The State Bar of California
Insurance Law Committee of the Business Law Section
APPELLATE LAW UPDATE
July 21, 2010
Submitted by H. Thomas Watson
Horvitz & Levy LLP
UNITED STATES SUPREME COURT:
1. Courts have discretions to award attorney fees and costs to either party in an ERISA action, provided the fee claimant achieved “some degree of success on the merits.” (Hardt v. Reliance Standard Life Ins. Co. (2010) __
U.S.__ [130 S.Ct. 2149].)
NINTH CIRCUIT COURT OF APPEALS:
1. District court has no authority to vacate arbitration award of full disability policy benefits, emotional distress, and punitive damages totaling more than $6 million on the ground the award was excessive.(Lagstein v. Certain Underwriters at Lloyd’s, London (9th Cir. 2010) 607 F.3d 634.)
CALIFORNIA SUPREME COURT:
1. The severability provision of a homeowners policy limits application of the intentional acts exclusion. (Minkler v. Safeco Ins. Co. of America (2010) 49 Cal.4th 315.) In Minkler, the California Supreme Court unanimously held that the severability provision of a homeowners policy (“ ‘This insurance applies separately to each insured’ ”) should be construed to mean that the policy’s exclusion for “ ‘bodily . . . injury expected or intended by an insured’ ” applies separately to each insured who allegedly contributed to the plaintiff’s bodily injury. Accordingly, the court held the exclusion did not bar coverage for a mother who was sued for negligently allowing her adult son to sexually molest a minor, even though the exclusion barred coverage for the son’s intentional misconduct.
The court left open the possibility that the result may be different when the plaintiff alleges that the insured is merely vicariously or derivatively liable for a coinsured’s intentional acts, rather than alleging that the insured’s own acts or omissions contributed to the bodily injury. Thus, even after Minkler, when a single tortious act causes the injury, and that injury was intended, the intentional acts exclusion may bar coverage for all insureds notwithstanding the severability provision.
CALIFORNIA COURT OF APPEAL:
1. Plaintiff’s status as a minor does not excuse his failure to comply with the two-year limitations period under Insurance Code section 11580.2, subdivision (i), for bringing suit against an insurer to recover uninsured motorist benefits. (Blankenship v. Allstate Ins. Co. (June 29, 2010, C059423) __ Cal.App.4th __ [2010 WL ___] [Third Dist.].)
2. Under the collateral source rule, a trial court may not reduce an award of past medical expense damages from the full amount billed by the healthcare providers to the lesser amount accepted by those providers as payment in full for their services pursuant to negotiated healthcare service agreements. (Yanez v. SOMA Environmental Engineering, Inc. (June 24, 2010, A123893) __ Cal.App.4th __ [2010 WL 2527483] [First Dist., Div.
Note that this issue is currently before the California Supreme Court in Howell v. Hamilton Meats & Provisions, Inc. (2009) 179 Cal.App.4th 686, review granted Mar. 10, 2010, S179115.)
3. Insurer may offset uninsured motorist payments with amounts paid for the same accident under the medical expense coverage provision in the same policy pursuant to an offset provision in the uninsured motorist section of the policy, notwithstanding a medical expense coverage endorsement that deleted provisions for medical expense payments offset or reimbursement from liability recoveries from those responsible for the accident. (Hervey v. Mercury Cas. Co. (2010) 185 Cal.App.4th 954 [Second Dist., Div. Five].)
4. Policy provision stating that insurer owed no duty to defend unless a $25,000 per claim self-insured retention amount was exhausted did not excuse insurer from defending construction defect lawsuit involving 73 homeowners and 43 homes because the term “claim” was ambiguous, and could reasonably be construed to refer to the lawsuit as a whole rather than each homeowner’s demand for payment. (Clarendon America Ins. Co. v. North American Capacity Ins. Co. (June 15, 2010, E048176) __ Cal.App.4th __ [2010 WL 2377835] [Fourth Dist., Div. Two].) HORVITZ & LEVY LLP
5. Commercial general liability insurer owes no duty to defend insured cab company for alleged liability stemming from an employee’s assault and battery of a customer because the employee’s acts were not an “accident” within the policy’s coverage clause regardless whether he acted in self defense. (L.A. Checker Cab Cooperative, Inc. v. First Specialty Ins. Co. (June 14, 2010, B213948) __ Cal.App.4th __ [2010 WL 2354301] [Second Dist., Div. One].)
6. Commercial general liability insurer owes insured contractor no duty to defend lawsuit by competitor alleging causes of action for misappropriation of trade secrets, intentional interference with prospective economic damages, and unfair competition based on the misappropriation of confidential customer information by employee hired away from the competitor by the insured: (1) there was no potential for advertising injury coverage because the misappropriated information was not alleged to have been used to attract new customers, but only to convince existing customers to follow the employee to his new employer; (2) there was no potential for personal injury coverage because the policy unambiguously limited such coverage to the invasion of a natural person’s right to privacy; coverage did not extent to liability for invasion of a legal entities’ privacy rights; and (3) the policy also excluded coverage for all causes of action based on intellectual property infringement. (S.B.C.C., Inc. v. St. Paul Fire & Marine Ins. Co. (June 11, 2010, H034211) __ Cal.App.4th __ [2010 WL 2338698] [Sixth Dist.].)
7. Umbrella policy insurer owes primary duty to defend insured against potentially covered claims regardless whether the underlying primary insurance policies or the self-insured retention have been exhausted. (Legacy Vulcan Corp. v. Superior Court (Transport Ins. Co.) (2010) 185 Cal.App.4th 677 [Second Dist., Div. Three].)
8. Commercial general liability insurer must share defense costs where its policy provision circumventing the continuous injury trigger rule did not unambiguously eliminate coverage for the insured’s liability for alleged negligence that occurred prior to the policy period but the resulting damages potentially first took place during the policy term. (Pennsylvania General Ins. Co. v. American Safety Indem. Co. (June 3, 2010, D054522) __ Cal.App.4th __ [2010 WL 2201517] [Fourth Dist., Div. One].)