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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 a district court's summary judgment in favor of Executive Risk Indemnity Inc. (Executive Risk) regarding coverage under a Directors and Officers (D&O) insurance policy. The appellate court, having jurisdiction under 28 U.S.C. § 1291, reviewed the case de novo and reversed in part while affirming in part. The district court's error stemmed from its ruling that Amoroso was not entitled to coverage for claims related to Paul Mason's alleged misrepresentations made in his individual capacity, rather than on behalf of the organization. Under California law, employees can act within the scope of their employment even if their actions are unauthorized, as long as they are not "unusual or startling." The appellate court concluded that Mason's actions did not meet this threshold and thus constituted wrongful acts under the D&O Policy. The court examined whether a contractual exclusion in the D&O Policy applied. California law interprets coverage clauses broadly in favor of the insured and exclusionary clauses narrowly against insurers. The litigation involving Mauna Kea Properties, which alleged that Amoroso made negligent misrepresentations, indicated that Amoroso was not a party to the relevant construction contract and thus not liable under it. Therefore, Executive Risk could not invoke the exclusion to deny coverage. However, there exists a triable issue regarding whether correspondence between Mason and Mauna Kea Properties created a separate contract that could exclude coverage. The district court must determine if this correspondence amounted to an agreement that would justify Executive Risk's denial of coverage based on the exclusion. The appellate court found that, due to the genuine issue of liability, Executive Risk could not have acted in bad faith by denying coverage. It affirmed the district court's summary judgment on Amoroso's bad faith claim but left the door open for further consideration regarding a potential breach of duty to defend. Amoroso's procedural error claims were dismissed as without merit. The appellate court reversed in part, affirmed in part, and remanded for further proceedings, awarding costs on appeal to Amoroso. This decision is not intended for publication or to serve as precedent except as specified by 9th Cir. R. 36-3.