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Alpha Therapeutic Corp. v. Federal Insurance
Citation: 126 F. App'x 833Docket: No. 03-56773
Court: Court of Appeals for the Ninth Circuit; March 17, 2005; Federal Appellate Court
Alpha Therapeutic Corporation and Welfide International Corporation (Alpha) initiated breach of contract and bad faith claims against their liability insurer, Federal Insurance Company (Federal), due to Federal's refusal to defend Alpha in lawsuits filed by former employees. Federal determined that the claims fell under the Employment Related Practices (ERP) exclusion in the insurance contracts, which excludes coverage for liabilities related to employee terminations, promotions, and hiring. The District Court ruled correctly that Federal had no duty to defend or indemnify Alpha. Under California law, as established in *Low v. Golden Eagle Ins. Co.*, claims of defamation in the context of employment-related issues can fall within ERP exclusions. The allegations against Alpha, which involved retaliatory terminations and defamation of former employees, were deemed intrinsically linked to employment matters. The statements made were part of an alleged retaliatory scheme and thus related to the employment context. There was no alternative explanation for the defamation claims outside of the employer-employee relationship, differentiating this case from others where a duty to defend was found, such as intimate relationships or competitive scenarios. Consequently, since the defamatory statements arose from the terminations of the former employees, Federal was protected from liability under the ERP exclusion and had no obligation to defend Alpha in the lawsuits. The Court's ruling was affirmed, and the disposition is not to be published or cited in court except under specific Ninth Circuit rules. The parties acknowledged that the ERP exclusions were consistent across the four relevant contracts.