Opinion
B158904.
7-3-2003
JAMES S. HURVITZ, Plaintiff and Appellant, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant and Respondent.
King & Ferlauto, William T. King and Thomas M. Ferlauto for Plaintiff and Appellant. Carlson, Calladine & Peterson, Robert M. Peterson, Asim K. Desai and Patrick M. Quigley for Defendant and Respondent.
This is a companion to the case of Hurvitz v. St. Paul Fire and Marine Insurance Company, case No. B158885. Appellant James Hurvitz, M.D., was insured by respondent St. Paul Fire and Marine Insurance Company (St. Paul) under a policy which included coverage for advertising injury. Dr. Hurvitz was sued by a third party, Attorney Richard Garrigues, for conversion, trespass to chattel, and quasi-contract or restitution as a result of Dr. Hurvitzs actions in relaying to the media a draft complaint prepared by Garrigues which contained sensational allegations about another doctor. St. Paul denied coverage under the policy and refused Dr. Hurvitzs tender of defense. Garriguess claim went forward without defense and resulted, after a last-minute amendment, in a multi-million dollar verdict against Dr. Hurvitz for violation of Garriguess right to privacy. The trial court granted St. Pauls request for judgment on the pleadings after the courts denial of Dr. Hurvitzs motion for summary adjudication on the issue of duty to defend resolved the essential dispute between the policies. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
The following background facts are not in dispute.
The Insurance Policy
Respondent St. Paul issued an insurance policy package to Dr. Hurvitz effective from January 1, 1997, to January 1, 1998. The package included Commercial General Liability (CGL) coverage for bodily injury, property damage, personal injury, and advertising injury. The "advertising injury liability" provision provided: "Well pay amounts any protected person is legally required to pay as damages for covered advertising injury that: results from the advertising of your products, work or completed work; and is caused by an advertising injury offense committed while their agreement is in effect." The term "advertising" was defined to mean "attracting the attention of others by any means for the purpose of seeking customers or increasing sales or business." The term "advertising injury" was defined to mean "injury, other than bodily injury or personal injury, caused by an advertising injury offense." The term "advertising injury offense" was defined to include "any of the following offenses: Libel or slander. Making known to any person or organization written or spoken material that belittles the products, work or completed work of others. Making known to any person or organization written or spoken material that violates an individuals right of privacy."
The Hurvitz/Hoefflin Litigation
Appellant Dr. Hurvitz was formerly in business with Dr. Richard Hoefflin. Dr. Hurvitz had filed suit against Dr. Hoefflin in a dispute involving business-related issues. While that case was pending, four former employees threatened to bring a sexual harassment claim against Dr. Hoefflin, and presented him with a draft complaint. Richard Garrigues was the attorney for the employees. Although the threatened action settled quickly under a confidentiality provision, a version of the complaint was accidentally filed and another version, containing unsavory details about Dr. Hoefflins alleged treatment of patients while they were under anesthesia, found its way into Dr. Hurvitzs office. Dr. Hurvitz sent it to Bob Woodard of the Washington Post, where a story was published concerning the allegations. As a result of this publication, Dr. Hoefflin filed a number of lawsuits, including one against Garrigues and some of the former employees for conspiracy, promissory fraud, fraud in the inducement, breach of settlement agreement, libel, slander, and injunctive relief. This case was denominated case No. SCO52602 (No. 602).
The Garrigues Cross-Complaint
Garrigues, in turn, filed a cross-complaint against Dr. Hurvitz in No. 602. The Garrigues cross-complaint asserted causes of action for conversion, trespass to chattels, and quasi-contract or restitution. The conversion claim alleged that Dr. Hurvitz converted the draft complaint, "which was and remains property in which [Garrigues] had and has the right to possession and an interest," and used the draft complaint "as part of a course of conduct designed to advertise the products, work, or completed work" and "for the purpose of attracting the attention of others for the purpose of seeking and/or retaining customers or increasing and/or retaining sales or business." Dr. Hurvitz allegedly "made known to persons or organizations written material, including the draft complaint, in violation of the right to privacy, work product privilege, and professional interests of [Garrigues]." As an alleged result of Dr. Hurvitzs acts, Garrigues was "required to defend [the] legal action [brought by Dr. Hoefflin], and has incurred attorneys fees and costs in connection therewith." Similar allegations were contained in the trespass to chattels claim and the restitution or quasi-contract claim. The prayer sought "return of the draft complaint"; "restitution . . . of any and all money or other benefits received and/or to be received by [Dr. Hurvitz]"; loss of income; and attorney fees. In a first amended cross-complaint, Garrigues repeated these allegations.
Dr. Hurvitz tendered the defense of the Garrigues matter to St. Paul, who refused to provide a defense. In a letter written to Dr. Hurvitzs counsel, St. Paul explained: "Defamation (libel and slander) and disparagement (making known . . . material that belittles the products, work or completed work of others) are listed as both personal injury and advertising injury offenses. However, there is nothing in the cross-complaint or amended cross-complaint which alleges that Dr. Hurvitz made any false statement or disparaging statement about Garrigues. [P] Invasion of privacy (making known to any person or organization written or spoken material that violates an individuals right of privacy) is also an enumerated offense for both personal injury and advertising injury. The allegations by Garrigues do not fit within any of the recognized causes of action for invasion of privacy under California law. Dr. Hurvitz is not alleged to have made any public disclosure of private facts about Garrigues. Garrigues cannot assert a right of privacy concerning disclosure of facts about someone else, such as Dr. Hoefflin. [Citation.] [P] Further, the fact that an attorney has prepared a complaint in a form which could be filed with a court is not a private fact for which the attorney could have a reasonable expectation of privacy."
St. Paul also refused to provide a defense in No. 602 generally, but as is discussed in the companion case, eventually settled with Dr. Hoefflin with respect to all his claims against the Hurvitzes over the objection of the Hurvitzes, who wished to preserve their right to prosecute a malicious prosecution action. The trial court found that the settlement was in good faith pursuant to Code of Civil Procedure section 877.6.
The Underlying Complaint and Motion for Summary Judgmentt
While the Garrigues cross-complaint was pending, Dr. Hurvitz filed suit against St. Paul for breach of contract, including breach of the implied covenant of good faith and fair dealing, and declaratory relief. The complaint alleged that St. Paul was obliged to provide a defense to the Garrigues cross-complaint.
There were two other named plaintiffs, who apparently settled their dispute and dropped out of the litigation.
Dr. Hurvitz moved for summary adjudication on the declaratory relief action concerning duty to defend, contending that the conduct alleged in the Garrigues cross-complaint "possibly or potentially" fell under the CGL policys definition of advertising and advertising injury offense, and "possibly" resulted in an advertising injury. The essential facts concerning the provisions of the insurance policy, Dr. Hurvitzs action leading to the litigation, and the allegations of the Garrigues cross-complaint were largely undisputed. The only real dispute centered around whether the allegations of the cross-complaint presented a potential for coverage under the policy. St. Paul argued both that Dr. Hurvitzs actions did not constitute promotional activity and that the injury alleged by Garrigues in the cross-complaint was not an advertising injury under the policy.
The Trial Courts Original Order
The trial court initially agreed with Dr. Hurvitz and granted the motion for summary adjudication on the declaratory relief cause of action. In its order, the court stated: "Comparing the allegations of the Garrigues Cross-Complaint to the Policy, St. Paul has a duty to defend [Dr.] Hurvitz. Garrigues alleges [Dr.] Hurvitz used the Draft Complaint to advertise the products, work, or completed work of [Dr.] Hurvitz. Garrigues alleges that [Dr.] Hurvitz used and disseminated that Draft Complaint to retain customers and/or sales. The Policy states, . . . covered advertising injury that: results from the advertising of your products, work or completed work; . . . . These factual allegations demonstrate that there is a potential theory upon which coverage might be afforded. [P] The issue before the Court is the potential for coverage, and not whether coverage or indemnity is required. St. Paul also argues that Garrigues is making his allegations to simply get St. Paul into the lawsuit because it is a deep pocket. St. Paul may be right, but that is not an issue that is before the Court."
With respect to the contentions that the distribution of the draft complaint was not promotional activity and that the injury complained of was not advertising injury, the court explained: "The difficulty for St. Paul is the language of the Policy. The Policy defines advertising injury offense as Making known to any person or organization written or spoken material that belittles the products, work or completed work of others. That is exactly what [Dr.] Hurvitz is alleged to have done — he made known to the Washington Post material that belittles the products, work, or completed work of [Dr.] Hoefflin. There is no reasonable basis to adopt St. Pauls argument that others must be limited to Garrigues, the claimant in the underlying action. The Policy does not limit the definition of other. And, to the extent the word other is ambiguous, the ambiguity must be resolved against St. Paul, the insurer."
St. Pauls Motion for Reconsideration
Shortly after the trial court issued its order on or about July 23, 2001, Dr. Hoefflin obtained an order in No. 602 severing the Garrigues cross-complaint from the complaint and the related actions. Dr. Hoefflins moving papers presented evidence that indicated Dr. Hurvitz had testified at his deposition that he did not transmit the draft complaint to the media for any advertising purpose.
In his moving papers, Dr. Hoefflin contended that "notwithstanding [the] settlement between the Hoefflin Parties and Garrigues . . . counsel for Garrigues has continued (and still continues) to litigate against the Hoefflin Parties in this action in direct violation of the release provisions of the settlement. In this regard, Garrigues is using the existence of his cross-complaint (which the evidence indicates is merely a sham pleading designed to trigger Dr. Hurvitzs insurance coverage) as an excuse to continue litigating against the Hoefflin Parties in this action and in the Related Cases (by way of his participation in discovery and motion practice that has no relevance to any of the claims asserted in Garrigues cross-complaint)." The moving papers further alleged "counsel for Garrigues has been cooperating with, and effectively working as co-counsel with, counsel for the [Hurvitzes] throughout the course of this litigation. In this regard, counsel for Garrigues has taken a position consistent with counsel for the [Hurvitzes] on virtually every motion, and has in fact joined counsel for the [Hurvitzes] in bringing and opposing numerous motions adverse to the Hoefflin Parties."
Dr. Hurvitz did not specifically so testify. Rather, he was asked why he contacted the Washington Post, and he expressed concern about the medical boards failure to act and the need to protect patient safety.
St. Paul seized on this fact to move for reconsideration of the order granting summary adjudication on the declaratory relief cause of action. The moving papers also referred to new case law consisting of an unpublished decision by the federal district court for the Western District of Washington and a published decision by the Connecticut Supreme Court. While this motion was pending, St. Paul appointed interim counsel to defend Dr. Hurvitz.
The trial court granted the motion for reconsideration, stating that St. Paul had presented new law that directly impacted the prior ruling in that "the Connecticut Supreme Court, . . . essentially ruled that . . . when the advertising injury offense is not directed at the underlying Plaintiff, there is no duty to defend." Persuaded by that authority, the court concluded that "St. Paul does not have a duty to defend [Dr.] Hurvitz against the claims of Garrigues unless the Garrigues cross-complaint alleges that [Dr.] Hurvitz made known any written or spoken material which belittles the products, work or completed work of Garrigues." This, in the courts view, the cross-complaint did not do: "The Garrigues cross-complaint does not allege that he suffered damage because he was belittled. The person who suffered alleged damage because of [Dr.] Hurvitz advertising conduct was [Dr.] Hoefflin, not Garrigues."
With respect to any violation of Garriguess right to privacy, the court stated: "Garrigues makes no allegations that he received unwanted publicity from the disclosure of his Draft Complaint. Garrigues makes no claims for damages for such unwanted publicity. In fact, Garrigues makes his violation of his right to privacy claims in his 3rd Cause of Action for Restitution (Quasi-contract). Garrigues does not seek damages. Rather, he seeks restitution for [Dr.] Hurvitz wrongfully obtained benefits. The Advertising injury liability provision states that St. Paul will pay amounts any protected person is legally required to pay as damages for covered advertising injury . . . . St. Paul does not have a duty to defend based on the allegations in the Garrigues cross-complaint relating to an alleged violation of the right of privacy."
The court further ruled that the reference to Dr. Hurvitzs deposition testimony was irrelevant because "the basis of the duty to defend does not depend on the testimony of [Dr.] Hurvitz concerning his motivation in sending the material to the press. It depends primarily on the allegations made in the Garrigues cross-complaint."
Dr. Hurvitzs Motion for Reconsideration
No sooner had the court issued its new order granting reconsideration and denying summary adjudication, then Dr. Hurvitz moved for reconsideration. The moving paper stated that Garrigues had responded to recent interrogatories as follows: Interrogatory: "Do you claim to have suffered unwanted publicity as a result of the violation of your right to privacy as alleged in your Cross-Complaint . . . ?" Answer: "Yes." Interrogatory: "Do you claim to have suffered damages as a result of the violation of your right to privacy as alleged in your Cross Complaint . . . ?" Answer: "Yes." Dr. Hurvitz contended that these new facts established that Garrigues had alleged an advertising injury offense as that term was used in the policy, triggering a duty to defend: "[Garrigues] alleges that he possesses a privacy interest in the Draft Complaint, which was never filed, and in his name, which appears on the Draft Complaint as one of its authors. When [Dr.] Hurvitz allegedly converted the Draft Complaint and disseminated it to the Washington Post, Garrigues was unwillingly thrust into the eye of a sensational media cyclone, resulting in extensive unwanted publicity. . . . In essence, Garrigues alleges that [Dr.] Hurvitz used Garrigues name and reputation as a lawyer to lend credibility to the allegations of the Draft Complaint so that the Washington Post would publish an article about the allegations and in the process attract attention to and promote [Dr.] Hurvitz business."
The interrogatories were submitted after the motion for reconsideration was granted and answered in less than 30 days.
St. Paul opposed, contending that notwithstanding the responses to interrogatories, the cross-complaint "has not pled any cause of action that would require proof of an invasion of privacy" and "does not alleged unwanted publicity from the disclosure of the draft complaint, nor does it seek damages for such unwanted publicity . . . ." Moreover, "Garrigues has not amended, or sought to amend, his cross-complaint to include the allegations contained in the discovery responses" and "if Garrigues were to request leave to amend the cross-complaint it is more than likely that the court would deny the request on the grounds that the proposed amendment is untimely."
St. Paul also complained of the possibility of fraud or collusion between Dr. Hurvitz and Garrigues based on the following facts: "First, the Garrigues cross-complaint was not filed until October 25, 2000, until immediately after St. Paul had settled all of [Dr.] Hoefflins claims against [Dr.] Hurvitz and possibly fraud by [Dr.] Hurvitz (over [Dr.] Hurvitzs objections). It was filed over two years after Garrigues had been sued by [Dr.] Hoefflin. Second, the Garrigues cross-complaint parrots, and in some instances quotes verbatim, St. Pauls policy language. Third, the day after this court issued its ruling finding no duty to defend the Garrigues cross-complaint, [Dr.] Hurvitzs counsel Thomas] Ferlauto served belated discovery directed at overturning this courts holding, and Garrigues provided expedited responses so that Ferlauto could file the instant motion for reconsideration within the statutory time limit. Lastly, the responses are drafted in a manner which Ferlauto believes are grounds for this motion for reconsideration."
The court denied the motion for reconsideration contending that Dr. Hurvitz had not established diligence required by section 1008 of the Code of Civil Procedure by waiting to submit discovery requested until after the courts prior order. The court further concluded that "(despite Garriguess recent discovery responses to the contrary), the Garrigues Cross-Complaint does not allege invasion of privacy. . . . [P] . . . [P] Garrigues claims, as set forth in his recent discovery responses, are outside the scope of his Cross-Complaint against [Dr.] Hurvitz."
Finally, the court expressed concern that "there does appear to be some sort of sweetheart arrangement between Garrigues and [Dr.] Hurvitz (and/or their attorneys)" based on the expedited response to the belated discovery.
Dr. Hurvitzs Second Request for Reconsideration and Judgment
The trial courts grant of St. Pauls motion for reconsideration (and denial of Dr. Hurvitzs motions) left the case unresolved since St. Paul had not filed a cross-motion for summary judgment. At one point, the parties tentatively agreed to stipulate to judgment in order to expedite an appeal, because the order denying declaratory relief on the duty to defend effectively resolved the case in St. Pauls favor.
In January 2002, Dr. Hurvitzs counsel informed the court and counsel for St. Paul by letter that "on January 9, 2002, the Garrigues Cross-Complaint was tried before Hon. Victoria Chaney in Department 311. The jury rendered its verdict on January 11, 2002. . . . The jury determined that [Dr. Hurvitz] was advertising [citation], that the advertising resulted in unwanted publicity to Garrigues [citations] and awarded Garrigues $ 3.17 million in damages as a result of that unwanted publicity [citation]." Counsel expressed the belief that this meant that "the Garrigues Cross-Complaint is and always has been a covered claim, which triggered a duty to defend" and invited the court to exercise its "inherent power to correct its ruling prior to the entry of a final judgment . . . ."
St. Paul protested the effort toward further reconsideration, and moved for judgment on the pleadings. Because the jury verdict in the Garrigues cross-complaint was obtained after an uncontested jury trial, with no one appearing on Dr. Hurvitzs behalf, St. Paul contended this was further "blatant proof of collusion and a sweetheart arrangement[] as previously suspected." Dr. Hurvitz protested that the grounds for a motion for judgment on the pleadings must appear on the face of the complaint or be based on facts which the court may judicially notice.
The court granted judgment on the pleadings, noting that its order that St. Paul did not have a duty to defend Dr. Hurvitz "essentially decided the entirety of issues and causes of action in this case." By entering judgment on the pleadings, the court expressed its intent to "resolve this case, and provide [Dr. Hurvitz] the opportunity to appeal this ruling . . . ." As the court anticipated, this appeal by Dr. Hurvitz followed shortly after judgment was entered.
DISCUSSION
Dr. Hurvitz contends that St. Paul was obliged to provide a defense to the Garrigues cross-complaint because it was a claim which potentially sought damages within the coverage of the policy. He contends that, if nothing else, this was established by the jury verdict obtained in the uncontested jury trial which awarded Garrigues over $ 3 million for damages caused by unwanted publicity due to his name appearing in the news articles as the attorney who drafted the former employees complaint for sexual harassment. For the reasons discussed, we do not agree.
I
We begin our analysis with the landmark case of Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 54 Cal. Rptr. 104, 419 P.2d 168, where the Supreme Court first held that an insurers duty to defend is broader than its duty to indemnify. In Gray, an insurer under a comprehensive personal liability policy refused to defend an action accusing the insured of assault on the ground that the policy excluded intentionally caused acts. The court believed that under the policy, the insurer made two promises: "[1.] To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage, and [2.] [to] defend any suit against the insured alleging such bodily injury or property damage and seeking damages which are payable under the terms of this endorsement, even if any of the allegations of the suit are groundless, false, or fraudulent." (Id. at p. 272.)
The court rejected the insurers argument that the fact the insured had gone to trial and lost on the assault charge proved the absence of a duty to defend: "The insured would reasonably expect a defense by the insurer in all personal injury actions against him. If he is to be required to finance his own defense and then, only if successful, hold the insurer to its promise by means of a second suit for reimbursement, we defeat the basic reason for the purchase of the insurance. In purchasing his insurance the insured would reasonably expect that he would stand a better chance of vindication if supported by the resources and expertise of his insurer than if compelled to handle and finance the presentation of his case. He would, moreover, expect to be able to avoid the time, uncertainty and capital outlay in finding and retaining an attorney of his own." (Gray v. Zurich Insurance Co., supra, 65 Cal.2d at p. 278.)
Although in Gray the underlying complaint itself "clearly presented the possibility that [the third party claimant] might obtain damages that were covered by the indemnity provisions of the policy," the court further held that "the duty to defend should be fixed by the facts which the insurer learns from the complaint, the insured, or other sources" and that an insurer "bears a duty to defend its insured whenever it ascertains fact which give rise to the potential of liability under the policy." (Gray v. Zurich Insurance Co., supra, 65 Cal.2d at pp. 276, 277.) Consequently, the allegations of the underlying complaint are not conclusive on the issue of whether a duty to defend existed, and the insurer cannot "construct a formal fortress of the third partys pleadings and retreat behind its walls" because "the pleadings are malleable, changeable and amendable" and courts should not "examine only the pleaded word but the potential liability created by the suit." (Id . at p. 276.)
The Supreme Court has since refined the rules governing the duty of an insurer to provide a defense to its insured on many occasions, but the basic rules remains the same: the insurers duty to defend is broader than the policy duty to indemnify and arises whenever there is a potential for coverage. In Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 861 P.2d 1153, for example, the court stated: "The . . . holding in Gray, . . . establishes the rule that the insurer must defend in some lawsuits where liability under the policy ultimately fails to materialize; this is one reason why it is often said that the duty to defend is broader than the duty to indemnify. [Citations.] Any doubt as to whether the facts establish the existence of the defense duty must be resolved in the insureds favor." (Id. at pp. 299-300.) In discussing the circumstances under which the insurer could be relieved from its duty to defend a lawsuit through a separate declaratory relief action, the court stated: "To prevail [in an action seeking declaratory relief on the issue of the duty to defend], the insured must prove the existence of a potential for coverage, while the insurer must establish the absence of any such potential. In other words, the insured need only show that the underlying claim may fall within policy coverage; the insurer must prove it cannot. Facts merely tending to show that the claim is not covered, or may not be covered, but are insufficient to eliminate the possibility that resultant damages (or the nature of the action) will fall within the scope of coverage, therefore add no weight to the scales. Any seeming disparity in the respective burdens merely reflects the substantive law." (Id. at p. 300.)
Concerning the insurers ability to resolve the duty to defend in a separate declaratory relief action, the court concurred with the Court of Appeal that: "It would be pointless, for example, to require an insurer to defend an action where undisputed facts developed early in the investigation conclusively showed, despite a contrary allegation in the complaint, that the underlying acts occurred on a date when the policy was not in effect or at a location concededly not covered by the policy. [Citations.] Similarly, where extrinsic evidence establishes that the ultimate question of coverage can be determined as a matter of law on undisputed facts, we see no reason to prevent an insurer from seeking summary adjudication that no potential for liability exists and thus that it has no duty to defend." (Montrose Chemical Corp. v. Superior Court, supra, 6 Cal.4th at p. 298.)
II
Based on these authorities, we review whether the trial court correctly determined in connection with the motion for summary judgment and motion for reconsideration that St. Paul owed Dr. Hurvitz no duty to defend the Garrigues cross-complaint. As the Supreme Court has indicated, that determination requires review of: the policy, the allegations of the cross-complaint, facts learned from the insured, and facts learned from other sources.
The CGL policy provided coverage for "amounts any protected person is legally required to pay as damages for covered advertising injury that: results from the advertising of your products, work or completed work; and is caused by an advertising injury offense committed while this agreement is in effect." Advertising was defined as "attracting the attention of others by any means for the purpose of seeking customers or increasing sales or business." Advertising injury was defined as "injury, other than bodily injury or personal injury, caused by an advertising injury offense." Advertising injury offense was defined as "any of the following offenses: Libel or slander. Making known to any person or organization written or spoken material that belittles the products, work or completed work of others. Making known to any person or organization written or spoken material that violates an individuals right of privacy." Plugging the definitions into the coverage provision, we see that St. Paul was obligated to provide coverage for damages obtained by injured third parties that resulted from Dr. Hurvitzs actions undertaken to attract the attention of others for the purpose of seeking customers or increasing sales or business, and that arose out of Dr. Hurvitzs actions in making known material that libeled or slandered someone or that belittled the products, work or completed work of "others" or that violated an individuals right of privacy.
The other advertising injury offenses described in the policy — "false arrest, detention or imprisonment"; "malicious prosecution"; "wrongful entry or wrongful eviction"; "invasion of the right of private occupancy of a room, dwelling or premises that a person occupies"; and "unauthorized taking or use of any advertising idea, material, slogan, style or title of others" — have no possible or arguable application to the present facts, so we ignore them.
As we have seen, there was no dispute that Garrigues was the attorney for the four former employees who threatened to bring a sexual harassment suit against Dr. Hoefflin. In order to induce settlement, he prepared several drafts of a proposed complaint. One was accidentally filed with the court, another — containing more detailed and salacious allegations concerning Dr. Hoefflins actions — made its way into Dr. Hurvitzs hands and from there to the Washington Post. Dr. Hoefflin sued Garrigues for libel, slander, and breach of the parties confidential settlement agreement. Garrigues cross-claimed against Dr. Hurvitz for conversion, trespass to chattels, and quasi-contract or restitution. In the cross-complaint and first amended cross-complaint, the only specific damages alleged by Garrigues were loss of time and attorney fees expended due to defending Dr. Hoefflins litigation. Otherwise, both the original and amended cross-complaints alleged that Dr. Hurvitz had somehow obtained benefit from revelation of the draft complaint and sought restitutional recovery of whatever monetary benefits he had received.
Neither cross-complaint alleged that Garrigues had been libeled or slandered. Thus, the question presented was whether there was an issue or potential issue that recovery under Garrigues claims as presented in the cross-complaints could be based on Dr. Hurvitzs actions in making known material that belittled the products, work or completed work of "others" or that violated an individuals right of privacy. The trial court gave clear reasons why the claims before it at the time of the summary judgment motion did not. First, "the Garrigues cross-complaint does not allege that he suffered damage because he was belittled. The person who suffered alleged damage because of [Dr.] Hurvitz advertising conduct was [Dr.] Hoefflin, not Garrigues." Second, with respect to any violation of Garriguess right to privacy, the court said "Garrigues makes no allegations that he received unwanted publicity from the disclosure of his Draft Complaint" and "makes no claim for damages for such unwanted publicity." Rather he sought "restitution for [Dr.] Hurvitz wrongfully obtained benefits." As the court pointed out, the policy provided coverage for damages, not restitution.
A
Dr. Hurvitz contends that the trial court erred in ruling there is no coverage where a third party claims to have been injured by disparagement or belittling of the products or work of someone other than the third party claimant himself. Dr. Hurvitz argues that because the policy, in describing an advertising injury offense, refers to the insureds actions in "making known . . . material that belittles the products, work or completed work" of "others" rather than "the claimant," the policy is intended to be more open-ended than the trial court supposed.
Although both parties devote a significant portion of their briefs to this issue, we see no possible merit to Dr. Hurvitzs position. Read in context, the term "others" could well be ambiguous. It might be read to mean either "other than the insured" or "other than the claimant." But in interpreting an insurance policy, we are not required to give it a strained or absurd meaning. (Bay Cities Paving & Grading, Inc. v. Lawyers Mutual Ins. Co. (1993) 5 Cal.4th 854, 867, 855 P.2d 1263.) A party does not have standing to assert a claim based on statements injurious to someone else. We can see no reason, therefore, why an insurance policy should be interpreted to afford coverage for such a claim.
The new authorities cited by St. Paul in support of its motion for reconsideration involve the issue of whether a policy that provides coverage for advertising or competitive injury asserted by a competitor should be extended to claims asserted by a consumer or consumer group who claim to have been indirectly injured because, for example, they are forced to pay more for goods and services. (See, e.g., QSP, Inc. v. Aetna Cas. and Sur. Co. (2001) 256 Conn. 343 ; Microsoft Corp. v. Zurich American Ins. Co. (D.Wa. July 2, 2001, No. C00-521P) 2001 U.S.Dist. LEXIS 24670.) In both cases, the court held that it should not. (QSP, Inc. v. Aetna Cas. and Sur. Co., supra, 773 A.2d at p. 378 [where the damages allegedly suffered by consumers "were economic damages arising out of the monopoly allegedly created by the commercial disparagement of the competitors of [the insureds]" court held "the connection between the covered offenses and the resultant injury is far too tenuous to trigger coverage under the policies"]; Microsoft Corp. v. Zurich American Ins. Co., supra, at p. 22 [holding that consumer complainants were not the victims of the insureds alleged advertising offenses]; see also Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1277, 833 P.2d 545 [holding that claims based on the inadequacy of disclosures to consumers and illegality of the terms of the loans taken out by the claimants "do not have a sufficient causal connection with advertisements directed solely to insurance agents"].)
The connection between Garrigues and the alleged advertising injury suffered by Dr. Hoefflin is even more attenuated than the connection between the consumers and the injured competitors discussed in those cases. In the cross-complaint and first amended cross-complaint, Garrigues identified no direct injury to himself from the publication of the employees complaint for sexual harassment. He claimed to have suffered loss of income and attorney fees and costs in defending the Hoefflin lawsuit. Such losses did not arise from any alleged advertising offense committed by Dr. Hurvitz — they resulted from being sued by Dr. Hoefflin, and represented an attempt by Garrigues to be indemnified for his costs and fees in defending the Hoefflin lawsuit. We agree with the authorities cited by St. Paul that this was not the type of injury that could be covered by the policys advertising provisions. Under Gray and Montrose, an insurer on a policy covering advertising injury owes a duty to defend its insured when a third party asserts a claim based on an advertising injury allegedly caused by the insured whether the claim is meritorious or not. This does not mean that the insurer has to reimburse every other codefendant sued by the third party plaintiff on the theory that the codefendants legal costs represented injury to them caused by advertising injury to "others." To hold otherwise would expand the insurers liability under the policy and the concept of duty to defend identified in Gray and Montrose to near infinite proportions.
We note that St. Paul obtained a good faith settlement determination on Dr. Hurvitzs behalf pursuant to Code of Civil Procedure section 877.6. Thus, even had Garriguess attempt to be indemnified for his legal expenses represented the direct injury needed to be covered by the policys advertising provisions, it was precluded by St. Pauls settlement and the good faith determination.
B
Alternatively, Dr. Hurvitz argues that Garriguess actual or potential claim for invasion of his own right to privacy required a finding that a duty to defend existed. The initial difficulty here is that, as the trial court pointed out, that there was no potentially covered claim for invasion of Garriguess privacy in either the original or first amended cross-complaints. There was an ambiguous reference to "violation of the right to privacy," which did not specify whether Dr. Hoefflins or Garriguess privacy was meant. The court presumed for the sake of argument that the reference was to violation of Garriguess right to privacy, but concluded that there was no possibility of coverage for this claim because it sought only restitution, and not damages.
See Bank of the West v. Superior Court, supra, 2 Cal.4th at pages 1266-1271, for a discussion of the public policy prohibition on providing insurance coverage for restitutionary recoveries of the disgorgement type.
Dr. Hurvitz argues that because Garrigues could have sought damages for invasion of his own privacy, a duty to defend arose despite the ambiguity in the original and first amended cross-complaints and the lack of any prayer for damages. In Gunderson v. Fire Ins. Exchange (1995) 37 Cal.App.4th 1106, the insureds similarly argued that the insurer should have anticipated that the third party complainant might allege a covered property damage-type claim against them notwithstanding the fact that the complaint asserted only equitable causes of action for quiet title, declaratory relief, and injunctive relief. The court disagreed: "An insured may not trigger the duty to defend by speculating about extraneous facts regarding potential liability or ways in which the third party claimant might amend its complaint at some future date. . . . The issues . . . are what facts [the insurer] knew at the time [the insureds] tendered the defense of the [third party] lawsuit, both from the allegations on the face of the third party complaint, and from extrinsic information available to it at the time; and whether these known facts created a potential for coverage under the terms of the Policy." (Id. at p. 1114.) The insureds pointed to facts suggestive of intentional destruction of property on their part, such as tearing down an obstructing fence. (Id. at p. 1115.) Because the policy provided coverage only for consequences "neither expected nor intended by the insured," (id. at p. 1116) the court believed that such damage "could not have arisen from an accidental occurrence within the meaning of the insuring clause . . . ." (Ibid.) The insureds also raised a number of extrinsic facts that might have provided the third party grounds to amend to bring a suit for property damage, but the court pointed out "most of this alleged extrinsic evidence of a potential claim for property damage arose after [the third partys] complaint was filed and tendered to [the insurer] for defense." (Gunderson v. Fire Ins. Exchange, supra, at p. 1117.)
The insurer "was entitled to base its determination of whether or not to accept the tender on the facts available to it at that time. Once it determined on the basis of the lawsuit itself and the facts known to it at that time that there was no potential for coverage, it did not have a continuing duty to investigate or monitor the lawsuit to see if the third party later made some new claim, not found in the original lawsuit." (Ibid.)
The courts analysis has equal applicability here. At the time Garriguess claims were tendered to St. Paul, there was no possibility of coverage under the allegations for the reasons set forth in the trial courts ruling. There were also no extrinsic facts that could have alerted St. Paul or the court to the possibility that a claim for damages for violation of Garriguess right to privacy was forthcoming.
Dr. Hurvitz points to Garriguess responses to the interrogatories submitted after the trial court ruled that no duty to defend existed. In one response, Garrigues claimed to have suffered unwanted publicity as the result of violation of his right to privacy and in another he claimed to have suffered damage as the result of violation of his right to privacy. These responses were submitted to the court to support Dr. Hurvitzs motion for reconsideration. The court denied the motion for reconsideration because, among other things, Garrigues had not amended or sought to amend to assert a claim for breach of privacy potentially covered under the policy.
Here again, we can find no fault with the trial courts ruling. The responses to interrogatories, submitted late in the litigation, by no means clarified any intent on the part of Garrigues to amend his complaint to assert a claim potentially covered by the policy. The "damages" referred to in the response could have been the costs of defending the Hoefflin litigation, which were not recoverable under the policy for the reasons we have stated. Moreover, a claim for violation of right to privacy based on public disclosure of private facts requires the following elements: "(1) public disclosure (2) of a private fact (3) which would be offensive and objectionable to the reasonable person and (4) which is not of legitimate public concern." (Shulman v. Group W Productions, Inc. (1998) 18 Cal.4th 200, 214, 955 P.2d 469.) It is difficult to fathom how publicity tending to show that an attorney successfully represented a group of employees in a sexual harassment lawsuit could be deemed offensive or objectionable. It was only much later, during the trial of Garriguess claims that his unusual theory of recovery became clear. Garrigues took the position at the uncontested trial that he was averse to publicity and did not wish his prominent cases to be discussed in the press. Garrigues also testified that he suffered extreme emotional distress and loss of income from the publicity and ensuing litigation. Recognizing that he had asserted no claims that would include these types of damages, he sought permission from the court after the evidentiary portion of the trial was concluded to include a cause of action for violation of right to privacy.
We recognize that insurers are obligated to defend even the most frivolous lawsuit against their insureds under Gray and Montrose if any claim within it would be potentially covered if true. However, as of the time the trial court ruled on the motion for summary adjudication and motion for reconsideration, Garrigues had not yet asserted any type of claim, meritless or otherwise, within the parameters of the policy and had not made clear his unusual sensitivity to publicity of any type. St. Paul was not required to assume that he intended to do so. (Gunderson v. Fire Ins. Exchange, supra, 37 Cal.App.4th 1106, 1117 ["Once [the insured] determined on the basis of the lawsuit itself and the facts known to it at that time that there was no potential for coverage, it did not have a continuing duty to investigate or monitor the lawsuit to see if the third party later made some new claim, not found in the original lawsuit"]; accord, Hurley Construction Co. v. State Farm Fire & Casualty Co. (1992) 10 Cal.App.4th 533, 538 [where counsel for the insured wrote several letters speculating about how the underlying claimant might amend its complaint at some future date, the court held: "The insured may not speculate about the unpled third party claims to manufacture coverage"].) The trial courts ruling on the motion for reconsideration was not erroneous.
III
Finally, Dr. Hurvitz contends that the jury verdict received by Garrigues is proof that the claims asserted in the cross-complaint were potentially covered and that St. Paul owed a duty to defend. As we have seen, after presenting all of his evidence at an undefended jury trial, Garrigues amended his complaint to assert a separate claim for damages for violation of right to privacy. Responding to questions in a special verdict prepared by Garrigues in connection with their claim, the jury found that (1) Dr. Hurvitzs conversion and use of the draft complaint "caused [Garrigues] to be exposed to unwanted publicity"; (2) Dr. Hurvitzs conduct in "invading [Garriguess] privacy" caused Garrigues to be exposed to unwanted publicity; (3) Dr. Hurvitz provided the draft complaint to the Washington Post in part to advertise and or obtain publicity for himself and his medical practice and to attract or retain patients; (4) Garrigues suffered the loss of attorney fees and costs in the amount of $ 450,000; (5) Garrigues suffered lost earnings and business opportunities in the amount of $ 220,000; and (6) Garrigues suffered noneconomic damages, including pain, suffering, inconvenience, mental suffering, emotional distress, humiliation, exposure to unwanted publicity, injury to reputation, and invasion of privacy, in the amount of $ 2.5 million.
Dr. Hurvitz contends that this judgment is binding on St. Paul because it breached its obligation to defend. The rule is that an insurer who wrongfully refuses to defend may be bound by a judgment in the underlying case. (Samson v. Transamerica Ins. Co. (1981) 30 Cal.3d 220, 237, 178 Cal. Rptr. 343, 636 P.2d 32; Wright v. Firemans Fund Ins. Companies (1992) 11 Cal.App.4th 998, 1018.) But an insurer does not become obligated to defend until a covered lawsuit is filed and has been tendered. (Montrose Chemical Corp. v. Superior Court, supra, 6 Cal.4th at p. 295; Foster-Gardner, Inc. v. National Union Fire Ins. Co. (1998) 18 Cal.4th 857, 878, 959 P.2d 265.) This is illustrated by the case of Lipson v. Jordache Enterprises, Inc. (1992) 9 Cal.App.4th 151. There, the insurer under a general liability policy refused tender of a lawsuit for wrongful termination on the ground that such claims were not covered. Shortly before trial, the insured and the third party plaintiff stipulated to adding two new causes of action for defamation and negligence. Two days before trial, the insureds counsel attempted to fax a letter and copy of the amended complaint to the insurer requesting defense based on the new claims, but the documents did not arrive until after the trial had concluded and the court had awarded damages to the plaintiff for defamation and negligence. The insurers motion to have the judgment vacated was denied by the trial court relying on Sunseri v. Camperos Del Valle Stables, Inc. (1986) 185 Cal. App. 3d 559, 230 Cal. Rptr. 23 in which a similar motion had been denied where an insurer refused to defend on the ground that the policy had been cancelled and then sought to vacate a stipulated judgment entered. On appeal, the insured in Lipson argued Sunseri was not applicable "because the insurer there had advance notice of the exact claims against its insured before refusing to defend" whereas the second amended complaint "of which it had at the most two days notice, raised new and different claims which it immediately agreed to defend." (Lipson v. Jordache Enterprises, Inc., supra, 9 Cal.App.4th at p. 158.)
Agreeing that the real question was "whether the second amended complaint presented new and unexpected claims, or whether [the insurer] should have anticipated the causes of action for negligence and defamation based on the facts of which it had notice," the appellate court reversed: "We conclude [the insurer] has presented an adequate case for relief from the judgment due to the surprise of the second amended complaint. We cannot agree with plaintiff and defendant that [the insurer] should have known of the new causes of action from the facts in its possession. . . . In relying on Sunseri, the trial court failed to appreciate the differences involved in this situation, where new causes of action were added at the last minute and judgment was entered shortly thereafter, following an alleged trial on the merits." (Lipson v. Jordache Enterprises, Inc., supra, 9 Cal.App.4th at pp. 158, 161.)
Failure to give notice resulted in the inability to obtain contribution from a co-insurer in Truck Ins. Exchange v. Unigard Ins. Co. (2000) 79 Cal.App.4th 966. The insured in that case tendered defense to one of its insurers. That insurer provided a defense and ultimately settled. It then sought contribution from another insurance company that had issued a policy to the insured. Recognizing that "the insured-insurer relationship is based on the premise that, in the event of a claim, occurrence, or suit, the insured will tender the defense to the insurer, which will provide a defense and control the litigation with the full cooperation of the insured" and that an insurer to whom no tender has been made is "a stranger to the litigation," the appellate court rejected the claim, holding that the insurer was required to give notice to the potential contributor promptly after it agreed to provide a defense. (Id. at pp. 979, 982.)
As in Lipson, prior to the amendment to assert a new claim for damages due to violation of Garriguess right to privacy, there was no potentially covered lawsuit on file. Despite the discovery responses, Garrigues did not amend his cross-complaint to assert a claim for damages until after the undefended trial was completed. No notice of this amendment was ever given to either St. Paul or, as far as can be ascertained, to Dr. Hurvitz. Consequently, it appears that the judgment may be entirely void. (See Heidary v. Yadollahi (2002) 99 Cal.App.4th 857, 864-865 [holding that when defendant failed to appear for trial, court erred in permitting plaintiffs to amend their cross-complaint to add damages in excess of what was originally specified, leading to a void judgment in excess of the courts jurisdiction].) Whether or not it is void as to Dr. Hurvitz, however, it was clearly not binding on St. Paul, who had no knowledge or notice that Garrigues had been permitted to go forward on a claim for damages for violation of right to privacy. Pursuant to settled law, the failure to tender the new claims or give notice of their existence precludes a recovery against St. Paul.
In holding that "the court cannot allow a plaintiff to prove different claims or different damages at a default hearing than those pled in the complaint," the court stated: "It is imperative in a default case that the trial court take the time to analyze the complaint at issue and ensure that the judgment sought is not in excess of or inconsistent with it. It is not in plaintiffs interest to be conservative in their demands, and without any opposing party to point out the excesses, it is the duty of the court to act as gatekeeper, ensuring that only the appropriate claims get through. That role requires the court to analyze the complaint for itself — with guidance from counsel if necessary — ascertaining what relief is sought as against each defaulting party, and to what extent the relief sought in one cause of action is inconsistent with or duplicative of the relief sought in another." (Heidary v. Yadollahi, supra, 99 Cal.App.4th at p. 868.)
DISPOSITION
The judgment is affirmed.
We concur: VOGEL (C.S.), P.J., and HASTINGS, J.