Justia California Supreme Court Opinion Summaries

In this case concerning the sequence in which Montrose Chemical Corporation, which was sued by causing environmental damage in the Los Angeles area, may access its excess insurance policies covering the period from 1961 to 1985, the Supreme Court held that Montrose may seek indemnification under any excess policy once it has exhausted the underlying excess policies in the same policy period.Montrose purchased primary and excess comprehensive general liability insurance to cover its operations at its Torrance facility from defendant insurers between 1961 and 1985. Montrose's primary insurance was exhausted in litigation due to environmental contamination allegedly caused by Montrose's operation of this facility. At issue was whether Montrose was required to exhaust other insurance coverage from other policy periods. The Supreme Court held (1) Montrose was entitled to access otherwise available coverage under any excess policy once it has exhausted directly underlying excess policies for the same policy period; and (2) an insurer called on to provide indemnification may seek reimbursement from other insurers that would have been liable to provide coverage under excess policies for any period in which the injury occurred. View "Montrose Chemical Corp. of California v. Superior Court" on Justia Law

The Supreme Court considered two questions from the federal court of appeals regarding California's common-law notice-prejudice rule and held (1) the notice-prejudice rule is a fundamental public policy of the state in the insurance context, and (2) the rule generally applies to consent provisions in the context of first party liability policy coverage and not to consent provisions in third party liability policies.The insurance policy in this case contained a choice of law provision designating that New York law should govern all matters arising under the policy. Under section 187 of the Restatement Second of Conflict of Laws the parties' choice of law generally governs unless it conflicts with a state's fundamental public policy. The party opposing the application of the choice of law provision sought to establish that California's notice-prejudice rule was a fundamental public policy for the purpose of choice-of-law analysis. The federal court of appeals issued certified questions to the Supreme Court, which answered as set forth above. The Court left it to the federal court of appeals to decide whether the consent provision at issue in this case was a consent provision contemplated first party or third party coverage. View "Pitzer College v. Indian Harbor Insurance Co." on Justia Law

A-1 Self Storage Inc.’s alternative indemnity agreement was not subject to regulation under the Insurance Code because (1) A-1 was not acting as an agent for an insurer, and (2) the indemnification agreement was incidental to the principal object and purpose of renting storage space. See Cal. Ins. Code 1758.7 et seq.In its rental agreements with tenants, A-1 required the tenant to obtain insurance for loss of or damage to a tenant’s stored property, stating that A-1 shall not be liable for such losses. A-1 also offered an alternative to the requirement that the tenant obtain insurance. In exchange for an additional amount in rent per month, A-1 provided that it would reassume the risk of such losses, up to $2,500. Plaintiff brought this putative class action arguing that the alternative constituted an insurance policy, which A-1 was not licensed to sell, and therefore, A-1’s sale of this indemnity agreement violated the Insurance Code. The trial court concluded that the alternative indemnity agreement was not insurance and entered judgment for Defendants. The court of appeal affirmed. The Supreme Court affirmed, holding that the alternative indemnity agreement did not constitute insurance subject to regulation under the Insurance Code. View "Heckart v. A-1 Self Storage, Inc." on Justia Law

At issue in this case was the Insurance Commissioner’s 2011 regulation (the Regulation) covering replacement cost estimates for homeowners insurance. A few weeks before the Regulation was to become effective, Association of California Insurance Companies and the Personal Insurance Federation of California (collectively, the Association) filed a complaint for declaratory relief challenging the validity of the Regulation. The trial court invalidated the Regulation, concluding that the Regulation exceeded the Commissioner’s authority by attempting to define additional acts or practices by regulation rather than by the procedure set out in Cal. Ins. Code 790.06. The Court of Appeal affirmed. The Supreme Court reversed, holding that Cal. Ins. Code 790.10 explicitly vests in the Commissioner authority to issue “reasonable rules and regulations” to administer the Unfair Insurance Practices Act, and this statutory authority supported the Regulation. View "Association of California Insurance Cos. v. Jones" on Justia Law

After Plaintiff was injured, he sought benefits from Defendant-insurer under an indemnity benefit policy. Plaintiff subsequently filed suit alleging that Defendant breached the insurance contract and the implied covenant of good faith and fair dealing. The jury awarded Plaintiff $31,500 in unpaid policy benefits, $35,000 in damages for emotional distress, and $19 million in punitive damages. The parties stipulated that the amount of attorney fees to which Plaintiff was entitled under Brandt v. Superior Court was $12,500, and the court awarded that amount. Defendant moved for a new trial seeking a reduction in the punitive damages award on the grounds that it was unconstitutionally excessive. The trial court granted the motion and reduced the jury’s award to a 10-to-1 ratio of punitive to compensatory damages. In so doing, the court considered only the $35,000 damages award but did not include the $12,500 in Brandt fees. The court of appeal affirmed. The Supreme Court reversed, holding that, in determining whether a punitive damages award is unconstitutionally excessive, Brandt fees may be included in the calculation of the ratio of punitive to compensatory damages, regardless of whether the fees are awarded by the trier of fact as part of its verdict or are determined after the verdict has been rendered. Remanded. View "Nickerson v. Stonebridge Life Ins. Co." on Justia Law

This case concerned an insured’s assignment of the right to invoke defense and indemnification coverage under a liability policy issued by Hartford Accident & Indemnity Company. The Supreme Court held in Henkel Corp. v. Hartford Accident & Indemnity Co., a case decided on similar facts, that the consent-to-assignment clause was enforceable and precluded the insured’s transfer of the right to invoke coverage without the insurer’s consent even after the coverage-triggering event had already occurred. At issue here was whether Cal. Ins. Code 520 - a statute that was not considered by the Court when it Henkel - changes the Court’s determination in Henkel. Section 520 specifically restricts an insurer’s ability to limit an insured’s right to transfer or assign a claim for insurance coverage. The court of appeal below concluded that section 520 does not apply to liability insurance and that, even assuming the statute applies, it should be construed to reflect the same rule articulated in Henkel. The Supreme Court reversed, holding (1) in light of the relevant language and history of section 520, the statute applies to third party liability insurance and bars an insurer from refusing to honor an insured’s assignment of policy coverage regarding injuries that predate the assignment; and (2) consequently, the decision in Henkel cannot stand. View "Fluor Corp. v. Superior Court of Orange County" on Justia Law

A commercial general liability insurer initially refused to defend its insured against a third-party lawsuit but subsequently provided independent counsel under a reservation of rights (so-called Cumis counsel) to defend its insured in the third party suit. A court order required the insurer to pay defense costs but expressly preserved the insurer’s right to later challenge and recover payments for “unreasonable and unnecessary” charges by counsel. The insurer sought reimbursement, alleging that independent counsel “padded” their bills by charging fees that were, in part, excessive unreasonable and unnecessary. The trial court concluded that the insurer’s right to reimbursement, if any, was from its insureds, not directly from Cumis counsel. The Court of Appeal affirmed, concluding that reimbursement could not be obtained directly from Cumis counsel. The Supreme Court reversed, holding that, under the circumstances of this case, the insurer could seek reimbursement directly from Cumis counsel. View "Hartford Cas. Ins. Co. v. J.R. Marketing, LLC" on Justia Law

At issue in this case was whether insurance practices that violate the Unfair Insurance Practices Act (UIPA) can support an Unfair Competition Law (UCL) action. In 1988, the Supreme Court held in Moradi-Shalal v. Fireman's Fund Insurance Companies that the Legislature did not intend to create a private cause of action under the UIPA for commission of various unfair practices listed in Cal. Ins. Code 790.03(h). In this case, Plaintiff sued Insurer for, among other causes of action, violation of California's unfair competition law (UCL) for engaging in false advertising. The trial court concluded that the UCL claim was an impermissible attempt to plead around Moradi-Shalal's bar against private actions for unfair insurance practices under section 790.03. The court of appeal reversed. The Supreme Court affirmed, holding (1) private UIPA actions are absolutely barred, and litigants may not rely on the proscriptions of section 790.03 as the basis for a UCL claim; (2) however, when insurers engage in conduct that violates both the UIPA and obligations imposed by other statutes or the common law, a UCL action may lie; and (3) here, Plaintiff alleged causes of action that provided grounds for a UCL claim independent from the UIPA. View "Zhang v. Superior Court" on Justia Law

Hartford Casualty Insurance Company issued a commercial general liability policy to Ultimate Support Systems, a company that sold the Ulti-Cart. The policy covered “personal and advertising injury,” which included claims arising out of publication of material that "disparages a person’s or organization’s goods, products or services.” Gary-Michael Dahl, the manufacturer of the Multi-Cart, sued Ultimate for patent and trademark infringement, false designation of origin, and damage to business, reputation, and goodwill. Hartford denied coverage on the ground that the suit did not allege that Ultimate had disparaged the Multi-Cart or Dahl. The Supreme Court affirmed, holding (1) a claim of disparagement requires a plaintiff to show a false or misleading statement that specifically refers to the plaintiff’s product or business and clearly derogates that product or business; and (2) because Dahl’s suit did not allege that Ultimate clearly derogated the Multi-Cart, there was no claim of disparagement triggering Harford’s duty to defend. View "Hartford Cas. Ins. v. Swift Distrib., Inc." on Justia Law

This case considered complex questions of insurance policy coverage interpretation in connection with a federal court-ordered cleanup of the state's Stringfellow Acid Pits waste site. The Supreme Court affirmed the court of appeal's judgment, holding (1) the "continuous injury trigger" and "all sums" rule announced in Montrose Chemical Corp. v. Admiral Ins. Co. and Aerojet-General Corp. v. Transport Indemnity Co. applied to the State's successive property or long-tail first party property loss, triggering the duty to indemnify here; and (2) the court of appeal correctly applied the "all-sums-with-stacking" allocation rule in allocating the indemnity duty among the insurers responsible for covering the property loss. View "State v. Cont'l Ins. Co." on Justia Law