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Los Angeles Federal Court Dismisses United Talent Agency's Breach-of-Contract Claim Brought Over Denial of Insurance Coverage
The U.S. District Court for the Central District of California granted summary judgment to an insurer on a breach-of-contract claim brought by United Talent Agency (UTA) over the insurer's refusal to cover allegations brought against UTA that the agency had improperly lured agents and talent away from an agency competitor. United Talent Agency LLC v. Markel American Insurance Co., 2:21-cv-00369. UTA's policy with Markel American contained a "Professional Services" exclusion clause that stated: "The Insurer shall not be liable to pay any Loss on account of, and shall not be obligated to defend, any Claim based upon, arising out of, or in any way involving any actual or alleged error, misstatement, misleading statement, act, omission, neglect, or breach of duty in connection with the rendering or failure to render any professional services to others for a fee, commission, or other compensation by any Insured." In his ruling, Central District Judge Mark C. Scarsi explained: "Plaintiff argues that the underlying suit did not arise out of or happen in connection with the rendering of professional services because a competitor sued Plaintiff, not a customer, and because the underlying acts did not involve rendering professional services to others for a fee, commission, or other compensation. This argument, however, is contrary to the facts and the language of the exclusions." District Judge Scarsi added: "First, the fact that an act harms a competitor instead of a customer does not take the act out of the realm of professional services. … Second, Plaintiff has no serious argument that the allegations of hiring agents from a competitive entertainment company have no connection with the rendering of professional services to others for compensation. The Court cannot imagine, and Plaintiff did not provide, any other motive for the alleged acts than for Plaintiff to increase its profits."
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"Single Claim" Provision Defeats DirecTV Law Firm's Bid for Reimbursement of Legal Fees Under Insurance Policy
The U.S. District Court for the Southern District of New York dismissed a law firm's claim under a professional liability policy for recovery of legal expenses the firm incurred in defending lawsuits that resulted from the firm's enforcement representation of DirecTV. Lonstein Law Office P.C. v. Evanston Insurance Company (EIC), 20-cv-9712. According to the district court's ruling, the Lonstein firm was retained by DirecTV to "identify, investigate, and bring claims and/or civil actions against businesses or individuals throughout the United States who illegally acquired DIRECTV services, either by acquiring it without payment or by misrepresenting that they were individuals when, in fact, the services were actually being received and exhibited in a commercial establishment." Lonstein Law had ended up as defendants in several lawsuits filed by small business operators protesting the firm's enforcement practices. One small business owner alleged, for example, that Lonstein Law and DirecTV "have a history and pattern of authorizing and/or tacitly approving of: [DirecTV] installers signing up small businesses (café's, bars, etc.) under non-commercial packages without explaining that a commercial package even exists; waiting until the services is [sic] up and running; sending out an investigator; and then essentially blackmailing the customer to pay large fines and/or signing up for commercial service in order to reduce the fine." Lonstein Law sought coverage under a "Lawyers Professional Liability Insurance Policy" it had obtained from EIC for legal fees and expenses the law firm incurred in defending itself against the complaints by the business owners. The EIC policy included a clause that stated: "More than One Claim arising out of a Single Wrongful Act or Personal Injury or a series of related Wrongful Acts or Personal Injuries shall be considered a single Claim." EIC responded to Lonstein Law that a one-million dollar liability limitation for a "single claim" applied to the business owners' lawsuits. Lonstein Law then sued EIC, but Southern District Judge Lewis J. Limon dismissed with prejudice the law firm's claim for breach of the duty of good faith and fair dealing with prejudice, and claim for breach of contract without prejudice. The district judge found: "Each of the [small business owners'] Actions allege a single overarching scheme by LLO, sometimes with DirecTV or with the investigator for LLO, over an overlapping period from 2010 to 2015, to defraud small-business owners using the same means through the identical or nearly identical misrepresentations. The Actions each are based on a single retention of LLO by the same single client pursuant to which LLO engaged in a single prearranged course of conduct involving the same types of victims through the same misrepresentations and illegal conduct."
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