Post by TheWallsScreamedPoetry on May 7, 2011 9:33:44 GMT
INSURANCE
Allegations That Defendant Marketed Products And Merchandise Sufficient To Give Rise To Duty To Defend Under Advertising Injury Provisions In Policy
Manzarek v. St. Paul Fire Marine Insurance Company
(9th Cir. 2008) ___F.3d___, 08 C.D.O.S. 3333
April 2008
The United States Court of Appeal for the Ninth Circuit held that the District Court for the Central District of California applied an unduly broad reading of an exclusion clause when it concluded that the insurer was not liable to provide coverage or defense against claims for advertising injury.
Raymond Manzarek (“Manzarek”) and Doors Touring, Inc. (“DTI”) filed suit against their insurer, St. Paul Fire & Marine Insurance Company (“St. Paul”), alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief arising from St. Paul’s refusal to defend and indemnify them in two lawsuits filed against them (“Underlying Lawsuits”). Manzarek is a founding member of the classic rock group The Doors. John Densmore, the former drummer for The Doors, filed one of the Underlying Lawsuits (“Densmore Lawsuit”) against Manzarek. The parents of Jim Morrison, a former vocalist for The Doors, and the parents of Pamela Courson, Morrison’s late wife, together filed the other Underlying Lawsuit (“Courson Lawsuit”) against Manzarek.
Both Underlying Lawsuits alleged that Manzarek and members of his band were liable for infringing on The Doors name, trademark, and logo in conjunction with their planned national and international tours. Both Underlying Lawsuits also included allegations against Manzarek and DTI for the improper use of The Doors logo in conjunction with the marketing of products and merchandise. Additionally, the Densmore Lawsuit alleged that the breaches by Manzarek and his band caused Densmore to suffer economic damages as well as damage to his reputation and stature.
St. Paul insured Manzarek under a commercial general liability policy, effective May 24, 2002 to May 24, 2003 (“Manzarek Policy.”) Although effective on May 24, 2002, St. Paul did not issue the Manzarek Policy until October 3, 2002. St. Paul also insured Manzarek, DTI, and Robert Krieger under another commercial general liability policy, effective December 2002 to December 30, 2003 (“DTI Policy”). St. Paul did not issue the DTI Policy until February 19, 2003.
Both the Manzarek Policy and the DTI Policy insured against the occurrence of “bodily injury,” “property damage,” “personal injury,” and “advertising injury.” Both Policies also contained a Field of Entertainment Limitation Endorsement (“FELE”) which excluded coverage for “personal injury or advertising injury that results from the content of, or the advertising or publicizing for, any Properties or Programs which are within your Field of Entertainment.” The Policies defined “Field of Entertainment Business” to include: “The creation, production, publication, distribution, exploitation, exhibition, advertising and publicizing of product or material in any and all media such as motion pictures of any kind and character, television programs, commercials or industrial or educational or training films, phonograph records, audio or video tapes, CDs or CD ROMs, computer on-line services or internet or Web site pages, cassettes or discs, electrical transcriptions, music in sheet or other form, live performance, books or other publications.”
St. Paul denied coverage and declined to defend Manzarek and DTI for both Underlying Lawsuits based on its interpretation of the FELE. Approximately two years later, Manzarek and DTI filed its coverage and bad faith lawsuit against St. Paul in the Los Angeles Superior Court. St. Paul removed the action to the United States District Court.
The District Court granted St. Paul’s motion to dismiss the first amended complaint, and entered an Order, prepared by St. Paul, which dismissed the Manzarek and DTI claims, holding that the FELE was conspicuous, plain, clear, and unambiguous. The District Court further held that St. Paul owed Manzarek and DTI no duty to defend or indemnify the claims in the Underlying Lawsuits. The District Court also refused to permit Manzarek or DTI to amend their complaint because “plaintiffs would be unable to allege facts that would alter these strictly legal determinations.”
The Ninth Circuit reviewed the District Court’s decision to grant St. Paul’s motion to dismiss de novo, and reversed the decision of the District Court. In its opinion, the Ninth Circuit restated and applied well settled principles under California law that an insurer must defend if the underlying complaint alleges potentially covered claims under the policy, that exclusionary clauses are interpreted narrowly against the insurer, and that exclusionary clauses must be conspicuous, plain, and clear.
The Ninth Circuit found the District Court’s decision to be erroneous for three reasons. First, the District Court failed to apply the language of the FELE to the factual allegations contained in the Underlying Lawsuit complaints. The Ninth Circuit found that the definition of the FELE was not broad enough to cover the entirety of the allegations. The Policies defined “Field of Entertainment Business” as excluding specific types of media. The Ninth Circuit held that because the Underlying Complaints were silent as to what type of products and merchandise Manzarek and DTI produced and marketed, such products may not qualify as “media” within the definition of the FELE. For example, the court stated that if the products at issue were The Door’s Own line of salad dressing, t-shirts or guitars, such products would not be “media” and fall outside the definition of the FELE. The Ninth Circuit accordingly held that because the allegations raised a potential for coverage, the District Court erred in granting St. Paul’s motion to dismiss.
Second, the Underlying Complaints contained an allegation of “bodily injury” and, accordingly, there was a potential for coverage under the “bodily injury” portion of the Policies. The Policies’ definition of “bodily injury” included mental anguish and emotional distress. The Ninth Circuit held that the Densmore Lawsuit included allegations of damage to Densmore’s reputation, which was sufficient to raise the potential of an award of mental anguish or emotional distress damages.
Third, the Ninth Circuit held that the FELE was not reasonably understood by the insureds. The Court noted that St. Paul had not yet delivered or issued the DTI Policy to Manzarek or DTI when they demanded coverage under the Policies. Based on this fact, the Court held that an insured cannot be deemed to reasonably understand the terms of the policy he has not seen or fully comprehend the exclusionary language of a policy that has not yet been issued.
The Court also found that the District Court erred in dismissing the claim of breach of the implied covenant of good faith and fair dealing. Because the Court found that Manzarek and DTI did indeed have a viable claim for breach of contract against St. Paul, the Court reasoned that Manzarek and DTI may also have a viable claim for breach of the implied covenant of good faith and fair dealing because such claim is based on the contractual relationship between the insured and the insurer.
Finally, the Ninth Circuit found that the District Court abused its discretion in denying Manzarek and DTI an opportunity to amend the complaint. The Court noted that Manzarek and DTI’s counsel suggested that several factual amendments and clarifications could be made to undermine St. Paul’s argument that the FELE excluded all potential for coverage under the Policies. Because the District Court did not give Manzarek and DTI an opportunity to explain how they could amend the complaint, the complaint should not have been dismissed with prejudice.
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This opinion is not final. It may be depublished, modified on rehearing, or review could be granted. This events would render this decision unavailable for use as legal authority.
Allegations That Defendant Marketed Products And Merchandise Sufficient To Give Rise To Duty To Defend Under Advertising Injury Provisions In Policy
Manzarek v. St. Paul Fire Marine Insurance Company
(9th Cir. 2008) ___F.3d___, 08 C.D.O.S. 3333
April 2008
The United States Court of Appeal for the Ninth Circuit held that the District Court for the Central District of California applied an unduly broad reading of an exclusion clause when it concluded that the insurer was not liable to provide coverage or defense against claims for advertising injury.
Raymond Manzarek (“Manzarek”) and Doors Touring, Inc. (“DTI”) filed suit against their insurer, St. Paul Fire & Marine Insurance Company (“St. Paul”), alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief arising from St. Paul’s refusal to defend and indemnify them in two lawsuits filed against them (“Underlying Lawsuits”). Manzarek is a founding member of the classic rock group The Doors. John Densmore, the former drummer for The Doors, filed one of the Underlying Lawsuits (“Densmore Lawsuit”) against Manzarek. The parents of Jim Morrison, a former vocalist for The Doors, and the parents of Pamela Courson, Morrison’s late wife, together filed the other Underlying Lawsuit (“Courson Lawsuit”) against Manzarek.
Both Underlying Lawsuits alleged that Manzarek and members of his band were liable for infringing on The Doors name, trademark, and logo in conjunction with their planned national and international tours. Both Underlying Lawsuits also included allegations against Manzarek and DTI for the improper use of The Doors logo in conjunction with the marketing of products and merchandise. Additionally, the Densmore Lawsuit alleged that the breaches by Manzarek and his band caused Densmore to suffer economic damages as well as damage to his reputation and stature.
St. Paul insured Manzarek under a commercial general liability policy, effective May 24, 2002 to May 24, 2003 (“Manzarek Policy.”) Although effective on May 24, 2002, St. Paul did not issue the Manzarek Policy until October 3, 2002. St. Paul also insured Manzarek, DTI, and Robert Krieger under another commercial general liability policy, effective December 2002 to December 30, 2003 (“DTI Policy”). St. Paul did not issue the DTI Policy until February 19, 2003.
Both the Manzarek Policy and the DTI Policy insured against the occurrence of “bodily injury,” “property damage,” “personal injury,” and “advertising injury.” Both Policies also contained a Field of Entertainment Limitation Endorsement (“FELE”) which excluded coverage for “personal injury or advertising injury that results from the content of, or the advertising or publicizing for, any Properties or Programs which are within your Field of Entertainment.” The Policies defined “Field of Entertainment Business” to include: “The creation, production, publication, distribution, exploitation, exhibition, advertising and publicizing of product or material in any and all media such as motion pictures of any kind and character, television programs, commercials or industrial or educational or training films, phonograph records, audio or video tapes, CDs or CD ROMs, computer on-line services or internet or Web site pages, cassettes or discs, electrical transcriptions, music in sheet or other form, live performance, books or other publications.”
St. Paul denied coverage and declined to defend Manzarek and DTI for both Underlying Lawsuits based on its interpretation of the FELE. Approximately two years later, Manzarek and DTI filed its coverage and bad faith lawsuit against St. Paul in the Los Angeles Superior Court. St. Paul removed the action to the United States District Court.
The District Court granted St. Paul’s motion to dismiss the first amended complaint, and entered an Order, prepared by St. Paul, which dismissed the Manzarek and DTI claims, holding that the FELE was conspicuous, plain, clear, and unambiguous. The District Court further held that St. Paul owed Manzarek and DTI no duty to defend or indemnify the claims in the Underlying Lawsuits. The District Court also refused to permit Manzarek or DTI to amend their complaint because “plaintiffs would be unable to allege facts that would alter these strictly legal determinations.”
The Ninth Circuit reviewed the District Court’s decision to grant St. Paul’s motion to dismiss de novo, and reversed the decision of the District Court. In its opinion, the Ninth Circuit restated and applied well settled principles under California law that an insurer must defend if the underlying complaint alleges potentially covered claims under the policy, that exclusionary clauses are interpreted narrowly against the insurer, and that exclusionary clauses must be conspicuous, plain, and clear.
The Ninth Circuit found the District Court’s decision to be erroneous for three reasons. First, the District Court failed to apply the language of the FELE to the factual allegations contained in the Underlying Lawsuit complaints. The Ninth Circuit found that the definition of the FELE was not broad enough to cover the entirety of the allegations. The Policies defined “Field of Entertainment Business” as excluding specific types of media. The Ninth Circuit held that because the Underlying Complaints were silent as to what type of products and merchandise Manzarek and DTI produced and marketed, such products may not qualify as “media” within the definition of the FELE. For example, the court stated that if the products at issue were The Door’s Own line of salad dressing, t-shirts or guitars, such products would not be “media” and fall outside the definition of the FELE. The Ninth Circuit accordingly held that because the allegations raised a potential for coverage, the District Court erred in granting St. Paul’s motion to dismiss.
Second, the Underlying Complaints contained an allegation of “bodily injury” and, accordingly, there was a potential for coverage under the “bodily injury” portion of the Policies. The Policies’ definition of “bodily injury” included mental anguish and emotional distress. The Ninth Circuit held that the Densmore Lawsuit included allegations of damage to Densmore’s reputation, which was sufficient to raise the potential of an award of mental anguish or emotional distress damages.
Third, the Ninth Circuit held that the FELE was not reasonably understood by the insureds. The Court noted that St. Paul had not yet delivered or issued the DTI Policy to Manzarek or DTI when they demanded coverage under the Policies. Based on this fact, the Court held that an insured cannot be deemed to reasonably understand the terms of the policy he has not seen or fully comprehend the exclusionary language of a policy that has not yet been issued.
The Court also found that the District Court erred in dismissing the claim of breach of the implied covenant of good faith and fair dealing. Because the Court found that Manzarek and DTI did indeed have a viable claim for breach of contract against St. Paul, the Court reasoned that Manzarek and DTI may also have a viable claim for breach of the implied covenant of good faith and fair dealing because such claim is based on the contractual relationship between the insured and the insurer.
Finally, the Ninth Circuit found that the District Court abused its discretion in denying Manzarek and DTI an opportunity to amend the complaint. The Court noted that Manzarek and DTI’s counsel suggested that several factual amendments and clarifications could be made to undermine St. Paul’s argument that the FELE excluded all potential for coverage under the Policies. Because the District Court did not give Manzarek and DTI an opportunity to explain how they could amend the complaint, the complaint should not have been dismissed with prejudice.
Click here for opinion.
www.gordonrees.com/publications/viewPublication.cfm?contentID=592
This opinion is not final. It may be depublished, modified on rehearing, or review could be granted. This events would render this decision unavailable for use as legal authority.