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HS Servs. v. Nationwide Mut. Ins. Co.

HS Servs. v. Nationwide Mut. Ins. Co.

United States Court of Appeals for the Ninth Circuit

December 13, 1996, Argued, Submitted, Pasadena, California ; March 31, 1997, Filed

No. 95-55489

Opinion

 [*643]  OPINION

TASHIMA, Circuit Judge:

This is an insurance coverage dispute. Plaintiff HS Services, Inc., formerly known as Cade-Grayson Company (and referred to herein as Cade-Grayson) seeks indemnification for a judgment against it and legal costs incurred in defending against a defamation action which it contends was covered under its commercial general liability (CGL) policy, issued by defendant Nationwide Mutual Insurance Company (Nationwide). The district court granted summary judgment to Nationwide on the basis of an exclusion in the policy. We reverse.

FACTS AND PROCEDURAL BACKGROUND

In December, 1991, Steven Cade (Cade) was fired as [**2]  president of Cade-Grayson for altering inspection certificates and substituting asparagus powder for shrimp in dried  [*644]  food. In March, 1992, Cade sued Cade-Grayson for wrongful termination.

About the same time, in March, Cade-Grayson learned that Cade (who had formed Seawind, a competing company in the dehydrated food business) had told its (Cade-Grayson's) vendors that Cade-Grayson was experiencing financial difficulty and was a candidate for bankruptcy. To counteract Cade's statements in the marketplace, a Cade-Grayson manager circulated a memo informing its sales representatives on how to respond to inquiries regarding the company's financial status:

I would recommend the following response concerning Cade-Grayson and Steve Cade's status.

1. Cade-Grayson is financially sound and values your business.

2. Steve Cade was terminated by Cade-Grayson Company for acts involving dishonesty.

3. We cannot provide further details because the company is in litigation with Mr. Cade and our lawyers advise us not to go into specifics at this time.

A letter repeating the substance of the memo was also sent to food brokers who acted as manufacturer's representative for Cade-Grayson.

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109 F.3d 642 *; 1997 U.S. App. LEXIS 6063 **; 135 Lab. Cas. (CCH) P58,315; 97 Cal. Daily Op. Service 2363; 12 I.E.R. Cas. (BNA) 1167; 97 Daily Journal DAR 4253

HS SERVICES, INC., a California corporation, Plaintiff-Appellant, v. NATIONWIDE MUTUAL INSURANCE COMPANY, an Ohio corporation, Defendant-Appellee.

Prior History:  [**1]  Appeal from the United States District Court for the Southern District of California. D.C. No. CV-94-0293 IEG. Irma E. Gonzalez, District Judge, Presiding.

Disposition: REVERSED and REMANDED.

CORE TERMS

termination, defamation, employment-related, coverage, insured, personal injury, practices, remarks, defamatory, invasion of privacy, district court, marketplace, proximately, omissions

Civil Procedure, Appeals, Standards of Review, De Novo Review, Summary Judgment Review, General Overview, Standards of Review, Summary Judgment, Entitlement as Matter of Law, Insurance Law, Claim, Contract & Practice Issues, Policy Interpretation, Judicial Review, Commercial General Liability Insurance, Exclusions, Contractual Liabilities, Exclusions, Contracts Law, Contract Interpretation, Ambiguities & Contra Proferentem, Ambiguous Terms, Construction Against Insurers, Defenses, Ambiguities & Mistakes, Reasonable Expectations