Navigators Specialty Insurance Company v. Double Down Interactive LLC
2:18-cv-01514
W.D. Wash.Jul 26, 2019Background
- Double Down Interactive operates Double Down Casino, a social casino game that gives free digital chips and sells additional chips to players; a putative class action (Benson) alleges gambling, unjust enrichment, and consumer protection claims based on player losses since 2016.
- Double Down purchased two claims-made policies from Navigators: a 2017–2018 policy and a Runoff Policy (claims-made through June 2023) that includes a Runoff Endorsement excluding wrongful acts on or after June 1, 2017, plus an interrelationship-of-claims provision and a professional services exclusion.
- A prior class action (Phillips, 2015) challenged substantially the same aspects of Double Down’s business; portions of the Benson complaint mirror the Phillips complaint.
- Navigators seeks a declaratory ruling it has no duty to defend/indemnify Double Down in the Benson action; the parties filed cross-motions for summary judgment and agreed there are no material factual disputes.
- The district court applied Washington law and resolved three main coverage issues under the Runoff Policy: interrelationship-of-claims, the Runoff Endorsement, and the professional services exclusion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether interrelationship-of-claims provision treats Benson and Phillips as a single claim | Navigators: the two actions are "Related Wrongful Acts" under the policy definition and therefore constitute a single claim dated to the earlier report, barring coverage | Double Down: plaintiffs, losses, timing, and governing laws differ; treating them as related would effectively nullify coverage for its business model | Court: Benson and Phillips are interrelated because complaints and facts substantially overlap; interrelationship provision applies, barring coverage under the Runoff Policy |
| Whether the Runoff Endorsement bars coverage for acts on/after June 1, 2017 | Navigators: endorsement excludes any claim based upon, arising from, or related to wrongful acts on/after June 1, 2017; Benson alleges wrongful acts both before and after that date and they are related, so endorsement bars coverage | Double Down: policy language ambiguous; some alleged acts predate June 1, 2017 so Runoff Policy should cover those aspects | Court: endorsement unambiguous; acts before June 1, 2017 are "in connection with" and related to acts after that date as part of same conduct; Runoff Endorsement bars coverage |
| Whether professional services exclusion applies to Benson claims | Navigators: claims involve performance of professional services and fall within exclusion | Double Down: playing or operating the game is not a professional service; policy should be construed in insured's favor | Court: professional services require specialized, predominantly intellectual skill; playing the game is not a professional service; exclusion does not apply |
| Duty to defend under 2017–2018 Policy | Navigators: 2017–2018 policy excludes claims based on wrongful acts before June 1, 2017, and Benson alleges acts since 2016, so no duty | Double Down: (no meaningful dispute) | Court: No duty to defend under the 2017–2018 policy |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burden allocation)
- Nat’l Sur. Corp. v. Immunex Corp., 297 P.3d 688 (Wash. 2013) (insurer must defend if any reasonably potential for coverage)
- Johnson v. Poway Unified Sch. Dist., 658 F.3d 954 (9th Cir.) (summary judgment evidence viewed for nonmovant)
- Witherspoon v. St. Paul Fire & Marine Ins. Co., 548 P.2d 302 (Wash. 1976) (insurance policy language given ordinary meaning)
- Am Star Ins. Co. v. Grice, 854 P.2d 622 (Wash. 1993) (ambiguities in exclusionary clauses construed for insured)
- Madison Materials Co. v. St. Paul Fire & Marine Ins. Co., 523 F.3d 541 (previous acts related when part of same scheme)
- State Farm Fire & Cas. Co. v. English Cove Ass’n, 88 P.3d 986 (Wash. Ct. App.) (clarity of policy language)
- Bank of Calif., N.A. v. Opie, 663 F.2d 977 (9th Cir.) (definition of professional services under Washington law)