UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA
October 22, 1992
SAN DIEGO NATIONAL BANK, a Nationally chartered bank; SDNB FINANCIAL CORP., a California corporation; and CHARLES I. FEURZEIG, an individual, Plaintiffs,
AETNA CASUALTY & SURETY COMPANY OF ILLINOIS, an Illinois corporation, Defendant.
The opinion of the court was delivered by: SAMUEL P. KING
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS
Plaintiffs San Diego National Bank, SDNB Financial Corp., and Director Charles I. Feurzeig (collectively "SDNB") are named defendants in a case in this court,
and a parallel state action.
In those actions, SDNB allegedly aided and abetted Pioneer Mortgage Company in a securities fraud-related scheme ("The PMC Scheme").
Aetna Casualty and Surety Company of Illinois ("Aetna") insured SDNB under a general liability insurance policy from November 1, 1990 to November 1, 1991. Aetna's policy covers "bodily injury" and "property damage" caused by an "occurrence," as well as "personal injury" and "advertising injury." Aetna has refused to defend or indemnify SDNB. SDNB's amended complaint alleges several causes of action against Aetna: 1) Breach of Contract, 2) Breach of the Implied Covenant of Good Faith and Fair Dealing, 3) Bad Faith Denial of Existence of Contract to Defend and Indemnify, 4) Fraud, 5) Negligent Misrepresentation and 6) Declaratory Relief.
Aetna has moved to dismiss the amended complaint for failure to state a claim upon which relief can be granted because it has no duty to defend or indemnify SDNB against the claims made against it in Goldman4 or in Owens.5 A hearing by teleconference was held on Sept. 23, 1992.
II. THE DISPOSITIVE ISSUE
I have reviewed all the arguments raised by the parties. As in another suit before this court by SDNB against Continental Insurance Company, the dispositive issue is whether Aetna potentially has a duty,
to defend or indemnify SDNB in either Goldman or Owens or both. As in the Continental case, 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." Aetna 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.
Aetna argues that its policy definition of "advertising injury" does not cover the claims against SDNB. 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 the underlying actions against SDNB seek recovery for actions outside the scope of the Aetna policy, there is no claim upon which relief can be granted in this action.
Aetna's motion to dismiss is GRANTED.
IT IS SO ORDERED.
Dated: October 22, 1992.
SAMUEL P. KING
UNITED STATE DISTRICT JUDGE
JUDGMENT IN A CIVIL CASE - October 23, 1992, Filed, Entered
Decision by Court. This action came to trial or hearing before the Court. The issues have been tried or heard and a decision has been rendered.
IT IS ORDERED AND ADJUDGED that defendant Aetna's motion to dismiss is granted.
October 23, 1992