Selman Breitman San Francisco Attorneys Prevent Stay of Coverage Lawsuit in Order to Summarily Resolve Duty to Defend
Linda Wendell Hsu, Chair of Selman Breitman's San Francisco Insurance Practice Group, along with practice group members Mark Inbody and Quyen Thi Le, filed a declaratory relief action in the United States District Court for the Northern District of California on behalf of an insurer seeking a judicial declaration that the insurer has no duty to defend or indemnify its insureds in an underlying habitability action. In response to the insurer's complaint, the insureds filed a Motion to Dismiss, or in the Alternative, Stay the insurer's complaint. Such motions, particularly motions to stay, are routinely granted by the courts and are difficult to oppose due to the courts' preference to allow the underlying tort action to proceed first.
Here, the insureds argued that the motion to stay should be granted because there were overlapping facts in the insurer's declaratory relief action and the underlying action, so it would be prejudicial to the insureds to allow the declaratory relief action to proceed. Our attorneys opposed the insureds' motion on the grounds that the insurer was not seeking to adjudicate any "overlapping facts," but rather seeking a legal determination based on evidence that was a matter of public record, and thus no discovery was necessary to adjudicate the declaratory relief action. As such, there would be no prejudice to the insureds in allowing the declaratory action to proceed. The Court agreed with the argument set forth by our attorneys, and denied the insureds' motion. In explaining the basis for its opinion the Court provided a nearly verbatim resuscitation of the argument presented by our Opposition, and agreed that there would be no prejudice to the insureds in allowing the insurer's declaratory relief action to proceed forward on whether the insurer owes the insured a duty to defend. With this ruling, our client can proceed with seeking summary judgment on its declaratory relief case, and can ultimately obviate any obligation to continue to defend the insured.
This case is a prime example of how the expertise and experience of the attorneys in our Insurance Practice Group can make a significant and positive impact on the litigation of coverage disputes on behalf of insurers, especially where the underlying dispute is still pending. The opinion of the District Court here confirms that, where presented with thorough and thoughtful legal analysis and argument, courts are receptive to foundationally appropriate declaratory relief actions and will allow those actions to proceed simultaneously with an underlying dispute. For more information regarding filing a declaratory relief action on the duty to defend while an underlying action is pending, or to learn more about our San Francisco Insurance Practice Group, please contact Ms. Hsu at firstname.lastname@example.org.
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