Court Opinion

ID: 4036776
Source: CourtListenerOpinion
Date Created: 2016-09-24 00:03:45.978526+00
Date Added: 2024-06-11T14:49:56.023433
License: Public Domain

Filed 9/23/16 Golden Eagle Ins. Corp. v. Munoz CA4/3

                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     FOURTH APPELLATE DISTRICT

                                                DIVISION THREE

GOLDEN EAGLE INSURANCE
CORPORATION,
                                                                       G052223
     Plaintiff and Respondent,
                                                                       (Super. Ct. No. 30-2014-00713009)
         v.
                                                                       OPINION
ALANA MUNOZ,

     Defendant and Appellant,

                   Appeal from a judgment of the Superior Court of Orange County, Peter J.
Wilson, Judge. Affirmed.
                   Law Office of John P. Yasuda and John P. Yasuda for Defendant and
Appellant.
                   Edwards & Hunter, Richard P. Edwards and Ellen E. Hunter for Plaintiff
and Respondent.
               Alana Munoz appeals from the trial court’s grant of Golden Eagle
Insurance Corporation’s (Golden Eagle) motion for summary judgment in Golden
Eagle’s declaratory relief action against Munoz, Sirous & Sons Rug Gallery, Inc. (S&S)
and Saeid Maralan. In a separate action, Munoz sued S&S and Maralan seeking damages
for personal injury caused by sexual assault and harassment (Munoz Action). Munoz
contends Golden Eagle has a duty to defend S&S and Maralan because there is possibility
of coverage for some of her claims against them. We conclude the trial court correctly
decided there was no triable issue of fact and affirm the judgment.
                                          FACTS
               The following factual summary is taken from the operative complaint.
S&S is a shop in Laguna Beach that sells Persian rugs. S&S knew Maralan was a
registered sex offender and hired him anyway.
               In August 2010 Munoz, a female minor, went to S&S looking for a job.
Maralan offered Munoz employment, and she started work a few days later. When
Munoz arrived for her first day, Maralan “hugged her and kissed her on both sides of the
lips.” He then “took her by the hand and asked if she would do something for him” and
“again hugged her and kissed her on the lips.” He “gave her a $100 bill and asked her to
go get some ice cream” and “repeatedly told her how beautiful she was.” A few days
later, Munoz returned to work. While there, Maralan began “caressing her face, arms and
her head.” He gave her $100 to make some photocopies and told her to keep the change.
He later told her to come into the vault where “he pulled her close to him and tried to kiss
her . . . .”
               Munoz brought a lawsuit against both Maralan and S&S for sexual
harassment, and assault and battery. Munoz sued Maralan individually for false
imprisonment and intentional infliction of emotional distress (IIED). She alleged the
following causes of action against S&S: (1) negligence in hiring and supervising
Maralan; (2) wrongful termination in violation of public policy; (3) constructive

                                             2
termination; and (4) failure to take reasonable steps to prevent harassment from occurring
pursuant to Government Code section 12940, subdivision (k).
              Golden Eagle issued to S&S a Commercial General Liability policy (CGL
policy), which was in effect from March 1, 2010, to March 1, 2011. The CGL policy
provides coverage for sums the insured becomes legally obligated to pay as damages
because of bodily injury only if the bodily injury is caused by an occurrence that takes
place in the coverage territory. The policy defines occurrence to mean an accident,
including continuous or repeated exposure to substantially the same general harmful
conditions. The policy also includes an employment-related practices exclusion, which
excludes coverage to bodily injury to a person arising out of termination of that person’s
employment or employment-related practices, policies, acts, or omissions, such as
coercion, harassment, and humiliation. The exclusion applies whether the insured may
be liable as an employer or in any other capacity. In addition, the policy contains a
“Separation Of Insureds” clause stating the insurance applies separately to each insured
against whom a claim is made.
              In 2014 Golden Eagle filed a declaratory relief action (GE Action) to
adjudicate whether Golden Eagle has an obligation to defend and/or indemnify any
defendant in the Munoz Action. Golden Eagle named Munoz, Maralan, and S&S as
defendants. In its complaint, Golden Eagle maintained there was no insurance coverage
because the Munoz Action alleged intentional acts and allegations falling under several
exclusions, including the employment-related practices exclusion (ERP exclusion).
              Munoz filed a motion for summary judgment in the GE Action. She
alleged Golden Eagle could not establish as a matter of law that no possibility of
coverage existed in the underling Munoz Action.
              Golden Eagle then filed its own motion for summary judgment asserting
the ERP exclusion “is a broad exclusionary endorsement which excludes, without
qualification, coverage for the harassment of Munoz.” The court heard both motions and

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granted Golden Eagle’s motion for summary judgment, ruling “there [was] no potential
for coverage under the policies of insurance issued by Golden Eagle.” In the court’s
minute order, the court stated it declined to rule on Munoz’s motion because it was
procedurally defective. It added, Munoz’s arguments in support of her motion were
addressed in her opposition to Golden Eagle’s motion and were therefore considered.
                                       DISCUSSION
              On appeal, Munoz makes the following arguments: (1) Golden Eagle
erroneously included in its summary judgment motion mere allegations mentioned in her
unverified third amended complaint to prove Maralan’s actions were intentional and
therefore precluded from coverage; (2) the term “occurrence” used in the CGL policy is
ambiguous; (3) the “Separation of Insured” clause contained in the CGL policy requires a
separate analysis of insurance coverage for S&S apart from Maralan; and (4) Golden
Eagle did not meet its initial burden of proof and therefore the burden did not shift to
Munoz.        Noticeably absent from her opening brief is any discussion of the policy’s
ERP exclusion. We conclude all causes of action raised in the Munoz Action fell within
this exclusion. The court correctly determined there was no potential for coverage under
the policy.
A. Standard of Review
              “We review de novo an order granting summary judgment. [Citation]. We
need only address sufficient grounds to affirm. [Citation.] [¶] The meaning of the policy
is a legal question. [Citation.] ‘“To prevail [on the issue of the duty to defend], the
insured must prove the existence of a potential for coverage, while the insurer must
establish the absence of any such potential. In other words, the insured need only show
that the underlying claim may fall within policy coverage; the insurer must prove it
cannot. . . .” [¶] Nevertheless, the obligation to defend is not without limits. “Rather,
such a duty is limited by ‘the nature and kind of risk covered by the policy.’” [Citations.]
“‘[T]he duty to defend derives from the insurer’s coverage obligations assumed under the

                                              4
insurance contract.’ [Citation.] Thus, ‘where there is no potential for coverage, there is
no duty to defend.’”’ [Citations.] [¶] In assessing coverage and exclusion issues, we
look primarily to the allegations of the underlying complaint: Ambiguities are construed
in favor of the insured. [Citation.]” (Uhrich v. State Farm Fire & Casualty Co. (2003)
109 Cal.App.4th 598, 607-608.)
B. The ERP Exclusion Applies
                Insurers have authority to exclude policy coverage. “‘Coverage may be
limited by a valid endorsement. . . . But to be enforceable, any provision that takes away
or limits coverage reasonably expected by an insured must be “conspicuous, plain and
clear.”’ [Citation.]” (Esparza v. Burlington Ins. Co. (E.D.Cal. 2011) 866 F.Supp.2d
1185, 1201.)
                In this case, the ERP exclusion provided as follows: “This insurance does
not apply to: [¶] ‘Bodily injury’ to: [¶]
                “(1) A person arising out of any:
                “(a) Refusal to employ that person;
                “(b) Termination of that person’s employment; or
                “(c) Employment-related practices, policies, act or omissions, such as
                coercion, demotion, evaluation, reassignment, discipline, defamation,
                harassment, humiliation or discrimination directed at that person; or
                “(2) The spouse, child, parent, brother or sister of that person . . . .
                “This exclusion applies:
                “(1) Whether the insured may be liable as an employer or in any other
capacity; and
                “(2) To any obligation to share damages with or repay someone else who
must pay damages because of the injury.”

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              Several courts have interpreted the language of this exclusion as having a
very broad scope. For example, in Jon Davler Inc. v. Arch Ins. Co. (2014)
229 Cal.App.4th 1025 (Jon Davler), the employer, Davler, brought an insurance coverage
action against its insurer. Davler’s manager, Yang, became enraged when she found a
used sanitary napkin near the women’s toilet and she forced every female employee to
undergo inspection to determine if they were on their menstrual period and the possible
source of the napkin. (Id. at p. 1029.) Several employees brought a false imprisonment
and sexual harassment suit against Davler and Yang. (Ibid.) Davler tendered defense to
its insurer under its commercial general liability policy that provided coverage for
injuries “‘arising out of’” “‘[f]alse arrest, detention[,] or imprisonment.’” (Id. at p. 1030.)
The insurer declined coverage because the policy also had an employment-related
practices exclusion (almost identical to the one in the case before us.)
              The ERP exclusion in the Jon Davler case stated, “that the coverage for
personal and advertising injury did not apply to an injury arising out of any refusal to
employ a person, termination of a person’s employment, or [e]mployment-related
practices, policies, acts or omissions such as coercion, demotion, evaluation,
reassignment, discipline, defamation, harassment, humiliation, discrimination or
malicious prosecution directed at that person . . . .” (Jon Davler, supra, 229 Cal.App.4th
at p. 1030.) The court sustained the insurers’ demurrer to Davler’s breach of contract
action, holding the employees’ suit fell within the ERP exclusion. The appellate court
agreed, rejecting Davler’s claim the ERP exclusion was ambiguous or did not apply to
false imprisonment claims. (Id. at p. 1033.)
              The Jon Davler court concluded, “The phrase ‘such as’ is ‘not intended to
be exhaustive’ [citation] and is ‘“illustrative and not limitative”’ [citation]. The use of
the phrase ‘such as’ in an exclusion is ‘nonexclusive’ and ‘“‘is not a phrase of strict
limitation, but is a phrase of general similitude indicating that there are includable other
matters of the same kind which are not specifically enumerated.’”’ [Citations.]” (Jon

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Davler, supra, 229 Cal.App.4th at pp. 1033-1034.) Similarly, the court noted the ERP
exclusions’ use of the term “arising out of” must be broadly interpreted to link events
with the exclusion. (Id. at p. 1035.) “‘“California courts have consistently given a broad
interpretation to the terms ‘arising out of’ or ‘arising from’ in various kinds of insurance
provisions. It is settled that this language does not import any particular standard of
causation or theory of liability into an insurance policy. Rather, it broadly links a factual
situation with the event creating liability, and connotes only a minimal causal connection
or incidental relationship.”’ [Citations.]” (Ibid.)
              The court determined the Davler employees’ injuries caused by their false
imprisonment arose out of their employment. (Jon Davler, supra, 229 Cal.App.4th at
p. 1035.) The court reached this conclusion after applying the two part test outlined in
Low v. Golden Eagle Ins. Co. (2002) 104 Cal.App.4th 306 (Low). The “‘factors relevant
to the . . . determination’ of whether the events in the underlying action were within the
scope of the employment-related practices exclusion ‘include (1) the nexus between the
allegedly defamatory statement (or other tort) at issue and the third party plaintiff’s
employment by the insured, and (2) the existence (or nonexistence) of a relationship
between the employer and the third party plaintiff outside the employment relationship.’
[Citation.]” (Jon Davler, supra, 229 Cal.App.4th at p. 1035, citing Low, supra,
104 Cal.App.4th at p. 314.)
              The Jon Davler court, considering these two factors, concluded “the nexus
between the ‘other tort’ (i.e., false imprisonment) and the employees’ employment with
. . . Davler was as close as a nexus can be: the only reason the employees were forced
into the bathroom for inspection was that they were employed by . . . Davler, were
following a directive from a supervisor at their place of employment, and would lose
their jobs if they did not comply with the inspection demand. And there was nothing in
the allegations of the complaint in the underlying action suggesting that there was any
relationship between . . . Davler and the employees subject to the inspection other than

                                              7
the employer-employee relationship. Indeed, cases involving strip searches of employees
have held that the employment-related practices exclusion applies to bar coverage.
[Citations.]” (Jon Davler, supra, 229 Cal.App.4th at pp. 1035-1036.)
              The court rejected Davler’s argument the exclusion’s language was
ambiguous because the term “employment-related” was not properly defined in the
policy. “‘The term [employment-related] is not technical in nature. It is used in its
ordinary sense, i.e., related to employment. As a term, it modifies the specified acts
(including defamation) as well as the terms “practices, policies, acts or omissions.” The
clear meaning of . . . the exclusion is coverage for practices, policies, acts or omissions
which are related to employment, including employment-related defamation.’
[Citations.]” (Jon Davler, supra, 229 Cal.App.4th at p. 1037.) The court recognized the
ERP exclusion did not list false imprisonment as one of the examples of an employment-
related practice, policy, act or omission. However, it determined this did not matter
because the exclusion’s language “provides a nonexhaustive list of examples of
employment-related practices, policies, acts or omissions, so that other practices, policies,
acts or omissions may qualify as employment related. [Citation.]” (Ibid.)
              Finally, the Jon Davler court explained why the exclusion satisfied the
“plain and clear language” required for all insurance policy exclusions. It reasoned, “An
average layperson would understand that the exclusion applies to a category of claims:
those arising in the employment setting. An average person knows what employment is.
[Citations.] . . . Unlike technical legal or medical terms, ‘employment-related’ and
‘arising out of employment’ are not terms or phrases that average persons cannot
understand. [Citation.]” (Jon Davler, supra, 229 Cal.App.4th at pp. 1040-1041.)
              The ERP exclusion in our case is similarly unambiguous and applies to
Munoz’s claims. We begin with her claims for sexual harassment, assault, battery, false
imprisonment, and IIED against Maralan individually. The ERP exclusion expressly
excludes coverage for coercion, harassment, and humiliation. As stated in the Jon Davler

                                              8
case, the exclusion also applies to false imprisonment and other torts occurring in the
workplace. (Jon Davler, supra, 229 Cal.App.4th at pp. 1035-1036.) Applying the two
factors used by Low and Jon Davler courts, we conclude the nexus between the alleged
torts and Munoz’s employment was “as close as a nexus can be” (id. at p. 1035), because
the only reason she suffered her injuries was because she was hired by S&S and directly
supervised by Maralan. There are no facts suggesting there was any other relationship
between S&S and Maralan and Munoz other than an employer-employee relationship.
                 Turning to Munoz’s claims against S&S, we reach the same result. She
raised the following causes of action against S&S: (1) negligence in hiring and
supervising Maralan; (2) wrongful termination in violation of public policy;
(3) constructive termination; and (4) failure to take reasonable steps to prevent
harassment from occurring pursuant to Government Code section 12940, subdivision (k).
In her reply brief, Munoz only focuses on the causes of action alleging S&S’s negligence
in hiring, supervising, and retaining Maralan and argues these claims were not meant to
be included in the policy’s ERP exclusion for three reasons. We are not convinced by her
             1
arguments.
                 First, Munoz argues S&S’s negligent conduct is not specifically
enumerated in the ERP exclusion’s list of causes of action. As mentioned earlier, this
same argument was rejected in the Jon Davler case. It held that although false
imprisonment was not expressly listed in the exclusion as an example of an employment
related practice, the policy listed the examples after the phrase “such as” signifying it was
a nonexhaustive list. (Jon Davler, supra, 229 Cal.App.4th at p. 1038.) The exclusion’s
list is “examples of employment-related practices, policies, acts[,] or omissions, so that

1
              We consider any purported challenge to the other claims falling within the
exclusion as being waived because they are not mentioned in either the opening or reply
brief. Appellate briefs must provide argument and legal authority for the positions taken.
In the absence of legal argument, the issue is deemed waived. (Pringle v. LaChapelle
(1999) 73 Cal.App.4th 1000, 1003, fn. 2.)

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other practices, policies, acts[,] or omissions may qualify as employment related.
[Citation.]” (Id. at p. 1037, italics added.) Like the Jon Davler ERP exclusion, the one in
this case clearly provides “that injuries arising out of all kinds of employment-related
practices, including those listed as examples, are subject to the exclusion.” (Id. at
p. 1038.)
              Second, Munoz argues the actions listed in the exclusion are “intentional”
and not “negligent based actions,” which is significant because negligent actions are
covered by the policy. This same argument was also rejected in the Jon Davler case. In
that case the policy generally covered injuries arising out of false imprisonment, but
nevertheless the court held the employees’ claim of being falsely imprisoned by their
supervisor during their workday to check for sanitary napkins fell within the ERP
exclusion. (Jon Davler, supra, 229 Cal.App.4th at p. 1034.)
              To the extent Munoz is suggesting the ERP exclusion only relates to
intentional torts, she failed to supply any legal authority to support this theory, and we
found none. In the Jon Davler case, the court noted the tort of false imprisonment shared
a “general similitude with several of the matters specifically enumerated in the
employment-related practices exclusion, such as coercion, discipline, and harassment.”
(Jon Davler, supra, 229 Cal.App.4th at p. 1034.) However, it never indicated the
exception only covered intentional tortuous conduct. Rather, the court determined the
policy language was written to broadly cover any bodily injury arising out of “all kinds of
employment-related practices” between the insured and its employee. (Id. at p. 1038.)
The exclusion is unqualified and an average layperson knows employment practices
encompass both intentional and negligent actions. Certainly the hiring and supervision of
a supervisor falls within the scope of “employment-related practices.”

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                Other jurisdictions agree negligent supervision and hiring are included in
ERP exclusions. For example, in Parts Inc. v. Utica Mut. Ins. Co. (D.Md. 2009)
602 F.Supp.2d 617 (Parts Inc.), a 17-year-old female employee of an auto supply store
sued, alleging sexual harassment by her supervisor and alleged the store (B&J) was liable
for negligent retention and supervision. The court held the insurance company’s ERP
exclusion precluded coverage and any duty to defend B&J for its “alleged failure to
properly supervise and restrain [the girl’s] supervisor during her employment with B&J.”
(Id. at p. 623) The court explained, “Although the exclusion does not explicitly list
supervision and retention, the exclusion’s use of the term ‘such as’ indicates that the list
of employment-related practices is neither exhaustive nor exclusive.” (Id. at p. 623; see
also Agricultural Ins. Co. v. Focus Homes, Inc. (8th Cir. 2000) 212 F.3d 407, 411
[finding exclusion applies to claims for sexual harassment, assault and battery, IIED,
negligent infliction of emotional distress, negligent hiring and supervision, whistle
blower, and aiding and abetting because “[e]ach of these claims turns on employment
practices”].)
                Finally, we turn to Munoz’s third argument. She maintains S&S’s actions
must be considered separate from Maralan’s actions. She reads the ERP exclusion to
preclude coverage for injuries to “a person” arising out of employment-related practices
“directed at that person.” Munoz argues she was the person who sustained bodily injury
but S&S’s actions (of negligent hiring, supervision, and retention) were not directed
towards her. She maintains the cause of action describes conduct directed towards
Maralan. In other words, Munoz believes the exclusion only applies to employment
related practices, policies, or omissions directed at the person claiming injury. Not so.
                The exclusion applies to employment related practices directed at the
person claiming injury “or” their family members. More importantly, the policy
expressly provides the “exclusion applies” regardless of “[w]hether the insured may be
liable as an employer or in any other capacity” and applies “[t]o any obligation to share

                                              11
damages with or repay someone else who must pay damages because of the injury.” The
exclusion expressly applies regardless of the capacity in which R&R is found liable for
Munoz’s sexual harassment injuries in the workplace. A layperson would plainly
understand the focus of the ERP exclusion is the injury and causes rather than the specific
pleaded claims asserted against the insured. (See e.g. Northwest G.F. Mut. Ins. Co. v.
Norgard (N.D. 1994) 518 N.W.2d 179, 184 [coverage turns on injury’s cause not legal
theory asserted].) Here, it was alleged R&R’s misconduct in hiring, supervising, and
retaining Maralan facilitated and resulted in the acts of sexual harassment that caused
Munoz’s injuries. For all the reasons stated above, we conclude the ERP exclusion
precludes coverage for all claims alleged against both S&S and Maralan. The trial court
properly granted the summary judgment motion.
                                     DISPOSITION
              The judgment is affirmed. Respondent shall recover its costs on appeal.

                                                 O’LEARY, P. J.

WE CONCUR:

MOORE, J.

THOMPSON, J.

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