Bad Faith

July 20.2011

Hindsight in Bad Faith

Sometimes an insurer declines coverage in either a first- or third-party context, and later, a court determines that this declination was in error and that coverage existed. Not infrequently in such circumstances, the policyholder asserts that the insurer did not conduct a thorough investigation prior to the declination and thus breached the implied covenant of good faith and fair dealing. When an insurer fails to conduct an investigation that would have uncovered facts supporting the possibility of coverage, the insurer may be imputed with knowledge of those facts. Safeco Ins. of America v. Parks, 170 Cal. App. 4th 992 (2009)....

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February 22.2011

Section 533 Does Not Bar Coverage for Innocent Co-Insureds

The California Supreme Court recently issued a decision in Century-National Ins. Co. v. Jesus Garcia, No. S179252, holding that California Insurance Code section 533, which bars coverage for intentional conduct, does not apply to coverage for innocent co-insureds. The Court examined this issue in the context of a fire insurance policy. The insureds, Jesus and Theodora Garcia, suffered substantial property damage to their home when their adult son – who was also an insured under the policy – set fire to his bedroom. Century-National denied coverage for the Garcias’ claim citing the policy’s exclusion for claims based on the intentional...

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November 30.2010

California Supreme Court Denies Review of Howard v. American National

On November 23, 2010, the California Supreme Court declined review of the First Appellate District’s decision in Howard v. American National Fire Insurance Co., 187 Cal. App. 4th 498 (2010). As I noted in a prior blog post. Howard provides powerful, additional support for policyholders demanding that their liability insurer fund a settlement. In Howard, the Court of Appeal considered whether an insurer can be held liable for bad faith breach of its duty to settle if it rejects a settlement offer that is within the total available limits of all the insurers’ policies, but which exceeds the limits of...

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September 02.2010

Bad Facts Make Good Law in Howard v. American National

A recent California Court of Appeal case, Howard v. American National Fire Insurance Co., 187 Cal. App. 4th 498 (2010), addresses a question that all insurance litigators will find of particular interest: whether an insurer can breach its duty to settle by rejecting a settlement offer that is within the total available limits of all the insurers’ policies, but which exceeds the limits of its own individual policy. In the first clear statement of California law on this issue, the First Appellate District ruled that the answer is “yes.” In the underlying case, plaintiff James Howard filed suit against the...

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February 16.2010

Insurer Misconduct: Testing the Reach of the UCL

In Zhang v. The Superior Court of San Bernardino County, E047207 (Super.Ct No. CIVVS707287), the Court of Appeal addressed the issue of whether an insured could bring a claim against an insurer under the Unfair Competition Law (“UCL”), based on an insurer’s violations of California’s Unfair Insurance Practices Act (“UIPA”). Reversing the trial court, the Court of Appeal held that existing precedent did not bar such a claim. In Moradi-Shalal v. Fireman’s Fund Ins. Co., 46 Cal.3d 287 (1998), the California Supreme Court held that there is no private cause of action under Section 790.03 of the California Insurance Code,...

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July 02.2009

Do California Courts Have Authority to Sanction Insurers for Bad Faith Settlement Negotiation?

At least one court, in a recent decision out of California’s second appellate district, has answered no to that question. In Vidrio v. Hernandez, the court reversed an order imposing sanctions on an insurer for failing to negotiate in good faith at a settlement conference. The court held that even if the insurer’s conduct had not been in good faith, there was no authority under California statute, the Rules of Court or any local rule for sanctioning the insurer. The Vidrio case involved personal injury claims brought by two plaintiffs injured in a car accident. Defendant’s insurer, Mercury Insurance Company,...

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April 03.2009

California Court of Appeal Holds Genuine Dispute Doctrine Inappropriate For Jury Instruction In Bad Faith Case

The California Court of Appeal for the Second District recently affirmed a trial court’s refusal to include an insurer’s proposed jury instructions on the “genuine dispute” doctrine in a bad faith case. McCoy v. Progressive West Insurance Co., 171 Cal. App. 4th 785, 793-794 (2009). McCoy limited the “genuine dispute” doctrine to the summary judgment context, holding that a jury should be allowed to determine for itself what facts are relevant to the reasonableness of an insurer’s coverage denial. Under the “genuine dispute” doctrine, an insurer may be entitled to summary judgment on a bad faith claim if “there is...

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