Articles Posted in California Courts of Appeal

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In November 2004, an excavator punctured a high-pressured petroleum line owned by Kinder. Gasoline, released into the pipe trench, was ignited by welding activities. The resulting explosion and fire killed five employees and seriously injured four others. Cal/OSHA issued Kinder two “Serious Willful” citations due to the failure of its employees to mark the location of the petroleum pipeline before the excavation to install a water line. Wrongful death and personal injury lawsuits were filed against several defendants, including Kinder and Comforce, which supplied Kinder with temporary employees. Kinder sought coverage under its insurance policies, and also under Comforce‘s primary and umbrella policies with ACE. ACE agreed to participate in Kinder‘s defense under Comforce‘s primary policy, but under a reservation of rights. ACE declined coverage under Comforce‘s umbrella policy, based on a policy exclusion for “professional services.” The lawsuits against Kinder settled before trial. When Kinder’s policy limit was exhausted, its insurer sued ACE, seeking full reimbursement of the payments it made under its excess policy, alleging that Kinder was an additional insured under Comforce‘s umbrella policy and that the ACE umbrella policy was a first-level excess policy. The court of appeal affirmed summary judgment in favor of ACE finding the policy excluded the claims in the underlying lawsuits. View "Energy Insurance Mutual Ltd. v. Ace American Insurance Co." on Justia Law

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Plaintiff, a gas station owner, filed suit demanding that its insurer pay for damages when the fiberglass sheath of one of its underground gasoline storage tanks split after resting on a rock for 16 years. The Court of Appeal affirmed summary judgment to the insurer, holding that a substantial impairment of the tank's structural integrity did not constitute a "collapse" as a matter of law. View "Tustin Field Gas & Food v. Mid-Century Insurance Co." on Justia Law

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Duarte's Oakland property was occupied by Bowers. Bowers’s daughter, Pleasants, moved into the property and remained after Bowers died. In February 2012, Duarte gave Pleasants a 45-day notice to quit, but she did not leave. On April 19, Duarte obtained landlord-tenant insurance coverage for the property with Pacific, including “Owners, Landlords & Tenants Liability Coverage,” effective April 19, 2012. In June 2012, Pleasants sued Duarte, alleging that habitability defects had allegedly existed throughout the tenancy. Duarte tendered defense of the suit to Pacific, which denied coverage. Duarte sought a declaration that the policy required Pacific to defend the tenant suit and sought damages for breach of contract. Pacific alleged material misrepresentations by Duarte on the application; he represented that there were no disputes concerning the property although he knew that the tenant had complained to the city and that there was no business conducted on the property although he knew the tenant was running a business. The court of appeal ruled in favor of Duarte. Pacific’s question about the existence of pending claims, property disputes, or lawsuits concerning the property was “utterly ambiguous.” Pacific did not show that Duarte knew a “business” was conducted on the property at the time he submitted his application. View "Duarte v. Pacific Specialty Insurance Co." on Justia 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

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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