Aaron Kaufman v. Federal Ins. Co. ( 2020 )

FILED
NOT FOR PUBLICATION
JUN 19 2020
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
AARON KAUFMAN, No. 19-55603
Plaintiff-Appellant, D.C. No.
2:18-cv-00844-ODW-MRW
v.
FEDERAL INSURANCE COMPANY; MEMORANDUM*
CHUBB NATIONAL INSURANCE
COMPANY,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
Otis D. Wright II, District Judge, Presiding
Submitted May 6, 2020**
Pasadena, California
Before: GOULD and CHRISTEN, Circuit Judges, and STEIN,*** District Judge.
*
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 Sidney H. Stein, United States District Judge for the
Southern District of New York, sitting by designation.
Plaintiff Aaron Kaufman appeals the district court’s order granting summary
judgment in favor of Defendants Federal Insurance Company and Chubb National
Insurance Company (“Defendants”). Kaufman alleged that Defendants owed him a
duty to defend under his homeowners insurance policy in an underlying action
against his former employer, Blue Shield of California (“Blue Shield”).1 In the
underlying action initiated by Kaufman, Blue Shield filed a cross-complaint
alleging fraud, breach of fiduciary duty, breach of the duty of loyalty, conversion,
and negligent misrepresentation. The claims related to Kaufman’s alleged misuse
of his company credit card. The insurer denied coverage, and Kaufman filed this
action. The district court concluded that the underlying cross-complaint filed by
Blue Shield did not trigger a duty to defend because it did not raise a potential
claim for defamation, libel, or slander, as required under the relevant policy, and
therefore granted summary judgment in favor of Defendants. We review the
district court’s order de novo. St. Surfing, LLC v. Great Am. E & S Ins. Co., 776
F.3d 603, 607 (9th Cir. 2014). We have jurisdiction pursuant to 28 U.S.C. § 1291,
and we affirm.
1
Because the parties are familiar with the facts, we recite only those
facts necessary to resolve this appeal.
2
1. Under California law, “[a] liability insurer owes a broad duty to defend
its insured against claims that create a potential for indemnity.” Montrose Chem.
Corp. of Cal. v. Superior Court, 861 P.2d 1153, 1157 (Cal. 1993) (quoting Horace
Mann Ins. Co. v. Barbara B., 846 P.2d 792, 795 (Cal. 1993)). The insurer has a
“duty to defend where, under the facts alleged, reasonably inferable, or otherwise
known, the complaint could fairly be amended to state a covered liability.”
Scottsdale Ins. Co. v. MV Transp., 115 P.3d 460, 466 (Cal. 2005).
Under the relevant policy, the insurer was obligated to “cover damages [that
Kaufman became] legally obligated to pay for personal injury or property damage
which [took] place anytime during the policy period and [were] caused by an
occurrence.” “‘Personal injury’ means the following injuries[:] . . . libel, slander,
[or] defamation of character . . . .”
Under California law, “[t]he tort of defamation ‘involves (a) a publication
that is (b) false, (c) defamatory, and (d) unprivileged, and that (e) has a natural
tendency to injure or that causes special damage.’” Taus v. Loftus, 151 P.3d 1185,
1209 (Cal. 2007) (quoting 5 B.E. Witkin, Summary of California Law § 529, at 782
(10th ed. 2005)). Defamation may be effected by either libel or slander. Cal. Civ.
Code § 44; see also id. §§ 45–46.
3
Here, Blue Shield’s factual allegations did not raise the possibility of
liability for a defamation claim. Blue Shield did not allege any publication or
utterance by Kaufman about Blue Shield, false or otherwise. Where the facts
known to the insurer, whether alleged or extrinsic, omit an essential element of the
cause of action, there is no potential for liability, and thus no duty to defend. See,
e.g., Shanahan v. State Farm Gen. Ins. Co., 122 Cal. Rptr. 3d 572, 579 (Ct. App.
2011) (concluding that there was no potential for liability for slander, and thus no
duty to defend, because “the complaint did not allege a publication, a necessary
element of slander”). Nor did Blue Shield allege that Kaufman undertook any
conduct that was “reasonably susceptible of a defamatory meaning” concerning
Blue Shield. See Phelan v. May Dep’t Stores Co., 819 N.E.2d 550, 554 (Mass.
2004).
On appeal, Kaufman relies heavily on references in Blue Shield’s complaint
to “reputational damage.” But Blue Shield identified this “reputational damage” as
its reason for terminating Kaufman, not as an injury caused by a false and injurious
publication made by Kaufman.
2. Kaufman also appeals the district court’s order granting summary
judgment in favor of Defendants on his claim for breach of the implied covenant of
good faith and fair dealing. But “[i]t is clear that if there is . . . no duty to defend
4
under the terms of the policy, there can be no action for breach of the implied
covenant of good faith and fair dealing because the covenant is based on the
contractual relationship between the insured and the insurer.” Waller v. Truck Ins.
Exch., Inc., 900 P.2d 619, 639 (Cal. 1995).
AFFIRMED.
5