Opinion
No. C-04-0415 JCS.
August 16, 2004
I. INTRODUCTION
On Friday, August 13, 2004, Defendant's Motion for Leave to Move for Reconsideration; or Alternatively for an Order Permitting an Interlocutory Appeal ("the Motion") came on for hearing. For the reasons stated below, the Motion is GRANTED in part and DENIED in part.
II. BACKGROUND A. Facts
Plaintiff AXA Rosenberg Group LLC ("AXA") is a Delaware limited liability company. Compl. 1. Defendant Gulf is a Connecticut corporation. Id. Gulf issued Directors and Officers Liability and Private Company Indemnification Insurance Policy No. GU 722527 ("Policy") to AXA for the period of July 1, 2001, to July 1, 2003. Decl. of Edward H. Lyman in Support of Pl. AXA Rosenberg's Motion for Partial Summary Judgment Re Coverage and Allocation ("Lyman Decl.") ¶ 4; Policy, Ex. A.
On May 20, 2003, counsel for the Strategy and Business Development Manager ("Releasor") for AXA Rosenberg Global Services ("AXA Global Services"), a wholly-owned subsidiary of AXA, sent a letter to AXA alleging Releasor was subjected to "aggressive sexual advances" and "ultimately raped" by her immediate supervisor ("Supervisor") on a business trip. Lyman Decl., Ex. C. Supervisor was a CEO of AXA and was also employed by the subsidiary AXA Global Services. Id. ¶ 6.
In July 2003, after a confidential mediation, AXA and Releasor agreed on a $2.5 million settlement amount for release of claims, which included "battery, assault, rape, sexual battery, sexual harassment, wrongful termination, retaliation, negligent and intentional infliction of emotional distress and negligent retention" that allegedly caused Releasor "to suffer extreme physical pain, injury and sickness." Lyman Decl., Ex. K, Settlement Agreement at 1. The release covered AXA's "parent corporation and subsidiaries, as well as all current and former employees, officers, directors, successors, predecessors, assigns, agents, attorneys, insurance providers and other representatives of such entities. . . ." Id. at 1-2.
In a letter to Gulf dated August 20, 2003, AXA requested indemnity under the Policy. Lyman Decl., Ex. H, August 20, 2003 Letter. Gulf notified AXA by letter dated November 12, 2003, that it was denying coverage for the settlement sum. Lyman Decl., Ex. J, November 12, 2003 Letter.
On January 29, 2004, AXA filed this action seeking a declaration that its defense costs and payment of $2.5 million in settlement of Releasor's claims are covered under the Policy. Compl. 7. AXA also asserts claims for breach of contract and breach of the implied covenant of good faith and fair dealing, seeking as damages $2.5 million to cover the settlement amount, the costs associated with settling the underlying action and attorney's fees incurred by AXA in its efforts to obtain coverage by Gulf. Id.
AXA filed a Motion for Partial Summary Judgment Re Coverage and Allocation ("Plaintiff's Summary Judgment Motion") on March 11, 2004. In its summary judgment motion, AXA asked the Court to hold, as a matter of law, that the Policy provides coverage, not subject to allocation, for the amount AXA paid in defense and settlement of Releasor's claims. Plaintiff's Summary Judgment Motion 1:18-2:4. On April 9, 2004, Gulf, in turn, filed a Motion for Summary Judgment ("Defendant's Summary Judgment Motion") seeking a declaration that the Policy provides no coverage for any payments made to Releasor or for any associated expenses. Defendant's Summary Judgment Motion 2:2-7. Defendant alternatively argued that if the Court found that any of the settlement payment is covered, AXA's summary judgment motion should be denied as premature and discovery should be conducted on the question of allocation of payment. Defendant's Summary Judgment Motion 2:8-21. On April 12, 2004, AXA filed a Motion to Strike Gulf's Counterclaim for Declaratory Relief and Certain of Gulf's Affirmative Defenses. Docket.
On June 9, 2004, this Court issued an Order Granting in Part and Denying in Part Plaintiff's Motion for Summary Judgment, Granting in Part and Denying in Part Defendant's Motion for Summary Judgment, and Denying Plaintiff's Motion to Strike ("Summary Judgment Order"). In the Summary Judgment Order, the Court held as follows: (1) Releasor's May 20 and June 4 letters, along with her mediation brief, constitute a "Claim" under the Policy and California law; (2) because the Policy expressly provides coverage for sexual harassment "of any kind," the assault and battery exclusions do not apply, but the exclusions for sickness and injury may apply; (3) the Releasor's claims fall within the Policy's definition of a "Wrongful Act;" (4) because California Insurance Code § 533 bars coverage of any settlement for claims against Supervisor and there is evidence that at least some of the settlement was in return for a release of claims against Supervisor, a factual question remains on the subject of allocation; and (5) Plaintiff's Motion to Strike Defendant's counterclaim and affirmative defenses is denied, but Defendant's Answer shall be withdrawn from the record and filed under seal. Summary Judgment Order 9:20-26, 12:19-24, 16:17-22, 17:24-28, 18:12-18, 22:7-24.
B. The Motion
In its Motion, Gulf argues it is entitled to reconsideration of the Court's Summary Judgment Order because "there was a manifest failure by the Court to consider material facts and dispositive legal arguments." Motion 2 (quoting Local Rule 7-9 (b)(3)). Specifically, Gulf argues that: (1) the Court erred by holding that Plaintiff incurred a loss arising from the actions of a supervisor employed by Plaintiff's subsidiary against another employee of the subsidiary; (2) the Court erred by holding the assault and battery exclusion does not bar coverage for Plaintiff; and (3) the Court erred by not permitting Gulf to conduct discovery on the issue of Plaintiff's willfulness. Finally, Gulf requests that if this Court does not grant leave to file a motion for reconsideration, the Court issue an order allowing Gulf to seek an interlocutory appeal of the Summary Judgment Order.
III. ANALYSIS A. Legal Standard
A motion for reconsideration of summary judgment is appropriately brought under Federal Rule of Civil Procedure 59(e) or Rule 60(b). Backlund v. Barnhart, 778 F.2d 1386, 1388 (9th Cir. 1985). Under Local Rule 7-9(a), "any party may make a motion before a Judge requesting that the Judge grant the party leave to file a motion for reconsideration of any interlocutory order made by the Judge on any ground set forth in Local Rule 7-9 (b)." To prevail on such a motion, the moving party must specifically show:
(1) That at the time of the motion for leave, a material difference in fact or law exists from that which was presented to the Court before entry of the interlocutory order for which consideration is sought. The party also must show that in the exercise of reasonable diligence the party applying for reconsideration did not know such fact or law at the time of the interlocutory order; or
(2) The emergence of new material facts or a change of law occurring after the time of such order; or
(3) A manifest failure by the Court to consider material facts or dispositive legal arguments which were presented to the Court before such interlocutory order.
Civ. L.R. 7-9. Local Rule 7-9(c) prohibits parties moving for leave to file a motion for reconsideration from repeating any oral or written arguments made regarding the order the party seeks to have reconsidered. The Court may sanction any party who violates this restriction. Civ. L.R. 7-9(c)).
B. Whether Plaintiff Incurred a "Loss"
Gulf argues that the Court erred in holding that AXA incurred a "Loss," as that term is defined in the Policy, asserting that because Releasor was an employee of AXA Global Services rather than AXA, AXA did not incur a "Loss." Motion 3:20-24. This issue was directly addressed by the Court in its Summary Judgment Order. Summary Judgment Order 16-17. In that order, the Court determined that the fact Releasor was employed by AXA Global Services did not preclude coverage because the Policy explicitly defines the "Insured Company" to include all subsidiaries. Summary Judgment Order 16:13-22; see also Policy § 2.O. Moreover, the Claim alleged wrongful conduct "both by the Supervisor (an employee of AXA Global Services) and by management (employees of AXA)" and Releasor "expressly threatened to sue not only AXA but also the AXA subsidiaries. Id. at 17: 17-18, 27-28. AXA, in turn, "responded to the allegations on behalf of AXA and its subsidiaries," id. at 17: 18-19, entering into a global settlement agreement that covered not only AXA but all of its subsidiaries.
Gulf, though, reargues the point, relying on a 1986 case that it cites for the first time in this Motion, Producers Dairy Delivery Co. v. Sentry Ins. Co., 41 Cal. 3d 903 (1986). Having carefully considered the Producers Dairy decision, the Court rejects Gulf's assertion that that case demonstrates manifest error on the part of the Court on the question of "Loss."
In Producers Dairy, Sentry Insurance Company issued a joint "Standard Workers' Compensation and Employers' Liability Policy" to Producers Dairy Delivery Company, Inc. ("Producers") and a subsidiary, LAS, in which both companies were listed under the heading of "Named of Insured." 41 Cal. 3d at 907, n. 1. Producers operated a dairy, while LAS operated a milk distributing business, furnishing teamsters truckers to deliver Producers' dairy products using Producers' trucks. Id. The Sentry policy provided: (1) workers' compensation coverage to the insured as required by law; and (2) employers' liability coverage for damages due to bodily injury sustained "by any employee of the insured . . ." Id. at 908-09.
The plaintiff in Producers Dairy, Noyes, was one of the teamsters truckers employed by LAS, who was injured while unloading milk from one of Producers' trucks. Id. Noyes asserted a tort claim against Producers in a separate action, and Producers was defended by an insurance company with which Producers had a general liability policy, Federal. Id. In the tort action, Federal defended on the basis that Noyes was an employee of Producers, asserting that Noyes was limited to the exclusive remedy provided under the worker compensation laws. Id. Following a 10-week jury trial, a special verdict was rendered finding that Noyes was not an employee of Producers. Id. Noyes proceeded to settle with Producers for $548,000.00. Subsequently, Producers and Federal brought a declaratory relief action against Sentry, arguing that the "employers' liability" coverage of the Sentry policy extended coverage to Producers for the settlement in the tort action. Id.
The California Supreme Court rejected Producers' and Federal's position, concluding that even though "the insured" was defined to include both Producers and LAS, one could not reasonably believe that coverage existed under Producers' employer liability policy where the potential plaintiff was not an employee of Producers. Id. at 913. The Court emphasized first that the policy was "one covering an employer's liability, that is, liability incurred by virtue of one's status as an employer," and Producers' liability to the LAS employee was not based on any employment relationship between them, but arose instead from Producers' negligent maintenance of its delivery truck. Id.
The Court found further support for its conclusion in the "established public policy as to the nature and purpose of this type of insurance." Id. at 914. In particular, the court pointed to "the statutorily expressed notion that employers' liability insurance is aimed at providing additional protection to the same employer, who has workers' compensation insurance covering the employee's injury." Id. at 914 (emphasis in the original). Thus, the court noted, the employer liability policy is generally a "gap-filler" to provide coverage to an employer for those situations in which an employee has a right to bring a tort action despite the provisions of the workers' compensation laws. Id. at 916. The Court concluded that the employer liability coverage in the Sentry policy was just such a gap-filler, pointing out that the employer liability coverage expressly excluded any obligation for which the insured or insurer could be held liable under workers' compensation. Id. Producers Dairy is not on point because both the facts and the policy language differ from those at issue here. First, the Policy issued by Gulf is not a workers' compensation policy but rather, a general liability policy. As a result, the policy concerns at issue in Producers Dairy do not apply here. More importantly, the facts here differ from those in Producers Dairy because both Releasor and Supervisor were employed by AXA Global Services and therefore, in contrast to Producers Dairy, there was an employment relationship between Releasor and AXA Global Services. As a result, AXA Global Services faced potential liability arising out of Releasor's allegations of sexual harassment, which is just the sort of liability covered under the Policy. Further, as the Court emphasized in its Summary Judgment Order, Releasor threatened to sue not only AXA but also all of its subsidiaries, who are included in the definition of the "Insured Company," and the settlement covered AXA and its subsidiaries. The Court rejects Gulf's suggestion that under such circumstances, AXA could not reasonably expect coverage merely because the settlement agreement was signed only by AXA.
The Court is also unpersuaded by Gulf's reliance on the use of the word "the" before "Insured Company" in the Policy to argue that "Insured Company" only refers to AXA Rosenberg Group, LLC, the "singular company seeking coverage under the policy." Motion 6-11. The cases cited by Gulf in support of this contention are not on point. See State Farm Mut. Auto Ins. Co. v. Jacober, 10 Cal. 3d 193 (1973) (holding that owners of automobiles who were injured or killed while automobiles were driven by permissive users were entitled to coverage for bodily injury even though policy contained exclusion for "bodily injury to insured" because policy covered liability to "other persons" incurred by permissive users and thus, it was not "conspicuous, plain and clear" that exclusion applied in such circumstances); Arenson v. Nat'l Auto. and Cas. Ins. Co., 45 Cal. 2d 81 (1955) (holding that holder of personal liability insurance policy was entitled to coverage for liability arising from intentional act of minor son even though policy defined "insured" as including family members and contained an exclusion for intentional acts by "the insured" because it was not "conspicuous, plain and clear" that exclusion applied to insured who had not committed intentional act); Am. States Ins. Co. v. Borbor, 826 F.2d 888, 894 (9th Cir. 1987) (holding that because Cal. Insurance Code § 533 is equivalent to exclusionary clause, it must be construed strictly against insurer and, on that basis, holding that where policy listed two individuals and a partnership made up of those individuals as the insured, one of the individuals was entitled to coverage for liability incurred by partnership as a result of the intentional acts of the other individual because the former individual did not commit any wilful act); Nat'l Union v. Lynette C., 228 Cal. App. 3d 1073, 1079 (1991) (holding that where foster parent liability policy covered both foster parents as "the insured" but excluded criminal acts of "an insured," policy did not exclude coverage for foster mother for liability arising from criminal acts of father). In all of these cases, "insured" was defined narrowly only as to exclusions. Because the rules of construction for exclusions differ from the rules that apply to provisions that grant coverage (see below), these cases are distinguishable from the facts here.
Accordingly, the Court rejects Gulf's assertion that it was manifest error for this Court to conclude in its Summary Judgment Order that Plaintiff incurred a Loss.
C. Whether the Assault and Battery Exclusions Apply
In its Motion, Gulf argues that the Court erred by holding that the assault and battery exclusions in the Policy do not bar coverage for the Plaintiff. Motion 11. Specifically, Gulf submits that the Court should have: (1) concluded that the assault and battery exclusions are "conspicuous, plain and clear;" (2) applied the assault and battery exclusions to exclude coverage; (3) concluded that even if the exclusions do not apply to coverage for sexual harassment, the assault and battery exclusions bar coverage for settlement of Releasor's claims of assault, battery, rape, wrongful termination, retaliation, negligent retention, constructive discharge, defamation and failure to conduct an adequate investigation; and (4) concluded that the assault and battery exclusions did not render coverage for "sexual or workplace harassment of any kind" illusory. Id. The Court does not find manifest error on these issues.
Under California law, "[t]he first issue is whether a claim falls within the scope of the basic coverage of the policy defined in the insuring clause." Am. Star Ins. Co. v. Ins. Co. of the West, 232 Cal. App. 3d 1320, 1325 (1991). The party claiming coverage has the burden to show a claim falls within the scope of basic coverage. Id. The insurer then has the burden of showing a claim falls within an exclusion. Id. "Insurance coverage is interpreted broadly so as to afford the greatest possible protection to the insured, whereas exclusionary clauses are interpreted narrowly against the insurer." Harris, 297 F. Supp. 2d 1220, 1224 (N.D. Cal. 2003). Thus, an exclusionary clause applies only if it is "conspicuous, plain and clear." Id. The court in Harris explained the rationale for this rule as follows:
An insurer cannot escape its basic duty to insure by means of an exclusionary clause that is unclear. . . . [A]ny exception to the performance of the basic underlying obligation must be so stated as clearly to apprise the insured of its effect. Thus, the burden rests upon the insurer to phrase exceptions and exclusions in clear and unmistakable language. The exclusionary clause must be conspicuous, plain and clear. This rule applies with particular force when the coverage portion of the insurance policy would lead an insured to reasonably expect coverage for the claim purportedly excluded.Id. at 1224-24 (citing MacKinnon v. Truck Ins. Exch., 31 Cal. 4th 635, 648 (2003)).
1) Are the assault and battery exclusions "conspicuous, plain and clear"?
Whether an exclusionary clause is "conspicuous, plain and clear" is a matter of law. Jauregui v. Mid-Century Ins. Co., 1 Cal. App. 1544, 1548 (1991). "To be conspicuous, an exclusion must be positioned in a place and printed in a form which will attract the reader's attention. To be plain and clear, the substance of an exclusion must be precise and understandable." Travelers Ins. Co. v. Lesher, 187 Cal. App. 3d 189, 184 (1986) (citations omitted).
Here, the Policy obligates the insurer to pay for Loss incurred as the result of any claim for a "Wrongful Act," which includes "Employment Claim[s]" based on "Wrongful Employment Practice[s]." Lyman Decl., Ex. A (hereinafter, "Policy"), §§ 1.C, 2.L, 2.HH, 2.II. The Policy defines a "Wrongful Employment Practice" as:
. . . any actual or alleged: (1) wrongful demotion, dismissal, discharge or termination (either actual or constructive) of employment; (2) employment related misrepresentation; (3) violation of employment laws; (4) sexual or workplace harassment of any kind . . .Id., § 2.II (emphasis added).
Under the "Exclusions" section of the Policy, "[t]he Insurer shall not be liable to make any payment for Loss in connection with any Claim: A. for libel, slander, . . . assault, battery or loss of consortium, mental anguish or emotional distress . . ." Id. § 4.
Gulf argues that the assault and battery exclusions are "conspicuous, plain and clear" as a matter of law because the exclusions appear under an "Exclusions" heading, appear in the same font and font size as other policy provisions, and are written in "understandable" language. Motion 12:14-24. The assault and battery exclusions do appear in a reasonable font within a clearly labeled section of exclusions and are thereby conspicuous. However, although the words of the exclusions are simple and plain, when read as part of the entire Policy, their meaning is far from clear. See Jurd v. Pac. Indem. Co., 57 Cal. 2d 699, 704 (1962) (holding that "in construction of insurance policies, it is the settled rule that the whole of the contract is to be taken together, each clause helping to interpret the other").
The Policy expressly covers claims based on "sexual or workplace harassment of any kind." Policy, § 2.II. The words "of any kind" could well indicate to a reasonable insured that the assault and battery exclusions do not apply to sexual harassment claims. See Summary Judgment Order 15:11-15. In order for the exclusions to be applied under the circumstances here, Gulf must show that it would have been clear to the insured that these exclusions exclude from the Policy's coverage for "sexual or workplace harassment of any kind" coverage for one of the most serious types of sexual harassment, rape of an employee by her supervisor. See Mackinnon, 31 Cal. 4th at 648. Gulf presents no new facts or legal arguments that suggest it was manifest error on the part of the Court to conclude that Gulf has not met this burden.
Gulf's reliance on Nat'l Ins. Underwriters v. Carter, 17 Cal. 3d 380 (1976), for the proposition that exclusionary provisions should be enforced even if they conflict with language in the insuring clause is misplaced. Motion 13:12-14:22. In Carter, the policy defined the word "insured" "to include not only the Named Insured but also any person while using or riding in the aircraft . . ." 17 Cal. 3d at 384. The policy also contained some exclusions, providing that "[t]his policy does not apply under [the insuring clauses] . . . while the aircraft is in flight whenever the pilot operating the aircraft is not qualified in accordance with the requirements specified in Item 7 `Pilots' of the Declarations." Id. The court found that the policy was unambiguous in restricting coverage to those specified in Item 7 because "the two provisions, the insuring and exclusionary language, fulfill two different functions." Id. at 385. The insuring provision defines "the persons . . . who may claim coverage and protection with respect to accidents to which the policy applies." Id. (emphasis in original). The exclusion specifies that the policy " does not apply unless the plane is piloted by a person named in that clause." Id. (emphasis in the original). The court found that the "two provisions act independently of each other. They are in harmony while performing different offices." Id. In contrast, the exclusionary clause and the provision extending coverage at issue here are not in harmony but rather, are potentially contradictory.
The Court also rejects Gulf's assertion that the exclusions should take precedence over the provision covering "sexual harassment of any kind" on the basis that the coverage for "sexual harassment of any kind" is "not the insuring clause, but rather one out of fifteen (15) acts or omissions which constitute Wrongful Employment Practices. See Motion 13:17-20. According to Gulf, the "specific assault and battery exclusion must control over the broader general provision concerning coverage for `sexual or workplace harassment of any kind.'" Id. Gulf's position flies in the face of the established rule that in construing provisions of an insurance policy, the policy must be read as a whole. See Jurd v. Pac. Indem. Co., 57 Cal. 2d 699, 704 (1962). Here, the insuring clauses in § 1 of the Policy clearly provide coverage for sexual harassment through the definitions of the policy terms, which lay out the types of Wrongful Employment Practices that, when alleged in a Claim, trigger coverage. Gulf's suggestion that the explicit coverage for "sexual harassment of any kind" is somehow less specific because it is contained in definitions of terms used in an insuring clause rather than in the insuring clause itself is unsupported by any authority. Nor is the Court persuaded that the assault and battery exclusions are more specific than the provisions providing coverage for sexual and workplace harassment of any kind.
2) Do the assault and battery exclusions render coverage for sexual harassment illusory?
Gulf submits that the Court "erred in holding that enforcing the assault and battery exclusions would render coverage for `sexual and workplace harassment of any kind' illusory" because, after applying the assault and battery exclusions, the Policy would still cover all types of non-physical sexual harassment, such as repeated sexual innuendo, sexual propositions, persistent romantic overtures, and exposing body parts. Motion 15-17. The Court disagrees. In the Summary Judgment Order, the Court concluded, "Gulf's interpretation of Exclusion A fails because it would render illusory the coverage for sexual harassment claims `of any kind.'" Summary Judgment Order 13: 26-27. The fact that Gulf's interpretation of the Policy would allow coverage for forms of sexual harassment that do not involve touching does not address the Court's point that the words "of any kind" would be rendered meaningless if the Court were to apply the assault and battery exclusions under the facts here. The Court finds no manifest error on this point.
3) Do the assault and battery exclusions bar Releasor's other, non-sexual harassment, claims?
Gulf argues that even if the assault and battery exclusions do not apply to sexual harassment claims, the exclusions bar coverage for settlement of claims for battery, assault, rape, sexual battery, wrongful termination, retaliation, negligent retention, and intentional and negligent infliction of emotional distress, "which Plaintiff expressly settled pursuant to its settlement agreement." Motion 18-19. The Court agrees — and Plaintiff does not dispute — that to the extent the settlement agreement expressly settled potential claims for assault and battery, coverage is barred and is subject to allocation. See Opposition at 11. Gulf, however, presents no authority for the assertion that the assault and battery exclusion extends to the remaining claims listed in the settlement agreement, such as wrongful termination and negligent retention.
Further, to the extent that there may be ambiguity as to whether claims for rape and sexual battery are excluded under the assault and batter exclusions, the Court need not reach this issue. In particular, because there is no evidence in the record that the alleged conduct by Supervisor was an outgrowth of his employment, claims for rape and sexual battery could be asserted only against Supervisor as an individual. See Lisa M. v. Henry Mayo Newhall Mem'l Hospital, 12 Cal. 4th 291, 298 (1995) (holding that employer can only be held liable for sexual torts of employee where the tort is "engendered by" or "an outgrowth" of employment and the fact that employment may have created conditions that allowed the tort to occur does not satisfy this requirement). The Court has already held, though, that any claims against Supervisor based on his alleged conduct are not covered and are subject to allocation. Summary Judgment Order at 23. D. Whether Gulf Should Have Been Permitted to Conduct Discovery on Willfulness
Gulf argues that the Court erred by ruling that, as a matter of law, California Insurance Code § 533 "does not apply to the settlement amount to the extent it was for claims against AXA and its insured subsidiaries." Rather, Gulf asserts, the Court should have deferred ruling on this question while permitting Gulf to conduct further discovery on this issue. The Court rejects Gulf's assertion because: 1) Gulf failed to satisfy the requirements of Fed.R.Civ.P. 56(f); 2) Gulf failed to identify any specific evidence that would have established the existence of a material issue of fact on the question of AXA's willfulness; and 3) Gulf's filing of a motion for summary judgment on this issue undercut its subsequent assertion, after failing to prevail on the issue, that the Court ruled prematurely on willfulness.
When a motion for summary judgment is made and supported as provided in Federal Rule of Civil Procedure 56, the party opposing summary judgment must respond by affidavits setting forth specific facts showing that there is a genuine issue for trial. Fed.R.Civ.P. 56(e). If the party opposing the motion demonstrates that it cannot, for stated reasons, present facts essential to justify its opposition, the court may allow further discovery. Fed.R.Civ.P. 56(f). A party seeking discovery under these circumstances must submit "affidavits setting forth the particular facts expected from the movant's discovery," Brae Transp., Inc. v. Coopers Lybrand, 790 F.2d 1439, 1443 (9th Cir. 1986), and must "show how additional discovery would preclude summary judgment." Mackey v. Pioneer Nat'l Bank, 867 F.2d 520, 524 (9th Cir. 1989). In addition, the party must show "why [it] cannot immediately provide `specific facts' demonstrating a genuine issue of material fact." Id.
In support of its opposition to Plaintiff's summary judgment motion, Gulf provided an affidavit by Richard Endres stating as follows:
Gulf has not had any opportunity conduct any discovery in this matter whatsoever. . . . The discovery that Gulf intends to conduct in this matter which will support its counter claim and affirmative defenses (as well as Gulf's claim that Plaintiff's motion should be denied as premature pursuant to FRCP Rule 56(f)) includes, inter alia, discovery . . . concerning the nature and extent of the intentional and willful acts for which plaintiff paid settlement monies.
May 7 Endres Decl. ¶ 8. Gulf did not, however, either in its briefs or at oral argument, provide the Court with any specific facts that might be revealed through additional discovery on the question of AXA's alleged willfulness that would have created a material issue of fact.
As the Court emphasized in its Summary Judgment Order, § 533 bars coverage for an employer where an employee is accused of sexual harassment only when the employer itself committed a "deliberate liability-producing act that the [employer], before acting, expected to cause harm." Smith v. Hughes Aircraft Co., 22 F.3d 1432, 1439) (9th Cir. 1993) (emphasis added) ( citing Shell Oil v. Winterthur Swiss Ins. Co., 12 Cal. App. 4th 715 (1993)). Thus, for example, the court in Coit Drapery Cleaners, Inc. v. Sequoia Ins. Co., found that § 533 barred coverage for the employer where the sexual harassment was carried out by the president, who was also the chairman of the board and major shareholder, where the harassment was "so widespread, well known and so ratified by the corporation as to constitute intentional corporate policy." 14 Cal. App. 4th 1595, 1606-1607 (1993). Indeed, in that case, a fellow employee even acted as a "procuress," attempting to assist the president in his efforts to seduce the plaintiff. Id. at 1600.
Here, Gulf has cited to no evidence that AXA committed any deliberate act intended, before the act was taken, to harm Releasor, as is required to bar coverage under § 533. More importantly, Gulf has not alleged a single fact, which, if proven true, would establish such a willful act on AXA's part. Nor is there anything in the record that suggests that Gulf could, in good faith, make any such allegations. Releasor's accusations focused exclusively on AXA's inadequate response to the alleged rape. See Lyman Decl., Ex. C D. Releasor herself did not ever suggest that anyone at AXA encouraged or assisted Supervisor in the alleged rape. Gulf has not cited — and the Court has not found — a single case in which § 533 has been invoked against a company solely based on the company's inadequate response to alleged sexual harassment. Moreover, Gulf concedes that Supervisor was not, in contrast to the alleged harrasser in Coit, such a prominent individual in the company that his actions could not be distinguished from those of the company. In short, Gulf offered no specific facts that suggested that further discovery would establish a material issue of fact.
Finally, Gulf's assertion that it needed to conduct further discovery on the question of willfulness is directly contradicted by its request for summary judgment on the same issue. When a party files a motion for summary judgment on a particular issue, it is asserting that there is no genuine dispute of material facts regarding that issue. Fed.R.Civ.P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). It is inappropriate for a movant to request summary judgment, thereby implying there is no genuine dispute of material fact, receive an undesired result, then complain that the result was incorrect because he did not have a chance to conduct discovery on the issue. See Cohen Co. v. North River Ins. Co., 1994 U.S. Dist. LEXIS 1104 at *6-7 (E.D. Pa.) (holding that by filing a cross-motion for summary judgment, plaintiff undermined subsequent assertion that it could not file a brief opposing defendant's summary judgment motion because plaintiff needed to conduct further discovery). Accordingly, the Court rejects Gulf's assertion that it should have been permitted to conduct further discovery on the question of willfulness.
E. Availability of Interlocutory Appeal
As an alternative to filing a motion for reconsideration, Gulf requests that this Court enter an order allowing Gulf to seek interlocutory appeal on the three issues discussed above. The Court concludes that the requirements for certifying an interlocutory appeal have been met with respect to the issues addressed in its Summary Judgment Order and therefore certifies that order for an interlocutory appeal.
The district court may certify an interlocutory order for appeal if the order "involves a controlling question of law as to which there is substantial ground for difference of opinion, and an immediate appeal from the order may materially advance the ultimate termination of the litigation." 28 U.S.C. § 1292(b). The legislative history of 28 U.S.C. § 1292(b) "indicates that it was to be used only in extraordinary cases where decision of an interlocutory appeal might avoid protracted and expensive litigation." United States Rubber Co. v. Wright, 359 F.2d 784, 785 (9th Cir. 1966); see also United States ex. rel Hollander v. Clay, 420 F. Supp. 853, 859 (D.D.C. 1976) ("Certification under § 1292(b) is far from the normal course of procedure. The federal scheme evidences a policy against piecemeal appeals," citing Switzerland Cheese Assoc., Inc. v. E. Horne's Market, Inc., 385 U.S. 23, 24-25 (1966)). "The party seeking certification bears the burden to show the presence of exceptional circumstances where considerations of judicial economy and fairness demand interlocutory review of an order." Mont-Bell Co., Ltd. v. Mountain Hardwear, Inc., 1997 U.S. Dist. LEXIS 22423 at *4-5 (N.D. Cal.).
Here, the Court finds that there is "substantial ground for difference of opinion" on the issues addressed in its Summary Judgment Order. Most notably, whether Plaintiff incurred a "Loss," whether the assault and battery exclusions apply, and whether a "Claim" was made were close questions. None of the cases relied on by the parties are factually directly on point on those issues. Moreover, if the Ninth Circuit determines, on appeal, that the Court has erred with respect to any of these issues, such a ruling may be dispositive of the entire case, thereby avoiding potentially protracted and expensive litigation. Conversely, if an interlocutory appeal is denied, it is likely that the ensuing discovery will be wide-ranging and expensive. Defendant intends to conduct extensive discovery regarding the underlying events that gave rise to Releasor's claims, raising the possibility that the very claims that were settled will, for all intents and purposes, be litigated in this action in the guise of litigating the remaining factual questions regarding allocation. For these reasons, the Court concludes that this is the unusual case in which interlocutory appeal is warranted.
IV. CONCLUSION
For the reasons stated above, the Motion is DENIED as to Defendant's request to file a motion for reconsideration. The Motion is GRANTED as to Defendant's request to file an interlocutory appeal. The Court certifies for appeal its June 9, 2004 Summary Judgment Order. All proceedings in this action shall be stayed pending a decision by the Court of Appeals as to whether it shall permit such an interlocutory appeal pursuant to 28 U.S.C. § 1292(b). If the Court of Appeals permits an interlocutory appeal, all proceedings shall be stayed pending resolution of that appeal. The parties shall notify the Court within ten (10) days of any decision by the Court of Appeals as to: 1) whether the Court of Appeals shall permit the appeal; and 2) resolution of the appeal.
IT IS SO ORDERED.