Preview: LexisNexis® Mealey's™ California Insurance Legal News
LexisNexis® Mealey's™ California Insurance Legal News
Headline California Insurance Legal News from LexisNexis®
Progressive Injury Exclusion Bars Coverage For Water Damage Suits, Judge Says
SAN FRANCISCO - A policy's continuous or progressive injury exclusion bars coverage for two underlying suits filed against an insured because the insured's repair work to address the water intrusion problems was completed more than four years before the inception of the policy, a California federal judge said Jan. 31 (Saarman Construction Ltd. v. Ironshore Specialty Insurance Co., No. 15-3548, N.D. Calif., 2017 U.S. Dist. LEXIS 13633).
California Appeals Panel Says No Additional Coverage Owed For Water Damages
SAN FRANCISCO - An insurer owes no additional coverage for water damages to an insured's condominium, the First District California Court of Appeal, Division Four, said Feb. 10 after determining that substantial evidence supports a jury's verdict in favor of the insurer (Greg Kawai v. State Farm Fire and Casualty Co., et al., No. A136569, Calif. App., 1st Dist., Div. 4, 2017 Cal. App. Unpub. LEXIS 1006).
Panel: Failure To Request Written Consent Before Settlement Negates Coverage
PASADENA, Calif. - The Ninth Circuit U.S. Court of Appeals on Jan. 19 found that a lower federal court properly applied California law in finding that a bank insured breached its professional liability insurance policy by failing to request or obtain the insurer's written consent before executing a settlement in an underlying mortgage loan dispute (OneWest Bank, FSB, v. Houston Casualty Co., No. 15-55579, 9th Cir.; 2017 U.S. App. LEXIS 993).
9th Circuit: Insurer Has Duty To Defend Against Product Disparagement Claims
PASADENA, Calif. - The Ninth Circuit U.S. Court of Appeals on Jan. 27 affirmed a lower federal court's judgment against an insurer on an insured's breach of contract and bad faith claims, finding that the insurer has a duty to defend its insured against two underlying product disparagement lawsuits brought by competitors (Millennium Laboratories, Inc. v. Darwin Select Insurance Co., No. 15-55227, 9th Cir., 2017 U.S. App. LEXIS 1533).
California High Court: Statutory Authority Supports Replacement Cost Regulation
SAN FRANCISCO - The Supreme Court of California on Jan. 23 held that statutory authority supports the California Insurance commissioner's 2011 regulation covering replacement cost estimates for homeowners insurance, reversing and remanding an appeals court's judgment that invalidated the regulation (Association of California Insurance Companies et al., v. Dave Jones, as commissioner, etc., No. S226529, Calif. Sup.; 2017 Cal. LEXIS 217).
Insureds Failed To File Suit Within 1-Year Limitation Period, Federal Judge Says
LOS ANGELES - Because insureds seeking coverage for damages to their home caused by a sewage backup did not file their lawsuit against their insurers until well after the policy's one-year limitation period expired, a California federal judge on Feb. 13 granted the insurers' motion for summary judgment and dismissed the insureds' complaint in its entirety (Jacqueline Keller. et al. v. Federal Insurance Co., et al., No. 16-3946, C.D. Calif., 2017 U.S. Dist. LEXIS 20820).
Breach Of Contract, Bad Faith Suits Consolidated For Discovery Purposes
LOS ANGELES - A federal judge in California on Jan. 13 granted an insured's motion to consolidate its insurance breach of contract and bad faith lawsuit with a related action for discovery purposes, ruling that consolidation was appropriate because no parties opposed (Aspen Specialty Insurance Co. v. Riddell Inc., et al, No. 15-6324; and Bell Sports Inc. v. Aspen Specialty Insurance Co., et al., No. 16-8409, C.D. Calif.; 2017 U.S. Dist. LEXIS 7655).
Insureds Sufficiently Pleaded Claims Against Broker, Panel Says In Reversal
LOS ANGELES - A California appeals panel on Feb. 1 found that insureds have sufficiently pleaded claims for fraud, negligent misrepresentation, negligence and breach of contract against a surplus line insurance broker, reversing a lower court (A Plus Fabrics, Inc., et al. v. Yates & Associates Insurance Services, et al., No. B260767, Calif. App., 2nd Dist., Div. 3, 2017 Cal. App. Unpub. LEXIS 728).
Couple Says Insurer's Abuse Exclusion Clause Was Improperly Applied
SAN FRANCISCO - A doctor and his wife recently told the Ninth Circuit U.S. Court of Appeals that a federal judge in Arizona erred when awarding summary judgment to their insurer, arguing that they were entitled to coverage for an adverse verdict in a wrongful death suit because the policy's abuse exclusion was not applicable (Carlos F. Verdugo, et al. v. American Family Insurance Company, Nos. 16-15687, 16-5717, 9th Cir.).
Farm Says It Should Have Been Given Information Regarding Criminal Investigation
SAN FRANCISCO - An agricultural business has told the Ninth Circuit U.S. Court of Appeals that information allegedly withheld by its federal crop insurer should have been divulged before the farm signed a settlement that led to a criminal indictment (POCO, LLC v. Farmer's Crop Insurance Alliance, Inc., No. 16-35310, 9th Cir.).
Panel Finds Limitations Period Precludes Insured's Breach Of Contract Claim
SAN FRANCISCO - A policy's 12-month limitations period bars an insured's breach of contract claim regarding its insurer's denial of coverage for scratches on glass windows at a condominium development project, the Ninth Circuit U.S. Court of Appeals affirmed Dec. 21 (Queensridge Towers LLC v. Allianz Global Risks US Insurance Co., No. 15-15128, 9th Cir.; 2016 U.S. App. LEXIS 22927).
Federal Judge Strikes Insurer's Counterclaim Over Coverage For Defects Suits As Redundant
FRESNO, Calif. - A California federal judge on Nov. 29 struck an insurer's counterclaim as being redundant of another insurer's declaratory judgment claim seeking to resolve a dispute over primary coverage for an insured in construction defect cases (Houston Casualty Co. v. Charter Oak Fire Insurance Co., et al., No. 16-535, E.D. Calif.; 2016 U.S. Dist. LEXIS 164622).
Coverage Dispute Arising From Storm Surge Was Not Timely Filed, Federal Judge Says
LOS ANGELES - A California federal judge on Dec. 21 granted a federal flood insurer's motion to dismiss an insured's breach of contract lawsuit, finding that the action was not filed in federal court within the one-year statute of limitations required by the Standard Flood Insurance Policy (SFIP) (Judd Apatow v. American Bankers Insurance Company of Florida, et al., No. 16-198, C.D. Calif.; 2016 U.S. Dist. LEXIS 180529).
9th Circuit Certifies 2 Questions To California High Court In Environmental Suit
SAN FRANCISCO - The Ninth Circuit U.S. Court of Appeals on Jan. 13 certified two questions to the California Supreme Court regarding whether California's notice-prejudice rule is a fundamental public policy for the purpose of choice-of-law analysis and whether a consent provision can be interpreted as a notice provision (Pitzer College v. Indian Harbor Insurance Co., No.. 14-56017, 9th Cir.; 2017 U.S. App. LEXIS 668).
Insured Not Entitled To Defense From 3 Insurers, 9th Circuit Panel Affirms
SAN FRANCISCO - A district court did not err in determining that an insured seeking coverage from three insurers for an underlying environmental lawsuit is not entitled to coverage under the policies because the insured failed to tender the underlying suit to the insurers and received a defense for the underlying suit from another insurer, the Ninth Circuit U.S. Court of Appeals said Jan. 13 (M.B.L. Inc. v. Federal Insurance Co., et al., No. 14-56107, 9th Cir.; 2017 U.S. App. LEXIS 695).
Insurer Acted In Good Faith In Handling Of Extra Expense Claims, Judge Rules
LOS ANGELES - An insured has failed to provide any genuine issues of material fact to show that his insurer breached the terms of an insurance policy or acted in bad faith in handling a business-income claim for losses associated with commercial property that sustained fire damage, a federal judge in California ruled Jan. 9 (Richard G. Heller v. American States Insurance Co., No. 15-9771, C.D. Calif.; 2017 U.S. Dist. LEXIS 3636).
Directors, Officers Policy Does Not Cover FDIC's Claims, Majority Says, Reverses
PASADENA, Calif. - A majority of the Ninth Circuit U.S. Court of Appeals on Jan. 10 found that a directors and officers liability insurance policy unambiguously excludes from coverage the Federal Deposit Insurance Corp.'s negligence, gross negligence and breach of fiduciary duty claims against a failed bank's former directors and officers, reversing and remanding a lower court (Federal Deposit Insurance Corporation, as Receiver for Security Pacific Bank v. BancInsure, Inc., No. 14-56132, 9th Cir.; 2017 U.S. App. LEXIS 452).
Federal Investigation Is Single Claim; Exclusions Apply, Insurer Tells 9th Circuit
SAN FRANCISCO - A health care organization's directors and officers liability insurer has responded to an insured's appeal asking the Ninth Circuit U.S. Court of Appeals to reverse or "at the very least" remand a lower federal court's finding in favor of the insurer in a coverage dispute arising from an underlying investigation brought by the U.S. Department of Justice (Millennium Laboratories, Inc. v. Allied World Insurance Company [U.S.], Inc., No. 16-55432, 9th Cir.).
Liquidator Asks Court To Set Contingent Claim Update Deadline
SAN FRANCISCO - The liquidator of an insolvent insurer on Oct. 17 asked a California court to set a deadline for claimants to submit updated information regarding unliquidated and contingent claims (Insurance Commissioner of the State of California v. Western Employers Insurance Company, No. CPF-97-984281, Calif. Super., San Francisco Co., Civil Div.).
Insurer: Arguments Made By Reinsurer Regarding Jurisdiction Are Invalid
SAN FRANCISCO - An insurer argued in a federal court in California on Dec. 20 that its reinsurer's "first-to-file" argument is invalid because the reinsurer did not raise that defense in a previous motion to dismiss the insurer's breach of contract suit (The American Insurance Co. v. R&Q Reinsurance Co., No. 16-3044, N.D. Calif.).
Panel: Insurer Entitled To Recoupment Of Costs Defending Trade Secret Dispute
SAN FRANCISCO - A California appeals panel on Jan. 10 affirmed a lower court's grant of summary judgment in favor of an insurer seeking recoupment of the costs it incurred in defending its agents against claims it brought against the agents involving trade secrets (State Farm Fire And Casualty Co. v. Richard Pyorre, No. A147302, Calif. App., 1st Dist., Div. 1).
9th Circuit Panel Upholds Woman's 151-Month Sentence For Health Care Fraud
PASADENA, Calif. - A Ninth Circuit U.S. Court of Appeals panel on Dec. 14 affirmed a federal judge in California's decision to sentence a woman convicted of health care fraud to 151 to 188 months in prison and order her to pay $8 million in restitution, finding that the woman's crimes warranted the punishment (United States of America v. Uben Rush, No. 13-50169, 9th Cir.; 2016 U.S. App. LEXIS 22201).
Appeals Panel Says Evidence Supports Insurer's Denial Of Disability Benefits
SAN FRANCISCO - The Ninth Circuit U.S. Court of Appeals on Dec. 23 affirmed a district court's ruling that a disability insurer's denial of benefits was reasonable after determining that the evidence does not support the contention that the claimant was permanently disabled (Fred Arko v. Hartford Life and Accident Insurance Co., No. 14-17287, 9th Cir.; 2016 U.S. App. LEXIS 23207).
California Federal Judge Sets Bench Trial In Suit Seeking Disability Benefits
SAN FRANCISCO - A California federal judge on Dec. 9 scheduled a bench trial in a disability benefits dispute after determining that it is not clear from the available evidence whether a claimant's prior disability claims factored into the insurer's decision to deny a third disability claim (Robert Bosley v. Metropolitan Life Insurance Co., No. 16-139, N.D. Calif.; 2016 U.S. Dist. LEXIS 170872).
California Federal Judge Adopts Insurer's Interpretation Of Elimination Period
SAN FRANCISCO - A California federal judge on Dec. 19 determined that a disability claimant's brief return to part-time work does not extend the end of the plan's elimination period for benefits because the claimant's attempt to work in a part-time capacity only bolsters the conclusion that the claimant was still disabled when he returned to part-time work (Marlon Montoya v. Reliance Standard Life Insurance Co., No. 14-2740, N.D. Calif.; 2016 U.S. Dist. LEXIS 175208).
Plan Administrator Did Not Abuse Discretion In Denying Claim, 9th Circuit Says
SAN FRANCISCO - A plan administrator did not abuse its discretion in denying a claim for disability pension benefits because the denial was reasonable based on the evidence and the terms of the plan, the Ninth Circuit U.S. Court of Appeals said Dec. 23 (Eun Sug Cha v. 1199SEIU Health Care Employees Pension Fund, No. 15-55435, 9th Cir.; 2016 U.S. App. LEXIS 23235).
Plaintiff Not Owed Coverage As Additional Insured, 9th Circuit Affirms
PASADENA, Calif. - The Ninth Circuit U.S. Court of Appeals on Jan. 11 affirmed a lower federal court's ruling in favor of an insurer in a breach of contract lawsuit seeking coverage for property and business interruption losses (Bita Trading Inc. v. Nationwide Mutual Insurance Co., et al., No. 15-55371, 9th Cir.; 2017 U.S. App. LEXIS 521).
Insurer Says No Defense Owed For Defective Mattress Class Action Complaint
SAN FRANCISCO - A California federal judge erred in finding that an insurer has a duty to defend its insured against an underlying consumer class action lawsuit alleging that the insured's mattresses were defective because the underlying suit does not allege any claims for bodily injury or property damage, the insurer argues in a Jan, 17 brief filed in the Ninth Circuit U.S. Court of Appeals (Hartford Fire Insurance Co. v. Tempur-Sealy International Inc., et al., No. 16-16056, 9th Cir.).
Policyholders: Compound Interest May Not Be Charged Without Signed Document
SAN FRANCISCO - An insurer may not charge compound interest on loans secured by life insurance policies without a signed agreement pursuant to an initiative measure passed by California voters in 1918, called the "1918 Initiative," two policyholders argue in a Sept. 15 appellant reply brief filed in the Ninth Circuit U.S. Court of Appeals (Brenda G. Martin, et al. v. Metropolitan Life Insurance Company, No. 16-15690, 9th Cir.).
Judge Rejects Insureds' Breach Of Contract Arguments In Bad Faith Suit
LOS ANGELES - Summary judgment is warranted against insureds in an insurance breach of contract and bad faith lawsuit because the insureds have failed to show that their insurer breached its contract in failing to pay their claims for benefits or denied their requests for a defense or indemnification, a federal judge in California ruled Dec. 6 (Julie Sohn, et al. v. Allstate Indemnity Co., et al., No. 15-8841, C.D. Calif.; 2016 U.S. Dist. LEXIS 168555).
Judge: Amount In Controversy Standard In Bad Faith Suit Not Met
LOS ANGELES - Remand of an insurance breach of contract and bad faith lawsuit to state court is proper, a federal judge in California ruled Dec. 1, because an insurer failed to show that the amount in controversy meets the statutory requirements for removal (Jules Kraut, et al. v. Bankers Life and Casualty Co., No. 16-6791, C.D. Calif.; 2016 U.S. Dist. LEXIS 166929).
Insurance Policy's Direct Supplier Provision Before 9th Circuit
SAN FRANCISCO - The Ninth Circuit U.S. Court of Appeals is set to weigh in on whether a manufacturer of hard-disk drives provided to a set-top box company was a direct supplier of satellite television provider DirecTV. The parties completed briefing on Sept. 21 (DirecTV v. Factory Mutual Insurance Co., No. 16-55313, 9th Cir.).
Reinsurer Says Court Lacks Jurisdiction To Hear Breach Of Contract Case
SAN FRANCISCO - A reinsurer tells a federal court on California in a Nov. 15 motion that the court should dismiss a case brought by a reinsured because, among other reasons, the reinsurer filed a similar suit against the reinsured in another federal court two months before the instant suit was brought (The American Insurance Co. v. R&Q Reinsurance Co., No. 16-3044, N.D. Calif.).
Federal Judge: False Claims Suit Arose Out Of Insured's Professional Services
SAN FRANCISCO - A California federal judge on Nov. 15 held that an underlying qui tam action brought against an insured under the False Claims Act arose out of the insured's professional services and, therefore, coverage is barred by the policy's professional services exclusion, dismissing breach of contract and bad faith claims against the insurer (HotChalk Inc. v. Scottsdale Insurance Co., No. 16-3883, N.D. Calif.; 2016 U.S. Dist. LEXIS 163046).
California Panel Affirms Ruling In Favor Of Insurer, Broker In Negligence Suit
SAN FRANCISCO - A California appeals panel on Nov. 14 affirmed a lower court's ruling in favor of a life insurer and an insurance agent in a negligence lawsuit brought by the insured's beneficiaries, finding that the beneficiaries are barred from relying on negligence per se to defeat summary judgment (Pacific Coast Drilling Company, Inc., et al. v. Farmers New World Life Insurance Co., et al., Nos. A140423 and A141464, Calif. App., 1st Dist., Div. 2).
Judge Awards Surety Default Judgment Of $305,067 For Breach Of Contract Claim
LOS ANGELES - A surety is entitled to a default judgment of $305,067.65 in damages against a subcontractor for breach of contract and implied contractual indemnity claims stemming from defective work on a media arts center construction project, a California federal judge ruled Oct. 31 (Hartford Fire Insurance Co. v. Oceans-One Interior Drywall Inc., No. 16-945, C.D. Calif.; 2016 U.S. Dist. LEXIS 151509).
Homeowners, Insurer Argue To 9th Circuit Whether Water Damage Was Sudden
SAN FRANCISCO - In briefs filed in the Ninth Circuit U.S. Court of Appeals, a California couple and their homeowners insurance provider dispute whether a trial court properly determined that water damage to the couple's home was caused gradually, rather than by a "sudden and accidental" occurrence, exempting their claim from coverage (Neda Raschkovsky, et al. v. Allstate Insurance Co., No. 16-55093, 9th Cir.).
Termination Of Benefits Was Not Abuse Of Discretion, Federal Judge Says
LOS ANGELES - A California federal judge on Nov. 30 determined that a disability insurer did not abuse its discretion when it terminated a claimant's short-term disability benefits because the insurer's termination was based on reliable evidence (Greg Martin v. Aetna Life Insurance Co. et al., No. 15-7355, C.D. Calif.; 2016 U.S. Dist. LEXIS 166120).
California Panel Affirms Attorney Fees Order As Modified, Reduces Award By $9,994
LOS ANGELES - A California appeals panel on Dec. 1 affirmed a lower court's attorney fee award in favor of an insurer except as to $9,994.76 in fees that were not recoverable, reducing the total award to $73,218.29 (Wertheim LLC v. The Bar Plan Mutual Insurance Co., No. B268539, Calif. App., 2nd Dist., Div. 5; 2016 Cal. App. Unpub. LEXIS 8558).
Federal Judge Grants Management Liability Insurer's Motion For Default Judgment
SAN FRANCISCO - A California federal judge on Nov. 29 granted a management liability insurer's motion for a default judgment in its declaratory judgment lawsuit disputing coverage for underlying workplace harassment claims against its insured's directors and officers (Maxum Indemnity Co. v. Sullivan Vineyards Corporation, et al., No. 16-03611, N.D. Calif.).
Insurer Argues It Is Entitled To Reimbursement Of Defense Costs Paid Under Deductible
SAN FRANCISCO - An insurer involved in an environmental contamination coverage dispute claims in a Dec. 1 motion for partial summary judgment filed in California federal court that it is entitled to reimbursement of the deductible it paid on behalf of its insured because the policy at issue specifically states that the deductible includes claim expenses such as defense costs (American Guarantee and Liability Insurance Co., et al. v. Technichem Inc., et al., No. 15-03611, N.D. Calif.).
Insurer Loses Bid For Judgment On Liquidating Trust's Payment Claims
OAKLAND, Calif. - An asbestos personal injury liquidating trust properly submitted proposals to an insurer regarding the payment of allowed claims that triggered the insurer's policies and did not violate two debtors' plan of reorganization by allocating to the insurer 100 percent of the liquidated value of each approved unpaid claim, a California federal bankruptcy judge held Nov. 21 (In re CFB Liquidating Corporation, f/k/a Chicago Fire Brick Co., et al., No. 01-45483, [Barry A. Chatz, as Trustee for the CFB/WFB Liquidating Trust v. Continental Casualty Company, No. 15-4136] N.D. Calif. Bkcy.; 2016 Bankr. LEXIS 4034).