(Article from Insurance Law Alert, June 2016)
For more information, please visit the Insurance Law Alert Resource Center.
The Ninth Circuit ruled that the phrase “arising out of” in a policy exclusion required only a causal connection rather than proximate causation and, therefore, that a business exclusion relieved an insurer of its duty to defend a suit based on credit card disputes that arose in connection with the policyholder’s employment. Griggs v. Allstate Ins. Co., 2016 WL 3002302 (9th Cir. May 25, 2016).
Bryan Griggs was employed by HDMC, a company that purchases hotel rooms in bulk for resale to convention attendees. In order to reserve the rooms, HDMC used its corporate credit cards. However, on certain occasions, Griggs gave HDMC permission to use his personal credit card to reserve rooms. At one point, Griggs had reason to believe that HDMC was using his credit card without his authorization and thus withdrew permission for use of his card. Several months later, HDMC fired Griggs and then sued him, alleging that he wrongfully disputed charges that he had authorized and for which he had been reimbursed. Griggs tendered defense of the action to Allstate pursuant to a renters policy. The policy covered losses arising out of the unauthorized use of a credit card, but excluded coverage for “any loss arising from any business of an insured person.” Allstate denied coverage and refused to defend based on the exclusion. In ensuing litigation, an Oregon federal district court granted Allstate’s summary judgment motion, concluding that the business exclusion applied. The Ninth Circuit affirmed.
The Ninth Circuit ruled that the credit card losses at issue arose from Griggs’s business (
i.e., his employment with HDMC). The court explained that under Oregon law, the phrase “arising out of” indicates a causal connection rather than proximate causation. Finding that the exclusion squarely applied, the court stated, “[a]ny losses Griggs sustained from HDMC’s unauthorized use of Griggs’s credit card arose from – that is, were causally connected to – his full-time, paid employment at HDMC.”