Douglas Guillon v. Amco Insurance Company

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS DEC 22 2021 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

DOUGLAS JOSEPH GUILLON, No. 21-15297

Plaintiff-Appellant, D.C. No. 3:20-cv-07926-CRB

v. MEMORANDUM* AMCO INSURANCE COMPANY,

Defendant-Appellee.

Appeal from the United States District Court for the Northern District of California Charles R. Breyer, District Judge, Presiding

Submitted December 9, 2021** San Francisco, California

Before: MURGUIA, Chief Judge, IKUTA and VANDYKE, Circuit Judges.

Douglas Guillon appeals the district court’s order granting AMCO Insurance

Company’s (AMCO) Motion to Dismiss. Guillon was Shareholder, Director, and

Chief Executive Officer of Crush Steakhouse and Bar in Ukiah, California until its

closure. In 2015, Guillon purchased a businessowners’ liability insurance policy for

* 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). Crush from Appellee AMCO. After learning of a lawsuit filed against Crush by

three former employees, Guillon contacted his insurance broker to request coverage

for the lawsuit under the policy. AMCO denied his claim and Guillon retained

counsel at his own expense. The underlying lawsuit culminated in a trial and a

verdict exceeding $430,000. One year after the verdict, Guillon filed this lawsuit,

alleging that AMCO breached the businessowners’ liability insurance policy.

The district court found that Guillon’s insurance policy did not provide

coverage for the conduct alleged in the underlying lawsuit. The district court

explained, in relevant part, that an employment-related practice exclusion provision

(ERP) in the policy excluded coverage for each of the claims and alleged conduct in

the underlying lawsuit, because the policy specifically excluded coverage for

allegations of “coercion, demotion, evaluation, reassignment, discipline,

defamation, harassment, humiliation, discrimination or malicious prosecution.”

Having found that Guillon was not entitled to coverage under the policy, the district

court dismissed his claims with prejudice and entered a final judgment on January

26, 2021. Guillon appealed. We have jurisdiction under 28 U.S.C. § 1291 and

affirm because the ERP excluded coverage for the underlying claims.

The plain language of Crush’s AMCO policy does not provide coverage for

the claims asserted in the underlying lawsuit because each of the plaintiffs in the

underlying lawsuit’s (underlying plaintiffs) allegations of discrimination,

2 harassment, and coercion, are excluded by the plain language of the ERP, which

specifically bars claims arising out of employment-related “practices, policies, acts

or omissions such as coercion, demotion, evaluation, reassignment, discipline,

defamation, harassment, humiliation or discrimination directed at that person.”1

When considering whether an ERP exclusion applies to a particular set of facts under

California law, courts analyze two factors: “(1) the nexus between the allegedly

defamatory statement (or other tort) at issue and the third-party plaintiff's

employment by the insured, and (2) the existence (or nonexistence) of a relationship

between the employer and the third party plaintiff outside the employment

relationship.” Low v. Golden Eagle Ins. Co., 128 Cal. Rptr. 2d 423, 428–29 (Cal.

Ct. App. 2002).

Here, three former employees brought the underlying claims for gender

discrimination, disability discrimination, sexual harassment, retaliation, failure to

prevent discrimination, failure to accommodate disability, failure to engage in the

interactive process, battery, wrongful termination, intentional inflection of

emotional distress, failure to pay wages and overtime, failure to give mandatory

breaks, failure to pay vested vacation, failure to pay wages upon discharge, failure

to provide properly itemized wage statement, inappropriately charging employees

for uniforms, unfair business practices, and failure to provide sexual harassment

1 On appeal, Guillon focuses on the underlying battery claim.

3 training. All of these claims arose out of employment-related “practices, policies,

acts or omissions” because (1) each claim alleged conduct that occurred at—or

because of employment with—Crush, which is a sufficiently close nexus, and (2) no

underlying plaintiff indicated the existence of a non-employment relationship with

Guillon or another defendant. See Jon Davler Inc. v. Arch Ins. Co., 178 Cal. Rptr.

3d 502, 511 (Cal. Ct. App. 2014).

Plaintiffs’ battery claims—the only underlying claims that Guillon now

argues “potentially” required AMCO to defend him under the policy—are excluded

by the policy’s ERP clause along with the other claims. The underlying plaintiffs’

claim was that a Crush manager committed batteries on Crush employees while he

was their supervisor. To the extent the underlying plaintiffs were around the

supervisor outside of work, they alleged they were following directives from him.

And they alleged that if they opposed or reported the supervisor’s conduct, they

faced discipline or termination of their employment. This nexus between the alleged

batteries and plaintiffs’ employment is sufficient to classify the underlying battery

claim as arising out of an employment-related practice pursuant to Low, 128 Cal.

Rptr. 2d 423. See also Jon Davler, 178 Cal. Rptr. 3d at 510.2

2 Furthermore, any claim of vicarious liability in this context has not been previously recognized. See Liberty Surplus Ins. Corp. v. Ledesma & Meyer Constr. Co., 233 Cal. Rptr. 3d 487, 491 (Cal. 2018). And to the extent Guillon argues that the plaintiffs’ allegations stated a claim for negligent hiring, retention, or supervision, such a claim is precluded by the exclusion clause in this case.

4 Given (1) the plain language of the AMCO employment-related practice

exclusion, (2) the close nexus between all of the underlying plaintiffs’ claims and

their employment, and (3) the lack of a non-employment relationship between the

plaintiffs and their supervisors who were the subject of the underlying claims, it is

clear that Guillon sought coverage for claims arising out of employment-related

“practices, policies, acts or omissions” excluded by the policy.

As Guillon concedes, an insurer has no duty to defend when there is no

possibility of coverage under the relevant insurance policy. Because there was no

possibility of coverage for any of the claims resulting from the employment-related

practices, policies, acts or omissions at issue here, the district court did not err in

finding that AMCO had no duty to defend in the underlying action and therefore did

not breach its contract with Crush.

AFFIRMED.