CA Office Achieves Winning Results In And Out Of Court
September 30, 2009
Clausen Miller Attorneys Obtain Dismissal Of Insurers In First-Party Property Case
Clausen Miller (CM) attorneys Keith E. Butler, Michael W. Goodin and G. Brent Sims of the Irvine, California office recently obtained the dismissal of two insurers in a first-party property litigation matter pending in the United States District Court for the Central District of California.
The Traynor family filed suit against its insurer, claiming bad faith and breach of contract after the company refused to fully reimburse them for water damage to their Hollywood, California condominium. The parent company of the insurer was also sued. The Traynors alleged that their home suffered four separate instances of water intrusion over a four-month period - each claimed to be a separate occurrence under the policy. The insurer viewed the claim as a single occurrence and paid its policy limit. The insurer then closed its file.
At the same time, the insureds pursued a separate construction defect ("CD") lawsuit against the condominium builder involving the same alleged damages. The CD suit was eventually settled with no notice to the insurer. The family then filed suit against the insurer and parent company in California state court, requesting $650,000 in compensatory damages, along with punitive damages and attorney's fees. Clausen Miller undertook representation of the insurer and parent company, and immediately removed the case to the U.S. District Court on the basis of diversity jurisdiction.
After removal to federal court, CM's attorneys moved to dismiss the suit on the basis that the Traynors had not complied with the one-year suit limitation clause contained in the policy. In response, the Traynors argued that the claim was timely filed and that it would therefore be inequitable to enforce the suit limitations clause. In finding for the insurer, the court held that the clause was not only enforceable, but that the insured had violated its terms. The court accepted the insurer's argument that compliance with the suit limitations clause was a condition precedent to recovery under the policy, and dismissed the case against the insurer.
At the same time, the court granted a second motion to dismiss brought by CM's attorneys on behalf of the insurer's parent company. In opposing that motion, the Traynors' alleged that the parent company was directly responsible for their claimed damages, by acting either as an insurer or as the "alter-ego" of its subsidiary, the underwriter. CM's attorneys argued that the parent company was not a party to the insurance contract, nor could it be considered an "alter-ego" of the underwriter for purposes of establishing liability against the parent. The court again agreed with Clausen Miller and dismissed the case with prejudice.
CM Attorneys Use Threatened Summary Judgment To Force Favorable Settlement
CM attorneys Keith Butler, Mike Goodin and Brent Sims (Irvine office) also 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.
For more information about Clausen Miller's first-party property insurance practice, please contact Keith Butler at kbutler@clausen.com, Michael Goodin at mgoodin@clausen.com or Brent Sims at bsims@clausen.com.
