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LENSCRAFTERS, INC. v. LIBERTY MUTUAL FIRE INSURANCE CO.

October 5, 2005.

LENSCRAFTERS, INC., et al., Plaintiffs,
v.
LIBERTY MUTUAL FIRE INSURANCE COMPANY, et al., Defendants.



The opinion of the court was delivered by: SAUNDRA ARMSTRONG, District Judge

ORDER

This matter comes before the Court on Defendant and Cross-Claimant Executive Risk Specialty Insurance Company's ("ERSIC") Motion for Summary Judgment against Defendant and Cross-Claimant Liberty Mutual Fire Insurance Company ("Liberty") [Docket No. 103]; Liberty's Motion for Partial Summary Judgment against ERSIC [Docket No. 110]; Liberty's Request for Judicial Notice [Docket No. 109]; and Liberty's Objection to Evidence [Docket No. 123]. Having read and considered the arguments presented by the parties in the papers submitted to the Court, the Court finds this matter appropriate for resolution without a hearing. The Court hereby GRANTS ERSIC's Motion for Summary Judgment [Docket No. 103]; DENIES Liberty's Motion for Partial Summary Judgment [Docket No. 110]; GRANTS Liberty's Request for Judicial Notice [Docket No. 109]; and OVERRULES Liberty's Objection to Evidence [Docket No. 123].

BACKGROUND

  A. The Underlying Snow Action

  On March 12, 2002, a lawsuit captioned Snow, et al. v. LensCrafters, Inc., et al., No. CGC-02-405544 (San Francisco Super Ct.) (the "Snow" action) was brought on behalf of a putative class of Eyexam/EyeMed parties from March 15, 1998 to the present. See Liberty MSJ at Ex. I. Named as defendants were LensCrafters, Inc., Luxottica Group S.p.A., Luxottica USA, Luxottica U.S. Holdings, Luxottica Sun Corp., Eye Med, Inc. and Luxottica Retail Group. Id. A Second Amended Complaint ("SAC") was filed on April 15, 2003 and, thereafter, some defendants were dismissed from the lawsuit. Id. at Ex. J. The remaining defendants are LensCrafters, Inc., EyeMed, Inc. and EyeMed Vision Care, LLC. Id.

  The Snow action asserts causes of action for deceptive advertising practices, unlawful business practices, violations of the consumer legal remedies act, and violations of the California Confidential Medical Information Act. Id. In particular, the plaintiffs in Snow allege, inter alia, that the defendants violated patient privacy rights by sharing confidential patient information among themselves, without authorization, for marketing and other purposes. Id.

  Currently, the Snow Action is stayed pending the determination of People v. Cole, Case No. S121724, which is before the California Supreme Court.

  B. The Liberty Policies

  Between 1998 and 2004, Liberty Mutual Fire Insurance Company ("Liberty") issued to Luxottica a series of Commercial General Liability Policies (collectively referred to herein as the "Liberty Policies"), including:
(1) Policy No. TB2-681-004130-038, for the February 1, 1998 to February 1, 1999 Policy Period;
(2) Policy No. RG2-681-004130-039, for the February 1, 1999 to February 1, 2000 Policy Period;
(3) Policy No. RG2-681-004130-030, for the February 1, 2000 to February 1, 2001 Policy Period;
(4) Policy No. RG2-681-004130-031, for the February 1, 2001 to February 1, 2002 Policy Period;
(5) Policy No. RG2-681-004130-032, for the February 1, 2002 to February 1, 2003 Policy Period; and
(6) Policy No. RG2-681-004130-033, for the February 1, 2003 to February 1, 2004 Policy Period.
See Liberty MSJ at Exs. A-F. Each of the Liberty Policies contains a $3 million limit of liability per occurrence and a $6 million aggregate limit of liability. Id. Insureds under the Liberty Policies include the following entities that are or were named as defendants in the Snow action: LensCrafters, Inc., Luxottica Group, S.p.A., EyeMed, Inc., United States Shoe Corporation, and EyeMed Vision Care, LLC. Id. The Liberty Policies provide that amounts incurred in defending the insureds is in addition to the Policies' limit of liability, and so does not apply to deplete or exhaust the Policies' limits. See Liberty MSJ at Ex. A (LC0013); Ex. B (LC00072-73); Ex. C (LC0098-99); Ex. D (LC0156-57); Ex. E (LC0213-14); Ex. F (LC0282-83). Accordingly, Liberty's duty to defend potentially covered suits does not end until all applicable limits of liability have been exhausted through the payment of damages on behalf of the insureds. See Liberty MSJ at Ex. A (LC0015, LC0023); Ex. B (LC0040, LC0064); Ex. C (LC0090, LC0115, LC0143); Ex. D (LC0148, LC0173, LC0200); Ex. E (LC0206, LC0249, LC0251); Ex. F (LC0257, LC0301).
  Relevant to the instant litigation is the fact that the Liberty Policies contain an "other insurance" clause, which is stated in the Liberty Policies as follows:
This insurance is excess over:
(1) Any other insurance, whether primary, excess, contingent or on any other basis:
(a) That is Fire, Extended Coverage, Builder's Risk, Installation Risk or similar coverage for "your work";
(b) That is Fire insurance for premises rented to you or temporarily occupied by you with permission of the owner;
(c) That is insurance purchased by you to cover your liability as tenant for "property damage" to premises rented to you or temporarily occupied by you with permission of the owner; or
(d) If the loss arises out of the maintenance or use of aircraft, "autos" or watercraft to the extent not subject to Exclusion g. of SECTION 1 — Coverage A — Bodily Injury and Property Damage Liability.
(2) Any other primary insurance available to you covering liability for damages arising out of the premises or operations for which you have been added as an additional insured by attachment of any endorsement.
See, e.g., Liberty MSJ at Ex. C (LC00104) (emphasis added). C. The ERSIC Policy

  Executive Risk Specialty Insurance Company ("ERSIC") issued Managed Care Organization Errors and Omissions Liability Policy No. 8167-2076 to EyeMed Vision Care, LLC for the November 12, 2001 to November 12, 2002 Policy Period (the "ERSIC Policy"). Liberty MSJ at Ex. H (ER00039). The ERSIC Policy contains a $3 million limit of liability per claim, and in the aggregate, inclusive of defense expenses and subject to a $100,000 deductible. Id. (ER00039, ER00072). EyeMed Vision Care, LLC and EyeMed Inc. are "Insured Entiti[es]" under the ERSIC Policy. LensCrafters, Inc., Luxottica Group, S.p.A., and United States Shoe Corporation are "Additional Insureds." Id. at Ex. H (ER00039, ER00046, ER00072).

  The "insuring agreement" of the ERSIC Policies provides that ERSIC "will pay on behalf of any Insured any Loss which the Insured is legally obligated to pay as a result of any Claim that is made against the Insured during the Policy Period [i.e., November 12, 2001 to November 12, 2002]. . . ." Id. at Ex. H (ER00064). The term "Loss" is defined as: "Defense Expenses and any monetary amount which an Insured is legally obligated to pay as a result of a Claim[.]" Id. at Ex. H (ER00066.)

  The ERSIC Policy contains an "other insurance" clause that is found at Section IV(G)(1) of the Policy, as amended by Endorsement No. 11. Endorsement No. 11 provides in relevant part that:
This Policy shall be excess of and shall not contribute with:
(a) Commercial General Liability Insurance Liability Insurance Policy No. RG2-681-004130-031 issued by Liberty Mutual or any renewal or replacement thereof, but only with respect to Managed Care Activities;
(b) any other existing insurance or self-insurance, unless such other insurance or self-insurance is specifically stated to be in excess of this Policy;
(c) any indemnification to which an Insured is entitled from any entity other than the Insured Entity.
Id. at Ex. H (ER00055-56) (emphasis in original).
  "Managed Care Activity" is defined in the ERSIC Policy as:
[A]ny of the following services or activities: Provider Selection; Utilization Review, advertising, marketing, selling, or enrollment for health care or worker's compensation plans; Claim Services; establishing health care provider networks; reviewing the quality of Medical Services or providing quality assurance; design and/or implementation of financial incentive plans; wellness or health promotion education; development or implementation of clinical guidelines; practice parameters or protocols; triage for payment of Medical Services; and services or activities performed in the administration of health care or workers' compensation plans.
See id. at Ex. H (ER00067) (emphasis in original).

  "Medical Information Protection" is defined in the ERSIC Policy as "maintaining the confidentiality of information regarding Medical Services and limiting the release or use of such ...


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