California Supreme Court Cases Involving Insurance Decided


Find Insurance-related 2016 & 2017 Supreme Court of California Decisions

California Supreme Court Cases Involving Insurance – The Supreme Court of California website indicates that the following cases, involving insurance, were decided by the court recently.

California Supreme Court Cases Involving Insurance Decided 2016 Court Decisions

Insurance Commissioner Authority: Association of California Ins. Companies v. Jones (S226529)

Insurance Commissioner Authority: Association of California Ins. Companies v. Jones (S226529) This case was decided on January 23, 2017: The Court ruled as follows: “The Legislature directed the Insurance Commissioner to promulgate reasonable rules and regulations . . . as are necessary to administer the Unfair Insurance Practices Act. (Ins. Code, § 790.10.) The question before us is whether that statutory authority supports the Insurance Commissioner’s 2011 regulation covering replacement cost estimates for home owners insurance (Cal. Code Regs.,Title. 10, § 2695.183). We conclude that it does. Accordingly, we reverse the Court of Appeals judgment invalidating the regulation.” (The case concerned homeowners property replacement UNDERINSURED problems that came to light in the property damage claims resulting from California wildfires in 2001 and 2007—A majority of homeowner claimants were underinsured even if they had extended replacement cost coverage and even if the recommended coverage limits were calculated according to the insurance companies recommended calculation methods. The homeowners were still substantially under-insured. The new Regulation was promulgated to remedy the problem.)

Ace American Ins. Co. v. Fireman’s Fund Ins. Co., S237175. (B264861; 2 Cal.App.5th 159; Los Angeles County Superior Court; BC559203.)

Ace American Ins. Co. v. Fireman’s Fund Ins. Co., S237175. (B264861; 2 Cal.App.5th 159; Los Angeles County Superior Court; BC559203.) Petition for review after the Court of Appeal reversed the judgment in a civil action. This case presents the following issue: When a primary insurer unreasonably refuses to settle an underlying action against its insured within policy limits and the UNDERLYING ACTION LATER SETTLES for the full amount of the primary policy as well as the full amount of an excess insurer’s policy, can the excess insurer maintain an equitable subrogation action against the primary insurer to recover the amount it expended in settlement? (Note: there was no underlying JUDGMENT establishing the excess value, only a settlement). (STATUS: Review granted 9/13/16; Briefs were due, but case was Dismissed on March 15, 2017. (Comment: It is suspected the case was settled, but no confirmation as to reason for dismissal at this point.)

(Arbitration Clauses) Sandquist v. Lebo Automotive (s220812) (July 2016)

(Arbitration Clauses) Sandquist v. Lebo Automotive (s220812) (July 2016) This case is a purported class action; One issue is whether the agreement at issue allows for arbitration of the class action. However, the preliminary issue is “Who should decide the issue of whether the agreement permits or prohibits arbitration of a class action. The Court concluded “no universal rule allocates this decision in all cases to either arbitrators or courts. Rather, who decides in the first instance is a matter of agreement, with the parties agreement subject to interpretation under state contract law. Under state law, these parties’ arbitration agreement allocates the decision to the arbitrator. Under federal arbitration law, no contrary presumption requires a different result, so the issue remains one for the arbitrator. Because the Court of Appeal arrived at a similar answer, we affirm.” (Comment: This case does not directly implicate insurance coverage issues, but the overall scope of the ruling may be important for underwriting considerations)

(Assignment of Insurance Policies)

(Assignment of Insurance Policies) In August, 2015 the California Supreme Court, in Flour Corp. v. Superior Court (2015) overruled its earlier decision in Henkel Corp. v. Hartford Accident and Indemnity Co. (2003) and allowed policy holders to assign rights to insurance coverage without obtaining insurance company consent. The earlier Henkel decision had been criticized as a barrier to mergers and acquisitions relating to business sales and asset purchases. The reversal resulted from the court suggesting that in the earlier decision the existence and/or importance of California Insurance Code sec. 520 (enacted in 1872) was not briefed or considered. That provision provided, and provides, that “an agreement not to transfer the claim of the insured against the insurer after a loss has happened, is void if made before the loss.” The Supreme Court, in Flour, provided an exhaustive analysis of the history of Ins. Code sec. 520, as well as subsequent amendments, and concluded that Ins. Code sec. 520 must have been intended to apply to assignments of not only first party property insurance policy rights, but rights under third-party liability insurance policies as well.

The court also reaffirmed several earlier rulings, such as the “continuous trigger” theory and its application to long-tail injury claims and that stacking of limits over successive years to pay for multi-year losses continues to be valid.

More… California Supreme Court Cases Involving Insurance Decided

(Statute of Limitations/ Medical): Pouzbaris v. Prime Healthcare Services-Anaheim, LLP 9S226846 and Flores v. Presbyterian Intercommunity Hospital (S209836)

(Statute of Limitations/ Medical): Pouzbaris v. Prime Healthcare Services-Anaheim, LLP 9S226846 and Flores v. Presbyterian Intercommunity Hospital (S209836); The Court identified the following issues for decision: “(1) Does the one year statute of limitation for claims under the Medical Injury Compensation Act (CCP sec. 340.5) or the two year statute of limitations for ordinary negligence (CCP 335.1) govern an action for premises liability against a hospital based on negligent maintenance of hospital equipment? (2) Did the injury in this case arise out of “professional negligence” as that term is used in Sec. 340.5 or ordinary negligence?”) (Pouzbaris Case involved slip and fall on freshly mopped floor, no warnings of condition; Flores case involved improperly latched bed rail that collapsed).

The Court reversed the lower court and decided that the one year statute under MICRA applies; “When a doctor or other health care professional makes a judgment to order that a hospital bed rails be raised in order to accommodate a patient’s physical condition and the patient is injured as a result of the negligent use or maintenance of the rails, the negligence occurs “in the rendering of professional services” and therefore is professional negligence for purposes of section 340.5). (Comment: what impact does this decision have on underwriting and/or whether the insurance applicable to the incident is the Professional liability or CGL coverage?)

(Asbestos Transmission Liability)

(Asbestos Transmission Liability) Kesner v. Superior Court, S219534. (A136378, A136416; 226 Cal.App.4th 251; Alameda County Superior Court; RG11578906.) Also, Haver v. BNSF Railway Co., S219919. (B246527; 226 Cal.App.4th 1104, mod. 226 Cal.App.4th 1376b; Los Angeles County Superior Court; BC435551.) The Court identified the following as the issue to be decided: If an employer’s business involves either the use or the manufacture of asbestos-containing products, does the employer owe a duty of care to members of an employee’s household who could be affected by asbestos brought home on the employee’s clothing?

The Court decided in December, 2016 that “where it is reasonably foreseeable that workers will transmit asbestos to household members, employers have a duty to take reasonable care to prevent this means of transmission; the duty also applies to premises owners who use asbestos on their property, subject to any exceptions and affirmative defenses generally applicable to premises owners, such as rules of contractor liability. The Duty only extends to members of a worker’s household because it is premised on the foreseeability of both the regularity and intensity of contact that occurs in a worker’s home.” (Question/Comment: Will Employers CGL carriers or work comp carriers be obligated to respond to claims of household members? Is there any risk to homeowner carriers owing a duty to regular employees of the household, such as a laundry maid?)

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