Engine Clean Technologies v. Essex Ins

Filed 4/20/06 Engine Clean Technologies v. Essex Ins. CA2/5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA]

SECOND APPELLATE DISTRICT

DIVISION FIVE

APPEAL from judgments of the Superior Court of Los Angeles County, Rita Miller, Judge. Affirmed.

John K. Saur for Plaintiff and Appellant.

Wright, Robinson, Osthimer & Tatum, David V. Rose, and Christiane E. Cargill for Defendant and Respondent.

I. INTRODUCTION

Plaintiff, Engine Clean Technology, Inc., appeals from a judgment dismissing this action with prejudice and a separately entered judgment awarding costs. We affirm the judgments.^[1]

II. BACKGROUND

Plaintiff filed its complaint against defendant on August 2, 1999. Plaintiff alleged as follows. Defendant issued it a commercial general liability policy of insurance for the policy period from July 31, 1995 to July 31, 1996. The policy covered personal and advertising injury. Plaintiff entered into, but subsequently terminated, a distributor agreement with Pamic Industries, Inc. (Pamic). Around November 1995, plaintiff filed a demand for arbitration against Pamic. Pamic filed a cross-demand for arbitration. The cross-demand asserted that: Robert E. Flynn, was an officer, director, and shareholder of plaintiff; Mr. Flynn had disparaged Pamic's goods throughout the industry; some of the allegedly disparaging statements were made during the time defendant's policy was in force; defendant accepted the defense of plaintiff against Pamic's arbitration cross-demand with a reservation of rights; however, defendant failed to defend plaintiff during the arbitration; and defendant did not pay any of plaintiff's attorneys fees and costs. The arbitrator issued an award in Pamic's favor. The arbitration award was confirmed and a judgment was entered against plaintiff. In late 1997, plaintiff filed a bankruptcy petition. On or about March 31, 1998, plaintiff entered into a settlement with Pamic. Plaintiff paid Pamic $400,000. Defendant's consent to the settlement was not secured. Despite continued demands to do so, defendant: refused to defend plaintiff; to pay the cost of plaintiff's defense; or to reimburse plaintiff in the amount of the $400,000 settlement with Pamic. Plaintiff asserted causes of action for: contract breach; implied covenant breach; and tortious breach of the implied covenant.

The matter was called for trial on January 25, 2005. A discussion ensued as to the admissibility of transcripts of the arbitration hearings involving plaintiff and Pamic. The trial court had previously deferred ruling on the legal issue of the duty to pay the $400,000 until after the jury resolved several matters. The trial court ruled the jury was to determine two matters. First, the jury was to decide whether defendant breached it duty to defend at the time of the $400,000 settlement between plaintiff and Pamic. Second, the jury was to decide whether the breach of the duty to defend was a legal cause of the settlement. If the jury found the breach of the duty was the legal cause of the plaintiff's decision to enter into the $400,000 settlement, then it could secure entry of judgment by means of a motion. Plaintiff's counsel was asked why it had an indemnification right given that the underlying dispute settled. (As will be noted, there was a consent clause in the policy.) Following argument, the trial court ruled that plaintiff did not have a right to put on evidence of indemnity. The trial court explained: â€