Nautilus Ins. Co. v. Mingione

NAUTILUS INSURANCE COMPANY, Plaintiff and Appellant, v. MONIQUE MINGIONE, Defendant and Respondent.

G055914

COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION THREE

May 31, 2019

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super. Ct. No. 30-2013-00691814)

OPINION

Appeal from a judgment of the Superior Court of Orange County, Thierry Patrick Colaw, Judge. Affirmed.

Selman Breitman, Alan B. Yuter and Rachel E. Hobbs for Plaintiff and Appellant.

Lakeshore Law Center and Jeffrey N. Wilens for Defendant and Respondent.

* * * Plaintiff and appellant Nautilus Insurance Company (Nautilus) appeals from a judgment in which the court found coverage under certain insurance policies it issued to its insured for claims made by defendant and respondent Monique Mingione (Mingione). In a class action, Mingione alleged the insured, not a party to this appeal, violated Penal Code section 632 (all further statutory references are to the Penal Code unless otherwise stated) by improperly recording a private interview without her knowledge and publishing it to third parties, both simultaneously and later. She sued for damages under section 637.2.

Nautilus contends the alleged wrongful acts were excluded from coverage under the criminal acts exclusion; section 637.2 provides only for recovery of penalties and not damages and thus the amounts were not covered; and the violation of privacy by the insured did not constitute a publication under the policy and thus was not covered.

We disagree with all of these assertions and affirm the judgment.

FACTS AND PROCEDURAL HISTORY

In 2012 Mingione filed the first amended complaint (FAC) in a class action against Events and Adventures California, Inc. and two other defendants (collectively Events) for violation of section 632, for invasion of privacy, and negligence, titled Mingione v. Events and Adventures California, Inc. (Super. Ct. Orange County, No. 30-2102-00547490) (underlying action).

Events is a "membership club designed to help singles meet while experiencing adventures." The application form potential members were required to complete stated: "I agree and understand that in order to maintain club standards, this club does screen via an interview process and is selective to whom club membership is offered. I also understand that details regarding membership fees and the club are not discussed until it has been determined that I in fact do qualify for membership. . . . Any information on this questionnaire is confidential and is used and kept by [Events] only." Above the signature line the following appeared: "I acknowledge that interviews aresometimes subject to monitoring to ensure customer service and the accuracy of our representatives' statements."

After Mingione signed the questionnaire she participated in an interview with an Events employee. It was conducted in a private room with the door closed. It was not possible for someone near the room to hear the conversation, and there were no visible recording devices in the room. Mingione did not agree to have her conversation recorded or have a third party listen in and reasonably believed it was private. After Mingione declined to join Events, the interviewer called her later that evening and mentioned he had watched her video. When Mingione asked what he meant, the interviewer explained the interview had been recorded. An Events representative told Mingione the questionnaire had disclosed interviews could be recorded and explained only the audio portion was recorded.

The FAC alleged the recording of the interview violated section 632.¹ It further alleged that pursuant to section 637.2 a party may bring a civil cause of action for violation of section 632 and recover the greater of $5,000 or treble the amount of actual damages, if any. Additionally, the FAC pleaded section 637.2, subdivision (c) provided a party could recover even without suffering or being threatened with actual damages. Mingione and the class members sought $5,000 each.

Nautilus had issued two essentially identical commercial general liability (CGL) policies (collectively Policy) to Events covering the period January 2011 to January 2013. It provided coverage for damages resulting from personal and advertisinginjuries, including "[o]ral or written publication, in any manner, of material that violates a person's right of privacy." The Policy excluded "'[p]ersonal and advertising injury' arising out of a criminal act committed by or at the direction of the insured."

Nautilus defended the underlying action under a reservation of rights. It also filed this declaratory relief action against Mingione and Events seeking a declaration it did not owe any coverage because the FAC in the underlying action did not allege property damage or bodily injury or any of the enumerated advertising injuries. It also alleged there was no coverage because the underlying action alleged criminal conduct and sought penalties under section 632.

Nautilus, Mingione, and Events settled the underlying action (Settlement Agreement) and judgment was entered. Events specifically denied any wrongdoing, including denying it had illegally recorded any interviews. In addition, Events maintained it had "substantial defenses." The Settlement Agreement specifically provided it was not an admission of liability by Events. The order approving the settlement, which also served as the judgment, contained the same term.

Mingione agreed not to execute on any Events assets except the Policy. Nautilus agreed to pay $1 million into a common fund and litigate five enumerated coverage issues with Mingione in the declaratory relief action. If Mingione prevailed on all five issues, Nautilus would pay the proceeds of the fund. The five issues were: 1) Whether the $5,000 or treble actual damages provided for under section 637.2, subdivision (a)(1) and (2) were excluded from coverage under the Policy; 2) whether the claims under section 632 fall within the criminal acts exclusion in the Policy; 3) whether the amounts sought did not constitute damages as provided in the Policy; 4) whether the viewing of the recordings by Events personnel did not constitute a publication as provided in the Policy; and 5) whether the prior publication exclusion applied.²According to the Settlement Agreement, Mingione had the burden to show her claims fell "within the insuring grant or to prove waiver." Nautilus had the burden to prove one of the exclusions in the Policy applied.

The parties stipulated to the facts, including Event's conduct in recording the interviews and the relevant provisions of the Policy. This included the fact the recordings "were distributed internally to and viewed by other company officers and employees (who were not present at the interviews), or to an by their counsel, either in real time or in subsequent viewings, but were not distributed to or viewed by the general public." There was no stipulation as to whether Events violated a criminal law. The parties also stipulated that had the underlying action gone to trial Mingione and the class would have sought the greater of three times actual damages or $5,000 per recording provided by section 637.2, subdivision (a)(1) and (2). The parties further stipulated to evidence, including the Policy, declarations and depositions of some of the class members, and the Settlement Agreement in the underlying action.

After a bench trial the court issued a tentative decision, finding in favor of Mingione on all five issues. As to the first issue, i.e., whether the $5,000 minimum damages or treble damages were excluded under the Policy, the court disagreed with Nautilus's argument the amounts were "purely penal" (underscoring omitted) and not compensatory. The court found Nautilus's interpretation was inconsistent with the plain language of the statute and particularly the use of the word damages in section 637.2. The court further noted section 637.2 did not contain the term "penalty." Further, section 637.2, subdivision (a) requires there be injury as a condition to an award of compensation. "This implies harm for which the law in California compensates with money damages."

The court also ruled the claims in the underlying action were civil and not excluded by the Policy's criminal acts exclusion. Although section 632 is a criminal statute, no criminal charges were filed, the underlying action did not seek relief under thatsection, there was no finding of liability or guilt against Events, nor did the parties stipulate to an offense under section 632. The court pointed out there were no California cases supporting Nautilus's argument and the out-of-state cases were inapt.

The court also found the amounts sought by Mingione in the underlying action were damages or harm as described in the Policy. "Damages" as used in insurance policies must be given its ordinary meaning. A reasonable insured would understand the language in the Policy to cover the claims made under section 637.2. The court observed no case had held amounts award under section 637.2 were not damages for purposes of insurance coverage.

The tentative decision further found, based on the stipulated facts, that for purposes of the Policy, there was publication when the interview was distributed internally at Events and viewed. It referred to Nautilus's contention to the contrary as "puzzling and unmeritorious." The court explained there needed to be "publication of some material," "in any manner," in violation of the right of privacy. (Italics omitted.) It found the interview occurred and was published when other persons, not present, listened to it. It further found Nautilus did "not dispute that the...