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Katy Nelson won summary judgment in a bad faith suit filed by an insured corporation seeking coverage vandalism damage. The claim was denied based upon the insured’s misrepresentations during the investigation, primarily presentation of a lease agreement that had actually been prepared after the loss, for purposes of documenting a claim.  The insured, which had been in default on the mortgage loans, contended it was collecting rental payments prior to the date of loss so it could receive loss of rental income benefits under the policy, a benefit that did not have to be shared with the mortgage lender.  The Orange County Superior Court found that the client had established a breach of the cooperation clause of the policy and granted summary judgment, ending the case.


Lisa Darling-Alderton and Jo Ann Montoya won summary judgment in a declaratory relief action filed on behalf of an insurer in the United States District Court. Judge Percy Anderson agreed that a drone is an “aircraft” excluded by the aircraft exclusion of a standard CGL policy, and the insurer had no obligation to defend the underlying liability lawsuit. This is the first reported case in the country involving whether a CGL carrier has an obligation to defend an injury caused by a drone. The decision has been reported in the Daily Journal, Law 360 and was named one of the Ten Most Significant Insurance Coverage Decisions of 2018 by Randy Maniloff of “Coverage Opinions”.


Lisa Darling-Alderton recently obtained summary judgment in a declaratory relief action in the United States District Court for the Northern District of California. The District Court agreed that an assault and battery exclusion contained in the policy issued to the property owner, avoided any duty to defend wrongful death lawsuits filed by the family of a man shot and killed by a security guard retained by tenant of the building that operated a bar. 


Lisa Darling-Alderton and Jo Ann Montoya recently obtained summary judgment in a declaratory relief action. The underlying liability case concerned a diabetic patient referred to a certified pedorthist to obtain specialty fitted diabetic shoes. The claimant contended the shoes were not properly fitted causing gangrene and ultimately the amputation of his leg. The District Court judge agreed that the professional services exclusion to the policy applied, and the insurer had no obligation to defend.


Lisa Darling-Alderton obtained summary judgment in favor of an insurer in a bad faith failure to defend suit concerning a purported additional insured to the policy. The underlying liability case involved grave injuries sustained by a grandfather who fell down an embankment while watching his granddaughter’s soccer game at a field on a plateau owned by a school district. The school district tendered its defense to the soccer club who was using the filed pursuant to a contract. The District Court agreed that a “premises defect” exclusion in the additional insured endorsement eliminated any potential for coverage.


Greg Scher and Katy Nelson won summary judgment in favor of an insurer sued for bad faith denial of coverage for an assault and battery lawsuit.  The underlying complaint, filed in 2011, alleged that the insured and a buddy repeatedly hit the claimant after they found him in bed with the buddy's wife.  The insured sought insurance coverage under the general liability coverage of his homeowner's policy, arguing that there was a potential for coverage because the lawsuit alleged causes of action for negligence as well as intentional torts, and because the insured denied that he hit the claimant.  The insured and the claimant eventually stipulated to a judgment of $250,000, and the claimant sued the insurer directly to collect the judgment.  In the summary judgment motion, the insurer pointed out that the underlying complaint did not allege an "occurrence" that might be covered under the homeowner's policy, in spite of the fact that it contained a cause of action for negligence.  The Los Angeles Superior Court, Central District, agreed that there was no potential for coverage for the underlying assault and battery action because the underlying lawsuit did not allege injuries caused by an “occurrence.”  


Greg Scher obtained a defense verdict for an insurer client following a jury trial in Los Angeles Superior Court.  The insured claimed the insurer improperly denied coverage for water damage to apartment building in California City, California when a pipe froze and burst.  The policy excluded coverage for damage arising from a frozen and burst pipe in a vacant or unoccupied dwelling unless the policyholder either turns off the water and drains the pipes, or uses reasonable care to maintain heat.  On inspection the adjuster learned that at the time of the loss the apartment was between tenants, but under lease for a one year term incepting in two weeks.  He also saw that the power was out and the batteries had been removed from the thermostat.  The adjuster obtained utility bills, which showed minimal natural gas use around the time of the loss.  The adjuster denied the claim without speaking with the property manager, who later testified that she shut off the power and removed the batteries from the thermostat on the date of loss.  Thus, the natural gas bill the adjuster relied on reflected gas usage over a three day period, not the thirty day billing period assumed.  Nevertheless, the jury agreed the insured failed to use reasonable care to maintain the heat.


Greg Scher and Lisa Alderton obtained a defense verdict for an insurer client in the United Stated District Court for the Central District of California in a case involving bad faith allegations following a total loss house fire near Lake Arrowhead, California.  The adjuster paid the Coverage A Building limit of the fire policy, which wasn’t sufficient to rebuild the insured’s recently remodeled house.  The policy contained Extended Replacement cost coverage, however, providing an additional 25% of the coverage A limit.  The insured inquired whether he could replace the house in a different location and still recover the ERC limits.  The adjuster consulted with his supervisors and then told the insured that he could.  In reliance, the insured purchased a new house in a different location.  When the insured sought the ERC limits to cover the cost of the new house, the adjuster told him the ERC coverage was not available to him because he replaced in a different location.  The jury deliberated 2½ hours before returning a defense verdict.


Greg Scher received a defense verdict for an insurer client in a bad faith lawsuit arising from an auto liability claim.  In February 2010, the client's insured struck a 72-year old woman in a crosswalk, causing brain and substantial other physical injuries.  The victim, who remained comatose for three months following the accident, was a Medicare recipient.  The insurance policy contained a $50,000 liability limit.  Two weeks after the accident counsel retained by the victim's son sent a "blind" policy limits settlement demand to the insurer requiring within thirty five (35) days either delivery of a release and check for the policy limit made payable to counsel and the claimant alone, or interpleader of the policy limit.  The demand letter stated that the claimant would be "exclusively responsible for all liens" and would indemnify the insurer and its insured against any lien claims.

Within the time specified, the insurer sent a check and a release for the policy limit to counsel.  However, the check named Medicare as an additional payee.  The proposed release also included a provision for the claimant to indemnify the insurer and its insured against lien claimants, as well as including a release of another named insured not involved in the accident.

The claimant and counsel took that response as a rejection of the demand and a counter-offer.  The claimant then filed suit and recovered a $5,000,000 judgment.    

After trial the insured assigned to the claimant his rights to collect from the insurer the amount of the excess judgment (without giving a covenant not to execute on the judgment against the insured).  Both the claimant and the insured then joined as plaintiffs in a bad faith suit. 

The court precluded evidence that the injured claimant had died approximately fourteen months after the accident, so the jury assumed the injured claimant needed the money for ongoing life care, while the insured – an elderly man working as a produce clerk in a grocery store – had experienced emotional distress accompanied by hypertension and depression as well as credit disability because of the unsatisfied judgment.  At the time of trial the judgment with interest amounted to more than $6,400,000.

The plaintiffs argued that if insurer didn't want to accept the payment terms and accept the indemnity offer, it should have filed the interpleader, as California law requires an insurer to settle a claim within policy limits when it has an opportunity to do so and excess exposure is realistic.  Having done neither, California law required the insurer to pay the full underlying judgment, with interest, as well as additional consequential damages to the insured.  Plaintiffs presented evidence that the insurer never interpleads under such circumstances and used that evidence to argue a pattern and practice of institutional misconduct. 

The pre-trial settlement demand was $72,000,000, making the decision to try the case relatively simple.  The insurer will be sending the claimant's counsel a check for its $50,000 policy limit shortly.


John Peer and Jo Ann Montoya recently obtained summary judgment for an insurer client in a multi-million dollar contribution lawsuit. The underlying litigation involved the U.S. Department of Justice suit against Donald Sterling and his property management for discrimination in violation of the Fair Housing Act, 42 U.S.C. § 3601, et seq.  

After paying to defend and settle the action, another insurer sought to recover from our client the approximately $9,000,000 in defense, indemnity and interest payments it had incurred to resolve the case. 

Our client’s policies applied to discrimination “not done intentionally or at the direction of the insured” and required the discrimination to be caused by an “occurrence” defined as “an accident”.  Based on arguments we presented, the federal district court agreed that the underlying lawsuit sought only damages for intentional discrimination and therefore our client had no duty to defend or indemnify.  As a result, the excess insurer recovered nothing.