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Employers Insurance of Wausau v. Albert D. Seeno Construction Co.

filed: September 20, 1991; As Corrected November 1, 1991.

EMPLOYERS INSURANCE OF WAUSAU, A MUTUAL COMPANY, FORMERLY KNOWN AS EMPLOYERS MUTUAL LIABILITY INSURANCE COMPANY OF WISCONSIN, A WISCONSIN CORPORATION, PLAINTIFF-APPELLEE,
v.
ALBERT D. SEENO CONSTRUCTION CO., A CALIFORNIA LIMITED PARTNERSHIP; DIABLO CONSTRUCTION COMPANY, A CALIFORNIA CORPORATION, ET AL., DEFENDANTS-APPELLANTS



Appeal from the United States District Court for the Northern District of California. D.C. No. CV-86-4890 EFL(CW). Eugene F. Lynch, District Judge, Presiding.

Alfred T. Goodwin and Joseph T. Sneed, Circuit Judges, and Gary L. Taylor,*fn* District Judge. Opinion by Judge Taylor.

Author: Taylor

TAYLOR, District Judge

Albert D. Seeno Construction Company ("Seeno") appeals from an order denying its request for a preliminary injunction requiring its insurance carrier to segregate liability claims handling from coverage investigation in a reservation of rights situation. While this issue may have been unsettled at the time of the hearing below, more recent cases show appellant's position is without merit, and we affirm.

I. BACKGROUND

Seeno is a real estate developer and general contractor which built residential tract housing in and around Contra Costa County, California. From 1975 to 1985 Seeno built several thousand homes in the area, and over 400 homeowners have made claims against Seeno for construction defects and soil movement. Lawsuits have been filed involving some of the homes ("litigated claims"), but the majority of the claims have not reached litigation ("unlitigated claims").

Seeno had comprehensive general liability insurance coverage with Employers Insurance of Wausau, for bodily injury and property damage, that could potentially cover the homeowners' claims. Seeno submitted the claims to Wausau, but a dispute arose over whether the claims were covered by Seeno's policies and over the proper method to handle the claims. Wausau reserved its right to deny coverage.

Seeno exercised its right to engage independent Cumis counsel,*fn1 and brought in the firm of Archer, McComas & Lageson to handle the litigated claims. However, Seeno declined to employ Cumis counsel for the unlitigated claims and requested that Wausau handle them.

Wausau retained the law firm of Robins, Zelle, Larson & Kaplan to represent Wausau's interest in all liability and coverage litigation stemming from the homeowner claims. This firm and the insurance company's internal investigators handled both the unlitigated claims involving the homeowners and the coverage dispute involving Seeno. Seeno contends that Wausau has used the investigation and settlement of these unlitigated claims to gather information for the coverage dispute against Seeno.

Wausau brought this action for declaratory relief to determine that there is no coverage for the claims. Seeno counterclaimed, including a request for injunctive relief requiring Wausau to segregate its liability claims handling from its coverage investigation.

During what the trial judge described as an "acrimonious litigation," the parties filed cross-motions to disqualify each other's counsel for claimed breaches of duty to the other side. After a lengthy and careful analysis of some of the same contentions asserted on this appeal, the trial judge denied the motions. Employers Insurance of Wausau v. Albert D. Seeno Const., 692 F. Supp. 1150 (N.D. Cal. 1988).

Thereafter, Seeno moved for a preliminary injunction to require Wausau to separate its handling of liability claims from its coverage investigation. At the hearing, the trial judge observed there was no legal authority to support Seeno's contentions and denied the motion.

The order is appealable to this court under 28 U.S.C. ยง 1292(a)(1)(1982). The grant or denial of a motion for a preliminary injunction is within the discretion of the district court, and the order of the district court will be reversed only if the court relied on an erroneous legal premise or otherwise abused its discretion. Chalk v. United States, 840 F.2d 701, 704 (9th Cir. 1988). Questions of law underlying a ...


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