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.
New liability for claims adjusters the right move. Daily Journal Publishes McKennon Law Group PC Article.April 22, 2014 Scott Calvert
The April 21, 2014 edition of the Los Angeles Daily Journal featured Robert McKennon’s article entitled: “New Liability for claim adjusters the right move.” In it, Mr. McKennon discusses a new case which exposes insurance adjustors to negligent misrepresentation and intentional infliction of emotional distress claims by policyholders. The article is posted below with the permission of the Daily Journal.
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.
In a recent ruling, the California Court of Appeal held that an insurer’s general reservation of rights to deny coverage of damages outside its policy does not create a conflict of interest with the insured, such that the insured in entitled to Cumis counsel. The decision in Federal Insurance Co. v. MBL, Inc. __ Cal. App. 4th __, 2013 Cal. App. LEXIS 679, 2013 WL 4506149 (August 26, 2013) follows California precedent denying insureds the right to select independent counsel at the insurer’s expense absent an actual conflict of interest.
Reasonable Interpretation of Statute Does Not Preclude Triable Issue of Fact on Insurance Bad Faith ClaimMay 10, 2013 Sean Crane
A recent California Court of Appeals decision sought to clarify the application of California Insurance Code Section 533.5(b) concerning the statute’s preclusion of an insurer’s duty to defend its insured in criminal actions. In Mt. Hawley Insurance Co. v. Richard Lopez, Jr.,__Cal.App.4th___, 2013 Cal. App. LEXIS 346 (May 1, 2013) the Court of Appeals held that Section 533.5 (b) is not applicable to criminal actions brought by federal prosecuting authorities, and thus is limited to precluding the insurer’s duty to defend its insured in state criminal actions brought by the Attorney General, any district attorney, any city prosecutor, or any county counsel. The Court importantly held that the insurer’s Motion for Adjudication of the insured’s bad faith claim should be denied given the insurer’s potentially unreasonable actions even though the insurer gave a reasonable interpretation to an insurance code section.
You have been probably wondering whether the filing of an insurance claim constitutes prelitigation activity that is protected under the anti-SLAPP statute, right? Well, if you were, you now have an answer: it is a resounding “maybe.”
In People ex rel. Fire Insurance Exchange v. Anapol, 211 Cal. App. 4th 809 (2012), the California Court of Appeals confirmed that, in certain circumstances, the filing of an insurance claim constitutes prelitigation activity that is protected under the anti-SLAPP statute. While such circumstances are described as the exception, not the rule, they are designed to protect insureds whose legitimate claims for insurance benefits are improperly denied by an insurance company.
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.
Insurers May Intervene and Assert the Same Rights as Their Insured's to Contest Both Liability and DamagesOctober 14, 2011 Robert McKennon
Under certain circumstances, an insurer has the right to intervene in a case against its insured to protect its own rights and to avoid harm to the insurer. These circumstances usually involve cases where an insured is either prevented from appearing and defending, or simply chooses not to and a default is taken against the insured. The recent case Western Heritage Insurance Company v. Superior Court, __ Cal. App. 4th __ (Oct. 11, 2011), addresses the second set of circumstances, and provides an examination of California intervention law and holds that an insurer has the right to intervene in a case and take over in litigation if an insured is not defending the action, and may contest both liability and damages while doing so.
Why Does The Pollution Exclusion in California Insurance Policies Exclude Asbestos Building Contamination But Not Pesticide Building Contamination?August 22, 2011 Eric Schindler
According to a recent California appellate court decision, a contractor’s negligent release of asbestos fibers during the removal of asbestos-containing acoustical spray in a condominium complex is excluded by the pollution exclusion in a homeowner association’s property and liability policy, despite a 2003 California Supreme Court ruling that a contractor’s negligent spraying of pesticide in an apartment complex is not excluded by a similar pollution exclusion in an apartment owner’s policy. The Villa Los Alamos Homeowners Association v. State Farm General Insurance Company, __ Cal. App. 4th __, 2011 WL 3586475 (August 17, 2011). How can that be?
California Homeowner's Insurer Not Required To Pay Extended Repair Limits Until Homeowner Shows Proof of RepairMarch 17, 2011 Eric Schindler
Under standard homeowner insurance policies the insurer is typically required to pay only the “actual cash value” of a loss—i.e., the fair (depreciated) market value—unless and until the insured actually incurs repair costs in excess of the actual cash value to repair the home. In Kelly Minich, et al. v. Allstate Insurance Company, __ Cal.App.4th __, 2011 Cal.App. LEXIS 270 (March 11, 2011) (Minich), a California appellate court recently rejected a homeowner’s creative interpretation of its Allstate homeowner’s insurance policy to get extended repair or replacement cost policy limits without regard to actually repairing or replacing the fire-damaged home.
In Minich Allstate issues a homeowner’s insurance policy to Kelly and Debbie Minich. A fire destroys the Minichs’ home. The policy requires Allstate to pay the Minichs the “actual cash value” of their home up to the $129,840 policy limit. An extended policy limits endorsement requires Allstate to pay up to 150% of the policy limit in excess of the actual cash value if the Minichs actually repair or replace the home.
Allstate pays the $129,840 policy limit, less the $250 deductible, within 2 weeks of the fire. Allstate refuses to pay the $64,920 extended limit until the Minichs demonstrate to Allstate 15 months after the fire that they in fact are rebuilding the home.