Case Law Update
There have been numerous relevant insurance law cases decided over the past couple of years. Below is a brief synopsis of recent developments in the case law.
Albert v. Mid-Century Ins. Co.
The court held that the homeowner’s insurer had no duty to defend its insured in an underlying lawsuit in which the insured homeowner was sued by her neighbor for damage she caused to her neighbor’s property when she erected an encroaching fence and pruned trees on her neighbor’s property. (Albert v. Mid-Century Ins. Co. (2015) 236 Cal.App.4th 1281, 1284.) The insurer did not have a duty to defend because the insured’s conduct was not an accident and therefore coverage was excluded under the policy. (Ibid.)
The policy defined an “occurrence” as “an accident, including exposure to conditions, which occurs during the policy period, and which results in…property damage…during the policy period…” and the policy contained an exclusion for “intentional acts.” (Id. at 1284-1285.) The court reasoned that the insured’s conduct was not accidental because she intended the trees to be pruned, and it is irrelevant that she did not intend to damage the trees. (Id. at 1292.)
DuBeck v. California Physicians’ Service
The court held that a health care insurer waived its right to rescind an insurance policy when it decided to cancel rather than rescind the policy; when it affirmed coverage up to the date of cancellation and assured the insured it would pay for services covered before the cancellation; when it retained the insured’s premiums; and when it failed to assert its right to rescind the policy until more than two years after it had all the relevant facts needed to rescind the policy. (DuBeck v. California Physicians’ Service (2015) 234 Cal.App.4th 1254, 1257.) The court further stated that the insurance company’s lack of diligence in the first couple of months of the policy by ignoring information that would have resolved the truthfulness of the statements in the insured’s application, and the prejudice that the insured suffered as a result, provided a second and independent basis for rejecting the insurer’s claimed right to rescind the policy. (Id. at 1268.)
Grebow v. Mercury Ins. Co.
The homeowners experienced damage to their rear deck and supporting structure of their home, and their contractor and engineer advised them that the rear of their home was in danger of falling to the ground. (Grebow v. Mercury Ins. Co. (2015) 241 Cal.App.4th 564, 567.) The homeowners paid for the repairs, and then made a claim for reimbursement to their homeowner’s insurer “because at least a portion of the house had collapsed and because the expenditure was to avoid imminent insurable damage and to mitigate damages.” (Ibid.) The court held that the insurer was not liable for the reimbursement costs because there was no collapse as defined by the policy, and the duty to mitigate only arises after a loss from a collapse. (Id. at 568.) Absent a provision in the policy that provides for reimbursement, an insurance company “has no obligation to reimburse an insured for costs to prevent an imminent insurable occurrence from occurring.” (Id. at 578.)
Lee v. California Capital Ins. Co.
The court held that it was wrong for the trial court to compel the appraisal panel to value items in three categories: (1) items of loss agreed by the parties to have been damaged; (2) items of loss the insured asserted to have been damaged but where the insurer disputes coverage; and (3) items of loss the insurer asserted to have been damaged but where the insured does not assert a claim. (Lee v. California Capital Ins. Co. (2015) 237 Cal.App.4th 1154, 1162, 1174.) Compelling an appraisal in such a way was incorrect because the trial court directed the appraisal panel to assign loss values to items without regard to whether they were actually damaged or existed in the first place. (Id. at 1169, 1174.) A trial court may compel the appraisal of disputed items when the disputes concern issues of coverage, causation, or policy interpretation, as those issues can be resolved through litigation. (Id. at 1169.) However, when the disputes turn on the condition or quality of damaged items, it is error for the appraisal panel to assign values to items that an inspection shows were not damaged or never existed. (Ibid.)
Nationwide Mutual Ins. Co. v. Shimon
While driving, a minor got into a motor vehicle accident, injuring others. (Nationwide Mutual Ins. Co. v. Shimon (2015) 243 Cal.App.4th 29, 31.) The minor was driving a car that was owned by and registered to her father, but he excluded his daughter from his insurance policy to save money. (Ibid.) In reality, his daughter was the only one who regularly drove the car. (Ibid.) The daughter’s mother (who was divorced from the minor’s father) had insurance for her own vehicle, but not for the minor’s car. (Ibid.) The mother’s policy provided coverage for a household family member’s use of a “non-owned” vehicle, but not if that vehicle was “furnished or available” for her “regular use.” (Id. at 31-32.) The court held that coverage was excluded under the mother’s policy because the car was furnished or available for the minor’s regular use. (Id. at 32.) It was also of no consequence that the minor’s parents placed some restrictions on the minor’s use of the car such that the minor should not have been driving the car at that particular time and place; the minor was still the exclusive user of the car. (Id. at 37-38, 39.)
Ong v. Fire Ins. Exchange
The owner of the insured property made a claim for a fire loss at his unoccupied property. (Ong v. Fire Ins. Exchange (2015) 235 Cal.App.4th 901, 904.) The investigation revealed that the fire was likely the result of a “camp fire” that got out of control and which was started by a transient living in the house. (Id. at 904, 905.) The insurance company denied the claim under the “vacancy exclusion” resulting from “vandalism or malicious mischief” because a “trespasser entered the vacant dwelling and intentionally set a fire on the kitchen floor.” (Id. at 904, 905.)
The court noted that “vandalism” was not defined in the policy, but the reasonable interpretation of “vandalism” as used in the policy meant “malicious destruction or defacement where there is malice in fact or actual ill will or intent to injure.” (Id. at 905, 910.) The court stated that in this case, the transient apparently kicked the firewood to attempt to stop the spread of the fire, and the fire was “unintentionally incendiary.” (Id. at 910.) Therefore, it was wrong to conclude that the “vacancy exclusion” in the insurance policy applied to exclude coverage for the loss. (Id. at 904.)