AUGUST ENTERTAINMENT, INC v. PHILADELPHIA INDEMNITY INSURANCE COMPANY
Filed
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF
SECOND APPELLATE DISTRICT
DIVISION
AUGUST ENTERTAINMENT, INC., Plaintiff and Appellant, v. PHILADELPHIA INDEMNITY INSURANCE COMPANY, Defendant and Respondent. | B184276 ( Super. |
APPEAL from a judgment of the Superior Court of Los Angeles County, Aurelio Munoz, Judge. Affirmed.
Law Offices of Christian J. Garris, Christian J. Garris; Law Offices of David M. Wolf and David M. Wolf for Plaintiff and Appellant.
Lewis Brisbois Bisgaard & Smith, Jeffry A. Miller, Thomas G. Oesterreich and Elizabeth G. O'Donnell for Defendant and Respondent.
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This appeal raises issues concerning whether a directors and officers (D& O) liability policy covers a breach of contract claim where an officer entered into a contract without stating that he was acting on behalf of the corporation. The corporation subsequently disputed liability under the contract, and the other contracting party brought suit against the corporation and the officer, seeking to recover the contract price. The officer sought a defense from the D& O insurer, which denied the claim. The corporation and the officer settled the suit for the contract price.
In this action against the insurer for bad faith, the trial court entered judgment for the insurer after sustaining a demurrer without leave to amend. We affirm because the D& O policy did not cover the corporation's contractual debt or the officer's liability for breaching a contract. The breach of the contractual obligation asserted in this case did not give rise to a loss caused by a wrongful act within the meaning of the policy. Rather, the corporation was simply being required to pay an amount it voluntarily contracted to pay. To hold the insurer liable for the contract price would be tantamount to making it a business partner of the corporation and the officer, which was not the mutual intention of the insurer and the insured under the policy.
I
BACKGROUND
We accept as true the following allegations of the complaint. (See Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)
InternetStudios.com, Inc., produced, distributed and marketed filmed entertainment products. The company operated a Web site for marketing films. Robert Maclean was an officer of InternetStudios.
August Entertainment, Inc., acts as the exclusive sales agent for various principals who own or control the rights of exploitation to several motion pictures. Gregory Cascante was the president of August Entertainment.
In October 1999, Maclean and Cascante began negotiations -- by telephone, meetings, and correspondence -- concerning possible deals between InternetStudios and August Entertainment. On March 14, 2000, Cascante faxed a memo to Maclean on August Entertainment letterhead, proposing that InternetStudios offer a minimum guarantee of $2 million to August Entertainment for the distribution rights to certain films. The memo contained other proposed terms. Cascante ended the memo, â€
