Articles Posted in Insurance Law

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Plaintiff Carmen Zubillaga was injured in an automobile accident. The other driver was at fault. Her insurer, defendant Allstate Indemnity Company (Allstate), rejected her demand for $35,000, the full amount of her remaining underinsured motorist (UIM) coverage, although it made her a series of offers increasing to $15,584 instead. After an arbitrator awarded plaintiff $35,000, the amount of her demand, she sued Allstate for breach of the implied covenant of good faith and fair dealing. While an insurance company has no obligation under the implied covenant of good faith to pay every claim its insured makes, the insurer cannot deny the claim, without fully investigating the grounds for its denial. To protect its insured’s contractual interest in security and peace of mind, it is essential that an insurer fully inquire into possible bases that might support the insured’s claim before denying it. The Court of Appeal found the problem in this case was that the undisputed facts showed the insurer’s opinions were rendered in October and November 2012, but insurer continued to rely on them through the arbitration in September 2013, without ever consulting with its expert again or conducting any further investigation. Summary judgment in favor of the insurer was reversed and the matter remanded for further proceedings. View "Zubillaga v. Allstate Indemnity Company" on Justia Law

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Pacific Bay treated an individual who was a subscriber to a Blue Shield health plan. It submitted invoices to Blue Shield for payment for the services rendered to the subscriber. Pacific Bay contends it was underpaid and brought suit against Blue Shield to recover the additional amount it claimed to be owed. The court sustained Blue Shield's demurrer to the first amended complaint (FAC) without leave to amend, finding that Pacific Bay had not shown that it was entitled to any payment from Blue Shield. As an out-of-network, nonemergency service provider, Pacific Bay was entitled to payment for treating Blue Shield's subscriber under the terms of the applicable evidence of coverage (EOC). Pacific Bay did not allege Blue Shield paid it improperly under the EOC, nor did it argue that it could allege additional facts to support such a claim. Pacific Bay claimed it was underpaid. Against this backdrop, Pacific Bay's other allegations did not give rise to any valid cause of action. View "Pacific Bay Recovery v. Cal. Physicians' Services" on Justia Law

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Garnes’s Richmond home was damaged by a kitchen fire. She had a fire insurance policy, with a limit of $425,000 from FAIR Plan Association, California’s insurer of last resort. Gaines claimed she should receive the amount it will cost her to repair the house, less an amount for depreciation, the net amount of which was agreed to be $320,549. FAIR argued the Policy and the Insurance Code allowed it to pay the lesser of that amount or the fair market value of the house, which at the time of the fire was $75,000. After examining Insurance Code, the court of appeals agreed with Garnes. Section 2051 provides that under an open fire insurance policy that pays “actual cash value,” as does the Gaines Policy, the actual cash value recovery is determined in one of two ways. For a “partial loss to the structure,” the measure is “the amount it would cost the insured to repair, rebuild, or replace the thing lost or injured less a fair and reasonable deduction for physical depreciation” or “the policy limit, whichever is less.” Construed in accord with its plain meaning, this provision, coupled with sections 2070 and 2071, sets a minimum standard of coverage that requires FAIR to indemnify Garnes for the actual cost of the repair to her home, minus depreciation, even if that amount exceeds the home's fair market value. View "California FAIR Plan Association v. Garnes" on Justia Law

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A workers' compensation insurance policy may be rescinded pursuant to Insurance Code section 650. A rescission is enforced by a civil action for relief based on rescission or by asserting rescission as a defense. In this case, the Board appealed an arbitrator's conclusion that, as a matter of law, the insurer could not rescind a workers' compensation insurance policy and that the policy was in effect. Because the arbitrator and the appeals board did not address and determine whether rescission was a meritorious defense to the employee's claim, the Court of Appeal annuled the appeal board's decision and remanded with directions to hear and determine whether the insurer was entitled to rescind, and did rescind, the policy at issue. View "Southern Insurance v. WCAB" on Justia Law

Posted in: Insurance Law

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The Act makes the builder who sells homes liable for violations without proof of negligence, while general contractors and subcontractors not involved in home sales are liable only if the plaintiff proves they negligently caused the violation in whole or part. The jury found the grading subcontractor, defendant Gerbo Excavating, was not negligent in any respect. The trial court, not the jury, found the builder/seller, Knotty Bear Development, Inc. and Knotty Bear Construction, Inc. (collectively Knotty Bear), liable after Knotty Bear failed to appear for trial. Plaintiffs sought redress from Gerbo under common law negligence theories for the tree damage, because they argued tree damage was not covered by the Act. The Court of Appeal found that plaintiffs failed to show tree damage was not covered by the Act: the jury found Gerbo was not negligent in any respect, even when the jury found building standards were violated. Finding no other basis for reversal, the Court affirmed the trial court’s judgment and post-trial orders. View "Gillotti v. Stewart" on Justia Law

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A medical device company, Heart Tronics, purchased directors and officers liability insurance policies from AXIS and HCC. The AXIS policy has been exhausted. Plaintiff, Heart Tronics' de facto officer, filed suit against HCC, alleging it defrauded him and breached the 2007 policy by failing to pay his litigation expenses on appeal. Plaintiff also filed suit against AXIS, alleging that it conspired with HCC to defraud him. The district court sustained the insurers' demurrers without leave to amend and dismissed the action. The court concluded that the AXIS demurrer was properly sustained because AXIS was a stranger to the HCC policy and owed no duties connected with it; the HCC demurrer was improperly sustained because when a policy expressly provides coverage for litigation expenses on appeal, an exclusion requiring repayment to the insurer upon a "final determination" of the insured's culpability applies only after the insured's direct appeals have been exhausted; and thus the court reversed as to HCC, and affirmed as to Heart Tronics, HCC Global Financial Products, HCC Insurance Holdgins, Inc., and the AXIS defendants. View "Stein v. AXIS Ins. Co." on Justia Law

Posted in: Insurance Law

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Defendant-appellant John Riddles pled guilty to one count of workers' compensation insurance fraud. His conviction grew out of his application for workers' compensation insurance, which fraudulently represented that a number of nurses who had been placed in residential care and skilled-nursing facilities by Riddles' staffing agency were computer programmers. His misrepresentation of the nurses as computer programmers substantially reduced the premium his agency was charged by the workers' compensation insurer that accepted his company's application; accordingly, the trial court required that Riddles pay, as restitution to the insurer, $37,000 in premiums the insurer would have earned in the absence of his misrepresentation. Contrary to his argument on appeal, a workers' compensation insurer could recover, as restitution under Penal Code section 1202.4, the premiums it would have earned in the absence of misrepresentations by an insurance applicant. The fact Riddles may have been able to establish that the Labor Code did not require that he provide workers' compensation coverage for the nurses did not relieve him of responsibility for providing the insurer with a fraudulent application or alter the fact the nurses were covered by the policy he obtained. View "California v. Riddles" on Justia Law

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This appeal stemmed from an application Mercury Casualty Co. (Mercury) filed in 2009 to increase its homeowners’ insurance rates. In denying the increase Mercury requested, the California Insurance Commissioner (the commissioner) made two decisions at issue on appeal. The commissioner determined: (1) under subdivision (f) of section 2644.10 of title 10 of the California Code of Regulations, Mercury’s entire advertising budget had to be excluded from the calculation of the maximum permitted earned premium because “Mercury[] aims its entire advertising budget at promoting the Mercury Group as whole” rather than “seek[ing] to obtain business for a specific insurer and also provid[ing] customers with pertinent information” about that specific insurer; (2) Mercury did not qualify for a variance from the maximum permitted earned premium under subdivision (f)(9) of section 2644.27 because “Mercury failed to demonstrate the rate decrease [that resulted from application of the regulatory formula] results in deep financial hardship.” Mercury and certain insurance trade organizations ("the Trades") unsuccessfully sought to challenge the commissioner’s decision in the superior court. On appeal, Mercury and the Trades raised three main issues: (1) the commissioner and the superior court erred in interpreting and applying section 2644.10(f) with regard to what constitutes institutional advertising expenses; (2) the Trades contended section 2644.10(f) violated the First Amendment to the United States Constitution because the regulation imposed a content-based financial penalty on speech; and (3) Mercury and the Trades contended the commissioner and the superior court erred in determining that Mercury did not qualify for the constitutional variance because the commissioner and the court wrongfully applied a “deep financial hardship” standard instead of a “fair return” standard. Finding no merit in these arguments, or any of the other arguments offered to overturn the judgment, the Court of Appeal affirmed. View "Mercury Casulaty Co. v. Jones" on Justia Law

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After Leigh Anne Flores injured plaintiff in an auto accident, plaintiff filed suit against Flores and Pacific Bell, her employer, for damages. Flores was driving a van Pacific Bell had furnished to her, but that she used for both business and personal purposes. The trial court found Pacific Bell, who self-insured the van, was not vicariously liable for Flores's actions because she was not acting in the course and scope of her employment at the time of the accident. In a subsequent arbitration involving only plaintiff and Flores, plaintiff was awarded over half a million dollars by the arbitrator. Geico, Flores's personal insurer, refused to pay the judgment. Plaintiff then filed suit against Geico, alleging breach of contract, bad faith, and declaratory relief. The trial court granted summary judgment for Geico. The court concluded that, under the circumstances here, because Flores was able to use the van for both business and personal purposes, and her personal use of the van at the time of the accident was not a departure from its customary use, the van was furnished to Flores for her regular use and there is no coverage under the GEICO policy. Accordingly, the court affirmed the judgment. View "Medina v. GEICO Indemnity" on Justia Law

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Navigators Specialty Insurance Company (Navigators) issued commercial general liability (CGL) insurance policies (the Policies) to Moorefield Construction, Inc. (Moorefield), a licensed general contractor. At issue in this appeal was the meaning, scope, and application of two standard provisions of the Policies. Moorefield appealed the judgment in favor of Navigators, where Navigators sought a declaration of its rights and duties under the Policies. Navigators' lawsuit was corollary to construction defect litigation arising out of the construction of a building to be used as a Best Buy store in Visalia. During the course of litigation, evidence obtained in discovery showed the most likely cause of flooring failure was that flooring tiles had been installed on top of a concrete slab that emitted moisture vapor in excess of specifications. Evidence also showed that Moorefield knew of the results of two tests showing excessive moisture vapor emission from the concrete, yet had directed the flooring subcontractor to install the flooring anyway. Evidence also established the cost to repair the flooring was $377,404. The litigation settled for $1,310,000. On Moorefield's behalf, Navigators contributed its policy limits of $1 million toward the settlement. Moorefield independently contributed an additional $150,000. The remaining $160,000 was made up of contributions from Best Buy Stores, LP (Best Buy), and the defendant subcontractors. In the meantime, Navigators filed this lawsuit seeking a declaration it had no duty under the Policies to defend or indemnify Moorefield. Navigators contended the flooring failure was not a covered occurrence under the Policies because it was not the result of an accident. Following a bench trial, the trial court found there was no covered occurrence under the Policies because Moorefield had directed the flooring subcontractor to install the flooring despite Moorefield's knowledge that moisture vapor emission from the concrete slab exceeded specifications. The trial court found that Moorefield had not met its burden of proving what portion, if any, of the $1 million paid by Navigators came within the supplementary payments provision of the Policies. The trial court also found that Navigators had no duty to make payments under the supplementary payments provision because Moorefield's liability arose from a noncovered claim. The judgment required Moorefield to reimburse $1 million to Navigators. Moorefield's appeal raised two primary issues, one related to the coverage "A" provision of the Policies and the other related to the supplementary payments provision of the Policies. The Court of Appeal found that Navigators had no duty to indemnify Moorefield and was entitled to recoup that portion of the $1 million paid toward settlement that was attributable to damages. The Court also found that Navigators had a duty to compensate Moorefield under the supplementary payments provision of the Policies. That duty was not extinguished by the determination that Navigators had no duty to indemnify. The Court of Appeal therefore affirmed in part, reversed in part, and remanded for a new trial limited to the issue of the amount of the $1 million paid by Navigators that was attributable to damages, not attorney fees and costs of suit under the supplementary payments provision. View "Navigators Specialty Ins. Co. v. Moorefield Const." on Justia Law