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Starr Indemnity & Liability Co. v. Monavie, Inc.

United States District Court, D. Utah

March 15, 2019

STARR INDEMNITY & LIABILITY COMPANY, Plaintiff,
v.
MONAVIE, INC. and MONAVIE, LLC, Defendants.

          MEMORANDUM DECISION AND ORDER GRANTING MOTION FOR SUMMARY JUDGMENT

          DAVID NUFFER, DISTRICT JUDGE

         Plaintiff Starr Indemnity & Liability Company (“Starr”) initiated this action for declaratory judgment against Defendants MonaVie, Inc. and MonaVie, LLC (collectively “MonaVie”), alleging that MonaVie's liability insurance policies with Starr exclude recovery for two pending class action lawsuits against MonaVie.[1] Starr moved for summary judgment on the grounds that coverage is barred under its policies by the (1) Prior Notice Exclusion; (2) Specific Event Exclusion; and (3) Anti-Trust Exclusion.[2] Starr further argues that punitive damages and other relief sought in the pending lawsuits is uninsurable by law and if any coverage is recoverable, it is limited to $1, 000, 000 under the prior litigation exclusions.[3] Finally, Starr asserts that any defense costs incurred should be repaid by MonaVie.[4] Andrew Harbut and Lisa Pontrelli (“Plaintiff Intervenors”) filed an opposition, [5] and Starr replied.[6] Based upon the Prior Notice Exclusion, the Motion for Summary Judgment is granted.

         Contents

         Background ..................................................................................................................................... 2

         Undisputed Facts ............................................................................................................................. 4

         The Policies ......................................................................................................................... 5

         Quixtar and Oliver Lawsuits ............................................................................................... 9

         Parker and Pontrelli Lawsuits .......................................................................................... 12

         Summary Judgement Standard ..................................................................................................... 17

         Discussion ..................................................................................................................................... 18

         The plain language of the Policies' Prior Notice Exclusion allows Starr to exclude coverage for Parker and Pontrelli based on related Wrongful Acts in Oliver ..... 19

         MonaVie is required to pay Starr for its defense costs ..................................................... 21

         Order…. . ....................................................................................................................................... 22

         BACKGROUND[7]

         Starr issued two successive liability policies-Resolute Portfolio for Private Companies Policy No. SISIFNL20071412 (“2012 Policy”) and Resolute Portfolio for Private Companies Policy No. SISIFNL20071413 (“2013 Policy”) (collectively, “Policies”)-to MonaVie.[8] The Policies each provide $10, 000, 000 in liability coverage, subject to the terms, conditions, and exclusions contained in the Policies.[9]

         Under the 2012 Policy, MonaVie reported Parker, et al. v. MonaVie, Inc., et al. (“Parker”) to Starr.[10] Parker is a putative class action brought by consumers of MonaVie's juice products, alleging that MonaVie and its distributors made false and misleading representations by falsely promoting the health benefits of its juices.[11] Under the 2013 Policy, MonaVie reported Pontrelli v. MonaVie, Inc., et al. (“Pontrelli”), [12] which is another putative class action complaint brought by consumers, alleging false advertising in connection with MonaVie's multilevel marketing scheme and false claims related to the health benefits of the juices and the benefits of becoming a MonaVie distributor.[13]

         Parker and Pontrelli were not the first lawsuits to be brought against MonaVie. Prior to the inception of the Policies, in 2008 and 2010 MonaVie was named as a defendant in two other cases. In Quixtar Inc. v. MonaVie, Inc., et al. (“Quixtar”), a competitor alleged false advertising and unfair trade practices against MonaVie based on the promotion of false medical benefits of its juice products.[14] In Oliver v. MonaVie, Inc., et al. (“Oliver”), consumers brought a class action against MonaVie alleging false and misleading advertising in connection with MonaVie's multilevel marketing scheme of its juices and claims that its juices prevent and treat illnesses.[15]

         Starr initiated this case when it filed its Complaint against MonaVie, alleging that coverage is not available under the Policies for the Parker and Pontrelli lawsuits.[16] Although MonaVie answered the Complaint, [17] it ultimately defaulted by failing to participate and defend itself in the proceedings.[18] Starr moved for default judgment against MonaVie.[19] Meanwhile, Plaintiff Intervenors, claimants in Parker and Pontrelli, sought to intervene to protect their interests in the potential insurance proceeds.[20] The motion to intervene was granted and the motion for default judgment was denied.[21] Starr now seeks summary judgment.

         UNDISPUTED FACTS[22]

         1. On or about May 23, 2014, Starr initiated this case when it filed the Complaint against MonaVie.[23]

         2. Starr seeks declaratory judgment that coverage is not available for two related lawsuits submitted to Starr for coverage by MonaVie.[24]

         3. The particular lawsuits Starr seeks to disclaim are Parker and Pontrelli.[25]

         4. Parker and Pontrelli arise out of claims that MonaVie engaged in a multilevel marketing scheme which made misrepresentations as to, inter alia, the purported health benefits of MonaVie beverages.[26]

         5. Parker and Pontrelli were not the first lawsuits against MonaVie. Quixtar and Oliver also involved similar claims.[27]

         The Policies

         6. On or about May 1, 2012, MonaVie executed a contract with Starr for liability insurance coverage for certain categories of claims (“2012 Policy”).[28]

         7. The covered “Policy Period” for the 2012 Policy was May 1, 2012, through May 1, 2013.[29]

         8. Under the 2012 Policy:

“Insurer” refers to Starr;[30]
“Insured” refers to MonaVie;[31] and
“Company” refers to MonaVie.[32]

         9. The 2012 Policy provides, in pertinent part, that:

[Starr] shall pay on behalf of the [MonaVie] the Loss (“Loss”) arising from a Claim (“Claim”) first made during [May 1, 2012 - May 1, 2013] (or Discovery Period, if applicable) against [MonaVie] for any Wrongful Act (“Wrongful Act”), and reported to [Starr] in accordance with the terms of this policy.[33]

         10. The 2012 Policy defines Claim as any:

(1) written demand for monetary, non-monetary or injunctive relief made against [MonaVie]; (2) judicial administrative or regulatory proceeding, whether civil or criminal, for any monetary, nonmonetary or injunctive relief commenced against [MonaVie], including any appeal therefore, which is commenced by: (i) service of a complaint or similar pleading . . . .”[34]

         11. The 2012 Policy defines Loss as:

(1) damages, settlements or judgments; (2) pre-judgment or post-judgment interest; (3) costs or fees awarded in favor of the claimant; (4) punitive, exemplary or the multiplied portion of any multiple damages awards, but only to the extent that such damages are insurable under the applicable law most favorable to the insurability of such damages; . . . and (6) Defense Costs.[35]

         12. The 2012 Policy excludes from the definition of Loss:

(i) any amounts for which [MonaVie] is not legally liable; (ii) any amounts which are without legal recourse to [MonaVie]; . . . (iv) fines and penalties except as provided for in [the definition of Loss above]; (v) matters which may be deemed uninsurable under applicable law; or (vi) any amounts paid or incurred in complying with a judgment or settlement for non-monetary or injunctive relief, but solely as respects [MonaVie].[36]

         13. Wrongful Acts are defined (in pertinent part) as “any actual or alleged breach of duty, neglect, error, misstatement, misleading statement, omission, or act by [MonaVie].”[37]

         14. Defense Costs are defined as:

(1) reasonable and necessary fees, costs, charges or expenses resulting from the investigation, defense or appeal of a Claim;
(2) premium for an appeal, attachment or similar bond, but without any obligation to apply for and obtain such bond;
(3) reasonable and necessary fees, costs, charges or expenses incurred in response to any extradition or similar proceeding brought against [MonaVie] in connection with a Claim; and,
(4) any fees, costs, charges or expenses incurred by [MonaVie] at the specific request of [Starr] to assist [Starr] in the investigation, defense or appeal of a Claim.[38]

         15. On or about May 1, 2013, MonaVie executed a second contract with Starr for liability insurance coverage for certain categories of claims (“2013 Policy”).[39]

         16. The Policy Period for the 2013 Policy was May 1, 2013, through June 30, 2014.[40]

         17. The terms Insurer, Insured, Company, Loss, Claim, Wrongful Acts, and Defense Costs are defined identically in the 2012 and 2013 Policies, notwithstanding their different Policy Periods.[41]

         18. The Policies provide that “[i]n the event and to the extent that [MonaVie] shall not be entitled to a payment of Defense Costs under the terms and conditions of this policy, such payments by [Starr] shall be repaid to [Starr] by [MonaVie], severally according to their respective interests.”[42]

         19. Both Policies also exclude from coverage any Loss in connection with any Claim fitting certain exclusions.[43]

         20. Specifically, the Policies include a Prior Litigation Exclusion, which excludes any Losses in connection with any Claim:

alleging, arising out of, based upon or attributable to, as of the Pending or Prior Date set forth in Item 6 of the Declarations as respects this Coverage Section, any pending or prior: (1) litigation; or (2) administrative or regulatory proceeding or investigation of which [MonaVie] had notice, including any Claim alleging or derived from the same or essentially the same facts, or the same or related Wrongful Act(s), as alleged in such pending or prior litigation or administrative or regulatory proceeding or investigation[.][44]

         21. The Policies also include a Prior Notice Exclusion, that excludes any Losses in connection with any Claim:

alleging, arising out of, based upon, or attributable to the same or essentially the same facts alleged, or to the same or related Wrongful Act(s) alleged or contained in any Claim which has been reported, or in any circumstances of which notice has been given, before the inception date of this policy as set forth in Item 2 of the Declarations, under any policy, whether excess or underlying, of which this policy is a renewal or replacement or which it may succeed in time[.][45]

         22. The Prior Notice and Prior Litigation Exclusions in the 2012 Policy are set forth identically in the 2013 Policy, notwithstanding their different Policy Periods.[46]

         23. The 2013 Policy also contains two additional exclusions: (1) Anti-Trust Exclusion; and (2) Specific Event Exclusion.[47]

         24. The Anti-Trust Exclusion provides, in pertinent part:

This policy shall not cover any Loss in connection with any Claim alleging, arising out of, based upon or attributable to any violation of any law, whether statutory, regulatory or common, as respects any of the following: . . . unfair trade practices . . . provided, however, that this exclusion shall apply only to [MonaVie].[48]

         25. The Specific Event Exclusion provides, in relevant part:

This policy shall not cover any Loss in connection with . . . any Claim alleging, arising out of, based upon, or attributable to any act, circumstance, or situation that is the same or substantially similar to those alleged or set forth in any Event.[49]

         26. The Specific Event Exclusion defines Event as:

Matters referenced in Note K.4., K.5., K.6., K.6. of the Consolidated Financial Statements and Report of Independent Certified Public Accountants Mona Vie, Inc. and Subsidiaries for Fiscal Year End December 31, 2011 and December 31, 2010 (dated June 27, 2012).[50]

         27. Note K.6. of the Financial Statements and Report refers to Oliver.[51]

         Quixtar and Oliver Lawsuits

         28. Quixtar was filed on or about March 18, 2008 - far in advance of the Policies.[52]

         29. MonaVie reported Quixtar to its then insurance carrier, Zurich.[53]

         30. The Quixtar plaintiffs alleged that “MonaVie and its distributors, among other things, falsely advertise the health benefits of its products . . . .”[54]

         31. The Quixtar plaintiffs further alleged that “MonaVie's products are sold through a multilevel marketing distribution system . . . .”[55]

         32. Oliver was filed on December 16, 2010.[56]

         33. MonaVie tendered Oliver to its insurance carrier at the time, Allied World.[57]

         34. The Oliver Class Action Complaint (“Oliver Complaint”) identified its prospective class as follows:

All individual residents of the state of Arkansas who purchased MonaVie Products before January 1, 2011. Excluded from the Class are: (1) Individuals who, at any point, have served as a Distributor for [MonaVie]; (2) [MonaVie] and all directors, officers, employees, partners, principals, shareholders and agents of [MonaVie]; (3) Persons or entities who timely opt-out of this proceeding using the correct protocol for “opting-out” that will be formally established by this Court; (4) Any and all Federal, State and/or Local Governments, including, but not limited to their Departments, Agencies, Divisions, Bureaus, Boards, Sections, Groups, Councils and/or any other subdivision, and any claim that such governmental entities may have directly or indirectly; (5) Any currently-sitting Arkansas State Court Judge or Justice, and the current spouse and all other persons within the third-degree of consanguinity to such judge/justice.[58]

         35. The Oliver Complaint identified 16 questions of law and fact common to the class as follows:[59]

a. “Have Defendants engaged in an overarching scheme between themselves and their Distributors to wrongfully profit by creating or tacitly approving false and/or misleading advertisements and statements about the health benefits of Mona[Vie] Products?”
b. “Was the purpose of the Mona[Vie] Scheme to increase sales of Mona[Vie] Products and thus the profits of the Scheme members?”
c. “Ha[s] [MonaVie] created false or misleading advertisements and/or statements about Mona[Vie] Products which were made public?”
d. “Ha[s] Mona[Vies'] Distributors created false or misleading advertisements and/or statements about Mona[Vie] Products which were made public?”
e. “Ha[s] [MonaVie] ever been aware of the production and/or publication of false or misleading advertisements or statements about Mona[Vie] Products?”
f. “Ha[s] Mona[Vie] affirmatively approved false or misleading advertisements and/or statements about ...

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