APPELLATE LAW UPDATE
April 28, 2011
Submitted by H. Thomas Watson
Horvitz & Levy LLP
SUPREME COURT: The California Supreme Court did not publish any recent decisions regarding insurance law, but it did order further briefing in one case that may be of interest to counsel practicing insurance law and related issues.
1. Howell v. Hamilton Meats & Provisions Inc. (2009) 179 Cal.App.4th 686, review granted Mar. 10, 2010, S179115.
On March 10, 2010, the California Supreme Court granted review in this case to decide the following issues: (1) Is the “negotiated rate differential” – the difference between the full billed rate for medical care and the actual amount paid as negotiated between a medical provider and an insurer – a collateral source benefit under the collateral source rule, which allows plaintiff to collect that amount as economic damages, or is the plaintiff limited in economic damages to the amount the medical provider accepts as payment? (2) Did the trial court err in this case when it permitted plaintiff to present the full billed amount of medical charges to the jury but then reduced the jury’s award of damages by the negotiated rate differential?
On April 20, 2011, after completion of all briefing, the Supreme Court ordered the parties “to submit supplemental briefs on the following issues: Assuming, for sake of argument, that only amounts that have been paid or remain owing to medical providers are recoverable as damages for past medical expenses, what evidence of such expenses is admissible in a jury trial? Given defendant’s concession that a jury properly hears evidence of “gross medical bills” (open. br., p. 52), should this court for guidance in other cases approve or disapprove the posttrial ‘Hanif’ motion procedure used in the trial court?”
The parties’ supplemental brief are due simultaneously on May 5, 2011. This short deadline suggests that the court may set the case for argument before its summer recess.
COURT OF APPEAL: The California Court of Appeal recently published the following decisions that may be of interest to attorneys practicing insurance law:
1. The Workers’ Compensation Appeals Board does not have exclusive jurisdiction over an employer’s insurance breach of contract and bad faith claim stemming from a workers’ compensation insurer’s alleged wrongful cancellation of its policy, even where the allegedly injured employee is the sole shareholder of the insured employer. (Edward Carey Constn. Co. v State Compensation Ins. Fund (Mar. 25, 2011, published April 20, 2011, A128047) __ Cal.App.4th __ [2011 WL 1102808] [First Dist., Div. One].)
2. An insurer defending its insured under a reservation of rights who accepts a reasonable settlement within policy limits, after giving the insured the opportunity to take over the defense or waive a claim of bad faith based on refusal to settle, may seek reimbursement of the settlement amount from the insured if coverage is found not to exist regardless whether the insured had “adequate” time to evaluate the settlement offer. (American Modern Home Ins. Co. (April 8, 2011, G042799) __ Cal.App.4th __ [2011 WL 1334959] [Fourth Dist., Div. Three].)
3. Products-completed operations hazard coverage in CGL policy is not triggered where insured general contractor is terminated prior to completion of construction project. Faulty workmanship provision bars coverage for defective work liability, and the claims in progress exclusion bars coverage for continuing and progressive property damage losses that began prior to the inception of the policy. (Clarendon American Ins. Co. v. General Security Indem. Co. of Arizona (Mar. 2, 2011, published Mar. 30, 2011, B223566) __ Cal.App.4th __ [2011 WL 711856] [Second Dist., Div. Two].)
4. The trial court properly denies insurers petition to compel arbitration of alleged dispute concerning amount of attorney fees owed under Civil Code section 2860 where the insurer failed to defend the underlying action. (The Housing Group v. PMA Capital Ins. Co. (2011) 193 Cal.App.4th 1150 [First Dist., Div. Three].)
5. Insurer owes no duty to defend insured against a lawsuit alleging sexual battery since that claim is based on intentional and non-accidental misconduct. (Shanahan v. State Farm General Ins. Co. (2011) 193 Cal.App.4th 780 [Fourth Dist., Div. Three].)
6. Under Insurance Code sections 2051 and 10102, an insurer may properly withholds payment of replacement cost benefits in excess of policy limits until fire-damaged home is rebuilt. (Minich v. Allstate Ins. Co. (2011) 193 Cal.App.4th 477 [Fourth Dist., Div. One].)
NINTH CIRCUIT COURT OF APPEALS: The Ninth Circuit published the following decisions that may be of interest to attorneys practicing insurance law:
CALIFORNIA FEDERAL CASES
1. Federal district court has subject matter jurisdiction over insurance company’s diversity action seeking rescission of a workers’ compensation policy regardless whether state law vests exclusive jurisdiction in a state workers’ compensation agency. (U.S. Fidelity and Guar. Co. v. Lee Investments LLC (9th Cir., April 18, 2011, No. 08-17753) __ F.3d __ [2011 WL 1458793].)