Source: http://dutytodefend.com/waiver-estoppel-and-forfeiture/
Timestamp: 2019-04-22 08:33:08+00:00

Document:
As a practical matter, there is a hierarchy of difficulty in enforcing these doctrines. From the most likely to the least likely that are: 1) estoppel, 2) waiver, and 3) forfeiture. Estoppel is “the only theory on which to base coverage.” While waiver may be express or implied, very few cases have enforced a waiver absent clear evidence that an insurer expressly waives its rights. It is extremely rare that a California reported opinions invalidates an insurer’s rights on the ground of forfeiture.
“‘The general rule supported by the great weight of authority is that if a liability insurer, with knowledge of a ground of forfeiture or noncoverage under the policy, assumes and conducts the defense of an action brought against the insured, without disclaiming liability and giving notice of its reservation of rights, it is thereafter precluded in an action upon the policy from setting up such ground of forfeiture or noncoverage. In other words, the insurer’s unconditional defense of an action brought against its insured constitutes a waiver of the terms of the policy and an estoppel of the insurer to assert such grounds.” While the holding of Miller vs. Elite appears to invoke concepts of forfeiture, waiver and estoppel, these three legal principles are quite different from one another and successfully invoking each may require different bodies of proof.
“An insurer can be estopped from raising coverage defenses if, knowing of the grounds of noncoverage, it provides a defense under the policy without a reservation of rights, and the insured reasonably relies on this apparently unconditional defense to his detriment.” Detrimental reliance may by shown if the insurer’s delay in asserting a reservation of rights prevented the policyholder from taking steps to protect his interests against the insurer. Such reliance may be supported by establishing that the insurer was under a duty to promptly communicate its coverage challenge. Such a duty is recognized in statute, regulations, and case law.
As applied to the duty to defend, “failure to retain separate counsel does not by itself show any detriment.” Nor is delay in asserting a reservation of rights usually sufficient to prove detrimental reliance. However, by negative implication detrimental reliance may be supported by evidence that independent counsel would have structured the defense differently or could have negotiated a more advantageous settlement.
The key to enforcing an estoppel is to have admissible evidence of detrimental reliance.
A waiver may be either express, based on words of the waiving party, or implied, based on conduct indicating an intent to relinquish the right. An insurer may be found to have waived a policy condition without any showing of detrimental reliance by the insured.
Waiver is generally a question of fact. As a practical matter, the proof necessary to establish a waiver is extremely difficult to elicit. Reported cases enforcing a waiver are very rare. But a useful technique to determine whether an insurer does waive any basis to deny coverage is simply to ask it – in writing. Under some circumstances, the insurer will withdraw or narrow the assertion of a reservation of rights, particularly if doing so will eliminate a disqualifying conflict of interest for dependent counsel. Some insurers find it to be a fair trade to limit a reservation in return for controlling the defense through dependent counsel and avoiding the expense of pay for independent counsel.
Forfeiture is a legal concept by which an insurer may lose rights by intentionally misleading its policyholder or by a material breach of an express contractual obligation. Several cases have stripped insurers of control of their policyholder’s defense or settlement following a failure to defend.
 Chase v. Blue Cross of Calif. (1996) 42 Cal.App.4th 1142, 1151 (Chase).
 State Farm Fire & Casualty Co. v. Jioras (1994) 24 Cal.App.4th 1619, 1627 (Jioras).
 Miller v. Elite Ins. Co. (1980) 100 Cal.App.3d 739, 754 (Miller).
 Gaunt v. Prudential Ins. Co. (1967) 255 Cal.App.2d 18, 23 (Gaunt).
 Chase, supra, 42 Cal.App.4th at 1157; Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 34 (Waller).
 Jioras, supra, 24 Cal.App.4th at 1626.
 Jioras, supra, 24 Cal.App.4th at 1629; Spartan, supra, 196 Cal.App.3d at 1327.
 Gaunt, supra, 255 Cal.App.2d at 23; see also, Insurance Co. of the West v. Haralambos Beverage Co. (1987) 195 Cal.App.3d 1308, 1321.
 Chase, supra, 42 Cal.App.4th at 1151.
 Aetna Cas. & Sur. Co. v. Richmond (1977) 76 Cal.App.3d 645, 653.
 Alta Cal. Regional Center v. Fremont Indemnity Co. (1994) 25 Cal.App.4th 455, 459.
 Ringler Assocs. Inc. v. Maryland Cas. Co. (2000) 80 Cal.App.4th 1165, 1188.
 Chase, supra, 42 Cal.App.4th at 1149 quoting Black’s Law dictionary.
 Id. at 1157 (citations, ellipses and quotation marks omitted).
 Jioras, supra, 24 Cal.App.4th at 1628, fn.8.
 Intergulf Development LLC v. Superior Court (2010)183 Cal.App.4th 16, 20 (emphasis added); see also, Fuller-Austin Insulation Co. v. Highlands Ins. Co. (2006) 135 Cal.App.4th 958, 984 (Fuller-Austin); Atmel Corp. v. St. Paul Fire & Marine Ins. Co. (N.D.Cal. 2005) 426 F.Supp.2d 1039, 1047.
 Fuller-Austin, supra, 135 Cal.App.4th at 984 (emphasis added); see also, Safeco Ins. Co. v. Superior Court,(1999) 71 Cal.App.4th 782, 787; United Services Automobile Assn. v. Alaska Ins. Co. (2001) 94 Cal.App.4th 638, 644.
 Chase, supra, 42 Cal.App.4th at 1151, 1157.
 Waller, supra, 11 Cal.4th at 31.
 Old Republic Ins. Co. v. FSR Brokerage (2000) 80 Cal. App. 4th 666, 679 (citations and quotation marks omitted).

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