KINSALE INSURANCE COMPANY v. RUIZ CORPORATION (2025)

STATEMENT OF DECISION GRANTING KINSALE INSURANCE COMPANY'S MOTION TO DISMISS COUNTERCLAIM

[FED. R. CIV. P. 12(b)(1) and 12(b)(6)]

STATEMENT OF DECISION

I. INTRODUCTION

Longstanding, binding California Supreme Court authority holds that under the terms of a standard commercial general liability policy, an insurer is “required to defend a ‘suit,’ but [has] discretion to investigate and settle a ‘claim.’ ” Foster-Gardner, Inc. v. National Union Fire Ins. Co., 18 Cal. 4th 857, 878, 77 Cal.Rptr.2d 107, 959 P.2d 265 (1998). It follows that absent a “suit,” such an insurer has, at that time, no duty to defend, and because the duty to defend has not yet ripened, the insurer has no duty to indemnify. In short, established California jurisprudence does not require a commercial general liability insurer to defend or indemnify anyone before there is a “suit.”

Equally established California law holds that a third party claimant who seeks recovery against a commercial general liability insurer's insured must wait to obtain a final judgment against that insured before attempting to sue the insurer to collect any damages covered by the policy. See Moradi-Shalal v. Fireman's Fund Ins. Companies, 46 Cal. 3d 287, 305, 250 Cal.Rptr. 116, 758 P.2d 58 (1988).

Contrary to these principles, Diversified Utility Services, Inc. (“Diversified”) filed a Counterclaim in response to Kinsale Insurance Company's (“Kinsale”) complaint for declaratory relief, alleging prematurely, that it has an immediate, direct right of action to collect policy benefits from Kinsale for damages it seeks in an underlying reimbursement action against Kinsale's insured, R.P. Ruiz Corporation dba Richards Construction Company (“Ruiz”). Diversified makes these claims despite the fact that the damages it seeks from Kinsale consist not of “property damage” covered under the Kinsale Policy but rather money that Diversified voluntarily paid at the behest of its customer, Southern California Edison (“SCE”) to re-do Ruiz's work relating to Ruiz's alleged nonconforming installation of guy anchor rods and screw type anchors for hundreds of electrical poles per contract specifications. Critical to the Court's analysis is the simple fact that Diversified was never sued by SCE for these damages, and never tendered a lawsuit to Kinsale to defend. Rather, Diversified alleges that because it paid those damages, it is entitled to recover them directly from Kinsale, despite never having been sued for them.

The Court finds that Kinsale is correct in its analysis that a commercial general liability insurer has the discretion, but not the duty, to investigate and settle a pre-lawsuit claim against its Named Insured. While it may be prudent for an insurer to attempt to resolve a claim without litigation, nothing in California law compels a commercial general liability insurer to do so. Here, Diversified is the plaintiff – the claimant seeking money – in an underlying indemnity action against Kinsale's insured, Ruiz. Under Moradi-Shalal, as a claimant, Diversified has no direct action against Kinsale at this stage of the proceedings. And, under Foster-Gardner, Diversified may not bring an action against Kinsale for failing to settle the claim made by SCE against Diversified, which was never reduced to a lawsuit by SCE against Diversified, even though that claim, which Diversified voluntarily paid without Kinsale's consent, has now blossomed into the underlying Diversified Action.¹ For these reasons, as detailed below, Kinsale's Motion to Dismiss Diversified's Counterclaim [ECF 25] is GRANTED. As Diversified has not demonstrated why amending its Counterclaim would be anything other than futile, Kinsale's motion is granted with prejudice.

II. STATEMENT OF FACTS

A. The Kinsale Policies

Kinsale issued a Commercial General Liability Policy (the “Policy”) to Ruiz with standard terms. Diversified is an additional insured under the Policy. In particular, the Policy provides as follows:

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury” or “property damage” to which this insurance does not apply. We may, at our discretion, investigate any “occurrence” and settle any claim or “suit” that may result.

(ECF 1-1 at 6 [emphasis added].) The Policy defines a “suit” as a “civil proceeding in which damages because of ․ ‘property damage’ ․ to which this insurance applies are alleged,” and includes arbitrations and other alternative dispute resolution proceedings. (ECF 1-1 at 20 [emphasis added].)

The Policy also contains an exclusion for “ ‘property damage’ for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement,” but provides an exception for an “insured contract,” which includes certain indemnity agreements by which the insured “assume[d] the tort liability of another party to pay for ․ ‘property damage’ to a third person or organization.” (Policy, (ECF 1-1 at 7, 18). It is this exception to an exclusion which Diversified attempts, unsuccessfully, to invoke to gain coverage (and the right to sue Kinsale) in this lawsuit.

B. The Underlying Project and SCE Deficient Work Claim

Diversified and Ruiz entered into a Master Service agreement (“Ruiz MSA”). (ECF 1-2 at 15.) Diversified asserts that Ruiz installed anchor screws, guy wires, guy anchor rods and/or guy anchor rod extensions which did not conform to the applicable Standards and Statement of Work promulgated by Diversified's customer, SCE. (Counterclaim, ¶¶ 106-110, ECF 16 at 13). When SCE expressed its displeasure via a Notice of Non-Acceptance and Request to Inspect and Remedy all guy anchor work performed since January 1, 2019 (“SCE Deficient Work Claim”), Diversified alleges it voluntarily performed the demanded remediation work at a cost exceeding $1,218,783. (ECF 1-2 at 5.) There are no allegations anywhere that SCE sued Diversified or that Diversified resisted SCE's claims in any manner. Rather, Diversified simply corrected Ruiz's work at Diversified's own expense. Diversified then demanded that Ruiz pay for this remediation work under the indemnity provision of the Ruiz MSA. It also demanded that Kinsale, as Ruiz's general liability insurer, pay those damages as covered “property damage,” even though Diversified had never been sued for them and had not yet filed suit against Ruiz.

Kinsale declined Diversified's request. Diversified then filed a lawsuit against Ruiz (the Diversified Action) which Kinsale is defending under a reservation of rights. Kinsale filed the instant action, requesting the Court to adjudicate certain coverage defenses which are not relevant to the instant motion.

On December 12, 2024, Diversified filed a Counterclaim (ECF 16), which alleges that Kinsale owed Diversified a duty to indemnify it under the Policies relative to claims it made against Ruiz in the Diversified Action. The Counterclaim alleges claims against Kinsale for Declaratory Relief, Breach of Written Contract, and Tortious Breach of Contract.

Despite the fact that no “suit” was ever filed against Diversified, Diversified claims that Kinsale failed to investigate the SCE Deficient Work Claim and failed to reimburse Diversified for money Diversified spent to remediate Ruiz's work. Diversified cites various tender correspondence between Kinsale and Diversified, none of which involves notice of a “suit” against Diversified. (Counterclaim, ¶¶ 131, 132, 153, 158, 183, 211, 238; ECF 16 at 17, 20, 24, 27, 30).

The basis for Diversified's claim for coverage under the Policies appears to be that the “insured contract” exception to the Contractual Liability exclusion somehow creates coverage for Diversified, based on the allegation that both the SCE MSA and Ruiz MSA qualify as “insured contracts.” Diversified further alleges that Kinsale's failure to advise Diversified of these “insured contract” benefits amounts to “deception,” even though Diversified never tendered a “suit” to Kinsale for a defense.

III. DISCUSSION

A. Legal Standard – Motion to Dismiss

Federal Rule of Civil Procedure 12(b)(1) permits a party to seek dismissal of a complaint for lack of subject matter jurisdiction. “Because standing and ripeness pertain to federal courts’ subject matter jurisdiction, they are properly raised in a Rule 12(b)(1) motion to dismiss.” Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th Cir. 2010).

In addition, dismissal under Fed.R.Civ.P. 12(b)(6) is appropriate where the complaint lacks sufficient facts to support a cognizable legal theory. Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). On a Rule 12(b)(6) motion to dismiss, the Court must accept as true all “well-pleaded factual allegations” in the complaint. Id. However, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true to ‘state a claim to relief that is plausible on its face.’ ” Id. at 678, 129 S.Ct. 1937 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).

In considering the grounds for a motion to dismiss, the Court may “take into account documents ‘whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the [claimant's] pleading.’ ” Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005) (quoting Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994)). The Court therefore GRANTS Kinsale's Request for Judicial Notice as to certain correspondence referenced in the Counterclaim (RJN Nos. 1, 2, 3, 4 (ECF 26)) as well as the contents of those letters.

B. Diversified's Breach of Written Contract Claim for Relief Fails As There Is No Liability Coverage Absent a “Suit,” and Thus No Present Duty to Defend or Indemnify

Under a CGL liability policy, an insurer's initial obligation is to assess the duty to defend, without which there is no duty to indemnify. Foster-Gardner, Inc. v. National Union Fire Ins. Co., 18 Cal. 4th 857, 878, 77 Cal.Rptr.2d 107, 959 P.2d 265 (1998) (noting duty to defend “suits” and “discretion to investigate and settle a ‘claim’ ”); Montgomery Ward & Co., Inc. v. Imperial Cas. & Indem. Co., 81 Cal. App. 4th 356, 373, 97 Cal.Rptr.2d 44 (2000) (discussing duties to defend and indemnify relative to subject underlying lawsuits); Montrose Chemical Corp. v. Admiral Ins. Co., 10 Cal. 4th 645, 655, n. 2, 42 Cal.Rptr.2d 324, 913 P.2d 878 (1995) (similar principle). Further, under a CGL policy, “[i]t is ․ well settled that because the duty to defend is broader than the duty to indemnify, a determination that there is no duty to defend automatically means that there is no duty to indemnify.” Certain Underwriters at Lloyd's of London v. Superior Court (“Powerine I”), 24 Cal. 4th 945, 961, 103 Cal.Rptr.2d 672, 16 P.3d 94 (2001). Absent the threshold duty to defend, there is no duty to indemnify, and Diversified's claim for breach of a written contract necessarily fails. See National Mechanical Services, Inc. v. Kinsale Insurance Company, 620 F.Supp.3d 1096, 1104-1105 (S.D. Cal. 2022) (absent duty to defend, there is no duty to indemnify, no basis for breach of contract and in turn, no bad faith).

1. Kinsale Never Had a Duty to Defend Diversified

Diversified does not and cannot state facts sufficient to constitute a claim for which relief may be granted because Kinsale's duty to defend under the Policies was not triggered by Diversified's claim, as there was never a “suit” against Diversified for Kinsale to defend, and of course no money judgment against Diversified for Kinsale to pay. For there to a be a duty to defend, there must be a “suit” describing facts which potentially fall within the insuring agreement of the commercial general liability Policy at issue. Montrose Chem. Corp. v. Superior Court, 6 Cal. 4th 287, 300, 24 Cal.Rptr.2d 467, 861 P.2d 1153 (1993) (“[t]he duty to defend is determined by reference to the policy, the complaint, and all facts known to the insurer from any source.”) “The parameters of a ‘suit’—and therefore the limits of a defense—are defined explicitly by the complaint, the policy, and any other information known to the insurer. It is because the insurer's duty to defend depends on the allegations in the complaint that the insurer may or may not owe a duty to defend those allegations.” Foster-Gardner, Inc., 18 Cal. 4th at 878, 77 Cal.Rptr.2d 107, 959 P.2d 265.

Here, the Diversified Action is solely against Ruiz. There never was a “suit” against Diversified and therefore coverage was never owed to Diversified under the Policies. As is typical, the Policy provides that “[Kinsale] will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies. [Kinsale] will have the right and duty to defend the insured against any ‘suit’ seeking those damages ․ [Kinsale] may, at [its] discretion, investigate any ‘occurrence’ and settle any claim or ‘suit’ that may result.” (ECF 1-1 at 6.) “Suit” is defined to include “a civil proceeding in which damages because of ․ ‘property damage’ are alleged,” as well as an “arbitration proceeding ․” or “[a]ny other alternative dispute resolution proceeding ․ to which the insured submits with [Kinsale's] consent for Kinsale to defend ․” (ECF 1-1 at 20.) Absent from the Counterclaim is an allegation referring to a lawsuit or arbitration proceeding against Diversified that would trigger Kinsale's duty to defend. (See Counterclaim, generally.)

Diversified cannot show that Kinsale owed Diversified a duty to defend given that there never was a civil proceeding, arbitration, or ADR proceeding against Diversified. Absent a complaint or arbitration proceeding filed by SCE, or even a request from Diversified that Kinsale consent to an ADR proceeding against Diversified, it follows that Diversified has not pled facts suggesting that there ever was a “suit” against Diversified which would trigger Kinsale's duty to defend.

2. A “Claim” Is Not A “Suit” As A Matter Of Law

Under the circumstances, California law is clear: where there is no “suit,” there is no duty to defend. To illustrate, Foster-Gardner makes the distinction between a “claim” and a “suit”:

[M]any courts note that the standard policy language differentiates between a “claim” and a “suit.” “If all of the policy's language is to be given effect, then the words ‘suit’ and ‘claim’ as used within [the policy] must have different meanings․ While [the insurer] has the power to investigate any claim, it has the duty to defend only suits. If the word ‘suit’ was broadened to include claims, in the face of policy language which distinguishes between the two, any distinction between these two words would become superfluous.”

Foster-Gardner, 18 Cal. 4th at 870–871, 77 Cal.Rptr.2d 107, 959 P.2d 265. As simply and elegantly stated by the Foster-Gardner Court, “Under the policies, the insurers are required to defend a ‘suit,’ but have discretion to investigate and settle a ‘claim.’ ” Foster-Gardner, 18 Cal. 4th at 878, 77 Cal.Rptr.2d 107, 959 P.2d 265. Said the Court:

[B]y specifying that only a “suit,” and not a “claim” triggers the duty to defend, insurers have drawn an unambiguous line to define and limit their contractual obligation. This delineation encourages stability and efficiency in the insurance system. In exchange for a higher premium, the policies might have obligated the insurer to defend any “demand” against the insured, or to provide a defense whenever the insured is subject to government compulsion or investigation. They did not. [Citations]. Although insureds certainly deserve no less than the benefit of their bargain, insurers should be held liable for no more. (Ray Industries, Inc. v. Liberty Mutual Ins. Co., 974 F.2d 754, 764 (6th Cir. 1992) [“By limiting its duty to defend to ‘suits,’ [the insurer] unambiguously demonstrated its intention to avoid responsibility for any action that fell outside the traditional and well-recognized meaning of that term. This court will not deprive [the insurer] of the benefit of its bargain by forcing it to insure against the creation of a new type of legal action, a risk for which it was not paid.”].)

Foster-Gardner, Inc., 18 Cal. 4th at 882, 77 Cal.Rptr.2d 107, 959 P.2d 265.

Here, like Foster-Gardner, the claim that SCE brought against Diversified was never reduced to a “suit.” Rather, Diversified apparently paid it, voluntarily and without challenge. Under those circumstances, the claim against Diversified was just that: a claim, not a “suit.” As Foster-Gardner observed, “[i]n exchange for a higher premium, the polic[y] might have obligated the insurer to defend any ‘demand’ against the insured,” but the Policies do not contain such a provision. Id.

3. There Is No Mandatory Duty to Investigate Absent Tender of a Third-Party Lawsuit

Diversified alleges that Kinsale breached its duty to investigate, as provided by California Insurance Code Section 790.03 and Cal. Code Regs., title 10, § 2695.3. However, neither Section 790.03 or 2695.3 create a private right of action. See Moradi-Shalal v. Fireman's Fund Ins. Companies, 46 Cal. 3d 287, 305, 250 Cal.Rptr. 116, 758 P.2d 58 (1988). More importantly, they do not confer a “duty to investigate” matters not in “suit” on an insurer. Nor do any of the Policies contain any such obligation. Rather, to the contrary, the Policy states that Kinsale “may, at [its] discretion, investigate any ‘occurrence’ and settle any claim or ‘suit’ that may result.” (ECF 1-1 at 6 [emphasis added].)

Based on the exact same language as the Kinsale Primary Policy, the California Supreme Court squarely held that in the absence of a tender of defense to a potentially covered lawsuit against an insured, insurers have the discretion, but not the duty, “to investigate and settle a ‘claim.’ ” Foster-Gardner, Inc., 18 Cal. 4th at 878, 77 Cal.Rptr.2d 107, 959 P.2d 265. In turn, courts have summarily rejected breach of contract claims against liability insurers premised on a purported duty to investigate prior to the filing and tender of a lawsuit under a CGL insurance policy like the Kinsale Policy. See Icasiano v. Allstate Ins. Co., 103 F.Supp.2d 1187, 1191 (N.D. Cal. 2000) (following Foster-Gardner; finding “the insurer's obligation to defend and investigate is not triggered until [the insured] tenders the defense of a third party lawsuit to the insurer”); National Mechanical Services, supra, 620 F.Supp.3d at 1104 (rejecting breach of contract and bad faith causes of action against Kinsale under an identical policy, premised on its alleged failure to investigate). Where an insurer owes no duty to investigate, it follows that allegations of a breach of such duty cannot underpin claims for relief for breach of the insurance contract or breach of the implied covenant of good faith and fair dealing.

4. There Is No Present Duty to Indemnify Diversified

Kinsale also has no present duty to indemnify Diversified for the SCE Deficient Work Claim as no court or arbitrator has ever found that Diversified was legally obligated to pay any sums as damages to SCE. Rather, Diversified allegedly capitulated to SCE and sued Ruiz to recover the money Diversified voluntarily paid.

The Policy provides that “[Kinsale] will pay those sums that the insured becomes legally obligated to pay as damages because of ․’property damage’ to which this insurance applies.” (ECF 1-1 at 6.) The California Supreme Court has held that an “insurer's duty to indemnify the insured for ‘all sums that the insured becomes legally obligated to pay as damages’ under [a] standard comprehensive general liability insurance policy is limited to money ordered by a court.” Powerine I, 24 Cal. 4th at 961, 103 Cal.Rptr.2d 672, 16 P.3d 94. Indeed, the high court explained that while “harm” exists outside court, “damages” exists only if determined by a court. Id. at 962-63, 103 Cal.Rptr.2d 672, 16 P.3d 94.

Here, Diversified is the plaintiff in the Diversified Action. No court ordered Diversified to pay money damages to SCE; rather, Diversified voluntarily undertook to make repairs in response to SCE's Notices. Because Kinsale never had a duty to defend Diversified, it follows that Kinsale owes no duty to indemnify Diversified. In turn, Diversified's direct claims for breach of contract and bad faith against Kinsale must fail.

C. Diversified's Argument that It Is Entitled to “Insured Contract” Benefits Is a Red Herring

With respect to Diversified's contention that “insured contract” coverage applies, the Court rejects that argument. “[A]n exception to a policy exclusion does not create coverage not otherwise available under the coverage clause.” Hurley Constr. Co. v. State Farm Fire & Cas. Co., 10 Cal. App. 4th 533, 540, 12 Cal.Rptr.2d 629 (1992).

Diversified's Opposition to Kinsale's motion to dismiss hinges on its argument that “contractual liability coverage” (i.e., an exception to the Contractual Liability Exclusion), provides a separate coverage grant from the Insuring Agreement in the Kinsale Policy. It does not. Because SCE never filed a lawsuit against Diversified in connection with the SCE Deficient Work Claim, Diversified has no direct claim to coverage under the Kinsale Policies. In turn, all causes of action in the Counterclaim fail.

Because there never was a “suit” against Diversified, Diversified lacks standing here to seek “contractual liability” coverage. That right, if any, belongs solely to Kinsale's Named Insured, Ruiz. See LaBarbera v. Security National Ins. Co., 86 Cal. App. 5th 1329, 1339, 303 Cal.Rptr.3d 256 (2022).

D. In The Absence Of A Duty To Defend or Indemnify, There Is No Duty To Settle

1. There is No Duty to Settle Under the Express Terms of the Kinsale Policy

A “duty to settle” cannot be imposed on Kinsale because the express terms of the Primary Policy make clear that Kinsale has the right to investigate and/or settle claims but that it has no obligation to do so. The insuring agreement states: “We may, at our discretion, investigate any “occurrence” and settle any claim or “suit” that may result.” (ECF 1-1 at 6 [emphasis added].) As recognized by the Foster-Gardner court, the Policy itself imposes no duty to settle on an insurer:

It is indeed arguable that an insured's early intervention in a dispute outside of the civil action context may reduce any indemnity for which the insurer is ultimately held liable. That does not alter the scope of the insurer's duty to defend ․ Under the language of the policy, however, this is a judgement call left solely to the insurer “the company ․ may make such investigation and settlement of any claim ․ as it deems expedient.”

Id., at 883 (emphasis added).

As Foster-Gardner observed, “[u]nder the policies, the insurers are required to defend a ‘suit’, but have discretion to investigate and settle a ‘claim.’ ” Id. at 878, 77 Cal.Rptr.2d 107, 959 P.2d 265 (emphasis added); see also Powerine I, 24 Cal.4th at 971, 103 Cal.Rptr.2d 672, 16 P.3d 94 (stating that the policy provision “grants the insurer a right to settle any at least potentially covered dispute involving the insured.”) While these courts expressly recognized that it may be prudent to settle, engrafting a duty to settle contravenes the express terms of the Policy, especially where there is no “suit” for the insurer to defend. If the high court meant to impose such a duty, it would have said so. Instead, it expressly held that an insurer's decision to settle a claim was “a judgment call left solely to the insurer.” Id. at 883, 77 Cal.Rptr.2d 107, 959 P.2d 265; see also Powerine I, 24 Cal. 4th at 957, 103 Cal.Rptr.2d 672, 16 P.3d 94 (observing that the right to settle, at best, is “part” of the duty to defend.)

Imposing a duty to settle in the absence of a “suit” would necessarily require this Court to eschew Foster-Gardner and rewrite binding California Supreme Court precedent. Effectively, any such “duty to settle” would be broader than the duty to defend and indemnify, which no California court has ever suggested. Settling a lawsuit necessarily “entails the payment of money.” Powerine I, 24 Cal. 4th at 958, 103 Cal.Rptr.2d 672, 16 P.3d 94 (quoting Aerojet-General Corp. v. Transportation Indem. Co., 17 Cal. 4th 38, 56 (1997)). It follows that there cannot be a “duty to settle” if the duty to defend has not yet arisen, because the duty to defend is a condition precedent to the duty to indemnify. See Woolett v. American Employers Ins. Co., 77 Cal. App. 3d 619, 625, 143 Cal.Rptr. 799 (1978) (sustaining demurrer on ground of res judicata where court previously held that “in the absence of any duty by defendant to indemnify [the insured], [the insurer] likewise had no duty to settle the case․”)

Given that the insurance contract only requires Kinsale to make a “judgment call” in determining whether to settle a “claim,” imposing an ex post facto duty to settle SCE's claim against Diversified would rob Kinsale of the ability to litigate Diversified's liability to SCE. In fact, that's exactly what happened. SCE made its claim against Diversified, and Diversified simply paid it, with little or no resistance, confident that it could sue Ruiz and collect the “damages” from Kinsale. Imposing an immediate duty to settle would require Kinsale to “pay and chase” – a duty it never bargained for. See Icasiano, 103 F.Supp.2d at 1191 (“the insurer's obligation to defend and investigate is not triggered until the [insured] tenders the defense of a third party lawsuit to the insurer.”)

The Court will not rewrite the Policy to impose an obligation to defend, investigate, and settle a pre-litigation “claim” where none existed before. Such a finding would directly contradict existing caselaw regarding the duty to defend / duty to indemnify. See San Diego Housing, 68 Cal. App. 4th at 540, 80 Cal.Rptr.2d 393 (“As explained in Foster-Gardner ․, standard liability policies require an insurer to defend a ‘suit,’ but give it discretion to investigate and settle a ‘claim.’ ”). And, because there is no breach of contract as a matter of law, Diversified's “bad faith” claims fail as well. Waller v. Truck Ins. Exch., 11 Cal. 4th 1, 35-36, 44 Cal.Rptr.2d 370, 900 P.2d 619 (1995). Further, Diversified's request for declaratory relief is entirely premised on its incorrect coverage arguments. As a result, its “mirror image” declaratory relief claim for relief must also be dismissed. See Wilton v. Seven Falls Co., 515 U.S. 277, 288, 115 S.Ct. 2137, 132 L.Ed.2d 214 (1995) (“ “[I]f a district court, in the sound exercise of its judgment, determines after a complaint is filed that a declaratory judgment will serve no useful purpose, it cannot be incumbent upon that court to proceed to the merits before ․ dismissing the action.”)

For the foregoing reasons, Diversified's Counterclaim is herein DISMISSED with prejudice in its entirety, as it appears to the Court that any attempt to amend would be futile.

IT IS SO ORDERED.

FOOTNOTES

1.   The Diversified Action refers to Diversified Utility Services, Inc. v. R.P. Ruiz Corp. dba Richard's Construction Co., Kern County Superior Court, Case No. BCV-21-102337.

John F. Walter, UNITED STATES DISTRICT JUDGE