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Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 1 of 53

RAMIRO MORALES [Bar No.: 167947]


rmorales@mfrlegal.com
CHRISTINE M. FIERRO [Bar No.: 191660]
cfierro@mfrlegal.com
W. BRIAN JONES [Bar No.: 251889]
wbjones@mfrlegal.com
MORALES FIERRO & REEVES
2300 Contra Costa Blvd., Suite 310
Pleasant Hill, CA 94523
Telephone: (925) 288-1776
Facsimile: (925) 288-1856

Attorneys for Plaintiffs

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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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CENTURION REAL ESTATE PARTNERS,


LLC; CENTURION REAL ESTATE
INVESTORS IV, LLC; MISSION PLACE,
LLC; AMERICAN GUARANTEE &
LIABILTY INSURANCE COMPANY;
ZURICH AMERICAN INSURANCE
COMPANY; WESTCHESTER SURPLUS
LINES INSURANCE COMPANY,

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Plaintiffs,
v.
ARCH INSURANCE COMPANY,

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Defendants.

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CASE NO.:

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COMPLAINT FOR DECLARATORY


RELIEF; BREACH OF CONTRACT;
BREACH OF THE IMPLIED
COVENANT OF GOOD FAITH AND
FAIR DEALING; EQUITABLE
SUBROGATION; AND EQUITABLE
CONTRIBUTION
JURY TRIAL DEMANDED

Plaintiffs CENTURION REAL ESTATE PARTNERS, LLC, CENTURION REAL

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ESTATE INVESTORS IV, LLC, MISSION PLACE, LLC, AMERICAN GUARANTEE &

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LIABILTY INSURANCE COMPANY, ZURICH AMERICAN INSURANCE COMPANY, and

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WESTCHESTER SURPLUS LINES INSURANCE COMPANY (collectively, Plaintiffs)

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complains of Defendant ARCH INSURANCE COMPANY (Arch), and alleges as follows:

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1.

At all times relevant herein, plaintiff Centurion Real Estate Partners, LLC, is and

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was at all time relevant hereto a business entity incorporated under the laws of the State of

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Delaware with its principal place of business in the State of New York.
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COMPLAINT

CASE NO.

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 2 of 53

2.

At all times relevant herein, plaintiff Centurion Partners, LLC, is and was at all time

relevant hereto a business entity incorporated under the laws of the State of Delaware with its

principal place of business in the State of New York.

3.

At all times relevant herein, plaintiff Centurion Real Estate Investors IV, LLC, is and

was at all time relevant hereto a business entity incorporated under the laws of the State of

Delaware with its principal place of business in the State of New York.

4.

At all times relevant herein, plaintiff Mission Place, LLC, is and was at all time

relevant hereto a business entity incorporated under the laws of the State of Delaware with its

principal place of business in the State of New York.

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5.

At all times relevant herein, plaintiff American Guarantee & Liability Insurance

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Company, is and was at all time relevant hereto a business entity incorporated under the laws of the

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State of Illinois with its principal place of business in the State of Illinois.

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6.

At all times relevant herein, plaintiff Zurich American Insurance Company, is and

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was at all time relevant hereto a business entity incorporated under the laws of the State of Illinois

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with its principal place of business in the State of Illinois.

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7.

At all times relevant herein, plaintiff Westchester Surplus Lines Insurance Company

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is and was at all time relevant hereto a business entity incorporated under the laws of the State of

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Georgia with its principal place of business in the State of Pennsylvania.

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8.

Plaintiffs are informed and believe and thereon allege that Arch Insurance Company

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is and was at all time relevant hereto a business entity incorporated under the laws of the State of

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Missouri with its principal place of business in the State of Missouri.

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transacted business in the State of California.

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Plaintiffs are informed and believe Arch is authorized to transact business and has

JURSIDICTION AND VENUE


10.

This action involves an amount in controversy in excess of Seventy-Five Thousand

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Dollars ($75,000.00) and is an action between citizens of different states. As such, diversity

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jurisdiction is appropriate pursuant to 28 U.S.C. 1332.

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11.

Venue is proper in the U.S. District Court, Northern District of California, in that the
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COMPLAINT

CASE NO.

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 3 of 53

subject matter of this action arose in the County of San Francisco, California. Specifically the

underlying civil lawsuits giving rise to the insurance dispute that are the subject of this declaratory

relief action, captioned Beacon Residential Community Assn. v. Catellus Third and King, et al., San

Francisco County Superior Court Docket Number CGC 08-478453, Zucker, et al. v. Catellus

Development Corp., et al., San Francisco County Superior Court Docket Number CGC 06-455352

(Zucker I), and Zucker, et al. v. Catellus Development Corp., et al., San Francisco County Superior

Court Docket Number CGC 08-471272 (Zucker II) (the Underlying Actions), were all litigated in

San Francisco County. Moreover, the dispute in the Beacon, Zucker I and Zucker II centered on the

construction and sale of condominiums located in San Francisco, California. Consequently, venue

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is proper in this district.

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FACTS
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Plaintiffs CENTURION REAL ESTATE PARTNERS, LLC, CENTURION REAL

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ESTATE INVESTORS IV, LLC, and MISSION PLACE, LLC, (collectively, Insured Plaintiffs)

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were named defendants in a civil action titled Beacon Residential Community Assn. v. Catellus

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Third and King, et al., San Francisco County Superior Court Docket Number CGC 08-478453

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(Beacon Action).

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13.

In the Beacon Action, plaintiffs alleged as against the Insured Plaintiffs multiple

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counts, including violations of California Civil Code Sections 895, et seq., negligence per se for

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violation of statute, breach of implied warranty, strict liability, negligence, breach of fiduciary duty,

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violation of California Business and Professions Code Section 11018.5, and concealment and

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misrepresentation, among other things.

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14.

Centurion Real Estate Partners, LLC, and Mission Place, LLC, were named

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defendants in two other civil actions titled Zucker, et al. v. Catellus Development Corp., et al., San

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Francisco County Superior Court Docket Number CGC 06-455352 (Zucker I) and Zucker, et al. v.

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Catellus Development Corp., et al., San Francisco County Superior Court Docket Number CGC 08-

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471272 (Zucker II) (collectively, Zucker I and Zucker II will be referred to herein as the Zucker

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Actions).

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15.

In the First Amended Complaint in Zucker I, plaintiffs alleged as against Centurion


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COMPLAINT

CASE NO.

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 4 of 53

Real Estate Partners, LLC, and Mission Place, LLC, fraud, negligent misrepresentation, and untrue

or misleading advertising, unfair competition, strict liability, negligence, and failure to adequately

disclose, among other things.

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In the First Amended Complaint in Zucker II, plaintiffs alleged as against Centurion

Real Estate Partners, LLC, and Mission Place, LLC, fraud, negligent misrepresentation, failure to

disclose/concealment, untrue or misleading advertising, unfair competition, strict liability

construction defect, negligence construction defect, breach of warranty, constructive fraud, and

breach of good faith and fair dealing, among other things.

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Plaintiffs AMERICAN GUARANTEE & LIABILTY INSURANCE COMPANY,

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ZURICH AMERICAN INSURANCE COMPANY, and WESTCHESTER SURPLUS LINES

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INSURANCE COPANY (collectively, Carrier Plaintiffs) issued liability policies to one or more

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Insured Plaintiffs.

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Carrier Plaintiffs agreed to defend Insured Plaintiffs in the Zucker Actions and/ or

the Beacon Action pursuant to a full reservation of rights, and expended substantial sums doing so.
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Carrier Plaintiffs paid defense fees and costs on behalf of Insured Plaintiffs in the

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Beacon Action and the Zucker Actions for the defense of claims which were not potentially covered

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under the policies issued by Carrier Plaintiffs.

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Insured Plaintiffs incurred fees and costs related to their defense in the Beacon

Action and the Zucker Actions for which they were not compensated by any insurer.
21.

Insured Plaintiffs liability in the Beacon Action was resolved by way of a settlement

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in the amount of $3,775,000. The $3,775,000 settlement was paid by Insured Plaintiffs and Carrier

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Plaintiffs. The Carrier Plaintiffs reserved rights regarding their settlement contributions.

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Arch issued a policy entitled Private Company Management Liability Insurance to

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one or more Insured Plaintiffs, policy number PCD 0015105-00, effective from May 3, 2006, to

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May 3, 2007 (the 2006-07 Arch Policy).

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23.

Arch issued a policy entitled Private Company Management Liability Insurance to

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one or more Insured Plaintiffs, policy number PCD 0015105-01, effective from May 3, 2007, to

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May 3, 2008 (the 2007-08 Arch Policy).


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COMPLAINT

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Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 5 of 53

24.

Arch issued a policy entitled Private Company Management Liability Insurance to

one or more Insured Plaintiffs, policy number PCD 0015105-02, effective from May 3, 2008, to

May 3, 2009 (the 2008-09 Arch Policy).

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Arch issued a policy entitled Private Company Management Liability Insurance to

one or more Insured Plaintiffs, policy number PCD 0015105-03, effective from May 3, 2009, to

May 3, 2010 (the 2009-10 Arch Policy) ( the 2006-07 Arch Policy, the 2007-08 Arch Policy, the

2008-09 Arch Policy, and the 2009-10 Arch Policy, collectively referred to as the Arch Policies).

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26.

Under the 2006-07 Arch Policy, the 2007-08 Arch Policy, and the 2008-09 Arch

Policy, Arch agreed as follows:


The Insurer will pay on behalf of the Private Company a Loss for which the Private
Company shall become legally obligated to pay as a result of a Claim first made
during the Policy Period or Discovery Period, if applicable, against the Private
Company for a Wrongful Act which takes place during or prior to the Policy Period.
The term Loss is defined to mean:
. . . damages, judgments (including pre/post judgment interest on a covered
judgment), settlements and Defense Costs for which the Insureds become legally
obligated to pay.
The term Wrongful Act is defined to mean:
Any actual or alleged breach of duty, neglect, error, misstatement, misleading statement,
omission or act by the Insured Persons in their respective capacities as such or, with respect
to Coverage C, by the Private Company.
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Under the 2009-10 Arch Policy, Arch agreed to the following:

The insurer shall pay Loss on behalf of an Insured Organization resulting from a
Claim first made against such Insured Organization during the Policy Period or
Extended Reporting Period, if applicable, for a Wrongful Act by an Insured
Organization.
The term Loss is defined to mean:
the amount that the Insureds area legally obligated to pay resulting from a claim,
including without limitation, damages, settlement, judgments, pre- and postjudgment interest, Defense Costs and Investigation Costs.
Loss shall include punitive and exemplary damages where insurable by law. The
insurability of such damages shall be governed by the laws of any applicable
jurisdiction that permits coverage of such damages . . .
The term Wrongful Act is defined to mean:
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COMPLAINT

CASE NO.

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 6 of 53

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act, error, omission, misstatement, misleading statement, neglect or breach of duty


by Insured Persons in their capacity as such or in an Outside Capacity or, with
respect to insuring agreement C, by any Insured Organization . . .
The 2009-10 Policy also obligates Arch as follows:
The Insurer shall have the right and duty to defend each Claim covered under a
Liability Coverage Part for which the Insurer receives notice, even if such Claim is
groundless, false or fraudulent. The Insurer may make any investigation it deems
appropriate.
28.

The defense and indemnity of the Insured Plaintiffs was tendered to Arch in the

Beacon Action.
29.

The defense and indemnity of Centurion Real Estate Partners, LLC, and Mission

Place, LLC was tendered to Arch in the Zucker Actions.


30.

Arch acknowledged receipt of the tenders and admitted in written correspondence

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that: the Beacon Action was timely and properly reported to Arch; the Beacon Action involved a

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Claim against the Insured Plaintiffs; the Claim was first made during the Policy Period; the

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Beacon Action involved one or more alleged Wrongful Acts committed by the Insured Plaintiffs;

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and that there was potential coverage for the Beacon Action. (Attached hereto as Exhibit A is a

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copy of a letter dated November 4, 2008, from counsel for Arch, regarding coverage for the Beacon

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Action under the Arch Policies.)

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31.

Arch acknowledged receipt of the tenders and admitted in written correspondence

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that: the Zucker Actions were timely and properly reported to Arch; the Zucker Actions involved a

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Claim against Centurion Real Estate Partners, LLC, and Mission Place, LLC; the Claim was

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first made during the Policy Period; the Zucker Actions involved one or more alleged Wrongful

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Acts committed by Centurion Real Estate Partners, LLC, and Mission Place, LLC; and that there

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was potential coverage for the Zucker Actions. (Attached hereto as Exhibit B are copies of letters

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dated October 17, 2006, and November 4, 2008, from counsel for Arch, regarding coverage for the

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Zucker Actions under the Arch Policies.)

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32.

Pursuant to the terms of the Arch Policies, Arch had the obligation to defend and/or

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pay for the cost of the defense of one or more of the Insured Plaintiffs in connection with the

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Beacon Action. Nonetheless, and despite prior admissions made by Arch regarding coverage,
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COMPLAINT

CASE NO.

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 7 of 53

Arch ultimately refused to defend and/or pay for the cost of the defense of one or more of the

Insured Plaintiffs in connection with the Beacon Action

33.

Pursuant to the terms of the Arch Policies, Arch had the obligation to defend and/or

pay for the cost of the defense of Centurion Real Estate Partners, LLC, and Mission Place, LLC, in

connection with the Zucker Actions. Nonetheless, and despite prior admissions made by Arch

regarding coverage, Arch ultimately refused to defend and/or pay for the cost of the defense of

Centurion Real Estate Partners, LLC, and Mission Place, LLC, in connection with the Zucker

Actions.

34.

Pursuant to the terms of the Arch Policies, Arch had the obligation to pay for the

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settlement of claims against the Insured Plaintiffs in the Beacon Action. Nonetheless, and despite

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prior admissions made by Arch regarding coverage, Arch ultimately refused to pay for any portion

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of the settlement of the claims against the Insured Plaintiffs in connection with the Beacon Action.

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35.

Arch breached the Arch Policies by unreasonably and without just cause withholding

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benefits, including, but not limited to a refusal to pay for the cost of the defense of the Insured

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Plaintiffs in the Beacon Action and Zucker Actions and a refusal to pay for the settlement of claims

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against the Insured Plaintiffs in the Beacon Action.

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FIRST CAUSE OF ACTION


Declaratory Relief Defense Expenditures in Beacon Action

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36.

Plaintiffs incorporate herein by reference all preceding paragraphs as though fully set

37.

A controversy has arisen between Plaintiffs, on the one hand, and Arch, on the other,

forth.

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in that Plaintiffs contend that Arch had a coverage obligation to defend and/or pay for the cost of

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the defense of the Insured Plaintiffs in connection with the Beacon Action and Arch contends that it

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did not have such a coverage obligation.

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38.

Plaintiffs assert and contend that a declaratory judgment is both necessary and proper

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at this time for the Court to determine the respective rights and liabilities of the parties regarding

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Archs duty to pay for the cost to defend the Insured Plaintiffs in the Beacon Action.

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COMPLAINT

CASE NO.

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 8 of 53

SECOND CAUSE OF ACTION


Declaratory Relief Defense Expenditures in Zucker Actions

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Plaintiffs incorporate herein by reference all preceding paragraphs as though fully set

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A controversy has arisen between Plaintiffs, on the one hand, and Arch, on the other,

forth.

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in that Plaintiffs contend that Arch had a coverage obligation to defend and/or pay for the cost of

the defense of Centurion Real Estate Partners, LLC, and Mission Place, LLC, in connection with the

Zucker Actions, and Arch contends that it did not have such a coverage obligation.

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Plaintiffs assert and contend that a declaratory judgment is both necessary and proper

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at this time for the Court to determine the respective rights and liabilities of the parties regarding

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Archs duty to pay for the cost to defend Centurion Real Estate Partners, LLC, and Mission Place,

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LLC, in the Zucker Actions.

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THIRD CAUSE OF ACTION


Declaratory Relief Settlement Payment in Beacon Action

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Plaintiffs incorporate herein by reference all preceding paragraphs as though fully set

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A controversy has arisen between Plaintiffs, on the one hand, and Arch, on the other,

forth.

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in that Plaintiffs contend that Arch had a coverage obligation to pay for the settlement of the claims

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against the Insured Plaintiffs in connection with the Beacon Action, and Arch contends that it did

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not have such a duty.

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44.

Plaintiffs assert and contend that a declaratory judgment is both necessary and proper

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at this time for the Court to determine the respective rights and liabilities of the parties regarding

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Archs duty to pay for the settlement of the claims against the Insured Plaintiffs in connection with

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the Beacon Action.


FOURTH CAUSE OF ACTION
Breach of Contract Beacon Action

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Plaintiffs incorporate herein by reference all preceding paragraphs as though fully set

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Insured Plaintiffs tendered their defense and indemnity in the Beacon Action to

forth.

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COMPLAINT

CASE NO.

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 9 of 53

Arch.

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Beacon Action.

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Arch was obligated to pay for the cost of the defense of the Insured Plaintiffs in the

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Arch was obligated to pay for the settlement of claims against the Insured Plaintiffs

in connection with the Beacon Action.

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Arch breached the Arch Policies by refusing and failing to perform its obligation to

pay for the cost of the defense of and the settlement of claims against the Insured Plaintiffs in

connection with the Beacon Action.

50.

As a direct and proximate result of the conduct of Arch, Insured Plaintiffs have been

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deprived of the benefit of the insurance coverage to which it is entitled and have sustained actual

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damages. This breach has been the legal and proximate cause of actual damages to Insured

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Plaintiffs in an amount to be determined at the time of trial, but in excess of the jurisdictional limit

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of this Court, including, but not limited to, expenses, attorneys fees and costs incurred in

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connection with the Beacon Action, the payment made towards the settlement of the Beacon

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Action, and other foreseeable economic losses, all in a sum to be shown by proof at trial.

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sustained additional damages, plus interest, in an amount to be shown by proof at the time of trial.

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FIFTHCAUSE OF ACTION
Breach of Contract Zucker Actions

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As a direct and proximate result of the conduct of Arch, Insured Plaintiffs have

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Plaintiffs incorporate herein by reference all preceding paragraphs as though fully set

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Centurion Real Estate Partners, LLC, and Mission Place, LLC, tendered their

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defense in the Zucker Actions to Arch.


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Arch was obligated to pay for the cost of the defense of Centurion Real Estate

Partners, LLC, and Mission Place, LLC, in the Zucker Actions.


55.

Arch breached the Arch Policies by refusing and failing to perform its obligation to

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pay for the cost of the defense of Centurion Real Estate Partners, LLC, and Mission Place, LLC, in

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connection with the Zucker Actions.


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COMPLAINT

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56.

As a direct and proximate result of the conduct of Arch, Centurion Real Estate

Partners, LLC, and Mission Place, LLC, have been deprived of the benefit of the insurance

coverage to which it is entitled and have sustained actual damages. This breach has been the legal

and proximate cause of actual damages to Centurion Real Estate Partners, LLC, and Mission Place,

LLC, in an amount to be determined at the time of trial, but in excess of the jurisdictional limit of

this Court, including, but not limited to, expenses, attorneys fees and costs incurred in connection

with the Zucker Actions, and other foreseeable economic losses, all in a sum to be shown by proof

at trial.

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As a direct and proximate result of the conduct of Arch, Centurion Real Estate

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Partners, LLC, and Mission Place, LLC, have sustained additional damages, plus interest, in an

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amount to be shown by proof at the time of trial.

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SIXTH CAUSE OF ACTION


Breach of The Implied Covenant of Good Faith and Fair Dealing

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Plaintiffs incorporate herein by reference all preceding paragraphs as though fully set

59.

The Arch Policies contain an implied covenant of good faith and fair dealing

forth.

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whereby Arch promised, among other things, to pay for the cost of the defense of the Beacon

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Action and Zucker Actions and the settlement in the Beacon Action, and to give at least as much

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consideration to Insured Plaintiffs interests as it does to its own.

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Arch has breached its duty of good faith and fair dealing owed to Insured Plaintiffs

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by: unreasonably and without just cause withholding policy benefits, including, but not limited to a

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refusal to pay for the cost of the defense in the Beacon Action and Zucker Actions and a refusal to

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pay for the settlement in the Beacon Action; forcing Insured Plaintiffs to incur and pay for the cost

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of the defense and the settlement in the Beacon Action and Zucker Actions; and by placing its own

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interests ahead of those Insured Plaintiffs.

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Insured Plaintiffs are informed and believe, and thereon alleges that Arch has

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breached its duty of good faith and fair dealing owed to Insured Plaintiffs by other acts or omissions

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of which Insured Plaintiffs are presently unaware. Insured Plaintiffs will seek leave of court to
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COMPLAINT

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Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 11 of 53

amend this Complaint at such time as it discovers the other acts or omissions of Insured Plaintiffs

constituting such breach.

62.

As a direct and proximate result of the wrongful and unreasonable conduct of Arch,

Insured Plaintiffs have suffered actual and consequential damages and expenses, including, but not

limited to expenses, attorneys fees and costs incurred in connection with the Beacon Action and

Zucker Actions, the payment made towards the settlement of the Beacon Action, and other

foreseeable economic losses, all to Insured Plaintiffs damage, in an amount to be shown by proof at

the time of trial.

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Insured Plaintiffs are entitled to recover any and all attorneys fees and costs that it

incurs in its efforts to obtain policy benefits that have been wrongfully withheld by Arch.

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SEVENTH CAUSE OF ACTION


Equitable Subrogation Beacon Action

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Plaintiffs incorporate herein by reference all preceding paragraphs as though fully set

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Arch was obligated to provide insurance coverage to Insured Plaintiffs in connection

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with the Beacon Action.


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Insured Plaintiffs performed all conditions giving rise to Archs obligation to provide

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insurance coverage to Insured Plaintiffs in the Beacon Action. Alternatively, Insured Plaintiffs have

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been excused from performing any conditions giving rise to Archs obligation to provide coverage.

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Defendants have breached their obligation to Insured Plaintiffs by wrongfully and

unreasonably refusing to provide coverage, as herein alleged.


68.

As a result of Archs wrongful denial of coverage, Carrier Plaintiffs, without acting

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as a volunteer, were forced to contribute amounts towards the defense and settlement of Insured

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Plaintiffs in the Beacon Action.

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69.

Carrier Plaintiffs payments towards the defense and settlement of Insured Plaintiffs

included amounts Carrier Plaintiffs were not obligated to pay under their respective policies.
70.

Due to their payments, Carriers Plaintiffs are subrogated by law and principles of

equity to the rights of Insured Plaintiffs against Arch pursuant to their respective policies with
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COMPLAINT

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Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 12 of 53

respect to the Beacon Action.

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Carrier Plaintiffs have suffered damages as a result of Archs actions and conduct.

EIGHTH CAUSE OF ACTION


Equitable Subrogation Zucker Actions

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Plaintiffs incorporate herein by reference all preceding paragraphs as though fully set

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Arch was obligated to provide insurance coverage to Centurion Real Estate Partners,

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LLC, and Mission Place, LLC in connection with the Zucker Actions.
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Insured Plaintiffs performed all conditions giving rise to Archs obligation to provide

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insurance coverage to Centurion Real Estate Partners, LLC, and Mission Place, LLC, in the Zucker

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Actions.

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giving rise to Archs obligation to provide coverage.

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Alternatively, Insured Plaintiffs have been excused from performing any conditions

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Defendants have breached their obligation to Centurion Real Estate Partners, LLC,

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and Mission Place, LLC, by wrongfully and unreasonably refusing to provide coverage, as herein

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alleged.

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As a result of Archs wrongful denial of coverage, Carrier Plaintiffs, without acting

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as a volunteer, were forced to contribute amounts towards the defense of Centurion Real Estate

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Partners, LLC, and Mission Place, LLC, in the Zucker Action.

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Carrier Plaintiffs payments towards the defense of Centurion Real Estate Partners,

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LLC, and Mission Place, LLC, included amounts Carrier Plaintiffs were not obligated to pay under

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their respective policies.

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Due to their payments, Carriers Plaintiffs are subrogated by law and principles of

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equity to the rights of Centurion Real Estate Partners, LLC, and Mission Place, LLC against Arch

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pursuant to their respective policies with respect to the Zucker Actions.

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NINTH CAUSE OF ACTION


For Equitable Contribution Beacon Action

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Carrier Plaintiffs have suffered damages as a result of Archs actions and conduct.

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Plaintiffs incorporate herein by reference all preceding paragraphs as though fully set
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COMPLAINT

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forth.

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Arch owed a coverage obligation to Insured Plaintiffs to defend and/or pay for the

cost to defend the Insured Plaintiffs with respect to the Beacon Action.

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the Beacon Action.

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the Insured Plaintiffs in the Beacon Action.


TENTH CAUSE OF ACTION
Equitable Contribution Zucker Actions

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Carrier Plaintiffs are entitled to equitable contribution from Arch for all sums that

Carrier Plaintiffs have paid in excess of their equitable shares towards the defense of claims against

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Carrier Plaintiffs have paid sums in excess of their equitable shares towards the

defense of claims against Insured Plaintiffs in the Beacon Action.

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Arch has not paid any share of the cost to defend Insured Plaintiffs with respect to

85.

Plaintiffs incorporate herein by reference all preceding paragraphs as though fully set

86.

Arch owed a coverage obligation to Centurion Real Estate Partners, LLC, and

forth.

Mission Place, LLC, to defend and/or pay for the cost to defend the Zucker Actions.
87.

Arch has not paid any share of the cost to defend Centurion Real Estate Partners,

LLC, and Mission Place, LLC in the Zucker Actions.


88.

Carrier Plaintiffs have paid sums in excess of their equitable shares towards the

defense of Centurion Real Estate Partners, LLC, and Mission Place, LLC in the Zucker Actions.
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Carrier Plaintiffs are entitled to equitable contribution from Arch for all sums that

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Carrier Plaintiffs have paid in excess of their equitable shares towards the defense of Centurion Real

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Estate Partners, LLC, and Mission Place, LLC, in the Zucker Actions.

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PRAYER FOR RELIEF

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WHEREFORE, Plaintiffs pray for the following:

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1.

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A declaration that Arch had a duty to defend and/or pay for the cost to defend the

Insured Plaintiffs in the Beacon Action;


2.

A declaration that Arch had a duty to defend and/or pay for the cost to defend the
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COMPLAINT

CASE NO.

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 14 of 53

Centurion Real Estate Partners, LLC, and Mission Place, LLC, in the Zucker Actions

2
3

3.

Insured Plaintiffs in the Beacon Action;

4
5

A declaration that Arch had a duty to pay for the settlement of the claims against the

4.

An award of any and all damages arising from Archs breach of the Arch Policies

and its failure to deal in good faith;

5.

An award of damages, under equitable subrogation, for expenditures made by Carrier

Plaintiffs towards the cost to defend and settle claims against the Insured Plaintiffs in the Beacon

Action and Zucker Action;

6.

An award of damages, under equitable contribution, for expenditures made by

10

Carrier Plaintiffs towards the cost to defend claims against the Insured Plaintiffs in the Beacon

11

Action and Zucker Actions;

12

8.

An award of attorneys fees;

13

9.

An award of pre-judgment interest;

14

10.

An award of costs of suit; and

15

11.

For any other relief this Court deems proper.

16
17

Dated: January 13, 2015

MORALES FIERRO & REEVES

18
19

By:

/s/ Ramiro Morales


Ramiro Morales
Christine M. Fierro
W. Brian Jones
Attorneys for Plaintiffs
CENTURION REAL ESTATE PARTNERS,
LLC; CENTURION REAL ESTATE
INVESTORS IV, LLC; MISSION PLACE,
LLC; AMERICAN GUARANTEE &
LIABILTY INSURANCE COMPANY;
ZURICH AMERICAN INSURANCE
COMPANY; WESTCHESTER SURPLUS
LINES INSURANCE COMPANY

20
21
22
23
24
25
26
27

///
///

28
14
COMPLAINT

CASE NO.

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 15 of 53

1
2
3
4
5
6
7

DEMAND FOR JURY TRIAL


Plaintiffs, CENTURION REAL ESTATE PARTNERS, LLC; CENTURION REAL
ESTATE INVESTORS IV, LLC; MISSION PLACE, LLC; AMERICAN GUARANTEE &
LIABILTY INSURANCE COMPANY; ZURICH AMERICAN INSURANCE COMPANY;
WESTCHESTER SURPLUS LINES INSURANCE COMPANY, hereby demand a trial by jury in
this action.
Dated: January 13, 2015

MORALES FIERRO & REEVES

8
9
By:

/s/ Ramiro Morales


Ramiro Morales
Christine M. Fierro
W. Brian Jones
Attorneys for Plaintiffs
CENTURION REAL ESTATE PARTNERS,
LLC; CENTURION REAL ESTATE
INVESTORS IV, LLC; MISSION PLACE,
LLC; AMERICAN GUARANTEE &
LIABILTY INSURANCE COMPANY;
ZURICH AMERICAN INSURANCE
COMPANY; WESTCHESTER SURPLUS
LINES INSURANCE COMPANY

10
11
12
13
14
15
16
17
18
19
20
21
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23
24
25
26
27
28
15
COMPLAINT

CASE NO.

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 16 of 53

EXHIBIT A

EXHIBIT A

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 17 of 53

_L

TUCKER ELLIS & WEST LLP


ATTORNEYS AT LAW

135 Main Street Suite 700 San Francisco, California 94105


phone 415.617.2400 facsimile 415.617.2409 www.tuckerellis.com
CLEVELAND COLUMBUS LOS ANGELES SAN FRANCISCO

Direct Dial: 415.617.2224


Email: Kwest@tuckerellis.corn

November 4, 2008
VIA E-MAIL & CERTIFIED MAIL

John Tashjian
Centurion Real Estate Partners, LLC

599 Lexington Avenue, Suite 2646


New York NY 10022
Re:

Insured:
Insurer:
Policy:
Policy No.:
Claim No.:
Our Ref.:
Claimant:

Centurion Real Estate Partners, LLC


Arch Insurance Company
Private Company Management Liability Insurance
PCD0015105-00
27873
10177-00007
Beacon Residential Community Association

Dear Mr. Tashjian:


We have been retained by Arch Insurance Company ("Arch") to represent its interests in
connection with that lawsuit styled Beacon Residential Community Association v. Catellus Third
and King LLC, et al., Case No. 08-478453, filed in the Superior Court for the State of California,
San Francisco County ("the Lawsuit"). By correspondence dated August 13, 2008 from Peter
Laufenberg of Wendel, Rosen, Black & Dean LLP, Centurion Real Estate Partners, LLC
("Centurion") tendered the. Lawsuit to Arch for defense and indemnity under Private Company
Management Liability Insurance Policy No. PCD0015105-00 which Arch issued to Centurion
("the Policy").
We are directing this letter to your attention in your capacity as the designated
representative of Centurion and other Insureds named as defendants in the Lawsuit. If you are
not acting on behalf of Centurion and the Insured defendants with respect to insurance coverage
matters, please direct a copy of this letter to the appropriate party and advise us immediately of
that party's identity.
We have reviewed the provisions of the Policy in light of the allegations set forth in the
Lawsuit. We recognize that the allegations set forth in the Lawsuit are unsubstantiated at this
time. Nothing contained in this letter is intended to suggest that these allegations have any
010177/000007/614711/5

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 18 of 53

TUCKER ELLIS & WEST LLP


ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC

Re: Beacon Residential Community Association


November 4, 2008
Page 2
factual or legal merit. This analysis is by necessity subject to modification as further facts are
discovered and as developments occur. Nevertheless, at this stage of the proceedings, we believe
it would be prudent to identify coverage issues that have arisen in connection with the Lawsuit.
For the reasons herein, Arch has determined that the Lawsuit is a Claim against
Centurion and other Insured defendants for which Coverage C [Private Company Liability] could
afford coverage, subject to certain coverage issues which otherwise could limit or preclude
coverage for Centurion and the Insured defendants. We discuss those issues herein.
Because this matter is in its preliminary stages, Arch's coverage analysis and conclusions
are, by necessity, subject to modification as further facts are discovered and as developments
occur. As a result, Arch's investigation of this matter continues to proceed under a full and
complete reservation of all rights accruing under the Policy, the applicable law and in equity.
Nothing said or left unsaid in our correspondence and other communications with you or any
other party should be considered a concession that coverage extends under the Policy. All rights
of Arch under the Policy, at law and in equity should continue to be considered fully and
specifically reserved at all times.
BACKGROUND

According to its website, the Named Insured, Centurion is a full-service real estate
acquisition, development and management company with offices in Manhattan and Los Angeles.
Centurion specializes in identifying, fmancing, and managing real estate investments on behalf
of institutional clients and sophisticated high net worth investors.
In January 2005, Centurion purchased Mission Place, a residential, retail and office
complex located in San Francisco, built in 2004 and designed by Skidmore Owings & Merrill
and Catellus Development Corporation. Centurion subsequently renamed the complex The
Beacon. It appears that the Centurion Real Estate Investors IV, LLC was the private equity fund
raised to finance the purchase. The Beacon and Mission Place LLC was formed as a subsidiary
to hold and manage the property. Both Mission Place LLC and Centurion Real Estate Investors
IV, LLC are identified as Additional Insureds in Endorsement No. 1 to the Policy.
The Beacon consists of 595 condominium units which, at the time of Centurion's
purchase, were newly-completed, vacant, and ready for immediate sale. The sales were
undertaken by Mission Place LLC.

010177/000007/614711/5

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 19 of 53

TUCKER ELLIS & WEST

LLP

ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Beacon Residential Community Association
November 4, 2008
Page 3

THE SECTION 895 INSPECTIONS


On September 8, 2006, the Beacon Residential Community Association ("the
Association") issued to various entities, including Centurion and Mission Place LLC, a written
notice of claim pursuant to California Civil Code Sections 895 and 1375 seeking the inspection
of the complex's common areas for defects. During this period of time, the Association's ability
to file suit with respect to the defects was statutorily stayed. We understand that the stay expired
in February 2008, at 'which time the parties entered a tolling agreement which tolled the
Association's time to file suit until the tolling agreement was terminated or September 20, 2008,
whichever occurred first. The Association recently terminated the tolling agreement and filed
the Lawsuit on August 8, 2008.
SUMMARY OF THE LAWSUIT

A.

Parties

The Association. The Association is a non-profit California mutual benefit


corporation composed of the owners of the units within the Beacon Residential
Community development.

Insured Defendants. Defendants include Centurion, Mission Place LLC, and


Centurion Real Estate Investors IV, LLC, all of which are Insureds under the Policy.
The complaint also names Mission Place Mezzanine LLC, Mission Place Mezz
Holdings LLC, and Mission Place Partners LLC. It is, not presently clear which, if
any, of these entities are Insureds and, according to Mr. Laufenberg, some of the
entities do not exist. However, for purposes of this letter, we hereinafter refer to all
of these defendants as "Mission Place."

Centurion Partners, LLC. The complaint also names Centurion Partners, LLC as a
defendant. We understand from Mr. Laufenberg that this entity is an actual but
entirely unrelated company and therefore not an Insured under the Policy.

Other defendants include:

The Construction Defendants. The Construction Defendants consist of the Catellus


Entities (Catellus Third and King LLC, Catellus Development Corporation, Catellus
Commercial Development Corp., Catellus Operating Limited Partnership, Catellus
Urban Development Corporation, Third and King Investors LLC, and Prologis), and

010177/000007/614711/5

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TUCKER ELLIS & WEST LLP


ATTORNEYS AT LAW .

John Tashjian

Centurion Real Estate Partners, LLC


Re: Beacon Residential Community Association
November 4, 2008
Page 4

the Webcor Entites (Webcor Construction, Inc., Webcor Builders, Inc., and Webcor
Construction LP).

B.

The Design Defendants. The Design Defendants consist of Skidmore Owings &
Merrill LLP, HKS, Inc., HKS Architects, Inc, and Catellus Development Corporation.

Allegations

The Lawsuit alleges that Mission Place was the "original builder" of The Beacon and had
entered into agreements with the original members of the Association in connection with the
purchase and sale of condominium units. The Association alleges that, in building the complex,
Mission Place violated certain of the "functionality standards" set forth in Section 896 of the
California Civil Code and certain of the "fit and finish" warranties set forth in Section 900 of the
Civil Code. The violations include numerous defects relating to, inter alia, the complex's
heating and ventilation systems.
C.

Causes of Action/Relief Sought

The Beacon Complaint asserts causes of action for (1) violation of California Civil Code
Section 895; (2) breach of implied warranty; (3) strict liability; (4) negligence; (5) action on
surety bond; (6) negligence of real estate broker; (7) breach of fiduciary duty and conspiracy to
breach of fiduciary duty; (8) breach of express warranty; (9) negligent misrepresentation; (10)
breach of contract on faithful performance bond to construct real property, in violation of
California Business and Professions Code Section 11018.5; and (11) third party beneficiary
breach of subcontracts.
All of the foregoing causes of action, save for the fifth and tenth causes of action (action
on surety bond and breach of contract on faithful performance of bond), are asserted against
Mission Place. The fifth and tenth causes of action are asserted against certain unnamed Doe
defendants.
The relief sought by the Association includes:

With respect to the first cause of action [Violation of Section 895], "the reasonable
cost of repairing any damages caused by the repair efforts in an amount in excess of
$10 million, the reasonable cost of repairing and rectifying any damages resulting
from the failure of the subject property to meet the standards, the reasonable cost of
removing and replacing any improper repair by Defendants . . . reasonable relocation

010177/000007/614711/5

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 21 of 53

TUCKER ELLIS & WEST

LLP

ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Beacon Residential Community Association
November 4, 2008
Page 5

and storage expenses, lost business income, reasonable investigative costs for each
established violation, and all other fees recoverable by contract or statute."
With respect to all causes of action compensatory damages in excess of $10 million,
reasonable attorneys' fees, and costs of suit.
D.

Procedural Status

The Lawsuit has been filed with the court but not yet served on Mission Place or any of
the other defendants.
On August 29, 2008, Mr. Laufenberg forwarded to us a notice of mediation scheduled for
September 24, 2008 at the JAMS office in San Francisco before mediator John B. Bates, Jr. We
understand that the mediation was scheduled as part of the Section 895 inspection process, not
the newly-filed litigation. According to Mr. Laufenberg, there was no court order or statutory
provision which required Arch to attend the mediation and Mission Place did not request
settlement authority or ask Arch to attend the mediation.
THE POLICY
Arch issued to Centurion Real Estate Partners, LLC Private Company Management
Liability Insurance Policy No. PCD0015105-00, effective for the Policy Period of May 3, 2006
to May 3, 2007. The Policy's Limit of Liability is $2 million each Claim and in the aggregate
for all Coverages combined, including Defense Costs. Claims other than Employment Claims
under Coverage C [Private Company Liability] are subject to a Retention of $75,000. A Pending
or Prior Claim Date of May 3, 2005 applies to claims under all Coverages.
COVERAGE EVALUATION
A.

Applicable Insuring Clause


As set forth in Section I of the Policy, the Policy provides the following Coverage:
COVERAGE C: PRIVATE COMPANY LIABILITY
The Insurer will pay on behalf of the Private Company a Loss for
which the Private Company shall become legally obligated to pay
as a result of a Claim first made during the Policy Period or

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TUCKER ELLIS & WEST

LLP

ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC

Re: Beacon Residential Community Association


November 4, 2008
Page 6
Discovery Period, if applicable, against the Private Company for a
Wrongful Act which takes place during or prior to the Policy
Period.
Private Company is defined to mean "the Named Company and any Subsidiary thereof."
The Named Company is Centurion Real Estate Partners, LLC. Endorsement Number 1
[Additional Insured(s) Endorsement (Excess)] identifies, inter alia, Mission Place LLC,
Centurion Real Estate Investors IV, LLC, and Centurion Real Estate Partners, LLC as Insureds.
The Policy defines "Subsidiary" as:
(1)

a not for profit organization exempt from federal income


tax under section 501(c)(3) of the Internal Revenue Code of
1986 (as amended) sponsored exclusively by a Private
Company;

(2)

a corporate organization with respect to which the Named


Corporation owns, either directly or indirectly through one
or more of its Subsidiaries, more than 50% of the
outstanding securities representing the present right to vote
for election of directors or equivalent positions; provided
that if the corporate organization first becomes a Subsidiary
as described in paragraph (2) during the Policy Period and
if its total consolidated assets as reflected in its then most
recent consolidated financial statements total more than
10% of the total consolidated assets of the Named
Company as reflected in the Named Company's then most
recent consolidated financial statements, then such
organization and its Insured Persons shall be covered under
this Policy only if.ithin 90 days of such organization
becoming a Subsidiary, the Named Company shall have
provided the Insurer with full particulars of the new
Subsidiary and paid any additional premium and agreed to
any amendment of the provisions of this Policy required by
the Insurer relating to such new Subsidiary.

An organization becomes a Subsidiary at the time the


circumstances described in paragraph (1) or (2) above first apply to
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Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 23 of 53

een
TUCKER ELLIS & WEST

LLP

ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Beacon Residential Community Association
November 4, 2008
Page 7
such organization. An organization ceases to be a Subsidiary at the
time such circumstances no longer apply to such organization.
In all events, coverage is otherwise afforded under this Policy with
respect to a Claim made against any Subsidiary or its Insured
Persons shall only apply for Wrongful Acts committed or allegedly
committed after the effective time that such Subsidiary became a
covered Subsidiary as provided above and prior to the time that
such Subsidiary ceased to be a covered Subsidiary.
Claim is defined to mean "a civil or arbitration proceeding against an Insured for
monetary, non-monetary or injunctive relief which is commenced by . . . service of a complaint
or similar pleading." Wrongful Act is defined to mean, in relevant part, "any actual or alleged
breach of duty, neglect, error, misstatement, misleading statement, omission or act by the Insured
Persons in their respective capacities as such or, with respect to Coverage C, by the Private
Company."
It appears that the Lawsuit is a Claim against Centurion, Mission Place LLC, and
Centurion Real Estate Investors IV, LLC which alleges that those entities committed Wrongful
Acts, L e. , that, in their capacities as Private Companies, they caused or allowed defects to exist
within The Beacon. It further appears that this Claim would be deemed first made during the
Policy Period in that: (1) the Association's Section 895 claim, from which this Lawsuit arises,
was issued on September 8, 2006; and (2) the Lawsuit alleges Wrongful Acts which are the same
or related to those set forth in the Zucker litigation which was filed on August 18, 2006 and
reported to Arch on August 28, 2006. It thus appears that Coverage C of the Policy potentially
would afford coverage for the Lawsuit with respect to these three entities, subject to the coverage
issues discussed below.'
We understand from Mr. Laufenberg that Centurion Partners, LLC is an actual but
entirely unrelated entity and therefore not an Insured under the Policy. We do not presently
know whether Mission Place Mezzanine, LLC, Mission Place Mezzanine Holdings LLC,
Mission Place Partners LLC, or Centurion Partners, LLC are Subsidiaries of Centurion Real
Estate Partners, LLC. Moreover, Mr. Laufenberg has advised that some of these entities do not
exist. Arch requests that Centurion provide further information with respect to these entities.

1 It presently appears that none of the Policy's other Coverages are implicated.

010177/000007/614711/5

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TUCKER ELLIS & WEST LLP


ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Beacon Residential Community Association
November 4, 2008
Page 8

B.

Potential Coverage Issues

Arch has determined that the following additional Policy provisions could operate to limit
or preclude coverage, in whole or in part, for the Lawsuit.

First, Exclusion 1(g) of the Policy provides that the Insurer shall not be liable under any
Coverages to make any payment for Loss as a result of a Claim made against an Insured "for
bodily injury, sickness, disease or death of any person, or for damage to or destruction of any
tangible property including loss of use thereof." (Emphasis ours). Given that the basis for the
Lawsuit appears to be construction defects in the complex, it appears that Exclusion 1(g) would
afford a potential basis to decline coverage for the Lawsuit.
Second, Exclusion 1(e) of the Policy provides that the Insurer shall not be liable under
any Coverages to make any payment for Loss as a result of a Claim made against an Insured:
[A]lleging, arising out of, based upon or attributable to any actual
or alleged act or omission of the Insured Persons in their capacities
as directors, officers, trustees, governors, employees, general
counsel, risk manager or in the case of a limited liability company,
members of the management board (or equivalent position), or any
organization other than the Private Company, even if service in
such capacity is with the knowledge and consent of, at the
direction or request of, or part of the duties regularly assigned to
the Insured Person by, the Private Company.
Although no Insured Persons are named as defendants, the Lawsuit names DOE
defendants and asserts a seventh cause of action for breach of fiduciary duty and conspiracy to
breach of fiduciary duty. Thereunder, it is alleged that the insured and DOE defendants: (1)
owned a majority of the voting shares in the Association; (2) from and after November 2004,
exercised domination and control over the majority of the members of the Association's directors
that were put in office by the insured and DOE defendants; (3) owed a fiduciary duty to the
Association; and breached their fiduciary duty to the Association and conspired to breach their
fiduciary duty to the Association.
In the event the Lawsuit is amended to include Insured Persons as defendants, Exclusion
1(e) could bar coverage for any loss against such Insured Persons arising allocable to the
complaint's seventh cause of action, in the event that claim involves the Insured Persons'
capacities as directors of the Association.

010177/000007/614711/5

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 25 of 53

TUCKER ELLIS & WEST LLP


ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC

Re: Beacon Residential Community Association


November 4, 2008
Page 9
Third, Exclusion 1(g) of the Policy provides that the Insurer shall not be liable under any
Coverages to make any payment for Loss as a result of a Claim made against an Insured "for
bodily injury, sickness, disease or death of any person, or for damage to or destruction of any
tangible property including loss of use thereof." (Emphasis ours). Given that the basis for the
Lawsuit is the construction defects in the complex, Exclusion 1(g) could bar coverage for the
entire Lawsuit.
Fourth, Exclusion 1(h) of the Policy provides that the Insurer shall not be liable under
any Coverages to make any payment for Loss as a result of a Claim made against an Insured:

[F]or emotional distress, mental anguish, outrage, humiliation,


false arrest or imprisonment, abuse of process, malicious
prosecution, defamation, violation or invasion of any right of
privacy or private occupancy, trespass, nuisance or wrongful entry
or eviction; provided, however, this exclusion shall not apply to
any Employment Claim.
(Emphasis ours).
The defects alleged in the Beacon Complaint relate to both the common areas of the
complex as well as the individual condo units. To the extent it is established that the defects
constitute a violation or invasion of any right of private occupancy, Exclusion 1(h) may apply.
Fifth, Exclusion 2(a) of the Policy provides that the Insurer shall not be liable under
Coverage C to make any payment for Loss as a result of a Claim made against a Private
Company:

[F]or any actual or alleged obligation under or breach of any oral


or written contract or agreement, including any liability of others
assumed by the Private Company under any such contract or
agreement; provided, however, this exclusion shall not apply to (i)
to an actual or alleged breach or any implied contract in an
Employment Claim, or (ii) to the extent the Private Company
would have been liable for such Loss in the absence of such
contract or agreement.

010177/000007/614711/5

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 26 of 53

TUCKER ELLIS & WEST

LLP

ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC

Re: Beacon Residential Community Association


November 4, 2008
Page 10
The Lawsuit asserts an eleventh cause of action for third party beneficiary breach of
contract and subcontracts. It appears that Exclusion 2(a) of the Policy would bar coverage for
any loss allocable to the Lawsuit's eleventh cause of action.
Sixth, Exclusion 2(f) of the Policy provides that the Insurer shall not be liable under any
Coverages to make any payment for Loss as a result of a Claim made against an Insured
"brought or maintained on behalf of a customer or client of the Private Company in connection
with the actual or alleged rendering or failure to render any service to or for the benefit of such
customer or client." In connection with the eleventh cause of action, it is alleged that Mission
Place entered into contracts and subcontracts for the purpose of constructing and improving the
Beacon complex for the benefit of the Association and the condo owners. To the extent the
Association and the condo owners are deemed to be customers or clients of Mission Place,
Exclusion 2(f) may apply.

In addition, the sixth cause of action [Negligence of Real Estate Broker] alleges that
Mission Place entered into agreements with other defendants by which Mission Place and the
other defendants agreed to "provide real estate brokerage services in connection with the
marketing, development, advertising, purchase, and/or sale of the property and the improvements
constructed on such property." It appears that Exclusion 2(f) also would bar coverage for any
loss allocable to the sixth cause of action.
Seventh, Section X [Defense Costs (Including the Advancement of Defense Costs),
Settlements, Judgments and Allocation] of the Policy provides, in relevant part, that:

If as a result of any Claim an Insured incurs both Loss covered


under this Policy and loss not covered under this Policy, either
because such Claim is made against both the Insured and others
because such Claim includes both covered and uncovered matters,
then such amount shall be allocated between covered and
uncovered matters, and in the event of a settlement, also based on
the relative benefit to the parties from settlement of such covered
and uncovered matters.
In the event that the Insurer and the Insureds cannot agree as to the
amount of the Defense Costs to be advanced under the Policy, then
the Insurer shall advance Defense Costs which the Insurer believes
to be covered under this Policy until a different amount shall be

010177/000007/614711/5

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 27 of 53

TUCKER ELLIS & WEST

LLP

ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC

Re: Beacon Residential Community Association


November 4, 2008
Page 11
agreed upon or determined pursuant to the provisions of this Policy
and applicable law.
As discussed above, it is possible that portions of any Loss sustained by Mission Place,
including Defense Costs, may not be covered under the Policy. It therefore appears that,
pursuant to Section X of the Policy, Arch would have basis to allocate between covered and
uncovered Loss.
Finally, Section XV [Other Insurance] of the Policy provides, in pertinent part, that:

Such insurance as is provided by this Policy shall apply only as


excess over any other valid and collectible insurance, unless such
other insurance is written only as specific excess insurance over
the Limit of Liability provided by this Policy. This Policy shall
also be specifically excess over any other and collectible insurance
pursuant to which any other Insurer has a duty to defend a Claim
for which this Policy may be obligated to pay Loss.
We understand that Mission Place also has CGL insurance policies issued by Zurich and
ACE Westchester. We understand that those insurers have been defending Mission Place in
connection with the Section 895 inspection and are likely to accept Mission Place's defense in
connection with the Lawsuit. We further understand that Mission Place may be entitled to
indemnity from some of the Construction and Design Defendants which are insured under
policies issued by AIG. We understand that all of these other policies contain duties to defend.
It therefore appears that, pursuant to Section XV of the Policy, any coverage afforded under the
Policy would be excess of any coverage available to Mission Place under the Zurich, ACE
Westchester, and AIG policies. See, Firemen's Ins. Co. of Washington, D.C. v. Federal Ins. Co.,
233 A.D.2d 193, 649 N.Y.S.2d 700 (1996) (court held that "excess only" insurance clause in
D&O policy meant that D&O policy was excess to CGL policy issued to same insured).
CONCLUSION

Arch reserves the right to supplement the coverage positions set forth herein, specifically
including the right to raise additional coverage defenses under the Policy, including the right to
recoup all defense expenses advanced, should the facts and circumstances developed in this
matter so warrant. Accordingly, the comments herein concerning coverage are based on the
allegations in the Lawsuit, and on the facts presently known.

010177/000007/614711/5

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 28 of 53

TUCKER ELLIS & WEST

LLP

ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Beacon Residential Community Association
November 4, 2008
Page 12

If the defendants believe that any of the coverage positions taken herein by Arch are
incorrect, please advise us and Arch will be pleased to consider any additional information or
arguments they may wish to submit. In the interim, all rights of Arch arising under and in
relation to the Policy, the applicable law and in equity remain fully and specifically reserved at
all times.
Please contact us should you have any questions or wish to further discuss this letter.

KWW/WJL:lah
cc:

Robert Schlesinger (via e-mail)


Centurion Real Estate Partners, LLC
Peter Laufenberg, Esq. (via e mail)
Wendel, Rosen, Black & Dean LLP
-

Joe Connors (via e mail)


Frank Crystal & Company
-

010177/000007/614711/5

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EXHIBIT B

EXHIBIT B

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 30 of 53

TUCKER ELLIS & WEST

LLP

ATTORNEYS AT LAW

One Market Street Steuart Tower Suite 1300 San Francisco, California 94105
phone 415.617.2400 fax 415.617.2409 tuckerellis.com
CLEVELAND LOS ANGELES SAN FRANCISCO

Direct Dial: 415.617.2224


Email:kwesttuckerellis.com

October 17, 2006


VIA CERTIFIED MAIL & E-MAIL

John Tashjian
Centurion Real Estate Partners, LLC
S99 Lexington Avenue
Suite 2646
New York NY 10022
Re: Insured:
Insurer:
Policy:
Policy No.:
Claimant:
Claim No.:
Our File No.:

Centurion Real Estate Partners, LLC


Arch Insurance Company
Private Company Management Liability Insurance
PCD0015105-00
Edward Zucker, et al.
27873
10177-00007

Dear Mr. Tashjian:


We have been retained by Arch Insurance Company ("Arch") to represent its interests in
connection with that lawsuit styled Edward Zucker, et al. vs. Catellus Development Corp., et al.,
No. CGC-06-455352, filed in the Superior Court for the State of California, San Francisco
County ("the Lawsuit"). By letter dated August 28, 2006, the Frank Crystal Agency has
provided Arch with notice of the Lawsuit under Private Company Management Liability
Insurance Policy No. PCD0015105-00 issued to Centurion Real Estate Partners, LLC
("Centurion") by Arch ("the Policy") on August 28, 2006.
We are directing this letter to your attention in your capacity as the designated
representative of Centurion and Mission Place, LLC ("Mission") 1, and their Directors and
Officers, with respect to insurance coverage matters. If you are not acting on behalf of Centurion
and Mission, and their Directors and Officers with respect to insurance coverage matters, please
direct a copy of this letter to the appropriate party and advise us immediately of that party's
identity.
Mission Place, LLC is identified as an Insured under the Policy as explained herein.

LAimanage/10177/00007/57849514

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 31 of 53

TUCKER ELLIS & WEST LLP


ATTORNEYS AT LAW

John Tashjian

Centurion Real Estate Partners, LLC


Re: Edward Zucker, et al. vs. Catellus Development
Corp., et al
October. 17, 2006
Page 2
INTRODUCTION
Arch has analyzed the Lawsuit in light of the provisions of the Policy. For the reasons
herein, Arch has determined that the Lawsuit sets forth Claims against Centurion and Mission.
Arch has identified certain coverage issues which otherwise could limit or preclude
coverage for Centurion and Mission. Those issues also are discussed herein.
Because this matter is in its preliminary stages, Arch's coverage analysis and conclusions
are, by necessity, subject to modification as further facts are discovered and as developthents
occur. As a result, Arch's investigation of this matter continues to proceed under a full and
complete reservation of all rights accruing under the Policy, the applicable law and in equity.
Nothing said or left unsaid in our correspondence and other communications with you or any
other party should be considered a concession that coverage extends under the Policy. All rights
of Arch under the Policy, at law and in equity should continue to be considered fully and
specifically reserved at all times.
THE POLICY
Subject to its terms, conditions, definitions, and exclusions, the Policy. provides Private
Company Liability coverage. The Policy Period is from May 3, 2006 to May 3, 2007. The
Policy's Limit of Liability is $2 million each Claim and in the aggregate for all Coverages
combined, including Defense Costs. Claims other than Employment Claims under Coverage C
[Private Company Liability] are subject to a Retention of $75,000. A Pending or Prior Claim
Date of May 3, 2005 applies to claims under all Coverages.
FACTUAL BACKGROUND
We summarize the allegations asserted in the Lawsuit in order to provide a context for
Arch's comments concerning coverage. This discussion is not meant to imply that the
allegations are accurate or have any merit whatsoever.

A.

The Parties
The following parties are identified in the Lawsuit:

Edward Zucker. ("Zucker") is the class representative of persons who purchased or


entered into a contract to purchase real property at The Beacon condominium

LAimanage/10177/00007/578495/4

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 32 of 53

TUCKER ELLIS & WEST LLP


ATTORNEYS AT LAW

John Tashjian
z
Centurion Real Estate Partners, LLC
Re: Edward Zucker, et al. vs. Catellus Development
.

Corp., et al.

October 17, 2006


Page 3
.

complex in San Francisco, California_

Catellus Commercial Development Corporation. ("Catellus") is a corporation


involved in real estate development. Catellus was acquired by ProLogis in 2005.

Centurion Real Estate Partners, LLC. Centurion is a California company and is a


full-service real estate acquisition, development and management company.

Third and King Investors, LLC. ("Third") is a Delaware company.

Mission Place, LLC. Mission is a California company.


The Beacon Homeowners Association. ("HOA") is the homeowners association for
The Beacon condominiums.

Mission Place Mezz Holdings, LLC. ("MPMH") is a Delaware company.

Mission Place Mezzanine, LLC. ("MPM") is a Delaware company.


Mission Place Partners, LLC. ("MPP") is a Delaware company.

Centurion Real Estate Investment, LLC. ("Centurion REI") is a California


company.

Catellus Third and King, LLC. ("Catellus LLC") is a California company.


B.

The August 18, 2006 Letter from Patrick E. Catalano

In his August 18, 2006 letter to HOA, Patrick E. Catalano identified ten defects, and
requested that those defects be repaired and that his clients be paid monetary damages for any
defects which could not be repaired.
C.

The Lawsuit

On August 18, 2006, Zucker, on behalf of all persons who at any time purchased or
entered into a contract to purchase real property at The Beacon condominium complex located at
250 and 260 King Street, San Francisco, California, filed a class action complaint styled Zucker,

LAimanage/10177/00007/578495/4

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 33 of 53

1INN
TUCKER ELLIS & WEST LLP
ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Edward Zucker, et al. vs. Catellus Development
Corp., et al_

October 17, 2006


Page 4
et al., vs. Catellus Development Corporation, et al., Case No. CGC 06 455352, in the California
-

Superior Court, San Francisco County.


According to the complaint, the defendants falsely represented the square footage of the units of The Beacon. In addition, it is alleged that defendants falsely represented that the
condominiums were "new" units, when the units, in fact, had been converted from apartments.
The Complaint asserts causes of action against Centurion and Mission for (1) fraud, (2)
negligent misrepresentation, (3) breach of contract, (4) untrue or misleading advertising, (5)
unfair competition, (6) constructive trust, (6) reformation, (7) strict liability for construction
defects, (8) breach of contract for construction defects, (9) negligence for construction defects,
(10) Es pendens/pre-judgment attachment, and (11) breach of warranty.'
The relief sought by plaintiffs includes (1) damages for the difference in the value of the
units purchased and the value of the units if they had the square footages as advertised, (2)
contract damages, (3) general damages, (4) special damages, (5) a temporary restraining order, a
preliminary injunction and permanent injunction, (6) a refund of the amount that the actual
purchase price paid exceeds the reformed purchase price, (7) punitive damages, (8) civil
penalties, (9) costs to repair the construction defects, and (10) diminution in value.
,

COVERAGE EVALUATION
A.

Coverages Provided by the Policy

As set forth in Section I of the Policy, the Policy provides the following Coverage:
COVERAGE C: PRIVATE COMPANY LIABILITY
The Insurer will pay on behalf of the Private Company a Loss for
which the Private Company shall become legally obligated to pay
as a result of a Claim first made during the Policy Period or
Discovery Period, if applicable, against the Private Company for a
Wrongful Act which takes place during or prior to the Policy
Period.

These causes of action are also alleged against Mission Place, LLC.

LAimanage/10177/00007/578495/4

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 34 of 53

TUCKER ELLIS & WEST LLP


ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Edward Zucker, et al. vs. Catellus Development
Corp., et al.

October 17, 2006


Page 5
Private Company is defined to mean "the Named Company and any Subsidiary thereof."
The Named Company is Centurion Real Estate Partners, LLC. Mission Place LLC is identified
as an Insured in Endorsement Number 1 [Additional Insured(s) Endorsement (Excess)].
The Policy defines "Subsidiary" as:
(1) a not for profit organization exempt from federal income
tax under section 501(c)(3) of the Internal Revenue Code of 1986
(as amended) sponsored exclusively by a Private Company;
(2)

a corporate organization with respect to which the Named


Corporation owns, either directly or indirectly through one
or more of its Subsidiaries, more than 50% of the
outstanding securities representing the present right to vote
for election of directors or equivalent positions; provided
that if the.coiporate organization first becomes a Subsidiary
as described in paragraph (2) during the Policy Period and
if its total consolidated assets as reflected in its then most
recent consolidated financial statements total more than
10% of the total consolidated assets of the Named
Company as reflected in the Named Company's then most
recent consolidated financial statements, then such
organization and its Insured Persons shall be covered under
this Policy only if within 90 days of such organization
becoming a Subsidiary, the Named Company shall have
provide the Insurer with full particulars of the new
Subsidiary and paid any additional premium and agreed to
any amendment of the provisions of this Policy required by
the Insurer relating to such new Subsidiary.

An organization becomes a Subsidiary at the time the


circumstances described in paragraph (1) or (2) above first apply to
such organization. An organization ceases to be a Subsidiary at the
time such circumstances no longer apply to such organization.
In all events, coverage is otherwise afforded under this Policy with
respect to a Claim made against any a Subsidiary or its Insured
Persons shall only apply for Wrongful Acts committed or allegedly

LAi manage/10177/00007/578495/4

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 35 of 53

TUCKER ELLIS & WEST LLP


ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC

Re: Edward Zucker, et al. vs. Catellus Development


Corp., et al.

October 17, 2006


Page 6
committed after the effective time that such Subsidiary became a
covered Subsidiary as provided above and prior to the time that
such Subsidiary ceased to be a covered Subsidiary.
Claim is defined to mean "a civil or arbitration proceeding against an Insured for
monetary, non-monetary or injunctive relief which is commenced by . . . service of a complaint
or similar pleading." Wrongful Act is defined to mean, in relevant part, "any actual or alleged
breach of duty, neglect, error, misstatement, misleading statement, omission or act by the Insured
Persons in their respective capacities as such or, with respect to Coverage C, by the Private
Company".
Arch concludes that the Lawsuit is a Claim against Centurion and Mission Place. Thus,
Arch concludes that Coverage C of the Policy would afford coverage for the Lawsuit with
respect to Centurion and Mission subject to the coverage issues discussed below.'
Presently, it is unclear whether Centurion Real Estate Investment, LLC, Mission Place
Holdings, LLC, Mission Place Mezzanine, LLC, Mission Place Partners, LLC are Subsidiaries of
Centurion Real Estate Partners, LLC. Therefore, we request that you provide further information
in this regard.
B.

Reservation of Rights as to Potential Coverage Issues


Arch wishes to bring to your attention other provisions of the Policy which might limit or

otherwise preclude coverage, either in whole or in part, for the Lawsuit.


First, the Policy affords coverage for Loss, which is defined to mean, in relevant part,

"damages, judgments (including pre/post-judgment interest on a covered judgment), settlements


and Defense Costs for which the Insureds become legally obligated to pay." However, Loss
"shall not include .. . any amount that represents or is substantially equivalent to disgorgement
or restitutionary or rescissionary damages or forfeiture of any profits or remuneration." In
addition, California courts have held there is no coverage for loss which is restitutionary in
nature. See, e.g., Bank of the West v. Superior Court, 2 Ca1.4th 1254 (1992) ("It is well
established that one may not insure against the risk of being ordered to return money or property
that has been wrongfully acquired."). The Lawsuit seeks a constructive trust and refund of the
amount that the actual purchase price paid exceeds the reformed purchase price. In the event
3 Based on the information provided to Arch, it does not presently appear that any of the Policy's other
Coverages are implicated.

LAimanage/10177/00007/578495/4

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 36 of 53

TUCKER ELLIS & WEST LLP


ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Edward Zucker, et al. vs. Catellus Development
Corp., et al.
October 17, 2006
Page 7
Centurion, or any Insured, is required to return funds previously obtained from plaintiffs, such
relief would be restitutionary in nature and therefore would not constitute covered Loss.

Second, the Policy's definition of Loss expressly excepts "matters which may be deemed
uninsurable under the law pursuant to which this Policy shall be construed." It would appear that
California law would govern any dispute under the Policy. Pursuant to Section 533 of the
California Insurance Code, loss resulting from wilful acts is uninsurable. The Lawsuit asserts
that the Insureds committed fraud and/or made intentional misrepresentations. Thus, Arch
reserves the right to deny coverage on the basis that any loss sustained in connection with the
Lawsuit is not Loss, as defined.
Third, the Policy's definition of Loss expressly excepts "civil or criminal fines or
penalties imposed by law." The Lawsuit seeks civil penalties against the named defendants. In
the event any civil penalties are imposed against any Insureds, Arch reserves the right to deny
coverage for any civil penalties on the basis that such penalties are not Loss, as defined.
Fourth, the Policy's definition of Loss expressly excepts "costs incurred by the Private
Company to comply with any injunctive or other non-monetary-relief or an agreement to provide
such relief" The Lawsuit asserts causes of action for "reformation; and for preliminary and
permanent injunction and restitution," and for "lis pendens/pre-judgment attachment?' In
addition, the relief sought includes injunction, reformation, and class certification. Neither of
these causes of action nor the types of relief sought would constitute Loss, as defined.
Fifth, Exclusion 1(a) of the Policy provides that the Insurer shall not be liable under any
Coverages to make any payment for Loss as a result of a Claim made against an Insured "arising
out of, based upon or attributable to the gaining of any profit, remuneration or financial
advantage to which such Insured was not legally entitled, as evidenced by a written statement or
written admission by such Insured or a judgment or other final adjudication in the underlying
action or in a separate action, alternative dispute resolution process (including one pursuant to
Section XVI) or other proceeding." The Lawsuit asserts, inter alia, causes of action against the
Insureds for fraud, negligent misrepresentation, untrue or misleading advertising, unfair
competition, and reformation, and.seeks preliminary and permanent injunction and restitution.
In the event it is judicially determined that any Insured gained any profit, remuneration or
financial advantage to which the Insured was not legally entitled, Arch reserves the right to deny
coverage pursuant to Exclusion 1(a).
Sixth, Exclusion 1(b) of the Policy provides that the Insurer shall not be liable under any
- Coverages to make any payment for Loss as a result of a Claim made against an Insured "arising

LAimanage/10177100007157849514

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 37 of 53

11)
TUCKER ELLIS & WEST

LLP

ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Edward Zucker, et al. vs. Catellus Development
Corp., et al.

October 17, 2006


Page 8
out of, based upon or attributable to the committing of any deliberate criminal or deliberate
fraudulent act by such Insured, as evidenced by a written statement or written admission by such
Insured Person or a judgment, ruling or other finding of fact in the underlying action or in a
separate action, alternative dispute resolution process (including one pursuant to Section XVI) or
other proceeding." The Lawsuit asserts, inter alia, causes of action against the Insureds for fraud
and untrue or misleading advertising. In the event it is judicially determined . that any Insured
committed any deliberate criminal or fraudulent act, Arch reserves the right to deny coverage
pursuant to Exclusion 1(b).
Seventh, Exclusion 1(g) of the Policy provides the Insurer shall not be liable under any
Coverages to make any payment for. Loss as a result of a Claim made against an Insured "for
bodily injury, sickness, disease or death of any person, or for damage to or destruction of any
tangible property including loss of use thereof'. Because the Lawsuit asserts causes of action for
strict liability, breach of contract for construction defect, negligence for construction defects and
seeks, inter alia, costs to repair the construction defects and diminution in value, Arch reserves
the right to deny coverage pursuant to Exclusion 1(g).
Eighth, Exclusion 2(a) of the Policy provides that the Insurer shall not be liable under
Coverage C to make any payment for Loss as a result of a Claim made against a Private
Company "for any actual or alleged obligation under or breach of any oral or written contract or
agreement, including any liability of others assumed by the Private Company under any such
contract or agreement; provided, however, this exclusion shall not apply (i) to an actual or
alleged breach of an implied contract in an Employment Claim, or (ii) to the extent the Private
Company would have been liable for such Loss in the absence of C such contract or agreement."
Because the Lawsuit arises from the purchase of condominium units by plaintiffS from
defendants, and includes causes of action for breach of contract and breach of contract for
construction defects, Arch reserves the right to deny coverage pursuant to Exclusion 2(a).
Ninth, Exclusion 2(g) of the Policy provides that the Insurer shall not be liable under
Coverage C to make any payment for Loss as a result of a Claim made against a Private
Company "alleging, arising out of, based upon, or attributable to any actual or alleged violation
of any statutory, regulatory or common law involving price fixing, restraint of trade,
monopolization, unfair trade practices, anti-trust, price discrimination, predatory pricing,
business competition or tortuous interference in another's business or contractual relationship."
Because the Lawsuit alleges causes of action for, inter alia, unfair competition and conflict of
interest, Arch reserves the right to deny coverage pursuant to Exclusion 2(g).

LAimanage/10177/00007/578495/4

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 38 of 53

TUCKER ELLIS & WEST

LLP

ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC

Re: Edward Zucker, et al vs. Catellus Development


Corp., et al.

October 17, 2006


Page 9
Tenth, Section X [Defense Costs (Including the Advancement of Defense Costs),
Settlements, Judgments and Allocation] of the Policy provides, in pertinent part, that the Insurer
does not assume any duty to defend any Claim against the Insureds and that the Insureds shall
defend and contest any claim made against them. Additionally, the Insureds shall not admit or
assume any liability, enter into any settlement agreement, make any settlement offer, stipulate to
any judgment, or incur any Defense Costs without the prior written consent of the Insurer.
Please provide us with the names and contact information of the attorneys retained to defend the
Insureds in the Lawsuit, the hourly billing rates for each attorney, and a summary of the
experience those attorneys have had with this type of Lawsuit.
Eleventh, Section X [Defense Costs (Including the Advancement of Defense Costs),
Settlements, Judgments and Allocation] of the Policy, further provides that:

If as a result of any Claim an Insured incurs both Loss covered


under this Policy and loss not covered under this Policy, either
because such Claim is made against both the Insured and others
because such Claim includes both covered and uncovered matters,
then such amount shall be allocated between covered and
uncovered matters, and in the event of a settlement, also based on
the relative benefit to the parties from settlement of such covered
and uncovered matters.
In the event that the Insurer and the Insureds cannot agree as to the
amount of the Defense Costs to be advanced under the Policy, then
the Insurer shall advance Defense Costs which the Insurer believes
to be covered under this Policy until a different amount shall be
agreed upon or determined pursuant to the provisions of this Policy
and applicable law.
As discussed above, it is possible that portions of any Loss sustained by the Insureds,
including Defense Costs, may not be covered under the Policy. Thus, Arch reserves the right to
allocate between covered and uncovered Loss.
Twelfth, Section VI [Retention] provides, "The Insurer shall only be liable for the amount
of Loss as a result of each Claim which is in excess of the applicable Retention amount stated in
Item 4 of the Declarations, such Retention amount to be borne by the Insureds and shall remain
uninsured." Please be advised that the Retention applicable to Coverage C is $75,000. Please

LAimanage/10177/00007/578495/4

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 39 of 53

TUCKER ELLIS & WEST LLP


ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Edward Zucker, et al. vs. Catellus Development
Corp., et al.
October 17, 2006
Page 10
advise us when the Loss, including Defense Costs,' sustained by Centurion and Mission has
exceeded $75,000.5

Thirteenth, Section XV [Other Insurance] of the Policy provides, in pertinent part, that:
Such insurance as is provided by this Policy shall apply only as
excess over any other valid and collectible insurance, unless such
other insurance is written only as specific excess insurance over
the Limit of Liability provided by this Policy. This. Policy shall ,
also be specifically excess over any other and collectible insurance
pursuant to which any other Insurer has a duty to defend a Claim
for which this Policy may be obligated to pay Loss.
If Centurion has not already done so, we request that it immediately place all other
applicable insurers and insurance policies on notice of this Claim. In addition, we request that
you provide us with the following documents:
,

All correspondence to such other insurer(s) placing them on notice of this Claim.

All correspondence from such other insurer(s) setting forth their position with regard
to coverage under their respective policies.

A complete copy of the other insurance policy(ies) at issue.

In addition to discharging its duty to cooperate with Arch in this matter, Centurion should
be aware that some of these other insurance policies may provide to it certain valuable benefits if
they can be held to provide coverage primary to this Policy. As an example, policies such as
CGL typically provide coverage for defense costs that are not subject to any deductible or
retention amount. Further, defense costs covered and paid under a CGL policy typically do not
erode the available limit of liability.

4 Defense Costs is defined to mean "reasonable and necessary fees, costs and expenses consented to by the
Insurer (including premiums for any appeal bond, attachment bond or similar bond, but without any obligation to
apply for or furnish any such bond) resulting solely from the defense and appeal of a Claim against the Insureds, but
shall not include salaries, wages, overhead or benefit expenses associated with Insured Persons or employees of the
Private Company."
s Section V [Limit of Liability (For All Loss, Including Defense Costs)] provides, in relevant part, "The

Insurer shall not pay Defense Costs in addition to the Limit of Liability. Defense Costs are part of Loss and as such
are subject to and reduce the Limit of Liability."

LAimanagen 0177100007/57849514

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 40 of 53

111
TUCKER. ELLIS & WEST LLP
ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Edward Zucker, et al. vs. Catellus Development
Corp.,. et al.

October 17, 2006


Page 11
Finally, Arch reserves the right to deny coverage and rescind the Policy in the event it
determines that misrepresentations were made in any of the Policy Applications.
FURTHER PROCEDURES

This will confirm that Arch's investigation of the Lawsuit is pursuant to a full reservation
of all of its rights and defenses under the Policy and applicable law, expressly including the right
to deny coverage and rescind the Policy. Arch reserves the right to supplement the foregoing
analysis as additional facts are discovered and developments occur.
Please contact us should you have any questions or wish to further discuss this letter.

KWW/WJL/MHL,
cc:

Robert Schlesinger
Centurion Real Estate Partners, LLC
599 Lexington Avenue
Suite 2646
New York NY 10022
George Mauro
Frank Crystal & Company
Financial Square, 32 Old Slip
New York NY 10005
Gregory Gamble
Frank Crystal & Company
Financial Square, 32 Old Slip
New York NY 10005
.

LAimanage/10177/00007/578495/4

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 41 of 53

TUCKER ELLIS & WEST

LLP

ATTORNEYS AT LAW

135 Main Street Suite 700 San Francisco, California 94105


phone 415.617.2400 facsimile 415.617.2409 www.tuckerellis.com
CLEVELAND COLUMBUS LOS ANGELES

SAN FRANCISCO

Direct Dial: 415.617.2224

Email: Kwest@tuckerellis.com

November 4, 2008
VIA E-MAIL& CERTIFIED MAIL

John Tashjian
Centurion Real Estate Partners, LLC

599 Lexington Avenue, Suite 2646


New York NY 10022
Re:

Insured:
Insurer:
Policy:
Policy No.:
Claim No.:
Our Ref.:
Claimant:

Centurion Real Estate Partners, LLC


Arch Insurance Company
Private Company Management Liability Insurance
PCD0015105-00
27873
10177-00007
Edward Zucker, et al. (Zucker II)

Dear Mr. Tashjian:


We have been retained by Arch Insurance Company ("Arch") to represent its interests in
connection with that lawsuit styled Edward Zucker, et al. vs. Catellus Development Corp., et al.,
Case No. CGC-08-471272, filed in the SuperiOr Court for the State of California, San Francisco
County ("the Lawsuit" or "Zucker II"). By correspondence dated July 10, 2008 from Peter
Laufenberg of Wendel, Rosen, Black & Dean, LLP, Centurion Real Estate Partners, LLC
("Centurion") reported the Lawsuit to Arch under Private Company Management Liability
Insurance Policy No. PCD0015105-00 which Arch issued to Centurion ("the Policy").
We are directing this letter to your attention in your capacity as the designated
representative of Centurion and other Insureds named as defendants in the Lawsuit with respect
to insurance coverage matters. If you are not acting on behalf of Centurion and the other Insured
defendants with respect to insurance coverage matters, please direct a copy of this letter to the
appropriate party and advise us immediately of that party's identity.
We have reviewed the provisions of the Policy in light of the allegations set forth in the
Lawsuit. We recognize that the allegations set forth in the Lawsuit are unsubstantiated at this
time. Nothing contained in this letter is intended to suggest that these allegations have any

010177/000007/614730/3

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 42 of 53

i] 4 ti
TUCKER ELLIS & WEST

LLP

ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC

Re: Edward Zucker, et al. vs. Catellus Development Corp., et al.


November 4, 2008
Page 2
factual or legal merit. This analysis is by necessity subject to modification as further facts are
discovered and as developments occur. Nevertheless, at this stage of the proceedings, we believe
it would be prudent to identify coverage issues that have arisen in connection with the Lawsuit.
For the reasons herein, Arch has determined that the Lawsuit is a Claim against Centurion
and other Insured defendants for which Coverage C [Private Company Liability] could afford
coverage, subject to certain coverage issues which otherwise could limit or preclude coverage for
Centurion and the Insured defendants. We discuss those issues herein.
Because this matter is in its preliminary stages, Arch's coverage analysis and conclusions
are, by necessity, subject to modification as further facts are discovered and as developments
occur. As a result, Arch's investigation of this matter continues to proceed under a full and
complete reservation of all rights accruing under the Policy, the applicable law and in equity.
Nothing said or left unsaid in our correspondence and other communications with you or any
other party should be considered a concession that coverage extends under the Policy. All rights
of Arch under the Policy, at law and in equity should continue to be considered fully and
specifically reserved at all times.
BACKGROUND

According to its website, the Named Insured, Centurion is a full-service real estate
acquisition, development and management company with offices in Manhattan and Los Angeles.
Centurion specializes in identifying, financing, and managing real estate investments on behalf
of institutional clients and sophisticated high net worth investors.
In January 2005, Centurion purchased Mission Place, a residential, retail and office
complex located in San Francisco, built in 2004 and designed by Skidmore Owings & Merrill
and Catellus Development Corporation. Centurion subsequently renamed the complex The
Beacon. It appears that the Centurion Real Estate Investors IV, LLC was the private equity fund
raised to finance the purchase of The Beacon and that Mission Place LLC was formed as a
subsidiary to hold and manage the property. Both Mission Place LLC and Centurion Real Estate
Investors IV, LLC are identified as Additional Insureds in Endorsement No. 1 to the Policy.
The Beacon consists of 595 condominium units which, at the time of Centurion's
purchase, were newly-completed, vacant, and ready for immediate sale. The sales were
undertaken by Mission Place LLC.

010177/000007/614730/3

Case 3:16-cv-00218-JCS Document 1 Filed 01/13/16 Page 43 of 53

TUCKER ELLIS & WEST

LLP

ATTORNEYS AT LAW

John Tashjian

Centurion Real Estate Partners, LLC


Re: Edward Zucker, et al. vs. Catellus Development Corp., et al.
November 4, 2008
Page 3

SUMMARY OF THE LAWSUIT

A.

The Parties

Plaintiffs are thirty-seven persons, including Edward Zucker, who purchased or entered
into a contract to purchase real property at The Beacon. They purport to sue on behalf of all
persons similarly situated.
Defendants include the following:

B.

Insured Defendants. Defendants include Centurion and Mission Place LLC, both of
which are Insureds under the Policy. The complaint also names Mission Place
Holdings, LLC, Mission Place Mezzanine, LLC, Mission Place Partners, LLC, and
Centurion Real Estate Investment, LLC. It is not presently clear which, if any, of
these entities are Insureds. However, for purposes of this letter, we hereinafter refer
to all of these defendants as "Mission Place."

The Sales Defendants. These defendants include the Mark Company and Blair
Shepherd.

The Construction Defendants. The Construction Defendants consist of the Catellus


Entities (Catellus Development Corporation, Third and King Investors LLC, Catellus
Third and King, LLC, Prologis Management Incorporated, Prologis Logistics
Services, Incorporated, Prologis Development Services Incorporated, and Catellus
Third and King, LLC), and Webcor Builders, Inc.

Farallon Capital Management. According to its website, Farallon is a San


Francisco-based private equity firm. Although the Lawsuit does not state Farallon's
connection to The Beacon, we assume it may be that Farallon investors have an
ownership interest in The Beacon and, consequently, are liable for Plaintiffs' alleged
injuries.

The Allegations
The complaint alleges that Mission Place and other defendants:

Overstated the square footage of Plaintiffs' individual condo units.

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TUCKER ELLIS & WEST LLP


ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Edward Zucker, et al. vs. Catellus Development Corp., et al.
November 4, 2008
Page 4

Falsely represented to Plaintiffs that they would own the parking space which came
with each condo unit. In fact, Plaintiffs were required to lease parking spaces.

Falsely represented to Plaintiffs that the complex and the individual units had air
conditioning and adequate ventilation systems. In fact, there was no air conditioning
and the ventilation was inadequate.

Failed to disclose to Plaintiffs that the complex was built on contaminated soils that
contain high levels of chemicals that render ground water unfit for human
consumption.

Failed to disclose that the contaminated soils had to be enclosed in a protective barrier
that the HOA had to maintain and fund.

Failed to disclose that, prior to Plaintiffs' purchase of their condo units, the units had
been rental units.

Sold Plaintiffs units which had defects including leaking water pipes, excessive sound
and odor transmission between units, sparking light switches, improper UV screening
on windows, and water collection on balconies.

The complaint asserts causes of action for: (1) fraud; (2) negligent misrepresentation:
(3) failure to disclose/concealment; (4) breach of written contract; (5) breach of CC&Rs';
(6) untrue or misleading advertising; (7) unfair competition; (8) constructive trust; (9) strict
liability construction defect; (10) negligence construction defect; (11) breach of warranty; (12)
constructive fraud; and (13) breach of covenant of good faith and fair dealing.
The relief sought by plaintiffs includes (1) general and special damages; (2) punitive
damages; (3) attorneys' fees; (4) pre judgment interest; (5) rescission of the purchase
agreements; (6) disgorgement of profits; (7) civil penalties allowed by statute; (8) imposition of a
constructive trust purchase price; (9) repair of all defects in condominiums; and (10) fees and
costs.
C.

Procedural Status

The Lawsuit was filed on January 22, 2008, the same day on which Plaintiffs filed their
motion to amend the First Amended Complaint in that lawsuit styled Zucker, et al. v. Catellus
' The term "CC&Rs" refers to the Covenants, Codes and Restrictions which govern a condominium
project.

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[In
TUCKER ELLIS & WEST LLP
ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Edward Zucker, et al. vs. Catellus Development Corp., et al.
November 4, 2008
Page 5

Development Corporation, Case No. CGC-06-455352 which also was filed in San Francisco
Superior Court ("Zucker I") by the same attorney, Patrick Catalano. Although the two cases are
entirely separate lawsuits, they are substantively the same, but for the addition of defendants
(The Mark Company, Blair Shepherd, and Farallon Capital Management, LLC) and the
embellishment of the facts and restructuring of the causes of action in Zucker II.
Mr. Catalano has asked Mr. Laufenberg to accept service on behalf of the Mission Place
defendants. Mr. Laufenberg has declined to do so with respect to all but Mission Place LLC
because all of the other Mission Place entities are not proper parties. In addition, Mr.
Laufenberg, as well as counsel for all of the other defendants, has refused to accept service
unless Catalano agrees to have the case assigned to Judge Warren. To date, Mr. Catalano has not
agreed to this and all of the defendants remain unserved. As a result, a Case Management
Conference set for August 1 was continued to September 12.
We understand that, if and when Mr. Catalano actually serves the defendants or gets them
to accept service, they will again demur to the complaint. Although the new complaint amplifies
Mr. Catalano's "money claims" for fraud and misrepresentation, Mr Laufenberg believes they are
still susceptible to demurrer. Of course, defendants also will expose Mr. Catalano's shenanigans
to the court and request sanctions.
The next step is to see whether Mr. Catalano incurs the time and expense to serve all of
the defendants with the new complaint or whether defendants ultimately agree to accept service,
which would require Catalano's agreeing to put the case before Judge Warren.
THE POLICY
Arch issued to Centurion Real Estate Partners, LLC Private Company Management
Liability Insurance Policy No. PCD0015105-00, effective for the Policy Period of May 3, 2006
to May 3, 2007. The Policy's Limit of Liability is $2 million each Claim and in the aggregate for
all Coverages combined, including Defense Costs. Claims other than Employment Claims under
Coverage C [Private Company Liability] are subject to a Retention of $75,000. A Pending or
Prior Claim Date of May 3, 2005 applies to claims under all Coverages.
COVERAGE EVALUATION
A.

Coverages Provided by the Policy


As set forth in Section I of the Policy, the Policy provides the following Coverage:

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TUCKER ELLIS & WEST

LLP

ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC

Re: Edward Zucker, et al. vs. Catellus Development Corp., et al.


November 4, 2008
Page 6
COVERAGE C: PRIVATE COMPANY LIABILITY
The Insurer will pay on behalf of the Private Company a Loss for
which the Private Company shall become legally obligated to pay
as a result of a Claim first made during the Policy Period or
Discovery Period, if applicable, against the Private Company for a
Wrongful Act which takes place during or prior to the Policy
Period.
Private Company is defined to mean "the Named Company and any Subsidiary thereof."
The Named Company is Centurion Real Estate Partners, LLC. Mission Place LLC is identified
as an Insured in Endorsement Number 1 [Additional Insured(s) Endorsement (Excess)].
The Policy defines "Subsidiary" as:
(1)

a not for profit organization exempt from federal income


tax under section 501(c)(3) of the Internal Revenue Code of
1986 (as amended) sponsored exclusively by a Private
Company;

(2)

a corporate organization with respect to which the Named


Corporation owns, either directly or indirectly through one
or more of its Subsidiaries, more than 50% of the
outstanding securities representing the present right to vote
for election of directors or equivalent positions; provided
that if the corporate organization first becomes a Subsidiary
as described in paragraph (2) during the Policy Period and
if its total consolidated assets as reflected in its then most
recent consolidated financial statements total more than
10% of the total consolidated assets of the Named
Company as reflected in the Named Company's then most
recent consolidated financial statements, then such
organization and its Insured Persons shall be covered under
this Policy only if within 90 days of such organization
becoming a Subsidiary, the Named Company shall have
provided the Insurer with full particulars of the new
Subsidiary and paid any additional premium and agreed to

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TUCKER ELLIS & WEST LLP


ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Edward Zucker, et al. vs. Catellus Development Corp., et al.
November 4, 2008
Page 7

any amendment of the provisions of this Policy required by


the Insurer relating to such new Subsidiary.
An organization becomes a Subsidiary at the time the
circumstances described in paragraph (1) or (2) above first apply to
such organization. An organization ceases to be a Subsidiary at the
time such circumstances no longer apply to such organization.
In all events, coverage is otherwise afforded under this Policy with
respect to a Claim made against any Subsidiary or its Insured
Persons shall only apply for Wrongful Acts committed or allegedly
committed after the effective time that such Subsidiary became a
covered Subsidiary as provided above and prior to the time that
such Subsidiary ceased to be a covered Subsidiary.
Claim is defined to mean "a civil or arbitration proceeding against an Insured for
monetary, non-monetary or injunctive relief which is commenced by . . . service of a complaint
or similar pleading." Wrongful Act is defined to mean, in relevant part, "any actual or alleged
breach of duty, neglect, error, misstatement, misleading statement, omission or act by the Insured
Persons in their respective capacities as such or, with respect to Coverage C, by the Private
Company."
Arch concludes the Lawsuit is a Claim against Centurion and Mission Place. Thus, Arch
concludes that Coverage C of the Policy would afford coverage for the Lawsuit with respect to
Centurion and Mission subject to the coverage issues discussed below.'
The Lawsuit alleges Wrongful Acts which are the same or related to those asserted in
Zucker I. Thus, pursuant to Section V [Limit of Liability (For All Loss, Including Defense
Costs]', Zucker I and Zucker II are deemed a single Claim first made on the date Zucker I was
filed (August 18, 2006), i.e., during the Policy Period.

2 Based on the information provided to Arch, it doeS not presently appear that any of the Policy's other
Coverages are implicated.

? In relevant part, Section V provides that "all Claims arising out of the same Wrongful Act and all
Interrelated Wrongful Acts shall be deemed to be one Claim for purposes of this Policy, and such Claim shall be
deemed to be first made on the date the earliest of such Claims is first made against an Insured, regardless of
whether such date is before or during the Policy Period."

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TUCKER ELLIS & WEST

LLP

ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Edward Zucker, et al. vs. Catellus Development Corp., et al.
November 4, 2008
Page 8

Presently, it is unclear whether Centurion Real Estate Investment, LLC, Mission Place
Holdings, LLC, Mission Place Mezzanine, LLC, Mission Place Partners, LLC are Subsidiaries of
Centurion Real Estate Partners, LLC. Arch requests that Centurion provide further information
in this regard.
B.

Reservation of Rights as to Potential Coverage Issues

Arch wishes to bring to yOur attention other provisions of the Policy which might limit or
otherwise preclude coverage, either in whole or in part, for the Lawsuit.

First, the Policy affords coverage for Loss, which is defined to mean, in relevant part,
"damages, judgments (including pre/post-judgment interest on a covered judgment), settlements
and Defense Costs for which the Insureds become legally obligated to pay." However, Loss
"shall not include . . . any amount that represents or is substantially equivalent to disgorgement
or restitutionary or rescissionary damages or forfeiture of any profits or remuneration." In
addition, California courts have held there is no coverage for loss which is restitutionary in
nature. See, e.g., Bank of the West v. Superior Court, 2 Ca1.4th 1254 (1992) ("It is well
established that one may not insure against the risk of being ordered to return money or property
that has been wrongfully acquired."). The Lawsuit seeks a constructive trust, rescission of the
purchase agreements, and disgorgement of profits. If such relief is awarded to Plaintiffs, Arch
reserves the right to assert that any such relief does not constitute covered Loss.
Second, the Policy's definition of Loss expressly excepts "matters which may be deemed
uninsurable under the law pursuant to which this Policy shall be construed." It would appear that
California law would govern any dispute under the Policy. Pursuant to Section 533 of the
California Insurance Code, loss resulting from wilful acts is uninsurable. In addition, California
law bars coverage for punitive damages. The Lawsuit seeks punitive damages and asserts that
the Insureds committed fraud and/or made intentional misrepresentations. Thus, Arch reserves
the right to deny coverage on the basis that any loss sustained in connection with the Lawsuit is
not Loss, as defined.
Third, the Policy's definition of Loss expressly excepts "civil or criminal fines or
penalties imposed by law." The Lawsuit seeks civil penalties against the named defendants. In
the event any civil penalties are imposed against any Insureds, Arch reserves the right to deny
coverage for any civil penalties on the basis that such penalties are not Loss, as defined.
Fourth, Exclusion 1(a) of the Policy provides that the Insurer shall not be liable under
any Coverages to make any payment for Loss as a result of a Claim made against an Insured

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TUCKER ELLIS & WEST LLP


ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Edward Zucker, et al. vs. Catellus Development Corp, et al.
November 4, 2008
Page 9

"arising out of, based upon or attributable to the gaining of any profit, remuneration or financial
advantage to which such Insured was not legally entitled, as evidenced by a written statement or
written admission by such Insured or a judgment or other final adjudication in the underlying
action or in a separate action, alternative dispute resolution process (including one pursuant to
Section XVI) or other proceeding." The Lawsuit asserts, inter alia, causes of action against the
Insureds for fraud, negligent misrepresentation, untrue or misleading advertising, unfair
competition, and reformation, and seeks preliminary and permanent injunction and restitution.
In the event it is judicially determined that any Insured gained any profit, remuneration or
financial advantage to which the Insured was not legally entitled, Arch reserves the right to deny
coverage pursuant to Exclusion 1(a).

Fifth, Exclusion 1(b) of the Policy provides that the Insurer shall not be liable under any
Coverages to make any payment for Loss as a result of a Claim made against an Insured "arising
out of, based upon or attributable to the committing of any deliberate criminal or deliberate
fraudulent act by such Insured, as evidenced by a written statement or written admission by such
Insured Person or a judgment, ruling or other finding of fact in the underlying action or in a
separate action, alternative dispute resolution process (including one pursuant to Section XVI) or
other proceeding." The Lawsuit asserts, inter alia, causes of action against the Insureds for fraud
and untrue or misleading advertising. In the event it is judicially determined that any Insured
committed any deliberate criminal or fraudulent act, Arch reserves the right to deny coverage
pursuant to Exclusion 1(b).
Sixth, Exclusion 1(g) of the Policy provides the Insurer shall not be liable under any
Coverages to make any payment for Loss as a result of a Claim made against an Insured "for
bodily injury, sickness, disease or death of any person, or for damage to or destruction of any
tangible property including loss of use thereof." Because the Lawsuit asserts causes of action for
strict liability, breach of contract for construction defect, negligence for construction defects and
seeks, inter alia, the repair of the construction defects, Arch reserves the right to deny coverage
pursuant to Exclusion 1(g).
Seventh, Exclusion 1(h) of the Policy provides that the Insurer shall not be liable under
any Coverages to make any payment for Loss as a result of a Claim made against an Insured:
[F]or emotional distress, mental anguish, outrage, humiliation,
false arrest or imprisonment, abuse of process, malicious
prosecution, defamation, violation or invasion of any right of
privacy or private occupancy, trespass, nuisance or wrongful entry

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TUCKER ELLIS & WEST LLP


ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Edward Zucker, et al. vs. Catellus Development Corp., et al.

November 4, 2008
Page 10
or eviction; provided, however, this exclusion shall not apply to
any Employment Claim.
(Emphasis ours).
The Lawsuit alleges construction defects with the individual condo units. To the extent it
is established that the defects constitute a violation or invasion of any right of private occupancy,
Exclusion 1(h) may apply.
Eighth, Exclusion 2(a) of the Policy provides that the Insurer shall not be liable under

Coverage C to make any payment for Loss as a result of a Claim made against a Private
Company "for any actual or alleged obligation under or breach of any oral or written contract or
agreement, including any liability of others assumed by the Private Company under any such
contract or agreement; provided, however, this exclusion shall not apply (i) to an actual or
alleged breach of an implied contract in an Employment Claim, or (ii) to the extent the Private
Company would have been liable for such Loss in the absence of such contract or agreement."
Because the Lawsuit arises from the purchase of condominium units by plaintiffs from
defendants, and includes causes of action for breach of written contract, breach of CC&Rs,
breach of warranty, and breach of covenant of good faith and fair dealing, Arch reserves the right
to deny coverage pursuant to Exclusion 2(a).
Ninth, Exclusion 2(f) of the Policy provides that the Insurer shall not be liable under any
Coverages to make any payment for Loss as a result of a Claim made against an Insured
"brought or maintained on behalf of a customer or client of the Private Company in connection
with the actual or alleged rendering or failure to render any service to or for the benefit of such
customer or client." In connection with the Fifth [Breach of Covenants Codes and Restrictions]
and Thirteenth [Breach of Covenant of Good Faith and Fair Dealing] causes of action, it is
alleged that Mission Place entered into a contract (the CC&Rs) with the Association and the
condo owners and, thereunder, agreed to maintain the common areas of the complex. To the
extent Plaintiffs are deemed to be customers or clients of Mission Place, Exclusion 2(f) may
apply.
Tenth, Exclusion 2(g) of the Policy provides that the Insurer shall not be liable under
Coverage C to make any payment for Loss as a result of a Claim made against a Private
Company "alleging, arising out of, based upon, or attributable to any actual or alleged violation
of any statutory, regulatory or common law involving price fixing, restraint of trade,
monopolization, unfair trade practices, anti-trust, price discrimination, predatory pricing,
business competition or tortuous interference in another's business or contractual relationship."

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[VI
TUCKER ELLIS & WEST LLP
ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Edward Zucker, et al. vs. Catellus Development Corp., et al.
November 4, 2008
Page 11
Because the Lawsuit alleges causes of action for, inter alia, unfair competition, Arch reserves the
right to deny coverage pursuant to Exclusion 2(g).

Eleventh, Section XV [Other Insurance] of the Policy provides, in pertinent part, that:
Such insurance as is provided by this Policy shall apply only as
excess over any other valid and collectible insurance, unless such
other insurance is written only as specific excess insurance over
the Limit of Liability provided by this Policy. This Policy shall
also be specifically excess over any other and collectible insurance
pursuant to which any other Insurer has a duty to defend a Claim
for which this Policy may be obligated to pay Loss.
If Centurion has not already done so, we request that it immediately place all other
applicable insurers and insurance policies on notice of the Lawsuit. In addition, we request that
you provide us with the following documents:

All correspondence to such other insurer(s) placing them on notice of this Claim.

All correspondence from such other insurer(s) setting forth their position with regard
to coverage under their respective policies.

A complete copy of the other insurance policy(ies) at issue.

In addition to discharging its duty to cooperate with Arch in this matter, Centurion should
be aware that some of these other insurance policies may provide to it certain valuable benefits if
they can be held to provide coverage primary to this Policy. As an example, policies such as
CGL typically provide coverage for defense costs that are not subject to any deductible or
retention amount. Further, defense costs covered and paid under a CGL policy typically do not
erode the available limit of liability.

Twelfth, Section X [Defense Costs (Including the Advancement of Defense Costs),


Settlements, Judgments and Allocation] of the Policy further provides that:
If as a result of any Claim an Insured incurs both Loss covered
under this Policy and loss not covered under this Policy, either
because such Claim is made against both the Insured and others
because such Claim includes both covered and uncovered matters,
then such amount shall be allocated between covered and

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TUCKER ELLIS & WEST

LLP

ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Edward Zucker, et al. vs. Catellus Development Corp., et al.

November 4, 2008
Page 12
uncovered matters, and in the event of a settlement, also based on
the relative benefit to the parties from settlement of such covered and uncovered matters.
In the event that the Insurer and the Insureds cannot agree as to the
amount of the Defense Costs to be advanced under the Policy, then
the Insurer shall advance Defense Costs which the Insurer believes
to be covered under this Policy until a different amount shall be
agreed upon or determined pursuant to the provisions of this Policy
and applicable law.
As discussed above, it is possible that portions of any Loss sustained by the Insureds,
including Defense Costs, may not be covered under the Policy. Thus, Arch reserves the right to
allocate between covered and uncovered Loss.
Finally, Section VI [Retention] provides, "The Insurer shall only be liable for the amount

of Loss as a result of each Claim which is in excess of the applicable Retention amount stated in
Item 4 of the Declarations, such Retention amount to be borne by the Insureds and shall remain
uninsured." Please be advised that the Retention applicable to Coverage C is $75,000. Please
advise us when the Loss, including Defense Costs,' sustained by Centurion and Mission has
exceeded $75,000. 5
CONCLUSION

Arch reserves the right to supplement the coverage positions set forth herein, specifically
including the right to raise additional coverage defenses under the Policy, including the right to
recoup all defense expenses advanced, should the facts and circumstances developed in this
matter so warrant. Accordingly, the comments herein concerning coverage are based on the
allegations in the Lawsuit, and on the facts presently known.
Defense Costs is defined to mean "reasonable and necessary fees, costs and expenses consented to by the
Insurer (including premiums for any appeal bond, attachment bond or similar bond, but without any obligation to
apply for or furnish any such bond) resulting solely from the defense and appeal of a Claim against the Insureds, but
shall not include salaries, wages, overhead or benefit expenses associated with Insured Persons or employees of the
Private Company."
5 Section V [Limit of Liability (For All Loss, Including Defense Costs)] provides, in relevant part, "The
Insurer shall not pay Defense Costs in addition to the Limit of Liability. Defense Costs are part of Loss and as such
are subject to and reduce the Limit of Liability."

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dfi
TUCKER ELLIS & WEST

LLP

ATTORNEYS AT LAW

John Tashjian
Centurion Real Estate Partners, LLC
Re: Edward Zucker, et al. vs. Catellus Development Corp., et al.
November 4, 2008
Page 13

If the defendants believe that any of the coverage positions taken herein by Arch are
incorrect, please advise us and Arch will be pleased to consider any additional information or
arguments they may wish to submit. In the interim, all rights of Arch arising under and in
relation to the Policy, the applicable law and in equity remain fully and specifically reserved at
all times.
Please contact us should you have any questions or wish to further discuss this letter.

KWW:WJL/lah
cc:

Peter Laufenberg, Esq. (via e-mail)


Wendel, Rosen, Black & Dean LLP
Joe Connors (via e-mail)
Frank Crystal & Company

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