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Shanti Eagle

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Shanti represents policyholders in complex insurance coverage disputes. She has experience handling claims under a variety of insurance policies, including general liability, errors and omissions, employment practice liability, homeowners, and directors’ and officers’ policies. Shanti has substantial coverage litigation experience in state and federal courts.

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In Part I (”When Can an Insurer Pursue a Malpractice Claim Against Defense Counsel Retained for an Insured”) of our two-part article published by the ABA’s Insurance Coverage Litigation Committee (ICLC), we addressed the circumstances in which an insurer can directly pursue malpractice claims against defense counsel. We observed that the majority of courts have allowed insurers to bring claims against defense counsel, and we discussed the three primary legal vehicles through which insurers can bring such claims. 

As we previewed in Part I, a related issue is how and when insurers can seek reimbursement of defense costs from the insured if it is later found that the insurer did not owe its insured a duty to defend. As in the cases discussed in Part I, there is a split of authority, with many jurisdictions still uncertain. 

In Part II, we discuss this split of authority and the requirements for an insurer to preserve a right to recoup defense costs, as well as practical considerations for insurers pursuing, and policyholders looking to fend off, a demand for recoupment. Although California was an early trendsetter in this area, with the decision in Buss v. Superior Court allowing a limited right to reimbursement becoming the majority view, a significant minority refuse to allow the insurer to seek reimbursement—a minority that may gain further traction in many jurisdictions. The Nevada Supreme Court split 4:3 on this issue, ruling in favor of reimbursement, but with a vehement dissent arguing against any such right. In contrast, Illinois has held that there is no right to reimbursement. Continue Reading When Can an Insurer Pursue a Malpractice Claim Against Defense Counsel Retained for an Insured? Part II: When Can an Insurer Pursue a Reimbursement Claim against an Insured?

We keep hearing about how difficult it is for our clients to get property insurance these days, both for homes and businesses in Northern California’s wildfire-prone areas. Which, of course, is most of Northern California.  Those who have not yet been non-renewed are dreading a potential notice on their next renewal cycle, and those who have been non-renewed or are purchasing new property are increasingly left with the FAIR Plan as the only available option. 

There is hope that things will improve. On September 21, 2023, Governor Newsom signed an Executive Order urging Commissioner Lara to take action to address the crisis in the property insurance market.[1]

Simultaneously, the Department of Insurance (“DOI”) announced proposed regulatory changes intended to curb the exodus of insurance companies from the market and provide additional options for those having difficulty finding insurance.[2] Continue Reading Regulatory Changes Underway To Address Dwindling California Property Insurance Market

When an insurer accepts an insured’s tender and agrees to provide a defense, it is often an afterthought as to whether the insurer can actually recoup those defense costs or indemnity payments from the insured or defense counsel if things go south. But in certain circumstances, insurance carriers can, and sometimes do, seek to recoup defense costs—and occasionally even attempt to pursue defense counsel for malpractice.

Part I of this two-part article, published by the ABA’s Insurance Coverage Litigation Committee (ICLC), addresses how and where an insurer may directly pursue malpractice claims against defense counsel. While the majority of courts that have addressed the issue allow insurers to bring claims against defense counsel, there is a split between jurisdictions over the legal bases for those claims, which can also affect the likelihood of success. The three primary vehicles, discussed below, are (1) the tripartite relationship, (2) as third-party beneficiaries, and (3) contractual or equitable subrogation.Continue Reading When Can an Insurer Pursue a Malpractice Claim Against Defense Counsel Retained for an Insured

To combat a perceived litigation tactic by plaintiffs counsel of using settlement demands within policy limits to set up insurers for bad faith, insurance company associations lobbied for statutory clarification to avoid uncertainty around insurers’ duties when faced with time-limited demands.

The result was the enactment of California Code of Civil Procedure Chapter 3.2, Sections 999–999.5, titled “Time-Limited Demands,” which goes into effect Jan. 1, 2023.

Claimants’ time-limited settlement demands often seek the available policy limits and are usually referred to in the industry as “policy limits demands,” though theoretically they could be for an amount below limits. The demands must be reasonable in order to subsequently impose extracontractual liability on an insurer for bad faith failure to settle.

For certain types of claims and policies, Section 999 imposes several new criteria that a presuit demand must comply with to be considered a reasonable offer to settle within policy limits. We’ll call these “Section 999 demands.”Continue Reading New Statute Imposes Additional Requirements for Pre-Suit Demands—and Insurers’ Responses

Two phrases combined in a single exclusion—“alleging, arising out of, based upon or attributable to any violation of any law…” and “as respects… unfair trade practices” could inspire carriers to make trouble for policyholders seeking coverage for consumer protection claims. Fortunately, a recent federal decision recognizes that California rules of policy construction limit the scope of this exclusion, in line with a policyholder’s reasonable expectations of coverage.
Continue Reading “Unfair Trade Practices” Exclusion Does Not Extend to Consumer Protection Claims

A recent California appellate court decision found that a wage and hour exclusion in an Employment Practices Liability Insurance (“EPLI”) policy did not bar coverage for claims under California Labor Code sections 2800 and 2802 alleging failure to reimburse expenses. S. Cal. Pizza Co., LLC v. Certain Underwriters at Lloyd’s, London Subscribing to Policy No. 11EPL-20208, Case No. G056243, 2019 WL 4572859 (Cal. Ct. App. Aug. 27, 2019), as modified on denial of reh’g (Sept. 20, 2019). This is a significant decision. It gives policyholders an argument that insurers must defend wage and hour suits that include covered allegations of failure to reimburse expenses, as the court in Southern California Pizza found. 
Continue Reading Reimbursement of Employment-Related Expenses Is Not a “Wage and Hour” Claim Within the Meaning of EPLI Exclusion

I recently moderated a Bar Association of San Francisco Insurance Section program co-sponsored with the Cannabis Law Section. The program highlighted recent changes to local insurance requirements and market availability of coverage for cannabis businesses.

Local insurance requirements vary greatly by city and county, and it is important to take this into account—especially if you will be doing business throughout California. While certain coverages are still unavailable (i.e., true outdoor crop insurance) or prohibitively expensive (i.e., quality D&O insurance), one point of optimism is that the insurance market is actually adapting quickly and well to the demand for insurance for this industry. As a result, the panel recommended reviewing and updating your insurance portfolio often with the assistance of a broker who is well versed in the cannabis space.
Continue Reading Insurance for the Cannabis Industry Program Takeaways

Insurers often claim “economic damages” are not covered under a standard commercial general liability (CGL) policy. The Fourth District Court of Appeal’s decision in Thee Sombrero, Inc. v. Scottsdale Ins. Co., 28 Cal. App. 5th 729, 736 (2018) review and request to depublish denied (Jan. 30, 2019), demonstrates that “loss of use” can be measured by “economic damages”—i.e., loss in profit or diminution in value—so long as they are tied to a property interest.

In Thee Sombrero, Inc., the insured’s negligent security services resulted in the revocation of Thee Sombrero’s permit to use its property as a night club after a patron was allowed to enter without passing through the metal detector, resulting in a fatal shooting. Thee Sombrero sued the security company, and obtained a default judgment. Thee Sombrero then pursued Scottsdale to satisfy the judgment. The trial court found in favor of Scottsdale, but the Court of Appeal reversed, finding that “the loss of the ability to use the property as a nightclub is, by definition, a ‘loss of use’ of ‘tangible property.’ It defies common sense to argue otherwise.” Id.
Continue Reading Damages for Permit Revocation Constitute Covered “Loss of Use”

A 6th Circuit case decided earlier this year demonstrates how positions taken by insureds in prior litigation can impact or foreclose coverage in subsequent disputes with insurers. See K.V.G. Properties, Inc. v. Westfield Ins. Co., 900 F.3d 818 (6th Cir. 2018).

In K.V.G. Properties, Inc., K.V.G., was unaware that its tenant was operating a cannabis growing operation. Although Michigan allowed for limited legal marijuana cultivation, there was no evidence the tenant was in compliance with local law. After a DEA investigation resulted in a search warrant, K.V.G. had the tenant evicted from the property. K.V.G. then sought recovery from Westfield under its property policy for extensive damage done to the property by the tenant, including torn out walls, and damage to the HVAC, duct work, and roofing.
Continue Reading Evicting Tenants Over “Illegal” Cannabis Operation Comes Back to Bite Landlords in Coverage Dispute