Court Opinion

ID: 9011696
Source: CourtListenerOpinion
Date Created: 2022-11-27 13:58:35.761238+00
Date Added: 2024-06-11T17:11:23.708877
License: Public Domain

FARRIS, Circuit'Judge,
dissenting:
“There’s no such thing as a free lunch,” an aphorism of political economy now heard throughout the land, dates back to the 19th Century, when saloon and tavern owners advertised ‘free’ sandwiches and tidbits at midday to attract patrons. Richard Lederer, On Language; Haunted words, N.Y. Times, Sept. 3, 1985, § 6, at 14. “Anyone who ate without buying a beverage soon discovered that ‘free lunch’ wasn’t meant to be taken literally; he would be tossed out unceremoniously.” Robert Hessen, The New Palgrave: A Dictionary of Economics (1987). Grahm has eaten for free, but has yet to be tossed out.
Alliance had no duty to indemnify the insureds on the state court judgment, nor a duty to defend the state court action. On this much — and only this much — we agree. Without so much as a word of discussion on *947the essential elements of waiver, the majority remands this case for trial.
Under California law, waiver is an affirmative defense, for which the insured bears the burden of pleading the essential elements. Insurance Co. of the West v. Haralambos Beverage Co., 195 Cal.App.3d 1308, 1318, 241 Cal.Rptr. 427 (1987). In cases where waiver has been found in the insurance context, there is generally some element of misconduct by the insurer or detrimental reliance by the insured. See e.g., Id. at 1319-21, 241 Cal.Rptr. 427; Miller v. Elite Ins. Co., 100 Cal.App.3d 739, 161 Cal.Rptr. 322 (1980); Elliano v. Assurance Co. of Am,., 3 Cal.App.3d 446, 83 Cal.Rptr. 509 (1970). Federal cases applying California law also suggest such misconduct or reliance must be shown. Intel Corp. v. Hartford Acc. & Indem. Co., 952 F.2d 1551, 1560 (9th Cir.1991).
The insureds have not alleged misconduct. The waiver doctrine prevents an insurer from “sandbagging” the insured by constantly raising additional grounds for its denial of coverage. Id. This is not a case where Alliance denied coverage on one ground without thoroughly investigating it and then defended a subsequent lawsuit on grounds which it develops during discovery for trial. See McLaughlin v. Connecticut Gen. Life Ins. Co., 565 F.Supp. 434, 451 (N.D.Cal.1983).
Nor have the insureds set forth in their pleadings, or in the Motions for Summary Judgment or Reconsideration, any allegations or facts which would indicate that they detrimentally relied upon or were prejudiced by Alliance’s conduct. They have therefore failed to meet their burden of pleading the essential elements of waiver. See Haralambos, 195 Cal.App.3d at 1320 n. 7, 241 Cal. Rptr. 427 (“We need not consider herein the sufficiency and timeliness of [the insurer’s] reservation of rights, due to our conclusion that [the insured] failed to properly plead the essential elements of the defenses of waiver and estoppel.”); Intel, 952 F.2d at 1561.
The “steaks” are high, involving more than sandwiches and tidbits. I respectfully dissent.