1260 BB Property LLC vs Certain Underwriters at Lloyd’s et al

Case Number

23CV00285

Case Type

Hearing Date / Time

Wed, 04/30/2025 - 10:00

Nature of Proceedings

Motions for Summary Judgment (2)

Tentative Ruling

For Plaintiff 1260 BB Property, LLC [“1260 BB”]: Jared M. Katz, Eric J. Munoz, William J. Ryan, Gregory J. Scandaglia.

                            

For All Defendants other than Defendant Liberty Mutual Fire Insurance Company [“Excess Insurers”]: Tyler M. Costanzo, Sava Alexander Vojcanin and Charles W. Deutsch.

                            

For Defendant Liberty Mutual Fire Insurance Company [“Liberty”]: Nicholas J. Boos.

HEARING

Two Summary Judgment Motions.

                  

RULINGS

A. The Liberty motion for summary judgment, or alternatively for summary adjudication, filed December 11, 2024, with amended notice of motion filed December 13 is DENIED except the Motion to Strike the Punitive Damage claim is GRANTED.

B. The Excess Insurers motion for summary judgment re Suit Limitation and Notice, filed December 9, 2024, is DENIED.

C. The trial date of 8/13/25 is confirmed. Do not stipulate for a continuance. This Court has invested a vast amount of time in this case. The case was filed in 1/2023; set for trial for on 9/25/24; continued by stipulation to 3/26/25; continued a 2^nd time by stipulation to 8/13/25; it will not be continued a 3^rd time. 21 trial dates are reserved; 8/14; 8/15; 8/18; 8/19; 8/21; 8/22; 8/25; 8/26; 8/28; 8/29; 9/1 [holiday]; 9/2; 9/4; 9/5; 9/8; 9/9; 9/11; 9/12; 9/15; 9/16; 9/18; 9/19 = 21 days; all trial documents including in limine motions, trial briefs, witness lists [with time estimates], exhibit lists, customized jury instruction and jury verdict forms, are due August 6.  

D. There is a request for a jury trial, but the Court does not find jury fees have been posted.

Acknowledgements

The Court acknowledges and appreciates the professional work done by counsel in the case.^[1] The case has been contentious; acrimonious at times.

Analysis

The Operative Underlying Complaint

1260 BB’s FAC [924 pages] filed in May 2023 is framed in 4 counts:

1. Breach of Contract Against Defendants/Primary Insurers.

2. Declaratory Judgment Against Defendants/Primary Insurers.

3. Declaratory Judgment Against Defendants/Excess Insurers).

4. Breach of the Implied Covenant of Good Faith and Fair Dealing (Insurance Bad Faith) against All Defendants.

Prayer:

1. Monetary damages according to proof; and

2. Exemplary [punitive] damages according to proof; and

3. Attorney's fees; and

4. A declaratory judgment in its favor and against Defendants, including finding that Plaintiff is entitled to the relief alleged in the causes of action asserted above; and

5. Costs of suit; and

6. Pre and post-judgment interest.

The Operative Answers

Liberty filed an answer in June 2023; general denial and 18 affirmative defenses.

Excess Insurers filed an answer in June 2023; general denial and 14 affirmative defenses.

The First Motion for Summary Judgment

The Liberty Motion

It is a motion for summary judgment, or alternatively for summary adjudication; was filed 12/11/24; an amended motion was filed 12/13/24.

The matter was original set for March 12, 2025. On that date it was continued sua sponte to April 23 and again continued sua sponte to April 30.

Liberty moves the Court, per Code of Civil Procedure section 437c, for summary judgment or, in the alternative, summary adjudication.

Liberty claims that both of 1260 BB’s claims against Liberty fail as a matter of law because this action is untimely. The Liberty insurance policy at issue in this action - in compliance with California law - explicitly bars all legal action against Liberty “unless commenced within one year next after the loss or damage occurs.” Though California law tolls limitations period such as this between the time a claim is reported and the claim is denied, because the undisputed facts here demonstrate that 1260 BB did not notify Liberty of the loss until approximately four years after the mudslide loss at issue. Because 1260 BB’s time period to sue had already run by the time it gave Liberty notice of the loss, no tolling period applies, and this action is time barred.

Liberty also claimed that, even if 1260 BB’s lawsuit was timely, its claims fail because coverage is not triggered under the Liberty policy until the primary insurers have paid the full amounts of their limits because it is undisputed that the primary insurers have not paid the full amount of their limits; that Liberty cannot have any payment obligation and cannot have breached the implied covenant of good faith and fair dealing. 

Liberty contends 1260 BB can neither maintain its claim for bad faith nor its request for a declaration that the primary insurers’ payment of amounts purportedly due will (in the future) exhaust the primary layer of insurance such that coverage under the excess policies will then (in the future) be triggered. 

Liberty argues it is entitled to summary judgment.

Liberty’s motion for summary adjudication in the alternative is brought pursuant to Cal. Code of Civ. Proc. § 437(c)(f)(2), and seeks summary adjudication on the following issues:

Issue No. 1: 1260 BB’s third cause of action for declaratory judgment fails as a matter of law as to Liberty.

Issue No. 2: 1260 BB’s fourth cause of action for breach of the implied covenant of good faith and fair dealing fails as a matter of law as to Liberty.

Issue No. 3: 1260 BB’s claim for punitive damages fails as a matter of law as to Liberty.

Liberty filed the applicable Separate Statement of Undisputed Facts.

                 Supported by the Declaration of Michael Famigliett

He testifies; summarized: He is familiar with the manner in which property insurance claims made under policies issued by Liberty are investigated, adjusted, and paid; personally familiar with the manner in which the records related to the investigation of claims are maintained and prepared; it is general practice and procedure to maintain records and document acts and events concerning the investigation of a claim at or about the time such records are received or such acts or events occur; claim file for a particular claim generally contains records and documentation regarding the handling of that claim, and the claim notes function as a diary of activities regarding a given claim that are entered by adjusters or other personnel at or near the time of the acts or events described therein; Liberty’s claim files and claim notes are reliable business records. Liberty issued excess Policy No. MQ2-L9L-538747-057 for the policy period April 1, 2017 to April 1, 2018; true copy of the Excess Policy attached as Exhibit A to the Index of Exhibits; attached to the Index of Exhibits as Exhibit B is a true copy of a December 20, 2021 email from Josh Collier to Liberty, which is in Liberty’s claim file; Mr. Collier’s email notified Liberty of a claimed December 2017 loss consisting of property damage to a hotel at 1260 Channel Dr., Santa Barbara, California, and business income loss, caused by a mudslide;  email referenced the Liberty Excess Policy number, and it was the first time Liberty was notified of a claimed loss sustained by 1260 BB Property, LLC caused by the Mudslide; after receiving Mr. Collier’s December 20, 2021 email Liberty opened a claim file relating to the Mudslide and assigned the claim to adjuster Tania Heinzen for handling; supervised her work on the claim; claim was subsequently transferred from Ms. Heinzen to Joan Donnelly; supervised her work on the claim as well; Exhibit C is a true copy of an email chain which is in Liberty’s claim file; email chain shows that Ms. Heinzen emailed Stuart Whiteside on December 21, 2021, cc’ing Josh Collier, and informed him of her assignment to the Mudslide claim to Liberty; asked Mr. Whiteside to confirm the date of loss; email chain shows that Mr. Collier responded via email the same day, December 21, 2021 and stated that the date of loss was January 9, 2018; Exhibit D is a true copy of an email chain which is in Liberty’s claim file; email chain shows that, on December 21, 2021, Stuart Whiteside sent an email to Tania Henizen, cc’ing Josh Collier; in that email, Mr. Whiteside stated that the claim was reported to the excess insurers related to a January 9, 2018 mudslide event; Mr. Whiteside stated that there was a separate claim involving a wildfire event that affected the subject hotel but he said that claim would not reach Liberty’s coverage layer; December 21, 2021 was the first time Liberty was notified of a claimed loss sustained by 1260 BB Property relating to a December 2017 wildfire; not aware of 1260 BB Property ever making a claim to Liberty for loss caused by the December 2017 wildfire.     

Supported by the Declaration of Nicholas Boos

Summarized: Attached to the Index of Exhibits as Exhibit G is a true excerpted copy of the transcript of the deposition of Michael Cerf, taken in this action. Attached to the Index of Exhibits as Exhibit H is a true copy of Exhibit 2 to the deposition of Michael Cerf, taken in this action.

Requested Judicial Notice

1. The Complaint filed in this action, Santa Barbara County Superior Court Case No. 23CV00285 on January 23, 2023. 

2. The First Amended Complaint filed in this action, Santa Barbara County Superior Court Case No. 23CV00285 May 9, 2023. 

Ruling: The Court takes Judicial Notice of the above exhibits.

Judicial notice is the recognition and acceptance by the court, for use by the trier of fact or by the court, of the existence of a matter of law or fact that is relevant to an issue in the action without requiring formal proof of the matter. Judicial notice may not be taken of any matter unless authorized or required by law. Matters that are subject to judicial notice are listed in Evid. Code §§ 451 and 452. A matter ordinarily is subject to judicial notice only if the matter is reasonably beyond dispute. Taking judicial notice of a document is not the same as accepting the truth of its contents or accepting a particular interpretation of its meaning. While courts take judicial notice of public records, they do not take notice of the truth of matters stated therein. When judicial notice is taken of a document, the truthfulness and proper interpretation of the document are disputable. Herrera v. Deutsche Bank National Trust Co., (2011) 196 Cal. App. 4th 1366.)  [Emphasis the Court’s]

Supported by Points and Authorities and an Index of Exhibits.

Summarized: This is an insurance dispute in which 1260 BB asserts causes of action against multiple primary and excess insurers.  Liberty is one of the defendant’s excess insurers. 1260 BB asserts two causes of action against Liberty: The Third Cause of Action seeks a declaration that the primary insurers’ payment of amounts purportedly due will exhaust the primary policies such that coverage under the excess policies will be triggered; and the Fourth Cause of Action alleges breach of the implied covenant of good faith and fair dealing.  Both claims fail as a matter of law based on the undisputed facts.

The Four Seasons Hotels Ltd. purchased insurance pursuant to a property insurance program providing up to $700 million of coverage for the policy period of April 1, 2017, to April 1, 2018.  The property insurance program involved primary and excess insurers.  Under the insurance program, the primary and excess insurance is not issued by a single entity, but by several separate insurance companies.  The $700 million insurance program includes a primary layer of $50 million and excess insurance coverage above $50 million up to $700 million. 

Certain insurers in the program have agreed to participate as primary insurers responsible for liability up to $50 million.  Other insurers in the program have agreed to participate as excess insurers responsible for a share of liability more than $50 million.  Some insurers participate as both primary and excess. Liberty participated in the insurance program solely as an excess insurer that provided insurance more than $50 million.  Liberty issued an Excess Policy for the policy period April 1, 2017, to April 1, 2018. The Excess Policy provided coverage of $22.5 million (a 5% pro-rata share of $450 million) in excess of $50 million, for risk of direct physical loss or damage in any one Occurrence to covered property except as excluded. The Excess Policy includes the following notice provision: The Insured agrees to file with the Company, a report of every loss or damage which might be or become a claim under this Policy; and shall, subsequent to such report, upon determination of the amount of each loss or claim, file with the Company a detailed sworn Proof of Loss.  Loss shall be payable by the Company within 30 days after filing final Proof of Loss by the Insured.

It also includes a contractual limitation provision which states, in part: Every action or proceeding against the insurer for the recovery of a claim under or by virtue of this contract is absolutely barred unless commenced within one year next after the loss or damage occurs. 

The Excess Policy also states that Liberty has no payment obligation until the primary layer of insurance is exhausted. It is agreed the following policy conditions supersede and replace those of the policy to which this endorsement is attached. Regardless of whether the policy is attached to another policy, the terms and conditions of the policy and endorsements attached thereto shall determine the coverage afforded by this policy. No liability shall attach under this policy until and only after the Primary Insurer has paid the full amount of the Primary Coverage and all lower level excess insurers’ limits of liability, plus any deductible which might be borne by the Insured through operation of any deductible clause in the primary insurance, except as provided under Item 3. of this endorsement. The maximum recover in any one occurrence for any coverage subject to a sublimit shall not exceed the sublimit provided by the Primary Insurer or any lower level excess insurer. In the event of the bankruptcy or insolvency, or other financial impairment, of any underlying insurer, this Company shall not be liable for the obligations of the underlying insurer. The insurance shall apply as if the underlying insurance were valid and collectible. This insurance shall not replace the underlying insurance. 

On December 9, 2017, a Wildfire spread through Santa Barbara. 1260 BB sustained a loss because of the Wildfire. By December 11, 2017, Four Seasons sent an email regarding ash on the hotel and evacuation of hotel guests. 1260 BB made insurance claims totaling $6.746 million for losses caused by the Wildfire, and certain insurers paid a total of $5.953 million in response to those claims.  On January 9, 2018, torrential rains caused water, boulders, mudflow, and debris to roll down foothills.  1260 BB’s hotel closed its doors because of the Mudslide on January 9, 2018, and 1260 BB sustained a loss because of the Mudslide. Certain defendant insurers responsible for the first layer of primary insurance of $50 million have paid $46,670,264 to 1260 BB under the primary policies in response to insurance claims made by 1260 BB for loss caused by the Mudslide. 

Those primary insurers have refused to pay the remaining $3,329,736 in policy limits provided by the first-level primary insurance policies.  The limits of the primary insurers’ insurance policies have not exhausted.  On December 20, 2021 - almost four years after the Mudslide - Liberty was notified of an insurance claim to it related to the Mudslide.  The next day, December 21, 2021, Liberty learned that 1260 BB had made a separate claim relating to the Wildfire.  Liberty was told that the separate Wildfire claim would not reach Liberty’s coverage layer. 

On January 23, 2023, 1260 BB filed the lawsuit against its primary and excess insurers, including Liberty.  1260 BB filed a first amended complaint on May 9, 2023. Liberty is sued as one of the excess insurers.  It alleges that the primary insurers paid $46,670.264 in response to that loss and refuse to pay the $3,329,736 remainder of the $50,000,000 primary limit.  1260 BB also alleges that it sustained a loss more than $6.7 million caused by the Wildfire.  It alleges that certain insurers have paid $5.953 million in response to that loss and refuse to pay more than $793,000 allegedly owed in connection with the Wildfire.  1260 BB asserts causes of action against the primary insurers for breach of contract (the First Cause of Action), declaratory judgment (Second Cause of Action), and breach of the implied covenant of good faith and fair dealing (Fourth Cause of Action). 

1260 BB asserts causes of action against the excess insurers - including Liberty - for declaratory judgment (Third Cause of Action) and breach of the implied covenant of good faith and fair dealing (Fourth Cause of Action).  The Third Cause of Action seeks a declaration that the primary insurers’ payment of amounts purportedly due will exhaust the primary policies such that coverage under the excess policies will be triggered, and the Fourth Cause of Action alleges breach of the implied covenant of good faith and fair dealing against the insurers for arbitrarily and without good cause or a genuine basis to raise a dispute, and in bad faith disavowal and failure] to perform their contractual obligations to pay the Wildfire and Mudslide Claims.  1260 BB’s claims against Liberty fail as a matter of law.

1260 BB’s claims against Liberty fail because 1260 BB filed this action beyond the binding one-year limitation provision in the Liberty policy.

The default statutes of limitation for breach of written contract claims and tortious insurance bad faith claims are four years and two years, respectively.  Cal. Code Civ. Proc. Sections 337(a), 339(1).  It is a well-settled proposition of law that the parties to a contract may stipulate therein for a period of limitation, shorter than that fixed by the statute of limitations, and that such stipulation violates no principle of public policy, provided the period fixed be not so unreasonable as to show imposition or undue advantage in some way. Such contractual limitations are upheld regardless of hardship or of the underlying merits of the claim.  Courts have repeatedly held that insurance policy contractual limitation periods of one year are reasonable and enforceable. 

Indeed, first party fire insurance policies are required to contain a provision that no lawsuit for recovery on any claim shall be sustainable unless commenced within twelve months after inception of the loss.  Here, the Policy’s contractual limitation provides: “Every action or proceeding against the insurer for the recovery of a claim under or by virtue of this contract is absolutely barred unless commenced within one year next after the loss or damage occurs.” Consistent with California law, this provision is squarely enforceable.

The one-year suit limitation bars contract and other actions not filed within the limitations period if the claim for relief is on the policy.  The phrase “on the policy” is broadly construed to include those claims that are generally grounded in a failure to pay benefits that are due under the policy.  Thus, a bad faith claim based on an insurer’s denial or mishandling of a claim for policy benefits is “on the policy” and subject to a contractual limitations provision.  A claim for declaratory relief is similarly “on the policy” where it is grounded on an alleged failure to pay policy benefits. 1260 BB’s claim for declaratory judgment seeks declarations that “the limits of the primary policies will be or have been exhausted,” that “coverage under the excess policies has been triggered,” and that excess insurers are required to pay policy benefits. 

The declaratory relief claim is “on the policy” and is barred pursuant to the contractual limitation period.  Similarly, 1260 BB’s claim for breach of the implied covenant of good faith and fair dealing (i.e., bad faith) is based on its assertion that the excess insurers, including Liberty, unreasonably failed to perform their contractual obligations to pay the Wildfire and Mudslide Claims. 

The bad faith claim is “on the policy” and barred by the contractual limitation provision.

1260 BB’s lawsuit is untimely under the contractual limitation provision. An insurer need not show anything more than the passage of the requisite period for a contractual limitations provision to bar a lawsuit. Under California law, the one-year limitations period begins to run at that point in time when appreciable damage occurs and is or should be known to the insured, such that a reasonable insured would be aware that his notification duty under the policy has been triggered. The one-year contractual limitations period is not tolled until the insured gives notice of the claim to the insurer. 

Here, the Wildfire occurred in December 2017 and the Mudslide occurred in January 2018.  Liberty was not notified of a claim made by 1260 BB relating to the Mudslide until December 20, 2021. Liberty later learned that 1260 BB had made a separate claim relating to the Wildfire and was told the separate claim would not reach Liberty’s coverage layer. Because Liberty was not notified of a claim by 1260 BB until approximately four years after the Wildfire and the Mudslide, the one-year contractual limitation period expired before it could ever be tolled.  This action, filed well after the already-belated notice, was thus untimely. 

In summary, 1260 BB’s causes of action are barred by the one year suit limitation provision. Plaintiff’s causes of action fail because the primary layer of coverage has not exhausted 1260 BB’s causes of action against Liberty also fail as a matter of law because the primary layer of insurance has not exhausted.

The Bad Faith Claim Fails.

Even if 1260 BB’s bad faith claim was not barred by the contractual limitations provision, it fails as a matter of law because no policy benefits are due.  Proof of a cause of action for breach of the implied covenant of good faith and fair dealing in the insurance context requires evidence that (1) benefits due under an insurance policy were wrongfully withheld, and (2) the reason for withholding the benefits was “unreasonable” or “without proper cause.” Here, there was no wrongful withholding of policy benefits because no amount was ever, or is currently, due under the Liberty policy. 

The terms of the Liberty policy require payment of the entire layer of primary insurance before Liberty can have a payment obligation.  Specifically, the Liberty policy states:

“No liability shall attach under this policy until and only after the Primary Insurer has paid the full amount of the Primary Coverage and all lower level excess insurers’ limits of liability, plus any deductible which might be borne by the Insured through operation of any deductible clause in the primary insurance, except as provided under Item 3. of this endorsement.” 

The provision precludes any payment obligation by Liberty.

The law concerning exhaustion of underlying insurance is clear: absent actual payment of “the full amount of the Primary Coverage,” the Excess Policy is not yet triggered, and Liberty cannot be held liable to 1260 BB for payment of policy proceeds. Here, it is undisputed that “Primary Insurer” has not “paid the full amount of the Primary Coverage.”  The primary insurers paid $5.953 in response to 1260 BB’s $6.746 Wildfire claim and paid $46,670.264 in response to the Mudslide claim. 

The primary insurers have refused to pay the $3,329,736 remainder of the $50 million primary layer and it is undisputed that limits of the primary insurers’ insurance policies have not exhausted.  1260 BB’s bad faith claim fails as a matter of law because there has been no withholding of benefits due under the Liberty policy.

The Declaratory Relief Claim Fails

1260 BB’s claim for declaratory relief against Liberty similarly fails because the primary layer of insurance has not exhausted.  1260 BB seeks declarations that “the limits of the primary policies will be or have been exhausted,” that “coverage under the excess policies has been triggered,” and that excess insurers are required to pay policy benefits.  1260 BB cannot obtain any of the declarations it seeks. Under terms of the Liberty policy Liberty does not have a payment obligation until the limits of the primary policies are exhausted. 

It is undisputed that the limits of the primary policies have not been exhausted.  Therefore, contrary to the declarations 1260 BB seeks, coverage under the Liberty policy has not been “triggered” and Liberty is not required to pay policy benefits.

California courts have rejected requests for declaratory relief where an excess insurer’s policy requires exhaustion of a primary insurer’s policy limits. That is precisely what 1260 BB seeks to do here.  1260 BB acknowledges that the primary policies have not exhausted, yet it seeks to continue to involve the excess insurers in this lawsuit.  That effort is improper. 1260 BB’s declaratory relief claim fails.

1260 BB’s Claim for Punitive Damages

Even if 1260 BB could maintain its bad faith claim as a matter of law it cannot maintain its claim for punitive damages against Liberty. 

Liberty requests summary judgment in its favor.  In the alternative, it requests summary adjudication as to each of 1260 BB’s causes of action against it, and as to 1260 BB’s claim for punitive damages.  

1260 BB’s Response

Filed February 26, 2025; summarized: 1260 BB was the owner of The Biltmore and Coral Casino Beach and Cabana Club.  The Biltmore was a luxury hotel in Santa Barbara, situated on a large property with gardens and tropical landscaping.  Located across the street, the Coral Casino was a small, private membership club that was classified as a department of The Biltmore and serviced both hotel guests and club members from the local and surrounding communities.  The Hotel was managed on behalf of 1260 BB by Four Seasons, which is an operator of branded luxury hotels and resorts throughout the world. 

The insurance policies at issue in this litigation are part of a property insurance program providing up to $700 million of coverage.  Liberty is an insurer who participated in the Insurance Program.   Liberty issued a policy of insurance which insured the Hotel against certain perils and risks of loss for the policy period April 1, 2017, to April 1, 2018.  The perils under the Liberty Policy included wildfires and mudslides. The Liberty policy included coverage for property damage, business interruption, extra expenses, and soft costs.  The attachment point for the Liberty Policy is $50 million.  As the owner of the Hotel, 1260 BB is an additional Named Insured under the Liberty Policy. 

1260 BB expected and relied on the insurance coverage provided by Excess Insurers to protect the Hotel and 1260 BB’s business from a catastrophic event.  Two such events struck Santa Barbara, including the Hotel, in late 2017 and early 2018. 

The first was the Wildfire, which at the time was the largest wildfire in modern California history.  The Wildfire reached the Santa Barbara area on December 10, 2017, where it burned until December 26, 2017.  The Hotel suffered extensive property damage and was so impacted that it had to close for nearly one month as remediation efforts were undertaken. The Hotel was finally able to reopen on January 8, 2018.  It was hit by heavy and sustained rain and there was a massive mudslide with water, boulders, mudflow, and debris flowing down the hillsides previously affected by the Wildfire and inundating the city.  Rivers of mud and rock stripped from the hills flowed through Santa Barbara, with rivers of mudflow that reached depths of up to five feet.  The Hotel was hit hard and suffered tens of millions of dollars in property damage.  The Hotel was forced to close again and this time it had to remain shut for nearly six months due to the extent of the damage and the necessary repairs. 

Supported by the Declaration of Eric Munoz in Opposition to Liberty’s separate statement of undisputed facts; summarized: attaches exhibits #1-34.

Supported by 1260 BB Property Notice of Lodgment regarding Liberty Statement of Facts Regarding Liberty’s Motion for Summary Judgment or, in the Alternative, Summary Adjudication.

The Court will allow 1260 BB’s Amended Notice of Lodgment of Evidence in Support of Its Opposition to Liberty Mutual Fire Insurance Company’s Separate Statement of Undisputed Facts for Summary Judgment or, in the Alternative, Summary Adjudication, to be considered as this was an inadvertent mistake of Joseph Swee.

Liberty’s Reply

Filed March 5, 2025; summarized: Contends the Liberty Motion is straightforward. 1260 BB never notified Liberty or its proper agent of a claim under Liberty’s Policy until four years after the loss at issue, meaning this action is time barred because the one year contractual limitation period was never tolled. Separately, even if timely, 1260 BB’s claims for bad faith and declaratory relief fail principally because Liberty cannot otherwise have a current obligation to pay benefits.

1260 BB’s Opposition through purported reliance on some 115 additional “facts” is an attempt at distraction and misrepresentation of facts and law. Each of 1260 BB’s arguments fail and Liberty is entitled to judgment as a matter of law.

First, 1260 BB’s arguments regarding notice to Aon Reed Stenhouse Inc. and Stuart Whiteside fail because this notice was plainly insufficient under the language of the Liberty Policy and California law. Namely, the Policy calls for notice of “loss or damage which might be or become a claim under the Liberty Policy.” These “Notices” - even if made to Liberty’s agents as 1260 BB posits - provided absolutely no such indication. In accordance with cases applying California law, notice was not provided as required and this suit is time barred.

Second, 1260 BB’s argument that it can maintain its bad faith claim even though there has concededly been no exhaustion of the primary layer fails. Initially, the abstracted “contractual duties” 1260 BB now purports to rely on were not even vaguely alleged in their operative FAC. However, even if 1260 BB’s apparent new legal theory could be considered, its reliance on wholly distinguishable case law cannot salvage its claim. At bottom, 1260 BB has not presented and cannot present any evidence showing any purported failing of Liberty resulted in a detriment to its ability to recover policy benefits. 

Third, 1260 BB’s declaratory relief claim is premature. As clearly set out in Liberty’s motion and in compliance with the California Code of Civil Procedure, Liberty’s motion was and is in the alternative. If the action is not time barred, 1260 BB is still not entitled to declaratory relief because it seeks declaration before Liberty’s liability has attached through exhaustion. There is no illogic to Liberty’s arguments and 1260 BB’s citation to Ludgate is a fallacy.

Fourth, 1260 BB’s attempt to shift the burden on the clear and convincing evidence it must present to support its claim for punitive damages fails; notwithstanding 1260 BB’s apparent keenness to sit on nothing more than its conclusory allegations, Liberty did present evidence showing a lack of oppression, fraud, or malice. As a result, 1260 BB’s punitive damages claim fails.

The Court’s Conclusions

The Court agrees with Liberty’s argument that this case is clearly not one for a punitive damage claim. Liberty’s contention makes sense and will be supported by the Court. Punitive damages are disfavored under California law and should be granted only with the greatest caution and in the clearest of cases.  The evidence necessary to establish a claim for punitive damages is of a different dimension from that needed to support a finding of bad faith. To establish an entitlement to punitive damages, 1260 BB must present clear and convincing evidence of fraud, oppression, or malice. Liberty may be liable for punitive damages only if 1260 BB can offer such evidence that Liberty is guilty of conduct so vile, base, contemptible, miserable, wretched, or loathsome that it would be looked down upon and despised by ordinary decent people. Here, there is no reasonable, arguable, convincing, or preponderating evidence, let alone clear and convincing evidence, that supports a claim that Liberty’s action was despicable, or that it acted with oppression, fraud, or malice.

The Court has read 1260 BB’s argument that its request for punitive damages in connection with its bad faith claim should not be dismissed. The Court disagrees with 1260 BB’s argument that the Court needs to ignore the Liberty claim for summary adjudication because it is based on an ipse dixit assertion that there is no evidence that it acted with oppression, fraud or malice and that summary judgment requires the presentation of evidence in the form of affidavits, declarations, admissions, answers to interrogatories, depositions, and matters of which judicial notice to demonstrate that 1260 BB does not possess and cannot reasonably obtain necessary evidence to establish his or her claim (citing Johnson & Johnson, 192 Cal.App.4th at p. 854). The Court is not persuaded with 1260 BB’s defense that despite 1260 BB’s claim, given its failure to satisfy its burden of providing evidence that demonstrates its entitlement to relief, there is evidence in the record demonstrating that Liberty’s conduct was oppressive. That “evidence” was not persuasive in the context of what needs to be proved. 

As to all the other claims made in Liberty’s Summary Judgment Motion 1260 BB has the much stronger case.

Liberty argues that its Motion for summary judgment or adjudication on 1260 BB’s declaratory and bad faith claims should be granted because the claims are purportedly untimely, relying on a provision of the policy that requires suit to be brought within one year after the loss or damage occurs.  This argument is fatally flawed and there is a triable issue of fact as to the claim made.

California law is clear that, once notice is provided to an insurer, the limitations provision of the policy is tolled for as long as the claim is being adjusted.  Here, the facts demonstrate that the Mudslide occurred on January 9, 2018; there is a triable issue of fact as to whether notice of the Mudslide was properly provided within no more than one day, thereby trigging tolling. 

The facts further present a triable issue of fact that, as of the date of the filing of this suit, Liberty had not denied 1260 BB’s Mudslide Claim and the claim remained open and subject to adjustment by Liberty.

There is a triable issue of fact as to whether the suit limitation period was tolled from January 10, 2018, through the present supporting the claims against Liberty as being timely.

Liberty also argues that judgment should be entered against 1260 BB’s declaratory judgment and bad faith claims because the primary policies have not been exhausted.  This argument also fails.  California law is clear that exhaustion of the primary policies is not required to sustain either claim against Liberty as an excess insurer.

The Court agrees for purpose of this motion that the Liberty Policy contains two provisions of note. 

First, the Liberty policy provides that: “The Insured agrees to file with the Company, a report of every loss or damage which might be or become a claim under this Policy.” 

Second, the Liberty policy contains a provision stating: “It is agreed that any such notice given to Aon Reed Stenhouse Inc Toronto shall be deemed as having been given to the Company.” 

Under these policy provisions, 1260 BB arguably could satisfy its obligation to provide timely notice of a claim through Aon Reed Stenhouse. 

1260 BB’s argument related to notification of the wildfire and the mudslide raises triable issues of fact.

On December 11, 2017, Diane Balasa, who was the Manager of the Risk and Insurance Programs for Four Seasons, notified Stuart Whiteside of the Wildfire causing damage to the Hotel. Mr. Whiteside worked as an Executive General Adjuster at Sedgwick and was designated as the Control Adjuster for all claims under the Excess Policies.

Even before the claims at issue in this litigation, Mr. Whiteside was known to Four Seasons and Ms. Balasa through his experience as the Four Seasons account adjuster.  Ms. Balasa also sent her December 11, 2017, notice email to Josh Collier of Aon Risk Services Northeast.  Among other responsibilities, Mr. Collier was charged with providing certain claims services in connection with the Four Seasons Insurance Program. 

After receiving a copy of Ms. Balasa’s December 11 email, Mr. Collier sent a further email informing various insurance company representatives of the Wildfire loss.  Excess Insurers do not raise any defense or issue in this litigation regarding notice of the Wildfire claim. After the Mudslide struck on January 9, 2018, 1260 BB (through its representatives) again acted promptly to inform all Excess Insurers of the Mudslide loss in multiple ways. That very same day, Michael Cerf, who was the Director of Finance at the Hotel, sent an email to Mr. Whiteside with the subject line “Notice of claim – FS Santa Barbara” in which he notified Mr. Whiteside of heavy rains and flash flood conditions as well as heavy mud and debris throughout the Hotel. 

This notification to Mr. Whiteside was arguably consistent with customary practice under the Four Seasons Insurance Program of providing notice through Mr. Whiteside.  Confirming that no further steps were necessary, Mr. Whiteside responded in writing to Mr. Cerf and said that he will ensure the insurance carriers are put on notice. Mr. Whiteside, his local adjuster at Sedgwick, and Mr. Cerf all understood that statement to mean that Mr. Whiteside would make sure the insurers received notice.  And Mr. Cerf relied on Mr. Whiteside’s representation that he would take care of the notice matter.  On the same day that he received the Cerf Notice, and without waiting for any further authorization from the insurance companies, Mr. Whiteside began the adjustment process for the Mudslide on January 9, 2018. 

On January 10, 2018, which was one day after the Mudslide, Mr. Collier sent an email in addition to the Cerf Notice.  The subject line of Mr. Collier’s message started with “New Loss” and the email provided notice of “flash flooding and mudslides” causing damage to the Hotel.  This email was sent to various insurance company representatives, including a person named Jennifer Kinsey.  Ms. Kinsey was an employee Aon Reed Stenhouse.  Ms. Kinsey’s inclusion was significant because Aon Reed Stenhouse was expressly identified as an authorized recipient of notice under the Liberty Policy. 

Following her receipt of the January 10th email, Jennifer Kinsey remained engaged at Aon Reed Stenhouse in connection with the Mudslide loss.  Ms. Kinsey sought and received information during the adjustment process.  And she was informed when the claim reached major milestones such as passing $40,000,000 and then later passing $50,000,000. 

There is a triable issue of fact related to Liberty’s refusal to pay and 1260 BB’s Operative Complaint. Following the Wildfire and the Mudslide, 1260 BB claimed approximately $64 million in losses under the Insurance Policies, including losses for property damage, business interruption, and extra expense.  1260 BB suffered losses of approximately $58 million from just the Mudslide alone.  Liberty refused to pay its share of the more than $8 million in losses that were within their excess policy limits.  Under industry custom and practice, as informed by the California Insurance Code, an insurer such as Liberty has duties to the insured beyond just their contractual duty to pay for covered losses. Those duties include the duties to maintain a complete claim file, follow proper claims handling procedures, oversee the independent adjustor and adjustment team, reasonably and diligently investigate the claim, keep the insured informed, and resolve the claim fairly in a timely manner, to name just a few. 

There is a triable issue of fact as to whether Liberty failed to satisfy numerous of these obligations. As of at least September 19, 2024, 1260 BB’s claim for losses arising from the Mudslide remained open in the Liberty claim file and still subject to the adjustment process.

There is a triable issue of fact as to whether Plaintiff’s Causes of Action are timely under the Liberty Policy’s contractual suit limitation provision and to whether the January 10, 2018, notice to Aon Reed Stenhouse constituted proper notice under the Liberty Policy.

On January 10, 2018, Josh Collier sent an email (the “ARS Notice”) to several recipients, including insurance company representatives, Four Seasons personnel, and several Aon employees.  The ARS Notice provided notice of a “a new loss for the Four Seasons Santa Barbara from the recent flash flooding and mudslides in the area.”  Arguably, Liberty did not identify any deficiency in the content of this notice during its Person Most Qualified deposition during this litigation, and arguably said that it did not know if the information in the ARS Notice was inconsistent in any way with what Liberty would expect to be in a notice.  Other Excess Insurer Defendants similarly were unable to identify any purported shortcoming in the content of the notice, with some even affirmatively agreeing the contents were sufficient. 

The sworn deposition testimony from Liberty and the other Excess Insurer Defendants’ designated representatives, each of whom was a claims adjuster with primary responsibility for handling the Mudslide Claim, raises a triable issue of fact as to if that alone provides an adequate basis for a jury to conclude that the ARS Notice had all the information necessary to constitute proper notice. 

The ARS Notice was sent directly to Ms. Kinsey, who was an employee of Aon Reed Stenhouse.  Arguably under the provisions of the Liberty Policy, notice to Aon Reed Stenhouse is deemed notice to Liberty and thus the ARS Notice discharged any notice obligation that 1260 BB had.

Reasonable people can differ as to whether the terms of the Excess Policies resolve this matter definitively, and whether the California Insurance Code compels the same conclusion.  Under the Code, “any person who has authority or responsibility to notify an insurer of a claim upon receipt of a notice of claim by a claimant” constitutes an “insurance agent” and “any person employed or authorized by an insurer, to conduct an investigation of a claim on behalf of an insurer or a person who is licensed by the Commissioner to conduct investigations of claims on behalf of an insurer” constitutes a “claims agent.” 

Aon Reed Stenhouse could arguably qualify under these definitions given its status under the Liberty Policy as a designee for notification of claims.  Aon Reed Stenhouse’s status as a claims agent and insurance agent matters because, under the express provisions of the Code, the failure of an insurance agent or claims agent to promptly transmit notice of claim to the insurer shall be imputed to the insurer.  There is a triable issue of fact as to whether the insured’s notice obligations are satisfied when the notice reaches an insurance agent or claims agent regardless of what happens thereafter.  The California Insurance Code arguably confirms what the Excess Policies already established: 1260 BB is not required to do anything more than notify Aon Reed Stenhouse, which is what it did.

There is a triable issue of fact as to whether Liberty may successfully attack the contents of the ARS Notice by asserting that the document did not specifically identify Liberty by its name and policy number. 1260 BB argues it is foreclosed by its own sworn deposition testimony in which Liberty admitted that it could not identify any apparent deficiencies in the ARS Notice. 

1260 BB argues that even without that testimony, the result would be the same because under California law, the adequacy of notice must be determined by reference to the “policy notice provisions” and there is no provision in the Liberty Policy that imposes a name or policy number requirement for a notice and points to the fact that the Liberty Policy instead merely requires a report of a loss.  There is a triable issue as to whether Liberty can impose new requirements that are not contained in their policies, particularly when California law requires that any ambiguous notice provision must be construed against an insurer. 

1260 BB argues the Court need not look outside the policies to resolve this matter, the result would be the same even if it did and raises a triable issue of fact as to whether Notice serves only a limited role: to provide a carrier with sufficient information about an occurrence to enable the carrier or the carrier’s adjuster to initiate an investigation to determine the existence and extent of any covered losses and consistent with that purpose and function, notice customarily is understood to require nothing more than a brief statement as to the occurrence of a peril at an insured property. 

There is a triable issue of fact as to whether the language used in the Liberty Policy would be understood in the insurance industry to demand nothing more. 1260 BB argues that under California law, the burden of seeking information and following up is generally on the insurer not the insured, and there is no reason to impose extracontractual requirements when, as here, an insurance policy does not contain detailed or specific demands concerning the content of notice.

Additionally, there is a triable issue of fact based upon 1260 BB’s argument that even if Liberty could somehow establish that the notice obligation under the Liberty Policy could not be satisfied until Aon Reed Stenhouse had the names or numbers of an excess insurer. Liberty’s argument still would fail here because the record evidence demonstrates that Aon Reed Stenhouse already knew the identities of the excess insurer defendants, including Liberty, as well as the numbers of their policies.  When Josh Collier wanted to obtain the policy numbers for the excess policies, he requested and received them from Aon Reed Stenhouse. It would be nonsensical to deny coverage to 1260 BB based on the failure to include information already known to the entity to whom notice was to be provided.

There is a triable issue of fact as to whether Liberty could prevail on the argument predicated not on the language of the Liberty Policy or any principle of California law but on the state of mind of Mr. Collier, who testified that he did not subjectively intend to notify Liberty when he sent the ARS Notice; that the intent of Mr. Collier is irrelevant and relying on Mr. Collier’s intent would be particularly inappropriate here as he was uniformed, could not recall ever reviewing any of the notice provisions of the Liberty Policy, and did not even make a determination as to the appropriate means to provide notice. 

There is a triable issue of fact as to what matters is the terms of the Liberty Policy and the California Insurance Code, which clearly provides for notice to Aon Reed Stenhouse. 

There is a triable issue of fact as to whether Liberty is also charged with Notice received by their Claims Agent Stuart Whiteside. It appears to the Court that the ARS Notice to Aon Reed Stenhouse makes this case straightforward at the summary adjudication stage because any notice obligation that 1260 BB had also would have been independently discharged through the email that the Hotel’s Director of Finance sent to Stuart Whiteside on the day of the Mudslide.  The subject line of the email was: “Notice of claim – FS Santa Barbara.”  In the body of the email, Mr. Cerf notified Mr. Whiteside of “heavy rains and flash flood conditions” as well as “heavy mud and debris” throughout the Hotel.  The email contained all the content necessary to inform Mr. Whiteside about the loss that had occurred at the property.  Mr. Whiteside apparently remained extensively involved throughout the life of the claim as the lead adjuster. 

Although Mr. Whiteside was not expressly designated in the Liberty Policy as an authorized representative to receive notice in the same manner as Aon Reed Stenhouse, California law still requires that notice given to a claims agent shall be imputed to the insurer regardless of whether the agent does – or does not – pass along notice.  The definition of a claim’s agent under the California Insurance Code is broad, covering any person employed or authorized by an insurer, to conduct an investigation of a claim on behalf of an insurer or a person who is licensed by the Commissioner to conduct investigations of claims on behalf of an insurer.

There is a triable issue of fact as to whether that provision encompasses Mr. Whiteside. 1260 BB argues that he was the account adjuster for the entire Four Seasons Program, and he was designated as the Control Adjuster for all claims under the Liberty Policy.  The company for which Mr. Whiteside worked, Sedgwick, had a standing contract with Liberty pursuant to which he was authorized to begin an investigation a claim upon receipt of notice without further approval from Liberty.  Consistent with that standing authority, Mr. Whiteside immediately began the investigation process on January 9th before the ARS Notice was even sent.  Throughout his involvement, Mr. Whiteside worked for and served as the “eyes and ears” of the insurance companies, including Liberty.  Mr. Whiteside was both a licensed California adjuster and was authorized to investigate on behalf of Liberty.  There is a triable issue of fact as to whether he constituted a claims agent under both prongs of Section 2695.2(d) of the California Insurance Code; 1260 BB correctly argues a reasonable jury could find so based on the evidence in the record.

1260 BB correctly argues this conclusion is bolstered by what occurred when Mr. Whiteside received the Cerf Notice.  Rather than object or insist that Mr. Cerf had to contact anyone else, Mr. Whiteside instead stated in writing in no uncertain terms: “I will ensure the insurance carriers are put on notice.”  As an experienced adjuster working on Four Seasons claims, Mr. Whiteside knew that the Four Seasons Insurance Program was layered, and he knew about the distinction between excess and primary insurers.  But Mr. Whiteside did not refer to any subset of insurers in his email; rather, he said that he would ensure “the insurance carriers” were put on notice.  Mr. Cerf interpreted Mr. Whiteside’s email as an affirmative representation that he would do anything necessary to further ensure the insurance carriers were directly informed about the Mudslide loss. and that consistent with Four Seasons’ customary practice, Mr. Cerf relied upon Mr. Whiteside.  Mr. Whiteside’s response to the Cerf Notice thus further confirms his status as a claims agent through whom notice must be imputed to Liberty under California law.

There is a triable issue of fact as to whether the one-year contractual suit limitation period has expired. 1260 BB argues that as a matter of well-established California law, a contractual suit limitation period in a commercial property insurance policy is tolled from the time the insured files a timely notice, pursuant to policy notice provisions, to the time the insurer formally denies the claim in writing and the provision in the Liberty Policy began to be tolled no later than January 10, 2018 when the ARS Notice was sent to Aon Reed Stenhouse.  Because Liberty never denied 1260 BB’s Mudslide Claim prior to the filing of this litigation, let alone issued a written denial, the limitation period remains tolled through the present and that means only one day of the one-year time period under the contractual suit limitation clause has expired; thus, this action is not time barred.

There is a triable issue of fact as to whether 1260 BB can maintain its Third and Fourth Causes of Action against Liberty without exhausting the primary policies’ limits. Liberty argues that summary judgment should be granted on 1260 BB’s third and fourth causes of action because the primary layer of insurance has not been exhausted.  But 1260 BB argues contrary to Liberty’s assertions, that California law does not require the primary policies be exhausted to sustain either a bad faith or declaratory judgement claim against Liberty.

There is a triable issue of fact as to the 4^th Cause of Action. 1260 BB argues Liberty is not entitled to Summary Judgment on 1260 BB’s Cause of Action for Bad Faith because the sole basis for this argument is Liberty’s assertion that 1260 BB’s bad faith claim fails as a matter of law because Liberty does not yet have a payment obligation under the Liberty Policy since the primary policies are not yet exhausted; that Liberty’s argument is without merit. 1260 BB argues an insurer has duties to its insured beyond just their contractual duty to pay for covered losses.  Those duties include the duties to maintain a complete claim file, follow proper claims handling procedures, oversee the independent adjustor and adjustment team, reasonably and diligently investigate the claim, keep the insured informed, and resolve the claim fairly in a timely manner, to name just a few. When those duties are not satisfied, an insurer may have engaged in bad faith.

1260 BB argues Liberty does not contest these other duties and has not come close to meeting its burden for summary judgment. That contrary to Liberty’s erroneous assertions, California law permits a bad faith claim to be based on the breach of policy obligations before the payment obligation ripens and before the primary insurance is exhausted. Provided there is some potential for coverage at the time of the alleged breach, an insurer can be sued for bad faith even if coverage has not yet attached if its actions negatively affected the insured’s benefits. Accordingly, 1260 BB may maintain an action for insurance bad faith for breach of the covenant of good faith and fair dealing with respect to conduct that Liberty engaged in which frustrated 1260 BB’s rights to the benefit of the Liberty policy.

1260 BB argues that although Liberty cites three cases in its Motion, none provides any support for its position.  1260 BB argues that its cited cases make clear that 1260 BB’s bad faith claim can be premised on breach of Liberty’s obligations and duties, including extracontractual duties imposed by industry custom and practice, as codified in the California Code, even when there is no present right to payment, including where the primary policy has not been exhausted.  The Court agrees with that argument. Because the lack of a payment obligation does not defeat 1260 BB’s bad faith claim as a matter of law, and because Liberty makes no other argument and asserts no other facts contesting its liability for bad faith under any theory other than the failure to make payment, Liberty’s SJ Motion must be denied.

Liberty seeks summary judgment on 1260 BB’s third cause of action for declaratory relief.  1260 BB’s argument that the exhaustion of the Primary Policies is not a requirement for 1260 BB’s cause of action for declaratory relief against Liberty is persuasive. Liberty advances the failed argument that 1260 BB may not pursue its claim for declaratory relief because the primary policies have not yet been exhausted. In making this argument, Liberty’s motion asserts the self-contradictory and legally erroneous argument that 1260 BB’s claims should be dismissed both because the claims were filed too late (under the one-year limitation provision) and too early (because of non-exhaustion of the primary policies).  This position is contrary to California law, including section 1060 of the California Code of Civil Procedure, which governs 1260 BB’s declaratory relief claim.

1260 BB’s Third Cause of Action seeks a declaration that the Liberty Policy, as well as the policies of the other excess insurers, provide coverage for 1260 BB’s mudslide losses above the $50 million primary layer of insurance.  There is a triable issue of fact. In support of this claim, 1260 BB pleads that it has suffered mudslide losses more than $58 million and that the Excess Insurers, including Liberty, have disputed coverage under the excess policies and their obligation to pay amounts over the $50 million primary limits. 1260 BB argues that in its motion, Liberty does not present any persuasive facts contesting that 1260 BB’s Mudslide claim exceeds $58 million or that Liberty has disputed coverage and its obligation to pay its pro rata share of the mudslide claim over $50 million. 

On this motion, there is no dispute – factual or otherwise – that 1260 BB has suffered losses more than the attachment point under the Liberty policy.

Liberty asserts that declaratory relief is still unavailable because it does not have a present obligation to pay money.  This argument fails as a matter of California law.  Under Section 1060 of the Code of Civil Procedure, a person may seek a declaration of its rights and duties in cases of actual controversy relating to the rights and duties of the respective parties. 

A plaintiff thus may bring an action for declaratory relief even if the dispute has not ripened into a claim for money damages. An insured does not need to plead or prove exhaustion of the primary policies to obtain a declaration of disputed coverage issues against an excess insurer. (Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592) The existence of an actual dispute over the legal rights and duties of the respective parties – such as coverage under the policy – is sufficient to maintain an action for declaratory relief.  (Ludgate Ins. Co., at 605.)  The Court stated in Ludgate: “Exhaustion of the underlying limits, while necessary to entitle the insured to recovery of money damages on the excess policy, is not necessary to create an actual controversy.  Exhaustion is merely an issue of proof and entitlement to recovery [of money damages].”  (Id. at p. 606.) [The Court understands why Liberty believes this case is not authority for the claims made by 1260 BB.]

Liberty seeks to avoid the clear import of Ludgate, and California declaratory relief law generally, by citing two cases.  But they are both inapposite because the court’s holding in each turned on the fact the plaintiff had not or could not show any meaningful prospect that the primary policy limits would be exhausted.  The present case is starkly different as 1260 BB has already sought coverage for losses more than the attachment point of Liberty’s policy.

There is another compelling reason why 1260 BB’s action for declaratory relief is both “necessary” and “proper” currently.  In this Motion, Liberty takes the position that 1260 BB was required to bring this action against Liberty within one-year of the Mudslide loss or from notice to Liberty of the Mudslide loss.  In asking this court to dismiss the declaratory relief action now as pre-mature, Liberty is asking the court to create a trick-box for 1260 BB that would bar forever any claims against Liberty. 

Under Liberty’s view, 1260 BB could have never brought a claim under the excess policy because according to Liberty, 1260 BB was barred from suing before the one-year period expired because the primary policies were not exhausted, and 1260 BB is also barred from bringing a claim after the one-year period from the date of loss based on the contractual limitation provision. 

Liberty’s “damned if you do, damned if you don’t” construction would eliminate 1260 BB’s rights to any relief under the excess policies.  A timely declaration of 1260 BB’s rights under the Liberty excess policy are essential to protect and preserve 1260 BB’s right to coverage and other bargained for benefits under the insurance policy with respect to the catastrophic mudslide loss.

The Second Motion for Summary Judgment

The Motion of Excess Insurers

Filed December 9, 2024; seeks summary judgment re Suit Limitation and

Notice: In summary, the claim is that 1260 BB’s claim for $273,822 in increased insurance premiums is not covered under the Policies’ Extra Expense or Soft Cost coverage and summary adjudication in favor of Insurers on this element of 1260 BB’s claim is warranted.

In support of the claim Excess Insurers allege the undisputed material facts demonstrate, and 1260 BB lacks admissible evidence to refute, that 1260 BB’s claimed increase in insurance premiums is not an “Extra Expense” or a “Soft Cost” as defined by the Polices. 1260 BB has not and cannot present any facts to support its argument that the increase in the premium amount allocated to it by Four Seasons for the 2018-2019 policy period was directly attributable to the experience of the Wildfire Claim and/or Mudslide Claim; even if 1260 BB could demonstrate some correlation, the claimed increase in insurance premiums is not an “Extra Expense” or a “Soft Cost” as defined by the Polices.

Excess Insurers allege they issued the Policies to Four Seasons for the policy period April 1, 2017, to April 1, 2018, and as the owner of the Hotel, 1260 BB was an additional Named Insured. 1260 BB submitted claims under the Policies for loss or damage relating to the December 10, 2017, Wildfire Claim and 2018 Mudslide Claim in the area of the Hotel. As part of its claim, 1260 BB seeks, under the Policies’ Extra Expense coverage, $273,822 in insurance premium expenses. 1260 BB alleges that this amount reflects the net increase in premiums incurred in the 2018 – 2019 renewal period, which is directly attributable to the 2017-2018 loss history, namely the Wildfire Claim and Mudslide Claim.  1260 BB alleges that the premium in 2017 was $351,004; whereas the premium in 2018 was $696,204. 

Diane Balasa, the director of risk management for Four Seasons, breaks down the increase as follows: $9,763 yr. over yr. value change; $61,615 market increase; and $273,822 NATCAT exposure and claims experience. This calculation was purportedly prepared by Four Seasons with the assistance of Aon and without the involvement of 1260 BB.  As an experienced claims advocate for policyholders of commercial policies that provide time element coverage, Josh Collier of Aon has not previously seen an extra expense claim that is calculated based on an increase in insurance premiums in the ensuing policy year. 

The premium amount for the 2018-2019 renewal period was negotiated by Four Seasons for all its properties, collectively, and then Four Seasons allocated a portion of the premium back to each property owner, including 1260 BB.  1260 BB was not involved with the premium calculation or allocation; rather it just pays the amount allocated to it by Four Seasons. 

The premium amount paid by 1260 BB for the 2018-2019 policy period was decided by Four Seasons and not Insurers.  Insurance premiums are not an enumerated category of Soft Costs as defined by the Policies.  Rather, “Soft Costs” are limited to the following:

(i) Additional interest costs on money used to finance construction or repair;

(ii) Additional real estate and property taxes incurred for the period of time that construction or repair extends beyond the projected completion date;

(iii)  Additional legal and accounting fees associated with construction or repair.

The Policies define “Extra Expense” as “the excess (if any) of the total cost incurred during the period of restoration chargeable to the operation of the Insured’s business, over and above the total cost that would normally have been incurred to conduct the business during the same period had no loss occurred.” Extra Expense specifically excludes “loss due to fines or

damages . . . or for any penalties of whatever nature.” 

1260 BB’s claim for increased insurance premiums is not covered under the Policies because 1260 BB has not produced any evidence that any difference in insurance premiums, or any percentage thereof, between the 2017-2018 policy period and any subsequent policy period, is directly attributable to the Wildfire Claim or Mudslide Claim.  Even if the increased insurance premiums are, even marginally, attributable to 1260 BB’s loss history, there is no coverage under the Policies for several reasons.

 

First, the Policies’ Extra Expense Coverage does not extend to normal business operating expenses. 

Second, the Policies’ exclusion for loss due to fines or penalties bars coverage. Third, insurance premiums are not a “Soft Cost.”

Excess Insurers allege insurance premiums are normal business expenses.

That 1260 BB is claiming, under the Policies’ Extra Expense coverage, $273,822 in increased insurance premiums.  Diane Balasa, the director of risk management for Four Seasons, with the assistance of its claim broker, Aon, concluded that this was the amount of the net change for the 2018-2019 policy year that was related to “NATCAT exposure and claims experience.” 

1260 BB has failed to produce any factual evidence that the increase is directly attributable to the Wildfire Claim or Mudslide Claim, as opposed to other causes, such as inflation, market forces, additions of or changes at other insured properties, or other independent factors. Four Seasons (and not Excess Insurers) controlled the amount of the premium that was allocated to 1260 BB -- the insurance premium paid by 1260 BB for the renewal period was determined by Four Seasons and not Insurers. 

Even if 1260 BB could present evidence to show that the increase in the subsequent policy year was in part due its loss history, 1260 BB cannot manipulate what is an everyday business operating expense into an “Extra Expense” as defined by the Policies.  “Extra Expense” is “the excess (if any) of the total cost incurred during the period of restoration chargeable to the operation of the Insured’s business, over and above the total cost that would normally have been incurred to conduct the business during the same period had no loss occurred.” 

Here, there was no cost “over and above” what normally what have been incurred to conduct business. In George’s Inc. v. Allianz Global Risks US Insurance Co., 596 F.3d 989, 993 (8th Cir. 2010), ice storms caused the insured to produce less chicken at its poultry processing plant, which led to an increase in the cost-per-pound of chicken relative to the company’s fixed costs.  The insured sought to recover under its property insurance policy the per pound increase; specifically, the insured argued that the labor and overhead costs were recoverable under the “extra expense” portion of the policy.  The Eighth Circuit held “the extra expense provision was intended to cover unanticipated outlays related to a business disruption.  Fixed labor and overhead costs do not fit that description.  The extra expense provision is focused instead on unforeseen expenditures such as overtime pay, or additional expenses associated with using a different facility …”.  Id. at 993.

Similarly, here, the costs associated with insurance premiums are not an “unexpected outlay” or an “unforeseen expenditure;” rather, insurance premiums are an overhead cost that does not meet the Policies’ definition of Extra Expense.  1260 BB would have paid insurance premiums irrespective of the Mudslide Claim and Wildfire Claim.  Fluctuations in annual insurance premiums, including year over year increases, are normal business expenses, and 1260 BB did not incur the increased insurance premiums as a result of a business disruption.  1260 BB’s obligation to pay insurance premiums is not an expense “over and above” the costs normally incurred; therefore, 1260 BB’s claim for increased insurance premiums is not covered under the Policies’ Extra Expense coverage. 

Josh Collier of Aon, an experienced claims advocate for policyholders of commercial policies that provide time element coverage, has never previously seen an extra expense claim that is calculated on the basis of an increase in insurance premiums in the ensuing policy year.

Excess Insurers contend that the exclusion for fines and penalties applies to exclude coverage and that even if 1260 BB could force increased insurance premiums into the Policies definition of “Extra Expense,” the Special Exclusion Clause would operate to bar coverage.  Under this provision, Insurers are not liable for “Loss due to fines …, or for any penalties of whatever nature …”. In Tower Automotive, Inc. v. American Protection Ins. Co., 266 F.Supp.2d 664 (W.D. Mich. 2003), a press failed which resulted in a delay in the delivery of manufactured truck parts to Ford.  Ford requested compensation from Tower for idle labor and lost production costs, which Tower paid and then submitted to its insurer as an extra expense.  The court held that the payment was voluntary and therefore not a covered extra expense. Id. at 669.  Additionally, the court held that the policy’s penalty exclusion barred coverage.  Id. at 671-675.

To the extent 1260 BB demonstrates that the insurance premiums were increased as a result of its loss history, specifically the Mudslide Claim and Wildfire Claim, and that the claim meets the Policies’ definition of “Extra Expense,” coverage is excluded under the Policies’ exclusion for fines and penalties.

Excess Insurers contend insurance premiums are not a soft cost and that is telling that 1260 BB seeks to recover its increased insurance premiums as an Extra Expense rather than a “Soft Cost.”  The Policies specifically enumerate only three categories of recoverable Soft Costs, and there is no genuine dispute that insurance premiums are not identified as a “Soft Cost.” The decision in One Place Condo., LLC v. Travelers Prop. Cas. Co. of Am., 2015 U.S. Dist. LEXIS 56565, *68 (N.D. Ill. April 22, 2015) is instructive.  In One Place, during construction, problems were encountered with the foundation that resulted in damage and the need for repair.  Id. at 3.  One Place obtained time element and soft cost coverage through an endorsement to its

builder’s risk policy, which provided coverage for four types of soft costs. Id. at 17.  The court recognized that it was common for builder’s risk policies to be specific and limit the type of soft costs to be reimbursed, and One Place could not recover costs beyond what was provided for in the policy. Id. at 46-47.  “One Place illogically disregards these provisions in arguing that they are

entitled to recover all of the claimed delay costs and loss…”.  Id. at 46.  The court held that One Place could not recover money paid for “extra insurance” because the cost was not an enumerated soft cost on the builder’s risk endorsement for soft cost coverage.  Id. at 68. Similarly, in Hunt Constr. Group, Inc. v. Allianz Global Risks United States Ins. Co., 2007 U.S. Dist. LEXIS 57799 (S.D. Ind. 2007), the insured sought to recover the insurance premiums paid to Allianz to extend its builders risk coverage as a result of rain damage to the property under construction.  The insurance policy at issue was unambiguous in not covering soft costs.  Id. at 14-16.  The court held “the additional insurance premiums are a soft cost not covered by the policy, and Defendant is not liable for them.”  Id. at *16.

Excess Insurers do not dispute that additional insurance premiums are sometimes identified as a covered Soft Cost in some builder’s risk policies given the nature of the risks insured.  However, these Policies’ limited coverage for “Soft Costs” does not include insurance premiums.  Similar to One Place and Hunt Constr. Group, 1260 BB cannot disregard the express language of the Policies and broaden coverage as it sees fit.  In short, 1260 BB’s claimed damages do not meet the Policies definition of “Soft Costs.”

1260 BB’s Response

Filed on February 27, 2025; supported by a Separate Statement; Declaration of Joseph J. Hicks; and Declaration of Eric J. Muñoz; summarized: Excess Insurers’ Motion is predicated on a one-year suit limitation provision contained in the insurance policies that they issued; as Excess Insurers

themselves acknowledge the limitation period is tolled under California law when an insured provides timely notice of a claim (Prudential-LMI

Commercial Insurance v. Superior Court (1990) 51 Cal.3d 674, 678, 693.)  The limitation period then remains tolled until the insurance company issues a written denial of the insured’s claim.  (Aliberti v. Allstate Insurance Co. (1999) 74 Cal.App.4th 138, 149.) 

Because, as Excess Insurers concede, they never denied 1260 BB’s Mudslide Claim, which remains open to this day, Excess Insurers cannot prevail on this Motion unless they establish, based on the undisputed facts, that 1260 BB did not give notice until after the one-year provision expired.  Excess Insurers cannot carry that burden.  Each of the Excess Policies includes a provision authorizing the provision of notice to a Canadian insurance brokerage named Aon Reed Stenhouse, Inc. (“Aon Reed Stenhouse”).  Notice to Aon Reed Stenhouse thus discharges any obligation that 1260 BB has under the Excess Policies. 

As California law makes clear, that is true regardless of whether Aon Reed Stenhouse itself appropriately passes along notice to the pertinent insurance companies.  The record facts show that, within one day of the Mudslide, 1260 BB provided notice of the Mudslide loss to Aon Reed Stenhouse.  Through the testimony of their Person Most Qualified representatives, Excess Insurers have either affirmatively admitted that the contents of this notice is sufficient to satisfy their respective Excess Policies or at least admitted that they could not find fault with the contents.  They had no other choice: the Excess Policies do not include any detailed provisions governing the content of notice, and California law does not allow for the imposition of extracontractual requirements, particularly when doing so would be to the detriment of an insured who paid large premiums to secure coverage.  The provision of notice to Excess Insurers’ designated representative (i.e., Aon Reed Stenhouse) one day after the Mudslide establishes that 1260 BB discharged its obligation to provide timely notice. 

Although that alone is sufficient to dispose of Excess Insurers’ Motion, it is not the only basis for doing so.  In addition to providing notice to Aon Reed Stenhouse, 1260 BB also sent an email on the day of the Mudslide to Stuart Whiteside, who was an Executive General Adjuster at a company named Sedgwick.  Mr. Whiteside was designated as the Control Adjuster in each of the Excess Policies and he was the account adjuster for the entire Four Seasons Insurance Program (which is the program through which 1260 BB obtained the coverage at issue in this case).  Upon receiving the email, Mr. Whiteside confirmed receipt and wrote back saying, in pertinent part: “I will ensure the insurance carriers are put on notice.”  1260 BB’s notification through Mr. Whiteside, as the claims agent of Excess Defendants, constitutes a separate and independently sufficient notice under the Excess Policies.    

The record evidence establishes that the Excess Insurers, through their designated agents, were timely notified of the Mudslide Claim in accordance with the Excess Policies and California law.  As a matter of law, that notification tolled – and is still tolling – the contractual suit limitation provision because Excess Insurers have never denied 1260 BB’s Mudslide Claim.  Thus, this lawsuit is timely and the Excess Insurers’ Motion must be denied.

The insurance policies at issue in this litigation are part of a layered property insurance program providing up to $700 million of coverage for the policy period April 1, 2017, to April 1, 2018.  The Excess Insurers are an insurer who participated in the Insurance Program.   Six of Excess Insurers issued excess-only insurance policies with an attachment point of $50,000,000.  Those six insurers are Chubb, Generali, Great Lakes, Westport, Zurich, and Liberty. 

The present motion is brought by those parties except for Liberty.  Liberty has filed its own motion arguing, among other things, that the contractual suit limitation provision bars the claims against them as well.

As the owner of the Hotel, 1260 BB was an additional Named Insured under each of the insurance policies issued by Excess Insurers.  1260 BB expected and relied on the insurance coverage provided by Excess Insurers to protect the Hotel and 1260 BB’s business from a catastrophic event.  Two such events struck Santa Barbara, including the Hotel, in late 2017 and early 2018.  The first was the Wildfire, which at the time was the largest wildfire in modern California history. The Wildfire reached the Santa Barbara area on December 10, 2017, where it burned until December 26, 2017.  The Hotel suffered extensive property damage and was so impacted that it had to close for nearly one month as remediation efforts were undertaken.  The Hotel was finally able to reopen on January 8, 2018.  The very next day, Santa Barbara was hit by heavy and sustained rain and there was a massive mudslide with water, boulders, mudflow, and debris flowing down the hillsides previously affected by the Wildfire and inundating the city.  Rivers of mud and rock stripped from the hills flowed through Santa Barbara, with rivers of mudflow that reached depths of up to five feet.  The Hotel was hit hard and suffered tens of millions of dollars in property damage. The Hotel was forced to close again and this time it had to remain shut for nearly six months due to the extent of the damage and the necessary repairs. 

The Excess Policies contain several notice provisions addressing the means and methods through which an insured should provide notice. All the Excess Policies included an express provision authorizing 1260 BB to satisfy its notice obligation by providing any required information to a Canadian brokerage company named Aon Reed Stenhouse, Inc.  The policies issued by two Excess Defendants (Chubb and Westport) include a sentence stating: “It is agreed that any such notice given to Aon Reed Stenhouse Inc. Toronto shall be deemed as having been given to the Company.”  The remaining three

Excess Policies state that notification shall be given to “the person(s) or firm named for the purpose in Item 11 of the Schedule” and then identify “Aon Reed Stenhouse Inc.” in Item 11 of the Schedule. 

None of the Excess Policies include detailed provisions concerning the necessary contents of notice.  The policies issued by three of Excess Insurers (Great Lakes, Zurich, and Generali) include a provision titled Notification of Claims.  That section states, in full: The Assured upon knowledge of any occurrence likely to give rise to a claim hereunder shall give immediate written advice thereof to Aon Reed Stenhouse.  For their part, policies issued by Chubb and Westport contain a section captioned Notice of Loss.  That section states in pertinent part as follows: The Insured agrees to file with the Company, a report of every loss or damage which might be or become a claim under this Policy.  And all the Excess Policies include a Requirements After Loss section which provides that, upon the occurrence of any loss or damage to the insured property, the insured shall forthwith give notice thereof in writing to the insurer. 

On December 11, 2017, Diane Balasa, who was the Manager of the Risk and Insurance Programs for Four Seasons, notified Stuart Whiteside of the Wildfire causing damage to the Hotel. Mr. Whiteside worked as an Executive General Adjuster at Sedgwick and was designated as the Control Adjuster for all claims under the Excess Policies. 

Even before the claims at issue in this litigation, Mr. Whiteside was known to Four Seasons and Ms. Balasa through his experience as the Four Seasons account adjuster.  Ms. Balasa also sent her December 11, 2017, notice email to Josh Collier of Aon Risk Services Northeast.  Among other responsibilities, Mr. Collier was charged with providing certain claims services in connection with the Insurance Policies.  After receiving a copy of Ms. Balasa’s December 11 email, Mr. Collier sent a further email informing various insurance company representatives of the Wildfire loss.  Excess Insurers do not raise any defense or issue in this litigation regarding notice of the Wildfire Claim.  After the Mudslide struck on January 9, 2018, 1260 BB (through its representatives) again acted promptly to inform all Excess Insurers of the Mudslide loss in multiple ways.

That very same day, Michael Cerf, who was the Director of Finance at the Hotel, sent an email to Mr. Whiteside with the subject line “Notice of claim – FS Santa Barbara” in which he notified Mr. Whiteside of “heavy rains and flash flood conditions” as well as “heavy mud and debris” throughout the Hotel.  This notification to Mr. Whiteside was consistent with customary practice under the Four Seasons Insurance Program of providing notice through Mr. Whiteside.  Confirming that no further steps were necessary, Mr. Whiteside responded in writing to Mr. Cerf and said that he “will ensure the insurance carriers are put on notice.” Mr. Whiteside, his local adjuster at Sedgwick, and Mr. Cerf all understood that statement to mean that Mr. Whiteside would make sure the insurers received notice. 

Mr. Cerf relied on Mr. Whiteside’s representation that he would take care of the notice matter.  On the same day that he received the Cerf Notice, and without waiting for any further authorization from the insurance companies, Mr. Whiteside began the adjustment process for the Mudslide on January 9, 2018.  On January 10, 2018, just one day after the Mudslide, Mr. Collier sent a separate email in addition to the Cerf Notice.  The subject line of Mr. Collier’s message started with “New Loss” and the email provided notice of “flash flooding and mudslides” causing damage to the Hotel.  This email was sent to various insurance company representatives, including a person named Jennifer Kinsey.  Ms. Kinsey was an employee of Aon Reed Stenhouse.  Ms. Kinsey’s inclusion was significant because Aon Reed Stenhouse was identified as an authorized recipient of notice under all the Excess Policies.  Following her receipt of the January 10 email, Jennifer Kinsey remained engaged at Aon Reed Stenhouse in connection with the Mudslide loss.  Ms. Kinsey sought and received information during the claims handling process. And she was informed when the claim reached major milestones, such as passing $40,000,000 and then later passing $50,000,000. 

Following the Wildfire and the Mudslide, 1260 BB claimed under the Insurance Policies losses totaling more than $64,000,000 caused by the Wildfire and the Mudslide. Although the amount of loss caused by the Wildfire remained below the $50,000,000 attachment point for the Excess Policies, the claim for Mudslide losses reached more than $58,000,000. 

Excess Insurers have not paid, and have refused to pay, any of the amounts claimed by 1260 BB. 

Excess Insurers claim that no reasonable jury could possibly find that 1260 BB provided notice to the Excess Insurers until after a one-year suit limitation provision contained in the Excess Policies had already run.  Excess Insurers base that argument on the erroneous assertion that they were not provided with any notice of the Mudslide until December 20, 2021. However, the record evidence shows that the Excess Insurers were provided with timely notice on the day of the Mudslide and again just one day later. 

The January 10, 2018, Notice to Aon Reed Stenhouse Constituted Proper Notice under the Excess Policies. On January 10, 2018, Josh Collier sent an email (the “ARS Notice”) to various insurance company representatives.  The ARS Notice expressly provided notice of a a new loss for the Four Seasons Santa Barbara from the recent flash flooding and mudslides in the area.  

No Excess Insurer identified any deficiency in the content of this notice during their Person Most Qualified depositions during this litigation.  To the contrary, Westport expressly admitted that the content was “sufficient” while Great Lakes confirmed that the ARS Notice “would be a notification” if sent to an appropriate recipient.  Other Excess Insurers could not identify any criticism of the contents of the notice, with Liberty stating that it “[did] not know” if the information in the ARS Notice was consistent with what it would expect, and Zurich insisting over and over again that it was “hard to say” one way or the other. 

This sworn deposition testimony from Excess Insurers’ own designated representatives, each of whom was a claims adjuster with primary responsibility for handling the Mudslide Claim, alone provides an adequate basis for a reasonable jury certainly to conclude that the ARS Notice had all the information necessary to constitute proper notice.  Rather than deny the adequacy of the ARS Notice’s contents, the Excess Insurers during their depositions asserted that the ARS Notice was improper because it was not sent to someone who they believed was an authorized recipient for the purposes of notice.  Excess Insurers, though, are simply wrong about that.  The ARS Notice was sent directly to Ms. Kinsey, who was an employee of Aon Reed Stenhouse.  Under the express and unambiguous provisions of every Excess Policy, notice to Aon Reed Stenhouse is deemed notice to Excess Insurers.  Thus, based on the plain terms of the policy, the ARS Notice discharged any notice obligation that 1260 BB had.

Although the terms of the Excess Policies resolve this matter definitively, the California Insurance Code compels the same conclusion.  Under the Code, “any person who has authority or responsibility to notify an insurer of a claim upon receipt of a notice of claim by a claimant” constitutes an “insurance agent” and “any person employed or authorized by an insurer, to conduct an investigation of a claim on behalf of an insurer or a person who is licensed by the Commissioner to conduct investigations of claims on behalf of an insurer” constitutes a “claims agent.”  Cal. Code Regs. tit. 10, § 2695.2(d), (h)(3).  Aon Reed Stenhouse easily qualifies under these definitions given its status under the Excess Policies as a designee for notification of claims. 

Aon Reed Stenhouse’s status as a claims agent and insurance agent matters because, under the express provisions of the Code, the “[f]ailure of an insurance agent or claims agent to promptly transmit notice of claim to the insurer shall be imputed to the insurer.”  Cal. Code Regs. tit. 10, § 2695.5.  In other words, the insured’s notice obligations are satisfied when the notice reaches an insurance agent or claims agent regardless of what happens thereafter.  The California Insurance Code thus confirms what the Excess Policies already established: 1260 BB is not required to do anything more than notify Aon Reed Stenhouse, which is what it did.

In their Motion, Excess Insurers asserted in passing that the ARS Notice only put “the Primary Insurers” of the Four Seasons Insurance Program on notice.  Excess Insurers, though, did not advance – let alone develop or support – any argument justifying that conclusory characterization.  And there is no merit to their statement. 

Perhaps in their reply, Excess Insurers may try to attack the contents of the ARS Notice by asserting that the document did not specifically identify Excess Insurers by their names and policy numbers.  Such argument already is foreclosed by their own sworn deposition testimony in which they either acknowledge the adequacy of the notice or stated that there were no apparent deficiencies.  Even without that testimony, though, the result would be the same. Under California law, the adequacy of notice must be determined by reference to the “policy notice provisions.”  There is no provision in the Excess Policies that imposes a name or policy number requirement for a notice.  The Excess Policies instead merely require “written advice” or “a report” of a loss.” 

Excess Insurers cannot now impose new requirements that are not contained in their policies, particularly when California law requires that any ambiguous notice provision must be construed against an insurer.  (Fireman’s Fund Insurance Co. v. National Bank for Coops (N. D. Cal. 1994) 849 F. Supp.

1347, 1364 (“Since conflicting provisions create ambiguities and ambiguities are construed against the insurer, Interstate is deemed to have received notice”). 

Although the Court need not consider look outside the policies to resolve this matter, the result would be the same even if it did.  Notice serves only a limited role: to provide a carrier with sufficient information about an occurrence to enable the carrier or the carrier’s adjuster to initiate an

investigation to determine the existence and extent of any covered losses. 

Consistent with that purpose and function, notice customarily is understood to require nothing more than a brief statement as to the occurrence of a peril at an insured property.  The language used in the Excess Policies would be understood in the insurance industry to demand nothing more.  Under California law, the burden of seeking information and following up is generally on the insurer not the insured. 

The California Insurance Code makes that clear, stating that “[a]ll defects in a notice of loss, or in preliminary proof thereof, which the insured might remedy, and which the insurer omits to specify to him, without unnecessary delay, as grounds of objection, are waived.”  (Cal. Ins. Code. § 553.)  Here, Excess Insurers did not raise an objection to the content of the notice during the adjustment process prior to the emergence of a coverage dispute.  Excess Insurers’ lack of compliance provides still yet another reason not to impose extracontractual requirements when, as here, an insurance policy does not contain detailed or specific demands concerning the content of notice.

Even if the Excess Insurers could somehow establish (which they cannot) that the notice obligation under the Excess Policies could not be satisfied until Aon Reed Stenhouse had the names and policy numbers for the Excess Insurers, Excess Defendants’ argument still would fail here.  The record evidence demonstrates that Aon Reed Stenhouse in knew the identities of the Excess Insurers as well as the numbers of their policies. In fact, when Josh Collier wanted to obtain the policy numbers for the excess policies, he requested and received them from Aon Reed Stenhouse.  Thus, it would be nonsensical to deny coverage to 1260 BB based on the failure to include information already known to the entity to whom notice was to be provided. 

Excess Insurers may make a desperate last-ditch argument predicted not on the language of the Excess Policies or any principle of California law but on the state of mind of Mr. Collier, who testified that he did not subjectively intend to notify the Excess Insurers when he sent the ARS Notice.  But Excess Insurers cite no authority for the novel proposition that the subjective

intent of a sender can defeat an otherwise proper notice.  The intent of Mr. Collier is irrelevant. Relying on Mr. Collier’s intent would be particularly inappropriate here as he was uniformed, could not recall ever reviewing any of the notice provisions of any of the Excess Policies, and did not make a determination as to the appropriate means to provide notice.  In any

event, what matters is the terms of the Excess Policies, which clearly provide for notice to Aon Reed Stenhouse.  That objective fact is what matters, particularly at the summary adjudication stage when all inferences must be found in favor of the party opposing summary judgment. 

Although the ARS Notice to Aon Reed Stenhouse makes this case straightforward, any notice obligation that 1260 BB had also would have been independently discharged through the email that the Hotel’s Director of Finance sent to Stuart Whiteside on the day of the Mudslide.  The subject line

of the email was: “Notice of claim – FS Santa Barbara.”  In the body of the email, Mr. Cerf notified Mr. Whiteside of “heavy rains and flash flood conditions” as well as “heavy mud and debris” throughout the Hotel.  The email thus contained all the content necessary to inform Mr. Whiteside about the loss that had occurred at the property.  Mr. Whiteside remained extensively involved throughout the life of the claim as the lead adjuster. 

Although Mr. Whiteside was not expressly designated in the Excess Policies as an authorized representative to receive notice in the same manner as Aon Reed Stenhouse, California law still requires that notice given to a claims agent “shall be imputed to the insurer” regardless of whether the agent does – or does not – pass along notice.  The definition of a claim’s agent under the California Insurance Code is broad, covering any person employed or

authorized by an insurer, to investigate of a claim on behalf of an insurer or a person who is licensed by the Commissioner to conduct investigations of claims on behalf of an insurer. That provision encompasses Mr. Whiteside.

Mr. Whiteside was the account adjuster for the entire Four Seasons Program, and he was designated as the Control Adjuster for all claims under each of the Excess Policies.  The company for which Mr. Whiteside worked, Sedgwick, had standing contracts with the Excess Insurers pursuant to which he was authorized to begin an investigation of a claim upon receipt of notice without further approval from the insurers.  Consistent with that standing authority, Mr. Whiteside immediately began the investigation process upon receipt of the Cerf Notice and before notice had even been provided directly to the Excess Insurers through Aon Reed Stenhouse.  Throughout his involvement, Mr. Whiteside worked for and served as the “eyes and ears” of all the insurance companies, including Excess Insurers. 

As these facts demonstrate, Mr. Whiteside was both a licensed California adjuster and was authorized to investigate on behalf of Excess Defendants.  Thus, he constituted a claims agent under both prongs of Section 2695.2(d) of the California Insurance Code, and a reasonable jury certainly could find so based on the evidence in the record. This conclusion is bolstered by what occurred when Mr. Whiteside received the Cerf Notice.  Rather than object or insist that Mr. Cerf had to contact anyone else, Mr. Whiteside instead stated in writing in no uncertain terms: “I will ensure the insurance carriers are put on notice.” 

As an experienced adjuster working on Four Seasons claims, Mr. Whiteside knew that the Four Seasons Insurance Program was layered, and he knew about the distinction between excess and primary insurers.  But Mr. Whiteside did not refer to any subset of insurers in his email; rather, he

said that he would ensure “the insurance carriers” were put on notice.  Mr. Cerf interpreted Mr. Whiteside’s email as an affirmative representation that he would do anything necessary to further ensure the insurance carriers were directly informed about the Mudslide loss.  It is no surprise then that, consistent with Four Seasons’ customary practice, Mr. Cerf relied upon Mr. Whiteside.  Mr. Whiteside’s response to the Cerf Notice thus further confirms his status as a claims agent through whom notice must be imputed to Excess Insurers under California law.  

As a matter of well-established California law, a contractual suit limitation period in an insurance policy is tolled “from the time the insured files a timely notice, pursuant to policy notice provisions, to the time the insurer formally denies the claim in writing.”  Consequently, the provision in the Excess Policies began to be tolled no later than January 10, 2018, when the ARS Notice was sent to Aon Reed Stenhouse.  Because Excess Insurers never denied 1260 BB’s Mudslide Claim, let alone issued a written denial, the limitation time period remains tolled through the present.  That means that, at most, only one day of the one-year time period under the contractual suit limitation clause has expired.  Accordingly, this action is not time barred.    

The Reply

Filed March 7, 2025; summarized: The Policies’ Soft Cost coverage for “interest” is specific and limited, and 1260 BB’s Opposition makes it clear that 1260 BB’s interest claim does not fit within the allowable coverage. The parties agree that to be covered, the interest expense must be necessarily incurred by 1260 BB in effecting repairs to the damage property, from the date of 1260 BB’s payment to others until payment of the loss by Insurers.

There is no factual dispute that 1260 BB was not listed as a borrower and was not a party to any of the Credit Facilities. As such, 1260 BB was not directly liable to pay interest to any of the Credit Facilities. In fact, 1260 BB has failed to present sufficient factual evidence to establish that it actually incurred any interest obligation. Rather, 1260 BB’s claim is orchestrated around the loss of interest or lost financial opportunities experienced by a third party, neither of which are covered under the Policies.

Furthermore, there is no dispute that Insurers made substantial payments to 1260 BB, which exceed the total amount of property damage expenditures made by 1260 BB because of the Wildfire and Mudslide; therefore, 1260 BB’s right to interest never accrued.

1260 BB sets forth many of the same facts presented by Excess Insurers in their Motion. The parties agree on the involved property (i.e., the Biltmore Hotel), the insurance program at issue, and the fact that the Wildfire and the Mudslide caused physical damage to the Hotel, which resulted in a suspension of operations. The divergence comes with 1260 BB’s characterization of its claimed amounts as well as the amount and nature of payments made by Excess Insurers. 1260 BB obfuscates by referring to “gross estimates” and deliberately misrepresents the adjustment process.

Despite 1260 BB, once again, inundating this Court with irrelevant and misleading facts, the record is clear that Excess Insurers made substantial payments to 1260 BB totaling more than $30 million by May 10, 2019; and so, 1260 BB did not, in fact, have any unreimbursed property damage costs, a fact that 1260 expressly admitted in its own internal correspondence. 1260 BB’s subsequent creative accounting does not change the fact that it was fully reimbursed for property damage and that it had actual knowledge that it had been fully reimbursed.

Most germane to this Motion, 1260 BB admits that it obtained financing through “Credit Facilities,” which were established by “Mr. Warner and companies affiliated with him.” There is no dispute that 1260 BB was not obligated to pay interest under any of these Credit Facilities. Although 1260 BB now alleges, in an unsupported and self-serving declaration years after the fact, that it was obligated to make interest payments to companies associated with Mr. Warner that served as a conduit to direct the financing.

1260 BB fails to offer any evidence of these obligations. To date, 1260 BB has failed to produce a single loan or other financing agreement to show that 1260 BB was ever actually obligated to make any interest payments. Excess Insurers have sought such proof for years, and 1260 BB has provided none. 1260 BB has not presented any evidence to create a triable issue of fact; thus, the Excess Insurers Motion for Summary Adjudication should be granted.

The Court’s Conclusions

It is black letter law that summary adjudication is a drastic procedure that should be used with caution so that it does not substitute for the open trial method of determining facts. It is an error to grant summary adjudication if a triable issue of fact exists. Summary adjudication can be granted only if the papers submitted show there is no triable issue as to any material fact and the moving party is entitled to judgment as a matter of law.  Because of the drastic nature of the summary [adjudication] procedure, and the importance of safeguarding the adverse party’s right to a trial, the moving party must make a strong showing. A defendant moving for summary adjudication must satisfy its initial burden before the plaintiff needs to controvert anything.  To do so, the defendant must show that one or more elements of the cause of action cannot be established.  Only after such a showing is made does the burden then shift to the plaintiff to show that a triable issue of material fact exists as to that cause of action. In ruling on a motion for summary adjudication, the court must view the evidence in the light most favorable to the opposing party. The moving party’s evidence must be strictly construed, while the opposing party’s evidence must be liberally construed. The court must not weigh conflicting evidence but rather must consider what inferences favoring the opposing party a factfinder could reasonably draw from the evidence. All doubts as to whether any material issues of fact exist must be resolved in favor of the party opposing summary adjudication.  

1260 BB seeks declaratory relief; but Excess Insurers have not shown that such relief is inappropriate. It is particularly appropriate when the insured party seeks declaratory relief to confirm their coverage under the policy for a specific incident. To obtain declaratory relief, a party needs to demonstrate that a good-faith dispute exists between parties, a justiciable question exists regarding a right, status, or fact, and there's a practical need for the declaration.

Additionally, a true "actual controversy" must exist, meaning the parties have a substantial, immediate, and real dispute with adverse legal interests. (CCP section 1060.)

Assuming Excess Insurers have carried their burden of proof the burden of proof shifts to 1260 BB who have shown there are numerous triable issues of fact. For example:

Has the one-year contractual suit limitation period expired?

Were Excess Insurers provided with timely notice on the day of the Mudslide and again just one day later? 

Did 1260 BB have any unreimbursed property damage costs?

Did Excess Insurers deny liability for the any losses arising from the Mudslide Claim on the grounds that the losses have not yet exceeded their respective attachment points?

Was that notice untimely and is that suit barred by the suit limitations provisions of the respective policies?

Whether Excess Insurers’ contention that it issued a denial of the claim is neither material nor pertinent?

Whether Stuart Whiteside had the authority to begin working on a claim as soon as it came in?

Whether Excess Insurers are charged with notice received by their claim’s agent Stuart Whiteside?

Is there meritorious objection to the sufficiency of the ARS Notice?

Did each Excess Insurer severally issue a policy of insurance?

Were all the policies issued by Excess Insurers part of one program of insurance? What did the excess policies provide?

Was Mr. Collier’s 12/11/2017 email the first notice of loss?

Were Mr. Whiteside and Ms. Kinsey previously informed of the Wildfire?

Did Excess Insurers receive notice of the Mudslide on 1/10/2028?

Prior to 12/20/2021 did Excess Insurers receive a claim submission of a loss or damage related to the Hotel?

Was notice of the Mudslide first provided to Excess Insurers 4 years after the date of loss?

After 1260 BB understood that their mudslide claim was more than $50 million did it instruct Four Seasons or any Aon entity to provide notice to the Excess Insurers?

In summary, triable issues of fact exist with respect to Excess Insurer’s’ Motion as to whether the record evidence shows that 1260 BB’s claims are not time barred, that 1260 BB timely provided notice under the Excess Policies, and that the one-year suit limitation does not defeat 1260 BB’s claims.

[1] The Court apologizes for any grammatical and typographical errors in this decision.