First One Lending Corporation v. Hartford Casualty Insurance Co ( 2019 )

FILED
NOT FOR PUBLICATION
MAR 05 2019
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
FIRST ONE LENDING CORPORATION; No. 17-55492
JOHN VESCERA,
D.C. No.
Plaintiffs-Appellants, 8:13-cv-01500-AG-DFM
v.
MEMORANDUM*
THE HARTFORD CASUALTY
INSURANCE COMPANY,
Defendant-Appellee.
Appeal from the United States District Court
for the Central District of California
Andrew J. Guilford, District Judge, Presiding
Argued and Submitted December 4, 2018
Pasadena, California
Before: O’SCANNLAIN and IKUTA, Circuit Judges, and KENNELLY,** District
Judge.
First One Lending Corporation and John Vescera appeal a grant of summary
judgment in favor of Hartford Casualty Insurance Company that found a lawsuit
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Matthew F. Kennelly, United States District Judge for
the Northern District of Illinois, sitting by designation.
against the appellants uninsurable under their general liability insurance policy. A
district court’s grant of summary judgment is reviewed de novo. Sony Comp.
Entm’t Am. Inc. v. Am. Home Assurance Co., 532 F.3d 1007, 1011 (9th Cir. 2008).
We reverse.
First, the district court erred in granting Hartford’s motion for summary
judgment based on a statutory exception for willful conduct. Cal. Ins. Code § 533.
To determine whether an insurer owes its insured a duty to defend, we “compare
the allegations of the [underlying] complaint—and facts extrinsic to the
complaint—with the policy terms to see if they reveal a possibility that the claim
may be covered by the policy.” See Pension Tr. Fund for Operating Eng’rs v. Fed.
Ins. Co., 307 F.3d 944, 949 (9th Cir. 2002). Because at least the Lanham Act
trademark infringement claim in the underlying complaint against the appellants
did not require a showing of willfulness within the ambit of section 533 to impose
liability, there was a sufficient “potential for liability” to trigger the insurer’s broad
duty to defend under California law. See Horace Mann Ins. Co. v. Barbara B., 4
Cal. 4th 1076, 1084, 846 P.2d 792, 797 (1993); see also Unified W. Grocers, Inc.
v. Twin City Fire Ins. Co., 457 F.3d 1106, 1111-12 (9th Cir. 2006); Brookfield
Commc’ns, Inc. v. W. Coast Entm’t Corp., 174 F.3d 1036, 1059 (9th Cir. 1999).
Nor was every claim in the complaint so “inseparably intertwined” with willful
2
conduct as to render the entire action uninsurable. See Unified W. Grocers, 457
F.3d at 1114.
Second, the district court erred in granting summary judgment on the basis
of the financial services exclusion. “[I]nterpreted narrowly against the insurer,” as
the exclusion must be under California law, see Manzarek v. St. Paul Fire &
Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008), the express exclusion for
claims “resulting from the rendering of or the failure to render financial services”
does not capture all the claims in the underlying complaint because at least some of
those claims bore an insufficient causal nexus with financial services.
In sum, Hartford failed to demonstrate that these exclusions apply to all of
the claims alleged against First One and Vescera “in all possible worlds,” Atlantic
Mut. Ins. Co. v. J. Lamb, Inc., 100 Cal. App. 4th 1017, 1039 (2003), and it thus
failed to demonstrate that it had no duty to defend the action. See Horace Mann, 4
Cal. 4th at 1084, 846 P.2d at 797; Montrose Chem. Corp. v. Superior Court, 6 Cal.
4th 287, 299, 861 P.2d 1153, 1160 (1993) (“Any doubt as to whether the facts
establish the existence of the defense duty must be resolved in the insured’s
favor.”); Manzarek, 519 F.3d at 1031 (“[I]f any of the claims in the underlying
complaint are covered the insurer has a duty to defend the entire action.”); see also
Hudson Ins. Co. v. Colony Ins. Co., 624 F.3d 1264, 1267 (9th Cir. 2010) (“ Where
3
there is doubt as to whether the duty to defend exists, the doubt should be resolved
in favor of the insured against the insurer.” (internal quotation marks omitted)).
Hartford’s alternative arguments that NACA’s claims fell either outside the
insurance policy’s coverage provisions or within the policy’s intellectual property
exclusion must also fail. Because there is a potential for coverage under the
affirmative coverage provisions and Hartford did not conclusively demonstrate that
the intellectual property exclusion applied, see Atlantic Mut. Ins. Co. v. J. Lamb,
Inc., 100 Cal. App. 4th at 1039; Manzarek, 519 F.3d at 1031, the district court’s
holdings on these two issues were sound.
REVERSED and REMANDED.
4
FILED
First One Lending Corp. v. Hartford Casualty Insurance Co., 17-55492
MAR 05 2019
IKUTA, Circuit Judge, dissenting:
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
I would affirm the district court on two grounds. First, each claim in the
underlying complaint was inseparably intertwined with willful conduct. See
Unified W. Grocers, Inc. v. Twin City Fire Ins. Co., 457 F.3d 1106, 1114 (9th Cir.
2006). Based on the allegations in the underlying complaint, any conduct on the
part of the defendants that could be characterized as merely negligent standing
alone was “so closely related to intentional misconduct as to be inseparable from
it.” State Farm Gen. Ins. Co. v. Mintarsih, 175 Cal. App. 4th 274, 288 (2009).
Therefore, the entire action was uninsurable under Cal. Ins. Code § 533.
Second, as an element of its trademark infringement and unfair competition
claims, NACA alleged reputational harm and loss of goodwill that were caused by
the defendants’ false claims of association with NACA in conjunction with their
failure to render (or negligent rendering of) the advertised financial services.
Because the policy’s financial services exclusion precluded coverage for injuries
resulting from “the rendering of or the failure to render financial services” to
others, these claims were not covered by the policy. See Horace Mann Ins. Co. v.
Barbara B., 4 Cal. 4th 1076, 1081 (1993).