Justia California Court of Appeals Opinion Summaries

Santa Clara Valley Water District was insured by Century. In 2000, the District notified Century that it had been advised by the federal government of potential claims for natural resource damages resulting from mercury contamination in the Guadalupe River Watershed (NRD Claim). Century requested additional information, including the status of negotiations. Century made several similar requests to the District between 2000-2002. In 2001, Century indicated that it had no duties under the primary policies because there was no lawsuit pending, had no duty to indemnify the District under the excess policies until the underlying limits of the policies had been exhausted, and was reserving its rights under the policies. The District subsequently signed a tolling agreement, was sued in federal court, and entered a Consent Decree without notifying Century.In 2008, the District notified Century of the existence of the lawsuit and the Consent Decree and stated that it had incurred $4 million in costs to comply with the Consent Decree. Century cited a No Voluntary Payment (NVP) provision. The District did not contact Century until 2014, when it completed its required Consent Decree work. In 2015, the District sued Century.The court of appeal affirmed summary judgment for Century. The NVP provisions barred the District from seeking indemnification for the expenses it incurred under the Consent Decree, without notifying Century or obtaining its consent. Those provisions apply to the settlement even though it was achieved through a consent decree rather than a traditional settlement agreement. Because the NRD Claim was disposed of by that settlement, there was no “adjudication” that gave rise to an “ultimate net loss” that gave the District the right to pay and seek indemnification. View "Santa Clara Valley Water District v. Century Indemnity Co." on Justia Law

An insured’s general liability insurer defended under a reservation of rights, and paid out its $2 million policy limits to settle the lawsuit. The insured’s workers’ compensation and employers’ liability insurer denied coverage and did not participate in the defense or settlement. This lawsuit followed, with the general liability insurer suing the workers’ compensation and employers’ liability insurer for equitable contribution. Following a bench trial, the trial court entered judgment for the general liability insurer, awarding roughly half the cost of defense and indemnity. The Court of Appeals reversed: an equitable contribution claim only lies if the two insurers share the same level of liability on the same risk as to the same insured. In this case, the general liability insurer is not entitled to equitable contribution because it did not insure the same risk as the workers’ compensation and employers’ liability insurer. View "California Capital Ins. Co. v. Employers Compensation Ins. Co." on Justia Law

This appeal from summary judgment in favor of Sequoia Insurance Company (Sequoia) was one of thousands of cases nationwide involving a claim for business interruption coverage arising out of the COVID-19 pandemic. The outcome here turned on whether there was evidence creating a triable issue that the insured, Best Rest Motel, Inc. (Best Rest), sustained lost business income “due to the necessary ‘suspension’ ” of its operations “caused by direct physical loss of or damage” to the insured property. Best Rest contended its case fell directly within the exception discussed by the Court of Appeal in Inns-by-the-Sea v. California Mut. Ins. Co., 71 Cal.App.5th 688 (2021). Though the Court found Inns might undermine, if not entirely foreclose Best Rest’s case, the Court limited its holding by positing in dicta a “hypothetical scenario” where “an invisible airborne agent would cause a policyholder to suspend operations because of direct physical damage to property.” Here, the Court determined Best Rest's argument failed because the record contained no evidence creating a triable issue that the hotel “could have otherwise been operating” but for the presence of COVID-19 on the premises. Best Rest’s own evidence established the exact opposite was true: its vice president and operating partner testified that the phones were “ringing off the hook[ ]” with cancellations—not because of COVID-19 in the hotel, but because of government shut down orders and travel restrictions that shuttered tourism. Accordingly, the Court affirmed summary judgment in the insurance company's favor because there was no evidence creating a triable issue that COVID-19 in the hotel caused the claimed lost income. View "Best Rest Motel, Inc. v. Sequoia Insurance Co." on Justia Law

The prosecution filed a complaint alleging that a defendant committed a lewd or lascivious act on a child by force, violence, duress, menace, and fear. The North River Insurance Company and its bail agent (collectively, North River) posted a $100,000 bond to release the defendant. The trial court declared the bond forfeited when the defendant did not appear for a hearing on February 22, 2018. North River moved to vacate the forfeiture and to exonerate the bond under section 1305, subdivision (d) or (g). In the alternative, it moved to toll time under section 1305, subdivision (e) or (h). On July 10, 2019, the court entered a judgment of $100,000 against North River. North River appealed.   The Second Appellate District affirmed. The court explained it decided a similar case against a surety in People v. Tingcungco (2015) 237 Cal.App.4th 249 (Tingcungco). The court reasoned that North River’s position is contrary to the language and legislative history of Penal Code section 1305, subdivisions (g) and (h). North River posted a bail bond on a defendant who fled California. North River chased him but found him too late to get the prosecution’s decision on extradition, which is a necessary part of the statutory process. To save itself now, North River maintains legislative purpose should override, or guide, the interpretation of the words of this statute. However, the court wrote, rescuing anyone who may have pledged assets as security for the bond is not an issue before the court. View "P. v. The North River Insurance Company" on Justia Law

This case arose out of a qui tam action against Prime Healthcare Services—Encino Hospital, LLC (Encino Hospital) and others to impose civil penalties for violation of the Insurance Fraud Prevention Act (IFPA), Insurance Code section 1871 et seq. The State of California and relator (Plaintiffs) appealed from a judgment entered after a bench trial in which the court found insufficient evidence to support their allegations that Defendants engaged in insurance fraud by billing insurers for services performed in a detox center for which they had no appropriate license, and by employing a referral agency to steer patients to the center.   The Second Appellate District affirmed the judgment. The court explained that, CDI alleged that Encino Hospital misrepresented to insurers that it was properly licensed to provide detox services when it was not. The trial court found no evidence suggesting that Defendants presented a false claim to any insurer. The court agreed, reasoning that no authority of which it is aware or to which it has been directed obligates Encino Hospital to hold any license other than its license as a general acute care hospital. Because Encino Hospital needed no separate license or approval, and no evidence showed it concealed any provider, the CDI’s cause of action for false claims failed for lack of a predicate. View "State of Cal. v. Encino Hospital Medical Center" on Justia Law

Shusha, Inc., dba La Cava (La Cava) appeals from the judgment of dismissal entered after the trial court sustained without leave to amend the demurrer filed by Century-National Insurance Company (Century-National) to La Cava’s first amended complaint. La Cava sued Century-National for breach of an insurance contract and related claims after Century-National denied coverage for La Cava’s lost business income as a result of its suspension of restaurant operations in March 2020 due to the COVID-191 pandemic and associated government shutdowns.   On appeal, La Cava contended the trial court erred in concluding the alleged presence of the COVID-19 virus in its restaurant did not constitute “direct physical loss of or damage to” the restaurant necessary for coverage under the terms of the policy at issue. La Cava also argued Century-National acted in bad faith by summarily denying coverage without investigating La Cava’s claim.   The Second Appellate District reversed the trial court’s order and remanded for the trial court to vacate its order sustaining the demurrer without leave to amend and to enter a new order overruling the demurrer. The court held that La Cava’s allegations that contamination by the COVID-19 virus physically altered its restaurant premises were sufficient to withstand demurrer. The court explained that Century-National’s denial of coverage just three weeks after La Cava tendered its claim and in the earliest days of our understanding of the novel COVID-19 virus, cannot be deemed as a matter of law to have been made in good faith with reasonable grounds. View "Shusha, Inc. v. Century-National Ins. Co." on Justia Law

Plaintiff-appellant Chris LaBarbera hired Richard Knight dba Knight Construction (Knight) to remodel a house pursuant to a contract that provided Knight would defend and indemnify LaBarbera for all claims arising out of the work. Knight obtained a general liability insurance policy from defendant-respondent Security National Insurance Company (Security National) that covered damages Knight was obligated to pay due to bodily injury to a third party. As relevant here, the policy also covered Knight’s “liability for damages . . . [a]ssumed in a contract or agreement that is an ‘insured contract.’ ” Security National acknowledged the indemnity provision in Knight’s contract with LaBarbera was an “insured contract” within the meaning of the policy. The policy also provided, “If we defend an insured [i.e., Knight] against a suit and an indemnitee of the insured [i.e., LaBarbera] is also named as a party to the suit, we will defend that indemnitee” if certain conditions were met. During the remodeling work, a subcontractor suffered catastrophic injuries, and sued both LaBarbera and Knight. LaBarbera’s liability insurer (plaintiff-appellant Lloyd's of London Underwriters) defended him in that lawsuit, and Security National defended Knight. LaBarbera also tendered his defense to Knight and to Security National, but they either ignored or rejected the tender. After settling the underlying lawsuit for $465,000, LaBarbera and Underwriters sued Knight and Security National, seeking to recover the full $465,000 settlement amount and over $100,000 in expenses and attorney fees incurred defending LaBarbera in that lawsuit. Security National moved for summary judgment on the ground that all claims against it were barred because the undisputed facts established it did not have an obligation to defend or indemnify LaBarbera. The trial court granted the motion and entered judgment in favor of Security National. LaBarbera and Underwriters appealed, but the Court of Appeal affirmed, adopting different reasoning than the trial court. The Court agreed with Security National that the indemnitee defense clause in Knight’s general liability insurance policy did not bestow third party beneficiary rights on the indemnitee, LaBarbera, who benefitted only incidentally from the clause. Because LaBarbera was not a third party beneficiary under Knight’s policy, he was precluded from bringing a direct action against Security National. View "LaBarbera, et al. v. Security Nat. Ins. Co." on Justia Law

John’s Grill in San Francisco was closed or operating at limited capacity during the pandemic. The restaurant was covered by Sentinel’s “Spectrum Business Owner’s Policy,” providing first-party property coverage, third-party liability coverage, and umbrella liability coverage. Sentinel denied the Grill’s claim for business interruption coverage. The trial court upheld the denial.The court of appeal reversed. A nearly uniform line of cases has held that temporary loss of use of property due to the COVID-19 pandemic does not constitute “direct physical loss of or damage to” property for purposes of first-party insurance coverage; nearly all of these cases involved standard form language that was not customized in any material way. Sentinel’s policy, however, has customized language. Other cases have analyzed the undefined term “direct physical loss of or damage to” property. Sentinel’s policy, by endorsement, affirmatively grants coverage for “loss or damage” caused by a virus; a special definition of “loss or damage” is broad enough to encompass pervasive infiltration of virus particulates onto the surfaces of covered property. The coverage is expressly limited to situations in which the virus is the “result of” a listed cause, none of which John’s Grill has alleged. The court rejected Sentinel’s proposed broad reading, citing the illusory coverage doctrine. Insuring agreements should be read broadly in favor of coverage, View "John's Grill, Inc. v. Hartford Financial Services Group, Inc." on Justia Law

This appeal concerned a particular rate known as a “base rate,” which State Compensation Insurance Fund (State Fund) used to calculate premiums for its insureds. California Insurance Code section 11664(e)(6)(A) stated: “[i]f the premium rate in the governing classification for the insured is to be increased 25 percent or greater and the insurer intends to renew the policy, the insurer shall provide a written notice of a renewal offer not less than 30 days prior to the policy renewal date.” In a matter of first impression, the Court of Appeal found State Fund was not obligated to provide notice to cross-complainant Cover Right Roofing (Cover Right) under this statute. The increase at issue was not due to any change in the premium rate of Cover Right’s governing classification. Rather, a third party changed the applicable governing classification criteria, which caused Cover Right to be assigned a new governing classification with a higher premium rate. The statute did not require notice in such circumstances. Thus, the Court found the trial court correctly granted State Fund’s motion for summary judgment and affirm the judgment. View "Cover Right Roofing, Inc. v. State Compensation Ins. Fund" on Justia Law

Plaintiff sued Farmers New World Life Insurance Company (Defendant or Farmers) for breach of contract, breach of the covenant of good faith and fair dealing, and punitive damages in connection with a policy insuring the life of her ex-husband. The trial court granted summary judgment for Defendant on those claims, concluding it was undisputed that the ex-husband remained the owner of the policy until he died, and that he had changed the beneficiaries on the policy, reducing his ex-wife’s interest from 100 percent to 25 percent.   The Second Appellate District reversed, finding that the trial court failed to consider the terms of a divorce decree affecting ownership of the policy, and because Defendant’s agent repeatedly assured Plaintiff, up to and after the ex-husband’s death, that Plaintiff remained the sole beneficiary. Therefore, the court concluded disputed issues of material fact prevent summary judgment. View "Randle v. Farmers New World Life Insurance Co." on Justia Law