Case Law Watch

Actions and ProceedingsBechtel Petroleum Operations Inc. v. The Continental Insurance Co.
(California Court of Appeals, 2nd District, March 6, 2006)
res judicata. Prior to that decision, the court held that the pollution exclusion applied, and the insurers did not have a duty to defend.

Auto — LiabilityNationwide Mutual Insurance Co. v. Mrs. Condies Salad Co. Inc.,
(Colorado Court of Appeals, March 9, 2006)
Ruling: Nationwide Mutual Insurance Co. brought declaratory judgment action against the insured, seeking declaration that it was not obligated to provide coverage for fatality caused by insured’s employee because the insured materially misrepresented that it owned the offending vehicle when it procured the auto liability policy. Nationwide further contended that had it known the true ownership of the vehicle, it would not have added it to the policy. In affirming summary judgment in favor of the insured, the court held that the insured’s misrepresentation as to ownership of the vehicle was not material. As such, the insurer was obligated to provide coverage.

The appeals court explained that a misrepresentation is material if it affects either the risk accepted or the hazard insured. The court determined the particular risk accepted in an auto liability policy is the possibility that the insured will incur liability for damage caused to third parties, which risk depends on the drivers it agrees to insure. Thus, the class of “insureds” on the policy would be controlling as to the risk accepted.

The liability policy defined the class of insureds as: “you [insured] for any covered auto.” “Covered auto” was defined to include “any auto,” which was again consistent with the driver-specific risk undertaken by the insurer. Therefore, misrepresentation of the ownership of the offending vehicle had no material effect on the risk the insurer accepted when underwriting the liability coverage policy.

Bad FaithEnoka v. AIG Hawaii Insurance Co. Inc.
(Hawaii, Feb. 23, 2006)
Ruling: One of the issues considered by this Court was whether an individual could assert a claim for Bad Faith where there is no coverage. The plaintiff claimed that the trial court erred in concluding that because the insurer had no duty to pay no-fault benefits pursuant to exclusion and, she was precluded from alleging a breach of the implied covenant of good faith and fair dealing (i.e. bad faith). The court, citing to the Best Place, Inc. v. Penn Am. Ins. Co., 82 Hawaii 120 (1996), held this was error. Based on the facts of the case, the court held that the insurer did not act in bad faith when it denied the plaintiffs’ claim for no-fault benefits.

Tilbury Constructors Inc. v. State Compensation Insurance Fund
(California Court of Appeals, 3rd District, March 7, 2006)
Ruling: The insured, under a workers’ compensation policy, sued its insurer, State Compensation Insurance Fund, contending that SCIF breached the insurance contract and the implied covenant of good faith and fair dealing. The basis of the insured’s claim was that SCIF performed an incompetent investigation into the responsibility for an accident suffered by one of its employees and unreasonably settled the claim that caused the insured’s premiums to skyrocket. The court dismissed the bad faith claim.

Walter v. United Benefit Life Insurance (Arizona 9th Circuit Court, March 8, 2006) (Non-precedential)
Ruling: The court held that there were issues of fact as to whether the defendant breached the terms and conditions of a health insurance policy (i.e. whether the insurer erroneously processed, delayed or denied payment of multiple medical claims). The court dismissed the bad faith claim because the insured did not present evidence that the insurer “acted unreasonably and either knew or was conscious of the fact that its conduct was unreasonable.”

Directors & OfficersOak Park Calabasas Condominium Assoc. v. State Farm Fire and Casualty Co.
(California Court of Appeals, 2nd District, Feb. 21, 2006)
Ruling: In an action arising from the Northridge earthquake, the insured had entered into various agreements with a construction company to repair its damaged structure. The insured refused to pay the construction company and was sued. The insured tendered its defense to the insurer under its D&O coverage. The insurer denied coverage, and the court upheld the motion for summary judgment.

Exclusions– Professional ServicesGiannetti v. The Burlington Insurance Co.
(California 9th Circuit Court, Mar. 7, 2006)
Ruling: A homeowners association instituted action against various entities for property damage resulting from faculty construction. The insurer denied coverage and any duty to defend based on the “professional services exclusion” in the general liability policy. The court affirmed the district court ruling that there was no potential coverage and no duty to defend under the policy. The insured had sought reimbursement of attorney fees for defending the underlying action and punitive damages. This relief was not allowed.

MiscellaneousSpirtos v. Allstate Insurance Co.
(California 9th Circuit Court, March 2, 2006)
Ruling: The insureds, subsequent to a fire at their home, instituted an action against its homeowner’s insurer and coverage counsel claiming torturous conduct and breach of contract. The court dismissed the claim against coverage counsel because they were not parties to the insurance contract and did not owe any fiduciary duty to the insureds.

Goldberg Segalla LLP is a best practices law firm with offices in Buffalo, Rochester, Albany, White Plains and New York. Kevin T. Merriman, a partner with the firm, compiled this information, Copyright 2006 Goldberg Segalla LLP. All rights reserved.

Topics Lawsuits California Carriers Auto Claims Hawaii