NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

MASSACHUSETTS BAY INSURANCE 

COMPANY, 

Plaintiff-Appellant, 

 v. 

NEUROPATHY SOLUTIONS, INC., DBA 

Superior Health Centers, 

Defendant-Appellee, 

and 

RIGOBERTO BERNAL, an individual; et 

al., 

Defendants.

No. 22-55272 

D.C. No. 

8:21-cv-00607-DOC-JDE 

MEMORANDUM*

Appeal from the United States District Court

for the Central District of California

David O. Carter, District Judge, Presiding

Argued and Submitted March 17, 2023 

Pasadena, California

Before: LEE, BRESS, and MENDOZA, Circuit Judges.

In this diversity action under California law, Massachusetts Bay Insurance 

* This disposition is not appropriate for publication and is not precedent 

except as provided by Ninth Circuit Rule 36-3.

FILED

APR 3 2023

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS
2 

Company (MBIC) seeks reimbursement of $2 million that it paid under a reservation 

of rights to settle litigation brought against its insured, Neuropathy Solutions, Inc.

(Neuropathy). On cross-motions for judgment on the pleadings, the district court 

held that MBIC had a duty to defend and indemnify Neuropathy in the underlying 

case (the Bernal action), and that MBIC was thus not entitled to any reimbursement. 

We have jurisdiction under 28 U.S.C. § 1291. We review the district court’s ruling 

de novo. Webb v. Trader Joe’s Co., 999 F.3d 1196, 1201 (9th Cir. 2021). We

reverse.1

1. MBIC satisfied the prerequisites for seeking reimbursement of the amount 

it paid to settle the Bernal action on Neuropathy’s behalf. To seek reimbursement

under California law, an insurer must provide (1) a timely and express reservation 

of rights; (2) an express notification to the insured of the insurer’s intent to accept a 

proposed settlement offer; and (3) an express offer to the insured that it may assume 

its own defense in the event that the insured does not wish to accept the proposed 

settlement. Blue Ridge Ins. Co. v. Jacobsen, 22 P.3d 313, 320–21 (Cal. 2001). 

MBIC provided a timely and express reservation of rights in its letter of

February 25, 2021. In its letter of May 13, 2021, MBIC informed Neuropathy of its 

intention to settle the claims for the $2 million policy limit, subject to Neuropathy’s 

approval and MBIC’s reservation of rights. This letter also informed Neuropathy of 

1 MBIC appeals only the district court’s ruling on the duty to indemnify.
3 

its “right to assume the further handling of this matter going forward” if Neuropathy 

did not wish to settle the claims for $2 million. Neuropathy signed the settlement 

agreement on May 28, 2021. Contrary to Neuropathy’s argument, MBIC gave 

Neuropathy sufficient time to consider the proposed settlement. See id. at 315 

(indicating that insurer provided notice on June 4 and requested a response by June 

10, where the settlement offer was to expire on June 12).

2. Under California law, “[t]he insurer’s duty to indemnify runs to claims that 

are actually covered, in light of the facts proved.” Buss v. Superior Ct., 939 P.2d 

766, 773 (Cal. 1997). “By contrast, the insurer’s duty to defend runs to claims that 

are merely potentially covered, in light of facts alleged or otherwise disclosed.” Id. 

Thus, “the insurer’s duty to defend is broader than its duty to indemnify.” Id. The 

district court erred by invoking the broader duty-to-defend standard (potentiality of 

coverage) to require MBIC to cover not just the cost of defending the underlying 

Bernal suit but also the $2 million paid to settle it. We thus proceed to evaluate 

whether the Bernal action actually fell within the MBIC policy as written.

3. To the extent that the underlying Bernal action falls within the coverage 

provisions of the insurance policy (i.e., to the extent Neuropathy’s liability arose out 

of an accidental “occurrence”), coverage is excluded under the policy’s 

“Professional Services” exclusion. That provision excludes:

“Bodily injury”, “property damage”, [and] “personal and advertising 

injury” caused by the rendering of or failure to render any professional 
4 

service, advice or instruction:

(1) By [the insured]; or 

(2) On [the insured’s] behalf; or 

(3) From whom [the insured] assumed liability by reason of a contract 

or agreement, 

regardless of whether any such service, advice or instruction is ordinary 

to any insured’s profession. 

Additionally, the insurance policy provides that professional services include, 

among other things, “[l]egal, accounting or advertising services,” “[m]edical . . . or 

nursing services treatment, advice or instruction,” and “[a]ny health or therapeutic 

service treatment, advice or instruction.”

2

 

In addition, under California law governing commercial general liability 

policies, “[p]rofessional services are defined as those arising out of a vocation, 

calling, occupation, or employment involving specialized knowledge, labor, or skill, 

and the labor or skill involved is predominantly mental or intellectual, rather than 

physical or manual.” Tradewinds Escrow, Inc. v. Truck Ins. Exch., 118 Cal. Rptr. 

2d 561, 568 (Ct. App. 2002) (quotation omitted). This “is a broader definition than 

‘profession,’ and encompasses services performed for remuneration.” Id. (quotation 

2 The policy extended this exclusion to wrongdoing by agents:

This [professional services] exclusion applies even if a claim alleges 

negligence or other wrongdoing in the supervision, hiring, 

employment, training or monitoring of others by an insured, if the 

“occurrence” which caused the “bodily injury” or “property damage”, 

or the offense which caused the “personal and advertising injury”, 

involved the rendering of or failure to render any professional service. 
5 

omitted). The “unifying factor” is “whether the injury occurred during the 

performance of the professional services, not the instrumentality of injury.” Id.

Based on California case law, the insurance policy’s text, and the operative 

complaint in the Bernal action, Neuropathy’s liability in Bernal fell within the 

“Professional Services” exclusion. Starting from the very first sentence of the 

Bernal complaint, it is evident that Neuropathy incurred liability as a result of the 

professional services it provided: “This complaint arises from a series of falsely 

advertised, recklessly administered, non-FDA approved ‘stem cell’ injections Mr. 

Bernal received that nearly killed him and left him a permanent paraplegic from the 

waist down.” The entire gravamen of the Bernal complaint was that Neuropathy 

engaged in deceptive and illegal advertising and business practices in connection 

with the provision of medical services. Neuropathy was thus liable for providing

“advertising services,” “[m]edical . . . or nursing services treatment, advice or 

instruction,” or “[a]ny health or therapeutic service treatment, advice or instruction,”

all of which are excluded under the “Professional Services” exclusion.

It does not matter that Elite Medical Group (EMG), not Neuropathy, allegedly

employed the medical professionals who performed the injection, nor does it matter

that Neuropathy’s contract with EMG purported to assign to Neuropathy only 

administrative duties. As we noted, the “Professional Services” exclusion extends 

to wrongdoing in the supervision and monitoring of others in the provision of 
6 

professional services, and Neuropathy incurred liability because of its provision of 

professional advertising and medical services, not inadequate recordkeeping or poor 

customer service. Finally, the complaint’s allegation that Neuropathy engaged in 

discriminatory “marketing techniques and high-pressure sales tactics” falls within 

the “Professional Services” exclusion for advertising services and health advice or 

instruction.

Neuropathy’s liability in the Bernal action was thus excluded from coverage, 

and MBIC is entitled to reimbursement of the $2 million it paid to settle that lawsuit.

REVERSED.