Sei Y. Kim v. Truck Insurance Exchange et al

Filing 77

ORDER re: DEFENDANT PEERLESS INSURANCE CO.'S MOTION FOR SUMMARY JUDGMENT 29 by Judge Ronald S.W. Lew. The Court GRANTS Defendant's Motion for Summary Judgment. SEE ORDER FOR FURTHER AND COMPLETE DETAILS. (jre)

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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11 SEI Y. KIM,
Plaintiff,
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v.
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TRUCK INSURANCE EXCHANGE
14 and PEERLESS INSURANCE
COMPANY,
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Defendants.
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CV 14-4270 RSWL (VBKx)
ORDER re: DEFENDANT
PEERLESS INSURANCE CO.’S
MOTION FOR SUMMARY
JUDGMENT [29]

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18

Before the Court is Defendant Peerless Insurance

19 Co.’s(“Peerless” or “Defendant”) Motion for Summary
20 Judgment.

The Court, having considered all arguments

21 presented to the Court, NOW FINDS AND RULES AS FOLLOWS:
22

The Court GRANTS Defendant’s Motion for Summary

23 Judgment.
24 ///
25 ///
26 ///
27 ///
28 ///
1

1

I.

2

FACTUAL BACKGROUND1

Sei Y. Kim (“Sei Kim” or “Plaintiff”) is a citizen

3 of the Republic of Korea, with his primary residence in
4 Anyang-si, Kyonggi-do, Reublic of Korea.
5 Complaint (“FAC”) ¶ 1[8].

First Amended

Defendant Truck Insurance

6 Exchange(“Truck”), an insurance company, is a business
7 incorporated in California, with its principal place of
8 business located at 4680 Wilshire Boulevard, Los
9 Angeles, CA 90010.

FAC ¶ 2.

Defendant Peerless

10 Insurance Company (“Peerless”) is incorporated in New
11 Hampshire, with its principal place of business at 62
12 Maple Avenue, Keene, New Hampshire 03431.

FAC ¶ 3.

13 Truck and Peerless (collectively, “Defendants”) are
14 qualified insurers in the State of California.

FAC ¶¶

15 2-3.
16

Cyclone USA, Inc. (“Cyclone”), now called Tornado

17 Air Management Systems, Inc., purchased an insurance
18 policy from Truck, Policy No. 29-9412 30 43, “effective
19 from May 5, 1999 to May 5, 2000, and from May 5, 2001
20 to May 5, 2002.”

FAC ¶¶ 5, 10.

For terms and

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1

The Court is aware that under typical summary
judgment proceedings, it is appropriate to make
findings of fact in addition to conclusions of law.
Here, however, the only dispositive issues are legal
ones, because, as explained below, interpretation of
insurance contracts are pure matters of law.
Accordingly, the Court notes the following factual
background as explained in Plaintiff’s Complaint,
though it does not present this background as official
findings of fact. Undisputed factual contentions are
noted as such within the Court’s analysis.
2

1 conditions of the insurance policy, see Ex. B[1]; FAC
2 11.
3

Cyclone also purchased an insurance policy from

4 Peerless, Policy No. CBP9592516, “effective May 9, 2002
5 to May 9, 2003, and May 9, 2003 to May 9, 2004.”
6 17.

FAC ¶

For terms and conditions of the insurance policy,

7 see Ex. C[1]; FAC ¶ 18.
8

On February 11, 2003, Cyclone filed a Complaint in

9 the United States District Court for the Central
10 District of California, CV 03-0992 AJW, against Sei
11 Kim.

FAC ¶ 24.

Sei Kim filed an Answer and

12 Counterclaims alleging “(1) Trademark Infringement, (2)
13 Unfair Competition Under 15 U.S.C. § 1125, (3)
14 Declaratory Relief Under 28 U.S.C. § 2201, (4) Unfair
15 Competition Under California Business & Professions
16 Code § 17200, (5) Breach of Fiduciary Duty, (6)
17 Intentional Interference With Contract, and (7) Breach
18 of Contract.”

FAC ¶ 25.

In his Answer and

19 Counterclaims to Cyclone’s Third Amended Complaint, in
20 the underlying action, Sei Kim “alleged that Cyclone
21 impermissibly marked its un-patented Tornado III fuel
22 saving devices as patented in violation of 35 U.S.C. §
23 292.”
24

FAC ¶ 27.

Peerless agreed to defend Cyclone and Jay Kim,

25 Cyclone’s President, and retained the firm Ropers,
26 Majeski, Kohn & Bentley (“RMKB”) as panel counsel.
27 ¶ 29.

FAC

Truck also agreed to defend Cyclone and Jay Kim

28 in the underlying action pursuant to the Truck Policy.
3

1 FAC ¶ 31.
2

On December 15, 2004, Truck filed a Complaint for

3 Declaratory Relief in the Superior Court of California,
4 County of Los Angeles, case number BC325973 . . .
5 against Cyclone, Jay Kim, Sei [Kim], and Peerless.
6 ¶ 34.

FAC

Truck asserted “that Truck had no obligation to

7 Defend or indemnify Cyclone or Jay Kim . . . because
8 the underlying claim was not even potentially covered
9 under the Truck Policy.”

Id.

After Truck’s Motion for

10 Summary Judgment was denied, Truck filed a Request for
11 Dismissal in the Declaratory Judgment Action; as a
12 result, the Clerk entered the dismissal on August 28,
13 2006.

FAC ¶¶ 38-39.

On October 24, 2006, Truck

14 appealed the Declaratory Judgment Action; however, on
15 November 15, 2006, Truck filed a Notice of Abandonment
16 of Appeal.
17

FAC ¶¶ 40-41.

On November 8, 2007, in the underlying action, the

18 trial court “found Cyclone liable under 35 U.S.C. §
19 292(a) for falsely marking 82,500 un-patented Tornado
20 III fuel saving devices as patented.”

FAC ¶ 46.

The

21 trial court found that Jay Kim, on behalf of Cyclone,
22 “directed the manufacturer to label the Tornado III as
23 patented, even though neither Jay Kim, nor Cyclone
24 owned a patent for the Tornado III.”
25 Memorandum of Decision, Ex. O [8].

Id.; see
The trial court

26 ordered Cyclone to pay $500 in damages.
27

FAC ¶ 47.

On January 2, 2008, Peerless sent a letter to

28 Cyclone and Jay Kim denying coverages for the damages
4

1 awarded by the trial court.
2

FAC ¶ 48.

On March 31, 2010, the trial court entered a final

3 judgment in favor of Cyclone against Sei Kim in the
4 amount of $1,048,976 after offset.

FAC ¶ 50.

Sei Kim

5 appealed to the Ninth Circuit of Appeals for the sole
6 purpose of challenging the trial court’s calculation of
7 damages for the False Patent Marking Claim.

FAC ¶ 51.

8 Peerless appointed panel counsel RMKB, and on behalf of
9 Cyclone, requested the Ninth Circuit to affirm the
10 trial court’s findings.

FAC ¶ 52.

On September 16,

11 2011, while under appeal, President Obama signed the
12 America Invents Act, (“AIA”) into law, which amended,
13 among others, 35 U.S.C. § 292.

FAC ¶ 53.

The new law

14 applied to all cases that were pending, such as the
15 appeal in the underlying case.

Id.

As a result, on

16 December 15, 2011, the Ninth Circuit vacated the trial
17 court’s award and “remanded the matter to the Trial
18 Court for a calculation of Cyclone’s liabilities under
19 the newly amended 35 U.S.C. § 292(b).”
20

FAC ¶ 54.

On December 29, 2011, Peerless notified Cyclone

21 that it was withdrawing its provided defense, and that
22 damages resulting from false patent marking were not
23 covered in Cyclone’s insurance policy.

FAC ¶ 55.

On

24 March 7, 2012, the Trial Court granted Truck-provided
25 independent counsel[’s] motion to withdraw as counsel
26 for Cyclone and Jay Kim.

FAC ¶ 59.

Likewise, on March

27 8, 2012, the trial court granted Peerless-provided
28 panel counsel RMKB’s motion to withdraw as counsel for
5

1 Cyclone and Jay Kim.
2

FAC ¶ 60.

On September 17, 2013, Sei Kim and Cyclone settled

3 their dispute and filed a joint stipulation for final
4 judgment to the court.

FAC ¶ 64.

On September 24,

5 2014, the trial court awarded Sei Kim $4,000,000 for
6 his False Patent Marking Claim, which was offset by
7 Cyclone’s previous award of $1,048,976.

FAC ¶ 65.

As

8 a result, the trial court “entered a final judgment in
9 favor of Sei Kim, against Cyclone, in the amount of
10 $2,951,024.”

Id.; see Final Judgment, Ex. U [8].

11 Furthermore, as a part of the settlement agreement,
12 “Cyclone transferred and assigned to Sei Kim, all legal
13 and beneficial rights, title, and interests to the
14 Truck and Peerless Insurance Policies.”

FAC ¶ 66. As

15 assignee, Sei Kim has asserted the claims he believes
16 Cyclone has against Truck and Peerless, and has
17 demanded that Peerless pay the final judgment.
18 68.

Peerless has refused to pay, as has Truck.

FAC ¶
FAC ¶

19 68.
20

II.

DISCUSSION

21 1.

Legal Standard

22

Summary judgment is appropriate when there is no

23 genuine issue of material fact and the moving party is
24 entitled to judgment as a matter of law.
25 P. 56(a).

Fed. R. Civ.

A genuine issue is one in which the evidence

26 is such that a reasonable fact-finder could return a
27 verdict for the non-moving party.
28 Lobby, 477 U.S. 242, 248 (1986).
6

Anderson v. Liberty
The evidence, and any

1 inferences based on underlying facts, must be viewed in
2 a light most favorable to the opposing party.

Diaz v.

3 American Tel. & Tel., 752 F.2d 1356, 1358 n.1 (9th Cir.
4 1985).
5

Where the moving party does not have the burden of

6 proof at trial on a dispositive issue, the moving party
7 may meet its burden for summary judgment by showing an
8 “absence of evidence” to support the non-moving party's
9 case.
10

Celotex v. Catrett, 477 U.S. 317, 325 (1986).

The non-moving party, on the other hand, is

11 required by Federal Rule of Civil Procedure 56(e) to go
12 beyond the pleadings and designate specific facts
13 showing that there is a genuine issue for trial.
14 at 324.

Id.

Conclusory allegations unsupported by factual

15 allegations, however, are insufficient to create a
16 triable issue of fact so as to preclude summary
17 judgment.

Hansen v. United States, 7 F.3d 137, 138

18 (9th Cir. 1993) (citing Marks v. Dep’t of Justice, 578
19 F.2d 261, 263 (9th Cir. 1978)).

A non-moving party who

20 has the burden of proof at trial must present enough
21 evidence that a “fair-minded jury could return a
22 verdict for the [opposing party] on the evidence
23 presented.”

Anderson, 477 U.S. at 255.

In ruling on a

24 motion for summary judgment, the Court's function is
25 not to weigh the evidence, but only to determine if a
26 genuine issue of material fact exists. Id.
27
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7

1 2.

Analysis

2

a. Has Defendant Peerless’s Duty to Defend Ceased

3

as a Matter of Law?

4

“Liability insurers owe a duty to defend their

5 insureds for claims that potentially fall within the
6 policy’s coverage provisions.”

Hameid v. Nat'l Fire

7 Ins. of Hartford, 31 Cal. 4th 16, 21 (2003).

“The

8 carrier must defend a suit which potentially seeks
9 damages within the coverage of the policy.”

Gray v.

10 Zurich Ins. Co. 65 Cal.2d 263, 275 (1966).

However, in

11 an action where a claim is not even potentially
12 covered, the insurer owes no duty to defend.
13 Superior Court, 16 Cal.4th 35, 46 (1997).

Buss v.

“[T]hat the

14 precise causes of action pled by the third party
15 complaint may fall outside policy coverage does not
16 excuse the duty to defend where, under the facts
17 alleged, reasonably inferable, or otherwise known, the
18 complaint could fairly be amended to state a covered
19 liability.”

Scottsdale Ins. Co. v. MV Transp., 36

20 Cal.4th 643, 654 (2005).
21

The duty to defend, however is “not unlimited; it

22 is measured by the nature and kinds of risks covered by
23 the policy.”

Waller v. Truck Ins. Exchange, Inc.,

24 Cal.4th 1, 19 (1995).

11

In an action concerning a duty

25 to defend, “the insured must prove the existence of a
26 potential for coverage, while the insurer must
27 establish the absence of any such potential. In other
28 words, the insured need only show that the underlying
8

1 claim may fall within policy coverage; the insurer must
2 prove it cannot.”

Montrose Chem. Corp. v. Superior

3 Court, 6 Cal. 4th 287, 300 (1993).
4

Interpretation of an insurance policy is a question

5 of law.

AIU Ins. Co. v. Superior Court, 51 Cal.3d 807

6 (1990); Waller v. Truck Ins. Exchange, Inc., 11 Cal.4th
7 1, 18, 44 (1995).

“Under statutory rules of contract

8 interpretation, the mutual intention of the parties at
9 the time the contract is formed governs
10 interpretation.” AIU, 51 Cal.3d at 821–822.

The rules

11 governing policy interpretation require us to look
12 first to the language of the contract in order to
13 ascertain its plain meaning or the meaning a layperson
14 would ordinarily attach to it.

Waller v. Truck Ins.

15 Exch., Inc., 11 Cal. 4th 1, 18 (1995), as modified on
16 denial of reh'g (Oct. 26, 1995).

The court should

17 “interpret the language in context, with regard to its
18 intended function in the policy.”

Bank of the West v.

19 Superior Court, 2 Cal.4th 1254, 1265 (1992).
20

As an initial matter of clarification, Plaintiff

21 repeatedly asserts that these are questions of “fact”
22 subject to dispute such that summary judgment is
23 unavailable.

As explained above, the questions at

24 issue are questions of law, not of fact.

Thus, an

25 insurer is entitled to summary judgment “that no
26 potential for indemnity exists . . . if the evidence
27 establishes as a matter of law that there is no
28 coverage.”

Cnty. of San Diego v. Ace Prop. & Cas. Ins.
9

1 Co., 37 Cal. 4th 406, 414 (2005).

While there do seem

2 to be some disputes as to fact that would have an
3 impact on other summary judgment issues, such as when
4 certain claims may have come to light, this Motion can
5 be settled without referring to those facts because
6 they are not germane to the question of contract
7 interpretation.

As a matter of law, the Policy cannot

8 be said to conform to Plaintiff’s proposed
9 interpretation.
10

i. Is False Patent Marking Covered Under

11

the Enumerated Offenses?

12

Peerless has a duty to defend a claim if it is

13 included in the Policy at issue.

Peerless claims that

14 the claim in question, false patent marking, is, as a
15 matter of law, not covered by the Policy.

It is

16 undisputed that the Policy does not cover false patent
17 marking per se.

Sei Kim claims that the Policy

18 includes Disparagement, and that Cyclone’s false patent
19 marking referred to Sei Kim’s patented device, which
20 constitutes disparagement.
21

Sei Kim cites Hartford Casualty Ins. Co. v. Swift

22 Distrib., Inc., 59 Cal.4th 277 (2014) in support of its
23 argument that Cyclone’s false patent marking
24 constitutes Disparagement such that the Policy’s
25 coverage for advertising injury is activated.

More

26 specifically, Plaintiff cites the following language
27 from the Hartford court: “[T]he related requirements of
28 derogation and specific reference may be satisfied by
10

1 implication where the suit alleges that the insured’s
2 false or misleading statement necessarily refers to and
3 derogates a competitor’s product.”

Opp’n 6:17-25

4 (citing Hartford, 59 Cal.4th at 294).

Yet, the

5 Hartford court explicitly enumerated the factors must
6 be present to constitute disparagement: a false or
7 misleading statement “(1) must specifically refer to
8 the plaintiff's product or business, and (2) must
9 clearly derogate that product or business.”
10 at 291.

59 Cal.4th

In further explaining this requirement, the

11 court noted that the false or misleading statement must
12 “have a degree of specificity that distinguishes direct
13 criticism of a competitor’s product or business from
14 other statements extolling the virtues or superiority
15 of the defendant’s product or business.”
16

Id.

The language at issue here is Cyclone’s false

17 marking of “Patented.

Made in USA.”

This statement

18 does not by express mention or clear implication refer
19 to Sei Kim’s product or clearly derogate that product.
20 See Hartford,

59 Cal. 4th at 294.

Sei Kim cites the

21 trial court’s finding that “Cyclone USA falsely marked
22 its unpatented devices as patented in an effort to
23 deceive the public either into thinking the Tornado III
24 was more desirable than it actually was or at least was
25 comparable or superior to the devices that Cyclone USA
26 previously had been selling” in order to assert that
27 the necessary showing for disparagement has been met.
28 Opp’n at 6-8.

This extrapolation is unreasonable and
11

1 unpersuasive, as the trial court clearly states Cyclone
2 was motivated by its desire to enhance the stature of
3 its product.

Further, it is unclear why Cyclone’s

4 alleged motivation is sufficient to satisfy the
5 elements of a derogation claim when its words clearly
6 are not.

Disparagement by confusion does not exist: “A

7 false or misleading statement that causes consumer
8 confusion, but does not expressly assert or clearly
9 imply the inferiority of the underlying plaintiff's
10 product, does not constitute disparagement.”

Id. at

11 297.
12

In addition to the fact that as a matter of law,

13 there is no potential for disparagement here, multiple
14 courts have held that personal and advertising injury
15 coverage does not apply to distinct trademark or patent
16 claims.

As clearly explained in Maxconn Inc. v. Truck

17 Ins. Exch., 74 Cal.App.4th 1267, 1276 (1999),
18

The absence of any express reference to

19

patent infringement in the policy would

20

lead

21

conclusion that patent infringement is

22

not

23

drafters

24

expressly cover certain offenses such as

25

slander, libel, invasion of privacy and

26

copyright infringement, but chose to

27

incorporate

28

implication under some category, which

a

reasonable

covered.
of

We
the

do

layperson

not

policy

patent

12

to

believe
intended

infringement

the

the
to

by

1

on its face does not include the words

2

patent infringement.

3 See also Owens-Brockway Glass Container, Inc. v. Int'l
4 Ins. Co., 884 F. Supp. 363, 367 (E.D. Cal. 1995) aff'd
5 sub nom. Owens-Brockway Glass Containers v. Int'l Ins.
6 Co., 94 F.3d 652 (9th Cir. 1996) (“Surely if coverage
7 for patent infringement were anticipated there would be
8 some mention of the term itself just as ‘copyright’ is
9 explicitly listed.”); Gencor Indus., Inc. v. Wausau
10 Underwriters Ins. Co., 857 F. Supp. 1560, 1564 (M.D.
11 Fla. 1994)(“Basic common sense dictates that if these
12 policies covered any form of patent infringement, the
13 word ‘patent’ would appear in the quoted ‘infringement’
14 clauses.”).

Ultimately, then, the Scottsdale test

15 cannot be satisfied with respect to Disparagement: the
16 Complaint cannot be fairly amended to state a claim for
17 Disparagement because as a matter of law, Cyclone’s
18 false patent marking does not constitute disparagement.
19 See Scottsdale, 36 Cal.4th at 654.
20

ii.

21

to Coverage as an Advertising Injury?

22

These principles apply with equal force to Sei

Is the False Patent Marking Subject

23 Kim’s argument that the False Patent Marking claim is
24 covered under the Policy’s coverage for “use of
25 another’s advertising idea in [Cyclone’s]
26 advertisement.”

FAC Ex. C at 244.

While Plaintiff

27 claims that “advertising idea” is undefined, Defendant
28 notes that “advertisement” is not undefined in the
13

1 policy.

The policy defines as advertisement as “a

2 notice that is broadcast or published to the general
3 public or specific market segments about your goods,
4 products or services for the purpose of attracting
5 customers or supporters.”

Peerless’s Statement of

6 Uncontroverted Facts ¶ 60.
7 “Patented.

Plaintiff asserts that the

Made in USA” mark is tantamount to a logo.

8 It then argues that a logo can constitute an
9 advertising idea.

Opp’n 8:28-9:1-4 (citing Street

10 Surfing, LLC v. Great Am. E & S Ins. Co., 2014 U.S.
11 App. LEXIS 21804 (9th Cir. 2014).

Plaintiff, however,

12 cites no authority equating a false patent marking with
13 a logo, nor has the Court found any.

It is

14 unreasonable, then, to equate the mark to a logo, and
15 by extension, to argue that by falsely marking its
16 product as patented, Cyclone was using Sei Kim’s
17 “advertising idea” of accurately marking its product as
18 patented.

As a matter of law, the false patent

19 marking claim cannot constitute disparagement or use of
20 another’s advertising idea.

Accordingly, Defendant has

21 no duty to defend on these grounds.
22
23

b.

Waiver

Waiver is “the intentional relinquishment of a

24 known right after knowledge of the facts.”
25 Truck Ins. Exchange, Inc.

Waller v.

11 Cal.4th 1, 31 (1995).

26 The party claiming a waiver of a right must prove that
27 claim by clear and convincing evidence; doubtful cases
28 are resolved against a waiver.
14

Id.

“California courts

1 have applied the general rule that waiver requires the
2 insurer to intentionally relinquish its right to deny
3 coverage and that a denial of coverage on one ground
4 does not, absent clear and convincing evidence to
5 suggest otherwise, impliedly waive grounds not stated
6 in the denial.”
7

Id.

Sei Kim argues that “Peerless has, at a minimum

8 implicitly waived its right to deny coverage for Sei
9 Kim’s False Patent Marking Claim by failing to notify
10 Cyclone that it was disclaiming coverage and reserving
11 its rights to assert non-coverage of the False Patent
12 Marking Claim prior to the beginning of trial in early
13 2006.”

Opp’n 21:22-25.

In support of this argument,

14 Sei Kim cites three cases it claims have resulted in
15 courts finding a waiver “when the insurer has failed to
16 specifically reserve its rights to deny coverage for a
17 particular claim or as to a particular basis for non18 coverage.”

Id. 21:16-18.

Canadian Ins. Co. v. Rusty’s

19 Island Chip Co., 36 Cal. App. 4th 491 (1995), is
20 distinguishable on its facts, and because it was pre21 Waller, it does not apply the rule this Court must
22 apply.

Stonewall Ins. Co. v. City of Palos Verdes

23 Estates, 46 Cal.App.4th 1810, 1836 (1996), is
24 distinguishable on its facts.

Specifically, the

25 Stonewall court found that “the insurer's unconditional
26 defense of an action brought against its insured
27 constitutes a waiver of the terms of the policy and an
28 estoppel of the insurer to assert such grounds. . . .
15

1 Here the record supports both an inference of waiver
2 and an inference that the City detrimentally relied on
3 Jefferson's nonassertion of a reservation of rights.”
4 Id. at 1839.

In the instant case, Defendant Peerless

5 has, multiple times, informed Cyclone that it would be
6 reserving all of its rights, including those of
7 coverage defenses.

First Amended Complaint Exh. E.

It

8 also asserted that “[n]o activities undertaken by
9 Peerless in the investigation or defense of this claim
10 should be construed as a waiver of any of its rights.”
11 Id.

Such clear language is, as a matter of law,

12 sufficient to nullify any suggestion of waiver.

See

13 State Farm Fire & Cas. Co. v. Jioras, 24 Cal.App.4th
14 1619, 1627-28 (1994);

California Union Ins. Co. v.

15 Poppy Ridge Partners, 224 Cal.App.3d 897, 901–902
16 (1990).

Finally, Citi Apts., Inc. v. Markel Ins. Co.,

17 2007 WL 1689013, at *4-5 (N.D. Cal. June 11, 2007),
18 involved a case in which the defendant argued that it
19 did not reserve its rights under an independent counsel
20 provision and that its failure to do so constituted a
21 waiver of the right to seek reimbursement.

The instant

22 facts are sufficiently distinguishable as to render
23 Citi unpersuasive in this context. Here, Peerless
24 unquestionably reserved all of its rights; under
25 Waller, there can be no implied waiver of its right to
26 deny coverage for non-covered claims.
27
28
16

1
2

c.

Estoppel

Sei Kim also asserts that Defendant Peerless should

3 be equitably estopped from denying coverage because
4 “when Peerless was tendered Sei Kim’s defense, it never
5 affirmatively disclaimed coverage for Sei Kim’s False
6 Patent Marking Claim.”

Opp’n at 23:1-2.

A claim for

7 equitable estoppel requires Sei Kim to prove (1) that
8 Cyclone had a reasonable belief that Peerless would
9 provide coverage for false patent marking, and (2) that
10 Cyclone detrimentally relied on Peerless’s conduct.
11 See Ringler Assoc. v. Maryland Cas. Co. 80 Cal.App.4th
12 1165, 1190-1191.

Questions of reasonable belief aside,

13 there can be no material issue of fact about
14 detrimental reliance.

As Defendant correctly notes,

15 there is no evidence that Cyclone detrimentally relied
16 on Peerless’s “erroneous basis for denying coverage and
17 withdrawing its defense” by entering into the
18 Stipulated Judgment and Assignment, Reply at 24:2-5,
19 because that Agreement was signed well after Peerless
20 expressly disavowed coverage for patent marking and
21 after it withdrew its defense.

Finally, it is unclear

22 as to the logic behind Sei Kim’s position, given that
23 Cyclone had no assets and was essentially out of
24 operation even before Peerless withdrew its defense.
25 Thus, the Court finds that Peerless is not equitably
26 estopped from denying coverage.
27
28

d.

Bad Faith Claims

Plaintiff’s bad faith claims are based on the
17

1 assumption that if an insurer’s denials are legally
2 incorrect or unreasonable, the insurer may be held
3 liable.

See Ringler, 80 Cal.App.4th at 1192; Montrose,

4 6 Cal. 4th at 301-04; PPG Indus., Inc. v. Transamerica
5 Ins. Co., 20 Cal.4th 310, 312 (1999).

“[I]f there is

6 no potential for coverage and, hence, no duty to defend
7 under the terms of the policy, there can be no action
8 for breach of the implied covenant of good faith and
9 fair dealing.”

Waller, 11 Cal.4th at 36.

Similarly,

10 if a plaintiff’s claims are not covered, there is no
11 claim for bad faith failure to settle.

Marie Y v.

12 General Star Indem. Co., 220 Cal.App.4th 928, 958
13 (2003).

Accordingly, because the false patent marking

14 claim and advertising claims have been found, as a
15 matter of law, to be outside of the scope of the
16 Policy, Plaintiff’s bad faith claims fail as a matter
17 of law.
18

III. CONCLUSION

19

For the foregoing reasons, Defendant Peerless’s

20 Motion for Summary Judgment is GRANTED in its entirety.
21

IT IS SO ORDERED.

22
23 DATED: June 25, 2015
24

HONORABLE RONALD S.W. LEW
Senior U.S. District Judge

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