Ulta Salon, Cosmetics & Fragrance, Inc. v. Travelers Prop. & Cas. Co. of Am.(Cal. Ct. App. July 11, 2011)
A California appeals court recently held that an insurer was not obligated to defend or indemnify its insured against a claim that the insured violated Proposition 65, the California Safe Drinking Water and Toxic Enforcement Act of 1986. The court based its ruling on the complaint’s failure to allege “bodily injury” and rejected the notion that an insurer’s duty to defend can be triggered by allegations that the insured’s conduct could potentially lead to bodily injury.
Ulta Salon, a nail products manufacturer, was sued by Christine Deubler, “on behalf of the general public,” for civil penalties and injunctive relief for alleged violations of California’s Proposition 65. The complaint alleged that Ulta’s nail products contain DBP, a reproductive toxin. Per Proposition 65, businesses are required “to warn individuals about carcinogens and reproductive toxins to which they are exposed through consumer transactions, employment, and the environment.” The complaint alleged that Ulta knew its nail products contained DBP, that consumers are exposed to DBP through the intended and foreseeable use of the nail products, and that Ulta failed to give consumers a clear and reasonable warning regarding the reproductive toxicity caused by exposure to DBP.
Ulta tendered its defense and indemnity to Travelers, its commercial general liability carrier. Travelers denied coverage, after which Ulta filed suit seeking a declaration that Travelers was obligated to defend and indemnify it under the policy. Travelers demurred to the first complaint, contending that it had no duty to defend or indemnify because the Deubler lawsuit did not allege bodily injury or property damage and sought only civil penalties under Proposition 65. The trial court sustained Travelers’ demurrer to the first amended complaint without leave to amend. Ulta appealed.
On appeal, Ulta argued that Travelers’ duty to defend was triggered by the underlying complaint which allegedly contemplated bodily injury insofar as it repeatedly emphasized the toxic nature of products manufactured by Ulta. The court, however, disagreed. The court held that an insured may not trigger the duty to defend by speculating about extraneous facts and ways in which the claimant might amend his or her complaint at some future date. A corollary to this rule, the court noted, is that the insured may not speculate about unpled claims to manufacture coverage.
For a copy of the decision, click here