Always Smiling Productions, LLC v. Chubb National Insurance Company

• Court: Court of Appeals for the Ninth Circuit
• Decided: July 11, 2024
• Docket: 22-55915
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JUL 11 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

ALWAYS SMILING PRODUCTIONS, No. 22-55915 LLC, a California limited liability corporation, D.C. No. 2:21-cv-05990-FMO-KS Plaintiff-Appellant,

v. MEMORANDUM*

CHUBB NATIONAL INSURANCE COMPANY, an Indiana corporation,

Defendant-Appellee.

Appeal from the United States District Court for the Central District of California Fernando M. Olguin, District Judge, Presiding

Submission Deferred September 7, 2023 Submitted July 9, 2024** Pasadena, California

Before: GRABER, MENDOZA, and DESAI, Circuit Judges.

Plaintiff, Always Smiling Productions LLC, a corporation that produces a

television series, timely appeals the district court’s judgment on the pleadings in

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). favor of Defendant, Chubb National Insurance Company, an insurance provider.

Plaintiff asserts several claims for breach of contract regarding Defendant’s denial

of coverage for losses that Plaintiff incurred from COVID-19-related disruptions

and delays in the production of its television show. Plaintiff also contends that the

district court should have allowed Plaintiff to present extrinsic evidence before

granting Defendant’s motion and should have granted leave to amend.

We review de novo a district court’s order on a motion for judgment on the

pleadings. Herrera v. Zumiez, Inc., 953 F.3d 1063, 1068 (9th Cir. 2020). We

review for abuse of discretion denial of leave to amend, but we review de novo the

futility of amendment. Cohen v. ConAgra Brands, Inc., 16 F.4th 1283, 1287 (9th

Cir. 2021). We affirm.

1. The district court correctly held that Plaintiff did not allege covered

losses under the policy’s imminent-peril provision. Coverage under that provision

is triggered only if imminent direct physical loss or damage at a location caused

Plaintiff to incur costs to protect property or people, or to experience impaired

production. Because “allegations of the actual or potential presence of COVID-19

on an insured’s premises do not, without more, establish direct physical loss or

damage to property,” Another Planet Ent., LLC v. Vigilant Ins. Co., 548 P.3d 303,

307 (Cal. 2024), Plaintiff failed to allege covered losses on the ground that the

COVID-19 virus threatened imminent direct physical loss or damage to property,

2 see id. (holding that, under California law, “direct physical loss or damage to

property requires a distinct, demonstrable, physical alteration to property”).

2. The district court correctly held that Plaintiff failed to allege covered

losses under the policy’s civil-authority provision. Plaintiff seeks coverage under

the provision for “costs to restart production and for COVID-19 related safety

protocols.” But the provision requires Plaintiff to allege that a civil or military

authority revoked its permission to use, or prohibited its access to, properties or

facilities used in an insured production, and Plaintiff does not do so. In addition,

although civil authorities issued orders in March 2020 that prohibited Plaintiff’s

access to properties or facilities used in Plaintiff’s insured production, Defendant

already paid Plaintiff the full coverage limit for losses associated with the March

2020 shutdown.

3. The district court correctly held that the loss-or-damage condition did not

provide coverage to Plaintiff. The condition applies only “in the event of loss or

damage.” As described above, Plaintiff has not alleged any covered loss or

damage resulting from COVID-19.

4. The district court correctly held that Plaintiff was not entitled to coverage

under the due-diligence condition. By the policy’s plain text, the condition does

not provide an independent grant of coverage; rather, it is a prerequisite to

coverage.

3 5. The district court properly dismissed Plaintiff’s claim that Defendant

breached the policy by failing to provide coverage beyond the policy’s stated

policy period. The policy explicitly states that the policy period spanned

November 7, 2019, to November 7, 2020. The policy also contains non-renewal

provisions that expressly permit Defendant to choose not to renew and provide for

a notice period of between 60 and 120 days before the policy’s expiration.

Defendant complied with those non-renewal provisions and notified Plaintiff of its

decision not to renew within the proper timeframe.

In light of the policy’s unambiguous wording, Plaintiff’s argument that

Defendant did not act in accordance with custom and practice is unavailing

because we do not consider that evidence. See Producers Dairy Delivery Co. v.

Sentry Ins. Co., 718 P.2d 920, 913 (Cal. 1986) (stating that a court may only

consider extrinsic evidence “when it is relevant to prove a meaning to which the

language of the instrument is reasonably susceptible” (citation and internal

quotation marks omitted)).

6. The district court also properly dismissed Plaintiff’s bad-faith claim.

Plaintiff premises that claim on the same allegations that support its other claims of

breach of contract, which the district court properly rejected. See Waller v. Truck

Ins. Exch., Inc., 900 P.2d 619, 638 (Cal. 1995) (explaining that, “because a

4 contractual obligation is the underpinning of a bad faith claim, such a claim cannot

be maintained unless policy benefits are due under the contract”).

7. The district court properly granted Defendant’s motion for judgment on

the pleadings without considering extrinsic evidence that Plaintiff asserted it would

obtain through discovery. Where, as here, a court considers a contract’s wording

and concludes that it is reasonably susceptible to only one interpretation, extrinsic

evidence is irrelevant. See Another Planet, 548 P.3d at 327 (stating that extrinsic

evidence is “only relevant to the extent [it] tend[s] to prove a meaning of which the

language of the policy is reasonably susceptible”); see also Skilstaf, Inc. v. CVS

Caremark Corp., 669 F.3d 1005, 1017. n.11 (9th Cir. 2012) (upholding the district

court’s dismissal without discovery when the plaintiff asserted that extrinsic

evidence made a contract ambiguous and stating that, under California law, a court

“can find a contract unambiguous in a motion on the pleadings”).

8. Finally, the district court did not abuse its discretion by denying Plaintiff

leave to amend its complaint. We uphold the district court’s denial of leave to

amend because, upon de novo review, we conclude that the plain terms of the

policy did not permit coverage for Plaintiff’s COVID-19-related costs, and

therefore amendment would be futile. See Carvalho v. Equifax Info. Servs., LLC,

629 F.3d 876, 893 (9th Cir. 2010) (“When the district court denies leave to amend

because of futility of amendment, we will uphold such denial if it is clear, upon de

5 novo review, that the complaint would not be saved by any amendment.” (citation

and internal quotation marks omitted)).

AFFIRMED.1

1 Plaintiff’s motion for judicial notice, Docket No. 28, is denied as moot.