November 2019 Update
The current update includes changes throughout this publication that reflect recent developments in case law, legislation, court rules, and jury instructions. Summarized below are some of the more important developments included in this update since publication of the 2018 update.
Declaratory relief. Under the Declaratory Judgment Act (28 USC §§2201–2202), a district court has the discretion to decline to exercise jurisdiction in such cases based upon several factors, including whether the case would involve a needless determination of state law issues, an encouragement of forum shopping, or duplicative litigation. In Maxum Indem. Co. v Kaur (ED Cal 2018) 356 F Supp 3d 987, the court discussed the factors in detail, exercised jurisdiction, and granted summary judgment in favor of a general liability insurer which sought to invoke its automobile exclusion to bar coverage for a claim of negligent truck driver training. See §§1.5, 1.43.
Notice-prejudice rule. The California Supreme Court held that California’s notice-prejudice rule, which requires that an insurer seeking to avoid providing coverage for a loss based on late notice bears the burden of establishing prejudice from the late notice, constitutes a fundamental public policy and applies to consent provisions in first party insurance policies. Pitzer College v Indian Harbor Ins. Co. (Aug. 29, 2019, S239510). See §§1.47, 10.5.
Contract formation. A broker fee required disclosure under Ins C §381(f) because there was no evidence that a policyholder had an opportunity to avoid the fee, and because customers who paid the broker fee (of $50, $100, or $150) received the same policy as those sold by agents who did not charge a fee. Mercury Ins. Co. v Lara (2019) 35 CA5th 82. See §1.15.
“Per person” limitations. When automobile insurance policy language was clear that the damages for bodily injury included loss of consortium, and that the “per person” limit applied when only one person suffered bodily injury, the single per-person limit of $250,000 applied to both the husband’s claim for damages for his injuries and his wife’s claim for loss of consortium. Jones v IDS Prop. Cas. Ins. Co. (2018) 27 CA5th 625. See §2.35.
Liability after exhausting policy limits. An insurer defending an action against the estate of a deceased insured under Prob C §§550–555 is a de facto party liable for costs and fees after rejecting a CCP §998 offer on behalf of the deceased defendant. Meleski v Estate of Hotlen (2018) 29 CA5th 616. See §2.38.
First party coverage; physical damage. An automobile insurer has the right to either repair or replace a damaged car, but is not required to restore the vehicle to both its pre-accident condition and its market value. Copelan v Infinity Ins. Co. (CD Cal 2019) 359 F Supp 3d 926; Hennessey v Infinity Ins. Co. (CD Cal 2019) 358 F Supp 3d 1074. See §7.14.
Statutory unfair claims settlement practices. The court of appeal recently considered whether 10 Cal Code Regs §2695.1 conflicts with the supreme court’s rulings in Zhang v Superior Court (2013) 57 C4th 364 and Moradi-Shalal v Fireman’s Fund Ins. Cos. (1988) 46 C3d 287, which overrule Royal Globe Ins. Co. v Superior Court (1979) 23 C3d 880 on certain issues. The court held that on the issue of single act liability, Royal Globe is still persuasive, and any contrary suggestions in Zhang and Moradi-Shalal are dicta. PacifiCare Life & Health Ins. Co. v Jones (2018) 27 CA5th 391. See §10.10.
Insurer’s duty of good faith; punitive damages. In Mazik v Geico Gen. Ins. Co. (2019) 35 CA5th 455, the court of appeal found that evidence in an insurance bad faith case supported the finding that a regional liability administrator was a managing agent and that a 3:1 ratio between punitive and compensatory damages was appropriate in light of the financial vulnerability of the policyholder, the insurer’s past practices, and the insurer’s intentional manipulation of facts in order to create a favorable record. See §10.35.
Litigation between insurers. For a case involving a reimbursement claim by an insurer which the court found to be one for “equitable subrogation” because the insurers “did not cover the same risk,” see Westport Ins. Corp. v California Cas. Mgmt. Co. (9th Cir 2019) 916 F 3d 769. See §11.16.