Los Osos Community Services District v. American Alternative Insurance

Proceedings: IN CHAMBERS (No Proceedings Held)

I. INTRODUCTION

This case involves a dispute over whether Defendant American Alternative Insurance Corporation’s (“AAIC”) insurance policy creates a “duty to defend” Plaintiffs against a civil suit in California state court. AAIC refuses to defend Plaintiffs, and Plaintiffs have sued in this Court alleging breach of contract and breach of the duty of good faith. Defendant filed a counterclaim for declaratory relief, asking the Court to determine that it has no duty to defend or to indemnify Plaintiffs. Plaintiffs now move for partial summary judgment that Defendant does have the duty to defend.

AAIC argues that it does not have a duty to defend because the policy covers only suits seeking “damages,” and the underlying suit does not seek “damages.” Even if that suit does seek “damages,” AAIC also argues, the types of damages sought are not insurable under California law. Finally, AAIC contends that even if the Court finds it has a duty to defend, it has denied coverage based on a genuine belief that no coverage applies and so the Court should dismiss Plaintiffs’ claim for breach of the duty of good faith.

The Court holds that the…