Case Law Watch

Actions and Proceedings

Brannon v. Continental Casualty Co.
(Alaska court, June 9, 2006, Unpublished)

Ruling: The trial court had dismissed the injured party’s action against the insurer based on statute of limitation grounds. The injured party previously had been assigned the rights of the insured arising from the insurer’s failure to defend its insured. This court reversed and remanded the case, holding that the claim against the insurer occurred when the insurer notified its insured that it would not defend. Further, the court held that although the statutory period had run, it was equitably tolled until the underlying litigation was complete.

Attorneys Fees

R.L. Schafer & Associates v. Certain Underwriters at Lloyd’s of London
(California Court of Appeals, Fifth District, June 8, 2006, Unpublished)

Ruling: In the underlying action, the insured, a surveying firm, lost its lawsuit it brought against a general contractor. The trial court awarded the general contractor attorneys fees and costs. Thereafter, the insured sued its professional liability insurer claiming that the insurer breached its duty to indemnify and defend the insured against the general contractor’s claim. The insurer contended that it had no duty to defend against the claim for attorney’s fees and costs.

The court held that the coverage of a professional liability policy extends to contractual claims for attorney fees and costs that an insured must pay to a prevailing party after the insured loses a breach of contract action regarding the scope of its contractual obligation.

Crusader Insurance Co. v. Harry W. Gorst Co. Inc.
(California Court of Appeals, Second District, June 1, 2006)

Ruling: The plaintiff, an admitted insurer in California, instituted the instant action against the defendant a California-licensed surplus lines broker. The insurer alleged that the broker violated Insurance Code §1763, which required that before placing insurance with a non-admitted insurer, a broker must first ensure that a diligent search is conducted among admitted insurers that write the particular type of insurance at issue, to determine whether the insurance can be obtained in the admitted market. The court had previously granted the insurer’s motion for summary judgment.

On this appeal, the court held that the insurer did not carry its burden of proving that it was entitled to attorney’s fees because the litigation conferred a significant benefit on the general public or a large class of persons.

Auto—Uninsured/Underinsured Motorist Coverage

Bjorquist v. Farmers Insurance Co.
(Washington Court of Appeals, Division 1, May 30, 2006)

Ruling: The insured selected $25,000 in uninsured motorist coverage under an election agreement that informed him that “underinsured motorist coverage” may be written for limits as high as the “bodily injury and property damage limits” of his policy. According to the court, the insured’s written selection of a specific amount of coverage was sufficient evidence of his intent to reject higher coverage up to the statutory maximum.

Cancellation & Non Renewal

Schott v. Foremost Insurance Co.
(California Court of Appeals, Second District, June 14, 2006)

Ruling: This appeal in this case involved a claim for insurance policy benefits arising from the Northridge earthquake, which caused damage to the insured’s mobile home. The court reversed the trial court’s decision that granted the insurer’s motion for summary judgment. The insurer had denied coverage for an alleged failure of the insureds to pay the renewal premium on the policy.

The court held that the insurer was not entitled to summary judgment as there were issues of fact.

Superpoweraffiliates.com Inc.
v. Transportation Insurance Co.

(California Ninth Circuit Court, June 2, 2006, Unpublished)

Ruling: The plaintiff (SPA) had instituted an action against the defendant/ insurer alleging breach of contract, as well as a violation of the duty of good faith and fair dealing arising from the insurer’s failure to defend in a claim SPA brought against the defendant’s insured. The court reversed the district courts holding that the insurer was entitled to summary judgment because there is a genuine dispute of material fact as to whether the insured violated the “no voluntary payments” provision of the insurance contract. The insured had contended that the settlement was not voluntary. It was the insurer’s position that the insured violated this provision and therefore, it was absolved of any potential duty to defend or indemnify.

Exclusions—Airworthiness

Griffin v. Old Republic Insurance Co.
(Arizona, May 11, 2006, Unpublished)

Ruling: The aviation liability insurer in this action sought a declaration that the policy excluded coverage because the airworthiness certificate on the aircraft had lapsed. The court held that the exclusion was unambiguous and denied coverage ,although the insurer could not establish a casual connection between the airworthiness exclusion and the loss.

Exclusions—Spoilage and Mechanical Failure

All Fresh Produce Inc. v. Hartford Fire Insurance Co.
(California Court of Appeals, Second District, June 13, 2006)

Ruling: The court granted the insurer’s motion for summary judgment holding that the insurer did not have a duty to defend the insured under a warehouseman’s legal liability policy because the plain language of the policy excludes coverage for damage caused by mechanical failure and spoilage.

The insured operated a cold storage warehouse for fresh produce. Because of refrigeration problems, produce being stored by customers of the insured were damaged. The court in reaching its decision, characterized the policy as a third-party liability policy, not a first-party property policy. There was no duty to defend.

Miscellaneous

R&B Auto Center Inc.
v. Farmers Group Inc.

(California Court of Appeals, Fourth District, June 9, 2006)

Ruling: At issue on this appeal was whether a car dealership could recover against an insurance carrier that would not agree to either defend or indemnify the dealership in connection with the lemon lawsuit. The dealership had sent out bid for lemon law insurance in connection with the sale of “title handed” buyback vehicles. The insurer took the position that the coverage only applied to the sale of new vehicles.

The court held that the trial court properly disposed of the causes of action for breach of contract, bad faith and breach of fiduciary duty, but improperly dismissed the causes of action for negligent and intentional misrepresentation, reformation and unfair completion. The latter causes of action were remanded.

CDM Investors v. Travelers Casualty and Surety Co.
(California Court of Appeals, Sixth District, May 26, 2006)

Ruling: The question of law considered on this appeal was whether the insured’s complaint (liberally construed) against the insurer entitled the insured to coverage for “response costs” incurred pursuant to an administrative order that charged the insured with suspected discharges of pollutant causing damage to soil and groundwater.

The court sustained the insurer’s demurrer and held there was no coverage because the expenses incurred by the insured were pursuant to the order of an administrative agency and were not ordered by a court.

Subrogation

Montana Petroleum Tank Release

Compensation Board v. Capitol Indemnity Co.
(Montana, June 13, 2006)

Ruling: This action involved a subrogation claim instituted by the Petroleum Tank Release Compensation Board against the insurers for the landlord and tenant of a gasoline service station. The insurer had issued a general commercial liability policy on the premises. Three years after the gas station went out of business, it discovered a hole in one of its underground storage tanks and notified the Department of Environmental Quality. The gas station/ insured complied with the DEQ’s cleanup requirement and was reimbursed by the Board. The Board, thereafter, instituted this subrogation action. The Court dismissed the action holding there was no right of subrogation.

Workers’ Compensation

Tri-S Corporation v. Western World Insurance, et al.
(Hawaii, May 18, 2006, Unpublished)

Ruling: In this declaratory judgment action, the court considered such issues as the definitions of “insured” and “occurrence” under a commercial general liability policy; as well as, the application of the exception to the workers’ compensation statutory provision. With respect to this wrongful death case, the court found that the “alleged” employer was not an employer and was immune from suit. Thereafter, the “alleged” employer sought coverage under its CLG Policy. The court found that the CGL insurer had a duty to defend and indemnify.

Goldberg Segalla LLP is a best practices law firm with offices in 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 Claims