Auto Policy Not Considered As Providing Excess Coverage Over Another Auto Policy Where “Other Insurance” Clauses Conflict

By on September 18, 2013

A California appellate court recently held that absent inclusion of exclusionary language authorized by California’s underinsured motorist statute, an auto liability insurer could not rely on its “other insurance” clause to support the position its policy provided excess coverage.

INS BLOG_carAccording to the Aug. 12 opinion in Progressive Choice Insurance Co. v. California State Automobile Association Inter-Insurance Bureau, Benjamin White was injured in a traffic collision while riding as a passenger in a vehicle operated by Scott Tortora. The third party who caused the collision was underinsured. White was insured under two automobile insurance policies.

The first policy was issued by Progressive to Tortora and covered Tortora’s vehicle. The Progressive policy provided underinsured motorist (UIM) bodily injury coverage with limits of $100,000 per person. The second policy was issued by the California State Automobile Association (CSAA) to White as the named insured. The CSAA policy provided UIM bodily injury coverage with limits of $50,000 per person.

White settled with the at-fault driver’s auto insurer for the limit under that policy of $25,000. White then made a claim for UIM benefits under the Progressive and CSAA policies. CSAA denied coverage. Progressive paid the sum of $62,500 to White. Progressive then demanded that CSAA reimburse Progressive $20,833.33, the pro-rata share of the payment made to White. CSAA denied any obligation to reimburse Progressive.

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Filed under Auto, Other Insurance

Conduct That Violates Unfair Insurance Practices Act May Be Actionable Under Unfair Competition Law Despite Moradi-Shalal Restriction

By and on September 13, 2013

On Aug. 1, the California Supreme Court held that an insured may state a cause of action against an insurer under the Unfair Competition Law (UCL) for conduct that violates the Unfair Insurance Practices Act (UIPA) despite the bar against private actions under the UIPA itself.  The Supreme Court’s holding in Zhang v. Superior Court, Opinion No. S178542, resolved a split on the issue among the state’s intermediate appellate courts.

Yanting Zhang sued her insurer, California Capital Insurance Co., over coverage for and the handling of a fire loss claim.  Zhang alleged causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of the UCL.  In the UCL claim, Zhang alleged California Capital had “engaged in unfair, deceptive, untrue, and/or misleading advertising” by promising to pay claims with no intention of paying the true value of the covered claims.  Zhang also alleged several bad-faith practices by California Capital including unreasonable delays causing deterioration of the insured property; withholding of policy benefits; refusal to consider cost estimates; misinforming her as to the right to an appraisal; and falsely telling Zhang’s mortgage holder that Zhang did not intend to repair the property, resulting in foreclosure proceedings.

The trial court sustained California Capital’s demurrer on the UCL cause of action finding it was an impermissible attempt to plead around the bar against private actions under the UIPA pursuant to Moradi-Shalal v. Fireman’s Fund Ins. Cos. (1988) 46 Cal. 3d 287.  The court of appeal had reversed finding the complaint sufficiently pled facts to support a UCL cause of action.  California Capital sought review from the Supreme Court, which affirmed.

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Filed under California Insurance Regulations

First Circuit Finds Mutual Rescission of Life Insurance Policy

By and on September 8, 2013

On June 28, the U.S. Court of Appeals for the First Circuit found that a mutual rescission of a life insurance policy had occurred where a company, which had been granted the policyholder’s power of attorney, cashed a premium refund check.

INS BLOG_insurancepolicyPaul L’Archevesque bought a life insurance policy from Pruco Life Insurance Co. and set up two trusts: one to take out a premium finance loan and another that ultimately would take control of the life insurance policy. Jay L’Archevesque was the sole trustee of one trust. Jay and Wilmington Trust Co. were co-trustees of the other. Together, Paul and Jay gave power of attorney to Coventry, a premium financing company, for purposes of the life insurance policy.

In obtaining the policy, Paul submitted a number of medical records to Pruco that indicated he suffered from dizziness and depression. However, the records did not include a letter that contained a doctor’s diagnosis that Paul likely had mild Alzheimer’s disease and was taking medication for it. Pruco issued a $15 million policy on Paul’s life.

Subsequently, Coventry contacted Pruco to inform it that Paul intended to sell his life insurance policy. Suspicious, Pruco requested Paul’s updated medical records, which revealed information regarding Paul’s mild Alzheimer’s disease.

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Filed under Life Insurance, Rescission