(Cases from February 16, 2021, to March 16, 2021)
The following published decisions may be of interest to attorneys practicing insurance law:
CALIFORNIA COURT OF APPEAL
An expert declaration opining that progressive property damage to a wall and surrounding property began to occur immediately upon completion of the wall’s construction–many years before the wall actually collapsed–created a triable issue of fact on whether “property damage” “occurr[ed]” during the policy period covering the time the wall was built. Guastello v. AIG Specialty Insurance Co. (2021) 61 Cal.App.5th 97_
In 2006, the plaintiff purchased a home for which AIG’s insured built a retaining wall in 2003-2004. The wall failed in 2010, causing substantial property damage. AIG’s insured sought insurance coverage for the plaintiff’s negligence suit under a policy covering the 2003-2004 policy period. The plaintiff obtained a default judgment against AIG’s insured and then filed suit against AIG to recover the judgment. AIG disputed coverage on the ground that the 2010 property damage caused by the wall failure occurred outside the policy period, and moved for summary judgment on that basis. In opposition to the motion, the plaintiff submitted a declaration from a structural engineer opining that the defective wall construction began causing progressive damage to the wall itself and surrounding land immediately after it was built in 2003-2004. The trial court granted summary judgment for AIG.
The Court of Appeal (Fourth Dist., Div. Three) reversed. Because there was a factual dispute about when the wall first started causing damage to the surrounding property, there was a material factual dispute about when the “occurrence” happened, precluding summary judgment. In reversing, the appellate court rejected AIG’s arguments that the structural engineer’s declaration was inadmissible as speculative and contrary to the plaintiff’s own prior admissions about when the loss occurred. AIG had not objected to the declaration in the trial court, and AIG’s objections went to the weight, not the admissibility, of the expert’s testimony.
To establish an insurer’s liability for an excess judgment, CACI No. 2334 notwithstanding, the plaintiff must prove the insurer’s failure to accept a reasonable settlement demand was unreasonable. Pinto v. Farmers Insurance Exchange (2021) __ Cal.App.5th __
This case arose out of a single-vehicle accident. One of the injured passengers made a policy limits demand to Farmers under a policy covering both the owner and the permissive driver. The demand included a requirement that Farmers deliver declarations from both the owner and permissive driver that they did not have other insurance. Farmers did everything within its control to accept the demand, including delivering a policy limits check before the demand expired, but Farmers was unable to procure the demanded declaration from the permissive driver because she refused to cooperate. The claimant deemed Farmers’ failure to provide the declaration as a rejection of his demand. He then secured an excess judgment against the owner and permissive driver, obtained an assignment of their claims against Farmers, and sued Farmers for bad faith. Over Farmers’ objection, the trial court modeled the verdict form upon CACI No. 2334, which as currently drafted does not include any requirement that the jury determine whether the insurer acted unreasonably when it failed to accept a settlement demand. The jury found the two existing elements of CACI No. 2334 satisfied–namely that the demand was reasonable and Farmers failed to accept it. Even though the jury also found that Farmers had acted reasonably in attempting to secure the permissive driver’s cooperation, the trial court entered judgment for the claimant.
The Court of Appeal (Second Dist., Div. One) reversed with directions to enter judgment for Farmers. All bad faith claims require a finding that the insurer acted unreasonably. An insurer’s mere failure to accept a reasonable demand is not unreasonable per se, and as currently drafted, CACI No. 2334 is erroneous because it omits the element of unreasonable conduct by the insurer. Because the claimant could have, but declined to, seek a jury verdict on that “crucial” element, judgment for the insurer was required.
[Full disclosure: Horvitz & Levy represented Farmers on appeal]
This e-Bulletin was prepared by Emily V. Cuatto, Certified Appellate Specialist and Partner of Horvitz & Levy LLP. Ms. Cuatto is a member of the Insurance Law Standing Committee of the Business Law Section of the California Lawyers Association.