A California appellate court ruled an email exchange did not constitute a claim under an insured's claims-made CGL policy. The case is Playboy Enters. v. Indian Harbor Ins. Co., 2022 Cal. App. Unpub. LEXIS 6027 (Cal. Ct. App. 2022). Please note that this case has been designated "not to be published in official reports" and is therefore not citable.
The Underlying Case
Elliott Friedman had two contracts with Playboy to sell licensed, Playboy-branded products in Asia, but both deals failed before they were finalized. Friedman complained it had been the self-dealing behavior of Playboy executives that ultimately sank the deal. In the spring of 2016, Friedman emailed Playboy's general counsel and said he "would rather focus…on settling the issues and just getting compensated for [his] investment." Friedman requested a meeting with Playboy's general counsel to discuss the matter. The meeting did not resolve the conflict, and Friedman sued Playboy over the failed business deal.
Playboy notified its CGL insurer, Indian Harbor, of the suit. Indian Harbor agreed to defend the case, subject to a reservation of rights. After reviewing Friedman's email, Indian Harbor told Playboy the claim wouldn't be covered solely because the email was a "claim" within the meaning of the policy, and it had been sent before the inception of Playboy's CGL policy.
Litigation for Coverage
The Friedman case ended in a settlement. Indian Harbor stressed to Playboy that, though the company intended to advance a large part of the settlement funds, it was doing so subject to the right to recover those funds because the claim was not covered. Indian Harbor advanced a large portion of the settlement to Friedman, and Playboy submitted the remainder.
Playboy subsequently filed suit for coverage against Indian Harbor. Indian Harbor, in turn, sought both recoupment of the funds it had advanced for the settlement and a declaration that coverage was unavailable to Playboy because the alleged "demand" in Friedman's email was a claim that had been made before the Indian Harbor policy was effective. Indian Harbor filed a motion for summary judgment. That motion was denied because, according to the trial court, the subject email "had not requested monetary damages," and Friedman had not "insisted on any course of action." Indian Harbor appealed.
Before the appellate court, the only issue was whether or not the subject email constituted a claim under the Indian Harbor policy. The policy defined a "claim," in part, as "a written demand for monetary damages, services, or injunctive or other non-monetary relief." (emphasis added). There was no policy definition for "demand," but Indian Harbor pointed to an earlier California case, Westrec Marina Management, Inc. v. Arrowood Indemnity Co., 163 Cal. App. 4th 1387 (Cal. Ct. App. 2008), where the appellate court had defined a "demand" as "a request for something under an assertion of right or an insistence on some course of action." In that case, the appellate court had found that an implied threat of litigation in a letter from an attorney to the opposing party had been sufficient to constitute a demand, and therefore a claim, under the relevant policy. Indian Harbor asserted that, similar to Westrec, Friedman's statement that he wanted to focus on settling his case implied an intent to sue Playboy if no settlement was reached.
The court disagreed. Based on the definition of "demand" in Westrec, the judges said Friedman's email, instead of demanding a specific course of action, had expressed Friedman's disappointment with how Playboy had handled the failed venture. The judges also said even if the email had contained a "demand," it was not a "demand" as contemplated by the policy definition of a claim. In his email, Friedman had asked for a meeting with Playboy's general counsel, not for "monetary damages, services, or injunctive or other non-monetary relief."
The ruling in favor of Playboy was affirmed.
Editor's Note: This case is a good example of two crucial points in any case for coverage: timing and definitions. It is important to know when, exactly, a "demand for relief" was made because insurers won't cover something that happened before their policy was effective. It is also important to know how your policy defines a "claim." As this case shows, simply requesting a meeting to discuss options, in and of itself, is not enough to constitute a "claim."
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