My Choice Decision
On August 19, 2020, Ninth Circuit issued its decision My Choice Software, LLC v. Travelers Casualty Insurance Co. of America No. 19-56030, 2020 WL 4814235, which contained that lengthy rules for the construction of insurance policy required that a district court contain a defense obligation. Specifically, the Court held that the exclusion of intellectual property rights in a travel policy does not unequivocally preclude the possibility of covering a claim against the insured, My Choice, and that travelers consequently had an obligation to defend.
In question, a traveler was "IP exclusion who stated coverage would not apply" "Personal injury" or "advertising damage" that occurs as a result of any actual or alleged violation or violation of any of the following rights or laws, or any other " personal injury "or" advertising damage "" alleged in any claim or "action" which also alleges any such infringement or infringement. "
In the underlying action, My Choice Trusted Tech sued allegations that its former employees had misused the company's sensitive client information and other property rights. In turn, Trusted Tech complained against My Choice, among other things, invoked a claim of defamation. The district court held that the exclusion of intellectual property rights ensured the entire trial, that the presence of any excluded accusations ̵
The Ninth Circuit reversed. As stated, it is a long-standing law that an exclusion clause must be "stated precisely and comprehensibly, in words that are part of the ordinary playperson's functioning vocabulary." (citing Haynes v. Farmers Ins. Exch. 32 cal. 4th 1198, 1204 (2004)). Here, it was reasonable for My Choice to consider each submission separately and, in the absence of express language to the contrary, to interpret the exclusion which applies only to allegations made against it.
The ninth district also did not accept the district court's alternative which considers that the allegations against My Choice arose from actual or alleged violations or violations of IP rights, so that the first part of the IP exclusion provided an independent basis to cover the coverage. The Court found that the application of the "derived from" phrase in the IP exclusion to these allegations is contrary to the principle that "insurance cover is interpreted largely to give the insured as much protection as possible, [whereas] … exclusive clauses are interpreted narrowly against the insurer. "(quoting MacKinnon v. Truck Ins. Exch. 31 cal. 4e 635, 648 (2003)). In order to reach this conclusion, the Court distinguished cases where gross margin where it would be largely interpreted ( eg Southgate Recreation & Park District v California Ass & # 39; n for Park & Recreation Ins. 106 Cal. App. 4th 293 ( 2003) from cases such as this where it appeared in an exclusion and was to be interpreted narrowly, in support of this distinction it cited Tower Ins. Co., NY v. Capurro Enters. Inc. No. C 11-03806 , 2012 WL 1109998, * 9-10 (ND Cal. 2 Apr. 2012) (rejects the argument that "arise from" is tol kas always largely, even in exclusion clauses, and notes that the "broad coverage-narrow exclusion principle is well illustrated with respect to the phrase" derived from. "). Here, Trusted Tech's allegations against My Choice do not" unambiguously, clearly fall within "which derives from the" language of IP exclusion "in My Choice policy (with reference to Haynes 32 Cal. 4 year 1204) and the exclusion would not prevent coverage.
Consequently, since the IP exclusion was found to be ambiguous and could reasonably be interpreted in favor of coverage, the ninth circuit ruled that it did not exclude an obligation to defend in the underlying act.
The ninth district decision affirms the well-established principles of California insurance law that an exception must be stated precisely and comprehensibly and that exceptions must be interpreted narrowly against insurers. However, the decision also speaks in a broader context, which is the design standard that courts apply to the interpretation of insurance under California law.
California law has long had an insurance is ambiguous when it is susceptible to two or more  reasonable constructions. Ameron Int’l Corp. v. Ins. Co. of State of Pennsylvania 50 Cal. 4th 1370, 1378 (2010). In other words, an insured person only needs to show that his interpretation of the policy language is a reasonable interpretation to justify the granting of cover under the ambiguous provision. Furthermore, as California's Supreme Court has explained, ambiguous terms in an insurance policy must be interpreted "against the insurer, who wrote the insurance policy and is held" responsible "for the uncertainty [,]" to protect the insured's reasonable expectation of reporting. Id . These principles ensure that the insured receives from their insurance the coverage that they reasonably expected to have purchased.