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Timestamp: 2019-04-22 16:34:52+00:00

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On behalf of Kring & Chung, LLP posted in Newsletter on Saturday, December 1, 2012.
A recent insurance law decision by the California Court of Appeals, St. Paul Mercury Insurance v. Mountain West Farm Bureau Mutual Insurance, (2012) 210 Cal.App.4th 645, clarifies the role and obligations of insurance carriers for subcontractors involved in construction defect litigation. This decision potentially sounds a very ominous note for both subcontractors and their carriers as it makes clear the peril inherent in refusing the general contractor's demand for a defense at the outset of a case.
Jacobsen Construction was the general contractor on a condominium project in Jackson Hole, Wyoming. Teton Builders was the rough framing subcontractor. Jacobsen was insured by St. Paul Mercury ("Mercury.") Teton was insured by Mountain West. Mountain West issued an additional insured endorsement to Jacobsen, agreeing to defend Jacobsen from any claims arising from Teton's work.
Jacobsen completed 90% of the project and then was fired by the developer. Jacobsen sued the developer for breach of contract. The developer cross-complained against Jacobsen for construction defects at the project. The developer's expert filed a report citing numerous construction defects, many of which involved the framing. Jacobsen cross-complained against Teton and other subcontractors in the construction defect action. Jacobsen tendered its defense to Mountain West as an additional insured on Teton's policy. Mountain West refused to accept the additional insured tender. However, it did retain defense counsel to defend Teton and did participate in settlement negotiations in the case.
The construction defect case eventually settled for $3,070,000. Of this total amount, Jacobsen (through Mercury) contributed $2,265,000. Teton contributed only $100,000. The settlement agreement released all claims by and between Jacobsen and Teton, but reserved all claims by Jacobsen's insurer, Mercury, against Teton's insurer, Mountain West. Mercury spent $1,780,000 defending Jacobsen in the action.
Mercury filed an equitable contribution action against Mountain West, contending that both it and Mountain West were jointly obligated to defend Jacobsen, and that Mercury paid more than its fair share of both defense costs and indemnity costs for Jacobsen. Accordingly, it demanded that Mountain West reimburse Mercury for a portion of defense and indemnity costs Mercury incurred in the case.
1) That Mountain West had a duty to participate in the defense of Jacobsen and failed to do so.
2) That Mountain West's fair share of the $1,780,000 spent by Mercury in defending Jacobsen was 43%, or $731,000.
3) That Mountain West fair share of the $3,070,000 total paid to settle the case was also 43%, or $1,320,000.
The trial court's assessment of 43% as Mountain West's fair share of both defense and indemnity was based on evidence produced at trial by Jacobsen's expert showing that a large percentage of the construction defect claims in the case related to the framing.
1) Mountain West claimed that, by retaining defense counsel to defend Teton in the case, it defended the framing allegations and discharged its defense obligation to Jacobsen. The Court rejected this argument, stating that the additional insured endorsement issued by Mountain West to Jacobsen required Mountain West to directly participate in the defense of Jacobsen, which means paying a fair share of Jacobsen's attorney and expert fees.
2) Mountain West claimed it was unfair to saddle it with 43% of Jacobsen's defense costs when it was one of 18 subcontractors who were named as cross-defendants. The court rejected this argument because equitable contribution requires a co-insurer to pay its fair share, not its pro rata share. Given how much of the claim was based on alleged framing defects, it was fair for the trial judge to allocate 43% of the settlement and of defense costs to the framer's insurance company.
3) The court held that, by failing in its duty to defend Jacobsen, Mountain West was precluded from challenging the reasonableness of either the settlement amount paid by Jacobsen's insurance carrier, or the amount of defense costs incurred and paid by Jacobsen's insurance carrier.
6) Finally, if you are an insurance carrier who has refused an AI tender, be mindful that a settlement of the case which reserves AI issues not only leaves you open to a suit for defense costs, it can also leave you open to a suit for reimbursement of indemnity costs.
The laws governing employers' obligations with respect to disabled employees are complex, and employers should tread carefully when faced with a disability-related request by an employee. The following covers some basic employer obligations under both federal and state laws with regards to disabled employees.
The Americans with Disabilities Act ("ADA") applies to all employers with 15 or more employees. However, the California Fair Employment and Housing Act ("FEHA,") which provides broader protection than the ADA, applies to employers with 5 or more employees. Both the ADA and FEHA were enacted to protect employment opportunities for individuals with disabilities. They prohibit discrimination on the basis of disability by employers. They also require employers to make reasonable accommodations to enable disabled individuals to perform their job.
The ADA defines a disability as (1) a physical or mental impairment that substantially limits one or more major life activities, (2) a record of such an impairment, or (3) being regarded as having such an impairment.
Under California's FEHA, it need only be shown that a condition "limits" (not "substantially limits") a major life activity. The following are examples of impairments that consistently meet the definition of "disability": deafness, blindness, intellectual disability (mental retardation,) partially or completely missing limbs, mobility impairments requiring use of a wheelchair, autism, cancer, cerebral palsy, diabetes, epilepsy, HIV/AIDS, hepatitis, multiple sclerosis, muscular dystrophy, major depression, bipolar disorder, post-traumatic stress disorder, obsessive-compulsive disorder and schizophrenia.
The individual must also be "qualified" for the position, i.e., possess the requisite skill, experience, and other qualification standards, and be capable of performing the "essential functions" of the position with or without a reasonable accommodation. If the employee or applicant lacks the requisite skill or other job-related requirements, the employer need not make a reasonable accommodation.
Employers must not discriminate against a qualified individual on the basis of a disability in regards to the job application procedures, hiring, advancement, discharge of employees, compensation, job training, and other terms, conditions and privileges of employment.
The employer's duty, however, does not extend to accommodations that "would impose an undue hardship on the operation of the business." Undue hardship is an action requiring significant difficulty or expense when considered in light of the following factors: the nature and cost of the accommodation needed; the overall financial resources of the employer; the overall size of the business; and the type of business operations.
The employee generally has the initial duty to notify the employer of the disability and request a reasonable accommodation. The request for an accommodation need not mention the ADA or use the phrase "reasonable accommodation." Although it is generally the employee's duty to request an accommodation, if the employer learns from any other source that the employee has a potential disability, the employer is under a duty to initiate discussions concerning the need for an accommodation.
Once an accommodation has been requested or the employer becomes aware of its necessity, the employer must initiate an informal, interactive process to determine the nature of the accommodation necessary to enable the individual to perform the position's essential functions. The interactive process requires communication and good faith exploration of possible accommodations between the employer and employee. The duty to accommodate is a continuing duty that is not exhausted by one effort. The obligation continues where the employee asks for a different accommodation, or where the initial accommodation is failing and further accommodation is needed.
Discriminating against, failing to provide reasonable accommodations, or refusing to engage in the interactive process with disabled employees can subject the employer to liability for loss of wages, emotional distress damages, punitive damages, and the plaintiff's attorneys' fees and costs.
David L. Miller has joined Kring & Chung as a Partner to manage the Family Law Department at the firm's headquarters in Irvine, CA. Mr. Miller operated his own successful family law firm for nearly 16 years before joining the firm. His practice was focused on representing federal, state and local peace officers who face the all-to-common occupational hazard of divorce that comes with such a demanding and stressful profession.
Mr. Miller's clients have included, but are not limited to, employees and relatives of municipal police departments (PD's), the Federal Bureau of Investigation (FBI), the Department of Homeland Security (DHS), the Immigration and Customs Enforcement (ICE), the California Highway Patrol (CHP), the Los Angeles Police Department (LAPD), the Los Angeles Sheriff's Department (LASD), the Orange County Sheriffs' Department (OCSD), and the State of California Department of Corrections and Rehabilitation (CDCR).
Mr. Miller has practiced in the Superior Court and for the counties of Orange, Los Angeles, San Bernardino, Riverside, San Diego, and Kern. Mr. Miller has developed a solid reputation for being able to negotiate when it benefits his clients and to aggressively advocate for his clients in a trial setting if negotiations are unsuccessful.
On behalf of Kring & Chung, LLP posted in Newsletter on Monday, October 1, 2012.
Nearly all cities and counties in California have adopted general plans and zoning ordinances. Any land use proposed by a property owner must be consistent with both. Zoning ordinances allow some uses "as of right"--meaning no special permit is required--while prohibiting others, and allowing still others only by application for a permit. Most zoning ordinances in California require a property owner seeking to establish an on-site winery to obtain a special or conditional use permit.
On behalf of Kring & Chung, LLP posted in Newsletter on Wednesday, August 1, 2012.
INSURANCE: When Do You Settle a Policy Limits Case?
The California Contractors State License Board ("CSLB") requires contractors to include specific language in each Service and Repair Contract between a contractor and an owner or tenant for the performance of a home improvement. Both the contractor and the buyer need to be aware of the important rules regarding these agreements.
Every service contract to repair, remodel, alter, convert, modernize, or add to a residential property, signed by a homeowner or tenant, must include specific language outlining the consumer's rights. California Business and Professions Code § 7159.10 (e) (12)(A) states that every service contract must identify the buyer's right to cancel the work when 1) the buyer receives the contract signed and dated by the contractor and 2) at any time before the contractor starts the work.
The buyer may cancel the contract if the payment was due or the contractor accepted any money before the work was complete.
A contractor's failure to provide a home solicitation contract to a homeowner with a proper notice of cancellation is grounds for disciplinary action and fines by the Contractors' State License Board. Handyman Connection of Sacramento, Inc. v. Sands (2004) 123 Cal.App. 4th 867.
There are many more important rules governing the required content of Service and Repair Contracts, and each situation is unique. Many contractors have been surprised by consumers who intentionally sign agreements without the proper buyer's notices, and then refuse to pay for services performed. Kring & Chung has over 25 years of experience representing both contractors and homeowners. Should you need assistance in preparing enforceable home improvement agreements, if you have a question about an agreement you have been asked to sign, or if you simply want to review the contracts you currently present to consumers, please do not hesitate to contact us.
When Do You Settle a Policy Limits Case?
The Federal Ninth Circuit Court of Appeal, applying California law, has held that an insurance company may breach its implied duty of good faith and fair dealing by failing "to effectuate settlement where liability is reasonably clear, even in the absence of a settlement demand." Du v. Allstate Insurance Company, et al. (2012) 681 F.3d 1118. The Court found this duty despite affirming the trial court's refusal to give a jury instruction requested by plaintiff's counsel to instruct the jury on the carrier's purported refusal to accept a reasonable settlement demand within policy limits.
In June 2005, appellant Yang Fang Du and three other occupants were injured when a car driven by Joon Hak Kim collided with their vehicle. Mr. Kim had a $100,000 per person, $300,000 per accident Deerbrook Insurance Company policy. Deerbrook, a subsidiary of Allstate Insurance Company, became aware in early 2006 that this was an adverse liability case with serious injuries. Almost one year after the accident, the attorney for all four injured plaintiffs sent Deerbrook a $300,000 policy limit demand to settle the four claims. His demand included $108,742.92 in medical bills for Ms. Du, and nearly $34,000 in medical bills for the other three passengers. Deerbrook rejected the $300,000 demand but offered $100,000 for Ms. Du's injuries.
This suit went to trial and the jury returned a verdict in favor of Ms. Du in the amount of $4,126,714.46. Mr. Kim thereafter assigned his bad faith rights to Ms. Du in exchange for a covenant not to execute. Ms. Du then filed her bad faith case against Deerbrook, alleging that they had violated their implied duty of good faith and fair dealing by not settling Ms. Du's claim within Mr. Kim's policy limits. Ms. Du requested a jury instruction that did NOT include language requiring plaintiff in the underlying action to make a demand before the Deerbrook had a duty to make an offer. The court refused to give the instruction and instead gave an instruction requiring a plaintiff's demand before the duty arose.
There exists an implied covenant of good faith and fair dealing in every liability insurance contract. Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654. This covenant includes the duty to accept a reasonable offer of settlement. PPG Indus., Inc. v. Transamerica Ins. Co. (1999) 20 Cal.4th 310. This implied covenant requires the insurance company to settle within policy limits when there is a substantial likelihood of recovery in excess of those limits. Kransco v. American Surplus Lines (2000) 23 Cal.4th 390. In Johansen v. California State Auto Assn. Inter-Ins. Bureau (1975) 15 Cal.3d 9, the California Supreme Court held that where it is likely that the judgment against the insured will exceed the policy limits, the covenant of good faith requires the carrier to settle the claim. In essence, public policy does not allow for an insurance carrier to gamble at trial with the policy holder's money.
The Du holding expands an insurance company's duty to offer to settle within the policy limits where liability has become reasonably clear. It will be interesting to see if there will be a reduction in policy limits demands in light of this court's finding that a plaintiff's demand is no longer required where liability is reasonably clear. For insurers and their clients, it becomes all the more important to reasonably identify cases of probable liability where policy limits might be exposed, and to perform diligent and early investigations.
Most people invest a great deal of time and thought into putting together the proper estate plan to protect their families and their hard earned assets in the event of their death or incapacity. However, initially putting the estate plan together is just the first step in making sure that your estate planning goals continue to be met in the future. As we all know, one of the only constants in life is change, and your estate plan should be examined periodically to accommodate for it. A properly drafted estate plan should be reviewed every 3-5 years to accommodate for changes in your family, financial or personal circumstances.
Changes in debts or liabilities.
But are you putting the right people in charge of you and your estate if something should happen to you? Beyond changes in circumstances, there are other reasons to evaluate your estate plan to make sure that it is right for you. Given the uncertainty in the status of the estate tax laws, your living trust may need flexibility to accommodate for and protect your estate and family from future tax law changes coming at the end of 2012. Also, there are provisions you can add to your existing trust to protect your loved ones' inheritance from divorce claims of spouses, lawsuits, creditors and a potential second estate tax. You should also think about who has the right to amend your existing trust after you are gone, whether or not you are properly dealing with inheritances for step children and children, and whether you have chosen the appropriate person to manage your trust estate in the event that you are not able to do so. Fortunately, there are many quick ways to correctly address these and other common trust problems before they explode into a public and expensive dispute in probate court.
Kring & Chung Partners Named "Top Attorneys" in O.C.
Congratulations to Kring & Chung Managing Partner, Kenneth W. Chung and Partner, Laura C. Hess, on being named two of the top attorneys in Orange County for 2012 by AVVO.com. Churm Media and OC METRO Business Magazine have partnered with AVVO.com for three years to spotlight the leading attorneys in Orange County every August. The "Top Attorneys" list will be featured in OC METRO Magazine's August issue.
Kring & Chung is proud to announce the addition of Hoang-Anh Zapien to its Irvine, CA office. Ms. Zapien joins the firm with three years of experience successfully practicing family law and civil litigation in her own private practice. Ms. Zapien has assisted clients in all types of family law matters including, but not limited to, marital dissolutions, child support and visitation, spousal support and property division matters. She has a genuine passion for the field of family law. Ms. Zapien has proven to be an aggressive advocate for her clients in the courtroom and strives to be a strong source of guidance and support for her clients through their time of family crisis.
On behalf of Kring & Chung, LLP posted in Newsletter on Friday, June 1, 2012.
Kring & Chung is participating in a law firm clothing drive called "Suits for a Cause" to benefit WHW (Women Helping Women/Men2Work), an Orange County non-profit organization that helps low-income women and men get jobs by providing them with resume assistance, job placement workshops, computer training, and a professional wardrobe. Visit the Women Helping Women/Men2Work website for more information.
Starting on Friday, June 1st and ending on Friday, June 29th, we will be collecting used men's and women's clothing, including professional/business attire, non-professional attire (all regular clothing), and accessories (shoes, purses, jewelry, ties, etc.) This year, WHW is especially looking for women's non-professional attire to sell in their resale boutique, Deja New, which supports many of their job assistance programs.
If you would like to make a donation, please contact Courtney Kring at (949) 261-7700 or ckring@kringandchung.com. We will have donation receipts available. Feel free to contact us for more information. Thank you for your support!
Partner Laura C. Hess Selected for OC METRO's "40 Under 40"
Congratulations to Partner Laura C. Hess who was named as one of OC Metro Magazine's "40 under 40" honorees.
The list consists of 40 Orange County entrepreneurs, leaders and opinion makers under the age of 40 who are making their mark. The list will appear in OC Metro Magazine's "40 Under 40" May 2012 issue.
Kring & Chung is proud to announce the addition of Lance A. Adair to our Irvine, CA office. Mr. Adair is Of Counsel to the firm and handles all types of real estate, construction and land use disputes and litigation for clients ranging from individuals to Fortune 500 companies. He is experienced in handling all aspects of complex case management and litigation, including mediation, arbitration, trial and appeal. Mr. Adair is rated "AV-Preeminent" TM by Martindale-Hubbell, the highest rating awarded.

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