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Boblo's Inc. v. Burlington Insurance Co.

August 5, 2008

BOBLO'S INC., DBA TRINO'S DAD LOUNGE AND PABLO SANCHEZ, PLAINTIFFS,
v.
THE BURLINGTON INSURANCE COMPANY, INC. AND DOES 1 THROUGH 50 INCLUSIVE, DEFENDANTS.



ORDER GRANTING MOTION FOR SUMMARY JUDGMENT

Boblo's, Inc., dba Trino's Lounge ("Trino's Lounge") and Pablo Sanchez ("Sanchez") (collectively "Plaintiffs") brought a state court action against Burlington Insurance Company ("Burlington") claiming that Burlington wrongly refused to defend and indemnify Plaintiffs in an underlying action arising out of an altercation between an employee of Trino's Lounge and one of its patrons. Burlington removed the action to this Court on the basis of diversity. Burlington now moves for summary judgment or, in the alternative, summary adjudication pursuant to Rule 56(c) of the Federal Rules of Civil Procedure. Plaintiffs oppose the motion. For the reasons set forth below, Burlington's motion is GRANTED.*fn1

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs own and operate Trino's Lounge, a bar/restaurant located in Sacramento County. Plaintiffs purchased a liability insurance policy ("Policy") from Burlington covering the operations at Trino's Lounge for the period January 4, 2003 to January 3, 2004. The Policy included a commercial general liability ("CGL") coverage part, with insurance limits of $1,000,000 each occurrence and $1,000,000 general aggregate. As to liability for "bodily injury," the Policy provides that Burlington "will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' . . . to which the insurance applies" ("Coverage A"). The Policy provides that "this insurance applies to 'bodily injury' . . . only if: (1) The "bodily injury" . . . is caused by an 'occurrence,' " which the policy defines as "an accident." As to liability for "personal and advertising injury," the Policy provides that Burlington "will pay for those sums that the insured becomes legally obligated to pay as damages because of 'personal and advertising injury' to which this insurance applies" ("Coverage B"). The Policy defines "personal and advertising injury" as "injury, including consequential 'bodily injury,' arising out of . . . false arrest, detention or imprisonment," among others. As to exclusions, the Policy provides that this insurance does not apply to "bodily injury" "expected or intended from the standpoint of the insured" ("Exclusion a. of Coverage A"). This exclusion, however, "does not apply to 'bodily injury' resulting from the use of reasonable force to protect persons or property."

The Policy also contains an endorsement titled "EXCLUSION-- ASSAULT OR BATTERY," which modifies the insurance provided under the CGL coverage part (the "endorsement"). Specifically, the endorsement provides that insurance under the CGL coverage part does not apply to "bodily injury" or "personal or advertising injury" "expected or intended from the standpoint of any insured" or "bodily injury" "[a]rising out of assault or battery, or out of any act or omission in connection with the prevention or suppression of an assault or battery" ("A&B Exclusion"). The endorsement further provides that it replaces the language of Exclusion a. of Coverage A (Section I) and adds Exclusion a.(11) to Coverage B (Section I).

On September 14, 2003, Domonick Robles ("Robles") was injured during an altercation outside Trino's Lounge. On November 10, 2003, Robles filed an action against Trino's Lounge in Sacramento Superior Court ("underlying action"), alleging negligence and intentional tort claims, including claims for assault, battery and false imprisonment. In his complaint, Robles alleged that he was physically attacked by a Trino's Lounge bouncer after he was refused entry to the establishment. Specifically, Robles alleged that a Trino's Lounge bouncer struck him with a closed fist, handcuffed him, and sprayed him with a noxious substance following a verbal altercation.

On December 4, 2003, Burlington received notice of the underlying action and a copy of the complaint. On December 5, 2003, Burlington sent a letter to Sanchez disclaiming coverage on the basis that the A&B Exclusion contained in the endorsement precluded any potential for coverage. In this letter, Burlington referenced the A&B Exclusion and explained that it was disclaiming coverage because the allegations in the underlying action indicated that Robles had been attacked by a Trino's Lounge employee during the course and scope of his duties. Burlington requested Plaintiffs to provide any additional documentation that they believed might effect this decision.

On December 16, 2003, Burlington received a letter from Plaintiffs' counsel requesting reconsideration of its decision to disclaim coverage. In this letter, Plaintiffs' counsel asserted that Burlington had a duty to defend against the underlying action because Robles was the aggressor and the Trino's Lounge bouncer acted reasonable. In support of this assertion, Plaintiffs' counsel referenced Policy language stating that "bodily injury" resulting from the use of reasonable force to protect persons and property is not excluded from coverage. On December 23, 2003, Burlington sent a letter to Plaintiffs' counsel explaining that his reliance on this language was misplaced insofar as the A&B Exclusion expressly modified this provision of the Policy. Burlington further explained that under the A&B Exclusion there was no potential for coverage, even if Robles was the aggressor and the Trino's Lounge bouncer acted reasonably, because the underlying action arose out of an assault and battery and an act or omission in connection with the prevention or suppression of an assault and battery. Burlington, again, requested Plaintiffs to provide additional information that they believed might effect Burlington's decision. Plaintiffs did not respond to this request for additional information.

On February 28, 2006, Plaintiffs' counsel sent a letter to Burlington demanding that it indemnify Plaintiffs for a judgment entered against them in the underlying action. On March 8, 2007, Burlington refused this demand. On April 12, 2007, Plaintiffs filed the instant action against Burlington in Sacramento Superior Court. On May 11, 2007, Burlington removed the action to this Court on the basis of diversity. On May 30, 2008, Burlington filed a motion for summary judgment or, in the alternative, summary adjudication. On July 7, 2008, Plaintiffs filed an opposition.*fn2

II. OPINION

A. Legal Standard

Summary judgment is appropriate if "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party sustains its burden, the burden then shifts to the nonmoving party to go beyond the pleadings and by his or her own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial. Id. at 324. Summary judgment is proper if, viewing the evidence and the inferences therefrom in the light most favorable to the nonmoving party, there are no genuine issues of material fact in dispute and the moving party is entitled to judgment as a matter of law. Valandingham v. Bojorquez, 866 F.2d 1135, 1137 (9th Cir. 1989). "Where the terms and conditions of an insurance policy constitute the entire agreement between the parties, its interpretation is essentially a question of law, particularly well-suited for summary judgment." Flintkote Co. v. General Accident Assurance Co., 410 F.Supp.2d 875, 881 (N.D. Cal. 2006) (internal quotation marks omitted).

B. Breach of Contract Claim

With respect to Plaintiffs' breach of contract claim, the central issue is whether Burlington had a duty to defend or indemnify Plaintiffs against the underlying action. The resolution of this issue turns on the interpretation of an insurance contract, a question of law. Conestoga Servs. Corp. v. Executive Risk Indem., Inc., 312 F.3d 976, 981 (9th Cir. 2002). Not surprisingly, the parties advance opposing positions. Burlington contends that it did not have a duty to defend or indemnify Plaintiffs against the underlying action because the A&B Exclusion precluded any potential for coverage.

Specifically, Burlington contends that coverage was properly denied because the A&B Exclusion precludes coverage for "bodily injury" and "personal and advertising injury" "arising out of assault or battery, or out of any act or omission in connection with the prevention or suppression of an assault or battery." Plaintiffs, on the other hand, contend that the A&B Exclusion does not apply because the language of the endorsement does not "clearly state how the endorsement relates to the insurance contract as a whole" and because "the endorsement was not provided to [Sanchez] until approximately three months after the policy was in effect." Alternatively, Plaintiffs contend that, even assuming the A&B Exclusion applies, summary judgment is ...


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