Journal of Consumer Attorneys Associations for Southern California
INSURANCE Primer: Insurance law for every plaintiff’s attorney The basics of advertising-injury coverage Trying a bad faith case: the duty to settle
Insurer misconduct: Is it fraud or just bad faith?
Don’t be a bull in the china shop.
Understand defendant’s insurance coverages before you write the PI complaint
“Loss-of-rents” coverage and commercial property insurance Seeking class certification of an insurance case
Also in this issue
Medical records disclosure: Rampant transgressions, elusive liability Empowering the damages expert with the Reptile theory
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Contents Volume 41, Number 8, AUGUST 2014
Editor-in-Chief Jeffrey Ehrlich Associate Editors Martin Aarons, Joan Kessler, James Kristy, Spencer Lucas, Beverly Pine, Norman Pine, Rahul Ravipudi, Ibiere Seck, Geraldine Weiss, Ronnivashti Whitehead Editors-in-Chief Emeriti Kevin Meenan, William Daniels, Steven Stevens, Christine Spagnoli, Thomas Stolpman
Managing Editor Cindy Cantu email@example.com Copy Editor Eileen Goss
Publisher Richard Neubauer firstname.lastname@example.org Art Director David Knopf
Consumer Attorneys Association of Los Angeles President Treasurer Geoffrey Wells Mike Arias President-Elect Secretary Joseph Barrett Shawn McCann First Vice President Immediate Past President David Ring Lisa Maki Second Vice President Executive Director Ricardo Echeverria Stuart Zanville
Board of Governors Martin Aarons, Mike Armitage, Shehnaz Bhujwala, Todd Bloomfield, John Blumberg, Michael Cohen, Scott Corwin, David deRubertis, Danica Dougherty, Jeffrey Ehrlich, Tobin Ellis, Mayra Fornos, Stuart Fraenkel, Scott Glovsky, Jeff Greenman, Genie Harrison, Arash Homampour, Neville Johnson, Bill Karns, Aimee Kirby, James Kristy, Lawrence Lallande, Tobin Lanzetta, Tim Loranger, Anthony Luti, Minh Nguyen, Christa Ramey, Rahul Ravipudi, Taylor Rayfield, David Rosen, Jeffrey Rudman, Ibiere Seck, Doug Silverstein, Kathryn Trepinski, Geraldine Weiss, Ronnivashti Whitehead, Andrew Wright
Orange County Trial Lawyers Association Secretary President Casey Johnson
President-Elect Ted Wacker
First Vice President Vincent Howard Second Vice President H. Shaina Colover
Third Vice President Geraldine Ly
B. James Pantone
Treasurer Jonathan Dwork Parliamentarian Jerry Gans Immediate Past President Scott Cooper
Executive Director Janet Thornton
Board of Directors Melinda S. Bell, Anthony W. Burton, Brent W. Caldwell, Darren J. Campbell, Cynthia A. Craig, Robert B. Gibson, T. Gabe Houston, Paul E. Lee, Kevin G. Liebeck, H. Gavin Long, Solange E. Ritchie, Sarah C. Serpa, Adina T. Stern, Douglas B. Vanderpool, Janice M. Vinci, Atticus N. Wegman
Periodicals postage paid at Los Angeles, California. Copyright © 2014 by the Consumer Attorneys Association of Los Angeles. All rights reserved. Reproduction in whole or in part without written permission is prohibited.
ADVOCATE (ISSN 0199-1876) is published monthly at the subscription rate of $50 for 12 issues per year by the Consumer Attorneys Association of Los Angeles, 800 West Sixth Street, #700, Los Angeles, CA 90017 (213) 487-1212 Fax (213) 487-1224 www.caala.org
Send address changes to ADVOCATE c/o Neubauer & Associates, Inc. P.O. Box 2239 Oceanside, CA 92051 6 — The Advocate Magazine
Insurance law for every plaintiff’s 12 Primer: attorney
Virtually all personal-injury litigation involves insurance issues. This article surveys and summarizes the fundamental insurance issues that affect personal-injury litigation, and provides specific advice and strategies for dealing with these insurance issues. Edward Susolik
24 Seeking class certification of an insurance case
Care must be taken to address each of the relevant class-certification elements – a look at the dos and don’ts. Robert S. Gianelli
coverage and commercial 32 “Loss-of-rents” property insurance
Policy language holds the key to loss-of-rents coverage; a look at Folksamerica Reinsurance and the clarity it brings to this issue. Christian J. Garris
42 The basics of advertising-injury coverage
Coverage for personal and advertising injury can be critical in business litigation, yet because it is complex and some of the concepts are not intuitive, many lawyers tend to ignore it. This article explains some of the basic concepts of this somewhat obscure area of insurance law. Jeffrey Ehrlich
52 Trying a bad-faith case: The duty to settle
Trying a bad-faith case arising out of a breach of the duty to settle poses some unique issues. The principles described here will first help get you to the punitive-damages phase. The author then looks at how to convince jurors that they must punish the bad conduct. Ricardo Echeverria
70 Insurer misconduct: Is it fraud or just bad faith?
A look at the benefits of a fraud claim of action against an insurer – in addition to a bad-faith claim. Kirk A. Pasich
the damages expert with the 82 Empowering Reptile theory
How expert testimony can help you to reach the Reptile or inner consciousness in the minds and hearts of jurors. David Orlowski
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Medical records disclosure: Rampant transgressions yet elusive liability
A look at challenges to privacy and data breach claims after UCLA and Eisenhower. Rabeh M.A. Soofi
Comprehensive eye exams for PI clients Head and neck injury victims may have subtle visual complaints to warrant examination. Steven Rauchman
A BOUT THIS I SSUE Insurance: Coverage and bad faith A complex issue with information galore
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CAALA R ESOURCE C ENTER
Welcome and connect with the newest members of CAALA
A PPELL ATE R EPORTS AND C A SES IN B RIEF Several recent opinions issued by The California Supreme Court of interest to Advocate readers
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CAALA VEGAS: It succeeds because it connects Empowering heroes of justice and civility
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Reflections on our history and the importance of fathers A special challenge for trial lawyers
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Changes on the way for OCTLA In a transformative year, change is the key to progress
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The Advocate Magazine â€” 7
From the Editor Jeffrey Isaac Ehrlich Editor-in-Chief
About this Issue Jeffrey Isaac Ehrlich Editor-in-Chief
Insurance: About Coverage and bad faith
Insurance experts this Issuebrief you on current issues in coverage and the duty of insurers I realize that when you pick up an issue of Advocate, you are interested in the Jeffrey Isaac Ehrlich articles and likely give little thought to how they made their way into the magazine. But there would be no Advocate without the articles, and no articles without the authors who volunteer to write them. This month, five lawyers who know a tremendous amount about insurance law By Jeffrey Ehrlich took the time to shareIsaac some of their knowledgeEditor-in-Chief with Advocate’s audience, and I am very grateful for their efforts. Kirk Pasich is by now a familiar contributor to the insurance issue. Every year I ask him for an article, and every
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year he sends one, even though he is one of the busiest, most in-demand insurance lawyers in the State. This year Kirk’s article is on how an insured might recover punitive damages against an insurer on a fraud theory. Rob Gianelli is a plaintiff ’s lawyer who knows insurance inside and out. His article is a primer on how to fashion an insurance-based class-action lawsuit. He explains some of the most common pitfalls, and the best strategies to get a class action certified. Ricardo Echeverria is one of the best trial lawyers in the State, and he often
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tries bad-faith cases. His article explores how to try a bad-faith case that arises out of the insurer’s failure to settle a thirdparty case within policy limits. Chris Garris is a friend of mine, whose practice emphasizes insurancerelated cases. Last year he won a big appellate victory for policyholders in a case involving commercial coverage for lost rents. In his article he explains the issues and how he convinced the court to rule his way. Ed Susolik is another amazing trial lawyer and story teller, with an expertise in insurance-coverage issues. Ed’s article explains some of the most important insurance-coverage principles that plaintiff ’s lawyers need to know, and how to use them to maximize the value of the cases you bring. Rounding out the insurance articles, you will find an article I wrote about the often misunderstood area of advertisinginjury coverage. You may find it particularly helpful if you sometimes handle business litigation. Aside from insurance, we have Rabeh M.A. Soofi, a privacy attorney, who explores the new challenges to privacy and data breach claims after UCLA and Eisenhower. Finally, vocational economist David Orlowski uses a personal experience to explain how to empower your damages expert with the Reptile theory. I am deeply grateful to these authors for taking the time to contribute these articles. I am also grateful to Advocate’s publisher, Rich Neubauer, and our amazing managing editor, Cindy Cantu. This month I took what is usually a fairly smooth process in getting the issue ready and threw in a combination of wrenches and sand. I thank them for putting up with me, and never once showing an ounce of annoyance, even though it was justified. I hope you enjoy the issue.
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10 â€” The Advocate Magazine
Edward By MikeSusolik Alder
CAALA Board of Governors member
Primer: Insurance law for every plaintiff’s attorney Don’t be the bull in a china shop, litigating PI cases aggressively with no regard for the impact of insurance issues on your case Knowledge of insurance law is critical to successful personal-injury litigation. All personal-injury lawyers should acquire a baseline understanding of insurance principles. You do not want to be the bull in a china shop, litigating personal-injury cases aggressively with no regard for the impact of insurance issues on your case. By way of example, virtually every settlement of personal-injury litigation involves insurance and insurance issues. In fact, of the hundreds of personalinjury matters which this author has litigated, virtually every case has either settled using insurance money or the judgment after trial was paid by insurance proceeds. An expertise in insurance coverage has helped maximize the ultimate recoveries in these cases. In the big picture, insurance coverage, bad faith, duty to defend, and other insurance coverage issues are frequently integral to personal-injury litigation and function as the catalysts for settlement. Insurance controls settlement dynamics of personal-injury litigation, and the ultimate decisions regarding the timing and amount of settlements are virtually always made by insurance companies. This article surveys and summarizes the fundamental insurance issues that affect personal-injury litigation, and provides specific advice and strategies for dealing with such insurance issues. My goal is that this article will provide a roadmap for plaintiff ’s lawyers to settle more cases and achieve greater recoveries for their clients.
The complaint and insurance issues: pleading into coverage
The first step in any litigation is the filing of the complaint. To trigger insurance coverage, a plaintiff must plead facts and assert claims that are at least potentially covered by insurance under 12 — The Advocate Magazine
defendant’s liability policies. Generally, the claim would be for negligence proximately causing plaintiff ’s injuries. But this covered claim could also be for negligent maintenance, hiring and training, entrustment of a vehicle or other dangerous objects, or any other act or omission that arguably constitute a breach of duty to act reasonably and refrain from injuring others. Given the egregiousness of certain conduct, plaintiff ’s attorneys will often plead a claim for intentional torts with the strongest possible and inflammatory language. But intentional torts (i.e., “willful” acts) are generally excluded under liability policies, and in fact, Insurance Code section 533 prohibits indemnification for intentional tortious acts. Section 533 says, “An insurer is not liable for a loss caused by the willful act of the insured; but he is not exonerated by the negligence of the insured, or of the insured’s agents or others.” Hence, in the context of obtaining insurance proceeds from a carrier, adding inflammatory allegations of intentional wrongdoing is a hindrance, not a help. There is, however, often a good-faith basis to plead negligence as an alternative cause of action even for acts that appear to be intentional torts – thereby triggering access to insurance money. In recent years, I have handled numerous cases where the wrongful act causing injury or death would seem to have been caused by intentional acts. Those include a notorious shooting at an Orange County hair salon that killed eight people, where the defendant has since pled guilty to murder and potentially faces the death penalty. I represented several families of the victims slain in that incident. In that case, the good-faith basis for asserting a cause of action for negligence was defendant’s possible state of mind at the time of the shooting.
Mental illness, impairment, or incapacity may serve to vitiate intent, thereby turning a seemingly uncovered “willful” act into a non-intentional “occurrence” that is covered. (Jacobs v. Fire Ins. Exch. (1995) 36 Cal.App.4th 1258, 1269 [if insured was legally insane, actions cannot be deemed “willful”]; J.C. Penney Cas. Ins. Co. v. M.K. (1991) [evidence that insured lacked sufficient mental capacity to control his own conduct is admissible to show that there could be no “voluntary act” of any kind].) As a result, the clients’ claim for negligence successfully triggered insurance coverage and ultimately, resolution of the case.
Obtaining a defendant’s insurance information pre-discovery
After the complaint has been filed, the first step in addressing insurance issues is to learn what coverage the defendant may or may not have, including the policy limits. In instances where the defendant promptly tendered the claim to its carrier, often the first response received by a plaintiff ’s lawyer to the demand letter or the filing of suit will be made by defense counsel appointed by the carrier. In those cases, appointed defense attorneys may be cooperative in sharing information concerning insurance policy, since they themselves know that the handling and ultimate outcome of the litigation will depend greatly on the availability of insurance. In fact, an insurer faces significant risk if it does not seek authority from its insured to disclose to a claimant the limits of a policy. In Boicourt v. Amex Assurance Co. (2000) 78 Cal.App.4th 1390, the plaintiff ’s attorney asked the insurer to disclose the policy limits applicable to a car accident where his client was seriously injured. The insurer responded that it had a policy of declining to disclose policy limits, as a result of
Primer — continued
which plaintiff did not make a settlement demand before or after filing suit. Five months after the litigation commenced, the insurer offered to pay the policy limit of $100,000, which plaintiff rejected. The case went to trial and plaintiff obtained a judgment for almost $3 million. The insured assigned to plaintiff his claim for bad faith against the carrier in exchange for a contract not to execute on the judgment. The claimant sued the carrier for bad faith, based on, among other things, the allegation that plaintiff would have demanded and taken the policy limit of $100,000 had it been disclosed before the filing of suit. The carrier moved for summary judgment on the ground that the insurer had not favored its own interests over the interests of its policyholder (the premise of a bad-faith claim) because plaintiff had not made a settlement demand. The Court of Appeal reversed. It held that the insurer’s blanket policy not to seek authorization from its insured to disclose the limits raised material issues of fact about whether the insurer did act in its own interests at the expense of the policyholder’s; i.e., engaged in bad faith. The court reasoned that, among other things, failure to disclose limits gives the carrier an advantage over plaintiff ’s attorneys but disadvantages the policyholder because it prevents or discourages settlement demands, thereby increasing the risk that the insured would be hit with judgment in an amount much greater than the policy limit. Accordingly, when faced with an adjuster or defense counsel who resists disclosing the policy limits, remind them of the Boicourt decision and specifically inform them that continued refusal to disclose such limits shall be among the grounds for a bad faith claim against the insurer.
Discovery of defendant’s coverage
Formal discovery is a powerful weapon for obtaining full and complete disclosure of insurance information. For example, in many cases, the defendant has not tendered the claim for whatever reason, or its insurer has failed to respond to a tender. In those instances, 14 — The Advocate Magazine
M it is the responsibility of the plaintiff ’s lawyer to ascertain any and all insurance policies and coverage that defendant may have. Aside from the fact that an insurance policy will ultimately provide a source of recovery, insurance information is important because it may affect the strategies of plaintiff ’s attorneys. For instance, if the policy has burning limits (i.e., defense fees and costs are deducted from the policy limit), a plaintiff ’s strategy that minimizes defense fees and costs would ultimately benefit the client plaintiff, while also being more efficient for plaintiff ’s lawyers. As a result, it is critical to obtain all insurance information from a defendant in formal discovery. Included among the first set of document requests served on defendant should be requests that call for the production of any and all policies that may cover plaintiff ’s claims. Since defendant and its attorneys may not know what policies maintained that may cover plaintiff ’s claims, such requests should enumerate the different insurance policies potentially available and applicable to plaintiff ’s claims, such as homeowners, errors and omissions, commercial general liability, professional liability, primary, and excess. Plaintiff should also make a catch-all request for any and all policies, as it is better to be overinclusive than underinclusive. As part of the First Set of Form Interrogatories, plaintiff ’s attorneys should check the boxes for Form Interrogatories 4.1 and 4.2, which ask for information concerning any policies that cover or may cover plaintiff ’s claims, as well as any self-insurance. If it appears necessary to inquire further on defendant’s insurance coverage (for instance, if the above requests for production and Form Interrogatories yield unsatisfactory or unclear information), a plaintiff ’s lawyer should also ask about insurance coverage through special interrogatories, as well as in the depositions of defendant and its principals. If attempts to obtain discovery on defendant’s insurance coverage are resisted, a plaintiff would have strong grounds to make a motion to compel and
for an award of sanctions. California statute expressly provides that insurance information is discoverable. (See Code Civ. Proc., § 2017.210 [“A party may obtain discovery of the existence and contents of any agreement under which any insurance carrier may be liable to satisfy in whole or in part a judgment that may be entered in the action or to indemnify or reimburse for payments made to satisfy the judgment. This discovery may include the identity of the carrier and the nature and limits of the coverage. A party may also obtain discovery as to whether that insurance carrier is disputing the agreement’s coverage of the claim involved in the action, but not as to the nature and substance of that dispute….”]) Case law also supports discovery of defendant’s insurance information, on the ground that insurance policies are directly relevant because they may assist in resolution of the case. (See Laddon v. Superior Ct. (1959) 167 Cal.App.2d 391, 395-396 [“plaintiff ’s ‘discoverable interest’ in defendant’s liability insurance arises with the ‘very pendency’ of the action against the assured. The conclusion is inescapable that ... the insurance policy is relevant to the subject-matter....”]; accord IrvingtonMoore, Inc. v. Superior Ct. (1993) 14 Cal.App.4th 733, 739-40; Pettie v. Superior Ct. (1960) 178 Cal.App.2d 680, 688-689.) Therefore, it would be an unusual circumstance in which a defendant could properly refuse to disclose its insurance information in response to proper discovery requests served by plaintiff.
The timing of insurance issues in litigation: Settlement and Mediation
In most personal-injury cases, the first time that insurance issues come to the surface is during the settlement process, especially if a formal mediation is conducted. Settlements can be attempted and reached at any time, including before filing suit or very shortly after the filing of a complaint. However, in cases that involve substantial sums and/or complex issues of fact and law, it is unlikely that a carrier would
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Primer — continued
agree to a favorable settlement so early or easily. It is uncommon for an insurance company to pay top money for settlement without going through the litigation process. In light of this reality, in order to have a meaningful mediation yielding maximum value, the mediation should, in almost all cases, be held in the later stages of litigation. Insurance adjusters deal with facts, not just allegations. Most carriers will not provide a true bottom line until they have completed all or most of discovery and have conducted an analysis of plaintiff ’s experts.
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Fundamental issues encountered in mediation
There are many critical insurance issues that a plaintiff ’s attorney may face at mediation, especially in high-value cases where there are multiple defendants and multiple policies. While it is difficult to address all such possibilities, the following are some of the key issues that should be considered and understood by plaintiff ’s lawyers. In cases involving a continuous loss that has occurred over a number of years, it is important to make sure that all insurers that insured the defendant from the time the loss began be given notice of the claim. California applies the “continuous injury” trigger of coverage in the context of a third-party liability policy; thus, “bodily injury” or “property damage” that is continuous or progressively deteriorating is potentially covered by all policies in effect during the period when the injury or damage occurred. (Montrose Chemical Corp. v. Admiral Ins. Co. (1995) 10 Cal.4th 645, 685-689.) Under the “all sums” rule adopted in AerojetGeneral Corp. v. Transport Indemnity Co. (1997) 17 Cal.4th 38, 55-57, an insurer on the risk when continuous or progressively deteriorating property damage or bodily injury first manifests itself is required to indemnify the insured for the whole of the ensuing damage or injury. The prospect of “continuous injury” highlights the importance of obtaining all defendant’s potentially applicable policies for all potentially applicable policy years, and not just the most recent
policy, because there may have been significant changes that have been made in coverage, even if the policies have been issued by the same insurer. In cases involving intentional acts by an insured which would not be covered because of an intentional acts exclusion or Insurance Code section 533, it is important to emphasize the separate liability of innocent co-insureds. Minkler v. Safeco Insurance Co. of America (2010) 49 Cal.4th 315, 319 held that under a policy containing a “separate insurance” clause, each insured’s coverage should be analyzed separately. (See also discussion in Section 2 supra regarding coverage for seemingly willful acts.) If there are excess and/or umbrella policies involved, it is important to determine what underlying policies need to be exhausted in order for each excess/ umbrella policy to come into play. The “horizontal exhaustion” rule requires all primary insurance to be exhausted before an excess insurer must drop down to defend an insured, including in cases of continuing loss. The “vertical exhaustion” rule allows an insured to seek coverage from an excess insurer as long as the specific underlying insurance policy or policies identified in the excess have been exhausted. Under California law, unless the excess insurance company has agreed to cover a claim when only one, specific underlying insurance policy is exhausted, the horizontal exhaustion rule applies and all primary insurance must be exhausted before an excess insurer must defend and/or indemnify, especially in cases of continuing loss. (Padilla Construction Co., Inc. v. Transportation Ins. Co. (2007) 150 Cal.App.4th 984, 986-987.) If one or more of the defendants is an additional insured on another defendant’s policy, there may be issues arising out of attempting to settle out only the named insured or only the additional insured. An insurance company cannot settle out one insured without obtaining a release of the other insured, without the other insured’s consent. (American Med. Int’l, Inc. v. National Union Fire Ins. Co. (9th Cir. 2001) 244 F.3d 715, 720-721.)
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Primer — continued
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policy limits to settle out the named insured or additional insured. In cases with “burning limits,” i.e., limits that are eroded by defense fees and costs, by the time of mediation, the remaining limits of the policy will be less than stated policy limits, and a policylimits demand would have to be less than the stated policy limits. One way to make a policy limits demand on a “burning limits” policy is to demand the remaining limits of the policy, as long as the amount of the remaining limits is over a specified amount (i.e., “we demand the remaining policy limits, in an amount not less than $1 million”).
Insurance bad-faith principles and settlement of personal-injury cases
Often, the lever that provides the best chance for settlement of cases that involve an insurance company is the threat of extra-contractual liability, or bad faith. This possibility arises when, among other things, the insurer has refused to offer the policy limit, and the case proceeds to trial with the insured being assessed a judgment vastly greater than the policy limit. Being able to open the policy limits significantly increases plaintiff ’s potential recovery and is the occurrence most feared by every insurance company. The following are some of the critical principles that govern bad faith in the context of settlement discussions. Under California insurance law, an insurer owes a good faith duty to settle claims made against their insureds, within the policy limits. (Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390, 40 [insurer has an implied duty to accept reasonable settlement demands on covered claims within policy limits]; accord Garner v. American Mut. Liab. Ins. Co. (1973) 31 Cal.App.3d 843, 848; Brown v. Guarantee Ins. Co. (1957) 155 Cal.App.2d 679, 689; Shade Foods, Inc. v. Innovative Products Sales & Mktg., Inc. (2000) 78 Cal.App.4th 847, 906.) In addition to case law providing for such duty, California Insurance Code section
Primer continues 20 — The Advocate Magazine
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790(h)(5) requires insurers to attempt “in good faith to effectuate . . . settlements of claims in which liability has become reasonably clear.” In deciding whether or not to settle a claim, the insurer must take into account the interests of the insured. (Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 658-661.) An insurer that breaches its duty of reasonable settlement is liable for all of the insured’s damages proximately caused by the breach, regardless of policy limits. (Hamilton v. Maryland Cas. Co. (2002) 27 Cal.4th 718, 725.) The only thing an insurer can consider in determining the reasonableness of a settlement demand is “whether, in light of the victim’s injuries and the probable liability of the insured, the ultimate judgment is likely to exceed the settlement offer.” (Johansen v. California State Auto. Assoc. Inter-Ins. Bureau (1975) 15 Cal.3d 9, 16.) An insurer’s good faith but incorrect belief there is no coverage is not a defense to liability for its refusal to accept a reasonable settlement demand. (Id. at 15-16.) Given those principles, the most powerful strategy that a plaintiff can follow at mediation is to make a policy-limits settlement demand. In fact, at best the law is uncertain on whether an insurance carrier has an affirmative duty to initiate settlement discussions in the absence of a settlement demand by plaintiff or plaintiff ’s initiation of settlement discussions. In Yan Fang Du v. Allstate Insurance Co. (9th Cir. 2012) 681 F.3d 1118 (“Du I”), the Ninth Circuit held that under California law, an insurer has the duty to initiate settlement discussions, failure to which may constitute bad faith. In a subsequent rehearing of the matter, the court withdrew (but did not vacate) the foregoing conclusion on the ground that it was unnecessary. Yan Fang Du v. Allstate Ins. Co. (2012) 697 F.3d 753, 758-59. A federal district court has nevertheless cited Du I as persuasive to find such duty. Travelers Indem. of Conn. v. Arch Specialty Ins. Co., 2013 U.S. Dist. LEXIS 169453 (E.D. Cal. Nov. 26, 2013). In contrast, a California Court of Appeal has held that the insurer’s duty to settle did not 22 — The Advocate Magazine
include initiating settlement efforts. (Reid v. Mercury Ins. Co. (2013) 220 Cal.App.4th 262, 277-78.) In any case, a plaintiff ’s attorney can avoid the matter by initiating settlement discussions and making a settlement demand supported by adequate law and facts establishing liability and damages. A plaintiff must make sure that the carrier has all the facts and information to reasonably consider such a policy limits demand, and the demand must be kept open a reasonable time. But if the carrier fails to reasonably settle a case within policy limit under those circumstances, it may be exposed to bad-faith liability. Finally, the mediation privilege is broad, in that communications made in mediation are considered confidential and inadmissible. Accordingly, to guarantee that policy limits settlement demands are admissible in a later bad-faith trial, they should be formally made (in writing) outside of the mediation context as well, even if they are substantively identical to what was discussed during mediation.
Strategies for dealing with denial of coverage
In many cases where defendants have insurance policies, their carriers have denied coverage, including refusing to defend. Under those circumstances, a plaintiff ’s attorney can take aggressive steps in obtaining a default judgment or assignment of the insured’s bad-faith rights. That would give plaintiff significant leverage against the carrier in mediation and other attempted settlement of the bad-faith case, assuming the underlying personal-injury case is significant, and the case for coverage is strong. The following are some of the principles involved when the carrier denies coverage to defendant. If defendant’s insurer has denied coverage, it may be worthwhile to either settle with defendant by agreeing to a stipulated judgment, with a covenant not to execute and an assignment of the insured’s claims against the insurer, or obtain a default judgment against the defendant and then attempt to get an
assignment. (Amato v. Mercury Casualty Co. (1997) 53 Cal.App.4th 825, 833 [insurer is liable for full amount of default judgment as damages caused by insurer’s bad-faith denial of coverage, regardless of whether there is coverage for judgment].) A possible complication that could arise in the case of a default judgment is that the insurer could seek to set aside the default and default judgment and move to intervene. After obtaining the stipulated judgment or default judgment (assuming the policy in question is one (that) is subject to the judgment creditor statute, which all policies covering bodily injury and property damage are), plaintiff can bring an action against the insurer as a judgment creditor under California Insurance Code section11580, subdivision (b)(2), and as an assignee of any claims assigned by the insured. In obtaining an assignment of rights from the insured, the plaintiff should consider the fact that the right to attorney’s fees and costs incurred in obtaining coverage is assignable, but claims for punitive damages and emotional distress damages are not. A partial assignment of the insured’s assignable rights would allow the insured to keep the claims for punitive damages and emotional distress damages. Plaintiff ’s counsel could then seek a conflict waiver and represent both the insured and the plaintiff in one suit against the insured.
Virtually all personal-injury litigation involves insurance and insurance issues, especially during the mediation and settlement phases of the case. For a plaintiff ’s lawyer, an extensive understanding of insurance law and insurance principles is an extremely powerful weapon. Edward Susolik is the partner in charge of the insurance department at Callahan & Blaine in Santa Ana, California. Mr. Susolik specializes in complex insurance litigation, and has filed over 1000 insurance badfaith lawsuits in his career. He is an adjunct professor of insurance law at USC Law School. He can be reached at email@example.com.
Robert S. Gianelli
CAALA Board of Governors member
Seeking class certification of an insurance case Care must be taken to address each of the relevant class-certification elements – a look at the the dos and don’ts Many types of insurance disputes have been successfully prosecuted as class actions. Some examples include: life insurance (“vanishing” premiums, discriminatory premiums, improper “mortality” costs); annuities (diminished returns due to misrepresented costs, illegal surrender penalties); health insurance (systematic denial of benefits for certain types of treatment, overcharged or discriminatory premiums, low-balling provider reimbursement rates, violating state mandated-benefit laws); and auto insurance (improper use of aftermarket parts, overcharged premiums, improper medical payments practices). To be sure, the standardized nature of insurers’ policy forms and/or sales materials and their standardized internal practices often provide ideal facts for class certification. But the mere presence of a dispute arising out of an insurer’s practice does not guarantee a grant of class certification. Federal and state class certification decisions have, to an increasing degree, made the class-certification process a much more scrutinized and labor-intensive effort. Although an insurance case presents many made-forcertification aspects, care must be taken to address each of the relevant class certification elements as they relate to the insurer’s sales materials, policy forms, and internal practices. Here are some points to keep in mind.
Do know both state and federal classcertification principles The vast majority of insurance class actions filed in California courts are “state” class actions, that is, they are comprised of California residents only. (Nicholas M. Pace, et al., Insurance Class Actions in the United States, RAND Corporation, Institute for Civil Justice (2007).) Even so, unless the insurer is domiciled in California (Farmers, Blue 24 — The Advocate Magazine
Shield of California, etc.), diversity rules under the Class Action Fairness Act allow for removal to federal court when the claims exceed $5 million. (28 U.S.C. § 1332(d)(2)). Consequently, counsel need to be conversant with both the state and federal class-certification rules. Drawing on Code of Civil Procedure section 382 and federal precedent, California courts have set forth the essential requirements for class certification: an ascertainable class, a well-defined community of interest, and substantial benefits to the class that render it superior to the alternatives. (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1021; Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326.) The “community of interest” requirement embodies the following elements: (1) predominate common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class. (Brinker, 53 Cal.4th at 1021.) Rule 23 of the Federal Rules of Civil Procedure has similar requirements. Rule 23(a) requires: (1) numerosity, (2) commonality; (3) typicality; and (4) adequacy of representation. If money damages are sought, it must also be shown that common questions “predominate over any questions affecting only individual members” and that class resolution “is superior to other available methods for the fair andefficient adjudication of the controversy.” (Fed. Rules Civ. Proc., rule 23(b)(3). 28 U.S.C.; Hanon v. Dataproducts Corp. (9th Cir. 1992) 976 F.2d 497, 508.) If a class seeks declaratory and injunctive relief only, “predominance” and superiority are not required. It is only necessary to show that the elements of Rule 23(a) are present and that the defendant has acted on grounds that apply to the class generally. (Rule
23(b)(2).) California courts have, in the appropriate cases, looked to Rule 23(b)(2) for guidance when a class seeks declaratory and injunctive relief. (Capitol People First v. State Dept. of Developmental Services (2007) 155 Cal.App.4th 676, 691692, fn. 12.) However, “California class actions can neither be certified pursuant to Rule 23(b)(2) nor barred from certification by the rule,” leaving some flexibility in cases where monetary damages are not sought. (Carter v. City of Los Angeles (2014) 224 Cal.App.4th 808, 824.)
Don’t forget to check for an arbitration provision
In the wake of AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __ [131 S.Ct. 1740], theorizing about a potential class action involving a consumer contract must necessarily involve a consideration of whether the contract contains an enforceable arbitration provision. This is so in an insurance class action. The good news is that most insurance policies other than health do not have arbitration provisions. Whether Concepcion will cause insurers to routinely add arbitration provisions to other types of policies remains to be seen. Health-insurance policies (and health-care service plans) issued in California do typically contain arbitration provisions. There are disclosure laws mandating the nature and extent of the notice that must be given to the consumer regarding arbitration and waiving the right to a jury trial. (Ins. Code, § 10123.19; Health & Saf. Code, § 1363.1.) An insurer’s or health plan’s failure to comply with the relevant statute’s requirements renders the arbitration provision unenforceable. (See, e.g., Rodriquez v. Blue Cross of California (2008) 162 Cal.App.4th 330, 335-337; Malek v. Blue Cross (2004) 121 Cal.App.4th 44, 71.) Reviewing the policy for the presence of
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W an arbitration provision, and determining whether the policy and enrollment documents make an adequate disclosure, is a necessary first step in determining whether the class allegations will disappear with the granting of a petition to compel arbitration.
Don’t confuse deceptive sales practice theories with contract theories
Putative insurance class actions often contain allegations regarding fraudulent acts without asserting a true fraud claim. They are cases that, at their heart, concern contractual issues – the insurer’s failure to pay a promised benefit or charge a promised rate. It is important to be clear on what the alleged wrongdoing is, and what the causes of action are seeking, because achieving class certification of a fraud claim is far more difficult than certifying a contractual claim. You don’t want to be in the middle of a class-certification proceeding when you learn that you don’t have the proof necessary to make the right arguments. A deceptive-sales-practice case is typically based upon the insurer’s pre-sale representations regarding the nature and extent of some policy feature. Such a case necessarily contains fraud claims – common-law fraud and violation of the fraudulent prong of Business & Professions Code section 17200 (Unfair Competition Law or “UCL”). To certify such a case, it must be shown that a common representation was communicated to the members of the class. For common-law fraud, it must be shown that reliance can be established through class-wide proof. But for UCL fraud, only the class representatives need rely on the common misrepresentation. (In Re Tobacco II Cases (2009) 46 Cal.4th 298, 324-326.) When a UCL “unlawful” claim is premised upon a law that prohibits some type of misrepresentation, the UCL fraud standard applies. (Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 326-327.) Demonstrating a common misrepresentation in an insurance case will mean proving that the insurer made a statement of fact, or an actionable omission, in written sales materials that were required to be distributed to each purchaser (Occidental Land, Inc. v. Superior Court (1976) 18 Cal.3d 355, 26 — The Advocate Magazine
363; (In re National Western Life Ins. Deferred Annuities Litig. (S.D. Cal. 2010) 268F.R.D. 652, 664) or that sales agents were required to use a standardized sales pitch that contained the misrepresented fact (Vasquez v. Superior Court (1971) 4 Cal.3d 800, 814). Defense counsel will attempt to show that the use of sales materials and the nature of the sales presentations varied from sale to sale causing individual issues to predominate. (Kaldenbach v. Mutual of Omaha (2009) 178 Cal.App.4th 830, 844-847 [“there was no evidence linking those common [marketing] tools to what was actually said or demonstrated in any individual sales transaction”]; (Fairbanks v. Farmers New World Life Ins. Co. (2011) 197 Cal.App.4th 544, 558559, 561-564 [materials describing life insurance as “permanent” were not uniform and there was no evidence of a uniform sales pitch in this regard].) It must also be remembered that the Achilles’ heel of a sales-practices case is a prominent disclosure by the insurer of the allegedly misrepresented fact, either at the point of sale or in the contract itself. (Broberg v. Guardian Life Ins. Co. (2009) 171 Cal.App.4th 912.) You are unlikely to be able to prove reliance, by anyone, if the allegedly misrepresented fact was adequately disclosed before the policy was issued or in the policy itself. (Hadland v. NN Investors Life Ins. Co. (1994) 24 Cal.App.4th 1578, 1589 [no reliance as a matter of law on representation that was at odds with unambiguous policy language].) The lesson here is not to make allegations about deception and fraud unless there is reason to believe the common proof necessary to prove those claims on a class basis exists. A class-certification motion that does not present adequate proof of common representations and reliance will not get off the ground. A breach-of-contract claim, on the other hand, can provide a much easier route to class certification. There is no problem with uniformity of the promise if the contractual language at issue is materially the same across the relevant policy forms. The nature of the breach will be likewise uniform because insurers are geared toward uniformity in the application of policy provisions, schooling their
claims personnel on standardized claims procedures. Courts routinely certify breachof-contract claims because “claims arising from interpretations of a form contract appear to present the classic case for treatment as a class action . . . .” (Kleiner v. First Nat’l Bank of Atlanta (N.D. Cal. 1983) 97 F.R.D. 683, 691; Menagerie Productions v. Citysearch (C.D. Cal. 2009) 2009 U.S.Dist. Lexis 108768, *36-37.) And while the defense will argue that an issue of the ambiguity of a policy provision will give rise to individualized issues regarding what each policyholder understood, the objective nature of policy interpretation dictates otherwise. [E]ven assuming that the contractual provision at issue were ambiguous, the subjective expectations of an insured class member would have little if any bearing on the breach of contract analysis. (Yue v. Conseco Life Ins. Co. (C.D. Cal. 2012) 282 F.R.D. 469, 476.)
Do assert statutory claims whenever possible
Insurance is a highly regulated business. There are a number of California statutes and regulations that apply to insurance policies issued in California. Laws or regulations that are not based upon a misrepresentation and, therefore, do not require a showing of a common misrepresentation and reliance, can provide a comparatively easy road to certification. Laws regulating health-insurance policies provide a good example. There are various provisions of the Insurance Code mandating that health insurance policies issued in California provide certain types of benefits. Many of these provisions are mirrored in the Health & Safety Code that applies to health-care service plans (that is, HMO plans.) Demonstrating that a health insurer or health plan has a practice of violating one of these mandated-benefit statutes will provide common questions that can be resolved in a class proceeding. For instance, in Arce v. Kaiser Foundation Health Plan, Inc. (2010) 181 Cal.App.4th 471, the trial court dismissed
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class allegations asserting that the health plan had systematically violated Health & Safety Code section 1374.72, the Mental Health Parity Act, by failing to provide applied behavior analysis and speech therapy to children with autism. (The Insurance Code also contains a Mental Health Parity provision at section 10144.5.) The health plan argued that determining whether a given child was entitled to the denied services would entail individualized medical determinations. In reversing, the appellate court found that assessing whether the health plan violated the statute required a determination of whether the type of treatment at issue was covered within the statutory mandate, not whether treatment was medically required for a given individual.
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To adjudicate whether Kaiser has violated the Mental Health Parity Act by denying coverage for applied behavior analysis therapy and speech therapy on these grounds, the trial court would not need to engage in individualized determinations of medical necessity for each putative class member. Instead, resolution of this issue would require the trial court to decide whether the therapies are health care services under the Mental Health Parity Act, and if so, whether the statute mandates that services only be provided by health care professionals licensed or certified by the state. (Arce, 181 Cal.App.4th at 494.) In Ticconi v. Blue Shield Life & Health Insurance Company (2008) 160 Cal.App.4th 528, the plaintiff sought class certification of claims for declaratory and injunctive relief based upon the insurer’s wrongful rescission of healthinsurance policies. The insurer contended that the putative class members had made material misstatements of fact about their health histories in their applications for insurance, justifying rescission. The plaintiff alleged that the insurer had systematically violated statutes that precluded rescission unless the applications were attached to the policies, something the insurer admittedly had not done. The appellate court reversed the denial of class certification on the basis that the individual issues raised by the defendant would not affect the liability decision to be made under the relevant statutes. (Id. at 544-543.) Statutory claims can be asserted under the unlawful prong of the UCL and as a breach of contract claim because laws regulating benefits are read into the contracts. (Modglin v. State Farm Mutual Automobile Ins. Co. (1969) 273 Cal.App.2d 693, 698.) For this reason, there is no issue in such cases regarding the uniformity of the policy language, simply the health plan’s practice relative to a statutory obligation.
Do familiarize yourself with the insurance principles at issue
Knowing the insurance principles at play will often help defeat arguments regarding individualized issues. For
instance, in a fraud case, the general rule is that there is no duty on behalf of a seller to disclose material facts without a fiduciary relationship, the disclosure of partial facts, etc. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 748.) Under Insurance Code section 332, however, “[e]ach party to a contract of insurance shall communicate . . . all facts within his knowledge . . . which the other has not the means of ascertaining.” (See also Pastoria v. Nationwide Insurance, et al. (2003) 112 Cal.App.4th 1490, 1495 [health insurer had duty under section 332 to disclose change in premiums and benefits it knew it would be making to the disadvantage of new purchasers].) Because an omission of a material fact is actionable in the insurance context, proof that the material fact was routinely hidden from all purchasers will satisfy the common misrepresentation element of a fraud claim. It is irrelevant what other information was conveyed or how “every sale was different,” so long as there is uniformity of the nondisclosure.
Don’t argue merits-only issues
The critical inquiry in the vast majority of class certification proceedings is whether common issues predominate. Ultimately, the judge must determine whether “the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants. [Citations omitted.]” (Brinker Restaurant Corp. v. Superior Court, supra, 53 Cal.4th at 1021.) Making a successful showing in this regard requires highlighting the relevant issues and the common proof underlying them. “Relevant” here means those elements of a cause of action that are not strictly “merits” issues. (Brinker, 53 Cal.4th at 1025; Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds (2013) 568 U.S. __ , 133 S.Ct. 1184, 1195, [“[m]erits questions may be considered to the extent−but only to the extent−that they are relevant to determining whether
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the Rule 23 prerequisites for class certification are satisfied”].) It is essential, therefore, to distinguish strictly merits issues from class issues to avoid being dragged into an irrelevant debate. For instance, in a sales-practices’ case alleging common-law fraud, class-wide proof of reliance can be established via a presumption that arises for each putative class member if the common representation is a material one. (Vasquez v. Superior Court, supra, 4 Cal.3d at 814 [uniform sales pitch regarding consumer goods]; (Occidental Land, Inc. v. Superior Court, supra, 18 Cal. at 363 [uniform misrepresentation and omission regarding the amount of a homeowners fee in a subdivision report presented to each purchaser]; (In re First Alliance Mortgage Co. (9th Cir. 2006) 471 F.3d 977, 991-992 [fraudulent system of inducing borrowers to agree to unconscionable subprime loan terms].) Because “materiality” is determined under an objective test, turning on whether “a reasonable man would attach importance to its existence or nonexistence in determining his choice of action” (Engalla v. Permanente Medical Group, Inc. (1977) 15 Cal.4th 951, 977), [it should be a merits-only question.] (Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds, supra, 133 S.Ct. at 11951196 [finding that the “materiality” element of a securities class-action fraud claim is necessarily a common question for purposes of a Rule 23(b)(3) analysis]; but see Fairbanks v. Farmers New World Life Ins. Co., supra, 197 Cal.App.4th at 555 [dicta stating that the alleged misrepresentation was not material because plaintiffs’ own survey evidence showed that a majority of the responding purchasers said they would have purchased the policies even if they knew their premiums were not guaranteed].) A court will be highly reluctant to deny class certification based upon a dispute over what should be a merits-only issue. “A certification decision is reviewed for abuse of discretion, but when the supporting reasoning reveals the court based its decision on erroneous legal assumptions about the relevant questions, that decision cannot stand. [Citations omitted.]” 30 — The Advocate Magazine
(Ayala v. Antelope Valley Newspapers, Inc. (June 30, 2014 S206874) __ Cal.4th __ [criticizing trial court for focusing on the substantive issue rather than whether common proof can be used to prove the substantive issue].) Every effort should be made to highlight why a given issue is a merits-only and not proper for consideration on certification.
Don’t forget a damages model
Common proof of damages in an insurance case can often be shown through the nature and extent of an insurer’s internal data. In certain cases, however, the nature of the damages sought will not be able to be shown in whole or in part through an analysis of the insurer’s data. (Ortega v. TOPA Ins. Co. (2012) 206 Cal.App.4th 463, 479 [class certification denied because the plaintiff could not show that the auto insurer’s aftermarket replacement parts were uniformly inferior]; Negrete v. Allianz Life Ins. Co. of N. America (C.D. Cal 2012) 287 F.R.D. 590, 605, 613 [financial modeling used to demonstrate that all members of the class were overcharged for their annuities because of insurer’s alleged misrepresentations].) A damages model is critical in these circumstances. Indeed, following the United States Supreme Court’s decision in Comcast Corp. v. Behrend (2013) 569 U.S. __ , 133 S.Ct. 1426, defense counsel will invariably assert that there are stringent new certification standards on damages that cannot be met. In Comcast, the court determined in an antitrust case that the proposed damages model could not satisfy Rule 23(b)(3)’s requirements because it was not necessarily tied to the sole antitrust theory of liability certified by the district court. The court noted that the model might well have been sound if all theories had been certified. (Comcast, supra, 133 S.Ct. at 1434.) Properly read, Comcast requires plaintiff to present a model that shows the alleged damages stemmed from the alleged wrongful actions. “[P]laintiff must be able to show that their damages stemmed from the defendant’s actions that created the legal
liability.” (Leyva v. Medline Industries, Inc. (9th Cir. 2013) 716 F.3d 510, 514.) It is the model that shows how common proof can be used to prove damages for all in the class. And while it may be necessary to break out individual damage claims at some point, doing so does not destroy commonality. (Yokoyama v. Midland National Life Ins. Co (9th Cir. 2010) 594 F.3d 1087, 1089 [“[t]he amount of damages is invariably an individual question and does not defeat class action treatment”].) Under substantive California law, once liability is determined, a plaintiff need only present a reasonable basis to estimate damages based on the available evidence. (Stott v. Johnston (1951) 36 Cal.2d 864, 875 [“[O]nce the cause and existence of damages have been so established, recovery will not be denied because the damages are difficult of ascertainment”]; (Mardirossian & Assoc., Inc. v. Ersoff (2007) 153 Cal.App.4th 257, 269 [affirming damages award for unpaid fees, even though plaintiff had failed to keep any formal billing records].) Whether proof of damages in a given insurance case can be culled exclusively from the insurer’s database or must be constructed from external sources, the court must be shown that common proof of damages can be presented. The classcertification motion should be accompanied by the appropriate evidence and an expert declaration establishing how the damages calculation will work. While the certification proceeding is not the time to prove damages, it is the time to show how damages can be proven without resorting to numerous individualized mini-trials. Robert S. Gianelli is a partner in the Los Angeles law firm of Gianelli & Morris, specializing in insurance-related class actions and individual insurance bad-faith cases. In 34 years of practice he has successfully prosecuted insurance-related class actions in state and federal courts. He serves as a Contributing Editor for the Rutter Group publication California Practice Guide: Insurance Litigation and was a finalist for the 2011 CAOC Consumer Attorney of the Year Award.
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Christian J. Garris
“Loss-of-rents” coverage under commercial property insurance Policy language holds the key to loss-of-rents coverage; a look at Folksamerica Reinsurance and the clarity it brings to this issue Commercial-property owners have coverage for physical damage to their building, but what if the time to repair that physical damage results in a tenant who moves out or who refuses to pay rent, or what if the building was in the process of being rented at the time of the loss? It all comes down to the policy language of course, but some policies are unclear on when loss-of-rents coverage is triggered. Under a homeowner’s policy, if a covered physical loss to the property occurs, and the repairs (or the damage itself) force the insureds to move out, coverage is usually pretty clear. The insurance company must pay up to the policy limits for the time the insureds have to relocate in a monthly amount that is commensurate with the insured property. The only issue that arises here is if the insurer takes an unreasonable amount of time to adjust and pay the claim for the property damage. Then, the limits may be suspended for the period of time that is an unreasonable delay. For commercial property, the situation can be quite different. What is insured is not the right of the insured to live in a place similar to their insured residence. Instead, what is commonly being insured is the right of the building owner to collect rent from a third-party occupant of the property. If the renter must move out because of covered damages, then the rent that was being paid by that tenant is recoverable under most commercial insurance policies. If, however, the building is vacant at the time of the loss – say when it is in between tenants – then what? Under most policies, the coverage still exists, even though there is no rent being paid that is to be reimbursed. The reason why there is still coverage is because of the economic concept of “opportunity cost.” If, for example, it takes a year to repair the property, then that is one year when the property 32 — The Advocate Magazine
could not be rented, and coverage should be afforded for that loss. The California Court of Appeal ruled in 2013 that when the policy promises to pay the insured for “loss of rents,” but goes into no further detail regarding the actual presence of a tenant at the time of the loss, the claim is covered even if the building is vacant at the time of the loss.
Ventura Kester, LLC, v. Folksamerica Reinsurance Co.
In Ventura Kester, LLC, v. Folksamerica Reinsurance Co. (2013) 219 Cal.App.4th 633, the Court of Appeal found that lost rents are covered even when there is no tenant: “Since the owner’s need for rental income and loss of rental income did not depend on having a tenant in place at the time of the covered incident, it was reasonable for the policyholder to expect the policy covered the owner’s actual lost rent as a result of the damage and did not depend on the fortuity of having a tenant in place when the damage occurred.” (Id. at 642.) •The Folksamerica policy language and the ISO form The Folksamerica policy is not an Insurance Services Office (“ISO”) policy. It is drafted by Folksamerica itself and differs somewhat from the ISO form used by the majority of property and casualty insurers. The ISO form states: (2) “Rental Value” If the necessary “suspension” of your “operations” produces a “Rental Value” loss payable under this policy, we will pay for the actual loss of “Rental Value” you incur during the period that: (a) Begins on the date property is actually repaired, rebuilt or replaced and tenantability is restored; and (b) Ends on the earlier of: (i) The date you could restore tenant occupancy, with reasonable
speed, to the level which would generate the “Rental Value” that would have existed if no direct physical loss or damage had occurred; or (ii) 30 consecutive days after the date determined in (2)(a) above. Under this language, loss of rents is covered until “tenantability is restored.” The coverage also requires an “actual loss” of “rental value.” Some insurers argue that if there is no tenant at the time of the loss, then there is no “actual loss.” Ventura Kester eliminates this argument as a defense against coverage in those circumstances. The Folksamerica policy defines whether the loss of rents claim is covered in two areas of the policy. The first is in the grant of coverage: Subject to the terms, conditions and limitations of this policy, we insure you against financial loss resulting from: .... (3) rents including accrued rents which become uncollectible, and extra expense incurred to prevent loss of rents, because of damage to or destruction of covered structures caused by an accident. All that is required for the loss of rents coverage to apply is (1) A financial loss, (2) resulting from rents (inclusive of accrued rents) or extra expense, (3) because of damage to covered structures. In other words, if there is “damage to . . . covered structures caused by an accident,” then there is loss of rents coverage. The first element was present in Ventura Kester. Ventura Kester suffered a financial loss of approximately $3.8 million in lost rents as a result of a vandalism claim. Certainly the fact that the building was vandalized and needed time to repair would prevent Ventura Kester from collecting rent from a tenant. Even Folksamerica conceded that the damages would take nearly a million dollars to repair; that was certainly
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not a repair that could take place in an afternoon. Ventura Kester’s expert opined that it would take approximately a year to complete the work. If there had been no vandalism, Ventura Kester could simply have completed the lease that it was negotiating with OfficeMax prior to the loss and rented the building. It could not be seriously contended that Ventura Kester suffered no “financial loss” as a result of not being able to rent the building. Although the parties might disagree as to the amount of the damages, there can be no dispute that there was some financial loss. The second element is that the financial loss must result from rents or extra expense incurred to prevent loss of rents. Here, because the building was vandalized and had to be repaired, it could not be rented, so there was a loss of rents. Ventura Kester also incurred significant extra expenses in attempting to avoid a loss of rents by hiring attorneys, designers, and architects to attempt to get the building back into a state where it could be rented. Ventura Kester also had to pay for taxes and insurance, which normally would have been paid by the tenant. The third element was undisputed. Folksamerica paid $927,424.03 on the building portion of the claim.
•These policies provide “all risk” loss of rents coverage. Since this kind of policy is ordinarily an “all risk” policy, every risk of loss is covered unless specifically excluded. Such a policy does not cover, for example, only losses as a result of the risk of earthquake, and instead covers all risks not specifically excluded. Under an “all risk” policy, the limits of coverage are defined by the exclusions. (Garvey v. State Farm Fire & Cas. Co. (1989) 48 Cal.3d 395, 406.) The insurer has the burden of proof that an exclusion applies. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 16.) •The Folksamerica policy provides three different coverages under this provision. The second portion of the Folksamerica policy that describes if loss of rents claims are payable states as follows: Basis of loss payment Subject to the provisions contained in the limit of insurance section and subject to all other terms and conditions of this policy the amount we will pay is calculated as follows: .... (5) Rents We will pay: a. your net loss of rental income; and
b. rents accrued but rendered uncollectible by reason of a covered loss at a location described on the Declarations Page; and c. your extra expenses necessarily incurred to minimize your rental income loss, but only to the extent that the rental income loss we would otherwise pay is reduced. There was coverage in its coverage in Ventura Kester under subsections (a) and (c). Ventura Kester agreed that there was no coverage under subsection (b).
Loss of rents coverage
Under (a), a loss of rental income is covered. In Ventura Kester, the insured lost the ability to collect rent because there was a vandalism claim that caused the building to need nearly a million dollars in repairs that would take a year to complete. Because of the vandalism, Ventura Kester suffered a loss of rental income.
Loss of accrued rents coverage
Under (b), there is coverage for rents that have “accrued” but are uncollectible due to a loss. This scenario does not apply here.
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Loss-of-Rents Coverage continues
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This coverage applies when there is a tenant, but the tenant is not paying rent because of damage to the building. This language proves that subsection (a) applied in Ventura Kester. Ventura Kester’s building was damaged, so Ventura Kester lost the ability to make money by renting it. If subsection (a) only applies when there is a tenant at the time of the loss that has stopped paying rent, then what is the need for (b)? Folksamerica argued that subsection (a) applies when the rent is being paid by the tenant and subsection (b) applies when rent is not being paid by the tenant. The problem with this interpretation is that if the rent is being paid, then there is no loss. Such an interpretation would therefore make subsection (a) totally superfluous. Any interpretation that would render some language of the Policy meaningless establishes that that interpretation is wrong by definition: “We must give significance to every word of a contract, when possible, and avoid an interpretation that renders a word surplusage.” (Advanced Network, Inc., v. Peerless Ins. Co. (2010) 190 Cal.App.4th 1054, 1063.)
Extra expense coverage
Under subsection (c), there is coverage for extra expenses incurred by the insured to reduce rental income loss. In Ventura Kester, the insured spent money on attorneys, designers, and architects in order to attempt to reduce the rental income loss by getting the building fixed as soon as possible. Since Ventura Kester spent money in order to get the property ready to rent after the vandalism loss, this portion of the claim should be covered. There are no grounds to state Ventura Kester did not spend money to reduce a loss of rental income.
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The Folksamerica policy only provides loss of rents coverage if there is a “financial loss.” Folksamerica argued that there was no “financial loss” in Ventura Kester because the building was not rented
when it was vandalized. Yet, clearly if it was going to take one year to repair the building, then there is an entire year where Ventura Kester did not have the opportunity to rent the building, suffering the financial loss that it had to spend a year repairing the building before it could be rented. In Nebo, Inc., v. Transamerica Title Insurance Co. (1971) 21 Cal.App.3d 222, 228, a title insurance policy covered loss of rents due to a defect in title. Because of a title defect, the insured had to pay its mortgage and other expenses but could not rent the building. The court held that it had therefore suffered a financial loss of rents.
An opportunity cost is a financial loss “An opportunity cost is ‘the benefit forgone by employing a resource in a way that’ prevents it from being put to another use.” (Meyer v. Sprint Spectrum L.P. (2009) 45 Cal.4th 634, 640 n.1.) The opportunity cost of not being able to rent a building for a year while repairs are made is obvious: when the building is being repaired, it cannot be rented. Such a cost is a real financial loss to the insured. The opportunity cost of repairing the building is forgoing the ability to rent the building. The cost of taking one action is the loss of opportunity to take another.
Separate coverage for “accrued” lost rents proves that there is coverage for lost rents that have not accrued
Under the Folksamerica policy, there is coverage for accrued loss of rents as well as loss of rents. Thus, the Folksamerica policy deems these two losses to be different. An “accrued loss of rents” is easily understood: when a building is damaged so that a tenant stops paying rent, then that loss of income can be claimed under this coverage. “Loss of rents” then is where no rent is being received and no tenant owes rent. This situation could only occur where there is no tenant. If there was a tenant, and it was paying rent, then there would be no loss. If there was a tenant,
and it was not paying rent, then there would be a claim for “accrued loss of rents.” Thus the only “financial loss” that could occur as a “loss of rents” that is not an “accrued loss of rents” is where the building is vacant, becomes damaged due to a covered loss and thereafter cannot be rented until repaired. There is no other way to ever trigger this coverage.
There were no applicable exclusions in the Folksamerica policy
In the trial court, Folksamerica agreed that no exclusion applied. Folksamerica argued at the Court of Appeal that because it was not relying on an exclusion to deny coverage, its limitation on coverage need not be “conspicuous, plain, and clear.” Yet, any restriction on coverage – such as Folksamerica’s desire to restrict coverage to non-vacant properties – must be clear. This rule applies not just to exclusions, but to any limitations on coverage: Hence the policy contains its own seeds of uncertainty; the insurer has held out a promise that by its very nature is ambiguous. Although this uncertainty in the performance of the duty to defend could have been clarified by the language of the policy we find no such specificity here. An examination of the policy discloses that the broadly stated promise to defend is not conspicuously or clearly conditioned solely on a nonintentional bodily injury; instead, the insured could reasonably expect such protection. (Gray v. Zurich Ins. Co. (1966), 65 Cal.2d 263, 272.) (1) There was no vacancy exclusion There is no exclusion for vacancy in the Folksamerica policy. Many policies only provide coverage for building loss – especially vandalism claims – if the building is occupied at the time of the loss. The Folksamerica policy did not have such an exclusion. (See, generally, TRB Investments, Inc. v. Fireman’s Fund Ins. Co. (2006) 40 Cal.4th 19, 30; Belgrade v. National Am. Ins. Co., (1962) 204 Cal.App.2d 44, 47.) (2) There was no “signed lease” exclusion
The person designated by Folksamerica to make the ultimate decision on coverage in Ventura Kester testified that, in order for there to be coverage for loss of rents, there must be a signed lease with a tenant before the loss. But this requirement is not stated anywhere in the policy. Of course, the test for whether Ventura Kester’s claim is covered is neither a claims person’s ideas nor the denial letter: the sole source of the rules for whether Ventura Kester’s claim was covered was the language of the Folksamerica policy. That policy does not state that a signed lease is required for coverage. It states that there must be a loss of rents as a result of physical damage to the building.
Interpretation of policy language
If a court finds that a policy is clear, then the plain meaning controls. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264-65.) If it is in any way uncertain whether or not there is coverage, then the court must look to the objectively reasonable expectations of the insured. (Ibid.) If that analysis does not resolve the question, then the court will construe the language against the drafter, the insurer. The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties. If contractual language is clear and explicit, it governs. On the other hand, “if the terms of a promise are in any respect ambiguous or uncertain, it must be interpreted in the sense in which the promisor believed, at the time of making it, that the promisee understood it.” This rule, as applied to a promise of coverage in an insurance policy, protects not the subjective beliefs of the insurer but, rather, “the objectively reasonable expectations of the insured.” Only if this rule does not resolve the ambiguity do we then resolve it against the insurer. (Ibid.) • The plain meaning of the policy establishes coverage In interpreting an insurance policy, courts first look to the plain meaning of the policy. Bank of the West, 2 Cal.4th at pp. 1264-65.) If it is clear, it controls.
(Ibid.) Words in an insurance policy should be construed as a layperson would read them. If, for example, an insured cannot rent a property due to covered physical damage, then the insured has suffered a “loss”: “Absent any indication that the parties intended some special or legalistic meaning to be given to the definition of ‘Loss,’ it is settled that we must determine its meaning by interpreting the phrase as a reasonable layperson, not as an attorney or an insurance expert, would construe it.” (Executive Risk Indem., Inc., v. Jones (2009) 171 Cal.App.4th 319, 329.) • The objectively reasonable interpretations of the insured results in coverage If, after reading policy language, a court is not certain whether or not there is coverage, then the objectively reasonable interpretation of a layperson controls. (Bank of the West, 2 Cal.4th at 126465.) In Ventura Kester, the court concluded that an objectively reasonable layperson would consider that a policy that has a loss of rents provision would provide coverage if the building is damaged and cannot be rented. • If neither the plain meaning nor the expectations of the insured answer the coverage issue, then it is automatically construed against the insurer Finally, if the court finds that the policy language is still unclear after taking into account the objectively reasonable layperson’s interpretation, then the language is automatically interpreted in favor of the insured. (Ibid.) • Restrictions on coverage are narrowly construed E.M.M.I. Inc. v. Zurich American Ins. Co. (2004) 32 Cal.4th 465, 470-71, held that in interpreting an insurance policy, limitations on coverage are to be strictly construed against the insurer: Furthermore, policy exclusions are strictly construed, while exceptions to exclusions are broadly construed in favor of the insured. “‘An insurer cannot escape its basic duty to insure by means of an exclusionary clause that is unclear. As we have declared time and again “any exception to the performance of the basic underlying obligation AUGUST 2014
The Advocate Magazine — 39
Loss-of-Rents Coverage — continued
must be so stated as clearly to aprise the insured of its effect.” Thus, “the burden rests upon the insurer to phrase exceptions and exclusions in
clear and unmistakable language.” The exclusionary clause “must be conspicuous, plain and clear.”’ This rule applies with particular force when the cover-
age portion of the insurance policy would lead an insured to reasonably expect coverage for the claim purportedly excluded. If the court in evaluating policy language considers the issue to be a “close call,” then the limitations must be construed against the insurer. It does not create a triable issue of fact, because the issue of policy interpretation is not a factual issue. It is a legal issue to be decided by the Court. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18.) Any uncertainty as to the enforceability of an insurance company’s claimed restrictions on coverage must result in a finding against its enforceability. If Folksamerica had wanted to limit coverage in its policy for loss of rents only to those situations where there is a signed lease with a tenant in effect at the time of the loss, then the policy should have stated that loss of rents and other expense is excluded unless the insured has entered into a written lease with a tenant prior to the date of the physical loss to the building. The policy did not contain that language.
Loss of rents provisions provide coverage when a commercial building can no longer be rented due to covered physical damage to the building – even if (a) there is no tenant in the building at the time of the loss, or (b) the building is not currently lease to anyone. The loss of the opportunity to lease the building is enough for coverage. Christian J. Garris has specialized in all aspects of insurance bad-faith litigation for over 16 years. He has obtained numerous multi-million dollar settlements for his clients in the fields of life, health, property/casualty, and disability insurance. He graduated with honors from Claremont McKenna College in 1991 and obtained his J.D. from Santa Clara University in 1994. He founded the Law Offices of Christian J. Garris in Los Angeles in 2004. He is a member of the Consumer Attorneys of Los Angeles.
40 — The Advocate Magazine
From the Editor Jeffrey Isaac Ehrlich Editor-in-Chief
About this Issue Jeffrey Isaac Ehrlich Editor-in-Chief
The basics of advertising-injury coverage The basic About concepts of this somewhat obscure this Issue and often mystifying area of insurance law Jeffrey Isaac Ehrlich The entire area of “insurance law” is sufficiently extensive and complex that many lawyers tend to view it as its own separate specialty. But even within that specialty, coverage for “advertising injury” tends to be regarded as a subspecialty, and many lawyers who are generally conversant with general principles of Jeffreyand Isaac insurance By coverage theEhrlich various types Editor-in-Chief of policy forms tend to shy away from anything related to advertising-injury coverage. Plaintiffs’ lawyers – particularly ones who are interested in pursuing business-related or intellectual-property litigation – would be well served to understand this type of coverage. This article highlights some of the key concepts related to advertising-injury coverage.
What is covered?
Since 1998, the standard “ISO” form for comprehensive general liability (CGL) policies provides a single coverage for “personal and advertising injury.” (Croskey, et al., California Practice Guide – Insurance Litigation (Rutter 2014 ed.) § 7:1001.4 (“Insurance Litigation”). The insuring agreement for that coverage is referred to as “Coverage B” and reads: a. We will pay those sums that the insured becomes legally obligated to pay as damages because of ‘personal and advertising injury’ to which this insurance applies. We will have the right and duty to defend any ‘suit’ seeking those damages . . . b. This insurance applies to ‘personal and advertising injury’ caused by an offense arising out of your business but only if the offense was committed in the ‘coverage territory’ during the policy period.” (Insurance Litigation, § 7:1002.) These two paragraphs do not even tell us exactly what “personal and advertising injury” is (we have to consult the policy’s definitions for that), but they already convey a fair amount of 42 — The Advocate Magazine
information about various conditions that must be met in order for coverage to exist. These include the following: • The coverage only applies to sums that “the insured” becomes legally obligated to pay, “as damages.” We know from this that only someone or some entity fitting within the policy’s definition of an “insured” is entitled to coverage; that there is no coverage unless the insured has become legally obligated to pay (i.e., voluntary payments won’t count) and what must be paid is “damages.” Do not assume that just because someone wants the insured to pay money that the money counts as “damages.” For example, a defendant who is ordered to pay back money that it had wrongfully acquired may be hit with a sizeable judgment, but the judgment won’t be considered to constitute “damages” for the purposes of this insurance coverage. “It is well established that one may not insure against the risk of being ordered to return money or property that has been wrongfully acquired. Such orders do not award “damages” as that term is used in insurance policies. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1266.) • There is a duty to defend in cases that trigger personal and advertising-injury coverage, but only “suits.” (So administrative hearings that do not qualify as “suits” won’t count. (Compare FosterGardner, Inc. v. National Union Fire Ins. Co. (1998) 18 Cal.4th 857, 878, [Order from Cal.EPA under California “Superfund” law notifying insured that it must remediate pollution is not a “suit” that triggers CGL coverage] with Ameron Intern. Corp. v. Insurance Co. of State of Pennsylvania (2010) 50 Cal.4th 1370, 1374, [holding that adjudicative proceeding before U.S. Dept. of the Interior Board of Contract Appeals qualifies as a “suit”].) • The personal and advertising injury must be caused by an “offense” (another defined term), must arise “out of your
business,” must be committed in the “coverage territory” (another defined term), and must occur “during the policy period.” Whew! And we have not even gotten to the complicated stuff yet. So, under the current CGL standard form, “personal and advertising injury” is defined as “injury, including consequential ‘bodily injury,’ arising out of one or more of the following offenses: • false arrest, detention or imprisonment; • malicious prosecution; • wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor; • oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services; • oral or written publication, in any manner, of material that violates a person’s right of privacy; • use of another’s advertising idea in your ‘advertisement’; or • infringing upon another’s copyright, trade dress or slogan in your ‘advertisement.’ (Insurance Litigation, § 7:1013.) Note here that some of the obvious “personal injury” offenses are intentional torts – like malicious prosecution and false arrest. In California, the statutory exclusion for willful misconduct in Insurance Code section 533 will preclude indemnification for these torts, even if the policy promises coverage. But that section does not prevent an insurer from defending a claim that falls within section 533. (See, e.g. Downey Venture v. LMI Ins. Co. (1998) 66 Cal.App.4th 478, 507, [insurer required to defend malicious prosecution claim against its insured, notwithstanding section 533].)
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Also note that these kinds of intentional torts cannot be considered “accidents.” But the personal and advertising injury coverage in a CGL policy is not triggered by an “occurrence” or an “accident;” it is triggered by the offense. By contrast, the liability in homeowner’s and umbrella policies often includes similar personal-injury coverage, but such policies are typically “occurrence” based. For the purposes of “advertising injury” coverage, the key provisions or “offenses” are the ones for disparagement of a person or organization’s goods, products or services, for the use of another’s advertising idea in your advertisement, and for infringing on someone else’s copyright, trade dress, or slogan in your advertisement. These are the provisions that seem to generate the most claims and therefore the most judicial decisions.
What is disparagement?
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When businesses make references to their competitors, they often do so in a way that is not perceived as kind, or accurate. Litigation ensues. This litigation frequently brings the “disparagement” component of personal and advertising injury into play. Some California courts had construed the concept of “disparagement” very broadly. But the California Supreme Court’s recent decision in Hartford Cas. Ins. Co. v. Swift Distribution, Inc. (2014) 59 Cal.4th 277, has narrowed the coverage. In Swift Distribution, the Court explained that, “The term ‘disparagement’ in the context of an insurance policy, in light of its proximity to the terms ‘libel’ and ‘slander,’ suggests it may be understood as a common law tort: Whereas defamation, which includes libel and slander, concerns damage to the reputation of a person or business, disparagement concerns damage to the reputation of products, goods, or services. . . . Yet the torts of disparagement and defamation protect different interests and have entirely different origins in
Basics continues 44 — The Advocate Magazine
Jay Cordell Horton MEDIATOR/ARBITRATOR
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Basics — continued
history.” (Id. 172 Cal.Rptr.3d at p. 660, internal quotation marks and citations omitted.) The Court explained that part of the confusion about what constitutes disparagement results from its name: “The tort has received various labels, such as ‘commercial disparagement,’ ‘injurious falsehood,’ ‘product disparagement,’ ‘trade libel,’ ‘disparagement of property,’ and ‘slander of goods.’ These shifting names have led counsel and the courts into confusion, thinking that they were dealing with different bodies of law. In fact, all these labels denominate the same basic legal claim.” (Swift Distribution, 172 Cal.Rptr.3d at 661, citing 5 McCarthy on Trademarks and Unfair Competition (4th ed.) § 27:100.)
Disparagement emerged from the common-law tort doctrine of slander of title. (Id. at p. 661.) It then expanded to encompass not just statements disparaging the state of a property owner’s title in property, goods, or chattels, but also to statements disparaging the quality of the property, goods or chattels themselves. (Ibid.) Surveying the cases, the Swift Distribution Court explained that, “disparagement, for purposes of commercial liability insurance coverage, [has been construed to mean] a knowingly false or misleading publication that derogates another’s property or business and results in special damages.” (Id. 172 Cal.Rptr.3d at p. 653.) That seems fairly straightforward. So try it out on a hypothetical factual
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Charlotte Russe Holding, Inc. (2012) 207 Cal.App.4th 969, 973. The Court of Appeal held that Charlotte Russe had made out a claim for disparagement, at least one that was sufficient to trigger the duty to defend Versatile’s lawsuit. The court explained, “we cannot rule out the possibility that Versatile’s pleadings could be understood to charge that the dramatic discounts at which the People’s Liberation products were being sold communicated to potential customers the implication – false, according to Versatile – that the products were not (or that the Charlotte Russe parties did not believe them to be) premium, high-end goods. Arguably, a trade libel claim might survive under these theories.” (Id. at p. 980.) Other courts were critical of this approach. The Court of Appeal’s opinion in Swift Distribution, for example, bluntly stated that, “We fail to see how a reduction in price – even a steep reduction in price – constitutes disparagement. Sellers reduce prices because of competition from other sellers, surplus inventory, the necessity to reduce stock because of the loss of a lease, changing store location, or going out of business, and because of many other legitimate business reasons. Reducing the price of goods, without more, cannot constitute a disparagement; a price reduction is not an injurious falsehood directed at the organization or products, goods, or services of another.” (Hartford Cas. Ins. Co. v. Swift Distribution, Inc. (2012) 148 Cal.Rptr.3d 679, 687 review granted and opinion superseded sub nom. Hartford Cas. Ins. v. Swift Distribution, and aff ’d, (2014) 59 Cal.4th 277.) The Supreme Court in Swift Distribution agreed. “We agree with this reasoning. There is no question that Charlotte Russe’s discounted prices on People Liberation’s clothing specifically referred to People Liberation’s product. But a mere reduction of price may suggest any number of business motivations; it does not clearly indicate that the seller believes the product is of poor quality. (Id., 172 Cal.Rptr.3d at p. 666.) In Swift Distribution, the insured, sold a product called the “Ulti-Cart,” a multi-
use cart marketed to help musicians load and transport their equipment. The insured was sued by the maker of the “Multi-Cart.” a patented collapsible cart capable of being manipulated into multiple configurations and typically used to transport music, sound, and video equipment. The suit included allegations of patent and trademark infringement, false designation of origin, and damage to business, reputation, and goodwill. The case ultimately settled, but not before the maker of the Ulti-cart sued its CGL insurer for refusing to defend it. The insured claimed that the suit included claims that accused it of disparaging the Multi-Cart, triggering coverage under its CGL policy. The insured offered two rationales to support its claim of coverage. First, it argued that the similarity in the two products’ names led consumers to confuse the Ulti-Cart with the Multi-Cart. Second, it contended that the maker of Multi-Cart claimed that its competitor’s advertising included false statements of superiority that implied that the MultiCart was inferior. The Court rejected both arguments. It first noted that, “There is no coverage for disparagement simply because one party tries to sell another’s goods or products as its own.” (Id. 172 Cal.Rptr.3d at p. 667.) Similarly, a party’s attempt to copy or infringe on the intellectual property of another’s product does not, without more, constitute disparagement. (Ibid.) Likewise, “A false or misleading statement that causes consumer confusion, but does not expressly assert or clearly imply the inferiority of the underlying plaintiff ’s product, does not constitute disparagement.” (Id. at 172 Cal.Rtpr.3d at p. 668.) Next, the Court rejected the contention that if a competitor lauds its own product by referring to it as “innovative,” “unique,” “superior,” and “unparalleled,” it suggests the superiority of its product and, by implication, the inferiority of its competitor. The Court held that these statements should be most reasonably understood as “generic assertions of the company’s excellence” and were akin to
“mere puffing” which cannot support a tort claim. (Id. at 172 Cal.Rtpr.3d at p. 669.) Ultimately, Swift Distribution adopted the following test: “a claim of disparagement requires a plaintiff to show a false or misleading statement that (1) specifically refers to the plaintiff ’s product or business and (2) clearly derogates that product or business. Each requirement must be satisfied by express mention or by clear implication.” (Id., 172 Cal.Rptr.3d at p. 657.)
The court-created causality requirement
If this area did not already seem complex enough, there are additional court-generated requirements for advertising-injury coverage that grow out of the policy language, but which do not expressly appear in the policy. For a court to find a covered “advertising injury” under California law, it must find that: (1) there is a causal connection between allegations in the plaintiff ’s complaint against the insured and the insured’s advertising activities; and (2) the allegations in the complaint fit into one of the enumerated offenses in the commercial general liability policy that could be considered advertising injuries. (Homedics, Inc. v. Valley Forge Ins. Co. (9th Cir. 2003) 315 F.3d 1135, citing Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1273-1274.) For example, a claim of patent infringement (the type of claim at issue in Bank of the West) does not occur in the course of advertising activities within the meaning of advertising-injury coverage simply because the insured advertises an infringing product, if the infringement claim is based on the sale or importation of the product, as opposed to its advertisement. Iolab Corp. v. Seaboard Sur. Co. (9th Cir. 1994) 15 F.3d 1500, 1505. Simply put, to satisfy the causation requirement, the advertising activity must cause the injury, not merely expose it. Simply Fresh Fruit Inc. v. Continental Ins. Co. (9th Cir. 1996) 94 F.3d 1219, 1233. Many putative advertising-injury claims fail on this requirement. AUGUST 2014
The Advocate Magazine — 47
Basics — continued
But the causation requirement will normally be satisfied where the insured is accused of violating a competitor’s copy-
right in its advertising. This is because the injury from copyright infringement in an advertisement “emanates within the
advertisement itself and requires no further conduct.” (Cahill v. Liberty Mut. Ins. Co. (9th Cir. 1996) 80 F.3d 336, 339 n. 3.) In other words, because the Copyright Act makes each act of infringement a separate violation for which damages can be recovered, simply using another’s copyrighted material in an advertisement is deemed to damage the copyright owner.
No advertising injury without an advertisement
Other putative advertising-injury claims get tripped up on the absence of any actual “advertising.” Courts have held that personal solicitations to potential customers do not satisfy the requirement of “advertising.” Hence, in S.B.C.C., Inc. v. St. Paul Fire & Marine Ins. Co. (2010) 186 Cal.App.4th 383, the insured temporary staffing agency (Rombe) was a franchisee of TRC Staffing. Rombe announced at a breakfast meeting that it would no longer be affiliated with TRC Staffing, was starting its own competing agency, and asked those in attendance to become its customers. The court held that this in-person solicitation was not an advertisement, and that a subsequent account of the event posted on the internet did not involve any advertising-injury offense enumerated in the policy. (Id. at p. 493.) In Oglio Entertainment Group, Inc. v. Hartford Cas. Ins. Co. (2011) 200 Cal.App.4th 573, 584, Davis, who recorded “cheesy” lounge style recordings of popular songs and genres of music under the name “Richard Cheese.” He claimed that the insured Oglio, “sought out artists to copy Davis’s product and later sold a competing product, injuring Davis’s sales and the value of his professional name.” (200 Cal.App.4th at p. 584, emphasis in original.) Held: no coverage because Oglio’s acts of seeking out artists to copy Davis’s product and later selling a competing product does not allege that Oglio copied Davis’s advertising idea or style of advertisement in its own advertising. (Ibid.)
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Basics — continued
Finally, in Simply Fresh Fruit, Inc. v. Cont’l Ins. Co. (9th Cir. 1996) 94 F.3d 1219, 1220, the insured was sued in state court for misappropriating a competitor’s automated method for slicing fresh fruit. The competitor claimed that by misappropriating its method, the insured was able to decrease its production costs, eroding the competitor’s economic advantage. The Ninth Circuit held that there was no advertising-injury coverage, because the allegations were based on the misappropriation of the fruit-slicing method, not that it was advertised.
No advertising, no foul
Admit it. Even if you have never given much thought to advertising-injury
50 — The Advocate Magazine
coverage before, by the time you read my description about the Simply Fresh Fruit case you knew how it was going to come out. You were thinking something like, “no allegation of advertising; therefore no advertising-injury coverage.” Even if you were not thinking that as you read the description of the case, you get it now. My point is this: If you litigate cases between commercial entities you need to know about advertising-injury coverage. You may either have to spot the coverage issue and advise your client to tender the claim to its insurer, or you may be bringing the case and you may decide to include advertising-related claims to ensure that there may be insurance
coverage. Or you may decide to omit what could be a gratuitous comment in your complaint that might have little to do with the underlying claim, but which might trigger a defense under the coverage for disparagement. Hopefully, this article will spur you to read more about this area, and to become more comfortable with advertising-injury concepts. Jeffrey Isaac Ehrlich is the editor-in-chief of Advocate magazine, and as of 2014 is a co-author of Croskey, Heeseman, Imre & Ehrlich, California Practice Guide – Insurance Litigation (Rutter 2014.) He is the principal of the Ehrlich Law Firm in Encino, California, and certified as an appellate specialist by the State Bar of California.
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Trying a bad faith case: The duty to settle The duty to settle under liability coverage is the single most important bad-faith principle of insurance When trying insurance bad-faith cases there are fundamental differences between the type of insurance that is involved. While different policies cover different risks, from property and liability to life, health and disability, the common denominator of insurance is that it is the one product we buy that we hope we never have to use. You certainly don’t buy property insurance hoping that your home burns down. Rather, you buy insurance so that if your home burns down, you have coverage to rebuild it. To put it simply, insurance provides peace of mind. One of the most important coverages we buy is liability insurance. Whether it is auto, professional malpractice, or employment practices, liability insurance provides protection whenever mistakes are made. It follows that the most important bad-faith principle in the context of liability insurance is the duty to settle. This article will focus specifically on handling some of the nuances of trying a bad-faith case that arise out of the breach of the duty to settle.
The duty of good faith and fair dealing requires a liability insurer to settle a lawsuit by a third party against its insured when there is a clear and unequivocal offer to settle within policy limits and liability is reasonably clear and a likelihood of a recovery in excess of the policy limits. In Comunale v. Traders & General Ins. Co., 50 Cal.2d 654, 328 P.2d 198, the Supreme Court held that, “the implied obligation of good faith and fair dealing requires the insurer to settle in an appropriate case although the express terms of the policy do not impose such a duty.” (Id. at 659.) In deciding whether a claim against an insured should be settled, the insurer “must take into account 52 — The Advocate Magazine
the interest of the insured and give it at least as much consideration as it does to its own interest.” (Ibid.) As stated in CACI 2334, the elements of the breach of the duty to settle include the following: (1) That [plaintiff in the underlying case] brought a lawsuit against [Plaintiff Insured] for a claim that was covered by Defendant’s insurance policy; (2) That [Defendant Insurer] failed to accept a reasonable settlement demand for an amount within policy limits; and (3) That a monetary judgment was entered against [Plaintiff Insured] for a sum greater than the policy limits. Notably, the insurer’s obligation is to accept a “reasonable settlement demand.” A settlement demand is reasonable “...if the [Defendant Insurer] knew or should have known at the time the settlement demand was rejected that the potential judgment was likely to exceed the amount of the settlement demand based on [plaintiff in the underlying case’s] injuries or loss and [The Insureds’] probable liability.” (CACI 2334)
One of the key differences when trying a bad-faith failure-to-settle case and other bad-faith cases is that your plaintiff insured was previously the defendant in the underlying action. Moreover, the insured has already been found negligent or to have committed a wrongful act by a previous jury, resulting in a judgment that exceeds the policy limit. Whether your client was a negligent driver who caused injury or a doctor who committed malpractice in the underlying case, you need to address those issues with potential jurors in voir dire. As I like to say, you need to “get the skunk out on the table.”
For example, if your client negligently caused a wrongful death in the underlying case, you need to open up the discussion with jurors about any biases they may have about that. I have found that if you hit the liability aspects of the underlying case head on, most jurors understand that people make mistakes. This dovetails nicely into a discussion about why we buy liability insurance. After all, no one wants to commit a negligent act that triggers liability coverage. But the coverage is there to provide peace of mind when necessary. I also think it is important to focus the jurors on their role in the bad-faith case. They need to understand that it is not their role to decide whether your client was negligent in the underlying case. Another jury has already decided that and you should embrace it. Rather, the focus is on the insurance company’s conduct and how it handled the underlying claim in refusing to settle within policy limits. Another topic you must cover is punitive damages. You can never expect a jury to return with a punitive-damage verdict in a bad-faith case unless you’ve prepared them to do so during voir dire. As with all issues that you cover in voir dire, you want to get jurors to open up about how they really feel about the concept of punitive damages. Don’t be afraid to ask open-ended questions even if you might get answers that you weren’t hoping to get. Letting the jurors express themselves in their own words is the only way that you’ll truly get the honest answers you want. As my old college roommate used to say, “You have two ears and one mouth, so you should listen twice as much as you speak.” This is especially true during voir dire. Before getting to the jurors’ feelings about punitive damages, I like to build
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up to it by asking a series of questions that get jurors talking about the difference between someone doing something negligently (like your client in the underlying case), and a defendant that has acted intentionally. Most people will agree that if conduct goes beyond mere negligence, it ought to be punished and deterred. Now you have prepared the jurors for a discussion about punitive damages. Inevitably, there will be some jurors who have heard or read about punitive damages and have negative feelings about it. For example, I’ve had more than one juror describe their understanding of punitive damages as “windfall.” To help get jurors to understand the concept of punitive damages, I like to refer to them as “penalty damages” or “punishment damages.” One of the things I’ve noticed in the past several years is that jurors, generally speaking, are more receptive to the concept of punitive damages. I’ve found this to be true even in conservative jurisdictions. I think the reason is because most jurors have heard about corruption cases where people have cheated other people out of money. I bring up examples like, Bernie Madoff, Charles Keating, Jeffrey Skilling, and Enron to get jurors thinking about it. Examples like these bring up the notion that sometimes greed causes people and/or corporations to do bad things and in the process cause harm to others. In a bad-faith case, the purpose of punitive damage is to punish and deter dishonest conduct. Ultimately, the goal in voir dire is to have jurors who are open to awarding punitive damages if they find the evidence establishes dishonest conduct. The jury should also understand that the purpose of punitive damages is not to compensate, but to punish and deter.
Cross-examination of the adjusters
The most important evidence you can develop in a bad-faith trial is during the cross examination of the claims’ adjusters. In a bad-faith trial arising out of the duty to settle, the manner in which you handle the cross examination of the adjuster will depend in large part on why
the insurer decided not to settle the underlying case. There are really just two reasons why insurers refuse to settle. First, is because the carrier believed there was no coverage. Second, is that the carrier believed the underlying case just wasn’t worth the full policy limit. •Failure to settle because of a coverage dispute In some cases, an insurer’s decision not to settle is based on its belief that there is no coverage under the policy. In other words, the carrier takes the position that the claim may be worth more than the policy limit, but that there is no coverage available under the policy. In such cases, it is important to note that the California Supreme Court in both Comunale and Johansen v. Cal. State Auto Ass’n Interinsurance Exch. (1975) 15 Cal.3d 9, 123, specifically addressed the issue of considering a carrier’s “good faith” decision to not settle based on non-coverage. In both cases the court concluded such considerations were irrelevant. As the court stated in Johansen: Defendant asserts, however, the Comunale principle does not apply to an insurer whose refusal to settle stems from a bona fide belief that the policy does not provide its insured coverage. In Comunale, the insurer asserted a virtually identical claim…This court nevertheless held the insurer liable for the excess judgment against its insured, stating: ‘an insurer who denies coverage does so at its own risk, and although its position may not have been 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….accordingly, an insurer’s good faith though erroneous belief in noncoverage affords no defense to liability flowing from the insurer’s refusal to accept a reasonable settlement offer. (Id. at 16-17) (Emphasis added). Moreover, in footnote 4, the Johansen Court made it clear that a “wrongful” decision in noncoverage in the above quote does not mean “culpable,” but rather, it simply means an “erroneous” decision:
FN4. Defendant seeks to avoid the import of this language by asserting that ‘wrongful’ must be equated with ‘culpable,’ a proposal for which there is absolutely no support in Comunale. Indeed, the language immediately preceding this portion of Comunale expressly states that the insurer denies coverage at its own risk. Viewed in context, it becomes apparent that a ‘wrongful’ denial of coverage as used in Comunale means merely an erroneous denial of coverage required by the policy. (Id., at 16-17) (Emphasis added). In addition, when a carrier is faced with the decision of whether or not to settle, it is not permitted to even consider coverage issues in making that decision. This is the standard that is clearly set forth in Johansen: Moreover, in deciding whether or not to compromise the claim, the insurer must conduct itself as though it alone were liable for the entire amount of the judgment. [cite]. Thus, the only permissible consideration in evaluating the reasonableness of the settlement offer becomes whether, in light of the victim’s injuries and the probable liability of the insured, and ultimate judgment is likely to exceed the amount of the settlement offer. Such factors as the limits imposed by the policy, a desire to reduce the amount of future settlements, or a belief that the policy does not provide coverage, should not affect a decision as to whether the settlement offer in question is a reasonable one. (Id. at 16). During the cross examination of the adjuster, you will be able to establish that insurer refused to settle based on a belief there is no coverage. Inevitably, the carrier will attempt to argue that its coverage position was reasonable and/or that it relied on the advice of its coverage lawyers in refusing to settle (i.e., the “advice of counsel” defense). But this provides no defense to payment of the entire excess judgment since a carrier is not permitted to even consider coverage issues when deciding whether or not to compromise a claim in the first instance. The reasonableness of AUGUST 2014
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its coverage position is therefore irrelevant; it remains liable for the entirety of the underlying judgment so long as there is coverage. For this reason, you should bring a motion in limine and/or a special instruction based on Johansen to preclude an advice of counsel defense because the reasonableness of the coverage position taken by the carrier is irrelevant so long as there is coverage. Also, by the time you get to trial the court will usually have decided coverage and a special instruction advising the jury of that is necessary. Finally, a special instruction, again based on Johansen, should be requested to tell the jury that a belief that the policy does not provide coverage should never have even been considered by the carrier in deciding whether or not to settle. •Failure to settle because of a valuation dispute In most cases, an insurer decides not to settle based on a belief that the underlying claim is not worth the full policy limit, even though there is no dispute that whatever damages are ultimately awarded are covered under the policy. As stated above, the duty of good faith and fair dealing requires an insurer to accept a “reasonable settlement demand” where “...in light of the claimed injuries or loss and plaintiff ’s probable liability, the judgment in the lawsuit was likely to exceed the amount of the settlement demand.” (CACI 2334) In light of this instruction, you will need to prove that the judgment in the underlying action was likely to exceed the amount of the demand. To some extent, this will require you to re-try the underlying action in the bad-faith case to prove that it was worth more than the policy limit. Of course, by the time you reach the bad-faith case the “proof is already in the pudding” since the underlying action will, necessarily, have resulted in a judgment that exceeded the policy limit. Notably, the actual judgment provides presumptive proof of the value of the claim. Consider the following taken from Crisci v. Security Ins. Co. of New Haven (1967) 66 Cal.2d 425: The size of the judgment recovered in the personal injury action, although 56 — The Advocate Magazine
not conclusive, furnishes an inference that the value of the claim is the equivalent of the amount of the judgment and that acceptance of an offer within those limits was the most reasonable method of dealing with the claim. (Id. at 430). It is important that the jury receive this instruction. I also emphasize, particularly in closing, that the jury in the badfaith case should give great deference to the verdict rendered in the underlying case and not second guess it. After all, the underlying case was decided by a jury that took the same oath that your jury was given. I also think it’s a good idea to read that oath during closing: Do you, and each of you, understand and agree that you will well and truly try the cause now pending before this court, and a true verdict rendered according only to the evidence presented to you and to the instructions of the court. (emphasis added). I’ve found that generally, jurors respect the views of other jurors. I think emphasizing that the jury in the underlying case rendered a “true verdict” under the oath goes a long way toward the jury in the bad-faith case not disrupting their findings. However, because the judgment itself provides a presumption of the value of the claim that is “not conclusive,” you should still be prepared to prove that the underlying action was worth more than the amount offered. During trial, the carrier will argue that it acted reasonably in handling the underlying claim. But the focus must be on the reasonableness of the settlement offer that was ultimately rejected, not the reasonableness of the insurers’ conduct leading up to that rejection. One helpful case in this regard is Betts v. Allstate (1984) 154 Cal.App.3d 688. Betts followed the Johansen and Comunale authorities and reinforced that the relevant inquiry is the reasonableness of the settlement offer, not the reasonableness of the insurers’ conduct when dealing with exposure for an excess judgment. In Betts, the court stated: [In Comunale] the Supreme Court held an insurer in determining
whether to settle a claim must give at least as much consideration to the welfare of the insured as it gives its own interest….An insurer may be held liable for a judgment against its insured in excess of its policy limits where it has breached the implied covenant of good faith and fair dealing by unreasonably refusing to accept a settlement offer within limits…. Allstate’s argument that liability for an excess judgment is not imposed unless there is a ‘bad faith’ breach of the contract is unsound. Liability is imposed ‘for failure to meet the duty to accept reasonable settlements, a duty included within the implied covenant of good faith and fair dealing.’ Recovery may be based on an unwarranted rejection of a reasonable settlement offer and …the absence of evidence, circumstantial or direct, showing actual dishonesty, fraud, or concealment is not fatal to the cause of action. (Id. at 706) (emphasis added). The Betts court went on to state the standard for evaluating the reasonableness of a settlement offer: Thus, the permissible considerations in evaluating the reasonableness of the settlement offer are whether in light of the victim’s injury and the probable liability of the insured the ultimate judgment is likely to exceed the amount of the settlement offer. (Id., at 706-707) Focusing on the reasonableness of the settlement offer, rather than the reasonableness of the insurer’s conduct, you should cross examine the claims adjuster on every facet of the underlying case that supports your argument that its value was greater than the policy-limit settlement demand. Go through the injuries, the past medical bills, the future medical bills, and any other aggravating factors. In some cases, you can cross the adjuster on the carrier’s own claims’ manual which usually classifies injuries and rates them in terms of severity. In some cases the carrier should have known to accept a demand within policy limits but because of its own delay in investigating the claim, it did not
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obtain all of the necessary information or discovery it needed to properly respond to the demand. You want to show that
the evidence was available if the carrier conducted a proper investigation. The following instruction should be given:
Defendant acted unreasonably or without proper cause if it failed to conduct a full, fair, and thorough investigation of all of the bases of the claim. When investigating plaintiff ’s claim, defendant had a duty to diligently search for and consider evidence that supported coverage of the claimed loss. (CACI 2332) This instruction is helpful to prove that if the carrier followed the rules and “diligently searched for and considered evidence that supported coverage,” it would have known the underlying demand was reasonable and it should have settled.
Establishing ratification during crossexamination
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In order to get to a second punitive damage phase, you will need to prove that the conduct constituted “malice, oppression, or fraud” in phase one. (See, CACI 3946.) In addition, you will also need to prove one of the following: (1) That the conduct constituting malice, oppression, or fraud was committed by one or more officers, directors, or managing agents of defendant who acted on behalf of the defendant; or (2) That the conduct constituting malice, oppression, or fraud was authorized by one or more officers, directors, or managing agents of defendants; or (3) That one or more officers, directors, or managing agents of defendant knew of the conduct constituting malice, oppression, or fraud and adopted or approved that conduct after it occurred. (Civ. Code, § 3294.) Going into trial, you need to identify the witness or witnesses that have the managerial capacity to establish ratification. In most cases it is either the immediate supervisor of the adjuster or that person’s supervisor. Whomever the witness is, you need to establish ratification of the conduct in order to get to a punitive-damage phase. In a failure-to-settle case, it is usually pretty easy to identify the person with managerial capacity: It’s the person who
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had the final authority to decide not to settle. It is usually a supervisor, and on cross- examination you will want to establish that given his/her role in the compa-
ny, that he/she has managerial capacity. Once that is established, you need to confirm ratification and approval of the claim. I usually ask questions that
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establish that the supervisor received no criticism and that they acted consistent with how the company goes about handling claims. These questions establish not only ratification but also “pattern and practice.” Inevitably, in phase I, the company and its witnesses will vigorously defend their conduct and stand behind it. Of course, if the jury finds that the same conduct was malicious, oppressive or fraudulent and there is a second phase, this testimony will be very helpful to address the amount of punitive damages the jury should award.
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Trying cases is like being in a boxing match. You’re fighting every day, whether you think it’s going well or not; you just don’t know if you’re ahead or behind on the jury’s scoring card. That’s why, like a boxer, no matter whether you had a good or bad day in trial, you must shake it off and go into the next day ready to fight again. But all of that changes when the jury has made a finding of malice, oppression or fraud and you find yourself now in phase II of the bifurcated trial. You now know that the jury is on your side and has found, by clear and convincing evidence, that the insurance company’s conduct was “despicable.” You no longer need to be the aggressive fighter who is zealously arguing every issue. The jury has already found that the conduct is really bad, now is the time to calmly reason with the jury about what to do about it. I remind the jury that we are doing this collectively, on behalf of society, to make sure this bad conduct is both punished, and more importantly, not repeated. •Evidence of financial condition The only new evidence to present during the punitive damage phase is of the company’s financial condition. Getting the financial information of an insurance company is very simple because they are required to lodge that information with the Department of Insurance. I usually will obtain certified copies of at least five years of the
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company’s financial statements filed with the DOI. Also, because the financial documents are certified by the DOI, they are self-authenticating. Usually, I will have retained a forensic economist to explain what the numbers in the financial documents mean to the jury. While there are many ways to evaluate the financial condition of the company, the most common way is to look at the company’s surplus. The documents obtained from the DOI will set forth the company’s assets, liabilities and surplus. Notably, the liability will list not only the actual losses paid but also reserved losses so that the remaining surplus is net of even potential claims the company has reserved for future payments. Once the
financial condition evidence is presented, it is time for the final closing argument. •The punitive damage closing While you know that the jury thinks the company’s conduct was really bad by the second phase, you don’t know what they are willing to do about it. It is your job as the trial lawyer to motivate the jury to “send a message,” not just to the defendant in your case, but also to the insurance industry as a whole. The starting point is to make sure you explain the purpose of punitive damages which is twofold: to punish & deter. Cite the jury instruction as follows: The purposes of punitive damages are to punish a wrongdoer for the conduct that harmed the plaintiff and to
discourage similar conduct in the future. (CACI 3949) It is important that the jury understand that punitive damages are designed to protect the public, which includes the members of the jury. One way to accomplish this task is to refer the jury back to the law. For example, in California, one powerful jury instruction is the following: The purpose of punitive damages is purely a public one. The public’s goal is to punish wrongdoing, and thereby protect itself from future misconduct, either by the same defendant or other potential wrongdoers. In determining the amount of punitive damages to be
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ACC 64 — The Advocate Magazine
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awarded, you are not to give any consideration as to how the punitive damages will be distributed.” (Adams v. Murakami (1991) 54 Cal.3d 105, 110; Neal v. Farmers Ins. Group (1978) 21 Cal.3d 910, 928, fn 13) (emphasis added). Thus, in the punitive phase, portray your role as being one of a public servant. You are advancing the “public’s goal” which is, in part, to punish the defendant’s misconduct. Ultimately, the jury should understand that their punitive verdict will protect not just an individual or some special interest group, but rather, will protect everyone from future abuses. The jury must understand the importance of their role of protecting the public in the punitive phase. It is important that the jury understand that they have the power to send a warning to the insurance industry that misconduct will not be tolerated by the public. The jury can do this by setting an example of the defendant. Again, one way to accomplish this is to refer back to the jury instructions, such as the following from the United States Supreme Court: In addition to actual or compensatory damages which you have already awarded, the law authorizes the jury to make an award of punitive damages in order to punish the wrongdoer for its misconduct or to serve as an example or warning to others not to engage in such conduct. (TXO Production Corp. v. Alliance Resources Corp. (1993) 509 U.S. 443, 459, 463, 113 S.Ct. 2711, 2721-2722, 125 L.Ed.2d 366) (emphasis added). The punitive damages that the jury awards will not only send a message to the defendant on how it should do business in the future, but it will also serve as an example or a warning to other competing companies that the public will not tolerate such misconduct. Give the jury examples of warnings they see every day: If a swimming pool is too shallow, it should have a warning; if a product is dangerous, it should have a warning; if a floor is slippery, it should have a warning, 66 — The Advocate Magazine
etc. Warnings like these must be prominently displayed in order to have an impact. In your case, the punitive damages award will serve as a warning to other insurance companies and so it must be a meaningful amount to be prominently displayed to the industry. I like to emphasize the second purpose of punitive damages, which is deterrence. The jury’s verdict should not only deter future wrongdoing by the defendant, but also by the industry as a whole. Another effective jury instruction to establish this point is the following: The object of [punitive] damages is to deter the defendant and others from committing like offenses in the future. Therefore, the law recognizes that to in fact deter such conduct, may require a larger fine upon one of larger means than it would upon one of ordinary means under the same or similar circumstances. (TXO Production Corp. v. Alliance Resources Corp. (1993) 509 U.S. 443, 459, 463, 113 S.Ct. 2711, 2721-2722, 125 L.Ed.2d 366) (emphasis added). Once the jury understands the “purely public” purpose of punitive damages, it is then time to turn to the amount of punitive damages to assess. The guidelines for the assessment of punitive damages include the following: (1) how reprehensible was the conduct? (2) is there a reasonable relationship between the amount of punitive damages and the harm? And, (3) in view of the financial condition of the defendant, what amount is necessary to punish and discourage future wrongful conduct? (See, CACI 3949.) Naturally, the evidence under each of these guidelines will largely depend on the facts of a given case as to the reprehensibility of the conduct, the defendant’s financial condition, and the plaintiff ’s actual injury. These facts must be presented in evidence and then argued specifically to the jury. In addition to these general guidelines, there are other authorities that speak more specifically to the amount of punitive damages. Take the following jury instruction:
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In determining the amount of punitive damages to be assessed against a defendant, you may consider the following factors: One factor is the particular nature of the defendant’s conduct. Different acts may be of varying degrees of reprehensibility, and the more reprehensible the act, the greater the appropriate punishment. Another factor to be considered is the wealth of the defendant. The function of deterrence and punishment will have little effect if the wealth of the defendant allows it to absorb the award with little or no discomfort. (Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 928) (emphasis added). These jury instructions convey credibility to your argument on the amount of punitive damages the jury should award.
68 — The Advocate Magazine
In other words, the jury should be told that the law requires a greater punitive damage award where the conduct is particularly reprehensible, and that the law requires that the amount the jury awards in punitive damages must cause some financial “discomfort,” in order to serve the public purpose of deterrence as discussed earlier. Naturally, determining what amount will cause the appropriate “discomfort” will depend on the financial condition of the defendant.
Trying a bad-faith case arising out of a breach of the duty to settle poses some unique issues. You can use the principles described here to get to the punitivedamages phase, and then to convince
jurors of their critical role in deterring unacceptable conduct by insurers. Ricardo Echeverria is a trial attorney with Shernoff Bidart Echeverria Bentley, LLP, where he handles both insurance badfaith and catastrophic personal-injury cases. He was named the 2010 CAALA Trial Lawyer of the Year, the 2011 Jennifer Brooks Lawyer of the Year by the Western San Bernardino County Bar Association, and a 2012 Outstanding Trial Lawyer by the Consumer Attorneys of San Diego. Mr. Echeverria was also a finalist for the CAOC Consumer Attorney of the Year Award in both 2007 and 2009. He currently sits on the CAALA Executive Committee and is also a member of ABOTA and the American College of Trial Attorneys.
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Insurer misconduct: Is it fraud or just bad faith? The tort of fraud may be a viable basis for recovery of punitive damages against insurers When an insurer breaches its duties under its insurance policy, it may be liable not only for breach of contract, but also for the tort of bad faith. As one court long ago explained: In every insurance policy there is implied by law a covenant of good faith and fair dealing. . . . This implied obligation requires an insurer to deal in good faith and fairly with its insured in handling an insured’s claim against it. . . . The duty of dealing fairly and in good faith with the other party to a contract of insurance is a duty imposed by law, not one arising from the terms of the contract itself. In other words, this duty of dealing fairly and in good faith is nonconsensual in origin rather than consensual. Breach of this duty is a tort. (Richardson v. Employers Liab. Assur. Corp. (1972) 25 Cal.App.3d 232, 239), disapproved on other grounds, (Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566). Furthermore, “punitive damages may be recovered upon a proper showing of malice, fraud or oppression even though the conduct constituting the tort also involves a breach of contract.” (Fletcher v. Western Nat’l Life Ins. Co. (1970) 10 Cal.App.3d 376, 400; See Cal. Civ. Code, § 3294.) Insureds frequently attempt to recover punitive damages from insurers by arguing that an insurance carrier acted with “malice” or “oppression.” However, “fraud,” also often is a viable basis for the recovery of punitive damages against insurers. “Fraud” is an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury. (Cal. Civ. Code § 3294, subd.(c)(3).) And, when fraud is asserted, a plaintiff need not prove malice or oppression 70 — The Advocate Magazine
to recover punitive damages. (See, e.g., Glendale Fed. Sav. & Loan Ass’n v. Marina View Heights Dev. Co. (1977) 66 Cal.App.3d 101, 135, [“The words ‘oppression, fraud, or malice’ in Civil Code section 3294 being in the disjunctive, fraud alone is an adequate basis for awarding punitive damages”] Stevens v. Superior Court (1986) 180 Cal.App.3d 605, 610, [reversing order sustaining demurrer; “A fraud cause seeking punitive damages need not include an allegation that the fraud was motivated by the malicious desire to inflict injury upon the victim. The pleading of fraud is sufficient.”].) A strong argument can be made that conduct that constitutes a breach of the implied covenant of good faith and fair dealing also is fraudulent. Indeed, California courts have noted that “bad faith conduct, involving deceit, has often been regarded as fraudulent . . . .” (Richardson, 25 Cal.App.3d at 245.) Furthermore, facts that support a badfaith cause of action also may support independent causes of action against an insurer for negligent misrepresentation, intentional misrepresentation, concealment, and making a promise without an intent to perform. (2 Witkin, Summary of California Law (10th ed. 2005) Insurance, section 251, page 371.) The starting point with the analysis is the nature of the relationship between an insurer and its insured. The governing principles have been summarized by a court of appeal as follows: In Vu v. Prudential Property & Casualty Ins. Co. (2001) 26 Cal.4th 1142, the Supreme Court recognized that while the relationship between the insurer and insured is not a true fiduciary one, it is nevertheless “special,” citing and quoting from cases that have used various terms to describe that relationship: “[L]ater cases have built upon this premise and declared that an insurer and its insured have a
‘special relationship’. Under this special relationship, an insurer’s obligations are greater than those of a party to an ordinary commercial contract. In particular, an insurer is required to ‘give at least as much consideration to the welfare of its insured as it gives to its own interests.’ Cases have referred to the relationship between insurer and insured as a limited fiduciary relationship [citation]; as ‘akin to a fiduciary relationship’; or as one involving the ‘qualities of decency and humanity inherent in the responsibility of a fiduciary’. The insurer-insured relationship, however, is not a true ‘fiduciary relationship’ in the same sense as the relationship between trustee and beneficiary, or attorney and client. It is, rather, a relationship often characterized by unequal bargaining in which the insured must depend on the good faith and performance of the insurer. This characteristic has led the courts to impose ‘special and heightened’ duties, but ‘[w]hile these “special” duties are akin to, and often resemble, duties which are also owed by fiduciaries, the fiduciary-like duties arise because of the unique nature of the insurance contract, not because the insurer is a fiduciary.’ (Bock v. Hansen (2014) 225 Cal.App.4th 215, 229.) Furthermore, the fact that an insured has a claim for breach of contract – and even recovers the benefits due under a policy – does not preclude it from pursuing recovery for fraud any more than it precludes it from pursuing recovery for bad faith. Courts have recognized in a variety of settings actions by an insurer that support claims for one species of fraud or another. For example, in Sharp v. Automobile Club (1964) 225 Cal.App.2d 648, the insured sought recovery for
Insurer Misconduct continues
The Advocate Magazine â€” 71
Insurer Misconduct — continued
breach of contract and for fraud. The court of appeal recognized that the insurer could be found liable for fraud and for punitive damages based on the amount awarded under the policy. The court upheld the propriety of a punitive damages award, noting that at the time of policy renewal, the insurer had represented that a particular provision in the policy applied in a certain way when its practice was to the contrary. (Id. at 65253; See also Kenevan v. Empire Blue Cross & Blue Shield (S.D.N.Y. 1992) 791 F. Supp. 75, 80 [claim of misrepresentation based on language in insurer’s promotional brochure was independent of claim based on failure to provide policy benefits and thus could support claim for fraud distinct from claim for breach of contract]; Sparks v. Republic Nat’l Life Ins. Co. (1982) 132 Ariz. 529, 647 P.2d 1127,
1139 [brochure that was only document reviewed by insured served as both insurance contract and evidence of carrier’s misrepresentation affirming award of punitive damages based on representations in brochure describing master policy; “Tort liability . . . was a separate and distinct issue from the contractual issue.”], cert. denied, (1982) 459 U.S. 1070; Guar. Trust Life Ins. Co. v. Palsce (Ind. Ct. App. 1994) 641 N.E.2d 1266, 1268 [affirming award of punitive damages based on representations in brochure describing master policy].) In finding that insurers can be liable for fraud and breach of contract, courts often have pointed to evidence of the insurer’s conduct in refusing to pay a claim as supporting a finding of fraud. For example, in Wetherbee v. United Ins. Co. (1968) 265 Cal.App.2d 921, 71, the
insured purchased a disability policy. She then sought to cancel it because she was concerned that the insurer could unilaterally terminate it. The insurer assured her that if she became disabled, she would draw benefits as long as she lived and the policy could not be canceled. The insured then continued her policy and purchased a second one. Thereafter, she became disabled. The insurer initially paid her benefits, but then stopped, citing a requirement that the insured be continuously confined indoors to receive benefits. The insured sued. The court of appeal affirmed the fraud finding and the propriety of a punitive damages award. In doing so, it stated that the insurer’s “intent not to live up to the representations contained in its letter can clearly be inferred from its subsequent conduct.” (Id. at 932.)
Insurer Misconduct continues
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Insurer Misconduct — continued
In Miller v. National American Life Insurance Co. (1976) 54 Cal.App.3d 331, the insured sued his insurer for breaching its contract and for fraud in inducing the insured to purchase the policy. The insured contended that the insurance policy expressly obligated the insurer to pay his monthly mortgage payments in the event that he became totally disabled. The insurer argued that because these “representations” were contained only in the insurance policy, they were insufficient as a matter of law to support a fraud cause of action. The court readily rejected this argument, stating: The contention is without merit. It is well settled that a “promise made with no intention of performing is actionable fraud where the other party relies upon it as an inducement to enter into an agreement.” . . . While
74 — The Advocate Magazine
the inducement may be more blatant where . . . the insurance company misrepresents its intentions in a separate letter intended to dissuade an insured from terminating his coverage, it is no less apparent where, as here, it is found in the very contractual promises that constitute the consideration for which the insured enters the agreement and exchanges his premium payments. (Id. at 338.) The court then held that how the insurer responded to the claim could be evidence that would establish its fraud. As the court explained: The law is established in California that, since direct proof of fraudulent intent is often an impossibility, because the real intent of the parties and the facts of a fraudulent transaction are peculiarly in the
knowledge of those sought to be charged with fraud, proof indicative of fraud may come by inference from circumstances surrounding the transaction, the relationship, and interest of the parties. . . . Subsequent conduct of an insurer in processing a claim may support an inference of prior intent not to fulfill its representations. (Id. at 338-39.) The court specifically noted that the insurer’s “later handling of the claim may also be seen as bad faith and procrastination in furtherance of [its fraudulent] intention.” (Id. at 339.) Another court more recently reached the same conclusion. In Petersen v. Allstate Indemnity Co. (C.D. Cal. 2012) 281 F.R.D. 413, the insured claimed that his insurer had promised to pay future medical
Insurer Misconduct continues
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expenses arising from an automobile accident and after initially doing so, denied coverage when the expenses mounted. He sued for breach of contract and promissory fraud. The insurer sought judgment on the pleadings. The court denied the motion. Citing Weatherbee and Miller, the court explained: [The insurer’s] misrepresentation as to its willingness to perform under its policy is shown by the facts . . . indicating [the insurer’s] eagerness to cease costly performance based on minimal evidence that its obligation had ended . . . [The insurer] partially performed by paying some money . . . However, . . . after performance became more costly . . . [the insurer] informed [its insured] that it would no longer pay for [his] medical care because [his] condition was not covered by the policy. . . .Thus, . . . [the insurer’s] decision to deny coverage only after further performance would become very costly supports the inference that its initial promise of coverage was made without intent to perform. . . Furthermore, [the insurer’s] misrepresentation of its intent to perform is shown by its alleged failure to pay a covered claim and failure to provide a more substantiated explanation or its denial of coverage. (Id. at 420-21.) The damages available for fraud include the premium paid by the insured, even if the insured recovers damages for the insurer’s breach of contract. Indeed, courts have recognized that an insured can recover as damages the premiums it paid and that such an award will, in turn, support an award of punitive damages. For example, in Wetherbee, the court concluded that an insured had stated a cause of action for fraud when she alleged that the carrier induced her not to cancel her policy by misrepresenting the terms of the benefits that would be received under that policy. The court recognized that the insured had suffered actual damage in the amount of the premiums paid over a period of five and one-half years for
Insurer Misconduct continues 76 — The Advocate Magazine
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78 — The Advocate Magazine
insurance coverage which was not as represented. . . . It is settled that although punitive damages are recoverable only where actual damages are recovered, the actual damages need not be more than nominal. (265 Cal.App.2d at 930.) As the court explained, damage resulting from this wrongful conduct – the payment of premiums for coverage which defendant never intended to provide – clearly cannot be deemed nonexistent merely because plaintiff has now recovered judgment against defendant and has thus obtained redress for its wrongful conduct. Under the circumstances here present, it was entirely proper for the trial court to instruct the jury that it could find insurance coverage as well as actionable fraud. (Id. at 931.) A federal court also has held that an insured may recover “for both breach of contract and for fraud in an action where the fraud consist(s) of a misrepresentation by an insurer as to its willingness to honor the terms of a policy.” (Glesenkamp v. Nationwide Mut. Ins. Co. (N.D. Cal. 1972) 344 F. Supp. 517.) In Glesenkamp, the insured sued the insurer for fraud based on representations made at the time it sold its policy and for breach of contract based on its refusal to pay policy benefits after she made a claim. The insured prevailed on summary judgment of her breach of contract claim. The insurer then argued that her fraud claim was barred because she otherwise would receive a double recovery. The court of appeal disagreed, explaining as follows: [T]he operative facts underlying the breach of contract claim are different than those underlying the fraud claim. The breach of contract came only after plaintiff suffered her personal injuries, at the time defendant refused to honor her claim for those injuries. The alleged fraud occurred at the time when the contract was entered into by the parties. Defendant’s failure to honor the claim serves only to evidence earlier fraudulent
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Insurer Misconduct continues
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Insurer Misconduct — continued acts, not as an operative element of the fraud. Therefore, any cases dealing with alternative tort or contract recovery in an action in which both claims are based on the same act, incident, or operative facts are not precedent for the present case. The fact that plaintiff alleges actual damages in her fraud claim which equal those sought and recovered under the breach of contract claim does not mean that plaintiff has suffered no actual damages by way of defendant’s alleged fraud in excess of those recovered under the breach of contract claim. Plaintiff may not, of course, recover again for the injuries she suffered in the accident, as she has already been fully compensated for said injuries through summary judgment on the breach of contract claim. (Id. at 519.) The court then quoted Wetherbee as follows: The damage resulting from this wrongful conduct−the payment of premiums for coverage which defendant never intended to provide – clearly cannot be deemed nonexistent merely because plaintiff has now recovered judgment against defendant and has thus obtained redress for its wrongful conduct. . . . (Ibid.) Therefore, when an insurer denies coverage, an insured may have claims not only for breach of contract and bad faith, but also for fraud. Even though the basis for all three claims may be the same contract, and even though the fraudulent activity involved may be the premise of both the bad-faith claim and the fraud claim, an insured may be able to recover different types of damages, such as some or all of the premiums it paid, in addition to the benefits due under the policy. Furthermore, if it turns out that there is no breach because a policy actually does not provide coverage, an insured still may be entitled to recover compensatory and punitive damages based on the insurer’s fraud. Kirk A. Pasich is a partner in Dickstein Shapiro LLP and the Client Strategy Leader of its Insurance Coverage Group. He represents insureds in complex coverage matters.
The Advocate Magazine â€” 81
David Orlowski By Mike Alder
CAALA Board of Governors member
Empowering the damages expert with the Reptile theory The damages expert’s testimony must keep the jurors engaged if they are to award fair damages The justice system is the public safety net that balances harms and losses suffered with compensation. The law says that when we drive on the highway, we have to watch where we are going and see what is before us. If we do not, and as a result we hurt someone, we are responsible for the harm. Jack drinks a whisky sour and heads out with his two children. Jack drives his two-ton pick-up west on Carefree Highway into the Friday late-afternoon sun. Jack travels at more than 15 mph over the speed limit. Jack turns his head repeatedly to talk to his children. Jack does not read the sign that shows the right-hand lane is ending and to move to the center lane. Jack looks up and his 82 — The Advocate Magazine
lane has run out. Jack is heading straight for a car in the right-hand turn lane. He yanks his truck’s steering wheel to the left. He sees the car pull out so as to not be hit by him. Jack’s truck strikes the car in the driver’s door. Jack’s truck launches the car 200 feet down the roadside. Mark, my son, is a front-seat passenger in the car. He suffers severe brain shearing injuries when his head strikes the head of the driver next to him, who dies instantly. Mark is medevac’d to John C. Lincoln Hospital. Mark is kept alive on life-support. We unplug the machines seven days later. Today is the one-year anniversary of Mark’s death. Mark’s sixmonth-old son at the time, Odon, our grandson, is now 1 and one-half years old.
David Ball and Don Keenan in their now-famous book, Reptile, assert that within every one of us, there exists what they call the Reptile, or inner conscience, that innately cares about right and wrong, especially when it senses danger. The Reptile does not concern itself with plaintiff or defense bars, but with threats that are inherently unsafe. The Reptile answers to a primal moral code that is both personal and communal. Ball and Keenan depict its inbred self as saying, “I don’t like you. I don’t like me. I don’t like.” Without survival at stake, I sleep. I work only when I have a chance of overcoming a survival threat. Otherwise, that snoring you hear in trial is me… I hate: immobility… arrogance…
greed (not mine)… competition (against me)… lying to me (dangerous)… hypocrisy (very dangerous)… legal language (not clear, therefore dangerous)…
the harms and damages suffered. Ball brings out that the word “compensate” comes from the old English, meaning
“balance the scales.” The weight of the harm must be balanced with a full and fair amount of compensation, or else
Ball and Keenan offer the formula: Safety Rule + Danger = Reptile. For example, a driver is not allowed to needlessly endanger the public. Drivers must drive at a safe speed. The only allowable decision is the safest available decision. No second-safest. The Reptile takes note, for example, of the consequences arising from unsafe drivers. The National Highway Traffic Safety Administration (NHTSA) reported in June, 2014, in their once-per-decade traffic study, that the economic harm from traffic accidents in the U.S. cost society $871 billion a year. The toll in lives included 32,999 fatalities and 3.9 million injured. Still, the Reptile will not be belabored with generalized statistics, but its interest is peaked that these crashes personally cost them an average of $897 each year. They care that those not directly involved in the crashes are made to pay for nearly three-quarters of the costs, primarily through insurance premiums and taxes. The Reptile cares that people who break the law by speeding cause 32 percent of all fatalities, and 20 percent of all nonfatal injuries. They react to distracted drivers on cell phones, etc. that cause ten percent of all fatalities and 18 percent of all nonfatal crashes. They call 911 on drunk drivers that weave about, and are loath to learn that alcohol-related crashes account for 40 percent of all fatalities. It vexes them that the lifetime comprehensive cost to society for each person needlessly killed is $9.1 million. The Reptile cares that the same may happen to them.
Reptiles on the jury
Ball and Keenan show that waking each juror’s “Reptile” is essential for them to heed the call to action. This is true for both plaintiff and defense attorneys who seek a true and just verdict. As with any lawsuit, it is the jurors’ duty to compensate the injured party for AUGUST 2014
The Advocate Magazine — 83
Reptile Theory — continued
there is no closure to the harm. Ball explains that the law requires that “nothing else be allowed on the scale – just harm on one side and money on the other. No outside reasons. However, in recent years, the Reptilian nature has embraced the outside reasons put forth by tort-reform advocates, being made to believe it is too risky to fully and fairly compensate the injured. Ball and Keenan counter however, that the defense’s attempts to tame the Reptile are for naught, for it fundamentally adheres to the law as a survival instinct. Because the Reptile instinctually seeks to guard against law-breaking abuses because law-breakers are dangerous, as soon as the Reptile connects the true threat to self and the community, it reacts. In using the analogy of the Reptile, they put forth that just verdicts are rendered by jurors who rightly embrace the law, rendering tort-“reform” fears impotent and unneeded. The Reptile is not concerned with plaintiff or defense disputes, but only with how the “true” harms and losses may pose a threat to itself or the community at large. Even so, the Reptile is keenly sensitive to predators, whether they come in the
guise of plaintiff or defense attorneys who seek to undermine the law. The Reptile trusts the law, not those with usurping motivations. The problem is that during the course of the trial, the Reptile easily falls asleep if it senses no lawful danger. The Reptile knows when it is safe to sleep. Because of this, it is incumbent upon the attorney, plaintiff or defense, to continually wake up and reinforce the Reptile throughout the trial. Never is this more needed than with the extended damages presentation. Unfortunately, vocational economic damage experts are often under-utilized, or worse, disconnected entirely from the larger context. This easily happens as many experts get mired in technical jargon and theory debate to the point where their testimony disengages the Reptile.
The damages experts
Thus, empowering damages experts with the Reptile is paramount to maintaining a cohesive, unified appeal. The days of damages experts presenting rote spiels that are uncoupled from the case engine need to end. John Blumberg, an apparent advocate of the Reptile, in his
recent article in this magazine, brings out that each case must simply and succinctly present its “theme” with stories and analogies. (J. Blumberg, Expert Testimony that Persuades, Advocate, (6/2014) p. 99.) This helps the jurors identify with the injured person. As jurors are led step by step through the expert’s methodology, it is vital that the examination creates immediate interest. For example, Blumberg proposes that attention-getting statements be made that set up the vocational economic expert’s testimony, such as, “Dr. Jones, I am going to ask you to project to a reasonable degree of economic certainty how much Ms. Thomas’ future economic damages are likely to be.” The natural follow-up question is – “Are you qualified to do this for us?” After the expert answers, “Yes,” the jury is now engaged in listening intently to the expert’s qualifications to see whether or not they agree. Blumberg notes that these “news headline” set-ups can effectively preface the expert’s testimony in each of the various damages areas. Finally, Blumberg cautions against juror overload by advocating the rule of
Reptile Theory continues
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The Advocate Magazine â€” 85
Reptile Theory — continued
Harms and Losses Past Medical Care Future Medical Care Minimum Lifecare Plan Past & Future Wage Loss Lost Household Services Exertional Exercise Disability Loss Not Included: Past Functional Loss (Loss of Mobility…) Future Functional Loss (Physical wherewithal, mental discipline, emotional fortitude…) Past Physical Pain (Severe, crippling…) Future Physical Pain (Burning, sharp, always compensating…) Past Emotional Pain (Loss of self-esteem w/work… coworkers) Future Emotional Pain (Humiliation, isolation, despair…) Inability to Do Activities of Daily Living Inability to Do & Enjoy Family Activities
$_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____ $_____
Figure 1. The damages expert must provide a line-upon-line evaluation of harms and losses to satisfy the keen observers on the jury
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three, where three points at a time are made, which are then backed up with stories and analogies. Undoubtedly, Ball and Keenan provide readily transferable insights that can be utilized not only by the attorney, but by the retained experts. Equipping the damages experts begins and ends with the law. Compensation is to be provided for all proven harms and losses, both tangible and intangible. It is the law. A vocational economic expert will clearly spell out the step-by-step process involved in performing a vocational assessment, and then follow that up with how the actual line-upon-line evaluation was conducted with regard to the injured client. Reptiles are razor sharp observers. Ball and Keenan stress that the proportion of time spent on harms, losses and money needs to be equal to that spent on liability. This means that rather than getting damages experts on and off the stand with expediency, it is vital to judiciously and thoroughly walk through their conclusions in order to fully inform the Reptile. But this can only be done if the attorney ensures that the expert is mindful of the boredom the Reptile feels when the law is disconnected from the damages presentation. For example, the jury is introduced to the preponderance standard that maintains that damages must be proved on a more likely than not basis. Usually, the expert is asked one question at the end of their testimony as to whether the damages are more likely necessary, than not. Ball and Keenan stress that by not repeatedly reiterating this lawful standard, jurors can and do revert to the unlawful basis of “reasonable doubt.” Thus, in order for jurors to balance the scales between harm and damages, the Reptile must be instilled with the lawful standard that it is more likely than not that the client’s injuries have led to her losses. Repetition is vital to keeping the Reptile focused on the law. Moreover, it is often the case that the vocational expert is uniquely positioned to describe the client’s lifestyle losses after the collision, in comparison with before
Reptile Theory continues 86 — The Advocate Magazine
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Reptile Theory — continued
Figure 2. “Few of us die right on schedule.” it, including reduced mobility and overall functional capacity. This ties back to other significant losses seen in their being a displaced worker and provider. Ball and Keenan state that other proven intangible losses might include loss of self-esteem gained from working, relationships on the job, significance in contributing to the greater good, role within the family circle, physical where-
withal and confidence, mental discipline, and emotional fortitude. Many clients feel humiliated, isolated, unprotected, looked down upon, and angry at being left with a permanent need for medical intervention. In contrast, the Reptile also spots the indolent, non-engaged survival instincts of others. Reptiles become alert when they hear personal stories. Therefore, during
Even the odds.
the vocational interview, the client’s story is drawn out: “Tell me how this has impacted your life?” The vocational expert will listen as the client discloses her heart. As pauses arise, the client is invited, “Please, tell me more about that.” As the client is vulnerable and transparent, the vocational consultant can list their tangible and intangible harms and losses. This helps the Reptile to appreciate the scope and extent of the damages as they balance the scales with fair compensation. It is vital that the vocational expert refrain from overcomplicating the damages presentation, and thereby fail to equip the jurors’ Reptiles for their deliberations. Ball and Keenan say that this can simply and succinctly be done by depicting the harms and losses in short, clear sentences. For example, “John is no longer able to work as a carpenter.” “John is severely limited physically.” “John is unable to work full-time,” etc. The point is that core phrases can be written down and remembered by the Reptile, who needs things to be simple. Ball and Keenan state that other short statements need emphasizing, such as,
Reptile Theory continues
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Reptile Theory — continued
“Pain is the worst harm in the case”; “No deduction for any outside reason”; and “This type of loss can happen to any of us.” The vocational expert can list out the Harms and Losses in a readily understandable format. Ball and Keenan put forth that the vocational expert can explain other important damage elements such as worklife and life expectancy estimates. Because workers are staying longer in the workforce, and people are living longer, injured plaintiffs have the “right to be taken care of without worrying about
running out of money.” The Reptile is concerned with the dangers of running out of money. Ball asserts that the client has the right to hope for a long life, and the right to have the money necessary should that occur. Most of us are “not likely to die right on schedule.” From the graph in Figure 2, a 65-year old man who goes on to reach his projected life expectancy still has a 30 percent chance of living four and one-half more years, and a 10 percent chance of living 10 more years. Prevailing law states that a tort victim’s recovery may be for losses extend-
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90 — The Advocate Magazine
ing to the balance of their life expectancy, undiminished by any shortening of that expectancy as a result of the injury. (Overly v. Ingalls Shipbuilding, Inc. (1999) 74 Cal.App.4th 164, 174.) Ball and Keenan maintain that the Reptile needs a simple, understandable damages presentation that prepares it for deliberations. Connecting the law to the client’s story wakes the Reptile, but helping it to reason through the two-sided viewpoints, is essential to equipping it for its needed decision-making. This can equally be done by both plaintiff and defense attorneys and experts. It is all about the law. Both sides want a lawful resolution, or else the Reptile will spy them out. Ball and Keenan conclude the law is paramount in that “when a driver gets behind the wheel, she implicitly agrees – in advance – to be responsible for any harm she does if she violates any safety rules.” But as Ball and Keenan also admit, “The Reptile is not particularly concerned with your client…the Reptile is concerned with the Reptile (their own safety), their world and family, their survival, and little else.” Therefore, if the jurors’ Reptiles are not aroused to the unlawful harms and losses, then they will not be alert to balance those out. Like in my son Mark’s wrongful death, drivers violate the law and their agreed-upon covenant when they travel at an unsafe speed, fail to watch where they are going, and drive while intoxicated. It is the job of the jurors to ensure that the scales of justice balance, even with such intangible damages as my grandson, Odon, never again having his father, or other brothers and sisters, or our having additional grandchildren, and great grandchildren. When the law is broken, it is the Reptile that balances the harms with full and fair compensation, with no outside reasons. David Orlowski DMIN CRE is based in Los Angeles and has served as a vocational economic consultant for 25 years.
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The Advocate Magazine â€” 91
From the Editor Jeffrey Isaac Ehrlich Editor-in-Chief
Appellate AboutReports and Cases in Brief
Recent decisions this Issue by the California Supreme Court, including Iskanian on class-action waivers Jeffrey Isaac Ehrlichand arbitration clauses in employment agreements
Editor-in-Chief Arbitration; Federal Arbitration Act preemption; class-action waivers; Private Attorneys General Act of 2004 (PAGA): Iskanian v. CLS Transportation Los Angeles, LLC (2014) __ Cal.4th __ (Cal Supreme). Plaintiff Iskanian worked as a driver for CLS Transportation. He signed a Isaac Ehrlich written agreementJeffrey that provided that “any and all claims” arising out of his employment would be submitted to binding arbitration. The agreement included a class-action waiver. In 2006,
About this Issue
Book Review By Jeffrey Isaac Ehrlich Editor-in-Chief
92 — The Advocate Magazine
Iskanian filed a class action against CLS alleging that it failed to pay overtime, provide meal and rest breaks, etc. CLS moved to compel arbitration, and its petition was granted. Shortly thereafter, the Supreme Court issued its opinion in Gentry v. Superior Court (2007) 42 Cal.4th 443, which held that class-action waivers were unenforceable when class arbitration was likely to be a significantly more practical way of vindicating the rights of affected employees. Relying on Gentry, the Court of
Appeal issued a writ, directing the trial court to reconsider its decision in light of Gentry. On remand, CLS voluntarily withdrew its petition to compel arbitration. In 2011, the U.S. Supreme Court issued its opinion in AT&T Mobility LLC v. Concepcion (2011) 563 U.S. __ [131 S.Ct. 1740]. Based on Concepcion, CLS renewed its petition. Held: • The U.S. Supreme Court’s decision in Concepcion abrogated Gentry. Concepcion held that requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the Federal Arbitration Act (“FAA”). Gentry’s rule against class-action waivers falls within the rule adopted in Concepcion, and is therefore preempted by the FAA. States cannot require a procedure that interferes with fundamental attributes of arbitration 8 even if it is desirable for unrelated reasons. Concepcion held that the FAA prevents states from mandating or promoting procedures that were incompatible with arbitration. The rule adopted in Gentry ran afoul of that principle, and therefore was preempted by the FAA. • CLS did not waive the right to compel arbitration by withdrawing its petition after the matter was remanded in light of the then-new decision in Gentry. Both parties concede that the class-action waiver in the agreement would not have survived under Gentry. It was therefore futile for CLS to press its arbitration demand while Gentry remained the controlling law. Even though Iskanaian expended resources on discovery and to press the case forward in the trial court, CLS had not acted unreasonably in
withdrawing its petition. “Where, as here, a party promptly initiates arbitration and then abandons arbitration because it is resisted by the opposing party and foreclosed by existing law, the mere fact that the parties then proceed to engage in various forms of pretrial litigation does not compel the conclusion that the party has waived its right to arbitrate when a later change in the law permits arbitration.” • The agreement provides for not only class actions, but also of “representative actions.” These would include representative actions under PAGA. Under that statute, an “aggrieved employee” may bring a civil action personally and on behalf of other current or former employees to recover civil penalties for Labor Code violations. (Lab. Code, § 2699, subd. (a).) Of the civil penalties recovered, 75 percent goes to the Labor and Workforce Development Agency, leaving the remaining 25 percent for the “aggrieved employees.” (Id., § 2699, subd. (i).) The civil penalties recovered on behalf of the state under the PAGA are distinct from the statutory damages to which employees may be entitled in their
individual capacities. A PAGA representative action is therefore a type of qui tam action. Under Civil Code sections 1668 and 3513, an employee’s right to bring a PAGA action is unwaivable. • The rule against PAGA waivers does not frustrate the FAA’s objectives because the FAA aims to ensure an efficient forum for the resolution of private disputes, and a PAGA action is not a private dispute. “Simply put, a PAGA claim lies outside the FAA’s coverage because it is not a dispute between an employer and an employee arising out of their contractual relationship. It is a dispute between an employer and the state, which alleges directly or through its agents – either the Labor and Workforce Development Agency or aggrieved employees – that the employer has violated the Labor Code. Attorney’s fees on appeal; Enforcement of Judgments Law; time limits: Conservatorship of McQueen (2014) __ Cal.4th __ (Cal. Supreme). Under Code of Civil Procedure section 685.040, a judgment creditor is entitled to the reasonable and necessary
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Appellate — continued
costs of enforcing the judgment, including statutory attorney fees “otherwise provided by law.” But a motion to claim enforcement costs must be made “before the judgment is satisfied in full.” (§ 685.080, subd. (a).) McQueen’s conservator obtained an award on behalf of McQueen for elder abuse. Welfare and Institutions Code section 15657.5, subdivision (a) provides an award of attorney fees to a prevailing plaintiff. Defendant Reed appealed, but the judgment was affirmed. The parties settled a separate action plaintiff brought after judgment seeking to prevent or reverse Reed’s transfer of real property to third persons. The question presented was whether plaintiff ’s motion to recover attorney fees incurred both on appeal from the elder abuse judgment and in the separate action over real property assets was subject to the time limitation of section 685.080, namely that it be made before the judgment was fully satisfied. Held: As to attorney fees on appeal from the elder abuse judgment, the motion was not subject to section 685.080, because plaintiff ’s efforts in opposing
94 — The Advocate Magazine
defendant’s appeal of the judgment were not undertaken to enforce the judgment but to defend it against reversal or modification. Where a statute provides for attorney fees, they are generally available both at trial and on appeal, and the procedure for their recovery is set out by court rule rather than by section 685.080. Plaintiff ’s separate action to prevent transfer of assets was, however, brought in aid of the judgment’s enforcement, and fees incurred in that action could only be recovered under section 685.040, making them subject to the time limits of section 685.080, subdivision (a). Architects; construction defects; duty of care: Beacon Residential Community Ass’n v. Skidmore, Owings & Merrill, LLP (2014) __ Cal.4th __ (Cal. Supreme). A homeowners association sued a condominium developer and various other parties over construction-design defects that allegedly make the homes unsafe and uninhabitable for significant portions of the year. Two defendants were architectural firms, which allegedly
designed the homes in a negligent manner but did not make the final decisions regarding how the homes would be built. The trial court sustained the architect’s demurrers without leave to amend, reasoning that an architect who makes recommendations but not final decisions on construction owes no duty of care to future homeowners with whom it has no contractual relationship. The Court of Appeal reversed. Held: Affirmed. “An architect owes a duty of care to future homeowners in the design of a residential building where, as here, the architect is a principal architect on the project – that is, the architect, in providing professional design services, is not subordinate to other design professionals. The duty of care extends to such architects even when they do not actually build the project or exercise ultimate control over construction.” After-acquired evidence; FEHA claims; disability discrimination; remedies; federal preemption: Salas v. Sierra Chemical Co. (2014) __ Cal.4th __ (Cal. Supreme).
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The Advocate Magazine â€” 95
Appellate — continued
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Salas sued his former employer, Sierra, alleging that it had failed to reasonably accommodate his physical disability and refused to rehire him in retaliation for his filing a workers’ compensation claim. Thereafter, Sierra learned of information suggesting that Salas had used another man’s Social Security number to gain employment with Sierra. The trial court denied Sierra’s motion for summary judgment. When Sierra sought a writ of mandate in the Court of Appeal, that court issued an alternative writ. In response, the trial court vacated its order denying the motion for summary judgment and entered an order granting the motion. Salas appealed from the ensuing judgment, which the Court of Appeal affirmed. It held that plaintiff ’s action was barred by the doctrines of afteracquired evidence and unclean hands (based on information defendant acquired during discovery showing wrongdoing by plaintiff). It further held that application of those doctrines was not foreclosed by Senate Bill No. 1818, enacted in 2002, which states that, “All protections, rights and remedies available under state law, except any reinstatement remedy prohibited by federal law, are available to all individuals regardless of immigration status who have applied for employment, or who are or who have been employed, in this state.” Reversed. The federal Immigration Reform and Control Act of 1986 (8 U.S.C. § 1101 et seq.), also known as IRCA, does not generally preempt application of the antidiscrimination provisions of California’s FEHA to workers who are unauthorized aliens. But it does bar an award of lost-pay damages under the FEHA for any period of time after an employer’s discovery of the employee’s ineligibility under federal law to work in the United States.
Appellate continues 96 — The Advocate Magazine
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Appellate — continued
Generally, the employee’s remedies should not afford compensation for loss of employment during the period after the employer’s discovery of the evidence relating to the employee’s wrongdoing. When the employer shows that information acquired after the employee’s claim has been made would have led to a lawful discharge or other employment action, remedies such as reinstatement, promotion, and pay for periods after the employer learned of such information would be “inequitable and pointless,” as they grant remedial relief for a period during which the plaintiff employee was no longer in the defendant’s employment and had no right to such employment.
The doctrine of “unclean hands” can be a complete defense to both legal and equitable claims. But equitable defenses such as unclean hands may not be used to wholly defeat a claim based on a public policy expressed by the Legislature in a statute. Accordingly, the Court of Appeal erred in treating the doctrine of unclean hands as a complete defense to plaintiff ’s lawsuit, an action founded upon public policies established by the Legislature in the FEHA. Negligence; duty of businesses to provide external defibrillators: Verdugo v. Target Corp. (2014) __ Cal.4th __ (Cal. Supreme).
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98 — The Advocate Magazine
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Appellate — continued
H On August 31, 2008, Mary Ann Verdugo was shopping at a large Target department store in Pico Rivera, California, with her mother and brother when she suffered a sudden cardiac arrest and collapsed. In response to a 911 call, paramedics were dispatched from a nearby fire station. It took the paramedics several minutes to reach the store and a few additional minutes to reach Verdugo inside the store. The paramedics attempted to revive Verdugo but were unable to do so; Verdugo was 49 years of age at the time of her death. Target did not have an Automatic External Defibrillator (“AED”) in its store. Verdugo’s mother and brother filed the underlying lawsuit against Target, maintaining that Target breached the duty of care that it owed to Verdugo, a business customer, by failing to have on hand within its store an AED for use in a medical emergency. The complaint contended that in view of the large number of persons (300,000) in this country who suffer an unanticipated
sudden cardiac arrest each year, and the large number of customers who shop in Target’s department stores, it was reasonably foreseeable that a patron might suffer such an attack in its store, and that because of the size of the store Target should have known that it would take emergency medical personnel many minutes to reach a sudden cardiac arrest victim, making an onsite AED a medical necessity. Further, the complaint noted that AEDs are relatively inexpensive and that, in fact, Target itself sold AEDs over the Internet for approximately $1,200. The district court granted summary judgment for Target. The Ninth Circuit certified the issue of Target’s duty to provide AEDs to the Supreme Court. Held: The various California statutes concerning the use of AEDs do not indicate that the Legislature intended the statutes to totally supersede and preclude any operation of general common law tort principles with regard to the acquisition and provision of AEDs. Accordingly, the California AED
statutes do not fully “occupy the field” and thereby implicitly preclude California courts from determining whether, under California common law, Target’s common-law duty of reasonable care to its patrons includes an obligation to acquire and make available an AED for use in a medical emergency. Under California law, Target has a common-law duty to provide at least some assistance to a patron who suffers a sudden cardiac arrest while shopping at a Target store. But, regardless of what the scope of that duty may be, it does not include a duty to acquire and make available to customers an AED for use in a medical emergency. Jeffrey Isaac Ehrlich is the principal of the Ehrlich Law Firm, with offices in Encino and Claremont, California. He is a cum laude graduate of the Harvard Law School, a certified appellate specialist by the California Board of Legal Specialization, and a member of the CAALA Board of Governors. He is the editor-in-chief of Advocate magazine.
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patient’s medical information and to safeguard confidential medical information from any unauthorized access, unlawful access, use, or disclosure. Under California Health and Safety Code section 130201(e), “unauthorized access” is defined as the inappropriate review or viewing of patient medical information without direct need for diagnosis, treatment, or other lawful use. The CMIA is California’s counterpart to HIPAA (Pub.L. 104-191, 110 Stat. 1936), for which there exists no enabling legislation authorizing private action. Only the Office of Civil Rights for the Department of Health and Human Services can initiate administration proceedings in connection with the violation of HIPAA’s regulations.
CMIA’s requirements for healthcare providers are just as onerous, however, requiring very specific conditions to be
met before a release of medical information is considered properly authorized: • The release must be either handwritten by the person who signs it or in a typeface no smaller than 14-point type, as required by Civil Code section 56.11(a). • The release must be clearly separate from any other language present on the same page and executed by a signature which serves no other purpose than to execute the authorization, as required by Civil Code section 56.11(b). • The release must be signed and dated by the patient (if an adult), the patient’s legal representative (if the patient is a minor or an adult who lacks decision-making capacity), or the beneficiary or personal representative of a deceased patient, as required by Civil Code section 56.11(c). • The release must state the specific uses and limitations on the medical information being disclosed, as required by Civil Code section 56.11(d).
Medical Records continues
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The Advocate Magazine â€” 103
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• The release must state the name or functions of the person or entity that is being permitted to disclose the medical information, as required by Civil Code section 56.11(e). • The release must state the names or functions of the persons or entities authorized to receive the medical information, as required by Civil Code section 56.11(f). • The release must state the specific uses and limitations on the use of the medical information by the persons or entities authorized to receive the medical information, as required by Civil Code section 56.11(g). • The release must state the specific date after which the person or entity disclosing the information no longer is permitted to do so, as required by Civil Code section 56.11(h). • The release must explicitly advise the person signing the authorization of the right to receive a copy of it, as required by Civil Code section 56.11(i). These are not optional requirements. The California Supreme Court has specifically stated that “the authorization requirements found in section 56.11 are detailed and demanding, reflecting the Legislature’s interest in assuring that medical information may be disclosed only for a narrowly defined purpose, to an identified party, for a limited period of time.” The statute also says that “[a]ny waiver by a patient of the provisions of [the CMIA] is contrary to public policy, and is unenforceable and void, except as authorized by Civ. Code § 56.11[.]” Under section 56.36, anyone who suffers economic loss or personal injury from the disclosure to recover their full compensatory damages, or nominal damages of $1,000; punitive damages not to exceed $3,000; attorney’s fees not to exceed $1,000; and costs.
Eisenhower Medical Center v. Superior Court
Unfortunately, despite what might otherwise be a moderately strong statute
Medical Records continues 104 — The Advocate Magazine
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with rigorous standards, the recent California Court of Appeal cases interpreting CMIA are headed towards rendering CMIA toothless. In May, 2014, the California Court of Appeal, Fourth District, issued a ruling in Eisenhower Medical Center v. Superior Court (2014) __ Cal.App.4th __, __ Cal.Rptr.3d __, which holds that the Rancho Mirage-based Eisenhower Medical Center was not liable for a data breach involving the private information of more than a half-million patients. The case arose following the theft from Eisenhower’s facilities of computers containing the ages, birth dates, social security numbers, medical record numbers, and names of patients. The case came upon appeal after the Superior Court of Riverside denied the hospital’s request for summary judgment arguing that the breach did not result in the actual disclosure of medical data. At issue in the appeal was the question of whether the release of the type of information above constituted individually-identifiable “medical information.” The Court held that it did not, because medical information is not “just any patient-related information,” but must be “individually-identifiable information” that includes the patient’s “medical history, mental or physical condition, or treatment.” Because the data breach at issue in Eisenhower only resulted in the disclosure of demographic information and the patient’s medical record number, the Court refused to find that a release of medical information had occurred – even though the data breach implicitly linked each identified individual to receiving treatment at Eisenhower. The Court determined that there was insufficient “medical information” released about patients. In addition, the Court’s opinion was also shaped by the fact that an exception exists in CMIA authorizing medical providers to release certain information about a particular patient being treated at the facility upon demand. This exception permits treatment providers to
reveal medical information, including a general description of the reason for treatment, general nature of the injury, general condition of the patient, and nonmedical information. (Garrett v. Young (2003) 109 Cal.App.4th 1393, 1405.) As a result, the Eisenhower Court refused to uphold the Riverside trial court’s ruling, and reversed.
UCLA Regents v. Superior Court
The Eisenhower decision is the second case in recent months that has created roadblocks for plaintiffs’ privacy and data breach claims in the medical context. Last October, in Regents of University of California v. Superior Court (2013) 220 Cal.App.4th 549 [Division 7 of the Second District Court of Appeal similarly rejected privacy violation claims raised in
a $16 million class action brought against UCLA Health System in connection with a 2011 data breach.], the events stemmed from a November, 2011, notification provided to more than 16,000 patients by Regents of the University of California, advising them that an encrypted hard drive containing their confidential medical information, along with an index card containing the password, was stolen during a robbery at a physician’s home. The plaintiffs, represented in part by CAALA’s own Brian Kabateck and Richard Kellner, alleged that UCLA failed to exercise due care on the part of Regents, in part, for permitting the physician to take home and store confidential medical information at his home. Although Regents’ demurrer was initially overruled, Regents sought a writ of man-
date, which was granted, and in October, 2013, led to the reversal of the order overruling the demurrer and sustaining Regents’ demurrer without leave to amend. In UCLA, the Court heightened the pleading standards for CMIA claims, requiring litigants to plead and ultimately “prove” that private patient medical information was not only lost, but also actually “released” for access by third parties. “[W]e believe the Legislature intended… more than an allegation of loss of possession by the health care provider is necessary to state a cause of action for negligent maintenance or storage of confidential medical information,” the Court held. The problem with the UCLA Court’s holding, of course, is that it is extremely difficult to ever prove that negligently-
The Advocate Magazine — 107
Medical Records — continued
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stored information was actually released into the hands of a third party – since there is little hope of tracking down the thief to ascertain what was done or not done with the information. It would be akin to conditioning negligent bailment claims on a requirement that the victim plead and prove what was done with the missing property subject to the bailment – it is utterly irrelevant. It is inconsequential what ultimately happens to the property, or in this case, private medical information – the point is that the entity charged with responsibility for its safekeeping was not successful in preserving its confidentiality, and should be held responsible. Furthermore, the statutory language of CMIA itself undermines the notion that actual misuse of the data must be pled or proven – that is the very purpose of the statutory nominal damages of $1,000. Nominal damages are awarded in the absence of actual damage, meaning no damages have to be proven or sustained in order to succeed on CMIA. Where does this leave the viability of privacy claims? Certainly, much more difficult to plead and succeed upon. The solution may ultimately have to be legislative in nature. However, for the time being, privacy practitioners should make sure to undertake the following steps: • Adjust intake/screening on data breach cases to investigate whether the subject
data of the breach was encrypted, required special software to open, view, or access. • Ensure that data breached includes information about patient medical history, mental or physical condition, or treatment, not just demographics. • Adjust intake/screening to inquire about consequences of the data breach, i.e., does victim have any facts to support allegations that data breach was actually accessed by a third party (i.e., actual or suspected identity theft, increase in telemarketing calls, misuse of credit information, etc.). • Ensure allegations of improper release and wrongful acquisition of data are properly pled in the Complaint to withstand demurrer. Privacy violations are too important and too pervasive in the medical, financial, and consumer payment processing contexts to ignore, even despite new hurdles. With some adjustments and a little luck, privacy practitioners should press on and continue holding information storage facilities, medical treatment providers, data clearinghouses, and others accountable for the private medical information they are federally obligated to protect. Rabeh M.A. Soofi is a privacy law practitioner and managing attorney at SOOFI | Legal Counsel.
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Comprehensive eye exams for PI clients Head and neck injury victims may have subtle visual complaints to warrant examination Clients involved in motor-vehicle collisions are routinely referred to orthopedic surgeons and chiropractors to document the extent of injury and need for treatment. Neurologists are often the next specialists involved if these individuals have headaches or a variety of other more subtle neurological complaints. These referrals are
routine after initial consultation with a personal-injury attorney, and are central to the appropriate medical care of injured clients. Are you aware that routine eye exams should be included in most cases? It is obvious that patients with direct eye injuries need an ophthalmologist’s evaluation, but even in the case
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110 — The Advocate Magazine
where there is no direct globe trauma, a dilated eye exam by an ophthalmologist should be performed to rule out any possible peripheral retinal tears resulting from the trauma. Symptoms such as “floaters and flashes” can indicate retinal issues that could result in a subsequent retinal detachment. But what about individuals with more subtle complaints and findings? The academic evidence speaks for itself. Historically, researchers in the academic community have not been interested in the visual impact of motor-vehicle accidents and head/neck injuries. However over the last 10 years there has been a lot of interest in returning veterans from Iraq and Afghanistan with any form of head injury, even relatively mild head injury. The results are surprising but very informative. In volume 46, number 6, of the Journal of Rehabilitation Research & Development (November 2009) Glenn C. Cockerham, M.D. the national program director of the Veteran’s Administration (VA) ophthalmology service in Stanford, California, describes symptoms of outpatients who live independently after only a mild traumatic brain injury. “In patients who had no significant visual complaints before their injury, 75 percent had post-accident visual complaints and 63 percent had difficulty reading. Objective findings in these patients with normal visual acuity include almost 50 percent with accommodative insufficiency and convergence insufficiency which are bilateral visual functions that can only be detected by a detailed neuro-ophthalmological exam.” In laymen’s terms, issues with accommodative and convergence
insufficiency affect binocular vision and can affect activities of daily living as well as job performance. In another publication from the Journal of Rehabilitation Research & Development (2007, Vol. 44, no. 7), Gregory L. Goodrich, PhD, also of the VA Health System, notes that even in veterans with non-blast-related injuries, including motor-vehicle accidents, 60 percent had difficulty reading and again a high percentage had objective findings of bilateral neuroophthalmologic dysfunction, with a full 12 percent having double vision. In the overall study of trauma
patients, 24 percent had visual field defects, a problem that can only be assessed in a comprehensive ophthalmological evaluation. Finally, in the June, 2011, issue of the New England Journal of Medicine, a letter to the editor by Dr. Cockerham concluded, “We recommend comprehensive ocular evaluation by an ophthalmologist including gonioscopy and dilated retinal examination with scleral depression, for any veteran with a diagnosis of TBI (traumatic brain injury) of any severity level from blast exposure, including veterans with normal visual acuity.”
Civilians deserve the same high level of care recommended for our veterans. Many accident victims have ocular complaints, if asked, and these ocular issues can have real economic and personal consequences. Steven Rauchman, M.D., is a comprehensive ophthalmologist and co-owner of North Valley Eye Medical Group in Mission Hills, practicing since 1987. He has developed a particular interest in the treatment of patients following accidents and injuries and has been seeing PI clients for the past four years. www.northvalleyeye.net.
The Advocate Magazine — 111
From the Executive Director Stuart Zanville
Consumer Attorneys Association of Los Angeles
CAALA VEGAS: It succeeds because it connects From the Empowering heroes of justice and civility Executive Director
In a few weeks more than 2,500 the special events, and oh, did I mention CAALA members,Stuart jurists,Zanville trial attorneys the location? and legal industryCAALA professionals will make But in recent years, we’ve come to their way to the Wynn Hotel for CAALA understand there’s another reason why Vegas 2014. This will be the 32nd the convention succeeds: it’s the connecCAALA annual convention and like a tions. Regardless of your age or years in classic symphony, film or work of art, it practice, the convention is a place to congets better every year. nect with old friends and other lawyers. CAALA Vegas is our Association’s sigShelly Alcorn is a consultant, trainer nature event, but it’s much more than that. and speaker specializing in non-profit Each year it evolvesStuart and grows trade and professional associations. She Zanvilleand today it has become almostCAALA a force of nature – a writes in her blog that associations are natural phenomenon that’s beyond human changing, technology is changing and control. Actually, that last part isn’t true; communications are changing, but CAALA Vegas is very much in the control “What’s not up for debate is the fundaof Cindy Cantu and CAALA’s remarkable mental concept of belonging…from the staff who put on this amazing event with symposiums in Greece, to the guilds in little or no outsourcing. Europe, to the salons of the Renaissance CAALA’s volunteer members also to the associations of today – HUMANS make it possible. This year’s Education NEED CONNECTION.” Stuart Zanville Chair and Vice-Chairs are Genie She describes the pleasure of “being Consumer Attorneys Association of Los Angeles Harrison, Christa Ramey and Jeff in a room with consummate professionals Rudman. The Convention Co-Chairs are who understand what you do 15 hours a Mike Arias, Danica Dougherty, Tobin day; take time to chat with you, get your Ellis, David Hoffman, Shawn McCann, obsessions, listen to your crazy ideas, Taylor Rayfield, Douglas Silverstein and have spirited discussions and develop Andrew Wright. friendships with you and understand how The CAALA Convention has become connections still resonate even after all the benchmark by which all similar attorney this time.” gatherings are judged and measured. It Alcorn writes about herself, but her By Stuart Zanville truly is the gold standard ofAttorneys legal convenwords aptly describe your experience at Consumer Association of Los Angeles tions. If you need evidence, just go to your CAALA Vegas. “Some connections are favorite search engine and type in “trial deep, some cursory, some tenuous. But all lawyer convention” or even just “attorney of these connections have created meanconvention,” nothing else. CAALA Vegas ing and made my life better. In a world of will come up high on the list of results. uncertainty, I am holding onto one thing Search for “CAALA Vegas” and be prepared that I believe is true – that what we do for to wade through literally millions of results. a living means something. That our comWe spend a lot of time thinking, munity is worth something.” talking and working on each year’s conCAALA Vegas is a living social media vention. Many hours are spent undersite and a community standing why it is so successful so we can make it better. If you haven’t registered yet, visit www.caala.org or our dedicated convenWhy it works tion web site: www.caalavegas.org. Registration is open online through There are many reasons why it August 31. works: the location, the hotel, the speakCAALA Vegas 2014 will take place at ers, the education content, the trade the Wynn Las Vegas beginning Thursday show, the theme, the décor, the parties,
From the Executive Director
From the Executive Director
112 — The Advocate Magazine
August 28 and concluding Sunday, August 31. It’s a great hotel, our most popular in many years. The theme is “Empowering Heroes of Justice and Civility” and those heroes are you, the attorneys and judges who tirelessly work to maintain the American Civil Justice system. CAALA Vegas is proof that all the parties who make up the Civil Justice system can get along with trust, respect and yes, civility. If you attend the convention you can earn 20 hours of MCLE credit at the 24 education sessions featuring the nation’s leading trial attorneys and judges. The panels are for all of the attendees, from new lawyers to seasoned veterans. More than 140 attorneys, jurists and legal professionals are speaking at the convention and the list runs the gamut from Court leadership and CAALA Hall of Fame members to sharp, new attorneys who have never spoken at the convention. Adjacent to the education session rooms is the state-of-the-art exhibit hall that is an extension of the education experience and features 125 exhibits of legal service providers. At the end of each day’s activities, themed networking receptions are held just steps from the session rooms and exhibit hall. This year a closing night party will take place at the Wynn’s famous Tryst nightclub. Registration is open to all attorneys, law firm staff, jurists and law student CAALA members. The fee includes all sessions, a syllabus on a USB flash drive, continental breakfasts, coffee breaks, plus Thursday, Friday and Saturday parties and Sunday breakfast session. Registration also includes one other thing – connection to people who, as Shelly Alcorn says, “Want to organize, create and achieve great things with each other as helpers, collaborators and friends.” See you in Las Vegas.
The Advocate Magazine â€” 113
From the President Casey Johnson
Orange County Trial Lawyers Association
Changes on the way for OCTLA In a transformative year, change is the key to progress Just over halfway through and 2014 has already been a transformative year for the Orange County Trial Lawyers Association. The time and efforts that have been and continue to be expended by OCTLA’s volunteer board members is inspiring and the result – representing over three years of efforts − is a top to bottom new look. First, after nearly ten years of complacency, OCTLA’s quarterly publication, The Gavel, has undergone a complete redesign. Having personally served as editor during half of those years, perpetually advocating the “if it’s not broken, don’t fix it” theory of operating – it likely surprised many that I wholeheartedly supported and even advocated for an update. New design, new fonts – we’ve finally entered the twenty-first century. OCTLA has also successfully launched its new and improved Web site with emphasis on both appearance and function. Thanks to the vision and hard work of Past Presidents Doug Schroeder and Scott Cooper, as well as the tremendous dedication of technology/Web site committee chairmen including Jim Pantone, Paul Lee and Greg Brown (in addition to the work of all committee members). The fully functional Web site includes user-friendly daily Forum posts that are easy to read and respond to and put OCTLA members in constant communication with one another. Additional features will be rolled out throughout the year, including deposition databases and document banks. Log in today on octla.org, update your user profile and begin taking advantage of the incredible access to information and assistance.
Change has also extended into OCTLA’s exemplary educational programs with OCTLA joining the ranks of travel seminar presenters – co-presenting this year’s Palm Springs Seminar with CAOC/Consumer Attorneys of the Inland 114 — The Advocate Magazine
Empire. If you were one of the nearly 200 participants lucky enough to attend this year’s seminar in April, you experienced some of the best educational programs and presentations trial lawyers have put on in decades. Thirty years ago the Palm Springs seminar was the biggest California trial lawyer seminar, attended by the most prominent trial lawyers in the state. OCTLA could not be more proud to be a part of the continued revitalization of such an incredibly powerful and historically rich travel seminar and we look forward to working with our brothers and sisters in the Inland Empire and at CAOC to continue to grow and expand this amazing event. You won’t want to miss next year, so mark May 1-3 on your calendar now!
Of course, not everything has to change. This year, OCTLA will return to Grant Howald Park on September 7, 2014, for the Bench and Bar Softball Game and family picnic. OCTLA will also be returning to El Niguel Country Club on Columbus Day, October 13, 2014, for the annual Bench and Bar Golf Tournament. We expect another sell-out this year, so book your foursome early! OCTLA is also continuing its tradition of change by selecting a new charity that will receive all of the proceeds of the silent and live auctions at this year’s Top Gun Trial Lawyer of the Year Awards Dinner on November 22, 2014. We are returning to the stunning Laguna Beach coast, and the world class Montage Resort to honor the accomplishments of our worthy colleagues. This event will sell out, so go to www.octla.org for sponsorship information, to make a charitable donation or to purchase tickets. This year’s charity, High Hope Brain Injury Treatment Program, is the oldest non-profit brain injury treatment program in the country. Started in Costa Mesa in 1975, the program has grown
and continues to provide much needed services to students striving to regain function, independence and dignity. With the overwhelming majority of students (over 90 percent) receiving scholarship assistance in order to attend the program, funding is crucial. It is estimated that over 20,000 people in Orange County suffer a head injury every year – with leading causes being transportation accidents, sporting injuries and strokes.
Change in Sacramento
OCTLA continues to push for change in Sacramento’s perception of the funding required to adequately operate our Courts and provide access to justice. Although there will be some restoration of funding in 2014-2015, our courts are still grossly underfunded. We must change this inequity to ensure Justice may be had for our clients and OCTLA will continue meeting with decision-makers, both locally and in Sacramento, to reinforce the critical importance of fully funded courts. Finally, OCTLA will continue to seek to change California into a safer state for patients and allow victims of malpractice to seek proper accountability. The Troy and Alana Pack Patient Safety Act represents what is likely the only opportunity that we will have in this generation to ensure increased patient protections, including inflationary adjustment of general damages available to victims of malpractice. We must all set personal bests, both in terms of financial giving and educating friends, family and clients in order to ensure that Proposition 46 passes in November. Change can be positive and the change OCTLA is helping to achieve this year will not only solidify OCTLA as one of the top trial lawyer associations in the state, but will make Orange County and California a better and safer place for everyone. The time to embrace change is now!
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CAALA Connection Center ConnectwithNewCAALAMembers
We welcome the following new members who joined CAALA during the months of May and June. Anthony Adderley Law Office of Tony S. Adderley CAALA Connection Center
Law Offices of Laleh Ensafi
Banker’s Hill Law Firm, A.P.C.
Law Offices of Al Lustgarten
Naziri Law Firm, P.C.
Pearson, Simon & Warshaw, LLP
Law Offices of Julia Mack
Goldstein Law Group
Nordstrom, Steele, Nicolette & Blythe
Law Offices of Tsarina Branyan
The deRubertis Law Firm, APC
Attorney at Law
Law Office of Jaime G. Monteclaro
Cheong, Denove, Rowell & Bennett
Law Office of Miguel A. Manzo
Hatan Law, Inc.
Law Offices of Stawicki And Maples
Southwestern Law School
Law Office of Jaime G. Monteclaro
Harris Personal Injury Lawyers, Inc.
Attorney at Law
Attorney at Law
Loyola Law School
A. Liberatore, P.C.
Bergener & Associates
Kiesel Law LLP
Ellis Law Corporation
Attorney at Law
Ron A. Rosen Janfaza
Ivan Moe Makarem & Associates, APLC
Attorney at Law
Law Offices of Ron A. Rosen Janfaza
Law Office of John R. Cogorno
Law Office of Jaime G. Monteclaro
Carpenter, Zuckerman & Rowley, LLP
Attorney at Law
Loyola Law School
The Law Office of James Morris
Shegerian & Associates, Inc.
Attorney at Law
Law Offices of Galindo & Fox
Inner City Law Center
Attorney at Law
Whittier Law School
Attorney at Law
Yepremyan Law Firm
Albertson & Davidson, LLP
Naziri Law Firm, P.C.
Whittier Law School
Attorney at Law
Law Offices of Mickey Fine
The deRubertis Law Firm, APC
Law Offices of Bruce M. Bunch
Albertson & Davidson, LLP
Khorrami Boucher, LLP
Attorney at Law
Carpenter, Zuckerman & Rowley, LLP
Naziri Law Firm, P.C.
Loyola Law School
Feldman & Associates, Inc.
The Luti Law Firm
Loyola Law School
116 — The Advocate Magazine
Shawn Steel & Associates
The Simon Law Group
Aleen Tomassian Loyola Law School
Pearson, Simon & Warshaw, LLP
Farar & Lewis, LLP
Whittier Law School
Naziri Law Firm, P.C.
Mesriani Law Group
The Ramirez Firm
Shamshoni Law Group
Rosanna Vargas Shegerian & Associates
Law Offices of Victor L. George
Schwimer & Weinstein
Consumer Action Law Group, PC
Shegerian & Associates
Naziri Law Firm, P.C.
Kristi Rothschild Rothschild & Associates, APC
Michael Rubinstein Law Office of Michael E. Rubinstein
Jamie Ryan Attorney at Law
Susan Sabry Loyola Law School
Brett Sachs Bergener & Associates
Edwin Saghian Saghian Law Firm, PC
Southwestern Law School
Christopher S. Walton
Law Office of Scott Sheldon
The Layfield Law Firm, APC
Rastegar Law Group
The Simon Law Group
Whittier Law School
Cohen & Marzban
Bailey & Partners
University of La Verne
Walter R. Zech, Inc.
The Lionâ€™s Law Office
Zerin Law Offices
Hyde & Swigart
Zolelhayan Law Group
Saghian Law Firm, PC
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The Advocate Magazine â€” 117
118 â€” The Advocate Magazine
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The Advocate Magazine — 119
CalendarCAALA Calendar Consumer Attorneys
ASSOCIATION OF LOS ANGELES
August 28 – August 31, 2014 CAALA Vegas Convention The Wynn Las Vegas
ASSOCIATION OF LOS ANGELES
ConsumerConsumer Attorneys Attorneys ASSOCIATION OF LOS ANGELES Association of Los Angeles
Board & Committee Meetings Executive Committee CAALA Offices Downtown Los Angeles, 6:00pm Sept 11, Oct 2
800 West Sixth Street,#700 Los Angeles, CA 90017 (213) 487-1212 www.caala.org
ADR Providers ADR Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53 Carrington, R.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80 Corcoran, Tim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Daniels, Jack . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 Fields ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .104 First Mediation Corp - Jeffrey Krivis . . . . . . . . . . . . . . . .96 Gage, Sandy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Graver, Darryl . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .108 Hanger, Bob . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38 Horton, Jay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 JAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67 Jossen, Sanford Law Office . . . . . . . . . . . . . . . . . . . . . . .92 Judicate West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83 Mehta, Steven G. Mediation . . . . . . . . . . . . . . . . . . . . . .18 Sepassi & Tarighati, LLP . . . . . . . . . . . . . . . . . . . . . . . . . .15 Watkins, Shirley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .98 Announcements and Career Opportunities CAALA Legal Education Center . . . . . . . . . . . . . . . . . .117 CAALA Membership . . . . . . . . . . . . . . . . . . . . . . . . . . .119 CAALA VEGAS Sponsors . . . . . . . . . . . . . . . . . . . . . . .113 Attorneys – Appeals Bader, Donna . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .94 Ehrlich Law Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54 Mahacek, Jim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78 Pine & Pine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .115 Steven B Stevens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79 Attorneys – Accepting Referrals Atigechi Law Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .75 Bailey Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89 Bisnar | Chase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Campbell & Farahani, LLP . . . . . . . . . . . . . . . . . . . . . . . . .4 CaseyGerry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 Cook, David . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44 Dolan Law Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49 Dordick Law Offices . . . . . . . . . . . . . . . . . . . . . . . . .62-63 Edzant, Barry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .96 Engstrom, Lipscomb & Lack . . . . . . . . . . . . . . . . . . . . . . .41 Galipo, Dale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 Gelber, Bruce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .108 Girardi | Keese . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97 Greene Broillet & Wheeler . . . . . . . . . . . . . . . . . . . . . . . .1 Hodes Milman Liebeck LLP . . . . . . . . . . . . . . . . . . . . . . .40 Kesluk & Silverstein . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86 Law Offices of Lisa Maki . . . . . . . . . . . . . . . . . . . . . . . . .31 Law Offices of Marc I. Zussman . . . . . . . . . . . . . . . . . .123 Law Office of Michels & Lew . . . . . . . . .Inside Back Cover Makarem & Associates . . . . . . . . . . . . . . . . . . . . . . . . . .17
122 — The Advocate Magazine
Attorneys – Accepting Referrals (cont.) Manly & Stewart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 McGonigle, Timothy . . . . . . . . . . . . . . . . . . . . . . . . . . . .21 McNicholas & McNicholas . . . . . . . . . . . . . . . . . . . . . . .9 Mesriani Law Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Metzger Law Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 Nemecek & Cole . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74 Panish Shea & Boyle . . . . . . . . . . . . . . . . .Back Cover, 69 Richard Harris Law Firm . . . . . . . . . . . . . . . . . . . . . . . . .25 Rizio & Nelson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 Shegerian & Associates . . . . . . . . . . . . . . . . . . . . . . . . . .13 Shernoff Bidart Echeverria Bentley LLP . . . . . . . . . . . . . .81 Taylor & Ring, LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 The Senators Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59 The Traut Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Your Legal Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 Court Reporters Jonnell Agnew . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51 Kusar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .109 Personal Court Reporters . . . . . . . . . . . . . . . . . . . . . . . . .91 Defense Medical Exam Observation Advantage Representatives . . . . . . . . . . . . . . . . . . . . . . .90 PRIME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .104 Expert Witnesses – Medical Forensic Autopsy Services . . . . . . . . . . . . . . . . . . . . . . . .93 Graboff, Dr. Steven . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72 Luckett, Karen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102 Physician Life Care Planning . . . . . . . . . . . . . . . . . . . . .105 Roughan & Associates at LINC, Inc. . . . . . . . . . . . . . . . .29 Expert Witnesses – Technical & Damages Accessible Design & Consulting, Inc. . . . . . . . . . . . . . . .90 Boster Kobayashi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87 Occupational Assessment Services, Inc. . . . . . . . . . . . . .33 The TASA Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58 Financial Services California Attorney Lending . . . . . . . . . . . . . . . . . . . . . .111 CPT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76 EPS Settlements Group . . . . . . . . . . . . . . . . . . . . . . . . .100 Farber, Patrick (Struct. Stlmnts) . . . . . . . .Inside Front Cover Fast Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 Fund Capital America . . . . . . . . . . . . . . . . . . . . . . . . . . .43 Millennium Settlements . . . . . . . . . . . . . . . . . . . . . . . . .103 RD Legal Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 Summit Structured Settlements . . . . . . . . . . . . . . . . . . . . .44 Tom Stevenson Associates . . . . . . . . . . . . . . . . . . . . . . . .85 Valdez Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 Zea, Michael . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80
Board of Governors – CAALA Offices Downtown Los Angeles, 6:00pm Sept 18, Oct 16 Education Committee – CAALA Offices Downtown Los Angeles, 5:00pm Sept 18, Oct 16 New Lawyers Committee - CAALA Offices Downtown Los Angeles, 6:00pm Sept 16, Oct 14
Graphics/Presentations/Video Court Graphix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .110 Courtroom Presentations . . . . . . . . . . . . . . . . . . . . . . . . .68 Executive Presentations . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Juris Productions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .107 Legal Graphics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .98 MotionLit Video Group . . . . . . . . . . . . . . . . . . . . . . . . . .93 Verdict Videos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73 Insurance Programs Lawyers Mutual Insurance Company . . . . . . . . . . . . . . .95 Lawyer’s Pacific Insurance . . . . . . . . . . . . . . . . . . . . . . . .25 Matloff Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64 Narver Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71 Investigators Tristar Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .110 Legal Marketing Berbay Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . .50 New Standard Solutions . . . . . . . . . . . . . . . . . . . . . . . . .84 Legal Nurse Consultants Cross, Kathy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .110 Nutris Consulting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76 PJ West & Associates . . . . . . . . . . . . . . . . . . . . . . . . . . .106 Legal Research Quo Jure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88 Legal Support Services 4 Corners Deposition Summaries . . . . . . . . . . . . . . . . . .78 USA Express Legal & Investigative Services . . . . . . . . . .60 Medical & Dental Service Providers Buena Vista Pharmacy . . . . . . . . . . . . . . . . . . . . . . . . . . .61 Doctors on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 Glendale Surgery Center . . . . . . . . . . . . .36-37, 120-121 Injury Institute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55 Landmark Imaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 North Valley Eye Medical Group . . . . . . . . . . . . . . . . .106 Parehjan & Vartzar Chiropractic . . . . . . . . . . . . . . . . . . .46 Total Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101 Polygraph Investigations Trimarco & Associates . . . . . . . . . . . . . . . . . . . . . . . . . . .77 Software HiPerSoft Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . .99
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From the President Geoffrey Wells
Consumer Attorneys Association of Los Angeles
Reflections on our history and the importance of fathers A special challenge for trial lawyers As we prepare for our 32nd Annual Las Vegas Convention, I want to look back and reflect on all the amazing board members and past presidents who have built the foundation for this association. This amazing group of trial lawyers has given their time and energy to raise our association to a point where our education programs are at an all-time high in attendance. Our networking mixers are overflowing with lawyers eager to connect and share ideas. This year’s Las Vegas Convention is sure to be our most successful ever. Our inaugural CAALA Trial Academy is going to give special insight to many of our members and this year’s first graduating class is going to be acknowledged with Certificates of Completion in front of a large crowd at this Las Vegas Convention. One of the joys of being president of CAALA is getting to meet so many young trial lawyers. However, it is also gratifying to see the old guard coming out to meetings and offering their advice and institutional knowledge. These veteran trial lawyers have given so much of their lives to the civil justice system and have helped to preserve the rights of our citizens in California and nationwide. When I see the next generation of trial lawyers coming through the ranks, it is so rewarding to know that the fight for justice will continue long after I am president of this great association.
Getting out the vote
While writing the article this month, I had been participating in numerous phone banks to raise money for the Pack Patient Safety Act so that our message can get out to the voters in November. When this initiative passes, the people of this State will get real improvements in the safety and the personal responsibility portions of our healthcare system. To those of you who are sitting on the sidelines waiting to see if we can win …. What are you doing? Are you seriously sitting there while your brothers and sisters are in the trenches, getting bloodied 124 — The Advocate Magazine
and bruised? What kind of trial lawyer sits on the sidelines and doesn’t grab a sword or a shield to enter the battle? I do not know a single trial lawyer who is afraid to fight in the battle …. it is in our DNA …. win or lose, we always get in the fight! Always! Don’t wait for someone to call you. Go online at www.caoc.org/packact and contribute.
Death of a father – A special challenge for trial lawyers
So, the moment of truth in your life is when your father is lying there in a hospital bed dying with no chance of recovery … How will you respond as his child, as his legacy, as a human being? For those of us who have been lucky enough to have a father in our lives, the loss of a father is a devastating one. Communicating that loss of a father to a jury is a heavy burden for any trial lawyer. After having suffered that loss personally and having to tell the doctors to go ahead and turn off the life support system and then watching the soul of my father leave his body … well, it is not something you ever get over or forget. For me, I often reflect on the death of my father, Carl Wells. A person I miss every day, even though he passed away some 12 years ago. He taught me how to dribble a basketball with both hands and to always look up for the open man. He taught me how to throw a baseball correctly. He taught me how to be a good teammate and how to compete in sports and life. My father, who played in the Cincinnati Reds organization in the 1950s, loved to compete at everything from ping pong to basketball to life. This summer, we lost an icon in Major League Baseball – Tony Gwynn, a classy, warm man, universally loved by everyone, and not just in San Diego. Amazingly, he got to see his son, Tony Gwynn, Jr. make it to the Major Leagues as a baseball player. When his father passed away this summer, Tony Gwinn, Jr., who was playing for the Philadelphia Phillies, was allowed a bereavement leave in order to take care of
the family business of a funeral and the grief that goes along hand-inhand. The funeral was followed by thousands of fans and the outpouring to the family was amazing. One of the most Carl Wells amazing things occurred when Tony Gwynn, Jr. came back to work with the Philadelphia Phillies. He apparently arrived at Philadelphia and was sent into the game as a pinch hitter in the eighth inning. When he came to the plate, the Philadelphia crowd, which is notoriously tough, rose to their feet and started a thunderous standing ovation. As Tony Gwynn, Jr. tried to gather his composure in the batter’s box, it was obvious at least to the Marlins catcher, Jarrod Saltamacchia, that this was a special moment. He called time out and walked out to the pitcher’s mound to pretend to speak with the pitcher in order to allow the opposing player, Tony Gwynn, Jr., a moment to reflect and gather himself. This also allowed Tony Gwynn, Jr. to look up, acknowledge the crowd and stand there for a moment as his father’s son. Can you imagine what he was thinking about his dad and his life at that moment? He probably thought about all the Little League games and all of the batting practice, and all of the coaching tips and times that he had spent with his dad over the course of his life. He probably thought about how amazing it was that all these people in a City where his father never played on their team, would acknowledge what an amazing father and person had left the planet. When you speak to a jury about the loss of a father to his son or daughter, remember the moment of Tony Gwynn, Jr. stepping to the plate in a Philadelphia Phillies uniform …. remember the magnitude of the loss that all fathers are to their children.
& LAW LAW OFFICES OF MICHELS & LEW MEDICAL MALPRACTICE • PERSONAL INJURY INJURY
Verdicts and Settlements Totaling Over 10 Figures.
BRADFORD S. DAVIS, M.D.
MARTIN P. WENIZ
STEVEN B. STEVENS
JEROME J. CALKINS
OUR TEAM • CAALA Trial Lawyer of the Year • CAALA Appellate Lawyer of the Year • Board Certified Physician • President Elect KABA • CAALA Board of Governors
11755 Wilshire Blvd. #1300 Los Angeles, CA 90025
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