by Chris Graham and Joseph Kelly

Screen Actors Guild Inc. v. Federal Ins. Co., Case No. CV 11-07123 (C.D. Cal. July 11, 2013)

Ken Osmond — the actor who played Eddie Haskell in “Leave it to Beaver” — filed a class action suit in September 2007 against SAG claiming that it collected $8 million in foreign royalties but didn’t distribute the royalties to its members as required by a collective bargaining agreement.

Federal agreed to defend, but not indemnify, SAG. SAG ultimately settled, agreeing to a payment plan for royalties due, a $15,000 “enhancement” payment for lead plaintiff Osmond, and $315,000 for class counsel’s fees. SAG sued Federal when it wouldn’t contribute for the enhancement payment or class counsel’s fees.

The District Court granted Federal summary judgment stating:

“[I]f a contracting party fails to pay amounts due under a lawful contract and is sued for that failure to pay, it cannot then obtain a windfall by having by having its payments covered by an insurance policy covering only ‘wrongful acts.'”

Citing to Health Net, Inc. v. RLI Ins. Co., 206 Cal. App. 4th 232, 141 Cal. Rptr. 3d 649 (2012), the District Court concluded:

“[I]f the entire action alleges no covered wrongful act under the policy, coverage cannot be bootstrapped based solely on a claim of attorneys fees.”