Court Opinion

ID: 3052326
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:41:31.680473+00
Date Added: 2024-06-11T11:49:27.656248
License: Public Domain

FOR PUBLICATION
 UNITED STATES COURT OF APPEALS
      FOR THE NINTH CIRCUIT

SONY COMPUTER ENTERTAINMENT           
AMERICA, INC.,
               Plaintiff-Appellant,
                                           No. 05-17425
               v.
AMERICAN HOME ASSURANCE                     D.C. No.
                                          CV-04-00492-PJH
COMPANY and AMERICAN
                                             OPINION
INTERNATIONAL SPECIALTY LINES
INSURANCE COMPANY,
            Defendants-Appellees.
                                      
       Appeal from the United States District Court
          for the Northern District of California
       Phyllis J. Hamilton, District Judge, Presiding

                 Argued and Submitted
       November 5, 2007—San Francisco, California

                    Filed July 15, 2008

  Before: Mary M. Schroeder, Cynthia Holcomb Hall and
              Jay S. Bybee, Circuit Judges.

                  Opinion by Judge Hall;
  Partial Concurrence and Partial Dissent by Judge Bybee

                           8749
             SONY v. AMERICAN HOME ASSURANCE            8753

                        COUNSEL

Martin H. Myers, Heller Ehrman, San Francisco, California,
for the plaintiff-appellant.

Thomas H. Sloan, Jr., Krieg, Keller, Sloan, Reilley & Roman,
San Francisco, California, for defendant-appellee American
International Specialty Lines Insurance Company.

Lane J. Ashley and Rebecca R. Weinreich, Lewis, Brisbois,
Bisgaard & Smith, Los Angeles, California, for defendant-
appellee American Home Assurance Company.

                         OPINION

HALL, Circuit Judge:

   Sony Computer Entertainment America, Inc. appeals the
district court’s summary judgment in favor of defendants
American International Specialty Lines Insurance Company
and American Home Assurance Company. Sony sued the sis-
ter insurance companies for failing to indemnify and defend
it in a class action suit alleging product defects in a video
game system known as the Sony PlayStation 2. The district
court found that neither insurance company had a duty to
indemnify or defend Sony in the lawsuit. We affirm.

       I.   FACTS AND PROCEDURAL HISTORY

A.   Sony and the PlayStation 2

  Sony markets, distributes, and supports the PlayStation
family of products. The PlayStation 2 is the successor to the
8754            SONY v. AMERICAN HOME ASSURANCE
original PlayStation, an advanced computer console. The
PlayStation 2 plays video games designed for the system on
either CD discs or DVD discs, as well as games designed for
the original PlayStation. Unlike the original PlayStation, how-
ever, the Playstation 2 was marketed as a home entertainment
system, able to play audio and video CDs and DVDs as well
as video games.

B.     The Insurance Policies

     1. American International Specialty Lines Insurance
     Company Policy

   Sony purchased a $10 million media liability insurance pol-
icy from American International Specialty Lines Company
(AISLIC) for the period of July 1, 2001 to July 1, 2002. The
policy, entitled “Multimedia Professional Liability Policy,”
provided that AISLIC would indemnify Sony in certain law-
suits. AISLIC promised to “pay on [Sony’s] behalf those
amounts . . . that [Sony] is legally obligated to pay as dam-
ages . . . resulting from any claim . . . during the policy period
for [Sony’s] wrongful act in the business of the insured.” The
term “wrongful act” was defined to include (a) defamation,
(b) invasion of privacy or publicity, (c) infringement of copy-
right, title, slogan, trademark, or trade dress, (d) unfair com-
petition (but only in conjunction with wrongful acts described
in section (c)), (e) unauthorized use of name or likeness, (f)
unintentional failure to credit on a matter, and (g) defective
advice, incitement, or “negligent publication.”1 The policy
had a $100,000 deductible “for each wrongful act or series of
wrongful act(s).”

  The AISLIC policy did not obligate AISLIC to defend
Sony in every lawsuit alleging a covered wrongful act.
  1
    Sony previously held an insurance policy with AISLIC that also cov-
ered “any error or omission, misstatement, misleading statement or misin-
terpretation,” but the 2001-2002 policy did not include such coverage.
              SONY v. AMERICAN HOME ASSURANCE              8755
Rather, it stated that AISLIC had “the right but not the duty
to defend any claim first made against [Sony] during the pol-
icy period and reported to [AISLIC] in writing for [Sony’s]
wrongful act.” However, the policy provided that AISLIC
would be responsible for at least part of Sony’s defense costs.
If Sony chose its own counsel in a suit alleging a covered
wrongful act, it would pay for its own defense until its deduct-
ible was exhausted, and then for a portion of it after the
deductible was exhausted. If Sony was defended by AISLIC’s
chosen counsel, AISLIC would be responsible for all defense
costs after Sony paid its deductible.

   The AISLIC policy excluded a number of claims from pol-
icy coverage. For example, AISLIC was not obligated to pay
damages arising from “unfair or deceptive business practices
including, but not limited to, violations of any local, state or
federal consumer protection laws” (Exclusion C), “alleging or
arising out of a breach of any express warranties, representa-
tions or guarantees” (Exclusion J), or “arising out of false
advertising or misrepresentation in advertising” (Exclusion
P). This last exclusion had an exception, whereby AISLIC
promised to “defend suits alleging [false advertising or mis-
representation in advertising] until there is a judgment, final
adjudication, adverse admission or finding of fact against
[Sony] at which time [Sony] shall reimburse [AISLIC] for
claim expense.”

  2.   American Home Assurance Company Policy

   Sony purchased a $2 million general commercial insurance
policy from American Home Assurance Company (American
Home) for the period of April 1, 2000 to April 1, 2001. The
policy, entitled “Commercial General Liability Coverage,”
provided that American Home would “pay those sums that the
insured becomes legally obligated to pay as damages because
of ‘bodily injury’ or ‘property damage,’ ” as well as “defend
the insured against any ‘suit’ seeking those damages.” Prop-
erty damage was defined to include both “physical injury to
8756           SONY v. AMERICAN HOME ASSURANCE
tangible property, including all resulting loss of use of that
property” and “loss of use of tangible property that is not
injured.”

   As with the AISLIC policy, a number of exclusions in the
American Home policy limited American Home’s duties. In
particular, under Exclusion (m), the policy did not cover
“ ‘property damage’ to ‘impaired property’ or property that
has not been physically injured, arising out of . . . a defect,
deficiency, inadequacy, or dangerous condition in ‘[Sony’s]
product.’ ” Exclusion (m) had an exception for the loss of use
of property “arising out of sudden and accidental physical
injury to ‘[Sony’s] product’ or ‘[Sony’s] work’ after it has
been put to its intended use.”

C.     Kim/Kaen Lawsuits

   In July 2002, PlayStation users sued Sony in two separate
class actions in California state court, later consolidated as the
Kim/Kaen case in San Mateo County. The Kim/Kaen plain-
tiffs alleged that the PlayStation 2s suffered from an “inher-
ent” or “fundamental” design defect that rendered them
unable to play DVDs and certain game discs. The complaints
set forth causes of action for breach of express and implied
warranties, fraud, negligent misrepresentation, bad faith, vio-
lations of the Consumer Legal Remedies Act (Cal. Civ. Code
§ 1750 et seq.), false advertising (Cal. Bus. & Prof. Code
§ 17500 et seq.), and unfair business practices (Cal. Bus. &
Prof. Code § 17200 et seq.). The assertions in the false adver-
tising and negligent misrepresentation claims primarily
revolved around Sony’s statements in press releases, advertis-
ing, product packaging, and instruction manuals that the
PlayStation 2 would function as a DVD player as well as a
game player.

D.     This Action

  Sony tendered the Kim/Kaen claims to AISLIC and Ameri-
can Home, both of which eventually denied coverage. Sony
              SONY v. AMERICAN HOME ASSURANCE              8757
filed this action in February 2004, claiming that AISLIC and
American Home had breached their contractual duty to defend
and indemnify Sony, and breached the implied covenant of
good faith and fair dealing.

  American Home moved for summary judgment on all
counts, and Sony moved for partial summary judgment on the
duty to defend claim. The district court granted summary
judgment in favor of American Home. It found that American
Home had no duty to defend Sony in the suit, and that,
accordingly, the indemnification and bad faith claims failed as
well. Sony Comp. Entm’t Am., Inc. v. Am. Home Assur. Co.,
No. CV 04-00492-PJH (N.D. Cal. Aug. 30, 2005).

   Later that year, AISLIC moved for summary judgment on
all claims and Sony cross-motioned with respect to the duty
to defend claim. The district court granted summary judgment
in favor of AISLIC, finding that AISLIC had no duty to
indemnify or defend Sony in the Kim/Kaen suits, and that
AISLIC had not engaged in any bad faith. Sony Comp. Entm’t
Am., Inc. v. Am. Home Assur. Co. and Am. Int’l Specialty
Lines Ins. Co., No. 05-17425, 2005 U.S. Dist. LEXIS 30424
(N.D. Cal. Dec. 1, 2005). Sony timely appealed.

                      II.   DISCUSSION

A.   Standard of Review

   A district court’s grant of summary judgment is reviewed
de novo. Suzuki Motor Corp. v. Consumers Union of United
States, Inc., 330 F.3d 1110, 1131 (9th Cir. 2003). “We must
therefore determine, viewing the evidence in the light most
favorable to the nonmoving party, whether there are any gen-
uine issues of material fact and whether the district court cor-
rectly applied the relevant substantive law.” Id. at 1131-32
(citing Devereax v. Abbey, 263 F.3d 1070, 1074 (9th Cir.
2001) (en banc)).
8758            SONY v. AMERICAN HOME ASSURANCE
B.     Principles of Insurance Policy Interpretation

   Though insurance contracts have special features, the gen-
eral rules of contract interpretation still apply in California.
Bank of the W. v. Superior Court, 2 Cal. 4th 1254, 1264
(1992); MacKinnon v. Truck Ins. Exch., 31 Cal. 4th 635, 647
(2003). The interpretation of a contract must “give effect to
the ‘mutual intention’ of the parties . . . at the time the con-
tract was formed.” Id. (citing Cal. Civ. Code § 1636). Such
intent is to be inferred, if possible, from the written provisions
of the contract based on their “ordinary and popular sense,”
unless a “technical sense or special meaning is given to them
by their usage.” Id. at 647-48 (citing Cal. Civ. Code §§ 1639,
1644, 1638). If the contractual language is clear and explicit,
it governs. AIU Ins. Co. v. Superior Court, 51 Cal. 3d 807,
822 (1990).

   [1] The terms in an insurance policy must be read in con-
text and in reference to the policy as a whole, with each
clause helping to interpret the other. Cal. Civ. Code § 1641;
Bay Cities Paving & Grading, Inc. v. Lawyers’ Mutual Ins.
Co., 5 Cal. 4th 854, 867 (1993); Palmer v. Truck Ins. Exch.,
21 Cal. 4th 1109, 1115 (1999). Accordingly, a provision is
ambiguous “only if it is susceptible to two or more reasonable
constructions despite the plain meaning of its terms within the
context of the policy as a whole.” Id.; see also Bank of the W.,
2 Cal. 4th at 1265 (“ ‘[L]anguage in a contract must be con-
strued in the context of the instrument as a whole, and in the
circumstances of that case, and cannot be found to be ambigu-
ous in the abstract.’ ”) (quotation source and emphasis omit-
ted). A court faced with an argument for coverage based on
an assertedly ambiguous policy language “must first attempt
to determine whether coverage is consistent with the insured’s
reasonable expectations,” id., and “[i]n so doing . . . must
interpret the language in context, with regard to its intended
function within the policy,” id. Thus, although unresolved
ambiguities in insurance policies are generally construed
against the insurer, AIU Ins. Co., 51 Cal. 3d at 822, that prin-
               SONY v. AMERICAN HOME ASSURANCE              8759
ciple only applies if the meaning of a term is ambiguous in
light of the policy as a whole, and if coverage is within the
objectively reasonable expectations of the insured. Bank of
the W., 2 Cal. 4th at 1265.

C.   AISLIC Had No Duty to Indemnify or Defend Sony

   The AISLIC policy obligated AISLIC to indemnify Sony
and provide defense costs for lawsuits arising from certain
“wrongful acts,” including “negligent publication.” Sony
argues that the district court erred in granting summary judg-
ment in favor of AISLIC because the false advertising and
negligent misrepresentation claims in the Kim/Kaen lawsuits
allege “negligent publication.” Alternatively, Sony argues that
AISLIC is obligated to defend it in the Kim/Kaen suits by vir-
tue of Exclusion P of the insurance policy. We disagree and
affirm the district court.

  1. The affirmative coverage provisions of the AISLIC
  policy do not obligate AISLIC to indemnify or defend Sony

   We begin our analysis by examining the policy’s affirma-
tive coverage clauses, because if a claim does not fall within
those clauses, no coverage exists. Palmer, 21 Cal. 4th at
1115-16. Sony does not assert that any wrongful act besides
“negligent publication” applies to the Kim/Kaen lawsuits, thus
the question of whether AISLIC’s policy covers Sony turns
on whether the Kim/Kaen lawsuits assert claims within the
meaning of that term.

     i.   Meaning of “negligent publication”

   [2] “Negligent publication” is not defined in the AISLIC
policy, nor does it appear in lay or legal dictionaries or in any
California statute. Because there is no evidence that the par-
ties intended the term to carry a technical meaning, the ordi-
nary and popular meaning of the term governs. AIU Ins. Co.,
51 Cal. 3d at 823; see also Cal. Civ. Code § 1644.
8760          SONY v. AMERICAN HOME ASSURANCE
   Sony argues that the term “negligent publication” should
have a broad meaning which it derives from stringing together
the dictionary definitions of “negligent” and “publication.”
According to Sony, “negligent publication” in the AISLIC
policy refers to “a communication of information to the pub-
lic, lacking or exhibiting a lack of due care or concern.” Sony
argues that this definition, broad enough to include the false
advertising and negligent misrepresentation claims in the
Kim/Kaen lawsuits, is the plain meaning of the term.

   Sony’s definition is not the proper plain meaning of the
term. While Sony is correct that courts often consult dictio-
naries to derive the ordinary and popular meaning of terms in
insurance contracts, see Scott v. Continental Ins. Co., 44 Cal.
App. 4th 24, 29-30 (Ct. App. 1996), Sony’s definition is
inconsistent with the context of the AISLIC policy as a whole,
see id. at 29 n.4 (“[T]he multiple meanings of a word as found
in a dictionary cannot be inserted into the text of an insurance
policy without regard to the document construed as a whole,
[and] the exact context of the language.”); MacKinnon, 31
Cal. 4th at 649 (“Although examination of various dictionary
definitions of a word will no doubt be useful, such examina-
tion does not necessarily yield the ‘ordinary and popular’
sense of the word if it disregards the policy’s context.”);
Palmer, 21 Cal. 4th at 1116-17.

   [3] The policy Sony purchased from AISLIC covered Sony
for wrongful acts defined in seven different sections, each
including a list of related terms. For example, part (a)
included “defamation, disparagement, or harm to the charac-
ter or reputation of any person, or entity”; part (b) listed “in-
vasion, infringement, or interference with rights of privacy or
publicity”; parts (c), (d), (e), and (f) covered copyright
infringement, unfair competition, unauthorized use of name or
likeness, and unintentional failure to credit on a matter,
respectively. Part (g) read that wrongful acts also consisted of
“defective advice, incitement, and negligent publication.”
Given that sections (a)-(f) each listed a series of related torts,
                SONY v. AMERICAN HOME ASSURANCE                    8761
the placement of “negligent publication” within the policy
suggests that the term refers to a narrow tort relating to defec-
tive advice and incitement, not a broad tort distinct from those
terms. See Am. Motorists Ins. Co. v. Allied-Sysco Food Ser-
vices, Inc., 19 Cal. App. 4th at 1347, 1350-51 (Ct. App. 1993)
(agreeing with the insurer that “the policy’s coverage for
damages arising out of ‘humiliation’ is limited to those cases
in which humiliation damages arise out of the types of torts
in which it is grouped — i.e., libel, slander, defamation of
character, and invasion of the right to privacy”), overruled on
other grounds in Buss v. Superior Court, 16 Cal. 4th 35, 50
& n.12 (1997). Yet, Sony’s expansive definition of “negligent
publication” disregards the term’s placement in wrongful act
(g) next to incitement and defective advice. If “negligent pub-
lication” were defined as Sony suggests — a communication
of information to the public, lacking or exhibiting a lack of
due care or concern — then the term would be broad enough
to subsume virtually all of the other wrongful acts defined in
the policy, such as defamation, misappropriation, infringe-
ment of copyright, unauthorized use of name or likeness, and
unintentional failure to credit on a matter. Such a reading
ignores the maxim that “a court must interpret . . . [policy]
language in context, with regard to its intended function in the
policy,” Bank of the W., 2 Cal. 4th at 1265.

   [4] Further, the AISLIC policy was a media liability policy.
Its affirmative coverage provisions were strictly limited to the
types of claims normally faced by media publishers, such as
defamation, copyright infringement, and so on. Notably
absent from those provisions was any coverage for product
defects. In fact, the exclusions in the policy made clear that
it was not intended to protect Sony from suits like Kim/Kaen.
AISLIC explicitly disclaimed liability for suits alleging
breach of warranties, representations, or guarantees (Exclu-
sion J); for suits arising from violations of consumer protec-
tion laws (Exclusion C); and for suits alleging false
advertising or misrepresentation in advertising (Exclusion P).2
  2
   Sony argues that Exclusion P “provides strong evidence of coverage”
because AISLIC would only have included the exclusion if it believed that
8762            SONY v. AMERICAN HOME ASSURANCE
Sony’s expansive interpretation of “negligent publication”
fails to recognize the limited coverage in the AISLIC media
liability policy, and thus fails to properly construe “the lan-
guage in a contract . . . in the context of that instrument as a
whole.” Bank of the W., 4 Cal. 4th at 1265.

   Sony’s construction of “negligent publication” is also
unpersuasive because it is not supported by the case law,
which we look to as further evidence of the proper meaning
of the term. See AIU, 51 Cal. 3d at 825-28. Though the cases
do not yield one clear definition of “negligent publication,”
the cases that reference the term are a limited set, none of
which use the term as broadly as Sony does.

   For example, in one line of cases, “negligent publication”
is used to describe a cause of action in which plaintiffs
attempt to hold publishers liable for material that led readers
to engage in harmful conduct. See, e.g. Way v. Boy Scouts of
Am., 856 S.W.2d 230, 232-34 (Tex. App. 1993) (plaintiff sued
magazine for the “negligent publication” of an advertisement
for firearms that she alleged led her son to accidentally kill
himself); Smith v. Linn, 563 A.2d 123, 125 (Pa. Super. Ct.
1989) (plaintiff sued the publisher of a diet book, claiming
that his wife — who read the book and followed its instruc-
tions — died of cardiac arrest due to the book’s “negligent
publication”); Hyde v. City of Columbia, 637 S.W.2d 251,
253 (Mo. Ct. App. 1982) (abduction victim brought action
against newspaper for the negligent publication of her name
and address while her assailant was still at large); see also
Eimann v. Soldier of Fortune Magazine, Inc., 880 F.2d 830
(5th Cir. 1989) (son and mother of murder victim sued maga-

false advertising was otherwise covered. This type of argument has been
rejected by California courts as “superficial and contrary to proper cover-
age analysis.” Old Republic Ins. Co. v. Superior Court, 66 Cal. App. 4th
128, 145 (Ct. App. 1998), overruled on other grounds in Vandenberg v.
Superior Court, 21 Cal. 4th 815, 838 n.12, 839 (1999).
              SONY v. AMERICAN HOME ASSURANCE                8763
zine for publishing gun for hire advertisement through which
victim’s husband hired assassin to kill her).

   Other courts have used the term “negligent publication” to
explain that creative pleading does not change the analysis of
a defamation-based claim or applicable privileges, see, e.g.,
Newcombe v. Adolf Coors Co., 157 F.3d 686, 695 (9th Cir.
1998); Block v. Sacramento Clinical Labs, Inc., 131 Cal. App.
3d 386, 392-93 (Ct. App. 1982), or to describe one of the ele-
ments of a defamation action, see, e.g., Mandel v. Boston
Phoenix, 456 F.3d 198, 209 (1st Cir. 2006); Reilly v. Associ-
ated Press, 797 N.E.2d 1204, 1209 n.3 (Mass. App. Ct.
2003). In addition, “negligent publication” has been used to
describe negligence on the part of advertisers who breached
contracts by erroneously printing plaintiff’s information. See,
e.g., Continental Kennel Club, Inc. v. Fancy Publ’ns, Inc.,
763 So. 2d 827, 828 (La. App. 2000); Discount Fabric House
of Racine, Inc. v. Wisconsin Tel. Co., 345 N.W.2d 417, 425
(Wis. 1984).

   Thus, while the term “negligent publication” has been used
in a variety of cases, no case uses the term as expansively as
Sony suggests. Sony would have “negligent publication”
mean “a communication of information to the public, lacking
or exhibiting a lack of due care or concern,” yet the case law
is essentially limited to plaintiffs suing publishers for the con-
tents of books, articles, or advertisements. A couple of cases
have involved plaintiffs suing individuals or governments —
rather than publishers — for defamation or related claims,
see, e.g., Block, 131 Cal. App. 3d at 392-93, but even their use
of the term remains entirely distinct from Sony’s proffered
definition.

   In light of the above, we cannot adopt Sony’s definition of
“negligent publication” as the meaning of the term in the AIS-
LIC policy. A more limited definition of the term is appropri-
ate, one that is consistent with the context of the policy and
supported in the case law. We find that defining the term
8764             SONY v. AMERICAN HOME ASSURANCE
“negligent publication” as a narrow tort in which the publica-
tion of material leads the reader to commit a harmful act
meets these criteria.

   This definition of “negligent publication” is supported by
the Smith, Way, and Hyde line of cases, which involved plain-
tiffs who sued publishers for harm resulting from the contents
of a book, magazine, or newspaper. The legal literature is also
helpful in this respect; scholars have recognized “negligent
publication” as a cause of action in which plaintiffs attempt
to hold a publisher liable for harm encouraged or instructed
by a publication.3

   More importantly, defining “negligent publication” in this
manner is consistent with the context of the AISLIC policy.
Recall that “negligent publication” was placed next to defec-
tive advice and incitement in the AISLIC policy. Our defini-
tion of “negligent publication” appropriately describes a tort
similar to those wrongful acts. For example, in incitement
cases, like in “negligent publication” cases, the plaintiff
alleges that defendant’s publication of material encouraged or
instructed the reader to commit a harmful act. However, the
plaintiff asserts incitement on the part of the defendant as well
as negligence in an effort to avoid First Amendment prob-
lems. See, e.g., Herceg v. Hustler Magazine, Inc., 814 F.2d
3
     See, e.g., Susan M. Gilles, “Poisonous” Publications and Other False
Speech Physical Harm Cases, 37 Wake Forest L. Rev. 1073, 1081-83
(2002) (“[A]ctions for negligent publication . . . [involve plaintiffs who]
sue publishers and assert that by publishing false statements that cause
physical harm, the defendants have breached a duty to independently
investigate the accuracy of the text.”) (citing Smith as an example); see
also Mark Sableman, Link Law Revisited: Internet Linking Law at Five
Years, 16 Berkeley Tech. L.J. 1273, 1316 n.235 (2001) (“ ‘[N]egligent
publication’ theory seeks to hold a publisher liable for publishing material
that instructs and/or encourages readers in committing violent or other
unlawful conduct.”); Charles A. Glasser, Jr. & Mark A. Sirota, Outline of
Decisions Involving “Negligent Publication” and Products Liability
Claims Against Publishers, 516 Practising Law Inst. 719, 721 (1998) (cit-
ing Way).
                 SONY v. AMERICAN HOME ASSURANCE                       8765
1017, 1018-19 (5th Cir. 1987) (plaintiff claimed that a Hustler
article about erotic asphyxiation incited her son to attempt the
practice, which led to his death); Yakubowicz v. Paramount
Pictures Corp., 536 N.E.2d 1067, 1070-71 (Mass. 1989)
(plaintiff claimed film incited teenagers to kill his son);
McCollum v. CBS, Inc., 202 Cal. App. 3d 989, 999-1001 (Ct.
App. 1988). The term defective advice can be described as a
related theory of liability, in which plaintiffs argue that the
“advice” in a publication is a “defective product,” and attempt
to hold the publisher strictly liable. See, e.g., Winter v. G.P.
Putnam’s Sons, 938 F.2d 1033, 1034-36 (9th Cir. 1991)
(plaintiffs became ill after eating poisonous mushrooms
labeled as edible in book and asserted defective product
claims against the publisher); Lewin v. McCreight, 655 F.
Supp. 282, 282-83 (E.D. Mich. 1987) (plaintiffs experienced
an explosion while following instructions in a book and sued
the publisher for “defective ideas”); Aetna Cas. & Sur. Co. v.
Jeppesen & Co., 642 F.2d 339, 341-43 (9th Cir. 1981); see
also Sandra Davidson, Blood Money: When Media Expose
Others to Risk of Bodily Harm, 19 Hastings Comm. & Ent.
L.J. 225, 248-90 (1997) (describing plaintiffs’ efforts to hold
media entities liable for harmful content under negligence,
incitement, and products liability theories); Terri R. Day,
Publications that Incite, Solicit, or Instruct: Publisher
Responsibility or Caveat Emptor?, 36 Santa Clara L. Rev. 73
(1995) (same).

   We find that defining “negligent publication” as a tort
faced only by publishers also properly construes the policy as
a whole, because it takes into account the AISLIC policy’s
status as a media liability policy with limited coverage provi-
sions. Bank of the W., 4 Cal. 4th at 1265. And whereas a
broader reading of the term would disregard the other
“wrongful acts” listed in the policy,4 defining negligent publi-
  4
   For example, the district court relied on Newcombe to hold that “negli-
gent publication” referred to “that category of tort claims typified by defa-
mation and misappropriation,” Sony Comp. Entm’t, 2005 U.S. Dist.
LEXIS 30424, at *14, but the AISLIC policy defines defamation and mis-
appropriation as separate wrongful acts in coverage provisions (a) and (c).
8766          SONY v. AMERICAN HOME ASSURANCE
cation as a cause of action in which a plaintiff alleges that a
defendant’s publication led to harmful conduct does not over-
lap with any of the other “wrongful acts.” See Boghos v. Cer-
tain Underwriters at Lloyd’s of London, 36 Cal. 4th 495, 503
(2005) (disfavoring constructions of contractual provisions
that would render other provisions surplusage).

   [5] In sum, we hold that the term “negligent publication”
in the AISLIC policy refers to a very narrow tort in which the
publication of material encourages or instructs readers to
engage in harmful conduct. We reject Sony’s expansive defi-
nition as inconsistent with the context of the policy as a whole
and unsupported by the case law. Sony, a sophisticated pur-
chaser, clearly could have purchased coverage for product
defects or false advertising — indeed, Sony previously held
an insurance policy with AISLIC that covered “any error or
omission, misstatement, misleading statement or misinterpre-
tation” — yet the policy at issue in this lawsuit did not include
such coverage. Sony’s attempt to expand the meaning of
“negligent publication” to cover all negligent communications
with the public fails.

    ii. The Kim/Kaen suits do not allege “negligent
    publication”

   [6] To determine whether the Kim/Kaen lawsuits alleged
claims of “negligent publication,” we must compare the alle-
gations of the complaints with the coverage language of the
policy. Palmer, 21 Cal. 4th at 1115-16 (“If a claim does not
fall within the terms of [the coverage] clauses, then no cover-
age exists.”). The Kim/Kaen lawsuits alleged claims for false
advertising, negligent misrepresentation, breach of warranty,
and other claims based on fraud. They did not allege that
Sony published material that led readers to engage in a harm-
ful act, nor did they allege that Sony engaged in any actions
typified by the body of case law discussing “negligent publi-
cation.”
              SONY v. AMERICAN HOME ASSURANCE             8767
   [7] Therefore, we hold that AISLIC does not have an obli-
gation to indemnify or provide any defense costs for Sony in
the Kim/Kaen suits under the “negligent publication” cover-
age provision of the policy. Sony does not allege coverage
under any other wrongful act, thus no affirmative coverage
provision in the AISLIC policy requires AISLIC to insure
Sony with respect to the class action suits.

  2. Exclusion P does not create an independent duty to
  defend

  Sony argues that even if the Panel does not agree that AIS-
LIC must indemnify Sony or pay its defense costs under the
coverage provisions, AISLIC nonetheless has a duty to defend
Sony under the exception language in Exclusion P. Exclusion
P disallows coverage for claims “arising out of false advertis-
ing or misrepresentation in advertising” but goes on to state:
“However, we will defend suits alleging any of the foregoing
conduct until there is a judgment, final adjudication, adverse
admission or finding of fact against [Sony].”

   [8] The district court properly held that Exclusion P cannot
establish coverage that does not exist under the affirmative
coverage provisions. While an insurer’s duty to defend is
broad in scope, Montrose Chem. Corp. v. Superior Court, 6
Cal. 4th 289, 295 (1993), proper coverage analysis begins by
considering whether the policy’s insuring agreements create
coverage for the disputed claim. See Stanford Ranch, Inc. v.
Md. Cas. Co., 89 F.3d 618, 627 (9th Cir. 1996). If coverage
exists, then the court considers whether any exclusions apply.
If coverage does not exist, the inquiry ends. The exclusions
are no longer part of the analysis because “they cannot expand
the basic coverage granted in the insuring agreement.” Id.

   [9] The rule is no different for exceptions to exclusions. A
“carve back” within an exclusionary provision merely restores
already-existing coverage. “[T]here is no cure for a lack of
coverage under the insuring clause. Even if the effect of an
8768             SONY v. AMERICAN HOME ASSURANCE
exception is to render a particular exclusion inoperative, the
insured must still prove the loss is covered.” Old Republic, 66
Cal. App. 4th at 145.5

   Sony argues that a ruling for AISLIC on this issue would
render the defense exception to Exclusion P meaningless,
because if AISLIC has no duty to defend false advertising
claims, then the carve-back for defense has no purpose. This
is not necessarily the case. As AISLIC points out, the defense
exception could apply to claims that allege false advertising
in conjunction with a covered wrongful act, such as wrongful
act (c), infringement of copyright or trade dress. See, e.g.,
Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532
U.S. 424, 428 (2001) (plaintiff alleged false advertising in
conjunction with infringement of trade dress); Herman Miller,
Inc. v. Palazzetti Imports and Exports, Inc., 270 F.3d 298, 306
(6th Cir. 2001) (same). In such a situation, AISLIC would
indemnify the policyholder and provide certain defense costs
with respect to the trade dress claim,6 but only defend the
insured with respect to the false advertising claim.
  5
     Sony vigorously argues that coverage provisions can and do appear in
exclusions to policy coverage. The cases it cites fail to prove its point. See,
e.g., Aydin v. First State Ins. Co., 18 Cal. 4th 1183, 1191-92 (1998)
(exception to a pollution exclusion was properly construed as a coverage
provision, but only for the purpose of allocating the burden of proof on the
insured); Marie Y. v. Gen. Star Indem. Co., 110 Cal. App. 4th 928, 959-
60 (Ct. App. 2003) (exception to exclusion clause supported duty to
defend where coverage otherwise existed); TRB Investments, Inc. v. Fire-
man’s Fund Ins. Co., 40 Cal. 4th 19, 22-23 (2006) (“under construction”
exception to “vacancy” exclusion did not create coverage but merely
restored coverage that exclusion took away); Nat’l Union Fire Ins. Co. v.
Lynette C., 228 Cal. App. 3d 1073, 1080 (Ct. App. 1991) (insured properly
read the exception to the exclusion “in light of the basic coverage clause”).
   6
     Recall that the AISLIC policy did not lay out a clear “duty to defend”
lawsuits alleging covered acts. Rather, it had a “right but not a duty to
defend” such suits, but promised to pay a varying portion of Sony’s
defense costs in excess of Sony’s deductible depending on whether Sony
chose its own lawyer or used AISLIC’s counsel.
              SONY v. AMERICAN HOME ASSURANCE              8769
   [10] In light of the above, we hold that because there is no
coverage under the insuring provisions of the AISLIC Policy,
there is no coverage under the carve-out for defense of false
advertising within Exclusion P. Therefore, we affirm the dis-
trict court’s grant of summary judgment on the issues of AIS-
LIC’s duties to indemnify and defend Sony. AISLIC did not
engage in bad faith when it refused coverage because cover-
age did not exist, thus summary judgment on that claim was
also appropriate. See Love v. Fire Ins. Exch., 221 Cal. App.
3d 1136, 1152-53 (Ct. App. 1990).

D. American Home Had No Duty to Defend or Indemnify
Sony

   The American Home policy provided that American Home
had a duty to indemnify and defend Sony against any lawsuit
seeking bodily injury or property damage. Property damage
was defined to include “physical injury to tangible property”
as well as “loss of use of tangible property that is not physi-
cally injured.” However, the policy excluded coverage for
property damage to Sony’s own product (Exclusion (k)), as
well as coverage for “impaired property or property not physi-
cally injured” arising out of “a defect, deficiency, inadequacy,
or dangerous condition in ‘[Sony’s] product’ ” (Exclusion
(m)). The impaired property exclusion had an exception for
“the loss of use of other property arising out of sudden and
accidental physical injury” to Sony’s product after it was put
to its intended use.

   Sony argues that the Kim/Kaen suits allege both “loss of
use of tangible property,” and “physical injury to property,”
therefore the district court erred when it granted summary
judgment in favor of American Home on the duty to defend
and indemnity claims. We disagree. While an insurer must
defend any claim potentially covered by a policy, Montrose
Chem. Corp., 6 Cal. 4th at 295, Sony has not proven potential
coverage of the Kim/Kaen claims under the American Home
policy.
8770            SONY v. AMERICAN HOME ASSURANCE
  1.   Loss of use claims

   [11] The Kim/Kaen complaints did not allege that the
defects in the PlayStation 2 caused them to experience a loss
of use of game discs or DVDs. Nonetheless, Sony argues that
the Kim/Kaen plaintiffs asserted “classic ‘loss of use’ ” claims
covered by the American Home policy. Sony cites to allega-
tions that the PlayStation 2 was unable to read or play CDs,
DVDs, or original PlayStation games, and complaints of discs
skipping and freezing, accompanied by banging or clicking
noises.

   [12] These allegations are far from “classic ‘loss of use’ ”
claims. As the district court noted, the statements regarding
discs freezing and skipping referenced the defects in the
PlayStation 2, not defects in the discs themselves. Sony Comp.
Entm’t, No. C 04-0492 PJH, at 6 (N.D. Cal. Aug. 30, 2005).
Indeed, though it is undisputed that certain discs did not prop-
erly play on the PlayStation 2, the complaints never suggested
that the discs themselves did not function properly on other
devices. Id. In this respect, the suit is easily distinguishable
from the loss of use cases Sony cites, in which the insured’s
defective property rendered the property of a third party unus-
able. See Anthem Elecs., Inc. v. Pac. Employers Ins. Co., 302
F.3d 1049, 1057 (9th Cir. 2002) (defective circuit boards
inserted into scanners of third party plaintiff rendered scan-
ners unusable); Hendrickson v. Zurich American Ins. Co., 72
Cal. App. 4th 1084, 1091-92 (Ct. App. 1999) (defective
strawberry plants planted in fields caused loss of use of fields).7
Moreover, the Kim/Kaen plaintiffs did not allege any recog-
nized measure of loss of use of discs, such as rental value.
See, e.g., F&H Constr. v. ITT Hartford Ins. Co., 118 Cal.
App. 4th 364, 377 (Ct. App. 2004). Last, Sony’s citation to
the Kim/Kaen settlement agreement, which references “loss of
  7
    Sony’s citation to Park Univ. Enter. v. American Cas. Co., 442 F.3d
1239, 1244-45 (10th Cir. 2006) is also unhelpful because the loss of use
in that case was not disputed.
              SONY v. AMERICAN HOME ASSURANCE               8771
use” of discs, is irrelevant, because the duty to defend is based
on the complaints and facts known to the insurer at the time
of tender only. We Do Graphics, Inc. v. Mercury Cas. Co.,
124 Cal. App. 4th 131, 136 (Ct. App. 2004) (“The duty to
defend is not measured by hindsight, but turns ‘upon those
facts known by the insurer at the inception of a third party
lawsuit.’ ”) (citing Montrose, 6 Cal. 4th at 295).

   [13] Even if Sony could establish coverage for the Kim/
Kaen suits under the loss of use provision, the lawsuits fall
squarely within the purview of Exclusion (m). That provision
excludes coverage for “loss of use” property damage arising
out of “a defect, deficiency, inadequacy, or dangerous condi-
tion in ‘[Sony’s] product.’ ” Any loss of use of the discs
inserted into the PlayStation 2 is the result of a defect in
Sony’s product, and is therefore excluded from coverage
under Exclusion (m). See America Online, Inc. v. St. Paul
Mercury Ins. Co., 347 F.3d 89, 98-99 (4th Cir. 2003) (loss of
use coverage barred by similar exclusionary provision).

   Sony’s only response to the Exclusion (m) argument is that
the “sudden and accidental” physical injury exception to the
exclusion applies. Sony unconvincingly contends that because
the complaints allege that the freezing and locking of the discs
can happen at any time and that the defects in the console
generally manifest at certain time periods, the allegations
“evince[ ] the possibility that the loss of use of discs resulted
from a sudden and accidental physical injury to the PlaySta-
tion 2s.” But these allegations provide far more support for
the theory that the devices deteriorated over time than that
each and every class member’s devices experienced a sudden
and accidental physical injury. Sony analogizes to Anthem, in
which this court held that the insured presented a possibility
that a similar “sudden and accidental physical injury” excep-
tion to an exclusion applied, but in that case extrinsic evi-
dence in the form of diagnostic reports suggested that
8772             SONY v. AMERICAN HOME ASSURANCE
physical damage had occurred to the insured’s product. Here,
no such evidence exists. Anthem, 302 F.3d at 1059-60.8

   [14] Accordingly, we hold that the Kim/Kaen lawsuits are
not covered under the “loss of use” coverage provision, and
that, even if they were, they are excluded from coverage
under Exclusion (m). The sudden and accidental injury excep-
tion to Exclusion (m) is inapplicable.

  2.    Physical damage claims

   [15] The Kim/Kaen complaints themselves did not allege
any property damage to discs. In fact, in depositions, all three
class representatives specifically denied any claims of physi-
cal injury to discs inserted into the PlayStation 2. Further,
none of the customer statements in the original complaint or
motions for class certification or jury trial referenced
scratched or damaged discs.

   Despite the lack of reference to property damages in the
lawsuit, Sony argues that the Kim/Kaen complaint potentially
includes claims of physical damage to discs inserted into the
PlayStation 2. It argues that merely because class plaintiffs
did not suffer physical injury to the discs does not mean the
class could not have recovered on such a theory, and that
Sony’s retender of the Kim/Kaen complaint to American
Home in October 2003 was accompanied by evidence of cus-
tomer complaints of physical injury to discs and/or games.9
  8
     Sony also argues that the district court improperly placed the burden
on Sony to establish that the “sudden and accidental” exception applies.
While the district court cited a case dealing with an indemnity provision
rather than a duty to defend provision, see Aydin, 18 Cal. 4th at 1188,
Sony still bears the initial burden of proving that there is a possibility that
the exception to the exclusion applies. See Anthem, 302 F.3d at 1059 &
n.3.
   9
     The customer complaints are properly part of the duty to defend analy-
sis because they were known to American Home at the time of tender.
Montrose, 6 Cal. 4th at 295.
              SONY v. AMERICAN HOME ASSURANCE               8773
   [16] We find these arguments unpersuasive. Though the
duty to defend is broad, “the insured may not speculate about
unpled third party claims to manufacture coverage.” Hurley
Construction Co. v. State Farm Fire & Cas. Co., 10 Cal. App.
4th 533, 538 (Ct. App. 1992). California courts have held that
no duty to defend attaches where, as here, the third party com-
plaint did not allege the type of damages covered by the pol-
icy, and the class representatives explicitly disavowed any
interest in the type of damages covered by the policy. See Low
v. Golden Eagle Ins. Co., 99 Cal. App. 4th 109, 113-14 (Ct.
App. 2002) (no duty to defend where “the . . . complaint is . . .
couched overwhelmingly in class action terms, but the named
plaintiff expressly disclaims any interest in seeking recovery
of damages for [the type of damages] . . . required to trigger
coverage and a related duty to defend under the policy”); see
also The Upper Deck Co. v. Federal Ins. Co., 358 F.3d 608,
615 (9th Cir. 2004) (“Upper Deck asked us to remember that
the underlying suit is a class action and that, even if the
named plaintiffs did not suffer bodily injury, members of the
class could have suffered bodily injury. This argument contra-
dicts the complaint itself, which states [that the named class
plaintiffs are typical of the class as a whole.]”). Moreover, the
customer complaints of scratches and other damage to discs
— which could potentially establish physical damage — were
never incorporated into the third party lawsuit. Gunderson v.
Fire Ins. Exch., 37 Cal. App. 4th 1106, 1116 (Ct. App. 1995)
(no duty to defend where “none of the allegations concerning
damage to the fence [which could have been covered under
the policy] . . . were ever incorporated in [the] complaint
against appellants”) (emphasis in original). Further, American
Home need not rely on the assertions of Sony’s own counsel
about potential covered claims in determining whether it has
a duty to defend. Hurley, 10 Cal. App. 4th at 538.

   [17] Accordingly, we affirm the district court’s summary
judgment in favor of American Home on the duty to defend
issue. Sony has not established the potential for coverage
either under the loss of use or physical damage provisions of
8774          SONY v. AMERICAN HOME ASSURANCE
the policy. Sony’s indemnification claim fails as well for the
duty to defend is broader than the duty to indemnify. Mon-
trose, 6 Cal. 4th at 295. The bad faith claim against American
Home is similarly rejected because if there is no coverage,
there can be no bad faith in refusing coverage. Love, 221 Cal.
App. 3d at 1153.

                    III.   CONCLUSION

  We AFFIRM the district court.

BYBEE, Circuit Judge, concurring in part and dissenting in
part:

   I agree with the majority that American Home Assurance
Company had no duty to indemnify or defend Sony Computer
Entertainment America, Inc. (“Sony”). I thus concur in Sec-
tion II.D of the majority opinion. I also agree that American
International Specialty Lines Insurance Company (“AISLIC”)
had no duty to indemnify Sony. For the reasons I explain
below, however, I disagree with the majority’s conclusion that
AISLIC had no duty to defend Sony. I respectfully dissent
from that portion of Section II.C of the majority opinion.

                               I

   Like the majority, I begin my analysis by examining the
policy’s coverage clauses; if a claim does not fall within those
clauses, no coverage exists. Palmer v. Truck Ins. Exch., 21
Cal. 4th 1109, 1115-16 (1999). The insurance policy between
Sony and AISLIC provided that AISLIC would indemnify
Sony for damages resulting from any claim for “a wrongful
act” in Sony’s business. The policy defined the term “wrong-
ful act” by listing a number of actions including “negligent
publication.” Therefore, I agree with the majority that “the
question of whether AISLIC’s policy covers Sony turns on
                 SONY v. AMERICAN HOME ASSURANCE                      8775
whether the Kim/Kaen lawsuits assert claims within the mean-
ing of [negligent publication].” Maj. Op. 8759.

                                    A

   In interpreting the phrase1 “negligent publication,” under
California law courts must give effect to the mutual intention
of the parties. See MacKinnon v. Truck Ins. Exch., 31 Cal. 4th
635, 647 (2003). The parties’ intent, in turn, is inferred solely
from the written provisions of the contract. Id. The words in
an insurance contract are to be “interpreted in their ordinary
and popular sense, unless used by the parties in a technical
sense or a special meaning is given to them by usage.” Id. at
648 (internal quotation marks omitted). Furthermore, “insur-
ance coverage is interpreted broadly so as to afford the great-
est possible protection to the insured.” Id. (internal quotation
marks omitted). The majority and I are in agreement on these
principles of California insurance contract interpretation. It is
in their application that our disagreement arises.

   AISLIC does not contend that the parties gave the phrase
“negligent publication” a technical or special meaning.
Accordingly, the words “negligent publication” are to be “in-
terpreted in their ordinary and popular sense.” Id. at 648
(internal quotation marks omitted).

  Sony contends that the ordinary and popular meaning of the
phrase “negligent publication” can be determined by combin-
ing the dictionary definitions of the individual words in the
two-word phrase. I agree. When a layperson encounters an
  1
    The majority refers to “negligent publication” as a “term.” I believe
that “phrase” is more appropriate and therefore refer to it as such.
Although this may seem like mere semantics, my disagreement with the
majority turns on the fact that the majority believes that “negligent publi-
cation” must be a single term with a single definition, whereas I believe
that “negligent publication” is not a single term at all, but a phrase made
up of two individual words that have meaning both individually and in
combination.
8776          SONY v. AMERICAN HOME ASSURANCE
unknown phrase, absent a technical or special meaning, that
layperson interprets the phrase by combining the meanings of
the individual words comprising that phrase. In this case, a
layperson would understand that “negligent publication”
would simply refer to a publication distributed negligently.
“In seeking to ascertain the ordinary sense of words [in an
insurance policy], courts in insurance cases regularly turn to
general dictionaries.” Scott v. Cont’l Ins. Co., 51 Cal. Rptr. 2d
566, 569 (Ct. App. 1996). Turning to the dictionary, the word
“negligent” means “lacking or exhibiting a lack of due care or
concern.” WEBSTER’S II NEW COLLEGE DICTIONARY 732 (1999).
The word “publication” means “communication of informa-
tion to the public.” Id. at 895. Given the ordinary meaning of
those words, a layperson might properly understand that the
phrase “negligent publication” means something like “com-
munication of information to the public lacking or exhibiting
a lack of due care or concern.”

                               B

   Applying this definition of “negligent publication,” the
Kim/Kaen lawsuits assert claims — namely, false advertising
and negligent publication — within the meaning of “negligent
publication.” The majority concedes as much. Maj. Op. 8759.
The Kim complaint claims that Sony’s “press releases and
advertisements have not and do not disclose the defect or the
viewing or software compatibility problems described in this
Complaint.” The Kim complaint clearly complains about
Sony’s press releases and advertising, that is, its communica-
tion of information to the public. Furthermore, by alleging
that those communications fail to disclose certain defects, the
Kim complaint can be understood to contend that Sony’s com-
munications were “negligent” or “exhibit[ed] a lack of due
care or concern.” Similarly, the Kaen complaint claims that
Sony issued advertisements that were “untrue, misleading,
and likely to deceive the public.” Unless there was an applica-
ble exclusion, the affirmative provisions of the insurance con-
              SONY v. AMERICAN HOME ASSURANCE               8777
tract provided coverage for the Kim/Kaen claims, and AISLIC
had a duty to indemnify Sony.

                               II

   The majority comes to a contrary conclusion. It does not
contend that “negligent publication” has a technical or special
meaning. On the contrary, the majority acknowledges that
“[b]ecause there is no evidence that the parties intended the
term to carry a technical meaning, the ordinary and popular
meaning of the term governs.” Maj. Op. 8759. The majority,
however, rejects the dictionary-derived meaning of “negligent
publication,” because it believes that this meaning would be
inconsistent with the context of the insurance policy as a
whole, and because it finds no judicial case using the phrase
in precisely this way.

                               A

   The majority argues that we should not apply the dictionary
definition of the phrase “negligent publication” because it is
inconsistent with the context of the AISLIC policy as a whole.
Maj. Op. 8760. I agree with the majority that the “meanings
of a word as found in a dictionary cannot be inserted into the
text of an insurance policy without regard to the document
construed as a whole.” Scott, 51 Cal. Rptr. 2d at 569 n.4. The
majority argues that the placement of the phrase negligent
publication in the list “defective advice, incitement, and negli-
gent publication” tends to supports the majority’s interpreta-
tion that the term refers to a narrow tort somehow relating to
“defective advice and incitement.” Maj. Op. 8761. Similarly,
the majority suggests that the fact that this is a media policy
cuts against the plain and ordinary meaning of the phrase.
Maj. Op. 8762.

   Other indications in the policy, however, support Sony’s
interpretation of “negligent publication,” in particular, Exclu-
sion P. Exclusion P disallows indemnity coverage for claims
8778          SONY v. AMERICAN HOME ASSURANCE
“arising out of false advertising or misrepresentation in adver-
tising” but goes on to carve back a duty to defend in those
cases. Although I agree that an exclusion cannot expand cov-
erage that does not exist under the affirmative coverage provi-
sions, see Stanford Ranch, Inc. v. Md. Cas. Co. 89 F.3d 618,
627 (9th Cir. 1996), it “can help to resolve an ambiguity in an
insuring clause in favor of coverage.” Am. Alternative Ins.
Corp. v. Super. Ct., 37 Cal. Rptr. 3d. 918, 924 n.2 (Ct. App.
2006). “Unquestionably, it may be considered part of the gen-
eral circumstances impacting an insured’s objectively reason-
able expectations as to the scope and extent of coverage under
a policy.” Id. Exclusion P provides contextual evidence for
the phrase “negligent publication” within the affirmative cov-
erage section of the AISLIC policy. If there was no affirma-
tive coverage for false advertising or misrepresentation in
advertising then the policy would have no need for an exclu-
sion specifying that those claims were not covered. Why
recite that certain acts are expressly excluded from the policy
if they were never covered in the first place? The majority’s
interpretation leaves Exclusion P meaningless. At best, the
context of the policy sends mixed signals. In light of this
ambiguity, I would apply the plain meaning of the words and
construe the insurance policy in favor of the insured. See
Bank of the W. v. Super. Ct., 2 Cal. 4th 1254, 1265 (1992)
(insurance policies are construed against the insurer if the
meaning of a term is ambiguous in light of the policy as a
whole).

                               B

   The majority also finds the dictionary definition of “negli-
gent publication” unpersuasive because it is not supported by
the case law. Maj. Op. 8762. I fear that in the course of imple-
menting the common law system, we have become so adept
at looking to judicial cases to obtain the solutions to the chal-
lenges we encounter, that we have come to believe that even
when determining the ordinary and popular meaning of
words, the solution is to be found in case law. The California
              SONY v. AMERICAN HOME ASSURANCE               8779
Supreme Court has admonished that absent evidence that the
parties intended the provision to have a specialized meaning
that a term must be construed as would a layperson, and not
as it might be analyzed by an attorney or an insurance expert,
or, I might add, a judge. See E.M.M.I. Inc., v. Zurich Am. Ins.
Co., 84 P.3d 385, 390 (Cal. 2004). I am quite certain that a
layperson looks to a dictionary to determine the meaning of
a phrase, not to case law.

   The consequences of the majority’s methodology would
surely befuddle a layman. On the one hand, the majority finds
that the term “negligent publication” cannot encompass the
definition that Sony proposes because none of the cases “use
the term as broadly as Sony does.” Maj. Op. 8762. On the
other hand, the majority acknowledges that “the cases do not
yield one clear definition of ‘negligent publication.’ ” Maj.
Op. 8762. The very fact, however, that courts across the coun-
try have applied the phrase “negligent publication” liberally
and loosely to a broad variety of claims and theories of recov-
ery is evidence that each of those courts is individually apply-
ing the plain meaning of the phrase. If the phrase does not
have a consistent meaning, cited by the majority, then why
prefer the cases over the dictionary?

   The only commonality in the “variety of cases” cited by the
majority involving the phrase “negligent publication” is that
all of them use a definition that is consistent with the ordinary
or popular meaning of the words. That is, they all involve the
publication of something in a negligent matter. Although it is
true that none of the cases encompass Sony’s proffered defini-
tion, I am puzzled as to why cases that “do not yield one clear
definition of ‘negligent publication’ ” should be seen as a
“limited set.” Maj. Op. 8762. If the first court to use the
phrase had been deemed to have created a closed set, then
none of the subsequent cases could have created separate defi-
nitions. I am unaware that Sony missed any secret deadline
after which a term may no longer be used in new judicial con-
texts, and the possible usages for the term is closed to the con-
8780          SONY v. AMERICAN HOME ASSURANCE
junction of the ways in which it had thus far been used.
Absent such a deadline, I would do what every court to have
used the phrase “negligent publication” has done, and I would
look to the plain meaning of the words to determine their
meaning. That plain meaning is better determined by looking
in a dictionary than in court cases.

                             III

   Having concluded that the policy’s affirmative insuring
agreements create coverage for Sony’s disputed claim, I next
turn to the exclusions, to determine whether coverage has
been otherwise excluded. See Stanford Ranch, 89 F.3d at 627.
Exclusion P of the policy disallows coverage for claims “aris-
ing out of false advertising or misrepresentation in advertis-
ing.” This language removes Sony’s claim from the coverage
granted it by the “negligent publication” provision. Exclusion
P, however, then states: “[h]owever, we will defend suits
alleging any of the foregoing conduct until there is a judg-
ment, final adjudication, adverse admission or finding of fact
against [Sony].” Although Exclusion P excludes indemnity
coverage of Sony’s claim, it affirms a duty to defend. Conse-
quently, I would conclude that AISLIC had a duty to defend
Sony’s claims and would reverse that portion of the district
court’s judgment.