CENTURION REAL ESTATE PARTNERS, LLC et al v. ARCH INSURANCE COMPANY complaint

8/20/2019 CENTURION REAL ESTATE PARTNERS, LLC et al v. ARCH INSURANCE COMPANY complaint

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RAMIRO MORALES [Bar No.: 167947][email protected]

CHRISTINE M. FIERRO [Bar No.: 191660][email protected]. BRIAN JONES [Bar No.: 251889][email protected] FIERRO & REEVES2300 Contra Costa Blvd., Suite 310Pleasant Hill, CA 94523Telephone: (925) 288-1776Facsimile: (925) 288-1856

Attorneys for Plaintiffs

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

CENTURION REAL ESTATE PARTNERS,LLC; CENTURION REAL ESTATEINVESTORS IV, LLC; MISSION PLACE,LLC; AMERICAN GUARANTEE &LIABILTY INSURANCE COMPANY;ZURICH AMERICAN INSURANCECOMPANY; WESTCHESTER SURPLUSLINES INSURANCE COMPANY,

Plaintiffs,v.

ARCH INSURANCE COMPANY,

Defendants.

))))))))))))))))))

CASE NO.:

COMPLAINT FOR DECLARATORYRELIEF; BREACH OF CONTRACT;BREACH OF THE IMPLIEDCOVENANT OF GOOD FAITH ANDFAIR DEALING; EQUITABLE

SUBROGATION; AND EQUITABLECONTRIBUTION

JURY TRIAL DEMANDED

Plaintiffs CENTURION REAL ESTATE PARTNERS, LLC, CENTURION REAL

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

LIABILTY INSURANCE COMPANY, ZURICH AMERICAN INSURANCE COMPANY, and

WESTCHESTER SURPLUS LINES INSURANCE COMPANY (collectively, “Plaintiffs”)

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

1. At all times relevant herein, plaintiff Centurion Real Estate 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.

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


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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.

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

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

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

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

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

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

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

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

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

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

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

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

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

transacted business in the State of California.

JURSIDICTION AND VENUE

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

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

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

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



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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

is proper in this district.

FACTS

12. Plaintiffs CENTURION REAL ESTATE PARTNERS, LLC, CENTURION REAL

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

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

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

(“ Beacon Action”).

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

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

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

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

misrepresentation, among other things.

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

defendants in two other civil actions titled 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 ) (collectively, Zucker I and Zucker II will be referred to herein as the “ Zucker

Actions”).

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



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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.

16. 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.

17. Plaintiffs AMERICAN GUARANTEE & LIABILTY INSURANCE COMPANY,

ZURICH AMERICAN INSURANCE COMPANY, and WESTCHESTER SURPLUS LINES

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

Insured Plaintiffs.

18. 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.

19. Carrier Plaintiffs paid defense fees and costs on behalf of Insured Plaintiffs in the

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

under the policies issued by Carrier Plaintiffs.

20. 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

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

Plaintiffs. The Carrier Plaintiff’s reserved rights regarding their settlement contributions.

22. Arch issued a policy entitled “Private Company Management Liability Insurance” to

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

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






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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”).

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 PrivateCompany shall become legally obligated to pay as a result of a Claim first madeduring the Policy Period or Discovery Period, if applicable, against the PrivateCompany 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 respectto Coverage C, by the Private Company.

27. Under the 2009-10 Arch Policy, Arch agreed to the following:

The insurer shall pay Loss on behalf of an Insured Organization resulting from aClaim first made against such Insured Organization during the Policy Period or

Extended Reporting Period, if applicable, for a Wrongful Act by an InsuredOrganization.

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 post-

judgment interest, Defense Costs and Investigation Costs.

Loss shall include punitive and exemplary damages where insurable by law. Theinsurability 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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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 aLiability Coverage Part for which the Insurer receives notice, even if such Claim isgroundless, false or fraudulent. The Insurer may make any investigation it deemsappropriate.

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

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

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

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

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

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

Action under the Arch Policies.)

31. Arch acknowledged receipt of the tenders and admitted in written correspondence

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

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

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

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

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

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

Zucker Actions under the Arch Policies.)

32. Pursuant to the terms of the Arch Policies, Arch had the obligation 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. Nonetheless, and despite prior admissions made by Arch regarding coverage,



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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

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

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

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

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

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

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

against the Insured Plaintiffs in the Beacon Action.

FIRST CAUSE OF ACTIONDeclaratory Relief – Defense Expenditures in Beacon Action

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

forth.

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

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

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

did not have such a coverage obligation.

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

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

Arch’s duty to pay for the cost to defend the Insured Plaintiffs in the Beacon Action.

/ / /



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SECOND CAUSE OF ACTIONDeclaratory Relief – Defense Expenditures in Zucker Actions


forth.


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.



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

LLC, in the Zucker Actions.

THIRD CAUSE OF ACTIONDeclaratory Relief – Settlement Payment in Beacon Action


forth.


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

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

not have such a duty.



Arch’s duty to pay for the settlement of the claims against the Insured Plaintiffs in connection with

the Beacon Action.

FOURTH CAUSE OF ACTIONBreach of Contract – Beacon Action


forth.

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



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Arch.

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

Beacon Action.

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

in connection with the Beacon Action.

49. 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

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 Insured

Plaintiffs 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 Beacon Action, the payment made towards the settlement of the Beacon

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

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

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

FIFTHCAUSE OF ACTIONBreach of Contract – Zucker Actions


forth.

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

defense in the Zucker Actions to Arch.

54. 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

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

connection with the Zucker Actions.



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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.

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

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

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

SIXTH CAUSE OF ACTIONBreach of The Implied Covenant of Good Faith and Fair Dealing


forth.

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

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

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

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

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

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

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

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

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

interests ahead of those Insured Plaintiffs.

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

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

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



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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.

63. Insured Plaintiffs are entitled to recover any and all attorney’s fees and costs that it

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

SEVENTH CAUSE OF ACTIONEquitable Subrogation – Beacon Action


forth.

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

with the Beacon Action.

66. Insured Plaintiffs performed all conditions giving rise to Arch’s obligation to provide

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

been excused from performing any conditions giving rise to Arch’s obligation to provide coverage.

67. Defendants have breached their obligation to Insured Plaintiffs by wrongfully and

unreasonably refusing to provide coverage, as herein alleged.

68. As a result of Arch’s wrongful denial of coverage, Carrier Plaintiffs, without acting

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

Plaintiffs in the Beacon Action.

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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respect to the Beacon Action.

71. Carrier Plaintiffs have suffered damages as a result of Arch’s actions and conduct.

EIGHTH CAUSE OF ACTIONEquitable Subrogation – Zucker Actions


forth.

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

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

74. Insured Plaintiffs performed all conditions giving rise to Arch’s obligation to provide

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

Actions. Alternatively, Insured Plaintiffs have been excused from performing any conditions

giving rise to Arch’s obligation to provide coverage.

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

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

alleged.

76. As a result of Arch’s wrongful denial of coverage, Carrier Plaintiffs, without acting

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

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

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

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

their respective policies.

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

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

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

79. Carrier Plaintiffs have suffered damages as a result of Arch’s actions and conduct.

NINTH CAUSE OF ACTIONFor Equitable Contribution – Beacon Action




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forth.

81. 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.

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

the Beacon Action.

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

defense of claims against Insured Plaintiffs in the Beacon Action.

84. 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

the Insured Plaintiffs in the Beacon Action.

TENTH CAUSE OF ACTIONEquitable Contribution – Zucker Actions


forth.

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

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.

89. 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 Centurion Real

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

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs pray for the following:

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

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

Insured Plaintiffs in the Beacon Action;

4. An award of any and all damages arising from Arch’s 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

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

Action and Zucker Actions;

8. An award of attorneys’ fees;

9. An award of pre-judgment interest;

10. An award of costs of suit; and

11. For any other relief this Court deems proper.

Dated: January 13, 2015 MORALES FIERRO & REEVES

By: /s/ Ramiro MoralesRamiro MoralesChristine M. FierroW. Brian JonesAttorneys for PlaintiffsCENTURION REAL ESTATE PARTNERS,LLC; CENTURION REAL ESTATEINVESTORS IV, LLC; MISSION PLACE,LLC; AMERICAN GUARANTEE &LIABILTY INSURANCE COMPANY;ZURICH AMERICAN INSURANCECOMPANY; WESTCHESTER SURPLUSLINES INSURANCE COMPANY

/ / /

/ / /



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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

By: /s/ Ramiro MoralesRamiro MoralesChristine M. FierroW. Brian JonesAttorneys for PlaintiffsCENTURION REAL ESTATE PARTNERS,LLC; CENTURION REAL ESTATEINVESTORS IV, LLC; MISSION PLACE,LLC; AMERICAN GUARANTEE &LIABILTY INSURANCE COMPANY;

ZURICH AMERICAN INSURANCECOMPANY; WESTCHESTER SURPLUSLINES INSURANCE COMPANY



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EXHIBIT A

EXHIBIT A



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_L

TUCKER ELLIS WEST

L L P

ATTORNEYS AT LAW

135 M ain S t r ee t Su i te 700 S an Franc isco , Ca l i fo rn ia 94105

phone 415.617.2400 facs imile 415.617.2409 www.tuckerel l is .com

CLEVELAND COLUMBUS LOS ANGELES SAN FRANCISCO

D i r e c t D i a l : 4 1 5 . 6 1 7 . 2 2 2 4

E m a i l : K w e s t @ t u c k e r e l li s . c o r n

N o v e m b e r 4 , 2 0 0 8

VIA E-MAIL CERTIFIED MAIL

J o h n T as h j i an

Centurion R eal Estate P artners, LL C

5 9 9 L ex i n g t o n A v en u e , Su i te 2 6 4 6

N e w Y o rk N Y 1 0 0 2 2

Re:

nsured:

e n t u r i on R e a l E s ta t e P a r t ne r s , L L C

Insure r :

r c h I n su r a n c e C o m p a n y

Pol icy:

r i v a te C om p a ny M a na g e m e n t L ia b i li ty I n s u r a nc e

Pol icy No. :

C D 0 0 1 5 1 0 5 - 0 0

C l a i m N o . : 7 8 7 3

O u r R e f . : 0 1 7 7 - 0 0 0 0 7

C l a i m a n t :

e a c on R e s i d e n t i a l C om m un i t y A s s oc i a t ion

D e a r M r . T a s h ji a n :

W e h a v e b e e n r e t a ine d b y A r c h I n s u r a nc e C om p a ny ( A r c h ) to r e p r e s e n t it s in t e r e s ts i n

co n n ec t i o n w i th t h a t l aw s u i t s ty l ed

Beacon R esidential Commu nity Association v. Catellus Third

and King LLC et al.

C a s e N o . 08 - 478 453 , f i l e d i n t h e S up e r i o r C our t f o r t h e S t a te o f C a l if o r n i a ,

San F r an c i s co C o u n t y ( t h e L aw s u i t ) . B y co r re s p o n d en ce d a t ed A u g u s t 1 3 , 2 0 0 8 f ro m Pe t e r

L a uf e nb e r g o f W e nd e l , R os e n , B l a c k & D e a n L L P , C e n t u r i on R e a l Es t a te P a r t ne r s , L L C

( C e n t u r i on ) te nd e r e d t h e . L a w s u i t t o A r c h f o r d e f e ns e a nd ind e m ni t y und e r P r i v a te C om p a ny

M an ag em en t L iab i li t y In s u r an ce Po l icy No . PC D 0 0 1 5 1 0 5 - 0 0 w h i ch A r ch i s su ed t o C en t u r i o n

( t he Pol i cy ) .

W e a re d i rec t ing th i s l e t te r to your a t t ent ion in your cap ac i ty as the des igna ted

r ep r e s en t a t iv e o f C en t u r io n an d o t h e r I n s u r ed s n am ed a s d e f en d an t s i n t h e L aw s u i t . I f y o u a r e

no t a c t i ng on b e h a l f o f C e n t u r ion a n d t h e I n s u r e d d e f e nd a n t s w i t h r e s p e c t t o i n s u r a nc e c ov e r a g e

m a t te r s , p l e a s e d ir e c t a c op y o f t h i s l e tt e r to t h e a p p r op r i a t e p a r t y a nd a d v i s e u s i m m e d i a te l y o f

tha t p ar ty 's iden t i ty .

W e h a v e r e v i e w e d t h e p r ov i s ions o f t h e P o l i c y i n l ig h t o f t h e a l l e g a ti ons s e t f o r th i n t h e

L a w s u i t . W e r e c og n i z e t h a t t h e a l l e g a ti ons s e t f o r t h i n t h e L a w s u i t a r e uns ub s t a n t ia t e d a t t h i s

t i me . N o t h i n g co n t a i n ed i n t h i s l e t t e r is i n t en d ed t o s u g g es t t h a t t h e s e a l l eg a ti o n s h av e an y

010177 000007 614711 5



18/53

TUCKER ELLIS WEST

L L P

ATTORNEYS AT LAW

John Tashjian

Centurion Real Estate Partners L L C

Re: B eacon R esidentia l Comm uni ty A ssociat ion

November 4 , 2008

Page 2

factual or legal merit. This analysis is by n ecessity subject to m odification as further facts are

discovered and as dev elopments 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 Law suit.

For the reasons herein, Arch has determined that the Law suit is a Claim against

Centurion and other Insured defendants for which Coverag e C [Private Com pany Liability] could

afford coverage, subject to certain coverage issues wh ich 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 developm ents

occur. As a result, Arch's investigation of this matter continues to proceed un der a full and

comp lete reservation of all rights accruing under the P olicy, the applicable law and in eq uity.

Nothing said or left unsaid in our correspondence and other com munications 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.

B CKGROUND

Acco rding to its website, the N amed Insured, Centurion is a full-service real estate

acquisit ion, development and m anagement company with offices in M anhattan and L os Ang eles.

Centurion specializes in identifying, fmancing, and managing real estate investments on behalf

of institutional clients and sop histicated high net w orth investors.

In January 200 5, Centurion purchased M ission Place, a residential, retail and office

complex located in San Francisco, buil t in 2004 and designed by Skidmore Ow ings M erril l

and Catellus Development C orporation. Centurion subsequently renamed the complex The

Beacon. I t appears that the Centurion Real Estate Investors IV, L LC was the private equity fund

raised to finance the purchase. The Beacon and M ission Place LL C w as formed as a subsidiary

to hold and manag e the property. Both M ission Place L LC and Centurion Real Estate Investors

IV, LL C are identified as Additional Insureds in Endorsem ent No.

to the Policy.

The B eacon consists of 59 5 condom inium units which, at the t ime of Centurion's

purchase, were new ly-completed, vacant, and ready for immediate sale. The sales were

undertaken by M ission Place LLC.

010177 000007 614711 5



19/53

TUCKER ELLIS WEST L L P

ATTORNEYS AT LAW

John Tashjian


Re: Beacon Residential Community Association

November 4, 2008

Page 3

THE SEC TION 895 INSPECTIONS

On September 8, 2006, the Beacon Residential Comm unity 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 Aug ust 8, 2008.

S U M M A R Y O F T H E L A WS U IT

A.

arties

•

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 D efendants.

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, M ission Place Mezz

Holdings LLC , and M ission 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. Ho weve r, for purposes of this letter, we hereinafter refer to all

of these defendants as Mission Place.

•

Centurion Partners LL C.

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 C onstruction D efendants.

The C onstruction Defendants consist of the Catellus

Entities (Catellus Third and King LLC, Catellus Development Corporation, Catellus

Commercial Development Corp., Catellus Operating Limited Partnership, Catellus

Urban D evelopment Corporation, Third and K ing Investors LLC, and P rologis), and

010177 000007 614711 5



20/53

TUCKER ELLIS WEST

L L P

ATTORNEYS AT LAW .

John Tashjian

Centurion Real Estate Partners LLC


November 4, 2008

Page 4

the Webcor E ntites (Webcor C onstruction, Inc., Webcor Bu ilders, Inc., and Webcor

Construction LP).

•

The Des ign Defendants .

The Design Defendants consist of Skidmore Owings

Merrill LLP, HKS , Inc., HKS A rchitects, Inc, and Catellus Development Corporation.

B.

Al legat ions

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 condom inium units. The A ssociation 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. T he violations include numerous defects relating to, inter alia the complex's

heating and ventilation systems.

C .

C ause s o f Act ion/Rel ief Sought

The Beacon Com plaint 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 consp iracy to

breach of fiduciary du ty; (8) breach of express warranty; (9) negligent m isrepresentation; (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 cau ses of action, save for the fifth and tenth causes of action (action

on surety bond and breach of con tract on faithful performance of bond), are asserted against

Mission Place. The fifth and tenth causes of action are asserted against certain unnam ed Do e

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 amou nt in excess of

$10 m illion, the reasonable cost of repairing and rectifying any damages resulting

from the failure of the subject property to m eet the standards, the reasonable cost of

removing and replacing any improper repair by Defendants . . . reasonable relocation

010177 000007 614711 5



21/53

TUCKER ELLIS & WEST

L L P

ATTORNEYS AT LAW

John Tashjian



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 .

rocedural Status

The Lawsuit has been filed with the court but not yet served on Mission Place or any o f

the other defendants.

On A ugust 29, 2008, M r. Laufenberg forwarded to us a notice of mediation scheduled for

September 24, 2008 at the JA MS 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 M r. Laufenberg, there was no court order or statutory

provision which required Arch to attend the mediation and M ission Place did no t request

settlement authority or ask Arch to attend the mediation.

THE POLI Y

Arch issued to Centurion Real Estate Partners, LLC P rivate Company M anagement

Liability Insurance Policy No. PCD 0015105 -00, effective for the Policy Period of May 3, 2006

to May 3, 2007. The P olicy's Limit of Liability is $2 million each Claim and in the aggregate

for all Coverages combined, including Defense Costs. Claims other than Employm ent Claims

under Coverage C [P rivate Company Liability] are subject to a Retention of $75,000. A Pending

or Prior Claim Date of M ay 3, 2005 applies to claims under all Coverages.

COVERAGE EVALUATION

A.

pplicable 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 b ehalf of the Private Company a Loss for

which the P rivate Com pany shall become legally obligated to pay

as a result of a Claim first made during the Policy Period or

010177/000007/614711/5



22/53

TUCKER ELLIS WEST

L L P

ATTORNEYS AT LAW

John Tashj ian

Centurion Real Estate Partners L LC

Re: Beacon R esidentia l Comm uni ty Assoc ia tion

Novem ber 4 , 2008

Page 6

Discov ery Period, if applicable, against the Pr ivate Com pany for a

W rongful Act which takes place during or pr ior to the Policy

Period.

Pr ivate Compan y i s def ined to mean the Named Com pany and any Subs idiary thereof .

The N amed Co mpany i s Centurion Real Esta te Par tners , LLC. Endorsement N umber 1

[Additional Insured(s) Endo rsement (Ex cess)] identifies,

inter alia Miss ion Place LLC,

Centurion Rea l Estate Investors IV, LLC , and Centurion Real Estate Partners, LLC as Insureds.

The Policy def ines Subsidiary as:

1)

a not for prof i t organization exem pt from federal incom e

tax under sect ion 501(c)(3) of the Internal Revenue C ode of

1986 (as amended) sponsored exclusively by a Pr ivate

Company;

2)

a corporate organization with respect to which the Named

Corpo ration own s, ei ther directly or indirectly through one

or more of i ts Subsidiar ies, more than 50% of the

outstanding securi ties representing the present r ight to v ote

for election of directors or equivalent po si tions; prov ided

that i f the corporate organ ization f i rst becomes a Subsidiary

as descr ibed in paragraph (2) during the Policy Period and

if i ts total consolidated assets as ref lected in i ts then m ost

recent consolidated f inancial s tatements total mo re than

10% of the total consolidated assets of the Na med

Com pany as re f lec ted in the Nam ed Com pany 's then m ost

recent consolidated f inancial s tatements, then such

organization and i ts Insured Persons shall be covered under

th is Pol icy only i f .i th in 90 days of such o rganizat ion

becoming a Subs idiary , the Named Compa ny shal l have

provided the Insurer w ith full par ticulars of the new

Subsidiary and paid any additional premium and agreed to

any am endm ent of the provisions of this Policy required by

the Insurer relating to such new Subsidiary.

An orga nization becom es a Subsidiary at the time the

circumstances descr ibed in paragraph (1) or (2) above f i rst apply to

01 01 77/000007/6 1 471 1 /5



23/53

n

TUCKER ELLIS WEST

L L P

ATTORNEYS AT LAW

John T ashjian

Centurion Real Estate Partners, LL C

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 W rongful Acts comm itted 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-mon etary or injunctive relief which is comm enced by . . . service of a complaint

or similar pleading. W rongful Act is defined to mea n, 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 Law suit is a Claim against Centurion, Mission Place LLC, and

Centurion Real Estate Investors IV, LLC which alleges that those entities comm itted W rongful

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 sam e

or related to those set forth in th e

ucker

litigation which was filed on A ugust 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 M r. 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 w hether Mission Place Mezzanine, LLC, M ission 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.

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

010177 000007 614711 5



24/53

TUCKER ELLIS WEST

L L P

ATTORNEYS AT LAW

John Tashjian

Centurion Real Estate Partners LL C


November 4, 2008

Page 8

B .

otential 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 managem ent board (or equivalent position), or any

organization o ther than the P rivate Co mpany, even if service in

such capacity is with the knowledge and consent of, at the

direction or request of, or part of the d uties regularly assigned to

the Insured Person by, the Private Company.

Although no Insured Persons are named as defendants, the Lawsuit names DO E

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 D OE 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 Law suit 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



25/53

TUCKER ELLIS WEST

L L P

ATTORNEYS AT LAW

John Tashjian


Re: Beacon Residential Community Associat ion

November 4 , 2008

Page 9

Third

Exclusion 1(g) of the Po licy provides that the Insurer shall not be liable under any

Cov erages to make any paymen t for Loss as a result of a Claim made against an Insured for

bodily injury, sickness, disease or death of any person , or for

dama ge to or destruction of any

tangible property

including loss of use thereof. (Emph asis ours) . Given that the basis for the

Lawsuit is the construction defects in the comp lex, Exclusion 1(g) could bar cov erage for the

entire Lawsuit.

Fourth

Exclusion 1(h) of the Po licy provides that the Insurer shall not be liable under

any Cov erages to make any pay ment for Loss as a result of a Claim made ag ainst an Insured:

[F]or emo tional distress, mental ang uish, outrage, hum iliation,

false arrest or imprisonm ent, abuse of process, m alicious

prosecution, defamation,

violation or invasion of any right of

privacy or private occupancy

trespass, nuisance or wrongful entry

or eviction; provided, howev er , this exclusion shall not apply to

any Employmen t Claim.

(Emphasis o urs) .

The defects alleged in the Beacon Co mplaint relate to both the comm on areas of the

comp lex as w ell as the individual condo units. To the extent i t is establ ished that the defects

consti tute a violation or invasion of any r ight of pr ivate occupan cy, Exclusion 1(h) may app ly.

Fifth

Exclusion 2(a) of the Policy prov ides that the Insurer shall not be liable under

Cov erage C to make any p aymen t for Loss as a result of a Claim made ag ainst a Pr ivate

Company:

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

or w ritten con tract or agreement, including any liabili ty of others

assumed by the Private Comp any under any such contract or

agreemen t; provided, however , this exclusion shall not apply to ( i)

to an actual or alleged breach o r any implied contract in an

Employm ent Claim, or ( i i) to the extent the Private Com pany

wo uld have been liable for such Loss in the absence of such

contract or agreemen t.

010177 /000007 /614711/5



26/53

TUCKER ELLIS WEST

LLP

ATTORNEYS AT LAW

John Tashj ian


Re: Beacon R esident ia l Com munity Associa t ion

November 4 , 2008

Page 10

The Law suit asserts an eleventh cause of action for third party beneficiary — breach of

contract and subcontracts. I t appears that Exclusion 2(a) of the Policy wo uld bar coverage for

any loss al locable to the Lawsuit 's eleventh cause of action.

Sixth

Exclusion 2(f) of the Policy provides that the Insurer shal l not be l iable under any

Coverages to m ake any p ayment for Loss as a resul t of a Claim made ag ainst an Insured

brought or m aintained on behalf of a customer or cl ient of the Private Com pany in connection

w ith the actual or alleged rendering o r failure to render any service to or for the benefit of such

customer or cl ient . In connection with the eleventh cause of action, it is alleged that Mission

Place entered into contracts and subcontracts for the purpose of con struct ing and im proving the

Beacon com plex for the benefit of the Associat ion and the condo ow ners. To the extent the

Associat ion and the condo ow ners are deemed to be customers or cl ients of M ission Place,

Exclusion 2(f) may app ly.

In addit ion, the sixth cause of act ion [N egligence of Real E state Brok er] al leges that

M ission Place entered into agreements with other defendants by w hich M ission Place and the

other defendants agreed to provide real estate brokerage services in connect ion with the

market ing, development , advert ising, purchase, and/or sale of the property and the imp rovements

constructed on such property. It appears that Exclusion 2(f) also wo uld bar coverage for any

loss allocable to the sixth cause of action.

Seventh

Section X [Defense Co sts (Including the Advancement of Defense Co sts) ,

Settlements, Judgm ents and Allocation ] of the Policy prov ides, in relevan t part, that:

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

under this Policy and loss n ot covered un der this Policy, either

because such Claim is made against both the Insured and others

because such Claim includes both covered and un covered matters,

then such am ount shal l be al located between covered and

uncovered matters, and in the event of a set t lement , also based on

the relative benefit to the parties from settlement of such cov ered

and uncov ered matters.

In the event that the Insurer and the Insureds cannot agree as to the

amo unt of the Defense Co sts to be advan ced under the Policy, then

the Insurer shal l advance D efense Costs w hich the Insurer bel ieves

to be covered un der this Policy until a different amo unt shall be

010177/000007/614711 /5



27/53

TUCKER ELLIS WEST

LLP

ATTORNEYS AT LAW

John Tashj ian


Re: Beacon Resident ia l Com mun i ty Associa t ion

Novemb er 4 , 2008

Page 11

agreed upon or determined pursuant to the provisions o f this Pol icy

and app l icable law.

As discussed abov e, i t is possible that port ions o f any Loss s ustained by Mission Place,

including D efense Costs, ma y not be co vered under the Policy. It therefore appears that ,

pursuant to Sect ion X of the Pol icy, Arch would have b asis to al locate between covered and

uncovered Loss.

Finally,

Sect ion XV [Other Insurance] of the P ol icy provides, in pert inent part , that :

Such insurance as is prov ided by this Pol icy shal l apply only as

excess over a ny o ther val id and col lectible insurance, unless such

other insurance is w ri tten only as specif ic excess insurance o ver

the Limit of L iabil ity provided by this P olicy. This Policy shall

also be specif ical ly excess o ver any other and col lect ible insurance

pursuant to which a ny other Insurer has a duty to defend a Claim

for which this Pol icy may be o bl igated to pay Loss.

W e understand that Mission Place also has CG L insurance pol icies issued by Zurich and

ACE W estchester. We understand that those insurers have been defending M ission Place in

connection w ith the Section 89 5 inspection and are l ikely to accept M ission Place's defense in

conn ection with the Law suit . W e further understand that M ission Place may be enti t led to

indemnity from some o f the Construction and D esign D efendants which are insured under

policies issued by AIG. W e understand that al l of these other policies contain duties to defend.

I t therefore appears that , pursuant to Sect ion XV of the Pol icy, any coverag e afforded under the

Policy would be excess of any coverage av ailable to M ission Place under the Zurich, AC E

W estchester , and AIG pol icies.

See, Firemen s Ins. Co. of Washington, D.C. v. F ederal Ins. Co.,

233 A.D.2d 193, 649 N.Y.S.2d 700 (1996 ) (court held that excess only insurance clause in

D& O po licy meant that D& O po licy was excess to CGL po l icy issued to same insured).

CONCLUSION

Arch reserves the r ight to supplement the cov erage p osi t ions set for th h erein, specifical ly

including the r ight to raise addit ional coverage defenses under the Pol icy, including the r ight to

recoup al l defense expen ses advan ced, should the facts and circumstances developed in this

matter so warrant . Accordingly, the comm ents herein concerning co verage are based on the

al legat ions in the Law suit , and on the facts presently know n.

010177 000007 614711 5



28/53

TUCKER ELLIS WEST

L L P

ATTORNEYS AT LAW

John Tashjian

Centurion R eal Estate P artners, LL C


Novem ber 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 m ay wish to submit. In the interim, all rights of A rch 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:

obert Schlesinger via e-mail)

Centurion Real Estate Partners, L L C

Peter Laufenb erg, Esq. via e

ail)

Wendel, Rosen, Black Dean L L P

Joe Connors via e

ail)

Frank Crystal Com pany

010177 000007 614711 5



29/53

EXHIBIT B

EXHIBIT B



30/53

TUCKER ELLIS WEST

L L P

ATTORNEYS AT LAW

One M arket Street Steuart Tower Suite 1300 San Francisco California 94105

phone 415.617.2400 fax 415.617.2409 tuckerellis.com

CLEVEL ND LOS NGELES S N FR NCISCO

Direct Dial: 415.617.2224

Email:kwest©tuckerellis com

October 17, 2006

VIA CE RT IFIE D MAIL & E -MAIL

John Tashjian

Centurion Real Estate Pa rtners , L L C

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, L L C

Arch Insurance Com pany

Private Compan y M anagement L iabili ty Insurance

PCD0015105-00

Edward Zucker, et al.

27873

10177-00007

Dear Mr. Tashjian:

W e have been retained by Arch Insurance Compa ny ( Arch ) to represent its interests in

conn ection with that lawsuit styled

Edw ard Zucker et al. vs. Catellus Developmen t Corp. et al.

No. CGC -06-455352, filed in th e Superior Court for the State of Ca lifornia, San Francisco

County ( the La wsuit ). By letter dated August 28, 2006, the Frank Crystal Agency has

provided Arch with notice of the La wsuit under P rivate Com pany M anagem ent Liabil ity

Insurance Policy No. PCD0015105-00 issued to Centurion Real Estate P artners, LL C

( Centurion ) by Arch ( the P olicy ) on August 28, 2006.

W e are directing this letter to your attention in your capacity as th e designated

representative of Centurion and Miss ion Place, LL C ( Miss ion )

, and their Directors and

Officers, with respect to insurance coverage m atters. If you are not acting on beh alf of Centurion

and Mission, and th eir Directors and Officers with respect to insurance coverage m atters, please

direct a copy of this letter to the appropriate party an d ad vise us imm ediately of that party's

identity.

Mission Place LL C is identified as an Insured under the Policy as explained herein.

LAimanage/10177/00007/57849514



31/53

TUCKER ELLIS WEST

L L P

ATTORNEYS AT LAW

John Tashjian

Centur ion Real Estate Partners LLC

Re: Edward Zucker et al. vs. Catellus Development

Corp. et al

October. 17, 2006

Page 2

INTRODU TION

Arch has analyzed the Law suit in light of the provisions of the Policy. For the re asons

herein, Arch has determined that the Law suit sets forth Claims against Centurion and Mission.

Arch h as identified certain coverage issues which otherwise could limit or preclude

coverage for Centurion and M ission. Those issues also are discussed herein.

Because this matter is in its preliminary stages, A rch's coverage analysis and conclusions

are, by ne cessity, subject to mo dification as further facts are discovered and as developthents

occur. As a re sult, Arch's investigation of this matter continues to proce ed un der a full and

complete re servation of all rights accruing under the Policy, the applicable law and in equity.

No thing said or left unsaid in our correspondence and other comm unications with you or any

other party should be considere d a concession that coverage e xtends unde r the Policy. All rights

of Arch und er the P olicy, at law and in equity should continue to be considered fully and

specifically reserve d at all times.

THE POLI Y

Subject to its terms, conditions, definitions, and exclusions, the Policy. provides Private

Com pany Liability coverage. The P olicy Period is from M ay 3, 2006 to May 3, 2007. The

Policy's Limit of Liability is $2 million each Claim and in the aggreg ate for all Coverages

combined, including Defense Costs. Claims other than Employment Claims under Coverage C

[Private Company L iability] are subject to a Retention of $75,000. A P ending or Prior Claim

Date of M ay 3, 2005 applies to claims under all Coverages.

F A C T U A L B A C K G R O U N D

W e summ arize the allegations asserted in the Lawsuit in order to provide a con text for

Arch's comm ents concerning coverage . This discussion is not meant to imply that the

allegations are accurate or have any me rit whatsoever.

A. he P a r t i e s

The following parties are identified in the L awsuit:

•

Edw a r d Z u c ke r .

( Zucke r ) is the class representative of persons who purchased or

entered into a contract to purchase real property at The Beacon co ndominium

LAimanage/10177/00007/578495/4



32/53

TUCKER ELLIS WEST

L L P

ATTORNEYS AT LAW

John Tashjian

Centur i o n Rea l E s ta te P a r tners L L C

Re:

Edward Zucker et al. vs. Catellus Development

Corp. et al.

October 17, 2006

Page

3

comp lex in San Francisco, California_

C a te l l u s C o m m e r c i a l D e v e lo p m e n t C o r p o r a t i o n .

( Ca tellus ) is a corporation

involved in real estate develop me nt. Catel lus was acqu ired by ProLogis in 2005.

C e n t u r i o n R e a l E s t a t e P a r t n e r s L L C . Ce nturion is a California comp any and is a

ful l -service real estate acquisit ion, developm ent and m anagem ent comp any.

•

Th i r d a n d K i n g I n v e s to r s L L C .

( Third ) is a Delaw are company.

• M i s s io n P la c e L L C . M ission is a California comp any.

•

Th e Be a c o n H o m e o w n e r s A s s o c ia t i o n . ( HOA ) is the home ow ners association for

The Beacon condom iniums.

•

M i s s i o n P l a c e M e z z H o l d i n gs L L C . ( M PM H ) is a Delaware company.

•

M i s s i o n P l a c e M e z z a n i n e L L C .

( MP M ) is a Delaw are comp any.

•

M i s s io n P l a ce P a r t n e r s L L C . ( M P P )

is a Delaware com pany.

• C e n t u r i o n R e a l E s t a te In v e s tm e n t L L C .

( Ce nturion REI ) is a California

company.

• C a te l lu s Th i r d a n d K in g L L C .

( Catellus LLC ) is a California com pany.

B .

Th e A u gu s t 1 8 2 0 0 6 L e t t e r f r o m Pa tr i c k E . C a ta l a n o

In his August 18, 2006 letter to HOA, Patr ick E. Catalano identified ten defects, and

requested that those defects be repaired and that his cl ients be paid mon etary damag es for any

defects wh ich could not be repaired.

C .

T h e L a w s u i t

On August 18, 2006, Zucke r, on behalf of al l persons w ho at any time pu rchased or

entered into a contract to purchase real property at The Bea con condom inium com plex located at

250 and 260 K ing Street, San Francisco, California, filed a class action com plaint styled

Zucker

LAimanage /10177/00007/578495 /4



33/53

I N N

TUCKER ELLIS WEST

L L P

A T T O R N E Y S A T L A W

John Tashj ian

Centurion Real Esta te Partners , LL C

Re:

Edw ard Zucker et al. vs. Catellus Developmen t

Corp. et al_

October 17, 2006

Page 4

et al. vs . Catellus Developm ent Corporation et al.

Case No. CGC

6

5535 2, in the California

Superior Court, San Francisco County.

A ccording to the com plaint, the defendan ts falsely represented the square footage of the -

units of The Beacon. In addition, it is alleged that defendants falsely represented that the

condo m iniums were new units, wh en the units, in fact, had been converted from apartments.

The Co mp laint asserts causes of action against Centurion a nd M ission 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 con tract for con struction d efects, (9) negligence for co nstruction defects,

(10) Es pendens/pre-judgment attachment, and (11) breach of warranty.'

The relief sought by plaintif fs includes (1) dam ages for the d ifference 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 amo unt that the actual

purchase price paid exceeds the reformed purchase p rice, (7) punitive damag es, (8) civil

penalties, (9) costs to repair the construction defects, and (10) diminution in value.

COVERAGE EVALUATION

A

overages Provided by the Policy

As set forth in Section

of the Policy, the Policy provides the following Coverage:

COVERA G E C: P RIVA T E COM P A N Y L IA B IL IT Y

The Insurer will pay on behalf of the Private Comp any a Loss for

wh ich the Private Compan y shall become legally obligated to pay

as a result of a Claim f irst mad e during the Policy Period or

Discov ery Period, if applicable, against the Private Compan y for a

W rongful Act which takes place during or prior to the Policy

Period.

2

These causes o f ac t ion a r e a lso a l leged aga ins t M iss ion P lace , LLC.

LAimanage/10177/00007/578495/4



34/53

TUCKER ELLIS WEST

L L P

A T T O R N E Y S A T L A W

John Tashj ian


Re:

Edw ard Zucker et al. vs. Catellus Development

Corp. et al.

October 17 , 2006

Page 5

Private Com pany i s def ined to mean the Named Com pany and any Subs idiary thereof .

The N amed Com pany i s Centur ion Real Es ta te Par tners , LLC. Miss ion Place LLC i s ident i fi ed

as an Insured in Endo rsement N umbe r 1 [Addi t ional Insured(s ) Endorsement (Excess) ] .

The Pol icy def ines Subs idiary as :

1)

a not for prof i t organizat ion exem pt f rom fed eral income

tax under sect ion 501(c)(3) of the Internal Revenue Code of 1986

(as amended) sponsored exclus ive ly by a Pr ivate Company;

2)

a corporate organization wi th respect to which the Nam ed

Corporat ion ow ns, ei ther direct ly or indirect ly through o ne

or more of i ts Subsidiaries , more than 50% of the

outstanding securi t ies represent ing the present r ight to vote

for elect ion of directors or equivalent posi t ions; provided

that i f the.coiporate organizat ion f i rs t becomes a Subsidiary

as descr ibed in paragraph (2) dur ing the Pol icy Pe r iod and

if its total conso lidated assets as ref lected in i ts then m ost

recent consolidated f inancial s tatem ents total more than

10% of the total consolidated assets of the Nam ed

Com pany as re f lec ted in the Nam ed Com pany ' s then m ost

recent consol idated f inancia l s ta t ements , then such

organizat ion and i ts Insured Persons shal l be covered under

this Policy only i f within 90 days of such organizat ion

becom ing a Subs idiary , the Nam ed Com pany shal l have

provide the Insurer with full part iculars of the new

Subs idiary and paid any ad di t ional premium and agreed to

any am endm ent of the provis ions of th i s Pol icy requi red by

the Insurer relat ing to such new S ubsidiary.

An organization become s a Subs idiary a t the t ime the

circumstance s described in paragrap h (1) or (2) above f i rs t apply to

such organizat ion . An organizat ion ceases to be a Subs idiary a t the

t ime such circum stances no longer app ly to such organ izat ion.

In a l l events , coverage i s o therwise af forded unde r th i s Pol icy wi th

respect to a Claim m ade ag ains t any a Subs idiary or i ts Insured

Persons shall only apply for Wrongful Acts committed or al legedly

LAi manage 10177 00007 578495 4



35/53

TUCKER ELLIS WEST

L L P

ATTORNEYS AT LAW

John Tashjian


Re:

Edw ard Zucker et al. vs. Catellus Developmen t

Corp. et al.

October 17, 2006

Page 6

com mitted after the effect ive t ime that such Subsidiary becam e a

covered Subsidiary as provided above a nd prior to the t ime that

such Subsidiary cease d to be a cove red Subsidiary.

Claim is defined to mean a civi l or arbi trat ion proceeding against an Insured for

mon etary , non-monetary or in junctive re l ie f which i s com men ced by . . . se rv ice of a com plain t

or similar pleading . Wrongful Act is defined to me an, in relevant part , any actual or al leged

breach o f duty, neglect , error, misstateme nt , misleading statement , omission or act by the Insured

Persons in their respect ive capaci t ies as such or, with respect to Cove rage C, by the P rivate

Company .

Arch conclude s that the Lawsuit is a Claim ag ainst Centurion and M ission Place. Thus,

Arch concludes that Coverage C of the Policy would afford coverage for the Lawsuit with

respect to Centur ion and M ission subject to the coverage i ssues d i scussed be low. '

Present ly, i t is unclear w hether C enturion Real Estate Investmen t , LLC, Mission Place

Holding s, LLC, Mission Place M ezzanine , LLC, Mission Place P artners , LLC are Subsidiaries of

Cen turion Real Estate Partners , LLC. Therefore, we request that you p rovide further informa tion

in this regard.

B .

eservation of Rig hts as to P otential Coverage Issues

Arch

wishe s to bring to your at tent ion other provisions of the Policy which m ight l im it or

otherwise prec lude cove rage, ei ther in whole or in part , for the Lawsuit .

First

the Pol icy af fords coverage for Loss , which i s def ined to m ean, in re l evant par t ,

dam ages , judgments ( including pre /pos t - judgm ent in te res t on a covered judgment ) , se t tl ements

and Defense C os t s for which the Insureds become legal ly obligated to pay . How ever , Loss

shal l not include . . . any am ount that represents or is substant ially equivalen t to disgorgem ent

or rest itut ionary or rescissionary dam ages or forfei ture of any profi ts or remun erat ion. In

addit ion, Cal ifornia courts have held there is no cove rage for loss which is rest i tut ionary in

nature.

See e.g. Bank of the West v. Superior Court

2 Ca1.4

t

1254 (19 92) ( It is we ll

es tab li shed that one m ay not insure agains t the r i sk of be ing ordered to re turn money or proper ty

that has been wron gful ly acquired. ) . The Law suit seek s a construct ive t rust and refund of the

amou nt that the actual purchase pr ice paid excee ds the re formed purchase pr ice . In the event

B a s e d on t h e i n f o rm a t ion p r ov i d e d t o A r c h , it doe

Documents

CENTURION REAL ESTATE PARTNERS, LLC et al v. ARCH INSURANCE COMPANY complaint