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California Liability Insurance Practice: Claims and Litigation

Use this guide to interpret rights and obligations under Commercial General Liability insurance policies, analyze coverage, initiate and investigate claims, conduct the defense and settle the case, and interpret claims involving multiple insurers and overlapping coverage.

Use this guide to interpret rights and obligations under Commercial General Liability insurance policies, analyze coverage, initiate and investigate claims, conduct the defense and settle the case, and interpret claims involving multiple insurers and overlapping coverage.

  • Rights and obligations of the parties
  • Claims process
  • Complex claims issues
  • Claim-related litigation
  • Coverage, interpretation, and defense checklists
  • Tables of cases, references, and forms
OnLAW CP94260

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$ 445.00
Print CP39260

2 looseleaf volumes, updated 9/19

 

$ 445.00

Use this guide to interpret rights and obligations under Commercial General Liability insurance policies, analyze coverage, initiate and investigate claims, conduct the defense and settle the case, and interpret claims involving multiple insurers and overlapping coverage.

  • Rights and obligations of the parties
  • Claims process
  • Complex claims issues
  • Claim-related litigation
  • Coverage, interpretation, and defense checklists
  • Tables of cases, references, and forms

1

Basic Liability Insurance Terms and Types of Liability Policies

Robert N. Schiff

Robert Berg

  • I.  SCOPE OF CHAPTER  1.1
  • II.  LIABILITY INSURANCE DEFINED
    • A.  Purpose of Liability Insurance  1.2
    • B.  Distinction Between First Party and Third Party Claims  1.3
    • C.  Primary, Excess, and Umbrella Policies
      • 1.  Primary Insurance  1.4
      • 2.  Excess (or Secondary) Insurance  1.5
      • 3.  Umbrella Insurance  1.6
    • D.  Other Insurance (“Double Insurance”)  1.7
    • E.  Reinsurance  1.8
  • III.  AN INSURANCE POLICY IS A CONTRACT
    • A.  Essential Terms  1.9
    • B.  Structure and Wording of Insurance Policy
      • 1.  Structure of Typical Liability Policy  1.10
      • 2.  Wording of Insurance Policy
        • a.  Standardized Wording  1.11
        • b.  Manuscript Policy (Nonstandardized Wording)  1.12
    • C.  Interpretation of Insurance Policy
      • 1.  Ambiguous Insurance Policies Interpreted Based on Insured’s Objectively Reasonable Expectations  1.13
      • 2.  Public Policy Considerations Favor Insured  1.14
    • D.  Impact of Statutory Regulations on Insurance Contract; List of Regulatory Statutes  1.15
  • IV.  COMMON TYPES OF LIABILITY INSURANCE AND HAZARDS COVERED
    • A.  Commercial General Liability Insurance (CGL)  1.16
      • 1.  Time of Occurrence Triggers Coverage  1.17
      • 2.  Hazards Covered by Standard CGL Policies
        • a.  Property Damage  1.18
        • b.  Bodily Injury  1.19
        • c.  Business Premises and Completed Operations  1.20
        • d.  Products Liability  1.21
        • e.  Personal Injury Liability  1.22
        • f.  Advertising Injury Liability  1.23
        • g.  Contractual Liability  1.24
      • 3.  Common Exclusions in Standard CGL Policies  1.25
    • B.  Comprehensive Personal Liability Insurance  1.26
    • C.  Homeowners’ Insurance  1.27
    • D.  Workers’ Compensation Insurance  1.28
    • E.  Professional Liability Insurance  1.29
    • F.  Directors and Officers Liability Insurance (D&O); General Partners’ Liability Insurance  1.30
    • G.  Public Officials’ and Employees’ Liability Insurance  1.31
    • H.  Owners’, Landlords’, and Tenants’ Liability Insurance (OL&T) [Deleted]  1.32
    • I.  Automobile Liability Insurance  1.33
    • J.  Garage Liability Insurance  1.34
    • K.  Aircraft Liability Insurance  1.35
    • L.  Watercraft Liability Insurance  1.36
    • M.  Pollution or Contamination Hazard Insurance  1.37
    • N.  Title Insurance  1.38
    • O.  Cyber Insurance  1.38A
  • V.  STATUTORY REGULATION OF LIABILITY INSURERS
    • A.  Liability Insurers Primarily Regulated by State, Not Federal, Government  1.39
    • B.  Insurance Commissioner’s Authority Over Liability Insurers  1.40
    • C.  Specific Areas of State Regulation
      • 1.  Admitted and Nonadmitted Insurers
        • a.  Admitted Insurer  1.41
        • b.  Nonadmitted Insurer  1.42
      • 2.  Insolvency and California Insurance Guarantee Association (CIGA)  1.43
      • 3.  Reserves  1.44
      • 4.  Rates  1.45
      • 5.  Antitrust Laws’ Application to Insurers  1.46
      • 6.  Unfair Business Practices Act  1.47
      • 7.  Regulation of Specific Activities  1.48

2

Overview of Rights and Obligations Under the Policy

James E. Chodzko

  • I.  SCOPE OF CHAPTER  2.1
  • II.  EXPRESS CONTRACTUAL OBLIGATIONS
    • A.  Insurer’s Duties
      • 1.  Duty to Indemnify  2.2
      • 2.  Duty of Insurer to Successor of Insured  2.2A
      • 3.  Duty to Defend
        • a.  Duty Defined  2.3
        • b.  Insurer’s Right to Control Defense; Obligation to Hire Independent Counsel in Conflict of Interest  2.4
    • B.  Insured’s Duties
      • 1.  Duty to Notify Insurer  2.5
      • 2.  Duty to Cooperate in Defense  2.6
      • 3.  Duty to Refrain From Making Voluntary Payments or Expenditures  2.7
      • 4.  Duty to Avoid Prejudicing Insurer’s Subrogation Rights  2.8
  • III.  IMPLIED CONTRACTUAL OBLIGATIONS
    • A.  Covenant of Good Faith and Fair Dealing
      • 1.  Basic Rule: Do Nothing to Injure Right of Other Party to Benefit of Contract  2.9
      • 2.  Term “Bad Faith” Denotes Breach of Covenant  2.10
    • B.  Application to Insurer
      • 1.  Obligation to Settle  2.11
      • 2.  Obligation Not to Withhold Coverage Unreasonably
        • a.  Derivation From First Party Cases  2.12
        • b.  Conduct Required of Insurer  2.13
      • 3.  Other Applications to Insurer  2.14
    • C.  Application to Insured  2.15
  • IV.  CLAIMANT’S STANDING TO ENFORCE INSURER’S CONTRACTUAL OBLIGATIONS  2.16
  • V.  INSURER’S STATUTORY OBLIGATIONS
    • A.  Unfair Insurance Practices Act (UIPA) (Ins C §§790–790.15)  2.17
    • B.  Violation of Ins C §790.03(h) May Subject Insurer to Administrative Sanctions  2.18
    • C.  Other Consequences of Violation of Ins C §790.03(h)  2.18A
    • D.  Insurance Code §790.03(h) Not Enforceable by Third Party Claimants  2.19

3

Analyzing Coverage: Reading and Interpreting Insurance Policies

Thomas W. Johnson, Jr.

Kent Keller

Larry M. Golub

  • I.  INTRODUCTION; CHECKLIST FOR READING AND INTERPRETING POLICY  3.1
  • II.  OBTAIN COMPLETE, CORRECT COPY OF POLICY
    • A.  Importance of Obtaining Complete Policy  3.2
    • B.  Summary of Documents to Obtain  3.3
    • C.  Steps to Take to Obtain Complete Policy
      • 1.  Examine Declarations Page; Sample Page  3.4
      • 2.  Check Form Number, Edition Date, and Page Count  3.5
      • 3.  Obtain Any Endorsements or Riders Issued After Policy Was Originally Executed  3.6
      • 4.  Form: Insurance Policy Inventory  3.7
  • III.  ASCERTAIN WHETHER POLICY COVERS RISK
    • A.  Process of Analyzing Coverage  3.8
    • B.  Analysis of Defense Obligation Distinguished From That of Indemnity Obligation and Fronting Policy  3.9
    • C.  Six Basic Steps of Analysis  3.10
      • 1.  Ascertain Basic Elements of Coverage From Declarations Page (STEP 1)  3.11
        • a.  Identify Named Insured and Other Insureds  3.12
        • b.  Ascertain Policy Period  3.13
        • c.  Identify Types of Coverage Provided  3.14
        • d.  Ascertain Restrictions, Limits, and Deductibles  3.15
      • 2.  Ascertain Whether Claim Comes Within Insuring Clause (STEP 2)  3.16
        • a.  Definition of Insuring Clause  3.17
        • b.  Three Principal Qualifications on Coverage Under Insuring Clause  3.18
          • (1)  Insured Qualification  3.19
          • (2)  Damages Qualification  3.20
            • (a)  Criminal Proceeding Not Within Definition of Claim or Lawsuit for Damages  3.21
            • (b)  Unclear Whether Injunctive Proceedings Involve Sums That Insured May Be Obligated to Pay as Damages  3.22
            • (c)  Environmental Cleanup Costs May Be “Damages” Under Standard Policy Language  3.23
          • (3)  Activity Qualification  3.24
      • 3.  Examine Definitions (STEP 3)  3.25
      • 4.  Ascertain Whether Exclusion Applies (STEP 4)  3.26
      • 5.  Ascertain Whether Condition Affects Coverage (STEP 5)  3.27
      • 6.  Ascertain Whether Endorsement (or Rider) Increases or Decreases Coverage (STEP 6)  3.28
    • D.  Ascertain Whether Policy Is Occurrence, Claims-Made, or Claims-Made-and-Reported Policy  3.29
      • 1.  Occurrence Policy  3.30
      • 2.  Claims-Made Policy  3.31
      • 3.  Claims-Made-and-Reported Policy  3.32
    • E.  Ascertain Whether Claim Comes Within Policy Period  3.33
      • 1.  Ascertain Policy Period  3.34
      • 2.  Identify Coverage-Triggering Event  3.35
      • 3.  Identify Date of Coverage-Triggering Event Under Occurrence Policy  3.36
        • a.  Exposure Rule  3.37
        • b.  Manifestation Rule  3.38
        • c.  Continuous Injury or Multiple-Trigger Rule  3.39
        • d.  Injury-in-Fact Rule  3.40
      • 4.  Determine Number of Occurrences  3.40A
  • IV.  ASCERTAIN CAUSE OF LOSS  3.41
    • A.  Concurrent Causes  3.42
    • B.  Policy Can Include Causation Language If Public Policy Not Violated  3.43
  • V.  INTERPRET POLICY PROVISIONS
    • A.  Summary of Process  3.44
    • B.  Applying Guiding Principles for Interpreting Policy
      • 1.  Policy Is a Contract Subject to Ordinary Contract Rules  3.45
      • 2.  Special Principles Affect Interpretation of Insurance Contracts
        • a.  Summary of Principles  3.46
        • b.  Order of Application  3.47
    • C.  Clear and Explicit Language Governs  3.48
    • D.  Goal Is to Give Effect to Intent of Parties; Use of Extrinsic Evidence  3.49
      • 1.  Admissibility of Extrinsic Evidence  3.50
      • 2.  Examples of Extrinsic Evidence Applied to Interpret Policy  3.51
    • E.  Resolving Ambiguities
      • 1.  Give Effect to Insured’s Reasonable Expectations  3.51A
      • 2.  Remaining Ambiguities Must Be Construed Against Insurer (Contra Insurer Rule)
        • a.  Rule Applies When Ambiguity Cannot Be Resolved Under Reasonable Expectation Principle  3.52
        • b.  Exceptions to Contra Insurer Rule  3.53
          • (1)  When Insured Is Sophisticated Business Entity and Assisted in Drafting Policy  3.54
          • (2)  When Ambiguous Policy Language Was Statutorily Imposed  3.55
          • (3)  Exception for Other Factors  3.56
      • 3.   [Deleted]  3.57
      • 4.  Defining Whether Language Is Ambiguous  3.58
        • a.  Unclear Terminology Creates Ambiguity  3.59
        • b.  Inconsistent Provisions Create Ambiguity  3.60
        • c.  Inconspicuous or Hidden Term May Be Considered Ambiguous  3.61
      • 5.  Interpreting Exclusions  3.62
        • a.  Automobile Exclusion  3.62A
        • b.  Employment-Related Practices Exclusion  3.62B
        • c.  Insured-Versus-Insured Exclusion  3.62C
        • d.  Intellectual Property Exclusion  3.62D
        • e.  Pollution Exclusion  3.62E
      • 6.  Burden of Proof  3.63
    • F.  Interpretation Is Question of Law Unless Underlying Facts Are Disputed
      • 1.  Question of Law  3.64
      • 2.  Disputed Facts Must Be Analyzed and Decided by Jury  3.65
  • VI.  STATUTES AFFECTING INTERPRETATION OF POLICY
    • A.  Importance of Examination of Statutes  3.66
    • B.  Examples of Statutes Affecting Interpretation
      • 1.  Indemnity for Willful Acts and Punitive Damages Prohibited (Ins C §533; CC §1668)
        • a.  Willful Acts  3.67
        • b.  Punitive Damages  3.68
      • 2.  Coverage for Fines, Penalties, or Restitution Prohibited (Ins C §533.5)  3.69
      • 3.  No Indemnity for Unlawful Acts (CC §2773)  3.70
      • 4.  Duty to Defend Implied in All Policies Unless Expressly Excluded (CC §2778)  3.71
      • 5.  Required Provisions in All Policies (Ins C §11580)  3.72
        • a.  Insurer Obligated to Third Party Claimant Even If Insured Becomes Bankrupt or Insolvent (Ins C §11 580(b)(1))  3.73
        • b.  Third Party Claimant Has Direct Action Against Insurer After Judgment Entered Against Insured (Ins C §11 580(b)(2))  3.74
      • 6.  Indemnity to Another Permitted Only If Loss Arises From Contingent or Unknown Event (Ins C §§22, 250)  3.75
      • 7.  Professional Liability Policy Must Provide Conspicuous Notice If It Is a Claims-Made Policy (Ins C §11580.01)  3.76
      • 8.  Division 2, Part 3, Article 2 of Insurance Code Contains Provisions Governing Automobile Liability Policies  3.77
  • VII.  CHOICE OF LAW CONSIDERATIONS IN INTERPRETATION OF POLICY
    • A.  Which State’s Law Applies to Interpretation of Policy When Out-of-State Contacts Exist  3.78
    • B.  Three-Step Governmental Interest Analysis  3.79
    • C.  Considerations in Applying Comparative Impairment Analysis  3.80
    • D.  Judge in Forum Court Applies Law Selected Under Forum’s Choice of Law Rules  3.81
  • VIII.  USING CASE LAW AND SECONDARY SOURCES TO INTERPRET POLICY
    • A.  In General  3.82
    • B.  Case Law  3.83
    • C.  Secondary Authorities  3.84
      • 1.  Annotated Insurance Policies  3.85
      • 2.  Specialty Insurance Treatises  3.86
      • 3.  General Insurance Treatises  3.87
      • 4.  Insurance Industry Publications  3.88
  • IX.  INSURANCE COVERAGE CHECKLIST  3.89

4

Determining Whether Insurer Must Defend

N. David Lyons

  • I.  SCOPE OF CHAPTER  4.1
  • II.  SOURCE OF DEFENSE OBLIGATION
    • A.  Duty Usually Defined in Insuring Agreement  4.2
    • B.  Duty May Be Implied by Statute Unless Contrary Intention Appears  4.3
    • C.  Standard Primary Policy Obligates Insurer to Defend Claims for Damages Within Coverage of Policy  4.4
  • III.  RULES FOR ASCERTAINING WHETHER INSURER MUST DEFEND
    • A.  Basic Rules
      • 1.  Insurer Must Defend Unless Policy Clearly Would Not Cover Any Potential Judgment  4.5
        • a.  Patent Infringement  4.5A
        • b.  Continuous or Progressively Deteriorating Property or Bodily Injury Losses  4.5B
        • c.  Eminent Domain  4.5C
        • d.  Personal Injury From Pollution  4.5D
      • 2.  Insurer May Be Obligated to Defend Even Though Not Obligated to Indemnify  4.6
      • 3.  Scope of Duty to Defend  4.6A
    • B.  Interpreting Policy
      • 1.  Insurance Policy Is a Contract Interpreted According to Rules of Construction Applicable to Written Contracts Generally  4.7
      • 2.  Determining Whether Claim Is of Nature and Kind Covered by Policy  4.8
      • 3.  Determining Whether Exclusion Clearly Applies  4.9
      • 4.  Application of “Groundless, False, or Fraudulent” Clause  4.10
    • C.  Determining Whether Potential Exists for Indemnifiable Damages
      • 1.  Evaluate Potential  4.11
      • 2.  Scope of Inquiry
        • a.  Determination Made on Basis of Facts Known or Reasonably Available  4.12
        • b.  Insurer Must Investigate Claim Before Refusing to Defend  4.13
      • 3.  Insurer Must Defend If Facts Could State Cause of Action for Indemnifiable Damages Under Any Legal Theory  4.14
      • 4.  Insurer Must Defend if Facts Could Be Resolved to Result in Indemnifiable Damages
        • a.  Application to Facts at Issue in Underlying Action
          • (1)  Rule Explained  4.15
          • (2)  Application of Rule When Insurer Has Extrinsic Facts Proving Claim Not Covered  4.16
        • b.  Application to Facts Material to Coverage But Not to Underlying Action  4.17
        • c.  Legally Meritless Cause of Action Does Not Relieve Insurer of Duty to Defend  4.18
        • d.  Conclusive Determination of Fact in Collateral Proceeding or by Admission of Insured  4.19
    • D.  Other Factors Affecting Obligation to Defend
      • 1.  Each Primary Insurer Has Independent Duty to Defend  4.20
      • 2.  Policy “Damage” Clause Limits Types of Proceedings for Which Defense Required
        • a.  Depends on Policy Language; Standard Policies Require Defense in Civil Actions for Damages  4.21
        • b.  Limitation on Defense of Other Types of Proceedings  4.22
  • IV.  APPLICATION OF RULES TO INTENTIONAL TORTS
    • A.  Defense of Intentional Torts Not Necessarily Barred by Statute or Policy  4.23
    • B.  Effect of Policy Language on Obligation to Defend  4.24
      • 1.  Provision Limiting Coverage to “Occurrences” or “Accidents”  4.25
      • 2.  Provision Excluding Coverage for Injuries Intentionally Caused by Insured  4.26
    • C.  Effect of Statutory Prohibitions on Obligation
      • 1.  General Obligation to Defend in Face of Statutory Prohibitions  4.27
      • 2.  Culpability Required to Relieve Insurer of Obligation to Defend  4.27A
      • 3.  Intent to Injure Need Not Be Identical to Injury That Occurred  4.28
    • D.  Issue Whether Statutory Exclusion and Policy Exclusion Are Synonymous  4.29
    • E.  Effect of Criminal Conviction on Establishing Intent  4.30
    • F.  Intent to Injure or Willfulness Can Be Inferred From Some Acts  4.31
    • G.  Insured’s Mental Capacity as Precluding Intent  4.32
    • H.  Insurer May Be Required to Defend When Insured Sued for Intentional Act of Another Person  4.33

5

Determining Whether Enforceable Obligation Exists

William F. Campbell

  • I.  SCOPE OF CHAPTER  5.1
  • II.  GENERAL PRINCIPLES AFFECTING ENFORCEABILITY
    • A.  Insurance Policy Is Unique Kind of Contract
      • 1.  General Contract Principles Still Apply  5.2
      • 2.  Special Statutory Rules and Judicial Doctrines Also Apply to Insurance Contracts  5.3
    • B.  Conduct of Agents and Brokers May Affect Whether a Contract Has Been Formed and Will Be Enforceable  5.4
      • 1.  Agent’s Role and Duties  5.5
      • 2.  Broker
        • a.  Role and Duties  5.6
        • b.  Insurance Broker as Dual Agent  5.7
      • 3.  Examples of Actions of Agent or Broker Affecting Enforceability  5.8
  • III.  ASCERTAINING WHETHER CONTRACT WAS FORMED
    • A.  Procedure  5.9
    • B.  Requirements for Formation of Written Insurance Contract
      • 1.  Offer  5.10
      • 2.  Acceptance
        • a.  Acceptance Generally Must Be Made in Same Terms as Offer  5.11
        • b.  Insurer’s Failure to Act Promptly on Application May Result in Implied Acceptance or Negligence Action  5.12
      • 3.  Delivery
        • a.  When Required  5.13
        • b.  Effective Delivery  5.14
      • 4.  Payment of Premium  5.15
    • C.  Oral Contracts of Insurance  5.16
    • D.  Temporary Insurance Contract
      • 1.  Binder Is Evidence of Temporary Contract  5.17
      • 2.  Types of Binders
        • a.  Written Binders  5.18
        • b.  Oral Binders
          • (1)  Underlying Principles  5.19
          • (2)  Binder Unenforceable Unless Parties Have Designated Insurer  5.20
      • 3.  Form: Sample Binder  5.21
  • IV.  WHEN INSURANCE CONTRACT HAS BEEN TERMINATED
    • A.  Cancellation, Flat Cancellation, Lapse, and Nonrenewal Defined  5.22
    • B.  Cancellation
      • 1.  Effect of Cancellation  5.23
      • 2.  Methods of Cancellation  5.24
        • a.  Cancellation by Mutual Agreement  5.25
        • b.  Cancellation by Insured
          • (1)  Insured Must Strictly Comply With Policy’s Cancellation Provisions  5.26
          • (2)  Insured’s Intent to Cancel Must Be Clearly Communicated to Insurer  5.27
        • c.  Cancellation by Insured’s Premium Finance Lender  5.27A
        • d.  Cancellation by Insurer  5.28
          • (1)  Statutory Cancellation Requirements Vary by Line of Insurance  5.29
          • (2)  Statutory Grounds for Cancellation  5.30
            • (a)  Grounds for Cancellation of Commercial Insurance Policies  5.31
            • (b)  Grounds for Cancellation of Automobile Insurance Policies  5.32
            • (c)  Grounds for Cancellation of Other Property and Liability Policies Issued to Individuals  5.33
      • 3.  Sufficiency of Notice of Cancellation  5.34
        • a.  Notice of Cancellation of Commercial Insurance  5.35
        • b.  Notice of Cancellation of Automobile Policies  5.36
        • c.  Notice of Cancellation of Other Property and Liability Policies Issued to Individuals  5.37
      • 4.  Statement of Reasons for Cancellation Required  5.38
        • a.  Reasons Must Be Included in Notice of Cancellation Under Commercial Insurance  5.39
        • b.  Reasons to Be Provided at Time of Cancellation for Automobile Policies  5.40
        • c.  Reasons to Be Provided at Time of Cancellation for Other Property and Liability Policies Issued to Individuals  5.41
        • d.  No Action Against Insurer Based on Statements Made in Notice of Cancellation  5.42
      • 5.  Public Policy Constraints on Cancellation  5.43
      • 6.  Cancellation in Bad Faith  5.44
      • 7.  Cancellation Stayed If Insured Files for Bankruptcy  5.45
    • C.  Renewal
      • 1.  General Rule: Offer and Acceptance Required  5.46
      • 2.  Exception: If Insurer Fails to Offer Renewal or Give Notice of Nonrenewal, Most Policies Automatically Renewed by Operation of Law  5.47
        • a.  Automatic Renewal of Commercial Insurance  5.48
        • b.  Automatic Renewal of Automobile Policies  5.49
        • c.  Automatic Renewal of Other Property and Liability Policies Issued to Individuals  5.50
    • D.  Lapse  5.51
    • E.  Nonrenewal
      • 1.  Insurer Generally Has Right of Nonrenewal  5.52
      • 2.  Statutory Exceptions to General Right of Nonrenewal
        • a.  Automobile Policies: Nonrenewal Must Be Based on One of Three Statutory Grounds  5.53
        • b.  Insurer Prohibited From Refusing to Renew If Refusal Based on Certain Criteria  5.54
      • 3.  Notice of Nonrenewal  5.55
        • a.  Notice of Nonrenewal of Commercial Insurance  5.56
        • b.  Notice of Nonrenewal of Automobile Insurance  5.57
        • c.  Notice of Nonrenewal of Other Property and Liability Insurance Issued to Individuals  5.58
    • F.  Protection for Insureds in Cancellation or Nonrenewal of Claims-Made Policies  5.59
      • 1.  Discovery Provision in Claims-Made Policies  5.60
      • 2.  Extended Reporting Period Clause in Claims-Made Policies  5.61
  • V.  WHEN RESCISSION OR REFORMATION REMEDIES APPLY TO INSURANCE CONTRACT  5.62
    • A.  Rescission  5.63
      • 1.  Effect of Rescission  5.64
      • 2.  Grounds for Rescission
        • a.  Breach of Warranty  5.65
        • b.  Fraud  5.66
        • c.  Unintentional Concealment or Misrepresentation  5.67
        • d.  Failure to Inform Insurer of Change of Circumstances  5.68
      • 3.  Insurer May Have Duty to Investigate Insurability in Certain Circumstances  5.69
      • 4.  Showing of Materiality Required  5.70
    • B.  Reformation
      • 1.  General Principles  5.71
      • 2.  Effect of Reformation  5.72
      • 3.  Grounds for Reformation
        • a.  Mutual or Unilateral Mistake  5.73
        • b.  Fraud or Misrepresentation  5.74
      • 4.  Effect of Insured’s Failure to Read Policy on Reformation  5.75
      • 5.  Effect of Reformation on Third Parties’ Rights  5.76
  • VI.  WAIVER AND ESTOPPEL AS DEFENSES TO ENFORCEABILITY OF INSURANCE CONTRACT
    • A.  General Principles  5.77
      • 1.  Estoppel  5.78
      • 2.  Waiver  5.79
    • B.  Examples of Application of Waiver and Estoppel to Formation and Enforceability of Insurance Contracts  5.80
    • C.  Application of Defenses of Waiver and Estoppel to Insurer’s Conduct in Handling Claims  5.81

6

Overview of the Claims Process

Arthur Schwartz

  • I.  INTRODUCTION  6.1
  • II.  CLAIMS PERSONNEL
    • A.  Company Personnel  6.2
      • 1.  Inside Claim Representatives  6.3
      • 2.  Field Adjusters  6.4
      • 3.  Supervisors and Claims Specialists  6.5
      • 4.  Claims Managers  6.6
      • 5.  Home and Regional Office Examiners  6.7
      • 6.  Staff Counsel  6.8
      • 7.  Specialized Units
        • a.  Litigation Unit  6.9
        • b.  Extracontractual Unit  6.10
        • c.  Subrogation Unit  6.11
    • B.  Noncompany Personnel
      • 1.  Independent Adjusters and Third Party Administrators  6.12
      • 2.  Specialized Consultants  6.13
      • 3.  Outside Counsel  6.14
  • III.  CLAIMS PROCESSING
    • A.  Initial Claim Report  6.15
    • B.  Claim Assignment  6.16
    • C.  Clerical Processing  6.17
    • D.  Investigation  6.18
    • E.  Establishment of Claim Reserve  6.19
    • F.  Claim Reporting  6.20
    • G.  Settlement by Claim Representative  6.21
    • H.  Referral to Counsel  6.22

7

Initiating a Claim

Mark E. Edwards

  • I.  IDENTIFYING INSURANCE COVERAGE: CLIENT INTERVIEW  7.1
    • A.  Identify Causes of Action  7.2
    • B.  Identify All Defendants  7.3
    • C.  Statements Made by Claimant  7.4
  • II.  NOTICE OF CLAIM
    • A.  When to Notify: Factors  7.5
      • 1.  Lack of Notice as Ground for Insurer to Deny Coverage  7.6
      • 2.  Amount of Time From Incident to Client Interview  7.7
      • 3.  Need to Obtain Immediate Benefits or Preserve Limits  7.8
      • 4.  Opportunity for Early Investigation
        • a.  Statements  7.9
        • b.  Photographs; Other Documentary Evidence  7.10
      • 5.  Special Notice Requirements  7.11
    • B.  Form: Who Should Notify  7.12
    • C.  Whom and How to Notify
      • 1.  Defendants
        • a.  Notification Letter  7.13
        • b.  Defendant’s Response  7.14
        • c.  Options When Defendant Fails to Respond or Claims No Insurance Coverage  7.15
      • 2.  Insured’s Insurer  7.16
        • a.  Describing Basic Claim  7.17
        • b.  Request for Claimant Statements  7.18
        • c.  Revocation of Prior Authorizations  7.19
        • d.  Request for Policy Limits Information  7.20
      • 3.  Claimant’s Insurer: Special Considerations If First Party Claim  7.21
  • III.  FORMS
    • A.  Form: Letter to Individual Defendant  7.22
    • B.  Form: Letter to Defendant Employer  7.23
    • C.  Form: Letter to Defendant’s Insurer  7.24
    • D.  Form: Letter to Claimant’s Insurer  7.25

8

Identifying Sources of Coverage; Tendering Defense to Insurer

Raphael Cotkin

Larry W. Mitchell

  • I.  OVERVIEW  8.1
  • II.  PROCEDURAL CHECKLIST  8.2
  • III.  STEPS IN DETERMINING WHICH INSURERS TO NOTIFY
    • A.  Investigate Underlying Facts  8.3
    • B.  Obtain Copies of Policies  8.4
      • 1.  Client as “Insured”  8.5
      • 2.  Lost Policies  8.6
        • a.  Finding Lost Policies  8.7
        • b.  Evidence of Lost Policies  8.8
    • C.  Analyze Facts and Policies to Find Coverage
      • 1.  First Steps  8.9
      • 2.  Take Broadest Possible View  8.10
    • D.  Decide Which Insurers to Notify  8.11
  • IV.  NOTIFYING INSURER
    • A.  Policy Notice Requirements  8.12
    • B.  Notice Provisions of Different Types of Policies
      • 1.  Occurrence Policies
        • a.  Form: Sample Notice Provision  8.13
        • b.  Discussion and Practice Tips  8.14
      • 2.  Claims-Made Policies
        • a.  Application to Actual Claim
          • (1)  Form: Sample Notice Provision  8.15
          • (2)  Discussion and Practice Tips  8.16
        • b.  Extensions to Coverage for Potential Claims Reported During Policy Period
          • (1)  Form: Sample Notice Provision  8.17
          • (2)  Discussion and Practice Tips; “Laundry Listing” Potential Claims to Avoid Gap in Coverage  8.18
      • 3.  Claims-Made-and-Reported Policies
        • a.  Form: Sample Notice and Reporting Provisions  8.19
        • b.  Discussion and Practice Tips  8.20
    • C.  Giving Notice
      • 1.  Timeliness; Importance of Giving Prompt Notice  8.21
      • 2.  Proper Recipient  8.22
      • 3.  Contents and Manner of Giving Notice  8.23
      • 4.  Effect of Untimely Notice  8.24
    • D.  Grounds for Overcoming Late or Inadequate Notice
      • 1.  Lack of Substantial Prejudice  8.25
      • 2.  Limitations of Late-Notice-Prejudice Exception
        • a.  Claims-Made-and-Reported Policies  8.26
        • b.  Reimbursement for Pre-Notice Defense Expenditures  8.27
      • 3.  Insurer’s Failure to Investigate; Constructive Notice  8.28
      • 4.  Excuse for Delay or Failure to Give Notice
        • a.  Under Policy Provision  8.29
        • b.  Under Judicial Decision
          • (1)  Excuse Found  8.30
          • (2)  No Excuse Found  8.31
      • 5.  Waiver and Estoppel  8.32
  • V.  PROTECTING INSURED’S INTERESTS PENDING INSURER’S RESPONSE  8.33
  • VI.  SAMPLE NOTICE LETTERS  8.34
    • A.  Form: Notice to Occurrence Insurer of “Occurrence” That Has Not Yet Resulted in Claim or Lawsuit  8.35
    • B.  Form: Notice to Occurrence Insurer of Claim or Lawsuit  8.36
    • C.  Form: Notice to Claims-Made Insurer  8.37

9

Investigating the Claim

Thomas M. Correll

Robert V. Closson

  • I.  SCOPE OF CHAPTER  9.1
  • II.  LEGAL PRINCIPLES GUIDING INVESTIGATION
    • A.  Covenant of Good Faith and Fair Dealing
      • 1.  Application to Investigation  9.2
      • 2.  Relevance of Insurer’s Conduct to Good Faith  9.3
    • B.  Unfair Insurance Practices Act (Ins C §§790–790.15)  9.4
    • C.  Insurance Information and Privacy Protection Act (Ins C §§791–791.27)
      • 1.  Summary of Act  9.5
      • 2.  Restrictions Imposed on Claims Investigation  9.6
    • D.  Common Law Tort Obligations  9.7
  • III.  COMMUNICATING WITH INSURED
    • A.  General Duty to Keep Insured Informed of Claim  9.8
    • B.  Affirmative Duty to Inform Insured That Claim Has Been Made  9.9
  • IV.  COMMUNICATING WITH CLAIMANT
    • A.  Exchanging Information  9.10
    • B.  Obtaining Information Held by Others but Controlled by Claimant; Use of Authorization  9.11
    • C.  Dealing With Claimant Insured by Same Carrier  9.12
    • D.  Making Advance Payments Pending Decision on Claim  9.13
  • V.  CONDUCTING INVESTIGATION
    • A.  Standards for Good Faith Investigation
      • 1.  Rule Requiring Proper Investigation  9.14
      • 2.  When Duty to Investigate Arises  9.15
      • 3.  Reasonable Investigation Explained  9.16
      • 4.  Unreasonable Investigation Practices  9.17
      • 5.  Effect of Insured’s Failure to Provide Information  9.18
    • B.  Liability for Specific Investigation Practices
      • 1.  Offensive or Intrusive Acts Generally  9.19
      • 2.  Risk of Using Deceit
        • a.  Deceit as Offensive or Intrusive Conduct  9.20
        • b.  Prohibition Against “Pretext Interviews”  9.21
      • 3.  Preserving Physical Evidence; Spoliation  9.22
      • 4.  Independent Adjusters; Negligent Handling of Claim  9.22A
  • VI.  DISCLOSURE OF INFORMATION ACQUIRED IN INVESTIGATION
    • A.  Immunity for Communications
      • 1.  General Immunity for Communications in Judicial Proceeding  9.23
      • 2.  Restrictions on Disclosure of Information Concerning Individuals (Ins C §791.13)  9.24
    • B.  Insurer’s Duty to Report Suspected Insurance Fraud (Insurance Frauds Prevention Act)
      • 1.  When Report Must Be Made  9.25
      • 2.  Immunity From Civil Liability for Report Made Without Malice  9.26
      • 3.  Effect of Duty to Report on Good Faith Obligations to Insured  9.27
  • VII.  CALIFORNIA CODE OF REGULATIONS UNFAIR CLAIMS SETTLEMENT PRACTICE REGULATIONS
    • A.  Scope of the Regulations  9.28
    • B.  Substantive Provisions
      • 1.  Definitions Used in the Subchapter  9.29
      • 2.  Insurer Must File and Record Documentation  9.30
      • 3.  Insurers Must Disclose Policy Provisions  9.31
      • 4.  Insurer Must Acknowledge Communications  9.32
      • 5.  Standards for Prompt Investigation of Claims  9.33
      • 6.  Standards Applicable to All Insurers  9.34
      • 7.  Standards Applicable to Automobile Insurance  9.35
      • 8.  Standards Applicable to Other Situations  9.36
      • 9.  Standards for Violations of Regulations  9.37
      • 10.  [Deleted]  9.38
    • C.  UNFAIR CLAIMS SETTLEMENT PRACTICE REGULATION DEADLINES
      • 1.  Notice of Claim Deadlines  9.39
      • 2.  Proof of Claim Deadlines  9.40
      • 3.  When Fraud Is Suspected  9.41
      • 4.  Statute of Limitations Deadline  9.42

10

Responding to Tender

Andre V. Tolpegin

  • I.  INTRODUCTION
    • A.  Scope of Chapter  10.1
    • B.  Decision-Making Process  10.2
  • II.  ACCEPTING TENDER
    • A.  When to Accept  10.3
    • B.  Effect of Acceptance  10.4
    • C.  Communicating Acceptance; Acceptance With Warning of Potential Excess Judgment  10.5
    • D.  Form: Sample Letter Accepting Tender and Warning of Potential Excess Judgment  10.6
  • III.  DENYING COVERAGE
    • A.  When Denial Is Appropriate  10.7
    • B.  Risk of Denying Coverage  10.8
    • C.  Making Good Faith Denial of Coverage
      • 1.  Standard: Decision Must Be Reasonable  10.9
      • 2.  Application of Standard
        • a.  Relevance of First Party Case Law  10.10
        • b.  Denial Based on Interpretation of Policy Language  10.11
        • c.  Denial Based on Facts  10.12
      • 3.  Obtaining Opinion of Counsel
        • a.  Coverage Counsel Defined; When to Retain  10.13
        • b.  Effect of Advice of Counsel on Determination of Good Faith  10.14
        • c.  Conduct Necessary to Establish Advice as Defense  10.15
      • 4.  Checklist: Steps to Reduce Risk of Bad Faith  10.16
    • D.  Communicating Denial
      • 1.  Form of Denial  10.17
      • 2.  Effect of Failing to State All Grounds for Denial  10.18
      • 3.  Form: Sample Letter Denying Coverage  10.19
  • IV.  DEFENDING UNDER RESERVATION OF RIGHTS
    • A.  Reservation of Rights Explained
      • 1.  Purpose and Effect  10.20
      • 2.  Effect of Failing to Reserve Rights  10.21
    • B.  Use of Reservation of Rights  10.22
    • C.  Economic Considerations in Deciding Whether to Reserve Rights  10.23
      • 1.  Waiving Coverage Defense and Defending Without Reserving Rights  10.24
      • 2.  Asserting Coverage Defense as Ground for Denial  10.25
    • D.  Making Effective Reservation of Rights
      • 1.  Form of Reservation; Nonwaiver Agreement Distinguished  10.26
      • 2.  Adequacy and Timing  10.27
      • 3.  Contents of Reservation; Informing Insured of Right to Select Defense Counsel  10.28
    • E.  Internal Segregation of Files Following Reservation of Rights  10.29
    • F.  Form: Sample Letter Reserving Right to Assert Coverage Defenses  10.30

11

Insured’s Role in Defense

Joseph W. Rogers

  • I.  INTRODUCTION  11.1
  • II.  WHEN INSURER ASSUMES DEFENSE; DUTY TO COOPERATE  11.2
    • A.  Source of Duty to Cooperate  11.3
    • B.  Relationship of Duty to Cooperate to Covenant of Good Faith and Fair Dealing  11.4
    • C.  Relationship of Duty to Cooperate to Duty to Notify Insurer  11.5
    • D.  Aspects of Duty to Cooperate  11.6
      • 1.  Statements  11.7
        • a.  If Criminal Case Pending
          • (1)  Statements Made to Insurer Privileged  11.8
          • (2)  Responding to Insurer’s Request for Statement; Paying for Criminal Defense Counsel; Deposition Testimony  11.9
        • b.  Examples of Breach  11.10
        • c.  Examples of No Breach  11.11
      • 2.  Concealment or Disappearance  11.12
      • 3.  Failure to Cooperate in Preparation for Trial or to Appear at Trial  11.13
      • 4.  Incurring Debts or Obligations, Settling Without Approval of Insurer; Insurer’s Subrogation Rights  11.14
    • E.  Effect of Insured’s Failure to Cooperate on Insurer’s Duty to Defend and Indemnify  11.15
      • 1.  Insurer’s Burden of Proof
        • a.  Substantial Prejudice
          • (1)  The Standard  11.16
          • (2)  Showing Required to Establish Prejudice  11.17
          • (3)  Comparative Fault Not Available  11.18
          • (4)  Establishing Prejudice After Withdrawing From Defense  11.19
        • b.  Due Diligence to Obtain Cooperation of Insured  11.20
          • (1)  Showing Required to Establish Due Diligence  11.21
          • (2)  Steps for Insurer to Take  11.22
          • (3)  Actions Insufficient to Establish Due Diligence  11.23
      • 2.  Waiver or Estoppel to Assert Breach  11.24
      • 3.  When and How to Establish Insured’s Breach of Duty to Cooperate
        • a.  After Judgment Against Insured in Underlying Action  11.25
        • b.  In Declaratory Relief Action While Underlying Tort Action Pending  11.26
  • III.  WHEN INSURER ASSUMES DEFENSE UNDER RESERVATION OF RIGHTS
    • A.  Effect of Reservation of Rights
      • 1.  Reflects Divergence of Interests Between Insurer and Insured  11.27
      • 2.  Does Not Suspend Parties’ Contractual Obligations  11.28
    • B.  Steps to Take in Responding to Reservation of Rights  11.29
      • 1.  Determine Whether to Object to Reservation  11.30
      • 2.  Object to Reimbursement of Defense Costs  11.31
      • 3.  Determine Whether Independent Counsel Required  11.32
      • 4.  Determine Whether to Hire Personal Counsel
        • a.  Personal Counsel Defined  11.33
          • (1)  Role as Coverage Counsel  11.34
          • (2)  Role as Counsel in Underlying Action  11.35
        • b.  Circumstances in Which Insurer Might Be Required to Pay Fees for Personal Counsel  11.36
      • 5.  Determine Whether to Reject Defense and Hire Personal Counsel to Defend  11.37
  • IV.  WHEN INSURER REFUSES TO DEFEND
    • A.  Denial of Coverage Relieves Insured of Contractual Obligations
      • 1.  No Further Duty to Notify or Cooperate With Insurer  11.38
      • 2.  Insured May Defend or Settle  11.39
    • B.  Determining How to Respond  11.40

12

Conducting the Defense

N. David Lyons

  • I.  INTRODUCTION
    • A.  Scope of Chapter  12.1
    • B.  Source of Defense Obligation in Language of Contract  12.2
    • C.  Overview of Defense Provided by Insurer
      • 1.  Formation of Tripartite Relationship Among Insured, Insurer, and Defense Counsel  12.3
      • 2.  Role Played by Each Participant
        • a.  When Interests of Insurer and Insured Align  12.4
        • b.  When Interests of Insurer and Insured Conflict  12.5
    • D.  Reimbursement Policies Distinguished  12.6
  • II.  WHEN DUTY TO DEFEND ARISES
    • A.  On Notification to Insurer  12.7
    • B.  May Include Pre-Suit Defense  12.8
  • III.  INSURER’S ROLE IN DEFENDING CLAIM
    • A.  Control of Defense  12.9
    • B.  Right to Control Affected by Reservation of Rights  12.10
    • C.  Obligation to Act in Good Faith  12.11
    • D.  Obligation to Provide Adequate Defense  12.12
    • E.  Scope of Obligation to Defend
      • 1.  Must Defend Entire Action  12.13
      • 2.  Insurer’s Right to Recover Defense Costs Allocable Solely to Defense of Claims Not Even Potentially Covered  12.14
      • 3.  No Obligation to Prosecute Cross-Complaints
        • a.  General Rule; Exceptions for Cross-Complaints for Indemnity  12.15
        • b.  Suggestions for Handling Cross-Complaints  12.16
      • 4.  No Obligation to Provide Coverage Advice or Representation  12.17
    • F.  Selection and Retention of Counsel
      • 1.  Use of Panel Counsel  12.18
      • 2.  Separate Counsel May Have to Be Retained for Insured Codefendants  12.19
    • G.  Risk of Failing to Perform Duties
      • 1.  Liability for Own Failure  12.20
      • 2.  No Purely Vicarious Liability for Defense Counsel’s Failure  12.21
      • 3.  Joint Liability With Defense Counsel  12.22
  • IV.  ROLE OF INSURER-RETAINED DEFENSE COUNSEL
    • A.  Representation of Insured and Insurer  12.23
    • B.  Communications Between Counsel and Clients
      • 1.  Communications Privileged From Discovery by Third Persons  12.24
      • 2.  No Privilege Between Insurer and Insured in Matters of Common Interest  12.25
      • 3.  Other Matters Must Be Kept Confidential  12.26
      • 4.  Practical Aspects of Communications
        • a.  Effecting Communications With Insurer  12.27
        • b.  Effecting Communications With Insured  12.28
        • c.  Obtaining Authority to Act  12.29
    • C.  Problems of Conflict in Representation
      • 1.  Prohibition Against Representing Conflicting Interests  12.30
      • 2.  When Conflict Affecting Joint Representation Arises  12.31
      • 3.  Determination of Conflict Between Insurer and Insured; Significance of CC §2860 Standards  12.32
      • 4.  Difficulty of Obtaining Consent for Actual Conflict  12.33
      • 5.  Procedure When Conflict Arises  12.34
      • 6.  Handling Specific Problems
        • a.  Coverage Disputes  12.35
        • b.  Insured’s Failure to Cooperate  12.36
        • c.  Exposure to Judgment in Excess of Policy Limits  12.37
    • D.  Consequences of Defense Counsel’s Breach of Duty
      • 1.  Potential Civil Liability to Insurer and Insured  12.38
      • 2.  Problem of Proving Damages for Breach  12.39
  • V.  TERMINATION OF OBLIGATION
    • A.  By Resolution of Claim; Obligation on Appeal  12.40
    • B.  Before Resolution of Claim
      • 1.  By Exhaustion of Policy Limit
        • a.  When Policy Expressly Provides for Termination
          • (1)  Typical Policy Language  12.41
          • (2)  Clear and Conspicuous Clause Terminating Defense Is Enforceable  12.42
          • (3)  Termination Provision Probably Unenforceable When Insurer Has Artificially Exhausted Policy Limits  12.43
        • b.  When Policy Does Not Expressly Provide for Termination  12.44
      • 2.  By Elimination of Covered Claims  12.45
    • C.  Procedure for Termination  12.46
  • VI.  APPORTIONMENT AND REIMBURSEMENT OF DEFENSE COSTS BETWEEN INSURER AND INSURED
    • A.  Reimbursement to Insured of Costs Expended Before Notice to Insurer  12.47
    • B.  Reimbursement to Insurer of Costs Expended Before Determination of Noncoverage  12.48
    • C.  Reimbursement to Insurer of Settlement Payments Made Before Determination of Noncoverage  12.48A
    • D.  Apportionment of Costs When Insured Is Partially Self-Insured or Has Gap in Coverage  12.49

13

Defending With Independent Counsel for Insured

Hon. Donald F. Miles

  • I.  INTRODUCTION; SCOPE OF CHAPTER  13.1
  • II.  DEFINITIONS  13.2
  • III.  SOURCE OF INSURED’S ENTITLEMENT TO INDEPENDENT COUNSEL
    • A.  Judicial Origin  13.3
    • B.  Codification of Right in CC §2860
      • 1.  Summary of Statute  13.4
      • 2.  Application of Statute to Policies and Claims in Existence before January 1, 1988  13.5
  • IV.  DETERMINING WHEN CONFLICT REQUIRES APPOINTMENT OF INDEPENDENT COUNSEL
    • A.  Standards for Determination
      • 1.  Statutory Guidelines for Determining Conflict  13.6
      • 2.  Independent Counsel Required When Outcome of Coverage Issue May Be Affected by Defense of Underlying Action  13.7
        • a.  Application of Rule to Intentional Conduct  13.8
        • b.  Application of Rule to Other Situations  13.9
      • 3.  Independent Counsel Not Required Solely Because of Allegation of Punitive Damages  13.10
      • 4.  Uncertain When Independent Counsel Required in Case With Possible Excess Judgment  13.11
      • 5.  Independent Counsel Not Required for Denial of Coverage  13.12
    • B.  Insurer’s Ability to Retain Control by Waiving or Resolving Coverage Issue  13.13
  • V.  INITIATING SELECTION OF INDEPENDENT COUNSEL; WAIVER
    • A.  Raising Issue of Conflict
      • 1.  By Insurer  13.14
      • 2.  By Insured  13.15
      • 3.  By Insurer-Retained Defense Counsel  13.16
      • 4.  By Third Party Claimant
        • a.  Including Allegations in Complaint  13.17
        • b.  Moving to Disqualify Insurer-Retained Counsel  13.18
    • B.  Securing Insured’s Waiver Under CC §2860  13.19
  • VI.  SELECTING INDEPENDENT COUNSEL
    • A.  Insured’s Right to Select Counsel  13.20
    • B.  Insurer’s Rights to Object to Unqualified Counsel and to Provide Policy Method for Selection  13.21
    • C.  Practical Suggestions for Selecting Counsel  13.22
  • VII.  PAYING FEES AND COSTS OF INDEPENDENT COUNSEL
    • A.  In General  13.23
    • B.  Statutory Billable Rate Under CC §2860(c)  13.24
    • C.  Methods for Resolving Fee Disputes  13.25
    • D.  Advisability of Fee Agreements
      • 1.  Between Insurer and Insured  13.26
      • 2.  Between Insured and Independent Counsel  13.27
  • VIII.  DEFENDING UNDERLYING ACTION
    • A.  Insured’s Right to Control Defense
      • 1.  Case Law and Statutory Basis  13.28
      • 2.  Limitations on Insured’s Control
        • a.  Insurer Has Statutory Rights to Participate and to Be Kept Informed
          • (1)  Rights Described  13.29
          • (2)  Effect of Disclosure Requirement on Attorney-Client Privilege  13.30
          • (3)  Resolution of Disputes Over Claim of Privilege  13.31
          • (4)  Consequences of Insured’s Breach of Obligation to Provide Information  13.32
        • b.  Insured’s Obligation to Cooperate With Insurer  13.33
    • B.  Scope of Independent Counsel’s Representation
      • 1.  Independent Counsel Represents Insured
        • a.  In Defense of Claim  13.34
        • b.  May Represent Insured’s Other Interests, Including Coverage  13.35
        • c.  Potential Liability to Insured  13.36
      • 2.  Independent Counsel Does Not Represent Insurer But Must Comply With Statutory Obligations  13.37
    • C.  Role of Independent Counsel in Conducting Defense
      • 1.  Historical Development of Role  13.38
      • 2.  Current Role: Primary Counsel  13.39
      • 3.  Representing Insured’s Interests in Settlement  13.40
    • D.  Participation by Insurer-Retained Counsel
      • 1.  Right to Participate  13.41
      • 2.  Participation as Defense Counsel  13.42
      • 3.  Participation as Coverage Counsel
        • a.  Role Described  13.43
        • b.  Duties to Insurer  13.44
        • c.  Duties to Insured  13.45

14

General Insurance Considerations in Settlement

Lane J. Ashley

  • I.  OVERVIEW OF SETTLEMENT
    • A.  Scope of Chapter  14.1
    • B.  Insurer’s Role in Settlement
      • 1.  Policy Usually Grants Insurer Control; Exceptions  14.2
      • 2.  Insurer Must Act in Good Faith to Protect Insured’s Interests
        • a.  Obligation to Accept Reasonable Offer Within Policy Limits  14.3
        • b.  Obligation to Protect Insured From Other Harm  14.4
      • 3.  Insurer Must Comply With Unfair Insurance Practices Act  14.5
    • C.  Insured’s Role in Settlement
      • 1.  Policy Provisions
        • a.  Insured Must Cooperate With Insurer in Securing Settlement  14.6
        • b.  Insured May Have Right to Withhold Consent to Settlement  14.7
        • c.  Insured Cannot Settle With Claimant  14.8
      • 2.  Insured Has Obligation to Deal With Insurer in Good Faith  14.9
      • 3.  Practical Suggestions for Insured’s Participation in Settlement  14.10
    • D.  Claimant’s Rights and Obligations in Settlement  14.11
  • II.  CHECKLIST OF INSURER’S GOOD FAITH SETTLEMENT PRACTICES  14.12
  • III.  INITIATING SETTLEMENT
    • A.  Initiation by Claimant  14.13
      • 1.  Formulating Settlement Position
        • a.  Factors to Consider  14.14
        • b.  Setting Range  14.15
        • c.  Determining Opening Offer  14.16
      • 2.  Obtaining Authorization for Settlement
        • a.  From Claimant  14.17
        • b.  From Claimant’s Own Insurers  14.18
      • 3.  Timing of Offer  14.19
      • 4.  Making Offer
        • a.  Procedure  14.20
        • b.  Contents of Offer  14.21
      • 5.  Considerations in Initiating Policy Limit Demand
        • a.  Deciding Whether to Make Demand  14.22
        • b.  Timing of Demand  14.23
        • c.  Making Demand; Response Time  14.24
    • B.  Initiation by Insurer
      • 1.  Whether and When Insurer Is Obligated to Initiate Settlement  14.25
      • 2.  Why Insurer Might Initiate Settlement
        • a.  In General  14.26
        • b.  Costs Under CCP §998  14.27
      • 3.  Initiation by Tendering Policy Limits  14.28
  • IV.  INSURER’S RESPONSE TO OFFER WITHIN POLICY LIMITS
    • A.  Guiding Principles  14.29
    • B.  Good Faith Procedure
      • 1.  Importance of Conduct to Good Faith Determination  14.30
      • 2.  Steps to Take
        • a.  Conduct Full and Fair Investigation  14.31
        • b.  Communicate With Insured; Inform Insured of Potential for Excess Judgment  14.32
        • c.  Obtain Advice From Claims Personnel and Defense Counsel  14.33
        • d.  Delegate Decision to Qualified Person  14.34
    • C.  Good Faith Evaluation of Offer
      • 1.  Basic Obligation: Insurer Must Accept Reasonable Offer When Substantial Likelihood of Excess Judgment  14.35
      • 2.  Any Offer May Trigger Obligation to Attempt Settlement  14.36
      • 3.  Initial Considerations: Problems With Offer
        • a.  Insufficient Time to Respond
          • (1)  Nature of Problem  14.37
          • (2)  Practical Advice  14.38
        • b.  Offers That Expose Insured to Additional Liability or Other Economic Harm
          • (1)  Nature of Problem  14.39
          • (2)  Need to Follow Up on Offer  14.40
      • 4.  Determining Risk of Excess Judgment
        • a.  Factors on Which to Base Response
          • (1)  All Factors Bearing on Liability and Damages  14.41
          • (2)  Information Available at Time of Response  14.42
          • (3)  Information Favorable to Claimant  14.43
        • b.  Factors on Which Response Should Not Be Based
          • (1)  Insurer’s Own Interests; Speculation That Judgment Will Be Lower Than Offer  14.44
          • (2)  Insurer’s Belief in Noncoverage  14.45
          • (3)  Fact That Insured Will Not Actually Pay Excess Judgment; Exception for Insolvent Estate  14.46
        • c.  Applications
          • (1)  Mathematical Approach  14.47
          • (2)  Balancing Facts  14.48
    • D.  Counteroffer and Continuing Negotiations  14.49
    • E.  Acceptance After Initial Refusal; Late Acceptance  14.50
  • V.  OPTIONS WHEN INSURER REFUSES TO ACCEPT SETTLEMENT WITHIN POLICY LIMITS
    • A.  Settlement Between Insured and Claimant
      • 1.  Conflicting Case Law on Whether Insured Can Settle With Claimant  14.51
      • 2.  Possible Solution: Settle With Insurer’s Consent  14.52
    • B.  Assignment and Covenant Not to Execute
      • 1.  General Use; Limited Assignability of Legal Malpractice Claim  14.53
      • 2.  Effect of Insured’s Bankruptcy  14.54
      • 3.  Assignable Rights; Alternative of Lien on Proceeds of Bad Faith Action  14.55
      • 4.  Effect of Covenant Not to Execute  14.56
      • 5.  Factors Claimant Should Consider in Entering Into Assignment  14.57
      • 6.  When to Make Assignment
        • a.  Options  14.58
        • b.  Considerations in Securing Underlying Judgment When Assignment Taken First  14.59
      • 7.  Formal Requirements  14.60
  • VI.  FORMALIZING SETTLEMENT
    • A.  Release
      • 1.  Generally  14.61
      • 2.  Release of Insurer  14.62
    • B.  Written Notice to Claimant  14.62A
    • C.  Dismissal  14.63
  • VII.  SETTLEMENT FORMS
    • A.  Form: Sample Policy Limit Demand  14.64
    • B.  Form: Sample Assignment and Covenant Not to Execute  14.65

15

Special Considerations in Settlement

Lane J. Ashley

  • I.  SCOPE OF CHAPTER  15.1
  • II.  SETTLING AFTER INSURER REFUSES TO DEFEND
    • A.  General Rule: Insured Can Settle and Sue Insurer  15.2
    • B.  Settling Claim
      • 1.  Considerations in Initiating Negotiations  15.3
      • 2.  Fixing Terms
        • a.  Settlement Must Be Reasonable  15.4
        • b.  No Fraud or Collusion  15.5
      • 3.  Involving Insurer in Settlement
        • a.  Providing Notice  15.6
        • b.  Making Policy Limit Demand  15.7
      • 4.  Assignment and Covenant Not to Execute  15.8
      • 5.  Choice of Settlement or Judgment
        • a.  Case Law Favors Judgment  15.9
        • b.  Stipulated Judgments of Questionable Effectiveness  15.9A
  • III.  SETTLING WHEN INSURER HAS RESERVED RIGHTS
    • A.  Nature of Problem; Risks of Not Settling  15.10
    • B.  Insurer’s Obligations When Defending Under Reservation of Rights  15.11
    • C.  Desirability of Early Coverage Determination
      • 1.  To Insurer; Use of Declaratory Relief  15.12
      • 2.  To Insured and Claimant  15.13
    • D.  Settlement Options
      • 1.  Solvent Insured
        • a.  Coverage Settlement  15.14
        • b.  Settlement With Contribution by Insured  15.15
        • c.  Settlement by Insurer With Reservation of Rights
          • (1)  By Nonwaiver Agreement or Unilateral Reservation of Rights  15.16
          • (2)  With Court Approval  15.17
      • 2.  Insolvent Insured: Settle or Refuse to Settle  15.18
  • IV.  SETTLING WHEN INSURED HAS UNINSURED EXPOSURE
    • A.  Self-Insured Retention (SIR)  15.19
    • B.  Gap in Coverage; Uninsured Damages
      • 1.  Insured’s Responsibility  15.20
      • 2.  Insurer’s Responsibility  15.21
    • C.  Demand in Excess of Policy Limits  15.22
  • V.  SETTLING AFTER EXCESS VERDICT RENDERED
    • A.  Offer Within Policy Limits After Excess Judgment Entered Is Reasonable as Matter of Law  15.23
    • B.  Steps for Insurer to Mitigate Damages
      • 1.  Initiating Settlement  15.24
      • 2.  Pay, or Guarantee Payment of, Excess Judgment  15.25
  • VI.  SETTLING MULTIPLE CLAIMS EXCEEDING POLICY LIMITS  15.26
  • VII.  SETTLING CLAIMS AGAINST MULTIPLE INSUREDS  15.27

16

Claims Involving Multiple Insurers and Overlapping Coverage

Scott Michael Kolod

  • I.  OVERVIEW
    • A.  Scope of Chapter  16.1
    • B.  Situations Involving Overlapping Coverage  16.2
      • 1.  Different Types of Insurance Policies Covering Same Risk  16.3
      • 2.  Continuing Loss Cases  16.4
      • 3.  Additional Insured Cases  16.5
  • II.  PRINCIPLES FOR ESTABLISHING RECIPROCAL RIGHTS AND OBLIGATIONS AMONG INSURERS
    • A.  Guiding Principles  16.6
    • B.  “Other Insurance” Clauses  16.7
    • C.  Statutory Allocation; Allocation Among Automobile Insurers  16.8
    • D.  Indemnity Rights Between Insureds
      • 1.  Right Defined  16.9
      • 2.  Contractual Rights  16.10
      • 3.  Equitable Rights  16.11
  • III.  APPLYING “OTHER INSURANCE” CLAUSES
    • A.  Application Described  16.12
    • B.  Types of Clauses
      • 1.  Prorata Clauses  16.13
      • 2.  Excess Clauses  16.14
      • 3.  Escape Clauses  16.15
      • 4.  Composite Clauses  16.16
    • C.  General Rules for Determining Interaction Between Clauses
      • 1.  Prorata/Prorata Clauses  16.17
      • 2.  Prorata/Excess Clauses  16.18
      • 3.  Prorata/Escape Clauses  16.19
      • 4.  Excess/Excess Clauses  16.20
      • 5.  Escape/Escape Clauses  16.21
      • 6.  Excess/Escape Clauses  16.22
      • 7.  Narrowly Drafted Excess Clauses  16.22A
      • 8.  Chart: Interaction of “Other Insurance” Clauses  16.23
  • IV.  METHODS OF APPORTIONING INDEMNIFICATION
    • A.  Factors Affecting Choice of Formula  16.24
    • B.  Proration by Policy Limits  16.25
    • C.  Contribution by Equal Shares  16.26
    • D.  Proration of Continuing Loss  16.27
  • V.  OBLIGATION TO DEFEND AMONG MULTIPLE INSURERS
    • A.  Common Obligation to Defend Among Primary Insurers  16.28
    • B.  Apportionment of Defense Costs Among Insurers  16.29
    • C.  Conducting Defense
      • 1.  Nature of Problem  16.30
      • 2.  Establishing Proration Formula; Paying Counsel  16.31
      • 3.  Selecting Defense Counsel; Controlling Defense  16.32
  • VI.  SETTLING CLAIM INVOLVING MULTIPLE INSURERS
    • A.  Incentives to Settle; Source of Disputes Among Insurers  16.33
    • B.  Resolving Settlement Problems
      • 1.  When All Insurers Defend
        • a.  Insurers’ Rights and Obligations  16.34
        • b.  Practical Resolutions to Disputes  16.35
      • 2.  Equitable Contribution When One Insurer Refuses to Defend  16.36
  • VII.  CHECKLIST FOR RESOLVING ALLOCATION OR PRORATION  16.37

17

Claims Involving Excess Insurance

Kent Keller

Steven H. Weinstein

Larry M. Golub

  • I.  INTRODUCTION  17.1
  • II.  EXCESS INSURANCE DEFINED
    • A.  Excess Insurance Distinguished From Primary Insurance  17.2
    • B.  Types of Excess Policies
      • 1.  Following Form Excess and Other Specific Excess Policies  17.3
      • 2.  Excess by Operation of Law or by Other Insurance Clauses  17.4
    • C.  Comparison of Excess and Umbrella Policies  17.5
    • D.  Excess Policies Differ From Standard Form Policies  17.6
    • E.  Impact of Self-Insured Retention (SIR) or Deductible on Excess Insurance  17.7
  • III.  EXCESS INSURER’S DUTY TO INDEMNIFY AND DEFEND  17.8
    • A.  Duty to Indemnify  17.9
    • B.  Duty to Defend and to Pay Defense Costs  17.10
      • 1.  Triggered by Exhaustion of Primary Policy Limits  17.11
        • a.  No Exhaustion If Only a Possibility That Primary Limits Will Be Exceeded  17.12
        • b.  No Exhaustion Based Solely on Tender of Defense by Primary Insurer  17.13
        • c.  When Case Involves Multiple Policies or Policy Periods  17.14
      • 2.  When Duty to Defend Not Explicitly Excluded by Policy  17.15
      • 3.  Defense Can Cease Once Policy Limits Have Been Paid  17.16
    • C.  Effect of Primary Insurer’s Insolvency
      • 1.  May Impose Duty to “Drop Down” and Provide Coverage  17.17
      • 2.  No Duty If Policy Language Explicitly Excludes It  17.18
      • 3.  When Policy Contains Ambiguous Language  17.19
        • a.  Interpretation of “Amount Recoverable”  17.20
        • b.  Interpretation of “Exhaustion of Underlying Insurance”  17.21
        • c.  Interpretation of the Term “Covered”  17.21A
        • d.  Interpretation of “Maintenance of Underlying Insurance” and “Other Insurance” Clauses  17.22
        • e.  Exception When Insured Is Sophisticated Business Entity  17.23
      • 4.  Resolution of Issue May Depend on Differences Between Primary and Excess Policies  17.24
    • D.  Effect of Insured’s Breach of “Maintenance Clause”  17.25
    • E.  Effect of Primary Insurer’s Refusal to Defend
      • 1.  Circumstances in Which Insurer Has No Duty to Defend  17.26
      • 2.  Circumstances in Which Duty to Defend Unclear  17.27
    • F.  Choice of Law Considerations Under Excess and Umbrella Policies  17.28
  • IV.  NOTIFYING EXCESS INSURER OF UNDERLYING ACTION  17.29
    • A.  Notice to Excess and Umbrella Insurers
      • 1.  Notice by Insured  17.30
      • 2.  Notice by Primary Insurer  17.31
    • B.  Sufficiency of Notice  17.32
  • V.  EXCESS INSURER’S RESPONSE TO NOTICE OF CLAIM  17.33
    • A.  If Coverage Not at Issue  17.34
    • B.  Reservation of Rights When Question of Coverage Exists
      • 1.  No Reservation of Rights Necessary Until Primary Limits Exhausted  17.35
      • 2.  Exceptions When Reservation of Rights May Be Desired Before Exhaustion  17.36
  • VI.  SETTLEMENT ISSUES INVOLVING EXCESS COVERAGE  17.37
    • A.  Insured’s Obligations to Excess Insurer
      • 1.  Duty of Good Faith and Fair Dealing  17.38
      • 2.  Limitation on Insured’s Duty of Good Faith  17.39
    • B.  Excess Insurer’s Obligation to Insured
      • 1.  General Duty to Settle Claim Within Excess Policy Limits  17.40
      • 2.  When Primary Insurer Is Not Making Reasonable Attempt to Settle  17.41
    • C.  Impact of Equitable Obligations Between Primary and Excess Insurers  17.42
      • 1.  Equitable Subrogation Theory
        • a.  Theory Explained  17.43
        • b.  Theory Applied to Allow Primary Insurer to Settle Claim Without Excess Insurer’s Consent  17.43A
      • 2.  Direct Duty Theory
        • a.  Viability of Theory in California Is Unclear  17.44
        • b.  Direct Duty Theory Has Been Applied by Federal and Out-of-State Courts  17.45
      • 3.  Other Available Theories  17.46
    • D.  Settling Requires Cooperation Among Insurers  17.47
    • E.  Excess Insurer’s Right to Subrogation Proceeds  17.48
    • F.  Proration Between Excess Insurers  17.49

18

Claims Involving Insurer Insolvency

Jonathan F. Bank

Donald W. McCormick

Patricia Winters

  • I.  OVERVIEW  18.1
  • II.  STATUTORY SCHEME
    • A.  Reports and Examinations  18.2
    • B.  Conservation Orders
      • 1.  Purpose and Effect  18.3
      • 2.  Anticipating Insolvency of Insurer Under Conservation Order  18.4
    • C.  Liquidation Orders  18.5
    • D.  California Insurance Guarantee Association (CIGA)  18.6
  • III.  INITIAL PROCEEDINGS AFTER ENTRY OF LIQUIDATION ORDER
    • A.  Notice to Interested Parties
      • 1.  Requirements and Procedures  18.7
      • 2.  Form: Sample Notice  18.8
    • B.  Filing Proof of Claim  18.9
      • 1.  Who Should File  18.10
      • 2.  What and Where to File  18.11
      • 3.  Time for Filing  18.12
      • 4.  Form: Proof of Claim  18.13
    • C.  Transferring Claims to CIGA  18.14
    • D.  Claimant Residing or Insurer Domiciled Outside California  18.15
  • IV.  CIGA AND HANDLING OF CLAIMS AFTER ENTRY OF LIQUIDATION ORDER
    • A.  Determining Whether Claim Covered by CIGA
      • 1.  Statutory Provisions  18.16
      • 2.  Acceptance or Rejection of Claim by CIGA  18.17
      • 3.  Responding to Rejection of Claim by CIGA  18.18
    • B.  Dealing With CIGA on Covered Claim
      • 1.  Defense of Insured  18.19
      • 2.  Claims-Handling Procedures  18.20
      • 3.  Settlement of Claim With CIGA; Immunity From Tort Liability  18.21
    • C.  Exploring Remedies When Claim Not Covered by CIGA  18.22

19

Overview of Claim-Related Actions

Philip L. Pillsbury, Jr.

  • I.  SCOPE OF CHAPTER  19.1
  • II.  ACTIONS TO ESTABLISH COVERAGE OR TERMS OF PERFORMANCE ON POLICY
    • A.  Declaratory Relief  19.2
    • B.  Rescission  19.3
    • C.  Reformation  19.4
    • D.  Interpleader  19.5
    • E.  Claimant’s Direct Action for Recovery on Policy  19.6
  • III.  INSURER’S ACTIONS TO SHIFT LOSS
    • A.  Contribution  19.7
    • B.  Indemnity  19.8
    • C.  Subrogation  19.9
    • D.  Actions Against Agent and Brokers  19.10
    • E.  Actions Against Attorneys  19.11
  • IV.  INSURED’S AND CLAIMANT’S ACTIONS FOR DAMAGES  19.12
    • A.  Actions by Insured
      • 1.  Breach of Contract  19.13
      • 2.  Breach of Implied Covenant of Good Faith and Fair Dealing  19.14
      • 3.  Breach of Fiduciary Duty  19.15
      • 4.  Negligent Performance of Defense Obligations  19.16
      • 5.  Broker Malpractice  19.17
    • B.  Actions by Either Insured or Claimant
      • 1.  Common Law Torts
        • a.  Infliction of Emotional Distress  19.18
        • b.  Fraud and Deceit  19.19
        • c.  Other Common Law Actions  19.20
      • 2.  Former Action for Breach of Ins C §790.03(h)  19.21
  • V.  COLLATERAL ESTOPPEL EFFECT OF DETERMINATIONS IN CLAIM-RELATED ACTIONS
    • A.  Nature of Problem  19.22
    • B.  Identical-Issue Requirement  19.23
      • 1.  Identicalness of Liability and Coverage Issues  19.24
      • 2.  Identicalness of Intent in Previous Criminal Proceeding and Intent in Coverage Action  19.25
    • C.  “Necessarily Decided” Requirement  19.25A
    • D.  Final Judgment on Merits  19.26
    • E.  Privity
      • 1.  Defined  19.27
      • 2.  Application to Insured and Claimant  19.28
    • F.  Binding Effect of Determinations in Underlying Action on Insurer
      • 1.  Rule  19.29
      • 2.  Stipulated Judgments  19.29A
      • 3.  Good Faith Determinations of Settlement  19.29B
      • 4.  Opportunity to Defend  19.30
      • 5.  Effect of Reservation of Rights  19.31

20

Actions for Declaratory Relief

Julia A. Molander

Fulton M. Smith III

  • I.  OVERVIEW
    • A.  Nature of Action; Other Actions Compared  20.1
    • B.  Statutory Bases
      • 1.  State (CCP §§1060–1062.5)  20.2
      • 2.  Federal (28 USC §§2201–2202; Fed R Civ P 57)  20.3
  • II.  USE OF ACTION TO RESOLVE LIABILITY INSURANCE DISPUTES
    • A.  In General  20.4
    • B.  General Limitations on Use
      • 1.  Use Limited in Determining Breach of Duty Arising From Conduct in Underlying Action  20.5
      • 2.  Inappropriate When Only Remaining Dispute Is Monetary  20.6
    • C.  Use to Resolve Questions of Policy Interpretation  20.7
    • D.  Use to Resolve Questions of Fact
      • 1.  In General; Use to Resolve Facts Not at Issue in Underlying Action  20.8
      • 2.  Use to Resolve Facts at Issue in Underlying Action
        • a.  In General; When Interests of Insurer and Insured Are Aligned  20.9
        • b.  When Interests of Insurer and Insured Are Opposed  20.10
    • E.  Advantages and Disadvantages of Use
      • 1.  To Insurer
        • a.  Speed of Determination; Reducing Defense Costs and Potential for Damage  20.11
        • b.  Expense of Action; Availability of Other Remedies  20.12
        • c.  Tort Exposure to Insured and Others  20.13
      • 2.  To Insured  20.14
  • III.  BRINGING ACTION
    • A.  Choosing Proper Forum
      • 1.  Considerations in Choosing Between State and Federal Court  20.15
      • 2.  State Court Jurisdiction  20.16
      • 3.  Federal Court Jurisdiction in General; Diversity Jurisdiction  20.17
        • a.  Insurer’s Citizenship  20.18
        • b.  Amount in Controversy  20.19
        • c.  Federal Abstention  20.20
      • 4.  Federal Question Jurisdiction  20.21
    • B.  Venue
      • 1.  State Venue  20.22
      • 2.  Federal Venue  20.23
    • C.  Identifying Proper Parties
      • 1.  Plaintiffs  20.24
      • 2.  Defendants  20.25
    • D.  Pleading Claim for Declaratory Relief
      • 1.  In General; Statutory Elements  20.26
      • 2.  Existence and Terms of Contract  20.27
      • 3.  Actual Controversy  20.28
      • 4.  Interest in Policy; Sample Clauses  20.29
      • 5.  Declaration of Rights; Other Relief  20.30
      • 6.  Form: Sample Complaint for Declaratory Relief by Insurer  20.31
  • IV.  RESPONDING TO COMPLAINT
    • A.  Form of Response
      • 1.  Stay of Action  20.32
      • 2.  Demurrer
        • a.  Use Generally  20.33
        • b.  Use to Invoke Court’s Discretion Not to Decide Cases  20.34
      • 3.  Answer  20.35
      • 4.  Cross-Complaint  20.36
    • B.  Defenses
      • 1.  In General  20.37
      • 2.  Statute of Limitations; Laches  20.38
      • 3.  “No Action” Provision Limiting Time for Bringing Suit  20.39
  • V.  PRETRIAL PROCEEDINGS
    • A.  Discovery  20.40
    • B.  Summary Judgment  20.41
  • VI.  TRIAL
    • A.  Coordinating Declaratory Relief With Underlying Action
      • 1.  Nature of Problem  20.42
      • 2.  Joinder, Consolidation, and Severance  20.43
      • 3.  Timing of Trials
        • a.  Statutory Precedence of Declaratory Relief Actions  20.44
        • b.  Court’s Discretion to Set Time for Trial  20.45
    • B.  Right to Jury Trial  20.46
    • C.  Burden and Order of Proof  20.47
    • D.  Judgment
      • 1.  Judgment Described  20.48
      • 2.  Right to Attorney Fees  20.49

21

Rescission and Reformation

Julia A. Molander

Fulton M. Smith III

  • I.  INTRODUCTION  21.1
  • II.  ACTION FOR RESCISSION
    • A.  Use of Action  21.2
    • B.  Grounds for Rescission  21.3
      • 1.  Fraud  21.4
      • 2.  Concealment
        • a.  Insurer’s Right to Rescind  21.5
        • b.  Limitations on Insurer’s Right to Rescind for Concealment
          • (1)  Policy Language  21.6
          • (2)  Insured’s Failure to Appreciate Significance of Information  21.7
          • (3)  Ambiguity in the Application   21.7A
      • 3.  Breach of Warranty
        • a.  Nature of Warranties  21.8
        • b.  Materiality Requirement  21.9
    • C.  Procedural Requirements for Rescission
      • 1.  Notice  21.10
      • 2.  Restoration of Consideration or Benefits  21.11
      • 3.  Timeliness  21.12
    • D.  Pleading Claim for Rescission
      • 1.  Necessary Elements; Combining With Other Causes of Action  21.13
      • 2.  Proper Parties
        • a.  Insurer and Insured; Additional Insured  21.14
        • b.  Agents and Brokers  21.15
        • c.  Third Party Claimant  21.16
      • 3.  Forum and Venue  21.17
      • 4.  Pleading Compliance With Procedural Requirements  21.18
      • 5.  Materiality  21.19
        • a.  Insurer Must Prove That Misrepresented or Concealed Information, If Known, Would Have Affected Its Decision
          • (1)  Tests for Determining Whether Decision to Insure Would Have Been Affected  21.20
          • (2)  Evidence of Materiality  21.21
        • b.  Misrepresented or Concealed Information Need Not Have Contributed to Insured’s Loss  21.22
      • 6.  Form: Sample Complaint for Rescission  21.23
    • E.  Responding to Complaint
      • 1.  Form of Response  21.24
      • 2.  Affirmative Defenses
        • a.  Statute of Limitations
          • (1)  In General  21.25
          • (2)  Two-Year Incontestability Period  21.25A
        • b.  Prior Action on Contract  21.26
        • c.  Waiver  21.27
        • d.  Failure to Investigate  21.28
          • (1)  Insurer Has Duty to Investigate If It Knows of Insured’s Misrepresentation  21.29
          • (2)  Automobile Insurer Has Duty to Third Parties to Investigate  21.30
    • F.  Pretrial Procedures
      • 1.  Discovery
        • a.  Investigation  21.31
        • b.  Formal Discovery
          • (1)  By Insurer  21.32
          • (2)  By Insured  21.33
      • 2.  Summary Judgment  21.34
    • G.  Trial
      • 1.  Judge or Jury  21.35
      • 2.  Burden of Proof  21.36
    • H.  Bad Faith Issues Raised by Rescission  21.37
    • I.  Additional and Alternative Remedies to Rescission  21.38
      • 1.  Cancellation  21.39
      • 2.  Damages  21.40
      • 3.  Reformation  21.41
  • III.  ACTION FOR REFORMATION
    • A.  Nature of Action  21.42
    • B.  Use of Action  21.43
    • C.  Pleading Claim for Reformation  21.44
      • 1.  Parties
        • a.  Insurer and Insured  21.45
        • b.  Third Parties
          • (1)  As Plaintiff  21.46
          • (2)  As Defendant  21.47
      • 2.  Grounds for Reformation
        • a.  Mutual Mistake  21.48
        • b.  Unilateral Mistake  21.49
        • c.  Fraud or Misrepresentation  21.50
      • 3.  Form: Sample Complaint for Reformation by Insurer  21.51
    • D.  Proving Reformation
      • 1.  Clear and Convincing Evidence  21.52
      • 2.  Admissibility of Parol Evidence  21.53
      • 3.  Court Cannot Remake Contract  21.54
    • E.  Defenses to Reformation
      • 1.  Timeliness  21.55
      • 2.  Prejudice to Third Parties’ Rights  21.56
      • 3.  Negligent Failure to Read Policy  21.57
      • 4.  Lack of Consideration  21.58

22

Interpleader

J. Alan Frederick

  • I.  INTRODUCTION
    • A.  Interpleader Described  22.1
    • B.  Use in Resolving Liability Insurance Claims  22.2
    • C.  Traditional Requirements Eliminated  22.3
    • D.  Statutory Features
      • 1.  Ability to Join Other Defendants  22.4
      • 2.  Attorney Fees and Costs  22.5
      • 3.  Staying Other Proceedings  22.6
    • E.  Two-Stage Procedure  22.7
      • 1.  Insurer’s Right to Interplead  22.8
      • 2.  Litigation Between Claimants  22.9
    • F.  Other Procedures Compared
      • 1.  Declaratory Relief  22.10
      • 2.  Deposit in Court  22.11
      • 3.  Consolidation  22.12
      • 4.  Contractual Indemnity  22.13
      • 5.  Alternative Dispute Resolution; Settlement Conferences  22.14
  • II.  INSURER’S PROCEDURES
    • A.  Tactical Considerations
      • 1.  Choosing State or Federal Jurisdiction; Venue  22.15
      • 2.  Effect of Insurer’s Deposit of Policy Proceeds on Duty to Defend  22.16
      • 3.  Possibility of Cross-Complaint Against Insurer  22.17
    • B.  Meeting Threshold Requirements
      • 1.  Showing Double Vexation  22.18
      • 2.  Jurisdiction
        • a.  Over State Interpleader Suits  22.19
        • b.  Over Claimants  22.20
    • C.  Procedures When Insurer Is Plaintiff in Interpleader; Complaint in Interpleader  22.20A
    • D.  Alternative Procedures When Insurer Is Defendant in Pending Action
      • 1.  Alternatives Described; Relative Advantages and Disadvantages  22.21
      • 2.  Motion for Discharge and Substitution or for Dismissal  22.22
        • a.  Timing of Motion  22.23
        • b.  Drafting Moving Papers  22.24
      • 3.  Cross-Complaint  22.25
      • 4.  Filing a Separate Action  22.26
    • E.  Procedures When Insurer Is Plaintiff in Interpleader; Complaint in Interpleader [Deleted]  22.27
  • III.  CLAIMANTS’ PROCEDURES
    • A.  Tactical Considerations  22.28
    • B.  Effect of Failure to Object to Stakeholder’s Discharge  22.29
    • C.  Available Responsive Procedures  22.30
    • D.  Defenses to Interpleader  22.31
    • E.  Cross-Complaint Against Insurer  22.32
    • F.  Cross-Complaints Against Other Claimants  22.33
  • IV.  TRIAL
    • A.  First Stage  22.34
    • B.  Second Stage
      • 1.  Right to Jury Trial  22.35
      • 2.  Trial Involving Multiple Issues  22.36
      • 3.  Trial Between Conflicting Claimants  22.37
  • V.  SAMPLE FORMS
    • A.  Form: Notice of Motion for Order for Discharge and Substitution or Dismissal  22.38
    • B.  Form: Declaration Supporting Motion for Order of Discharge and Substitution or Dismissal  22.39
    • C.  Form: Order Discharging Defendant and Substituting Claimant as Defendant  22.40
    • D.  Form: Complaint in Interpleader  22.41
    • E.  Form: Interlocutory Order in Interpleader by Cross-Complaint  22.42

23

Contribution, Subrogation, and Indemnity

Dennis Gildea

  • I.  INTRODUCTION
    • A.  Scope of Chapter  23.1
    • B.  Overview of Remedies
      • 1.  Contribution  23.2
      • 2.  Subrogation  23.3
      • 3.  Indemnity  23.4
      • 4.  Remedies Compared  23.5
    • C.  Necessity of Establishing Basis for Allocating Loss  23.6
    • D.  Limitations on Use for Claims Involving Insolvent Insurer  23.7
    • E.  Actions as Equitable Remedies; Importance of Avoiding Inequitable Conduct  23.8
    • F.  Developing Comprehensive Approach to Litigation  23.9
  • II.  CONTRIBUTION AMONG INSURERS
    • A.  Use of Action
      • 1.  To Recover From Other Insurer  23.10
      • 2.  Contribution to Recover From Joint Tortfeasor Distinguished  23.11
    • B.  Pleading Cause of Action
      • 1.  Necessary Elements  23.12
      • 2.  Burden of Proof  23.12A
      • 3.  Plaintiff’s Legal Obligation  23.13
      • 4.  Defendant’s Common Obligation  23.14
      • 5.  Payment in Excess of Fair Share
        • a.  Actual Payment Required  23.15
        • b.  Effect of Payment Inconsistent With Insurer’s “Other Insurance Clause”  23.16
    • C.  Defenses
      • 1.  Negation of Element of Action  23.17
      • 2.  Insured’s Breach of Policy Conditions as Defense  23.18
      • 3.  Equitable Defenses  23.19
    • D.  Relief Available  23.20
  • III.  SUBROGATION
    • A.  Use of Action
      • 1.  In General  23.21
      • 2.  Limitations on Use Against Own Insured  23.22
      • 3.  Excess Insurer’s Right to Subrogation Proceeds  23.22A
      • 4.  Subrogation Right When Insurer Not Part of Underlying Action  23.22B
    • B.  Source of Right  23.23
    • C.  Assignment Compared  23.24
    • D.  Partial Subrogation
      • 1.  Necessity of Joining Insured and Insurer on Partial Subrogation  23.25
      • 2.  Priority When Recovery Insufficient to Compensate for Full Loss  23.26
    • E.  Initiating Action
      • 1.  Limitation of Time for Bringing Action  23.27
      • 2.  Action Filed in Name of Insurer as Real Party in Interest  23.28
    • F.  Pleading Cause of Action
      • 1.  Necessary Elements  23.29
      • 2.  Insured’s Right to Recover for Loss  23.30
      • 3.  Defendant’s Liability for Same Loss  23.31
      • 4.  Payment by Plaintiff  23.32
      • 5.  Assignability of Claim  23.33
      • 6.  Causal Relationship Between Loss and Wrong  23.34
      • 7.  Superior Equities  23.35
      • 8.  Insurer’s Damages in Stated Sum, Not Voluntary or Unreasonable  23.36
    • G.  Defenses to Subrogation
      • 1.  All Defenses Assertable Against Insured  23.37
      • 2.  Defenses Assertable Against Insurer  23.38
  • IV.  FORM: SAMPLE COMPLAINT FOR CONTRIBUTION, SUBROGATION, AND INDEMNITY  23.39

24

General Principles of Contract and Bad Faith Actions

Alexander F. Stuart

Bradley Ashley Bening

  • I.  INTRODUCTION
    • A.  Scope of Chapter  24.1
    • B.  Use of Actions by Insured
      • 1.  Breach of Contract  24.2
      • 2.  Breach of Implied Covenant of Good Faith and Fair Dealing  24.3
    • C.  Insurer’s Action for Breach of Contract or Comparative Bad Faith  24.4
  • II.  PERSONS WHO CAN BRING ACTIONS
    • A.  In General; Holder of Contractual Right  24.5
    • B.  Joint Insured  24.6
    • C.  Insured’s Successors in Interests
      • 1.  Persons Who Can Succeed to Insured’s Right; Effect of Transfer  24.7
      • 2.  Transfer Limited to Pecuniary Damages; Exception for Estate  24.8
      • 3.  All Holders of Right Must Join as Plaintiffs to Avoid Splitting Cause of Action  24.9
  • III.  PERSONS WHO CAN BE SUED
    • A.  In Action for Breach of Contract  24.10
    • B.  In Action for Bad Faith
      • 1.  Insurer Is Proper Defendant  24.11
      • 2.  Insurer’s Agents and Employees
        • a.  Cannot Be Sued for Bad Faith  24.12
        • b.  Insurer’s Liability for Acts of Independent Agent  24.13
      • 3.  Defense Counsel Can Be Sued for Conspiracy to Commit Bad Faith  24.14
  • IV.  LIMITATION OF ACTIONS; TIME FOR BRINGING SUIT
    • A.  Action on Contract
      • 1.  Written Policy  24.15
      • 2.  Oral Policy  24.16
    • B.  Action for Breach of Covenant of Good Faith and Fair Dealing
      • 1.  Plaintiff May Elect Contract or Tort Period; Effect of Election of Contract Period  24.17
      • 2.  Time Within Which Tort Action Must Be Brought  24.18
    • C.  When Cause of Action Accrues  24.19
    • D.  Effect of Contractual Provisions Defining Time Within Which Suit Can Be Brought
      • 1.  Clause Limiting Time for Bringing Action  24.20
      • 2.  Clause Prohibiting Suit Before Judgment or Settlement of Underlying Action  24.21
    • E.  Estoppel to Assert Statute of Limitations  24.22
  • V.  PLEADING AND PROVING BREACH OF CONTRACT
    • A.  Essential Elements  24.23
    • B.  Waiver or Estoppel Must Be Specially Pleaded  24.24
  • VI.  PLEADING AND PROVING BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING
    • A.  Overview  24.25
    • B.  What Constitutes Duty
      • 1.  Existence of Contract  24.26
      • 2.  Existence of Coverage  24.27
      • 3.  Nature of Duty  24.28
      • 4.  Possible Duty to Protect Insured From Collateral Harm  24.29
    • C.  Breach of Duty
      • 1.  Conduct Constituting Breach  24.30
        • a.  Standards for Breach of Duties to Settle and to Defend and Indemnify  24.31
        • b.  Standards for Other Types of Breach  24.32
        • c.  Analyzing Case for Potential Breach  24.33
      • 2.  Requirement of Judgment in Underlying Action  24.34
    • D.  Proof of Bad Faith
      • 1.  In General; Relationship Between Evidence of Bad Faith and Evidence Justifying Punitive Damages  24.35
      • 2.  By Evidence of Insurer’s Claims Policies and Practices  24.36
      • 3.  By Evidence of Industry Standard  24.37
      • 4.  By Expert Testimony  24.38
      • 5.  By Insurer’s Litigation Tactics
        • a.  Admissible as Evidence of Bad Faith  24.39
        • b.  Admissibility of Settlement Offers  24.40
      • 6.  By Evidence From Attorneys, Claims Personnel, and Others  24.41
        • a.  Attorneys
          • (1)  Defense Counsel  24.42
          • (2)  Coverage Counsel  24.43
          • (3)  Representation Issue: Attorney as Witness  24.44
        • b.  Claims Personnel  24.45
        • c.  Reinsurers  24.45A
  • VII.  DEFENSES TO ACTIONS
    • A.  Defenses to Breach of Contract
      • 1.  Types of Defense; Need to Plead Affirmative Defense  24.46
      • 2.  Checklist of Contractual Defenses  24.47
    • B.  Defenses to Bad Faith
      • 1.  Contractual Defenses
        • a.  Use Depends on Nature of Defense  24.48
        • b.  Insured’s Breach of Contract Is Not a Defense, but May Negate Proof of Bad Faith  24.49
      • 2.  Comparative Fault
        • a.  Insured’s Acts  24.50
        • b.  Acts of Insured’s or Claimant’s Counsel  24.51
      • 3.  Advice of Counsel
        • a.  Defense Explained; Origin in Malicious Prosecution Actions  24.52
        • b.  Application to Bad Faith Actions  24.53
        • c.  Conduct Necessary to Establish Defense  24.54
        • d.  Effect of Defense on Attorney-Client Privilege  24.55
      • 4.  Release of Contract Claim  24.56
  • VIII.  CONTRACT DAMAGES
    • A.  Measure of Damages  24.57
    • B.  Policy Benefits  24.58
    • C.  Liability for Interest on Underlying Judgment  24.59
    • D.  Other Consequential Damage
      • 1.  In General  24.60
      • 2.  Judgment in Excess of Policy Limits  24.61
      • 3.  Emotional Distress  24.62
      • 4.  Past Inflation Loss  24.63
      • 5.  No Right to Attorney Fees Incurred in Action Against Insurer  24.64
    • E.  Prejudgment Interest
      • 1.  Right to Interest on Ascertainable Damages (CC §3287(a))  24.65
      • 2.  Judicial Discretion to Award Prejudgment Interest on Disputed Damages (CC §3287(b))  24.66
    • F.  No Right to Punitive Damages  24.67
  • IX.  DAMAGES FOR BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING
    • A.  Tort Measure of Damages  24.68
    • B.  Judgment in Excess of Policy Limits  24.69
    • C.  Attorney Fees and Other Litigation Expenses in Action Against Insurer
      • 1.  Right to Recover Fees Attributable to Contract Claim  24.70
      • 2.  Determination of Amount  24.71
    • D.  Other Economic Loss
      • 1.  Broad Recovery Available  24.72
      • 2.  Future Economic Losses Must Be Proved With “Reasonable Certainty”  24.73
      • 3.  Prejudgment Interest  24.74
    • E.  Emotional Distress
      • 1.  Recoverable on Showing of Other Harm  24.75
      • 2.  Compensable Emotional Injury  24.76
      • 3.  Proof Required  24.77
    • F.  Punitive Damages
      • 1.  Right to Award  24.78
      • 2.  Proof, by Clear and Convincing Evidence, of Oppression, Fraud, or Malice  24.79
      • 3.  Definitions of Oppression, Fraud, and Malice  24.80
      • 4.  Showing Required  24.81
      • 5.  Examples of Facts Justifying Award  24.82
      • 6.  Examples of Facts Not Justifying Award  24.83
      • 7.  Factors to Consider in Determining Amount  24.84
      • 8.  Insurer’s Liability for Punitive Damages for Acts of Employee
        • a.  In General (CC §3294(b))  24.85
        • b.  Managing Agent  24.86
        • c.  Authorization and Ratification  24.87
      • 9.  Reporting Requirements  24.88

25

Actions for Failure to Defend

Alexander F. Stuart

  • I.  INTRODUCTION
    • A.  Scope of Chapter  25.1
    • B.  Nature of Action
      • 1.  Failure to Provide Defense  25.2
      • 2.  Inadequate Defense Distinguished  25.3
  • II.  INITIATING ACTION FOR BREACH OF DUTY TO DEFEND
    • A.  Developing a Pleading Strategy
      • 1.  Actions for Breach of Contract and of Implied Covenant Compared  25.4
      • 2.  Pleading Both Contract and Tort  25.5
      • 3.  Combining With Cause of Action for Breach of Duty to Settle  25.6
    • B.  Timing of Action
      • 1.  When Action Can Be Brought  25.7
      • 2.  When Action Must Be Brought
        • a.  Statute of Limitations  25.8
        • b.  When Statute Begins to Run  25.9
  • III.  PLEADING AND PROVING A CONTRACT ACTION
    • A.  Necessary Elements  25.10
    • B.  Duty to Defend
      • 1.  Proof Needed to Establish Duty  25.11
      • 2.  Test for Determining When Insurer Has Duty to Defend  25.12
      • 3.  Rules Affecting Facts That Can Be Considered in Determining Duty  25.13
    • C.  Breach of Duty  25.14
  • IV.  PLEADING AND PROVING ACTION FOR BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING
    • A.  Action Incorporates Action for Breach of Contract  25.15
    • B.  Duty to Deal Fairly and in Good Faith  25.16
    • C.  Breach of Duty
      • 1.  Test
        • a.  Unreasonable Refusal to Defend  25.17
        • b.  Derivation of Test From First Party Cases  25.18
      • 2.  Application of Test
        • a.  Determination of Reasonableness Is Question of Fact  25.19
        • b.  Reasonableness of Coverage Decision Evaluated on Basis of Information Known to Insurer at Time of Decision  25.20
        • c.  Reasonableness Evaluated on Basis of Grounds Cited by Insurer  25.21
      • 3.  Factors to Consider in Determining Breach  25.22
        • a.  Whether Insurer Conducted Adequate Investigation  25.23
        • b.  Whether Decision Had Reasonable Legal Basis  25.24
        • c.  Whether Insurer Fairly Considered Facts  25.25
        • d.  Motive or Intent to Reduce or Avoid Obligation on Claim  25.26
        • e.  Insurer’s Awareness of Liability  25.27
        • f.  Whether Insurer Treated Insured Fairly  25.28
  • V.  DAMAGES RECOVERABLE ON PROOF OF BREACH OF DUTY TO DEFEND
    • A.  In General
      • 1.  Contract and Tort Damages Distinguished  25.29
      • 2.  Effect of Another Insurer Defending Claim  25.30
    • B.  Costs of Defending Underlying Action
      • 1.  Insurer Liable for All Costs Reasonably Incurred in Defense  25.31
      • 2.  Determining Reasonableness of Costs and Fees  25.32
      • 3.  Necessity of Showing Proximate Cause  25.33
      • 4.  Apportionment Between Covered and Noncovered Costs and Fees  25.34
    • C.  Judgment in Underlying Action
      • 1.  Within Policy Limits  25.35
      • 2.  Exceeding Policy Limits  25.36
    • D.  Settlement Amount of Underlying Action
      • 1.  Insurer’s Liability  25.37
      • 2.  Evidentiary Presumptions Arising on Settlement  25.38
      • 3.  Liability May Be Overcome When Settlement Is Fraudulent or Collusive  25.39
  • VI.  FORM: SAMPLE COMPLAINT FOR BREACH OF CONTRACT AND BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING (INSURER’S REFUSAL TO DEFEND)  25.40

26

Actions for Failure to Settle

Alexander F. Stuart

  • I.  INTRODUCTION
    • A.  Scope of Chapter  26.1
    • B.  Nature of Action
      • 1.  Obligation to Settle Implied in Contract  26.2
      • 2.  Obligation Owed to Insured Only  26.3
      • 3.  Use of Action  26.4
      • 4.  Other Acts of Bad Faith in Settlement Compared  26.5
  • II.  BRINGING ACTION FOR WRONGFUL FAILURE TO SETTLE
    • A.  Pleading Strategy
      • 1.  Pleading Breach of Settlement Duty  26.6
      • 2.  Combining With Other Causes of Action
        • a.  Failure to Defend or Indemnify  26.7
        • b.  Direct Action for Recovery of Judgment  26.8
        • c.  Other Torts  26.9
        • d.  Malpractice Against Defense Counsel  26.10
    • B.  Timing of Action
      • 1.  Statute of Limitations Applies  26.11
      • 2.  When Statute Begins to Run  26.12
  • III.  PLEADING AND PROVING ACTION FOR WRONGFUL FAILURE TO SETTLE
    • A.  Essential Elements  26.13
    • B.  Coverage  26.14
    • C.  Duty to Settle Implied in Contract
      • 1.  Nature of Duty  26.15
      • 2.  When Duty Arises
        • a.  Opportunity to Compromise Claim  26.16
        • b.  Offer to Settle as Opportunity  26.17
        • c.  Sufficiency of Offer to Trigger Obligation to Settle  26.18
        • d.  Duty Without Settlement Offer
          • (1)  Insurer’s Refusal to Contact Policyholder About Claimant’s Request for Disclosure of Policy Limits  26.19
          • (2)  Illustration of Arguments Made for Imposition of Liability  26.20
    • D.  Breach of Settlement Obligation
      • 1.  Test: Prudent Insurer Rule  26.21
      • 2.  Breach by Failing to Accept Reasonable Settlement Offer Within Policy Limits
        • a.  In General  26.22
        • b.  Considerations in Determining Whether Offer Is Reasonable
          • (1)  Probability of Judgment in Excess of Policy Limits  26.23
          • (2)  Determination of Probability; Inference From Entry of Excess Judgment  26.24
          • (3)  Other Factors That May Affect Determination  26.25
        • c.  Reasonableness Is Question of Fact Unless Reasonable Minds Could Not Differ  26.26
      • 3.  Breach by Failing to Negotiate After Conditional Offer  26.27
      • 4.  Other Proof of Breach: Relevant Evidence of Conduct  26.28
      • 5.  Importance of Excess Judgment to Establish Breach
        • a.  Necessity for Entry of Judgment  26.29
        • b.  Payment Before Final Judgment Does Not Preclude Action  26.30
    • E.  Damages
      • 1.  All Damages Proximately Caused by Breach  26.31
      • 2.  Excess Judgment
        • a.  In General  26.32
        • b.  Proof of Proximate Causation  26.33
      • 3.  Emotional Distress  26.34
      • 4.  Punitive Damages  26.35
  • IV.  FORM: SAMPLE COMPLAINT FOR BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING (INSURER’S FAILURE TO SETTLE)  26.36

27

Claimant’s Direct Action for Recovery of Judgment

Alexander F. Stuart

  • I.  OVERVIEW
    • A.  Source of Right to Sue Insurer Directly
      • 1.  Statute and Policy Provision  27.1
      • 2.  Municipal Ordinances  27.2
    • B.  Nature of Direct Action  27.3
    • C.  Importance of Proof by Collateral Estoppel  27.4
  • II.  BRINGING DIRECT ACTION
    • A.  Preliminary Considerations
      • 1.  When to Use Direct Action; Assigned Action Compared  27.5
      • 2.  Ascertaining Authority Under Which Suit Will Be Brought  27.6
      • 3.  When Policy Will Be Construed as Though It Contains Direct Action Provision  27.7
    • B.  Parties
      • 1.  Plaintiffs  27.8
      • 2.  Defendants  27.9
    • C.  Timing of Action
    • D.  When Action Accrues  27.10
      • 1.  When Action Must Be Brought  27.11
        • a.  Written Policy: 4 Years  27.12
        • b.  Oral Policies: Unclear
          • (1)  Probably 2 Years  27.13
          • (2)  Possibly 3 Years  27.14
        • c.  Policy Limitations on Bringing Action Unenforceable  27.15
    • E.  Pleading Cause of Action
      • 1.  Necessary Allegations Depend on Authority for Suit  27.16
      • 2.  Allegations Required by Ins C §11580
        • a.  Checklist of Allegations  27.17
        • b.  Final Judgment Against Insured  27.18
        • c.  Coverage Under Policy  27.19
    • F.  Defenses
      • 1.  Available Defenses  27.20
      • 2.  Policy Defenses
        • a.  Exclusions  27.21
        • b.  Breaches of Condition
          • (1)  Insured’s Breach in General  27.22
          • (2)  Insured’s Breach of Notice Condition  27.23
          • (3)  Claimant’s Breach of Condition  27.24
        • c.  Misrepresentation in Application  27.25
        • d.  Waiver and Estoppel Considerations  27.26
    • G.  Damages; Judgment Against Insured  27.27
  • III.  FORM: COMPLAINT FOR DAMAGES UNDER INS C §11580  27.28

28

Other Actions for Improper Claims Conduct

CEB Staff

  • I.  INTRODUCTION
    • A.  Scope of Chapter  28.1
    • B.  Tactical Considerations in Combining Causes of Actions  28.2
  • II.  INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS
    • A.  Parties
      • 1.  Plaintiffs  28.3
      • 2.  Defendants  28.4
    • B.  Timing of Action  28.5
    • C.  Pleading Cause of Action  28.6
      • 1.  Outrageous Conduct  28.7
        • a.  Actions Constituting Outrageous Conduct  28.8
        • b.  Actions Not Constituting Outrageous Conduct  28.9
      • 2.  Pleading Other Elements  28.10
        • a.  Intent  28.11
        • b.  Severe Emotional Distress  28.12
        • c.  Causation  28.13
    • D.  Defenses
      • 1.  Privileges  28.14
      • 2.  Advice of Counsel  28.15
    • E.  Damages  28.16
  • III.  NEGLIGENT INFLICTION OF EMOTIONAL DISTRESS
    • A.  Elements; Comparison With Intentional Infliction  28.17
    • B.  Problem of Duty; Limitation of Plaintiffs
      • 1.  Factors Creating Duty  28.18
      • 2.  Application to Insurance Cases  28.19
  • IV.  FRAUD AND DECEIT
    • A.  Elements of Cause of Action  28.20
    • B.  Relationship to Bad Faith and Breach of Fiduciary Duty  28.21
    • C.  When Fraud Might Be Alleged  28.22
  • V.  OTHER POSSIBLE ACTIONS FOR RECOVERY OF DAMAGES
    • A.  Negligent Performance of Contractual Duties
      • 1.  History and Availability of Action  28.23
      • 2.  Scope of Liability; Importance of Distinguishing Defense Counsel’s Negligence  28.24
      • 3.  Use of Action  28.25
      • 4.  Failure to Provide Adequate Defense and Failure to Defend Distinguished  28.25A
    • B.  Breach of Fiduciary Duty  28.26
    • C.  Interference With Prospective Economic Advantage
      • 1.  History and Use of Action  28.27
      • 2.  Possible Limitations  28.28
    • D.  Unfair Business Practices  28.29
    • E.  Conspiracy  28.30
    • F.  Malicious Prosecution  28.31
    • G.  Elder Abuse  28.31A
  • VI.  FORMER ACTION FOR BREACH OF INS C §790.03(h)
    • A.  History of Former Action  28.32
    • B.  Current Relevance  28.33
    • C.  Requirement of Knowledge or General Business Practice [Deleted]  28.34
    • D.  Possible Defendants [Deleted]  28.35
    • E.  Action for Failure to Attempt Good Faith Settlement [Deleted]
      • 1.  Necessary Elements [Deleted]  28.36
      • 2.  Reasonably Clear Liability [Deleted]  28.37
      • 3.  Good Faith Attempt to Settle [Deleted]  28.38
      • 4.  Conclusion of Underlying Action [Deleted]
        • a.  By Judicial Determination [Deleted]  28.39
        • b.  Substance of Judgment [Deleted]  28.40

29

Actions Against Agents and Brokers

Barbara A. Goode

David A. Firestone

Eliot R. Hudson

  • I.  INTRODUCTION
    • A.  Scope of Chapter  29.1
    • B.  Ascertaining Whether Producer Is Agent or Broker  29.2
      • 1.  “Agent” Defined  29.3
      • 2.  “Broker” Defined  29.4
      • 3.  Reasons to Distinguish Brokers From Agents  29.5
    • C.  Use of Actions; Use by Third Party Claimants  29.6
  • II.  INSUREDS’ LAWSUITS; GROUNDS FOR BROKER AND AGENT LIABILITY
    • A.  Failure to Procure Coverage
      • 1.  Duty to Use Reasonable Diligence in Procuring Requested Coverage  29.7
      • 2.  Broker’s Commitment to Procure Coverage  29.8
      • 3.  Expanded Duties in Limited Circumstances  29.9
      • 4.  Effect of Insured’s Obligations on Broker’s Duty  29.10
    • B.  Failure to Notify Insured of Inability to Procure Coverage  29.11
    • C.  Failure to Place Coverage at Best Available Terms  29.12
    • D.  Failure to Place Coverage With Authorized and Solvent Insurer  29.13
      • 1.  Admitted California Insurer  29.14
      • 2.  Nonadmitted Insurer  29.15
    • E.  Failure to Exercise Expertise
      • 1.  General Rule: Agency Law Standard  29.16
      • 2.  Effect of Insured’s Knowledge  29.17
    • F.  Failure to “Service” Policy
      • 1.  Keeping Coverage in Force; Change of Insurer  29.18
        • a.  Express or Implied Agreement; Ongoing Relationship With Insured  29.19
        • b.  Effect of Direct Billing or Automatic Renewal  29.20
      • 2.  Broker’s Duty to Monitor Risks and Update Coverage  29.21
      • 3.  Broker’s Duty to Inform of Insurer Financial Condition and Insolvency  29.21A
      • 4.  Broker’s Duty to Forward Claims and Notices of Claim  29.22
    • G.  Brokers as Fiduciaries  29.22A
    • H.  Elder Abuse  29.22B
  • III.  INSURERS’ LAWSUITS; GROUNDS FOR BROKER LIABILITY  29.23
    • A.  Misappropriating Premiums  29.24
    • B.  Failure to Disclose Risk Factors  29.25
    • C.  Failure to Cancel or Notify of Cancellation  29.26
    • D.  Failure to Use Reasonable Care
      • 1.  Acts Performed Under Agency Agreement  29.27
      • 2.  Exercise of Authority to Bind  29.28
      • 3.  Premium Financing Activities  29.29
  • IV.  PROCEDURE
    • A.  Actions by Insureds
      • 1.  Contract and Tort Causes of Action  29.30
      • 2.  Timing  29.31
    • B.  Actions by Insurers  29.32
    • C.  Strategic Considerations
      • 1.  Producer’s Role in Litigation  29.33
        • a.  Producer as Insured’s Agent  29.34
        • b.  Producer as Insurer’s Agent  29.35
      • 2.  Using Expert Testimony to Ascertain Industry Custom and Practice  29.36
      • 3.  Effect of Producer’s Liability Insurance  29.37
      • 4.  Settlement  29.38
  • V.  Broker and Agent Damages
    • A.  Introduction  29.39
    • B.  Contract Versus Tort Measure of Damages  29.40
    • C.  Specific Damage Claims
      • 1.  Damages for Loss of Coverage  29.41
      • 2.  Emotional Distress  29.42
      • 3.  Costs of Litigating Coverage Disputes  29.43
      • 4.  Policyholder’s Own Time  29.44
      • 5.  Prejudgment Interest  29.45
    • D.  Insured’s Actions Involving Both Producer and Insurers  29.46
      • 1.  Setoff  29.47
      • 2.  Collateral Source Rule   29.48
    • E.  Assigned Claims  29.49

Selected Developments

September 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.

Measure of Damages for Claims Against Brokers and Agents. Chapter 29 has been expanded to cover how the general rules regarding measure of damages have been applied to claims against insurance producers. Among the areas covered are damages under both contract and tort theories (§29.4), specific damages claims for items such as loss of coverage (§29.41), emotional distress (§29.42), costs of litigating coverage disputes (§29.43), and policyholder’s time (§29.44).

Bodily Injury and Damages Qualification. In Jones v IDS Prop. Cas. Ins. Co. (2018) 27 CA5th 625, a single per person limit applied to both husband’s claim for damages for injuries and wife’s claim for loss of consortium under automobile policy. See §§1.19, 3.20.

Regulation of Unfair Practices. In PacificCare Life & Health Ins. Co. v Jones (2018) 27 CA5th 391, it was determined that Ins C §790.03(h) applies both to a pattern of violation and to single violations knowingly committed. See §3.42.

Duty to Defend and Activity Qualification. In Yahoo! Inc. v National Union Fire Ins. Co. of Pittsburgh (9th Cir 2019) 913 F3d 923, the Ninth Circuit certified to the California Supreme Court the issue of whether claims under the Telephone Consumer Protection Act of 1991 trigger a commercial liability policy. See §3.24.

Anti-Montrose Policy Language. In Insurance Co. of State of Pa. v American Safety Indem. Co. (2019) 32 CA5th 898, the court discussed a situation where the insurer adopted anti-Montrose policy language in an attempt to contract around the continuous injury trigger. See §3.36.

Concurrent Causes. Restating what it understood to be existing law for the special circumstance of mudslides, the legislature adopted Ins C §530.5, providing that coverage shall be provided if an insured’s peril is the efficient proximate cause of the loss. See §3.42.

Scope of Duty to Defend. In Travelers Prop. Cas. Co. of Am. v Engel Insulation, Inc. (2018) 29 CA5th 830, the court determined that Rev & T C §23301 prevents an insurer from defending suspended corporations and also from enforcing the subrogation rights of suspended corporations. See §4.6A.

Following Form Excess Policies. In Deere & Co. v Allstate Ins. Co. (2019) 32 CA5th 499, the court determined the exemption of liability limits from a following form excess policy resulted in self-insured retention that should be applied only to the first layer of umbrella policy coverage and not to higher layers. See §17.3.

Public Entity Insured’s Right to Recover for Loss. In Westport Cas. Corp. v California Cas. Mgmt. Co. (9th Cir 2019) 916 F3d 769, the court determined that Govt C §825.4 does not necessarily preclude a public entity from obtaining contribution from its employees’ insurer. See §23.30.

Superior Equities in Subrogation Claim. In Western Heritage Ins. Co. v Frances Todd, Inc. (2019) 33 CA5th 976, the court of appeal affirmed summary judgment to lessees of a commercial condominium owner on an equitable subrogation claim made by the insurer of the condominium owners’ association. See §23.35.

Punitive Damages Against Insurers. In Mazik v GEICO Gen. Ins. Co. (2019) 35 CA5th 455, a claims representative’s regional authority over the settlement of claims determined corporate policy and satisfied the requirements of CC §3294(b). See §24.86.

Statute of Limitations in Professional Negligence Actions. In Lederer v Gursey Schneider LLP (2018) 22 CA5th 508, a cause of action against an accounting firm for purchasing an underinsured motorist insurance policy with limits lower than requested did not accrue until the injury claim was settled with the other driver because the insured only obtained the right to coverage that would occur on the exhaustion of the driver’s policy. See §29.31.

About the Authors

LANE J. ASHLEY, B.A., 1973, University of Illinois; J.D., 1976, University of California, Los Angeles, School of Law. Mr. Ashley practices with Lewis, Brisbois, Bisgaard & Smith LLP, Los Angeles. He is the author of chapters 14 and 15.

JONATHAN F. BANK, B.A., 1965, University of Oklahoma; J.D., 1968, Creighton University School of Law. Mr. Bank practices with Lord, Bissel & Brook LLP, in Los Angeles. He is a coauthor of chapter 18.

BRADLEY ASHLEY BENING, B.A., 1978, California State University, Chico; J.D., 1982, University of California, Davis, School of Law. Mr. Bening practices with Willoughby, Stuart & Bening, San Jose. He is a coauthor of chapter 24.

ROBERT BERG, B.A., 1978, University of California, Davis; J.D., 1981, University of California, Hastings College of the Law. Mr. Berg practices with Sedgwick, Detert, Moran & Arnold LLP, San Francisco. He is a coauthor of chapter 1.

WILLIAM F. CAMPBELL, B.S., 1967, Springfield College; J.D., 1970, Rutgers Law School. Mr. Campbell practices with BraunHagey & Borden LLP, San Francisco. He is the author of chapter 5. Mr. Campbell gratefully acknowledges the assistance of Matthew S. Covington of DLA Piper Rudnick Gray Cary US, LLP, San Francisco.

JAMES E. CHODZKO, B.A., 1973, Whittier College; J.D., 1977, California Western School of Law. Mr. Chodzko is self-employed as a full-time mediator, discovery referee, and arbitrator. He is the author of chapter 2.

ROBERT V. CLOSSON, B.A., 1983, Shippensburg State College; J.D., 1986, Western State University School of Law. Mr. Closson practices with Summers & Shives LLP, San Diego. He is a coauthor of chapter 9.

THOMAS M. CORRELL, B.S., 1968, Pennsylvania State University; J.D., 1976, Western State University School of Law. Mr. Correll practices with Higgs, Fletcher & Mack LLP, San Diego. He is a coauthor of chapter 9.

RAPHAEL COTKIN, B.A., 1960, University of California, Los Angeles; J.D., 1964, University of Southern California School of Law. Mr. Cotkin practices with Cotkin, Collins & Ginsburg, Los Angeles. He is a coauthor of chapter 8.

MARK E. EDWARDS, B.S., 1974, and J.D., 1975, Western State University School of Law. Mr. Edwards practices with Edwards & Hayden, Santa Ana. He is the author of chapter 7.

DAVID A. FIRESTONE, B.A., 1968, University of Nevada; J.D., 1974, University of San Francisco School of Law. Mr. Firestone practices with Vogl & Meredith, San Francisco. He is a coauthor of chapter 29.

J. ALAN FREDERICK, B.A., 1971, University of California, Santa Barbara; J.D., 1974, University of California, Los Angeles, School of Law. Mr. Frederick practices law with Marrone, Robinson, Frederick & Foster in Los Angeles. He is the author of chapter 22.

DENNIS GILDEA, A.B., 1974, University of Southern California; J.D., 1977, University of California, Berkeley, School of Law. Mr. Gildea is of counsel at Bishop Barry Howe Haney & Ryder, Emeryville. He is the author of chapter 23. Mr. Gildea would like to acknowledge the assistance of Garth A. Gersten, who now practices with Womble Carlyle Sandridge & Rice PLLC, North Carolina.

LARRY M. GOLUB, B.A., 1979, University of California, Los Angeles; J.D., 1983, University of California, Hastings College of the Law. Mr. Golub practices with Barger & Wolen LLP, Los Angeles. He is a coauthor of chapters 3 and 17.

BARBARA A. GOODE, A.B., 1973, Bryn Mawr College; J.D., 1976, University of California, Berkeley, School of Law. Ms. Goode’s practice, the Law Office of Barbara A. Goode, is in San Francisco. She is a coauthor of chapter 29.

ELIOT R. HUDSON, B.A. (cum laude), 1972, University of California, Davis; J.D., 1975, University of California, Hastings College of the Law. Mr. Hudson is a Senior Counsel of DLA Piper LLP (US) in San Francisco. He is a coauthor of chapter 29.

THOMAS W. JOHNSON, JR., B.S., 1963, and J.D., 1969, Indiana University School of Law. Mr. Johnson practiced with Irell & Manella, Newport Beach. He was a coauthor of chapter 3.

KENT KELLER, B.A., 1965, Southwest Missouri State College; J.D., 1968, Washington University School of Law. Mr. Keller practices with Barger & Wolen LLP, Los Angeles. He is a coauthor of chapters 3 and 17.

SCOTT MICHAEL KOLOD, B.S., 1979, Indiana University; J.D., 1982, University of San Diego School of Law. Mr. Kolod is the managing partner of Kolod, Wager & Gordon LLP, in San Diego. He is the author of chapter 16.

N. DAVID LYONS, B.A., 1972, Harvard College; J.D., 1975, Georgetown University Law Center. Mr. Lyons practices with Lewis Brisbois, Bisgaard & Smith LLP, Los Angeles. He is the author of chapters 4 and 12.

DONALD W. McCORMICK, B.A., 1976, Vanderbilt University; J.D., 1981, Tulane University School of Law. Mr. McCormick practiced with Caron, Greenberg & Fitzgerald, Los Angeles. He is a coauthor of chapter 18.

THE HONORABLE DONALD F. MILES, A.B., 1971, Stanford University; J.D., 1974, University of California, Hastings College of the Law (Order of the Coif). Mr. Miles is a judge of the California State Bar Court. Before his appointment to the bench, Judge Miles practiced with Ropers, Majeski, Kohn & Bentley, San Francisco. He is the author of chapter 13.

LARRY W. MITCHELL, B.A., 1972, California State University, Northridge; J.D. (magna cum laude), 1976, Loyola University School of Law. Mr. Mitchell practices with Berman, Berman & Berman LLP, Los Angeles. He is a coauthor of chapter 8.

JULIA A. MOLANDER, B.S.S., 1974, Northwestern University; J.D., 1978, Stanford University Law School. Ms. Molander practices with Sedgwick, Detert, Moran & Arnold LLP, San Francisco. She is the author of chapters 20 and 21. Ms. Molander would like to thank William F. Campbell of BraunHagey & Borden LLP, San Francisco; Katherine Stein of DLA Piper Rudnick Gray Cary US, LLP, San Francisco; and Glenn E. Tremper of Church, Harris, Johnson & Williams, PC, Great Falls, Montana, for their contributions.

PHILIP L. PILLSBURY, JR., A.B., 1973, Middlebury College; J.D., 1976, Northwestern School of Law of Lewis & Clark College. Mr. Pillsbury practices with Pillsbury & Levinson LLP, San Francisco. He is the author of chapter 19.

JOSEPH W. ROGERS, A.B., 1943, San Diego State College; LL.B., 1949, Stanford University Law School. Mr. Rogers is now retired from practice. He is the author of chapter 11. Mr. Rogers gratefully acknowledges the assistance of Susan M. Popik, who practices with Chapman, Popik & White LLP in San Francisco.

ROBERT N. SCHIFF, B.S., 1969, University of Pennsylvania; J.D., 1973, University of California, Berkeley, School of Law. Mr. Schiff practices with Haight, Brown & Bonesteel LLP, San Francisco. He is a coauthor of chapter 1.

ARTHUR SCHWARTZ, B.S., 1973, Queens College of the City University of New York; J.D., 1985, Golden Gate University School of Law. Mr. Schwartz practices with Gordon & Rees, San Francisco. He is the author of chapter 6.

ALEXANDER F. STUART, A.B., 1977, University of California, Berkeley; J.D., 1980, Santa Clara University School of Law. Mr. Stuart practices with Willoughby, Stuart & Bening, San Jose. He is a coauthor of chapter 24 and the author of chapters 25, 26, and 27.

ANDRE V. TOLPEGIN, A.B., 1951, University of California, Berkeley; J.D., 1954, University of California, Hastings College of the Law. Mr. Tolpegin practiced with Leland, Parachini, Steinberg, Flinn, Matzger & Melnick, San Francisco. He is the author of chapter 10.

STEVEN H. WEINSTEIN, B.A., 1975, University of California, Los Angeles; J.D., 1978, Southwestern University School of Law. Mr. Weinstein practices with Barger & Wolen LLP, Los Angeles. He is a coauthor of chapter 17.

PATRICIA WINTERS, B.A., 1980, University of Minnesota; J.D., 1983, Loyola Law School. Ms. Winters practices with Reinsurance Counsel, A Law Corporation, Pasadena. She is a coauthor of chapter 18.

The authors wish to acknowledge the contribution of Sharon E. Jackson of Milbank, Tweed, Hadley & McCloy LLP, Los Angeles, for her reviews and comments on updated versions of the original manuscript.

About the 2019 Update Authors

WILLIAM F. CAMPBELL, B.S., 1967, Springfield College; J.D., 1970, Rutgers Law School. Mr. Campbell is counsel at BraunHagey & Borden LLP in San Francisco. He has over 30 years’ experience in representing both insurers and policyholders in a wide variety of coverage issues, and currently represents policyholders exclusively. He also assists policyholders in improving their insurance programs, and represents insurance brokers in errors and omissions cases. He is the original author of chapter 5. (Chapters 5 and 10)

STEPHEN J. ERIGERO, B.A., 1982, Loyola Marymount University, Los Angeles; J.D., 1985, University of California, Hastings College of the Law. Mr. Erigero is a partner of Ropers, Majeski, Kohn & Bentley in Los Angeles, where he specializes in commercial litigation, including defense of professional liability claims, insurance bad faith and coverage litigation, D&O liability, complex construction litigation involving design professionals, and environmental and toxic torts. (Chapters 24, 25, and 26)

ELIOT R. HUDSON, B.A. (cum laude), 1972, University of California, Davis; J.D., 1975, University of California, Hastings College of the Law. Mr. Hudson is a retired Senior Counsel of DLA Piper LLP (US) in San Francisco, where until 2019 he represented insurers, insurance brokers, and policyholders in complex matters involving coverage, bad faith, and professional liability disputes. Mr. Hudson is an AV rated lawyer by Martindale-Hubbell and has been selected by ALM as a San Francisco Top-Rated Lawyer. Mr. Hudson is a coauthor of chapter 29, and has served as an update author since 2005. (Chapter 29)

KIM KARELIS, B.A., Winona State University; J.D. (cum laude), 1993, Southwestern School of Law. Mr. Karelis is a partner of Ropers, Majeski, Kohn & Bentley in Los Angeles, where he primarily represents insurance companies in litigation concerning insurance coverage disputes. (Chapter 27)

TIMOTHY J. LEPORE, B.A., 2010, San Diego State University, San Diego; J.D., 2013, University of California, Hastings College of the Law. Mr. Lepore is an associate of Ropers, Majeski, Kohn & Bentley in Las Vegas and Los Angeles, where he focuses on commercial litigation, including defense of insurance bad faith and coverage litigation, business tort claims, and premises liability actions. (Chapters 24, 25, and 26)

DUNCAN S. MacDONALD, B.A., 1987, University of Michigan; J.D., 1990, University of Michigan Law School. Mr. MacDonald is the CEO of MacDonald Law, APC in San Francisco, where he specializes in the defense of contractual and extracontractual insurance claims, real estate litigation, employment litigation and counseling, broker liability defense, and complex business disputes. He is also an active mediator and a panel member for the Bar Association of San Francisco’s mediation program. (Chapter 22)

JULIA A. MOLANDER, B.S.S., 1974, Northwestern University; J.D., 1978, Stanford Law School. Ms. Molander is a member of Cozen O’Connor (US) in San Francisco, where she specializes in insurance coverage, reinsurance, claims handling, and insurance bad faith. (Chapter 21)

DEAN A. PAPPAS, B.A., 1975, California State University, Chico; J.D., 1984, University of San Francisco School of Law. Mr. Pappas is a partner of Ropers, Majeski, Kohn & Bentley in Redwood City. His practice is focused on providing assistance to insurance companies in the analysis of property and liability insurance coverage issues. He also represents insurers in litigation concerning insurance contract or extracontractual claims. (Chapters 8, 17, and 18)

FULTON M. SMITH III, B.A., 1980, University of California, Los Angeles; J.D., 1984, Southern Methodist University School of Law. Mr. Smith is a member of Cozen O’Connor (US) in San Francisco, where he specializes in insurance-related issues and disputes. (Chapter 20)

LAURA H. SMITH, B.A., 1985, Cornell University; J.D., 1988, University of California, Hastings College of the Law. Ms. Smith is a partner of Nicolaides Fink Thorpe Michaelides Sullivan LLP in San Francisco. She advises all types of liability insurers on a broad range of issues and represents insurers in coverage disputes. (Chapter 23)

ELIZABETH A. TRITTIPO, B.A., 1996, Reed College, Portland, Oregon; J.D., 2001, University of California, Hastings College of the Law. Ms. Trittipo is special counsel to Severson & Werson in San Francisco, where she counsels insurers concerning their coverage rights and obligations under a wide range of policies, including employment practices liability and directors and officers liability insurance policies. (Chapter 16)

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