United States District Court, C.D. California
December 19, 2014
Viacom Int'l Inc., et al.
Axis Insurance Co
CIVIL MINUTES - GENERAL
Honorable Philip S. Gutierrez, United States District Judge.
Proceedings (In Chambers): (In Chambers) Order DENYING Defendant Axis Insurance Company's Motion to Dismiss for Failure to State a Claim upon which Relief can be Granted (FRCP 12(b)(6))
In this insurance coverage dispute, Plaintiffs Viacom International, Inc. and Ish Entertainment, LLC (" Plaintiffs") challenge Defendant AXIS Insurance Company's (" Defendant") refusal to indemnify Plaintiffs in an underlying litigation (" Underlying Litigation"). Dkt. # 1 (" Cpt."). Before the Court is Defendant's motion to dismiss the Complaint under Federal Rule of Civil Procedure 12(b)(6). Dkt. # 10 (motion); dkt. # 10-1 (memorandum of points and authorities) (" Mtn."). The Court finds the matter appropriate for decision without oral argument. Fed. Rule Civ. P. 78(b); L.R. 7-15. After considering the arguments in the moving, opposing, and reply papers, the Court DENIES the motion.
A. The Insurance Policy
Defendant issued Plaintiffs a Film & Entertainment Liability Policy (" Policy") for the production, distribution, and broadcast of a television program entitled T.I.'s Road to Redemption (" Program"). Cpt. ¶ 7. The Policy has a self-insured retention of $25, 000 for " each loss, " a coverage limit of $3 million for " each loss, " and a total limit of $5 million. Id.; see also Dkt. # 10-2, Request for Judicial Notice (" RJN") Ex. A, at 3.
B. The Underlying Litigation
On February 9, 2011 (years after the Program was produced and broadcast), the eight plaintiffs in the Underlying Litigation (" Decedent's Family") sued Plaintiffs and other parties (" Georgia Parties") in the state court of Georgia in connection with the Program. Cpt. ¶ 9; Dkt. # 16 (" Opp.") at 1. Decedent's Family asserts twenty-four claims for damages arising from two types of activities and two spans of time: first, the production of the Program in November of 2008; and second, the broadcast of the Program on television and its distribution on the Internet beginning in February of 2009. Cpt. ¶ ¶ 9, 13; Opp. at 1.
Specifically, the Decedent's Family indicates that in November of 2008, the Georgia Parties interfered with their contract with a funeral home and invaded their privacy by viewing and filming the Decedent without their consent, and that during the filming, a funeral home employee made negligent misrepresentations concerning the Decedent and his cause of death. Cpt. ¶ ¶ 9, 13; Opp. at 4. Then, beginning in February of 2009, the Georgia Parties defamed the Decedent and his Family, presented the Decedent and his Family in a false light, misappropriated the Decedent's likeness, and intentionally and negligently caused emotional distress to his Family by broadcasting and distributing the misrepresentations. Cpt. ¶ ¶ 9, 13; Opp. at 4-5.
C. The Coverage Dispute
The parties agree that the Underlying Litigation is covered under the Policy. Cpt. ¶ 10. However, they do not agree on whether the underlying events constitute one or multiple " occurrences" pursuant to its terms. Id. ¶ 11. Thus, Plaintiffs ask Defendant to make the $5 million aggregate limit available to finance the defense and fund a settlement, but Defendant is willing to pay no more than the $3 million " each loss" limit. Id. ¶ ¶ 11, 14.
In their Complaint, Plaintiffs assert three claims for: (1) a declaratory judgment that the Underlying Litigation involves several occurrences, and that Plaintiffs are entitled to coverage of up to $5 million; (2) breach of contract; and (3) breach of the implied covenant of good faith and fair dealing. Defendant moves to dismiss the Complaint under Federal Rule of Civil Procedure 12(b)(6) on the ground that the Underlying Litigation involves one occurrence.
II. Standard of Review
Federal Rule of Civil Procedure 12(b)(6) permits a defendant to move to dismiss for failure " to state a claim upon which relief can be granted." In deciding a motion to dismiss, the Court " accept[s] all factual allegations of the complaint as true and draw[s] all reasonable inferences" in favor of the nonmoving party. TwoRivers v. Lewis, 174 F.3d 987, 991 (9th Cir. 1999); see also Rodriguez v. Panayiotou, 314 F.3d 979, 983 (9th Cir. 2002). However, the Court is not " required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). " To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations; rather, it must plead 'enough facts to state a claim to relief that is plausible on its face.'" Weber v. Dep't of Veterans Affairs, 521 F.3d 1061 (9th Cir. 2008) (citing Bell A. v. Twombly, 550 U.S. 544, 561-63, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (rejecting interpretation of Rule 8 that permits dismissal only where plaintiff can prove " no set of facts" to support his claim).
III. Judicial Notice
Although Plaintiffs refer to the Policy and the complaint in the Underlying Litigation in their Complaint, they do not attach those documents. Even so, the Court may " take into account documents 'whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached.'" Knievel v. ESPN, 393 F.3d 1068, 1076-77 (9th Cir. 2005) (quoting In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 2002)). Defendant's motion requests judicial notice of the Policy. Mtn. at 3-4; RJN. Plaintiffs do not oppose the request. See Opp. Further, Plaintiffs request judicial notice of the complaint in the Underlying Litigation. Dkt. # 16-1. While the reply asserts that Plaintiffs " base their opposition on a de facto amendment to their complaint by asking the Court to consider the allegations of the first amended complaint in the Underlying Litigation, " Dkt. # 18 (" Rpl.") at 1, Defendant has neither moved to strike, nor offered compelling reasons why the Court should not consider the allegations. The Court therefore takes judicial notice of both documents.
IV. Governing Law
" In [an] insurance action based upon diversity jurisdiction, California law controls." Forest Meadows Owners Ass'n v. State Farm Gen. Ins. Co., 569 F.App'x 523, 524 (9th Cir. 2014). Insurance agreements are " contracts to which the ordinary rules of contractual interpretation apply." N. Am. Bldg. Maint., Inc. v. Fireman's Fund Ins. Co., 137 Cal.App.4th 627, 641, 40 Cal.Rptr.3d 468 (2006). The Court must interpret the contract " to give effect to the mutual intention of the parties as it existed at the time of contracting, " Cal. Civ. Code § 1636, and ascertain the intention of the parties " from the writing alone, if possible." Id. § 1639; Haynes v. Farmers Ins. Exch., 32 Cal.4th 1198, 1204, 13 Cal.Rptr.3d 68, 89 P.3d 381 (2004).
The contract language governs its interpretation " if the language is clear and explicit." Cal. Civ. Code § 1638; Bank of the W. v. Superior Court, 2 Cal.4th 1254, 1264, 10 Cal.Rptr.2d 538, 833 P.2d 545 (1992). Thus, " where the language of a contract is clear, [the Court] ascertain[s] intent from the plain meaning of its terms and go[es] no further." Blackhawk Corp. v. Gotham Ins. Co., 54 Cal.App.4th 1090, 1095, 63 Cal.Rptr.2d 413 (1997). Words are " understood in their ordinary and popular sense . . . unless used by the parties in a technical sense, or unless a special meaning is given to them by usage." Cal. Civ. Code § 1644; MacKinnon v. Truck Ins. Exch., 31 Cal.4th 635, 648, 3 Cal.Rptr.3d 228, 73 P.3d 1205 (2003).
To ascertain the existence of an ambiguity, " the disputed policy language must be examined in context with regard to its intended function in the policy. This requires a consideration of the policy as a whole, the circumstances of the case in which the claim arises and common sense." Kavruck v. Blue Cross of Cal., 108 Cal.App.4th 773, 780, 134 Cal.Rptr.2d 152 (2003). A provision is ambiguous if it " is capable of two or more constructions, both of which are reasonable." Waller v. Truck Ins. Exch., Inc., 11 Cal.4th 1, 18, 44 Cal.Rptr.2d 370, 900 P.2d 619 (1995). In such a case, the Court must " adopt an interpretation which provides the greatest coverage." Holcomb v. Hartford Cas. Ins. Co., 230 Cal.App.3d 1000, 1008, 281 Cal.Rptr. 651 (1991).
Where, as here, " [t]he central issue ... is whether ... the injuries suffered ... arose out of a single 'occurrence, ' as the term is defined in the applicable policies, or whether there were multiple 'occurrences[, ]' . . . the primary and governing rule of the construction of insurance contracts is to ascertain the intention of the parties.'" Interstate Fire & Cas. Co. v. Archdiocese of Portland, 35 F.3d 1325, 1328-29 (9th Cir. 1994)).
The parties dispute the number of " occurrences" generating the Underlying Litigation in light of the meaning of an " occurrence" as the term is used in the Policy. The media liability coverage agreement provides:
The Company will pay on behalf of the Insured all Damages and Claim Expense in excess of the Self-Insured Retention and within the applicable Policy Limit as a result of one or more Claims arising from an actual or alleged Occurrence in connection with Scheduled Production(s) when the first written Claim is made against any Insured during the Policy Period or Extended Reporting Period, including but not limited to Claims for or arising out of: [13 enumerated types of conduct].
RJN Ex. A, at 19.
In addition to a total limit of $5 million, the Policy has an " each loss" limit of $3 million and a self-insured retention of $25, 000, both of which apply based on the number of occurrences that produced the loss. Cpt. ¶ 7; see also Dkt. # 10-2, Request for Judicial Notice (" RJN") Ex. A, at 3. The Policy defines " occurrence" as:
1. acts committed in the process of researching, investigating, gathering, obtaining, acquiring, developing, preparing, compiling or producing Matter, if such acts are committed prior to the inception date if the policy or during the Policy Period; or
2. the licensing, syndication, serialization, sale, distribution, lease, release, exhibition, broadcast or other dissemination of Matter during the Policy Period, by or with the permission of the Insured.
RJN Ex. A, at 19.
Plaintiffs have pled sufficient facts to survive a motion to dismiss because the Policy is, at minimum, susceptible to reasonable disagreement on the number of " occurrences" that generated the Underlying Litigation. The Policy splits the definition of an " occurrence" in two paragraphs, one concerning activities connected with production, and the other covering activities connected with distribution. The paragraphs are indented, enumerated, and separated by a semicolon, a line space and, crucially, the disjunctive " or" (as opposed to the conjunctive " and"). This implies an intent to treat an occurrence in production as separate from an occurrence in distribution. The Georgia Plaintiffs allege damages arising from both types of occurrences.
Defendants cite Bay Cities Paving & Grading, Inc. v. Lawyers' Mut. Ins. Co., 5 Cal.4th 854, 21 Cal.Rptr.2d 691, 855 P.2d 1263 (1993), and EOTT Energy Corp. v. Storebrand Int'l, 45 Cal.App.4th 565, 52 Cal.Rptr.2d 894 (1996), in order to urge the Court to view " 'occurrence' and 'loss' from the perspective of causation, " and hold that, " as long as all injuries/damages resulted from the same underlying cause, they constitute one occurrence or one loss." Mtn. at 9. However, those cases do not create a standard definition linking the meaning of an " occurrence" to " causation." Instead, the Policy remains " subject to the rules of construction governing contracts, " Safeco Ins. Co. of Am. v. Robert S., 26 Cal.4th 758, 762, 110 Cal.Rptr.2d 844, 28 P.3d 889 (2001), including that meanings of words are governed by the contract language itself.
Moreover, the courts in Bay Cities and EOTT both relied on the express language of their insurance policies to define an " occurrence." In Bay Cities, the policy provided that " [t]wo or more claims arising out of a single act, error or omission, or a series of related acts, errors or omissions shall be treated as a single claim." 5 Cal.4th at 857. In EOTT, " occurrence" was not defined. 52 Cal.Rptr.2d at 899; see also Hon. H. Walter Croskey et al., Cal. Prac. Guide: Ins. Litig., Ch 6A-G, § 6:172.1 (citing EOTT for the proposition that " [a]bsent further definition, 'occurrence' . . . has been interpreted to mean the underlying cause of the loss.") (emphasis added). Those facts are not consistent with the Policy in this case.
Indeed, in Interstate Fire & Cas. Co. v. Archdiocese of Portland, 35 F.3d 1325 (9th Cir. 1994), the Ninth Circuit used the language of an insurance policy to define as multiple occurrences the numerous molestations of a single victim by a single priest. Id. at 1330-31. Like the Defendant in this case, the defendant in Interstate claimed the " multiple occurrences" argument to be unreasonable because it required the insured to pay a separate self-insured retention for every occurrence, despite the fact that they arose from related facts. Rpl. at 4; Interstate, 35 F.3d at 1331. The circuit reasoned that, " [h]owever unfortunate such a result would be from the perspective of the [insured], it is dictated by the terms of the policies." Id. As in Interstate, the conclusion that the Policy is, at the least, ambiguous on the number of " occurrences" that generated the Underlying Litigation is dictated by its terms.
For the reasons discussed above, Defendant AXIS Insurance Company's Motion to Dismiss (Dkt. # 10) is DENIED.
IT IS SO ORDERED.