                                                                              FILED
                           NOT FOR PUBLICATION                                MAR 03 2014

                                                                          MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                          U.S. COURT OF APPEALS



                           FOR THE NINTH CIRCUIT


THE BURLINGTON INSURANCE                         No. 12-55285
COMPANY,
                                                 D.C. No. 2:11-cv-02926-R-FFM
              Plaintiff-counter-defendant -
Appellee,
                                                 MEMORANDUM*
  v.

CHWC, INC., DBA Crazy Horse
Restaurant and Nightclub,

              Defendant,

  and

RUDY MARTINEZ, Jr.,

              Defendant-counter-claimant -
Appellant.


                   Appeal from the United States District Court
                      for the Central District of California
                    Manuel L. Real, District Judge, Presiding

                      Argued and Submitted January 8, 2014
                              Pasadena, California



        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
                                                                             Page 2 of 5
Before: W. FLETCHER, M. SMITH, and WATFORD, Circuit Judges.

      1. The district court erred by granting summary judgment for Burlington on

the ground that it had no duty to defend (and thus, a fortiori, no duty to

indemnify).

      Burlington received both Martinez’s complaint and the police report (which

included multiple witness statements) before it denied coverage. Martinez’s

complaint alleged that he had been injured as a result of an assault by Crazy Horse

security guards, allegations that appeared to bring Martinez’s injuries within the

policy’s assault-or-battery exclusion. (The exclusion precludes coverage for

injuries “[a]rising out of assault or battery, or out of any act or omission in

connection with the prevention or suppression of an assault or battery.”) But the

police report and attached witness statements also contained facts indicating that

Martinez’s injuries might have been caused by events that would not fall within the

assault-or-battery exclusion. Those extrinsic facts, which Burlington was obligated

to consider in making its coverage decision, triggered a duty to defend because

they “reveal[ed] a possibility that the claim may be covered by the policy.”

Montrose Chem. Corp. of Cal. v. Superior Court, 861 P.2d 1153, 1157 (Cal. 1993).

      Specifically, some of the witness statements provided to Burlington stated

that Martinez was injured when he tried to sit down on a stool, lost his footing, and
                                                                            Page 3 of 5
hit his head on the wall. That version of events would not fall within the exclusion

unless Martinez’s fall “ar[ose] out of assault or battery, or out of any act or

omission in connection with the prevention or suppression of an assault or battery.”

Some of the witness statements indicated that, before being escorted out of the

club, Martinez may have assaulted a female patron on the dance floor. If true, this

incident could render the exclusion applicable even if Martinez had been injured by

the fall from the stool. But other witness statements contain no indications of any

such assault. If it proved true that no assault or battery occurred, and Martinez’s

injuries were in fact caused by the fall from the stool, the assault-or-battery

exclusion would not apply. Thus, the extrinsic facts available to Burlington

indicated the potential for coverage, which is all that was necessary to trigger its

duty to defend. Gray v. Zurich Ins. Co., 419 P.2d 168, 176 (Cal. 1966).

      We recognize that extrinsic facts cannot trigger a duty to defend when they

relate only to claims that have not been pleaded in the third-party claimant’s

complaint. That was true in all of the cases on which Burlington relies. See, e.g.,

Microtec Research, Inc. v. Nationwide Mut. Ins. Co., 40 F.3d 968, 970–71 (9th Cir.

1994); Storek v. Fid. & Guar. Ins. Underwriters, Inc., 504 F. Supp. 2d 803, 808,

811 (N.D. Cal. 2007); Ulta Salon, Cosmetics & Fragrance, Inc. v. Travelers Prop.

Cas. Co. of Am., 127 Cal. Rptr. 3d 444, 449 (Ct. App. 2011); Gunderson v. Fire
                                                                             Page 4 of 5
Ins. Exch., 44 Cal. Rptr. 2d 272, 277–78 (Ct. App. 1995). But here the extrinsic

facts at issue do relate to a claim pleaded in Martinez’s complaint—namely, his

negligence claim. Although as originally pleaded Martinez’s negligence claim was

predicated on the theory that he had been assaulted, the extrinsic facts available to

Burlington revealed the possibility that Martinez could amend his negligence claim

to allege theories of liability that would fall outside the assault-or-battery

exclusion. Under well-settled California law, that possibility was enough to trigger

Burlington’s duty to defend. See Montrose, 861 P.2d at 1160; Gray, 419 P.2d at

176–77.

      2. Even if, as we hold, Burlington had a duty to defend, it may still prevail if

it can establish that it owes no duty to indemnify. Burlington has a duty to

indemnify only if the state court judgment entered against Crazy Horse rests on a

liability within the policy’s coverage. See Hogan v. Midland Nat’l Ins. Co., 476

P.2d 825, 832–33 (Cal. 1970). The state court judgment is predicated on Crazy

Horse’s negligence in preventing Martinez’s fall from the stool, not on the theory

that Martinez was assaulted or battered by Crazy Horse’s security guards. Thus,

the state court judgment on its face precludes any finding that Martinez’s injuries

“ar[ose] out of assault or battery” within the meaning of the first clause of the

exclusion. Burlington nonetheless argues that the state court judgment is covered
                                                                           Page 5 of 5
by the second clause of the assault-or-battery exclusion, thereby relieving it of any

duty to indemnify.

      Material factual disputes preclude granting summary judgment to Burlington

on this ground. The state court judgment did not resolve whether Martinez’s fall

from the stool “ar[ose] . . . out of any act or omission in connection with the

prevention or suppression of an assault or battery” within the meaning of the

second clause of the exclusion. As noted above, resolution of that issue turns on

whether Martinez did or did not assault a female patron on the dance floor before

being escorted out of the club—an issue the state court judgment does not address

at all, since it was irrelevant to determining whether Crazy Horse was negligent in

preventing Martinez’s fall from the stool. Accordingly, the state court judgment

has not expressly or impliedly resolved a material factual dispute related to

coverage, rendering summary judgment for Burlington improper. See id. at 833.

      REVERSED and REMANDED.
                                                                               FILED
Burlington Ins. Co., v. Martinez, 12-55285                                       MAR 03 2014

                                                                            MOLLY C. DWYER, CLERK
M. SMITH, Circuit Judge, dissenting:                                         U.S. COURT OF APPEALS



      The majority holds that, under California law, an insurer carries a duty to

defend, based on hypothetical theories of liability that are found in evidence

extrinsic to the complaint, even where no such theories of liability are actually

pleaded. In my view, this holding is contrary to clearly established California law. I

respectfully dissent.

      Under California law, the duty to defend “is not unlimited.” Buss v. Superior

Court, 939 P.2d 766, 773 (Cal. 1997). A determination regarding “whether the

insurer owes a duty to defend usually is made . . . by comparing the allegations of

the complaint with the terms of the policy.” Horace Mann Ins. Co. v. Barbara B.,

846 P.2d 792, 795 (Cal. 1993). In assessing the allegations in the complaint,

“coverage turns not on the technical legal cause of action pleaded by the third party

but on the facts [actually] alleged.” Swain v. Cal. Cas. Ins. Co., 99 Cal. App. 4th 1,

8–9 (2002) (emphasis added).

      “Facts extrinsic to the complaint [may] also give rise to a duty to defend.”

Id. at 8. But extrinsic facts will only create a duty to defend where they reveal a

possibility that the claims actually alleged may be covered by the policy. Horace

Mann, 846 P.2d at 795 (explaining that extrinsic facts “give rise to a duty to defend

                                          1
when they reveal a possibility that the claim may be covered by the policy”

(emphasis added)). A duty to defend does not arise merely because extrinsic facts

establish that claims within the policy’s purview could have been asserted, where

no such claims were actually brought. Id. Accordingly, in determining whether a

duty to defend exists, courts decline to look to extrinsic evidence where the

plaintiff does not “allege the type of damages covered by the policy.” The Upper

Deck Co. v. Federal Ins. Co., 358 F.3d 608, 615–16 (9th Cir. 2004). “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.” Gunderson v. Fire Ins. Exch., 44 Cal. App. 4th

1106, 1114 (1995).

      Crazy Horse’s insurance policy contains an “assault or battery exclusion,”

which provides that the policy does not cover any bodily injury “[a]rising out of

assault or battery, or out of any act or omission in connection with the prevention

or suppression of an assault or battery.” It is also undisputed that Martinez’s

Complaint and Amended Complaint (Complaints) solely alleged that his injuries

arose from Crazy Horse’s employees’ wrongful acts of physical violence.

Although the factual allegations that Martinez actually asserted do not establish

any legal claim creating a possibility of coverage, the majority concludes that

                                          2
Burlington was obligated to defend Crazy Horse, because facts extrinsic to the

Complaints indicated that Martinez may have suffered additional injuries as a

result of falling from a stool. I disagree.

      Under California law, an insurer’s duty to defend is not triggered where the

underlying claims raise no potential for liability covered by the policy. Horace

Mann, 846 P.2d at 795. “[And] [t]he possibility of an amendment does not require

the insurer to speculate about any conceivable claim that a plaintiff might bring

against the insured . . .” Upper Deck, 358 F.3d at 615–16. For whatever reason,

Martinez’ Complaints did not include any allegations indicating that he fell from a

stool, and they solely alleged facts and theories of liability that the policy did not

cover. Under such circumstances, California law does not require an insurer to

provide coverage based on potential theories of liability that were not pleaded.

And, as “a determination that there is no duty to defend automatically means that

there is no duty to indemnify,” I would affirm the district court’s order, holding

that Burlington is not now liable to Martinez as a judgment creditor. Certain

Underwriters at Lloyd’s of London v. Superior Court, 16 P.3d 94, 104 (Cal. 2001)

(internal quotations and citations omitted).

      I respectfully dissent.




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