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Trial Court May Stay Appraisal Arbitration of Property Loss under Cal. Ins. Code § 2071 Until It Decides Whether Insurer’s “Actual Cash Value” Determination Complies With Cal. Ins. Code § 2051 Alexander v. Farmers Ins. Co., Inc. (2013) 219 Cal.App.4

th 1183

By Joanne M. Wendell, Esq., of Adleson, Hess & Kelly 3

Action to Void a Contract is an Action “On the Contract” Within the Meaning of a Contractual Attorney Fee Provision Eden Township Healthcare Dist. v. Eden Medical Center (2013) 220 Cal. App. 4th 418

By Dean A. Pappas, Esq., of Ropers, Majeski, Kohn & Bentley 5

Three Year Contractual Limitations Period that Begins before ERISA Cause of Action Accrues is Enforceable; Equitable Doctrines are Available Only in Extraordinary Circumstances Heimeshoff v. Hartford Life & Accident Ins. Co., et al. (2013) 134 S.Ct. 604

By Susan D. Pelmulder, Esq., of Flynn, Rose and Perkins 6

CGL Policy Covers Breach of Privacy Claim Involving the Unauthorized Publication of Patient’s Medical Records

U.S.D.C. (C.D. Cal.) CV13-3728 GAF (JCx), Oct. 7, 2013, 2013 WL 5687527

By Ronald J. Cook, Esq., of Willoughby, Stuart & Bening 7

Insurer has No Obligation to Initiate Settlement, and No Liability for Failing to Settle Within Policy Limits, Absent Claimant’s Demand or Interest in Settlement Reid v. Mercury Ins. Co. (2013) 220 Cal.App.4

th 262

By Helen H. Chen, Esq., of Robinson & Wood, Inc. 8

SCCBA INSURANCE LAW SECTION

Winter 2014 Case Review

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Reasonable Coverage Expectation of Named and Additional Insureds May Differ When AI Has Its Own Insurance; Legacy Vulcan Did Not Collaterally Estop Insurer from Contesting Coverage Due to AI Transport Ins. Co. v. Superior Court (R.R. Street & Co., Inc.) (2014) 222 Cal.App.4

th 1216

By Joanne M. Wendell, Esq., of Adleson, Hess & Kelly 9

CGL Insurer Had No Duty to Defend Until Plaintiff Amended Complaint To Include Compensatory Damages; No Bad Faith If No Possibility of Coverage San Miguel Community Assoc. v. State Farm Ins. Co. (2013) 220 Cal.App.4th 798

By Susan D. Pelmulder, Esq., of Flynn, Rose & Perkins 11

Review Granted 13

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Second Appellate District:

Trial Court May Stay Appraisal Arbitration of Property Loss under Cal. Ins. Code § 2071 Until It Decides

Whether Insurer’s “Actual Cash Value” Determination Complies with Cal. Ins. Code § 2051

Alexander v. Farmers Ins. Co., Inc. (2013) 219 Cal.App.4th 1183

By Joanne M. Wendell, Esq., of

Adleson, Hess & Kelly APC This action concerned the method of appraising a first party property loss from fire under Cal. Ins. Code § 2071, and whether the appraisal arbitration must precede or can follow judicial attention to other issues. The Second District affirmed the trial court, which denied Farmers’ motion to compel the appraisal arbitration without prejudice to renewing it later in the litigation. A trial court has the discretion to stay an appraisal arbitration pending judicial resolution of the parties’ rights on other coverage issues. A stay is sensible when judicial resolution of other issues would resolve the appraisal and thus eliminate the need for one. Policyholders sued Farmers, claiming its method of calculating depreciation to determine the covered actual cash value of a loss was improper under Cal. Ins. Code § 2071, § 2051, and 10 Cal. C. Reg. § 2695.9(f). Cal. Ins. Code § 2071 contains standard terms each form fire insurance policy must contain, and directs that disagreements over actual cash value or the amount of loss from fire are subject to appraisal by arbitration. An appraisal proceeding is limited to determining the actual cash value of property loss. The appraisal panel does not resolve coverage issues. It does not construe policy language or governing statutes. It lacks authority to decide whether an insured lost what he or she claims to have lost. Cal. Ins. Code § 2071 does not preclude separate legal proceedings on these and other issues, which a policyholder must commence within 12 months of the loss. Cal. Ins. Code § 2051 defines how to determine the “actual cash value” of a partial loss: “[i]n case of a partial loss to the structure, or loss to its contents, the amount it would cost the insured to repair, rebuild, or replace the thing lost or injured less a fair and reasonable deduction for physical depreciation based upon its condition at the time of the injury or the policy limit, whichever is less. In case of a partial loss to the structure, a deduction for physical depreciation shall apply only to components of a structure that are normally subject to repair and replacement during the useful life of that structure.”

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10 Cal. C. Reg. § 2695.9(f) requires an insurer to include “all justification” for any adjustment in the claim file. “Any adjustments shall be discernible, measureable, itemized, and specified as to dollar amount, and shall accurately reflect the value of the betterment, depreciation, or salvage. Any adjustments for betterment or depreciation shall reflect a measureable difference in market value attributable to the condition and age of the property and apply only to property normally subject to repair and replacement during the useful life of the property. The basis for any adjustment shall be fully explained to the claimant in writing.” Policyholders alleged Farmers improperly decided compensable loss by first determining replacement cost and depreciating that based on age and not actual condition. As to structural loss, Farmers allegedly depreciated components not normally repaired or replaced within the useful life of the structure (baseboards, insulation, doors, closets, window framing, wiring, and fireplace). It then divided the age of the component by an estimate of the component’s useful life. Policyholders sued to determine whether (1) Farmers complied with Cal. Ins. Code § 2051(b) and 10 Cal. C. Reg. § 2695.9(f) when adjusting partial loss; (2) Farmers may only consider age or useful life of an item, or excessively rely on same, to determine depreciation; (3) Ins. Code § 2051(b) permits Farmers to depreciate though a standardized schedule rather than by examining the property’s condition; (4) Farmers may conceal its depreciation method; and (5) Farmers must first adjust the claim and calculate actual cash value under § 2051 before it can invoke the appraisal (arbitration) provision. Additionally, as to structural claims only, they sued to determine whether (6) Farmers depreciates on structural components not normally subject to repair and replacement during the structure’s useful life. Farmers moved to compel the appraisal, lost (without prejudice), and appealed to the Second District, which decided whether a trial court may defer appraisal pending the judicial resolution of other issues. Farmers relied on a case decided before the legislature amended § 2051 in 2004 (Community Assisting Recovery, Inc. v. Aegis Security Ins. Co. (2001) 92 Cal.App.4th 886). The appellate court declined to follow that case in favor of two decided after the 2004 amendment, i.e., Kirkwood v. Cal. State Auto. Assn. Inter-insurance Bureau (2011) 193 Cal.App.4th 49 and Doan v. State Farm General Ins. Co. (2011) 195 Cal.App.4th 1082. The appellate court held a trial court has discretion to defer an appraisal pending resolution of other issues. It reasoned an appraisal may become unnecessary once the valuation method is judicially determined to comply (or not) with § 2051. Thus, deferring the appraisal would often be the most efficient way to resolve the entire dispute. The appellate court was not persuaded by Farmers’ concession (on appeal) it had the obligation to consider the actual condition of damaged property along with its age. The court stated acknowledging the obligation to factor in actual condition, and satisfying that obligation to determine benefits due, are two different things. Policyholders sufficiently alleged Farmers failed to routinely consider the actual condition of damaged property in the complaint to stay the arbitration.

You may contact Joanne M. Wendell, Esq., at Adleson, Hess & Kelly, 577 Salmar Ave., 2nd Fl., Campbell, CA 95008, T: 408-341-0234, E: jwendell@ahk-law.com.

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First Appellate District:

Action to Void a Contract is an Action “On the Contract” Within the Meaning of a Contractual Attorney Fee Provision

Eden Township Healthcare Dist. v. Eden Medical Center 220 Cal.App.4th 418

By Dean A. Pappas, Esq., of

Ropers, Majeski, Kohn & Bentley

Eden Township Healthcare District (“District”) filed a cross-action against Eden Medical Center (“EMC”) for declaratory and injunctive relief, asserting an agreement between them was illegal, invalid and, therefore, void and unenforceable. EMC successfully moved for summary judgment, and filed a motion for attorney fees and costs. The attorney’s fee clause in the agreement stated “[t]he prevailing party in any action or proceeding commenced in court for breach of this Agreement shall be entitled to its attorneys' fees, costs, and expenses of experts incurred in prosecuting or defending such action or proceeding.” The District contended the attorney’s fee clause did not apply because it did not file the cross-complaint for breach of the agreement. The trial court denied EMC's request for attorney fees, finding the cross-action was not “on a contract” for purposes of Civil Code § 1717. The appellate court assessed whether a cross-defendant could recover its attorney fees from the complaining party that unsuccessfully alleged the underlying contract was illegal and invalid. It recognized the broad nature of actions seeking declaratory and injunctive relief have been held to be an ‘action on a contract.’” Id. at 426-428. It noted the District affirmatively raised the issue to legitimize its position it would incur no liability if it took actions contrary to the Agreement, and could raise the same issue as a defense to a breach of contract claim. The court also noted the District requested attorney fees in its prayer, and described that as “strong indicia” the cross-action was intended to be “on the contract.” Id. at 428. It reversed the trial court and held EMC was entitled to its attorney fees. You may contact Dean A. Pappas, Esq., at Ropers, Majeski, Kohn & Bentley, 1001 Marshall St., Redwood City, California 94063, T: 650-364-8200, E: dpappas@rmkb.com.

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U.S. Supreme Court:

Three Year Contractual Limitations Period that Begins before ERISA Cause of Action Accrues is Enforceable;

Equitable Doctrines are Available Only in Extraordinary Circumstances

Heimeshoff v. Hartford Life & Accident Ins. Co., et al. (2013) 134 S.Ct. 604

By Susan D. Pelmulder, Esq., of

Flynn, Rose and Perkins, a Professional Assoc. Heimeshoff filed a claim for benefits with Wal-Mart Stores' Group Long Term Disability Plan, insured and administered by Hartford Life and Accident Ins. Co. The Plan required a claimant provide a proof of loss within 90 days of filing for disability benefits. Hartford denied her claim on the ground she had not filed a satisfactory proof of loss, because her doctor never responded to Hartford's request for additional information. Hartford agreed to reopen her claim if her doctor provided the requested information. Eleven months later Heimeshoff provided an evaluation by another physician and additional evidence to support her claim. Hartford denied the claim after its retained physician reported Heimeshoff was not disabled from her job. Heimeshoff filed a second appeal with additional evaluations. Hartford denied the appeal after having two physicians review the evidence submitted. The Plan had a three year contractual limitations period after proof of loss is due in which a beneficiary may file suit for judicial review of the benefit denial under ERISA § 502(a)(1)(B). Heimeshoff filed suit to recover benefits under the Plan less than three years after the first denial of benefits, but more than three years after the proof of loss was due. The central issue became whether a contractual limitations period that begins to run before the claim accrues is enforceable in a benefits plan under ERISA. The high court reiterated the importance of enforcing Plan terms as written, citing the recent cases of McCutchen and Amara, among others. (US Airways, Inc., v. McCutchen, 133 S.Ct. 1537, 1548; CIGNA Corp. v. Amara (2011) 563 U.S. ___ , 131 S.Ct. 1866, 1877). It looked back to 1947 for the framework to evaluate the enforceability of a contractual limitations period, i.e., Order of United Commercial Travelers of America v. Wolfe (1947) 331 U.S. 586; 67 S.Ct. 1355. Wolfe provides “in the absence of a controlling statute to the contrary, a provision in a contract may validly limit, between the parties, the time for bringing an action on such contract to a period less than that prescribed in the general statute of limitations, provided that the shorter period itself shall be a reasonable period.” (Id. at 608.) ERISA § 502(a)(1)(B) does not contain a statute of limitation nor a bar to a shorter contractual limitations period. The Court noted the remainder of ERISA was not contrary. After noting most claimants would typically have 1-2 years after their cause of action accrues to file suit, the Court found three years was not unreasonably short. It left in place traditional doctrines of waiver and

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estoppel based on the plan administrator’s conduct during the internal review (LaMantia v. Voluntary Plan Administrators (9th Cir. Cal. 2005) 401 F.3d 1114, 1119) and equitable tolling for extraordinary circumstances (Irwin v. Dept. of Veterans Affairs (1990) 498 U.S. 89, 95). The Ninth Circuit equitably tolled the contractual limitations period between the date the proof of loss was due and the date the cause of action accrued. (Price v. Provident Life & Accident, Ins. Co.(9th Cir. Cal. 1993) 2 F.3d 986). Heimeshoff left equitable remedies available, but only in “extraordinary circumstances.” Heimeshoff accordingly abrogates the Ninth Circuit's approach in Price of equitably tolling the typical contractual limitations period while the claim is being internally reviewed. When a cause of action accrues under ERISA is governed by federal law, and is defined as when the “plaintiff knows or has reason to know of the injury that is the basis of the action." (Northern Cal. Retail Clerks Unions v. Jumbo Markets, Inc. (9th Cir. Cal. 1990) 906 F.2d 1371, 1372 (citations omitted). This is often the date of the denial letter, but is determined from the facts if the insurer or Plan has not provided the required notice. In California, a disability policy must contain a three year limitations period, commencing from the date the proof of loss is made in accordance with the terms of the policy. (Cal. Ins. Code § 10350.11.) In addition, a claimant must submit a proof of loss within 90 days of the loss or termination of the period for which the insurer is liable. (Cal. Ins. Code § 10350.7.) These provisions, however, do not apply to self funded plans, which typically contain a shorter contractual limitations period. You may contact Susan D. Pelmulder, Esq., at Flynn, Rose and Perkins, 59 N. Santa Cruz Ave., Ste. Q, Los Gatos, CA 95030, T: 408-399-4566, E: sue@frplawyers.com.

U.S.D.C. (C.D. Cal.):

CGL Policy Covers Breach of Privacy Claim Involving the Unauthorized Publication of Patient’s Medical Records

CV13-3728 GAF (JCx), Oct. 7, 2013 2013 WL 5687527

By Ronald J. Cook, Esq., of Willoughby, Stuart & Bening

This coverage dispute results from two California state court actions involving private medical records posted on a public website. A group of patients sued Corcino Associates (Corcino) and Stanford Hospital after 20,000 patients’ private medical records / information were posted on a public website by a Corcino job applicant and remained there for almost a year. The information concerned Stanford’s Emergency Department.

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Corcino handed the information to the job applicant as a “test for employment suitability.” The applicant posted the information on a public website entitled “Student of Fortune,” and requested help from strangers to convert the information so the applicant could pass the employment suitability test.

After a patient discovered the information online, plaintiffs filed state court actions for violation of the right of privacy. Corcino tendered the actions to Hartford which agree to defend under a reservation of rights. At the same time, Hartford filed a declaratory relief action in federal court. It requested the court determine the policy did not cover “statutory relief,” under an exclusion precluding personal injury coverage for claims “arising out of the violation of a person’s right to privacy created by any state or federal act. However, this exclusion does not apply to liability for damages that the insured would have any absence of such state or federal act.” Stanford filed a motion to dismiss Hartford’s federal action on the ground it failed to state a claim. The federal court granted the motion to dismiss Hartford’s action for declaratory relief because the right to privacy is not solely based upon state and federal acts, but the constitution and common law as well. It reaffirmed the general rule that policy exclusions are read narrowly in favor of coverage. Because the patient’s right to privacy existed on constitutional and common law bases long before the statutes were enacted, the exception to the exclusion applied, triggering Hartford’s duty to defend and indemnify its insured.

You may contact Ronald J. Cook, Esq., at Willoughby, Stuart & Bening, 50 W. San Fernando St., Ste. 400, San Jose, CA 95113, T: 408-289-1972, E: rjc@wsblaw.net.

Second Appellate District:

Insurer has No Obligation to Initiate Settlement, and No Liability for Failing to Settle Within Policy Limits,

Absent Claimant’s Demand or Interest in Settlement

Reid v. Mercury Ins. Co. (2013) 220 Cal.App.4th 262

By Helen H. Chen, Esq., of

Robinson & Wood, Inc.

This action addressed whether an insurer must initiate settlement negotiations or offer its policy limits before or in the absence of a demand or settlement offer from the third party claimant. The Second Appellate District said “no,” and an insurer is not liable for violation of the implied covenant of good faith and fair dealing in that circumstance. The insured ran a red light and caused a multi-car accident, with injuries to plaintiff and others. Plaintiff’s injuries alone potentially exceeded the policy limits. Plaintiff asked Mercury to disclose the policy limits, which it did with the insured’s permission. However, plaintiff never made a policy limits demand or a demand for settlement in any amount.

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Nine months after the accident, Mercury offered plaintiff the $100,000 per person policy limit after review of plaintiff’s medical records and evaluation of claims from other injured parties. Plaintiff rejected the offer. A bench trial resulted in a $5,900,000 judgment against the insured. The insured filed for bankruptcy and assigned her rights to plaintiff. Plaintiff sued Mercury, contending its failure to settle within the policy limits violated the implied covenant of good faith and fair dealing. The trial court entered summary judgment for Mercury, finding it was not liable for failing to settle in bad faith. The appellate court affirmed the decision. The appellate court explained an insurer’s duty to settle is not precipitated solely by the likelihood of a judgment against the insured in excess of policy limits. No California precedent suggests an insurer has a duty to initiate settlement discussions or offer its policy limits as soon as an insured’s liability in excess of policy limits has become clear. Bad faith liability for the failure to settle requires some evidence either that plaintiff made a settlement demand, or the insurer knew or should have known plaintiff was interested in settling the claim. The court distinguished this case from those in which a claimant communicates an interest in settlement to the defendant and/or insurer, but the insurer ignores or rejects the opportunity. In sum, there is no liability for bad faith failure to settle without a settlement demand or other manifestation the injured party is interested in settlement, because the insurer has done nothing to discourage, delay or reject the opportunity.

You may contact Helen H. Chen, Esq., of Robinson & Wood, Inc., at 227 North First Street, San Jose, CA 95113, T: 408-792-5919, E: hhc@robinsonwood.com.

Second Appellate District:

Reasonable Coverage Expectation of Named and Additional Insureds May Differ When AI Has Its Own Insurance;

Legacy Vulcan Did Not Collaterally Estop Insurer from Contesting Coverage Due to AI

Transport Ins. Co. v. Superior Court (R.R. Street & Co., Inc., et al.) (2014) 222 Cal.App.4th 1216

By Joanne M. Wendell, Esq., of

Adleson, Hess & Kelly APC

This action concerned the duty to defend between policies issued to R.R. Street & Co., Inc., against allegations of environmental contamination in multiple actions. National Union Fire Ins. Co. of Pittsburgh, Pennsylvania issued a primary policy to R.R. Street as the named insured and defended R.R. Street in the underlying actions. Transport Insurance Company issued an excess/umbrella policy naming R.R. Street as an additional insured and Vulcan Materials Company as the named insured. R.R. Street was not named as an additional insured under any of Vulcan’s primary policies.

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R.R. Street and National Union sought coverage and contribution from Transport. The appellate court found the excess Transport policy to be ambiguous; Vulcan as named insured and R.R. Street as additional insured differed in their objectively reasonable expectations of coverage; and Transport was not collaterally estopped in challenging its obligation to R.R. Street by Legacy Vulcan Corp. v. Superior Court (2010) 185 Cal.App.4th 677. In Legacy Vulcan, the Second Appellate District earlier held “underlying insurance” in Transport’s same insuring clause was ambiguous and to be construed in Vulcan’s favor. Transport as the excess insurer had the obligation to defend Vulcan upon the exhaustion of the sole underlying primary policy for that period, rather than all collectible primary insurance available to Vulcan. R.R. Street successfully contended at the trial level Legacy Vulcan collaterally estopped Transport from claiming any other policy had to exhaust before it provided a defense to R.R. Street. Transport filed a petition for writ of mandate. The appellate court accepted the petition and reversed the trial court, which erred by focusing on the reasonable expectation of coverage by Vulcan (the named insured), rather than R.R. Street (the additional insured). Collateral estoppel only applies when the issue is identical, and was actually litigated and necessarily decided in a former proceeding. The duty to defend in Legacy Vulcan concerned Transport’s obligation to defend the named insured Vulcan. Transport was not collaterally estopped by Legacy Vulcan with respect to coverage owed to an additional insured. Because the issue here was Transport’s duty to defend additional insured R.R. Street, it was not identical and collateral estoppel did not apply. While the appellate court opined “[i]t is arguable Street would not expect the Transport excess and umbrella policy to move into first position ahead of Street’s own commercial liability policies,” it noted Transport did not request it make that determination, only that it reverse the trial court’s order and summary adjudication in R.R. Street’s favor, which it did. It held a third party beneficiary analysis does not apply on remand when the trial court decides R.R. Street’s reasonable expectation of coverage under Transport’s insurance policy. An additional insured’s intent is relevant to the construction of Transport’s policy, because the named insured’s intent in requesting added coverage directly depends on the bargain made between the named and additional insureds.

You may contact Joanne M. Wendell, Esq., at Adleson, Hess & Kelly, 577 Salmar Ave., 2nd Fl., Campbell, CA 95008, T: 408-341-0234, E: jwendell@ahk-law.com.

Quarterly Quote

The future is here. It’s just not widely distributed yet.

William Gibson (1948 - )

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Fourth Appellate District:

CGL Insurer Had No Duty To Defend Until Plaintiff Amended Complaint to Include Compensatory Damages;

No Bad Faith If No Possibility of Coverage

San Miguel Community Assoc. v. State Farm Ins. Co. (2013) 220 Cal.App.4th 798

By Susan D. Pelmulder, Esq., of Flynn, Rose, and Perkins

Two residents of San Miguel Community Association (“San Miguel”) demanded mediation of their complaints that parking restrictions were not enforced. The mediation was unsuccessful, and the residents filed a complaint against the president of the board of directors. They alleged causes of action for breach of the CC&Rs and nuisance, and sought an injunction and punitive damages. The first amended complaint added San Miguel as a defendant and a cause of action for breach of fiduciary duty, but continued to only seek injunctive relief and punitive damages. The second amended complaint added allegations for “an amount to be proved at trial or … nominal damages to the extent necessary,” and a prayer for compensatory damages according to proof at trial “or alternatively … and award of nominal damages.” The director tendered defense to State Farm after the demand for mediation and after service of each complaint. Each time, State Farm denied the defense, contending the action did not seek damages payable under the policy. After initially denying a defense against the second amended complaint, State Farm agreed to defend San Miguel under a reservation of rights. San Miguel was insured under a comprehensive business liability policy with a Directors and Officers endorsement. State Farm agreed to “defend a claim or suit seeking damages payable under this policy even though the allegations of the suit may be groundless.” Coverage included “those sums that the insured becomes legally obligated to pay as damages because of bodily injury, property damage, personal injury or advertising injury” caused by an “occurrence.” The D&O endorsement added coverage for wrongful acts directly related to the operations of San Miguel, but did not apply to “any dishonest, fraudulent, criminal or malicious act, including fines or penalties resulting from these acts.” It also did not apply to “damages other than monetary damages.”

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San Miguel filed suit against State Farm for breach of contract and bad faith. State Farm’s motion for summary judgment was granted and affirmed. The issue was whether the residents sought compensatory damages. The Fourth Circuit considered it irrelevant the residents may have suffered harm that could give rise to a covered claim against San Miguel. It held the duty to defend is triggered by a third party seeking to recover damages that could potentially be covered. San Miguel argued allegations of actual damages were implied in the first amended complaint as necessary to support the allegations of punitive damages, and relied on Travelers Property Casualty Co. of America v. Charlotte Russe Holding, Inc. (2nd App. Dist. 2012) 207 Cal.App.4th 969 (“Charlotte Russe”). In response, the Fourth District cited United Pacific Ins. Co. v. Hall (1988) 199 Cal.App.3d 551, which held an insurer that agrees to defend an action for damages has no obligation to defend an action where damages are not sought. In Charlotte Russe, a self-described premium, high end, clothing manufacturer alleged damage to its brand and trademark after a retailer published fire-sale prices for its product. The court identified other disparagement cases and held low published prices implied the goods were not high quality. See Atlantic Mutual Ins. Co. v. J. Lamb, Inc. (2002) 100 Cal.App.4th 1017; Nichols v. Great American Ins. Cos. (1985) 169 Cal.App.3d 766. The Fourth District agreed with Charlotte Russe that allegations in the underlying complaint need not mimic policy language to trigger coverage. But it stated the complaint clearly did not seek compensatory damages until the second amended version, and declined to infer allegations into the complaint before that time. The court noted an inference of an allegation that residents were seeking compensatory damages contradicted the testimony of San Miguel’s attorney regarding his understanding of the residents’ demands. Compensatory damages were also contrary to the positions San Miguel took in successfully demurring to the first amended complaint, and were contrary to express allegations of irreparable harm with no adequate remedy at law. The Fourth District also rejected San Miguel’s claim of a triable issue of fact on its allegation of bad faith based on how State Farm investigated the claim, and based on statements State Farm made in denial letters before accepting the defense. It cited Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 36 (“a claim for liability based on an insurer’s alleged breach of the implied covenant of good faith and fair dealing cannot be maintained unless the insured was entitled to coverage under the insurer’s policy”). Because plaintiffs did not seek compensatory damages before filing their second amended complaint, it did not matter whether any of San Miguel’s allegations of bad faith were true. You may contact Susan D. Pelmulder, Esq., at Flynn, Rose and Perkins, 59 N. Santa Cruz Ave., Ste. Q, Los Gatos, CA 95030, T: 408-399-4566, E: sue@frplawyers.com.

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Review Granted

NEW SINCE LAST CASE REVIEW Nickerson v. Stonebridge Life Ins. Co. – Reply Brief Due No. S213873 from 2

nd App. Dist. (219 Cal.App.4

th 188)

Los Angeles County Superior Court Case No. BC405280 Question presented: Is an award of attorney fees under Brandt v. Superior Court (1985) 37 Cal.3d 813 properly included as compensatory damages where the fees are awarded by the jury, but excluded from compensatory damages when they are awarded by the trial court after the jury has rendered its verdict? Opening Brief filed: Feb. 11, 2014 Answering Brief due by request for extension granted: Apr. 11, 2014 Reply Brief due (20 days after unless extended): May 1, 2014 CONTINUING Fluor Corp. v. Superior Court (Hartford Accident & Indem. Co.) – Fully Briefed No. S205889 from 4

th App. Dist. - 208 Cal.App.4

th 1506

Question presented: whether the limitations on assignment of third party liability insurance policy benefits recognized in Henkel Corp. v. Hartford Accident & Indem. Co. (2003) 29 Cal.4

th 934 are inconsistent with

the provisions of Cal. Ins. Code § 520. Opening Brief filed: Mar. 13, 2013 Answering Brief filed: June 12, 2013 (extension granted) Reply Brief filed: Aug. 2, 2013 (extension granted, one day late) Amicus Brief filed: 10-08-13 California Ins. Commissioner; 09-10-13 Stonewall Ins. Co.; 10-08-13 Complex Ins. Claims Litigation Assn., and American Ins. Assn.; 09-24-13 Alpha Appalachia Holdings, Inc.; 09-10-13 Henry Company LLC and Parsons Corp.; 09-10-13 United Policyholders Response to Amicus Brief filed: 12-10-13 Hartford; 12-10-13 Flour Corp. Hartford Cas. Ins. Co. v. Swift Distribution Ins. – Fully Briefed No. S207172 from 2

nd App. Dist. – 210 Cal.App.4

th 915

Question presented: Did allegations of the complaint constitute disparagement for purposes of insurance coverage or the duty to defend under the “advertising injury” provision of defendant’s insurance policy? Opening Brief filed: May 15, 2013 Answering Brief filed: August 13, 2013 (extension granted, one day late) Reply Brief due: Sept. 24, 2013 (extension granted, one day late) Amicus Brief filed: all on 10-24-13 American Ins. Assn.; United Policyholders; America Guar. And Liability Ins. Co.; Bullpen Distribution, Inc.; Steven W. Murray; Ironshore Specialty Ins. Co.; Complex Ins. Claims Litigation Assn; 10-28-13 Charlotte Russe Holding, Inc.; 11-07-13 David A. Gauntlett Response to Amicus Brief filed: 12-10-13 Swift Distribution, Inc.

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Hartford Cas. Ins. Co. v. J.R. Marketing, L.L.C. – Reply Brief due March 10, 2014 No. S211645 from 1

st App. Dist. – 216 Cal.App.4

th 1444

Question presented: After an insured has secured a judgment requiring an insurer to provide independent counsel to the insured (see San Diego Fed. Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358), can the insurer seek reimbursement of defense fees and costs it considers unreasonable and unnecessary by pursuing a reimbursement action against independent counsel or can the insurer seek reimbursement only from its insured? Opening Brief filed: 11-19-13 Answering Brief filed: 01-17-14 Reply Brief due: March 10, 2014 (by granted application) Amicus Application and Brief due (14 days after unless extended): TBD

American States Ins. Co. v. Ramirez – Settled with Approval of Minor’s Compromise; Not Yet Dismissed No. S205073 from No. E052849 (unpublished opinion from 4

th App. Dist.);

San Bernardino County Superior Court Case No. CIVVS703193 Questions presented: (1) whether a form included in the envelope containing policy documents sent to insured which stated insured was covered for any vehicle he drove was part of the insurance policy; and (2) if so, did that form create an ambiguity in coverage that should be construed against the insurer.

EXECUTIVE COMMITTEE MEMBERS

Joanne M. Wendell, Chairperson Joanne M. Wendell, Editor

Helen H. Chen

Ronald J. Cook, Past Chair Randy M. Hess, Past Chair

Colin G. McCarthy Dean A. Pappas, Past Chair

Susan D. Pelmulder

March 2014 Insurance Law Section of

Santa Clara County Bar Association