California Court of Appeal, California Fair Plan Association v. Lara, as Insurance Commissioner, Docket No. B336043

Basic Property Insurance Inspection and Placement Plan

 

California FAIR Plan Association (CFPA)

 

California Law

 

 

 

APPEAL from a judgment of the Superior Court, Los Angeles County, Curtis A. Kin, Judge. Reversed with directions.

 

In 1968, our Legislature enacted the “Basic Property Insurance Inspection and Placement Plan” (the Basic Property Insurance Law, Ins. Code, §§10090–10100.2). To meet its defined goals, the law established a joint reinsurance association known as the California FAIR Plan Association (CFPA). (§10090, subd. (d).) CFPA is the insurer of last resort in this state, statutorily mandated to offer basic property insurance to any “persons having an interest in real or tangible personal property who, after diligent effort ..., are unable to procure such insurance through normal channels from an admitted insurer.” (§ 10094, subd. (a); St. Cyr v. California FAIR Plan Assn. (2014) 223 Cal.App.4th 786, 793 (St. Cyr).) This appeal concerns the statutory definition of “basic property insurance.” The law defines the term as follows: “‘Basic property insurance’ means insurance against direct loss to real or tangible personal property at a fixed location in those geographic or urban areas, as designated by the Insurance Commissioner of this state, from perils insured under the standard fire policy and extended coverage endorsement, from vandalism and malicious mischief, and includes other insurance coverages as may be added with respect to that property by the industry placement facility with the approval of the commissioner or by the commissioner, but shall not include insurance on automobile risks, commercial agricultural commodities or livestock, or equipment used to cultivate or transport agricultural commodities or livestock.” (§ 10091, subd. (c)(1), italics added. 

 

 

(FAIR is an acronym that refers to “fair access to insurance requirements.” (§ 10090, subd. (d).) As we will discuss, the Basic Property Insurance Law’s purposes are (1) to assure stability in the property insurance market, (2) to assure the availability of basic property insurance as defined in the law, (3) to encourage the maximum use of the normal insurance market in obtaining basic property insurance, and (4) to provide for the equitable distribution among admitted insurers of the responsibility for insuring qualified property for which basic property insurance cannot be obtained through the normal insurance market. (§10090.) Fn. 2).

 

(As we will discuss, section 10091, subdivision (c)(2) refines this definition to specify that, “for the purposes of earthquake coverage that is provided as a component of basic property insurance, the association shall sell only the policy described in Section 10089.”) Fn. 3).

 

 

Plaintiff and appellant CFPA petitioned the trial court for a writ of mandate directing the Commissioner to withdraw, annul, or vacate a 2021 order directing CFPA to submit a plan to offer and sell a “‘Homeowners’ Policy’” that provides coverage for, among other things, “premises liability” and “incidental workers’ compensation” (Order No. 2021-2). The trial court found the “other insurance coverages” phrase ambiguous and, in deference to the interpretation advanced by the Department of Insurance (DOI), construed the statute to authorize the addition of liability insurance coverages, so long as those coverages “have some connection to the property.”  We reach a different conclusion. While we agree the statutory definition is susceptible of DOI’s interpretation, our review of the statutory scheme and the historical context of the law’s passage compel us to conclude that the Legislature’s intent in enacting the Basic Property Insurance Law was to ensure that first-party property insurance—not liability coverage—would be available to property owners in this state. We therefore reverse the judgment and direct the trial court to grant the petition for writ of mandate.

 

(…)

 

 

(California Court of Appeal, Dec. 5, 2025, California Fair Plan Association v. Lara, as Insurance Commissioner, Docket No. B336043, Certified for Publication)

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

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)

 

 

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

Insurance Law

 

Coverage

 

Genuine Dispute Doctrine

 

Third Party Duty to Defend

 

Bad Faith

 

California Law

 

 

 

(…)

 

(Chateau Chamberay, supra, 90 Cal.App.4th at p. 346; see Century Surety Co. v. Polisso (2006) 139 Cal.App.4th 922, 949 [genuine dispute doctrine “holds that an insurer does not act in bad faith when it mistakenly withholds policy benefits, if the mistake is reasonable or is based on a legitimate dispute as to the insurer’s liability”].) Numerous state and federal decisions have recognized the genuine dispute doctrine is not compatible with the principles that govern third party duty to defend cases, in which the possibility of coverage triggers the duty. (See, e.g., Mt. Hawley, supra, 215 Cal.App.4th at p.1424; Howard, supra,187 Cal.App.4th at p. 530; Harbison v. American Motorists Ins. Co. (E.D. Cal. 2009) 636 F.Supp.2d 1030, 1040.)

 

 

 

(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

 

Bad Faith Claim

 

Breach of the Implied Covenant of Good Faith and Fair Dealing

 

Range of Possible Damages

 

Availability of Tort Remedies

 

Recovery of Attorney Fees in This Context—Often Called Brandt Fees

 

Emotional Distress

 

Declaratory Relief

 

California Law

 

 

 

“The law implies in every contract, including insurance policies, a covenant of good faith and fair dealing.” (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 720.) “‘The implied promise requires each contracting party to refrain from doing anything to injure the right of the other to receive the agreement’s benefits.’” (Ibid.; see Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 818 (Egan).) In other words, it “ ‘imposes upon each party the obligation to do everything that the contract presupposes they will do to accomplish its purpose.’” (Chateau Chamberay Homeowners Assn. v. Associated Internat. Ins. Co. (2001) 90 Cal.App.4th 335, 345 (Chateau Chamberay).) “An insurer is said to act in ‘bad faith’ when it not only breaches its policy contract but also breaches its implied covenant to deal fairly and in good faith with its insured.”  (Jordan v. Allstate Ins. Co. (2007) 148 Cal.App.4th 1062, 1071.) In this context, “the term ‘bad faith’ is used as “a shorthand reference to a claimed breach by the insurer of the covenant of good faith and fair dealing.” (Bosetti v. United States Life Ins. Co. in City of New York (2009) 175 Cal.App.4th 1208, 1235.) “An insurer’s tortious ‘breach of the implied covenant of good faith and fair dealing involves something beyond breach of the contractual duty itself.’” (Howard, supra,187 Cal.App.4th at p. 528.) That is, “an insurer’s responsibility to act fairly and in good faith in handling an insured’s claim ‘is not the requirement mandated by the terms of the policy itself—to defend, settle, or pay. It is the obligation ...under which the insurer must act fairly and in good faith in discharging its contractual responsibilities.’” (California Shoppers, Inc. v. Royal Globe Ins. Co. (1985) 175 Cal.App.3d 1, 15, quoting Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 573–574.)“ In simple terms, an insurer’s tortious bad faith conduct is conduct that is unreasonable.” (Howard, at p. 529.)

Reasonableness is an objective standard (Bosetti, at p.1237) and must be evaluated as of the time of the insurer’s decisions and actions, not “in the light of subsequent events that may provide evidence of the insurer’s errors.” (Chateau Chamberay, at p.347.)

 

 

“Ordinarily, reasonableness is a factual issue to be decided by a jury.”  (Fadeeff v. State Farm General Ins. Co. (2020) 50 Cal.App.5th 94, 102.)  However, the reasonableness of an insurer’s conduct “can be decided as a matter ‘of law where the evidence is undisputed and only one reasonable inference can be drawn from the evidence.’” (Ghazarian v. Magellan Health, Inc. (2020) 53 Cal.App.5th 171, 186–187; accord Chateau Chamberay, supra, 90 Cal.App.4th at pp.346, 350; Mt. Hawley Ins. Co. v. Lopez (2013) 215 Cal.App.4th 1385, 1424 (Mt. Hawley).)

 

 

The relevant facts related to Bartel’s tender requests and Chicago Title’s investigation and denials of tender are neither in dispute nor susceptible to competing reasonable inferences. We therefore review the trial court’s determination on Bartel’s bad faith claim de novo, and we do not defer to the trial court’s determination that Chicago Title did not act in bad faith. Regarding the legal principles governing Bartel’s claim for damages in relation to Chicago Title’s alleged breach of the implied covenant of good faith and fair dealing, a finding of bad faith exposes the insurer to a broad range of possible damages. (See Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390, 400 [“The availability of tort remedies in the limited context of an insurer’s breach of the covenant [of good faith and fair dealing] advances the social policy of safeguarding an insured in an inferior bargaining position who contracts for calamity protection, not commercial advantage”].) Such damages include any damages, including attorney fees, that are the proximate result of the insurer’s breach of the implied covenant of good faith and fair dealing. (Brandt v. Superior Court (1985) 37 Cal.3d 813, 817(Brandt); see Civ. Code, § 3333.) The recovery of attorney fees in this context—often called Brandt fees—is an exception to the generally applicable rule that parties to a lawsuit must ordinarily pay their own fees. (Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 806 (Cassim).) “If an insurer fails to act fairly and in good faith when discharging its responsibilities concerning an insurance contract, such breach may result in tort liability for proximately caused damages. Those damages can include the insured’s cost to hire an attorney to vindicate the insured’s legal rights under the insurance policy. ‘When an insurer’s tortious conduct reasonably compels the insured to retain an attorney to obtain the benefits due under a policy, it follows that the insurer should be liable in a tort action for that expense. The attorney’s fees are an economic loss—damages—proximately caused by the tort. [Citation.] These fees must be distinguished from recovery of attorney’s fees qua attorney’s fees, such as those attributable to the bringing of the bad faith action itself.’ ” (Ibid., quoting Brandt, supra, 37 Cal.3d at p. 817.) Stated differently, because the “entitlement to attorney fees as compensatory damages is premised on an insured’s need to hire an attorney to vindicate his or her contractual rights under an insurance policy” (Cassim, supra, 33 Cal.4th at p. 807), our high court has “placed a critical limitation on the amount of fees recoverable. ‘The fees recoverable, . . ., may not exceed the amount attributable to the attorney’s efforts to obtain the rejected payment due on the insurance contract. Fees attributable to obtaining any portion of the plaintiff’s award which exceeds the amount due under the policy are not recoverable.’ ” (Ibid., italics omitted.) To the extent the claimed legal fees for both the contract and tort recoveries are intertwined, the plaintiff bears “the burden of demonstrating how the fees for legal work attributable to both the contract and the tort recoveries should be apportioned.” (Cassim, supra, 33 Cal.4th at p. 813.) Further, “to the extent some overlap in legal work occurs, the trial court should exercise its discretion to apportion the fees” (id. at p. 811) to ensure that the Brandt fee award reflects only those fees attributable to the attorney’s efforts to recover under the breach of the insurance contract. (Id. at p. 813.) Similarly, while noneconomic damages such as for emotional distress are available, those damages must flow from the initial breach of the implied covenant and resulting economic loss. (Gourley v. State Farm Mut. Auto. Ins. Co. (1991) 53 Cal.3d 121, 128–129; see also Major v. Western Home Ins. Co. (2009) 169 Cal.App.4th 1197, 1215 (Major).) 

Whether a party is entitled to a particular measure of damages is a question of law. (Atkins v. City of Los Angeles (2017) 8 Cal.App.5th 696, 738).

 

 

(…) As our Supreme Court has stated in connection with the duty to defend, “an insurer must defend against a suit even ‘“where the evidence suggests, but does not conclusively establish, that the loss is not covered.”’” (Hartford, supra, 59 Cal.4th at p. 287.) Any doubt must be resolved in favor of the insured (ibid.), such that the insurer is excused from defending against a third party claim “only when ‘“the third party complaint can by no conceivable theory raise a single issue which could bring it within the policy coverage.”’”(Id. at p. 288, italics added; see also Montrose, supra, 6 Cal.4th at p. 300, italics omitted [stating, to prevail in an action seeking declaratory relief on the issue of the duty to defend “the insured need only show that the underlying claim may fall within policy coverage; the insurer must prove it cannot”].)

 

 

The implied covenant in this context did not require Chicago Title to divine the outcome or speculate as to unpleaded legal theories. Rather, in the face of a claim against the property based on ambiguous maps and road designations, Chicago Title had an implied promise to take reasonable steps to fulfill the expectations of its insured and provide a defense to the claim arising from circumstances conceivably within the scope of the policy. (See Lambert, supra, 53 Cal.3d at p.1081 [“The contract of insurance is unique in that the purchaser seeks not commercial advantage, but rather peace of mind and security in the event of unforeseen calamity.”].)

 

 

 

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

 

U.S. Court of Appeals for the Fourth Circuit, Towers Watson & Co. v. National Union Fire Insurance Co., Docket No. 24-1302

Insurance Policy

 

Interpretation

 

Virginia Law

 

 

 

Virginia law still governs our interpretation of the Policy. See Towers Watson & Co., 67 F.4th at 653. Under Virginia law, “an insurance policy is a contract, and, as in the case of any other contract, the words used are given their ordinary and customary meaning when they are susceptible of such construction.” Hill v. State Farm Mut. Auto. Ins. Co., 375 S.E.2d 727, 729 (Va. 1989). If policy language is ambiguous, i.e., susceptible of two or more reasonable meanings, then “any doubt concerning the meaning of the policy language” must be “resolved against the insurer.” Id. at 730; Erie Ins. Exch. v. EPC MD 15, LLC, 822 S.E.2d 351, 355 (Va.  2019). This contra proferentum rule applies with particular force when construing policy exclusions, as the insurer bears the burden of proving that an exclusion applies. See TravCo Ins. Co. v. Ward, 736 S.E.2d 321, 325 (Va. 2012) (“Language in a policy purporting to exclude certain events from coverage will be construed most strongly against the insurer.” (quoting PBM Nutritionals, LLC v. Lexington Ins. Co., 724 S.E.2d 707, 713 (Va. 2012))).

 

 

That said, the Supreme Court of Virginia has “cautioned” courts to “resist” the “temptation” to “give up quickly on the search for a plain meaning by resorting to the truism that a great many words—viewed in isolation—have alternative, and sometimes quite different, dictionary meanings.” Erie Ins. Exch., 822 S.E.2d at 355. Otherwise, “the contra proferentem thumb-on-the-scale would apply to nearly every interpretation of nearly every insurance policy.” Id. Policy language is therefore ambiguous only where the “competing interpretations . . . are ‘equally possible’ given the text and context of the disputed provision.” Id. at 356 (quoting Appalachian Reg’l Healthcare v. Cunningham, 806 S.E.2d 380, 386 n.10 (Va. 2017)). In other words, the mere fact that the parties disagree on the meaning of the terms of a provision does not necessarily render those terms ambiguous. TM Delmarva Power, L.L.C. v. NCP of Va., L.L.C., 557 S.E.2d 199, 200 (Va. 2002).

 

 

 

(U.S. Court of Appeals for the Fourth Circuit, May 28, 2025, Towers Watson & Co. v. National Union Fire Insurance Co., Docket No. 24-1302, Published)

 

 

U.S. Court of Appeals for the Fourth Circuit, Towers Watson & Co. v. National Union Fire Insurance Co., Docket No. 24-1302

Excess Insurers

 

To « Follow Form »

 

 

 

National Union is the primary insurer. There are also several excess insurers, but their policies “follow form” to the primary policy, “meaning that they incorporate the same terms.” Towers Watson & Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 67 F.4th 648, 650 (4th Cir. 2023). The district court’s conclusion thus applies with equal force to all the policies. (Fn. 1).

 

 

 

(U.S. Court of Appeals for the Fourth Circuit, May 28, 2025, Towers Watson & Co. v. National Union Fire Insurance Co., Docket No. 24-1302, Published)

 

 

U.S. Court of Appeals for the Second Circuit, Certain Underwriters at Lloyds, London, v. 3131 Veterans Blvd LLC; MPIRE Properties LLC, Docket Nos. 23-1268-cv, 23-7613-cv

Insurance Law

 

Could State Insurance Law Reverse-Preempt the Foreign Sovereign Immunities Act (“FSIA”)?

 

McCarran–Ferguson Act

 

 

 

(…) Shortly after Stephens I, we decided another case involving the MFA, Stephens v. Nat'l Distillers & Chem. Corp. (Stephens II), 69 F.3d 1226 (2d Cir. 1995), amended (Jan. 11,1996). That decision assessed whether the MFA allowed state insurance law to reverse-preempt the Foreign Sovereign Immunities Act (“FSIA”). Id. at 1231–32. The panel in that case, noting the earlier Stephens I in a footnote, ultimately rested its decision on the grounds that “international law preempted the relevant state insurance law before the passage of both the McCarran–Ferguson Act and the FSIA” and codification of international law standards in the FSIA did not undermine that preexisting preemptive force. Id. at 1233 & n.6. As the Convention and its implementing legislation both post-date the MFA, that holding is inapplicable here, and we address Stephens I alone in this opinion. Compare McCarran–Ferguson Act, c. 20, § 2, 59 Stat. 33, 34 (1945) (codified at 15 U.S.C. § 1012), with An Act To Implement the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Pub. L. 91-368, § 1, 84 Stat. 692 (1970) (codified at 9 U.S.C. § 201) (providing that “the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958, shall be enforced in United States courts in accordance with this chapter.”). (Fn. 2).

 

 

 

(U.S. Court of Appeals for the Second Circuit, May 8, 2025, Certain Underwriters at Lloyds, London, v. 3131 Veterans Blvd LLC; MPIRE Properties LLC, Docket Nos. 23-1268-cv, 23-7613-cv)

 

U.S. Court of Appeals for the Second Circuit, Certain Underwriters at Lloyds, London, v. 3131 Veterans Blvd LLC; MPIRE Properties LLC, Docket Nos. 23-1268-cv, 23-7613-cv

Insurance Law

 

Surplus Lines Insurers

 

Arbitration

 

Convention on the Recognition and Enforcement of Foreign Arbitral Awards

 

Supremacy Clause of the United States Constitution

 

McCarran-Ferguson Act (“MFA”), 15 U.S.C. § 1012(b)

 

Self-Executing Treaty Provisions

 

Reverse Preemption

 

Assignation of Rights

 

Louisiana Law

 

 

 

 

 

This opinion addresses two cases, each of which involves an insurance policy issued by certain surplus lines insurers at Lloyd’s, London (“the Insurers”). Both policies contain an identical arbitration clause, which the Insurers argue is enforceable under Article II Section 3 of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), adopted June 10, 1958, 21 U.S.T. 2517. The defendants-appellees argue that the clauses are unenforceable because (1) Louisiana law prohibits arbitration clauses in insurance contracts, (2) the McCarren Ferguson Act (“MFA”), 15 U.S.C. § 1012(b), allows state insurance laws to “reverse preempt” any treaty provisions that are not “self-executing,” and (3) we previously held that Article II Section 3 of the New York Convention was not “self-executing” in Stephens v. American International Insurance (“Stephens I”), 66 F.3d 41, 45 (2d Cir.1995). We conclude, however, that our reasoning in Stephens I has been fatally undermined by the Supreme Court’s subsequent decision in Medellín v. Texas, 552 U.S. 491 (2008). Medellín established an entirely different test for determining whether a treaty provision should be considered “self-executing” than the one we applied in Stephens I, and under the new Medellín test, Article II Section 3 is clearly self-executing. As a result, we abrogate Stephens I to the extent that it holds that Article II Section 3 of the New York Convention is not self-executing, reverse the underlying district court decisions to the extent they relied on that holding in Stephens I, and remand the matters to their respective district courts for further proceedings consistent with this opinion.

 

 

(…) Surplus lines insurers “fill an important niche in the insurance market by covering otherwise uninsurable risks.” James River Ins. Co. v. Blue Ox Dance Hall, LLC, No. 16 Civ. 151, 2017 WL 5195877, at *3 (N.D. Okla. Nov. 9, 2017). One common use for their policies is to insure against the cost of hurricane damage in high-risk zones, including areas of Louisiana.

 

 

(…) The sellers, who were the named insureds under the policies, assigned their rights under the policies to 3131 Veterans and Mpire.

 

 

Louisiana state insurance law is unfriendly to arbitration clauses. It provides that “no insurance contract delivered or issued for delivery in this state . . . shall contain any condition, stipulation, or agreement . . . depriving the courts of this state of the jurisdiction or venue of action against the insurer.” La. R.S. § 22:868(A)(2). In 2015, the Louisiana Supreme Court observed that this provision “effectively prohibits the enforcement of arbitration provisions in the context of insurance disputes.” Courville v. Allied Professionals Ins. Co., 174 So.3d 659, 666. (La. Ct. App. 2015).

 

 

In contrast with Louisiana law, arbitration clauses are generally enforceable under federal law, because the FAA puts arbitration clauses “on an equal footing with other contracts.” Coinbase, Inc. v. Suski, 602 U.S. 143, 148 (2024); see also 9 U.S.C. § 2. Ordinarily under the Supremacy Clause of the United States Constitution, a federal statute like the FAA would “preempt a state law that withdraws the power to enforce arbitration agreements.” Southland Corp. v. Keating, 465 U.S. 1,16 n.10 (1984). Thus, an arbitration clause could generally be expected to prevail even in the face of state laws – like Louisiana’s – that purport to prohibit or void such clauses. See Stephens I, 66 F.3d at 43. “However, Congress created an exception to the usual rules of preemption when it enacted the McCarran–Ferguson Act.” Id. Under the MFA, state laws enacted “for the purpose of regulating the business of insurance” are generally exempt from preemption. Id. Specifically, the MFA provides that no Act of Congress shall be construed to invalidate, impair or supersede any law enacted by any State for the purpose of regulating the business of insurance . . . unless such Act specifically relates to the business of insurance. 5 U.S.C. § 1012(b). Under the MFA, the normal rules of preemption apply to a state insurance law only when an incompatible federal law exists that also relates to insurance. Humana Inc. v. Forsyth, 525 U.S. 299, 307–08 (1999).

 

 

Because the MFA’s reverse-preemption rule applies not to federal policies generally but to “Acts of Congress” specifically, 15 U.S.C. § 1012(b), we have held that state law can reverse-preempt a treaty provision under the MFA only when that treaty provision relies on an “Act of Congress” to take effect – in other words, when the provision is not “self-executing.” Stephens I, 66 F.3d at 45. Where a treaty provision is self-executing and requires no implementing Act of Congress, the MFA by its own terms does not apply. Accordingly, the principal disagreement in this case is whether Article II Section 3 of the New York Convention is “self-executing,” making it exempt from reverse-preemption under the MFA, or whether it relies on an Act of Congress for its effect, such that it can be reverse-preempted by Louisiana law.

 

 

In Medellín, the Supreme Court did not confine its analysis to the narrow question of whether Congress enacted legislation purporting to implement the treaty at issue (there, the United Nations Charter). 552 U.S. at 508. Instead, the Court identified several hallmarks of a “self-executing” treaty provision within a larger treaty – namely: (1) that it provides “a directive to domestic courts” of the contracting nation, id.; (2) that it “provides that the United States ‘shall’ or ‘must’” take a particular action, id., and (3) that the “text, background, negotiating and drafting history” regarding the provision indicate the Senate and/or the President’s intention, id. at 523, that the ratified treaty take “immediate legal effect in domestic courts,” id. at 508. A non-self-executing treaty provision, in contrast, would merely “call upon [member] governments to take certain action.” Id. (quotation marks omitted). Because Article 94 of the U.N. Charter, the specific provision at issue, lacked those hallmarks of a “self-executing” treaty provision, the court held that it was not self-executing. Id. at 508–09.

 

 

Since Medellín, other circuits addressing the New York Convention have reasoned persuasively that under the test announced in that case, Article II Section 3 of the Convention is in fact self-executing. The First Circuit held that “the text of that provision manifests precisely the type of directive to United States courts that is a hallmark of a self-executing treaty provision.” Green Enterprises, LLC v. Hiscox Syndicates Ltd. at Lloyd’s of London, 68 F.4th 662, 668 (1^st Cir. 2023).

 

 

Under the Medellín factors, Article II Section 3 of the New York Convention is self-executing. As the First and Ninth Circuits have observed, the text of Article II Section 3 readily appears “self-executing” under the first two Medellín factors. CLMS Mgmt. Servs., 8 F.4th at 1013; Green Enterprises, 68 F.4th at 667-68. The text expressly provides that when a party before a contracting nation’s court seeks to enforce the type of arbitration agreement contemplated by the New York Convention, that court “shall . . . refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.” New York Convention, art. II § 3. That instruction serves as “a directive to domestic courts” of the member state, and it “provides that the United States ‘shall’ or ‘must’” take a particular action. Medellín, 552 U.S. at 508. Thus, both the first and second factors strongly suggest that the provision is self-executing.

 

 

(…) Under the Medellín test, Article II Section 3 of the New York Convention is self-executing, with the result that it cannot be reverse preempted by Louisiana law under the MFA.

 

 

For the foregoing reasons, we ABROGATE Stephens v. American International Insurance, 66 F.3d 41 (2d Cir. 1995) to the extent that it holds that Article II Section 3 of the New York Convention is not self-executing, REVERSE the district courts’ decisions to the extent that they relied on that holding in Stephens I, and REMAND the matters to their respective district courts for further proceedings consistent with this opinion.

 

 

 

 

(U.S. Court of Appeals for the Second Circuit, May 8, 2025, Certain Underwriters at Lloyds, London, v. 3131 Veterans Blvd LLC; MPIRE Properties LLC, Docket Nos. 23-1268-cv, 23-7613-cv)

 

 

California Court of Appeal, 11640 Woodbridge Condominium Homeowners’ Association v. Farmers Insurance Exchange, B333848

Insurance Law

 

Covenant of Good Faith and Fair Dealing

 

Liability in Tort

 

California Law

 

 

 

(…) “An insurer is said to act in ‘bad faith’ when it not only breaches its policy contract but also breaches its implied covenant to deal fairly and in good faith with its insured. ‘A covenant of good faith and fair dealing is implied in every insurance contract. [Citations.] The implied promise requires each contracting party to refrain from doing anything to injure the right of the other to receive the agreement’s benefits. To fulfill its implied obligation, an insurer must give at least as much consideration to the interests of the insured as it gives to its own interests. When the insurer unreasonably and in bad faith withholds payment of the claim of its insured, it is subject to liability in tort.’” (Jordan v. Allstate Ins. Co. (2007) 148 Cal.App.4th 1062, 1071–1072, italics omitted.)

 

 

 

(California Court of Appeal, March 28, 2025, 11640 Woodbridge Condominium Homeowners’ Association v. Farmers Insurance Exchange, B333848, Certified for Publication)

 

 

California Court of Appeal, 11640 Woodbridge Condominium Homeowners’ Association v. Farmers Insurance Exchange, B333848

Insurance Law

 

Punitive Damages

 

California Law

 

 

 

An insurer may be liable for punitive damages if the insured can prove not only that the insurer denied or delayed the payment of policy benefits unreasonably or without proper cause, but, in doing so, was guilty of malice, oppression or fraud. (Jordan, 148 Cal.App.4th at p. 1080, citing Moradi-Shalal v. Fireman’s Fund Ins. Companies (1988) 46 Cal.3d 287, 305.)

 

 

 

(California Court of Appeal, March 28, 2025, 11640 Woodbridge Condominium Homeowners’ Association v. Farmers Insurance Exchange, B333848, Certified for Publication)