Legal Conclusions are Not Allegations of Fact
Barry Zalma
Feb 12, 2024
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Post 4734
Read the full article at https://lnkd.in/g5rYCgH4 and see the full video at https://lnkd.in/gA4uUAj3 and at https://lnkd.in/g9BysvGz and at https://zalma.com/blog plus more than 4700 posts.
Zox LLC (“Zox”) appealed the district court’s grant of summary judgment in favor of West American Insurance Company. Zox contended the district court erred because the Zox Brothers sought damages for three potentially covered claims: (1) malicious prosecution; (2) disparagement; and (3) use of an “advertising idea.”
In ZOX LLC, a California Limited Liability Company, v. West American Insurance Company; et al., No. 23-55125, USCA, 9th (February 9, 2024) the dispute was resolved.
ANALYSIS
Under California law, a liability insurer owes a broad duty to defend its insured against claims that potentially seek damages within the coverage of the policy. Coverage turns not on the technical legal cause of action pleaded by the third party but on the facts alleged.
While the duty to defend is broad, an insurer will not be compelled to defend its insured when the potential for liability is tenuous and farfetched.
The Zox Brothers did not plead facts, nor provide extrinsic evidence, to satisfy any of the requisite elements of a malicious prosecution claim. The Pleadings did not trigger coverage for malicious prosecution.
Disparagement
The Zox Brothers must plead facts to show a false or misleading statement that clearly derogates that product or business.
Appropriation of Advertising Ideas
Zox Brothers triggered coverage by claiming that Zox appropriated their “advertising ideas” by using the “Zox” name and “passing off” their products as Zox Brothers’ goods. The district court did not err in finding that the Pleadings did not trigger coverage for a “use of another’s advertisement” claim.
CONCLUSION
For the reasons stated by the Ninth Circuit, outlined above, it found that West American did not have a duty to defend or indemnify Zox in the Zox Litigation because, there was no duty to defend.
Where there is a duty to defend, there may be a duty to indemnify; but where there is no duty to defend, there cannot be a duty to indemnify.
ZALMA OPINION
The Ninth Circuit applied the clear and unambiguous language of the policy to the “facts” alleged; found that the allegations were mostly speculative or based on legal conclusions, failure to allege facts to support the three claims failed and, therefore, the Ninth Circuit had no choice but to affirm the summary judgment find no duty to defend nor a duty to indemnify.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
follow me @bzalma on X;Subscribe to my substack at https://lnkd.in/gcZKhG6g; videos at Rumble.com at https://lnkd.in/gV9QJYH; Insurance Claims Library – https://lnkd.in/gwEYkxD.
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© 2025 Barry Zalma, Esq., CFE
When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive ...
