Michael Feiz Medical Corp. v. Scottsdale Insurance Co.
688 F. App'x 503
| 9th Cir. | 2017Background
- Feiz (Michael Feiz Medical Corp.) sued Scottsdale Insurance to require indemnification under a business liability policy for parts of an adverse arbitration award brought by a former employee (breach of employment contract and California Labor Code claims).
- The arbitration award included: damages for breach of contract, prejudgment interest on those damages, and attorney fees and costs (the arbitrator awarded fees under the contract but did not apportion them between contract and Labor Code claims).
- Scottsdale moved for summary judgment arguing the policy excludes amounts "owed under any employment contract," so it need not indemnify prejudgment interest or contract-based attorney fees; Feiz sought coverage under the policy’s definition of "Loss," which expressly included "pre-judgment or post judgment interest" and "reasonable and necessary legal costs, charges, fees, and expenses."
- The district court denied Feiz’s summary judgment and granted Scottsdale’s cross-motion; Feiz appealed to the Ninth Circuit.
- The Ninth Circuit applied California insurance-contract interpretation rules (ordinary meaning, ambiguities resolved for coverage; exclusions must be "plain and clear") and reviewed whether policy language unambiguously excluded prejudgment interest or attorney fees/costs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the policy requires Scottsdale to indemnify prejudgment interest awarded on breach-of-contract damages | Prejudgment interest is expressly listed in the policy’s definition of "Loss," so it is covered | Prejudgment interest is a component of contract damages and thus falls within the exclusion for "amounts owed under any employment contract" | Reversed: Scottsdale must indemnify prejudgment interest (policy separately lists prejudgment interest; no plain-and-clear exclusion) |
| Whether Scottsdale must indemnify attorney fees and costs awarded in the arbitration | Fees/costs generally covered by policy; fees attributable to Labor Code claims are compensable under § 218.5 and fall within coverage | Fees awarded under the employment contract are "amounts owed under any employment contract" and excluded from coverage; arbitrator’s labeling makes all fees contract-based | Affirmed in part and vacated in part: Fees/costs attributable to breach-of-contract are excluded; fees/costs attributable to Labor Code claims are covered. Case remanded to apportion fees accordingly |
Key Cases Cited
- AIU Ins. Co. v. Superior Court, 799 P.2d 1253 (Cal. 1990) (rules for interpreting insurance policy language and resolving ambiguities in favor of coverage)
- Crane v. State Farm Fire & Cas. Co., 485 P.2d 1129 (Cal. 1971) (exclusionary policy language must be plain and clear and construed against insurer)
- Vandenberg v. Superior Court, 982 P.2d 229 (Cal. 1999) (courts look to the nature of the obligation underlying a judgment, not labels, to determine insurance coverage)
- Kirby v. Immoos Fire Prot., Inc., 274 P.3d 1160 (Cal. 2012) (employee who prevails on wage/nonpayment claims is entitled to attorney fees and costs under California statute)