WAWGD, INC. v. Sentinel Insurance Company, LTD.
3:16-cv-02917
S.D. Cal.Sep 29, 2017Background
- Max Out Golf sued Roger Dunn, Inc. and GWNE, Inc. for alleged patent infringement of two patents relating to golf equipment fitting systems.
- Dunn/GWNE filed a third-party complaint (TPC) against WAWGD, Inc. d/b/a Foresight Sports alleging Foresight warranted non-infringement and agreed to indemnify Dunn/GWNE for Max Out’s claims.
- Foresight tendered the TPC to its insurer, Sentinel Insurance, seeking defense and indemnity under a Business Owners Policy.
- The Policy provides coverage for damages from "property damage" caused by an "occurrence" (defined as an accident), contains a contract-liability exclusion, a professional-services exclusion, and an intellectual-property exclusion; a technology-services endorsement carves back the professional-services exclusion for certain property damage.
- Sentinel refused defense; Foresight sued for coverage and bad faith. Cross-motions for summary judgment followed; the court considered whether the TPC potentially alleged covered "property damage," whether an "occurrence" existed, and whether exclusions applied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether TPC alleges "property damage" under policy | TPC seeks indemnity for losses tied to Foresight products; could imply loss of use of tangible products, so property damage may be implicated | TPC alleges only contractual indemnity/economic loss (payments for patent liability and defense); no allegation of physical injury or loss of use of property | No — TPC does not allege property damage triggering coverage |
| Whether injury (if property damage) was caused by an "occurrence" (accident) | Even if economic loss could be framed as loss of use, any injury arose unexpectedly and thus could be an accident | Foresight’s manufacture, sale, warranty and indemnity were deliberate acts; without an independent unexpected event there is no "accident" | No — claims arise from intentional acts, not an "occurrence" |
| Applicability of intellectual-property exclusion | Technology-services carveback/exceptions and broad duty to defend may create coverage | Policy excludes any injury or damage alleged in a suit that also alleges IP infringement; TPC arises in a suit that includes patent infringement claims, so exclusion applies | Exclusion applies — even if coverage otherwise existed, IP exclusion bars coverage |
| Effect of technology-services endorsement | Endorsement exempts technology services from professional-services exclusion, supporting coverage for property-damage claims tied to tech services | An exception to an exclusion cannot create coverage where the insuring clause does not apply; no insuring-agreement coverage exists here | Endorsement immaterial — no baseline coverage under insuring agreement, so carve-back does not help |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- Anderson v. Liberty Lobby, 477 U.S. 242 (genuine dispute standard for summary judgment)
- Montrose Chem. Corp. v. Superior Court, 6 Cal. 4th 287 (insured need only show potential for coverage; insurer must prove no potential)
- Waller v. Truck Ins. Exch., Inc., 11 Cal. 4th 1 (interpretation of insurance contracts and implied covenant analysis)
- Minkler v. Safeco Ins. Co., 49 Cal. 4th 315 (ambiguity construed to protect insured’s reasonable expectations; exclusions interpreted narrowly)
- Certain Underwriters at Lloyd’s v. Superior Court, 24 Cal. 4th 945 (no duty to indemnify follows from no duty to defend)
- Pension Trust Fund for Operating Engineers v. Fed. Ins. Co., 307 F.3d 944 (duty-to-defend scope; insured’s lower burden)
- Merced Mut. Ins. Co. v. Mendez, 213 Cal. App. 3d 41 (deliberate acts not an "accident" for occurrence analysis)
- AIU Ins. Co. v. Superior Court, 51 Cal. 3d 807 (coverage clauses interpreted broadly but governed by policy language)