Court Opinion

ID: 9368310
Source: CourtListenerOpinion
Date Created: 2023-02-03 18:00:45.347337+00
Date Added: 2024-06-11T17:16:06.989730
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                        FEB 3 2023
                                                                     MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

FCE BENEFIT ADMINISTRATORS, INC., No.                 22-15484

                Plaintiff-Appellant,            D.C. No. 3:21-cv-00186-CRB

 v.
                                                MEMORANDUM*
INDIAN HARBOR INSURANCE
COMPANY,

                Defendant-Appellee.

                   Appeal from the United States District Court
                     for the Northern District of California
                   Charles R. Breyer, District Judge, Presiding

                     Argued and Submitted January 26, 2023
                           San Francisco, California

Before: GOULD, RAWLINSON, and BRESS, Circuit Judges.
      This is an insurance dispute between an insured, Appellant FCE Benefit

Administrators, Inc. (“FCE”), and insurer, Appellee Indian Harbor Insurance

Company (“Indian Harbor”), over the coverage afforded under an errors and

omissions policy. FCE sued Indian Harbor, claiming that Indian Harbor breached

this policy by refusing to reimburse FCE beyond a $3 million per-claim limit on

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
defense costs and damages arising out of a $5.7 million arbitration award entered

against FCE. Indian Harbor counterclaimed for restitution, claiming that FCE owed

it several hundred thousand dollars that Indian Harbor had paid beyond this $3

million limit. The district court granted summary judgment in favor of Indian

Harbor on both issues, and FCE appealed. We have jurisdiction under 28 U.S.C. §

1291. We “review the district court’s grant of summary judgment de novo,” Bliss

Sequoia Ins. & Risk Advisors, Inc. v. Allied Prop. & Cas. Ins. Co., 52 F.4th 417, 419

(9th Cir. 2022), and we affirm.

      1. The district court correctly held that the policy’s $3 million per-claim limit

applies to the defense expenses and damages arising from the underlying arbitration

proceeding against FCE. The policy has two per-claim limits on liability: (1) a $3

million limit for “any claim by reason of an actual or alleged act or omission . . .

committed prior to June 6, 2017”; and (2) a $5 million limit for “any claim based

exclusively on acts or omissions . . . committed on or after June 6, 2017.” And,

relevant to this dispute, the policy “consider[s as] a single claim” “[t]wo or more

claims arising out of the same or related facts, circumstances, situations, transactions

or events, or arising out of the same or related acts or omissions[.]”

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         Here, the claims1 asserted in the underlying arbitration are related under this

policy. The underlying arbitration was a single proceeding brought by two related

insurance companies for whom FCE managed group health plans. The claimants

sought to recover for damages they had incurred as a result of FCE’s alleged errors

and omissions in managing such plans dating back to, at least, 2014. Under the

policy’s related claims provision, the claims asserted in arbitration arose from

“related facts, circumstances, situations, transactions or events” and constituted a

“single claim.” And because this claim arose (at least in part) from errors and

omissions committed by FCE before June 6, 2017, the $3 million per-claim limit

applied.

         FCE offers several counterarguments, none of which is persuasive. FCE

argues that the underlying claims are too distinct to be related. However, given the

breadth of the related claims provision in the policy and the California Supreme

Court’s “broad” construction of such provisions, Bay Cities Paving & Grading, Inc.

v. Lawyers’ Mut. Ins. Co., 855 P.2d 1263, 1271 (Cal. 1993),2 we hold that the claims

are related. FCE also contends that the related claims provision does not pertain to

the issue of which coverage limit applies. That contention is without support in the

1
  Like the district court, we conclude that even if the policy consisted of multiple
claims, the policy considers them to be a single claim under the related claims
provision, and so the same result follows as if there were just one claim.
2
    California law applies to this action.

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policy or California law. See Homestead Ins. Co. v. Am. Empire Surplus Lines Ins.

Co., 52 Cal. Rptr. 2d 268, 273 (Cal. Ct. App. 1996) (recognizing that related claims

provisions “exist[] to clarify other policy provisions” including provisions related to

“limits of liability”). Next, FCE insists that the district court erroneously construed

the term “by reason of,” as it appeared in the $3 million per-claim limit, broadly.

However, the record shows that some of FCE’s errors and omissions took place

before June 6, 2017.3 By any reasonable construction, the $3 million claim limit

applies. Finally, FCE relies on the “potentiality of coverage” standard to argue

Indian Harbor had to pay up to the largest limit afforded under the policy because it

was (allegedly) unclear at the outset of the arbitration which limit applied. We reject

that argument. The standard cited by FCE applies to an insurer’s duty to defend.

Hartford Cas. Ins. Co. v. Swift Distrib., Inc., 326 P.3d 253, 258 (Cal. 2014). There

is no question that Indian Harbor defended FCE in the underlying arbitration. The

duty to defend is not at issue.

      2. We also agree with the district court that Indian Harbor is entitled to

summary judgment on its counterclaim for restitution. The California Supreme

Court has recognized that an insurer’s payment of defense costs and damages beyond

3
  FCE insists that the district court erroneously relied on the Seventh Circuit’s
opinion confirming the arbitration award against FCE in reaching this conclusion.
This contention is without merit for (at least) the simple reason that the record
outside of that decision unquestionably supports the district court’s conclusion.

                                          4
what is required by an insurance policy may entitle the insurer to restitution on that

excess amount. See Buss v. Superior Ct., 939 P.2d 766, 777 (Cal. 1997). Here,

Indian Harbor paid several hundred thousand dollars in excess of the $3 million per-

claim limit. The district court did not err in awarding Indian Harbor restitution of

that excess amount. FCE counters that restitution is improper here because it alleges

that it relied on this excess amount in reaching a settlement. However, we agree

with the district court that FCE did not offer evidence from which a reasonable finder

of fact could conclude that FCE relied on this relatively small amount in settling a

nearly $6 million award.

      AFFIRMED

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