WCAB Properly Ruled Applicant Had Done Enough To Object to UR Determination And That Both Parties Had Recognized That Fact

In the unpublished case of Trimas Corporation, et al, v. Workers’ Compensation Appeals Board and Frank Rendon, No. F060040 (July 30), Trimas petitioned for a writ of review of a WCAB decision.  Trimas argued that the WCAB erroneously concluded an employee may proceed to the dispute resolution process without first timely objecting to an employer’s utilization review determination, and that the WCAB erred in finding the issue waived as not raised at trial.  The Fifth Appellate District denied the petition.  The appellate court found that the WCAB had noted that the applicant did enough to resort to the dispute resolution process of Labor Code Section 4062 (a) when he disagreed with the employer’s UR denial of a recommendation for a neurological/neurosurgical evaluation.  The parties, the Court went on, then selected an agreed medical evaluator.  Furthermore, Section 4062 (a) indicates that “good cause or mutual agreement” may extend the 20 days to seek a resolution before the WCAB, and the record contained sufficient evidence that the parties here had agreed to do so at least implicitly.  The Court also held that the appellant had waived any timeliness defense by not raising it before or at the hearing, and that it would not entertain that factual issue on appeal.

July 30, 2010   Posted in: Blog  Comments Closed

Insurer Not Obligated To Speculate A Plaintiff Might Allege A Covered Claim

In the unpublished case of Innovay, Inc.,  et al, v. The Hartford Casualty Insurance Company, No. B215357 (July 30), plaintiff Innovay and its directors filed a claim against Hartford after Hartford denied Innovay’s tender of defense of a third party complaint for fraud, deceit, and negligent misrepresentation.  After filing the action, Innovay provided Hartford with extrinsic evidence, and Hartford concluded the third party might be able to amend his complaint to allege a covered claim of defamation.  Hartford then agreed to provide a go-forward defense.  The third party did not amend his complaint.  Innovay settled the action and paid the third party.

Innovay claimed that Hartford was obligated to provide a defense from the date of initial tender and was required to reimburse Innovay for the defense costs and the settlement amount it had paid.  After a bench trial, the trial court found in favor of Hartford, concluding that Hartford did not have a duty to defend or indemnify under the facts before it and therefore Hartford did not breach the policy or the implied covenant of good faith and fair dealing.  Innovay appealed.

Division One of the Second Appellate District affirmed.  To be covered under the personal and advertising injury provisions of the policy upon which Innovay relied, the injury must have arisen out of one or more enumerated offenses.  Innovay maintained the allegations in the complaint establish a potential for coverage for the enumerated offenses of libel or slander and humiliation.  The appellate court disagreed.  There were simply no allegations of libel or slander.  Nor could Innovay rely on the covered ground of “humiliation.”  The core claim was fraud; while the injury alleged may have been “humiliation,” it is the offense that triggers coverage.  Harm that results from a noncovered offense is not covered.  See American Motorists Insurance Company v. Allied-Sysco (1993) 19 Cal. App. 4th 1342, 1351, disapproved on another ground in Buss v. Superior Court (1997) 16 Cal. 4th 35, 50, fn. 12.  And while remote facts buried within causes of action may establish a defense duty, Barnett v. Fireman’s Fund Insurance Co. (2001) 90 Cal. App. 4th 500, 510, here there were no facts alleged that could provide a basis for a potential for coverage.  Hartford had never owed a defense duty in the underlying action.

The appellate court also rejected the claim that there was any inadequacy in Hartford’s investigation.  It was only obligated to act on the basis of the fact it knew at the time the claim was tendered.  See Gunderson v. Fire Insurance Exchange (1995) 37 Cal. App. 4th 1106, 1114.  Hartford was not under a duty to speculate as to what plaintiff might claim.

July 30, 2010   Posted in: Blog  Comments Closed

DOI Schedules Workshop on Principally At-Fault Regulations

The Department has scheduled a workshop in Sacramento on Friday, September 3 to consider the latest version of its Principally At-Fault Regulations.  The regulations continue to suffer from the infirmity discussed in our June 2 blog post and prior blog posts on the subject.  See, especially, our March 27, 2009 blog entry, where this issue is discussed in considerable detail.

July 30, 2010   Posted in: Blog  Comments Closed

DOI To Require Electronic Filing Of Life And Disability Forms And All Corporate Affairs Bureau Filings

The Department will hold a hearing in San Francisco on Wednesday, September 15, 2010 to consider amendments to regulations that will require that all forms filed with the Policy Approval Bureau and Actuarial Office be filed electronically through the System for Electronic Rate and Form Filings (SERFF) of the National Association of Insurance Commissioners (NAIC).  The amended regulation will apply to life, health, disability income, long-term care, variable annuity, and other form filings, eliminate provisions pertaining to paper filing, clarify various nomenclature used in submissions, and use gender-neutral language.  The Department is also considering adopting regulations to require that all applications, registrations, notices, reports, or other material that are submitted to the Corporate Affairs Bureau be submitted by means of the Department’s Online Assistance System for Insurer Submittals (OASIS).  These proposed regulations will be considered at the same hearing.  The last day to submit written comments on the proposed regulations is September 15, 2010

July 30, 2010   Posted in: Blog  Comments Closed

Insurer Told To “Lie In the Bed It Made” After Defending Party Not Its Named Insured

In the case of  Essex Insurance Company v. Heck, No. F058139 (July 29), Essex provided a defense to a defendant in a personal injury action who was not its named insured, but did not discover its mistake until after judgment was entered following a jury verdict in the plaintiff’s favor.  Litigation followed over Essex’s obligation to pay the judgment.  Essex eventually entered into a global settlement with the plaintiff that resulted in the dismissal of three lawsuits, including the personal injury action and a bad faith action plaintiff brought against Essex, in exchange for a lump sum payment.  The settlement agreement, however, did not allocate the payment among the three lawsuits or resolve issues regarding the identify of Essex’s insured.

Essex then sought indemnity from Dr. Richard Heck, who had treated the plaintiff in the personal injury action, through equitable subrogation, for his proportionate liability for the amount Essex paid in settlement.  Dr. Heck filed a summary judgment motion, which the trial court granted on the grounds that Essex had waived any claim for equitable subrogation.  The trial court also awarded Dr. Heck his expert witness costs.  On appeal, Essex challenged both the judgment and the costs order.

The Fifth Appellate District affirmed.  The Court noted that the loss Essex incurred — a $700,000 payment — is not the same as the loss incurred by the party Essex defended.  Payment was made on a global basis to resolve all issues.  Since the settlement agreement did not allocate among the various claims, in order for Essex to prove that it compensated an insured for the personal injury portion of the settlement and the amount of such compensation, Essex had to resort to evidence outside the settlement agreement.  The Court found that was an impossible task.  Such issues were riddled with mediation and attorney client privilege issues.  Essex’s failure to resolve the issue regarding the identity of the insured and to apportion the amount paid out among his various claims placed Dr. Heck in the inequitable position of having to show that Essex did not stand in its insured’s shoes without access to the evidence necessary to do so.  The Court therefore upheld the trial court’s  decision Essex had impliedly waived its right to indemnification, citing USAA v. Alaska Insurance Co. (2001) 94 Cal. App. 4th 628 where such an implied waiver was found in a claim against an excess insurer when the primary had assumed the defense and settled within policy limits.  The Court also upheld the expert witness award to Dr. Heck on the basis that he had made a proper Code of Civil Procedure Section 998 offer even though it would have given Essex no net recovery; the Court found the reasonableness of such an offer cannot be determined solely by its amount, but must be based, rather, on all the circumstances at issue.  Here, the Court wrote, Essex failed to establish that Dr. Heck’s offer was unreasonable and, in the end, recovered nothing from him.

July 29, 2010   Posted in: Blog  Comments Closed

Opinion Survey Evidences Public Skepticism Towards First Party Bad Faith Litigation

A majority of Americans believe that laws allowing people to sue their own auto insurance company for punitive damages, in addition to receiving benefits for their insured claim losses, are not a good idea.

New public opinion survey findings from the Insurance Research Council  (IRC) indicate that 26 percent of those surveyed said that allowing such lawsuits was a poor idea, and 31 percent said it was only a fair idea.

The survey also asked whether respondents would be willing to pay more for insurance in order to allow first-party bad-faith lawsuits. Forty-seven percent said they were “not at all willing” to pay more and 24 percent said they were “not very willing” to pay more. Even among those who thought that allowing first-party bad-faith lawsuits was a good or an excellent idea, one-half (51 percent) said they were unwilling to pay more for insurance in order to allow the lawsuits.


July 29, 2010   Posted in: Blog  Comments Closed

Second Appellate District Enforces Claims Made And Reported Policy Terminology

The unpublished case of Beta Healthcare Group Risk Management Authority v. Norcal Mutual Insurance Company, No. B216295 (July 28) involves a coverage dispute between Beta and Norcal over a malpractice claim.  In 2006, Dr. Michael Wang operated on the spine of Marteen Moore at the USC University Hospital.  Dr. Anne Anglim treated an infection to the surgical wound.  On December 3, 2007, Moore sued the hospital, Dr. Wang, Dr. Anglim and others in federal court.  Moore’s action was tendered to Norcal and Beta for a defense.  When Norcal denied coverage for Dr. Anglim, Beta began paying her defense costs.  Norcal asserted that coverage was properly denied because Norcal did not receive notice of a claim against Dr. Anglim until after the Norcal policy was canceled.  That cancellation was effective October 1, 2007.  Beta sued Norcal for a declaration of Norcal’s defense and indemnity obligations.  Norcal’s obligations, it argued, were triggered when it received notice in September 2007 of a medical incident involving Moore.  The parties filed cross-motions for summary judgment on Norcal’s obligations.  Norcal prevailed.

Division Two of the Second Appellate District affirmed.  The Norcal claims made and reported policy, it found, plainly indicated what constituted notice of a claim and how it should be communicated.  The particular insured must be identified as part of that process.  Nowhere was it suggested that notice of a claim against one physician constituted notice of a claim against a second physician and that the second physician’s (or its principal’s, in this case the hospital’s) obligation to report is thereby absolved.  The policy indicated that liability must be evaluated on a per physician basis.  However, not all policy provisions did indicate that a “claim” relates to a single insured, and Beta relied on those to advance a contrary argument.  The appellate court conceded that the word “claim” was not adequately defined in the policy, but that this did not render the policy ambiguous.  Beta’s urged meaning, it found, was unreasonable because it conflicted with other provisions in the policy.  The effect of Beta’s interpretation would be to convert the coverage made available to a nonreporting physician such as Dr. Anglim from a claims made and reported form to an occurrence policy.  The Court also rejected the argument that the policy’s separation of insureds provision did not modify the claims reporting provisions.  The Court recognized that it may well be that the purpose of the provision is to guarantee that all insureds are not denied coverage because an exclusion applies to one insured — that is, the clause aims at protecting insureds, but, in its view, the appellate court went on, it would ignore the plain language of the policy to treat the Norcal policy as separate insurance for purposes of exclusions, but not for the reporting of claims.

July 28, 2010   Posted in: Blog  Comments Closed

Commissioner’s Broad Discretion In Insurance Code Enforcement Upheld

The unpublished case of Schwartz, et al, v. Poizner, No. A126217 (July 28), arises out of a settlement agreement the Insurance Commissioner reached with a number of related insurers whose claims-handling allegedly violated the Insurance Code.  In the pending case, plaintiff Schwartz alleged numerous causes of action against the insurers and also petitioned for a writ of mandate against the Commissioner on behalf of a purported class who, like him, did not submit claims under the settlement agreement, but were allegedly overcharged for their policies in view of the insurers’ constricted view of their claims-handling responsibility.  The trial court dismissed the petition for a writ of mandate aiming to compel the Commissioner to seek additional remedies against the insurers.

Division Three of the First Appellate District, affirming the trial court, held that the Commissioner does not have a ministerial duty to seek the additional relief and did not abuse his discretion in failing to do so.   Contrary to plaintiff’s contentions, the appellate court held, the Commissioner does not have a ministerial duty to enforce the Insurance Code’s rights of rescission as plaintiff sought.  On the contrary, the Commissioner has no duty to enforce the rescission or other provisions of the Code “in any particular manner.”  The Commissioner has broad discretion to decide how he will act.  Alternatively, plaintiff argued, the Commissioner abused his discretion by failing to act as plaintiff sought.  Here again, the appellate court held, the Commissioner’s discretion is broad and there was nothing alleged that indicated the Commissioner abused that discretion by failing to act as plaintiff wanted.  It was not unreasonable for the Commissioner to conclude that modified claims procedures under the settlement would affect those who had not submitted claims under the settlement agreement on a go-forward basis and that further relief was unnecessary.

July 28, 2010   Posted in: Blog  Comments Closed

“Sufficient Excuse” Justified Not Declararing Bail Forfeiture Upon First Nonappearance

In the unpublished case of County of Los Angeles v. American Surety Company, No. B218291 (July 28), Division Three of the Second Appellate District upheld the trial court’s denial of American Surety’s motion to set aside a summary judgment on a forfeited bail bond.  The Court rejected the County’s contention that the appeal was untimely, finding that the County had already made the same arguments and that they had been rejected before.  On the merits, the surety argued that the trial court should have ordered the bond forfeited the first time the defendant failed to appear, January 14, 2008, and not on February 5, 2008.  The Court rejected this contention.  Penal Code Section 1305 (a) allows the trial to determine there was “sufficient excuse” for a nonappearance, and here there was a representation of emergency surgery that prevented an appearance.  Therefore, there was no merit to the surety’s contention that the trial court lost jurisdiction over the bond when it failed to declare a forfeiture upon that first nonappearance.

July 28, 2010   Posted in: Blog  Comments Closed

Defense Duty Extends To Calderon Act Process In Construction Defect Litigation

Clarendon America Insurance Company v. StarNet Insurance Company, No. G042353 (July 27), is a case of first impression from Division Three of the Fourth Appellate District affirming a trial court judgment that the CGL policy defense duty extends to proceedings under the Calderon Act, Civil Code Section 1375 et seq.  The Court specifically held that the process mandated by the Calderon Act in construction defect litigation is “a civil proceeding in which damages…to which this insurance applies are alleged” within the meaning of the standard-form CGL definition.  Although the Calderon Act procedure occurs before a complaint is filed and itself does not result in a judgment or court-ordered payment of money, the Court nonetheless found that its process is an “integral part” of construction defect litigation initiated by a common interest development association and therefore should be encompassed within the defense duty.

In the case, Clarendon argued that the Calderon Process does fall within the standard CGL definition.  StarNet argued to the contrary.  The Court of Appeal, resolving the case in Clarendon’s favor, distinguished Foster-Gardner, Inc. v. National Union Fire Insurance Company (1998) 18 Cal. 4th 857, 887, where the Supreme Court took a bright-line approach founded on the notion that a “suit” is “a court proceeding initiated by the filing of a complaint.”  Thus, the insurer there had no duty to defend an administrative proceeding before the Department of Toxic Substances Control.  The claim here, however, was based on a post-1986 insurance policy form in which the term “suit” was defined to include “a civil proceeding” in which covered damages are asserted.  In 1988, the term “suit” was further expanded to cover alternative dispute resolution procedures.  Therefore, the Court went on, the term “suit” now means something more, in standard CGL parlance, than a proceeding initiated by the filing of a complaint.  Applying the “literal meaning” approach to policy interpretation used by the Supreme Court in Foster-Gardner, the appellate court went on, the Calderon Process is a “civil proceeding” within the meaning of the current standard-form CGL policy’s intended reach.  The StarNet policies’ language supported this understanding.  They used the term “alleged” damages in referring to civil proceedings; they used the word “claimed” when referring to arbitration and alternative dispute resolution.  Therefore, the fact that damages aren’t actually obtained in the Calderon Process makes no difference.  The Calderon Process is still part of a civil proceeding process that includes from the beginning an assertion of damages.

July 27, 2010   Posted in: Blog  Comments Closed

Ninth Circuit Reaffirms That Insurance Agents Are Independent Contractors

In Murray v. Principal Financial Group, et al, No. 09-16664 (July 27), the Ninth Circuit affirmed a district court decision that the plaintiff in the case, a “career agent” suing for alleged sex discrimination, is not an employee entitled to the Title VII protections of an employee.  See Adcock v. Chrysler Corp. (9th Cir. 1999) 166 F. 3rd 1290, 1292.  The Court cited law from a number of other circuits which holds that “insurance agents are independent contractors and not employees for purposes of federal employment statutes”, including ERISA, the Age Discrimination in Employment Act, and Title VII.  The Court said it wrote on the case to clarify the three different formulations of the test to determine whether an individual is an independent contractor or an employee: the common agency test, the economic realities test, and the common law hybrid test.  The district perceived the second test to have been set forth in Adcock, where the Circuit wrote that the test is a “fact-specific” one founded on the “economic realities” of the arrangement.  The Court said it agreed with the district court that there is no functional difference among the three different formulations and that the basic issue is the hiring party’s means and manner of controlling how the work is accomplished.

July 27, 2010   Posted in: Blog  Comments Closed

Commissioner’s Rejection Of Artemis Insurance Company Sale Upheld

Last year, Commissioner Poizner denied a request for permission to buy a California insurance company from a foreign company whose owner is the defendant in a multi-billion dollar post-Executive Life Insurance Company insolvency lawsuit brought by Commissioner Poizner. The sale, according to the Commissioner, would have siphoned money out of the United States while a federal court is in the process of determining how much that owner, French company Artemis S.A., ought to pay in compensation for fraud in connection with the disposition of Executive Life assets. The proposed seller in the transaction, Artemis subsidiary Aurora S.A., sued the Commissioner for denying the transaction. A court has now rejected that lawsuit.

San Francisco Superior Court Judge Charlotte Woolard rejected the lawsuit against  Commissioner Poizner, ruling that the Commissioner acted properly when he denied approval of a sale transaction that had the potential in his view to cause harm to former policyholders of Executive Life. The suit is part of the on-going fallout resulting from the failure of Executive Life in 1991 and the fraud that was allegedly committed by French companies and companies owned by the French government in the subsequent insolvency proceeding.

July 27, 2010   Posted in: Blog  Comments Closed

Commissioner Announces Farmers Auto Insurance Rate Cut

Commissioner Poizner announced that hundreds of thousands of Farmers Insurance customers are eligible to receive an average rate reduction of 14.5 percent and a one time 10 percent insurance premium rebate, worth a combined total of up to $100 million.

Customers of Farmers Insurance are insured through one of their two major auto insurance subsidiaries, Farmers Insurance Exchange and Mid-Century Insurance Co. Today’s rate cut announcement applies to those under the Farmers Insurance Exchange banner. Farmers Insurance customers insured by the subsidiary, Mid-Century Insurance Co., are already receiving the new lower rate.

Those currently insured by Farmers Insurance Exchange and renewing their policies between July 15, 2010 and Jan. 15, 2011 will receive a one-time 10 percent rebate on their premiums. That rebate is estimated to be worth approximately $50 per insured car or $32 million. In addition, those same customers will also receive an ongoing rate cut of approximately 15 percent worth an estimated $72 million.

July 27, 2010   Posted in: Blog  Comments Closed

Dismissal of Bad Faith Suit Against Farmers Reversed Where Insureds Incurred Attorney Fee Expense

In the unpublished case of Kennedy v. Farmers Insurance Exchange, No. B217963 (July 27), Division Two of the Second Appellate District reversed a dismissal after demurrer of a lawsuit against Farmers arising out of alleged wrongful conduct in Farmers’ handling of a liability claim.  The Court of Appeal held that the complaint pled facts sufficient to state causes of action for breach of contract and bad faith, but upheld the dismissal with respect to the fraud claim alleged.  Farmers asserted that because it assigned counsel to defend appellants and ultimately paid the policy limit, plus the excess portion of the judgment, it satisfied all express and implied duties to the appellants.  The Court of Appeal said that could not be established as a matter of law at this stage of the proceedings.  Farmers did not assign counsel to the case when it first received a policy limits demand on the claim.  Moreover, Farmers never told appellants that it had taken the position at mediation that it would never pay policy limits; nor did it tell its insureds that it in fact believed the liability could exceed policy limits.

Farmers argued that all this made no difference because plaintiffs never suffered any damages as a result of this conduct.  The Court of Appeal held that it was sufficiently alleged that the insureds had retained their own counsel to make up for Farmers’ shortcomings.  Farmers alleged that such counsel was retained only after Farmers ultimately agreed to tender policy limits and therefore such counsel was not counsel retained consistent with Brandt v.  Superior Court (1985) 37 Cal. 3rd 813 to secure policy benefits.  Farmers took the view that the attorneys fees were incurred to persuade Farmers to pay the excess judgment.  The Court of Appeal found that “Farmers ignores that its  failure to explore settling within the policy limit prior to trial and certainly after it knew that liability could exceed the policy limit, as well as it failure to keep appellants informed of [the] various settlement demands and offers, exposed appellants to potential liability beyond the policy limit.”  This justified the appellants’ actions and made Farmers potentially liable for that expense.  The Court, however, found that the facts alleged did not justify a claim for fraud because Farmers did ultimately pay the full amount of the judgment.

July 27, 2010   Posted in: Blog  Comments Closed

ERISA Plan Member Eligible For Disability Benefits From MetLife Where MetLife Failed To Cross-Complain For Indemnification

In Mitchell v. CB Richard Ellis Long Term Disability Plan, Metropolitan Life Insurance Company, UNUM Life Insurance Company of America, etc., Nos. 08-55277, 08-55689 (July 26), MetLife appealed from a district court’s judgment awarding Mitchell long-term disability benefits and attorneys fees in an ERISA action.  MetLife is the current administrator for the CB Richard Ellis plan, and it insured and administered the plan at the time Mitchell filed his claim for benefits.  UNUM, however, was the insurer and administrator of the plan at the onset of Mitchell’s disability.  The Ninth Circuit found that Mitchell was in fact eligible for benefits under MetLife’s policy, and, because MetLife failed to file a compulsory cross-complaint for indemnification again UNUM, the district court action should be affirmed.

The Ninth Circuit found that MetLife, arguing no coverage under its policy,  incorrectly relied on a single line in that policy, the first clause of which states: “If You Become Disabled while insured.”  It found that the Met Life reading took that phrase out of context and without regard to the policy definition of “disabled.”  The sentence, in its entirety, states “If You Become Disabled while insured, proof of disability must be sent to Us.”  Thus, read in context, the clause upon which MetLife relied does not provide that coverage takes effect only if disability begins after the policy’s effective date.  Rather, the Court went on, it stipulates the requirements for submitting a claim if an individual is “disabled” while insured.  The Court also rejected MetLife’s belated argument that Mitchell had not met the “actively at work” requirement in the policy, finding that he was never put on leave and never stopped working as a full-time employee even though his ability to generate commission income had been reduced.  Finally, the Court determined that because MetLife had failed to file a compulsory cross-complaint against UNUM for indemnification, the district court did not err by failing to address that issue and the issue, in turn, was not now before the Circuit.

July 26, 2010   Posted in: Blog  Comments Closed

Supreme Court Approves Contingent Fee Delegation Of Public Nuisance UCL Actions To Private Attorneys

In County of Santa Clara, et al, v. Superior Court (ARCO), No. S163681 (July 26), a group of public entities are prosecuting a public nuisance action against numerous lead paint manufacturers.  The public entities are represented by their own government-paid attorneys and by several private law firms working on a contingency basis.  Defendants moved to bar the public entities from compensating their private counsel via contingency fees.  The Superior Court, relying on the Supreme Court’s decision in People ex rel. Clancy v. Superior Court (1985) 39 Cal. 3rd 740, agreed, reasoning that public nuisance actions require “absolutely neutral” representation.  Contingent fees, the court found, preclude private counsel from having a neutral stake in a public case’s outcome.  On petition for writ of mandate by the public entities, the Court of Appeal disagreed.  It found that Clancy does not bar all contingent fee arrangements with private counsel, but only those in which the private attorneys appear in place of, rather than with and under the supervision of, government attorneys.

The Supreme Court acknowledged that Clancy arguably supports the bright-line approach of the Superior Court, but found, upon reexamination, that Clancy should be narrowed in recognition of both the wide array of public nuisance actions (and the comparable diversity in the types of interests implicated) and the different means by which prosecutorial duties may be delegated without compromising either the integrity of the prosecution or the public’s confidence in the judicial process.  The Court found that because private counsel with contingent fee arrangements have a pecuniary interest in a case’s outcome, that may place them at odds with the public interest.  Citing a case from the Rhode Island Supreme Court, State of Rhode Island v.  Lead Industries Association, Inc. (R.I. 2008)  951 A. 2nd 428, the Court went on, this conflict does not necessarily mandate disqualification when fundamental constitutional rights and the right to continue operation of an existing business are not implicated by a case.  Instead, retention of contingent fee private counsel is permissible if neutral, conflict-free government attorneys retain the power to supervise the litigation.  The Court found such agreements must provide that settlement decisions are reserved exclusively to the government’s own attorneys and that such government attorneys can deal directly with opposing counsel.  The Court also indicated that complete control must be vested in the government attorneys, including veto power over decisions of private counsel, and that a government attorney must be actively involved in overseeing the litigation.

July 26, 2010   Posted in: Blog  Comments Closed

WCAB Decision Upheld Where Insurer Identified Early On And Defective Notice Corrected

In the unpublished case of Krause v. Workers’  Compensation Appeals Board and Wal-Mart Stores, Inc., No. F058788 (July 23), the Fifth Appellate District was asked to review Krause’s contention, on a petition for a writ of review, that the WCAB erred by adding an employer’s workers’ compensation insurer as a party defendant to a prior award and by failing to treat notification errors regarding a medical provider network as a basis for the employee to treat outside the MPN.  The Court denied the petition.  For her first contention, Krause relied on Coldiron v. Compuware Corp. (2002) 67 Cal. Comp.Cases 289, where there was a six-year delay in disclosing to the WCAB that the employer was actually insured.  Here, in contrast, American Home Assurance Company appeared very early in the process and there was no basis for concluding Krause was aggrieved by what little delay there was.  The Court also rejected Krause’s second contention.  Here the notice with respect to the provider network was technically deficient in that it was not sent in Spanish, but the notice was subsequently corrected and there was no reason to believe that Krause had relied on the defects that did exist.

July 23, 2010   Posted in: Blog  Comments Closed

Health Insurance Rate Filing Notices Now Available By E-Mail

Commissioner Poizner announced today that consumers can now be notified via e-mail when new health insurance rate filings for the individual market are made.

“We want as many people as possible scouring these rate filings to ensure they are mistake-free,” said Commissioner Poizner. “The e-mail notification tool will expand access to these documents by informing the public of when there are new filings to peruse. This additional analysis, in conjunction with scrutiny by the Department of Insurance’s in house actuaries and independent actuaries retained by the Department, will help ensure that consumers are protected and insurers are spending 70 percent of premiums on medical benefits, as required by state law.”

To sign up, consumers should visit http://www.insurance.ca.gov/email-updates/ and select which of the Department of Insurance’s updates they would like to receive.

July 23, 2010   Posted in: Blog  Comments Closed

Title Insurer’s Offer to Insure Over Title Defect Does Not Remove Cause Of Claim

In the unpublished case of De Paz, et al, v. First American Title Insurance Co., No. B220937 (July 22), Division Five of the Second Appellate District considered a trial court’s confirmation of an arbitration award in favor of First American Title Insurance Co.  The arbitration award was subject subject to the standard for review of errors of law and substantial errors of fact in accord with Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal. 4th 11334, 1340, 1364.  The Court of Appeal reversed the trial court on the ground that an offer to insure a speculative new buyer did not remove the cause of the claim.

The Court found that the recorded title showed there was a question of plaintiffs’ rights and ownership until at least September, 2008.  The policy language specifically insured the property’s marketability.  The law recognizes that any adverse claim to property which indicates a buyer will not receive the complete interest is sufficient to cloud title and render property unmarketable.  See Paramount Properties Co. v. Transamerica Title Insurance Co. (1970) 1 Cal. 3rd 562, 567, fn. 4.  The Court went on to find that the title insurer’s exclusionary clause which purported to insulate it “if We remove the cause of the claim with reasonable diligence after receiving notice of it…including any obligation for loss You had while We were removing the cause of the claim” did not protect the insurer until, in fact, the title defect was actually removed.  An offer to insure title was not the same thing as the removal of the defect itself.  Plaintiffs were damaged by the property’s lack of marketability within the policy’s meaning until at least September, 2008.

July 22, 2010   Posted in: Blog  Comments Closed

Aon Decides to Take Contingent Commission After All

Insurance broker Aon Corp. said it will resume taking contingent commissions from insurers where they are allowed — reversing its policy on that form of compensation just six months after a legal settlement banning the volume-based payments was lifted.

In a press release, Steve McGill, chairman and chief executive officer of Chicago-based Aon Risk Solutions, said the firm has “conducted a great deal of research around broker compensation across the globe with a focus on serving the needs of our clients and competing on a level playing field in the marketplace…”  It now finds no problem with the practice.

Among the other large brokers that were subject to prohibitions, Willis has made clear that it has no plans to accept the payments. The broker has established a web site to “educate” clients about the dangers of the payments and their allegedly detrimental effect on the insurance-buying process.

Marsh, which in March said it will not take contingent commissions in its brokerage business, will accept such payments in its agency subsidiary, Marsh & McLennan Agency.


July 22, 2010   Posted in: Blog  Comments Closed

No Defense Obligation Where Home Fails To Fall Within Definition Of “Insured Location”

In the unpublished case of Subkoski v. The Standard Fire Insurance Company, No. B21800 (July 21), Division Four of the Second Appellate District considered the trial court’s decision that Standard properly refused to provide a defense for a lawsuit brought by a purchaser of a home constructed by the appellants on land they owned.  Standard’s position rested on two prongs: for any damage that arose prior to the sale of the property, the exclusion in the policy for damage to property owned by appellants precluded recovery; and, for any damage that arose after the sale, recovery was precluded because the subject property was no longer an “insured location” by virtue of the fact that appellants did not reside in it.  There was no dispute on appeal that the exclusion for property “owned” by the insured that is not an “insured location” applies to both property the insured “owned” at the time of injury and property previously owned by the insured, but belonging to a third party at the time injury occurred.  See Preston v. Goldman (1986) 42 Cal. 3rd 108.

That left the question of whether the property was an “insured location.”  The policy required in paragraph f. that  an “insured location” be one “being constructed.”  That did not apply.  Alternatively, it could be an “insured location,” it was argued, because it was listed on the declarations page.  But that alternative also mandated that it be a location “where [appellants] reside” or a location “used by [appellants] as a residence.”  This could not be demonstrated, the Court held.  The fact that appellants allegedly failed to maintain the property or performed improper repairs, it was reasoned, could not be stretched to mean that they thereby lived on the property after sale.  And it made no difference to the Court that the the declarations page stated that the subject property was an “[a]dditional residence occupied by the insured” when the facts showed otherwise.

July 21, 2010   Posted in: Blog  Comments Closed

Clerk’s Certification Satisfied Requirements for Notice of Bail Forfeiture

In The People v. Safety National Casualty Corporation, No. E047157 (July 15), Division Two of the Fourth Appellate District considered a surety’s appeal of a trial court denial of a motion to set aside forfeiture of a bail bond and to exonerate the bail.  The surety contended that the trial court lost jurisdiction to declare the forfeiture because it contended the clerk failed to give notice of the forfeiture as required.  The Court of Appeal affirmed.  The surety’s argument was not based on the contention the clerk failed to comply with Penal Code Sections 1305 or 1306, but, rather that the clerk’s certificate failed to comply with Code of Civil Procedure Section 2015.5.  The surety argued that a clerk’s certificate must meet all the criteria of Section 2015.5, including that it be signed under penalty of perjury.  This assumes, the appellate court found, that the certificate must be sworn in some manner.  But Section 2015.3 provides that a clerk’s certificate “has the same force and effect as his or her affidavit.”  And, the Court went on, despite the surety’s argument, such a certificate has evidentiary value even if unsworn.  The subclass identified in Section 2015.3 are sworn officers or officials with the power to administer oaths themselves, and the same standard applicable to the general population does not apply to them.  The Court found a number of cases supporting this distinction in related and other contexts, and held that the same distinction was equally valid here.

July 15, 2010   Posted in: Blog  Comments Closed

Department Issues Notice As To CAARP Electronic Application Submissions

The Department of Insurance has issued a 15-Day Notice of Text with respect to proposed amendments to the CAARP Plan of Operations.  The amendments were the subject of a hearing on September 22, 2009.  The Department found that its Initial Statement of Reasons issued in connection therewith failed to meet the necessity standards in Government Code Section 11349 (a).  The Department has therefore now updated its Statement of Reasons.  The regulations themselves are unchanged.  The changes are designed to conform the Plan of Operations to coordinate with information requested on the Electronic Application Submission Interface (EASi) application and to satisfy the Department’s examination findings.  The EASi application amended, deleted, and added several provisions that were not included in the Plan of Operations.  Written comments on the issue are due by August 3, 2010.  However, comments on the regulations themselves — unchanged from the previous release — will not be considered.

July 13, 2010   Posted in: Blog  Comments Closed

Public Entities May Be Liable For Failing To Disclose Material Information To Contractors

Los Angeles Unified School District v. Great American Insurance Company, Hayward Construction Company, No. S165113 (July 12), is a 6-1 decision from the California Supreme Court defining the conditions under which a contractor may recover when a public entity knows, but fails to disclose, material facts that would affect the contractor’s bid or performance.  It has long been recognized that a public entity’s misleading plans or specifications justify additional compensation.  See Souza & McCue Construction Co. v. Superior Court (1962) 57 Cal. 2nd 508, 510.  In this case, the Court answered what happens when the public entity simply  fails to disclose facts within its knowledge affecting the cost of performance.

There is a district split on the issue.  One Court of Appeal, like the trial court here, held that the contractor must demonstrate affirmative misrepresentation or intentional concealment on the part of the public entity.  See Jasper Construction, Inc. v. Foothill Junior College District (1979) 91 Cal. App. 3rd 1, 10-11.  Other appellate courts have said affirmative fraudulent intent  need not be shown, Welch v. State of California (1983) 139 Cal. App. 3rd 546,556, or that careless failure to disclose where the public entity has superior knowledge, Thompson Pacific Construction, Inc. v. City of Sunnyvale (2007) 155 Cal. App. 4th 525, 552, is enough.  The Court of Appeal below offered the view that failure to disclose facts of which the public entity is simply aware is enough.

The Supreme Court ruled that extra compensation may be allowed if the public entity failed to disclose facts that would affect the contractor’s bid or performance.  Because public entities do not insure contractors against their own negligence, such compensation is available only when there is an absence of material information, the public entity had the information and was aware the contractor did not, the contractor was misled, and the public entity failed to provide the information it knew the contractor did not have and did not have any reason to obtain.

Justice Corrigan dissented, expressing the view that Jasper states the law accurately and that the majority decision inordinately shifts risk to public entities.

July 12, 2010   Posted in: Blog  Comments Closed

Emergency Life Settlement Regulations Reissued Once Again

The Commissioner has reissued the proposed life settlement regulations for a third time.  See our May 17 and June 11 blog posts.  Notice is required five days before filing.  In fact, the proposed regulations were not actually filed on either of the two prior occasions on which the Commissioner gave this notice.  Interested parties therefore have five days from filing to submit comments on the proposed regulations.

July 9, 2010   Posted in: Blog  Comments Closed