United States District Court, N.D. California, San Jose Division
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 ...