We all know the maxim that “bad facts make bad law.” Two years after J.R. Marketing, LLC prevailed in the Court of Appeal concerning its dispute with its commercial general liability insurer, Hartford, it ran out of luck before the California Supreme Court in its fight over important Cumis counsel issues. Hartford Cas. Ins. Co. v. J.R. Marketing, LLC, 190 Cal. Rptr. 3d 599, 2015 DJDAR 9111 (Cal. Aug. 10, 2015). This is a must read for every lawyer in California that acts as Cumis counsel.
The Reasonable Expectations of the Covered Party, Even an Additional Insured, Determines the Interpretation of Ambiguous Policy LanguageJanuary 27, 2014 Robert McKennon
In California, courts have long held that where a policy provision is ambiguous because it is susceptible to multiple interpretations, the reasonable expectation of the covered party governs. But which parties’ objectively reasonable expectations should govern where there are both a named insured and an additional named insured claiming coverage? In its significant decision in Transport Insurance Company v. Superior Court of Los Angeles County, __ Cal. App. 4th __, 2014 Cal. App. LEXIS 28 (Jan. 13, 2014), the Court of Appeal of California held that it is the objectively reasonable expectation of each party seeking coverage that is applied in determining the meaning of language within an insurance contract as it applies to that party, even where it is an additional insured who is not a party to the contact.
Insurers providing general liability insurance cannot shirk their duty to defend insureds at the outset of litigation by relying on self-insured retention (SIR) provisions in those policies unless the policies expressly and unambiguously make the insurer’s duty to defend contingent upon the SIR. So held the Fourth District Court of Appeals in American Safety Indemnity Company v. Admiral Insurance Company, __ Cal. App. 4th ___, 2013 Cal. App. LEXIS 779 (2013). The court’s decision in American Safety is highly favorable to insureds because it substantially limits the ability of insurers to circumvent their obligation to pay first-dollar for the defense of their insured by arguing that the SIR has not been exhausted.
Insurers Forfeit Their Protections Under Civil Code Section 2860 (Cumis Statute) When They Fail to Meet Their Duty to Defend ObligationsJune 27, 2013 Robert McKennon
If you want to read an important case on Cumis counsel and the consequences to insurers who fail to fulfill their obligations relating thereto, we have one for you. J.R. Marketing LLC v. The Hartford Cas. Insurance Co., __ Cal.App.4th __ (May 17, 2013). This case has a lot to offer: Cumis counsel, attorneys’ fees, Buss allocations, duty to defend, and insurance bad faith issues. In this case, the California Court of Appeal for the First District handed down a very important decision that is highly beneficial to insureds and their independent counsel (i.e., Cumis counsel). Significantly, the court expanded upon the limitations on the ability of insurers to impose upon their insureds’ choice of defense counsel when they do not properly defend their insureds, most likely committing insurance bad faith. Specifically, the Court found that insurers who wrongfully refuse to defend their insureds are barred from maintaining suits against their insureds’ independent counsel for reimbursement of fees and costs charged by such counsel and are barred from relying on the protections afforded insurers under Civil Code section 2860.
California Court Holds That Third-Party Plaintiffs Can Bring Claims Against Defendant's Insurer for Breach of Contract and Bad Faith After a SettlementJune 21, 2013 Robert McKennon
In a case of first impression, the California Court of Appeal for the Sixth District held that a plaintiff who sued a defendant and settled the case can later sue the defendant’s insurer directly for breach of contract and bad faith concerning a medical expense provision. This unprecedented decision potentially opens a new avenue for injured plaintiffs to pursue redress directly from insurers for injuries caused by their insureds.
Barnes v. Western Heritage Insurance Co., __ Cal.App.4th __, 2013 Cal. App. LEXIS 480 (June 18, 2013) involves a Plaintiff who was injured in 2001 when a table fell on his back during a recreational program co-sponsored by the Defendant. Plaintiff made a claim against the Defendant. But when Plaintiff subsequently requested payment from Defendant’s insurer, Western Heritage Insurance Company, more than one year after the accident for consultation with a medical specialist, the insurer denied the request under the insured’s Comprehensive General Liability Policy. The insurer asserted that to qualify for medical payment coverage under the applicable policy, Plaintiff had to report a claimed medical expense to the insurer within one year of the accident
A recent California Court of Appeals decision served as a reminder of the long-standing rule in California that the mutual intent of the parties will always control the interpretation of potentially conflicting provisions in an insurance contract. In its recent decision in Gemini Ins. Co. v. Delos Ins. Co. (Dec. 5, 2012, B239533) __ Cal.App.4th __ [2012 WL 6050774] [Second Dist., Div. Five], the Court of Appeals was faced with the task of interpreting the inter-insured exclusion (i.e., an exclusion for claims between two insureds) in a liability policy as it applied to an additional insured named in the policy when the additional insured’s property has been damaged.
The Facts: A restaurant owner, and tenant to the property, negligently caused a fire which caused damage to property of the landlord. The landlord was an additional insured under the policy at issue, which insured him from liability for acts caused by the restaurant. The policy also contained an exclusion for claims asserted between two insureds. After the fire, the landlord sought relief from the restaurant for damage to his property. On a motion for summary judgment by the landlord’s insurer, the landlord argued that he was not an insured under the policy, and therefore the inter-insured exclusion did not apply. The trial court granted the motion.
We recently wrote about a policyholder friendly opinion by the Ninth Circuit Court of Appeals that seemingly held that an insurer’s duty of good faith and fair dealing, which is implied in every contract of insurance, may be violated by the insurer’s failure to attempt to effectuate a settlement within policy limits after liability of its insured has become reasonably clear, even without a policy limits settlement demand. In other words, the court held that a demand within policy limits was not an element of a bad faith failure to settle claim. The Ninth Circuit, on October 5, 2012, issued an amended opinion deleting this language and leaving open the questions: 1) whether the duty to settle can be breached absent a settlement demand from the third party claimant; and 2) whether the genuine dispute doctrine can be applied in third-party cases.
Bad Faith Liability May Be Premised on an Insurer's Failure to Effectuate Settlement When Insured's Liability Was Reasonably ClearJune 20, 2012 Robert McKennon
The Ninth Circuit Court of Appeals in a recent decision held that an insurer’s duty of good faith and fair dealing, which is implied in every contract of insurance, may be violated by the insurer’s failure to attempt to effectuate a settlement within policy limits after liability of its insured has become reasonably clear. In essence, the Court found that an insurer’s unreasonable refusal to attempt to effectuate settlement after the evidence reasonably indicates that the insured’s liability will be in excess of the policy limits constitutes bad faith.
California Court of Appeal Upholds Insurance Coverage for Health Net Finding The "Dishonest Acts" Exclusion Did Not Preclude CoverageMay 29, 2012 Robert McKennon
In Health Net, Inc. v. RLI Insurance Company, et al., the California Court of Appeal, Second District, reversed a trial court’s entry of judgment on a Motion for Summary Judgment finding some coverage for Health Net, Inc. (“Health Net”) in connection with numerous lawsuits filed against it arising under the Employee Retirement Income Security Act of 1974 (“ERISA”). Health Net brought suit against four of its insurers (one primary and three excess carriers) seeking a declaratory judgment that the insurers had a duty to defend and indemnify Health Net in over 20 underlying actions involving Health Net’s insurance plans provided by employers, which plans were subject to the requirements of the ERISA. The parties, however, directed their attention to two specific underlying actions, as the amount of indemnity sought in those actions would far exceed the combined policy limits of the defendant insurers. Relying on a policy exclusion for “dishonest acts,” the trial court granted summary adjudication to the insurers with respect to Health Net’s claim for reimbursement of its defense costs and the costs of settling the specified underlying actions. The parties subsequently settled their dispute regarding the remaining underlying actions, and summary judgment was granted in favor of the insurers. Health Net appealed the ruling.
New ED CA Decision is a Feast of First-Party and Third-Party Insurance Coverage and Bad Faith PrinciplesMarch 15, 2011 Eric Schindler
Every now and then a court decision comes along that is a virtual one-stop shop for basic insurance coverage and bad faith principles—a primer for newbie insurance attorneys and a refresher for seasoned litigators. Chief Judge Anthony Ishii’s recent decision granting in part and denying in part an insurer’s motion for summary judgment on a farm-owners insurance policy is one. Ted Gaylord, et al. v. Nationwide Mutual Insurance Company, et al., 2011 U.S. Dist. LEXIS 21736 (Eastern District of California, March 4, 2011). The Gaylord decision also sounds a cautionary note to policyholder attorneys to be mindful that first-party and third-party claims in a single action may be subject to different limitations periods.
Gaylord owns and operates a livestock operation, raising his own cattle and raising cattle for others. In June 2008 some of the cattle die suddenly. By September and October 2008 cattle begin dying at an alarming rate. Gaylord suspects feed poisoning. Autopsies and feed testing confirm that the cattle are dying from liver failure caused by toxic plants in the alfalfa feed. There is no known cure, so Gaylord gets permission from the Department of Agriculture to sell the cattle off for early slaughter—but at a financial loss for Gaylord and the other cattle owners.
Nationwide issued a farm-owners insurance policy to Gaylord in March 2008. One part insures against physical loss to covered property (first-party); one part insures against third-party liability claims. Gaylord says he moved his farm-owners insurance from Fireman’s Fund to Nationwide because his long-trusted insurance agent told him that Nationwide had better coverage, including coverage for cattle loss from poisoned feed. But Gaylord’s agent says he told Gaylord that a “custom feeding of livestock” endorsement was necessary to cover cattle loss from poisoned feed, and that Gaylord declined it because it was too expensive.