Metropolitan News-Enterprise

 

Wednesday, October 5, 2022

 

Page 1

 

Court of Appeal:

Playboy Is Not Liable to Insurer for $5 Million Pay-Out

Request for Meeting to Avert Litigation Did Not Constitute ‘Claim’ for Purpose of Claims-Made Policy—Opinion

 

By a MetNews Staff Writer

 

Playboy Enterprises need not reimburse an insurer for the nearly $5 million it paid out under a reservation of rights to a company claiming that the insured wrongfully backed out of a deal to license use of its trade name on cigarettes and beer in China, the Court of Appeal for this district held yesterday, rejecting the contention that a claim had been made to the former magazine publishing company before the policy went into effect.

A May 10, 2016 email from businessman Elliott Friedman to Playboy’s then-general counsel, Rachel Sagan, seeking a meeting to avoid litigation did not constitute a “claim,” Div. One said in an unpublished opinion by Presiding Justice Frances Rothschild.

Playboy, in its May 13 response to the email, described Friedman’s email and other communications as “litigationoriented messages” and insisted that the parties’ respective attorneys be included at any meeting. However, that response was not admitted into evidence and, Rothschild said in a footnote, even if it had been, the result would not be different.

 

Although Playboy Magazine ceased publication in 2020, Playboy Enterprises is thriving, marketing products on its website and licensing its name, rabbit-head logo, and images for use on a wide range of products—such as cigars (above)—generating, it claims, “more than $3 billion in global sales in more than 180 countries.” A deal that went sour entailed the licensing of its trade name for use on cigarettes and beer to be sold in China, and the Court of Appeal for this district decided yesterday that Playboy need not fork over to its insurer the nearly $5 million it paid to the would-be licensee.

 

Policy Period

The policy period for coverage by defendant Indian Harbor Insurance Company was Nov. 30, 2016 to July 1, 2018. Playboy advised the insurance company in 2017 of demand letters from an attorney representing the companies that had hoped to market Playboy beer and Playboy cigarettes.

If the May 10, 2016 email constituted a “claim” served upon Playboy—which, under the claims-made policy, includes a “written demand for monetary damages, services, or injunctive or other non-monetary relief”—it would have pre-dated the policy and there would be no coverage.

Playboy brought an action against Indian Harbor for a determination that coverage did exist, and the insurer cross-complained seeking reimbursement of the $4,840,259.97 it paid toward the settlement.

Takasugi’s Ruling

Los Angeles Superior Court Judge Jon R. Takasugi, in denying a motion by Indian Harbor for summary adjudication, found that “the only thing Friedman requested was a meeting, and Friedman explicitly stated that he preferred to sit down ‘alone’ without the presence of attorneys.”

He added:

“While Friedman called the idea of a trial ‘interesting,’ he did not request ‘monetary damages, services, or injunctive or other non-monetary relief,’ nor did he insist on any course of action.

“Moreover, while the email does not foreclose the possibility of litigation, Friedman’s email...does not express a clear intent to sue if an appropriate settlement cannot be reached.”

Indian Harbor dismissed claims not covered by the summary adjudication motion, without prejudice, and a stipulated judgment was entered, from which the insurer appealed.

Rothschild’s Opinion

Rothschild said in her opinion affirming the judgment:

“The subject email does not contain a ‘demand.’ Rather, it contains a description of Friedman’s ‘grievance’ and an ‘expression of [Friedman’s] dissatisfaction’ with the behavior of certain Playboy executives—each of which…is “not a demand.”… The subject email does go on to make a request based on this grievance; specifically, it suggests, ‘Let[’]s just the two of us meet for now.’ But it neither insists on any course of action, nor expresses an entitlement to any course of action.”

Friedman’s email also said that while “a billion dollar damages trial is interesting, challenging and should be successful, I would rather focus at this point of my life on settling the issues and just getting compensated for my investment (cash and time) in Playboy Breweries and Playboy Lifestyle [cigarettes].”

No ‘Demand’

The presiding justice said that language did not constitute a “demand” for compensation “because it does not request the compensation referenced, let alone ‘insist[ ]’ on it or claim Playboy owes it to Friedman as a matter of right.” But even if a “demand” were inferred, she continued, it would not be a demand of the sort delineated in the policy, that is, for “for monetary damages, services, or injunctive or other non-monetary relief.”

She remarked:

“A meeting is obviously not monetary damages.”

Indian Harbor asserted that the email sought a settlement discussion to avoid litigation, thus constituting an implied demand. Rothschild responded that “opaque reference to litigation—specifically, how Friedman does not want to pursue it, even though he believes he would prevail” does not amount to “an indirect request for settlement compensation.”

May 13 Email

Indian Harbor argued on appeal, in a footnote, that Takasugi erred in excluding, as evidence, Sagan’s May 13 email in which she construed Friedman’s May email as “litigationoriented.” Rothschild said, in a footnote:

“This is insufficient to raise an appellate challenge to the court’s exclusion of the document….[F]ootnoted arguments not identified in a separate heading  are forfeited….Even if Indian Harbor had sufficiently  raised the issue, however, and even assuming the court incorrectly  excluded Sagan’s email, considering this email would not affect our  analysis or disposition of the instant appeal….

The case is Playboy Enterprises v. Indian Harbor Insurance, B315763.

Attorneys on appeal were Randolph P. Sinnott of the downtown Los Angeles firm of Sinnott, Puebla, Campagne & Curet and for Indian Harbor and Amber D. Henry and Zachary Elsea of the Beverly Hills firm of Eisner, LLP for Playboy.

 

Copyright 2022, Metropolitan News Company