A California federal judge has denied Navigators Specialty Insurance Company’s request to file a reconsideration motion concerning a prior ruling that dismissed the insurer’s claims in a coverage dispute involving a data center project.
The case centers on a 2017 contract in which SVO Building One, LLC engaged Vertiv, an equipment manufacturing company, to design a data center in Sacramento, California. In 2019, Vertiv filed a complaint against SVO alleging defamation, among other causes of action. Navigators, a division of The Hartford, agreed to defend SVO in the underlying lawsuit. After the case was settled, Navigators sought reimbursement from SVO for over $5 million in attorney’s fees and costs, contending that its duty to defend was limited to the defamation claim. SVO countered, arguing that Navigators failed to meet its burden under the controlling case of Buss v. Superior Court in allocating defense fees and costs solely attributable to non-covered claims.
Judge Araceli Martínez-Olguín ruled that Navigators had not met its burden under the Buss case and that the allegations in the underlying complaint were sufficient to maintain the duty to defend even after the defamation cause of action was dismissed. Consequently, the court granted SVO’s motion for summary judgment on the complaint and denied Navigators’ motion for reconsideration. The court also granted SVO’s Daubert motion to exclude Navigators’ expert testimony, which was deemed untrustworthy and not in line with the applicable standard under Buss.
This ruling underscores the high burden on insurers seeking reimbursement from their policyholders for defense costs incurred in cases involving both covered and non-covered claims. It also highlights the potential consequences for insurers who fail to properly allocate defense costs and attempt to recoup expenses from their insureds without sufficient justification.