New ED CA Decision is a Feast of First-Party and Third-Party Insurance Coverage and Bad Faith Principles
Every now and then a court decision comes along that is a virtual one-stop shop for basic insurance coverage and bad faith principles—a primer for newbie insurance attorneys and a refresher for seasoned litigators. Chief Judge Anthony Ishii’s recent decision granting in part and denying in part an insurer’s motion for summary judgment on a farm-owners insurance policy is one. Ted Gaylord, et al. v. Nationwide Mutual Insurance Company, et al., 2011 U.S. Dist. LEXIS 21736 (Eastern District of California, March 4, 2011). The Gaylord decision also sounds a cautionary note to policyholder attorneys to be mindful that first-party and third-party claims in a single action may be subject to different limitations periods.
The Facts
Gaylord owns and operates a livestock operation, raising his own cattle and raising cattle for others. In June 2008 some of the cattle die suddenly. By September and October 2008 cattle begin dying at an alarming rate. Gaylord suspects feed poisoning. Autopsies and feed testing confirm that the cattle are dying from liver failure caused by toxic plants in the alfalfa feed. There is no known cure, so Gaylord gets permission from the Department of Agriculture to sell the cattle off for early slaughter—but at a financial loss for Gaylord and the other cattle owners.
Nationwide issued a farm-owners insurance policy to Gaylord in March 2008. One part insures against physical loss to covered property (first-party); one part insures against third-party liability claims. Gaylord says he moved his farm-owners insurance from Fireman’s Fund to Nationwide because his long-trusted insurance agent told him that Nationwide had better coverage, including coverage for cattle loss from poisoned feed. But Gaylord’s agent says he told Gaylord that a “custom feeding of livestock” endorsement was necessary to cover cattle loss from poisoned feed, and that Gaylord declined it because it was too expensive.
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Delving into the sometimes arcane metes and bounds between insurers’ rights of equitable subrogation and equitable contribution, a California appellate court recently denied an excess insurer’s right to bring an equitable subrogation action against its insured’s agent for failing to renew another excess insurer’s policy that would have covered the same underlying bodily injury risk. The appellate court expanded on the trial court’s reasoning, and concluded that the excess insurer could not establish at least two necessary elements of an action for equitable subrogation, and could not show that it had paid more than its fair share under the doctrine of equitable contribution. James Dobbas, et al. v. Fred Vitas, et al., 2011 Cal. App. LEXIS 15 (January 7, 2011).
