“Slimy Conduct That Gives Insurance Companies a Bad Name:” Some Quotes from Judge Alex Kozinski

Posted in: Insurance Blog, Policy Interpretation, Property & Casualty Insurance, Uncategorized June 03, 2015

We do not normally focus on dissents in our blogging but we made an exception here with a published Per Curiam opinion from the Ninth Circuit Court of Appeals, Guam Industrial Services, Inc. v. Zurich American Insurance Co., 2015 DJDAR 5948 (9th Cir. June 1, 2015).  This insurance coverage case arose out of the sinking of a dry dock, loaded with barrels of oil, during a typhoon on Guam. The issues pertain to whether either of two insurance policies covered costs of damage to the dock and the associated cleanup which was accomplished before any of the oil leaked out of the containers into the Pacific Ocean. Guam Industrial Services, Inc. (“Guam Industrial”) owned the dry dock.  At the time of the sinking, one of its insurance policies, an Ocean Marine Policy, covered liability for property damage caused by pollutants, issued by Zurich American Insurance Company (“Zurich”). After the dock sank, Guam Industrial filed a claim under each policy. Zurich denied the claim, and Guam Industrial brought suit. The district court granted summary judgment for the insurers, finding that the first policy was voidable because Guam Industrial had failed to maintain the warranty on the dock, and that the coverage under the second policy was never triggered because no pollutants were released. Guam Industrial appealed the decision and the Ninth Circuit affirmed.

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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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New liability for claims adjusters the right move. Daily Journal Publishes McKennon Law Group PC Article.

Posted in: Case Updates, Negligence, Property & Casualty Insurance April 22, 2014

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.

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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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Insurer's General Reservation of Rights Does Not Entitle Insured to Cumis Counsel

Posted in: Commercial General Liability Insurance, Directors & Officers Insurance, Duty to Defend, Policy Interpretation, Property & Casualty Insurance September 05, 2013

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.

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Reasonable Interpretation of Statute Does Not Preclude Triable Issue of Fact on Insurance Bad Faith Claim

Posted in: Duty to Defend, Insurance Bad Faith, Property & Casualty Insurance May 10, 2013

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.

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Filing an Insurance Claim can be Protected Conduct Under Anti-SLAPP Law

Posted in: Case Updates, Insurance Bad Faith, Property & Casualty Insurance January 10, 2013

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.

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California Courts Give Effect to the Intent of the Parties to an Insurance Contract

Posted in: Breach of Contract, Case Updates, General Liablity, Property & Casualty Insurance December 28, 2012

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.

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Insurers May Intervene and Assert the Same Rights as Their Insured's to Contest Both Liability and Damages

Posted in: Case Updates, Commercial General Liability Insurance, Duty to Defend, Property & Casualty Insurance October 14, 2011

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.  

 

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Why Does The Pollution Exclusion in California Insurance Policies Exclude Asbestos Building Contamination But Not Pesticide Building Contamination?

Posted in: Case Updates, Commercial General Liability Insurance, Duty to Defend, Homeowners Insurance, Insurance Bad Faith, Legal Articles, Policy Interpretation, Property & Casualty Insurance August 22, 2011

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?

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