Court Opinion

ID: 7082572
Source: CourtListenerOpinion
Date Created: 2022-07-24 10:03:51.197426+00
Date Added: 2024-06-11T16:12:55.283893
License: Public Domain

O’SCANNLAIN, Circuit Judge,
concurring in part and dissenting in part.
I agree with the majority that the district court improperly granted summary judgment against Pacific as to the proof of its loss, and that the district court properly granted summary judgment against Pacific on its bad faith and punitive damages claims. I also agree with the majority that Federal bears the burden to prove a factual basis for the policy’s employee exclusion. Therefore, I concur in Parts A, B, and D of the majority disposition. However, I must respectfully dissent from Part C, because I disagree with the decision to reverse the district court’s denial of Pacific’s motion for partial summary judgment on its duty to mitigate.
I would affirm the district court’s denial of the summary judgment motion because the issue of whether Pacific was obligated to mitigate its damages is a distinct question from whether Pacific gave timely notice of its loss. Pacific’s duty to mitigate is a common law obligation which applies to every contract and exists independently from an insured’s obligation to notify the insurer of his loss. Under California law, “A plaintiff has a duty to mitigate damages and cannot recover losses it could have avoided through reasonable efforts.” Thrifty-Tel, Inc v. Bezenek, 46 Cal.App.4th 1559, 54 Cal. Rptr.2d 468, 474 (1996). This rule is consistent with the traditional practice of judging a party against an objective standard — i.e. would a reasonable party have been able to avoid these losses? See E. Allan Farnsworth, Contracts § 12.12 (3d ed. 1999) (“A court ordinarily will not compensate an injured party for loss that that party could have avoided making efforts appropriate, in the eyes of the court, to the circumstances.”). Part of the reasonableness inquiry must be a determination whether the party should have been aware of its loss, and therefore, its duty to mitigate, because a party “cannot recover for harm he could have fore*632seen and avoided by ... reasonable efforts and without undue expense.” Brandon & Tibbs v. George Kevorkian Accountancy Corp., 226 Cal.App.3d 442, 277 Cal.Rptr. 40 (1990) (emphasis added).
There were genuine issues of fact as to whether Pacific should have investigated its subsidiaries’ financial irregularities. The district court correctly applied an objective standard for mitigation, and properly denied Pacific’s motion for partial summary judgment. I would affirm the district court on that issue.