Appellate Law Update: April – May 2025

The following published decision may be of interest to attorneys practicing insurance law:

California Court Of Appeal

Primary insurer who paid contribution to umbrella carrier for defense costs was entitled to new trial on claim that umbrella insurer had fraudulently concealed that its payment of the defense costs was voluntary rather than obligatory. Truck Insurance Exchange v. Federal Insurance Company (2025) _ Cal.App.5th _.

Moldex-Metric, Inc. was sued in various products liability lawsuits. Federal Insurance Company issued an umbrella policy to Moldex and incurred defense costs of nearly $5 million. Moldex later discovered it had a primary policy from Truck Insurance Exchange (Truck). Federal sued Truck to obtain reimbursement of defense costs it had paid for Moldex, and Truck settled that action with Federal. After Truck’s primary policy exhausted, it then sued Federal to recoup defense costs that Truck had paid after its policy exhausted. Federal defended against that action by successfully establishing that it had no duty to defend under its policy and that it had made a business decision to defend Moldex “at its own expense.” Truck then sued Federal for fraud and recission of the settlement agreement, alleging that Federal obtained the settlement by misrepresenting in the original contribution action that it had a duty to defend and fraudulently concealing that its payment of defense costs was voluntary (which would have defeated Federal’s right to contribution). After a bench trial, the trial court held that Federal’s statements in the original contribution action were made in the context of litigation, they were protected by the litigation privilege and could not be used to support a fraud claim. The trial court did not address Truck’s fraudulent concealment theory in its statement of decision, despite Truck’s request it do so.

The Court of Appeal (Second Dist., Div. Eight) reversed for a new trial on the fraudulent concealment claim. While intrinsic fraud is protected by the litigation provision, extrinsic fraud is not. Intrinsic fraud exists only where the party to the prior litigation unreasonably failed to protect itself from the fraud. Here, Truck did not unreasonably fail to protect itself from the fraud because Federal’s representations in its pleadings and discovery responses in the original contribution action all reasonably led Truck to believe that Federal had considered its actions compulsory, not voluntary. Federal’s concealment of the fact it had paid defense costs as a voluntary business decision constituted extrinsic fraud. Because the trial court did not consider this fraudulent concealment theory, a new trial was required.

Ninth Circuit

A plaintiff was entitled to declaratory relief that her life insurer failed to comply with statutory notice provision before cancelling her policy, but was not entitled to declaratory relief that her policy was still in effect absent evidence that she would have responded to the notice. Siino v. Foresters Life Insurance and Annuity Company (9th Cir. 2025) _ F.5th _.

Plaintiff’s life insurance policy was terminated in 2018 for nonpayment of premiums. She brought this putative class action against her life insurer arguing that the insurer’s notice of cancellation practices violated Insurance Code Sections 10113.71 and 10113.72, which require insurers to provide 30-day notice before termination and to notify insureds of their rights to designate a third party to receive lapse notices. Plaintiff’s complaint sought declaratory relief that: (1) the insurer failed to comply with these statutes when terminating her policy, (2) her policy remained valid and enforceable, and (3) the insurer could not require her to pay back overdue premiums to reinstate the policy. The district court granted the requested declaratory relief on the first two points, but ordered that she had to pay back premiums.

The Ninth Circuit affirmed in part and reversed in part. The district court properly granted declaratory relief that the insurer violated both statutory requirements because (1) the insurer’s pretermination notice stated that the policy had “already lapsed” rather than that it would lapse in 30 days, and (2) plaintiff had provided unrebutted proof that she did not receive any notices concerning designating others to receive notice of lapse. However, the district court erred in concluding that the policy remained valid. To be entitled to declaratory relief that the policy was still in effect, plaintiff had to prove all the elements of breach of contract, including causation. Because plaintiff moved in 2014 and never updated the insurer with her correct address, she could not prove that correct notices would have reached her even if they had been sent.

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.