Insurance Coverage: June 2012

by Low, Ball & Lynch

Pacific Rim Mech. Cont. Inc. v. Aon Risk Ins. Services West, Inc.
(2012) 203 Cal.App.4th 1278

Before the work was completed on a construction project, the Illinois Department of Insurance issued an order of conservation against Legion, which had OCIP coverage. Legion became insolvent and was liquidated. Construction defect litigation against the developer and its subcontractors commenced seven years later. A subcontractor, Pacific Rim, cross-complained against the developer and its broker Aon for failing to advise of the discontinuation of the required coverage. The Court of Appeals affirmed the trial court in sustaining Aon’s demurrer to the cross-complaint upon the basis that it was not a party to the contract and Pacific Rim was not its client. The Court of Appeals believed that imposing such a duty upon the broker would fundamentally alter the nature and corresponding duties of insurance broker and increase the costs of insurance.

Axis Surplus Insurance Company v. Glenco Insurance Ltd.
(April 2012) Court of Appeal, Fourth District

Pacifica Point L.P. was insured by Axis Surplus Insurance Company for general liability and by Glenco Insurance Ltd which had a $250,000 SIR. When construction defect litigation commenced against Pacifica, Axis defended Pacifica but Glenco only monitored the litigation. Axis settled for $1,000,000 including the SIR, and filed an action for equitable contribution against Glenco. The Court of Appeals found that Axis only needs to show the potential for coverage under Glenco’s policy on a contribution claim and the burden then shifts to Glenco to prove there was no actual coverage under its policy. The court further noted that an equitable contribution claim was not based on contract, but instead on equitable principles, and Glenco was aware of the underlying action, and subject to the SIR it would have had a duty to defend and indemnify Pacifica.

Global Hawk Insurance Company v. Century-National Insurance Company
(February 29, 2012) Court of Appeal, First District

Global Hawk denied coverage of a claim under a commercial policy because the involved vehicle was not listed on its schedule, although Global Hawk had issued an MCS-90 endorsement that obligated Global Hawk to provide coverage under certain conditions for all of its insured’s vehicles. Third-party claimant Padilla subsequently filed a claim for uninsured motorist benefits under his employer’s insurance issued by Century-National Insurance Company. Century-National paid the claim up to its policy limits of $100,000. In subsequent litigation, the appellate court affirmed Century-National’s right to reimbursement from Global Hawk, finding that the MCS-90 endorsement required Global Hawk to provide coverage for the accident, and that Century-National was entitled to subrogation against persons responsible for Padilla’s injuries.


Eric E. Ortega v. Topa Insurance Company, et al.
(May 24, 2012) Court of Appeal, Third District

Plaintiff Ortega had a restricted policy of automobile insurance in which the insurer, defendant Topa Insurance Company (Topa), provided two tiers of physical damage coverage, paying all of the reasonable costs incurred at the insurer’s ‟preferred repair facility” or “PRF,” but only 80 percent of the reasonable costs incurred at an unapproved repair facility selected by the insured. The application stated the restrictions in separately boxed sections and bold letters and requested certification of the restrictions. Ortega took his vehicle to a PRF and filed a class action after non-OEM parts were used. The Court of Appeals found that under Insurance Code Section 758.5(d), an insurance carrier may have the above limited or “tiered” coverage so long as the same is “prominently disclosed”, as they were here, and the insurer still pays 100% of repairs with the preferred repair shop.

Donald DeWitt v. Monterey Insurance Company, et al.
(March 13, 2012) Court of Appeal, Fourth District

After an injury at a New Year’s Eve party, a defendant whom plaintiff claimed was the “on-site property manager,” Mr. DeWitt sued the building owner’s carrier, Monterey Insurance Company for for breach of contract and breach of the covenant of good faith. DeWitt alleged that Monterey’s failure to defend him and to accept a reasonable settlement offer had resulted in damages. DeWitt succeeded on a motion for summary adjudication to establish that Monterey had owed him a duty to defend in the underlying action and that there was “a possibility of coverage” under the policy. However, the Court of Appeal noted that in the absence of actual coverage for a claim, a carrier could not be found liable for failing to accept a third party’s settlement offer. Here, Dewitt had not established that the carrier had either assumed its defense, or alternatively, that there was a duty to indemnify. Without a determination that the claim was actually covered, the court properly refused to give jury instruction CACI 2334 on the carrier’s refusal to accept the settlement offer, which only applied to allow a finding of bad faith where there was actual coverage of a claim.

California Paving & Grading Co. v. Lincoln General Ins. Co.
(2012) ___ Cal.App.4th ___

California Paving & Grading Co., Inc. appealed a judgment of dismissal following the sustaining without leave of a demurrer brought by Lincoln General Insurance Company (Lincoln) to Paving’s second amended complaint seeking recovery on a payment bond. The Court of Appeals found that the characterization of the nature of the contract determines whether this action is governed by Civil Code section 3097 (preliminary 20-day notice for private work) or by section 3098 (preliminary 20-day notice for public work). The nature of the contract also determines whether Paving’s lawsuit is governed by the limitations period applicable to an action on a public works payment bonds (§ 3249), or by a longer limitations period. Here, the Court of Appeals concluded that the work constituted a “work of improvement contracted for by a public entity” pursuant to a master development contract with City of Los Angeles, even though the Paving’s work was with a private developer, and therefore amounted to a public work within the meaning of section 3100.


Written by:

Low, Ball & Lynch

Low, Ball & Lynch on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.