United States: Insurance Law Update

Fuller-Austin Insulation Company v. Highlands Insurance Company
California Court of Appeal
Second District, Division Two
Case No. B170079
Filed January 19, 2006

The California Court of Appeal reversed the trial court's ruling that confirmation of Fuller-Austin Insulation Company's bankruptcy plan triggered its excess insurers' indemnity obligations for present and future asbestos-related claims.

The Court of Appeal ruled that the bankruptcy confirmation proceedings were not an actual trial of Fuller-Austin's liability and could not fix Fuller-Austin's liability to asbestos victims for purposes of establishing the existence or amount of an indemnity obligation by insurers. Moreover, the court held that estimations of the individual and aggregate value of present and future asbestos claims served neither to affix nor accelerate insurers' indemnification obligations and did not provide a basis for coverage to be presumed, as the trial court had ruled. Rather, the bankruptcy confirmation constituted a settlement of Fuller-Austin's liability.

The court also found that the insurers did not breach any duty to defend Fuller-Austin, as their policies did not contain any defense obligations, and the jury verdict further established that insurers did not waive their right to consent to settlement reached by Fuller-Austin due to an alleged breach of contract. Duane Morris partners William J. Baron and Dominica C. Anderson represent appellants London Market Insurers in this case.

For the full opinion, see: http://www.courtinfo.ca.gov/opinions/documents/B170079.DOC

Wilson v. 21st Century Insurance Company
California Court of Appeal
Second District, Division Seven
Case No. B180323
Filed January 30, 2006

The California Court of Appeal held that summary judgment in favor of the insurer on breach of contract and tortious bad faith in adjusting the claim should be reversed because triable issues of fact exist as to whether the insurer failed to investigate and evaluate the plaintiff's claim thoroughly.

This case arose in November 2000, after the insured was injured in an automobile accident with an intoxicated underinsured motorist. The insured had a policy with 21st Century which provided underinsured motorist coverage (UIM) up to $100,000. The insured demanded the $100,000 policy limits from 21st Century and accompanied her request with a police report, photos of her demolished vehicle and medical reports from the emergency room and her treating physician. Initially 21st Century rejected the insured's policy limit demand based on a review of the medical reports submitted by the insured and her physical activities following the accident. 21st Century at first concluded that the $15,000 that the insured received from the other driver, plus $5,000 from medical payments coverage, fully compensated the insured. However, more than two years later, in June 2003, 21st Century had the insured examined by its own neurosurgeon, who recommended surgery. After this exam and recommendation, 21st Century paid the insured the remaining amount of her UIM coverage. After receiving full payment, the insured brought this action for breach of contract and bad faith. Both of the insured's causes of action arose from an allegedly unreasonable delay in paying the policy limits and the alleged failure to conduct an adequate investigation.

The Court of Appeal found that there were triable issues of fact as to whether 21st Century failed to investigate and evaluate the plaintiff's claim thoroughly and that summary judgment was therefore improper. The court also found that the plaintiff should have had the opportunity to conduct discovery into 21st Century's use of a computer software program known as Colossus in the evaluation of bodily injury claims.

For the full opinion, see: http://www.courtinfo.ca.gov/opinions/documents/B180323.PDF

If you have any questions about this Update or would like more information, please contact William J. Casey, head of the Insurance and Reinsurance Practice Group.

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