The Ninth Circuit affirmed the dismissal of an insured's complaint against their insurer because the complaint did not allege facts that could give rise to a covered claim. The case is Nat'l Promotions & Adver., Inc. v. Nat'l Sur. Corp., 2024 U.S. App. LEXIS 2118 (9th Cir. 2024). Please note that this case is unpublished and is therefore subject to specific rules about citation and precedential value.
The Underlying Suit
According to the District Court's published opinion in Nat'l Promotions & Adver., Inc. v. Nat'l Sur. Corp., 2022 U.S. Dist. LEXIS 187765 (C.D. Cal, 2022), National Promotions and Advertising (NPA) is an advertising services company hired by clients to create an advertising campaign and post temporary signs on temporary construction walls. NPA also had a nuisance abatement team, which would drive to sites where NPA had placed signs and replace or paint over graffiti and unpermitted signs.
An NPA contractor was driving his nuisance abatement route and alerted his manager to what the contractor believed to be unpermitted posters. The manager erroneously determined that the posters were unpermitted and told the contractor to paint over them. The next week, however, the contractor saw the same signs had been reposted. As he repainted over the signs, a security guard informed the contractor he did not have permission to do so. The contractor gave his manager's name and phone number to the guard. The company whose signs had been painted over sued NPA for trespass, conversion, and other business torts.
The Present Case
NPA submitted a claim to their insurer, National Surety Corporation (NSC), but the insurer refused the claim. NPA subsequently filed suit against NSC for breach of the duty to defend. The district court dismissed NPA's suit for failure to state a claim, and NPA appealed.
The NSC policy agreed the insurer would cover property damage claims to which the policy applied. However, the policy specifically stated it did not apply to any expected or intended injuries, meaning any bodily injury or property damage intended by the insured would not be covered.
The judges of the Ninth Circuit agreed with the district court that NPA's complaint was insufficient to establish the possibility of a covered claim. The policy only applied to accidents, not intentional conduct. Though the contractor had been acting on incorrect instructions from his manager, mistaken beliefs were not a shield against intentional conduct under California law. The contractor intentionally entered the construction site to paint over the posters. Accidents, by definition, cannot be intended, so there was no "accident" to which coverage could apply.
NPA pointed out that the complaint included allegations of negligent supervision of the contractor, which was covered by the NSC policy. This argument also failed because NPA's complaint had not included facts that showed how the negligent supervision allegations could have led to coverage. The company had not claimed the contractor's actions in painting and repainting over the posters was unexpected or unforeseeable. The court explained that the contractor's behavior could not have been unforeseeable anyway because he was explicitly instructed by his manager to paint over the posters, and it was foreseeable that the contractor would follow his manager's instructions.
The dismissal of NPA's claim was affirmed.
Editor's Note: An insurer's duty to defend is triggered when an insured alleges facts that could, not would, lead to a covered claim. If a claim could not lead to coverage, the duty to defend does not apply. In this case, there was no occurrence that could have led to a covered claim because the contractor, though acting on erroneous instructions, acted with intent, so his conduct, by definition, could not be accidental. Since the policy specified that it only applied to accidents, there could be no covered claim, and therefore the duty to defend did not apply.
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