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SONY COMPUTER ENTERTAINMENT AM. v. AMERICAN HOME ASSURANCE

December 1, 2005.

SONY COMPUTER ENTERTAINMENT AMERICA INC., Plaintiff,
v.
AMERICAN HOME ASSURANCE COMPANY; and AMERICAN INTERNATIONAL SPECIALTY LINES INSURANCE COMPANY, Defendants.



The opinion of the court was delivered by: PHYLLIS HAMILTON, District Judge

ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT; DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
The parties' cross-motions for summary judgment came on for hearing on November 16, 2005 before this court. Plaintiff Sony Computer Entertainment America Inc. ("Sony") appeared through its counsel, Martin H. Myers, and defendant American International Specialty Lines Insurance Company ("AISLIC") appeared through its counsel, Thomas H. Sloan. Having read all the papers submitted and carefully considered the relevant legal authority, the court hereby GRANTS defendant AISLIC's motion for summary judgment and DENIES plaintiff Sony's motion for partial summary judgment, for the reasons stated at the hearing, and as follows.

BACKGROUND

  A. Factual Background

  In 2001, AISLIC sold Sony a "Multimedia Professional Liability Policy" covering liability for certain specified "wrongful acts," provided such acts arose and were tendered during the period covering July 1, 2001 through July 1, 2002. See Declaration of Norman Rafsol in Support of AISLIC's Motion for Summary Judgment ("Rafsol Decl."), Ex. C.

  In July 2002, Sony was sued in state court in two class actions (the Kim/Kaen actions), in which the class plaintiffs alleged that Sony's Playstation 2s ("PS2"s) suffered from a design defect that rendered them unable to play DVDs and certain game discs. See Declaration of Jennifer Liu in Support of Sony's Motion for Summary Judgment ("Liu Decl."), Exs. A-B. Specifically, the Kim/Kaen complaints alleged causes of action for breach of warranty, negligent misrepresentation, unfair business practices (Cal. Bus. & Professions Code § 17200), and false advertising (Cal. Bus. & Professions Code § 17500), among other claims. Id.

  Sony tendered the Kim/Kaen claims to AISLIC for coverage pursuant to the AISLIC policy. On June 17, 2003, AISLIC denied coverage.

  B. Insurance Policy

  1. Provisions

  The AISLIC policy has the following relevant provisions:

  Wrongful Act: AISLIC agrees to pay "for each wrongful act or series of continuous, related or repeated wrongful act(s) . . .". See Rafsol Decl., Ex. C at 00102 (Policy, Declarations). "`Wrongful act' means the following committed by the insured in the business of the insured: . . . (g) defective advice, incitement, or negligent publication, including bodily injury or property damage or death arising out of the foregoing." See Rafsol Decl., Ex. C at 00122-23 (Policy, section VII (Definitions)).

  2. Exclusions

  Certain exclusions have also been singled out in the policy.

  First, the AISLIC policy excludes coverage for any claim "arising out of . . . unfair or deceptive business practices including but not limited to, violations of any local, state or federal consumer protection laws . . .". Rafsol Decl., Ex. C at 00105-109 (Policy, section II (Exclusion C)).

  Second, the policy also excludes coverage for any claim "alleging or arising out of a breach of any express warranties, representations or guarantees." Id. (Policy, section II (Exclusion J)).

  Finally, the policy excludes coverage for any claim "arising out of false advertising or misrepresentation in advertising." Id. (Policy, section II (Exclusion P)). Significantly, however, this exclusion has an important "exception", which provides: "However, we will defend suits alleging any of the foregoing conduct until there is a judgment, final adjudication, adverse admission or finding of fact against you as to such conduct at which time you shall reimburse us for claim expense . . .". Id.

  C. Procedural History

  On February 5, 2004, Sony filed the instant action against AISLIC (along with several other insurers), alleging that AISLIC had improperly refused to tender a defense to Sony in the Kim/Kaen actions. Specifically, Sony asserts five causes of action against AISLIC: (1) breach of contract for failure to defend Sony; (2) breach of contract for failure to indemnify Sony; (3) breach of the implied covenant of good faith and fair dealing; (4) ...


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