National Insurance Law Forum : Insurance Litigation Lawyer & Attorney : National Insurance Law Forum : Insurance Coverage, Bad Faith Litigation

In an opinion issued on August 19, 2009, the Oregon Court of Appeals addressed the issue of whether a dispute concerning the enforceability of a release is an issue that relates only to “damages.” In Cardenas v. Farmers Ins. Co., ___ Or. App. ___, (2009), the Oregon appellate court affirmed the trial court and held that the dispute at issue was not limited to damages alone, and so the defendant insurer does not qualify for the “safe harbor” immunity from attorney fees established by ORS 742.061(3). The appellate court remanded to the trial court to determine what fees are reasonable.

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In Bridgetown Condominium Homeowner’s Assn. v. Granite State Ins. Co., 2009 U.S. Dist. LEXIS 51568, Judge Anna Brown of the Oregon District Court recently examined the meaning of the undefined term “condominium” within the meaning of a CGL policy. In Bridgetown, the plaintiff homeowner’s association had previously settled a state court action with a defendant developer for claims at a condominium project. The project consisted of fourteen single-family dwellings. The plaintiff entered into a stipulated judgment with the insured defendant in which the plaintiff agreed it would seek a portion of the stipulated judgment amount from the defendant’s insurer. The plaintiff then brought this garnishment action against the insurer.

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As reported in March, a bill was introduced, H.B. 2791, in the Oregon Legislature that would allow "any person" suffering injury or loss as a result of a practice prohibited under Oregon’s unfair claim settlement practices statute to sue for triple damages plus attorney’s fees. This would have drastically changed Oregon law that there is no private right of action for a violation of the unfair claim settlement practices statute.

Although the bill was introduced, it did not get very far and was not passed before the end of the legislative session. In fact, a hearing scheduled for March 31 2009, regarding the bill was cancelled, and there was no further formal action on the bill. Oregon's legislature typically only meets every two years, unless there is a special session. The legislature is planning a special session in February 2010 that will focus on the State budget, but may address other issues. If the bill is not reintroduced in this session, the bill could next be introduced in January 2011.
 

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In reviewing whether there has been an “occurrence,” where occurrence is defined as an accident, California (unlike many jurisdictions) makes a distinction between whether the act was intended versus whether the resulting damage or injury was intended. The latest unanimous decision from the California Supreme Court reiterates that even if the consequence of the action is different from what was intended, or there was a mistake as to the reason for the conduct, where the conduct is intentional it cannot be recast as having been an accident for purposes of obtaining insurance coverage. Delgado v. Interinsurance Exchange of Automobile Club of Southern California (2009) __ Cal.4th __ (2009 WL 2356908).

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California follows federal, and some state, courts in enacting new e-discovery rules. The rules took immediate effect and apply to all pending and future lawsuits.  Cal. Code Civ. Proc. § 2031. The rules for the most part mirror the 2006 changes made to the Federal Rules of Civil Procedure.

The new California rules provide for discovery of electronically stored information (“ESI”). ESI is defined as information stored in an electronic medium and can include technology with electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities. Parties are allows to inspect, copy, test, and sample ESI in the possession, custody or control of the other party. The requesting party may specify the form in which ESI is to be produced and the responding party can object and indicate the form in which it will be produced, or if no mention is specified, produce it as it is ordinarily maintained and in a form that is reasonably usable.

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California courts have been busy on insurance coverage decisions – and I am having trouble keeping up! Be ready for several posts.

An excellent (and correct) decision was issued from California’s Appellate court as to when there is an obligation to pay attorneys fees awarded against an insured pursuant to the supplementary payments provision of a general liability policy. In State Farm General Ins. Co. v. Mintarshi (2009) 175 Cal.App.4th 274, the court held that it is only where the attorney fee award is based on a covered claim that there is a duty to pay the “costs awarded” against the insured. 

The supplementary payments provision provides that the insurer will pay “costs taxed against the insured” in “any suit we defend.”  Under California law, where there is a duty to defend any one claim, there is a duty to defend the entire case. Buss v. Sup. Ct. (1997) 16 Cal.4th 35, 48-49. That duty is implied in law. Id. The insurer can reserve its right to seek reimbursement for amounts it pays in connection with the non-covered claims. Id.at 50-53.

Until now, this unanswered question troubled insurers and caused some to consider deleting this aspect of supplementary coverage because attorneys fee awards (on non-covered claims) can far exceed the value of the covered claim. This question was narrowed a few years ago when California’s appellate court ruled there was no obligation to pay an attorneys fee award based on a non-covered claim that was uninsurable because of willful conduct excluded pursuant to Ins. Code Section 533. See Combs v. State Farm Fire & Cas. Co. (2006) 143 Cal.App.4th 1338, 1344-1346.

Thus, if at the end of the case the claimant is awarded attorneys fees against the insured, if that award is based upon a claim not covered by the policy, there was no contractual obligation to defend that claim, only an implied in law duty. As such, the court reasoned, there should not be any obligation to cover attorneys fees relating to an aspect of the lawsuit that there was no duty under the contract to defend. To the extent Prichard v. Liberty Mutual Ins. Co. (2000) 84 Cal.App.4th 890, 912,  suggested a different result, the court declined to follow Prichard.

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Drew Berry died last week.  He was on vacation in Maine with his family when he suffered a heart attack.   Drew was a powerful advocate for policyholders and a good friend to his community.  Those of us who only knew him from the courtroom have been surprised to learn from the obituaries how much he did to rebuild Newark  He was "old school" before anyone thought to call it that.  He was smart, tenacious, courtly and a lot of fun  I'll miss him.

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