For Women Only Fitness, Inc. v. Specialty National Insurance

MEMORANDUM *

Plaintiffs For Women Only Fitness, Inc., and Garry Peterson, president and an employee of For Women Only, brought suit against Defendant Specialty National Insurance Company, asserting a number of causes of action arising from Defendant’s refusal to defend Plaintiffs in a lawsuit brought against Plaintiffs by a former employee. The district court dismissed Plaintiffs’ First Amended Complaint under Federal Rule of Civil Procedure 12(b)(6). Plaintiffs timely appealed. On de novo review, ASW v. Oregon, 424 F.3d 970 , 974 (9th Cir.2005), we affirm in part, reverse in part, and remand for further proceedings.

1. The insurance contract’s Employment-Related Practices Exclusion (“Exclusion”), on which Defendant relied to deny coverage for the third-party lawsuit, is valid. Under California law, which the parties agree controls interpretation of the insurance contract, the exclusion is conspicuous, clearly worded, and enforceable. See MacKinnon v. Truck Ins. Exch, 31 Cal.4th 635 , 3 Cal.Rptr.3d 228 , 73 P.3d 1205, 1213 (2003) (stating that for an exclusionary clause to be enforceable it “must be conspicuous, plain and clear” (internal quotation marks omitted) (emphasis…