Court Opinion

ID: 4575384
Source: CourtListenerOpinion
Date Created: 2020-10-09 21:01:23.112151+00
Date Added: 2024-06-11T13:32:03.182554
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                        OCT 9 2020
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

UNITY COURIER SERVICE, INC., a                  No.    19-56168
California corporation; ALI SHARIFI,
                                                D.C. No.
                Plaintiffs-Appellants,          2:18-cv-08143-RGK-GJS

 v.
                                                MEMORANDUM*
HUDSON INSURANCE COMPANY,

                Defendant-Appellee.

                   Appeal from the United States District Court
                      for the Central District of California
                   R. Gary Klausner, District Judge, Presiding

                            Submitted October 7, 2020**
                               Pasadena, California

Before: M. SMITH and OWENS, Circuit Judges, and CARDONE, *** District
Judge.

      Unity Courier Service, Inc., and Ali Sharifi (collectively, “Unity”) appeal

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
      ***
            The Honorable Kathleen Cardone, United States District Judge for the
Western District of Texas, sitting by designation.
from the district court’s summary judgment in favor of Hudson Insurance

Company (“Hudson”) in a diversity insurance coverage action arising out of

Hudson’s refusal to defend Unity in an underlying state court class action

(“underlying action”). “We review de novo a district court’s decision to grant

summary judgment.” Weber v. Allergan, Inc., 940 F.3d 1106, 1110 (9th Cir.

2019). As the parties are familiar with the facts, we do not recount them here. We

affirm.

      “Under California law, an insurer must defend its insured ‘if the underlying

complaint alleges the insured’s liability for damages potentially covered under the

policy, or if the complaint might be amended to give rise to a liability that would

be covered under the policy.’” Manzarek v. St. Paul Fire & Marine Ins. Co., 519

F.3d 1025, 1031 (9th Cir. 2008) (quoting Montrose Chem. Corp. v. Superior Court,

861 P.2d 1153, 1160 (Cal. 1993)). “The determination whether the insurer owes a

duty to defend usually is made in the first instance by comparing the allegations of

the complaint with the terms of the policy.” Id. (quoting Montrose Chem. Corp.,

861 P.2d at 1157).

      Here, the district court properly determined that Hudson’s duty to defend

was not triggered because Unity failed to raise a genuine dispute of material fact

that the underlying action was potentially covered, or might be amended to be

covered, under the insurance policy. See id. Contrary to Unity’s contention, the

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underlying action was not potentially covered by a provision of the insurance

policy stating that an “Employment Practices Wrongful Act” includes an alleged

“breach of any oral, written, or implied employment contract, including, without

limitation, any obligation arising from a personnel manual, employee handbook, or

policy statement.”

      The underlying action’s allegation that Unity had a policy and practice that

failed to properly reimburse its delivery drivers for employment-related expenses

in violation of California labor law was not potentially covered by this provision

because the underlying action did not allege the “breach” of an obligation arising

from an employee handbook or policy statement. Rather, the underlying action

alleged that Unity followed its own expense reimbursement policy. Under the

plain language of the insurance policy, it is insufficient that the allegation merely

arose from an employee handbook or policy statement.

      Likewise, the underlying action’s allegation that Unity misrepresented that

its policies complied with all applicable laws also did not allege a potentially

covered Employment Practices Wrongful Act. Following Unity’s suggested

interpretation would strain the insurance policy language by rendering superfluous

the other Employment Practices Wrongful Act provisions which limit coverage to

specific claims. See Producers Dairy Delivery Co. v. Sentry Ins. Co., 718 P.2d

920, 925 (Cal. 1986) (stating that words in a policy “must be read in their ordinary

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sense” and an “ambiguity cannot be based on a strained interpretation of the policy

language”).

      Finally, the district court properly determined that Unity failed to raise a

genuine dispute of material fact that Hudson did not undertake a reasonable

investigation before denying a duty to defend the underlying action. See Am. Int’l

Bank v. Fidelity & Deposit Co., 57 Cal. Rptr. 2d 567, 574-75 (Ct. App. 1996)

(holding that the insurer conducted a reasonable investigation by reviewing the

complaint and the insurance policy). Unity contends that if Hudson had conducted

a reasonable investigation, it would have discovered that Unity had an employee

handbook which contained a policy statement regarding expense reimbursement.

However, as discussed above, even if Hudson had discovered the existence of an

employee handbook with such a policy statement, it would not have altered the

coverage determination because the underlying action did not allege a “breach” of

that policy statement.

      AFFIRMED.

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