Court Opinion

ID: 4586290
Source: CourtListenerOpinion
Date Created: 2020-11-13 21:00:25.243609+00
Date Added: 2024-06-11T13:48:08.519869
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                       NOV 13 2020
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

OFFICE DEPOT, INC.,                             No.    19-55819

                Plaintiff-Appellant,            D.C. No.
                                                2:15-cv-02416-SVW-JPR
 v.

AIG SPECIALTY INSURANCE                         MEMORANDUM*
COMPANY, FKA American International
Specialty Lines Insurance Company,

                Defendant-Appellee.

                   Appeal from the United States District Court
                       for the Central District of California
                   Stephen V. Wilson, District Judge, Presiding

                     Argued and Submitted September 2, 2020
                              Pasadena, California

Before: SILER,** BERZON, and LEE, Circuit Judges.

      Office Depot, Inc. (“Office Depot”) appeals the district court’s award of

summary judgment in favor of AIG Specialty Insurance Company (“AIG”). We

affirm.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
            The Honorable Eugene E. Siler, United States Circuit Judge for the
U.S. Court of Appeals for the Sixth Circuit, sitting by designation.
      The district court held that AIG did not have a duty to defend or indemnify

Office Depot in a 2011 California False Claims Act lawsuit. The court reasoned that

the claims alleged in the underlying lawsuit (“Sherwin lawsuit”) do not fall within

the scope of the relevant insuring agreement and, even if they did, multiple policy

exclusions preclude coverage.

      We review de novo the district court’s decision on cross-motions for summary

judgment. See St. Surfing, LLC v. Great Am. E & S Ins. Co., 776 F.3d 603, 607 (9th

Cir. 2014). We affirm the district court’s decision on the basis that the Sherwin

lawsuit falls under the “Contract Exclusion.”

      1.     The “Contract Exclusion” of the insurance agreement precludes

coverage of any claim “alleging, arising out of or resulting, directly or indirectly,

from any liability or obligation under any contract or agreement or out of any breach

of contract.” This exclusion does not apply to liabilities or obligations “an insured

would have in the absence of such contract or agreement.” Under California law,

the term “arising out of” requires “only a minimal causal connection or incidental

relationship.” Travelers Prop. Cas. Co. v. Actavis, Inc., 225 Cal. Rptr. 3d 5, 21 (Cal.

Ct. App. 2017) (“This broad interpretation of ‘arising out of’ applies to both

coverage provisions and exclusions.”). These clauses also exclude coverage of tort

claims which could not exist without the relevant underlying contracts. See Medill

v. Westport Insurance Co., 49 Cal. Rptr. 3d 570, 578–80 (Cal. Ct. App. 2006)

                                          2                                    19-55819
(holding negligence and breach of fiduciary duty claims against directors were

excluded under the contract).1

      Here, the allegations of the Sherwin lawsuit, directly, and indirectly, arose out

of Office Depot’s contractual obligations under the Master Agreements and USC

contract. This suit is based primarily on two contracts between Office Depot and

Los Angeles County. In Office Depot’s own words “[t]he heart of this suit is the

contention that Office Depot overcharged California government entities under the

terms of particular contracts.” Office Depot’s in-house counsel testified that “the

claims are related to [Office Depot’s] performance or nonperformance under [Office

Depot’s] government contracts . . . this is a complaint for violation of the False

Claims Act, but the claims and the allegations that he made were related to our

performance or nonperformance of our government contracts.” We conclude, noting

the uncomfortable breadth of such contract exclusions, that the allegations in the

Sherwin lawsuit are premised directly or indirectly on Office Depot’s contractual

1
  The Medill court considered the breach of contract language in the context of
coverage provisions. Specifically, the court considered whether the claims in the
underlying lawsuit were covered because the policy’s definition of a covered
“loss” was defined in the policy not to include “damages ‘arising out of breach of
any contract.’” Medill, 49 Cal. Rptr. 3d at 578. Although the present case
considers the breach of contract language in the context of an exclusion, as
opposed to a definition within the scope of coverage, the court’s analysis in Medill
is still instructive.

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obligations and therefore the lawsuit is precluded from coverage under the contract

exclusion.

      2.     An insurer’s duty to indemnify arises when there is coverage of the

claim determined in light of the facts. See Buss v. Superior Ct., 939 P.2d 766, 773

n.10 (Cal. 1997). Based on the analysis of contract exclusion, the Sherwin lawsuit

is not covered under Office Depot’s policy with AIG. Therefore, we conclude that

AIG did not have a duty to indemnify Office Depot and affirm the district court.

Because there was no duty to defend or indemnify Office Depot, we decline to rule

on the other exclusions raised by the insurer.

      AFFIRMED.

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