“You can’t turn a ‘no’ into a ‘yes’ without a ‘maybe’ in between.”[1]

The Los Angeles Superior Court recently gave the production companies that produced the Netflix series “House of Cards” their “maybe” by allowing the plaintiffs’ coverage suit against Firemans Fund Insurance Company to proceed. The court held that allegations in the third amended complaint facially satisfied the policy’s insuring agreement by alleging that House of Cards’ lead actor, Kevin Spacey, was “necessarily prevented” from continuing or completing his duties under his contract and that his sickness was the direct and sole cause of the plaintiffs’ claimed loss.[2] The court dismissed the plaintiffs’ bad faith claim, effectively ending the plaintiffs’ campaign to recover punitive damages.

The Firemans Fund Policy 

Firemans Fund issued a Motion Picture/Television Productions policy to the plaintiffs that included cast coverage where the insurer agreed to pay “loss . . . you directly and solely sustain by reason of any covered person in connection with an insured production, being necessarily prevented by their death, injury or sickness . . . from commencing or continuing or completing their respective duties or performance(s) in an insured production.”

The Plaintiffs’ Claim and Coverage Action

After reports of sexual misconduct against Spacey were reported in the media, the plaintiffs submitted a claim to Firemans Fund for losses caused by what they understood to be Spacey’s sickness and inability to perform on set. These losses are defined by the policy to include things like the production costs to re-photograph, retape, recreate or reprogram. Firemans Fund refused to take a coverage position based on the lack of medical records from Spacey’s treating physician. The plaintiffs then filed the coverage action for losses sustained during the production of the show’s final season. Firemans Fund eventually received Spacey’s medical records yet still refused to acknowledge any coverage obligation.

The plaintiffs allege in the coverage action that, following the reports against Spacey, they were advised that he was “sick” and “going away for a very long time.” After additional allegations were reported, including by several crew members, the plaintiffs suspended Spacey from the series. Prior to his suspension, the plaintiffs “allegedly told Spacey that they had received word that he was being admitted to a medical facility for in-patient treatment and assumed he was incapacitated due to his sickness.” Spacey’s character, Frank Underwood, was written out of the series. The final revised season of House of Cards came tumbling down when it was not met with the success anticipated prior to Spacey’s departure.

The Court Refuses to Dismiss the Third Amended Complaint

Firemans Fund’s primary argument for dismissing the third amended complaint was that the allegations did not satisfy the contractual language for coverage.[3] The court disagreed.

First, the court found the third amended complaint adequately alleged that Spacey was “necessarily prevented” from continuing or completing his duties under his contract with the plaintiffs. The third amended complaint alleged that Spacey was in a treatment program during the show’s production, the treatment program was to last several weeks, it would have harmed Spacey to leave during the program, Spacey was diagnosed with certain conditions that made it unsafe for him to perform on set, and Spacey’s situation was made worse by the ensuing media coverage.

Then, the court considered whether the “loss” was “caused ‘directly and solely’ due to sickness.” The court agreed with the plaintiffs that causation is a “quintessential question of fact.” The court held that the third amended complaint’s allegations of timing explain how Spacey’s sickness precluded his full participation in House of Cards. “Whether plaintiffs’ loss was caused, in whole or in part, by the media outcry is a question for summary judgment or trial.”

Lessons Learned

While the plaintiffs have not yet prevailed or received a “yes” on their coverage action, they have at least received a “maybe.” Even at this early stage, however, the proceedings highlight the importance of applying the policy’s plain meaning. The court’s decision is based on the requirements laid out by the policy’s plain language and how the allegations in the third amended complaint fit them – nothing more. Relatedly, the proceedings show the value of, when possible, negotiating precise policy language and familiarizing yourself with the available coverages before a policy is issued. Especially when entering a contract to protect against significant losses, each and every word can be the difference between “yes” and “no.”

[1] Frank Underwood, House of Cards, Season 3, Ep. 3, Ch. 29.

[2] The court previously dismissed Certain Underwriters at Lloyd’s of London from the case because the Lloyd’s policy contained an exclusion for conditions that pre-dated the policy period. This language was not included in the Firemans Fund policy.

[3] Firemans Fund made additional arguments in seeking to dismiss the third amended complaint, which the Court addressed in its order.