What’s a Policyholder to Do? California Court Permits “Conditional Judgment” Awarding Replacement Cost to Policyholders

Posted in: Breach of Contract, Case Updates, Commercial General Liability Insurance, Insurance Bad Faith, Property & Casualty Insurance December 11, 2014

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.  

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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 Coverage

Posted in: Breach of Contract, Case Updates, Commercial General Liability Insurance, Insurance Bad Faith June 20, 2014

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. 

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Expert Testimony Can Help Policyholders Establish Property Damage and Survive Summary Judgment

Posted in: Breach of Contract, Case Updates, Commercial General Liability Insurance, Expert Testimony, Insurance Bad Faith May 22, 2014

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).

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Policyholder Wins Handed Down in Insurance Decisions. Daily Journal Publishes McKennon Law Group PC Article.

Posted in: Breach of Contract, Case Updates, Disability Insurance, Duty to Defend, Duty to Settle, ERISA, Insurance Bad Faith, News, Unfair Business Practices/Unfair Competition February 12, 2014

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.  

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Clearing Up Murky Waters: Insurer's Duty to Settle. Daily Journal Publishes McKennon Law Group PC Article.

Posted in: Breach of Contract, Duty to Settle, Insurance Bad Faith October 29, 2013

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.

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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 It

Posted in: Auto Insurance, Breach of Contract, Duty to Settle, Insurance Bad Faith October 18, 2013

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. 

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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 Demand

Posted in: Auto Insurance, Breach of Contract, Duty to Settle, Insurance Bad Faith October 18, 2013

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.

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Property Insurers May Be Liable to Owners for Loss of Rents Resulting from Damaged Property

Posted in: Breach of Contract, Case Updates, Insurance Bad Faith, Policy Interpretation, Property & Casualty Insurance September 25, 2013

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.

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California Court of Appeal Finds That a 10:1 Ratio Between Punitive Damages and Compensatory Damages Awards Satisfies Due Process

Posted in: Breach of Contract, Case Updates, Insurance Bad Faith, Punitive Damages September 06, 2013

A 10-to-1 ratio of punitive damages to compensatory damages awards in an insurance bad faith case passes Constitutional muster.  So says the California Court of Appeal in its decision in Nickerson v. Stonebridge Life Insurance Company, __ Cal. App. 4th ___, 2013 Cal. App. LEXIS 583 (2013).  The decision is significant in that it affirms that punitive damages are not limited to a single-digit ratio and that a ratio of punitive to compensatory damages of 10-to-1, and perhaps higher, falls within the maximum permitted under due process.  Additionally, the decision clarifies what damages may be included in fixing the ratio of compensatory to punitive damages. 

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Supreme Court Reaches Favorable Decision for Insureds in Zhang v. Superior Court of San Bernardino; Daily Journal Publishes McKennon Law Group PC Article on Zhang

Posted in: Case Updates, Insurance Bad Faith, Unfair Business Practices/Unfair Competition August 07, 2013

The Wednesday August 7, 2013 edition of the Los Angeles Daily Journal featured Robert McKennon’s article entitled:  “Clear win for insureds, though scope uncertain.”  In it, Mr. McKennon discusses how a highly anticipated decision by the California Supreme Court in Zhang v. Superior Court of San Bernardino (California Capital Insurance), 2012 DJDAR 10174, expands the availability of claims that can be brought under Bus. & Prof. Code 17200, a.k.a. California’s Unfair Competition Law, or UCL.  The article discusses how in Zhang, the Supreme Court addressed the split among courts in California regarding the scope of the court’s prior holding in Moradi-Shalal v. Fireman’s Fund Insurance Companies, 46 Cal. 3d 287 (1988) and adopted a narrow interpretation of Moradi-Shalal.  The article explains how the Supreme Court’s holding in Zhang will now allow insureds to bring claims under the UCL against insurers for unfair business practices, such as false advertising, so long as those claims do not rest exclusively on California’s Unfair Insurance Practices Act, or UIPA.  This means that insureds will not just have breach of contract and bad faith claims against insurers, but may also have UCL claims too.  The article is posted below with the permission of the Daily…

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