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S.J. Amoroso Construction Co. v. Executive Risk Indemnity, Inc.
Citation: 325 F. App'x 548Docket: No. 07-17182
Court: Court of Appeals for the Ninth Circuit; April 30, 2009; Federal Appellate Court
S.J. Amoroso Construction Company, Inc. (Amoroso) appeals the district court’s summary judgment favoring Executive Risk Indemnity Inc. (Executive Risk) regarding coverage under a Directors and Officers (D&O) insurance policy. The court has jurisdiction under 28 U.S.C. § 1291 and reviews the decision de novo, leading to a partial reversal and partial affirmation of the district court's ruling. The district court incorrectly concluded that Amoroso was not entitled to D&O Policy coverage for claims related to Paul Mason's alleged misrepresentations, asserting Mason acted in his individual capacity rather than on behalf of the insured entity. According to California law, actions taken by employees can fall within the scope of employment, even if unauthorized, unless they are deemed so "unusual or startling" that it would be unjust to consider the employer liable. The appellate court found no evidence that Mason's actions met this threshold. Mason’s alleged misrepresentations qualify as a "wrongful act" under Insuring Clause 1(C) of the D&O Policy. The court examined whether Exclusion 111(C)(2), which excludes claims arising from any contract, applies. California law favors broad interpretation of coverage clauses and narrow interpretation of exclusions. The construction contract with Mauna Kea Properties, Inc. does not wholly exclude coverage because the claims against Amoroso stemmed from alleged misrepresentations, not direct contractual liability. However, a factual dispute exists regarding whether correspondence between Mason and Mauna Kea Properties regarding the potential assignment of the construction contract constituted a separate agreement that could exclude coverage. The district court must determine if this correspondence created a binding contract, which could justify Executive Risk’s denial of coverage based on Exclusion 111(C)(2). If a genuine liability issue persists, Executive Risk could not be deemed to have acted in bad faith in denying coverage. The district court did not err in granting summary judgment on Amoroso's bad faith claim but should evaluate whether Amoroso’s claims related to the duty to defend are valid. Amoroso’s procedural error arguments were dismissed as meritless. The decision is reversed in part, affirmed in part, and remanded, with costs on appeal awarded to Amoroso. The disposition is not intended for publication and does not set a precedent.