Justia Insurance Law Opinion SummariesArticles Posted in California Courts of Appeal
St. Mary & St. John Coptic Orthodox Church v. SBC Insurance Services, Inc.
The Church experienced water damage 57 days after escrow closed on a residence it had purchased; its insurance broker, SBC, had procured commercial property insurance for the residence with Philadelphia Indemnity. Philadelphia denied a claim. The policy states the insurer will not pay for losses if the building where the loss occurs was vacant for more than 60 consecutive days before the loss. The parties entered into an agreement whereby the Church gave Philadelphia the right to control litigation in the Church's name against SBC or third parties in exchange for a loan of money to repair and remediate the residence; the loan was to be repaid out of any recovery.In a suit against SBC for professional negligence, the court found that SBC had breached its duty of care, but that the Church suffered no damages because the loss was covered under the Philadelphia policy. The court found the vacancy provision ambiguous and concluded that it did not include time before the insured owned the residence.The court of appeal reversed. When the vacancy provision is properly interpreted and applied to the undisputed evidence, there was no coverage for the loss. The residence did not contain enough personal property to conduct operations as a residence for the Coptic Pope and visiting clergy or the prior owner. The court rejected an argument that the residence was not vacant under the policy because it was being held out for sale. View "St. Mary & St. John Coptic Orthodox Church v. SBC Insurance Services, Inc." on Justia Law
Auburn Woods I Homeowners Assn. v. State Farm General Ins. Co.
Auburn Woods I Homeowners Association (HOA) and its property manager Frei Real Estate Services (FRES), tendered the defense of two lawsuits filed against them by a member of HOA under HOA’s condominium/association policy. HOA’s insurer, State Farm Insurance Company (State Farm), denied the tender for the first lawsuit, but accepted defense of the second lawsuit as to HOA only. HOA and Al Frei, individually and doing business as FRES, sued State Farm and its agent Frank Lewis for, among other things, breach of contract and breach of the implied covenant of good faith and fair dealing. The trial court entered judgment in favor of State Farm and Lewis after a bench trial. HOA and Frei appealed, contending: (1) the trial court erred in concluding that State Farm did not owe a duty to defend HOA and FRES against the first lawsuit; (2) HOA had a reasonable expectation that FRES would be covered under the directors and officers liability provision of its policy; (3) State Farm failed to reimburse HOA for post-tender expenses related to the second lawsuit; (4) Lewis breached his contract with HOA by failing to include FRES as an additional insured and failing to alert HOA and Frei that itwas not possible to include FRES under the directors and officers liability provision; (5) State Farm breached the covenant of good faith and fair dealing implied in HOA’s policy; and (6) the trial court erred in denying HOA and Frei’s motion to tax the expert witness fees State Farm and Lewis sought to recover under Code of Civil Procedure section 998. After review, the Court of Appeal concluded: (1) State Farm did not have a duty to defend HOA and FRES against the first lawsuit; (2) HOA and Frei failed to establish that FRES should have been deemed an insured under the directors and officers liability provision; (3) substantial evidence supported the trial court’s finding that HOA did not present State Farm with a clear statement of the amount of attorney’s fees and costs HOA incurred in defending against the second lawsuit; (4) HOA and Frei did not establish the alleged contract between Lewis and HOA; (5) HOA and Frei failed to demonstrate error with regard to their breach of implied covenant cause of action; and (6) State Farm and Lewis’s pretrial offer to compromise was effective to trigger cost shifting under section 998. View "Auburn Woods I Homeowners Assn. v. State Farm General Ins. Co." on Justia Law
Truck Insurance Exchange v. AMCO Insurance Co.
In the underlying action, two restaurant patrons filed suit against the restaurant owner and his landlords after a vehicle accident caused a car to crash through the restaurant, injuring the patrons. The patrons alleged that the property lacked safety measures that would have protected them from this type of injury. Summary judgment was granted for the restaurant owner but denied for the landlords, who later settled with the patrons.The landlords' insurer, Truck Insurance, then filed suit against the restaurant's insurer, AMCO, for equitable contribution. The "additional insured" provision in the restaurant's AMCO policy covered the landlords' liability "arising out of" the restaurant owner's "use" of the premises. The trial court found that the landlords' liability arose from the restaurant owner's use of the premises and was therefore covered under the AMCO policy.The Court of Appeal affirmed, holding that the phrase "arising from" in a general liability insurance policy requires only a minimal causal connection, which existed here, and the respective liability of the parties is irrelevant to the additional insured provision. Because AMCO failed to assert that the trial court's 50 percent apportionment was erroneous, the court found this argument forfeited. View "Truck Insurance Exchange v. AMCO Insurance Co." on Justia Law
Dones v. Life Insurance Co. of North America
While employed by Alameda County and on a medical leave of absence, Johnson enrolled online in supplemental life insurance coverage under a LINA group insurance policy. She remained on leave on the policy’s effective date and died six months later, without returning to work. When her beneficiary claimed benefits, LINA denied coverage based on a policy provision stating the insurance would not become effective if the employee was not in “active service” on the effective date. Johnson’s beneficiary sued for breach of contract, arguing that LINA and the county waived or were estopped from asserting the active service precondition.The court of appeal affirmed the dismissal of Alameda County but reversed the dismissal of LINA. In determining the effect of preconditions to effective coverage, waiver and estoppel are questions of fact. There are factual questions as to what Johnson knew or should have known about the active service requirement and whether the conduct of LINA and the county supported a reasonable expectation that the supplemental insurance was in place and effective. It is not apparent that “active service” has a single unambiguous meaning such that Johnson necessarily must have known she was not in “active service” because she was on medical leave. If Johnson’s policy went into effect, LINA, not the county, is liable for improper denial of benefits. View "Dones v. Life Insurance Co. of North America" on Justia Law
Murray v. UPS Capital Ins. Agency, Inc.
David Murray purchased used computer equipment worth nearly $40,000, which was damaged by the United Postal Service (UPS) while it was being transported from California to Texas. Murray believed he purchased appropriate insurance to cover this loss, but the insurance company denied his claim. Murray sued his insurance broker, UPS Capital Insurance Agency (UPS Capital), for breach of contract and negligence, claiming UPS Capital owed him a special duty to make the insurance policy language understandable to an ordinary person and to explain the scope of coverage. The court granted UPS Capital’s motion for summary judgment after concluding there was no heightened duty of care and dismissed Murray’s lawsuit. On appeal, Murray asked the Court of Appeal to create a new rule that brokers/agents, specializing in a specific field of insurance, hold themselves out as experts, and are subject to a heightened duty of care towards clients seeking that particular kind of insurance. While the Court declined the invitation to create a per se rule, it concluded Murray raised triable issues of fact as to whether UPS Capital undertook a special duty by holding itself out as having expertise in inland marine insurance, and Murray reasonably relied on its expertise. Therefore, the Court reversed the judgment of dismissal and remanded the matter for further proceedings. View "Murray v. UPS Capital Ins. Agency, Inc." on Justia Law
Ghazarian v. Magellan Health
Plaintiffs Rafi Ghazarian and Edna Betgovargez had a son, A.G., with autism. A.G. received applied behavior analysis (ABA) therapy for his autism under a health insurance policy (the policy) plaintiffs had with defendant California Physicians’ Service dba Blue Shield of California (Blue Shield). Mental health benefits under this policy are administered by defendants Magellan Health, Inc. and Human Affairs International of California (collectively Magellan). By law, the policy had to provide A.G. with all medically necessary ABA therapy. Before A.G. turned seven years old, defendants Blue Shield and Magellan approved him for 157 hours of medically necessary ABA therapy per month. But shortly after he turned seven, defendants denied plaintiffs’ request for 157 hours of therapy on grounds only 81 hours per month were medically necessary. Plaintiffs requested the Department of Managed Health Care conduct an independent review of the denial. Two of the three independent physician reviewers disagreed with the denial, while the other agreed. As a result, the Department ordered Blue Shield to reverse the denial and authorize the requested care. Plaintiffs then filed this lawsuit against defendants, asserting breach of the implied covenant of good faith and fair dealing against Blue Shield, and claims for intentional interference with contract and violations of Business and Professions Code section 17200 (the UCL) against defendants. Defendants each successfully moved for summary judgment. As to the bad faith claim, the trial court found that since one of the independent physicians agreed with the denial, Blue Shield acted reasonably as a matter of law. As to the intentional interference with contract claim, the court found no contract existed between plaintiffs and A.G.’s treatment provider with which defendants could interfere. Finally, the court found the UCL claim was based on the same allegations as the other claims and thus also failed. After its review, the Court of Appeal concluded summary judgment was improperly granted as to the bad faith and UCL claims. "[I]t is well established that an insurer may be liable for bad faith if it unfairly evaluates a claim. Here, there are factual disputes as to the fairness of defendants’ evaluation. . . .There are questions of fact as to the reasonability of these standards. If defendants used unfair criteria to evaluate plaintiffs’ claim, they did not fairly evaluate it and may be liable for bad faith." Conversely, the Court found summary judgment proper as to the intentional interference with contract claim because plaintiffs failed to show any contract with which defendants interfered. View "Ghazarian v. Magellan Health" on Justia Law
Storm v. The Standard Fire Insurance Co.
In an action arising from an underinsured motorist arbitration, the Court of Appeal reversed the trial court's order striking plaintiff's memorandum of costs and remanded the matter with directions for the trial court to consider whether the costs as claimed by plaintiff are recoverable within the meaning of Code of Civil Procedure section 998 and 1293.2.The court held that the relevant policy language, which stated that "[e]ach party will . . . [p]ay the expenses it incurs [in arbitration]" and "[b]ear the expenses of the arbitrator equally," does not preclude the recovery under section 998 of arbitration costs, or the recovery under section 1293.2 of post-arbitration costs. The court explained that specifying how the costs are to be paid in the first instance says nothing about whether such costs may be recouped later under the cost-shifting provisions of sections 998 or 1293.2.The court also held that the insurance policy strictly limited the decisional authority of the arbitrator to two issues—plaintiff's entitlement to damages, and the amount thereof. However, the court explained that it did not give the arbitrator the power to award costs. Therefore, the court found Heimlich v. Shivji (2019) 7 Cal.5th 350 (Heimlich) distinguishable. View "Storm v. The Standard Fire Insurance Co." on Justia Law
Carter v. Pulte Home Corp.
Pulte, a residential developer, was sued for construction defects by the owners of 38 homes. Many subcontractors worked on the projects, under contracts requiring each subcontractor to indemnify Pulte and to name it as an additional insured on the subcontractor’s commercial general liability insurance. Pulte cross-complained against subcontractors who worked on the homes. Travelers, the insurer for four subcontractors, provided a defense. The “Blanket Additional Insured Endorsements” to Travelers’s named insureds’ policies stated that the “person or organization is only an additional insured with respect to liability caused by ‘your work’ for that additional insured.Travelers filed a complaint in intervention against the insurers for seven subcontractors (respondents), who declined to provide a defense, seeking equitable subrogation. Pulte settled the homeowners’ claims and its claims against all the subcontractors. The court concluded that it “would not be just” to find respondents jointly and severally liable for the costs Travelers sought to recover. There was considerable variation in the number of homes each respondent worked on. The homeowners’ complaints did not indicate which subcontractor worked on which home, and no evidence was presented as to whether the work of any subcontractor was defective.The court of appeal affirmed. Pulte was entitled to indemnity and defense from each respondent only with respect to its own scope of work. Travelers was "not seeking to stand in Pulte’s shoes. It is seeking to stand in a different, more advantageous" shoes. View "Carter v. Pulte Home Corp." on Justia Law
Santa Fe Braun, Inc. v. Insurance Co. of North America
Braun sought coverage for numerous asbestos-related claims under various excess insurance policies. In phased proceedings lasting over 10 years, the trial court entered judgment in favor of the excess insurers based on Braun’s failure to establish that the primary and, in some cases, underlying layers of excess insurance had been exhausted.Braun challenged the interpretation of the policies as requiring exhaustion of all underlying layers of insurance (horizontal exhaustion) rather than exhaustion of only policies specified in each policy (vertical exhaustion). Braun also argued the court abused its discretion in refusing to consider additional evidence of exhaustion presented four years after the trial's evidentiary phase was completed. The California Supreme Court subsequently decided “Montrose,” addressing the sequence in which the insured could access its excess insurance policies for coverage of claims for continuous environmental damage caused in 1947-1982. Interpreting the language of those excess policies, the Montrose court held the insured “is entitled to access otherwise available coverage under any excess policy once it has exhausted directly underlying excess policies for the same policy period.”After considering Montrose, the court of appeal reversed. The trial court erred in interpreting the Braun policies to require horizontal exhaustion of all primary and underlying excess insurance coverage before accessing coverage under the excess policies at issue. The trial court abused its discretion in refusing to consider Braun’s new evidence of exhaustion. View "Santa Fe Braun, Inc. v. Insurance Co. of North America" on Justia Law
Ben-E-Lect v. Anthem Blue Cross Life and Health Insurance Co.
Ben-E-Lect, a third-party insurance claim administrator, developed a medical expense reimbursement plan; employers could buy a group policy of medical insurance with a high deductible and self-fund to pay for the healthcare expenses employees incurred within the annual deductible or any copay requirement. The practice of employers’ using such plans in conjunction with a high-deductible health plan is called “wrapping.” Ben-E-Lect was the state’s largest third-party administrator for small group employers who wrapped their employee medical policies. Anthem provides fully insured health plans to the California small group employer market. Beginning in 2006, Anthem announced a series of policies that limited wrapping. In 2014, Anthem prohibited wrapping all Anthem plans. Employer groups who used Anthem plans certified they would not wrap Anthem policies, and agents certified they would not advise employers to enter into any employer-sponsored wrapping plan. Ben-E-Lect sued Anthem.The court of appeal affirmed that Anthem’s policy to prohibit wrapping its health insurance products violated the Cartwright Act (Bus. & Prof. Code, 16700); interfered with Ben-E-Lect’s prospective business relationships; and was an illegal, coercive, vertical group boycott under the antitrust rule of reason (Bus. & Prof. Code, 17200), because Anthem told its insurance agents that if they wrapped any Anthem policies they would be subject to termination loss of sales commissions. The court affirmed an award of $7.38 million and an injunction. The trial court considered sufficient evidence of market power and market injury. View "Ben-E-Lect v. Anthem Blue Cross Life and Health Insurance Co." on Justia Law