California Insurance Newsletter - Vol. 10, 2016
RECENT CALIFORNIA INSURANCE CASES |
California Supreme Court
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California Supreme Court Clarifies When Brandt Fees May Be Considered In Determining If A Punitive Damages Award Is Unconstitutionally ExcessiveNickerson v. Stonebridge Life Ins. Co., 63 Cal. 4th 363 (2016)
In determining if a punitive damages award is unconstitutionally excessive in light of compensatory damages, is an award of attorneys’ fees under Brandt v. Superior Court, 37 Cal. 3d 813 (1985), properly included as compensatory damages where the fees are awarded by the jury, but excluded when they are awarded by the trial court after the jury has rendered its verdict? In Nickerson v. Stonebridge Life Insurance Co., the California Supreme Court held that Brandt fees are properly included as compensatory damages in either event. Read More
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California Court Of Appeal
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Provision Purporting To Make Primary CGL Insurer’s Defense Duty Vanish If A Defense Is Available From Other Insurance Held A Disfavored Escape ClauseCertain Underwriters at Lloyds, London v. Arch Specialty Ins. Co., 246 Cal. App. 4th 418 (Cal. App. 3d Dist. 2016)
If an “other insurance” provision would be recognized as a disfavored escape clause if placed elsewhere in a primary commercial general liability policy, does that conclusion change if it is placed in the insuring agreement? In Certain Underwriters at Lloyds, London v. Arch Specialty Insurance Co., the California Court of Appeal, Third Appellate District, concluded, “no.” It held that a primary commercial generally liability insurer could not, in a contribution action brought by a defending co-primary insurer, rely on a provision purporting to eliminate its own duty to defend whenever a defense is available under other insurance. Read More
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Second District’s Fourth Division Takes A Side In The Split Over Whether An Excess Insurer That Contributes To An Excess Settlement Can Assert A Cause Of Action Based On A Primary Insurer’s Unreasonable Rejection Of Prior DemandsAce American Ins. Co. v. Fireman’s Fund Ins. Co., 2016 Cal. App. LEXIS 647 (Cal. App. 2d Dist. Div. 4, Aug. 5, 2016)
If a primary insurer unreasonably rejects a settlement demand within its policy limits then, later, consents to a settlement above its policy limits, can the excess insurer that paid the excess amount state a cause of action against the primary insurer when there is no litigated excess judgment against the insured? Two divisions of the Second District have already issued conflicting decisions on this issue. In Ace American Insurance Co. v. Fireman’s Fund Insurance Co., the Fourth Division took a side, holding that the excess insurer properly pled a cause of action against the primary and that a litigated excess judgment is not essential. Read More
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Where Primary Cause Of Stone Floor Cracking Was Improperly Applied Mortar, Cost of Making Good Exclusions Barred Coverage Under Builder’s Risk Policies And Ensuing Loss Exception Did Not Restore Any CoverageOlympic and Georgia Partners LLC v. Arch Specialty Ins. Co., 2016 Cal. App. Unpub. LEXIS 5559 (Cal. App. 2d Dist. Div. 2, July 28, 2016)
Where an excluded peril of mortar improperly applied too thick causes cracking of stone that, combined with the mortar, comprises the flooring, is the cracking, itself, a covered ensuing loss? In Olympic and Georgia Partners LLC v. Arch Specialty Ins. Co., the California Court of Appeal for the Second District, held that it was not – rather, the cracking stone was the very damage necessitating repair. Read More
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Ninth Circuit Court Of Appeals
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Insurer Did Not Act in Bad Faith by Conditioning Its Acceptance of Policy Limit Demand on Release of InsuredGrayson v. Allstate Ins. Co., 2016 U.S. App. LEXIS 8946 (9th Cir. May 16, 2016)
In Grayson v. Allstate Ins. Co., the Ninth Circuit Court of Appeals held that an insurer did not act in bad faith by responding to a policy limit settlement demand with a request that the claimant sign a broad release of its insured. Read More
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Ninth Circuit Court Of Appeals Addresses What The Word “Intentional” Means In A “Dishonest, Malicious, Fraudulent, Criminal Or Intentional” Acts ExclusionBerns v. Sentry Select Ins. Co., 2016 U.S. App. LEXIS 13684 (9th Cir. July 27, 2016)
When a policy affords employment practices liability coverage for wrongful termination and harassment (among other things) but excludes coverage for any “dishonest, malicious, fraudulent, criminal or intentional” act, what does “intentional” mean? In Berns v. Sentry Select Ins. Co., the Ninth Circuit Court of Appeals held that it means more than any “voluntary” or “deliberate” act. Read More
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Exclusion For Losses Caused By “Authorized Representatives” Was Not Ambiguous In The Context Of Losses Caused By Insured’s Payroll-Services AgentS. Cal. Counseling Ctr. v. Great Am. Ins. Co., 2016 U.S. App. LEXIS 11825 (9th Cir. June 28, 2016)
In S. Cal. Counseling Ctr. v. Great Am. Ins. Co., the Ninth Circuit Court of Appeals affirmed the district court’s summary judgment determination that a computer fraud insurance policy’s exclusion for losses caused by “authorized representatives” unambiguously applied to bar coverage for underlying losses caused by the insured’s payroll-services agent and/or its principal. Read More
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U.S. District Courts In California
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District Court Finds That Claims Handler Is Not A Proper Party To Insurance Dispute For Acts Allegedly Within The Course And Scope Of Her EmploymentDurben v. State Farm Gen. Ins. Co., 2016 U.S. Dist. LEXIS 100485 (E.D. Cal. July 29, 2016) In Durben v. State Farm Gen. Ins. Co., the district court dismissed, without leave to amend, intentional misrepresentation and negligent misrepresentation claims the insureds brought against the claims handler for a fire claim submitted under a homeowner’s insurance policy, concluding she was not a proper defendant. Read More
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District Court Rules On The Measure Of Damages For Breaching The Duty To Defend A Mixed ActionKM Strategic Management, LLC v. American Cas. Co. of Reading, PA, 2016 U.S. Dist. LEXIS 98273 (C.D. Cal. July 25, 2016)
In KM Strategic Management, an insurer was found to have breached its duty to defend two underlying lawsuits, and the district court was faced with cross-motions for partial summary judgment on the measure of damages. The insurer argued that it should have an opportunity to allocate and not pay over 95% of the defense expense incurred, which it contended was spent in connection with claims not even potentially covered by its policy. But the district court ruled that, having breached its duty to defend, the insurer must pay upfront as damages all reasonable and necessary fees and costs the insureds incurred to defend the underlying actions, including any fees and costs related to the defense of claims for which there was not even a potential for coverage. Nothing in the decision indicates that the policy at issue had any relevant express allocation provision. Read More
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District Court Rules That A State Civil Investigative Demand Is Not A “Claim,” And That A Contractual Liability Exclusion Does Not Apply To All ContractsIronshore Specialty Insurance Company v. 23AndMe, Inc., 2016 U.S. Dist. LEXIS 96079 (N.D. Cal. July 22, 2016)
In Ironshore Specialty Insurance Company v. 23AndMe, Inc., the district court ruled that a professional liability insurer had no duty to defend a civil investigative demand from the State of Washington, finding it was not a “Claim” as defined by the policy; additionally, the district court ruled that the policy’s contractual liability exclusion applied to the insured’s assumption of third parties’ liabilities or obligations -- not all contracts entered into by the insured. Read More
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District Court Rules That Intellectual Property Exclusion Does Not Bar Duty To Defend Patent-Holder For Allegedly Making False Accusations Of InfringementSt. Paul Mercury Ins. Co. v. Tessera, Inc., 2016 U.S. Dist. LEXIS 81464 (N.D. Cal. June 21, 2016)
In St. Paul v. Tessera, the district court decided on cross-motions for partial summary judgment that the insurer had a duty to defend an underlying lawsuit alleging that the insured had falsely accused others of violating its patent and breaching related licensing agreements, notwithstanding a policy exclusion for actual or alleged infringement or violation of intellectual property rights. Read More
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Although Gravamen Of Underlying Action Was Non-Covered Trademark Infringement, District Court Found Duty To Defend Based On Potential Covered Liability For Trade Dress Infringement In Insured’s AdvertisementsGreat Lakes Reinsurance UK PLC v. In & Out Fashion, Inc., 2016 U.S. Dist. LEXIS 80656 (C.D. Cal. June 20, 2016) Categories: Duty to Defend – Personal and Advertising Injury Coverage – Intellectual Property Exclusion – Trade Dress In Your Advertisement In Great Lakes Reinsurance v. In & Out Fashion, the district court decided on cross-motions for partial summary judgment whether a commercial general liability insurer had a duty to defend an underlying lawsuit for damages and injunctive relief arising out of the insured garment merchant’s alleged advertising, offering to sell, sale, and distribution of products that infringed various intellectual property rights of the clothing company Forever 21. Read More
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Insurer Had No Duty To Defend Or Indemnify Claims Based On Unpaid WagesGranite Outlet, Inc. v. Hartford Casualty Ins. Co., 2016 U.S. Dist. LEXIS 74238, No. 2:14-cv-00575-TLN-EFB (June 7, 2016)
In Granite Outlet, Inc. v. Hartford Casualty Ins. Co., the district court granted a liability insurer’s motion to dismiss with prejudice an action seeking liability insurance benefits for the defense and settlement of two unpaid wage claims. Read More
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District Court Rejects Insured’s Attempts to Compel Production of Post-Suit Claims Handling InformationGenesis Ins. Co. v. Magma Design Automation, Inc., 2016 U.S. Dist. LEXIS 70886 (May 31, 2016)
In Genesis Ins. Co. v. Magma Design Automation, Inc., the insured, Magma Design Automation, Inc. (“Magma”), unsuccessfully attempted to compel the production of its insurer’s claim file relating to the very claim in litigation between them. Read More
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District Court Finds It Cannot Decide Rescission Claim As A Matter Of Law Due To Discrepancy Between Witness Deposition Testimony and Subsequent ErrataIll. Union Ins. Co. v. Intuitive Surgical, Inc., 2016 U.S. Dist. LEXIS 70234 (N.D. Cal. May 27, 2016)
In Intuitive Surgical, the district court concluded that the relevant date for assessing an insurer’s knowledge of concealed facts for the insurer’s rescission claim is the date the policy was issued when later than the policy’s inception date; further, the court found that a difference between the underwriters’ deposition testimony and later notices of errata concerning the date they first learned of the allegedly concealed facts precluded a summary determination. Read More
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