Articles Posted in California Court of Appeal

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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

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Advent was the general contractor for the Aspen Village project in Milpitas. Advent subcontracted with Pacific, which subcontracted with Johnson. Advent was covered by a Landmark insurance policy and a Topa excess insurance policy. Johnson was covered by National Union primary and excess policies. Kielty, a Johnson employee, fell down an unguarded stairway shaft at the site and sustained serious injuries. Kielty sued Advent, which tendered its defense to its insurers and to National Union. National Union accepted under a reservation of rights. Kielty settled for $10 million. Various insurers, including Topa and National Union (under its primary policy), contributed to the settlement. National Union did not provide coverage under its excess policy. Advent sought a declaration that it was an “additional insured” under that excess policy. Topa intervened, seeking equitable contribution from National Union, and equitable subrogation. Advent dismissed its complaint with prejudice. Summary judgment was entered against Topa, for National Union. The court of appeal affirmed. While Topa’s policy was vague, National Union’s excess policy states that coverage will not apply until “the total applicable limits of Scheduled Underlying Insurance have been exhausted by the payment of Loss to which this policy applies and any applicable, Other Insurance have been exhausted by the payment of Loss.” View "Advent, Inc. v. National Union Fire Insurance Co. of Pittsburgh" on Justia Law

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A fire destroyed a house. The homeowner’s insurer agreed to pay for the damages resulting from the fire, then sued the contractor who installed the fireplace several years earlier, claiming negligence. The contractor tendered defense of the action to its liability insurer, asserting that even though the fire occurred after the relevant policy periods ended, there was a possibility of coverage because the fire may have been the result of ongoing damage to the wood in the chimney during one or more policy periods due to the exposure of that wood to excessive heat from the chimney every time a fire was burned in the fireplace. The issue this case presented for the Court of Appeal’s review was whether, under the standard language of the commercial general liability policy at issue here, did the liability insurer have a duty to defend the contractor? After review of that policy, the Court answered “yes” and reversed the trial court’s judgment that concluded otherwise. View "Tidwell Enterprises v. Financial Pacific Ins. Co." on Justia Law

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Plaintiff filed suit against Stonebridge, challenging the insurer’s partial denial of his claim for hospitalization benefits. The trial court ruled that a policy provision was unenforceable, entitling plaintiff to $31,500 in additional benefits under the policy. A jury then found that Stonebridge acted with fraud and fixed the punitive damage award at $19 million. At issue is the trial court's remittitur of that award from $19 million to $350,000 based on a ratio of punitive to compensatory damages of 10:1. The Supreme Court held on review that the Brandt v. Superior Court fees should be included as compensatory damages in the ratio calculation irrespective of whether such fees were awarded by the trial court or the jury. On remand from the Supreme Court, the court held that the Brandt fees should be included in the compensatory damages, modified the judgment and, as modified, affirmed it. View "Nickerson v. Stonebridge Life Insurance Co." on Justia Law

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A person who pays for a trip to the emergency room out-of-pocket can be charged significantly more for care than a person who has insurance. This case centered on whether a person could maintain an action challenging this variable pricing practice under the Unfair Competition Law, the Consumer Legal Remedies Act or and action for declaratory relief. The Court of Appeals concluded after review of this case that most of the claims asserted by plaintiff Gene Moran lacked merit. However, he sufficiently alleged facts supporting a conclusion that he had standing to claim the amount of the charges defendants' hospital bills self-pay patients was unconscionable. Therefore, the Court reversed the trial court's dismissal of Moran's case, and remanded for further proceedings. View "Moran v. Prime Healthcare" on Justia Law

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Defendant insurance company denied uninsured motorist coverage to a third party beneficiary injured in an automobile accident because it had cancelled the policy before the accident occurred. The third party sued, and the insurer sought summary judgment. The third party opposed, contending the cancellation was invalid because a written notice seeking information sent by the insurer to the insureds prior to cancellation was unreasonable as a matter of law, and disputed facts existed as to whether the insurer had mailed the notice of cancellation and actually cancelled the policy. The trial court granted summary judgment, and finding no error, the Court of Appeal affirmed. View "Mills v. AAA Northern CA, NV and Utah Ins. Exch." on Justia Law

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Allstate filed a qui tam action on behalf of itself and the State against defendants under the California Insurance Frauds Prevention Act, Insurance Code 1871.7. Following entry of the qui tam judgment, Allstate began efforts to collect it. During its investigation, Allstate learned of a series of real estate transactions conducted by defendants designed to transfer away their assets. Allstate, on behalf of the State, filed an action to set aside the fraudulent transfers of real and personal property. Allstate subsequently obtained a stay of the fraudulent conveyance action and returned to the qui tam court where it filed a motion for an order allocating the qui tam judgment proceeds. The motion was based on a stipulation entered into between the People and Allstate allocating to Allstate 50 percent of the civil penalties and assessments, plus reasonable attorney fees and costs. The trial court granted Allstate's allocation motion and entered the stipulation as judgment. Defendants appealed. The court held that judgment-debtor defendants in qui tam insurance fraud actions are not aggrieved by such allocation orders under section 1871.7, subdivision (g)(2)(A), with the result that they do not have standing to appeal. Accordingly, the court dismissed the appeal. View "People ex rel. Allstate Ins. Co. v. Dahan" on Justia Law