Ratchford v. Watford Specialty Insurance Company

• Court: District Court, D. Arizona
• Decided: March 6, 2023
• Docket: 2:22-cv-01629
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Abigail Ratchford, et al., No. CV-22-01629-PHX-SMM

10 Plaintiffs, ORDER

11 v.

12 Watford Specialty Insurance Company,

13 Defendant. 14 15 Pending before the Court is Defendant’s Motion to Dismiss. (Doc. 14). For the 16 following reasons, the Court grants the Motion. 17 I. BACKGROUND 18 This case stems out of two earlier cases, in which Plaintiffs—thirteen professional 19 models—sued two strip clubs for misappropriating their images and likenesses and using 20 them in advertisements. (Doc. 1 at 2). The Dalton Plaintiffs sued Dalton Corporation 21 (“Dalton”), which owns Chicas Cabaret in Phoenix, Arizona, in the U.S. District Court for 22 the District of Arizona. (Id. at 3); Ratchford v. Dalton Corp., Case No. 19-cv-1421-PHX- 23 SRB. They secured a $565,000 consent judgment. (Doc. 1 at 3); (Doc. 1-2 at 4). The 4Play 24 Plaintiffs sued 4Play Gentlemen’s Lounge, LLC (“4Play”) in Florida state court and 25 secured a $675,000 consent judgment. (Doc. 1 at 3, 12); Gray v. 4Play Gentlemens Lounge 26 LLC, Case No. 20-004534-CI (Fla. Cir. Ct.). 27 Both strip clubs were insured at the time by commercial general liability insurance 28 policies (“the Policies”) issued by Defendant Watford Specialty Insurance Company 1 (“Watford”). (Doc. 1 at 3).1 The Dalton Policy covered a period between February 12, 2017 2 and February 12, 2018. (Doc. 1 at 6). The 4Play Policy2 covered a period between August 3 4, 2016 and August 4, 2018. (Id. at 9). 4 The Policies contain a section pertaining to “personal and advertising injury 5 liability.” (Doc. 14-2 at 41-44). Section 1 states that Watford will “pay those sums that the 6 insured becomes legally obligated to pay as damages because of ‘personal and advertising 7 injury’ to which this insurance applies. We will have the right and duty to defend against 8 any ‘suit’ seeking those damages. However, we will have no duty to defend the insured 9 against any ‘suit’ seeking damages for ‘personal and advertising injury’ to which this 10 insurance does not apply.” (Id. at 41). 11 “Personal and advertising injury” is defined as “injury . . . arising out of one or more 12 of the following offenses: 13 a. False arrest, detention or imprisonment; 14 b. Malicious prosecution; 15 c. The wrongful eviction from, wrongful entry into, or invasion of the right of 16 private occupancy of a room, dwelling or premises. . . ; 17 d. Oral or written publication, in any manner, of material that slanders of libels a 18 person of organization of disparages a person’s or organization’s goods, 19 products, or services; 20 e. Oral or written publication, in any manner, of material that violates a person’s 21 right of privacy; 22 f. Oral or written publication, in any manner, of another’s images, photographs, 23 likenesses or personal attributes.” 24 (Id. at 47).

25 1 The Court considers these Policies under the “incorporation by reference doctrine” because they have been provided in full and are referenced in the Complaint, undisputed, 26 and central to both parties’ arguments. See Biltmore Assocs., LLC v. Twin City Fire Ins. Co., 572 F.3d 663, 665 n.1 (9th Cir. 2009). The Court also takes judicial notice of the 27 complaints in the two underlying cases for similar reasons and because these court filings are matters of public record. See Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 999 28 (9th Cir. 2018). 2 Technically, two consecutive year-length policies. (Doc. 1 at 9). 1 The section pertaining to “personal and advertising injury liability” contains a 2 number of exclusions. (Id. at 41-44). The section begins by stating, “This insurance does 3 not apply to:” before providing a list of exclusions. Each exclusion contains a heading in 4 bold with every word capitalized and then non-bold and uncapitalized statements 5 underneath the heading. 6 One such exclusion pertains to “Material Published Prior To Policy Period. 7 ‘Personal and advertising injury’ arising out of oral or written publication, in any manner, 8 of material whose first publication took place before the beginning of the policy period.” 9 (Id. at 41). 10 Another such exclusion is headed “Infringement of Copyright, Patent, 11 Trademark Or Trade Secret.” (Id. at 42). This exclusion contains two subsections: (i)(1) 12 and (i)(2). (Id.) Subsection (i)(1) states: “‘Personal and advertising injury’ arising out of 13 the actual or alleged infringement of copyright, patent, trademark, trade secret or other 14 intellectual property rights.” (Id.) Subsection (i)(2) states: “‘Personal and advertising 15 injury’ arising out of the actual or alleged use of another’s images, photographs, likenesses 16 or personal attributes whether altered or unaltered.” (Id.) 17 During litigation in the two earlier cases, Watford denied the strip clubs’ request for 18 defense and coverage. (Id.) On September 23, 2022, Plaintiffs filed a Complaint in this 19 Court, bringing a breach of contract action against Watford. (Doc. 1). Plaintiffs argue that 20 Watford was obligated under the terms of the Policies to defend and cover the strip clubs. 21 (Id. at 12). They do so as assignees of the two strip clubs, who each assigned all of their 22 claims against Watford and rights under the Policies to Plaintiffs. (Id. at 3, 9, 12). Plaintiffs 23 seek compensation for the costs and expenses incurred in the underlying cases, a defense 24 and indemnity under the operative insurance policies, the full amount of the Dalton and 25 4Play judgments, costs and disbursements, and all accruing interest. (Id. at 3-4). 26 On December 19, 2022, pursuant to Rule 12(b)(6), Watford filed a Motion to 27 Dismiss for Failure to State a Claim. (Doc. 14). The Motion is fully briefed. (Docs. 17, 20). 28 /// 1 II. LEGAL STANDARD 2 A motion to dismiss pursuant to Rule 12(b)(6) challenges the legal sufficiency of a 3 complaint. Cook v. Brewer, 637 F.3d 1002, 1004 (9th Cir. 2011) (citation omitted). Rule 4 12(b)(6) must be read in conjunction with Rule 8, which requires “a short and plain 5 statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2); 6 see also Ileto v. Glock, Inc., 349 F.3d 1191, 1199-1200 (9th Cir. 2003). A complaint need 7 not provide detailed factual allegations but must provide more than “labels and 8 conclusions.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). It must contain 9 factual allegations sufficient to raise a right to relief above the speculative level and to 10 “state a claim that is plausible on its face.” Id. at 555, 570. “A claim has facial plausibility 11 when the pleaded factual content allows the court to draw the reasonable inference that the 12 defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) 13 (citing Twombly, 550 U.S. at 556). A court may dismiss a claim either because it lacks “a 14 cognizable legal theory” or because it fails to allege sufficient facts to support a cognizable 15 legal claim. See SmileCare Dental Group v. Delta Dental Plan of Cal., Inc., 88 F.3d 780, 16 783 (9th Cir. 1996). 17 When a court is deciding a motion to dismiss, “[a]ll allegations of material fact are 18 taken as true and construed in the light most favorable to the nonmoving party.” Smith v. 19 Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996) (citing Everest & Jennings v. American 20 Motorists Ins. Co., 23 F.3d 226, 228 (9th Cir. 1994)). However, legal conclusions couched 21 as factual allegations are not given a presumption of truthfulness, and “conclusory 22 allegations of law and unwarranted inferences are not sufficient to defeat a motion to 23 dismiss.” Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). 24 Ordinarily, a court may not consider evidence outside the pleadings in ruling on a 25 Rule 12(b)(6) motion to dismiss. See United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 26 2003). However, courts may consider matters of judicial notice. (Id. at 908). “A court may 27 take judicial notice of matters of public record,” Khoja v. Orexigen Therapeutics, Inc., 899 28 F.3d 988, 999 (9th Cir. 2018). As such, judgments and other court documents are proper 1 subjects of judicial notice. See, e.g., United States v. Black, 482 F.3d 1035, 1041 (9th Cir. 2 2007). A Court is permitted to take judicial notice sua sponte. See, e.g., Callan v. N.Y. 3 Cmty. Bank, 643 Fed. Appx. 666, 666 (9th Cir. 2016). 4 Further, the “incorporation by reference” doctrine allows a court deciding a Rule 5 12(b)(6) motion to consider documents incorporated by reference, but not physically 6 attached to the complaint if such documents are central to the plaintiff’s claim and their 7 authenticity is undisputed. Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006) (citation 8 omitted). 9 III. DISCUSSION 10 At the center of this dispute is a disagreement as to the correct interpretation of an 11 exclusionary provision contained in each of the Policies. In its Motion to Dismiss, Watford 12 points to the Policies’ exclusion of coverage for “‘[p]ersonal and advertising injury’ arising 13 out of the actual or alleged use of another’s images, photographs, likenesses, or personal 14 attributes whether altered or unaltered.” (Doc. 14 at 7). This exclusion, Watford argues, is 15 unambiguous and Plaintiffs’ claims against 4Play and Dalton “fall squarely within” it. (Id.) 16 Plaintiffs deny that this exclusion applies to their claims. (Doc. 17 at 4). They also 17 argue that in the alternative, if the exclusion does apply, then it is void because it renders 18 illusory the protections it supposedly offers. (Id. at 9). Before addressing these arguments, 19 the Court will first establish some basic tenets of insurance policy interpretation. 20 The “interpretation of an insurance contract is a question of law . . . .” Sparks v. 21 Republic Nat'l Life Ins. Co., 647 P.2d 1127, 1132 (Ariz. 1982). An insurance policy is 22 “read as a whole, so as to give a reasonable and harmonious effect to all of its 23 provisions.” Charbonneau v. Blue Cross of Wash. & Alaska, 634 P.2d 972, 975 (Ariz. Ct. 24 App. 1981). Courts should attempt to give effect to all provisions so that none are “rendered 25 meaningless.” Am. Fam. Mut. Ins. Co. v. White, 65 P.3d 449, 453 (Ariz. Ct. App. 2003). 26 “Provisions of insurance policies are to be construed in a manner according to their plain 27 and ordinary meaning.” Sparks, 647 P.2d at 1132. “[W]here the provisions of the contract 28 are plain and unambiguous upon their face, they must be applied as written, and the court 1 will not pervert or do violence to the language used, or expand it [beyond] its plain and 2 ordinary meaning or add something to the contract which the parties have not put 3 there.” D.M.A.F.B. Fed. Credit Union v. Emps. Mut. Liab. Ins. Co. of Wis., 396 P.2d 20, 4 23 (Ariz. 1964). When policy language is unambiguous, a court may not create ambiguity 5 to find coverage. Sec. Ins. Co. v. Andersen, 763 P.2d 246, 248 (1988). “An interpretation 6 of a contract which renders it unreasonable should be avoided.” Custom Roofing Co. v. 7 Transamerica Ins. Co., 584 P.2d 1187, 1189 (Ariz. Ct. App. 1978). 8 If a clause in an insurance contract “appears ambiguous, [courts] interpret it by 9 looking to legislative goals, social policy, and the transaction as a whole.” First Am. Title 10 Ins. Co. v. Action Acquisitions, LLC, 187 P.3d 1107, 1110 (Ariz. 2008). “If an ambiguity 11 remains after considering these factors, [courts] construe it against the insurer.” Id. This 12 rule applies “with even greater force where the ambiguity appears in an exclusionary 13 clause.” Roberts v. State Farm Fire & Cas. Co., 705 P.2d 1335, 1336-37 (Ariz. 1985). “In 14 determining whether an ambiguity exists in a policy, the language should be examined 15 from the viewpoint of one not trained in law or in the insurance business.” Sparks, 647 16 P.2d at 1132. “Generally, the insured bears the burden to establish coverage under an 17 insuring clause, and the insurer bears the burden to establish the applicability of any 18 exclusion.” Keggi v. Northbrook Prop. & Cas. Ins. Co., 13 P.3d 785, 788 (Ariz. Ct. App. 19 2000). 20 A. Whether the Exclusion Applies 21 The Policies contain a three-and-a-half-page section dedicated to “Personal and 22 Advertising Injury Liability.” (Doc. 14-2 at 41). Under that section, Watford agrees to 23 “pay those sums that the insured becomes legally obligated to pay as damages because of 24 ‘personal and advertising injury’ to which this insurance applies. . . . However, we will 25 have no duty to defend the insured against any ‘suit’ seeking damages for ‘personal and 26 advertising injury’ to which this insurance does not apply.” (Id.) 27 The phrase ‘personal and advertising injury’ appears between apostrophes because 28 it is a defined term under the Policies. (Id. at 35). Under the Policies’ Definitions section, 1 the phrase is defined by six subsections, including as “injury . . . arising out of . . . oral or 2 written publication, in any manner, of another’s images, photographs, likenesses or 3 personal attributes.” (Id. at 50). 4 Clearly, Plaintiffs’ underlying claims fall under this term. Indeed, the parties do 5 not dispute that these claims represent a ‘personal and advertising injury’ as defined by 6 the Policies. The dispute is instead whether their claims are excluded by one of two 7 relevant exclusions. The section dedicated to “Personal and Advertising Injury Liability” 8 outlines a number of exclusions to coverage. (Id. at 41). Among these is section (i), 9 headed “Infringement of Copyright, Patent, Trademark or Trade Secret.” (Id. at 42). 10 Under this heading are two subsections: (i)(1) “‘personal and advertising injury’ arising 11 out of the actual or alleged infringement of copyright, patent, trademark, trade secret or 12 other intellectual property rights” and (i)(2) “‘personal and advertising injury’ arising out 13 of the actual or alleged use of another’s images, photographs, likenesses or personal 14 attributes whether altered or unaltered.” (Id.) 15 Because Plaintiffs’ claims in the underlying actions were centered around the 16 misappropriation of their likenesses, such claims—under the plain language of the 17 Policies—would seem to be excluded from coverage under (i)(2). To combat this 18 intuitive reading of the exclusion, Plaintiffs argue that this exclusion does not apply 19 because it must be understood in reference to the heading under which it appears— 20 “Infringement of Copyright, Patent, Trademark or Trade Secret.” (Doc. 17 at 5-7). The 21 Court must read (i)(2) in reference to the heading, Plaintiffs assert, so as to give meaning 22 to all terms, which means, here, to that heading. (Id.) Essentially, Plaintiffs argue that 23 (i)(2) excludes injuries arising out of the use of another’s images, photographs, or 24 likenesses only if such use is related in some way to copyright, patents, or trademarks. 25 Because Plaintiffs’ claims, they argue, are unrelated to copyright, patent, trademark, or 26 trade secret infringement, they are therefore not excluded by this provision. (Id.) 27 In reply, Watford argues that (i)(2) should not be read in conjunction with its 28 heading, citing a case from the District Court for the Northern District of California that 1 applies California law and a case from the Third Circuit. (Doc. 20 at 3).Watford also 2 argues that Plaintiffs’ interpretation of this section would render (i)(2) itself superfluous. 3 (Doc. 20 at 5). If read Plaintiffs’ way, Watford argues, (i)(2) is “already included” in the 4 much broader (i)(1), which includes all claims relating to copyright, patents, or 5 trademark. (Id.) Thus, (i)(2) becomes redundant if it only applies to claims relating to 6 copyright, patents, or trademark, which are already covered by (i)(1). 7 Watford has the better side of this argument. Although its placement is slightly 8 odd, the exclusion is clear and unambiguous. The Court will not create ambiguity to find 9 coverage, Andersen, 763 P.2d at 248, or expand the language beyond its plan and 10 ordinary meaning, D.M.A.F., 396 P.2d at 23, by awkwardly adding language to (i)(2) that 11 incorporates the heading under which it falls. Indeed, adding such language would simply 12 render that very subsection meaningless, as such a resulting exclusion would already be 13 covered by the broader (i)(1). 14 Even when placing (i)(2) in its broader context, Watford’s interpretation prevails. 15 Section (i)(2), like the other exclusions, must be read in conjunction with the phrase that 16 begins the Exclusions section: “This insurance does not apply to: . . .” This language only 17 makes sense and forms full sentences when read in conjunction with the actual 18 subsections, such as (i)(2), rather than with the headings. As such, the exclusion clearly 19 reads: “This insurance does not apply to ‘Personal and advertising injury’ arising out of 20 the actual or alleged use of another’s images, photographs, likenesses or personal 21 attributes whether altered or unaltered.” This exclusion is unambiguous and excludes 22 Plaintiffs’ underlying claims. 23 B. Illusory Coverage 24 Plaintiffs next argue that even if the Court were to agree with Watford as to the 25 applicability of section (i)(2), the Court should not apply the exclusion because doing so 26 would render the Policies’ coverage illusory. (Doc. 17 at 7). 27 Plaintiffs cite a variety of cases for the proposition that courts should not interpret 28 insurance policies in such a way that would render coverage null or illusory. (Doc. 17 at 7- 1 9). Under Arizona law, “a policy interpretation that would result in no payment of benefits 2 under any reasonably expected circumstance—or ‘render coverage null’—is illusory.” 3 Hanover Ins. Co. v. Vemma Int’l Holdings Inc., Case No. CV-16-10710PHX-JJT, 2016 4 WL 4059606 at *8 (D. Ariz. July 29, 2016) (citing Wilshire Ins. Co. v. S.A., 227 P.3d 504, 5 507-08 (Ariz. Ct. App. 2010); Aetna Cas. & Sur. Co. v. Dannenfeldt, 778 F. Supp. 484, 6 493 (D. Ariz. 1991)). 7 Here, (i)(2) renders neither null nor illusory the Policies’ coverage for ‘Personal and 8 Advertising Liability’—it simply narrows it. That section covers ‘personal and advertising 9 injur[ies],’ a term defined by six subsections, (15)(a) through (f). (Doc. 14-1 at 47). 10 Exclusion (i)(2) does not exclude all coverage under this section, only one form of it—that 11 defined by (15)(f). The Policies still provide coverage for five other forms of ‘personal and 12 advertising injury:’ (15)(a) through (e). As such, the Policies still offer the insured effective 13 protection for ‘personal and advertising liability.’ 14 None of the cases cited by Plaintiffs constitute mandatory authority that this Court 15 must follow. Regardless, each of these cases demonstrate why (i)(2) does not render the 16 Policies’ coverage illusory. These cases focus on the “completeness” of the exclusion of 17 coverage. (Id. at 8-9) (citing Travelers Indemnity Co. of Conn. v. Richard McKenzie & 18 Sons, Inc., 10 F.4th 1255 (11th Cir. 2021). For example, in Travelers Indemnity, the 19 Eleventh Circuit held that coverage was illusory where a policy “grants coverage with one 20 hand and then with the other completely takes away the entirety of that same coverage. 21 Completeness is the key.” 10 F.4th at 1265 (emphasis added). Similarly, ACE Cap. Ltd. v. 22 Morgan Waldon Ins. Mgmt., LLC, 832 F.Supp.2d 554, 572 (W.D. Pa. 2011) and Aspen 23 Specialty Ins. Co. v. 4 NYP Ventures, LLC, 162 F.Supp.3d 337, 345 (S.D.N.Y. 2016) both 24 hold that coverage is illusory when “the insured purchases no effective protection.” The 25 other cited cases all also emphasize that the exclusions must effectively eliminate coverage 26 completely in order to render coverage illusory. 27 Again, (i)(2) does not “completely” remove coverage. 10 F.4th at 1265. The strip 28 clubs did not “purchase[] no effective protection.” 832 F.Supp.2d at 572; 162 F.Supp.3d at 1 345. The exclusion simply narrows coverage. As such, the Policies’ coverage for ‘personal 2 and advertising liability’ is neither rendered null nor illusory. 3 C. Libel and Slander Coverage 4 Plaintiffs argue that Watford was not only obligated to defend and indemnify the 5 strip clubs because their underlying claims involved the use of another’s photo, image, and 6 likeness, but also because they involved allegations of libel and slander. (Doc. 17 at 11). 7 One of the definitions of ‘personal and advertising injury’ under the Policies is “oral or 8 written publication, in any manner of material that slanders of libels a person . . . or 9 disparages a person’s . . . goods, products, or services.” (Doc. 14-1 at 47). Here, Plaintiffs 10 claim that their image and likeness constitute their ‘goods, products, or services.’ (Doc. 17 11 at 11). Plaintiffs assert that both underlying complaints alleged disparagement of Plaintiffs’ 12 goods, products, or services, and therefore Watford was obligated to defend and indemnify 13 the strip clubs in relation to those complaints. (Id.) 14 Plaintiffs argue that the Dalton Complaint alleged such disparagement by alleging 15 under its false light invasion of privacy claim that Dalton’s use of their images created an 16 impression about Plaintiffs that would be “objectionable to a reasonable person” and had 17 harmed Plaintiffs’ “professional reputation[s].” (Id.) (citing Doc. 43 at 24). 18 As for the 4Play Complaint, Plaintiffs highlight the repeated allegations of 19 “irreparable harm” to the Plaintiffs’ “reputation[s] and brand[s]” through the 20 advertisements’ attribution to the Plaintiffs of the strip club’s “adult entertainment and 21 striptease lifestyle and activities.” (Doc. 17 at 11) (citing Doc. 14-4 at 41, 43). 22 In response, Watford argues that section (i)(2) excludes Plaintiffs’ claims because 23 such claims arose out of the use of the models’ images, photographs, or likenesses. (Doc. 24 20 at 8). 25 Again, Watford has the better side of this argument. Regardless of whether Plaintiffs 26 adequately pled libel and disparagement claims sufficient to trigger coverage under the 27 Policies, such allegations are clearly excluded by (i)(2). Any such libel, slander, or 28 disparagement arose out of the strip clubs’ use of Plaintiffs’ image, photographs, and 1 likenesses and was thus excluded by (i)(2). As Watford notes, none of the cases relied 2 upon by Plaintiffs include an exclusionary clause similar to (i)(2). 3 Again, this does not render coverage null or illusory. The Policies still offer 4 coverage for injuries arising out of oral or written publications that slander or libel—so 5 long as such injuries do not arise out of the use of another’s image, photographs, or 6 likeness. The archetypal instances of libel or slander—a public written or oral statement 7 disparaging an individual or entity—remain covered by the Policies. 8 D. Prior Publication 9 Watford also argues that the claims of Plaintiffs Pinder, Hathaway, Ratchford, and 10 Patrick were excluded from coverage because their images were first published before the 11 policy periods began. (Doc. 14 at 8). The Policies’ section dedicated to “Personal and 12 Advertising Injury Liability” includes an exclusion headed “material published prior to 13 policy period.” (Doc. 14-2 at 41). Specifically, the Policies do not apply to “‘personal and 14 advertising injury’ arising out of oral or written publication, in any manner, of material 15 whose first publication took place before the beginning of the policy period.” (Id.) 16 (1) Prior Publication of Patrick 17 Plaintiffs acknowledge that 4Play first published an image of Patrick seven months 18 prior to the start of the insurance policy. (Doc. 17 at 14). However, because that initial 19 publication was on 4Play’s Instagram page and subsequent publications were on their 20 Facebook page, Plaintiffs argue that the publications reached different audiences and thus 21 do not constitute republication and are not covered by this prior publication exclusion. (Id.) 22 In reply, Watford argues that because the later publications on Facebook were substantially 23 similar to the prior publication on Instagram, the prior publication rule applies. (Doc. 20 at 24 10). 25 To aid their argument that the prior publication exclusion does not apply when 26 material is republished on a different platform because the new platform represents a new 27 audience, Plaintiffs cite to Larue v. Brown, 333 P.3d 767 (Ariz. Ct. App. 2014). However, 28 as Watford points out, the Larue court’s analysis was made in a different context. Larue 1 deals with the single publication rule, which protects defendants from being sued separately 2 for each copy of a book or newspaper containing an allegedly defamatory statement and 3 prevents the statute of limitations from being reset each time a copy of that publication is 4 purchased or read. Id. at 771-72. Neither Larue nor the other two cases that Plaintiffs cite 5 address the issue raised here—the applicability of a prior publication exclusion in an 6 insurance contract. 7 More on point is Street Surfing, LLC v. Great Am. E & S Ins. Co., which deals with 8 an almost identical prior publication exclusion in an insurance policy. 776 F.3d 603, 610 9 (9th Cir. 2014). A prior publication exclusion, the Ninth Circuit explained, is designed to 10 “bar coverage when the wrongful behavior . . . began prior to the effective date of the 11 insurance policy.” Id. (punctuation removed) (quoting Taco Bell Corp. v. Cont’l Cas. Co., 12 388 F.3d 1069, 1072 (7th Cir. 2004). “[T]he exclusion bars coverage of injuries arising out 13 of republication of that advertisement, or any substantially similar advertisement . . . 14 because such later publications are part of a single, continuing wrong that began before the 15 insurance policy went into effect.” Id. A later advertisement is thus excluded if it is 16 “substantially similar” to the pre-coverage advertisement. Id. 17 As the Street Surfing court noted, in assessing whether a subsequent advertisement 18 is “substantially similar” to a pre-coverage advertisement, courts do not consider all 19 differences between them, but instead “focus[] on the relationship between the alleged 20 wrongful acts manifested in” the advertisements. Id. at 612-613 (italics omitted). For 21 instance, in Taco Bell Corp., the Seventh Circuit used an example of a copyright-infringing 22 article originally published in a magazine and then later republished as part of an anthology. 23 388 F.3d at 1073. Even though the anthology would be a “much different [] work”, the 24 wrongful act—that is, the copying of the copyrighted article without authorization— 25 “would be the same” and therefore the prior publication exclusion would apply. Id. 26 The Seventh Circuit’s analogy, also referenced in Street Surfing, is an apposite one 27 here. In the present case, the pre-coverage advertisement was published on Instagram and 28 the subsequent advertisements were published on Facebook, just as in the Seventh Circuit’s 1 example the pre-coverage publication took place in a magazine and the subsequent 2 publication occurred in an anthology. The wrongful act—there, the use of a magazine 3 article without authorization and here, the use of Patrick’s likeness without authorization— 4 is the same. The fact that Facebook and Instagram might have different audiences is 5 irrelevant—just as the fact that a magazine and an anthology might have different 6 audiences was irrelevant to the Street Surfing and Taco Bell Corp. courts. Because the 7 wrongful use of Patrick’s likeness without her authorization was the same in both the pre- 8 coverage and coverage periods—indeed, 4Play used the very same image—the insurance 9 policy’s prior publication exclusion applies. Watford therefore had no duty to defend or 10 indemnify 4Play for the claims made by Patrick. 11 (2) Prior Publication of Pinder, Hathaway, and Ratchford 12 The advertisements featuring Pinder, Hathaway, and Ratchford require a different 13 analysis. Unlike the pre- and post- coverage period advertisements featuring Patrick, which 14 were identical save for the platform on which they were published, Plaintiffs did not 15 allege—and the parties do not agree—that these advertisements were identical. There does 16 not appear to be any shared understanding between the parties as to the number and content 17 of these advertisements. 18 Watford argues that the prior publication exclusion applies to these three Plaintiffs 19 because in their complaint in the underlying action, Plaintiffs allege that the first 20 advertisements were published before the coverage period began. (Doc. 14 at 9-10). 21 Watford notes that in the Dalton Complaint, Plaintiffs did not allege that any 22 advertisements published during the coverage period were different to the pre-coverage 23 advertisements. (Id. at 10). 24 Plaintiffs counter that when Watford denied Dalton coverage, it had not seen the 25 advertisements of the three models that had been published during the policy period 26 because these advertisements were not attached as exhibits to the complaint. (Doc 17 at 27 15). As a result, Watford’s Motion to Dismiss does not compare the content of the images 28 published pre-coverage period and those published during the coverage period. (Id. at 15- 1 16). In their Response, Plaintiffs attach some of these advertisements as exhibits, (Doc. 17- 2 5), and highlight differences between the pre-coverage images and the images published 3 during the coverage period. (Doc. 17 at 16-17). 4 However, the Court may not consider these advertisements. A court may consider 5 documents offered by a defendant in a motion to dismiss if the documents form the basis 6 of the plaintiff’s complaint or if the complaint makes extensive reference to the documents. 7 Khoja, 899 F.3d at 1002. Hence, this court’s examination of the two Policies. However, 8 there is a general prohibition against a plaintiff’s introduction of evidence at the motion to 9 dismiss stage. Id. The purpose of this prohibition is to prevent plaintiffs from “selecting 10 only portions of documents that support their claims, while omitting portions of those very 11 documents that weaken . . . their claims.” Id. (citation omitted). 12 Plaintiffs may not incorporate by reference the attached advertisements. The 13 rationale behind this prohibition is made clear in this case because Plaintiffs have not 14 attached all the relevant advertisements. Rather, they have only attached three 15 advertisements featuring Ratchford and one featuring Rosario (who Watford has not 16 claimed is excluded under the prior publication exclusion). (Doc. 17-5). They have not 17 supplied advertisements featuring Pinder or Hathaway and it is possible that 4Play used 18 other, non-attached advertisements featuring Ratchford. 19 As for the fact that the Dalton Complaint did not affirmatively allege that the 20 advertisements posted pre- and post- coverage period were different, nor did that complaint 21 allege that they were identical or even similar. This is in stark contrast to the 4Play 22 Complaint’s allegations surrounding Patrick, where the 4Play Plaintiffs alleged that the 23 post-coverage period advertisements featuring Patrick constituted a “re-upload[]” of “the 24 same image” that had been posted before the coverage period. (Doc. 14-4 at 21). Although 25 Watford might ultimately prevail on the applicability of the prior publication rule as to 26 Pinder, Hathaway, and Ratchford’s claims, the Court cannot make any determination on 27 the issue at the motion to dismiss stage, based on the underlying complaints and the Polices 28 alone. 1 The Court must therefore deny Watford’s Motion to Dismiss as it relates to the prior 2 publication of advertisements featuring Pinder, Hathaway, and Ratchford. The Court does 3 not have all of the relevant advertisements before it and the precise number and content of 4 these advertisements is not currently in the record. Any analysis here will likely involve 5 the comparison of various advertisements and a determination as to whether advertisements 6 published pre- and post- coverage period are “substantially similar.” This constitutes a 7 question of fact, requires discovery, and is thus not suitable for determination at the motion 8 to dismiss stage. Regardless, Pinder, Hathaway, and Ratchford’s claims must be dismissed 9 because they are excluded under the plain and unambiguous language of section (i)(2), as 10 discussed above. 11 IV. CONCLUSION 12 Watford was not obligated to cover and indemnify Watford and 4Play in the 13 underlying actions because the operant Policies excluded coverage for Plaintiffs’ claims. 14 Those Policies also excluded the claims brought by Plaintiff Tara Leigh Patrick on separate 15 grounds. As such, the Court will grant Watford’s Motion to Dismiss. 16 When granting a motion to dismiss based on Rule 12(b)(6), a court must give the 17 plaintiff leave to amend, unless it finds that any amendment would be futile. See Lopez v. 18 Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc); Bly-Magee v. California, 236 F.3d 19 1014, 1019 (9th Cir. 2001). Here, it is unclear how Plaintiffs could cure their Complaint 20 because they cannot change the underlying complaints or the Policies, which are 21 undisputed and form the basis of this ruling. As such, the Court finds that any amendment 22 would be futile and will dismiss Plaintiffs’ claims with prejudice. 23 Accordingly, 24 IT IS HEREBY ORDERED granting Defendant’s Motion to Dismiss. (Doc. 14). 25 IT IS FURTHER ORDERED dismissing with prejudice Plaintiffs’ claims. 26 /// 27 /// 28 /// 2 IT IS FURTHER ORDERED directing the Clerk of the Court to terminate this 3 || action. 4 Dated this 6th day of March, 2023. 5 6 aphid Z.. - Bir arvvnae Hdhorable Stephen M. McNamee 7 Senior United States District Judge 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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