Clausen Miller Irvine Attorneys Use Threatened Summary Judgment To Force Favorable Settlement
October 28, 2009
Clausen Miller (CM) attorneys Keith Butler, Mike Goodin and G. Brent Sims of the Irvine office recently obtained a favorable settlement ending first-party property litigation against an insurer in the United States District Court for the Central District of California.
Denim Republik ("DR") was a clothing retailer operating in Southern California. On New Year's Day of 2008, DR's store was burglarized and the entire inventory was reported stolen. DR then submitted a six-figure claim for property loss and business interruption to its property insurer, which denied coverage on the basis that the policy did not provide theft coverage. DR subsequently filed suit alleging causes of action for breach of contract, bad faith, negligence and fraud.
The case was initially brought against the insurer, its parent company, and the retail broker in the Los Angeles Superior Court system with a sympathetic judge, making summary judgment problematic. During the pendency of the case, the retail broker filed for bankruptcy and DR dismissed the retail broker from the litigation. By doing so, DR created diversity jurisdiction where none previously existed. CM's attorneys removed the case to the U.S. District Court. In a belated attempt to destroy diversity jurisdiction, DR filed a motion to amend its complaint to add the wholesale broker as a defendant. Like the plaintiff, the wholesale broker was a California corporation. CM's attorneys opposed the motion. In rejecting plaintiff's motion to amend, the court agreed that DR's attempt to add the wholesale broker was merely a ploy to defeat diversity jurisdiction.
In its complaint, DR alleged that the insurer failed to include theft coverage that had allegedly been promised by the retail broker. Moreover, DR claimed that the insurer failed to provide a policy until after the theft occurred. The insured claimed that it had specifically requested theft insurance and that the policy either included theft coverage or should have included theft coverage. CM's attorneys were able to show that there was never an intent to cover theft. The binder and the policy were clear and consistent on this point. Moreover, during discovery it was learned that the retail broker apparently tried to have the coverage backdated without reporting the theft to the insurer.
With strong evidence favoring the insurer and faced with having to oppose a summary judgment motion, DR decided to cut its losses and accepted a modest settlement offer from CM's insurance client.
Editor's Note: CM's Irvine, California office handles both first and third-party insurance matters. Mike Goodin and Brent Simms analyze recent California decisions on third-party bad faith liability in the article entitled Third Party Bad Faith Liability Not Expanded By Recent California Court Rulings in CM Report of Recent Decisions Volume 3 2009.
