Big 5 Sporting Goods Corp. v. Zurich American Insurance
957 F. Supp. 2d 1135
D. Cal.2013Background
- Big 5 faced multiple class actions (2008 and 2011) alleging violation of the Song‑Beverly Credit Card Act for requesting/recording customer ZIP codes; plaintiffs sought statutory civil penalties, injunctive and other relief; many suits were consolidated.
- Zurich issued CGL policies (2007–2010) with Coverage B for “personal and advertising injury” (includes publication violating privacy) but included statutory‑violation exclusions and $250,000 per‑occurrence SIR endorsements.
- Hartford issued a CGL policy (2010–2011) with similar Coverage B, statutory‑privacy and distribution exclusions, a $250,000 SIR, and exclusions for knowing/intentional acts.
- Insurers initially participated under reservations of rights for some matters and denied or limited reimbursements for others; Big 5 sought declaratory relief and reimbursement of defense costs; insurers moved for summary judgment.
- Key legal disputes: (1) whether Big 5 satisfied the SIR condition precedent, (2) whether policy Coverage B potentially covers the complaints’ allegations, and (3) whether statutory‑violation and related exclusions bar coverage for Song‑Beverly claims and related common‑law privacy/negligence theories.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Big 5 satisfy the $250,000 SIRs so insurers had a duty to reimburse defense costs? | Big 5: SIRs exhausted — either by a single continuing corporate policy (one occurrence) or by discrete publications/payments during each policy year exceeding $250,000. | Zurich/Hartford: SIR is a condition precedent and had not been satisfied for each relevant ‘‘offense’’ or policy period. | Held: Court finds SIRs were satisfied based on submitted payment records per policy periods; condition precedent met. |
| Do the policies’ Coverage B provisions potentially cover the underlying claims (publication invading privacy)? | Big 5: Complaints allege publication/dissemination of ZIP codes; Coverage B’s publication/privacy language creates potential coverage for invasion‑of‑privacy claims. | Insurers: Even if labeled privacy claims, the pleaded facts are statutory Song‑Beverly claims (a statutory right) and fall squarely within policy exclusions. | Held: Big 5 met initial burden to show potential Coverage B exposure, but exclusions control the outcome. |
| Do statutory‑violation / right‑of‑privacy‑created‑by‑statute exclusions bar coverage for Song‑Beverly claims and related relief? | Big 5: Underlying allegations implicate constitutional/common‑law privacy and dissemination theories, not solely statutory rights; exclusions should not categorically bar coverage. | Insurers: Song‑Beverly created a statutory privacy right; policies exclude coverage for personal‑privacy injuries arising from statutory rights or distribution in violation of statutes. | Held: Exclusions applied — Song‑Beverly claims assert a statutory right created by statute, so statutory‑violation exclusions bar coverage. |
| Can civil penalties, restitution or statutory remedies sought in the underlying suits be insured as ‘damages’ under Coverage B? | Big 5: Sought reimbursement for defense costs and argued policies cover ‘‘damages’’ arising from personal and advertising injury. | Insurers: Civil penalties, disgorgement, restitution and statutory fines are not ‘‘damages’’ insurable under these policies; public policy and precedent preclude insuring such relief. | Held: Civil penalties and restitutionary remedies are not insured damages; policies do not cover statutory penalties. |
Key Cases Cited
- Pineda v. Williams‑Sonoma Stores, Inc., 51 Cal.4th 524 (Cal. 2011) (ZIP code is personal identification information under Song‑Beverly)
- Folgelstrom v. Lamps Plus, Inc., 195 Cal.App.4th 986 (Cal. Ct. App. 2011) (statutory Song‑Beverly claims do not necessarily support common‑law privacy recovery absent a serious, offensive intrusion)
- Legacy Vulcan Corp. v. Superior Court, 185 Cal.App.4th 677 (Cal. Ct. App. 2010) (self‑insured retention delays insurer’s duty to defend until SIR is exhausted)
- Scottsdale Ins. Co. v. MV Transp., 36 Cal.4th 643 (Cal. 2005) (insurer owes duty to defend if complaint or known facts suggest potential coverage)
- Bank of the West v. Superior Court, 2 Cal.4th 1254 (Cal. 1992) (contract interpretation principles; limits on insuring certain remedies)
- Montrose Chem. Corp. v. Superior Court, 6 Cal.4th 287 (Cal. 1993) (duty to defend is broader than duty to indemnify; compare complaint facts to policy language)
- Gray v. Zurich Ins. Co., 65 Cal.2d 263 (Cal. 1966) (insurer need not defend if complaint cannot conceivably state a covered claim)