Articles Posted in California

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iStock-511353393-referee-300x225California law has long held that an insurer may not use declaratory relief or other tactics to prejudice the defense of its policyholder in an underlying lawsuit. But in their zeal to avoid coverage, and despite California Supreme Court precedent, insurers sometimes employ tactics that actually increase their policyholder’s risk of liability in the underlying action, contrary to the very purpose of liability insurance. That was the case in the coverage action between football helmet manufacturer Riddell and its liability insurers, which is pending in California state court, where certain London Market Insurers tried to require the production of extensive discovery before that substantially identical production took place in the underlying product liability action.

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The startup guys in the hit television series Silicon Valley might be surprised to learn that the California legislature has expanded the scope of mandatory Workers’ Comp coverage to include their corporate officers, directors and working partners. The new law, effective January 1, 2017, sweeps in a broadiStock-504017662-workers-comp-300x264 range of individuals, unless they file a written opt-out. These changes to the California Labor Code are creating confusion for some businesses regarding which employees must now be included on workers’ comp insurance coverage. The consequences of noncompliance can be severe, and businesses would be well-advised to ensure that they have secured the necessary additional coverage or obtained the necessary opt-outs from affected officers, directors, and working partners.

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CalculatingWhen a jury awards punitive damages against an insurance company for bad faith, the maximum it may award is determined based on a multiple of its underlying award of compensatory damages and attorney fees (so-called “Brandt fees”). In a June 9 decision, the California Supreme Court unanimously held that when a judge, instead of a jury, awards the attorney fees, they should still be included when considering the maximum punitive damages the jury may award.

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Houdini managed an escape from a straight jacket while suspended 40 feet in the air. But that trick turned out to be easier than a primary insurer’s recent attempt to escape its duty to defend in California. In Underwriters of Interest Subscribing to Policy No. A15274001 v. ProBuilders Specialty Ins. Co., Case No. D066615, Ct. App. Dist. 4, Oct. 23, 2015 (Underwriters), the California Court of Appeal ruled that an “other insurance” clause in a CGL policy that purported to eliminate an insurer’s duty to defend if another insurer picked up the defense was unenforceable. Continue Reading ›

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California’s Supreme Court has closed a loophole of its own creation. The 12-year-old Henkel decision—which permitted insurers to avoid liability for losses when the insured subsequently assigned its policy rights to another entity—has been overruled. Continue Reading ›

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Businesses have been warned before about mandatory arbitration provisions proliferating in insurance policies, which require referral of coverage disputes to an arbitrator or arbitral panel and bar commencing civil lawsuits to resolve insurance coverage disputes. Other policies require the exhaustion of alternative dispute resolution (ADR) procedures, such as mediation, before a coverage action may commence. On July 17, a federal judge in the Northern District of California enforced such an ADR provision against an insurer that sued its policyholder for a declaratory judgment on coverage.

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