Group Life Insurer’s Literal Policy Interpretation Penalizing Insured for not working on Paid Holiday RejectedSeptember 08, 2015 Joe McMillen
Group life insurance policies often have confusing language about when they become effective. A trial court recently interpreted one to mean that the policy had not become effective to a full-time employee, though he was already eligible for the coverage, because he was not physically present at work when the policy was issued to his employer. Instead he was at home for a paid holiday and then in the hospital on sick-leave because of a sudden and fatal illness. The insurer and trial court penalized the employee for taking his paid holiday and sick-leave. They docked him the life insurance proceeds for which he had paid. The dispute centered around the policy’s “effective date of coverage” provision: whether being a full-time employee was enough to make the policy commence even if out for a sick-day. Or whether the employee had to be actively working in the employer’s building.
In an important victory for claimants, a United States District Court recently determined that a plaintiff who obtained an individual disability insurance policy through a conversion provision in an ERISA plan can pursue remedies in a state court under the newly issued individual policy. This ruling is important because the range of damages available through a lawsuit containing state law claims is much broader than the range of damages available through ERISA, and includes emotional distress damages and punitive damages.
What’s a Policyholder to Do? California Court Permits “Conditional Judgment” Awarding Replacement Cost to PolicyholdersDecember 11, 2014 Iris Chou
When a covered property is damaged, the insured may face a quintessential Catch-22—the insured cannot afford to proceed with costly repairs or replacement without insurance money, but until the repairs or replacements are finished, the insured cannot recover under the replacement cost provision of the liability policy. A recent court decision held a policyholder must actually repair or replace the damage in order to claim replacement cost value, but may recover a “conditional judgment” for replacement cost benefits and satisfy the condition after trial. Stephens & Stephens XII, LLC v. Fireman’s Fund Insurance Co., 2014 Cal. App. LEXIS 1073, 2014 WL 6679263 (Cal. App. 1st Dist. Nov. 24, 2014) (“Stephens”). Stephens fashions a pragmatic approach whereby insurers can condition payment on actual replacement, while policyholders preserve their rights to benefits after proving coverage.
Insurers Have a Duty to Defend Where a Complaint Could Be Fairly Amended to State a Covered Liability; California Supreme Court Clarifies Duty to Defend Disparagement Claims Under Advertising Injury CoverageJune 20, 2014 Robert McKennon
An insurer has a duty to defend even if the causes of action in a lawsuit are not expressly covered by a liability policy if the factual allegations may support a potentially covered claim. This was expansive interpretation of the duty to defend adopted by the United States District Court Southern District of California in Millennium Laboratories, Inc. v. Darwin Select Insurance Company, __ F. Supp. 2d ___ (S.D. Cal. May 13, 2014). This highly significant decision further buttresses the now well-established position of courts in California that all of the facts and allegations in a lawsuit, not just the stated causes of action and facts stated in the complaint, must be considered in determining whether there exists a potentially covered claim triggering an insured’s duty to defend.
Policyholders often face a formidable challenge proving causation on property damage claims, particularly when insurance companies insist on deferring to their own experts and adjustors. Of course, insurance companies must conduct reasonable investigations and review and evaluate all of the evidence before making a claim decision. The Ninth Circuit Court of Appeals held in an insurance action where the policyholder provides admissible evidence showing a genuine dispute as to coverage, the evidence should be evaluated by a trier of fact. Pyramid Technologies Inc. v. Hartford Casualty Insurance Co., 2015 DJDAR 6205 (Cal. App. May 19, 2014).
Policyholder Wins Handed Down in Insurance Decisions. Daily Journal Publishes McKennon Law Group PC Article.February 12, 2014 Scott Calvert
The February 10, 2014 edition of the Los Angeles Daily Journal featured Robert McKennon’s article entitled: “Policyholder Wins Handed Down in Insurance Decisions.” In it, Mr. McKennon discusses six insurance decisions handed down in California and federal courts in 2013 that were favorable to policyholders.
Clearing Up Murky Waters: Insurer's Duty to Settle. Daily Journal Publishes McKennon Law Group PC Article.October 29, 2013 Robert McKennon
The October 29, 2013 edition of the Los Angeles Daily Journal featured Robert McKennon’s article entitled: “Clearing Up Murky Waters: Insurer’s Duty to Settle.” In it, Mr. McKennon discusses the California Court of Appeal’s decision in Reid v. Mercury Insurance Company, 2013 DJDAR 13436 (Cal. App. 2nd Dist. Oct. 7, 2013). The Reid case followed the uncertainty left by the Ninth Circuit Court of Appeals’ decision in Du v. Allstate Ins. Co., 697 F.3d 753 (9th Cir. 2012). The Reid case resolved some legal issues relating to whether, in the absence of a settlement demand within policy limits, an insurer owes its insured a duty to settle a claim. The article is posted below with the permission of the Daily Journal.
Want to Open Up the Policy Limits on a Policy? Try Making a Section 998 Offer Above Policy Limits and You Just May Be Able to Do ItOctober 18, 2013 Robert McKennon
Can a pretrial California Code of Civil Procedure section 998 offer to settle above an insurer’s policy limits result in opening up a policy’s liability limits? Interestingly, a California Court of Appeal has said “yes” to this question under certain limited circumstances if the offer is reasonable and made in good faith. In Aguilar v. Gostischef, ___ Cal. App. 4th ___, 2013 Cal. App. LEXIS 816, 2013 WL 5592976 (Oct. 11, 2013) (“Aguilar”), the California Court of Appeal held that where an injured party rationally believed an insurer may be liable for excess judgment, and the insurer refuses to provide this third-party with the amount of policy limits when requested prior to litigation, a section 998 offer above policy limits may open up the policy to an excess judgment.
Alas, A Very Hot Issue in California Insurance Law is Decided (At Least for Now): Insurers Have No Affirmative Duty to Settle as Long as They Do Not Foreclose the Possibility of Settlement and/or Absent a Within-Policy-Limits Settlement DemandOctober 18, 2013 Robert McKennon
One of the hottest issues in California insurance law has been whether a breach of the good faith duty to settle can be found in the absence of a within-policy-limits settlement demand, thus giving rise to an insurer’s liability for an excess judgment.
Commercial property owners may recover lost rental income from their insurer if they are unable to rent out damaged property, absent clear policy exclusions. The California Court of Appeal recently held the owner of commercial property has a reasonable expectation of coverage for loss of rent, even if the property was not leased out at the time the damage occurred. Ventura Kester, LLC v. Folksamerica Reinsurance Company, 2013 DJDAR 12253 (September 11, 2013). The court explained that if insurers want to limit loss of rent coverage to leases in force at the time of the damages occur, such limitations must be plainly stated in the policy. Ventura is significant because it limits insurers’ abilities to take advantage of ambiguous policy language as a means to deny coverage.