9th Circuit Hears Insurer’s Refusal to Pay for Kink Defense

SAN FRANCISCO—It’s been almost five years since Kink.com, then-owner of Armory Studios, and its principal Peter Acworth were sued by adult performers Cameron Bay, her partner Rod Daily and another unnamed actor, who claimed that they had contracted HIV while shooting for Kink’s production arm, Cybernet Entertainment, at the Armory—and now that case has reached the Ninth Circuit Court of Appeals. Earlier this week, a three-judge panel of appeals judges heard argument via teleconference from attorneys for Armory Studios and Acworth, as well as from the studio’s insurer, Atain Specialty Insurance Co. At issue was not whether Bay and Daily actually contracted HIV on a Cybernet set, which Kink adamantly denied in a 2015 statement and continues to deny today, but whether Atain has a duty to pay for the studio’s defense against Bay and Daily’s lawsuit, with Atain’s attorneys arguing that the studio’s policy didn’t cover tenants who may rent space from the studio. The controversy centers around Cybernet’s relationship to Armory Studios, since Acworth appears to have been a principal of each company, but once Atain’s duty to indemnify its insured is settled as to which company is the insured—it could be both, as Kink’s attorneys have argued—the question remains whether the exclusion in Atain’s policy for “physical-sexual abuse” should apply to the fact that back in 2015, condoms were not required on Cybernet shoots. (The case is further complicated by the fact that Kink tested all the performers who interacted with Bay and Daily on the set and none were found to be HIV-positive.) However, U.S. Circuit Judge Richard C. Tallman, one of the panelists, seemed to echo the thoughts of U.S. District Judge James Donato, who said back in 2017, “There can be no serious dispute that plaintiffs would not have contracted the virus but for their sexual activity during the shoots. Consequently, it cannot seriously be debated that even the claims and causes of action against Armory and [its manager] are ones that ‘aris[e] out of … sexual behavior intended to lead to, or culminating in any sexual act, … caused by … omission by … [t]he insured or the insured’s employees.'” “If he [Acworth] in fact were directing these sexual acts and causing injury and ordering actors to not use [condoms], why doesn’t that directly fall into the exclusions under the policy of sexual acts caused by insurer?” Judge Tallman asked at this week’s hearing. Armory Studio’s attorney James C. Nielsen responded that that allegation, if true, might impact whether Atain had to pay for the damages claimed by Bay and Daily, but not its duty to defend the lawsuit in the first place. Nielsen further argued that the only reason Atain’s policy would not cover Armory Studios would be if the studio itself “caused or directed or instigated sexual acts,” but the studio’s position is that it never played a role in the sexual acts at issue, and that no Armory employee was on-site when the sexual acts were taking place. It may be notable that Atain had already spent $500,000 in settling one case against Armory, which Judge Donato ruled that Atain could not recoup because, according to an article on Law360.com by Dorothy Atkins, “it [Atain] either failed to preserve its right to recover the expenses, failed to notify the policyholders of the potential settlement or failed to give them a chance to take over their defense.” Atain’s attorney challenged that reasoning during the argument here, but if Judge Donato’s ruling is upheld, it could form a precedent that could affect the outcome of this appeal. However, panelist Circuit Judge Kenneth K. Lee challenged the framing of Cybernet, the production company, as a “tenant” of Armory Studios, the alleged “landlord,” since Acworth had ownership roles in both and had at times directed filming at the studio. “I don’t think this is your typical commercial landlord-tenant situation,” the judge said. In any case, the panel took the arguments “under submission,” and there is no set time within which the panel must render its decision. Pictured: The James R. Browning Federal Courthouse in San Francisco where the Ninth Circuit hears appeals

written by: Mark Kernes

source: 9th Circuit Hears Insurer’s Refusal to Pay for Kink Defense | AVN