Janone, Inc. v. Great American Insurance Company

• Court: Court of Appeals for the Ninth Circuit
• Decided: May 9, 2025
• Docket: 24-992
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAY 9 2025 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

JANONE, INC., No. 24-992 D.C. No. Plaintiff - Appellant, 2:21-cv-01554-JCM-NJK v. MEMORANDUM* GREAT AMERICAN INSURANCE COMPANY,

Defendant - Appellee,

and

ENDURANCE AMERICAN INSURANCE COMPANY,

Defendant.

Appeal from the United States District Court for the District of Nevada James C. Mahan, District Judge, Presiding

Argued and Submitted April 9, 2025 San Francisco, California

Before: SCHROEDER, S.R. THOMAS, and MILLER, Circuit Judges.

JanOne, Inc., appeals from the district court’s order granting summary

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. judgment to its former insurance provider, Great American Insurance Company, on

various claims arising out of a dispute over insurance coverage. We have

jurisdiction under 28 U.S.C. § 1291, and we affirm.

We review the district court’s grant of summary judgment de novo. Csutoras

v. Paradise High Sch., 12 F.4th 960, 965 (9th Cir. 2021). As a federal court sitting

in diversity, we apply the substantive law—including the choice-of-law rules—of

the forum state, here, Nevada. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S.

487, 496 (1941); Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).

Under the terms of the insurance policy, JanOne is entitled to coverage for

all losses that “Insured Persons” become “legally obligated to pay as a result of a

Claim.” The policy defines a “Claim” to include an “Inquiry.” An “Inquiry,” in

turn, is defined as “a request or demand for an Insured Person either to appear at a

meeting, deposition or interview or to produce documents relating to the business

of [JanOne] or such Insured Person’s capacity with [JanOne].” The policy further

provides that any “Claim which arises out of [an] Inquiry shall be deemed to have

been first made at the time such written notice of the Inquiry was received by

[Great American].” Thus, a “Claim” that arises after the conclusion of the coverage

period is covered if it “arises out of” an “Inquiry” that was noticed within the

coverage period.

JanOne seeks coverage for various litigation expenses that were incurred

2 24-992 after the conclusion of the coverage period. Those expenses are related to an

investigation and subsequent complaint brought by the SEC against JanOne and its

former CFO, among others, for violations of federal securities laws. JanOne argues

that those expenses are covered under the policy because they “ar[ose] out of” an

“Inquiry”—namely, a notice sent by the SEC stating its intention to take the

deposition of Tim Matula, a former JanOne director.

Even assuming that the SEC’s notice of intent to take Matula’s deposition

constituted an “Inquiry” under the policy, there is no triable dispute of fact as to

whether the expenses for which JanOne seeks coverage “ar[ose] out of” that notice.

The parties debate whether Nevada choice-of-law rules call for the application of

Nevada law or Minnesota law in construing the policy. We need not resolve that

debate because the same result obtains under either State’s law. Each time the

Minnesota Supreme Court has confronted the phrase “arising out of” in an

insurance contract, it has required at least some causal connection between the two

relevant events. See, e.g., Associated Indep. Dealers, Inc. v. Mutual Serv. Ins. Cos.,

229 N.W.2d 516, 518 (Minn. 1975) (explaining, in an automobile insurance case,

that the phrase “arising out of” requires a “causal link”); accord Dougherty v. State

Farm Mut. Ins. Co., 699 N.W.2d 741, 743–44 (Minn. 2005). And although there

appears to be no authoritative decision from the Supreme Court of Nevada,

common usage and the weight of authority convince us that it would interpret that

3 24-992 phrase in a similar manner, requiring the subsequent event to grow out of or flow

from the original event. See Judd v. Weinstein, 967 F.3d 952, 955–56 (9th Cir.

2020) (explaining that where a State’s highest court has not addressed an issue, we

must predict how it would decide the issue, and in so doing, we may rely on

treatises and decisions from other jurisdictions); Oxford English Dictionary 629

(2d ed. 1989) (defining “arise” as “[t]o spring, originate, or result from”); 7 Lee R.

Russ & Thomas F. Segalla, Couch on Insurance § 101:52 (3d ed. 2006) (observing

that courts have typically interpreted the phrase “arising out of” in insurance

policies to require “some causal relation or connection”).

JanOne has produced no evidence that the SEC’s investigation and JanOne’s

ensuing litigation expenses grew out of, flowed from, or bore any causal

relationship to the SEC’s notice of its intent to depose Matula. Because the

deposition never occurred, the SEC did not learn anything that could have caused it

to continue its investigation or ultimately bring the complaint against JanOne and

its CFO. It is insufficient that the Matula deposition notice may have been related

to the same underlying SEC investigation as JanOne’s later expenses. That shows

only that the Matula deposition notice flowed from the underlying investigation,

not that JanOne’s expenses flowed from the deposition notice. Therefore, JanOne’s

litigation expenses are not covered by the policy.

AFFIRMED.

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