Insurance Coverage: March 2012

by Low, Ball & Lynch
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Villa Los Alamos HOA v State Farm General Ins. Co.
(2011) 198 Cal.App.4th 522

The Association hired a contractor to remove ceiling material from ceilings and staircases, in the process releasing asbestos fibers into a building. The Association paid $650,000 to fully clean and abate the building. The State Farm insurance policy covered both first party property losses and third party business losses. However, there was a pollution exclusion. The Court of Appeal affirmed the trial court’s granting of State Farm’s motion for summary judgment based upon the pollution exclusion. The release of asbestos from a property was excluded under the pollution exclusion in a first party property insurance policy.

State Farm General Ins. Co. v. Frake.
(2011) 197 Cal.App.4th 568
(review denied Sept. 28, 2011)

John King was struck around his groin by his intoxicated friend, Patrick Frake, at a baseball game. Although there was no particular injuries, King that he was hurt and incurred $70,000 in medical bills. Frake tendered his defense to State Farm, which insured him under a renter’s policy. A jury found Frake negligent and awarded $450,000 to King. The Court of Appeal made a focal determination of whether the action itself was intended. An “accident” did not occur because the insured performed a deliberate act. Unless some additional, unexpected, independent and unforeseen happening occurred that produced the damage, there was no coverage for Frake’s actions.

Richards v. Sequoia Ins. Co.
(2011) 195 Cal.App.4th 431.

Linda and Thomas Richards were sued by a bar patron’s estate that claimed the Richards negligently served alcohol that contributed to the patron’s death. The Richards tendered their defense to Sequoia. Sequoia referred the matter to coverage counsel, and told the Richards to hire their own attorney to file a responsive pleading in the meantime. Only 9 days elapsed until Sequoia retained counsel. The Richards filed suit for breach of contract and breach of the covenant of good faith and fair dealing, claiming reimbursement for 60 hours at $250 per hour for researching and working on their own case. The Court of Appeal affirmed the trial court’s summary judgment that the Richards’ self-representation was not payment of attorney’s fees “expended” or “incurred” by the insured. The Richards could not recover fees for their own services based on contract claims.

Western Heritage Ins. Co. v. Sup. Ct.
(2011) 199 Cal.App.4th 1196.

Western Heritage defended under a reservation of rights a healthcare service and its employee against claims for negligence and wrongful death. The claims arose from the death of a client in an automobile accident occurring while the client was a passenger in a vehicle driven by the healthcare service’s employee. Western Heritage file an answer on the employee’s behalf, but her answer was stricken and default entered because she failed to provide verified responses to discovery and appear for her deposition. Western Heritage intervened and the trial court ordered that it could only litigate at trial plaintiff’s damages, but not the defaulting employee’s liability. The Court of Appeal reversed and the carrier intervening on behalf of the defaulted insured defendant was not bound by the default. Because it had been defending its insured, even under a reservation of rights, Western Heritage was able to contest both liability and damages.

Barnett v. State Farm General Insurance
(2011) 200 Cal. App. 4th 536.

Greg Barnett had a homeowners policy from State Farm that included coverage for loss of physical propery due to enumerated hazards, including theft. Officers from the Costa Mesa Police Department executed a search warrant at his house, authorizing the police to search for and seize marijuana at the premises. The police seized, among other things, 12 seven-foot-tall marijuana plants. The superior court denied his petition for return of the plants. However, after State Farm denied Barnett’s claim, the superior court ordered the return of his marijuana plants which were already destroyed by the police. Barnett filed suit against State Farm for breach of contract and breach of the covenant of good faith and fair dealing. The trial court granted State Farm’s motion for summary judgment. The Court of Appeal affirmed and held that the officers’ seizure of the plants pursuant to a search warrant could not constitute a “theft” because it was not criminal.

American States v. National Fire Insurance
(2011) 202 Cal.App.4th 692.

ASIC filed suit against National after a settlement for which National did not contribute. ASIC alleged that it was entitled to equitable contribution for a portion of amounts paid by ASIC. National demurred to the complaint and a subsequent amended complaint based on statutes of limitations. ASIC filed a second amended complaint to plead equitable subrogation. The trial court sustained another demurrer without leave to amend based upon ASIC not being able to plead the essential elements of a subrogation claim. The Court of Appeal affirmed and noted that ASIC was unable to plead equitable subrogation because the action was clearly one for contribution.

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