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Insurer Has Duty To Defend Insured Served With Calderon Notice
Insured Guilty Of Felony Not Required To Make Restitution To Insurer For Repair Costs Incurred By Insurer For Hit-And-Run Accident
The California Constitution provides that persons who suffer losses as a result of criminal activity have the right to restitution from the persons convicted of crimes causing the losses they suffer. An insurance company may be entitled to restitution when it is the direct victim of a crime. A company that suffers the consequences of a crime only by reimbursing the crime-related losses of its insured is not a direct victim. Thus, GEICO is not entitled to restitution for the costs incurred to repair the cars. The insurer must be the “real and immediate object of the defendant’s offenses” to warrant restitution. In this case, Fuhr was the “real and immediate” object of Busser’s crime. GEICO was contractually obligated to assume the risk of the repair costs in exchange for premiums paid by Busser. Therefore, Busser’s fraud was not the underlying event that resulted in GEICO paying the repair costs. Any money GEICO would have been obligated to pay had Busser not misrepresented the facts of the accident was not attributable to his misrepresentation and thus not a loss arising out of his criminal offense.
The court cited two cases in which restitution was properly ordered. In these cases, the defendants directed their fraud at the insurance companies and induced them to make payments they otherwise would not have made absent the defendants’ frauds. In one case, the court required restitution to a workers’ compensation carrier after the insurer honored the defendant’s false workers’ compensation claim and made payments to the defendant and her medical providers. In another case, the defendant was required to pay restitution to defrauded insurers because he deceived the insurers into settling false claims by fraudulently causing car accidents and submitting false claims to the motorists’ insurance companies. Shooting Of Passenger By Cab Driver Not Covered Under Policy Issued To Cab Company Which Defined Occurrence As An Accident On June 14, 2010, the Second Appellate District filed its opinion in L.A. Checker Cab v. First Specialty Ins. Co. holding the shooting of a customer by a cab driver was not an “accident” within the meaning of the cab company’s commercial general liability policy. Factual and Procedural Background Alexander Terminassian, an employee of L.A. Checker Cab, was operating his taxi one evening when he got into a dispute with a passenger, Marco Cifuentes. Cifuentes asserted Terminassian told him he would not accept him as a passenger because he was drunk, and that Terminassian ordered him out of the cab. Terminassian testified that in response, Cifuentes spat in his face, kicked him, struck him in the head and threatened to kill him. Terminassian further described Cifuentes as “deranged” and “out of control.” Terminassian warned Cifuentes he was armed. He removed the gun from his pocket and “racked the slide.” Cifuentes got out of the cab, opened the driver’s side door and tried to pull Terminassian out of the cab. Terminassian fired at Cifuentes who ran away. In response to the question as to whether he intended to shoot Cifuentes, Terminassian said “there was no time to intend or not to intend. I just shot him because it was on the spur of the moment.” Terminassian shot Cifuentes “because of the danger to my life.” Cifuentes sued Checker and Terminassian for assault and battery and Checker for negligent supervision of Terminassian. Checker tendered the defense to its insurer First Specialty, which refused to defend or indemnify. The trial court granted the insurer’s motion for summary judgment and the appellate court affirmed the judgment. Judicial Holding and Analysis Checker’s policy covered bodily injury caused by an “occurrence.” The term “occurrence” was defined as an “accident.” An “accident” is “an unexpected, unforeseen, or undesigned happening or consequence from either a known or unknown cause.” “An injury-producing event is not an accident . . . when all the acts, the manner in which they are done, and the objective accomplished occurred as intended by the actor.” According to the court, the “undisputed evidence” showed that Terminassian intentionally chambered a bullet in his gun and intentionally shot Cifuentes at point-blank range. Thus, Cifuentes’ injury was not accidental as a matter of law, and there was no potential for coverage and no duty to defend or indemnify by the insurer. The court rejected Checker’s argument that there was a potential for coverage because Terminassian had an unreasonable belief in his need for self-defense and his response to Cifuentes’ provocation was negligent. The court relied on the recent Supreme Court decision in Delgado v. Interinsurance Exchange (2009) 47 Cal. 4th 302 which held “an insured’s unreasonable belief in the need for self-defense does not turn the resulting purposeful and intentional act of assault and battery into an accident . . .” The court also rejected the argument that Cifuentes’ negligent acts provoked a response from Terminassian that was also negligent. Again, citing Delgado, the court stated the term “accident” refers to “the injury-producing acts of the insured, not those of the injured party. Checker also contended the insured had a duty to defend the cause of action for negligent supervision, but the court stated the policy unambiguously refers to an event causing damage, not the earlier event creating the potential for injury. Pursuant to Delgado, the court held the “focus of the analysis . . . must be on the conduct that directly produced Cifuentes’ injury, not some remote act that had the potential for producing a future injury.” Checker’s alleged negligence in failing to supervise Terminassian was not the direct cause of Cifuentes’ injury, but only a “remote antecedent” cause which did not qualify as an occurrence under the policy. Comments and Implications In Delgado, the insured allegedly struck, battered and kicked claimant without provocation or justification. In holding the injuries were not accidental, and therefore not covered, the court noted there was no allegation that the insured’s acts were merely shielding or the result of a reflex action. Although this language appears to acknowledge the possibility of coverage in certain self-defense situations, the Checker court followed Delgado without discussion of the apparent differences between the two cases. In Delgado, the insured allegedly attacked the claimant without provocation. There were no allegations of conduct indicating the insured acted in self-defense. In Checker, Terminassian testified that the claimant assaulted and threatened to kill him and that he shot the claimant “on the spur of the moment” when the claimant attempted to pull him out of the cab. Another Appellate Decision Holds Plaintiff Entitled To Full Amount Of Billed Medical Expenses Without Reduction For Discount Given To Plaintiff’s Insurer
On June 24th, 2010, the First Appellate District filed its opinion in Ana Silva Yanez v. SOMA Environmental Engineering, Inc., 185 Cal. App. 4th 1313, holding that the collateral source rule entitled plaintiff to recover the entire amount of billed medical expenses without reduction for the amount not incurred because of the discount given to plaintiff’s insurer by her health providers.
The plaintiff sued SOMA for injuries suffered in an automobile accident. The jury awarded her $150,000 in damages, including $44,519.01 for past medical expenses. SOMA moved to reduce the award to $18,368.24, the amount accepted by plaintiff’s medical providers as payment in full under their contracts with Aetna and Healthnet, her private insurers. The trial court granted the motion and reduced the damages award.
On appeal, plaintiff argued the trial court violated the collateral source rule by limiting her recoverable damages to the amounts she and her insurers paid for her medical care. She claimed the portions of the bills written off by the providers were collateral source benefits that could not be deducted from her recoverable damages. The appellate court agreed with plaintiff and directed the trial court to enter a new judgment restoring the original amount of damages awarded by the jury.
Under the collateral source rule benefits received by the plaintiff from a source independent of and collateral to the wrongdoer will not diminish the damages otherwise recoverable from the wrongdoer. Courts apply the rule even when it confers a windfall on the plaintiff, because “not applying the rule allows the wrongdoer to profit from the victim’s investment in purchasing insurance or from the generosity of those who come to the victim’s aid.” The court cited Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal. 3d 1, for the proposition that a defendant should not be able to avoid full compensation for the injury inflicted merely because the victim had the foresight to provide himself with insurance. Rate discounts negotiated between health insurers and providers are collateral benefits which, under the collateral source rule, should accrue to the insured plaintiff, not the defendant.
Howell v. Hamilton (2009) 179 Cal. App. 4th 686, also held that amounts written off by a health provider pursuant to its contract with a private health insurer may be recovered as damages under the collateral source rule. However, that decision has been accepted for review by the Supreme Court. The court distinguished Hanif v. Housing Authority (1988) 200 Cal.App.3d 635. Hanif was a personal injury action brought on behalf of a minor struck by an automobile on the defendant public housing authority’s property. The court concluded the plaintiff was entitled to recover up to, and no more than, the actual amount expended or incurred for past medical services so long as that amount is reasonable, and thus held his entitlement to damages for past medical services was limited to the actual amount paid by Medi-Cal, rather than the total amount billed. Hanif did not address the situation in which patients covered by private health insurance are charged reduced rates by the provider for their care as an insurance benefit negotiated between the insurer and the health care provider. In Nishihama v. City and County of San Francisco (2001) 93 Cal. App. 4th 298, the plaintiff was injured when she tripped and fell on a crosswalk maintained by the city. The jury awarded plaintiff the sum of $17,168 for past medical expenses even though the hospital accepted from plaintiff’s private health insurer the amount of $3,600 as payment in full. The court of appeal held the trial court erred in permitting the jury to award the plaintiff an amount in excess of $3,600 for the services provided by the hospital. The court refused to follow Nishihama, because it was based on the decision in Hanif which the court believed should not be extended beyond the Medi-Cal context. Exclusion For Injury Expected Or Intended By An Insured Does Not Bar Coverage For All Insureds In Policy Also Containing A Severability Clause On June 17, 2010, the California Supreme Court filed its opinion in Minkler v. Safeco Insurance Company holding the insurer had a duty to defend an insured’s mother in an action by a minor against the son for sexual molestation and against the mother for negligent supervision. Factual and Procedural Background Scott Minkler sued Betty and David Schwartz in superior court alleging David had sexually molested him over a period of several years. He alleged causes of action against David for sexual battery, intentional infliction of emotional distress, negligence and negligence per se. Scott also alleged a cause of action against Betty for negligent supervision based on allegations that he was molested by David in Betty’s home, that Betty knew David was molesting Scott, but failed to stop the molestation. Betty was insured by Safeco under several homeowners policies which defined “an insured” to include both the policy holder and any relative resident of the policyholder’s household. Pursuant to this definition, David was an additional insured under the policy. The policies excluded coverage for bodily injury “expected or intended by an insured or which is the foreseeable result of an act or omission intended by the insured…” The policies also provided, under the Conditions section, that “this insurance applies separately to each insured. This condition will not increase [Safeco’s] liability for any one occurrence.” David tendered the defense of the action to Safeco. Safeco denied the tender based on the intentional acts exclusion. Scott obtained a default judgment against Betty in the amount of approximately $5 million. Betty subsequently assigned her claims against Safeco to Scott. Scott filed an action in superior court against Safeco for breach of contract and bad faith, alleging Safeco had wrongfully denied coverage for the claim against Betty. Safeco removed the case to the U.S. District Court. Safeco filed a motion to dismiss the action on the ground the intentional acts exclusion barred coverage. The district court granted Safeco’s motion. Scott appealed to the U.S. Court of Appeals for the Ninth Circuit which requested that the California Supreme Court decide the following question: Where a policy covering multiple insureds contains a severability clause, does an exclusion barring coverage for injuries arising out of the intentional acts of “an insured” bar coverage for claims that one insured negligently failed to prevent the acts of another insured? Judicial Holding and Analysis The Supreme Court held that the exclusion for intentional acts of “an insured”, read in conjunction with the severability clause, creates an ambiguity which must be construed in favor of coverage. An insured would reasonably anticipate that under the severability clause, each insured’s coverage would be analyzed separately, so the intentional act of one insured would not bar coverage of another insured for the latter’s independent act that did not fall within the exclusion. Betty was not precluded from coverage merely because David’s conduct fell within the intentional acts exclusion. The policies provided the company would defend and indemnify “an” insured for bodily injury arising from an occurrence, but they specifically excluded coverage for injury that was expected or intended by “an” insured. Safeco argued that because the injury to Scott was expected or intended by David, neither David, nor Betty, was entitled to coverage. Scott contended the severability clause created an ambiguity as to the scope of the exclusion. The Court agreed with Scott finding there was ambiguity as to whether the exclusion for an intentional act by one insured extended to all other insureds, and therefore the court was obligated to construe the ambiguity to conform to the objectively reasonable coverage expectations of the insured. Because of the severability clause, Betty would have reasonably expected Safeco’s policies, whose general purpose was to provide coverage for each insured’s legal liability for injury to others, to cover her separately for her independent acts or omissions causing such injury, so long as her conduct did not fall within the policies’ intentional acts exclusion, even if the acts of another insured contributing to the same injury were intentional. The Court rejected Safeco’s argument that the second sentence of the severability clause makes clear that the purpose of the clause was to specify that each insured was separately entitled to be indemnified up to the full policy limits applicable to an individual insured, so long as the per occurrence limit was not exceeded. The Court stated that Safeco could have eliminated any ambiguity in the clause by providing that the “limits of liability of this policy apply separately to each insured.” The Court recognized that the majority view is that the severability clause does not alter the collective application of an exclusion for intentional, criminal or fraudulent acts by “an” insured, because the severability clause is intended only to extend policy limits separately to each insured and cannot prevail over a clear expression that coverage for all insureds is barred in a case where “an” insured has committed an excluded act. The Court adopted the minority view, stating that even if a provision excluding coverage for injury arising from the specified acts of “an” insured would normally mean that the excludable conduct of an insured bars coverage for all, a provision stating that the insurance applies separately to each insured reasonably implies a contrary result, at least in certain circumstances. Comments and Implications The Court stressed that its reasoning and conclusion under the specific circumstances of this case, which involves the interplay between a severability clause and an exclusion for the intentional acts of “an” insured, does not mean a severability clause necessarily affects all exclusions framed in terms of “an” or “any” insured. Application of a severability clause can never result in a finding of coverage the insured had no objective reason to expect. Thus, each exclusion applicable to “an” or “any” insured must be examined individually, and in context, to determine the effect a severability clause like the one at issue here might have on its operation.
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