Direct Focus Inc. v. Admiral Insurance

MEMORANDUM *

Admiral Insurance Company (“Admiral”) appeals the district court’s summary judgment in favor of Direct Focus Inc. (“Direct Focus”) in this insurance coverage *265 dispute. Direct Focus cross-appeals the district court’s judgment denying an award of attorney’s fees and costs and summary judgment in favor of Admiral on the enforceability of the parties’ settlement agreement. 1 We have jurisdiction under 28 U.S.C. § 1291 , and reverse in part, affirm in part, and remand.

We reverse the district court’s Order Denying Admiral’s Motion for Summary Judgment Based on Known Loss Doctrine. Under this doctrine, losses caused by Direct Focus’s 1998 television advertisements are not covered by the insurance policy if Direct Focus subjectively knew at the policy’s inception that there was a substantial probability it would be sued by Soloflex for these commercials. See Pub. Util. Dist. No. 1 v. Int’l Ins. Co., 124 Wash.2d 789 , 881 P.2d 1020, 1030 (Wash.1994). The district court reasoned that because small changes can have significant legal effects, Direct Focus could not have known that its 1998 advertisements would be found to be infringing. By analyzing whether Direct Focus…