Clausen Miller Irvine Attorneys Obtain Dismissal Of Insurers In First-Party Property Case
October 28, 2009
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. CM 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 CM and dismissed the case with prejudice.
