Settlement Negotiations Fall Under Protection Of Anti-SLAPP Statute

Seltzer v.  Barnes, No. A123784 (February 11; ordered published March 9), is a case from Division Five of the First Appellate District upholding the applicability of the anti-SLAPP statute (Code of Civil Procedure Section 425.16) to settlement negotiations.  Barnes appealed from an order in the trial court denying his special motion to strike plaintiff Seltzer’s complaint.  He contended that the trial court erred in concluding the plaintiff’s two causes of action against him did not arise from speech or petitioning activity where his alleged conduct was the negotiation of a settlement agreement in a prior case.  The Court of Appeal agreed.  That is the first hurdle for an anti-SLAPP motion.  Moreover, the Court went on, because Barnes may not be held liable for the alleged conduct under the litigation privilege (Civil Code Section 47 (b)), Seltzer could not demonstrate a probability of success on the merits on her causes of action for fraud and intentional infliction of emotional distress.  That is the second hurdle.  The appellate court therefore directed the trial court to grant Barnes’ anti-SLAPP motion to strike.

The core of plaintiff’s claim was the notion that Barnes, acting on behalf of Allstate Insurance Company, secretly negotiated a settlement agreement that resulted in the dismissal of trespass claims against her.  This resulted, she alleged, in her being injured because it led to Allstate’s refusal to pay defense expenses on the remainder of a cross-complaint against her, which Allstate asserted no longer involved a covered claim.  The Court found GeneThera, Inc. v. Troy & Gould Professional Corp. (2009) 171 Cal. App. 4th 901, which also dealt with a settlement scenario, directly on point as to the applicability of the anti-SLAPP statute.  The Court held that Barnes’ activity constituted petitioning activity on behalf of Allstate, which had ultimate authority over the settlement of any covered claim, and that this distinguished the case before it from others cited by plaintiff where illegal activity, such as a conflict of interest, was alleged.  Here, in contrast, the behavior at issue was fully protected by the litigation privilege as discussed in Home Insurance Company v. Zurich Insurance Company (2002) 96 Cal. App. 4th 17, 23, where the court held that the “privilege has been extended to any communication, whether or not it is a publication, and to all torts other than malicious prosecution.”  This includes torts such as fraud, negligent misrepresentation, and interference with contract.  Thus, there was no possibility of plaintiff prevailing on her substantive claims.

March 9, 2010   Posted in: Blog  Comments Closed

Bail Forfeiture Upheld Where Lack of Notice To Surety Resulted From Office Move Not Communicated To Court

In the unpublished case of County of Orange v. Continental Heritage Insurance Company, No. G041767 (March 4), Division Three of the Fourth Appellate District upheld a trial court’s decision to refuse to discharge an order of forfeiture where the surety argued that it did not receive notice of the forfeiture proceedings.  The appellate court agreed that the lack of notice resulted from the surety having moved its offices without advising the court.  Since the clerk had properly provided notice in accord with Penal Code Section 1305 (d), requiring use of the “mailing address of the corporate surety” if “plainly displayed” on the bond, the surety’s argument was found unavailing.  This was so despite the fact the notice was returned to the court with the surety’s new address marked on it.

March 4, 2010   Posted in: Blog  Comments Closed

Bond Properly Forfeited Where Extradition From Country Of Georgia Impossible

In the unpublished case of County of Los Angeles v. Indiana Lumbermens Mutual Insurance Company, No. B212756 (March 4), the surety appealed from an order denying its motion to vacate forfeiture and exonerate bail after the failure of a criminal defendant to appear in court.  The surety relied on Penal Code Section 1305 (f), which states, in part, that “[i]n all cases where a defendant is in custody beyond the jurisdiction of the court that ordered the bail forfeited, and the prosecuting agency elects not to seek extradition after being informed of the location of the defendant, the court shall vacate forfeiture and exonerate the bond…”  The surety argued that it had informed the prosecutor of the defendant’s location in the Country of Georgia, and it then became the prosecutor’s responsibility to “elect”  or not to seek extradition.   The County relied on County of Los Angeles v. Fairmont Specialty Group (2009) 173  Cal. App. 4th 538, 544 for the proposition that no such election is feasible if the defendant is in a location from which extradition is impossible.  Division Two of the Second District Court of Appeal agreed.  It also agreed with the County that the language “seek” does not require the prosecutor “to try;” ascertaining that extradition was impossible was enough.  Finally, the appellate court held, because extradition was impossible, the surety was not entitled to a tolling of the forfeiture even if it had requested such.

March 4, 2010   Posted in: Blog  Comments Closed

Second Appellate District Reconciles Insurance Code Section 1063.1 (c) (13) With Prior Case Law

City of Laguna Beach v. California Insurance Guarantee Association (CIGA), No. B214027 (March 3), an opinion from Division Two of the Second Appellate District, addresses this discrete question: Did the addition of subdivision (c) (13) to Insurance Code Section 1063.1 abrogate Denny’s Inc. v. Workers’ Compensation Appeals Board (2003) 104 Cal. App. 4th 1433?  Subdivision (c) (13) renders the  obligation of an insolvent excess workers’ compensation insurer a “covered claim” that CIGA must ordinarily reimburse.  However, the Court of Appeal concluded, supporting the trial court’s grant of summary judgment in favor of CIGA, CIGA still need not reimburse a permissibly self-insured employer for benefits paid to an employee for cumulative injury if the employer’s liability is based in part on a period of time when the employer was self-insured and chose not to buy excess insurance for the particular risk.

In Denny’s, an employee suffered a cumulative injury spanning from May 22, 1996 to May 22, 1997.  The employer was self-insured through July 31, 1996.  Thereafter it was covered by a primary policy from a private insurer.  When the insurer was declared insolvent, the employer sought reimbursement from CIGA.  The appellate court held that CIGA was an insurer of last resort and not intended to cover Denny’s as a self-insurer.  Denny’s, that court went on, “cannot reap the benefits of self-insurance without accepting its burdens.”

The appellate court here found that Denny’s can be reconciled with subdivision (c) (13).  Under a scenario where the employer has excess insurance for the entire year of liability, the excess insurer becomes insolvent, and a claim is made to CIGA, harmonization is clear.  There the coverage afforded by CIGA would not rescue the employer from its gamble and thus would not violate Denny’s logic.  When the employer took the risk for only part of the period of cumulative injury, the Court went on, reconciliation is still possible.  The Court illustrated that with a hypothetical that triggers the application of subdivision (c) (9) and takes the obligation out of the the realm of covered claims because CIGA was only designed to serve as an insurer of last resort.  Under this logic outlined by the Court, Denny’s does not conflict with subdivision (c) (13); it merely enforces the exception to covered claims in subdivision (c) (9).

March 3, 2010   Posted in: Blog  Comments Closed

Where Reporter’s Transcript Does Not Reflect Declaration Of Forfeiture In Open Court, Bond Must Be Exonerated

In The People v. Bankers Insurance Company, No. C060243 (March 2), Bankers posted a bond on behalf of a criminal defendant.  The defendant then failed to appear in court.  The court minutes reflected that bail was ordered forfeited at that time.  However, the reporter’s transcript did not a reflect a declaration of forfeiture in open court.  Bankers appealed, contending that the bond was not declared forfeited in open court as required, and, therefore, the bond should be exonerated.  The Court of Appeal agreed.

Penal Code Section Section 1305 (a) provides: “(a) A court shall in open court declare forfeited the undertaking of bail…”  This is interpreted to mean that where such declaration is not made the court no longer retains “statutory control and jurisdiction over the bond,” and the bond is exonerated by operation of law.  See People v. Amwest Surety Insurance Co. (2004) 125 Cal. App. 4th 547, 554.  Here the record before the appellate court was not silent on whether the declaration was made in open court.  The record might be in conflict on that issue, but the reporter’s transcript should take precedence, the Court held, over the clerk’s minutes.  The reporter’s transcript reflects, the Court found, everything that took place at the time of the hearing.  There is no suggestion in the transcript that anything took place outside the reporter’s hearing.  Accordingly, the appellate court found, there was no reason to believe there had been the required declaration in open court.

March 2, 2010   Posted in: Blog  Comments Closed

Where Cause of Action Arises Out Of Failure to Procure Insurance, Dismissal Of Claim Based On Notion That It Asserted Breach of Insurance Contract Improper

In the unpublished case of Hernandez, et al, v. Magat, No. E047081 (March 2), Division Two of the Fourth Appellate District reversed a dismissal of a claim against Magat after finding that the claim alleged rested not on an alleged breach of an insurance contract, but, rather breach of an agreement to obtain insurance.  The case arose out of a sewage back-up at the plaintiffs’ home.  Plaintiffs thought they had obtained a Farmers Insurance policy via an insurance agency recommended by their escrow company.  After at first acknowledging that insurance and beginning the claims process, Farmers then told plaintiffs they in fact had no insurance.  Farmers then reversed itself again.  A month later, however, it then began a collection action against plaintiffs and declined to proceed with their claim.  Plaintiffs sued all involved.

Magat, an individual Farmers agent, obtained a judgment of dismissal from the trial court.  He argued that he was only an insurance agent, and therefore could not be held liable for any breach of an insurance contract.  The Court of Appeal found that the trial court had misunderstood plaintiffs’ claim.  The complaint actually sought damages for failure to procure the requested coverage.  Magat next argued that that such duty lay with the insurance agency recommended by the escrow company, but the Court of Appeal found that the insurance could only be obtained through a Farmers agent himself or herself, which Magat was conceded to be.  The insurance agency could not have obtained the insurance without him.  Magat also argued that the coverage requested had in fact been ultimately obtained.  The appellate court, however, found that plaintiffs’ position below was alternative: either the policy purportedly procured for which plaintiffs paid had not been procured or, alternatively, it had been procured but Farmers improperly denied coverage.  While the second possibility is consistent with Magat’s defense that he did procure the insurance and that the fault, if any, lay in the denial of the claim, the Court found that at the demurrer stage alternative pleading is permissible, and the first factual alternative does not give rise an absolute defense such as Magat argued as a matter of law.

March 2, 2010   Posted in: Blog  Comments Closed

Voluntary Parting Exclusion In Commercial Property and Liability Policy Upheld

In the unpublished case of PNS Jewelry, Inc. v. Penn-America Insurance Company,  No. B212348 (March 1), Division One of the Second Appellate District upheld the enforceability of Penn-American’s voluntary parting exclusion in a commercial property and liability policy issued to a jeweler.  PNS voluntarily parted with jewelry to an individual posing as an employee of a transport company.  The jeweler did not know he was being duped and the imposter did not force the turnover of the jewelry.  Penn-American denied the claim based on a policy exclusion excluding loss or damage caused directly or indirectly by “[v]oluntary parting with any property by [the insured] or anyone else to whom you have entrusted the property if induced to do so by any fraudulent scheme, trick, device or false pretense.”  The trial court granted summary judgment to the insurer, and the jeweler appealed.  The Court of Appeal found the exclusion clear and conspicuous.  It noted that it was included in a list under the bold heading “Exclusions,” was not buried in a complex or unduly long section of unrelated items, and was not therefore comparable to the exclusion the Supreme Court refused to uphold in Haynes v. Farmers Insurance Exchange (2004) 32 Cal. 4th 1198.

March 1, 2010   Posted in: Blog  Comments Closed

Trial Court Did Not Err in Deducting from Auto Accident Judgment Only Portions of WC Lien Pertaining To Benefits Paid For Neck and Back Injuries

In the unpublished case of Barba, Sr. v. Wal-Mart Transportation, LLC, et al, No. B213376 (March 1), Division Seven of the Second Appellate District considered an appeal by defendants contending that the the trial court erred in failing to reduce an award following an automobile accident by the full amount of workers’ compensation benefits paid the plaintiff.  Barba was injured when the police car he was driving in the course and scope of his employment as a Hacienda La Puente Unified School District police officer was struck by a tractor trailer owned by Wal-Mart.  The defendants were assignees of the School District’s workers’ compensation lien by virtue of a $42,000 charitable contribution made in satisfaction of the School District’s Complaint in Intervention.  Following a jury trial at which liability was admitted, the jury awarded Barba $76,850.  The trial court ordered that award reduced by $12,500, the amount of workers’ compensation benefits the jury found had found attributable to defendants’ negligent conduct.  Barba’s shoulder injury, the jury found, was not so caused.  Defendants, as assignees of the School District’s workers’ compensation lien, appealed, arguing that the award should be reduced by the full amount of workers’ compensation benefits paid.

The Court of Appeal affirmed.  The Court found that no workers’ compensation lien reimbursement is appropriate for injury not caused by the defendants’ negligent conduct.   The appellate court cited Breese v. Price (1981) 29 Cal. 3rd 923, 928 for the proposition that an employer’s action for reimbursement is “limited to recovery for damages proximately caused by the injury.”  The Court rejected the defendants’ contention that a workers’ compensation lien cannot be divided, distinguishing the cases they cited as being being premised on there either being a lack of any proximate causation between the defendant’s conduct and the employee’s injuries or there being no dispute but that the defendant’s conduct caused all of the the plaintiff’s injuries.  This case law, the Court held, does not override the principle that reimbursement is appropriate only for those payments made by reason of a proximately caused injury.

March 1, 2010   Posted in: Blog  Comments Closed

Wall Street Journal Pummels ObamaCare’s Massachusetts Precursor

Today’s Wall Street Journal editorializes against ObamaCare’s Massachusetts precursor, RomneyCare.  Massachusetts Governor Deval Patrick, in an effort to contain its out-of-control cost, has now proposed hard price controls across almost all aspects of Massachusetts health care.  For fiscal year 2010, taxpayer costs are $47 million over budget, and spending has grown on average 6.7 percent each year.  Meanwhile, Massachusetts insurance premiums are at the nation’s top. Since 2006, they’ve climbed at an annual rate of 30 percent in the individual health market.  Per capita health spending there is now 27 percent higher than the national average.  Incredibly, the Journal points out, the average loss ratio for individual policies is 112 percent. The Journal attributes this to flat pricing which makes it rational for people to wait to enroll until they need expensive coverage and mandated policy benefits well above national norms. The Journal predicts Governor Patrick’s efforts will fail.  Thirty states, the Journal points out, imposed hospital rate-setting in the 1970’s and 1980’s.  Except for Maryland, every one eventually eliminated it — including Massachusetts — partly because costs weren’t in fact contained.  That experiment had one more effect as well: it actually killed people.  A 1988 study by the Journal of New England Medicine found that the states with the tightest rate-setting had mortality rates 6 to 10 percent higher than those that didn’t.  Yet this same approach is what Harvey Rosenfield now appears to wish to bring to California.  And, in the absence of an Insurance Commissioner and other public officials willing to stand up against it, he may eventually be successful.

March 1, 2010   Posted in: Blog  Comments Closed

Afro-American Icon Golden State Mutual Life To Pass Into History

Commissioner Poizner today announced that Golden State Mutual Life Insurance Company has entered into a letter of intent with IA American Life Insurance Company to negotiate a reinsurance agreement to transfer all in-force insurance policies of Golden State Mutual.  As this blog reported on September 30, Golden State Mutual, the largest minority-owned life insurance company in California, was placed into conservation that day when the company’s surplus dropped below the minimum required. Golden State Mutual had recorded six consecutive years of net operating losses. The Commissioner said IA American Life Insurance Company, rated A- by AM Best, was the only bidder that satisfied all key components of the selection criteria.

February 26, 2010   Posted in: Blog  Comments Closed

Fourth Appellate District Upholds Dismissal Of Fraud, Bad Faith, And Emotional Distress Claims Against Interinsurance Exchange

In the unpublished case of Cohen, et al v. Automobile Club of Southern California, et al, No. D053900 (February 26), Division One of the Fourth Appellate District upheld a trial court’s dismissal of fraud, bad faith, and intentional infliction of emotional distress claims against the Interinsurance Exchange of the Auto Club.  The Cohens’ home was destroyed in the 2003 Cedar fire.  Thereafter they retained a contractor on the Exchange’s preferred provider list to restore their property.  That contractor allegedly performed substandard work and lacked the financial resources to complete the assignment.  The Exchange then paid a second contractor to fix the problems and finish the construction.  Nonetheless, the Cohens sued, alleging that an Auto Club employee had a financial interest in the first contractor.  They sought compensation primarily for the emotional distress allegedly caused by the delay in moving back into their home.  The trial court sustained a demurrer to their Second Amended Complaint without leave to amend.

The Court of Appeal affirmed.  It found the Exchange had no duty to disclose negative information about the initial contractor or the employee’s alleged relationship with it.  See Kaldenbach v. Mutual of Omaha Insurance Company (2009) 178 Cal. App. 4th 830, 850.  The Court relied on the fact that an insurer-insured relationship is not a fiduciary or confidential one.  See Vu v. Prudential Property & Casualty Insurance Co. (2001) 26 Cal. 4th 1142, 1150-1151.  The Cohens, in turn, relied primarily on the exception to the general rule that a non-fiduciary lacks a disclosure duty based on volunteered representations communicating  a “half-truth.”  One who volunteers information can become liable to another by not disclosing everything relevant with respect to the information conveyed.

The Court found that nothing said by or on behalf of the Exchange fell within this exception: “There is nothing in the alleged statements or the surrounding circumstances showing a reasonable insured would have understood [the Exchange] was purporting to provide a list of advantages and disadvantages of retaining [the initial contractor]…”  Even the Cohens conceded it was made clear that “it was each insured’s responsibility to select a building contractor, and the stated ‘enticement’ for using a contractor on the [preferred] list was [only] that the insurer would provide a full warranty…”  The Exchange fulfilled that obligation by fulfilling its warranty.  See Linear Technology Corp. v. Applied Materials, Inc. (2007) 152 Cal. App. 4th 115 where a similar warranty was held not to require a disclosure of an underlying alleged defect because the warranty constituted only a promise to take remedial steps with respect to the purchaser then before the court, not a misrepresentation of any underlying facts that purchaser was entitled to have.

February 26, 2010   Posted in: Blog  Comments Closed

Truth In Lending Errors and Omissions Liability Endorsement Held To Potentially Cover Credit Union Claims

In the unpublished case of Mid-Century Insurance Co. v. Vinci Investment Company, Inc., No. G040815 (February 25), Division Three of the Fourth Appellate District reversed a trial court’s summary judgment in favor of Mid-Century, finding that there was a potential for coverage and therefore Vinci was entitled to a defense.  Vinci, doing business as Honda Santa Ana, sold installment sales contacts for vehicles it sold retail customers to the Santa Ana Federal Credit Union.  The credit union subsequently sued Vinci for alleged wrongdoing in connection with such sales.  Mid-Century declined Vinci’s tender of its defense.  The trial court ruled that Mid-Century’s CGL policy did not cover the claims as a matter of law and therefore granted summary judgment on both the defense duty and Vinci’s bad faith claim.

The Court of Appeal, reversing, agreed with Vinci.  Mid-Century argued that the credit union’s breach of contract and interference with contract claims did not seek truth in lending damages covered under its truth in lending errors and omissions endorsement.  It contended that the breach of contract claim prayed for sums due under the loans and/or deficiencies after repossession and resale.  In turn, it posited that the interference claim prayed for recovery of outstanding loan balances after repossession and resale.  Neither, Mid-Century concluded, evoked indemnity for any truth in lending damages paid by the credit union to any of the actual purchasers of the automobiles in question.  The appellate court found these arguments “ostrich-like.”  The credit union had alleged that Vinci breached its agreement with it by assigning to it contracts not in compliance with law, as to which buyers had defenses and counter-claims to payment of their contractual obligations, and in which the down payments shown on the contracts were not correct.  Mid-Century had promised to cover Vinci’s liability for “damages resulting solely from an ‘occurrence’ involving any negligent (italics added)” violation of federal or state truth in lending law. The credit union’s complaint did assert such violations.   The Court found the damages alleged by the credit union therefore did involve Vinci’s possibly negligent violation of a truth in lending statute.

February 25, 2010   Posted in: Blog  Comments Closed

Second Appellate District Determines Gardener Not Employee For Workers’ Compensation Coverage Purposes

In Lara v. WCAB and Bratiff Home Corp., No. B214234 (February 25), Division Three of the Second Appellate District considered whether a gardener hired twice in the space of twelve months to prune bushes for a diner was an employee at the time he sustained injury.  The WCAB had held that he was an independent contractor.  The Court of Appeal, relying on S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal. 3rd 341, agreed.  The primary Borello factor is whether the alleged employer controls the manner and means of accomplishing the result desired.  Secondary factors include whether the worker has a distinct occupation, whether he or she supplies his or her own materials, the method of payment, whether the work is a component part of the alleged employer’s business, whether the worker makes his or her own investment in the worker’s business, and whether the worker has his or her own employees.  The worker here was hired for purposes of achieving a result, the pruning of the trees; there was no evidence the means by which he did so was directed.  The Court decided that its review of the secondary Borello factors also supported its holding.

February 25, 2010   Posted in: Blog  Comments Closed

First Appellate District Holds That Employer Failed To Follow Prescribed Procedures For Resolving Conflict Between Employee’s Treating Physician And Employer’s Utilization Review Process

An employer faced with a treating physician’s recommendation must conduct a utilization review before denying treatment.  See State Compensation Insurance Fund v. WCAB (2008) 44 Cal. 4th 230, 233-234.  And it cannot, as an alternative to utilization review, avail itself of the general dispute resolution framework set forth in Labor Code Section 4062 (a).  In Elliott v. WCAB and Newsgroup of Sacramento, et al, No A125585 (February 25), Division Four of the First Appellate District was asked to clarify the dispute resolution procedure applicable to a conflict between the treating physician’s recommendation with respect to spinal surgery and the results of the utilization review.  The Court held that the appropriate course was for the employer to invoke the special procedures and timeframes set forth in Labor Code Section 4062 (b).  This does not depend, as the employer here assumed, on the employee objecting to a denial.  Contrary to the WCAB holding in Brasher v. Nationwide Studio Fund (2006) 71 Cal.Comp.Cases 1282, the employer must act on its own.  The employer here did not.  In coming to this decision, the Court cited to the WCAB’s post-Brasher decision in Cervantes v. El Aguila Food Products, Inc. (2009) 74 Cal.Comp.Cases 1336 in which the WCAB itself denounced Brasher.  The Court therefore held that the WCAB must direct the employer in this case to authorize the spinal surgery recommended or object under Section 4062 (b), thereby commencing the spinal surgery second opinion process.

February 25, 2010   Posted in: Blog  Comments Closed

Negligent Entrustment Claim Held To Survive Admission Of Respondeat Superior Liability

Diaz v. Carcamo, et al, No. B211127 (February 25), is a decision from Division Six of the Second Appellate District dealing with these facts: Diaz was seriously injured when she was struck by a car that had jumped a freeway center divider following its collision with a truck.  She sued Tagliaferri, the driver of the car that hit her, and Carcamo, the driver of the truck with which Tagliaferri had collided.  She also sued Carcamo’s employer, Sugar Transport, alleging it was vicariously liable as Carcamo’s employer.  In addition, she alleged that Sugar Transport was liable for its independent negligence in hiring and retention of Carcamo.  The jury returned a verdict against each defendant awarding plaintiff a total of $22,566,373 in damages.  Pursuant to Proposition 51, it apportioned fault among Tagliaferri, Carcamo, and Sugar Transport.

Sugar Transport appealed.  It contended that because it admitted it was vicariously liable for Carcamo’s conduct on a theory of respondeat superior, the trial court erred in permitting Diaz to proceed against it for its negligent hiring and retention of Carcamo.  It claimed that this error was compounded by the admission of evidence as to Carcamo’s background.  Relying on Jeld-Wen, Inc. v. Superior Court (2005) 131 Cal. App. 4th 853, Sugar Transport contended that its concession of vicarious liability removed all questions of its independent fault and rendered evidence of Carcamo’s character and prior conduct inadmissible.  Sugar Transport also asserted that the trial court erred by giving a spoliation of evidence instruction regarding a missing tachograph chart.

The Court of Appeal affirmed.  It determined that Jen-Weld was a negligent entrustment case that did not discuss negligent hiring and retention.  Furthermore, a recent case from the Second Appellate District, it said, Bayer-Bel v. Litovsky (2008 159 Cal. App. 4th 396, 400 held that Jeld-Wen’s conclusion that a pre-trial admission of respondeat superior liability bars a negligent entrustment claim was erroneous and that, in fact, negligent entrustment is an independent tort imposing direct liability.  Even more importantly, the Court went on, Jeld-Wen does not even purport to deal with apportionment of liability under Proposition 51.  The Court then cited Fernelius v. Pierce (1943) 22 Cal. 2nd 226, 233-234 for the proposition that negligent retention is a theory of direct liability independent of vicarious liability.  The Court viewed  the evidence about Carcamo’s background relevant to his employer’s knowledge and opportunity to prevent what occurred and found the instruction given with respect to the tachograph appropriate given Sugar Transport’s knowledge of its use and importance to the key factual issues in the case.

February 25, 2010   Posted in: Blog  Comments Closed

Required Vehicle Exception to Going and Coming Rule Applies Even When Use of Personal Vehicle Infrequent

Lobo v. Tamco, Lobo v. Tamco, No. E047593 (February 24), is an opinion from Division Two of the Fourth Appellate District dealing with an employer’s liability for a serious automobile accident causing death.  It was uncontested that at the time of the accident the employee was going home, thereby potentially invoking the going and coming rule that bars employer liability under such circumstances.  However, it was also conceded that he kept necessary equipment in his car and would have used the car to visit a customer site had he been asked.  The employer argued that the required use exception to the going and coming rule applies only when use of a personal vehicle for job purposes is “integral” to the job.  Here, it went on, the employee was only very infrequently asked to use his own car to visit a customer site.  The Court of Appeal declined to graft a frequency of use requirement onto the required use exception.  The Court found that the cases support the notion that what is key is whether the employer explicitly or implicitly requires an employee vehicle to be available for work and benefits from that availability.  Here there was testimony that the reason the company did not make a company car available to the employee was because such use was infrequent and therefore the employee’s own vehicle was considered sufficient for such purposes.  Accordingly, the employer’s summary judgments on the motor vehicle and negligence causes of action alleged against it were reversed.

February 24, 2010   Posted in: Blog  Comments Closed

Insurance Law Principles Held To Require Enforcement Of Subrogation Rights Despite Lack of Resolution Of Non-Insurance Contractual Indemnity Issues

The unpublished case of Great American Insurance Company v. Fidelity and Guaranty Insurance Company, No. A122722 (February 24), arose out a partial collapse of a roof during construction of a commercial warehouse.  Two employees of the roofing subcontractor were injured, and a third was killed.  Personal injury and wrongful death actions ensued and were then settled, spawning a “hydra-like” series of disputes among the various parties on indemnification, insurance coverage, contribution, and subrogation rights.  The dispute before Division Five of the First Appellate District was between two of the insurers, Great American and Fidelity, contesting liability to one another for amounts paid in settlement of the personal injury action.  Fidelity insisted that the obligations of the carriers can only be quantified after resolution of disputed issues of material fact as to the proportionate liability of each of insured principals.  Great American contended that it was entitled to equitable subrogation against Fidelity under well-established insurance law without regard to any contractual indemnity agreement between their insureds.

The appellate court sided with Great American.  It acknowledged that the issues of express indemnification obligations between the insured principals may not have been resolved, but decided, as did the trial court, that Great American was entitled to summary judgment on its complaint for equitable subrogation anyway.  Citing JPI Westcoast Construction, L.P. v. RJS & Associates Inc. (2007) 156 Cal. App. 4th 1448 and Reliance National Indemnity Company v. General Star Indemnity Company (1999) 72 Cal. App. 4th 1063, the Court focused on the fact that Great American’s insurance with respect to the mutual insured and settling party was only secondary and excess to that of Fidelity’s; it did not come into play until coverage by Fidelity was exhausted.  It was also clear from the evidence that Great American had paid a total of $1.95 million, $1 million of which was allocated to the liability of the mutual insured.  There was substantial evidence that insured’s liability was in fact substantially higher.  Accordingly, the Court went on, Great American was entitled to recover the entire limits of Fidelity’s $1 million primary policy.  At the same time, the Court noted, nothing it held served to abrogate any contractual indemnity agreements among the parties.  The Court found nothing in record to indicate that those issues had been resolved and  took pains to note that they were not being resolved by its opinion.

February 24, 2010   Posted in: Blog  Comments Closed

Third Appellate District Hands Down Post-In Re Tobacco Cases II Analysis of UCL and CLRA Class Requirements

McAdams v. Monier, Inc., No. CO51841 (February 24), is a decision from the Third Appellate District regarding the certification of a class action under the CLRA and the UCL.  It is instructive on how post- In Re Tobacco Cases II (2009) 46 Cal. 4th 298 class certifications will be handled. The factual context is defendant’s alleged failure to disclose that the color composition of its roof tiles would erode away, leaving bare concrete, well before the end of the tiles’ represented 50-year lifetime.  In an earlier decision, the Third District reversed a trial court decision denying class certification.  The Supreme Court granted and held that decision in the light of its pending consideration of In Re Tobacco Cases II.  After that decision was handed down, the Supreme Court returned McAdams to the Third District.

Hearing the case again on remand, the appellate court reiterated its prior position that an inference of common reliance may be applied to material misrepresentations consisting of a failure to disclose a particular fact.  See Massachusetts Mutual Life Insurance Company v. Superior Court (2002) 97 Cal. App. 4th 1282, 1293.  The Court then remanded the case back to the trial court for determination of whether or not the representative plaintiff meets the Proposition 64 standing requirements, otherwise finding the UCL claim suitable for class certification.  The appellate court also added the proviso that the members of both the CLRA and UCL classes, prior to purchasing or obtaining their roof tiles, must have been exposed to a statement along the lines that the roof tile would last for 50 years, or would have a permanent color, or would be maintenance free.  The Court said proof of such would be sufficient to permit an inference of common reliance by the entire proposed class.

February 24, 2010   Posted in: Blog  Comments Closed

Summary Adjudication Reversed Where Trial Court Acted On Superseded Pleading

In the unpublished case of State Compensation Insurance Fund (SCIF)  v. Superior Court (Onvoi Business Solutions, Inc.), No. A125834 (February 23), Division Five of the First Appellate District granted SCIF writ relief where the trial court had entered a summary adjudication against it on a superseded complaint.  SCIF had sued Onvoi to collect unpaid premiums SCIF claimed were owed for workers’ compensation insurance policies it had issued.  The Fund’s original complaint included a fraud cause of action.  Onvoi moved for summary adjudication based on the three-year fraud statute of limitations.  SCIF then filed a First Amended Complaint alleging an ongoing conspiracy to defraud SCIF by concealing the information SCIF needs to calculate Ovoi’s premium.  Onvoi did not amend its motion in response to the First Amended Complaint, and the trial court acted on it despite SCIF’s objection that it was mooted by its subsequent filing.

SCIF timely appealed, and the appellate court agreed that the trial court had erred in granting a motion for summary adjudication on a superseded pleading.  Onvoi argued on appeal that it did not matter to which pleading the court looked; it was entitled to summary adjudication of the fraud claim regardless of that.   The Court of Appeal, in issuing a writ to the trial court, disagreed.  It found that the First Amended Complaint raised new issues of fact with respect to the tolling of the statute of limitations and found there was substantial evidence before it supporting SCIF’s theory of the case.

February 23, 2010   Posted in: Blog  Comments Closed

Fourth Appellate District Grants Writ Petition Overturning Trial Court Order Compelling Interim Payment of Defense Costs

The unpublished opinion of Division Two of the Fourth Appellate District in Wausau Underwriters Insurance Company, et al v. Superior Court (Atlantic Mutual Insurance Company), No. E049323 (February 23), involved a petition for writ of mandate by Wausau.  The body of the opinion is two pages in length and not entirely self-explanatory.  However, what is clear about it is extremely significant.  Wausau apparently petitioned for writ relief from an order by the San Bernadino Superior Court ordering the fixing of sums due by Wausau “and, implicitly at least, authorizing enforcement by real party in interest Atlantic.”  The appellate court found “[t]he issue [defense costs]  has not been bifurcated and there is no enforceable (or appealable) judgment at this time.”

The Court went on to distinguish American Motorists Insurance Co. v. Superior Court (1998) 68 Cal. App. 4th 964, finding that there the appellate court had “construed the lower court’s order (italics in original)” to include what that appellate court found was “an implied order” severing the duty to defend from the remaining issues and entering a final judgment on that collateral issue.  The Court here declined to similarly construe the lower court’s order before it and parenthetically noted that “we express no opinion on the question of whether this limited issue could be properly severed (italics in original).”  The Court went on to write that Watts Industries, Inc. v. Zurich American Insurance Co. (2004) 121 Cal. App. 4th 1029 also does not discuss the propriety of a payment order, and therefore is not authority for that issue which was not actually considered.  Insurers facing interim defense costs payment orders will want to carefully read this short opinion.  It appears to be a substantial judicial pushback from over fifteen years of assumed jurisprudence.  See Montrose Chemical Corp. v. American Motorists Insurance Co. (1993) 16 Cal. Reptr. 516, rev. gtd. and opinion superseded, 18 Cal Reptr. 2nd 868 and review dismissed, cause remanded, 28 Cal. Reptr. 2nd 149.

February 23, 2010   Posted in: Blog  Comments Closed

Fire Insurance Exchange HO Claims Denial Upheld Based On Failure To Cooperate

Abdelhamid v. Fire Insurance Exchange, No. C059098 (February 22; ordered published March 9), is a decision from the Third Appellate District upholding a summary judgment in favor of Fire Insurance Exchange after its denial of a homeowners’  insurance claim after fire destroyed Abdelhamid’s home.  Fire Insurance Exchange’s denial was based on plaintiff’s failure to produce requested documentation, failure to answer material questions when examined under oath, failure to submit a completed proof of loss with necessary documentation, and failure to cooperate in the processing of the claim.  After summary judgment was granted Fire Insurance Exchange, plaintiff appealed.

The Court of Appeal affirmed.  The Court cited Brizuela v. CalFarm Insurance Co. (2004) 116 Cal. App. 4th 578, 587 (citing Hickman v. London Assurance Corp. (1920) 184 Cal. 524, 534) for the proposition that “[a]n insured’s compliance with a policy requirement to submit to an examination under oath is a prerequisite to the right to receive benefits under the policy.”  The insured here claimed her refusal to answer questions was based on the advice of counsel.  Since counsel purportedly providing such advice did not appear at the examination where the plaintiff was represented by a public insurance adjuster, the Court indicated some question about the underlying legitimacy of that claim.

The Court then noted that, in Hickman, the insured was being prosecuted for arson, claimed that providing documents to his insurer would violate his Fifth Amendment privilege against self-incrimination, and the Supreme Court had still held that requiring the insured’s cooperation was an enforceable condition precedent to receiving benefits under a policy.  While it found no case directly on point with the precise argument made here, the appellate court determined that California case law strongly supports cooperation clauses such as were at issue herein and further noted that the standard fire insurance policy, including such provisions, has been prescribed by the legislature.  Its language, the Court went on, allows insureds to object to questions asked in such examinations, but also specifically references the fact that they can be advised coverage may thereby be affected.

February 22, 2010   Posted in: Blog  Comments Closed

Where Insured Not Provided Notice of Nonrenewal, Policy Term Automatically Extended By Operation Of Law

Norcal Mutual Insurance Company v. Certain Underwriters at Lloyd’s of London, et al, No. B213122 (February 22), is an unpublished case from Division Four of the Second Appellate District founded on a statutory interpretation of Insurance Code Section 678.1.  The defendants reinsured Norcal for its liability under a managed health care professional liability insurance policy.  They subsequently denied a claim submitted by Norcal arising after its 1999/2000 policy term.  Norcal argued that such policy term was extended by operation of law because its insured was not provided with a statutory notice of nonrenewal as required by Insurance Code Section 678.1.  The Court of Appeal, reversing in part the trial court, agreed with Norcal.  The absence of notice did extend the policy term, and therefore the defendants’ reinsurance was invoked.  However, because it was Norcal’s own obligation to give such notice, the Court went on, summary adjudication in defendants’ favor of Norcal’s cause of action alleging that it was defendants who had negligently failed to provide the notice was also appropriate.

Defendants argued that Section 678.1 does not always require notice to be given.  And subdivision (f) (3) does indicate notice is not required when the named insured has obtained replacement coverage or has agreed, in writing, within 60 days of the termination of the policy, to obtain that coverage.  The defendants argued that the underlying insured had agreed to obtain replacement coverage by virtue of its directions with respect to renewal of the policy.  The Court of Appeal disagreed.  It found that a “replacement” policy within the meaning of subsection (f) (3) is not the “renewal” of an existing policy.  Subsection (f) (6) contains a different exception to the notice requirement when an insurer offers to renew a policy under changed terms or conditions.  The Court found that it was obliged therefore to interpret the two different terms — “replacement” and “renew” –  separately, giving independent meanings to each.  The subdivision (f) (6) exception depends on a timely offer to renew, but, under defendants’ interpretation, that timeliness requirement would be excused under the language of subdivision (f) (3).  The Court found it was obligated to interpret the statutory terminology so as to avoid such an incongruity.

February 22, 2010   Posted in: Blog  Comments Closed

Contractual Indemnification Claim To Which Insurer Subrogated Not Barred By Good Faith Settlment

In Interstate Fire and Casualty Insurance Company v. Cleveland Wrecking Company, No. A124920 (February 22), Division Five of the First Appellate District ruled on an appeal by Interstate after the trial court sustained, without leave to amend, Cleveland’s demurrer to its subrogation complaint.  Cleveland was a subcontractor.  Interstate insured Cleveland’s principal.  Although Cleveland was contractually obligated to defend and indemnify Interstate’s insured and to obtain liability insurance covering its principal’s defense and indemnity, it did not.  Nonetheless, the trial court held that Cleveland’s liability was disposed of by virtue of its good faith settlement of the underlying personal injury action.  Interstate appealed,  arguing that the trial court erred because (1) the subrogation complaint, based on its insured’s contractual indemnification claim against Cleveland, was not barred by Cleveland’s good faith settlement in the underlying litigation; and (2) Cleveland’s equities were not equal to or superior to those of Interstate as a matter of law because, contrary to what the trial court held, Interstate’s insured suffered damages as a result of Cleveland’s breach of its duty to defend.

The Court of Appeal agreed with Interstate.  It found that a good faith settlement order, such as was entered in the underlying action, does not bar a non-settling tortfeasor from asserting an indemnification claim against the settling defendants based on an express contract.  See Bay Development, Ltd. v. Superior Court (1990) 50 Cal. 3rd 1012, 1031-1032 and Plant Insulation Co. v. Fibreboard Corp. (1990) 224 Cal. App. 3rd 781, 790.  Because an insurer stands in the shoes of its insured, the insurer can likewise pursue a cause of action against the settling tortfeasor for breach of an express contactual indemnification clause.

The Court also found that the balance of the equities favored Interstate.  Interstate’s insured was damaged as a result of Cleveland’s breach of its contractual agreement with the insured.  The fact that it was insured and therefore suffered no out-of-pocket loss does not change this.  Under Cleveland’s theory, supported by the trial court, there would be no such thing as a viable subrogation action from an insurer pursuing its insured’s independent claim.  Here Interstate accepted its insured’s defense and resolved the claim against it.  Although contactually obligated to obtain insurance covering Interstate’s insured, Cleveland did not, and then refused to defend and indemnify Interstate’s insured under its contract with that insured.  Further, Cleveland was allegedly a contributing party to the injuries alleged in the underlying litigation.  Interstate’s equitable position, the Court held, was clearly superior.

February 22, 2010   Posted in: Blog  Comments Closed

Commissioner Charges Anthem Blue Cross With More Than 700 Claims Violations

Escalating his ongoing battle with Anthem Blue Cross over its planned rate increases, Commissioner Poizner announced today an enforcement action against the health insurer alleging more than 700 claims-handling violations.  The charges are based on consumer complaints between 2006 and 2009, and include 277 alleged improper failures to pay within 30 days, 143 alleged failures to respond timely to Department of Insurance claims inquiries, 66 alleged misrepresentations to insureds regarding claims facts or policy provisions, 25 alleged failures to pay interest on unreimbursed claims, 21 alleged failures to pay or contest claims within 30 days of presentation, 22 alleged unreasonable settlement offers, and 178 assorted other violations.

The Commissioner stated that three of the six completed recent market conduct examinations of major health insurers have resulted in recent fines or other actions: $1 million in fines against Anthem Blue Cross arising out its rescission practices, reimbursements and offers of new insurance to Blue Shield insureds arising out of its rescission practices, and $3.6 million in fines and $7.2 million in waived insurance premiums by Health Net arising out of its rescission practices.  Four other exams are in progress.

February 22, 2010   Posted in: Blog  Comments Closed

Three Major Brokers Reach Agreements To Reinstate Contingent Commission

Marsh & McLennan Cos., Inc., Aon Corp., and Willis Group Holdings, P.L.C., the three largest insurance brokers in the United States, have announced that they have reached agreements with state insurance regulators in New York, Connecticut, and Illinois which will amend their 2005 settlement agreements with those states to allow them once again to receive contingent commissions.  Broker Arthur J. Gallagher came to a similar agreement with the Illinois Attorney General last July.

February 18, 2010   Posted in: Blog  Comments Closed