Lassen Canyon Nursery, Inc. v. Royal Ins. Co. of America

• Decision Date: 23 September 1983
• Docket Number: I-X,No. 81-4602,81-4602
• Citation: 720 F.2d 1016
• Parties: LASSEN CANYON NURSERY, INC., Plaintiff-Appellant, v. ROYAL INSURANCE COMPANY OF AMERICA (formerly Royal Globe Insurance Co.), National Union Fire Insurance Company of Pittsburgh, Pa., and Does, inclusive, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1016

720 F.2d 1016

LASSEN CANYON NURSERY, INC., Plaintiff-Appellant, v. ROYAL INSURANCE COMPANY OF AMERICA (formerly Royal Globe

Insurance Co.), National Union Fire Insurance

Company of Pittsburgh, Pa., and Does

I-X, inclusive, Defendants-Appellees.

No. 81-4602.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 14, 1982.

Decided Sept. 23, 1983.

Michael F. Kelley, Furth, Fahrner, Bluemle & Mason, San Francisco, Cal., for plaintiff-appellant.

Cynthia H. Plevin, Sedgwick, Detert, Moran & Arnold, David W. Gordon, Bronson, Bronson & McKinnon, San Francisco, Cal., for defendants-appellees.

Appeal from the United States District Court for the Northern District of California.

Before ANDERSON, HUG, and NORRIS, Circuit Judges.

J. BLAINE ANDERSON, Circuit Judge:

Plaintiff Lassen (insured) appeals from summary judgment in favor of defendants Royal and National (insurers). The district court held that neither insurer had a duty to defend Lassen in a suit alleging violation of federal anti-trust law (the underlying litigation). We affirm.

As there are no material issues of fact, the only question for review is whether defendants prevail as a matter of law. Ferguson v. Flying Tiger Line, Inc., 688 F.2d 1320, 1322 (9th Cir.1982). We will uphold the determination of a district judge as to the law of the state in which the district is located unless such determination is clearly wrong. Anderson v. Allstate Insurance Co., 630 F.2d 677, 682 (9th Cir.1980).

An insurer must furnish a defense when it learns facts creating potential liability. Giddings v. Industrial Indemn. Co., 112 Cal.App.3d 213, 217, 169 Cal.Rptr. 278, 280 (1980). Both policies covered physical damage to tangible property, including loss of use. Unlike Giddings, Lassen has satisfied each policy's stipulation that injury be caused by an "occurrence" (damage neither expected nor intended by the insured) in that purely unintentional acts may violate antitrust law. Rex Chainbelt Inc. v. Harco Products, Inc., 512 F.2d 993, 1006 (9th Cir.), cert. denied, 423 U.S. 831, 96 S.Ct. 52, 46 L.Ed.2d 49 (1975).

It is generally accepted that economic losses such as lost profit or good will are not property damage within the coverage of these policies. Giddings, 112 Cal.App.3d at 219, 169 Cal.Rptr. at 281. The diminution in value of fixed assets due to loss of use, however, has been allowed as an element of damage in an antitrust action. Story Parchment Paper Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 567, 51 S.Ct. 248, 252, 75 L.Ed. 544 (1931). Such an intangible economic loss may be covered if it provides a measure of damage to tangible property. Giddings, 112 Cal.App.3d at 219, 169 Cal.Rptr. at 281. Geddes & Smith, Inc. v. St. Paul Mercury Indemn. Co., 63 Cal.2d 602, 609, 47 Cal.Rptr. 564, 568, 334 P.2d 881, 885 (1959).

The question presented in this appeal, however, is not whether the diminution in value of tangible property caused by Lassen's intentional or inadvertent conduct is covered by the policies, but rather, whether the insurers have been fairly apprised of facts creating potential liability under the policies. Ritchie v. Anchor Casualty Co., 135 Cal.App.2d 245, 251, 286 P.2d 1000, 1004 (1955). Gray v. Zurich, 65 Cal.2d 263, 54 Cal.Rptr. 104, 419 P.2d 168, 177 (1966). In Story Parchment and Geddes, the fact that tangible property was reduced in value was obvious, and the insurers were fully aware of the insureds' claims for this type of property damage.

A thorough review of plaintiffs' complaint in the underlying action and other information available to the insurers about the nature of the action reveals no claim which could reasonably be construed as seeking recovery for property damage as defined in the policies. Lassen's assertions to the contrary are not based on facts, but instead, rest entirely on speculation and conjecture. Giddings, 112 Cal.App.3d at 220, 169 Cal.Rptr. at 282....