Summary
In Criticom Internat. Corp. v. Scottsdale Ins. Co. (9th Cir. 2007) 228 Fed.Appx. 677, the insured under a CGL policy, an alarm installation company (Criticom), was sued by alarm system retailers for selling their equipment to another company (King).
Summary of this case from Advanced Network, Inc. v. Peerless Ins. Co.Opinion
No. 05-55307.
Argued and Submitted February 12, 2007.
Filed April 6, 2007.
Christopher B. Leonard, Esq., Mahogany Paulino, Esq., Mitchell Silberberg et al., LLP, Los Angeles, CA, for Plaintiffs-Appellants.
Alan B. Yuter, Esq., Selman Breitman, LLP, Los Angeles, CA, for Defendant-Appellee.
Dean B. Herman, Esq., Michelman Robinson, LLP, Encino, CA, for Defendants.
Appeal from the United States District Court for the Central District of California, Dickran M. Tevrizian, District Judge, Presiding. D.C. No. CV-04-02079-DT.
Before: PREGERSON, W. FLETCHER, and BERZON, Circuit Judges.
MEMORANDUM
This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3.
Appellants Criticom International Corporation and Criticom International Corporation California ("Criticom") appeal from the district court's grant of summary judgment to Appellee Scottsdale Insurance Company ("Scottsdale") on Criticom's denial of coverage and bad faith claims. We affirm.
The parties are familiar with the facts, so we do not repeat them here. We apply California law in this diversity case.
The Errors and Omissions ("E 0") provision of Criticom's insurance policy with Scottsdale covered "sums that the insured becomes legally obligated to pay as `damages' because of injury as a result of an `error or omission'. . . ." "Error or omission" was defined as "any negligent act, error or omission while performing any services normal to the business of the insured described in the Declarations." (Emphasis added). The policy declarations listed Criticom's business as "Alarm Installation and Monitoring." Because Criticom's alleged sale of the alarm system retailers' toll-free telephone lines and equipment to King Central was not a service normal to the business of alarm installation and monitoring, the alarm system retailers' complaints did not trigger a possibility of coverage under the E O provision. Nor did the complaints' allegations that King Central provided inferior monitoring services after Criticom sold it the central alarm station require Scottsdale to defend Criticom.
The General Commercial Liability ("GCL") provision of the policy covered "bodily injury" or "property damage" caused by an "occurrence." The policy defined "property damage" as (1) "[physical injury to tangible property, including all resulting loss of use of that property" or (2) "[l]oss of use of tangible property that is not physically injured." For two reasons, we hold that the alarm system retailers' complaints regarding the sale did not allege property damage covered by the GCL provision. First, toll-free telephone lines are not "tangible property," which "refers to things that can be touched, seen, and smelled." Avery Dennison Corp. v. Allendale Mut. Ins. Co., 310 F.3d 1114, 1116 (9th Cir. 2002) (quoting Kazi v. State Farm Fire Cos. Co., 24 Cal.4th 871, 103 Cal.Rptr.2d 1, 15 P.3d 223, 229 (2001)). Second, although the alarm system retailers' complaints alleged that Criticom wrongfully sold the retailers' "equipment" to King, they did not claim damages for " loss of use" of the equipment. Rather, their claim was for conversion, an action that California courts have distinguished from physical injury and loss of use. See Collin v. Am. Empire Ins. Co., 21 Cal. App.4th 787, 26 Cal.Rptr.2d 391, 408-09 (1994).
Therefore, we conclude that Scottsdale had no duty to defend Criticom because the alarm system retailers' complaints did not give rise to the possibility of coverage under either the E O or GCL provisions of the insurance policy. Because we affirm the district court's holding that Scottsdale did not have a duty to defend Criticom, we also affirm its holding that Scottsdale did not act in bad faith.
AFFIRMED.