Recent Cases -

2010

Silvers v. State Board of Equalization (9/30/10) Surplus line insurance premiums are subject to a statutorily based 3 percent surplus line premium tax but are not subject to an additional 2.35 percent premium tax because issuance of surplus line policies does not constitute business done in California.

Colony Insurance Company v. Crusader Insurance Company (8/27/10) Where insured had liability policies with two companies, and one of them refused coverage based on alleged material misrepresentations, and second insurer argued that the alleged misrepresentations were immaterial and sued for equitable contribution and declaratory relief, plaintiff’s claim that defendant waived its right to deny coverage or was estopped from denying coverage--based on its alleged failure to follow its own internal guidelines in investigating the statements made in insured’s application--were forfeited where raised for the first time in a request for statement of decision. Insurer’s internal guidelines, standing alone, created no enforceable rights on co-insurer’s part.

Sprinkles v. Associated Indemnity Corporation (9/1/10) Where commercial general liability policy covered insured's employees "but only for acts within the scope of their employment while performing duties related to the conduct of [insured’s] business," and employee--who caused fatal motor vehicle collision on his way to work--was required to drive to work in his own vehicle to be able to travel to various locations, employee was an insured under the policy, and claim was unambiguously excluded from coverage as one arising from the operation of a motor vehicle by an insured.

HCM Healthcare, Inc v. California Insurance Guarantee Association (8/30?10) California Insurance Guarantee Association is not required to pay claim that was not timely filed in sister state liquidation proceeding even if the laws of that state grant the local regulators discretion to allow such untimely claims.

Village Northridge Homeowners Association v. State Farm Fire and Casualty Company (8/30/10) Insured who settled disputed insurance claim with first party insurer, executed a full and complete release of claim, and kept the money the insurer paid in the claim settlement without rescinding the release could not sue the same insurer for fraudulently inducing the insured to settle the claim for less than it was worth under the policy, where such action was precluded by the terms of the release. General contract rule that a party to a contract may elect to affirm the contract and sue for fraud damages does not apply where that party has waived that remedy under the terms of a release and has not rescinded it.

Schwartz v. Poizner (7/28/10) Insurance Code does not impose upon insurance commissioner a ministerial duty to seek any particular remedy for policyholders whose disability income claims were unfairly denied. Insurance commissioner did not abuse discretion by entering into settlement whereby insurers agreed to reevaluate improperly denied claims and to pay an $8 million penalty, where there was no evidence that commissioner's investigation was inadequate in any respect, and plaintiff did not rebut presumption that commissioner complied with his official duties in conducting the investigation.

Clarendon America Insurance Company v. Starnet Insurance Company (7/27/10) A provision in a commercial general liability insurance policy requiring the insurer to "defend the insured against any 'suit' seeking...damages" to which the insurance applies includes the duty to defend the insured in proceedings under the Calderon Act, which requires a common interest development association to satisfy certain dispute resolution requirements with respect to the builder, developer, or general contractor before the association may file a complaint in court for construction or design defects.

Hyundai Motor America v. National Union Fire Insurance Company of Pittsburgh, PA (4/5/10)
Insurer who was obligated to defend insured from advertising injury claims had a duty to defend insured from a patent infringement claim alleging insured had misappropriated a third party’s patented marketing methods or marketing systems under California law. When an advertisement itself infringes on a patent, the causal connection requirement linking the advertisement to the alleged injury is met.

 Dominguez v. Financial Indemnity Company (3/20/10) Placement of automobile policy's lesser coverage limitations within insuring agreement on page three, combined with multiple emphasized references to coverage limitations on the face page, table of contents, and page seven of policy, conspicuously advised insured that coverage for a permissive user of the insured vehicle are not coextensive with insured's and explicitly informed insured what those limits were. Where insured was advised that coverage no greater than the minimum limits would be provided if vehicle were operated by "a person other than you, a relative, and an agent or employee of you or a relative in the course and scope of their agency or employment," and further that the coverage reduction "does not apply to any liability incurred by you or a relative," such language was sufficiently plain and clear to render limitation enforceable.

Risely v. Interinsurance Exchange of the Automobile Club (3/26/10) The mere fact that insurer provided insured a defense under one policy did not necessarily insulate it from liability for alleged breach of the duty to defend and settle under a second policy, and trial court erred in concluding that refusal to defend under second policy was of "no consequence" where it potentially increased the insured's exposure to personal liability.

Gray v. Begley (March 22, 2010) Key factor in determining whether an insurer is bound by a settlement reached without insurer’s participation is whether insurer provided insured with a defense, not whether insurer denied coverage. Therefore, when an insurer provides an insured a defense under a reservation of rights and that insured subsequently reaches a private settlement with a third-party claimant without insurer’s participation, insurer may intervene in the underlying action brought by claimant to protect its own interests—including the right to seek a set-off of the judgment against insured based on a prior settlement by claimant with another party.

Intergulf Development v. Superior Court (Interstate Fire & Casualty Company (March 24, 2010)
Trial court abused its discretion in granting insurer's petition to compel binding arbitration of an alleged Cumis fee dispute under Civil Code Sec. 2860(c) in an action by an insured for breach of contract and bad faith where there had been no determination that insurer had a duty to defend and the parties disputed whether insurer satisfied that duty and its obligations.

Chandler v. State Farm Mutual Automobile Insurance Company (March 17, 2010) Plaintiff lacked standing to sue under the made-whole rule absent a showing that he was foreclosed from recovering from third-party tortfeasor's insurer because of defendant's act of seeking and obtaining reimbursement from that insurer; plaintiff could not show defendant had impaired plaintiff's ability to recover rental car expenses without having attempted to recover those expenses himself.

Scottsdale Insurance Company v. Century Surety Company (March 10, 2010) Where multiple insurance companies have a duty to defend a mutual insured in a legal action and one declines to participate in the defense of the common insured, insurer seeking equitable contribution from non-participating insurer must prove that it paid more than its "fair share" of defense and indemnity costs for the common insured and must produce evidence necessary to calculate such "fair share"; insurer cannot recover equitable contribution from another insurer any amount that would result in the first insurer paying less than its "fair share" even if that means that the otherwise liable second insurer will have paid nothing.

Abdelhamid v. Fire Insurance Exchange (2/22/10) Where insured did not provide insurer with address where she was living when property she had insured was damaged by fire and failed to provide insurer with an estimated value of loss for other damages buildings, detailed estimates of repair, inventory of damaged personal property, and receipts and records supporting her additional living expenses, no reasonable trier of fact could have found insured substantially performed her obligations or complied with condition of her insurance contract requiring her to provide a proof of loss with supporting documentation.

City of Laguna Beach v. California Insurance Guarantee Association (3/3/10) Insurance Code Sec. 1063.1(c)(13) did not abrogate common law rule that California Insurance Guarantee Association does not need to reimburse an employer who was covered by a primary workers’ compensation policy from an insolvent insurer and was also self-insured.

Interstate Fire and Casualty Insurance Company v. Cleveland Wrecking Company (2/22/10) A general liability insurer that has paid a claim to a third party on behalf of its insured may have an equitable right of subrogation against other parties who contributed to the harm suffered by the third party under an equitable indemnification theory and other parties who are legally liable to insured for the harm suffered by the third party under a contractual indemnity theory. A good faith settlement will preclude claims based on an equitable indemnity theory but not claims based on a contractual indemnity theory.

 Forecast Homes, Inc. v. Steadfast Insurance Company (1/12/10) Where subcontractors' policies defined "you" to mean the named insured and specified that "it is a condition precedent to our liability that you make actual payment...until you have paid" the self-insured retention amount, and further stated "Payments by others, including but not limited to additional insureds or insurers, do not serve to satisfy the self-insured retention," it was unambiguous that payments by general contractor, whom subcontractors were contractually required to add to their general liability policies as an additional insured, did not satisfy the self-insured retention.

Nieto v. Blue Shield of California Life & Health Insurance Company, (1/19/2010) Insurer was entitled to rescission as a matter of law where insured failed to disclose material information about her medical condition and treatment on her application; evidence showing that insured lacked any intent to defraud failed to create a triable issue of fact.
Insurer had no statutory duty to show that insured’s application had been physically attached to insurance policy or to conduct further inquiries during underwriting process to ascertain truthfulness of insured’s representations before issuing policy.

December 2009

Mahnke v. Superior Court of Los Angeles County, No. B216110 (Cal. App. 12/21/2009) (Cal. App., 2009)
Disclosure and disqualification standards for neutral arbitrators set forth in California Arbitration Act do not apply to party-selected appraisers in fire insurance disputes under Insurance Code Sec. 2071, but such appraisers may--under common law conflict-of-interest rules--be disqualified based on the existence of a substantial business relationship between appraiser and a party.

October 2009

Zhang v. Superior Court of San Bernardino County, E047207 (Cal. App. 10/29/2009) (Cal. App., 2009)
Fraudulent conduct by an insurer, connected with conduct that would violate Insurance Code Sec. 790.03 et seq. can also give rise to a private civil cause of action under the Unfair Competition Law.

August 2009

Hinton v. Beck, C056911 (Cal. App. 8/11/2009) (Cal. App., 2009)

An insurer who denied coverage and a defense to policyholder when policyholder was sued by an injured plaintiff could not intervene in the action between the plaintiff and policyholder as insurer did not have a direct interest in that litigation.

July 2009

Maystruk v. Infinity Insurance Company, B209404 (Cal. App. 7/9/2009) (Cal. App., 2009)

Insurance Code Sec. 758.5 does not require 100 percent coverage for reasonable costs of vehicle repair irrespective of where the vehicle is taken for such repairs.

June 2009

Onebeacon America Insurance Company v. Fireman's Fund Insurance Company, B209526 (Cal. App. 6/24/2009) (Cal. App., 2009)

An insurer's obligation of equitable contribution for defense costs arises where, after notice of litigation, a diligent inquiry by the insurer would reveal the potential exposure to a claim for equitable contribution, thus providing that insurer with an opportunity for investigation and participation in the defense in the underlying litigation. The right of equitable contribution between insurers is not controlled by the contract between the insured and the insurer but by equitable principles, the application of which do not run afoul of the policy provision prohibiting voluntary payments.

May 2009

Coast Plaza Doctors Hospital v. Blue Cross of California, B205892 (Cal. App. 5/11/2009) (Cal. App., 2009)
Knox-Keene Health Care Service Plan Act regulates insurance because it imposes conditions on the right of insurers to conduct their business in California and thus falls under the purview of the Employee Retirement Income Security Act’s savings clause.

First National Insurance Company v. Cam Painting, Inc., B200830 (Cal. App. 5/15/2009) (Cal. App., 2009)
A surety that issued a payment and performance bond to a contractor and subcontractor on the same construction project could not allocate the loss from the subcontractor’s failure to pay a materials supplier between the bonds. As a surety’s liability is commensurate with that of a principal, trial court erred in granting contractual award of attorney fees to obligee against principal only; surety and principal were jointly and severally liable for such an award.

March 2009

Sentry Select Ins. v. Fidelity & Guar. Ins., 205 P.3d 1084, 92 Cal.Rptr.3d 639, 46 Cal. 4th 204 (Cal., 2009)
Where insured lessor routinely leased nearly three quarters of its commercial fleet of trailers to independent truckers with whom it contracted for hauling jobs, and leased two trailers to independent trucker who in turn made a profit from their use but was involved in multiple-vehicle accident, activity was not "merely incidental" to lessor’s business and qualified under former Insurance Code Sec. 11580.9(b) for conclusive presumption that policy was excess to other insurance covering the loss.

Broberg v. Guardian Life Insurance Company of America, B199461 (Cal. App. 3/2/2009) (Cal. App., 2009)
Consumers Legal Remedies Act does not apply to sale of insurance products.

Troyk v. Farmers Group, Inc., D049983 (Cal. App. 3/10/2009) (Cal. App., 2009)
A "premium," as used in Insurance Code Sec. 381(f)--which sets forth specific disclosures that must be included in an insurance policy--includes the service charge imposed for payment of the stated premium for a policy’s one-month term. Assuming that Sec. 381(f) may be complied with by reference in policy to other documents setting forth the premium, references in declarations page did not suffice where they were ambiguous or uncertain regarding incorporation of such documents.
Insurance Code Sec. 381(f)'s disclosure requirement is mandatory and not merely directory; inclusion of premium information in other documents does not constitute substantial compliance with requirement of an express statement in an insurance policy of the premium charged. Insurer was properly held liable under Unfair Competition Law for restitution of service charges not properly disclosed where insurer was the ultimate beneficiary of such charges paid directly to its subsidiary.

February 2009

Executive Risk Indemnity, Inc. v. Jones, A119005 (Cal. App. 2/20/2009) (Cal. App., 2009)

Indemnity-only policy that did not impose a duty to defend upon insurer but obligated insurer to pay for any loss occasioned by a wrongful act which insured became legally obligated to pay.
Insurer was bound by results of arbitration proceeding and could not contest validity of insured's liability or amount of damages because issues were conclusively established by arbitration award.