Liberty Mutual Insurance Compa v. Michael Blatt

MEMORANDUM

Liberty Mutual Insurance Company appeals the district court’s denial of summary judgment and subsequent entry of judgment in a diversity action to recoup the cost of defending Michael Blatt in a separate state court lawsuit. We affirm.

We review de novo the district court’s denial of summary judgment. Warfield v. Alaniz, 569 F.3d 1015, 1019 (9th Cir.2009). In California, the insurer’s duty to defend an insured “runs to claims that are merely potentially covered, in light of facts alleged or otherwise disclosed.” Buss v. Superior Court, 16 Cal.4th 35 , 65 Cal.Rptr.2d 366 , 939 P.2d 766, 773 (1997). In a “mixed” action, where some of the claims are at least potentially covered and the others are not, the insurer has a duty to defend the action in its entirety. Id. at 774-75. Nonetheless, an insurer may recoup those defense expenses that can be allocated solely to claims for which there never was any potential for coverage. Id. at 776.

The district court reviewed the negligence and breach of contract claims against Blatt in the state court complaint and found that they involved property damage potentially covered by the terms of Liberty Mutual’s policy with Schnabel…