United States District Court, N.D. California
W.G. HALL, LLC, Plaintiff,
ZURICH AMERICAN INSURANCE COMPANY, Defendant.
ORDER GRANTING IN PART AND DENYING IN PART
ZURICH'S MOTION FOR SUMMARY JUDGMENT; ORDER GRANTING IN
PART AND DENYING IN PART WGH'S MOTION FOR SUMMARY
JUDGMENT RE: DKT. NOS. 29, 32
NATHANAEL M. COUSINS, UNITED STATES MAGISTRATE JUDGE
W.G. Hall, LLC (WGH), a staffing services company, settled a
wage and hour class action lawsuit. Before and after settling
the class action, WGH sought coverage from its professional
liability insurer, Zurich American Insurance Company for the
amount it would pay out in the settlement agreement. Zurich
refused to reimburse WGH for the settlement amount on several
grounds, and WGH sued Zurich for breach of contract and
motion, WGH seeks summary judgment on its claims for breach
of contract and declaratory relief, as well as a judgment
from the Court that none of five affirmative defenses raised
by Zurich are applicable in this case. Zurich opposes
WGH's motion and seeks summary judgment on its behalf as
to the entire case.
reasons stated below, the Court GRANTS IN PART and DENIES IN
PART Zurich's motion for summary judgment. WGH's
motion for partial summary judgment is also GRANTED IN PART
and DENIED IN PART. The effect of this order is that Zurich
is not obligated to cover WGH's settlement in the
the interpretation of the insurance policy in this case is
hotly debated, the factual background of this case is largely
not. On November 27, 2013, Zurich issued to WGH an insurance
coverage package effective from December 1, 2013, through May
19, 2015. Dkt. No. 29-1 at 12. That package contained
Professional Liability coverage. Id.
a staffing services company, which hires and trains staffing
services workers and furnishes them to its clients. Even when
its employees are working directly for WGH's clients, WGH
remains the employer of record for its employees and provides
payroll services for its clients for the work its employees
perform. Dkt. No. 29 at 6. In 2014 and 2015, Danny Isquierdo
and Freddy Robledo filed putative class actions against WGH,
which were later consolidated in July 2015
(Isquierdo and Robledo litigation).
Id. at 210.
lawsuits alleged California Labor Code and Industrial Welfare
Commission Wage Order violations for failure to pay wages,
and other related claims arising from the failure to pay,
such as failure to reimburse and a claim under the California
Unfair Competition Act. Id. at 210-36. The alleged
actions giving rise to these claims were that WGH failed to
compensate its employees “for internal orientations,
client orientations, reporting and consultations,
post-assignment termination meetings, client interviews,
related travel and other work off the clock . . . .”
Id. at 216. In addition, the plaintiffs claimed WGH
did not pay them for the time they spent traveling to deliver
their timesheets to its office, nor were they reimbursed for
their mileage. Id. at 217. WGH notified Zurich of
the lawsuits against it, but Zurich refused to assume
coverage over the claims. Id. at 332-37, 342-46,
351-55. WGH and the class reached a settlement, and the court
preliminarily approved the class action settlement.
Id. at 277. Both parties agree that WGH reach a
settlement without Zurich's consent.
filed this case on February 6, 2017, alleging claims for (1)
breach of contract, (2) breach of contract/duty to defend,
(3) breach of the implied covenant of good faith and fair
dealing, and (4) declaratory relief. Dkt. No. 1. WGH moved
for summary judgment on May 25, 2017. Dkt. No. 29. Zurich
filed a cross motion for summary judgment on June 23, 2017.
Dkt. No. 32. Both parties consented to the jurisdiction of a
magistrate judge under 28 U.S.C. § 636(c). Dkt. Nos. 8,
judgment may be granted only when, drawing all inferences and
resolving all doubts in favor of the nonmoving party, there
is no genuine dispute as to any material fact. Fed.R.Civ.P.
56(a); Tolan v. Cotton, 134 S.Ct. 1861, 1863 (2014);
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
A fact is material when, under governing substantive law, it
could affect the outcome of the case. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute about a
material fact is genuine if “the evidence is such that
a reasonable jury could return a verdict for the nonmoving
party.” Id. Bald assertions that genuine
issues of material fact exist are insufficient. Galen v.
Cnty. of L.A., 477 F.3d 652, 658 (9th Cir. 2007).
moving party bears the burden of identifying those portions
of the pleadings, discovery, and affidavits that demonstrate
the absence of a genuine issue of material fact.
Celotex, 477 U.S. at 323. Once the moving party
meets its initial burden, the nonmoving party must go beyond
the pleadings, and, by its own affidavits or discovery, set
forth specific facts showing that a genuine issue of fact
exists for trial. Fed.R.Civ.P. 56(c); Barthelemy v. Air
Lines Pilots Ass'n, 897 F.2d 999, 1004 (9th Cir.
1990) (citing Steckl v. Motorola, Inc., 703 F.2d
392, 393 (9th Cir. 1983)). All justifiable inferences,
however, must be drawn in the light most favorable to the
nonmoving party. Tolan, 134 S.Ct. at 1863 (citing
Liberty Lobby, 477 U.S. at 255).
issues raised in both motions are (1) was there a
“wrongful act” within the meaning of the policy;
(2) whether the insured v. insured exclusion applies; (3)
whether Zurich waived its right to object to WGH's
settlement of the underlying litigation; (4) whether the
contract exclusion applies; and (5) whether the settlement
constitutes damages. In addition, Zurich argues that as to
the legal issues, there is no dispute of material fact,
necessitating a grant of summary judgment.
Insurance Contract Interpretation Under California
policies are contracts. AIU Ins. Co. v. Superior
Court, 51 Cal.3d 807, 822 (1990). The “mutual
intention” of the parties at the time of contract
formation governs the contract's interpretation.
Id. at 821. The parties' intentions are inferred
from the “clear and explicit” meaning of these
provisions. Id. at 822. The provisions are
interpreted in their “ordinary and popular” sense
unless the terms are used in a “technical sense or a
special meaning is given to them by usage.”
Id. A policy provision is considered ambiguous when
it is capable of more than one interpretation. Waller v.
Truck Ins. Exch., Inc., 11 Cal.4th 1, 18 (1995). When
ambiguity in policy language or term arises, courts must
resolve that ambiguity in favor of the insured. United
Nat. Ins. Co. v. Spectrum Worldwide Inc., 555 F.3d 772,
777 (9th Cir. 2009). The language of a contract must be
interpreted as a whole, which means ambiguities cannot be
found in the abstract. Waller, 11 Cal.4th at 18.
“Courts will not strain to create an ambiguity where
none exists.” Id. at 18-19.
burden is on the insured to bring the claim within the basic
scope of coverage, and (unlike exclusions) courts will not
indulge in a forced construction of the policy's insuring
clause to bring a claim within the policy's
coverage.” Collin v. Am. Empire Ins. Co., 21
Cal.App.4th 787, 803 (1994); see also Waller, 11
Cal.4th at 16. As for policy exclusions, they are strictly
construed against the insurer, and exceptions to exclusions
are broadly construed in favor of the insured. E.M.M.I.
Inc. v. Zurich Am. Ins. Co., 32 Cal.4th 465, 471 (2004)
(citing cases). The burden falls upon the insurer “to
phrase exceptions and exclusions in clear and unmistakable
language.” MacKinnon v. Truck Ins. Exch., 31
Cal.4th 635, 648 (2003) (quotation marks omitted). An
exclusion precludes coverage only if it is
“conspicuous, plain and clear.” Id.
(quoting State Farm Mut. Auto. Ins. Co. v. Jacober,
10 Cal.3d 193, 201-02 (1973)).
The Disputed Policy Text
insurance policy at issue here provides the following:
“We will pay those sums that the insured becomes
legally obligated to pay as ‘damages' because of
any ‘claim' arising from a ‘wrongful act'
to which this insurance applies. The ‘wrongful act'
must take place: a. During the policy period; and b. In the
‘coverage territory.'” Dkt. No. 29-1 at 88.
The terms in the coverage provision are defined as follows:
C. “Claim” means a:
1. Written demand for money resulting from a “wrongful
act”; or 2. “Suit” resulting from a
“wrongful act.” . . . .
F. “Damages” means the monetary portion of any
judgment, award or settlement, provided such settlement is
negotiated with our assistance and approval.