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Jon Davler, Inc. v. Arch Insurance Co.

California Court of Appeals, Second District, Seventh Division

August 25, 2014

JON DAVLER, INC., Plaintiff and Appellant,
v.
ARCH INSURANCE COMPANY, Defendant and Respondent.

[As modified Sept. 15, 2014.]

APPEAL from a judgment of the Superior Court of Los Angeles County, No. BC517442 Michelle Rosenblatt, Judge.

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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COUNSEL

Ideal Legal Group and Jie Lian for Plaintiff and Appellant.

Musick, Peeler & Garrett and Cheryl A. Orr for Defendant and Respondent.

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OPINION

SEGAL, J. [*]

INTRODUCTION

A group of employees brought an action against their employer, Jon Davler, Inc., for various employment claims, including sexual harassment, invasion of privacy, and false imprisonment. Jon Davler tendered the action to its insurer, Arch Insurance Company, which denied coverage based on an employment-related practices exclusion. After Jon Davler filed this insurance coverage action against Arch, the trial court sustained Arch’s demurrer to the complaint without leave to amend. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

A. The Underlying Action

Three female employees of Jon Davler, a cosmetics company, sued their employer, individually and on behalf of all similarly situated employees, for sexual harassment in violation of Government Code section 12940, subdivision (j), failure to prevent sexual harassment in violation of Government Code section 12940, subdivisions (j) and (k), invasion of privacy in violation of article I, section 1 of the California Constitution, intentional infliction of emotional distress, and false imprisonment. The employees also named as a defendant Christina Yang, an owner, manager, or supervisor of Jon Davler.

The employees alleged that Yang became upset one morning “because she found a used sanitary napkin around the toilet area in the women’s bathroom and blood around the toilet seat” at the Jon Davler facility where they worked. The employees alleged that Yang was so upset that she went to the department where they were working “and started yelling that they were ‘dirty’ and demanded to know who was on their menstrual period so that she could determine who had left the used sanitary napkin by the toilet and the toilet unclean.” Yang demanded in a loud, angry voice, “‘Are you on your period!’” The employees denied that they were on their menstrual cycle, but Yang “was not satisfied with the responses she received.” She instructed another female employee, against her will, “to take each of [the employees] into the bathroom, one by one, and check their panties to see who was on

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their menstrual period, by requiring each to pull down their pants and underwear for an inspection.”

The employees were “shocked and in a state of disbelief” at Yang’s instructions. When they asked about the consequences of refusing to participate in the inspection, Yang said that anyone who refused would be fired. Yang then lined up the employees outside the bathroom. While a male supervisor waited with Yang outside the bathroom door, the designated female employee went into the bathroom with each employee, “stood a foot or two away” while the employees “had to pull down their pants and their panties, exposing their vaginal area, so that [the employee] could see if they were wearing a sanitary napkin and therefore on their period.” When the employees exited the bathroom after the inspection, they “found it extremely difficult and embarrassing to face Yang” and the male supervisor, “and quickly went back to their work area while the inspections continued with the other” employees. In their cause of action for false imprisonment, the employees alleged that they “were wrongfully detained and confined by [Jon Davler and Yang] in the bathroom for the purpose of conducting a humiliating and wrongful inspection of their vaginal area to determine if they were on their menstrual period.”

B. The Policy

Arch issued Jon Davler a commercial general liability policy that, among other coverage, provided coverage for “those sums [Jon Davler] becomes legally obligated to pay as damages because of ‘personal and advertising injury’ to which this insurance applies.”[1] The policy defined “personal and advertising injury” as “injury, including consequential ‘bodily injury, ’ arising out of” seven categories of offenses, one of which was “[f]alse arrest, detention or imprisonment....”

The policy contained an “Employment-Related Practices Exclusion, ” which the parties refer to as an ERP exclusion. This exclusion stated that the coverage for personal and advertising injury did not apply to an injury arising out of any refusal to employ a person, termination of a person’s employment, or “[e]mployment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination or malicious prosecution directed at that person....”

Jon Davler tendered the underlying action to Arch. Arch declined coverage and refused to provide indemnity or a defense based on the ...


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