The following published decisions may be of interest to attorneys practicing insurance law:
CALIFORNIA COURT OF APPEAL
An insured’s claims for breach of contract and bad faith accrue when policy benefits are actually withheld. Bennett v. Ohio National Life Assurance (2023) __ Cal.App.5th __.
At the age of 53, plaintiff was thrown from a horse. He continued working for several years, but then had to quit due to chronic pain and numbness. He sought disability benefits from his disability insurer. Under his disability policy, he was entitled to benefits for life for a total disability due to “sickness” that started before age 55 or “injury” that started before age 65. He was entitled only to 10 years’ worth of benefits for “sickness” that started after age 55. The insurer accepted the claim, noting that it was continuing to investigate whether his disability was due to “sickness” or “injury.” It eventually concluded that the disability was due to “sickness” and advised plaintiff that benefits would stop after 10 years. After unsuccessful efforts to persuade the insurer to reconsider and the benefits stopped, plaintiff sued. The insurer moved for summary judgment on statute of limitations grounds, arguing that it had advised him of its “sickness” determination more than 4 years prior and so his contract claim (subject to a 4-year statute) and bad faith claim (subject to a 2-year statute) were time barred. The trial court granted the motion.
The Court of Appeal (First Dist., Div. Three) reversed. Damages are an element of both breach of contract and bad faith. Plaintiff’s claim for denial of disability benefits did not accrue until the benefits actually ceased and he was actually damaged by the failure to pay. The court further observed that the right to benefits was contingent on plaintiff remaining disabled and alive, and so the insurer’s breach of its duty to pay benefits was not complete until the benefits actually became due under the policy.
An insurance policy’s provision requiring actions on the policy to be brought within one year applied to a UCL claim premised on the insurer’s handling of the plaintiff’s claim. Rosenberg-Wohl v. State Farm Fire and Casualty Co. (2023) __ Cal.App.5th __.
Plaintiff submitted a claim under her homeowners’ policy seeking reimbursement of expenses she incurred to fix a staircase that had “settled” and was no longer safe. The insurer denied the claim with no investigation, observing that there appeared to be no covered cause of loss and the policy specifically excluded damage caused by “settling.” The insurer further noted that the staircase issues appeared more than a year before plaintiff submitted her claim and therefore, any claim was barred by the policy’s one-year limitations provision. Plaintiff’s husband later asked the insurer to reconsider, and it “reopened” the claim and again denied it. Plaintiff then filed two lawsuits, one for breach of contract and bad faith and another “class action” for violation of the UCL. With respect to the UCL lawsuit, the insurer demurred arguing that the claims were time-barred under the policy. The trial court sustained the demurrer, reasoning that the UCL claim was an action on the policy grounded in plaintiff’s complaints about denial of her claim.
A majority of a Court of Appeal panel (First Dist., Div. Two) affirmed. The UCL was an action on the policy because it was premised on allegations that the insurer mishandled the plaintiff’s own claim in violation of its contractual obligations. The fact that plaintiff disclaimed seeking damages did not change the analysis. Indeed, the injunction she sought was no different than an articulation of already-existing law requiring the insurer to act in good faith in adjusting claims. Also, the insurer did not waive the time bar by “reopening” the claim after it was barred. That conduct alone did not indicate an intentional relinquishment of the right to rely on the time bar. A dissenting justice disagreed that a UCL claim constitutes an action on the policy since the claim sought a public injunction against the insurer’s general business practices and not policy benefits.
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.
On July 14, 2023, the CDI issued a Pre-Hearing Notice - Export List Hearing Request for Proposed Additions, Modifications or Deletions to the Export List notifying interested parties of the opportunity to make recommendations for additions to or deletions from the Export List in advance of the hearing, which is to be scheduled in the next few months. Read more
On June 19, 2023, the CDI issued Bulletin 2023-5 indicating that the Export List remains unchanged. The Export Lists identifies types of coverage or risk that can be placed on a surplus line basis without a diligent search of the admitted market because the Commissioner has determined that there is not a reasonable or adequate market among admitted insurers or that the type of coverage is for new, innovative products for which a reasonable or adequate market among admitted insurers has not had time to develop. Read more
Insurer had a duty to defend lawsuit alleging insured was liable for dog attack, even if lawsuit’s allegations that the insured owned the dog were false. Dua v. Stillwater Insurance (2023) __ Cal.App.5th __. Read more
Hotel that lost business during COVID-19 shut-downs did not show it lost business income due to “direct physical loss or damage” of its property entitling it to insurance coverage. Best Rest Motel, Inc. v. Sequoia Insurance Company (2023) __ Cal.App.5th __. Read more
Telephone Communications Privacy Act claims may be within the coverage for personal injury claims arising from the “publication, in any manner, of material that violates a person’s right of privacy” if consistent with the insured’s reasonable expectations. Yahoo v. National Union Fire Insurance Company of Pittsburgh, PA (2022) 14 Cal.5th 58. Read more