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Certain Interested Underwriters Subscribing to Policy No. B1262PW00017013 v. American Realty Advisors

United States District Court, E.D. North Carolina, Western Division

November 9, 2017

CERTAIN INTERESTED UNDERWRITERS SUBSCRIBING TO POLICY NO. B1262P20017013, Plaintiff,
v.
AMERICAN REALTY ADVISORS; SVF WESTON LAKESIDE, LLC; AND DOES 1-25, INCLUSIVE, Defendants. SVF WESTON LAKESIDE, LLC; and AMERICAN REALTY ADVISORS, Plaintiffs,
v.
CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, Defendant.

          ORDER

          LOUISE W. FLANAGAN UNITED STATES DISTRICT JUDGE

         This matter is before the court on defendants' motion for application of California law and designation as plaintiffs, which the court construes as a motion for partial summary judgment, [1] (DE 47), and plaintiff's motion for partial summary judgment regarding governing law. (DE 49). The motions have been fully briefed, and, in this posture, the issues presented are ripe for ruling. Defendants request hearing for oral argument on their motion. Because the facts and legal arguments adequately are presented in the briefs and record, the court dispenses with any hearing, as the same would not aid significantly the decisional process. For the reasons that follow, defendants' motion is granted in part and denied in part, and plaintiff's motion is denied.

         BACKGROUND

         These consolidated cases each concern applicability of an insurance policy (“the policy”) to water intrusion damage inflicted upon certain property owned by defendants. Plaintiff initiated case number 5:16-CV-940-FL September 21, 2016, in the General Court of Justice, Superior Court Division for Wake County, North Carolina, seeking declaratory judgment that it is not liable under the policy to cover water intrusion damage to defendants' property and, relatedly, that it is under no duty to pay defendants under the policy. Defendants removed that action to this court December 9, 2016.

         Defendants initiated case number 5:17-CV-74-FL October 14, 2016, in the U.S. District Court for the Central District of California, seeking damages for breach of contract and breach of the covenant of good faith and fair dealing, alleging that plaintiff is liable under the policy to cover defendants' losses. By order dated February 9, 2017, Hon. Dolly M. Gee, to whom the case originally was assigned, transferred the case to this district.

         With both cases pending before the undersigned, on motion by defendants, this court consolidated the actions for pretrial purposes on April 11, 2017. In initial order entered the same day, the court invited the parties to inform whether efficiencies may accrue upon early resolution of any choice of law issues raised in the case. In their Rule 26(f) joint report and plan, the parties indicated that early decision on choice of law issues may indeed prove efficient, and the court permitted limited discovery to facilitate resolution of the same. Following completion of early discovery, the parties filed the instant motions.

         In support of their motion, defendants rely upon the policy and the deposition of Nick West, whom plaintiff designated as representative for purposes of the deposition authorized by the Case Management Order. In support of its cross-motion, plaintiffs rely also upon the policy and the deposition of Nick West, and, in addition, declaration of Paul Vacherson who is plaintiff's managing director of asset management.

         STATEMENT OF THE UNDISPUTED FACTS

         The undisputed facts pertinent to the instant motions may be summarized as follows. Defendant SVF Weston Lakeside, LLC (“SVF”) owns real estate at various locations throughout the United States. SVF's principal place of business is California, and plaintiff issued and delivered the policy to defendants through an insurance broker located in California. (DE 68 ¶¶ 9, 19). SVF owns an apartment complex located in North Carolina that suffered water intrusion damage (“the property”). (DE 18 ¶ 8). Defendant American Realty Advisors (“ARA”) serves as real estate investment manager for the property, (DE 18 ¶ 1), and purchased from plaintiffs the policy in issue. (Id. ¶ 2).

         The policy contains a choice of law provision, which reads as follows:

CHOICE OF LAW & JURISDICTION: Law: State of California, United States of America.
Jurisdiction: United States of America per the LMA5020 Service of Suit Clause.

(DE 52-4 at 5).

         The policy provides excess all-risk property insurance, (DE 35 ¶ 15), but the parties dispute whether the policy covers damage to the property. In any event, defendants filed a claim under the policy on the basis of water intrusion damage to the property. (Id. ΒΆ 5). After denying defendants' claim, plaintiff initiated its action for declaratory judgment. Defendants ...


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