California Insurance Litigation Blog

The genuine dispute doctrine received another blow as the California Court of Appeals held that the doctrine may not be used to refuse settlement in third party coverage cases.  The recently decided case of Howard v. American National Fire Ins. Co.,  __Cal. App. 4^th __,  2010 WL 3156851 (decided August 11, 2010), involved allegations of priest molestation by an employee of the Roman Catholic Bishop of Stockton (“Bishop”).  American National Fire Insurance Co. (“American”) provided liability insurance to Bishop that covered bodily injury caused by an employee’s battery.  When Howard filed suit for negligent retention of the molesting priest, Bishop asked American to defend and indemnify against the suit.  American refused on the grounds that the alleged molestation occurred after the policy had expired in November of 1979.  In support, American relied on deposition testimony by Howard in which he stated that his first memory of being molested was when he was five or six years old, the earliest of which would have been seven months after the policy had expired.  The case continued to trial and Bishop was found liable for negligent retention and directed to pay $5.5 million in compensatory and punitive damages.  While the case was still on appeal, the parties settled and Howard agreed to join Bishop in a suit against American to recover on the judgment and for bad faith failure to defend, settle, and indemnify against the molestation case.

The Wednesday August 11, 2010 edition of the Los Angeles Daily Journal featured my article, entitled “The Waiver Doctrine, Alive And Well in ERISA Cases,” in the Perspective column. It explains a very recent case from the Ninth Circuit Court of Appeals in Mitchell v. CB Richard Ellis Long Term Disability Plan, 2010 DJDAR 11532 (9th Cir. July 26).  The article is posted below with permission of Daily Journal Corp. (2010). 

The Department of Health and Human Services issued new appeal regulations under the recently enacted Patient Protection and Affordable Care Act (“Affordable Care Act”).  These regulations give claimants the right to appeal decisions made by their health plan to an outside, independent decision maker, regardless of what state they live in or what type of health coverage they have, i.e., both group and individual coverage.  If a particular health plan or insurance is governed by a state law, the state regulations will apply as long as the protections offered to consumers is at least as strong as the National Association of Insurance Commissioners (“NAIC”) Model Act.  At a minimum, the state external review process must provide:

Commercial General Liability (“CGL”) policies that cover personal injury and property damage require CGL carriers to defend “suits,” typically defined to mean “a civil proceeding in which damages . . . to which this insurance applies are alleged.”  A question arises as to whether the process prescribed by the Calderon Act (the Calderon Process) is a” civil proceeding” within this definition.  The Calderon Act requires a common interest development association to satisfy certain dispute resolution requirements with respect to the builder, developer, or general contractor before the association may file a complaint in court for construction or design defects.  (Civil Code § 1375, subd. (a))  Although the Calderon Process occurs before a complaint is filed and itself does not result in a judgment or court-ordered payment of money, the Calderon Process is an integral part of construction defect litigation initiated by a common interest development association.  In a case of first impression, the Fourth Appellate District in Clarendon America Insurance Co. v. StarNet Insurance Co., __ Cal. App. 4th ___ (decided July 27, 2010) held that a CGL insurer has a duty to defend its insured in such proceedings.