California Insurance Litigation Blog

Under certain circumstances, an insurer has the right to intervene in a case against its insured to protect its own rights and to avoid harm to the insurer.  These circumstances usually involve cases where an insured is either prevented from appearing and defending, or simply chooses not to and a default is taken against the insured.  The recent case Western Heritage Insurance Company v. Superior Court, __ Cal. App. 4^th __ (Oct. 11, 2011), addresses the second set of circumstances, and provides an examination of California intervention law and holds that an insurer has the right to intervene in a case and take over in litigation if an insured is not defending the action, and may contest both liability and damages while doing so.  

Under standard homeowner insurance policies the insurer is typically required to pay only the “actual cash value” of a loss—i.e., the fair (depreciated) market value—unless and until the insured actually incurs repair costs in excess of the actual cash value to repair the home.  In Kelly Minich, et al. v. Allstate Insurance Company, __ Cal.App.4^th __, 2011 Cal.App. LEXIS 270 (March 11, 2011) (Minich), a California appellate court recently rejected a homeowner’s creative interpretation of its Allstate homeowner’s insurance policy to get extended repair or replacement cost policy limits without regard to actually repairing or replacing the fire-damaged home. 

In Minich Allstate issues a homeowner’s insurance policy to Kelly and Debbie Minich.  A fire destroys the Minichs’ home.  The policy requires Allstate to pay the Minichs the "actual cash value" of their home up to the $129,840 policy limit.  An extended policy limits endorsement requires Allstate to pay up to 150% of the policy limit in excess of the actual cash value if the Minichs actually repair or replace the home. 

Allstate pays the $129,840 policy limit, less the $250 deductible, within 2 weeks of the fire.  Allstate refuses to pay the $64,920 extended limit until the Minichs demonstrate to Allstate 15 months after the fire that they in fact are rebuilding the home.

Noting a paucity of recent California Supreme Court precedent on whether strict or merely substantial compliance with an insurance warranty is required to invoke coverage, the Ninth Circuit Court of Appeals recently held that California law requires strict compliance with a pilot warranty in an aviation insurance policy as a condition precedent to coverage.  Trishan Air, Inc. v. Federal Insurance Company, __ F.3d __ 2011 WL 540532 (9th Cir. 2011).  The Ninth Circuit affirmed the Central District of California’s summary judgment dismissal of the insured’s breach of contract and bad faith claims.

Trishan Air, Inc. (Trishan) owned a fleet of corporate jets.  It purchased an aviation insurance policy from Federal Insurance Company (Federal). The policy included a pilot warranty endorsement that required a two-pilot crew for each aircraft and that

such pilot(s) must have successfully completed a ground and flight recurrent/initial training course for the make and model operated within the past 18 months. Any such course must incorporate the use of a motion-based simulator specifically designed for the insured make and model/make and model series.

In June 2007 Trishan’s 13-passenger Dassault Falcon 900 ran off the main runway at the Santa Barbara Municipal Airport in an aborted high-speed takeoff.  The impact snapped the front landing gear, and the Falcon 900 skidded to rest in the dirt 600 feet away.  Thankfully, no fatalities.  At the time of the accident the co-pilot had never attended any formal training course or flight simulator course for the particular jet involved.