In Travelers Casualty and Surety Co. v. Century Surety Co. (2004) 118 Cal.App.4th 1156, 13 Cal.Rptr.3d 526, both the plaintiff and defendant insurers provided primary coverage to a common insured. Travelers defended the insured in a construction defect case. Century refused to contribute citing an “other insurance” endorsement under which Century would have no duty to defend if there were other insurance available and Century’s insurance was in excess of such insurance. The Court found for Travelers, holding that when the policies of two or more insurers of a common insured provide primary coverage for the same risk and contain conflicting “other insurance “ clauses, a right to contribution arises if one insurer pays more than its share of the loss.

An insured’s refusal to submit to examination by the insurer in connection with the insured’s first party claim negates the insurer’s duty to pay regardless of whether the refusal resulted in prejudice.

In California Fair Plan Assn. vs. Superior Court (2003) 115 Cal.App.4th 158, 8 Cal.Rptr.3d 746 the plaintiff was the trustee of a trust which held real property. After being told that she could not obtain an insurance policy to cover property owned by a trust, she assigned less than 1% ownership interest in the property to an individual who then applied for coverage. The policy was then issued to that individual. After a vandalism loss the individual filed a claim. Pursuant to the policy the carrier asked him to attend an examination under oath. He failed to comply. Thereafter the trustee sued to recover for the vandalism loss.

In denying summary judgment the trial court determined that the insurance carrier was not prejudiced by the failure to appear for the examination. The trial court also determined that the individual could recover the entire vandalism loss despite his minuscule ownership interest and that his assignment was valid. The Court of Appeal reversed, ordering that the summary judgment be granted after determining that the insurer need not show prejudice because the obligation to submit to an examination is a condition precedent to the duty to pay on the claim.

Bad faith claim against insurer for refusal to settle a case cannot proceed unless an excess judgment is rendered after a trial.

In Mercado vs. Allstate Insurance Company (2003) 340 F.3d 824, plaintiff sued an Allstate insured for personal injuries.  Allstate assumed defense of the insured and offered to pay plaintiff its policy limits of $15,000.00.  Plaintiff declined the offer and thereafter entered into a settlement with the insured whereby judgment was stipulated against the insured for $150,000.00 and plaintiff agreed not to enforce the judgment against the insured.  The insured then assigned her rights against Allstate to  plaintiff who sued Allstate for bad faith refusal to settle the case.

The United States Court of Appeals 9th Circuit, affirmed summary judgment in favor of Allstate.  In relying upon the California Supreme Court decision in Hamilton vs. Maryland Casualty Company (2002) 27 Cal.4th 718, 117 Cal.Rptr.2d 318, the Court here held that insurer may not be sued for declining to settle unless the case proceeds to trial and results in a judgment in excess of the policy limits.  A stipulated judgment does not satisfy this requirement.

In Kapsimallis v. Allstate Insurance Company (2002) 104 Cal.App.4th 667, 128 Cal.Rptr.2d 358, insureds brought an action against Allstate for denying claims for damage from the Northridge earthquake more than one year earlier. The policy provided that no lawsuit for recovery of any claim could be pursued in court unless it was commenced within twelve months after inception of the loss. The trial Court determined that the "inception of the loss" was the date of the Northridge earthquake as a matter of law since any reasonable person would be aware of the necessity to make inquiry concerning damage following such an event.

The Court of Appeal reversed the decision relying upon the delayed discovery rule. The "inception of the loss" is that point in time when appreciable damage occurs and is or should be known to the insured, such that a reasonable insured would be aware that its notification duty under the policy had been triggered. This rule applies regardless of the nature or severity of the physical event causing the loss. The Court of Appeal determined that the allegations in the second amended complaint were sufficient to establish an issue as to whether the lawsuit was timely brought under the delayed discovery rule.

In the case of Royal Surplus Lines Insurance Co., Inc. v. Ranger Ins. Co. (2002) 100 Cal.App.4th 193, 122 Cal.Rptr.2d 459, a landowner and its liability insurer brought an action against a subcontractor and its liability insurer to recover on theories that the subcontractor breached contractual obligations to defend and indemnify the landowner and to procure insurance naming the landowner as an additional insured, and that the subcontractor's insurer breached the duty of good faith. Generally, an insurer may not be joined as a party defendant in an underlying action against the insured by an injured third party. The landowners' insurer here maintained that it was entitled to equitable subrogation, contribution and indemnity from both. The trial court sustained the demurrer of the subcontractor's insurer alleging a misjoinder. The Court of Appeal reversed, finding that both the subcontractor and its insurer could be joined in the lawsuit.

In Calfarm Insurance Co. v. Wolf (2000) 86 Cal.App.4th 811, 103 Cal.Rptr.2d 584, the passenger in a vehicle struck by an uninsured motorist had an automobile policy with UM limits of $100,000.00, and his driver had a policy with UM limits of $30,000.00. The passenger's insurance carrier denied UM benefits to its insured citing a "similar insurance" exclusion in the policy. The Third District Court of Appeals affirmed judgment for the passenger, noting that the insured should get what he bargained for, and the intent of his policy was to put him in the same position he would have been in if he had been driving his own vehicle when the accident occurred. The passenger was therefore permitted to make a pro-rated recovery against both policies.

In Kotlar v. Hartford Fire Insurance Company (2000) 83 Cal.App.4th 1116, 100 Cal.Rptr.2d 246, a commercial landlord was named as an additional insured under his tenant's commercial general liability policy. When a claim arose, the carrier refused to defend or indemnify the landlord on the basis that the policy had previously been canceled for the tenant's failure to pay premiums.

The Second District Court of Appeals reversed summary judgment for the insurer, holding that a duty existed to provide advance notice of cancellation of the policy to all named insureds, including all additional named insureds. Failure to provide advance notice of cancellation nullified the cancellation.

In Von's Companies, Inc v. United States Fire Insurance Company (2000) 78 Cal.App.4th 52, 92 Cal.Rptr.2d 597, a comprehensive general liability insurer, which was obligated to pay that portion of the insured's ultimate net loss as the result of a tort settlement that exceeded the self insured retention, argued that its obligation to pay is not triggered until the insured pays an amount equivalent to the SIR out of its own pocket, rather than through other insurance. The court held that the CGL policy did not preclude payment of the insured's SIR through other insurance. 

John Alan Appelman, the preeminent authority on insurance law, warned over 40 years ago that a liability insurer is "playing with fire" when it refuses to disclose to a potential claimant the applicable policy limits. To be fair, Insurance Code § 790.13(a) now specifically proscribes the disclosure of policy limits absent written permission from the insured. However, a blanket policy against disclosing policy limits, coupled with the blanket refusal to contact the insured seeking input, can put the insurer in peril.

In Boicourt v. Amex Assurance Company (2000) 78 Cal.App.4th 1390, 93 Cal.Rptr.2d 763, the insurer refused to disclose policy limits to the claimant and made no effort to secure input from the insured. The insured subsequently settled for an amount in excess of policy limits, and assigned his rights against his own carrier to the accident victim in exchange for a covenant not to execute. The accident victim then sued the insurer for bad faith. The Appellate Court reasoned that, by failing to disclose policy limits, coupled with refusing to solicit input from the insured, the insurer deprived its insured of the option of disclosure and may have foreclosed the possible settlement of the claim within policy limits. 

In Montgomery Ward & Company v. Imperial Casualty Co. (2000) 81 Cal.App.4th 356, 97 Cal.Rptr.2d 44, the insured brought suit against four successive insurers seeking coverage under CGL policies for environmental contamination. Each policy contained a sizable self insured retention. The trial court dismissed the case on grounds that the SIRs were primary insurance, and under the rule of horizontal exhaustion applicable to primary policies, the insured was required to exhaust the SIRs under all potentially-applicable policies before the insurers had any obligation to indemnify.

In reversing, the Second District ruled that SIRs are not primary insurance to which the horizontal exhaustion rule applies, and the insurers had a duty to provide a defense beginning at the time the tender was first made. 

In Maryland Casualty Co. v. Nationwide Mutual Insurance Co. (2000) 81 Cal.App.4th 1082, 97 Cal.Rptr. 374, the CGL insurers for a general contractor brought suit against a subcontractor's insurer on which the general was named as an additional insured, seeking equitable subrogation and equitable contribution. The trial court found for the subcontractor's carrier, and the general's carrier appealed. The Fourth District reversed, holding that a duty to defense had existed.

On remand, the trial court entered a judgment for the general's carrier, shifting the entire defense burden to the subcontractor's carrier on a theory of equitable subrogation. The subcontractor's carrier then appealed. Finally, the Court of Appeal reversed again, holding that equitable subrogation does not apply, but equitable contribution is available to achieve equitable apportionment of the defense costs. 

On August 4, 1998, the First Appellate District in Fireman's Fund v. Maryland Casualty, 98 Daily 3ournal D.A.R. 8339, affirmed an award to Fireman's Fund of 50% of indemnity and defense costs against Maryland Casualty even though the co-insured had sued and settled with Maryland for breach of contract.

The court, in a lengthy discussion, explained the fundamental distinction between contribution among co-insurers of the same risk and equitable subrogation. A co-insurer has an independent right to force contribution from the non-contributing co-insurers. Subrogation is purely derivative of the insured's claim against the "primarily" liable party. The co-insurer's independent right to compel contribution requires the same primary level of liability on the same risk.