel Air which entitle Bel Air to be defended by independent counsel of its own choice. One such conflict is based on Arrowood's reservation to deny coverage if Bel Air expected or intended contamination, or if the contamination was "non-accidental," which are facts at issue in the underlying litigation which can, therefore, be controlled or impacted by panel counsel first retained by the Arrowood for the defense of the claim. A second such conflict exists by virtue of the fact that Arrowood is itself a defendant in the underlying CERCLA litigation, with an incentive to shift liability to Bel Air for expected, intended, and non-accidental discharges. A third such conflict exists by virtual of the fact that Arrowood has sued Bel Air in the instant insurance coverage litigation. Each and every one of these conflicts, considered separately or together, entitles Bel Air to be defended in the underlying CERCLA litigation by independent counsel of its own choice pursuant to California Civil Code section 2860.

IT IS SO ORDERED.