Ironshore Specialty Insurance Co. v. 23andMe, Inc.

          ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT [RE: ECF 50]

          BETH LAB SON FREEMAN UNITED STATES DISTRICT JUDGE

         This declaratory relief action arises out of an insurance coverage dispute between Plaintiff Ironshore Specialty Insurance Company (“Ironshore”) and its insured, Defendant 23andMe, Inc. (“23andMe”). Ironshore seeks a declaration that a professional liability policy issued to 23andMe does not give rise to a duty to defend or indemnify 23andMe with respect to certain lawsuits, arbitrations, and other legal proceedings. Currently before the Court is Ironshore’s motion for summary judgment, which is granted in part and denied in part for the reasons discussed below.

         I. BACKGROUND ^[1]

         23andMe provides a “personal genome service” to consumers who wish to access and understand their personal genetic information. A consumer may buy a DNA saliva collection kit and then send a saliva sample back to 23andMe for testing. 23andMe posts the results to the consumer’s personal account on a 23andMe website. During the relevant time frame, the results consisted of the raw genetic data obtained by saliva testing (“DNA Data”), information regarding ancestry (“Ancestry Component”), and information regarding personal genetic traits and personal health (“Health Component”).

         On November 22, 2013, the United States Food and Drug Administration (“FDA”) sent 23andMe a warning letter stating that “you are marketing the 23andMe Saliva Collection Kit and Personal Genome Service (‘PGS’) without marketing clearance or approval in violation of the Federal Food, Drug and Cosmetic Act.” Warning Letter, Exh. 5 to Schiller Decl. ECF 50-9.^[2] The FDA was particularly concerned about information provided by 23andMe regarding consumers’ risks for certain medical conditions and assessments of drug responses. Id. 23andMe thereafter stopped offering the Health Component to new consumers.

         Several legal proceedings were commenced against 23andMe, including class actions in federal district courts, class arbitration complaints before the American Arbitration Association (“AAA”), and a Civil Investigative Demand (“CID”) issued by the State of Washington. Those actions alleged among other things that: 23andMe falsely represented in advertising that the personal genome service would give consumers knowledge about their health conditions and their status as carriers of genetic disorders; the results actually provided were inaccurate and incomplete; 23andMe misled consumers into believing that the personal genome service had received government approval; and 23andMe did not disclose to consumers that their genetic information would be used to create a database that 23andMe could market to physicians and pharmaceutical companies. Claims asserted in those proceedings included false advertising under California Business & Professions Code § 17500, unfair competition in violation of California Business & Professions Code § 17200, violation of California’s Consumer Legal Remedies Act, deceit, breach of warranty, negligent misrepresentation, and unjust enrichment.

         23andMe tendered the defense of the actions to Ironshore under a policy that Ironshore issued to 23andMe for the period March 19, 2013 to March 19, 2014. Ironshore accepted the defense of the actions under a reservation of rights and filed the present lawsuit seeking a declaration that it has no duty to defend or indemnify 23andMe in the underlying actions. 23andMe moved to stay the declaratory relief lawsuit pending resolution of the underlying actions. This Court granted the stay motion in in part, but ordered that Ironshore could proceed in litigating two coverage defenses: (1) a policy exclusion for contractual liability and (2) an assertion that the CID does not qualify as a covered claim. See Order Granting in Part and Denying in Part Motion for Stay, ECF 48. Ironshore now seeks summary judgment based on those two defenses.

         II. LEGAL STANDARD

         “A party is entitled to summary judgment if the ‘movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’” City of Pomona v. SQM North Am. Corp., 750 F.3d 1036, 1049 (9th Cir. 2014) (quoting Fed.R.Civ.P. 56(a)). “The moving party initially bears the burden of proving the absence of a genuine issue of material fact.” In re Oracle Corp. Sec. Litig., 627 F.3d 376, 387 (9th Cir. 2010) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). “Where the non-moving party bears the burden of proof at trial, the moving party need only prove that there is an absence of evidence to support the non-moving party’s case.” Id. “Where the moving party meets that burden, the burden then shifts to the non-moving party to designate specific facts demonstrating the existence of genuine issues for trial.” Id. “[T]he non-moving party must come forth with evidence from which a jury could reasonably render a verdict in the non-moving party’s favor.” Id. “The court must view the evidence in the light most favorable to the nonmovant and draw all reasonable inferences in the nonmovant’s favor.” City of Pomona, 750 F.3d at 1049. “‘Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.’” Id. (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).

         III. DISCUSSION

         The policy contains two “insuring agreements, ” referred to as “Insuring Agreement A” and “Insuring Agreement B.” Policy § I, Exh. 1 to Bromfield Decl., ECF 50-2. Only Insuring Agreement B, titled “Professional Liability Insurance, ” is at issue here. That agreement provides professional liability insurance as follows:

We will pay Damages that th1e Insured becomes legally obligated to pay because of a Claim alleging a Wrongful Act by the Insured or by a party for whose conduct the Insured may be legally responsible in rendering or failing to render Professional Services (including in the course of a Human Clinical Trial).

Policy § I.B., Exh. 1 to Bromfield Decl., ECF 50-2 (bold in original).^[3]

         Ironshore contends that this provision does not obligate it to defend or indemnify 23andMe in the underlying federal class actions and class arbitrations (collectively, “underlying class actions”) because all of the claims asserted in those actions fall within a policy exclusion for contractual liability. Ironshore also contends that it is not obligated to defend or indemnify 23andMe with respect to the CID issued by the State of Washington because the CID does not qualify as a covered “claim” under the policy.

         A. Law Governing Policy Interpretation

         Because California is the forum state in this diversity action, its substantive law governs interpretation of the insurance policy. See Encompass Ins. Co. v. Coast Nat’l Ins. Co., 764 F.3d 981, 984 (9th Cir. 2014) (“California’s substantive insurance law governs in this diversity case.”) (internal quotation marks and citation omitted); Bell Lavalin, Inc. v. Simcoe & Erie Gen. Ins. Co., 61 F.3d 742, 745 (9th Cir. 1995) (applying forum state’s law to policy interpretation in diversity action). Under California law, “‘[i]nterpretation of an insurance policy is a question of law and follows the general rules of contract interpretation.’” MacKinnon v. Truck Ins. Exch., 31 Cal.4th 635, 647 (2003) (quoting Waller v. Truck Ins. Exch., Inc. 11 Cal.4th 1, 18 (1995)).

         The California Supreme Court instructs that the following principles “govern the construction of insurance policy language in this state”: “Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation.” MacKinnon, 31 Cal.4th at 647 (internal quotation marks and citations omitted). Judicial interpretation is controlled by the “clear and explicit meaning” of the contract provisions, which are “interpreted in their ordinary and popular sense” unless given a special meaning by the parties. Id. at 647-48. Policies are interpreted broadly to afford the greatest possible protection to the insured, while “exclusionary clauses are interpreted narrowly against the insurer.” Id. at 648 (internal ...