General Star Indemnity Company v. Toy Quest Ltd.

Background

General Star brought a declaratory-judgment action against Toy Quest Ltd., Chan Ming Yiu, also known as Samson Chan, Chan Siu Lun, also known as Alan Chan, Liu Yi Man, also known as Lisa Liu, and ASI, Inc. General Star had issued Toy Quest Defendants a primary commercial general liability policy and an excess liability policy. General Star had been defending Toy Quest Defendants under a reservation of rights in ASI, Inc. v. Aquawood, LLC, No. 19-763, which included an abuse-of-process claim.

The parties agreed that the only claim at issue in this insurance case was abuse of process. The policy’s definition of “Personal and Advertising Injury” listed several offenses, including malicious prosecution, but did not list abuse of process. General Star sought a declaration that the claim did not trigger its duty to defend and that coverage was also barred by policy exclusions.

Procedural History and Standard

Toy Quest Defendants previously moved to dismiss, asking the court to abstain from deciding the case; the court denied that motion. After the pleadings closed, General Star moved for judgment on the pleadings under Rule 12(c) of the Federal Rules of Civil Procedure. The court applies the same standard used for a motion to dismiss for failure to state a claim: judgment is appropriate when there is no dispute about any material facts and the moving party is entitled to judgment as a matter of law.

After fact discovery closed, General Star also moved for summary judgment, and ASI filed two motions to compel. ASI also asked the court to defer ruling until it could conduct additional discovery. The court found that additional discovery was unnecessary and denied that request.

Choice of Law

General Star and Toy Quest Defendants argued that Minnesota law applied; ASI argued for California law. The policies contained no choice-of-law provision. The court concluded that California and Minnesota law did not produce a conflict because it predicted that both states’ highest courts would interpret “malicious prosecution” in this type of insurance policy as unambiguously excluding abuse of process.

The court also concluded that Minnesota law would apply even if the states’ laws conflicted. Applying Minnesota’s significant-contacts test, the court found that Minnesota had the strongest connections to the dispute. The underlying action and allegations involved conduct in Minnesota, Tennessee, and New Jersey; the judgment that ASI alleged the defendants were trying to avoid paying was issued in Minnesota; and the action General Star was being asked to defend was located in Minnesota. The court therefore applied Minnesota law.

Policy Coverage

Under Minnesota law, an insurer’s duty to defend depends on the insurance contract and the allegations in the underlying complaint. The duty is triggered when any part of the underlying claims is arguably within the policy’s coverage.

The court found that abuse of process and malicious prosecution are similar but distinct torts. Because the policy specifically listed malicious prosecution and omitted abuse of process, the court held that a reasonable insured would not understand the policy to cover the additional, unstated tort. The court therefore held that “malicious prosecution” was clear and unambiguous and meant only malicious prosecution.

Because abuse of process was not even arguably covered by the primary policy, the policy did not trigger General Star’s duty to defend Toy Quest Defendants. The court did not address the policy exclusions because it determined that coverage was never triggered. It also did not determine whether General Star had a duty to indemnify, explaining that the duty to defend is broader than the duty to indemnify.

Disposition

The court granted General Star’s motion for judgment on the pleadings. It denied General Star’s motion for summary judgment as moot and denied ASI’s two motions to compel as moot. The court ordered that judgment be entered accordingly.