CALPINE CORPORATION v. ACE AMERICAN INSURANCE COMPANY Complaint

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MARTIN L. SEEGER, IV (SBN: 58264) BABIN & SEEGER, LLP 3550 Round Barn Boulevard, Suite 201 Santa Rosa, California 95403 Telephone: (707) 526-7370 Facsimile: (707) 526-0307 Attorneys for Defendant CALPINE CORPORATION

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION CALPINE CORPORATION, a California Corporation, Plaintiff, v. ACE AMERICAN INSURANCE COMPANY, Defendant. / CASE NO. COMPLAINT FOR DECLARATORY RELIEF
[28 USC §2201, et seq.]

DEMAND FOR JURY TRIAL

JURISDICTION 1. Jurisdiction of this action is based on Title 28, United States Code, §

1332(a), there being diversity of citizenship between the parties. The amount in controversy exceeds $75,000, exclusive of interest and costs.

VENUE 2. Venue is proper in the Northern District of California because a

substantial part of the events or omissions giving rise to the claim occurred in this District. 1
COMPLAINT

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INTRADISTRICT ASSIGNMENT The San Francisco Division of the Northern District California is proper

under Northern District California Local Rule 3-2(d) as the events or omissions giving rise to the claims occurred in Sonoma County.

THE PARTIES Plaintiff, CALPINE CORPORATION, is and was at all times mentioned, a

corporation duly organized and existing under the laws of the State of Delaware, with its principal place of business at 50 West San Fernando Street, San Jose in the State of California. 5. Defendant ACE AMERICAN INSURANCE COMPANY was, and is now,

a corporation duly organized and existing under the laws of the State of Pennsylvania, with its principal place of business at Two Liberty Place, 1601 Chestnut Street, Philadelphia in the State of Pennsylvania.

RIGHT TO DECLARATORY JUDGMENT There is now existing between the parties hereto an actual, justiciable

controversy in respect to which Plaintiff is entitled to have a declaration of its rights and further relief pursuant to the provision of the Declaratory Judgment Act, 28 USC §2201, et seq..

STATEMENT OF CASE On August 15, 2002, Plaintiff CALPINE and Marley Cooling Tower

Company (hereinafter “Marley”) entered into a written contract entitled “Continuing Services Agreement” (hereinafter referred to as the “CSA”), whereby MARLEY agreed to perform certain services for Plaintiff CALPINE, the operator of geothermal powered electric generating facilities. /// 2
COMPLAINT

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8.

On February 26, 2003, Plaintiff CALPINE and Marley entered into

Purchase Order No. SV33641 (hereinafter referred to as the “PO”) involving a project designated as the “RidgeLine Unit 8 Cooling Tower Rebuild.” Under the terms of said PO, MARLEY agreed to rebuild the cooling tower at Plaintiff CALPINE’s Unit 8 facility (hereinafter “Calpine project”) located at The Geysers near Middletown in Sonoma County, California. 9. The parties to the CSA and the PO agreed that MARLEY would obtain a

policy of liability insurance during the term of the CSA, naming CALPINE as an additional insured. The purpose of the insurance was understood by CALPINE to be for the protection of CALPINE from any and all claims arising out of Marley’s performance of work under the CSA and PO. 10. On May 13, 2003, George McVay, a Marley employee, was killed in the

course of his employment at the Calpine project. McVay’s successor filed a lawsuit against Plaintiff CALPINE in the Superior Court of California, County of Santa Clara, Case No. 104CV026059 (the “Action”), seeking damages, which are believed to be in excess of $75,000. 11. At the time of the incident, Defendant ACE AMERICAN INSURANCE

COMPANY (hereinafter “ACE”) afforded Marley commercial general liability (hereinafter “CGL”) insurance. Plaintiff was a named additional insured on Marley’s Comprehensive General Liability (“CGL”) policy. 12. After commencement of the underlying lawsuit by McVay’s successor,

Plaintiff CALPINE tendered its defense to Marley under the terms of the contract. Marley refused to defend or indemnify Plaintiff CALPINE in the McVay lawsuit. 13. In September 2004, Plaintiff CALPINE tendered its defense of the

McVay lawsuit to Defendant ACE. ACE refused to respond for 4 months, and Plaintiff CALPINE finally received word from ACE acknowledging receipt of Plaintiff’s tender letter in January 2005. ACE has employed the tactic of delay and refuses to admit its obligations in this matter. 3
COMPLAINT

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FIRST CLAIM FOR RELIEF Breach of Written Contract Plaintiff CALPINE incorporates by reference each and every allegation in

the foregoing paragraphs as if fully set forth herein. 15. Marley and Defendant ACE entered into a written contract with Marley

wherein Defendant ACE provided Marley with CGL insurance for the Calpine project. McVay’s death occurred during the effective policy dates under the ACE insurance policy. 16. Plaintiff CALPINE was an additional insured on Marley’s CGL insurance

policy provided by Defendant ACE at the time of McVay’s death. 17. As an additional insured to Marley’s CGL insurance policy, Defendant

ACE was contractually obligated to pay any and all sums Plaintiff CALPINE would be legally obligated to pay arising from Marley’s involvement in the Calpine project under the CSA and PO and to defend CALPINE in the Action. 18. As an additional insured, Defendant ACE was required to respond to and

investigate Plaintiff CALPINE’s tender of defense under Marley’s CGL insurance policy. 19. On September 10, 2004, Plaintiff CALPINE tendered defense of the

underlying McVay action to Defendant ACE. Defendant ACE failed to acknowledge or respond to this letter. 20. On November 15, 2004, more than two months later, Plaintiff CALPINE

again tendered defense of the McVay action to Defendant ACE. Defendant ACE again failed to acknowledge or respond to this letter. 21. On December 31, 2004, more than three months from the initial tender

of defense, Plaintiff CALPINE tendered defense of the McVay action for a third time. On January 21, 2005, Defendant ACE finally responded to Plaintiff CALPINE’s tender. 22. In Defendant ACE’s January 21, 2005 response, Defendant ACE simply

advised Plaintiff CALPINE that Defendant ACE had received Plaintiff CALPINE’s 4
COMPLAINT

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tender of defense and requested further documentation. Defendant ACE further informed Plaintiff CALPINE that Crawford & Co, Defendant ACE’s third-party administrator, would contact Plaintiff CALPINE in the future. Although it is unclear when ACE notified Crawford and Co. of Plaintiff CALPINE’s tender of defense, it is clear that Crawford and Co. had not opened a file to investigate Plaintiff CALPINE’s tender of defense at the time of the letter and still has not contacted Plaintiff CALPINE.

23.

Defendant ACE breached its contract by failing: 1) to acknowledge and

respond to Plaintiff CALPINE‘s tender letters within a reasonable time as Plaintiff CALPINE was an additional insured under the terms of Marley’s CGL policy; and 2) to acknowledge its duty to defend and indemnity Plaintiff CALPINE. 24. Plaintiff CALPINE has been compelled to incur attorney fees,

investigative, Court and other costs to protect itself in the Action and have, therefore, been damaged as a result of Defendant ACE’s failure to respond to and investigate Plaintiff CALPINE’s tender of defense. 25. Plaintiff CALPINE seeks damages accord to proof at the time of trial.

SECOND CLAIM FOR RELIEF Breach of Implied Covenant of Good Faith and Fair Dealing 26. Plaintiff CALPINE incorporates by reference each and every allegation in

the foregoing paragraphs as if fully set forth herein. 27. Defendant ACE approved the addition of Plaintiff CALPINE as an

additional insured on Marley’s CGL policy for the Calpine Project. As an additional insured under Marley’s insurance policy, Defendant ACE owed Plaintiff CALPINE a duty of good faith and fair dealing in Plaintiff CALPINE’s tender of defense under Marley’s CGL policy. 28. In the case at bar, Defendant ACE’s implied promise to Plaintiff

CALPINE was to promptly acknowledge and investigate Plaintiff CALPINE’s tender of 5
COMPLAINT

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defense and to provide a defense and indemnity to Plaintiff CALPINE, as an additionally named insured, in connection with the Action. 29. Defendant ACE breached the Implied Covenant of Good Faith and Fair

Dealing by its failure to acknowledge receipt of Plaintiff CALPINE’s tender of defense within a reasonable time and by failing to investigate the tender of defense. 30. Plaintiff CALPINE has been compelled to incur attorney fees,

investigative, Court and other costs to protect itself in the underlying McVay litigation and have, therefore, been damaged as a result of Defendant’s breach of its duties and obligations under the CSA and PO. 31. Plaintiff CALPINE seeks damages accord to proof at the time of trial.

THIRD CLAIM FOR RELIEF Violation of Insurance Code §790.03 32. Plaintiff CALPINE incorporates by reference each and every allegation in

the foregoing paragraphs as if fully set forth herein. 33. California Insurance Code Section 790.03(h)(3) specifies that

“[f]ailing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies,” constitutes an unfair claims settlement practice. 34. Under Title 10, California Code of Regulations Section 2695.5(e), an

insurer has fifteen (15) calendar days to 1) acknowledge receipt of the claimant’s notice; 2) providing the claimant forms and reasonable assistance; and 3) begin any necessary investigation of the claim. 35. Defendant ACE had a statutorily-imposed duty to respond within fifteen

(15) days of Plaintiff CALPINE’s first tender of defense sent on September 10, 2004. Having failing to comply with this statutory requirement, Defendant ACE had two more opportunities to acknowledge and respond to Plaintiff CALPINE’s tender of defense. Defendant ACE failed to do so. 6
COMPLAINT

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36.

Defendant ACE’s failure to reasonably promptly to acknowledge and

respond to Plaintiff CALPINE’s tender of defense constituted an unfair claims settlement practice prohibited by Insurance Code Section 790.03(h)(3). 37. Plaintiff CALPINE has been compelled to incur attorney fees,

investigative, Court and other costs to protect itself in the Action and have, therefore, been damaged as a result of Defendant’s breach of its duties and obligations under both the CSA and PO. 38. Plaintiff CALPINE seeks damages accord to proof at the time of trial.

FOURTH CLAIM FOR RELIEF Declaratory Relief 39. Plaintiff incorporates by reference each and every allegation in the

foregoing paragraphs as if fully set forth herein. 40. This is an action for declaratory judgment pursuant to Title 28, United

States Code, § 2201 et seq., for the purpose of determining a question of actual controversy between the parties. 41. Plaintiff CALPINE contends that Defendant ACE is obligated to

indemnify and hold Cross-Complainants harmless from any and all liability concerning the matters set forth in Plaintiff’s Complaint. 42. Defendant ACE’s unreasonable delaying tactics forced Plaintiff

CALPINE to incur unnecessary financial obligations in defending itself from the Action. Accordingly, a declaration from the Court regarding Defendant ACE’s liability and obligation to Plaintiff is necessary to avoid multiple suits and actions.

PRAYER WHEREFORE, plaintiff prays for judgment as follows: 1. Enter a declaratory judgment that under the terms of the appropriate

insurance policy contract between CALPINE and ACE, Defendant ACE AMERICAN 7
COMPLAINT

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INSURANCE COMPANY is required to accept Plaintiff CALPINE’s tender of defense of September 10, 2004; 2. 3. Awarding plaintiff compensatory damages; Awarding plaintiff costs and expenses of this litigation, including

reasonable attorney’s fees; 4. Awarding plaintiffs such equitable or other and further relief as may be

just and proper under the circumstance.

DATED: March ___, 2005 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

BABIN & SEEGER, LLP

Martin L. Seeger, IV Attorneys for Defendant CALPINE CORPORATION

JURY DEMAND Plaintiff hereby demands a trial by jury in this matter.

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COMPLAINT

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