Court of Appeal Revives Doors Insurance Lawsuit

Wednesday, March 26, 2008

Page 3

Court of Appeal Revives Doors Insurance Lawsuit

By STEVEN M. ELLIS, Staff Writer

The Ninth U.S. Circuit Court of Appeals yesterday reinstated an action by the former keyboardist for the band The Doors against his insurer for refusing to defend him in an action by the band’s former drummer over use of the band’s name.

In an opinion by Judge N. Randy Smith, the court held that U.S. District Judge Manual L. Real of the Central District of California erred when he dismissed Raymond Manzarek’s action against St. Paul Fire & Marine Insurance Company over the company’s denial of coverage in a 2003 suit against Manzarek by drummer John Densmore and the heirs of vocalist Jim Morrison because Manzarek’s complaint raised at least the potential for coverage under the operative insurance policies.

Manzarek, who founded the band along with Densmore, Morrison, and guitarist Robert Krieger in 1965, had sought coverage when Densmore and Morrison’s heirs brought suit against him and his company, Doors Touring Inc., after he and Krieger announced their intention to tour internationally as a supergroup with Ian Astbury of the Cult and Stewart Copeland of the Police under the name “The Doors of the 21st Century.”

Densmore and Morrison’s heirs—who included both Morrison’s and his late wife Pamela Courson’s parents—contended that Manzarek had improperly used The Doors’ logo to market products and merchandise in connection with the new group based on an agreement the surviving bandmembers had entered into after Morrison’s 1971 death requiring the unanimous agreement of all three, plus Morrison’s estate, for any use of the band’s name or logo.

Densmore also contended that Manzarek had caused him to suffer economic damages and damage to his reputation and stature by leading people to believe that he was not “an integral and respected part of the band,” and could easily “be replaced by another drummer.”

Manzarek, who was covered by St. Paul under two commercial general liability policies that insured against “bodily injury,” “property damage,” “personal injury,” and “advertising injury,” requested a defense to the action.

However, the insurer denied coverage based on a “field of entertainment” endorsement in each policy which limited coverage with respect to the “creation, production, publication, distribution, exploitation, exhibition, advertising and publicizing of product or material in any and all media such as motion pictures of any kind and character, television programs, commercials or industrial or educational or training films, phonograph records, audio or video tapes, CDs or CD ROMs, computer on-line services or internet or Web site pages, cassettes or discs, electrical transcriptions, music in sheet or other form, live performance, books or other publications.”

Manzarek defended the matter at trial, where a jury found him liable on some of the claims, but awarded no damages.

Having incurred defense fees and costs exceeding $3 million, Manzarek filed a complaint against St. Paul in the Los Angeles Superior Court alleging breach of contract and the implied covenant of good faith and fair dealing.

St. Paul removed the action to federal court, and then filed a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).

Real, concluding that the endorsement was “conspicuous, plain, clear, and unambiguous,” held that St. Paul owed Manzarek no duty to defend or indemnify the claims in the underlying lawsuits. He further held that that amendment by Manzarek “would be futile because plaintiffs would be unable to allege facts that would alter these strictly legal determinations,” and dismissed the action with prejudice.

However, on appeal, Smith wrote that Real had erred in both respects.

Opining that the underlying complaints raised “at least the potential for coverage under the operative insurance policies” under California law, Smith wrote that the “fundamental problem with the district court’s decision is that it fails to apply the language of the [endorsement] to the factual allegations contained in the complaints filed in the” underlying lawsuits.

Using an example raised by St. Paul, Smith noted that the endorsement “would not exclude advertising injury coverage if, for example, Manzarek and DTI began distributing “The Door’s Own” line of salad dressing…because Manzarek and DTI would not necessarily publicize, distribute, exploit, exhibit, or advertise in media such as motion pictures, etc.,” and pointed out that Densmore and Morrison’s heirs’ lawsuits were silent about what type of products Manzarek and DTI had produced and marketed.

“For all St. Paul knew when it denied coverage,” Smith wrote, “the products marketed by Manzarek and DTI included guitars, t-shirts, and perhaps (although we realize it is not likely) salad dressing bottles with The Doors logo and/or Morrison’s likeness affixed to them. These allegations raised a potential for coverage under the Policies and, for that reason, the district court erred by summarily dismissing Manzarek’s and DTI’s breach of contract claim.”

Smith also concluded that the district court erred by dismissing the breach of contract claim as to the “bodily injury” portion of the policies because Densmore’s allegations of damage to his reputation and stature were “sufficient to raise the potential of an award of mental anguish or emotional distress damages,” and wrote that Real’s conclusion that the endorsement “was conspicuous, plain and clear,” was error because the record was silent as to when St. Paul actually delivered a copy of the policy to him.

“It should go without saying that an insured cannot be deemed to reasonably understand the terms of a policy he or she has not seen or fully comprehend the exclusionary language of a policy that has not yet been issued,” he wrote.

Opining that Real had erred in not allowing Manzarek and DTI the opportunity to amend their complaint because “nothing in the record justified the district court’s decision to enter dismissal with prejudice” and because Real “did not even consider the viability of any potential amendments to the complaint before dismissing the complaint with prejudice,” Smith wrote that reversal of the decision and remand for further proceedings were required.

Judges Alfred T. Goodwin and Betty B. Fletcher joined Smith in his opinion.

The case is Manzarek v. St. Paul Fire & Marine Insurance Company, No. 06-55936.