Ninth Circuit Holds Three Printing Errors Constitute Single Wrongful Act

Applying California law, the United States Court of Appeals for the Ninth Circuit has held that three printing errors constituted a single wrongful act subject to a policy’s single claim limit. Impress Commc’n Inc. v. Travelers Prop. Cas. Co. of Am., No. 20-56203, 2021 WL 6101384 (9th Cir. Dec. 21, 2021).

The insurer issued a policy to the insured printing company, which insured the printing company for “product recall” created by a “wrongful act” when providing “printing services or products.” The coverage was subject to an “Each Wrongful Act Limit” of $100,000.   The Wrongful Act definition provided that “[a] series of negligent acts, errors or omissions that have as a common connection, tie, or link any fact, circumstance, situation, event, transaction, cause, or series of related facts, circumstances, situations, events, transaction, or causes” would be considered a single Wrongful Act.  After purchase orders were rejected due to printing defects in connection with a single trade show, the insured reprinted the items and filed claims for coverage with the insurer to cover the expenses for reprinting.

The insured made three separate claims for coverage, contending that there were three distinct printing errors, one for each product. The insured argued that the three purportedly separate errors—problems with color variation, coating and overprint production defects, and foiling production defects—were separate wrongful acts, noting that the products were printed on different machines, by different people, using different processes. The insurer disagreed and concluded that the three printing errors qualified as a single wrongful act under the policy and accordingly reimbursed the insured $100,000—the amount for a single claim.  The insured then sued for breach of contract and bad faith. The district court granted the insurer’s motion for summary judgment, holding that the claim for three printing errors was limited by the policy’s wrongful act definition. The insured appealed.

In affirming, the Ninth Circuit agreed with the district court’s ruling, finding that the three printing errors constituted a single wrongful act under the relevant policy language. The court noted that the policy language was “sufficiently broad to encompass the logical connections between the errors” and that the three errors “have as a common connection” “related . . . transactions.” The Court further noted that the items at issue were ordered during a short period, intended for a single product line, largely involved different parts of packaging of single items (boxes and inserts), and shared an expedited shipping timeline for use at the trade show.