Ninth Circuit rejects Sony's attempts to find coverage for Playstation 2 warranty claims
In Sony Computer Entertainment America, Inc. v. American Home Assurance Company et al. (9th Cir. July 15, 2008), the Ninth Circuit recently affirmed a district court’s denial of coverage for claims arising from the alleged malfunction of Sony’s Playstation 2, one of the world’s most popular gaming consoles.
Facing breach of warranty, negligent misrepresentation, and related consumer protection claims by disgruntled purchasers, Sony turned to its media liability and general commercial liability insurers for defense and indemnity. Sony filed suit when the insurers denied coverage, but the district court granted summary judgment in favor of both insurers.
As to Sony’s media liability policy, the Ninth Circuit concluded that the policy was not designed to provide coverage for alleged misrepresentations stemming from an alleged product defect. In reaching this result, the court rejected Sony’s attempts to find coverage by focusing upon the plain meaning of isolated phrases rather than evaluating the policy as a whole. The court also rejected Sony’s argument that the insurer at least had a duty to defend based on policy exclusions because exclusions “cannot expand the basic coverage granted in the insuring agreement.”
As for the general liability policy, the Ninth Circuit distinguished the Playstation 2 plaintiffs’ claims of misrepresentation from the covered occurrences of “loss of use of tangible property” or “physical injury to property.” When Sony pointed out that the Playstation 2 plaintiffs could also have filed claims for loss of use and physical injury to property, the Ninth Circuit refused to allow the insured to wander so far beyond the terms of the written complaint to support the claim of the coverage. In so doing, the Ninth Circuit confirmed that an insurer is generally entitled to rely on the face of the underlying complaint when assessing its obligations, particularly its obligation to defend.
