When it comes to litigation over “claims made” policies, two issues get the vast majority of the attention – what is a “claim” and when was it made?  And often times these issues overlap.

That’s what happened in Playboy Enterprises v. Indian Harbor Ins. Co., No. B315763 (Ct. App. Calif. Oct. 4, 2022).  Elliott Friedman had licensing deals with Playboy to sell Playboy-branded beer and Playboy-branded cigarettes.  The deals soured.  Friedman sent some lengthy emails to Playboy’s general counsel to address the situation and express his anger about it. 

One of the emails [May 10, 2016] is the focus of the case.  Thus, it is necessary to set it out verbatim:

“Hi Rachel: [¶] I agree that all business has potential risks. [¶] Unfortunately, the inexcusable actions of Michael McNabb and Matt Nordby while working as senior executives at [Playboy], killed two businesses which were well underway and widely acknowledged to be extremely valuable. Their negligent behavior caused significant damage to [Playboy] but also to myself. [¶] I spoke with my long time lawyer, Robert O’Brien (Larsonobrienlaw.com), and he suggests you and I sit down alone to see if we can come to a meeting of the minds. While working with Robert is great, and a billion dollar damages trial is interesting, challenging and should be successful, I would rather focus at this point of my life on settling the issues and just getting compensated for my investment (cash and time) in Playboy Breweries and Playboy Lifestyle (cigarettes with HH). [¶] Let[‘]s just the two of us meet for now—I am available Thursday /Friday at your office in West LA or Larson O’Brien offices downtown.”    
There was a subsequent meeting but no settlement was reached.
 
In March 2017 and December 2017, Friedman’s lawyer, the aforementioned Mr. O’Brien, sent letters to Playboy that demanded $95 million and $90 million, respectively, to settle the matter.

Playboy notified Indian Harbor of the letters and sought coverage under a professional liability policy.  [The specific type of policy, and any coverage issues (other than “claim”), are not relevant here.]  Indian Harbor paid close to $5 million to settle the matter.  Playboy paid $159,000 toward the settlement and the remainder of its SIR.  Playboy filed a coverage action and Indian Harbor filed a cross-complaint seeking to recoup the nearly $5 million settlement payment.

Indian Harbor later learned of the May 10, 2016 email and argued that no coverage was owed for the settlement as the email was a “clam,” as defined under the policy, and, thus, not first made during the policy period of November 30, 2106 to July 1, 2018.

The policy defined “claim,” in pertinent part, as follows: “[a] written demand for monetary damages, services, or injunctive or other non-monetary relief.”

The trial court concluded that the email was not a “claim.”  The California appeals court agreed.  The decision, following a dissection of the email, and examination of case law, was based on three rationales:

“The subject email does not contain a ‘demand.’ Rather, it contains a description of Friedman’s ‘grievance’ and an ‘expression of [Friedman’s] dissatisfaction’ with the behavior of certain Playboy executives—each of which, under the guidance in [citation omitted] is ‘not a demand.’  The subject email does go on to make a request based on this grievance; specifically, it suggests, ‘Let[‘]s just the two of us meet for now.’ But it neither insists on any course of action, nor expresses an entitlement to any course of action.”

***

“Even assuming, for the sake of argument, that the letter contained a ‘demand,’ the email still would not constitute a claim, because it still would not contain a demand ‘for monetary damages, services, or injunctive or other non-monetary relief.’”

***

“Unlike the letter in [citation omitted], there is no additional context in the subject email that would allow us to interpret the email requesting a meeting as even an indirect request for settlement compensation. For example, the [citation omitted] letter, unlike the subject email, expressly states that litigation may become necessary, and describes affirmative steps, including jurisdictional exhaustion of administrative remedies, the employee had already taken towards being able to file suit. The subject email’s opaque reference to litigation—specifically, how Friedman does not want to pursue it, even though he believes he would prevail—is distinguishable from the discussion of litigation in the [citation omitted] letter in this and other respects.”

There is no shortage of case law addressing what is a “clam” for various purposes under a “claims made” policy.  But Playboy Enterprises v. Indian Harbor Ins. Co. provides some detailed discussion of interesting aspects of a communication that is in dispute.