N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C UIT
FOREST M EADOW S OW NER S ASSOC IATION, Plaintiff - Appe lla nt,
v. STATE FAR

M GENER

AL INSUR

ANC E C OM PANY, De fe nda

nt - Appe lle e . No. 12-16073 D.C . No. 1:11-c v-01642-AW ISKO
M EM O R ANDUM *

Appe a l from

the Unite d

Stat e s Distric t C ourt for the Ea ste rn Distric t of C a lifornia Anthony W . Ishii, Se nior Distric t

Judge , Pre siding Subm itte d April 11, 2014 ** San Fran c isc o , C a lifornia B e fore : SILVER

M AN, W . FLETC HER , a nd B YB EE, C irc uit Judge s. Appe lla nt Fore st M e a dows Owne rs Assoc i ation (“ FM O A ” ) a ppe a ls the distric t c o urt’ s gra

nt of Appe l le e State Farm Ge ne ra l Insura

nc e C om pa ny ’ s (“ State 

# FIL E D
APR 15 2014 M OLLY C. DW Y ER, CLERK U. S. CO URT O F APPEALS

* This disposition is not a ppropria te for public at ion a

nd is not pre c e de nt e xc e pt a s provide d

by 9th C ir. R . 36-3. ** The pa

ne l una nim ously c onc lude s this c a se is suita ble for de c ision without ora l a

rgum e nt. Se e Fe d. R . App. P. 34(a)(2).Farm ” ) m otion for sum m a ry judgm e nt, a

nd the c o urt’ s de nia l of FM O A’ s m otion for sum m ary judgm e nt, in FM OA’ s bre a c h of c ontra c t a nd bre a c h of the c ove na

nt of good fa ith a

nd fa ir de a ling a c tion a ga inst Sta te Farm . W e have jurisdic tion unde r 28 U.S.C . § 1291. W e re vie w a distric t c ourt’ s de c ision on c ross-m otions for
sum m ary judgm e nt denov o . Guatay C hristian Fe llow

ship v . C nty . of San Die

go , 670 F.3d 957, 970 (9th C ir. 2011). W e a ffirm
. In this insura

nc e a c t ion ba se d upon dive rsity jurisdic tion, “ C a lifornia

la w
c ontrols.” St. Paul Me rc ury Ins. C o. v . Rale e Eng’g C

o. , 804 F.2d 520, 522 (9th C ir. 1986). An “ insure r ha s a duty to de fe nd a

n insure d if it be c om e s a

ware of, or if the t hird pa rty la wsuit ple a ds, fa c ts giving rise to the pote ntia l for c ove ra g e unde r the i nsuring a gre e m e n t .” Aroa Mk tg., Inc . v . Hartford Ins. C o. of Midw e

st , 198 C a l. App. 4th 781, 786 (2011) (inte rna l c i tation a

nd quota tion m arks om itte d). The distric t c o urt did not err in c onc luding tha t Sta te Farm ’ s duty to de fe nd FM OA in the unde rly ing suit wa s ne ve r im plic ate d be c a

use the a lle ge d m isc onduc t— t he firing of a n e m ploy e e in viola

tion of C a lifornia M i lita

ry & Ve te ra ns C ode § 394
and the Uniform e d Se rvic e s Em ploy m e n t a nd R e e m ploy m e nt R ights Ac t, 38 U.S.C . § 4301, e t se q.
— did not fa ll within the sc ope of FM OA’ s Dire c tors a nd Offic e rs (“ DO” ) lia

bility polic y . The DO polic y

c ove re d “ those sum s tha

t the insure d be c om e s le ga lly

obliga t e d to pa y a s da m a ge s be c a

use of ‘ wrongful a c ts’ 2c om

m itte d by an insure d sole ly

in the c onduc t of the ir m a n a g e m e nt re sponsibilitie s for the C ondom inium

/Assoc iation.” The polic y de fine d “ w rongful a c ts” to m e an

“ any n e glige nt a c ts, e rrors, om issions or bre a c h of duty dire c tly re lat e d to the ope ra t ions of theC o ndom inium /Assoc iation.” Esta

blishe d C a lifornia

la w holds that this polic y

la ngua ge s re a c he s only

ne glige nt c onduc t— “ ne glige nt a c t [s] , ne glige nt e rror[s] , or ne glige nt om ission[s]
. ” Oak Park C alabasas C

ondo. Ass’n v

. State Farm Fire & C

as. C o. , 137 C a l. App. 4th 557, 564 (2006). Sinc e the firing of
an e m ploy e e is a

n inte ntiona l a c t, it c annot qua lify a s ne g lige nc e and doe s not fa ll within thepolic y . Se e C

o i t Drape ry

C le a ne rs, Inc . v . Se quoia Ins. C o. , 14 C a l. App. 4th 1595, 1603 (1993). Ac c ordingly , FM OA ha s not shown the re wa s a pote ntia l for c ove ra ge . FM OA’ s a lte rnative argum e nt tha t, e ve n if the firing we re inte ntiona l , the suppose d ly ultra v ire

s a c t of the boa

rd pre s ide nt in te rm inating thee m ploy e e
c annot be re l ie d upon to deny c ove ra ge to FM OA unde r the polic y ’ s “ se p ara tion of insure ds” c la

use is of no m om e nt. FM OA wa s the only e ntity sue d, a nd it wa s not
sue d on a the ory of vic arious lia

bility , but dire c tly , a s a

ny c o rporation c a

n be . C a l. C orp. C o de § 105; se e also He iman v
. W ork e rs’ C omp. Appe als Bd. , 149 C a l. App. 4th 724, 739 (2007).

3Fina lly , be c a u se State Farm ’ s duty

to de fe nd FM OA wa s ne ve r im plic ate d, Stat e Farm

wa s not c ontra c t

ua lly lia ble for re fusing to a c c e pt FM OA’ s te nde r of de fe nse . Sinc e it wa s not c ontra c tua lly lia ble for the te nde r, the re wa s no bre a c h of
c ontra c t. And be c a

use the re wa s no bre a c h of c o ntra c t, FM OA’ s c la i m for bre a c h of the im plie d c ove na

nt of good fa ith a

n d fa ir de a ling a lso fa ils. S e e W alle r v . Truc k Ins. Ex c h., Inc

. , 900 P.2d 619, 639 (C a l. 1995). Sinc e no duty

to de fe n d a

rose , we ne e d

not a ddre ss the a

pplic a bility of the
c ivil rights e x c lusion in the polic y . AFFIRM E D.

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