Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_15-cv-00435/USCOURTS-cand-5_15-cv-00435-3/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

PHP INSURANCE SERVICE, INC., et al.,

Plaintiffs,

v.

GREENWICH INSURANCE COMPANY,

Defendant.

Case No. 15-cv-00435-BLF 

ORDER GRANTING PLAINTFF’S 

MOTION FOR PARTIAL SUMMARY 

JUDGMENT AND GRANTING IN PART 

DEFENDANT’S MOTION FOR 

SUMMARY JUDGMENT

[Re: ECF 26, 27]

This is a declaratory judgment action to determine coverage under an insurance policy 

issued by defendant Greenwich Insurance Company (“Greenwich”), which insures plaintiffs PHP 

Insurance Service, Inc., PHP Group, Inc., and Trung Tran (collectively, “PHP”) against liability 

for certain “Wrongful Employment Acts.” Before the Court are the parties’ motions for summary 

judgment. Greenwich Mot., ECF 26; PHP Mot., ECF 27. The Court heard oral argument on these 

motions on June 18, 2015. For the reasons stated herein, Greenwich’s motion for summary 

judgment is GRANTED IN PART and DENIED IN PART. PHP’s cross motion for partial 

summary judgment is GRANTED.

I. BACKGROUND

A. The Underlying Action

On November 19, 2012, Huong Ho and Kevin Nguyen filed a class action lawsuit against 

PHP in the Superior Court for the State of California, Santa Clara County styled Huang Ho and 

Kevin Nguyen v. PHP Group Inc.; PHP Insurance Service, Inc.; Trung Tran; and Does 1-15, Case 

No. 112CV236349 (“Ho Action”). The plaintiffs in the Ho Action alleged violations of California 

state labor regulations including the failure to provide accurate itemized wage statements as 

required by California Labor Code (“CLC”) § 226, as well as violations of other sections of the 

Case 5:15-cv-00435-BLF Document 41 Filed 08/12/15 Page 1 of 17
2

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

CLC requiring the payment of overtime, provision of adequate meal and rest periods, maintenance 

of payroll records, and compensation for vested vacation hours. Stipulation to Facts for Purposes 

of Summ. J. (hereinafter “J.A.”), ECF 25, Exh. B (Ho Compl.). 

The introductory paragraph of the complaint in the Ho Action stated that “Defendants run 

[PHP] as a taskmaster over immigrant and Vietnamese workers, consisting of Plaintiffs and the 

class of employees they seek to represent.” Ho Compl. at 1. The “Factual Background” section 

expounded upon this theme:

[PHP conducts its] business primarily in Vietnamese-speaking 

communities of Santa Clara County and surrounding cities, 

including San Jose. Accordingly, Plaintiffs and the Class Members 

are predominantly Vietnamese-speaking individuals. Some of the 

employees are recent immigrants from Vietnam or are new 

graduates who are unsophisticated in employment and labor rights. 

Defendants routinely entered into oral employment contracts with 

Plaintiffs and Class members. Plaintiffs and Class Members did not 

receive employment handbooks at the time of hiring or otherwise 

that contained the internal policies of PHP Insurance. Defendants 

purposefully hire recent immigrant workers to improperly take 

advantage of their lack of knowledge regarding labor and 

employment rights. 

Id. ¶ 14. The gravamen of the complaint was misclassification, as the plaintiffs alleged that they 

and the class members were never paid overtime by PHP because “all employees were 

misclassified as exempt employees.” Id. ¶ 23. The plaintiffs in the Ho Action further alleged that 

they were “pressured into staying to service clients even during meal breaks” and that “Employees 

who were not available to assist customers were later berated by management for neglecting their 

duties.” Id. ¶ 19. Mr. Tran purportedly maintained strict control over every aspect of PHP’s 

insurance operation. The Ho plaintiffs alleged that they were “discouraged from conversations 

with one another if the conversation is not directly related to work. Id. ¶ 25. “In addition to 

controlling the Plaintiffs and the Class Members’ schedules, work, and communication, [PHP] 

also required that some employees change their Vietnamese names to American names that were 

selected by Defendant Tran.” Id.

On January 18, 2013, the Ho plaintiffs amended their complaint to add a claim under 

California’s Private Attorneys General Act (“PAGA”). The remainder of the complaint was left 

unchanged. J.A. Exh. C. The Ho parties reached a proposed class wide settlement, which 

Case 5:15-cv-00435-BLF Document 41 Filed 08/12/15 Page 2 of 17
3

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

received preliminary approval from the court in July 2013. Compl. ¶ 18; J.A. Exh. E. The 

settlement was ultimately given final approval on October 18, 2013.1 Stipulation re Exhibit, ECF 

39, Exh. 1 (State Court’s “Order, Judgment, and Decree Granting Final Approval of Class Action 

Settlement” entered in the Ho Action). 

B. The Policy

This action concerns Employment Practices Insurance policy No. ABD9774242-00 issued 

by Greenwich to PHP and effective December 26, 2011 through December 26, 2012. J.A. Exh. A

(“Policy”).2 The Policy provides that Greenwich “will pay, on behalf of the Insureds, Loss in 

excess of the applicable Retention arising from any Employment Claim first made against an 

Insured during the Policy Period (or Extended Reporting Period, if applicable) for a Wrongful

Employment Act.” Id. at 1. An employment claim under the policy refers to “any written demand 

or notice received by an Insured alleging that an Insured has committed a Wrongful Employment 

Act.” Id. at 2-3. 

The Policy lists thirteen actual or alleged actions that constitute covered “Wrongful 

Employment Acts.” Such covered acts include Discrimination, Harassment, and breaches of 

written or oral employment contracts or implied employment contracts. Id. at 4. Of particular 

relevance to the issues before the Court, the Policy defines “Discrimination” as:

1. the termination of an employment relationship;

2. a demotion or the failure to hire or promote any individual; or

3. the segregation, classification, or modification of any term or 

condition of employment of any Employee;

because of race, color, creed, religion, age, national origin [and other 

protected classes or characteristics].

Id. at 2. “Harassment” is defined in relevant part as “harassing conduct of a non-sexual nature 

 

1 At some point prior to settlement, the Ho plaintiffs dismissed PHP Group, Inc. from the 

underlying action. Compl. ¶ 16. Thus, the settlement in the Ho Action bound only plaintiffs PHP 

Insurance Service, Inc. and Trung Tran. Furthermore, the insurance policy at issue in this case 

appears to have been issued to PHP Insurance Service, Inc., extending coverage to that company 

as well as its members, directors, and employees. It is unclear from the record before the Court 

whether PHP Group, Inc. is an insured under the policy and the parties have not addressed this 

issue in their briefing. 

2 Citations to the “Policy” refer to the document beginning at page 13 of 104 at ECF 25-1.

Case 5:15-cv-00435-BLF Document 41 Filed 08/12/15 Page 3 of 17
4

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

which creates a work environment with the Company that interferes with an Employee’s job 

performance, or creates an intimidating, hostile or offensive working environment.” Id. at 3.

Furthermore, certain types of claims are excluded from coverage under the Policy. 

Specifically, Section IV of the Policy states:

The Insurer shall not be liable to make any payment for Loss in 

connection with any Claim based upon, arising out of, directly or 

indirectly resulting from, in consequence of, or in any way 

involving: 

. . . 

H. any actual or alleged violation of the Employee Retirement 

Income Security Act of 1974 (“ERISA”), any state workers’

compensation or disability benefits law, the Fair Labor Standards 

Act (except the Equal Pay Act), the National Labor Relations Act, 

the Worker Adjustment and Retraining Notification Act, the 

Consolidated Omnibus Budget Reconciliation Act of 1985, the 

Occupational Safety and Health Act, or any rules or regulations 

promulgated thereunder, or similar provisions of any federal, state or 

local statutory law or common law; provided that this exclusion 

shall not apply to the part of any Employment Claim alleging 

Retaliation with respect to an Employee’s exercise or attempted 

exercise of his or her rights under any of the foregoing acts or laws.

Id. at 5. 

C. Allegations in this Action

As alleged in the Complaint and demonstrated through the documents submitted with the 

parties’ motions for summary judgment, PHP were defendants in the Ho Action, which was filed 

within the coverage period of the Policy. Compl. ¶ 15; J.A. Exh. B. 

PHP tendered notice of the Ho Action to Greenwich on November 27, 2012. Greenwich 

denied coverage through ABA Insurance Services Inc. (“ABA”) on December 6, 2012. J.A. Exh. 

F. In response, PHP sent a rebuttal letter on March 8, 2013 enclosing additional information about 

the underlying action, including a the record of an interview with a former PHP employee made 

by the Employment Development Department (“EDD Statement”) and a “Joint Initial Status 

Conference Class Action Response Statement” (“Joint CMS”) from the Ho Action. Id. Exh. G. 

Greenwich again denied coverage on April 30, 2013, this time through counsel. Id. Exh. H. PHP 

sought reconsideration and indemnification on June 19, 2013, which was again rebuffed by 

Greenwich’s counsel on July 17, 2013. Id. Exhs. I, J. In a final bid for indemnification, PHP 

emailed Greenwich on July 25, 2013 and Greenwich issued a formal response (another denial) on 

Case 5:15-cv-00435-BLF Document 41 Filed 08/12/15 Page 4 of 17
5

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

September 8, 2014. Id. Exhs. K, L.

Following this refusal, PHP filed the complaint in this action on January 30, 2015 seeking 

a declaration that Greenwich had a duty to defend (First Claim) and a duty to indemnify (Second 

Claim) PHP against the Ho Action and furthermore asserting claims for breach of contract (Third 

Claim), breach of the implied covenant of good faith and fair dealing (Fourth Claim), and 

violation of California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200, et 

seq. (Fifth Claim). The parties then filed the instant motions for summary judgment on a 

stipulated evidentiary record. 

II. LEGAL STANDARD

Federal Rule of Civil Procedure 56 governs motions for summary judgment. Summary 

judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions 

on file, together with the affidavits, if any, show that there is no genuine issue as to any material 

fact and that the moving party is entitled to a judgment as a matter of law.” Celotex Corp. v. 

Catrett, 477 U.S. 317, 322 (1986) (citing Fed. R. Civ. P. 56(c)). 

The moving party seeking summary judgment bears the burden of showing there is no 

material factual dispute. Once the moving party has satisfied this initial burden, the non-moving 

party must then “identify with reasonable particularity the evidence that precludes summary 

judgment.” Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir. 1996); see also Schneider v. TRW, Inc., 

938 F.3d 986, 991 (9th Cir. 1990). It is not the duty of the district court to “to scour the record in 

search of a genuine issue of triable fact.” Keenan, 91 F.3d at 1279 (quoting Richards v. Combined 

Ins. Co., 55 F.3d 247, 251 (7th Cir. 1995)). Moreover, the court makes no credibility 

determinations and does not weigh the evidence. “The evidence of the non-movant is to be 

believed, and all justifiable inferences are to be drawn in his favor.” Anderson v. Liberty Lobby, 

Inc., 477 U.S. 242, 254 (1986); see also Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 

U.S. 574, 587 (1986). For a court to find that a genuine dispute of material fact exists, “there must 

be enough doubt for a reasonable trier of fact to find for the [non-moving party].” Corales v. 

Bennett, 567 F.3d 554, 562 (9th Cir. 2009). If the non-moving party fails to make this showing, 

the moving party is entitled to summary judgment. Celotex, 477 U.S. at 323.

Case 5:15-cv-00435-BLF Document 41 Filed 08/12/15 Page 5 of 17
6

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

The filing of cross-motions for summary judgment or partial summary judgment does not 

mean that the material facts are undisputed, and the denial of one motion does not necessarily 

require the granting of the other. See, e.g., Regents of Univ. of Calif. v. Micro Therapeutics, Inc., 

507 F. Supp. 2d 1074, 1077-78 (N.D. Cal. 2007) (citing Atl. Richfield Co. v. Farm Credit Bank of 

Wichita, 226 F.3d 1138, 1147 (10th Cir. 2000). The cross-motions are to be evaluated in 

accordance with the requisite burden of proof facing each party. Id. at 1078. 

III. DISCUSSION

PHP moves for partial summary judgment on the narrow question of Greenwich’s duty to 

defend the Ho Action. PHP Mot., ECF 27. Greenwich, in turn, moves for summary judgment in 

its favor on all of PHP’s claims on the ground that under the terms of the Policy, it owed neither a 

duty to defend PHP against the Ho Action nor a duty to indemnify PHP for the settlement of that 

action. Absent such duties, PHP cannot maintain its other claims for breach of contract, bad faith, 

and violation of the UCL. See generally Greenwich Mot., ECF 26. The Court turns first to the 

issue of Greenwich’s duty to defend.

A. Duty to Defend (First Claim)

“[T]he duty to defend in California is extensive.” Hudson Ins. Co. v. Colony Ins. Co., 624 

F.3d 1264, 1267 (9th Cir. 2010). An insurer’s duty to defend arises when a third party “potentially 

seeks damages within the coverage of the policy.” Gray v. Zurich Ins. Co., 65 Cal. 2d 263, 275 

(1966) (emphasis in original). “Implicit in this rule is the principle that the duty to defend is 

broader than the duty to indemnify; an insurer may owe a duty to defend its insured in an action in 

which no damages ultimately are awarded.” Horace Mann Ins. Co. v. Barbara B., 4 Cal. 4th 

1076, 1081 (1993). Given the breadth of the duty to defend, an insured in an action seeking 

declaratory relief concerning a duty to defend “need only show that the underlying claim may fall 

within policy coverage; the insurer must prove it cannot.” Montrose Chem. Corp. v. Superior 

Court, 6 Cal. 4th 287, 300 (1993) (emphasis in original); see Hartford Cas. Ins. Co. v. Swift 

Distribution, Inc., 59 Cal. 4th 277, 288 (2014). If a potential cause of action is shown for one 

covered claim, the insurer has a duty to defend all claims asserted against the insured, “regardless 

of whether the other claims were covered under the policy. Hudson Ins., 624 F.3d at 1267 (citing 

Case 5:15-cv-00435-BLF Document 41 Filed 08/12/15 Page 6 of 17
7

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

CNA Cas. of Cal. v. Seaboard Sur. Co., 176 Cal. App. 3d 598, 612 n.7 (1986)). 

To determine whether a duty to defend exists, courts compare the terms of the policy with 

the allegations in the third party complaint, along with any extrinsic facts known to the insurer at 

the time of tender, to see whether “the allegations on the face of the third party complaint, and . . . 

extrinsic information available to [the insurer] at the time” indicate a potential for coverage. 

Gunderson v. Fire Ins. Exchange, 37 Cal. App. 4th 1106, 1114 (1995). As articulated by the 

California Supreme Court, “[i]f any facts stated or fairly inferable in the complaint, or otherwise 

known or discovered by the insurer, suggest a claim potentially covered by the policy, the 

insurer’s duty to defend arises and is not extinguished until the insurer negates all facts suggesting 

potential coverage.” Scottsdale Ins. Co. v. MV Transp., 36 Cal. 4th 643, 655 (2005). “Any 

ambiguity in the insurance policy, including in the exclusions, must be resolved in favor of finding 

coverage.” Hudson Ins., 624 F.3d at 1267; see also Montrose, 6 Cal. 4th at 299-300. On the other 

hand, the duty to defend, though broad, cannot be founded in “speculat[ion] about extraneous 

‘facts’ regarding potential liability or ways in which the third party claimant might amend its 

complaint at some future date.” Gunderson, 37 Cal. App. 4th 1114. Rather, a court’s 

determination of a duty to defend is guided by established principles of contract interpretation and 

the “nature and kinds of risks covered by the policy.” Hartford Cas. Ins., 59 Cal. 4th at 288 

(quoting Waller v. Truck Ins. Exchange, Inc., 11 Cal. 4th 1, 19 (1995)). 

i. The Ho Complaint Alleged a Potential for Coverage

Here, there can be no dispute that the Policy expressly excludes coverage for federal and 

state overtime law violations. See Policy at 5. PHP contends, however, that the Ho Action 

triggered Greenwich’s duty to defend because the facts alleged in the underlying complaint 

reflected potentially covered “Wrongful Employment Acts” under the Policy. Specifically, PHP 

identifies three “Wrongful Employment Acts” that pertain to the underlying allegations: (1) breach 

of an employment contract; (2) harassment; and (3) discrimination. PHP Mot. 4-9; Policy at 4. 

The first of these theories of coverage rests on the premise that every violation of the CLC 

is a breach of contract because every employment contract has as an implied obligation an 

Case 5:15-cv-00435-BLF Document 41 Filed 08/12/15 Page 7 of 17
8

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

employer’s compliance with the CLC.

3

 Id. at 5 (quoting Harris v. Atl. Richfield Co., 14 Cal. App. 

4th 70, 81 (1993) for proposition that “compliance with statutorily imposed duties is implied in 

law in every contract”). The theory is unavailing for several reasons, not least of which is PHP’s 

inability to identify binding or even persuasive case authority holding that every oral employment 

contract in California carries with it the implied contractual obligation to comply with the CLC. 

See Ho Compl. ¶ 14 (alleging that PHP entered into “oral employment contracts” with 

employees). More fundamentally, accepting PHP’s argument would eviscerate the Policy’s 

express exclusions and create a tempting moral hazard. As explained by the Seventh Circuit in 

considering a similar policy that excluded coverage for overtime law violations: 

Insurance against a violation of an overtime law, whether federal or 

state, would enable the employer to refuse to pay overtime and then 

invoke coverage so that the cost of the overtime would come to rest 

on to the insurance company. The employer would have violated 

the overtime law with impunity, unjustly enriching itself by the 

difference between the overtime wage for the hours in question and 

the straight wage. No insurance company would knowingly write a 

policy that would enable the insured to trigger coverage any time it 

wanted a windfall.

Farmers Auto. Ins. Ass’n v. St. Paul Mercury Ins. Co., 482 F.3d 976, 978-79 (7th Cir. 2007). For 

those same reasons, no insurance company would knowingly write a policy that expressly 

excluded coverage for federal and state overtime law violations while at the same time extending 

coverage to breaches of implied employment contract terms in the manner that PHP suggests, 

allowing the insured to obtain coverage over that which was expressly excluded. 

PHP’s assertion that the complaint in the Ho Action suggested potential coverage for 

“harassment” and/or “discrimination” is more credible. PHP argues that the allegations in the 

underlying complaint that “some of the employees are recent immigrants from Vietnam or are new 

graduates who are unsophisticated in employment and labor rights” and that PHP “purposefully 

[hired] recent immigrant workers to improperly take advantage of their lack of knowledge 

 

3

PHP did not allege breach of employment contract as a basis for Greenwich’s duty to defend in 

its Complaint in this action. Furthermore, the record reveals that PHP did not argue that 

discrimination was a basis for the duty in its correspondence with Greenwich. As the parties have 

not brought to the Court’s attention any case law indicating that an insured can waive grounds for 

coverage not previously identified, the Court proceeds to consider all of PHP’s arguments on the 

merits.

Case 5:15-cv-00435-BLF Document 41 Filed 08/12/15 Page 8 of 17
9

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

regarding labor and employment rights” and “required that some employees change their 

Vietnamese names to American names” reflect potential claims of discrimination. PHP Mot. 8-9; 

PHP Opp. 4, ECF 29; Ho Compl. ¶¶ 14, 25. PHP also argues that the Ho complaint alleged facts 

which could potentially give rise to a claim for “harassment,” as that term is broadly defined in the 

Policy, highlighting the allegations that PHP ran its business “as a taskmaster,” that it “did not 

provide a policy to relieve employees from their duties during their meal breaks” and that 

“Employees who were not available to assist customers were later berated by management for 

neglecting their duties.” PHP Mot. 9; PHP Opp. 5; Ho Compl. at 1 and ¶ 19. 

Greenwich responds that these allegations in the underlying complaint are insufficient to 

suggest potential coverage for harassment and discrimination and that PHP instead improperly 

relies upon facts in two pieces of extrinsic evidence—the EDD statement and the Joint CMS—to 

support its claim for coverage. Greenwich Mot. 13; Greenwich Opp. 2-7, ECF 28. Greenwich’s 

argument largely focuses on the fact that the allegations identified by PHP are few and 

introductory and that the words “harassment” and “discrimination” were never used in either the 

Ho complaint or the Joint CMS. As PHP appropriately observes, these arguments are directed 

more to the merits of any potential harassment or discrimination claim than to whether the facts 

were sufficiently present to indicate a potential for coverage. PHP Mot. 9. Greenwich pledged to 

defend PHP against “any covered Claim, even if the allegations in such Claim are groundless, 

false or fraudulent.” Policy at 6 (emphasis added). The Court is therefore not concerned with the 

merits of any claim based on the allegations identified by PHP but only with whether PHP has 

discharged its burden as the insured to show a potential for coverage under the Policy. 

Gunderson, 37 Cal. App. 4th 1114. PHP has done so here.

As described above, the Policy defines “discrimination” to include “classification” on the 

basis of race or national origin. Policy at 2. As the Ho plaintiffs made clear, their claims were 

premised upon the misclassification of PHP employees to avoid paying them overtime. Ho

Compl. at 1 and ¶ 23. Moreover, PHP carried out such misclassification by purposefully hiring 

“recent immigrant workers to improperly take advantage of their lack of knowledge regarding 

labor and employment rights.” Id. ¶ 14. At a minimum, these allegations suggest a potential 

Case 5:15-cv-00435-BLF Document 41 Filed 08/12/15 Page 9 of 17
10

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

claim for discriminatory classification on the basis of national origin.4 Coupled with the further 

allegations that Vietnamese employees were required to change their names to American ones 

selected by Tran, the facts alleged also suggest discrimination on the basis of race. Similarly, the 

Policy defines “harassment” expansively to include “harassing conduct of a non-sexual nature 

which creates a work environment . . . that interferes with an Employee’s job performance, or

creates an intimidating, hostile or offensive working environment.” Policy at 3 (emphasis added). 

The allegations that Tran required certain Vietnamese employees to change their names to ones he 

selected and that employees were berated by management for failing to always be available to 

assist customers at the very least potentially qualify as “harassment” under this definition. Ho

Compl. ¶¶ 19, 25. Thus, this is not a situation, as Greenwich suggests, in which the insured is 

attempting to obtain coverage based upon extrinsic facts relating to unpleaded claims. See 

Greenwich Mot. 9-10. To the contrary, the factual allegations in the Ho complaint are alone

sufficient to demonstrate the possibility of coverage under the Policy. 

Greenwich stresses in its papers that in deciding whether it had a duty to defend PHP, the 

Court should take into account the fact that the Ho plaintiffs did not actually assert a cause of 

action for discrimination or harassment either in their original or amended complaint. Greenwich 

Reply 6, ECF 31. Greenwich argues that this was likely a strategic decision by the underlying 

plaintiffs, since a claim for discrimination or harassment would have threatened their ability to 

obtain class certification. Id. “There is no merit for this ‘election’ or ‘conscious avoidance’

theory in the case law.” Hudson Ins., 624 F.3d at 1269. Where there are facts alleged in the third 

 

4 Greenwich suggested at oral argument that discriminatory classification is no more than a claim 

for failure to pay overtime, the latter of which is expressly excluded under the Policy. While the 

argument has some facial appeal, the Court agrees with the court in Admiral Insurance Co. v. Kay 

Automotive Distributors, Inc. in finding that “a wage and hour law exclusion of the kind at hand 

(absent very clear language to the contrary) serves only to exclude wrongdoing where the 

wrongful act has the effect of offloading labor costs to the insurer, and only to the degree that the 

claim rests on or involves violations of the wage and hour statutory scheme.” ---F.3d---, No. CV 

13-05100 DDP SSX, 2015 WL 400634, at *4 (C.D. Cal. Jan. 29, 2015). A claim that an employer 

purposefully exploited employees of a certain race or national origin in order to avoid paying them 

overtime goes beyond a mere offloading of labor costs. Furthermore, the Policy expressly 

provides coverage for discriminatory “classification” and accepting Greenwich’s argument would 

render that coverage illusory. The Court can only enforce an insurance policy according to its 

terms. 

Case 5:15-cv-00435-BLF Document 41 Filed 08/12/15 Page 10 of 17
11

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

party complaint that give rise to potential coverage, it does not matter “whether the claimed cause 

of action was omitted out of negligence or ‘for strategic adversarial reasons.’” Id. at 1269 

(quoting CNA Cas., 176 Cal. App. 3d at 609. Instead, “it only matters whether the facts alleged or 

otherwise known by the insurer suggest potential liability or whether they do not.” Id. 

To be sure, the claims actually asserted in the underlying action involved violations of 

California labor law. However, Greenwich would have the Court construct a silo around those 

claims and conclude that no duty to defend could ever be triggered in such an action, regardless of 

the facts alleged in the complaint or the language of the Policy. Such a rigid application of the 

duty to defend is ultimately not persuasive and not mandated by the case law. See Admiral Ins. 

Co. v. Kay Automotive Distributors, Inc., ---F.3d---, No. CV 13-05100 DDP SSX, 2015 WL 

400634, at *3-4 (C.D. Cal. Jan. 29, 2015). The breadth of the duty to defend is such that the 

possibility the Ho plaintiffs could assert claims arising out of their factual allegations concerning 

PHP’s discrimination against and harassment of its employees triggered Greenwich’s duty to 

defend under the Policy until such time as it could be shown that there was no longer any potential 

for coverage. Scottsdale Ins., 36 Cal. 4th at 655. 

ii. The Claims in the Ho Action Were Not All Expressly Excluded

Although the Court has found a duty to defend based upon potentially covered claims 

alleged in the Ho complaint, Greenwich may nevertheless relieve itself of the duty by providing 

“conclusive evidence demonstrating that [a policy] exclusion applies.” Atl. Mut. Ins. Co. v. J. 

Lamb, Inc., 100 Cal. App. 4th 1017, 1038-39 (2002). Here, Greenwich points to Section IV of the 

Policy, which excludes “Loss in connection with any Claim based upon, arising out of, directly or 

indirectly resulting from, in consequence of, or in any way involving . . . any actual or alleged 

violation of . . . the Fair Labor Standards Act [“FLSA”]. . . or similar provisions of any federal, 

state or local statutory law or common law.” Policy at 5 (hereinafter “4(H) Exclusion”). Because 

it is undisputed that all of the Ho claims were based upon violations of the CLC, Greenwich 

asserts all of those claims are “similar” to the FLSA and therefore excluded from coverage under 

the Policy. Greenwich Mot. 4-5; Greenwich Opp. 10-14. As PHP points out, however, the Ho

Case 5:15-cv-00435-BLF Document 41 Filed 08/12/15 Page 11 of 17
12

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

plaintiffs also asserted a claim for violation of CLC § 2265and that at least one court has 

determined that there is no analogous or “similar” provision in the FLSA. PHP Mot. 13-14. As 

such, Greenwich cannot sustain its burden to show no possibility of coverage under the Policy. 

The Court agrees with PHP.

In California, “insurance coverage is ‘interpreted broadly so as to afford the greatest 

possible protection to the insured, [whereas] . . . exclusionary clauses are interpreted narrowly 

against the insurer.’” MacKinnon v. Truck Ins. Exch., 31 Cal. 4th 635, 648 (2003) (alteration in 

original) (quoting White v. Western Title Ins. Co., 40 Cal. 3d 870, 881 (1985)) (internal quotation 

marks omitted). Applying these principles and relying on California Dairies, Inc. v. RSUI Indem. 

Co., 617 F. Supp. 2d 1023 (E.D. Cal. 2009), PHP argues that the 4(H) Exclusion does not apply to 

the Ho plaintiffs’ CLC § 226 claim. In California Dairies, the court considered a very similar 

exclusionary clause stating that the insurer would not be liable for any payment for the insured’s 

“violation of any of the responsibilities, obligations or duties imposed by the . . . Fair Labor 

Standards Act . . . or any similar provision of federal state or local statutory law or common law . . 

. .” Cal. Dairies, 617 F. Supp. 2d at 1029 (emphasis added). There, the court conducted an 

exhaustive comparison of each CLC provision identified in the underlying third party complaint to 

provisions of the FLSA to arrive at the conclusion that § 226 claims were not barred by the 

exclusionary clause because “[n]either the FLSA nor its implementing regulations require such 

wage statements.” Id. at 1046.

Greenwich (respectfully disagreeing with the California Dairies court) argues that § 226 

claims are expressly excluded by the 4(H) Exclusion, asserting that the policy language bears 

more likeness to that at issue in Payless Shoesource, Inc. v. Travelers Companies, Inc., 585 F.3d 

1366 (10th Cir. 2009), Admiral Insurance Co. v. Kay Automotive Distributors, Inc., and New 

Hampshire Ball Bearings, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., No. CV 13-06114 

DDP AGRX, 2014 WL 935120 (C.D. Cal. Mar. 10, 2014). See Greenwich Mot. 10-14; 

 

5 CLC § 226 requires that an employer furnish to employees, on a semimonthly basis, itemized 

wage statements setting forth nine categories of required information. CLC § 226(a). An 

employee injured by an employer’s failure to comply with this provision is entitled to receive 

statutory penalties. Id. § 226(e).

Case 5:15-cv-00435-BLF Document 41 Filed 08/12/15 Page 12 of 17
13

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

Greenwich Opp. 10-14. All of these cases are distinguishable. First, the Admiral Insurance court 

expressly distinguished California Dairies on the ground that the policy before it excluded 

coverage over “any federal, state, local or foreign wage and hour laws, including, without 

limitation, the Fair Labor Standards Act,” and not “similar provisions” of those laws, as was the 

case in California Dairies. See Admiral Ins., 2015 WL 400634, at *2-3. Indeed, the Admiral

Insurance court observed that “California Dairies shows, then, that when parties want to limit the 

exclusion to provisions of state law similar to FLSA, they can do so in plain language.” Id. at *3 

(emphasis added). PHP and Greenwich did so here. See Policy at 5. Second, the New Hampshire 

Ball Bearings court, by contrast, considered an exclusionary provision enumerating specific 

misconduct (and causes of action relating to that misconduct) that would be excluded from 

coverage, thereby rendering the reasoning in that case inapposite to the issue at hand. See 2014 

WL 935120, at *5 and n.1. Finally, while the Payless Court confronted an exclusion with the 

“similar provisions” language, it considered only whether the wage and hour violations alleged 

under California law were “similar” to the FLSA and had no occasion to determine whether CLC 

§ 226 could be considered a “similar provision” to anything in the FLSA. See Payless, 585 F.3d at 

1373-74. The California Dairies court did have occasion to consider that precise question and this 

Court finds its conclusion persuasive. See Cal. Dairies, 617 F. Supp. 2d at 1046.

Because there was a potential for coverage alleged in the complaint and because not all of 

the claims asserted in the underlying Ho Action were expressly excluded, Greenwich had a duty to 

defend PHP in that action. The Court accordingly GRANTS PHP’s motion for partial summary 

judgment on the duty to defend and DENIES Greenwich’s motion on the same issue.

B. Duty to Indemnify (Second Claim)

Just because Greenwich had a duty to defend PHP, however, does not mean that it also has 

a duty to indemnify PHP against the damages incurred in the Ho Action. Greenwich here moves 

for summary judgment that it does not have a duty to indemnify.6 Greenwich Mot. 5-10. PHP, in 

 

6 Greenwich’s motion technically argues that it has neither a duty to defend nor a duty to 

indemnify. The same coverage arguments pertain to both duties though, as discussed above, 

Greenwich does not acknowledge that the two duties have decidedly different scopes.

Case 5:15-cv-00435-BLF Document 41 Filed 08/12/15 Page 13 of 17
14

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

opposition, largely addresses the issue of Greenwich’s duty to defend and not its duty to 

indemnify. See PHP Opp. 4-9.

The duty to indemnify is narrower than the duty to defend and only “runs to claims that are 

actually covered, in light of the facts proved.” Buss v. Superior Court, 16 Cal. 4th 35, 45 (1997); 

Gunderson, 37 Cal. App. 4th at 1113. In light of the fact that the Ho Action settled, PHP must 

thus prove that the settled claims were covered “Wrongful Employment Acts” within the 

definition of the Policy. This it cannot do because, as has already been discussed, the actual 

claims asserted and resolved in the Ho Action were limited to violations of the CLC. Per the state 

court’s order entering final approval for class settlement in the Ho Action, the settlement and final 

judgment discharged PHP from the following claims by the named plaintiffs and class members:

[A]ny and all claims, debts, liabilities, demands, obligations, 

guarantees, costs, expenses, attorneys’ fees, penalties, damages, 

restitution, injunctive relief, or a remedy of any other type that is 

based on or arises out of the allegations the Lawsuit, including but 

not limited to such claims for (i) the alleged non-payment of 

overtime under the California Labor Code; (ii) the alleged nonpayment of rest-period premiums under the California Labor Code, 

as well as the applicable Industrial Welfare Commission Wage 

Order; (iii) the alleged non-payment of meal-period premiums under 

the California Labor Code, as well as the applicable Industrial 

Welfare Commission Wage Order; (iv) the alleged failure to provide 

accurate information on pay stubs in violation of California Labor 

Code section 226; (v) the alleged failure to maintain payroll records 

in violation of California Labor Code section 1174; (vi) the alleged 

failure to pay vested vacation upon termination or quitting in 

violation of California Labor Code section 227.3; (vii) the alleged 

failure to timely pay wages in violation of California Labor Code 

sections 201, 202, and 203 (viii) the alleged unfair business 

practices under California Business and Professions Code section 

17200 et seq. stemming from Defendant’s alleged failure to pay 

meal-period premiums and alleged failure to reimburse for uniformmaintenance expenses; and (ix) the alleged civil-penalty liability 

under the California Labor Code section 2698 et seq. and the 

applicable Industrial Welfare Commission Wage Order.

Stipulation re Exhibit, Exh. 1 (State Court’s “Order, Judgment, and Decree Granting Final 

Approval of Class Action Settlement” entered in the Ho Action) ¶ 3; see also J.A. Exh. D 

(Settlement Agreement and General Release) at 1.7 By the terms of the Policy, Greenwich is 

 

7

The Settlement Agreement also states that PHP denies liability on the asserted claims. J.A. Exh. 

D at 2. 

Case 5:15-cv-00435-BLF Document 41 Filed 08/12/15 Page 14 of 17
15

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

liable only for “Loss . . . arising from any Employment Claim . . . for a Wrongful Employment 

Act,” and has no duty to indemnify PHP on claims that do not constitute “Wrongful Employment 

Acts.” Policy at 1 (emphasis added). None of the claims identified in the state court’s final order 

and the settlement agreement fall within any of the thirteen types of misconduct constituting 

“Wrongful Employment Acts” under the Policy.8 See id. at 4. Thus, while the Court credits 

PHP’s argument that claims brought under CLC § 226 are not excluded from coverage under the 

Policy’s 4(H) Exclusion, the fact that the § 226 claim is not excluded does not necessarily mean 

that it is a covered “Wrongful Employment Act.” Unless PHP can demonstrate that the settled 

claims were covered by the Policy, Greenwich is not contractually required to indemnify PHP for 

the amount of the settlement.

It is clear that the issues of harassment and discrimination against PHP employees—

misconduct that would trigger coverage—were not raised in the Ho Action and that the ultimate 

settlement does not resolve any factual disputes concerning those charges. As such, Greenwich is 

not precluded from asserting that the claims ultimately resolved are not covered by the Policy. 

Moreover, as the Court has already determined, the only claim actually asserted in the Ho Action 

(as opposed to potentially asserted) that was not expressly excluded from coverage under the 

Policy was the claim under CLC § 226. Absent any evidence to suggest that the § 226 claim 

resolved as part of the underlying settlement was a covered “Wrongful Employment Act” within 

the definition of the Policy, however, Greenwich is entitled to judgment as a matter of law that it 

has no duty to indemnify PHP against the amount of the settlement in the Ho Action. PHP has put 

forth no such evidence and therefore fails to meet its non-moving burden to demonstrate a genuine 

dispute of material fact. Based on the stipulated record before the Court, there is thus no dispute 

that the settlement in the Ho Action does not give rise to a duty to indemnify under the Policy. 

PHP in its own moving papers attempts to suggest that the Court should find that 

Greenwich is liable for defense and indemnity under the well-settled principle in California law 

 

8 As discussed above, the Court rejects PHP’s assertion that the CLC claims are covered as 

“breach[es] of written or oral employment contract or implied employment contract.” PHP Reply 

6, ECF 32.

Case 5:15-cv-00435-BLF Document 41 Filed 08/12/15 Page 15 of 17
16

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

that “an insurer that wrongfully refuses to defend is liable on the judgment against the insured.” 

Gray, 65 Cal. 2d at 279; see PHP Mot. 15 (citing Amato v. Mercury Cas. Co., 53 Cal. App. 4th 

825, 837-38 (1997) and Pershing Park Villas Homeowners Ass’n v. United Pac. Ins. Co., 219 F.3d 

895, 902 (9th Cir. 2000)). This argument is inapposite because it pertains more to the 

consequences of Greenwich’s breach of the duty to defend than to the contractual matter of 

Greenwich’s duty to indemnify. 

Where the issue upon which insurance coverage turns is not raised in the underlying 

action, the insurer may assert non-coverage as a defense in the subsequent insurance dispute, as 

Greenwich did here. Hogan v. Midland Nat’l Ins. Co., 3 Cal. 3d 553, 566 (1970). As a matter of 

contract interpretation, the Court agrees with Greenwich that it owes no duty to indemnify. 

Absent a duty to indemnify and bad faith, “[t]he general measure of damages for a breach of the 

duty to defend an insured, even if it is ultimately determined there is no coverage under the policy, 

are the costs and attorney fees expended by the insured defending the underlying action.” 

Emerald Bay Cmty. Ass’n v. Golden Eagle Ins. Corp., 130 Cal. App. 4th 1078, 1088-89 (2005); 

see also Marie Y. v. Gen. Star Indem. Co., 110 Cal. App. 4th 928, 960-61 (2003) (“Where an 

insurer is liable for breach of contract to defend (but not indemnify) an insured, and where the 

insurer is not guilty of tortious bad faith, and where the insured in fact retains counsel to defend 

the claim, the proper measure of damages is the reasonable attorneys’ fees and costs incurred by 

the insured in defense of the claim.”). Of course, bad faith breach of a duty to defend may give 

rise to consequential damages that may include the amount of a judgment against the wrongfully 

abandoned insured. See Amato, 53 Cal. App. 4th at 834 (finding it appropriate to hold insurer 

liable for default judgment against insured as consequential damages for tortious breach of the 

duty to defend). As such, although PHP cannot prevail on its Second Claim for a determination 

that the Policy mandates a duty to indemnify in connection with the settlement in the Ho Action, 

PHP is not foreclosed from seeking the amount of the settlement as consequential damages in the 

event Greenwich is determined to have denied coverage in bad faith. 

Greenwich’s motion for summary judgment is accordingly GRANTED with respect to its 

duty to indemnify PHP against the amount of the settlement in the Ho Action. 

Case 5:15-cv-00435-BLF Document 41 Filed 08/12/15 Page 16 of 17
17

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

C. Breach of Contract (Third Claim), Breach of the Implied Covenant of Good 

Faith and Fair Dealing (Fourth Claim), and UCL (Fifth Claim)

Greenwich seeks summary judgment in its favor on PHP’s claims for breach of contract, 

bad faith, and violation of the UCL on the sole ground that it had no duty to defend or indemnify. 

See Greenwich Notice of Motion 1, ECF 26; Greenwich Mot. 15. Because the Court has 

determined that Greenwich did have a duty to defend PHP, Greenwich’s motion for summary 

judgment is DENIED with respect to those claims. Because the issue of bad faith has not been

resolved at summary judgment, the Court expresses no opinion regarding whether, even in the 

absence of a duty to indemnify, PHP can recover the amount of the Ho Action settlement as 

consequential damages.

IV. ORDER

For the foregoing reasons, IT IS HEREBY ORDERED that:

1. PHP’s Motion for Partial Summary Judgment on its First Claim for a declaration 

that Greenwich had a duty to defend PHP against the Ho Action is GRANTED. Greenwich’s 

cross-motion on the same claim is DENIED.

2. Greenwich’s Motion for Summary Judgment is GRANTED on PHP’s Second 

Claim for a declaration that Greenwich has a duty to indemnify PHP in connection with the 

settlement in the Ho Action.

3. Greenwich’s Motion for Summary Judgment is DENIED on PHP’s Third Claim for 

breach of contract, Fourth Claim for breach of the implied covenant of good faith and fair dealing, 

and Fifth Claim for violation of the UCL.

IT IS SO ORDERED.

Dated: August 12, 2015

______________________________________

BETH LABSON FREEMAN

United States District Judge

Case 5:15-cv-00435-BLF Document 41 Filed 08/12/15 Page 17 of 17