Marina Karvelas

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Marina Karvelas is a partner in the firm’s Los Angeles office. Her practice focuses on insurance and business litigation including insurance industry regulation, insurance rate regulation, insurance bad faith, class actions, statutory unfair business practices, and appellate practice matters.
Ms. Karvelas has rendered numerous coverage opinions involving property and casualty insurance, including private passenger automobile policies, commercial automobile policies, comprehensive general liability policies, commercial trucking policies and MCS-90 endorsements. Her coverage expertise includes all levels of insurance coverage from primary, excess to umbrella. In connection with her transportation insurance coverage experience, Ms. Karvelas has rendered coverage opinions involving the law in various states including Arizona, California, Mississippi, Nevada, Utah, Washington, and Wyoming.
Ms. Karvelas also has extensive experience in bad faith litigation including defending insurers against multimillion dollar stipulated judgments brought by third party plaintiffs as assignees of the insured’s rights under the policy. In these cases, Ms. Karvelas aggressively postures the case for negotiation and settlement favorable to the insurer. Recently, Ms. Karvelas has handled bad faith litigation involving construction defects in the State of Washington.
Ms. Karvelas handles a myriad of complex litigation matters in the California courts. She has extensive experience with California’s prior approval statutory scheme for private passenger automobile policies and has defended insurance companies in numerous cases alleging violations of the statutory scheme. Ms. Karvelas was integral in defeating claims that the statute provided a private right of action to sue insurance companies. See Farmers Ins. Exchange v. Superior Court, 137 Cal. App. 4th 842 (2006).

Articles By This Author

Another Decision Uses the UCL to Circumvent the Moradi-Shalal Restriction as to Private Rights of Action Against Insurers

In a decision issued October 24, 2012, the California Second Appellate District, Division Four became the most recent decision applying California’s unfair competition law, Business & Professional Code, § 17200 et seq. (“UCL”), to bring bad faith claims against insurers, undercutting a key aspect of the decision in Moradi-Shalal v. Fireman’s Fund Ins. Cos.

In Ocie E. Henderson v. Farmers Group, Inc., the court analyzed and rejected the determinations of one line of California decisions issued in the years since Moradi-Shalal that precluded a private right of action under the UCL against insurers for violations of California’s Unfair Insurance Practices Act (“UIPA”), Ins. Code, § 790.03(h) et seq. See Textron Financial Corp. v. National Union Fire Ins. Co., and Safeco Ins. Co. v. Superior Court, abrogated on other grounds by Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co.

Henderson instead followed the same reasoning applied by the Fourth Appellate District, Division Two in Zhang v. Superior Court (review granted Feb. 10, 2010).

Zhang held that a cause of action for violation of the UCL based on conduct that allegedly violates the UIPA is not an end-run around Moradi-Shalal so long as that conduct also supports a claim against the insurer for something other than a UIPA violation. 

The conduct at issue in Zhang involved alleged fraudulent misrepresentations and misleading advertising regarding coverage. 

The conduct at issue in Henderson involved denial of property damage claims based on the failure to submit a proof of loss and late notice.  

Both Zhang and Henderson rely on State Farm Fire & Casualty Co. v. Superior Court, which held that a breach of contract or bad faith cause of action could serve as a predicate for a UCL claim even if the conduct supporting the claim also constitutes a violation of the UIPA. 

Additional decisions following Zhang include: Hughes v. Progressive Direct Ins. Co., review granted September 28, 2011, but deferred pending consideration and disposition of Zhang; Williams v. Prudential Ins. Co., 2010 U.S. Dist. LEXIS 14566 (N.D. Cal. 2010); Burdick v. Union Sec. Ins. Co., 2009 U.S. Dist. LEXIS 121768 (C.D. Cal. 2009).  

In Sanders v. Choice Mfg. Co., 2011 U.S. Dist. LEXIS 137365 (N.D. Cal. 2011), the district court refused to apply Zhang because of its unpublished status but nonetheless applied reasoning similar to Zhang in holding that plaintiff’s allegations regarding untrue and deceptive statements alleged more than just a violation of the UIPA because the conduct also involved allegations of the sale of insurance without first obtaining a license or certificate. 

Despite these holdings, other recent decisions in the district courts continue to apply broadly Moradi-Shalal and Textron but have left open their decisions pending the California Supreme Court’s determination in Zhang. See Wayne Merritt Motor Co. v. N.H. Ins. Co., 2011 U.S. Dist LEXIS 122320 (N.D. Cal. 2011) (dismissal without prejudice of UCL claim based on allegations that the insurer misrepresented coverage by “burying” a limitation of liability clause in the endorsement); Willbanks v. Progressive Choice Ins. Co., 2010 U.S. Dist. LEXIS 128144 (E.D. Cal. 2010) (dismissed without prejudice of UCL claim based on unfair claims practices).

While Zhang has been fully briefed since June 2010, oral argument has yet to be set. Presumably, the Supreme Court’s long-awaited decision in Zhang will bring certainty to these conflicting decisions and reconcile the interplay of the UCL and the UIPA.

We will continue to report on the developments in this significant area of insurance litigation.


Can a Plaintiff Evade CAFA's Jurisdictional Threshold By Stipulating to the Amount of Damages the Plaintiff Will Seek on Behalf of the Class?

On August 31, 2012, the United States Supreme Court granted review in Standard Fire Ins. Co. v. Knowles. The issue presented is whether a plaintiff can preclude removal of his state class action complaint under the Class Action Fairness Action of 2005 (“CAFA”) (PDF) by stipulating that he will not seek damages for the class in excess of the $5 million jurisdictional threshold. 

Knowles attached to his putative class action complaint a signed stipulation in which he stated he will not “seek damages for the class as alleged in the complaint . . . in excess of $5,000,000 in the aggregate (inclusive of costs and attorneys’ fees).”

Although the Arkansas federal district court determined that the aggregated claims of the individual class members exceeded the $5 million threshold, it remanded the case to state court. Central to the district court’s ruling is the principle that the plaintiff is “master of his complaint” and can plead to avoid federal jurisdiction. It found dispositive the fact that plaintiff signed a stipulation that he would not seek damages in excess of the jurisdictional threshold and that he was bound by that stipulation. 

The stipulation comported with a recent Arkansas statute that permits a plaintiff to specify an amount in controversy in the complaint in order to establish subject matter jurisdiction. The district court further reasoned that should plaintiff amend its complaint down the road to seek additional damages that trigger CAFA, then Standard Fire could file another motion to remove the case.

In its opening brief, filed on October 22, 2012, Standard Fire hits hard on the Arkansas venue to support its arguments that plaintiff’s stipulation cannot circumvent CAFA. 

Plaintiff filed this putative class action . . . in Miller County Circuit Court, a court known to be a ‘magnet jurisdiction’ for class action plaintiffs’ lawyers because of its willingness to force defendants to engage in prohibitively expensive and wide-ranging discovery that coerces substantial settlements prior to class certification, and its willingness to certify classes that have been rejected in other jurisdictions.” 

Under this backdrop, Standard Fire presents several strong arguments. These include arguments that:

  1. the district court’s remand order violates the fundamental policy behind CAFA to curtail state court class action abuses by authorizing defendants to remove sizeable interstate class actions to federal court;
  2. CAFA, unlike traditional diversity jurisdiction, specifies a methodology for determining the jurisdictional threshold;
  3. under that methodology, which expressly permits aggregation of individual claims, if the aggregate total of the individual class member’s claims exceed $5 million, CAFA has been triggered and the jurisdictional inquiry ends; and,
  4. under basic class action doctrine and due process principles, a plaintiff has no authority to bind absent individual class members to a stipulation to reduce their individual claims before a class has been certified.

Knowles’ brief is due November 28, 2012. Amicus briefs will also be coming down the pipe, and indeed the National Association of Manufacturers filed an amicus brief on October 29 suggesting reversal of the district court’s remand to state court. We will report on future developments on this case.

California Courts Continue to Rein in Class Certification in the Marketing and Sale of Insurance

By Larry Golub and Marina Karvelas

In Fairbanks v. Farmers New World Life Ins. Co., decided July 13, 2011, California's Second Appellate District, Division Three, upheld the trial court’s denial of class certification for a proposed nationwide class of universal life insurance policyholders. Plaintiffs sued Farmers New World Life Insurance Company and Farmers Group, Inc. (collectively, “Farmers”) alleging violations of the Unfair Competition Law (Bus. & Prof. Code, 17200, “UCL”) in the marketing and sale of universal life insurance policies.  

The decision, authored by Justice Walter Croskey, contains in its opening pages an extensive discussion of universal life insurance policies. Justice Croskey’s discussion is well worth the read as it presents in simple and understandable terms many of the intricacies of universal life insurance.

Plaintiffs alleged in their complaint numerous theories of wrongdoing against Farmers; however, their motion for class certification was narrowly tailored and based only on one of the three prongs of the UCL, that of a fraudulent business practices. 

Relying on a series of recent decisions (Knapp v. AT&T Wireless Services, Inc., 195 Cal. App. 4th 932 (2011); Kaldenbach v. Mutual of Omaha Life Ins. Co., 178 Cal. App. 4th 830 (2009), and Pfizer Inc. v. Superior Court, 182 Cal. App. 4th 622 (2010)), the Fairbanks opinion reiterates the requirements for class certification under the fraudulent prong of the UCL:

“[W]hen the class action is based on alleged misrepresentations, a class certification denial will be upheld when individual evidence will be required to determine whether the representations at issue were actually made to each member of the class.”

Finding the case “virtually identical” to Kaldenbach, the Court of Appeal upheld the trial court’s determination that the alleged misrepresentations were not commonly made to members of the class and thus class certification was properly denied.  (For a discussion of the Kaldenbach case, see our firm’s prior blog.)

Plaintiffs argued that the class action should proceed on the theory that the language in the policies was misleading. However, the class certification motion was not based on the theory that the policy language standing alone was misleading. Even if it were, “it is still impossible to consider the language of the policies without considering the information conveyed by the Farmers agents in the process of selling them.” 

In addition, the Fairbanks Court determined that the materiality of the alleged misrepresentation was likewise not subject to common proof. Relying on the Supreme Court’s recent decision in Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 332 (2011), the standard for materiality is whether “a reasonable man would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question.” While noting that the standard is objective, the Court of Appeal nonetheless agreed with the trial court that the materiality of the representations at issue in the case was a matter of individual proof for any given policyholder. 

In concluding, the Court of Appeal refused to address whether commonality existed with respect to any other purported classes. None of the alternative theories were presented to the trial court in the class certification motion. “[W]e leave it to the trial court’s discretion, on remand, to determine whether it should consider any subsequent motion for class certification, should plaintiffs choose to proceed on an alternative basis.”

As is often the case in the class certification context, plaintiffs will seek to define as narrow a class as possible to present a “common issue” for certification purposes, which attempt sometimes undercuts not only the ability to obtain certification (as in the Fairbanks situation) but, even if it does survive certification, sets up a defense motion for summary judgment.

Has California Gone Too Far in Responding to Underinsurance Problems in Homeowners Insurance?

Barger & Wolen insurance litigation and regulatory law partner Marina Karvelas will be a guest blogger for the DRI’s blog, DRI Today for the next two weeks.

Her first post, Has California Gone Too Far in Responding to Underinsurance Problems in Homeowners Insurance? is live.

California’s Office of Administrative Law recently approved new regulations promulgated by the California Insurance Commissioner for homeowners insurance. 

The regulations create new duties, impose additional standards and establish a new "unfair trade practice" violation on insurance companies and insurance producers selling homeowners insurance policies in California.

Months in the making, the new regulations profess to respond to underinsurance problems experienced by California homeowners who in the wake of wildfire disasters throughout the state in the past decade discovered they did not have enough insurance to rebuild their homes. 

The new regulations, as well as a newly revised California Residential Property Disclosure Form and California Residential Property Insurance Bill of Rights, mark a key shift in California’s public policy. 

The new California homeowner insurance regulations and disclosure requirements take effect on June 27, 2011, and July 1, 2011, respectively.

Click here to read more.

Guidelines for Health Insurers Requesting Rate Increase Issued by California Insurance Commissioner (SB 1163)

On February 4, 2011, California Insurance Commissioner Dave Jones released draft guidelines for implementing SB 1163 (“Guidance 1163:2”).

SB 1163, signed by former Governor Schwarzenegger on September 30, 2010, responds to the federal Patient Protection and Affordable Care Act (“PPACA”), which requires the United States Secretary of Health and Human Services to establish a process for the annual review of “unreasonable” increases in premiums for health insurance coverage.

Under the federal act, health insurers must submit to the secretary, and the relevant state, a justification for an “unreasonable” premium increase prior to implementation of the increase.

SB 1163, effective January 1, 2011, requires health insurers to file with the California Department of Managed Health Care or the California Department of Insurance detailed rate information regarding proposed premium increases and requires that the rate information be certified by an independent actuary. 

The bill authorizes the departments to review these filings and issue guidance regarding compliance. It also requires the departments to consult with each other regarding specified actions as well as post certain findings on their Internet Web sites.

In his draft guidelines (“Guidance 1163:2”), Commissioner Jones lists several factors that will be used by the Department to determine if a rate is “unreasonable.”

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New Regulations for Replacement Cost Estimating in Homeowners' Insurance approved by California Office of Administrative Law

On December 29, 2010, the Office of Administrative Law ("OAL") approved California Insurance Commissioner Poizner's new regulations setting forth "Standards and Training for Estimating Replacement Value on Homeowners' Insurance." The regulations take effect on June 27, 2011. 

As discussed earlier in this blog here, the regulations encompass significant new obligations on producers and insurers:

  • Require all California resident fire and casualty broker-agents and personal lines broker-agents, who have not already done so, to satisfactorily complete one three-hour training course on homeowners’ insurance valuation prior to estimating the replacement value of structures in connection with, or explaining the various levels of coverage under, a homeowners’ insurance policy;
  • Require insurers, agents and brokers that provide replacement cost estimates to applicants and insureds to document who created the estimate and the sources or methods used to create the replacement cost estimate; and
  • Require that all replacement cost estimates communicated to applicants or insureds be complete, based upon specifically enumerated standards set forth in the regulations. [CDI 12/31/2010 Press Release]

The final regulations, as adopted by the OAL, address some of the criticisms from industry opponents.

For example, Section 2695.183(e) was amended to remove any reference to setting or recommending a policy limit. The Commissioner's Final Statement of Reasons explains that the language was removed in response to comments that it "could be interpreted as establishing an obligation on the part of licensees to set or recommend policy limits, which is not the intent of the regulations."

Issues concerning whether the new regulations exceed the authority of the enabling statute remain and may be the subject of litigation down the road.


California Residential Property Disclosure - AB 2022 (Update)

On November 30, 2010, California Insurance Commissioner Steve Poizner issued a Notice to all California Residential Property Insurers attaching the revised California Residential Property Disclosure Form and Bill of Rights.

Pursuant to AB 2022, which was written about in detail here, California insurers must implement the new notice and revised bill of rights on July 1, 2011.

On October 27, 2010, Commissioner Poizner invited public comment with respect to changes recently made to his proposed regulations setting forth "Standards and Training for Estimating Replacement Value on Homeowners’ Insurance.” (Amended Text of Regulation). The deadline for comments was November 12, 2010.

Personal Insurance Federation of California submitted comments addressing, among other issues, whether the amended regulation meets the requirements of California Government Code section 11349.1 in that it appears to exceed the authority of the enabling statute; whether the regulations would apply to manufactured homes; as well as problems with the broad definition of "estimate of replacement cost" and new obligations imposed on insurance licensees.

As of this date, the proposed regulations have not been adopted.

The New and Improved California Residential Property Disclosure Form: A Harbinger of More Significant Reforms in Replacement Cost Estimating

On September 30, 2010, Governor Schwarzenegger signed AB 2022 into law (Chaptered copy).

Introduced by Assembly Member Ted Gaines (R), AB 2022 revamps California’s Residential Property Disclosure Form (current page 3; new page 10) and the accompanied California Residential Property Insurance Bill of Rights (current page 13; new page 15). The new disclosure form, drafted in plain and simple language, significantly improves the current form and makes understandable the differences in residential insurance coverages available to California insurance consumers. The changes, however, are much more than stylistic.

Commissioner Poizner, whose office helped craft AB 2022, has also drafted comprehensive regulations in an effort to respond to the under-insurance problems caused by the 2003, 2007 and 2008 California wildfires.

The Proposed Regulations establish standards for accurate replacement cost estimating, broker agent training on replacement cost estimating, and new record keeping requirements. The Proposed Regulations place the burden of accurately estimating replacement value of a home squarely on the insurance industry. The new disclosure form, the first step towards this regulatory reform, removes critical language found in the current disclosure form that obligates the consumer to determine and maintain the proper policy limits on their home. 


California Residential Property Disclosure Form (July 1, 2011)

Effective July 1, 2011, insurance companies must use the new disclosure form. The new form eliminates the legalese that plagues the current form and presents the different coverage levels in a reader friendly manner. The new form calls specific attention to the fact that “actual cash value” coverage is “the most limited level of coverage listed,” while “guaranteed replacement cost” coverage is “the broadest level of coverage.” The new coverage definitions are as follows:

  • ACTUAL CASH VALUE COVERAGE pays the costs to repair the damaged dwelling minus a deduction for physical depreciation. If the dwelling is completely destroyed, this coverage pays the fair market value of the dwelling at the time of loss. In either case, coverage only pays for costs up to the limits specified in your policy.
  • REPLACEMENT COST COVERAGE is intended to provide for the cost to repair or replace the damaged or destroyed dwelling, without a deduction for physical depreciation. Many policies pay only the dwelling’s actual cash value until the insured has actually begun or completed repairs or reconstruction on the dwelling. Coverage only pays for replacement costs up to the limits specified in your policy.
  • EXTENDED REPLACEMENT COST COVERAGE is intended to provide for the cost to repair or replace the damaged or destroyed dwelling without a deduction for physical depreciation. Many policies pay only the dwelling’s actual cash value until the insured has actually begun or completed repairs or reconstruction on the dwelling. Extended Replacement Cost provides additional coverage above the dwelling limits up to a stated percentage or specific dollar amount. See your policy for the additional coverage that applies.
  • GUARANTEED REPLACEMENT COST COVERAGE covers the full cost to repair or replace the damaged or destroyed dwelling for a covered peril regardless of the dwelling limits shown on the policy declarations page.
  • BUILDING CODE UPGRADE COVERAGE, also called Ordinance and Law coverage, is an important option that covers additional costs to repair or replace a dwelling to comply with the building codes and zoning laws in effect at the time of loss or rebuilding. These costs may otherwise be excluded by your policy. Meeting current building code requirements can add significant costs to rebuilding your home. Refer to your policy or endorsement for the specific coverage provided and coverage limits that apply.

In addition, the new disclosure form removes the following statements from the replacement cost coverage definitions in the current disclosure form:

To be eligible for [this coverage], you must insure the dwelling to its full replacement cost at the time the policy is issued, with possible periodic increases in the amount of coverage to adjust for inflation and increases in building costs; you must permit inspections of the dwelling by the insurance company; and you must notify the insurance company about any alterations that increase the value of the insured dwelling by a certain amount (see your policy for that amount).”

To be eligible to recover this benefit, you must insure the dwelling to [company shall denote percentage] [ ] percent of its replacement cost at the time of loss.”

California Residential Property Insurance Bill of Rights (July 1, 2011)

The revised bill of rights that must accompany the new disclosure form eliminates the first 16 lines of the current disclosure form. The omitted lines include statements concerning the applicant’s/policyholder’s burden to determine and maintain proper policy limits such as: “Take time to determine the cost to rebuild or replace your property in today’s market.” “Once the policy is in force, contact your agent or insurance company immediately if you believe your policy limits may be inadequate.” 

The language deleted from the current versions of the disclosure form and bill of rights marks a significant change in California public policy. In Everett v. State Farm General Ins. Co., 162 Cal. App. 4th 649 (2008), the court held that the homeowner, rather than the property insurer, had the duty to maintain insurance policy limits equal to replacement costs. In reaching this conclusion, the court relied on the current version of the residential property disclosure which places the burden of determining whether a higher policy limit is needed on the homeowner.

AB 2022 and Commissioner Poizner’s proposed regulations effectively nullify Everett.

Putative Class Action Lawsuits May Remain in Federal Court Even After Court Denies Class Certification

In United Steel et al. v. Shell Oil Co., et al., the Ninth Circuit Court of Appeals held that putative class action lawsuits properly removed to federal court under the Class Action Fairness Act of 2005 ("CAFA") [28 USC 1332(d), 1453 ] may remain in federal court even after the court denies class certification.

If the putative class action was properly removed to begin with, the subsequent denial of Rule 23 class certification does not divest the district court of jurisdiction. The case remains removed and is not to be remanded to state court."
In construing CAFA, the Ninth Circuit reasoned that if:
Congress intended that a properly removed class action be remanded if a class is not eventually certified, it could have said so." 
The Ninth Circuit joins the Seventh and Eleventh Circuits on this point.

California Confirms Insurer's Right to Intervene in Underlying Action to Protect Its Own Interests


In Gray v. Begley, (filed March 22, 2010), the Second Appellate District, Division Three (Justice Croskey), confirmed that an insurer defending its insured may intervene in the underlying action to protect its interests against a private settlement between the insured and the injured party. This right exists even if the insurer has reserved its rights to deny coverage later.

Dicta in prior case law suggested that, in reservation of rights situations, insurers did not have a sufficient interest to justify intervention. The Begley decision, however, confirms that the right to intervene is no different in a situation where the insurer has admitted coverage than a situation where the insurer defends under a reservation of rights.

[T]he key factor in determining whether an insurer is bound by a settlement reached without the insurer’s participation is whether the insurer provided the insured with a defense, not whether the insurer denied coverage.’ It therefore follows that an insurer providing a defense, even though subject to a reservation of rights, may intervene in the action when the insured attempts to settle the case to the potential detriment of the insurer.” Begley at pp. *20-22, citing Safeco Ins. Co. v. Superior Court, 71 Cal. App. 4th 782, 785, 787 (1999).

The necessity for such a rule was evident from the facts of the particular case.

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