Communities and businesses throughout California are dealing with the serious, and for some, catastrophic effects of historic wildfires. The fires have devastated homes and businesses across a large swath of the state, and while their full impact is not yet known, they are sure to cause long-term disruption to individuals and families, residential areas, businesses and the economic health of the entire region. Our thoughts are with those affected by these events, and our interdisciplinary Severe Weather Emergency Recovery Team (“SWERT”) has prepared two resources that are immediately helpful to those in the affected areas: Continue reading “California Corner: Resources for Those Impacted by California Wildfires”
Most commercial general liability (“CGL”) policies contain standard, insurance industry-drafted language regarding an insurer’s duty to defend and indemnify its insured. The language typically states something like, the insurer “will pay those sums that the insured becomes legally obligated to pay as damages because of . . . ‘property damage’ to which this insurance applies. We will have the right and duty to defend the insured against any ‘suit’ seeking those damages.” Commercial General Liability Insurance Policy Form No. CG 00 01 04 13, § I, Coverage A.1.a. (Insurance Services Office, Inc. 2012). “Property Damage” is defined as “[p]hysical injury to tangible property, including all resulting loss of use of that property” or “[l]oss of use of tangible property that is not physically injured.” Id. at § V, ¶ 17.a and b.
The second definition of “property damage” provides coverage when the allegations do not amount to physical injury of tangible property. However, insurers often attempt to strictly narrow the coverage available by arguing that certain types of lost use are not covered because they are merely the loss of economic privileges that accompany the property, such as the right to hold a liquor license or to use the property a certain way via a permit. In other words, insurers often argue that “loss of use” of tangible property requires the total loss of all uses on the property, not merely some uses. The California Court of Appeal recently rejected this argument. See Thee Sombrero, Inc. v. Scottsdale Ins. Co., 28 Cal. App. 5th 729, 239 Cal. Rptr. 3d 416 (2018). Continue reading “California Corner: Loss of Use under Commercial General Liability Insurance Policies Includes the Inability to Use a Property in a Particular Manner”
Like a number of states, California prohibits insurers from indemnifying policyholders for liability based on intentional conduct that was committed with the intent to cause harm, although it does not bar a defense against such claims. California’s public policy is codified in Insurance Code Section 533, which provides: “An insurer is not liable for a loss caused by the wilful act of the insured; but he is not exonerated by the negligence of the insured, or of the insured’s agents or others.”
A significant body of law has elucidated the rules for application of Section 533. Reckless or grossly negligent conduct generally does not trigger application of the statute. Nor, with very limited exceptions, does the mere fact that a policyholder intended the act that caused the harm bring the conduct within Section 533. Instead, the policyholder must have intentionally performed a liability-producing act for the express purpose of causing harm or with knowledge that harm was highly probable or substantially certain to result. Fraud and malicious prosecution are common examples. Section 533, however, does not bar coverage for intentionally harmful acts based solely on vicarious liability. Continue reading “California Corner: California’s Bar on Coverage for Willful Acts under Insurance Code Section 533—Don’t Assume It Applies”
On June 28, 2018, California passed a historic privacy bill (AB 375) that mirrors some of the privacy obligations that recently came into effect in Europe under the General Data Protection Regulation (“GDPR”). The new California Consumer Privacy Act of 2018 (the “Act”) will go into effect on January 1, 2020. The new law requires greater transparency in information practices and gives individuals powerful new rights with respect to their personal information. Complying will be a challenge for many American businesses, in particular those that have not had to grapple with GDPR. Continue reading “California Corner: California Passes Historic Privacy Law: What to Consider Now to Reduce Future Financial Exposure”
Under California law, the insurer has the heavy burden of establishing there is no potential for coverage of an underlying claim. With respect to the duty to defend, “[t]o prevail, the insured must prove the existence of a potential for coverage, while the insurer must establish the absence of any such potential. In other words, the insured need only show that the underlying claim may fall within policy coverage; the insurer must prove it cannot.” Montrose Chem. Corp. v. Superior Court, 6 Cal. 4th 287, 300 (1993). The Ninth Circuit reconfirmed this fundamental principle earlier this year in Hanover Insurance Co. v. Paul M. Zagaris, Inc., No. 17-15477, 2018 U.S. App. LEXIS 5429 (9th Cir. March 2, 2018), when it upheld the district court’s decision that the insurer failed to establish that an exclusion for deceptive business practices applied to the entire proposed class action for an alleged kickback scheme. Continue reading “The Ninth Circuit Reconfirms that under California Law an Insurer Bears a Heavy Burden to Demonstrate an Exclusion Eviscerates Its Defense Duty”
Welcome to “California Corner,” dedicated to posts authored by our new team of Insurance Recovery attorneys based in our Los Angeles office. Partner Linda Kornfeld, who serves as vice chair of the Insurance Recovery group, Partner David Thomas and Of Counsel Julia Holt focus on national and California-specific issues, including property and weather-related business interruption issues, data breach and privacy issues, and professional liability, asbestos, and environmental liabilities. Their clients include telecommunications companies, universities, real estate developers, manufacturers, and nonprofit organizations around the country. We hope you find their perspectives informative and insightful!
Many companies in today’s global economy are dependent upon the efficient and disruption-free operation of their multinational supply chains. Unfortunately, such supply chains are vulnerable to numerous physical and non-physical elements, including natural disasters, information technology failures, cyberattacks, pandemics, climate change, and civil and political unrest. These vulnerabilities can, and often do, result in the disruption of business operations resulting in significant financial losses. Continue reading “Insurance Can Reduce the Financial Repercussions to Your Supply Chain of Superstorms, Wildfires, Climate Change, and Global Economic Disruptions”