Source: https://californiainsurancelawblog.wordpress.com/
Timestamp: 2019-04-22 01:17:25+00:00

Document:
“Proper cause” may exist so as to eliminate bad faith liability, as opposed to breach of contract, where there exists a genuine issue as to the insurer’s liability. [Opsal v. USAA, supra] See § G11 GENUINE ISSUE DOCTRINE. “Proper cause” does not exist where a dispute is “non-genuine”. Where there is a legitimate basis for the insured to dispute the position of the insurer causing a withholding of benefits or delaying the payment of benefits when due, the court will not apply the genuine issue doctrine thereby eliminating the insured’s cause of action for bad faith. There are many illustrations of “non-genuine disputes”. See § G11 GENUINE ISSUE DOCTRINE [§ G11:2 Non-genuine dispute by insurer]; § B2 BAD FAITH LAWSUIT – FIRST PARTY [§ B2:5].
The reasonableness of the insurer’s decision and action must be evaluated as of the time that the decisions were made. The evaluation cannot be fairly made in light of such subsequent events which may provide evidence of the insider’s errors. [Chateau Chambray v. Assoc. Limited Ins. (2001) 90 Cal.App.4th 335, 347, 108 Cal.Rptr.2d 776 (insured disputed valuation supported by evidence)] See § H10 HINDSIGHT [§ H10:5 Time for determining “bad faith” conduct on the part of an insurer is determined at the time the decision to deny benefits is made].
Facts known to the insurer which are extrinsic to the third party complaint, may give rise to the duty to defend even if the complaint does not reflect a potential of liability under the policy. See § E59 EXTRINSIC FACTS – DUTY TO DEFEND.
Where a third party complaint alleges facts giving rise to a “potential for coverage” under a liability policy, the genuine-issue-doctrine is not a defense to an insurer’s obligation to provide a defense to the insured. [Century Sur. Co. v. Polisso (2006) 139 Cal.App.4th 922, 952, 43 Cal.Rptr.3d 468] See § G11 GENUINE ISSUE DOCTRINE [§ G11:9 Third party liability].
1. Giving the insurer timely notice of the loss. See § N35 NOTICE OF CLAIM OR ACCIDENT.
2. Cooperation with regards to the insurer’s investigation as well as the insured protecting the property from further loss. [Abdel Hamid v. Fire Ins. Exchange (2010) 182 Cal.App.4th 990, 999, 106 Cal.Rptr.3d 26] See § P15 PROTECT PROPERTY; § E44 EXAMINATION UNDER OATH.
3. Providing a proof of loss. See § P105 PROOF OF LOSS.
Until the insured performs required duties and conditions set forth in a first party policy the insurer has “proper cause” to refuse to pay benefits. [Abdel Hamid v. Fire Ins. Exchange, supra] See § B20 BREACH OF CONTRACT [§ B20:1.01]. An insurance company has an obligation to assist the insured to recover policy benefits. See § B2 BAD FAITH LAWSUIT – FIRST PARTY [§ B2:3.5.1]. The insurer cannot perform subterfuges and/or evasions to deprive an insured of policy benefits. See § B2 BAD FAITH LAWSUIT – FIRST PARTY [§ B2:5.3].
An insured has a duty to cooperate with the insurer. The duty includes a requirement to disclose all pertinent facts, assist in giving evidence. The policy provides that no action will lie against the insured until all of the policy terms are complied with. See § C116 COOPERATION CLAUSE. The liability policy’s claims provisions must be complied with. See § C31 CLAIM; §C33 CLAIM-MADE POLICY.
The insured must comply with the liability policy’s “no-action-clause” provisions. See § N18 NO-ACTION-CLAUSE.
The insured must not be in violation of the “no-voluntary-payment” clause. See § N19 NO-VOLUNTARY-PAYMENT CLAUSE.
BOLD references are to sections in Bruce Cornblum’s 3-volume text entitled CALIFORNIA INSURANCE LAW DICTIONARY AND DESK REFERENCE, 2011 Edition. This 3-volume text is available through Thomson West Publishing at 1-800-344-5008.
The purpose of Controlled Insurance Programs (CIPs) is described in 29-SUM CONSLAW 11 (2011) (Reprint of 2009 American Bar Association Article by Kaplan, Bunting, Hobbs entitled OCIPS, CCIPS, and PROJECT Policies).
The CIP provides coverage only for exposures at the “project”.
The core coverage provided in a CIP is commercial general liability (CGL) insurance. CGL policies cover property damage, bodily injury, personal and advertising injury, premises and occupational liability, medical payments and contractual liability, all subject to policy terms, conditions, and exclusions. CGL policies provide coverage during both ongoing (occurring while work is being performed) and completed (occurring after the work is completed) operations, again subject to policy terms, conditions, and exclusions.
CIP policies either are specifically crafted ‘manuscript’ policies [see § M16 MANUSCRIPT POLICY] with specific exclusions tailored to a particular project, or are written on a standard form policy. The Insurance Services Office (ISO) [§ I85 ISO (INSURANCE SERVICES OFFICES, INC.] CGL coverage form, CG 0001 1986 or later, is the form used on most projects; it provides bodily injury and property damage liability coverage. Regardless of the specific form used, CGL coverage for a CIP should include (but not be limited to) several key provisions to safeguard the sponsor’s interests: contractual liability; broad-form property damage; CIP liability (usually written on a separate project-specific policy); collapse and underground coverages; personal injury liability, and employee-as-insureds.
Certain professions and trades are often excluded from controlled insurance programs. Such professions and trades include: design professionals, demolition contractors, hazardous materials and environmental remediation contractors and their consultants, and those who merely transport materials or persons to and from the project site. Before submitting a bid for a project, participants need to understand which parties will be excluded from the CIP and make sure that their price includes the cost of covering these exposures.
Aircraft and watercraft liability are typically not covered under a CIP.
Because wrap insurance is, by definition, shared risk management, wrap programs constitute a ‘drastic departure from the previous insurance model’. Most CIPs reverse the previous risk transfer model which model relied upon a false premise that construction defects and job site injuries were caused by subcontractors and not be builders/general contractors. [50 No. 8 DRI For Def. 24, page 4-5] This premise, coupled with superior market power, allowed builders and general contractors to transfer virtually all risks, even for claims arising out of the general contractor’s sole or contributory negligence, to trade (subcontractors) contractors. As a consequence, a builder’s strict reliance on risk transfer to subcontractors explains the persistent increase in defect litigation and job site injuries.
1. Some general contractors continue using contractual indemnity provisions on wrap projects, which cause a conflict of interest between the parties, who are otherwise “co-insureds” under the wrap policy.
2. A wrap policy for a large project often will not have adequate limits to resolve the claims including defense costs. Multiple defense costs incurred in defending the general contractor and subcontractors accelerate the “burning limits” provision in the wrap policy.
3. Wrap policies incorporate “burning limits” policies in which defense fees erode policy limits. See § D20 DEFENSE COSTS – SEPARATE FROM OR INCLUDED WITHIN POLICY LIMITS.
6. a good faith estimate of the amount of available limits remaining under the policy as of a date indicated in the disclosure obtained from the insurer.
Upon the written request of any participant, a copy of the insurance policy must be provided, if available, that shows the coverage terms and items in paragraphs (1) – (4) above.
“This insurance does not apply to ‘bodily injury’ or ‘property damage’ arising out of either your ongoing operations or operations included within the ‘products-completed operations hazard’ at the location described in the schedule of this endorsement, as a consolidated (wrap-up) insurance program as being provided by the prime contractor/project manager or owner of the construction project in which you are involved.
Bolds references are to sections in Bruce Cornblum’s text entitled CALIFORNIA INSURANCE LAW DICTIONARY AND DESK REFERENCE, 2011 Edition (3 volumes) available through Thomson West Publishing at 1-800-344-5008.
* BOLD references are to the 3-volume treatise entitled CALIFORNIA INSURANCE LAW DICTIONARY AND DESK REFERENCE (4500 pages, 2011 Ed.), which can be purchased from West Publishing at 1-800-328-4880.
A plaintiff’s attorney may want to prove facts obtained from the internet regarding facts contained in the web page of an insurer or facts contained in the web page of a defendant- insureds web page. Other uses may include information used during the punitive damage phase such as net worth information regarding public corporations, or facts and propositions that are of such common knowledge that they cannot reasonably be subject to dispute. The discussion below will be helpful in either proof of such facts or defending against use of such facts obtained from the internet. The information below is contained in the 2011 Edition of CALIFORNIA INSURANCE LAW DICTIONARY AND DESK REFERENCE, 3 Volumes, 4500 pages, available from West Publishing after June 15, 2011.
Use of evidence obtained from the internet can arise for differing reasons.
Insurance Code § 900 requires every insurer to provide the insurance commissioner with statements exhibits its financial condition and affairs. This information can be found at the California Department of Insurance website (www.insurance.ca.gov) At the trial, records obtained from the website of the insurance commissioner can be introduced by having the court take judicial notice of these records. See § J11 JUDICIAL NOTICE – INTERNET.
If the court orders discovery pursuant to CCP § 3295(c) or a jury returns a verdict for fraud against a defendant, subpoena of records will be appropriate. Do not limit the records to net worth, gross income, gross assets. Other categories in the subpoena should include a request for credit information, audits and reviews, general ledgers, trial balances, balance sheets, income statement records, rent reports, real property statements, loan and credit applications are examples.
* BOLD references are to Mr. Cornblum’s new 3-Volume legal treatise CALIFORNIA INSURANCE LAW DICTIONARY AND DESK REFERENCE. You may purchase the treatise by clicking here.
Although there is little California case authority regarding the status of an insurer’s subrogation rights when the insurer foregoes participating in the underlying action, the weight of out-of-state case authority supports the proposition that, in some circumstances, the insurer may recover funds paid to the insured by a legally responsible third party, even though the insurer did not participate in the insured’s legal action against the third party. [Hodge v. Kirkpatrick Development, Inc., 130 Cal. App. 4th 540, 553, 30 Cal. Rptr. 3d 303 (4th Dist. 2005); Plut v. Fireman’s Fund Ins. Co., 85 Cal. App. 4th 98, 104, 102 Cal. Rptr. 2d 36 (2d Dist. 2000)] See § O12 OFFSITE.
It is a general equitable principle of insurance law that, absent an agreement to the contrary, an insurance company may not enforce a right to subrogation until the insured has been fully compensated for his or her injuries, that is, has been made whole. Thus, absent the right to intervene, the insurer is to a large extent at the mercy of its insured’s efforts and success in recovering from the responsible third party. [Hodge v. Kirkpatrick Development Inc.] See § S105 SUBROGATION (PROPERTY POLICY) [Six essential elements of equitable subrogation].
The made-whole rule is a rule that protects first-party insurance policy insureds from insurer reimbursement claims after a recovery from a third party tortfeasor.
When an insurance company pays out a claim on a first-party insurance policy to its insured, the insurance company is subrogated to the rights of its insured against any tortfeasor who is liable to the insured for the insured’s damages. [Progressive West Ins. Co. v. Yolo County Superior Court, 135 Cal. App. 4th 263, 272, 37 Cal. Rptr. 3d 434, 444 (3d Dist. 2005)] To preserve its right of subrogation, the insurance company must either interplead itself into any action brought by the insured against the third party tortfeasor, or wait to seek reimbursement under the language of its policy from its insured to the extent that the insured recovers money from the third party. See § M31 MEDICAL PAY REIMBURSEMENT TO FIRST PARTY AUTOMOBILE INSURER; § S105 SUBROGATION (PROPERTY POLICY) [Insurer’s right to recoup payments directly from the insured’s recovery; right of insured to be “made whole”].
In dictum, Progressive West Ins. Co. v. Yolo County Superior Court, 135 Cal. App. 4th 263, 274–275, 37 Cal. Rptr. 3d 434 (3d Dist. 2005) approved the provision in Samura v. Kaiser Foundation Health Plan, Inc., 17 Cal. App. 4th 1284, 1289–1290, 22 Cal. Rptr. 2d 20 (1st Dist. 1993), which states: “Health plan (or its designee) shall be entitled to the payment, reimbursement and subrogation as provided in this section C(1) regardless of whether the total amount of the recovery of the Member (or his or her estate, parent or legal guardian) on the account of the injury or illness is less than the actual loss suffered by the Member (or his or her estate, parent or legal guardian).
Where the insurer foregoes participating in the underlying action against the third party tortfeasor to recover funds paid to the insured by legally responsible third party, but seeks to recover from a settlement of the action between the insured and a third party, the insured need not account to the nonparticipating insurer for more than the surplus remaining in the insured’s hands, after satisfying his [insured’s] loss in full and his reasonable expenses incurred in the recovery. [Plut v. Fireman’s Fund Ins. Co., 85 Cal. App. 4th 98, 104–105, 102 Cal. Rptr. 2d 36 (2d Dist. 2000)] See § S105 SUBROGATION (PROPERTY POLICY) [§ S105:8 Insurer’s options to pursue subrogation when insured sues third party tortfeasor for damages]; § O11 OFFSETS, INSURER’S ENTITLEMENT TO.
Plut v. Fireman’s Fund Ins. (2000) 85 Cal.App.4th 98, 104-105, 102 Cal.Rptr.2d 36, discussed above, involved a recovery by the insured against an insurance company in a first party policy suit. See § O11 OFFSETS, INSURED’S ENTITLEMENT TO [§ O11:3]. In 21st Century Ins. v. Superior Court (2009) 47 Cal.4th 511, 527-528, 98 Cal.Rptr.3d 516, discussed in § M4:3.03, supra, the issue was limited to reimbursement of med-pay benefits to the insurer after a personal injury recovery was made on behalf of the insured.. 21st Century applied the common fund apportionment rule regarding attorneys fees to reduce the med-pay reimbursement amount to the insurer. See § C48.04 COMMON-FUND DOCTRINE; § M31 MEDICAL PAY REIMBURSEMENT TO FIRST PARTY AUTOMOBILE INSURER [§ M31:2 Offset or reduction of plaintiff’s attorney fees].

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