U.S. Supreme Court, Keathley v. Buddy Ayers Construction, Inc.

Judicial Estoppel

 

Equitable Doctrine

 

Bankruptcy Proceedings

 

 

 

Judicial estoppel is an “equitable doctrine” intended “to protect the integrity of the judicial process,” both by “prohibiting parties from deliberately changing positions according to the exigencies of the moment,” and by preventing the “risk of inconsistent court determinations.” New Hampshire, 532 U. S., at 749–751.

 

Sometimes, as happened here, a debtor seeks to litigate a claim against a third party that he failed to disclose in his bankruptcy proceedings.

 

Some lower courts apply judicial estoppel to bar such lawsuits, reasoning that application of the doctrine “raises the cost of lying” and “induces debtors to be truthful in their bankruptcy filings.” Cannon-Stokes v. Potter, 453 F. 3d 446, 448 (CA7 2006).

 

The courts that apply judicial estoppel to claims in the bankruptcy context view the debtor’s failure to disclose a particular claim as an “implicit representation” that the claim does not exist. 18B C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure §4477.9 (3d ed. 2019 and Supp. 2026) (collecting cases). On this view, when the debtor files a lawsuit based on that claim, he has taken inconsistent positions in the two judicial proceedings “by asserting in the civil lawsuit that he has a claim against the defendant while denying under oath in the bankruptcy proceeding that the claim exists.” Slater v. United States Steel Corp., 871 F. 3d 1174, 1176 (CA11 2017) (en banc).

 

Based on that understanding, those lower courts have developed a general rule for the application of judicial estoppel in the bankruptcy context: “If a plaintiff-debtor omits a pending (or soon-to-be-filed) lawsuit from the bankruptcy schedules and obtains a discharge (or plan confirmation), judicial estoppel bars the action.” Ah Quin v. County of Kauai Dept. of Transp., 733 F. 3d 267, 271 (CA9 2013).

 

While this Court has never applied judicial estoppel in the bankruptcy context, in a different context we left open whether it “may be appropriate to resist application of judicial estoppel” when the party’s prior inconsistent position was due to “inadvertence or mistake.” New Hampshire, 532 U. S., at 753. For purposes of this opinion, we assume without deciding that judicial estoppel can apply in the bankruptcy context and that “inadvertence or mistake” can function as an exception to that application. Operating under those assumptions, the Fifth Circuit’s understanding of “inadvertence or mistake” is simultaneously too rigid and too broad.

 

The rigidity comes from the Fifth Circuit’s failure to fully recognize that “judicial estoppel is an equitable doctrine.” Id., at 750 (internal quotation marks omitted). As such, its “examination must be made in the light of the recognized principles of equity.” United States Nat. Bank v. Chase Nat. Bank, 331 U. S. 28, 36 (1947). Equity, we have said, “eschews mechanical rules; it depends on flexibility.” Holmberg v. Armbrecht, 327 U. S. 392, 396 (1946). Thus, when a court conducts an equitable inquiry, it must act “on a case-by-case basis,” considering all relevant facts and circumstances. Holland v. Florida, 560 U. S. 631, 649–650 (2010) (internal quotation marks omitted). In other words, equitable doctrines require room to consider all of the particulars.

 

By contrast, the Fifth Circuit’s rule allows courts to consider only two circumstances when assessing inadvertence or mistake: whether the debtor knew of the underlying facts of the claim, and whether there was a potential motive to conceal the claim. See In re Coastal Plains, Inc., 179 F. 3d 197, 210 (CA5 1999); Love, 677 F. 3d, at 262. And under

this rule, a court may not look at any other evidence tending to show that the omission was inadvertent. That rigidity is out of step with equity. To determine whether the omission was inadvertent or a mistake, the Fifth Circuit instead should have examined the totality of the circumstances surrounding Keathley’s failure to report his personal-injury claims earlier. See, e.g., Ah Quin, 733 F. 3d, at 276 (“Rather than applying a presumption of deceit, judicial estoppel requires an inquiry into whether the plaintiff ’s bankruptcy filing was, in fact, inadvertent or mistaken, as those terms are commonly understood” (emphasis added and deleted)).

 

The Fifth Circuit’s rule is not only overly rigid; it is also overly broad. In particular, the Fifth Circuit holds that an omission falls outside of the exception any time a debtor knows certain facts or could potentially benefit from non-disclosure of a claim. But it is rare for a debtor to be unaware of the underlying facts of his claim, and a debtor will almost always hypothetically benefit from not revealing such a claim to his creditors. In essence, then, the Fifth Circuit’s approach is a one-size-fits-all test that requires courts to view as purposeful nearly every bankruptcy omission. Indeed, the decision below acknowledged as much, noting that, under Fifth Circuit precedent, the potential-motive element “‘is almost always met if a debtor fails to disclose a claim or possible claim to the bankruptcy court.’” 2025 WL 673434, *5 (quoting Love, 677 F. 3d, at 262).

 

The overbreadth of the Fifth Circuit’s rule (the fact that it almost always is satisfied) makes it patently incompatible with an inadvertence-or-mistake standard, which suggests that circumstances—and outcomes—may vary. A near-dispositive criterion is a poor fit for a fair inquiry into whether an omission is actually the result of inadvertence or mistake.

 

Today’s decision is straightforward. The Fifth Circuit artificially narrowed its inquiry into whether Keathley’s bankruptcy-schedule omission was the result of inadvertence or mistake by assessing only whether he had knowledge of the underlying facts or a potential motive to conceal his personal-injury suit. That was error. Accordingly, we vacate the judgment of the Court of Appeals for the Fifth Circuit and remand the case for further proceedings consistent with this opinion.

 

(The parties also dispute at some length whether bad faith is required for judicial estoppel to apply (...) In light of our narrow holding - responding only to the analysis used by the Fifth Circuit - we need not resolve any further questions about the application of judicial estoppel in the bankruptcy context).

 

(U.S. Supreme Court, June 11, 2026, Keathley v. Buddy Ayers Construction, Inc., J. Jackson, Unanimous)

 

 

 

 

 

U.S. Supreme Court, CC/Devas (Mauritius) Ltd. v. Antrix Corp., 605 U.S. 223

Foreign Sovereign Immunity

 

Personal Jurisdiction over a Foreign Sovereign

 

Subject-Matter Jurisdiction

 

Immunity Exception Applies and Service of Process

 

Minimum Contacts?

 

 

 

 

Held: Personal jurisdiction exists under the FSIA when an immunity exception applies and service is proper. The FSIA does not require proof of “minimum contacts” over and above the contacts already required by the Act's enumerated exceptions to foreign sovereign immunity.

 

 

Under the Foreign Sovereign Immunities Act of 1976 (FSIA), 28 U. S. C. §§ 1330, 1602 et seq., foreign states are generally immune from suit in United States courts, but the Act creates several exceptions. See §§ 1604, 1605–1607. And when an exception applies, § 1330(a) of the FSIA vests federal courts with “original jurisdiction” over such claims.

 

 

This suit concerns the FSIA's neighboring personal-jurisdiction provision. It provides that “personal jurisdiction over a foreign state shall exist” whenever (1) an exception to foreign sovereign immunity applies, and (2) the foreign defendant has been properly served. § 1330(b). In the decision below, however, the Ninth Circuit imposed a third requirement: a plaintiff must also prove that the foreign state has made “minimum contacts” with the United States sufficient to satisfy the jurisdictional test set forth in International Shoe Co. v. Washington, 326 U. S. 310, 316 (1945), and its progeny. Because the Ninth Circuit's additional requirement goes beyond the text of the FSIA, we reverse.

 

 

For much of American history, foreign states and their instrumentalities enjoyed near total immunity from suit in our courts. See Hungary v. Simon, 604 U. S. 115, 118–119 (2025). This posture reflected the venerable international law principle that states are independent sovereign entities, and it encouraged others to respect the sovereignty of the United States in their courts. Bolivarian Republic of Venezuela v. Helmerich & Payne Int'l Drilling Co., 581 U. S. 170, 179 (2017). Notably, this immunity was not statutorily or constitutionally required. Instead, we have long understood foreign sovereign immunity as “a matter of grace and comity,” so judges historically “`deferred to the decisions of the political branches—in particular, those of the Executive Branch—on whether to take jurisdiction' over particular actions against foreign sovereigns and their instrumentalities.” Republic of Austria v. Altmann, 541 U. S. 677, 689 (2004) (quoting Verlinden B. V. v. Central Bank of Nigeria, 461 U. S. 480, 486 (1983)). In practice, that usually entailed the State Department filing a case-specific “`suggestion of immunity’” whenever a foreign sovereign was sued, and when that occurred, the court would abide by the suggestion. Samantar v. Yousuf, 560 U. S. 305, 311 (2010) (quoting Ex parte Peru, 318 U. S. 578, 581 (1943)).

 

 

The Act also waives immunity for suits to confirm arbitration awards. §1605(a)(6). The arbitration exception applies in four statutorily defined contexts, including where the “agreement or award” is “governed by a treaty or other international agreement in force for the United States calling for the recognition and enforcement of arbitral awards.” §1605(a)(6)(B). The United States, for instance, has acceded to the New York Convention, which requires it to enforce certain awards issued abroad. See Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U. S. T. 2517, T. I. A. S. No. 6997;

9 U. S. C. §§ 201–208. In such instances, and when the FSIA is otherwise satisfied, the arbitration exception would also apply.

Whenever an FSIA immunity exception applies, jurisdiction usually follows.

 

 

(…) To the extent that some or all FSIA exceptions satisfy International Shoe, it is only because the exceptions Congress wrote happen to meet that standard, not because § 1330(b) secretly incorporated our jurisdictional due-process cases.

 

 

(…) See Republic of Sudan v. Harrison, 587 U. S. 1, 4–5, 8–13 (2019) (discussing § 1608's specialized service-of-process rules).

 

 

28 U. S. C. § 1330(b) provides:

 

“Personal jurisdiction over a foreign state shall exist as to every claim for relief over which the district courts have subject-matter jurisdiction under subsection (a) where service has been made under section 1608 of this title.”

 

 

Restatement (Fourth) of Foreign Relations Law of the United States § 451, Comment b (2017).

 

 

 

 

(U.S. Supreme Court, June 5, 2025, CC/Devas (Mauritius) Ltd. v. Antrix Corp., 605 U.S. 223, J. Alito, Unanimous)

U.S. Supreme Court, CC/Devas (Mauritius) Ltd. v. Antrix Corp., 605 U.S. 223

Remand

 

Forfeiture

 

Waiver

 

 

 

(…) We decline to answer those questions today. The Ninth Circuit relied exclusively on its interpretation of the FSIA's personal-jurisdiction provision, so that court has not yet addressed Antrix's alternative arguments. “And, for that reason, neither shall we.” F. Hoffmann-La Roche Ltd v. Empagran S. A., 542 U. S. 155, 175 (2004); accord, United States v. Oakland Cannabis Buyers' Cooperative, 532 U. S. 483, 494 (2001). Of course, Antrix is welcome to litigate these contentions on remand consistent with principles of forfeiture and waiver.

 

 

 

(U.S. Supreme Court, June 5, 2025, CC/Devas (Mauritius) Ltd. v. Antrix Corp., 605 U.S. 223, J. Alito, Unanimous)

 

 

 

 

California Court of Appeal, Bartel v. Chicago Title Insurance Co., Docket No. H052083

Punitive Damages

 

Clear and Convincing Standard

 

Insurance Law

 

California Law

 

 

 

“In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.” (Civ. Code, §3294, subd. (a).) A plaintiff is never entitled to punitive damages as a matter of right. (Uzyel v. Kadisha (2010) 188 Cal.App.4th 866, 923.) Rather, “a claim for punitive damages requires ‘evidence which establishes by “clear and convincing evidence” that the defendant has been “guilty of oppression, fraud, or malice.” If a plaintiff is to recover on such a claim, it will be necessary that the evidence presented meet this higher evidentiary standard.’” (Food Pro, supra,169 Cal.App.4th at p.994; see Civ. Code, §3294, subd. (a).) In the context of failure to properly administer an insurance claim, punitive damages are ordinarily “based on ‘malice’ or ‘oppression,’ rather than on the third possible ground for the award, ‘fraud.’ Both ‘malice’ and ‘oppression’ are defined in Civil Code section 3294 as involving ‘despicable conduct,’ which in the case of malice ‘is carried on by the defendant with a willful and conscious disregard of the rights or safety of others,’ and as to oppression is ‘conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.’” (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1286–1287 (Tomaselli).) We review de novo whether the undisputed facts underlying Chicago Title’s claim handling in this case satisfy the requirements of Civil Code section 3294, subdivision (a).  (See Ghirardo, supra, 8 Cal.4th at p.801.)

 

 

(…) Furthermore, we have determined that the manner in which Chicago Title repeatedly rejected tender in the face of a clear duty to defend amounted to bad faith. Nevertheless, we are not persuaded that Chicago Title’s bad faith refusal to defend Bartel under the policy until partway through Composti III rises to the level of malice or oppression within the meaning of Civil Code section 3294.

 

 

The heightened legal standard for imposing punitive damages guides our determination. “Under the clear and convincing standard, the evidence must be ‘“‘“so clear as to leave no substantial doubt”’”’ and ‘“‘“sufficiently strong to command the unhesitating assent of every reasonable mind.”’’”’” (Butte Fire Cases (2018) 24 Cal.App.5th 1150, 1158.) This stringent standard must be accompanied by evidence of “‘malice,’” defined as “conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights ...of others” (Civ. Code, §3294, subd. (c)(1)), or “‘oppression,’” defined as “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights” (id., subd. (c)(2)). “‘Despicable conduct’ is conduct that is ‘“so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people.”’ ” (Butte Fire Cases, at p.1159.)

 

 

 

(California Court of Appeal, Bartel v. Chicago Title Insurance Co., May 30, 2025, Docket No. H052083, Certified for Publication)

 

 

California Court of Appeal, Bartel v. Chicago Title Insurance Co., Docket No. H052083

Statute of Limitations

 

Equitable Tolling

 

Insurance Law

 

Duty to Defend

 

California Law

 

 

 

(…) Chicago Title contends the trial court erred in applying equitable tolling to reject its statute of limitations defense and deciding Bartel’s title insurance action was timely. Bartel counters that the interim judgment properly rejected Chicago Title’s statute of limitations defense and applied equitable tolling consistent with the California Supreme Court’s decision in Lambert, 53 Cal.3d 1072, and with the primary right doctrine. Bartel asserts in the alternative that, even assuming equitable tolling paused upon the dismissals of Composti I and Composti II, it resumed when Bartel timely reasserted tender of defense based on Composti III.

 

 

(Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191(Aryeh).) “A plaintiff must bring a claim within the limitations period after accrual of the cause of action.” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 806; see Code Civ. Proc., § 312.) A cause of action typically “accrues at ‘the time when the cause of action is complete with all of its elements.’” (Fox, at p. 806.) “Actions on title insurance policies are subject to a two-year statute of limitation. (Code Civ. Proc., § 339, subd. (1).)” (Lee v. Fidelity National Title Ins. Co. (2010) 188 Cal.App.4th 583, 599.) Accrual of a cause of action upon a contract or policy of title insurance does not occur “until the discovery of the loss or damage suffered by the aggrieved party thereunder.” (Code Civ. Proc., §339, subd. (1).) Certain equitable exceptions “may alter the rules governing either the initial accrual of a claim, the subsequent running of the limitations period, or both.” (Aryeh, supra, 55 Cal.4th at p.1192.) These exceptions exist “to align the actual application of the limitations defense more closely with the policy goals animating it.”  (Ibid.) Equitable tolling, applied by the trial court here, “may suspend or extend the statute of limitations when a plaintiff has reasonably and in good faith chosen to pursue one among several remedies and the statute of limitations’ notice function has been served.” (Ibid.)

 

In Lambert, our Supreme Court examined whether a cause of action under a title insurance policy alleging a failure to defend accrues when the insurer refuses to defend or when the underlying action is terminated by final judgment. (Lambert, supra, 53 Cal.3d at p.1074.) After considering the statutory language and policies underlying the duty to defend, the court concluded that “although the statutory period commences upon the refusal to defend, it is equitably tolled until the underlying action is terminated by final judgment.” (Id. at p.1077.) While resolution of the statute of limitations is normally a question for the trier of fact, the application of the statute of limitations on undisputed facts is a purely legal question that we review de novo. (Aryeh, supra, 55 Cal.4th at p.1191; see Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1112.)

 

 

We agree with the parties that Lambert guides our resolution of the application of the statute of limitations here. In that decision, our Supreme Court explained, “The duty to defend in a title insurance case is governed by the same principles which govern the duty to defend under general liability policies. The duty commences upon tender of the defense, and continues until the underlying lawsuit is concluded.”  (Lambert, supra, 53 Cal.3d at p.1077.) In rejecting a prior appellate decision that had held that the statute of limitations begins to run upon the rejection of tender, the court stated that such a rule “would allow expiration of the statute of limitations on a lawsuit to vindicate the duty to defend even before the duty itself expires. This grim result is untenable. The insured must be allowed the option of waiting until the duty to defend has expired before filing suit to vindicate that duty.” (Ibid.) The Supreme Court held that the statute of limitations begins to run “upon accrual, which in this case occurs upon the refusal to defend.” (Lambert, supra, 53 Cal.3d at p.1078.) It further decided that the statute of limitation should be equitably tolled between accrual and a final judgment. It reasoned, “the duty to defend is a continuing duty. It is equitable and consistent with the legislative intent to toll the limitations period in which this duty continues from the date of accrual of a cause of action to final judgment.” (Id. at p.1079.)

 

 

The Supreme Court emphasized that its decision was grounded in equitable principles: “It is harsh to require an insured—often a private homeowner—to defend the underlying action, at the homeowner’s own expense, and simultaneously to prosecute—again at the homeowner’s own expense—a separate action against the title company for failure to defend. ‘The unexpected burden of defending an action may itself make it impractical to immediately bear the additional cost and hardship of prosecuting a collateral action against an insurer.’” (Lambert, supra, 53 Cal.3d at p.1078.) The court reasoned that this rule would not prejudice the insurer. “By tendering defense of a third party action to an insurer, the insured will have put the insurer on notice that it may be required under the policy to defend the action. Thus, the insured [sic] will be aware that it must take the steps necessary to prepare and preserve a defense to an action by its insured.” (Id. at p. 1079.) Moreover, an insured has the option of bringing suit against the insurer prior to the entry of final judgment in the underlying litigation. Nothing “prohibits the insured from commencing an action once the insurer has refused a tender of defense. We merely conclude that the insured is not required to do so.” (Id. at p.1080.)

 

 

Applying the principles articulated in Lambert to the facts here, we decide that Bartel’s title insurance action against Chicago Title was timely. Composti filed Composti I, which asserted a right-of-way easement benefiting Composti’s parcel over Bartel’s parcel, on May 25, 2010. Bartel tendered defense to Chicago Title in Composti I on March 18, 2011, triggering Chicago Title’s duty to defend. (See Buss v. Superior Court (1997) 16 Cal.4th 35, 46 (Buss) [stating the duty to defend “arises as soon as tender is made”].)

 

 

On July 27, 2011, Chicago Title declined (in connection with Composti II) to accept tender. Bartel’s claim against Chicago Title therefore accrued on July 27, 2011. Under the principles articulated in Lambert, the claim was equitably tolled until October 16, 2012, the date on which Composti II was dismissed without prejudice. Beginning on that date, Bartel had two years—that is, until October 16, 2014—to bring a claim against Chicago Title for violation of its duty to defend in Composti I and Composti II.

 

 

We reject Bartel’s contention that equitable tolling continues after a dismissal without prejudice. The duty to defend is bound to the pendency of the underlying action and terminates upon its conclusion. Once dismissed, there is no pending action on that claim, regardless of whether a future action arises. (See Abatti v. Imperial Irrigation Dist. (2012) 205 Cal.App.4th 650, 666 [“Claims that have been dismissed, whether with or without prejudice, are not ‘pending.’”].) (Fn. 10).

 

 

On September 5, 2014 (over one month before the running of the statute of limitations from the dismissal of Composti II), Bartel again tendered defense to Chicago Title. Under the Supreme Court’s analysis in Lambert, this tender of defense triggered Chicago Title’s duty to defend.  (See Lambert, supra, 53 Cal.3d at p.1077 [“The duty commences upon tender of the defense, and continues until the underlying lawsuit is concluded.”].) We decide that, on these facts, Bartel’s tender of the defense equitably tolled the statute of limitations for bringing suit against Chicago Title as of the date of the tender.  

 

 

 

(California Court of Appeal, Bartel v. Chicago Title Insurance Co., May 30, 2025, Docket No. H052083, Certified for Publication)

 

 

 

 

 

California Court of Appeal, Bartel v. Chicago Title Insurance Co., Docket No. H052083

Prejudgment Interest

 

California Law

 

 

 

Prejudgment interest “‘provides just compensation to the injured party for loss of use of the award during the prejudgment period—in other words, to make the plaintiff whole as of the date of the injury.’” (Hewlett-Packard Co. v. Oracle Corp. (2021) 65 Cal.App.5th 506, 574 (Hewlett-Packard).) Code of Civil Procedure section 3287, subdivision (b), applicable here, “governs cases involving unliquidated contract claims and grants the court discretion to award prejudgment interest from a date no earlier than the filing of the action.” (Hewlett-Packard, at p. 574.) We review the court’s ruling on prejudgment interest under the statute for abuse of discretion. (Ibid.) An abuse of discretion occurs when the court’s ruling “is ‘so irrational or arbitrary that no reasonable person could agree with it.’” (Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747, 773.) Conversely, we will uphold a court’s exercise of discretion “‘if it is based on a “reasoned judgment” and complies with the “legal principles and policies appropriate to the particular matter at issue.”’” (Hewlett-Packard, at pp. 574–575, quoting Bullis v. Security Pac. Nat. Bank (1978) 21 Cal.3d 801, 815.)

 

 

An award of prejudgment interest on an unliquidated contractual claim is discretionary under Code of Civil Procedure section 3287, subdivision (b), including identifying the date from which interest runs, so long as the date does not precede the filing of the action. (Hewlett-Packard, supra, 65 Cal.App.5th at p. 574; North Oakland Medical Clinic v. Rogers (1998) 65 Cal.App.4th 824, 829.) Absent any evidence or indication in the record that the court failed to properly exercise its discretion, considered inappropriate factors in making its determination, or exceeded the bounds of reasonable judgment, we conclude the trial court did not abuse its discretion in awarding prejudgment interest.

 

 

 

 

(California Court of Appeal, Bartel v. Chicago Title Insurance Co., May 30, 2025, Docket No. H052083, Certified for Publication)

 

California Court of Appeal, Bartel v. Chicago Title Insurance Co., Docket No. H052083

Insurance Law

 

Duty to Defend

 

California Law

 

 

 

Bartel’s title insurance policy, obtained from Chicago Title in 1998, states in relevant part as to coverage: “Subject to the exclusions from coverage, the exceptions from coverage contained in schedule B and the conditions and stipulations ...[Chicago Title] insures, as of [the policy date] against loss or damage...sustained or incurred by the insured by reason of: 1. Title to the estate or interest described in schedule A being vested other than as stated therein; 2. Any defect in or lien or encumbrance on the title.”

 

 

Regarding the defense and prosecution of actions, the policy states:  “Upon written request by an insured and subject to the options contained in ...these conditions and stipulations, [Chicago Title] at its own cost and without unreasonable delay, shall provide for the defense of such insured in litigation in which any third party asserts a claim adverse to the title or interest as insured.” In the event of any litigation, the policy provides that Chicago Title “shall have no liability for loss or damage until there has been a final determination by a court of competent jurisdiction, and disposition of all appeals therefrom, adverse to the title...as insured.” As to the exceptions from coverage, the policy states: “This policy does not insure against loss or damage ...which arise by reason of” certain matters specified in parts I and II of schedule B, including “3. Easements, liens or encumbrances, or claims thereof, which are not shown by the public records”; and “5. A road maintenance agreement, including the terms, covenants, provisions and assessments, as contained in the agreement entered into by and between: Mary Swafford, et al. Recorded: September 2, 1970 in Book 2039, Page 369, Official Records of Santa Cruz County Instrument No. 23843” (followed by a list of recorded amendments to the road maintenance agreement).

 

 

“The duty to defend is guided by several well-established principles.” (Hartford Casualty Ins. Co. v. Swift Distribution, Inc. (2014) 59 Cal.4th 277, 287 (Hartford).) “An insurer owes a broad duty to defend against claims that create a potential for indemnity under the insurance policy.  (Gray [, supra,] 65 Cal.2d 263, 277–278.) An insurer must defend against a suit even ‘“where the evidence suggests, but does not conclusively establish, that the loss is not covered.”’ (Montrose [, supra,] 6 Cal.4th 287, 299.)” (Ibid.) “Any doubt as to whether the facts give rise to a duty to defend is resolved in the insured’s favor.” (Horace Mann, supra, 4 Cal.4th at p.1081.) “The insurer has a duty to defend the insured as to the claims that are at least potentially covered.” (Buss, supra, 16 Cal.4th at p.49.) “The determination whether the insurer owes a duty to defend usually is made in the first instance by comparing the allegations of the complaint with the terms of the policy. Facts extrinsic to the complaint also give rise to a duty to defend when they reveal a possibility that the claim may be covered by the policy.” (Horace Mann, at p.1078; accord Hartford, at p.287.) “This includes all facts, both disputed and undisputed, that the insurer knows or ‘“becomes aware of”’ from any source [citation] ‘if not “at the inception of the third party lawsuit,” then “at the time of tender.”’ ” (Hartford, at p.287.)

 

 

The California Supreme Court has recognized that its opinion in “Gray made clear that facts known to the insurer and extrinsic to the third party complaint can generate a duty to defend, even though the face of the complaint does not reflect a potential for liability under the policy. [Citation.] This is so because current pleading rules liberally allow amendment; the third party plaintiff cannot be the arbiter of coverage.”  (Montrose, supra, 6 Cal.4th at p. 296.) Stated differently, “‘That the precise causes of action pled by the third party complaint may fall outside policy coverage does not excuse the duty to defend where, under the facts alleged, reasonably inferable, or otherwise known, the complaint could fairly be amended to state a covered liability.’ [Citation.]  Thus, ‘if any facts stated or fairly inferable in the complaint, or otherwise known or discovered by the insurer, suggest a claim potentially covered by the policy, the insurer’s duty to defend arises and is not extinguished until the insurer negates all facts suggesting potential coverage.’” (Hartford, supra, 59 Cal.4th at p. 287.) To determine whether the insurer owed the insured a duty to defend, the reviewing court examines the insurance policy at issue. (Hameid v. National Fire Ins. of Hartford (2003) 31 Cal.4th 16, 21 (Hameid).) “Insurance policy interpretation is a question of law.” (Ibid.; accord, Hartford, supra, 59 Cal.4th at p. 288.)  Appellate courts “apply an independent standard of review to decisions interpreting, constructing, and applying insurance policies to determine the scope of actual or potential coverage.” (Food Pro Internat., Inc. v. Farmers Ins. Exchange (2008) 169 Cal.App.4th 976, 984–985 (Food Pro); see also Atlantic Mutual Ins. Co. v. J. Lamb, Inc. (2002) 100 Cal.App.4th 1017, 1031.)

 

 

(…) See Howard v. American National Fire Ins. Co. (2010) 187 Cal.App.4th 498, 520 (Howard) [“‘If coverage depends on an unresolved dispute over a factual question, the very existence of that dispute would establish a possibility of coverage and thus a duty to defend.’”].)

 

 

(…) As our Supreme Court has repeatedly emphasized, “the duty to defend is broader than the duty to indemnify; an insurer may owe a duty to defend its insured in an action in which no damages ultimately are awarded.” (Horace Mann, supra, 4 Cal.4th at p.1081; Buss, supra, 16 Cal.4th at p.46.)

 

 

(…) While it may be true that Chicago Title was not required to speculate about unpleaded theories of easement, it was obligated to investigate whether the extrinsic facts known to it at tender raised a possibility of liability within the scope of the policy’s coverage. “The carrier must defend a suit which potentially seeks damages within the coverage of the policy” (Gray, supra, 65 Cal.2d at p.275) and “cannot construct a formal fortress of the third party’s pleadings and retreat behind its walls. The pleadings are malleable, changeable and amendable.” (Id. at p.276.)

 

 

(…) General rule that a liability ‘“insurer who has had an opportunity to defend [the underlying action brought against its insured] is bound by the judgment against its insured as to all issues which were litigated in the action,”’” provided the insurer had proper notice of the pendency of that action. (Pruyn v. Agricultural Ins. Co. (1995) 36 Cal.App.4th 500, 515 (Pruyn); see Hogan v. Midland National Ins. Co. (1970) 3 Cal.3d 553, 564.)

 

 

(…) In Foster-Gardner, the California Supreme Court confirmed the distinction between insurance policy terminology pertaining to a “‘suit’” (referring to “actual court proceedings initiated by the filing of a complaint”) (id. at p. 878) and a “‘“claim”’” (referring to “any number of things” that “‘may ultimately ripen into a suit’”) (id. at p.879). The court held that due to these differences, a precomplaint notice to an insured party regarding its responsibility for environmental pollution remediation does not trigger the insurer’s duty to defend a “‘suit.’” (Id. at p. 880.)

 

 

(…) These cases reinforce the proposition that an insurer who wrongfully refuses to provide its insured with a defense will be bound by the outcome based on the insured’s good faith efforts to resolve the matter. (See Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 660 [“An insurer who denies coverage does so at its own risk, and, although its position may not have been entirely groundless, if the denial is found to be wrongful it is liable for the full amount which will compensate the insured for all the detriment caused by the insurer’s breach of the express and implied obligations of the contract.”].)

 

 

(…) Bartel maintains that he was not required to renew tender after Chicago Title wrongfully refused to defend him in the first two underlying actions. The cases cited by Bartel for this point are factually distinguishable in that they involve a single underlying action, in which the insurer denied coverage, and the insured was “thereby relieved of his obligation to notify the insurance company of the progress of the action against him.” (Samson, supra, 30 Cal.3d at p. 238.) The cases cited by Bartel that absolve an insured of the need to renotify the insurer after the wrongful denial of a tender for defense do not address circumstances in which the alleged liability for the insured’s attorney fees and expenses extends to preparations for a separate action from that in which the insurer had notice. (See, e.g., Samson, at pp. 238–239; Stalberg, supra, 230 Cal.App.3d at p. 1233 [holding that when insurer refused plaintiffs’ tender of their appeal in the underlying action, it “gave up the right to control the litigation and could not insist that plaintiffs use” a specific law firm to cover the attorney’s fees on appeal]; Moe, supra, 21 Cal.App.3d at p. 302 [declining to enforce notice clause in insurance contract absent a showing of prejudice to the insurer due to the delayed notice and where insurer was aware of the pending claim].)

 

 

 

(California Court of Appeal, Bartel v. Chicago Title Insurance Co., May 30, 2025, Docket No. H052083, Certified for Publication)