Larry Golub

Larry Golub has no picture

Larry Golub is a litigation partner in the firm’s Los Angeles office. His practice focuses on a wide range of litigation matters for insurance companies and non-insurance clients. His insurance expertise includes coverage litigation, class action litigation and appellate practice, as well as California Unfair Competition Law 17200-17210.
His non-insurance experience includes employment litigation and construction litigation.
Mr. Golub speaks regularly on insurance-related claims handling topics for continuing legal education providers, clients and trade organizations. He is co-editor of Barger & Wolen’s Insurance Litigation and Regulatory Law Blog.


Articles By This Author

No Settlement Offer, No Bad Faith Liability for Insurer

By Samuel Sorich and Larry Golub

On October 7, 2013, the California Court of Appeal for the Second Appellate District held in Reid v. Mercury Insurance Company that an insurer that acknowledged its insured’s liability for a third party’s injuries and recognized that there was a substantial likelihood of a recovery in excess of policy limits had no liability for bad faith failure to settle in the absence of a settlement demand by the claimant or any other manifestation that the claimant was interested in settlement.

The Court of Appeal’s decision in this case provides guidance on the scope of an insurer’s duty to settle. The issue became confused when, in June 2012, the Ninth Circuit ruled in Du v. Allstate Insurance Company that an insurer had a duty to initiate settlement once liability was reasonably clear even though the injured party made no settlement demand. The Ninth Circuit retracted that portion of its  ruling in October 2012. The Du rulings are discussed on this blog here and here.

The Court of Appeal’s decision puts any confusion resulting from Du to rest in stating,

In short, nothing in California law supports the proposition that bad faith liability for failure to settle may attach if an insurer fails to initiate settlement discussions, or offer its policy limits, as soon as an insured’s liability in excess of policy limits has become clear. Nor will this court make such a rule of law, for which neither precedent nor sound policy considerations have been offered.”   

This case involves a Mercury insured who failed to stop at a red light and collided with another car. The driver of the other car was seriously injured. Within a few weeks of the accident, Mercury advised the injured party’s representative that Mercury “was accepting liability and that there may be a ‘limits issue.’”

Mercury requested medical records from the injured party, which were not made available. Mercury and the injured party’s attorney exchanged correspondence on the medical records and other matters, but the injured party never made a settlement demand.

The injured party filed a lawsuit against Mercury’s insured. The lawsuit resulted in a $5.9 million judgment against the insured. The Mercury policy covering the insured had a $100,000 policy limit.

Mercury was sued for bad faith failure to settle. The lawsuit alleged that the insurer’s failure to make a settlement offer exposed the insured to a judgment in excess of policy limits.

Mercury filed a motion for summary judgment, arguing that the plaintiff could not establish a bad faith action because the injured party never made a settlement demand. The trial court granted Mercury’s motion. The Court of Appeal affirmed the trial court’s decision.

The Court of Appeal explained that in a case where the insured is exposed to a judgment in excess of policy limits, in order to establish a bad faith action against an insurer for failure to pursue settlement discussions:

there must be, at a minimum, some evidence either that the injured party has communicated to the insurer an interest in settlement, or some other circumstance demonstrating that the insurer knew that settlement within policy limits could feasibly be negotiated.” 

The court concluded that there no evidence in this case that could support a finding Mercury knew or should have known that the injured party was interested in settlement. The court ruled, “Accordingly, defendant cannot be liable for bad faith failure to settle.”

 

California Court Clarifies What Triggers the Right to "Cumis Counsel"

Nearly 30 years ago, the California Court of Appeal announced its landmark decision in San Diego Federal Credit Union v. Cumis Insurance Society, Inc., 162 Cal. App. 3d 358 (1984), holding that if a conflict of interest exists between an insurer and its insured arising out of possible noncoverage under the insurer’s policy, the insurer is obligated to offer independent counsel to the insured, which is to be paid for by the insurer.  Shortly after the issuance of the Cumis case, the California Legislature passed Civil Code section 2860 to codify and clarify the rights and responsibilities of insureds and insurers when a claim of conflict of interest is asserted.

Since that time, a number of decisions have weighed in on the scope of the right to Cumis counsel and the meaning of section 2860, and the most recent decision is Federal Insurance Company v. MBL, Inc., decided August 26, 2013. Significantly, MBL confirms that not every reservation of rights entitles an insured to independent counsel.

Following the filing of an environmental remediation action against a dry cleaner for PCE contamination of soil and groundwater, the dry cleaner filed a third-party action against MBL, a supplier of dry cleaning products.  MBL retained defense counsel, who tendered MBL’s defense to multiple insurers and requested that the insurers provide MBL with Cumis counsel. 

While all of the insurers accepted the defense subject to various reservations of rights, only one, Great American Insurance Company, agreed to the retention of Cumis counsel. The rest of the insurers contended that their reservation of rights did not create a conflict of interest that required the appointment of independent Cumis counsel. /p> In June 2008, all of the insurers except Great American filed an action for declaratory relief against MBL, seeking a declaration that they were not obligated to provide independent counsel based on their various reservations of rights, which they contended did not create any conflict of interest between them and MBL. Shortly thereafter, Great American filed a separate action against MBL for declaratory relief also seeking to establish that it did not need to provide Cumis counsel, and it further filed a claim for contribution against the other insurers seeking to have them share in the cost of such counsel. The actions were later consolidated.

The trial court granted summary judgment to the insurers, finding there was no actual conflict of interest and thus no right to Cumis counsel. The Court of Appeal affirmed.

After detailing the development of the of the right to independent/Cumis counsel under California law, the Court of Appeal emphasized that

not every conflict of interest entitles an insured to insurer-paid independent counsel. Nor does every reservation of rights entitle[] an insured to select Cumis counsel.

For example, the court advised that where the coverage issue is independent of, or extrinsic to, the issues in the underlying case, or where the damages are only partially covered by the policy, there is no right to Cumis counsel. Rather, it is only when there is a reservation of rights and the outcome of that coverage issue can be controlled by the defense counsel retained by the insurer is independent counsel required to be appointed.

MBL contended that there were conflicts of interest because the insurers reserved their rights as to the applicability of various pollution exclusions, the policy limits for each accident or occurrence, and that there was no coverage for any damages outside of the insurers’ policy periods. In the context of this case, however, the court found that none of these reservations created a conflict of interest triggering the right to Cumis counsel under section 2860.  The court also found no conflict on interest merely because some of the insurers were defending other insureds that had interests adverse to MBL.

MBL further argued that the insurers’ “general reservation of rights” provided the basis for a conflict of interest. To this, the Court of Appeal concluded,

To the extent MBL contends the Insurers’ general reservations of rights gave rise to a conflict of interest, we reject that argument.  General reservations are just that: general reservations.  At most, they create a theoretical, potential conflict of interest – nothing more.

Finally, as to Great American, which had paid MBL’s independent counsel, subject to a reservation of the right to seek reimbursement from MBL, the court concluded that since Great American was not obligated to pay those fees in the first place, it could only seek reimbursement from MBL itself, and not from the other insurers who had no obligation to provide Cumis counsel to MBL.

California Supreme Court Finally Decides How a UCL Claim and First Party Bad Faith Claim Can Co-Exist

On August 1, 2013, the California Supreme Court issued its long-awaited decision in Zhang v. Superior Court, holding that an insured may assert a claim against an insurer based on California’s Unfair Competition Law, Business & Professions Code section 17200 et seq. (the “UCL”) for conduct that allegedly constitutes common law bad faith, even if the alleged conduct also happens to violate the Unfair Insurance Practices Act (UIPA).   

The Supreme Court’s decision resolves a simmering conflict among lower court decisions. A number of courts held that the Supreme Court’s landmark ruling in Moradi-Shalal v. Fireman’s Fund Ins. Companies, 46 Cal.3d 287 (1988), which abolished any private right of action to enforce the UIPA, precluded UCL claims based on specific unfair practices prohibited by Insurance Code section 790.03(h), which is part of the UIPA. Other courts found that Moradi-Shalal did not bar UCL claims when the basis for the UCL claim was common law bad faith, as opposed to the UIPA – even though the asserted “bad faith” practices are also prohibited under the UIPA.  The Supreme Court adopted the latter position, concluding:

We hold that Moradi-Shalal does not preclude first party UCL actions based on grounds independent from section 790.03, even when the insurer’s conduct also violates section 790.03.

While the Court’s opinion does not dwell on the facts of the case, the claim involved an insured’s purchase of a liability policy to cover her commercial property. The insured disputed the insurer’s handling of her fire damage claim and sued the insurer for breach of contract, breach of the implied covenant of good faith and fair dealing (i.e., bad faith), and a violation of the UCL. 

The UCL claim alleged “unfair, deceptive, untrue, and/or misleading advertising” in that the insurer made promises as to coverage “when it had no intention of paying the true value of its insureds’ covered claims.”  The Court observed that the insured alleged “causes of action for false advertising and bad faith, both of which provide grounds for a UCL claim independent from the UIPA.”

The Zhang case was decided on demurrer. Thus, the Court considered only the allegations of the complaint, and it had to assume the truth of those factual allegations.

After presenting a thorough history of prior decisions over the last quarter century that have considered Moradi-Shalal’s effect on UCL lawsuits against insurers (and other defendants), the Supreme Court allowed the insured to pursue her UCL claim and observed,

Because Moradi-Shalal barred only claims brought under section 790.03, and expressly allowed first party [common law] bad faith actions, it preserved the gist of first party UCL claims based on allegations of [common law] bad faith. Moradi-Shalal imposed a formidable barrier, but not an insurmountable one.

As a result, the insured’s alleged claim of false advertising and “litany of bad faith practices” were “sufficient to support a claim of unlawful business practices.”

In summarizing its holding, the Court stated:

Private UIPA actions are absolutely barred, a litigant may not rely on the proscriptions of section 790.03 as the basis for a UCL claim. . . . However, when insurers engage in conduct that violates both the UIPA and obligations imposed by other statutes or the common law, a UCL action may lie.  The Legislature did not intend the UIPA to operate as a shield against any civil liability.

A concurring opinion written by Justice Werdegar and joined in by Justice Liu agreed with the majority conclusion that the insured should be allowed to pursue her UCL lawsuit against the insurer, but disagreed with the conclusion that no UCL claim could ever be based on violations of the UIPA unless the Legislature affirmatively intended to preclude such indirect enforcement.

While the Zhang decision is likely to generate much attention and be cited extensively in the future, the Court’s holding is nevertheless quite limited and the following points should be noted:

  • The decision is restricted to UCL claims brought by first parties; that is, by insureds.  The Court specifically advised two times that whether third parties may pursue UCL claims “is a matter beyond the scope of this case.”
  • The decision reiterated that while the scope of a UCL claim is broad (“any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising”), the remedies are very narrow – restitution and injunctions. Damages in any form are not recoverable.
  • The UCL does not allow for attorney’s fees (except in those cases where the plaintiff could qualify as a private attorney general under California Code of Civil Procedure section 1021.5).
  • Since the UCL is solely an equitable claim, the trial court possesses “broad discretion” in issuing orders or judgments with respect to any restitution or injunctive relief, and defendants are allowed to advance not only various defenses to the UCL claim but also “equitable considerations” that could minimize or even eliminate a finding of a UCL violation.
  • The restrictions to a UCL claim added by Proposition 64 (standing to assert a UCL cause of action and complying with the class action requirements in any UCL action brought on behalf of others) still apply.
  • The Court referenced another lingering issue in UCL claims – what is the standard for determining what business acts or practices are “unfair” mean in the consumer context under the UCL. This issue, however, remains unsettled and for the Court to decide another day.

Finally, the most likely consequence of the Zhang decision is that insureds may, as a matter of course, add UCL claims to bad faith cases as one more cause of action, incorporating by reference the prior alleged bad faith allegations. Since any UCL claim does not allow a damage remedy, and the only monetary remedy is restitution, the ultimate impact of adding a UCL claim may be minimal.

California Supreme Court Hears Argument on Whether Insurance Code Limits UCL Lawsuits Against Insurers

By Samuel Sorich and Larry Golub

On May 8, 2013, the California Supreme Court convened to hear oral argument in Zhang v. Superior Court. The case presents the issue of whether conduct of an insurer, which is related to conduct that would violate California’s Unfair Insurance Practices Act, Insurance Code, §790.03(h) et seq. (UIPA), can be the basis for a private civil cause of action against the insurer under California’s Unfair Competition Law, Business & Professions Code, §17200 et seq. (UCL).

The Court of Appeal in Zhang had ruled in October 2009 that an insurer may be sued by a private citizen for conduct prohibited by the UCL even though the conduct is within the scope of the UIPA. The Supreme Court accepted review of the matter in February 2010.

At the oral argument session, counsel for the insurer relied on the California Supreme Court’s 1988 ruling in Moradi-Shalal v. Fireman’s Fund Insurance Companies, which held that violations of the UIPA may be prosecuted only by administrative action taken by the Insurance Commissioner, not by civil action by private citizens. Counsel argued that the holding in Moradi-Shalal bars a UCL action against an insurer when the action is based on insurer conduct that is governed by the UIPA.

Counsel for the plaintiff insured responded that Moradi-Shalal does not preclude the insured’s UCL action against the insurer, pointing to language in the Moradi-Shalal decision which noted that “the courts retain jurisdiction to impose civil damages or other remedies against insurers in appropriate common law actions, based on such traditional theories as fraud, infliction of emotional distress, and (as to the insured) either breach of contract or breach of the implied covenant of good faith and fair dealing.”

We have monitored the Zhang case and other appellate court decisions on the interplay between the UIPA and the UCL in prior blogs. Please see here, here, here and here.

The Supreme Court is required to issue a written opinion in the Zhang case within 90 days of the date of the oral argument, or by August 6, 2013.

The Supreme Court focused on the UCL this week. On May 7, 2013, the Court heard oral argument in Rose v. Bank of America which presents an issue analogous to the issue in Zhang. The question in Rose is whether a cause of action under the UCL can be predicated on an alleged violation of the Truth in Savings Act (12 U.S.C. $4301 et seq.) despite Congress’s repeal of the private right of action initially provided for under that Act.

 

California Court of Appeal Again Finds No Stacking of Liability Policy Limits

Nearly two years ago, the California Court of Appeal for the Second Appellate District issued a decision that upheld the concept of horizontal exhaustion of primary liability policy limits before triggering the obligation of an excess insurer, but also concluded that, in the context of that case, there was no stacking of liability insurance policies. The case was Kaiser Cement and Gypsum Corp. v. Insurance Company of the State of Pennsylvania, and we reported on it in this blog.

The California Supreme Court accepted review of Kaiser Cement, but then returned the case to the Court of Appeal after the Supreme Court issued its decision in State of California v. Continental Insurance Co., 55 Cal. 4th 186 (2012), a decision we also reported on in a prior blog

In Continental, the Supreme Court adopted the “all-sums-with-stacking” approach to addressing indemnification for continuous injury cases. With respect to the stacking issue, the Court found that allowing the insured to “stack” its policies and recover up to the policy limits of all the triggered policies was not only the correct rule based on the policy language but also the equitable result and one that can be achieved “with a comparatively uncomplicated calculation.” The Court, however, advised that insurers may be able to enforce “anti-stacking” provisions in their policies to avoid such a result.  

In the unanimous opinion of the Court of Appeal panel in Kaiser Cement, the primary policy considered in that case contained such language that precluding stacking of policy limits. Other than its addition of a brief section on the Continental decision (and some other minor revisions), the second opinion in Kaiser Cement, issued April 8, 2013, is virtually identical to the prior opinion issued June 3, 2011.

The underlying dispute involved coverage obligations for thousands of asbestos bodily injury claims brought against Kaiser, and in an even earlier decision, the appellate court held that asbestos bodily injury claims should be treated as multiple occurrences under the primary policies issued to Kaiser by Truck Insurance Exchange, rather than one single occurrence for multiple claimants. The primary policies all had non-aggregating per-occurrence limits, meaning the policies potentially could be on the hook for the total per-occurrence limit for each occurrence.

The present appeal addressed the situation as to whether, when an asbestos bodily injury claim exceeded the primary coverage issued by Truck in a particular year, the excess coverage issued by Insurance Company of the State of Pennsylvania (“ICSOP”) was triggered to provide indemnification to Kaiser. Because the case involved asbestos bodily injury, which continues to cause injury over time, even with a single claimant, a claim could trigger coverage in multiple policy years, and ICSOP argued that the insured had to exhaust all underlying primary policies for all years in which coverage was triggered. Kaiser and Truck both argued that the ICSOP excess policy was triggered upon exhaustion of the single $500,000 per occurrence limit.

The 2013 Kaiser Cement decision, just like the one in 2011, issued three holdings:

First, it held that the excess insurer ICSOP was entitled to horizontally exhaust all underlying primary insurance that was collectible and valid, and not just those policies directly underneath its excess policy.

The second holding, however, concluded that ICSOP was not able to “stack” the individual limits of the Truck primary policies. The court did not base this holding on judicially imposed anti-stacking principles, but rather concluded that under the particular language of the Truck policies, Truck could only be liable as a company for one per-occurrence limit for each occurrence. Specifically, the court cited the language in the insuring agreement stating that,

the Company’s liability as respects any occurrence . . . shall not exceed the per occurrence limit designated in the Declarations. (Italics added by court.) 

Thus, the court permitted horizontal exhaustion in principle but held that there was no valid and collectible insurance to horizontally exhaust in this case since Kaiser was only entitled to one per-occurrence limit for Truck as a whole for claims that exceeded the $500,000 per occurrence limit in the implicated Truck policy.

It was in this part of the Court’s analysis that it considered and analyzed the Continental decision, explaining that its “conclusion that Kaiser may not ‘stack’ Truck’s annual liability limits is consistent with the Supreme Court’s analysis in Continental” because Truck’s policy language was the type of provision envisioned by the Continental decision that precluded the stacking of policy limits for any one occurrence.  

Finally, as with the prior decision in Kaiser Cement, the Court of Appeal found that the summary judgment that had been issued by the trial court in favor of Kaiser had to be reversed because, on the present record, the appellate court could not determine if there was primary coverage issued to Kaiser by other insurers (outside of Truck) whose primary policies still needed to be exhausted under the court’s horizontal exhaustion ruling.

As of the moment, the Kaiser Cement decision remains citable law, though its status could change if review is sought from the Supreme Court and such review is accepted.

Barring such action, the case is helpful to excess insures as it affirms the obligation that horizontal exhaustion of all primary insurance is still the rule in the continuous occurrence context.

For primary insurers, the case affords the opportunity to avoid stacking of policy limits in those situations in which specific policy language precludes triggering more than one policy limit per occurrence. As we noted in our prior blog on the Kaiser Cement case, a careful review of the specific policy language found in each primary and excess policy at issue is required.

Judge Invalidates California Regulation on Estimating Replacement Costs for Homeowners Insurance

By Samuel Sorich and Larry Golub

On March 25, 2013, Los Angeles Superior Court Judge Gregory Alarcon issued a decision which found the California Department of Insurance’s regulation on estimating replacement costs for homeowners insurance to be invalid. The decision is Association of California Insurance Companies and Personal Insurance Federation of California v. Jones.

California Code of Regulation section 2695.183 was adopted by the insurance commissioner in 2010; the regulation went into effect on June 27, 2011. Section 2695.183 requires insurers to use a detailed method for estimating replacement costs for homeowners insurance. The regulation specifies that an insurer that communicates an estimate which does not comport with the regulation’s method makes a misleading statement in violation of Insurance Code section 790.03.

Two insurer trade associations, the Association of California Insurance Companies and Personal Insurance Federation of California, challenged the validity of section 2695.183. The associations petitioned the Los Angeles Superior Court for a judgment declaring section 2695.183 to be invalid because its adoption is beyond the insurance commissioner’s authority. Judge Alarcon granted the associations’ petition.

Insurance Code section 790.03 defines unfair and deceptive acts or practices in the business of insurance. Subdivision (b) of section 790.03 states that the definition of unfair or deceptive acts includes making a statement “which is known, or which by the exercise of reasonable care should be known, to be untrue, deceptive, or misleading.” The insurance commissioner relied on section 790.03(b) as authority to adopt section 2695.183, contending that the regulation simply interpreted section 790.03 by identifying one type of misleading statement.

Judge Alarcon rejected the commissioner’s reliance on section 790.03(b). The judge’s decision explains,

By characterizing all estimates of replacement costs as misleading (save the one provided by 10 CCR § 2695.183), Defendant, in exercising its authority under § 790.10, expands the meaning of something ‘known’ or which ‘should be known’ to be misleading beyond the parameters of § 790.03(b).”

Judge Alarcon’s decision notes that “[t]he limits of the authority granted by § 790.03 are underscored by Cal Ins Code § 790.06 which provides a special process which the commissioner can determine how acts not listed in § 790.03 can be defined as unfair or deceptive.”

The need to interpret the authority granted to the insurance commissioner by Insurance Code section 790.03 in light of Insurance Code section 790.06 was also central to the recent decision of California Administrative Law Judge Stephen J. Smith, who found that the Fair Claims Settlement Practices Regulations may not be used by the insurance commissioner to constitute unfair claims acts under section 790.03, which was discussed in this blog post.

Supreme Court Closes CAFA Loophole

A unanimous decision by the United States Supreme Court has restored the integrity of the Class Action Fairness Act, or CAFA. At issue in Standard Fire Insurance Co. v. Knowles was the transparent attempt by a named plaintiff to ouster federal court jurisdiction by “stipulating” that the damages sought through a class action complaint would not exceed the $5,000,000 minimum jurisdictional limit of CAFA. 

In a brief and direct decision, Justice Stephen Breyer disallowed the use of such a pre-certification stipulation, concluding that prior to the issuance of any certification order, a named plaintiff does not have the ability to bind absent class members and to concede the value of those class members’ claims.

Knowles was the named plaintiff in an action filed in Arkansas state court against Standard Fire concerning an alleged practice of failing to include general contractor fees in homeowner’s insurance loss payments. The complaint filed by Knowles, as well as an attachment to the complaint, contained a stipulation that Knowles and the Class would not seek to recover damages “in excess of $5,000,000 in the aggregate.” 

Accordingly, after Standard Fire removed the action to federal court under CAFA jurisdiction, Knowles moved to remand the action back to state court based on the stipulation that Knowles claimed made the “amount in controversy” fall beneath the $5,000,000 CAFA threshold and therefore defeated jurisdiction under CAFA. While the federal district court agreed with Knowles, other cases reached the opposite view, and thus the issue ended up at the Supreme Court.

In Knowles, the district court had found that the amount at issue would have exceeded the $5,000,000 minimum limit, but for the stipulation. As such, the Supreme Court had little difficulty concluding that the stipulation was ineffective to bind absent class members because, at the precertification stage, the proposed class members are not yet – and potentially never will be – parties to the action, and thus the named plaintiff cannot bind those non-parties. At the pre-certification stage, the named plaintiff cannot bind “anyone but himself.”

In enacting CAFA, Congress sought to relax the jurisdictional threshold of class actions and ensure “Federal court consideration of interstate cases of national importance.” The unilateral “stipulation” attempted in Knowles and in other cases not only frustrated the intent of Congress but also prejudiced the claims of absent class members. The Supreme Court correctly restored the balance in CAFA.

California Supreme Court Allows "Continuous Accrual" Doctrine to Avoid Statute of Limitations for "Unfair" UCL Claim

Seeking to clarify the extent to which the four-year statute of limitations applies to claims under the Unfair Competition Law, Business & Professions Code section 17200 et seq. (the “UCL”), a unanimous California Supreme Court today issued its decision in Aryeh v. Canon Business Solutions, Inc., allowing at least a portion of the plaintiff’s UCL claim to proceed beyond demurrer.

Relying on the continuous accrual doctrine, the Court explained that this equitable exception to the usual rules governing limitations periods would permit the plaintiff to pursue:

at least some [alleged unfair] acts within the four years preceding suit, [and thus] the suit is not entirely time-barred.”

Background

The plaintiff ran a copying business and entered into two agreements with Canon (one in November 2001 and one in February 2002) to lease copiers. The agreements required the plaintiff to pay monthly rent for each copier, subject to a maximum copy allowance. If plaintiff exceeded the monthly allowance, he had to pay an additional per copy charge. The agreements also provided that Canon would service the copiers. 

Beginning in 2002, plaintiff noticed discrepancies between meter readings taken by Canon employees and the actual number of copies made on each copier, and he began compiling independent records. Plaintiff alleged that Canon employees had run thousands of test copies during 17 service visits between February 2002 and November 2004, which he claimed resulted in him exceeding his monthly allowances and having to pay excess copy charges and fees to Canon.

Plaintiff delayed until January 2008 before he filed a single-claim complaint for violation of the UCL. In that complaint, plaintiff alleged that Canon’s practice of charging for test copies implicated both the unfair and fraudulent prong of the UCL.

Canon demurred to the complaint, contending that plaintiff’s claim was barred by the four-year statute of limitations for UCL claims. After permitting plaintiff leave to amend the complaint two times, the trial court dismissed the action. The Court of Appeal, in a 2-1 decision, affirmed the dismissal and held that neither the “delayed discovery” rule nor the “continuing violation doctrine” applied to avoid the statute of limitations. The dissenting opinion would have allowed plaintiff to proceed with a portion of his claim under the “continuous accrual” theory for those parts of the claim that were not time-barred.

Supreme Court Decision

Continue Reading...

California Supreme Court Depublishes Decision that Found Claims Adjusters Not Exempt from California's Overtime Pay Requirement

 

By Larry Golub and Sam Sorich

On July 23, 2012, we reported that the California Court of Appeal (Second Appellate District) held in Harris v. Superior Court that claims adjusters for two insurers were not exempt from California’s overtime compensation laws. More specifically, the court concluded that the duties of those adjusters functioned as the day-to-day operations of the insurers and were not “directly related to management policies or general business operations” to fall within exempt status under California law.

The Court of Appeal’s earlier decision in the case was reversed and remanded by the Supreme Court on December 29, 2011, and the intermediate court was told to apply the correct analysis. Consequently, our prior report expected this second decision, as issued by a divided panel of the Court of Appeal, again to be presented to the Supreme Court seeking a petition for review.

Indeed, Liberty Mutual Insurance Company and Golden Eagle Insurance Corporation, the insurers sued in the action, filed a Petition for Review on September 4, 2012, followed by a request to have the Court of Appeal’s decision depublished, as submitted by the California Employment Law Council.

On October 24, the Supreme Court ended the appellate proceedings in this case by (1) denying the Petition for Review and (2) depublishing the Court of Appeal decision. By this action, while the case is final as between the plaintiff claims adjusters and the insurers, the decision cannot be cited as authority in any other case.

With removal of this case from the precedential decisions of California law, the issue as to whether insurance adjusters in other cases and other contexts are exempt employees will continue to be litigated.

Du Two - Ninth Circuit Backs Off on Controversial Duty to Settle Decision

 

In June 2012, the Ninth Circuit Court of Appeals issued a decision in Du v. Allstate Insurance Company that asserted a liability insurer must “effectuate” or initiate a settlement within policy limits after liability has become reasonably clear. That decision generated extensive criticism, including on this blog.

Less than four months later, some semblance of balance has been restored with the issuance of the Ninth Circuit’s October 5, 2012 amended decision in Du. The amended decision replaces the court’s prior ruling and, most significantly, relegates its prior ruling as to the duty to “effectuate” settlement to merely raising the concept but concluding that it “need not resolve” this legal issue. 

Whatever the reason for the court’s retreat, the Ninth Circuit panel found, as it did in its original decision, that a jury instruction proffered by the plaintiff that raised the duty to “effectuate” settlement issue was not supported by the evidence and thus the trial court did not abuse its discretion in rejecting the instruction.

While the amended decision still references case law that it asserts extends “the duty to settle beyond mere acceptance of a reasonable settlement demand,” it also cites to California case law “suggesting no breach of the good faith duty to settle can be found in the absence of a settlement demand, the typical context in which the duty has been found.”  While this language will remain in the final decision, at most it is only dicta.

The amended decision also backtracked on another criticized finding, namely, that the “genuine dispute doctrine” does not apply to third party duty to settle cases.  Once again, while the original decision found the doctrine did not apply in third party cases, the amended decision advised: “[w]e need not resolve” this legal issue. 

Hopefully, with the issuance of the amended decision in Du, the parameters of the “duty to settle” under California law have been substantially restored.

Older Entries

September 29, 2012 — Standard CGL Policy "Personal Injury" Coverage Excludes Defense for Housing Discrimination, But Broader Umbrella Policy Provides Duty to Defend

August 24, 2012 — Update: California Health Insurance Initiative Will Be on the Ballot in November 2014

August 22, 2012 — California Legislature Passes Iran Investment Bill

August 10, 2012 — Updated: Fight Begins Over Prop 33 - Even as to the Ballot Language

August 9, 2012 — California Supreme Court Adopts "All-Sums-With-Stacking" Rule for Continuous Injury Cases

August 8, 2012 — Court of Appeal Affirms Buss Reimbursement of Non-Covered Settlement to Insurer

August 3, 2012 — Fight Begins Over Prop 33 - Even as to the Ballot Language

July 23, 2012 — Court of Appeal Again Finds Claims Adjusters Not Exempt from California's Overtime Pay Requirement

July 11, 2012 — 2012 Automobile Insurance Discount Act will be Proposition 33 on November California Ballot

June 28, 2012 — California Health Insurance Initiative Fails to Qualify for November Ballot

April 12, 2012 — California Supreme Court Refines the Scope of Considering "the Merits" of the Case in Class Certification Motions

March 11, 2012 — California Court of Appeal Extends Howell v. Hamilton Meats Rule to Limit Injured Person's Medical Expenses to Discounted Amounts Paid Under Workers' Compensation

February 6, 2012 — California Department of Insurance Settles Suit Over Iran Investments

January 13, 2012 — Next Up in the 'Tort War': Discounted Medical Expenses?

January 6, 2012 — Signatures May Be Collected for California Health Insurance Initiative

December 29, 2011 — California Supreme Court Rules that Court of Appeal Used Incorrect Legal Analysis in Deciding that Claims Adjusters Are Not Exempt from Overtime Pay Requirement

August 18, 2011 — Collateral Source Rule Inapplicable When Injured Person's Medical Expenses are Discounted by Health Insurer

July 16, 2011 — California Courts Continue to Rein in Class Certification in the Marketing and Sale of Insurance

June 23, 2011 — No Certification in Massive Wal-Mart Class Action

June 16, 2011 — Another Toehold in Using the UCL to Scale the Barriers of Moradi-Shalal

June 8, 2011 — Horizontal Exhaustion Analyzed by California Court in Continuous Damage Case

May 30, 2011 — California Court Dismisses UCL Claim Over Fiji Water

May 26, 2011 — California Insurance Commissioner Dave Jones' Holds Investigatory Hearing on Life Insurer Claims Payments of Death Benefits

April 11, 2011 — Two Air Ambulance Suits Grounded in Two Days by Federal and State Courts

April 8, 2011 — Insurers Can Only Seek to Pay "Cumis" Rates if They are Actually Defending the Insured

March 8, 2011 — New Restitution Remedy Proposed for Insurers and Licensees in California

February 17, 2011 — California Supreme Court Holds that Zip Codes Constitute "Personal Identification Information" under the Song-Beverly Credit Card Act, Triggering a Flurry of Consumer Lawsuits

January 30, 2011 — California Supreme Court Announces Expansive Standing Rule Under the UCL

November 21, 2010 — California Supreme Court Again Confirms a Penalty is Not Restitution Under the UCL

November 11, 2010 — Commissioner Poizner Criticized By Director of Office of Administrative Law Over His Filing of Lawsuit Concerning Iran "Underground" Regulations

November 9, 2010 — Commissioner Poizner Files Suit Against Office of Administrative Law

October 12, 2010 — California Office of Administrative Law Disallows Insurance Department Rule on Iranian Investments

September 27, 2010 — Patient Protection and Affordable Care Act of 2009 Now in Effect

September 3, 2010 — Dismissal of Class Allegations at Pleading Stage Disallowed - Again

August 9, 2010 — California Supreme Court Holds Treble Damages Not Permitted under the Unfair Competition Law - Restitution is the Sole Monetary Remedy

July 12, 2010 — California Supreme Court Precludes Pass-On Defense in Clayton Act Claim and Finds Standing Under the UCL

July 11, 2010 — California Court of Appeal Opinions Uphold Class Settlements Over Claims of Objectors

July 2, 2010 — The Federal Insurance Office is on the Way

June 25, 2010 — Imprecise Policy Language Results in Umbrella Policy Becoming Primary for Duty to Defend Purposes

June 24, 2010 — California Supreme Court Resolves Coverage Dispute Over Interplay Between Intentional Acts Exclusion and Severability Clause

May 13, 2010 — California Insurance Commissioner Issues List of 296 Insurers Refusing to Agree Not to Invest in "Iran-Related" Companies

March 16, 2010 — Los Angeles Jury Finds Health Insurer is Required to Pay for Out-of-State Liver Transplant

March 11, 2010 — From Out of the Blue Comes a Proposed Exemption for Air Ambulance Companies to Avoid California Workers' Compensation Official Medical Fee Schedule

February 4, 2010 — Unfair Competition Law Cases Still Occupy Numerous Spaces on the California Supreme Court's Docket

January 25, 2010 — California Court of Appeal Upholds Insurer's Rescission of Health Insurance Policy

January 11, 2010 — Federal Court Denies Class Certification Motion Involving Deferred Annuities

November 3, 2009 — California Appellate Court Clarifies Issues Raised in Tobacco II

October 18, 2009 — Staying an Insurer's Declaratory Relief Action - the Rules Clarified

September 25, 2009 — 24-Hour Health Coverage Draws Industry Fire

August 29, 2009 — Ninth Circuit Overrules Denial of Class Certification Ruling in Annuity Litigation, Adopting a De Novo Standard of Review

August 10, 2009 — Appellate Court Finds Insured's Failure to Allege the Actual Theory of Liability on Which the Trial Court Based Its Judgment Requires Reversal of Bad Faith Judgment

August 4, 2009 — California Supreme Court Finds No Duty to Defend Insured for Assault and Battery Claim Where Injured Party Alleged Insured Acted Under an Unreasonable Belief in the Need for Self-Defense

July 30, 2009 — Federal Court Dismisses Claim by Air Ambulance Company Seeking to Avoid California Workers' Compensation Official Medical Fee Schedule

July 13, 2009 — Ninth Circuit Upholds Use of "Preemptive" Motion to Deny Class Certification

July 1, 2009 — Welcome to Our Blog

June 30, 2009 — California Supreme Court Further Clarifies Scope of UCL Claims Following Proposition 64

June 26, 2009 — California Court of Appeal Establishes "Diligent Inquiry" Notice Rule for Equitable Contribution Claims Between Insurers