American National Insurance Co. v. Vartan Akopyan

• Court: Court of Appeals for the Ninth Circuit
• Decided: February 24, 2023
• Docket: 22-55208
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS FEB 24 2023 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

AMERICAN NATIONAL INSURANCE No. 22-55208 COMPANY, a Texas Corporation, D.C. No. Plaintiff-Appellant, 2:20-cv-08502-RGK-E

v. MEMORANDUM* VARTAN AKOPYAN, Trustee of the Sogomon Akopyan Family Irrevocable Life Insurance Trust,

Defendant-Appellee,

and

DOES, 1 through 10, inclusive,

Defendant.

Appeal from the United States District Court for the Central District of California R. Gary Klausner, District Judge, Presiding

Submitted January 13, 2023** Pasadena, California

* 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). Before: WATFORD, FRIEDLAND, and BENNETT, Circuit Judges. Dissent by Judge BENNETT.

Plaintiff-Appellant American National Insurance Company (“ANICO”)

appeals the district court’s denial of its motion for attorney’s fees, which ANICO

filed after prevailing in a lawsuit against Defendant-Appellee Vartan Akopyan

(“Vartan”) involving his father’s life insurance policy. Reviewing de novo

because the fee question turns on issues of contract interpretation, FDIC v. Lugli,

813 F.2d 1030, 1034 (9th Cir. 1987), we affirm.

ANICO issued a life insurance policy to Sogomon Akopyan (“Sogomon”),

which designated Sogomon’s life insurance policy trust as the owner of the policy

and Vartan as the successor trustee. After Sogomon died and his son Vartan

submitted a claim for death benefits to ANICO, ANICO investigated and learned

that Sogomon had concealed material facts about his health history when applying

for the life insurance policy. ANICO therefore denied Vartan’s claim and returned

Sogomon’s premium payments.

ANICO then sued for rescission of the policy and for declaratory relief.

ANICO argued that it would not have issued the policy if the Akopyans had been

truthful about Sogomon’s health history. In response, Vartan filed counterclaims

for breach of contract, breach of the covenant of good faith and fair dealing, and

violation of California’s unfair competition law. The district court granted

summary judgment in favor of ANICO.

2 ANICO subsequently filed a motion for attorney’s fees. ANICO sought the

amount that it claimed it incurred in filing its complaint and in obtaining dismissal

of Vartan’s counterclaims. In support, ANICO invoked the attorney’s fee clause in

the Trust Certification attachment to the insurance policy application, which

certified Sogomon’s life insurance policy trust as the beneficiary on the policy.

That paragraph provides:

Each of the undersigned, jointly and severally, individually, and as trustee, indemnifies the Company and agrees to hold the Company harmless against all obligations, demands, losses or liabilities (including attorney’s fees) that the Company incurred, suffered, or paid or may incur, suffer or pay in the future because of the Company’s reliance on this Certification and/or transactions or actions by the undersigned. By indemnifying the Company, each of the undersigned, jointly and severally, individually, and as trustee, indemnifies the Company’s agents, officers and employees. This indemnification shall survive termination of this document or the life insurance policy.

The district court denied ANICO’s motion.

In California, “[a] contract must be so interpreted as to give effect to the

mutual intention of the parties as it existed at the time of contracting.” Cal. Civ.

Code § 1636. When a court is interpreting the words of a contract, “words . . . are

to be understood in their ordinary and popular sense, rather than according to their

strict legal meaning.” Cal. Civ. Code § 1644.

The fee clause states that “the undersigned”—Vartan—will “indemnif[y]”

ANICO for “attorney’s fees . . . that [ANICO] incurred . . . because of [ANICO’s]

reliance on th[e] [Trust] Certification and/or transactions or actions by [Vartan].”

3 ANICO argues that Vartan’s “actions” forced ANICO to incur fees. First, Vartan

attested that the answers on the application about Sogomon’s health history were

true when they were not, causing ANICO to later need to seek rescission and incur

fees as a result. Second, when ANICO sued for rescission, Vartan brought

counterclaims, thus leading ANICO to incur fees to defend against those

counterclaims. ANICO argues that because each of those “actions” caused it to

incur fees, it is entitled to fees under the plain meaning of the fee clause in the

Trust Certification.

We are not persuaded by ANICO’s argument, which depends on reading

“actions” more broadly than makes sense in the context of the contractual language

here. Read in context, it is clear that the fee clause in the Trust Certification

reflects the parties’ intention that ANICO would be indemnified not for fees

incurred as a result of any action by Vartan or even any action by Vartan involving

the life insurance policy, but for fees incurred as a result of actions by Vartan

involving the Trust Certification. Importantly, the fee clause exists solely in the

Trust Certification—a document that was completed only because a trust was

being named as owner or beneficiary of the life insurance policy. If the parties

intended there to be fee shifting for litigation related to the life insurance policy as

a whole, one would expect the life insurance policy itself to contain a fee-shifting

clause, but it does not. In addition, the fee clause in the Trust Certification is

4 surrounded by a list of “Declarations and Certifications” that relate to the trust as

owner and beneficiary of the life insurance policy. That suggests that the fee

clause is concerned with actions specifically related to the Trust Certification, not

the life insurance policy more generally. And to the extent there is any ambiguity

about what the parties intended the fee clause to mean, we must construe it against

ANICO, which drafted the contract. See Linton v. Contra Costa, 31 Cal. App. 5th

628, 636 (2019) (holding that when a contract remains ambiguous after

considering both its plain meaning and the objectively reasonable expectations of

the parties, courts must construe the language “most strongly against the party who

caused the uncertainty to exist” (quoting Cal. Civ. Code § 1654)).

The best reading, therefore, is that ANICO is entitled to fees incurred

because of actions by Vartan related to the Trust Certification. Because the fees

ANICO incurred were the result of actions related not to the Trust Certification but

to the life insurance policy, ANICO cannot rely on the fee clause to obtain fees

here.

AFFIRMED.

5 FILED American National Insurance Company v. Vartan Akopyan, No. 22-55208 FEB 24 2023 BENNETT, Circuit Judge, dissenting: MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

The contract here is not ambiguous, and Plaintiff-Appellant American

National Insurance Company (“ANICO”) is entitled to the reasonable attorneys’

fees it incurred because of Vartan Akopyan’s (“Vartan”) actions: applying for the

life insurance policy with his father, Sogomon; filing a claim for a payout from the

policy; and asserting counterclaims against ANICO for breach of contract. Thus, I

respectfully dissent.

The attorneys’ fees clause states that “the undersigned”—Vartan—will

“indemnif[y]” ANICO for “attorney’s fees . . . that [ANICO] incurred . . . because

of [ANICO’s] reliance on th[e] [Trust] Certification and/or transactions or actions

by [Vartan].” The majority characterizes ANICO’s argument on appeal as

claiming that “ANICO would be indemnified . . . for fees incurred as a result of

any action by Vartan.” Finding this interpretation of the contract to be “more

broad[] than makes sense in the context of the contractual language,” the majority

concludes that the clause covers only “fees incurred as a result of actions by Vartan

involving the Trust Certification.”

First, the contractual interpretation that the majority rejects is not ANICO’s

argument. ANICO does not claim that the provision would entitle it to fees for

actions by Vartan that are unrelated to the life insurance policy. Even then, “in

construing a contract[, our] function is not merely to import all of the possible definitions or even the broadest definition.” Mirpad, LLC v. Cal. Ins. Guar. Ass’n.,

132 Cal. App. 4th 1058, 1069 (2005) (emphasis added). Instead, we must “glean

the meaning of the words from the context and usage of the words in the contract

itself.” Id. And we must “not strain to create an ambiguity where none exists.”

Waller v. Truck Ins. Exch., Inc., 900 P.2d 619, 627 (Cal. 1995), as modified on

denial of reh’g (Oct. 26, 1995). In context, the fee clause neither extends to “any

action by Vartan” nor is it limited to “actions . . . involving the Trust

Certification.”

Unlike the majority, I start with the text of the contract. The clause

explicitly requires Vartan to indemnify ANICO for attorneys’ fees it incurred

because of its reliance on the Trust Certification, and the clause separately requires

Vartan to indemnify ANICO for attorneys’ fees it incurred because of “transactions

or actions” by Vartan. If the second obligation were limited to transactions and

actions involving the Trust Certification, as the majority posits, the relevant

provision would necessarily have read as follows: “because of the Company’s

reliance on this Certification and/or transactions or actions by the undersigned that

specifically relate[] to the Trust Certification.” However, a “Judge is simply to

ascertain and declare what is in terms or in substance contained therein, not to

insert what has been omitted.” Cal. Civ. Proc. Code § 1858 (emphasis added). See

also Rosen v. State Farm Gen. Ins. Co., 70 P.3d 351, 356 (Cal. 2003) (“[W]e do

2 not rewrite any provision of any contract, including [an insurance policy], for any

purpose.”).

In addition, the majority’s interpretation renders part of the attorneys’ fees

clause itself surplusage. We must “favor an interpretation that gives meaning to

each word in a contract over an interpretation that makes part of the writing

redundant.” Yahoo Inc. v. Nat’l Union Fire Ins. Co., 519 P.3d 992, 999 (Cal.

2022). The fee clause already states that Vartan will “indemnif[y]” ANICO for

“attorney’s fees . . . that [ANICO] incurred . . . because of [ANICO’s] reliance on

th[e] [Trust] Certification.” Other provisions of the Trust Certification already

ensure that the information in the Certification is “accurate and complete” (¶ 1);

the named Trust is “currently in effect” (¶ 2); beneficial interest under the Trust

will be limited to a certain class of people (¶ 3); and that the Trustees will inform

ANICO “immediately in writing” of changes or amendments to the Trust (¶ 8).

Paragraph 4 even states that ANICO is “relying exclusively on the representations

in this Certification.” Therefore, other provisions of the Trust Certification already

list transactions or actions “specifically related to the Trust Certification,” and the

first condition in the attorneys’ fees clause already covers ANICO’s reliance on

them.

As to the supposed absurdity of extending the provision to “any action” by

Vartan (such as Vartan vandalizing ANICO’s corporate headquarters), this

3 possibility was already foreclosed by the Trust Certification being signed in

consideration for—and as part of a package with—the life insurance policy. Cf.

Mountain Air Enters., LLC v. Sundowner Towers, LLC, 398 P.3d 556, 566 (Cal.

2017) (holding that courts can “construe together several documents concerning

the same subject and made as part of the same transaction even [when] the

documents were not executed contemporaneously and do not refer to each other”)

(cleaned up). Absent the insurance policy, there would not have been any Trust

Certification. Therefore, “transactions or actions” are neither limited to those

involving only the Trust Certification (because that is not what the provision says),

nor can they be extended to acts of vandalism or other actions or transactions

unrelated to the life insurance policy.

And, of course, ANICO is not making a claim based on “any action by

Vartan”; ANICO is arguing—and the undisputed record demonstrates—that it

incurred attorneys’ fees because of actions taken by Vartan related to the life

insurance policy. Vartan applied for the $1 million life insurance policy with his

father, Sogomon. As the policy’s owner, he attested that “all of the answers in all

pages of this application and any supplements to it are full, complete and true”

even though he knew that Sogomon had misrepresented his health history.1 Three

1 For example, the Application asked if Sogomon had ever “had a heart attack, heart murmur, chest pains, irregular heartbeat, stroke, high blood pressure, anemia or any disease or abnormality of the heart, blood or blood vessels.” Sogomon

4 days after Sogomon’s death, Vartan made a claim for benefits under the policy.

After ANICO denied the claim and returned the policy premiums, it sued the

Trustee (Vartan) as the policy’s owner seeking rescission and declaratory relief. In

response, Vartan counterclaimed alleging breach of contract, breach of the duty of

good faith and fair dealing, and unfair business practices under California’s unfair

competition law.2 ANICO had to defend against these claims until it was awarded

summary judgment.

Interpreting the attorneys’ fees clause as applying to the entire life insurance

policy is consistent with its placement in the Trust Certification. The “whole of a

contract is to be taken together, so as to give effect to every part, if reasonably

practicable, each clause helping to interpret the other.” Cal. Civil Code § 1641.

The majority states that the clause’s placement in the Trust Certification and its

surrounding clauses “suggests that the fee clause is concerned with actions

specifically related to the Trust Certification, not the life insurance policy more

generally.” First, of course, that supposed suggestion is inconsistent with the text

answered “No.” Vartan certified that this answer was “full, complete, and true.” However, Vartan had taken Sogomon to the doctor the date he was diagnosed with an Abdominal Aortic Aneurysm (“AAA”), and was aware of his diagnosis as well as a later surgery for the treatment of his AAA. 2 Vartan sought more than nine hundred thousand dollars in compensatory damages, attorneys’ fees himself, punitive damages, pre-judgment interest, costs, and other relief.

5 of the clause. But moving past that, the Trust Certification refers to obligations

and rights that the Trust has as a result of being the policy’s owner. The provision

preceding the fee clause states:

I/We are duly authorized to act as trustee(s) under the terms of the trust provisions and/or applicable law. I/We have the power to exercise all rights associated with ownership of a life insurance policy, including, but not limited to, purchase, surrender, selection of and transfers between variable funding options, withdrawal of funds, taking a loan or other encumberment and assignment of the policy.

This provision lists several transactions or actions that the Trustee (Vartan)

certifies he is authorized to take as the owner of the life insurance policy. The

attorneys’ fees clause, just after, holds the Trustee (Vartan) responsible for any

attorneys’ fees that ANICO may incur because of those (and other) life insurance

policy transactions or actions. And, of course, Vartan is not “simply” the Trustee

(not that it would matter if he were); he is the beneficiary of the $1 million life

insurance policy.

ANICO is entitled to attorneys’ fees it incurred because of Vartan’s

transactions and actions. Accordingly, I would reverse.