First One Lending Corp. v. Hartford Casualty Insurance Co. ( 2016 )

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FILED
FOR THE NINTH CIRCUIT
OCT 20 2016
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FIRST ONE LENDING CORPORATION;
JOHN VESCERA, No. 14-56492
Plaintiffs-Appellants, D.C. No. 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, Districr Judge Presiding
Argued and Submitted October 4, 2016
Pasadena, California
Before: D.W. NELSON and PAEZ, Circuit Judges, and BUCKLO,** District
Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Elaine E. Bucklo, United States District Judge for the
Northern District of Illinois, sitting by designation.
First One Lending Corporation and John Vescera (together, “First One”)
appeal from the district court’s grant of summary judgment in favor of The
Hartford Casualty Insurance Company (“Hartford”). The district court held that
Hartford had no duty to defend First One in a lawsuit brought against it by the
Neighborhood Assistance Corporation of America (“NACA”) because the
complaint sought only restitution of ill-gotten gains, which are not insurable as a
matter of public policy under California law. See, e.g., Bank of the W. v. Superior
Court, 833 P.2d 545, 553-54 (Cal. 1992) (in bank). We have jurisdiction under 28
U.S.C. § 1291. We review the district court’s order de novo, see, e.g., Trishan Air,
Inc. v. Fed. Ins. Co., 635 F.3d 422, 426 (9th Cir. 2011), and we reverse.
“The California Supreme Court has stated that the insured is entitled to a
defense if the underlying complaint alleges the insured’s liability for damages
potentially covered under the policy, or if the complaint might be amended to give
rise to a liability that would be covered under the policy.” Anthem Elecs., Inc. v.
Pac. Emp’rs Ins. Co., 302 F.3d 1049, 1054 (9th Cir. 2002) (internal quotation
marks omitted). The underlying action against First One potentially sought
damages within the coverage of Hartford’s insurance policy. NACA’s Lanham Act
and common law unfair competition claims both authorize compensatory relief for
the kind of reputational injury alleged in the complaint. That NACA’s requested
2
monetary award was based on First One’s profits does not mean the award would
have been restitutionary in nature. See, e.g., Nintendo of Am., Inc. v. Dragon Pac.
Int’l, 40 F.3d 1007, 1011 (9th Cir. 1994) (defendants’ profits may be used as a
measure of compensatory damages in Lanham Act claims).
This case is distinguishable from San Miguel Community Ass’n v. State
Farm General Insurance Co., 163 Cal. Rptr. 3d 358 (Cal. Ct. App. 2013), and
Gunderson v. Fire Insurance Exchange, 44 Cal. Rptr. 2d 272 (Cal. Ct. App. 1995),
where the insureds’ potential liability was deemed too speculative to trigger the
duty to defend. Unlike those cases, First One’s potential liability did not require
speculation about additional allegations that could have been, but were not,
included in the complaint. See, e.g., Hudson Ins. Co. v. Colony Ins. Co., 624 F.3d
1264 (9th Cir. 2010) (insurer had duty to defend where complaint did not assert a
covered claim but contained factual allegations supporting such a claim).
Moreover, unlike in San Miguel and Gunderson, Hartford produced no declaration
from NACA’s counsel disavowing any claim for compensatory damages.
Because the underlying action potentially sought damages covered by the
policy, Hartford was not entitled to summary judgment.1
1
We express no opinion regarding the merits of other grounds on which
Hartford may have reserved the right to contest its duty to defend First One.
3
REVERSED.
4