A California appeals court recently sharpened the teeth of insurance companies’ duty to settle [Ace Am. Ins. Co. v. Fireman’s Fund Ins. Co. (2016) 2 Cal. App. 5th 159].  By broadening the situations in which an insurer can be held liable for failing to settle within limits to include cases that never go to verdict or judgment, this ruling protects policyholders from unreasonable insurer decision-making without forcing them into risky trials.  With a clear split among the California Appellate Divisions, this issue is now ripe for Supreme Court review.

On the set of Warner Bros.’ superhero film “Green Lantern,” a stunt gone wrong injured a special effects supervisor, who then sued Warner Bros. Entertainment Inc. and related entities to recover damages for his injuries. Warner Bros. had a $2 million primary policy and $3 million umbrella policy with Fireman’s Fund, and an excess policy of $50 million with Ace American to respond to the accident.
Continue Reading Recent California Ruling Enables Excess Carriers to Put Additional Pressure On a Primary Carrier to Accept a Reasonable Policy Limits Demand

On October 6, 2015, the United States District Court, Northern District of California held that an insurer breached its duty to defend by interpleading remaining policy limits and ceasing its defense of its insured.  Doublevision Entertainment, LLC v. Navigators Specialty Insurance Company, N.D. Cal., No. C 14-02848 WHA. Despite language in the policy stating that the insurer was not obligated to defend after it had deposited remaining policy limits with a court, the district court held that Navigators could not simply interplead the funds and abandon its insured “at the moment of her greatest peril.”

Navigators issued an errors and omissions policy to Commercial Escrow Services (“CES”) and its principal, Antoinette Hardstone. Beginning in 2010, CES and Hardstone were sued by a number of customers alleging improper escrow handling. After CES and Hardstone tendered to Navigators, Navigators assumed the defense of the claims.  While the claims were pending, the California Department of Corporations conducted an investigation into CES and determined that it had a shortage of $195,750. The Department of Corporations appointed a receiver, who had authority to collect any insurance proceeds needed to cover the shortage.Continue Reading Beware of Good Intentions: Insurer Cannot Escape Duty to Defend by Interpleading Policy Limits That Were Not Subject to Competing Claims