NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT OCT 20 2010
MOLLY C. DWYER, CLERK
U .S . CO UR T OF AP PE A LS
FREDERICK (RICK) GOERNER, an No. 09-55385
individual,
D.C. No. 8:07-cv-00166-GW-
Plaintiff - Appellant, MLG
v.
MEMORANDUM *
AÈIS REINSURANCE CO, a New Yorµ
corporation, FKA Royal & Sun Alliance
Personal Insurance Company,
Defendant - Appellee.
Appeal from the United States District Court
for the Central District of California
George H. Wu, District Judge, Presiding
Argued and Submitted October 5, 2010
Pasadena, California
Before: PREGERSON, D.W. NELSON and IKUTA, Circuit Judges.
Plaintiff-Appellant Fredericµ Goerner ('Goerner') appeals the district
court's grant of summary judgment in favor of Defendant-Appellee Axis
Reinsurance Co. ('Axis'). The district court found that Axis had no duty to defend
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Goerner under a Directors & Officers ('D&O') liability policy purchased by
Goerner's former employer, TransDimension, Inc., against a suit brought by
Manuchehr Neshat ('Neshat'). The court concluded that, because the underlying
complaint did not specifically allege that Goerner acted in his capacity as Chief
Executive Officer ('CEO') of TransDimension, but rather asserted that he acted on
behalf of two other companies in the same industry, coverage under the policy was
not triggered. We have jurisdiction under 28 U.S.C. y 1291 and, for the reasons
which follow, we now reverse and remand.
Axis's Duty to Defend
Axis Reinsurance issued a D&O policy requiring it to both defend and
indemnify claims against TransDimension officers for 'any actual or alleged error'
committed by an insured individual 'in [his] capacity as such.' Goerner contends
that the actions alleged in the underlying complaint were taµen in his capacity as
CEO of TransDimension, and he is entitled to a defense. Axis argues that, because
the complaint does not specifically allege that Neshat's losses resulted from actions
Goerner tooµ in his capacity as TransDimension CEO, the policy is not triggered
and Axis is relieved of the duty to defend.
'The determination whether the insurer owes a duty to defend is usually
made in the first instance by comparing the allegations of the complaint with the
2
terms of the policy.' Anthem Electronics v. Pacific Employers Ins. Co., 302 F.3d
1049, 1054 (9th Cir. 2002). The guiding consideration is whether 'the insured
would reasonably expect a defense by the insurer.' Gray v. Zurich Ins. Co., 419
P.2d 168, 178 (Cal. 1966). 'The courts will not sanction a construction of the
insurer's language that will defeat the very purpose or object of the insurance.' Id.
Under Axis's interpretation of its policy, Goerner would not be owed a
defense even for actions he was directly ordered by his superiors to undertaµe if the
third-party plaintiff failed to allege in the complaint that those actions were
undertaµen in his capacity as CEO. This interpretation defeats the purpose of the
insurance coverage. Moreover, an insured would reasonably expect coverage for
actions taµen in the capacity of director or officer of an insured company, whether
or not that capacity was alleged by the third-party plaintiff.
The question remains whether the actions at issue in Neshat's amended
complaint could have been taµen by Goerner in his capacity as CEO of
TransDimension. To establish a duty to defend, 'the insured must prove the
existence of a potential for coverage, while the insurer must establish the absence
of any such potential.' Montrose Chem. Corp. v. Superior Court, 861 P.2d 1153,
1161 (Cal. 1993) (emphasis in original). '[T]he existence of a disputed fact
determinative of coverage establishes the duty to defend.' Amato v. Mercury Cas.
3
Co., 18 Cal. App. 4th 1784, 1790 (Cal. Ct. App. 1993) (citing Horace Mann Ins.
Co. v. Barbara B., 846 P.2d 792 (Cal. 1993)) (emphasis in original). '[S]ummary
judgment for [the insured] is required unless the insurers are able, at summary
judgment stage, conclusively to negate coverage as a matter of law.' Anthem
Electronics, 302 F.3d at 1060.
Goerner has shown that TransDimension had business dealings, or potential
dealings, with all of the individuals and companies at issue in the underlying
complaint. Moreover, the complaint alleges that TransDimension's Board of
Directors authorized and paid for Goerner's travels to meet with two of those
companies in Asia, which was a µey factual component of at least one cause of
action. These facts give rise to the possibility of coverage. Axis, therefore, had a
duty to defend Goerner under the D&O policy.
Admission of the Mediation Brief
Goerner also alleges that the district court erred in admitting into evidence a
mediation brief from the underlying lawsuit. To reverse on the basis of an
erroneous evidentiary ruling, this court must conclude not only that the district
court abused its discretion, but also that the error was prejudicial. Harper v. City of
Los Angeles, 533 F.3d 1010, 1030 (9th Cir. 2008).
4
'In California, certain documents and communications pertaining to
mediation are generally inadmissible in civil litigation.' Babasa v. LensCrafters,
Inc., 498 F.3d 972, 974 (9th Cir. 2007) (citing Cal. Evid. Code y 1119 (2006))
(holding that no writing prepared for the purpose of mediation is admissible in a
civil action in which testimony can be compelled). Thus, admission of the brief
was error. However, the record does not suggest, and Goerner has not shown, that
the error was prejudicial. Therefore, reversal on this ground is not warranted.
For the foregoing reasons, we REVERSE the district court's grant of
summary judgment in favor of Axis and REMAND with instructions to grant
summary judgment in Goerner's favor on the issue of Axis's duty to defend.
Goerner's request for reassignment of his remaining claims is DENIED.
5
FILED
Goerner v. Axis Reinsurance Co., No. 09-55385: OCT 20 2010
MOLLY C. DWYER, CLERK
IKUTA, Circuit Judge, concurring: U .S . CO UR T OF AP PE A LS
I concur in the result on the ground that nothing in the Second Amended
Complaint or the settlement agreement between Neshat and TransDimension
eliminated the possibility that Goerner would face liability based on actions he
tooµ in his capacity as the chief executive officer of TransDimension. Cf. Bowie v.
Home Ins. Co., 923 F.2d 705, 706 (9th Cir. 1990). Because there is a genuine issue
of material fact as to whether Goerner engaged in any of the wrongful acts alleged
in the Second Amended Complaint in his insured capacity, there was a potential for
coverage and Axis had a duty to defend. See Amato v. Mercury Cas. Co., 18 Cal.
App. 4th 1784, 1790 (Cal. Ct. App. 1993).