Illinois Union Insurance Co. v. Brookstreet Securities Corp. , 444 F. App'x 194 ( 2011 )

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT JUL 20 2011
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
ILLINOIS UNION INSURANCE No. 10-55060
COMPANY,
D.C. No. 8:07-cv-01095-CJC-RNB
Plaintiff - Appellee,
v. MEMORANDUM*
BROOKSTREET SECURITIES
CORPORATION; et al.,
Defendants,
and
JUDITH L. CHIOSSO-GLASS,
Defendant - Appellant.
Appeal from the United States District Court
for the Central District of California
Cormac J. Carney, District Judge, Presiding
Argued and Submitted June 9, 2011
Pasadena, California
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Before: B. FLETCHER, and N.R. SMITH, Circuit Judges, and BREWSTER,
Senior District Judge.**
We affirm the district court’s order granting summary judgment in favor of
the Appellee/Insurer, Illinois Union Insurance Company.
The professional liability insurance policy provides, in relevant part, the
following exclusion:
The Insurer shall not be liable for Loss on account of any Claim
made against any Insured:
....
W. Based upon, arising out of, or attributable to the sale,
attempted sale, or servicing of:
1. Commodities, commodity future contracts, any type of
option contract or derivative.
The policy clearly excluded losses arising out of investments in derivatives. The
collateralized mortgage bonds in Appellant’s portfolio were derivatives.1
Appellant argues that part of her damage arises out of conduct that is separate
and apart from the sale of derivatives. She contends that the Insured, Brookstreet
Securities Corporation, breached its fiduciary duty, committed fraud, made
misrepresentations, omitted material facts, acted negligently, and violated state and
federal securities laws before buying derivatives. Appellant argues the insurance
**
The Honorable Rudi M. Brewster, Senior United States District Judge
for the Southern District of California, sitting by designation.
1
The district court held that collateralized mortgage bonds fell within
the definition of derivatives. Appellant did not appeal that issue.
-2-
policy covers this distinct conduct under a theory of concurrent causation or
efficient proximate cause analysis. See, e.g., State Farm Mut. Auto. Ins. Co. v.
Partridge, 514 P.2d 123, 129–32 (Cal. 1973).
We are not persuaded by this argument. The exclusion at issue in this case
applies irrespective of the legal theory of recovery asserted against the Insured. See
Century Transit Sys., Inc. v. Am. Empire Surplus Lines Ins. Co., 49 Cal. Rptr. 2d
567, 571 (Ct. App. 1996). The plain terms of the policy exclude coverage for any
loss attributable to an investment in derivatives. The fact that the Insured allegedly
made intentional misrepresentations of fact or breached a fiduciary duty sets up the
purchase of collateralized mortgage bonds. The measure of damages for each and
every claim is loss based upon the purchase and sale of derivatives; therefore, these
claims directly arise from a category of claims arising from a loss specifically
excluded from coverage. See Cont'l Cas. Co. v. City of Richmond, 763 F.2d 1076,
1081–82 (9th Cir. 1985); Century Transit, 49 Cal. Rptr. 2d at 571–72 & n.6.
AFFIRMED.
-3-
FILED
JUL 20 2011
N.R. SMITH, Circuit Judge, concurring in part:
MOLLY C. DWYER, CLERK
Appellant argued in her Reply Brief that she had an actionable claim against APPEALS
U.S. COURT OF
Brookstreet under California’s “concurrent cause doctrine,” notwithstanding the
policy exclusion. See Cont’l Cas. Co. v. City of Richmond, 763 F.2d 1076, 1081
(9th Cir. 1985) (“[U]nder California insurance law, when two different risks
concur in proximately causing a loss, coverage will be upheld if either risk is
covered, notwithstanding the exclusion of the other.” (citing State Farm Mut. Auto.
Ins. Co. v. Partridge, 514 P.2d 123, 129 (Cal. 1973) (emphasis added)). Although
her concurrent cause claim may have merit, Appellant waived this argument by
failing to raise it (1) before the district court, see Hillis v. Heineman, 626 F.3d
1014, 1019 (9th Cir. 2010), and (2) in her Opening Brief, see Dilley v. Gunn, 64
F.3d 1365, 1367 (9th Cir. 1995). We must therefore affirm the district court’s
summary judgment order.