Justia California Court of Appeals Opinion Summaries

Articles Posted in Insurance Law
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In this case, the Court of Appeal, Fourth Appellate District Division One State of California decided on a matter concerning an automobile insurance policy. The plaintiffs, Silvia Escarcega and Alberto Molinar, who are the parents of Tania Molinar, filed a lawsuit against 21st Century Insurance Company (defendant) for refusal to defend or indemnify their daughter in a lawsuit brought against her following a car accident she caused. The insurer denied coverage on the grounds that the policy had been cancelled due to nonpayment of premiums prior to the accident. The plaintiffs argued that the insurer had a duty to give advance notice of cancellation not only to them as policyholders but also to their adult daughter who was named as an insured driver on their policy and whose vehicle was also insured under the policy.The court held that under Insurance Code section 662, subdivision (a), the insurer was required to give advance notice of cancellation to the adult daughter. Because the insurer did not give notice to the adult daughter, the policy was still legally in effect when she got into the accident driving her covered vehicle without knowledge of the purported cancellation. Therefore, the court reversed the trial court's summary judgment in favor of the insurer on claims arising out of its refusal to defend or indemnify the daughter. The court remanded the case for further proceedings. View "Molinar v. 21st Century Insurance Co." on Justia Law

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A dispute arose between The Pep Boys — Manny, Moe & Jack and The Pep Boys Manny Moe & Jack of California LLC (collectively, Pep Boys) and their insurers, Old Republic Insurance Company (Old Republic); Executive Risk Indemnity Company, formerly known as American Excess Insurance Company (American Excess); and Fireman’s Fund Insurance Company (Fireman’s Fund). Pep Boys had been sued by hundreds of people claiming harm from exposure to asbestos in products sold by Pep Boys. Following these claims, Pep Boys sought coverage from their insurers who had sold them a "tower" of commercial general liability policies providing coverage between February 1, 1981, and July 1, 1982.The insurers claimed that their respective policies provided only a single aggregate annual limit, while Pep Boys filed a declaratory judgment action against them, arguing that each policy provided two aggregate annual limits, one for the first 12 months and one for the remaining period. The trial court ruled in favor of the insurers, holding that the policies each provided only a single aggregate limit.In the appeal, the Court of Appeal of the State of California First Appellate District Division Four held that Old Republic's and Fireman’s Fund's policies, which were for terms longer than 12 months, contained two separate annual periods for the purposes of the annual aggregate limits of liability. However, it agreed with the trial court that the American Excess policy, which had different language, had only one period for purposes of that policy’s annual aggregate limits. Therefore, the appellate court reversed the trial court’s judgment in part. View "The Pep Boys v. Old Republic Insurance Company" on Justia Law

Posted in: Insurance Law
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The plaintiff, Kathryn Tornai, filed a lawsuit against her insurance company, CSAA Insurance Exchange, alleging breach of contract and bad faith for not paying her underinsured motorist claim. In response, CSAA filed a motion to compel arbitration, in line with a provision in Tornai's automobile policy. The trial court denied the motion, leading to CSAA's appeal. The Court of Appeal of the State of California First Appellate District Division Two reversed the trial court's decision. It concluded that the parties disagreed over the amount of underinsured motorist damages owed to Tornai, leading to the requirement for arbitration under section 11580.2, subdivision (f) and the terms of the policy. The appellate court found that the trial court erred in denying CSAA's motion to compel arbitration. Therefore, it instructed the lower court to grant CSAA's motion to compel arbitration of the underinsured motorist damages. View "Tournai v. CSAA Insurance Exchange" on Justia Law

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This is a coverage dispute between Pep Boys and their insurers, Old Republic Insurance, Executive Risk Indemnity, and Fireman’s Fund Insurance, over the interpretation of their insurance policies' annual aggregate limits. The policies were for terms longer than 12 months. The core issue was whether the policies contained two separate annual periods for the purposes of the annual aggregate limits of liability.The Court of Appeal of the State of California, First Appellate District, Division Four, held that for Old Republic and Fireman’s Fund's policies, which had similar language, the phrase "each annual period" within the policy term created two separate aggregate limits of liability, one for the first 12 months and another for the remaining period. The court reasoned that both the language of the policies and the parties' reasonable expectations supported this interpretation. The court noted that the policies' language could not be applied literally because it would either dilute the benefits or create a gap in coverage, neither of which were the insured's intention when extending the policies.However, the court agreed with the trial court that the American Excess policy, which had different language, had only one period for the purpose of that policy’s annual aggregate limits. The court noted that American Excess's policy unambiguously set its limits for the entire duration of the policy, not based on annual periods within the policy term.In conclusion, the court reversed the trial court's judgment in part, ruling in favor of Pep Boys for Old Republic and Fireman’s Fund's policies, and in favor of American Excess regarding its policy. View "The Pep Boys v. Old Republic Ins. Co." on Justia Law

Posted in: Insurance Law
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In this case, the National Hockey League and associated parties (plaintiffs) sued their insurer, Factory Mutual Insurance Company (defendant), over losses incurred due to the COVID-19 pandemic under a commercial insurance policy. The plaintiffs claimed that their policy covered physical loss or damage to property due to COVID-19 and sought to overturn a lower court order that struck down most of their coverage theories.The Court of Appeal of the State of California, Sixth Appellate District, found that while the plaintiffs had adequately alleged physical loss or damage from the coronavirus, their insurance policy's contamination exclusion unambiguously excluded coverage for losses due to viral contamination. The court concluded that the policy excluded both the physical loss or damage caused by viral contamination and the associated business interruption losses.The plaintiffs had alleged that the virus physically damaged their property by changing the chemical composition of air and altering the molecular structure of physical surfaces. They also claimed that they had to close their hockey arenas, cancel games, limit fan access, and undertake various remedial measures to mitigate the virus's impact. However, under the terms of their insurance policy, the court found that these losses were not covered because they resulted from viral contamination, which was excluded from coverage under their policy. Thus, the court denied the plaintiffs' petition for review. View "San Jose Sharks, LLC v. Super. Ct." on Justia Law

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JRK Property Holdings, Inc. appealed from the order of dismissal entered after the trial court granted a motion for judgment on the pleadings filed by primary insurer Ironshore Specialty Insurance Company (Ironshore) and excess insurers RSUI Indemnity Company (RSUI), Evanston Insurance Company (Evanston), and others (collectively, Insurers). JRK sued Insurers for breach of contract and declaratory judgment after Insurers denied coverage for JRK’s lost business income that resulted from the  COVID-19 pandemic and associated government orders. The trial court entered an order of dismissal in favor of Insurers. JRK appealed.   The Second Appellate District reversed the trial court’s order of dismissal except as to RSUI and Evanston. The court remanded for the trial court to vacate its order granting the motion for judgment on the pleadings and to enter a new order granting the motion without leave to amend as to RSUI and Evanston and denying the motion as to all other defendants. The court explained that under MacKinnon v. Truck Ins. Exchange (2003), the historical background of the pollution exclusion shows its inclusion in insurance policies was intended to address only traditional sources of environmental pollution. The court rejected Insurers’ argument that inclusion of the term “virus” in the definition of a contaminant transforms an exclusion that applies to “pollution” into one that encompasses the spread of a virus due to the normal human activities of breathing and touching surfaces. The court further concluded that the RSUI pathogen exclusion applies because it bars coverage for “losses or damage” caused by the discharge or dispersal of “pathogenic” material. The Evanston pathogen exclusion specifically bars loss or damage caused by the spread of an organic pathogen, defined to include a virus. View "JRK Property Holdings, Inc. v. Colony Ins. Co." on Justia Law

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Endeavor Operating Company, LLC (Endeavor) is a “holding company” that owns “various subsidiaries in the entertainment, sports, and fashion business sectors.” Endeavor sued the insurers for (1) declaratory relief and (2) breach of contract related to COVID-19 closures. The insurers demurred to the complaint. The trial court issued a ruling (1) sustaining the demurrer without leave to amend and (2) denying Endeavor’s motion for a new trial. The court modified its initial ruling to find that the “actual” or “threatened presence” of COVID-19 or the SARS-CoV-2 virus “does not constitute a physical loss or damage required to trigger coverage for property insurance coverage” but reaffirmed its initial ruling that the contamination/pollution exclusion applied, which in the court’s view obviated its need to address the argument Endeavor raised for the first time in its new trial motion. Endeavor appealed.   The Second Appellate District affirmed. The court concluded that the insurance policy unambiguously requires “direct physical loss or damage to property” before Endeavor may recover under the business interruption clauses. The court held that Endeavor failed as a matter of law to plead “direct physical loss or damage to property.” The court explained that California courts are in accord that the phrase “direct physical loss or damage to property” means a “‘distinct, demonstrable, physical alteration’” of the insured property. This is the default definition to be applied where a policy does not provide a different definition of “direct physical loss or damage.” The policy here provides no different definition. View "Endeavor Operating Co., LLC v. HDI Global Ins. Co." on Justia Law

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Appellant, a former employee of the City of La Habra Heights (City), pled no contest to a felony that arose out of the performance of her official duties. Under the terms of Appellant’s plea agreement, the conviction was later reduced to a misdemeanor under Penal Code section 17 and then dismissed under Penal Code section 1203.4. After Respondent California Public Employees’ Retirement System (CalPERS) determined that Appellant forfeited a portion of her retirement benefits as a result of her felony conviction, she filed a petition for writ of administrative mandate. The trial court denied her petition.   The Second Appellate District affirmed. The court concluded the trial court did not err in denying the petition because, consistent with the language and purpose of section 7522.72, Appellant’s retirement benefits were subject to forfeiture upon her no-contest plea to a job-related felony, notwithstanding the subsequent reduction to a misdemeanor and dismissal of the charge. Further, the court explained that Appellant asserts that section 7522.72 is unconstitutional, but she fails to present any cognizable argument or legal authority to support her claim. View "Estrada v. Public Employees' Retirement System" on Justia Law

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The insurer, in this case, had notice of the hospital’s lien for treatment provided to the patient and, pursuant to a settlement agreement with the patient, gave him a check for the lien amount made payable to both him and the hospital. The hospital, Long Beach Memorial Medical Center, claims this action did not comply with the Hospital Lien Act (HLA) and sued the insurer who wrote the check, Allstate Insurance Company, for violating the HLA. The trial court granted Allstate’s motion for summary judgment, ruling Allstate’s two-payee check, which was never cashed, satisfied its obligation under the HLA.   The Second Appellate District reversed. The court concluded that merely delivering to the patient (or, in this case, his attorney) a check for the lien amount, made payable to both the patient and the hospital, is not a payment in satisfaction of the hospital’s lien under the HLA. The court explained Allstate maintains that it made this payment to the Medical Center concurrent with payment to the patient and that, therefore, the Medical Center cannot establish Allstate made a settlement payment to the patient without paying the Medical Center the amount of its lien. The court explained that Allstate declined to specify which check made payable to the Medical Center as copayee—the February 2020 check or the March 2021 check— Allstate claims satisfied its payment obligation to the Medical Center. However, neither check was a payment to the Medical Center. Moreover, Allstate does not invoke the exception to the general rule here. View "Long Beach Memorial Medical Center v. Allstate Ins. Co." on Justia Law

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Plaintiff and appellant Rhonda S. is the conservator, appointed pursuant to section 5350 of the Lanterman-Petris Short Act (LPS), of her adult son David S. Plaintiff sued Defendants and respondents Kaiser Foundation Health Plan, Inc. and Kaiser Foundation Hospitals for a declaration of their obligations, under LPS and the terms of David’s health plan, to transport and accept for “assessment and evaluation” (each as defined in LPS) conservatees like David upon their conservators’ demand. The trial court sustained Kaiser’s demurrer.
The Second Appellate District affirmed. The court explained that it rejects Plaintiff’s implication that an LPS conservatee is per se suffering from an “Emergency Medical Condition” at all times following the judicial determination of grave disability. The purposes of LPS conservatorship include providing treatment to the conservatee. (Section 5350.1.) To assume a conservatee’s condition remains static following the conservatorship order is to assume treatment is always ineffectual. We are offered no basis for such an assumption. For a mental health condition to be an “Emergency Medical Condition” under the plan, “acute symptoms of sufficient severity” must result in an “immediate” specified danger or mental health disorder-induced disability. Second, even if conservatees were in a state of perpetual “Emergency Medical Condition” within the meaning of the plan, Plaintiff’s requested declaration would eliminate the coverage requirement that a “reasonable person would have believed that the medical condition was an Emergency Medical Condition which required ambulance services.” View "Rhonda S. v. Kaiser Foundation Health Plan" on Justia Law