1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 ULTIMA MOBILE BOTTLING, INC, Case No. 21-cv-09944-JD

8 Plaintiff, ORDER RE MOTION TO DISMISS v. 9

10 NATIONWIDE AGRIBUSINESS INSURANCE COMPANY, 11 Defendant.

12 13 In this insurance coverage dispute, plaintiff Ultima Mobile Bottling, Inc. was sued in a 14 case brought by West Villa Winery LLC in Sonoma County Superior Court. Dkt. No. 39. Ultima 15 tendered its defense and indemnity to its insurer, defendant Nationwide Agribusiness Insurance 16 Company, which rejected the tender. Id. ¶ 16. Plaintiff and Wise Villa settled the underlying 17 action on the eve of trial. Id. ¶ 19. 18 Ultima alleges three claims against Nationwide: breach of contract, breach of the implied 19 covenant of good faith and fair dealing, and a claim for declaratory relief. Id. ¶¶ 20-37. All three 20 claims arise out of Nationwide’s denial of coverage. See id. ¶ 22 (“Defendants breached the 21 contract of insurance by failing to provide a defense or indemnity to the claims made in the 22 Complaint.”); ¶ 27(e) (“Defendants violated the covenant of good faith and fair dealing by . . . 23 unreasonably denying Plaintiff’s claim”); ¶ 32 (“Plaintiff contends that Defendants must 24 reimburse Plaintiff for the defense costs it incurred in connection with the Underlying Action, and 25 that Defendants wrongfully denied their coverage obligations to Plaintiff.”). 26 Nationwide asks to dismiss Ultima’s complaint under Federal Rule of Civil Procedure 27 12(b)(6), on the argument that Ultima “fails to state a claim as a matter of law because the 1 Inc., Sonoma County Superior Court, Case No. SCV-266433, triggered no duty to defend under 2 the relevant insurance policy.” Dkt. No. 40. Dismissal is granted, with leave to amend. 3 Under the operative insurance policy, Nationwide agreed to “pay those sums that the 4 insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property 5 damage’ to which this insurance applies.” Dkt. No. 40-1, Ex. B at EXHIBIT B-21.1 The 6 insurance applies to “property damage” only if it was “caused by an ‘occurrence.’” Id. “Property 7 damage” includes “[p]hysical injury to tangible property” and “[l]oss of use of tangible property 8 that is not physically injured,” and “occurrence” means “an accident, including continuous or 9 repeated exposure to substantially the same general harmful conditions.” Id. at EXHIBIT B-35. 10 “A liability insurer owes a broad duty to defend its insured against claims that create a 11 potential for indemnity,” and the “carrier must defend a suit which potentially seeks damages 12 within the coverage of the policy.” Montrose Chemical Corp. v. Superior Court,

, 13 295 (1993) (cleaned up; emphasis in original). “The determination whether the insurer owes a 14 duty to defend usually is made in the first instance by comparing the allegations of the complaint 15 with the terms of the policy. Facts extrinsic to the complaint also give rise to a duty to defend 16 when they reveal a possibility that the claim may be covered by the policy.”

(quotations 17 omitted). 18 The problem for Ultima is that the Wise Villa complaint did not allege property damage 19 resulting from an occurrence, i.e., an accident. Rather, the complaint alleged that Wise Villa hired 20 Ultima to filter and bottle its wine, and the wine was damaged by acts or omissions of Ultima, 21 including “contamination or improper filtration of the wine during the filtering and/or bottling 22 process.” Dkt. No. 40-1, Ex. A ¶¶ 5-6. In effect, Wise Villa alleged that its wine was damaged 23 because Ultima performed its work incorrectly, coverage for which is plainly excluded under the 24 Nationwide insurance policy. See Dkt. No. 40-1, Ex. B at EXHIBIT B-24 - B-25 (listing under 25 “Exclusions,” “‘Property damage’ to . . . [t]hat particular part of any property that must be 26 restored, repaired or replaced because ‘your work’ was incorrectly performed on it.”). 27 1 In addition, Ultima has not pleaded in its complaint against Nationwide any “[f]acts 2 || extrinsic to the [underlying] complaint” that might “give rise to a duty to defend” by “reveal[ing] a 3 possibility that the claim may be covered by the policy.” Montrose Chemical,

. 4 || With respect to Wise Villa’s wine, Ultima’s complaint states only that “[t]he sole allegation stated 5 in [Wise Villa’s] complaint . . . was that Plaintiff contaminated or improperly filtered the wine 6 || during the bottling process which damaged Wise Villa’s wine.” Dkt. No. 39 4115. So Ultima’s 7 allegations, too, fail to plead an “occurrence” that might bring Wise Villa’s claim against Ultima 8 || under the scope of Ultima’s insurance policy with Nationwide. 9 Consequently, as the pleadings stand, Ultima’s allegations fail to show that “the underlying 10 || claim may fall within policy coverage.” Mirpad, LLC v. Cal. Ins. Guarantee Ass’n,

4th 1058, 1068 (2005) (quotations omitted; emphasis in original). Dismissal of the first amended 12 || complaint is granted on that basis. 13 Ultima has requested an opportunity to amend, Dkt. No. 43 at 10-11, and at this stage of 14 || the case, there is no good reason to deny that request. Ultima may file an amended complaint by 15 April 29, 2024. The amended complaint may not add parties or new claims without express leave a 16 || of Court. The case deadlines set by the amended scheduling order, Dkt. No. 51, are stayed 3 17 pending further order. 18 IT IS SO ORDERED. 19 Dated: March 29, 2024 20 21 JAMES#PONATO 22 United fftates District Judge 23 24 25 26 27 28