State Farm Fire and Casualty Company v. Drake Real Estate Group

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAR 6 2025 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT STATE FARM FIRE AND CASUALTY No. 24-2752 COMPANY, an Illinois Corporation, D.C. No. 2:22-cv-08776-JLS-MRW Plaintiff - Appellee, v. MEMORANDUM* DRAKE REAL ESTATE GROUP, a California Corporation; CHRISTOPHER CHARLES DRAKE, an individual, Defendants - Appellants. Appeal from the United States District Court for the Central District of California Josephine L. Staton, District Judge, Presiding Submitted March 3, 2025** Pasadena, California Before: CLIFTON, IKUTA, and CHRISTEN, Circuit Judges. Drake Real Estate Group and Christopher Charles Drake (collectively, Drake) appeal an order granting summary judgment in favor of State Farm Fire and * This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). Casualty Company (State Farm). We review orders granting summary judgment de novo and may affirm on any ground supported by the record. Nat’l R.R. Passenger Corp. v. Su, 41 F.4th 1147, 1152 (9th Cir. 2022). We assume the parties are familiar with the facts and recite them only as necessary. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm. The primary issue on appeal is whether Drake knew of “a circumstance that could reasonably be expected to lead to [a c]laim” against Drake when it applied for the subject E & O insurance policy with State Farm. We apply an objective standard to this question. Am. Int’l Specialty Lines Ins. Co. v. Cont’l Cas. Ins. Co., 49 Cal. Rptr. 3d 1, 13 (Ct. App. 2006). We conclude that emails exchanged a year before the policy began, between Drake and Darryl Wong, would put a “reasonable professional in the insured’s position” on notice of circumstances reasonably expected to lead to a claim. Kinsale Ins. Co. v. Golden Beginnings, LLC, 557 F. Supp. 3d 1000, 1008 (C.D. Cal. 2021) (citation omitted). Drake’s subjective belief about those emails does not control the outcome here. Id. The increasingly contentious emails discussed mediation, liability, settlement of disputed repair costs and related damages, assumption of responsibility, and coverage of costs for fixing construction defects. As these emails demonstrate, the dispute involved responsibility for significant repair costs. This evidence left no room for a jury to 2 24-2752 find that Drake lacked notice of circumstances that were reasonably likely to give rise to Wong’s eventual lawsuit. See Chateau Chamberay Homeowners Ass’n v. Associated Int’l Ins. Co., 108 Cal. Rptr. 2d 776, 784 (Ct. App. 2001) (noting that reasonableness becomes a question of law when only one reasonable inference can be drawn from the undisputed facts); Evanston Ins. Co. v. OEA, Inc., 566 F.3d 915, 920 (9th Cir. 2009) (same). We affirm the district court’s ruling that the email exchange put Drake on notice of circumstances reasonably expected to lead to a claim before Drake applied for the subject E & O insurance policy. As such, State Farm had no duty to defend the resulting claim. Because this issue resolves the appeal, we decline to reach State Farm’s alternative grounds for denying coverage. See Nat’l R.R. Passenger Corp., 41 F.4th at 1152. AFFIRMED. 3 24-2752