Blog Archives

COVID-19 Business Interruption Claims: First California Court of Appeal Decision Holds That Closure Orders Are Not “Direct Physical Loss”

Posted on November 18, 2021 by Dina R. Richman

California has been a hotbed of litigation regarding COVID-19 business interruption claims. The vast majority of the trial courts have held in favor of insurers and against businesses. Now, the California Court of Appeal has weighed in. In a published decision, The Inns by the Sea v. California Mutual Insurance Company (November 15, 2021, Case No. D079036), the Fourth Appellate District held that a hotel’s business income loss resulting from the COVID-19 pandemic was not covered. About The Author

Tagged with: Business Interruption Coverage, California, Civil Authority Coverage, covid-19, Insurance, shutdown order
Posted in Uncategorized

California Supreme Court Upholds Replacement Cost Estimate Regulation (For Now)

Posted on January 27, 2017 by Dina R. Richman

In 2011, the California Insurance Commissioner promulgated a regulation governing replacement cost estimates for homeowners insurance (Cal. Code Regs., tit. 10, §2695.183 [the Regulation]). After the trial court and intermediate court of appeal invalidated the Regulation,[1] this week the California Supreme Court reversed those decisions in a published decision, Association of California Insurance Companies v. Jones (Cal. Jan. 23, 2017) Case No. S226529. The Regulation was originally enacted in response to complaints from numerous homeowners who found that they were underinsured only after disaster completely destroyed their homes. In investigating these complaints, the Department of Insurance had found that the replacement cost coverage limit recommended by a number of insurers for their policyholders had understated what was actually necessary to…

Tagged with: California, homeowners insurance
Posted in Homeowners Coverage

California Court Holds Pre-Loss Preventative Measures To Avert A Collapse Are Not Covered as Mitigation.

Posted on October 29, 2015 by Dick Bennett

Last week in Grebow v. Mercury Ins. Co., 2015 Cal. App. LEXIS 948, 2015 WL 6166610 (Cal.App., Oct. 26, 2015), a unanimous panel of California’s intermediate level appellate court rejected arguments that expenses incurred to prevent the collapse of a portion of the policyholders’ house were covered as mitigation. The court held that the policy provision requiring an insured to protect the property from further damage was not analogous to a sue and labor provision and did not apply until after a loss that already occurred because to hold otherwise would effectively convert the contract of insurance into a maintenance agreement. The insureds owned a house in Tarzana. In early 2013, concerned over recurring watermarks, they had a general contractor…

California Court Adopts Expansive Reading of Contamination and Product Recall Coverage

Posted on October 22, 2015 by Dick Bennett

Two weeks ago in Foster Poultry Farms, Inc. v. Certain Underwriters at Lloyd’s, London, 2015 U.S. Dist. LEXIS 138609, 2015 WL 5920289 (E.D.Cal., Oct. 9, 2015), a California Court applying New York law found coverage under a product contamination insurance policy for a loss of poultry caused by salmonella. The Court allowed the recovery of decontamination expenses as “accidental contamination,” holding that the policyholder need only prove that there was a “reasonable probability” that consumption of its processed chicken would lead to bodily injury or sickness. In addition, the Court rejected the insurers’ arguments that the undefined term “recall” was only applicable if the loss involved the of destruction of product already in the hands of customers, and it thereby…

California Court: Appraisers Cannot be Directed to Assign Loss Values to Undamaged or Non-Existent Items in the Insured’s Scope

Posted on July 21, 2015 by Dick Bennett

It is axiomatic that the appraisers’ task is solely to determine the amount of loss, as opposed to coverage or liability. In Li-Lin Sung v. California Capital Ins. Co., 2015 WL 3797827, 2015 Cal. App. LEXIS 530 (Jun. 18, 2015), a unanimous panel of California’s Court of Appeal recently held that that necessarily entailed assessing whether components of the policyholder’s claim were actually damaged or even in existence at the time of the loss. According to the opinion, it was error to compel the appraisers to assign loss values to each and every item the insured claimed — such as damage to non-existent windows or to a fourth story on a three-story building — because assessing the existence and nature…

Tagged with: California
Posted in Arbitration and Appraisal, Fire, Investigation, Loss Adjustment

A New Twist in the California Debate Over Allegedly Inadequate Replacement Cost Limits in Homeowners’ Policies

Posted on April 15, 2015 by Joann Selleck, Maria Louise (Ria) Cousineau

The April 8, 2015 decision of the California Court of Appeals in Ass’n. of Cal. Insurance Companies v. Jones, 2015 WL 1569669, 2015 Cal. App. LEXIS 298 (Cal.Ct.App., Apr. 8, 2015) held that the state’s Insurance Commissioner overstepped his authority in attempting to regulate the content and format of replacement cost estimates under homeowners’ insurance policies. Although the legislature may choose to provide such a definition, it has not done so. While the sufficiency of policy limits remains a concern in the insurance industry and there are other valid statutes in effect that address replacement cost, pending a potential appeal of the decision the Regulation at issue, Title 10, Cal. Code of Regulations, §2695.183, is therefore no longer effective. Fire…

Tagged with: California, Estimates, Replacement Value
Posted in Loss Adjustment, Replacement Cost, Unfair Insurance Practices

Squatter’s Warming Fire in Vacant Home Held Not to be Vandalism by Divided California Court

Posted on April 9, 2015 by Dick Bennett

In February, we published a Post about a Florida decision that aligned that state with the clear majority of American courts that have held that the destruction of property by an intentionally set fire is encompassed within the terms “vandalism and malicious mischief.” Last Friday, in Hung Van Ong v. Fire Ins. Exch., 2015 WL 1524464, 2015 Cal. App. LEXIS 290 (Cal.Ct.App., Apr. 3, 2015), two of the three justices on a California intermediate level appellate court panel rejected that approach, reversing a grant of summary judgment in favor of the insurer in a case in which a vacant dwelling had been damaged when a transient set a fire on the kitchen floor to warm himself because they concluded that…

Tagged with: California, Vandalism and Malicious Mischief
Posted in Arson, Exclusions, Fire, Vacant or Unoccupied, Vandalism

California Court Holds Product Contamination Insurance Does Not Cover Ingredients Contaminated by Insured’s Supplier

Posted on March 18, 2015 by Dick Bennett

On February 6th, an intermediate level California appellate court held that a product contamination policy only covered contamination that occurs during or after manufacturing operations by the insured, meaning that there was no coverage where the policyholder’s product was found to be adulterated because it used an ingredient that had been contaminated by a third-party supplier. The decision is Windsor Food Quality Co. v. Underwriters of Lloyds of London, 2015 WL 901867, 2015 Cal. App. LEXIS 195 (Cal.App., Feb. 6, 2015). One of the three panel members filed a lengthy and convincing dissent that is arguably a more correct interpretation of the language at issue. The policyholder was Windsor Food Quality Company, a frozen food manufacturer. Windsor’s ground beef supplier…

Tagged with: California
Posted in Contamination, Contamination and Product Recall

California: Service of Suit Endorsement Trumps Forum Selection Clause in Case Involving Product Recall Due to Contamination.

Posted on February 24, 2015 by Joann Selleck

On February 5th in a case involving the recall of over $500,000 worth of oyster products made from Korean shellfish, the Southern District of California held: (1) that the policy’s service of suit clause, which gave the insured the choice of forum, trumped a forum selection clause that provided for suit in a New York state court; (2) that California law, as opposed to New York law, applied, and (3) that for purposes of a 12(b)(6) motion, plaintiff’s complaint, which alleged potential contamination, was sufficient to state a claim. The decision is Tri-Union Seafoods, LLC v. Starr Surplus Lines Ins. Co., 2015 WL 728477, 2015 U.S. Dist. LEXIS 23441 (S.D.Cal., Feb. 5, 2015). The case arose after Tri-Union Seafoods initiated a…

California Court Holds an Adjuster May Be Personally Liable for Misrepresentations Made to the Insured

Posted on April 16, 2014 by Nejat Ahmed

Earlier this month, an intermediate level California court rejected arguments that an insurance company’s adjuster owes no independent duty to the policyholders and cannot be liable even for “appalling” misconduct if he is acting within the course and scope of his employment. According to the panel, the adjuster occupies the same “special relationship” with the insured as the insurance carrier does, and he can, therefore, be independently liable for the tort of negligent misrepresentation during the adjustment. In Bock v. Hansen, — Cal.Rptr.3d —, 2014 WL 1315314 (Cal. App. 1st Dist. Apr. 2, 2014), Michael and Lorie Bock submitted a claim to their insurerafter a 41-foot, 7,300 pound tree limb crashed onto their home. The insurer assigned an adjuster, Craig Hansen,…

Tagged with: California, Negligent Misrrepresentation, Principal and Agent
Posted in Investigation, Loss Adjustment