Continental has refused to defend or indemnify SDNB; SDNB's complaint alleges several causes of action against Continental: 1) Breach of Contract, 2) Breach of the Implied Covenant of Good Faith and Fair Dealing, and 3) Bad Faith Denial of Existence of Contract to Defend and Indemnify.
Continental has moved for summary judgment, claiming there is no genuine issue as to any material fact and that it is entitled to judgment as a matter of law because it has no duty to defend or indemnify SDNB against the claims made against it in Goldman3 or in Owens.
II. THE DISPOSITIVE ISSUE
I have reviewed all the arguments raised by the parties. The dispositive issue is whether Continental Insurance potentially has a duty,
based upon the allegations or evidence discovered to date, to defend or indemnify SDNB in either Goldman or Owens or both. The answer is no.
Under the policy language, in order for SDNB to be covered, SDNB must become "legally obligated to pay" damages for "bodily injury" or "property damage" resulting from an "occurrence," or from "personal injury," or "advertising injury." Continental has the "right and duty to defend any 'suit' seeking those damages." The underlying causes of action are basically securities fraud-related, involving economic harm, not bodily-injury or property damage. There is no personal injury. There is no advertising injury. There is no "occurrence" within the meaning of the policy. There is no coverage.
1. "Personal Injury" or "Advertising Injury."
The policy defines "personal injury" as the result of false arrest or imprisonment, malicious prosecution, wrongful entry, libel, slander, or invasion of privacy. There are no such allegations against SDNB in either underlying action, and the parties admit in oral argument that coverage for personal injury is not at issue.
The policy defines "advertising injury" as libel, slander, invasion of privacy, misappropriation of ideas, or copyright infringement. Owens alleges it. Goldman does not. The Owens complaint states that underlying plaintiffs suffered "'advertising injuries' as such injuries are commonly defined by comprehensive general liability insurers in California" in a paragraph alleging that the PMC scheme constituted unfair competition.
Continental argues that its policy definition of "advertising injury" does not cover unfair competition. That is, its policy is not like those which are "commonly defined by . . . insurers in California" and thus its policy does not cover claims against SDNB for advertising injury. I agree.
2. "Bodily Injury" or "Property Damage" caused by an "Occurrence."
According to the policy language, to be an "occurrence," the conduct must be an "accident" and "unexpected or unintentional." Here, SDNB is alleged to have been involved in the PMC scheme of securities fraud. Specifically, SDNB is alleged to have aided and abetted the PMC scheme. Assuming arguendo that SDNB assisted in the underlying fraud, there is no potential for coverage. Fraud is not an "occurrence."
Aiding and abetting is intentional behavior.
Furthermore, even if the behavior of SDNB is not intentional and does otherwise constitute an "occurrence," there is no "property damage"
nor "bodily injury"
thus precluding coverage. Because of these findings, I do not reach the issue of whether any claims potentially relate back to the policy period. I do note, however, that the policy expired in November 1990 while fraud allegedly was not discovered until January 1, 1991.
Because there is no potential for coverage, summary judgment is appropriate.
Continental Insurance Company's motion for summary judgment is GRANTED.
IT IS SO ORDERED.
Dated: October 21, 1992.
SAMUEL P. KING
UNITED STATES DISTRICT JUDGE