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Ulta Salon, Cosmetics & Fragrance, Inc v. Travelers Property Casualty Company of America

July 11, 2011

ULTA SALON, COSMETICS & FRAGRANCE, INC., PLAINTIFF AND APPELLANT,
v.
TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, DEFENDANT AND RESPONDENT.



(Los Angeles County Super. Ct. No. BC424099) APPEAL from an order of the Superior Court of Los Angeles County, Joanne O'Donnell, Judge.

The opinion of the court was delivered by: Klein, P. J.

Filed 6/10/11; pub. order 7/11/11 (see end of opn.)

Affirmed.

Plaintiff and appellant Ulta Salon, Cosmetics & Fragrance, Inc. (Ulta) appeals an order of dismissal following the sustaining without leave to amend of a demurrer interposed by defendant and respondent Travelers Property Casualty Company of America (Travelers) to Ulta's first amended complaint.*fn1

The essential issue presented in this insurance coverage action is whether the trial court properly held Travelers had no duty to defend or indemnity Ulta, its insured, in an underlying action against Ulta alleging violations of Proposition 65, the California Safe Drinking Water and Toxic Enforcement Act of 1986. (Health & Saf. Code, § 25249.5 et seq.)*fn2 *fn3

We conclude Travelers did not owe Ulta a defense because neither the pleadings nor the extrinsic evidence in the underlying action revealed a possibility the Proposition 65 claim being asserted against Ulta might be covered by the Travelers policy. Therefore, the order of dismissal is affirmed.

FACTUAL AND PROCEDURAL BACKGROUND

1. The policy.

On or about April 17, 2006, Travelers issued a $10 million Commercial General Liability Policy to Ulta, a nail products manufacturer, affording Ulta coverage from March 15, 2006 to March 15, 2007 (the policy).

The policy required Travelers to defend "any suit" against Ulta seeking damages that Ulta "becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage.' " The policy defines "bodily injury" as "bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time."

2. The underlying Proposition 65 action against Ulta.

On August 15, 2007, one Christine Deubler filed the underlying action "on behalf of the general public" against numerous manufacturers, distributors and/or sellers of nail products, including Ulta, seeking civil penalties and injunctive relief. The Deubler complaint contained a single cause of action for violation of Proposition 65, based on allegations the defendants' nail products contain DBP, a reproductive toxin, and that the State of California in December 2005 officially listed DBP as a chemical known to cause reproductive toxicity. The complaint alleged the defendants knew their respective nail products contain DBP, that consumers are exposed to DBP through the intended and foreseeable use of the nail products, and that the defendants failed to give consumers a clear and reasonable warning regarding the reproductive toxicity caused by exposure to DBP.

Pursuant to Proposition 65, the Deubler complaint sought civil penalties of $2,500 per day for each individual exposed to DBP from the use of the defendants' nail products, as well as an injunction barring defendants from offering their nail products for sale without disclosing the presence of DBP in the products.

3. The coverage dispute.

On or about October 8, 2007, Ulta received notice of the Deubler lawsuit. Ulta notified Travelers of the suit, provided Travelers with a copy of the complaint, and requested that Travelers defend and indemnify Ulta pursuant to the terms of the policy. On October 17, 2007, Travelers denied coverage of the Deubler lawsuit. On January 7, 2009, Travelers reiterated its denial, in response to a December 2, 2008 request by Ulta that Travelers withdraw its letter denying coverage.

Ulta allegedly incurred $241,684 to defend against the Deubler lawsuit, as well as $25,000 to settle the lawsuit, for a total of $266,684.

4. The instant bad faith action.

a. Pleadings.

On October 16, 2009, Ulta commenced this action against Travelers, and filed the operative first amended complaint on January 4, 2010. Ulta pled causes of action against Travelers for breach of contract, declaratory relief, breach of the implied covenant of good faith and fair dealing, and tortious breach of the implied covenant of good faith and fair dealing. Ulta alleged Travelers at all times was obligated to defend and indemnify ...


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