Advocate June 2013 Issue

Journal of Consumer AttorneysAssociations for Southern California

June 2013

“OPEN, Sesame!”Is there is a magic word to open up the insurer’s policy limits?

INSURANCEFrom brokers and agents to the bad-faith trial

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Named Top Tier Los Angeles Law Firm for personal injury, product liability and professional malpractice law by U.S. News–Best Lawyers®

Named the Top Listed Personal Injury Law Firm in California by Best Lawyers®

Named one of the “Top Plaintiff’s Law Firms in America” by the National Law Journal

Named as Top 10 Super Lawyers by Southern California Super Lawyers® Magazine

The only plaintiff’s firm with 4 of the top 100 Southern California Super Lawyers® for 2013

Multiple Lawyers of the Year winners by U.S. News – Best Lawyers

2 of the Top 10 impact verdicts of 2012 by Daily Journal

Multiple Trial Lawyer of the Year award winners by Consumer Attorneys Association of Los Angeles

NAMED TOP TIER LAW FIRM NATIONWIDE BY U.S. NEWS — BEST LAWYERS® IN PRODUCT LIABILITY




JUNE 2013 The Advocate Magazine — 5

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6 — The Advocate Magazine JUNE 2013

ContentsContentsFeatures:

Advertising Sales: Neubauer & Associates, Inc. Chris Neubauer - Sales Manager. 760-721-2500 Fax: 760-721-0294e-mail: [email protected] Rate card available online at www.theadvocatemagazine.com

Submitting articles for publication: Check the annual editorial calendar at www.theadvocatemagazine.com to see when yourlegal topic would be most appropriate. Articles on time sensitive matters are welcome throughout the year, as are opinion columns,humor pieces, human-interest stories, lifestyle and personality features. Send your article as a WordPerfect or Word documentattachment to e-mail: [email protected]. Please check the website for complete editorial requirements.

Reprint permission: E-mail written request to Managing Editor Cindy Cantu: [email protected]

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What do we do with Du?Have the courts resolved whether insurers must make settlement offers,or just respond to offers?Sharon Arkin

The overlooked benefits of Coverage “P” in generalliability policiesCoverage “P” affords coverage beyond physical injury and property damage,including privacy and disparagement claims.Kirk Pasich

HMO bad faith Using legislative history to take on Martin v. PacifiCare.Carolina Rose and Jeffrey Ehrlich

California’s ban on discretionary clauses indisability and life insuranceCalifornia Insurance Code section 10110.6: When it applies and how it standsup to ERISA preemption.Brent Brehm and Corrine Chandler

Winning punitive damages for insurance bad faithYour guide to the bad-faith trial from voir dire through closing statement.Ricardo Echeverria

“OPEN, Sesame!”Is there a magic word to open up the insurer’s policy limits? The authorsexplore the nuances of litigation that can result in the lid being taken off thepolicy.Mark Algorri and Carolyn Tan

Insurance agent or insurance broker – what’sin a name? Why it’s a distinction with a difference.Robert S. Gianelli and Jully C. Pae

Should California provide drivers’ licensesregardless of immigration status? The author suggests that driving privilege cards and provisional licenses,along with buying plenty of Uninsured Motorist Coverage, are the onlylogical methods of improving public safety. Barry P. Goldberg

Volume 40, Number 6, JUNE 2013

Editor-in-ChiefJeffrey EhrlichAssociate EditorsJoseph Barrett, Mary Bennett, Joan Kessler, James Kristy,Beverly Pine, Norman Pine, Rahul Ravipudi, Linda Rice,Ibiere Seck, Geraldine WeissEditors-in-Chief EmeritiKevin Meenan, William Daniels, Steven Stevens, Christine Spagnoli, Thomas StolpmanManaging EditorCindy [email protected] EditorEileen Goss

Consumer Attorneys Association of Los AngelesPresidentLisa MakiPresident-ElectGeoffrey WellsFirst Vice PresidentJoseph BarrettSecond Vice PresidentDavid Ring

Board of GovernorsMartin Aarons, Mike Armitage, Shehnaz Bhujwala, ToddBloomfield, John Blumberg, Michael Cohen, Scott Corwin,Jeffrey Ehrlich, Mayra Fornos, Stuart Fraenkel, ScottGlovsky, Steve Goldberg, Jeff Greenman, Christa Haggai-Ramey, Genie Harrison, Arash Homampour, Neville Johnson,Bill Karns, Aimee Kirby, James Kristy, Lawrence Lallande,Anthony Luti, Shawn McCann, Minh Nguyen, Linda FermoyleRice, David Rosen, Jeffrey Rudman, Ibiere Seck, DouglasSilverstein, Armen Tashjian, Kathryn Trepinski, GeraldineWeiss, Jeff Westerman, Ronnivashti Whitehead, AndrewWright, Dan Zohar

Orange County Trial Lawyers AssociationPresidentScott CooperPresident-ElectCasey JohnsonFirst Vice PresidentTed WackerSecond Vice PresidentVincent HowardThird Vice PresidentH. Shaina Colover

Board of DirectorsMelinda S. Bell, Gregory G. Brown, Anthony W. Burton,Brent W. Caldwell, Cynthia A. Craig, Jerry N. Gans, RobertB. Gibson, Paul E. Lee, Kevin G. Liebeck, Christopher E.Purcell, 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 © 2013 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 thesubscription rate of $50 for 12 issues per year by theConsumer Attorneys Association of Los Angeles,800 West Sixth Street, #700, Los Angeles, CA 90017(213) 487-1212 Fax (213) 487-1224 www.caala.org

POSTMASTER:Send address changes to ADVOCATEc/o Neubauer & Associates, Inc.P.O. Box 2239Oceanside, CA 92051

TreasurerRicardo EcheverriaSecretaryMichael AriasImmediate Past PresidentMichael AlderExecutive DirectorStuart Zanville

PublisherRichard [email protected]

SecretaryGeraldine LyTreasurerB. James PantoneParliamentarianJonathan DworkImmediate Past PresidentDouglas SchroederExecutive DirectorJanet Thornton

Art DirectorDavid Knopf

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On the cover:Main Image: Opening the Vault | iStockphoto | www.thinkstockphotos.com

“Open, Sesame” was the magic phrase used by Ali Baba in the story Ali Baba and the Forty Thieves.The words opened the cave in which the forty thieves had hidden a treasure.

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Independent Cumis counsel: The second prongWhen the insured is given the right to choose counsel and control its owndefense.Kim Collins

Insurance strategies for mediationA look at the fundamental insurance issues that arise at mediation.Edward Susolik

Departments:

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ABOUT THIS ISSUEInsurance: Coverage and bad faithGuidance from some of the best plaintffs’insurance lawyers in Southern California.Jeffrey Isaac Ehrlich

FROM THE EXECUTIVE DIRECTORConsumer Attorneys Association of Los AngelesThe Court funding crisisShocking numbers and wordsthat will make a difference.Stuart Zanville

Appellate Reports and cases in briefRecent cases of interest to members of theplaintiffs’ bar.Jeffrey Isaac Ehrlich

FROM THE PRESIDENTOrange County Trial Lawyers AssociationJoin in the fight against MICRA.Support “38 is too late”Scott Cooper

DIRECTORY OF ADVERTISERSCALENDAR OF EVENTS

CAALA RESOURCE CENTERCAALA Webinar Library –Resources FREE for membersFree educational Webinarsare now available for FREEon demand at caala.org

FROM THE PRESIDENTConsumer Attorneys Association of Los AngelesA message for petand animal loversShare your stories aboutspecial pets in the CAALA community.Lisa Maki

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This year we have a great insuranceissue. In fact, we have so many articlesthat space is at a premium, so I have tokeep this “about this issue” column veryshort. My brevity should not be seen asan absence of gratitude to each of theauthors for sharing their wisdom. KirkPasich once again contributed an article,this year on advertising-injury coverage.This is one of the least-understood kindsof insurance coverage, but as Kirk pointsout, it can be critical. His article is agreat place to start.

I have new authors this year. MarkAlgorri and Carolyn Tan have written anarticle on the various ways that an insurermay “open up” a liability policy by failingto settle within policy limits. This can bethe difference between a $15,000 recoveryand multi-million dollar for your client.Also Kim Collins, a career defense lawyer,explains some of the finer points aboutwhen insurers must provide independentcounsel for their insured because theylack a financial interest in the outcome ofthe underlying case.

If you were to ask experienced plain-tiffs (or defense) lawyers to name the

plaintiffs’ lawyers with the most knowledgeabout insurance, that list would likelyinclude the following names: Rob Gianelli,Ed Susolik, Ricardo Echeverria, andSharon Arkin. I have articles from each ofthem in this issue. Robert S. Gianelli andJully C. Pae have written an article thatcanvasses California law on the often-con-fusing area of broker/agent liability. SharonArkin has written on the Ninth Circuit’sdecisions in Du v. Allstate. Du I createdsomething of a firestorm of controversyabout whether an insurer had an affirma-tive duty to settle a case. Du II somewhatsidestepped the issue, but Sharon showswhy you need to know about both deci-sions. Ricardo has written at what he isparticularly adept – trying an insurancebad-faith case. His article is the next-bestthing to second-chairing a trial with him.And Ed Susolik has written on what maybe the most important issue of all to theplaintiff ’s practice – how to use insuranceissues to leverage settlement in mediation.

These articles would make for a goodissue, but as they say on TV, “But wait,there is more.” Brent Brehm and CorinneChandler have explained how California

law now forbids the use of “discretionary”clauses in life, disability, health, and acci-dental-death insurance policies, and howERISA is likely to impact that legislation.

Carolina Rose, an expert on Californialegislative history, has co-written an articlewith me concerning Health & Safety Codesection 1371.25, which courts have con-strued to abolish vicarious liability forclaims against HMOs. Carolina shows how,properly evaluated, the legislative historyfor that statute shows that the courts aregetting it wrong.

Finally, Barry Goldberg has written avery topical article on whether — fromthe standpoint of public safety and unin-sured-motorist coverage — Californiashould provide drivers licenses to undoc-umented immigrants.”

My thanks go to each author.Writing good articles is hard work. So,too, is putting an issue of this magazinetogether. And every month Cindy Cantu,David Knopf, Eileen Goss, and oftenRich Neubauer make it happen. I get thesexy title – “Editor in Chief.” And theydo the hard work of making a bunch ofarticles into a magazine.


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I am not a numbers person, I preferwords. Maybe it’s because I was nevergood at math (it took me three tries topass high school algebra), and I’ve alwayspreferred verbal communication over sta-tistics.

But when it comes to the CaliforniaCourt funding crisis, there are somenumbers I want to share with you: • $1.1 billion (Amount cut from theCalifornia’s Court budget since 2007)• $161 million (Amount cut from theL.A. County Superior Court budget since2010)• 60 (Courthouses closed in California)• 10 (Courthouses closed in L.A. County)• 31 (California counties that havereduced the hours their Courts’ publicwindows are open)• 38 (California counties that havereduced their Courts’ self-help services)• 16 (California counties that have closedtraffic court locations)• 4 (L.A. County courthouses that nowhear landlord-tenant disputes)• 5 (L.A. County courthouses that nowhear small claims cases)

These are shocking numbers to any-one who believes in the Constitution andits guarantees of access to justice for all,not just the rich and powerful.

Justice delayedAs the Court changes that were man-

dated by the budget cuts begin to takeeffect, one unavoidable and highly dam-aging consequence is delay. Justicedelayed is justice denied and these days,a lot of justice is being denied inCalifornia.

California Supreme Court JusticeGordon Liu recently said, “Civil suits arethe bread and butter of our daily livesand delays will force people to find otherways to settle disputes.”

In June of last year L.A. SuperiorCourt Judge Mary Ann Murphy wrote in

this magazine, “Further budget cuts mayusher a return to master calendar, thecalendar congestion of the 1970’s, 1980’sand early 1990’s and five years to trial.”

She quoted from a Rand Institutefor Civil Justice study that the long waitto trial caused a “profound crisis” thatimpeded access to justice in the LosAngeles Superior Court. “Frustrated liti-gants may accept a settlement ratherthan wait for an open courtroom andmay lose faith in the court’s ability toresolve disputes.”

Judge Murphy surmised, “Furtherbudget cuts may cause the unthinkable –a return to the master calendar. Mastercalendar is a highly inefficient utilizationof court resources that would likely causea return to five years to trial.”

Unfortunately, in the year since thatarticle appeared and through no fault ofthe Court, Judge Murphy’s worst-casescenario has become the new normal.

A recent report from the Trial CourtPresiding Judges Advisory Committeequoted a representative of the L.A.Superior Court with powerful wordsabout the impact of the delays that willbe caused by the budget cuts:

Delay is pernicious. It takes holdincrementally. There will be no catas-trophe, only a slow and inexorabledecline. Delay allows everyone to con-tinue to pretend there is access to jus-tice. Only after months or years ofwaiting will one litigant at a time real-ize how the system has failed.Courthouse doors are being closed

and no amount of teeth-gnashing, hand-wringing or finger-pointing will changethe reality that our Courts are in gravedanger.

The power of wordsWhat will make a difference are

words. Words that must be spoken byConsumer Attorneys on behalf of the

people you stand up for every day. Wordsthat must be heard by California’s law-makers to better understand the impor-tance of the Courts and the serviceConsumer Attorneys perform forCalifornians of all creeds, colors, reli-gions and socioeconomic circumstances.

Whether you are talking to yourelected officials or to your friends andneighbors, educate them about what youdo each day to create a safer California,and that public safety is at risk withoutCourts that are accessible.

Explain that closing Courts hitsespecially hard at our state’s most vulner-able citizens; the less fortunate, the poor,veterans and the disabled.

Be clear that this is not about thelawyers. The Courts and the civil justicesystem protect people from unsafe prod-ucts, unsafe medicine, unfair businesspractices and negligent corporate con-duct.

Individuals, including corporateinterests, must be held accountable whenthey do something wrong, harmful orillegal and the civil justice system levelsthe legal playing field and guaranteesthat ordinary people get a fair shake incourt.

As California’s revenues increase, thestate has the money to repair the exten-sive damage done to our judicial systemas a result of years of budget cuts.

Two months ago the U.S. Congresspassed emergency legislation that fixeddelays at the nation’s airports caused bythe sequestration furlough of air trafficcontrollers. The bill was passed in a mat-ter of days after legislators were besiegedwith complaints from their constituents.

The time for California’s legislatureto act to address the impact of delays inthe Courts is now, and now is the timefor your voice to be heard. Contact me [email protected]. �

The Court funding crisisShocking numbers and words that will make a difference

Stuart ZanvilleConsumer Attorneys Association of Los Angeles

From theExecutive Director


Advocate Jun13 issue2_Advocate template 2007.qxd 5/22/2013 11:28 AM Page 12

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In June 2012, the initial publisheddecision issued by the Ninth CircuitCourt of Appeals in Du v. Allstate Ins. Co.(9th Cir. 2012) 681 F.3d 1118 (“Du I”)created a firestorm in the insuranceindustry. The decision issued after denialof rehearing in October 2012 (Du v.Allstate Ins. Co. (9th Cir. 2012) 697 F.3d753 [“Du II”] spread the fire to the plain-tiffs’ insurance bad-faith bar.

The “central legal issue” the NinthCircuit purported to address in Du I –and which it neatly dodged in Du II –was this: “Does an insurer have a duty,after liability of the insured has becomereasonably clear, to attempt to effectuatea settlement in the absence of a demandfrom the claimant?” (Du I, at 1122.)

In Du I, the court first discussed thegeneral duty of good faith and fair deal-ing of an insurer to settle a third-partyliability claim against its insured “withinpolicy limits ‘when there is substantiallikelihood of a recovery in excess of thoselimits,’” citing Kransco v. American EmpireSurplus Lines Ins. Co. (2000) 23 Cal.4th390. But, as the court went on to pointout, the duty to settle has been common-ly applied “to situations in which theinsurer unreasonably rejects a settlementoffer within policy limits. “ (Id., at 1123.)The Du I court, however, concluded thatthe duty applies more broadly andrequires “an insurer to effectuate settle-ment when liability is reasonably clear,even in the absence of a settlementdemand.” (Ibid.)

Ultimately, despite its conclusionthat such a duty existed, the Du I courtheld that the evidence in the trial courtdid not support giving the jury aninstruction to that effect.

Not surprisingly, the insurer soughtrehearing of the decision. “Within daysof the Ninth Circuit’s June 11, 2012opinion, the court received dozens ofamicus letters and briefs urging the court

to grant rehearing or certify the case tothe California Supreme Court.”(DiMugno & Glad, California InsuranceLaw Handbook, § 11:196, Comment.)

In its October 2012 amended deci-sion, the court noted that Du’s appealraised the issue of whether the duty ofgood faith and fair dealing can bebreached in the absence of a settlementdemand by the third party, and brieflysummarized the cases and arguments oneither side of the issue. Ultimately, how-ever, the court declined to resolve thatlegal question because it was unnecessaryto do so in light of the fact that theinsured did not present adequate evi-dence to support that claim in any event.

So what do we do with Du?In both Du I and Du II, the Ninth

Circuit identified a hotly contested issuein insurance bad-faith law: Does a liabili-ty insurance company have an affirmativeduty to attempt to settle a third-partyclaim against its policyholder without asettlement demand from the third party?

Du II does not give us a definitiveanswer. So, what do we do with that?

Well, the first thing we don’t do iscite Du I. That decision was supersededby Du II and it is therefore unciteable.But that doesn’t mean that – as policy-holders’ counsel – we can’t adapt theanalysis applied by the Ninth Circuit inDu I. We can – and should.

Think before you leapOne caveat before going through the

analysis: Make sure you have a strongcase on the facts before you try to makethis argument and especially before youtry to appeal it. The old law-schoolmaxim that “bad facts make bad law” istrue – especially in the insurance bad-faith context. Even when you have agreat case on the facts, the insurancecompany will do its level best (meaning it

will do its worst) to argue that the com-pany was “set up” and that the bad faithwas all on the part of the policyholderand/or the third party. Making bad lawfor everyone else just to promote yourown marginal case is a grave disservice toevery other injured third party and, inthe long run won’t help your client any-way. So think before you leap.

Obviously, the best way to deal withthe issue is to avoid it altogether. If you arecounsel for the injured third party, provideall the relevant documentation and infor-mation the insurance company reasonablyneeds to assess its insured’s liability andyour client’s damages and make a reason-able settlement offer. You can do it “early”in the case so long as you have a strong lia-bility case and damages clearly in excess ofthe policy limits. Yes, by making a settle-ment offer, you take the risk that the insur-ance company will accept the offer andyour client will not be able to “blow the lidon the policy.” But if you don’t provide therelevant information, you and your clientare at far greater risk that the bad-faithcase will go south on you and you will beleft with nothing but the bill for the costspaid and the loss of months of litigationtime on a case-to-nowhere that could havebeen spent on more productive litigation.

If you are bad-faith counsel, youpretty much have to take the facts as theyare and work with what you have. Butthat doesn’t mean you should take a runat every case. The trial and appellatecourts – especially in these days of severebudget cuts – are looking for ways to getrid of cases and will not tolerate over-reaching. Be smart with your time andthe court’s resources and leave the mar-ginal cases alone.

How do you make the argument?The California Supreme Court has

unequivocally established that the


What do we do with Du?Are insurers required to offer settlements before the claimant asks?

Sharon J. Arkin

Du continues


What do we do with Du?Are insurers required to offer settlements before the claimant asks?


Du — continued

implied covenant of good faith and fairdealing in an insurance policy “obligatesthe insurance company, among otherthings, to make reasonable efforts to set-tle a third party’s lawsuit against theinsured.” (PPG Industries, Inc. v.Transamerica Ins. Co. (1999) 20 Cal.4th310, 312.) One of the primary reasonsfor the imposition of this duty on aninsurer is the inherent conflict created bythe circumstances: The policyholderwants the claim to settle within the policylimits in order to avoid personal liability;and the company wants to settle theclaim for as little as possible. Without theduty of good faith as an incentive to set-tle within the policy limits, it would be inthe company’s best interest to simply letthe case go to trial and let the policy-

holder take the risk of an excess judg-ment, knowing that it would never paymore than the policy limit no matterwhat. (Merritt v Reserve Ins. Co. (1973) 34Cal.App.4th 858, 874.) Thus, the insur-ance carrier “must conscientiously try tostrike a balance between conflicting inter-ests” and must assess the claim “bothfrom its own point of view and from thatof the assured.” (Ibid.)

There is no question that the goodfaith duty to settle applies when a reason-able settlement demand within policylimits is made by the third party.(Johansen v. California State Auto. Ass’ninter-Ins. Bureau (1975) 15 Cal.3d 9, 16;Blue Ridge ins. Co. v. Jacobsen (2001) 25Cal.4th 489, 498; Merritt, supra.) Butmerely responding to a settlement

demand from the third party, rather thaninitiating settlement efforts, ignoresimportant statutory, regulatory and pub-lic policy obligations on the part of aninsurance company to make affirmativeefforts to resolve the litigation against itspolicyholder.

First, nothing in the controllingSupreme Court decisions even impliedlyjustifies conditioning the duty to settle onreceipt of a settlement demand from thethird party. (Comunale v. Traders &General Ins. Co. (1958) 50 Cal.2d 654,659-661; Crisci v. Security Ins. Co. of NewHaven, Conn. (1967) 66 Cal.2d 425, 429;Johansen, at 16-17.) And that makessense: While a settlement demand maycrystallize the existence of the conflict in


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Du continues



Du — continued

the mind of the company, the conflictitself manifestly exists irrespective ofwhether there is an actual demand. Inassessing the policyholder’s risk, theinsurer “must conduct itself as though italone were liable for the entire amountof the judgment” (Johansen, at 16) and, asa practical reality “no rational defendantwould sit back and allow a high exposurecase to go to trial without at leastattempting to settle simply because theplaintiff shows no interest in settling.”(DiMugno & Glad, California InsuranceLaw Handbook, § 11:196.)

Second, statutory provisions alsosupport the conclusion that a carrier can-not simply sit back and await a settle-ment demand. Insurance Code section790.03(h)(5) expressly provides that acarrier has a duty to attempt in “good

faith to effectuate prompt, fair and equi-table settlements of claims in which lia-bility has become reasonably clear.” Athird-party claimant cannot base a claimon violation of that statutory mandate.But the violation of that statutory man-date is evidence of the insurance compa-ny’s unreasonable conduct in an actionfor breach of the duty of good faith bythe policyholder or the policyholder’sassignee. (Jordan v. Allstate Ins. Co. (2007)148 Cal.App.4th 1062, 1078; Rattan v.United Services Auto. Association (2000) 84Cal.App.4th 715, 724.) Thus, the factthat the insurer failed to make any effortto attempt to settle the case in theabsence of a specific settlement demandmay be evidence of its breach of the duty ofgood faith. And that this is a justifiablebasis for imposition of liability is supported

by the fact that the Judicial Council hascrafted an approved jury instructionbased on violations of section 790.03(h)to be used in bad-faith cases. (CACI2337.)

Third, several cases have confirmedthe carrier’s duty to affirmativelyattempt to settle a claim in which liabil-ity is reasonably clear, even in theabsence of a settlement demand. InPray v. Foremost Ins. Co. (9th Cir. 1985)767 F.2d 1329, 1330, the Ninth Circuitspecifically found that “[i]t is reasonablyclear that California courts will inter-pret the California statute as imposingupon an insurance company the dutyactively to investigate and attempt tosettle a claim by making, and by accept-ing, reasonable settlement offers once


Du continues




Du — continued

liability has become reasonably clear.”(Emphasis added.) Although the directenforceability of the mandates of sec-tion 790.03(h) is now precluded byMoradi-Shalal v. Fireman’s Fund Ins. Cos.(1988) 46 Cal.3d 287, such a violationis, as noted above, evidence of an insur-er’s breach of the duty of good faith.More importantly, Pray supports theconstruction and interpretation of sec-tion 790.03(h)(5) as requiring an affir-mative effort on the part of the carrierto make a settlement offer once liabilityis reasonably clear.

Boicourt v. Amex Assurance Co.Boicourt v. Amex Assurance Co. (2000)

78 Cal.App.4th 1390 provides powerfulsupport for the conclusion that a carrierhas a duty to take affirmative action tosettle a claim. In Boicourt, the injuredthird party requested disclosure from thecarrier of its policyholder’s policy limitsbefore filing suit. The carrier refused todisclose the limits, or even to contact itspolicyholder for permission to disclosethe limits. Five months into the litigation,the carrier offered the $100,000 policylimits – which the third party refused. Inthe subsequent bad-faith case, the trialcourt granted summary judgment infavor of the carrier, ruling that becausethe injured third party never made a for-mal settlement offer, the carrier did notbreach the covenant of good faith. The

appellate court rejected that conclusionand reversed the summary judgment.

In discussing the issue, Boicourt tiedits analysis to the fact by refusing to dis-close the policy limits, the carrier ham-pered the ability of the third-partyclaimant to even make a reasonable set-tlement offer and the carrier’s blanketpolicy could be evidence of bad faitheven in the absence of a settlement offerby the injured third party. The courtexpressly limited its holding by statingthat the decision was not intended to“explore the degree to which the impliedcovenant of good faith and fair dealingimposes on a liability insurer a duty to be‘proactive’ in settling cases.” (Id., at1400.)

But one thing the Boicourt opiniondoes is very strongly reject reliance onthe decision in Merritt v. Reserve Ins. Co.(1973) 34 Cal.App.3d 858, 877 for theproposition that a carrier can be in badfaith “only” if a reasonable settlementoffer is made by the third party claimantand unreasonably rejected by the carrier.As Boicourt extensively demonstrates,Merritt’s discussion of the issue is dicta –and nothing more. (Boicourt, at 1395-1397.) Among other considerations in itsrejection of Merritt’s dicta, Boicourt point-ed out that Merritt “did not reject thisbasis of liability on the legal ground thatan insurer need never ‘initiate settlementovertures,’ but on the particular facts of

the case before the court: There was noevidence at all to support the conjecturethat ‘overtures’ might have been fruitful.”(Boicourt, at 1396, fn. 3; emphasis inoriginal.)

Thus, Boicourt provides strong sup-port for the argument that Merritt – thecase usually relied on by carriers to arguethat they have no duty to make an offer –does not answer the question.

ConclusionThe simple reality is that this ques-

tion will not be resolved unless and untilthe Supreme Court actually decides it. Inthe meantime, it’s a valid argument tomake in the right factual setting. But,again, the best course of action is alwaysto make a reasonable settlement offerwithin policy limits as early in the case aspossible consistent with the availability ofinformation needed by the carrier tomake a reasonable determination.

Sharon J. Arkin is the principal of The Arkin Law Firm. She has been certifiedby the California State Bar, Board of LegalSpecialization as an appellate specialist since 2001. In 2011 Ms. Arkin received theCLAY award from California Lawyer magazine as an Appellate Attorney of the Yearand in 2012 was named one of the Top 50Women Attorneys in Southern Californiaby Los Angeles Magazine. E-mail:[email protected].


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In 1966, Coverage “P” was intro-duced as a standard form endorsementfor general liability insurance policies,adding coverage for claims alleging “per-sonal injury.” (Farbstein & Stillman,Insurance for the Commission of IntentionalTorts (1969) 20 Hastings L.J. 1219 (here-after “Farbstein”).) Before then, personalinjury coverage was not provided on astandard form basis. As one insuranceindustry publication explained:

Coverage of liability for libel, slan-der, false arrest, detention, maliciousprosecution, invasion of privacy, etc.has been written for many years under

non-standard forms. . . . [D]ifferencesin coverage and policy provisions arebecoming less common. These latterendorsements have even establishedthe quasi-official title of ‘PersonalInjury Liability’ insurance for this typeof coverage.

(Fire Casualty & Surety Bulletin, PersonalInjury Liability Coverage (second print-ing, May 1968) Public Liability, p.i-1.)

The Personal Injury endorsement wasadopted so that coverage would no longerbe “confined to those damages resultingfrom ‘bodily injury or property damage.’”(Farbstein, at 1238.) When introduced, the

endorsement extended coverage to injuryarising out of listed “offenses” beyondbodily injury and property damage.

The two most important features ofthe endorsement are the unrestricteduse of the term “injury” and the absenceof any requirement that the loss be“caused by an occurrence.” Thus, cover-age is afforded for any injury arising outof one of the scheduled torts, undoubt-edly extending to all forms of generaland special damages normally recover-able in actions predicated on these torts.

(Id. at 1239.)

The overlooked benefits of Coverage “P” in general liability policiesCoverage “P” affords coverage beyond physical injuryand property damage, including privacy and disparagement claims

Kirk A. Pasich

Overlooked continues

To


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Over the years, the coverage mor-phed, becoming part of the standard ISOCGL form rather than an endorsement.Later versions of the policy began com-bining personal injury and advertisinginjury coverage into a single form.

“Personal and advertising injury”coverage now typically obligates insurersto defend and indemnify their insuredsagainst claims alleging injury arising outof specified “offenses.” These offensestypically include the “[o]ral or writtenpublication, in any manner, of materialthat slanders or libels a person or organi-zation or disparages a person’s or organi-zation’s goods, products or services,” orthat “violates a person’s right of privacy,”or “[i]infring[es] upon another’s copy-right, trade dress or slogan” in an adver-tisement. (Commercial General LiabilityCoverage Form (ISO Properties, Inc.2006) § V.14.) This coverage extends to awide range of claims.

For example, courts have recognizedthat personal-injury provisions afford cov-erage for privacy claims. In St. Paul Fire &Marine Insurance Co. v. Green Tree FinancialCorp. (5th Cir. 2001) 249 F.3d 389, thecourt addressed coverage for claims thatdebt collectors contacted plaintiffs severaltimes per week and threatened to inform

their employers of their delinquency. Theinsurer argued that it had no duty todefend because there was no specific alle-gation of an invasion of privacy and thatthe claim was for “unfair debt collectionpractices.” The court held that the insur-er had a duty to defend, noting that thefactual allegations “clearly support acause of action for invasion of privacy.”(Id. at 394.) It explained that “becausefactual allegations may favor one cause ofaction over another does not alleviate aninsurer’s duty to defend if the facts poten-tially state a cause of action coveredunder the policy.” (Ibid.)

Disparagement claimsPersonal-injury coverage also pro-

vides broad protection for claims involv-ing disparagement. Commentators havelong said that personal-injury coveragefor disparaging statements “appears tocreate coverage for a wide range of eco-nomic injuries,” including “interferencewith a prospective advantage,” “inducinga third person to breach a contract [and]. . . stealing his customers . . . or tradesecrets, all [of which] may involve defam-atory or disparaging utterances or thepublication of private information.”(Farbstein, at 1240.)

For example, in Propis v. Fireman’sFund Insurance Co. (1985) 492 N.Y.S.2d228, the court considered allegations thatthe insured had interfered with theclaimant’s business activities by “contact-ing and communicating with others” andthat the insured maliciously interferedwith the claimant’s new contract andinduced a third party to discharge theclaimant. The court held that the person-al injury provisions provided coverage,stating:

We note that the material publishedor uttered need not, to be the basis ofa covered claim under [the personalinjury provision], constitute a libel orslander or be legally defamatory oreven allegedly false . . . [T]he defini-tion of ‘Personal Injury’ lists the cov-ered publications or utterances in thedisjunctive, i.e., ‘of a libel and slanderor of other disparaging or defamingmaterial’ . . . It is enough if theinsured has published or uttered ‘dis-paraging material’ – material which isderogatory or belittling. . . .

(Id. at 737-38.)In Atlantic Mutual Insurance Co. v. J.

Lamb, Inc. (2002) 100 Cal.App.4th 1017, the issue was whether certain


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communications with customers of a com-petitor fell within personal injury cover-age, thus triggering a duty to defend.The underlying complaint alleged that

the insured intentionally communicatedwith another company, falsely stating thatthe other company was selling productsthat were subject to the insured’s patent

claim. The court of appeal held that theallegations in the underlying complaint“clearly allege a disparagement of [theother company] as well as its products.”(See also Sentex Sys., Inc. v. HartfordAccident & Indem. Co. (C.D. Cal. 1995) 882F.Supp. 930 [allegation that insured madefalse or misleading statement about com-petitor or its products triggers duty todefend for claim of disparagement].)

Personal-injury coverage also hasbeen held to obligate insurers to defendantitrust lawsuits based on unsubstantiat-ed allegations in otherwise uncoveredclaims. As the Ninth Circuit Court ofAppeals explained:

[In] Ruder & Finn v. Seaboard Sur.(1981) 52 N.Y.2d 663, 439 N.Y.S.2d858, 422 N.E.2d 518 , . . . a New Yorkcourt determined that an insurancecompany had a duty to defend itsinsured against an antitrust action thatincluded an allegation of “false dispar-agement.” . . . The court rejected theinsurer’s argument that “two solitary,unsubstantiated words” buried within a“completely unrelated federal antitrustcause of action, which was, itself,undisputedly not covered” could nottrigger the duty to defend.

(Pension Trust Fund for Operating Eng’rs v.Fed. Ins. Co. (9th Cir. 2002) 307 F.3d 944,951 n.4.)

Thus, even if the focus of the lawsuitappears to be on allegations or claimsthat are not covered, this does not meanthat an insurer is excused from its dutiesto its insured. (See Horace Mann Ins. Co.v. Barbara B. (1993) 4 Cal.4th 1076, 1084 [duty to defend even if uncoveredclaim “is the ‘dominant factor’ in [the]case”].)

Another Ninth Circuit decision pro-vides an example of how the duty todefend is triggered based on a similarnotion of “two solitary, unsubstantiatedwords” buried in a complaint. InManzarek v. St. Paul Fire & Insurance Co.(9th Cir. 2008) 519 F.3d 1025, 1031,Robby Krieger and Ray Manzarek, two ofthe founding members of The Doors,had been sued by John Densmore, thedrummer of The Doors. Densmore


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alleged that Krieger and Manzarek, whowere touring as members of the band“The Doors of the 21st Century,” andtheir touring company, Doors Touring,Inc., were liable for infringing on TheDoors name, trademark, and logo inconjunction with tours and marketing.Densmore also alleged, in a single para-graph in his 68-paragraph complaint,that he had suffered damage to his “rep-utation and stature” because the infringe-ment caused people to believe “that hewas not, and is not, an integral andrespected part of The Doors band, or isone member who easily can be replacedby another drummer.” (Id. at 1033.)

Advertising injuryManzarek and Doors Touring noti-

fied their insurer, seeking coverage for

“advertising injury” (which includedlibel, slander, and disparagement) and“bodily injury” (which included mentalanguish and emotional distress). Theinsurer denied coverage. It first contend-ed that there was no coverage for thecopyright infringement and relatedclaims because the policy had an exclu-sion for claims arising in the “field ofentertainment,” which applied to thepublication and advertising of productsand materials in media. (Id. at 1032.)The insurer next claimed that Densmorehad not alleged “bodily injury.”

The Ninth Circuit disagreed. Itbegan by analyzing the duty to defend. Itemphasized that, “‘Any doubt as towhether the facts establish the existenceof the defense duty must be resolved inthe insured’s favor.’” (Id. at 1031.) The

court held that the field of entertainmentexclusion did not apply. It pointed outthat the exclusion would not apply, forexample, if Manzarek and Doors Touring“began distributing ‘The Door’s Own’ lineof salad dressing . . . because [they]would not necessarily publicize, distrib-ute, exploit, exhibit, or advertise inmedia such as motion pictures.” (Id. at1032-33.) It further noted that the exclu-sion also would not bar all coverage ifthey “began marketing a line of t-shirtsor electric guitars with The Doors logo or[Jim] Morrison’s likeness on them.” (Id.at 1033.) It then held that the insurerhad a duty to defend because the under-lying complaint was “silent about whattype of products and merchandise thatManzarek and [Doors Touring] produced

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and marketed.” (Ibid.) This sufficed totrigger the defense duty.

The Ninth Circuit next turned to thequestion of whether the policy’s “bodilyinjury” coverage obligated the insurer todefend. It rejected the insurer’s argu-ment that there was no potential for“personal injury” coverage. It held thatthe allegations that Densmore’s “reputa-tion and stature” had been damagedwere “sufficient to raise the potential ofan award of mental anguish or emotionaldistress damages,” even though the com-plaint contained no emotional distresscause of action and did not refer to emo-tional distress.

A California Court of Appeal recentlyheld that the alleged disparaging state-ment may be implied from the allegationstriggering the duty to defend. (Travelers

Prop. & Cas. Co. of Am. v. Charlotte RusseHolding, Inc. (2012) 207 Cal.App.4th 969,978 [“[t]he underlying claims may triggera duty to defend if the conduct for whichthe policies provide coverage is chargedby implication, as well as by direct accusa-tion”].) Moreover, no cause of action fordisparagement or trade libel is needed totrigger coverage. “In order to trigger per-sonal injury coverage it is not essentialthat the underlying claims must beexpressly phrased in terms of ‘disparage-ment’ or trade libel.” (Ibid.)

In Travelers, the plaintiff alleged thatthe insured had damaged its brand by itssale of products at severely discountedprices. The insured sought coverageunder the advertising injury provisions ofthe policy, which included coverage for“[o]ral, written, or electronic publication

of material that slanders or libels a per-son or organization or disparages a per-son’s or organization’s goods.” (Id. at974.) Even though the complaint did notcontain a single allegation regarding anystatement by the insured, the court heldthat the insurer had a duty to defend. (Id.at 981.) In doing so, the court explainedthat the potential for coverage existedunder the policy’s definition of “advertis-ing injury” even though the plaintiff hadneither asserted a cause of action fortrade libel nor pled all of the elements oflibel or defamation. (Id. at 979-80.) Forcoverage purposes, the alleged disparag-ing statement was implied in the allega-tion that the insured’s conduct hadcaused damage to the plaintiff ’s brandand the marketability and saleability of itsproducts. As the court explained:

[T]he allegation of disparagementmay be implied. The question here, . . .therefore is not whether the underlyingclaims expressly allege that the [insured]parties disparaged [the claimant’s] prod-ucts, but whether the allegations may beunderstood to accuse the [insured] par-ties of statements and conduct “thatslanders or libels a person or organiza-tion or disparages a person’s or organi-zation’s goods, products or services . . . .

(Id. at 978-79.) The court also confirmed that it did

not matter whether the underlying law-suits involved a cause of action for tradelibel. It acknowledged that even if theclaim against the insureds

...could not be viable without alleg-ing all of the elements of a trade libelcause of action, . . . [t]he insurer’s dutyto defend is not conditioned on thesufficiency of the underlying pleading’sallegations of a cause of action; that isan issue for which the policy entitledthe [insured parties] to an insurer-funded defense.

(Id. at 979.) Finally, the court noted that con-

sumers might be confused as to the ori-gin, quality, and affiliation of theinsureds’ products:

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to charge that the dramatic discountsat which the . . . products were beingsold communicated to potential cus-tomers the implication — false, accord-ing to [the claimant] — that the prod-ucts were not (or that the [insured]parties did not believe them to be) pre-mium, high-end goods.

(Id. at 980.) Therefore, the court concluded that

an allegation of a disparaging statementwas implied based on the underlyingplaintiff ’s allegations regarding damageto its brand and the marketability of itsproducts.

Courts also have found that person-al-injury coverage applies to a variety ofclaims alleging interference with interestsattending to the possession or enjoymentof real property. (See, e.g., Fragomeno v.Ins. Co. of the West (1989) 207 Cal.App.3d

822, 828 [term “personal injury” obli-gates insurer to defend and indemnifyfor “any act constituting an invasion ofthe right of private occupancy whichincurs tort liability”].) Indeed, courtshave found coverage in a broad range ofcircumstances:• Battery made possible by trespass.(Hartford Accident & Indemnity Co. v.Krekeler (8th Cir. 1974) 491 F.2d 884.)• Conversion when repossession alleged-ly was accomplished by insured’s techni-cally deficient entry onto premises.(Cincinnati Insurance. Co. v. Davis (1980)265 S.E.2d 102.) • Enactment of zoning amendment limit-ing development. (Town of Stoddard v.Northern Security Insurance Co. (D.N.H.1989) 718 F.Supp. 1062.) • Interference with quiet enjoyment anduse of home from loud noise and unduly

bright night lighting. (Titan HoldingsSyndicate, Inc. v. City of Keene (1st Cir.1990) 898 F.2d 265.)• Race discrimination. (Gardner v.Romano (E.D. Wisc. 1988) 688 F.Supp.489; Clinton v. Aetna Life & Casualty Co.(Conn. Super. Ct. 1991) 594 A.2d 1046.)• Trespass, nuisance, and CERCLAclaims. (Martin-Marietta Corp. v. SuperiorCourt (1995) 40 Cal.App.4th 1113.)

Overlooking personal-injury cover-age can result in insureds not obtaining adefense paid for by their insurers forclaims that otherwise would be covered,and in less insurance money being avail-able for possible settlements of claims.

Kirk Pasich is a partner in the LosAngeles office of Dickstein Shapiro LLP. He is the Client Strategy Leader for the firm’sInsurance Coverage Group.

Shook & Stone is a Nevada Law Firmpracticing for 17 years exclusively in theareas of Personal Injury and Disability Law.The Firm has three o�ces throughoutNevada located in Las Vegas, Reno andCarson City. Practice Areas include:

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Shook & Stone is a Nevada Law Firmpracticing for 17 years exclusively in theareas of Personal Injury and Disability Law.The Firm has three o�ces throughoutNevada located in Las Vegas, Reno andCarson City. Practice Areas include:

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In 1995, the Legislature enactedHealth and Safety Code section 1371.25,at the behest of the CaliforniaPsychological Association (“CPA”). Thestated purpose of the bill was to preventhealth care service plans (HMOs), fromincluding draconian “hold harmless”provisions in their contracts with the pro-fessionals who provide medical services

to the HMOs’ subscribers (“providers”),forcing the providers to indemnify theHMOs for the HMOs’ wrongful denial ofservices.

The statutory language is brief – onlythree sentences. Section 1371.25 says:

A plan, any entity contracting with aplan, and providers are each responsi-ble for their own acts or omissions, and

are not liable for the acts or omissionsof, or the costs of defending, others.Any provision to the contrary in a con-tract with providers is void and unen-forceable. Nothing in this section shallpreclude a finding of liability on thepart of a plan, any entity contractingwith a plan, or a provider, based on the


HMO bad faith Using legislative history to take on Martin v. PacifiCare

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HMO continues

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HMO bad faith Using legislative history to take on Martin v. PacifiCare


HMO — continued

doctrines of equitable indemnity, com-parative negligence, contribution, orother statutory or common law basesfor liability.

For many years, the statute appearedto serve its stated purpose and to do littleelse. But over time, HMOs began to relyon it as a virtual immunity shield against

bad-faith claims against them. TheHMOs argued that the statute eliminatedall claims against them based on vicari-ous liability for the conduct of theirproviders. They claimed that if an entitythey hired to make utilization-reviewdecisions wrongfully refused to providecoverage, and a subscriber sufferedinjury, that subscriber had no claimagainst the HMO itself – only a claimagainst the provider. The only situationwhere HMOs claimed they could be heldliable was if the subscriber appealed theproviders’ decision to the HMO, and theHMO affirmed it.

Plaintiffs argued that this approachstood the concept of insurance bad faithon its head. After all, it was the HMOs –not their contracted providers – whostood in contractual privity with the sub-scribers. California law was settled thatthe tort of bad faith followed the line ofcontractual privity. As a result, when aninsurer denied a claim and was sued forbad faith, the claim had to be maintainedagainst the insurer; not against theadjuster who the insurer hired to adjustthe claim. This was the holding ofGruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d566. And it was also well established thatan insurer’s duty of good faith and fairdealing was non-delegable. (Hughes v.Blue Cross of Northern California (1989)215 Cal.App.3d 832.)

Plaintiffs argued that the purpose ofsection 1371.25 was to outlaw the type ofhold-harmless provisions that the CPAcomplained about, and the Legislatureachieved that goal in an inelegant, buteffective way. The first sentence of thestatute, standing alone, did abolish theconcept of vicarious liability for HMOs.The second sentence – which was the keyprovision – then outlawed all contractswith HMOs that were inconsistent withthe principle. And then the third sen-tence operated as a saving clause, essen-tially re-establishing the basic principlesof common-law liability: “Nothing in thissentence shall preclude a finding of liabil-ity on the part of a plan . . . based on thedoctrines of equitable indemnity, compar-ative negligence, contribution, or otherstatutory or common law bases for liability.”



The first published opinion to con-sider the issue was Watanabe v. CaliforniaPhysicians’ Service (2008) 169 Cal.App.4th56.) The Watanabe court adopted theHMO’s view, finding that it was nonsensi-cal to interpret the third sentence as re-establishing the liability that the first sen-tence abolished. But the Watanabe courtrefused to review the statute’s legislativehistory, finding that the statutory mean-ing was so clear on its face that there wasno need to do so.

In Martin v. PacifiCare of Cal. (2011)198 Cal.App.4th 1390, the court didconsider the statute’s legislative history,and it decided that it supported theWatanabe court’s construction of thestatute. As a result, it affirmed a nonsuitin a bad-faith lawsuit and wrongful-deathagainst PacifiCare arising out of thedenial by its contracted provider, BrightMedical Group (“Bright”). The claimalleged that Bright refused to authorizethe treatment that its subscriber, ElsieMartin, needed to treat a cerebralaneurysm. She had been referred to spe-cialists at USC for care that Bright’s owndoctors could not provide, but Brightneedlessly sent her to those doctors any-way, delaying her care for months. Elsie’saneurysm burst before she got the treat-ment she needed.

Relying on Watanabe, the trial courtgranted nonsuit in favor of PacifiCare,finding that the only claim available toElsie’s family was against Bright itself, notPacifiCare. (Full disclosure, one of the co-authors of this article, Jeff Ehrlich, wasappellate counsel for the Martin family.)In this article, legislative history expertCarolina Rose has reviewed the Martincourt’s legislative-history analysis, andconcludes that the Martin court got itwrong. I will let Carolina take it from here.

The Martin Court The Martin court did not correctly

apply the legislative history and intent ofHealth and Safety Code section 1371.25as added by Stats. 1995, Chapter 774,Sec. 2, Assembly Bill (AB) 1840(Figueroa) when it reached this decision:

We agree with Watanabe that section1371.25’s plain language prevents a

health care service plan from being heldvicariously liable for a medical provider’sacts or omissions. Our examination of section 1371.25’s legislative history fur-ther supports that conclusion.

[Emphasis added. Martin, 198Cal.App.4th at p.1392.]

It is a confusing reality that an entitythat is authorized under the Knox-Keeneact to be a “provider” of medical healthcare services to patients can also contractwith the health care service insuranceplan to serve in a separate, strictlyadministrative manner as the plan’s con-tract agent to determine if medical serv-ices requested by one of the “provider’s”roster of licensed medical professionalsmade on behalf of an insured patient aremedically necessary and should thereforebe covered by the plan.

Such gatekeepers of insurance cover-age are known as medical utilizationreview (UR) contractors or agents. (URservices can also be provided by the planitself or another entity who does not alsoprovide medical health care services tothe plan.)

In Martin, Bright, the licensed“provider” of health care services forPacifiCare, was also PacifiCare’s URagent. PacifiCare paid Bright extra just todo the UR. The patient harm at issuewas caused by Bright in its capacity as theplan’s UR agent – not in its capacity asPacifiCare’s “provider” of medical healthcare services. Unfortunately, the Martincourt attributed Bright’s UR decision toits “provider” status.

As the court saw it, the applicationof 1371.25 was simple: (1) Bright was alicensed “provider” of medical services.(2) Bright’s UR decision to deny servicesto the patient caused the patient harm atissue. (3) Under a plain reading of sec-tion 1371.25, as supported by the legisla-tive history, only Bright, the “provider,”was responsible for the harm caused byits UR “acts or omissions” – not the plan,PacifiCare.

The legislative history of AB 1840does not support this outcome. A detailedreview of the extensive record reveals thatthe terms “providers … acts or omissions”adopted in the first sentence of section

1371.25 were only intended to apply toproviders’ negligence or malpractice inthe delivery of health care services. Thehistory does not reveal that the 1995Legislature intended to insulate plans,such as PacifiCare, from vicarious liabilityfor harm caused by their UR agents, suchas Bright, who also happen to be theplans’ medical service “provider.”

Unfortunately, a detailed review of the key legislative records docu-menting these findings is not possiblegiven the space constraints imposed forthis article. Feel free to contact me formy unedited analysis. What follows is abrief outline of some of the major find-ings.PART 1. Key findings from the legisla-tive history which contradict Martin.• The definition of “provider” inHealth and Safety Code Section 1345(i)’s harmonizes with the use of thatterm in section 1371.25. It only encom-passes acts related to patient care, notUR acts.

Strictly speaking, a “provider” ofmedical services is only obligated to acton behalf of a patient’s interests. Asdefined under Health and Safety Codesection 1345 (i), a “provider” is “licensedby the state to deliver or furnish health careservices” (emphasis added). In contrast, aplan’s UR contract agent is only obligat-ed to act on behalf of a plan’s financialand insurance coverage interests. SuchUR services are not embraced within thedefinition of “provider” under section1345(i). Significantly, this definition wasin existence in 1995 when section1371.25 was added. The 1995Legislature was aware of it under theprincipal of statutory construction thatthe Legislature is presumed to act in cog-nizance of existing law. (SutherlandStatutory Construction, Statutes and StatutoryConstruction (7th Ed. 2007) Vol. 2A,s.45:12 at pages 115-119.)

Both the Watanabe and Martin courtsfailed to consider that the term“providers” in section 1371.25 wasintended to harmonize with the defini-tion of “provider” in 1345 (i). In effect,the “providers… acts or omissions”addressed in section 1371.25 were only



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intended to apply to those occurring inthe delivery of health care services forpatients – not in the delivery of UR

services for the plan. As summarizedbelow, this understanding is supported inthe legislative history.

• The sole purpose of section 1371.25is to stop plans from shifting liabilityfor harm caused by their UR decisionsto their “providers” of medical servicesthrough insidious “hold harmless”agreements. Watanabe and Martincompletely undermined this purpose.

Martin acknowledged that the original purpose of section 1371.25 was to stop HMOs from forcing their“providers” of medical services to acceptinsidious “hold harmless” provisions intheir contracts, thereby shifting theplans’ liability to their “providers” forharm caused by the plans’ UR decisionsto delay or deny health care coverage.But the court found that this purpose was“broadened” during the amendmentprocess to eliminate vicarious liability.(Martin, 198 Cal.App.4th at pp. 1403-1404.)

Not true. The legislative historyactually shows that the amendmentswere merely technical clarifications toassure that plans would not be liable for“providers… acts or omissions” relatingto negligence or malpractice in thedelivery of health care services. The his-tory does not document an intent toinsulate a plan from vicarious liabilityfor harm caused by its UR agents,including agents who also happened tobe the plan’s provider of medical servic-es. 1. The Assembly Committee on Health’searly analysis set the tone at page 3 intwo ways. (1) It incorporated the spon-sor’s intent to require plans to be respon-sible for their acts, just as providers areresponsible for their negligence or mal-practice in the delivery of health careservices. (2) It also pointed to the possi-bility of future amendments to clarifythat intent.

This bill would prohibit plans fromincluding hold harmless provisionsprotecting the plans in contracts withproviders. The sponsors feel that plansshould be responsible for adverse results oftheir actions in the same manner asproviders. Generally, there seems to beagreement with the intent of this provision


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but disputes remain on the specific wording.In addition, a concern has been raised toinsure that such language covering circum-stances where the provider, not the plan,has denied services or otherwise committedwrongful acts.

[Emphasis added.] 2. HMO concerns trigger amendmentsaddressed in Martin. An “expansion” ofthe original purpose was not intended.Rather, concerns raised by Health Net,the California Association of HMOs(CAHMO) and Kaiser Permanente(“Kaiser”) ultimately resulted in amend-ments to assure that plans would not bevicariously liable for their providers’ neg-ligence or malpractice in the delivery ofhealth care services. This intent wasembodied in the final version of 1371.25that the Martin court misconstrued. • Health Net’s letter dated April 27,1995, lobbies for a targeted amend-ment. It was aimed at making sure thatplans would only be liable for harmcaused by plans or their UR “agents” intheir decisions to deny services. HealthNet did not want to be liable for harmcaused by providers’ negligence or mal-practice in the delivery of health careservices:

AB 1840 would prohibit contractswith providers from holding plansharmless from liability in cases where adenial of services resulted in harm tothe patient. We agree with the intent ofthis provision, but the language shouldspecify that a plan’s hold harmless provi-sions should not apply in cases where theplan or its agents, not the provider, hasdenied services. [Emphasis added.]Significantly, Health Net did not

express concerns about providers who alsowore the hat of a plan’s UR contractor. URservice denials by such entities would havefallen under the wide umbrella of “theplan’s… agents” addressed in its letter.Also, Health Net did not express the desireto amend the bill to insulate plans fromharm caused by their agent’s UR servicedenials. On the contrary, it agreed thatproviders should be liable for such denials. • CAHMO’s letter of April 28, 1995,requested a “technical” amendment. Itwas intended to clarify the original intent of1371.25 by insulating plans from providers’negligence, malpractice etc. in the deliveryof health care services. In substance, it pro-posed an amendment that would also takecare of Health Net’s concern:

HMO — continued


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HMO — continued

Finally, the provisions prohibitinghold-harmless clauses requires technicalamendments that CAHMO will proposeto the sponsors.

[Emphasis added.]CAHMO’s technical amendment was

as follows:In contracts with health care

providers, health care service plansand entities employed by plans for thepurpose of reviewing claims for serviceshall not require providers to hold them-selves the plan or other entity harmlessfrom liability in cases in which a denialfor of services by the plan or other entityresulted in harm to the patient.Nothing in this section may be construed toprohibit contractual provisions that require

the provider to hold the plan or other entityharmless from liability for negligence, mal-practice or other tortious or wrongful actscommitted by the provider.

[Strikeouts (deletions) and italics (newlanguage) are from the original.]

They were merely “technical”because they were not intended to sub-stantively alter the well-understood pur-pose of the original bill version whichhad been described in the AssemblyHealth Committee’s analysis as haltingplans from engaging in their insidious“hold harmless” contract practices byrequiring plans to be “responsible foradverse results of their actions in thesame manner as providers” (page 3).These amendments were merely offered

to clarify that original intent whichremained with the bill throughout itsenactment; without expansion or broad-ening as Martin concluded. They werepublished in the May 16, and May 30,1995, Assembly amendments to 1371.25.• CPA’s June 20, 1995, statement. Thesponsor agreed that the May amend-ments “clarified that plans are not respon-sible for liability arising from malpracticeby providers.” (Emphasis added.) • The Senate Committee on Insurance’sanalysis. It clarified that the Mayamendment only applied to “providernegligence or malpractice.”

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HMO — continued

provisions to hold harmless plans fromliability in cases where the plan hasdenied services and the patient hassuffered harm. AB 1840 is intended tooutlaw such provisions to ensure thatplans are held responsible for theresults of their medical decisions. Amendments have clarified that plansare not responsible for liability arisingfrom provider negligence or malpractice.[Bold italics added.]

• Kaiser weighed in on June 8, 1995.Nonetheless, Kaiser remained skepticalthat it could avoid liability for non-Kaiserproviders’ medical malpractice. Its objec-tions resulted in the Senate’s August 21stamendments that the Martin court mis-

construed. Notably, Kaiser did notexpress a concern involving harm causedby a service provider acting in the capaci-ty of a UR agent. • The Senate Judiciary Committee’sanalysis. It confirmed the original pur-pose of the bill without describing any so-called expansion. It also described theintent of the HMO amendments (page 3).

The purposes of this bill are … [to](2) limit the use by plans of “holdharmless” liability provisions. …CAHMO has worked with the sponsorsand CMA on this ameliorative legisla-tion to specify that health plans are notresponsible for liability arising fromprovider negligence or malpractice just as

providers are not liable for the negligence ofthe health plan. (Emphasis added.)

This analysis does not list any oppo-nents to the bill under its “Opposition”category on page 5. Not Health Net, notCAHMO, not Kaiser. This means that allof their concerns had been resolvedregarding potential plan liability forproviders’ acts of medical negligence ormalpractice. • Democrats did not sponsor and supporta highly anti-consumer, pro-HMO bill.

Martin’s interpretation of the legisla-tive history necessarily embraces thefrankly outlandish notion that Democraticlegislators intended to enact a highlyanti-consumer, pro-insurance plan bill.



There can be no other way to describethe public policy impact of eliminating aplan’s vicarious liability for its agent’s URdecisions that result in patient harm. Atminimum, such a major policy wouldhave merited comment in the legislativehistory. Yet there is only silence on thatsubject. This strongly indicates that nosuch purpose was intended.

Certainly such a purpose would nothave been promoted by a Democraticlegislator such as AssemblypersonFigueroa, the author of AB 1840. Norwould such a purpose have received theoverwhelming support of the Democraticlegislators who voted for the bill. AB1840 did not receive a single “no” vote asit passed through the Senate or on theAssembly floor for the last vote on thefinal bill version. This would not haveoccurred if the intent assigned by theMartin court had actually been adoptedby the Legislature. • The last sentence of 1371.25 wasaimed at “preserving existing bases ofliability.”

The Martin court reaffirmed theWatanabe court’s rejection of the argu-ment that the third sentence preservesliability theories otherwise barred by thestatute’s first sentence: “We do not thinkthat, having precluded the imposition ofvicarious liability in the first and secondsentences of section 1371.25, theLegislature intended to reimpose it bymeans of the third sentence. This wouldbe an absurd result by any measure…”(Martin, 198 Cal.App.4th at p.1401.)

However, as the above legislative his-tory reveals, the Legislature did notintend to preclude imposition of vicari-ous liability in the first and second sen-tences. So there was no need to “reim-pose it by means of the third sentence.”Also, the Senate Judiciary Committee’sanalysis described the last sentence as“preserving existing bases of liability”(page 3). Martin overlooked this state-ment.

PART 2. A review of the legislativehistory records relied upon in Martin

Needless to say, Martin did not takethe above developments into account.

Instead it misapplied various records tosupport its understanding that the firstsentence of 1371.25 abolished a plan’svicarious liability for harm caused by itsUR agent’s decisions. These were: (1)various Legislative Counsel’s Digests, (2)various amendments, (3) two committeeanalyses and (4) one enrolled bill reportto the Governor. (Again, space con-straints do not permit a thorough reviewhere. A brief outline of the key findingsfollows.) (1) Legislative Counsel’s Digests. • A post enactment LegislativeCounsel’s Digest of the final chapteredbill (Martin, supra, page 1402). It merelyrestated the provisions of the bill withoutelaboration as to their meaning. Alsopost enactment statements by any sourcetake a back seat to the actual enactmentera legislative history. • Dueling digests (Martin, at p.1403).Martin was impressed that LegislativeCounsel’s post enactment description ofthe final version of 1371.25 contrasted sohighly with its first digest of the originalversion of AB 1840. The court faulted theMartins’ reliance upon that earlier digestbecause it found that the original purposehad been “broadened” later in the Senateamendments. However, Martin failed totake into account the above developmentswhich show that the original purpose hadnot been broadened, but had been merely“clarified” in a “technical” manner toaddress concerns raised by Health Net,CAHMO and Kaiser.(2) Martin’s review of the amendments(Martin, at pp. 1403-1404). Martin’s sim-ple review of the bill’s evolution duringthe amendment process led to its con-clusion that the original intent had been“expanded” or “broadened.” However,Martin failed to take into account theactual rationale or purpose for theamendments summarized above.

Martin also relied upon the rejec-tion of a September 8, 1995, amend-ment, noting that its provisions “wouldhave returned the bill to its originalpurpose.” (Martin, supra, page 1403).Thus, it argued, “[w]hen the Legislaturerejects language from a bill which waspart of it when it was introduced, it

should be construed according to thefinal version.” Also, “[t]he rejection of aspecific provision contained in an act asoriginally introduced is ‘most persua-sive’ that the act should not be inter-preted to include what was left out.”(Martin, at p.1403).

The Court’s argument here is morethan puzzling since it had already con-ceded that the bill retained its originalpurpose, which it believed had been“expanded” in the Senate as specified.Also, its focus on the rejection of theSeptember 8, 1995, amendments doesnot work to overcome the extensive histo-ry documenting the reason for the finalversion of 1371.25 as summarized above. (3) Martin’s reliance upon two commit-tee analyses. The court relied upon twoSenate committee analyses to support itsunderstanding that the Senate had“broadened” the bill’s original purposeto also “limit liability by making plansand providers liable for their own actsor omissions.” Inexplicably, Martin over-looked their plain meaning. • The Senate Insurance Committee’sanalysis (Martin, 198 Cal.App.4th atp.1403). This analysis addressed theabove described May amendments thatwere intended to resolve Health Net’sand CAHMO’s concerns aboutproviders’ medical malpractice. Martin said:

Section 1371.25’s purpose and lan-guage, however, expanded as thestatute worked its way through theLegislature. The Senate broadened thesection to limit liability by makingplans and providers liable for theirown acts or omissions only. A SenateCommittee on Insurance reportexplained, “Amendments have clarifiedthat plans are not responsible for lia-bility arising from provider negligenceor malpractice.”

Oddly, the court’s chosen excerptmakes it plain that the amendmentsmerely effected a “clarification” of theoriginal intent, not a broadening of it.• The Senate Judiciary Committee’sanalysis of the critical August 21, 1995,amendments (Martin, supra, page 1403).


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HMO — continued

The court compared it to the aboveSenate Committee on Insurance’s analy-sis:

Similarly, a Senate JudiciaryCommittee report explains that section1731.25 “specif[ies] that health plansare not responsible for liability arisingfrom provider negligence or malprac-tice just as providers are not liable forthe negligence of the health plan.” …That same report explains that section1371.25’s purpose is to “provide that ahealth plan, and providers are eachresponsible for their own acts or omis-sions, and are not liable for the acts oromissions of, or the costs of defending,others. It would make void and unen-forceable any provision to the contraryin a contract with providers.As summarized above, the refer-

enced “provider negligence or malprac-tice” was only intended to encompassproviders’ health care services forpatients – not provider UR services forplans. Also, as mentioned earlier, it issingularly unhelpful to rely upon state-ments that merely repeat the terms ofthe statute without elaboration as to theirmeaning.

(4) Martin’s reliance upon the EnrolledBill Report by the Department ofCorporations is misplaced. (Martin, atp.1404)

The Department of Corporationssubmitted its Enrolled Bill Report to theGovernor for consideration after the billpassed through the Legislature. Martinrelied upon it because it raised an alarmabout potential ill effects of 1371.25 ontort liability principles. However, asdetailed below it was either ignored orcontradicted. Martin said:

Finally, the Enrolled Bill Report bythe Department of Corporationsacknowledged that the Legislatureexpanded section 1371.25 beyond itsinitial purpose to include provisionslimiting liability for others’ acts oromissions. The report explained,“Although the bill provides that certain per-sons are not liable for others, this provisionis inconsistent with the laws of agency andemployment. For instance, existing lawrecognizes that principal parties areliable for the acts or omissions ofagents.... [¶] The bill’s nonliability pro-visions may be interpreted by courts toexempt plans or providers from liabili-ty for the actions of persons acting ontheir behalf.” The report urged theGovernor to veto the bill for these reasons,but the Governor nonetheless signed it. …As the Supreme Court explained [cita-tion] … “[W]e have routinely foundenrolled bill reports, prepared by aresponsible agency contemporaneouswith passage and before signing,instructive on matters of legislativeintent.

(Martin, 198 Cal.App.4th at p. 1404.)The Department of Health Services

(DHS), however, weighed in with anopposite take on 1371.25 when it urgedthe Governor to sign the bill. Its enrolledbill report states: “The prohibitionagainst HCSP [Heath Care ServiceProvider] contracts containing require-ments that providers must indemnify ordefend the acts or omissions of others, isreasonable and is consistent with tort law.”[Emphasis added.]

Faced with the dueling DHS andDOC understandings, Governor Wilson

obviously opted to discount the DOC’sconcerns when he approved the bill onOctober 11, 1995. Yet, Martin inappro-priately seized upon the DOC’s concernsas representing the Legislature’s intentwhile ignoring the DHS’s statement com-pletely.

In conclusion, I recommend that acourt that revisits the issues raised inWatanabe and Martin should, at mini-mum, undertake its own thorough reviewof the legislative history. It will find thatthe history strongly supports the under-standing that the terms “providers… actsor omissions” in 1371.25 only apply to“acts or omissions” involving medicalhealth care services to a patient – not to“acts or omissions” of a UR nature by aplan’s agent.

Jeffrey Isaac Ehrlich is the principal ofthe Ehrlich Law Firm in Encino, California.He is a cum laude graduate of the HarvardLaw School, is certified by the State Bar ofCalifornia as an appellate specialist, is theEditor-in-Chief of the Advocate, and is amember of the CAALA Board of Governors.

Carolina Rose, J.D. (Stanford, 1976), isowner and President of Legislative Research& Intent LLC (LRI) which has researchedthe history and intent of over 10,000 enact-ments for over 1500 clients since 1983 (for-merly Legislative Research, Inc.). Previously,she worked for approximately 7 years in theCalifornia State Legislature where she wasresponsible for over 200 bills. Ms. Rose is arecognized expert in the reconstruction ofCalifornia legislative, regulatory and constitu-tional history and has written expert witnessopinions or provided testimony or consulta-tions in over 100 cases at the administrative,trial and appellate levels. Her website offerscomplimentary online research and advocacyresources at www.lrihistory.com. She can becontacted at [email protected].


�



Corrine ChandlerBrent Brehm

Litigating an ERISA case is challeng-ing and, at times, frustrating. One of thebiggest challenges an individual claimantfaces is when their adversary, the insur-ance company, has been granted “discre-tion” in the insurance policy governingthe claim. The U.S. Supreme Court hasacknowledged that discretionary clausesare features “highly prized” by insurers,meaning they will fight hard to retaindiscretionary language. (See RushPrudential HMO, Inc. v. Moran (2002) 536U.S. 355, 384.)

The typical discretionary clausegrants the insurer discretion to deter-mine eligibility for benefits and to inter-pret the policy. In practice, this grant ofdiscretion changes the standard of reviewat trial and affects the type of discoverythat can be conducted. If there is a grantof discretion, a reviewing court willemploy an “abuse of discretion” review attrial. It has been said that under thisstandard of review, a claim decision willnot be overturned unless it is “illogical,implausible, or without support in infer-ences that may be drawn from the factsin the record.” (Salomaa v. Honda LongTerm Disability Plan (9th Cir. 2011) 642F.3d 666, 676.)

It is not surprising that there are anumber of cases which have held thatthe weighty burden of the abuse of dis-cretion review required a finding for theinsurer, although a de novo or non-def-erential standard of review may haveyielded a different result. (Brigham v.Sun Life of Canada (1st Cir. 2003) 317,F.3d 72, 85-86 (“[I]t seems counterintu-itive that a paraplegic suffering seriousmuscle strain and pain, severely limitedin his bodily functions, would not bedeemed totally disabled,” but uphold-ing the termination of disability bene-fits because the question was “not whichside we believe is right….”); Curtis v.

Kansas City Life Ins. Co. (W.D. Ky. 2011)2011 WL 901992 *7 (“If the standard ofreview was de novo, the Court would beinclined to find for Plaintiff. However,that is not the applicable standard. Thearbitrary and capricious standard andexisting case law indicate to the Courtthat Plaintiff ’s claim should be denied.Although the Court does not necessarilylike this result, the Court believes it hasreached the correct decision applyingthe law applicable to this case.”).) A sur-vey of cases performed in 2004observed that consumers filing groupdisability lawsuits had a significantlylower chance of winning their case (28percent versus 68 percent) when theinsurance contract contained a validdiscretionary clause.

National movement to eliminatediscretion

In 2004, the National Association ofInsurance Commissioners issued a ModelAct banning the use of discretionaryclauses in health policies. Later that year,the Model Act was amended to extendthe ban to include disability policies. Inadvocating for the adoption,Commissioner Sandy Praeger of theKansas Insurance Department describedthe effect of discretionary clauses:

These clauses give considerable dis-cretion to insurers to interpret the ben-efits and other terms of the policy andlead to court decisions favoring insur-ers unless the insured can show thedecisions by the insurer were arbitraryand capricious. This is a huge burdenfor the insured….

Subsequent to the issuance of theModel Act, at least 16 states have enactedlegislation, or issued insurance regula-tions, banning the inclusion of discre-tionary clauses in certain types of insur-ance policies.

California’s efforts on banningdiscretionary clauses

In 2004, California’s thenCommissioner of Insurance, JohnGaramendi, issued a Notice ofWithdrawal to all disability carriers sell-ing policies within the state withdrawingapproval of certain policy forms. Theforms in question contained discretionaryclauses, which Commissioner Garamendihad determined rendered the policies“unintelligible, uncertain...and likely tomislead.” Commissioner Garamendi alsospecified certain policy forms whichcould no longer be utilized in Californiaunless the discretionary clauses wereremoved. Commissioner Garamendi’sactions were laudable, but had a short-lasting effect. This was because insurerssubsequently settled with the Departmentof Insurance and, for various reasons, theNinth Circuit has refused to enforce theCommissioner’s action as a state ban onthe enforceability of discretionary clauses.(See Saffon v. Wells Fargo & Co. Long TermDisability Plan (9th Cir. 2008) 522 F.3d863, 867; Stephan v. Unum Life Ins. Co. ofAmerica, (9th Cir. 2012) 697 F.3d 917,924-28.)

After similar legislation was vetoedin 2010, California enacted legislationbanning discretionary clauses in life, dis-ability, health, and accidental deathinsurance contracts (California’sInsurance Code includes health and acci-dental death insurance as part of disabili-ty insurance). Sponsored by Senator RonCalderon (D-Montebello) and endorsedby Insurance Commissioner David Jones,California’s ban on discretionary clauseswent into effect on January 1, 2012. Thisself-executing law regulating insurancewas codified as California InsuranceCode Section 10110.6. The statute


California’s ban on discretionary clauses in disability and life insurance policiesCalifornia Insurance Code section 10110.6:When it applies and how it stands up to ERISA preemption

Discretionary continues



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California’s ban on discretionary clauses in disability and life insurance policiesCalifornia Insurance Code section 10110.6:When it applies and how it stands up to ERISA preemption


Discretionary — continued

applies to all disability and life insurancepolicies providing coverage to aCalifornia resident which were offered,issued, delivered, or renewed on or afterJanuary 1, 2012. In relevant part, section10110.6 provides that a grant of discre-tion in any such policy is void and unen-forceable:

(a) If a policy, contract, certificate, oragreement offered, issued, delivered,or renewed, whether or not inCalifornia, that provides or funds lifeinsurance or disability insurance cover-age for any California resident con-tains a provision that reserves discre-tionary authority to the insurer, or anagent of the insurer, to determine eli-gibility for benefits or coverage, tointerpret the terms of the policy, con-tract, certificate, or agreement, or toprovide standards of interpretation or

review that are inconsistent with thelaws of this state, that provision is voidand unenforceable.(b) For purposes of this section,“renewed” means continued in forceon or after the policy’s anniversarydate.(c) For purposes of this section, theterm “discretionary authority” means apolicy provision that has the effect ofconferring discretion on an insurer orother claim administrator to determineentitlement to benefits or interpretpolicy language that, in turn, couldlead to a deferential standard of reviewby any reviewing court.

As of the date of this article, theauthors know of no court decision whichhas substantively applied or interpretedthe provisions of section 10110.6.However, it is anticipated that the

insurance industry will vigorously contestany attempt by the plaintiff ’s bar toenforce the statute and its resulting voidof discretionary clauses in group insur-ance contracts. This article will identifythe anticipated issues that one may facewhen attempting to change the standardof review based on section 10110.6.

Does section 10110.6 survive ERISApreemption?

It is widely known that ERISA con-tains a broad preemption provision, pre-empting “any and all State laws insofar asthey may now or hereafter relate to any[covered] employee benefit plan.” (29U.S.C. § 1144(a).) However, at the sametime, ERISA contains a “saving clause,”exempting any state law that regulatesinsurance from the preemption provision


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of ERISA. (29 U.S.C. § 1144(b)(2)(A).)Accordingly, although ERISA plans arefederally regulated and enforced in fed-eral courts, the saving clause permits

states to dictate mandatory insurance-policy provisions. (Rush Prudential HMO,Inc. v. Moran (2002) 536 U.S. 255,364.)

The Ninth Circuit addressed theissue of whether a state law or practicebanning discretionary clauses was “saved”from ERISA’s preemption provision inStandard Ins. Co. v. Morrison (9th Cir.2009) 584 F.3d 837 cert. denied sub nomStandard Ins. Co. v. Lindeen (2010) 130S.Ct. 3275. The court held that theMontana Insurance Commissioner’spractice of disapproving policy formscontaining grants of discretion was savedfrom preemption because it was specifi-cally directed to the insurance industryand affected the risk-pooling factors ofthe Montana insurance industry. Amongother things, it was noted that theMontana practice of disapproving discre-tionary clauses affected the risk poolingbecause it would lead to a greater num-ber of claims being paid, increasing thebenefit of risk pooling for consumers.(Id. at 845.) Using a similar analysis, theSixth Circuit has held that Michigan’sban on discretionary clauses is not pre-empted by ERISA. (American Council ofLife Insurers v. Ross (6th Cir. 2009) 558F.3d 600, 606.)

Does section 10110.6 apply to out-of-state contracts?

Another tactic that insurers areexpected to employ in an effort to avoidsection 10110.6 is to claim that out-of-state law, rather than California’s lawbanning discretion, should be applied.Often insurance policies specify a placewhere the policy was issued or delivered.In other jurisdictions, insurers havesought to avoid local bans on discre-tionary clauses by arguing that a policy“issued or delivered” in another stateshould not be subject to the local regula-tion or statute. (Curtis v. Hartford Life andAcc. Ins. Co. (N.D. Ill. 2012) 2012 WL138608.) That argument is likely to beunsuccessful for insurers in Californiasince the statute applies to policies whichprovide coverage to California residents.

It can also be expected that insurerswill rely upon, or start including, choice-of-law provisions in their contracts speci-fying a governing jurisdiction other thanCalifornia. In the event that the policy says


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it is governed by the laws of a state otherthan California, local courts will likelyapply the Ninth Circuit’s choice-of-law

rules. This is an area that has not beenextensively litigated and there is scantlaw in the Ninth Circuit governing

choice-of-law rules in the ERISAcontext.

An older case, Wang v. Kagan (9thCir. 1993) 990 F.2d 1126, suggests hon-oring a stated choice-of-law provision ina federal-question case unless the provi-sion is unreasonable or fundamentallyunfair. Generally speaking, this is consis-tent with the Restatement (Second) ofConflicts of Laws, which provides thatcourts should not honor the choice if thechosen state has no “substantial relation-ship to the parties or the transaction andthere is no other reasonable basis for theparties’ choice,” or application of thechosen state’s laws would contradict thepolicy of a state which has a “materiallygreater interest” than the chosen state inissue’s determination. (Restatement(Second) of Conflicts of Laws § 187(1)(1988).) Since California has legislatedpublic policy to protect its citizens bybanning discretionary clauses in insur-ance policies after January 1, 2012, itwould appear that it has a materiallygreater interest in having its own lawsgovern the claims of its residents.

Finally, in the event that choice-oflaw-becomes an issue, it is also importantto research whether the selected state has also banned discretionary clauses. A number of jurisdictions have enactedregulations, statutes, or agency opinionsbanning discretionary clauses, making it possible that there may be no conflict.

What determines if the statuteapplies to your client’s policy?

The ban on discretionary clauses wentinto force on January 1, 2012. Therefore,from this date forward, discretionary claus-es in life and disability insurance “offered,issued, delivered, or renewed” are ren-dered void and unenforceable. These firstthree are easy to determine: look at theapplicable documents and if they aredated on or after January 1, 2012, therecan be no discretion.

The statute also provides helpfulguidance on the meaning of the term“renewed.” This is defined as continued inforce on or after the policy’s anniversary




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date. Typically, the face page of thegroup contract will specify the anniver-sary date of the policy. This is the datethat the terms of the policy may be modi-fied or premiums can be adjusted. Theanniversary date does not necessarily cor-respond with the date the insurancebecame effective. Common anniversarydates utilized in group policies that differfrom the effective date are January 1st orJuly 1st of every year. In a policy that wasoffered, issued and delivered beforeJanuary 1, 2012, with an anniversary datethereafter, the discretionary language isunaffected until the anniversary date.

Claim submitted before January 1,2012

The date in which the claimant sub-mitted the claim or the date of disabilityis immaterial. In ERISA cases, the NinthCircuit has held that the controllinginsurance document is the one that wasin effect at the time the claimant’s causeof action accrued. (Grosz-Salomon v. PaulRevere Life Ins. Co. (9th Cir. 2001) 237F.3d 1154, 1160-61.) An ERISA cause ofaction for a denial of benefits does notaccrue until a claimant has exhausted hisor her administrative remedies under theplan. Thus, if your client exhausted theiradministrative remedies after bothJanuary 1, 2012, and the policy’sanniversary date, you may still takeadvantage of section 10110.6 to argue

any discretionary language is renderedvoid and unenforceable.

Does applying section 10110.6 to anexisting policy make it a retroactivestatute?

We have heard insurers argue thatsection 10110.6 cannot be applied toexisting contracts because to do so wouldbe an impermissible retroactive applica-tion of the statute. This argumentignores the fact that the statute expresslyapplies to renewals of policies after itseffective date. If there had been anyquestion regarding the viability of thisprovision, it was recently eliminated withthe Ninth Circuit’s decision in Stephan,supra, 697 F.3d 917.

The Stephan case involved the previ-ously mentioned Notice of Withdrawalauthored by Commissioner Garamendiin 2004. One insurer, Unum, subsequent-ly entered into a settlement agreementwith the Department of Insurance whichbanned the inclusion of discretionaryclauses in “newly issued” policies.Unum’s settlement agreement mandatedother policy changes to both “newlyissued” and “renewed” policies. TheStephan court seized upon this distinctionand held that the discretionary clauseban did not apply because plaintiff ’s pol-icy was not newly issued, but rather was arenewed policy which was originallyissued in 1999.

However, in doing so, the Stephancourt also provided compelling languagethat would defeat any argument that sec-tion 10110.6 cannot be applied to poli-cies renewed after its effective date. Thecourt repeated the rule that insurancepolicies are governed by statutory anddecisional law in effect at the time ofissuance and renewal. The court statedthat each renewal incorporates anychanges in the law that occurred prior tothe renewal. (Id. at 928.) Unfortunatelyfor Mr. Stephan, the law in effect at thetime of the latest renewal, which hadoccurred in 2007, did not include a banon discretionary clauses. Fortunately forCalifornia insureds, after January 1,2012, the law has been changed.

ConclusionEven though the statute is self-exe-

cuting, it can be expected that insurerswill strongly contest the elimination ofthe highly prized discretionary clauses ininsurance contracts. Any ERISA practi-tioner should be prepared to utilize allavailable tools to “level the playing field”and ensure a fair, de novo, review of theirclient’s claim. Securing the application ofsection 10110.6 is a large step in theright direction. Prior to asserting that10110.6 controls, and engaging in theinevitable motion practice on the issue,review the above questions to help youevaluate whether this new law applies toyour case.

Brent Dorian Brehm litigates ERISAand bad-faith insurance cases at Kantor &Kantor. When not suing insurance compa-nies, he enjoys cycling and cartography.

Corinne Chandler has practiced law forover 30 years and has over 25 years of experi-ence litigating life and disability disputes. Ms.Chandler’s current practice is devoted to repre-senting insureds in actions involving life, dis-ability and long-term care insurance benefits.She received a B.A. Degree from St. Mary’sCollege of Notre Dame, Indiana and her J.D.Degree from De Paul University, College ofLaw.



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I’ve had the good fortune of trying awide variety of cases over the years. I’vetried everything from bad-faith cases, topersonal injury, employment, medicalmalpractice, premises liability, etc. Thereis a fundamental difference when trying anegligence case versus an insurance bad-faith case. In a negligence case, whateverthe allegation is about what the defen-dant did wrong, they usually didn’t intendto cause the harm that occurred. But in abad-faith case, you’re not saying that thecompany did something negligently.Rather, you’re coming into court sayingthat the company cheated your client;acted with malice, oppression and fraud.Simply put, this wasn’t just an “oops,”

this was something far worse. It wassomething intentional.

Recognizing this difference is thefirst step to presenting, and then win-ning, a punitive-damage award. Thereare a number of issues to cover in a bad-faith case from voir dire and leading upto closing argument. But in this article,I’m just going to focus on dealing withthe topic of punitive damages from thebeginning of trial to the end.

Voir direYou can never expect a jury to return

with a punitive-damage verdict in a bad-faith case unless you’ve prepared them todo so during voir dire. As with all issues

that you cover in voir dire, you want toget jurors to open up about how theyreally feel about the concept of punitivedamages. Don’t be afraid to ask open-ended questions even if you might getanswers that you weren’t hoping to get.Letting the jurors express themselves intheir own words is the only way thatyou’ll truly get the honest answers youwant. As my old college roommate usedto say, “You have two ears and onemouth, so you should listen twice asmuch as you speak.” This is especiallytrue during voir dire.

Before getting to the jurors’ feelingsabout punitive damages, I like to build


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Winning punitive damages for bad faithA guide from voir dire through closing statement

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Task continues


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Winning punitive damages for bad faithA guide from voir dire through closing statement


Task — continued

up to it by asking a series of questionslike the following:Q: Mr. Jones, do you think that some-times people simply make honest mis-takes and really didn’t mean to causeharm? A: Sure, of course they do. We’re allhuman after all and humans make mis-takes.Q: And do you think that sometimespeople don’t just make mistakes, but theymight do things with a bad motive tobenefit themselves and in the processcause harm to others?A: I’m sure that happens too.Q: Do you think that sometimes, peopledo things to try to cheat other people outof money for their own benefit?A: Well, yeah, you hear about that all thetime.

Q: Do you think that as a society we oughtto treat those two types of conduct differ-ently? In other words, conduct which is anhonest mistake that causes harm versusdishonest conduct that causes harm?A: Sure, if the evidence proves that.

I like to open up this dialogue withother jurors with questions like, “How do youfeel about that?”; “What are your thoughts?”;“Do you agree or disagree?” etc. At thispoint, you’ll find that most people will agreewith the basic concept that people can causeharm to others both honestly and dishonest-ly. You’ll also find that most people will agreewith the notion that honest and dishonestconduct should be treated differently.

Now you have prepared the jurorsfor a discussion about punitive damages.Inevitably, there will be some jurors whohave heard or read about punitive

damages and have negative feelingsabout it. For example, I’ve had more thanone juror describe their understanding ofpunitive damages as “Isn’t that where theplaintiff gets a big windfall?” To help getjurors to understand the concept of puni-tive damages, I like to refer to them as“penalty damages” or “punishment dam-ages.” I ask questions like:* “Ms. Smith, what do you think about asystem that allows for civil penalty dam-ages if the conduct was dishonest, andnot just an honest mistake?” * “Mr. Jones, what do you think about asystem that allows for civilly prosecutingdishonest conduct in cases like this?” * “Ms. Evans, do you think that we as asociety should punish dishonest conduct?If so, why?”


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AUGUST 2012 The Advocate Magazine — 45

Advocate Aug12 issue2_Advocate template 2007.qxd 7/20/2012 5:35 PM Page 45



Task — continued

One of the things I’ve noticed in thepast several years is that jurors, generallyspeaking, are more receptive to the con-cept of punitive damages. I’ve found thisto be true even in conservative jurisdic-tions. I think the reason is because mostjurors have heard about corruption caseswhere people have cheated other peopleout of money. I bring up examples like,Bernie Madoff, Charles Keating, JeffreySkilling, and Enron to get jurors thinkingabout it. Examples like these bring upthe notion that sometimes greed causespeople and/or corporations to do badthings and in the process cause harm toothers.

In a bad-faith case, the purpose ofpunitive damages is to punish and deter

dishonest conduct. Ultimately, the goalin voir dire is to have jurors who areopen to awarding punitive damages ifthey find the evidence establishes dishon-est conduct. The jury should also under-stand that the purpose of punitive dam-ages is not to compensate, but to punishand deter.

Opening statementWe all know that opening statement

is the time to tell your client’s story. It’s atime to showcase why the defendant’sconduct was wrong and to demonstratethe harm that your client suffered. Aftertelling my client’s story and showcasingthe bad conduct of the insurance compa-ny, I make it a point to explain that there

are two purposes to the case. The firstpurpose of the case is to compensate myclient and to make up for the harmcaused. I then talk about the damagesthat I intend to prove and the basis forthose damages. But in a bad-faith case,you can’t stop there. I also talk about thesecond, and more important, purpose ofthe case: to make sure this conduct ispunished and never repeated. In a bifur-cated trial, I explain at the end of theopening statement that we will be look-ing for a finding of malice, oppression orfraud, so that the jury can get to the sec-ond phase to address what the appropri-ate punishment should be.

Cross-examination of the adjustersThe most important evidence you

can develop in a bad-faith case is duringthe cross-examination of the claimsadjusters. Cross-examination of thedefendant’s witnesses is usually when thejurors are on the edge of their seats. Thisis especially true in bad-faith cases.

In every bad-faith case there is a dis-pute about the amount of money paidon the claim. Sometimes there’s a dis-pute about coverage and nothing hasbeen paid. Other times there is a valua-tion dispute and a claim of low-balling.Regardless, there is always that one finalletter or e-mail from the adjuster thattells your client “We’re done! You getnothing more!”

I like to cross-examine the adjusterwith simple questions like the following:Q: Sir, when you adjust a claim, do youwant your policy holder to believe youwhen you communicate with them?A: Of course.Q: Do you want your policyholder to feelthat you’re telling them the truth?A: Sure.Q: Do you want your policyholder tohave confidence in what you tell them?A: Yes, I do.Q: And, in this case, when you sent thisletter telling my client that their claimwas denied and would not be paid, whatwould have happened if my clientsbelieved you?A: Well, I guess we wouldn’t be here.


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Task continues


What do eleven winners ofCAALA’s Trial Lawyer of theYear award have in common?

Their Appellate Lawyer.

Choosing the right appellate lawyer can be the most important decision a trial lawyer makes.

These are a few reasons why leading trial lawyers choose Jeff Ehrlich:

• Certified Appellate Specialist*; Harvard Law School, cum laude

• Over 50 published appellate opinions — including cases in the U.S. Supreme Court and California Supreme Court

• Contributing Author of Rutter Group’s Insurance Litigation treatise and featured speaker on Civil Procedure and Insurance Litigation

• Two-time CAALA Appellate Lawyer of the Year

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Task — continued

Q: Right, the claim would have beenclosed and no payment would have beenmade, correct?A: I believe that would be true.

Now, these are pretty simple conceptsthat really can’t be disputed. After all, noadjuster is going to say that he/she doesnot want their policyholder to believethem. The reason I ask these questions isbecause if you get to the second phase,the jury will necessarily have found thatthe conduct was malicious, oppressive orfraudulent. During that time, you will beable to ask the jury the rhetorical ques-tion, “What would have happened if myclient just believed and trusted their insur-ance company?” Well, the answer comesfrom the defendant’s own witnesses: yourclient would have been cheated out ofmoney they deserved.

Establishing ratification In order to get to a second, punitive

damage phase, you will need to provethat the conduct constituted “malice,oppression, or fraud” in phase I. (See,CACI 3946.) In addition, you will alsoneed to prove one of the following:1. That the conduct constituting malice,oppression, or fraud was committed byone or more officers, directors, or man-aging agents of defendant who acted onbehalf of the defendant; or2. That the conduct constituting malice,oppression, or fraud was authorized byone or more officers, directors, or man-aging agents of defendants; or3. That one or more officers, directors,or managing agents of defendant knewof the conduct constituting malice,oppression, or fraud and adopted orapproved that conduct after it occurred.”

Going into trial, you need to identifythe witness or witnesses that have themanagerial capacity to establish ratifica-tion. In most cases it is either the imme-diate supervisor of the adjuster or thatperson’s supervisor. Whoever the witnessis, you need to establish ratification ofthe conduct in order to get to a second,punitive damage phase.

On cross-examination of the supervi-sor, you will want to first establish thatgiven his/her role in the company, he/she

has managerial capacity. Once that isestablished, you need to confirm ratifica-tion and approval of the claim. I usuallyask questions like the following:* “Sir, there is nothing that you thoughtthe company did wrong in handling thisclaim, is that true?”* “As the supervisor, you approve of themanner in which this claim was han-dled?”* “In fact, this claim was handled in themanner in which the company strives tohandle claims, is that true?”* “There were no changes made to thecompany’s claim-handling guidelines as aresult of this claim, is that true?”* “Any other insured of this companycould expect to receive the same treat-ment that my client received in thisclaim, is that true?”*”No one was reprimanded for work theydid on this file, is that true?”

These questions establish not onlyratification but also pattern and practice.Inevitably, in phase I, the company andits witnesses will vigorously defend theirconduct and stand behind it. Of course,if the jury finds that the same conductwas malicious, oppressive or fraudulentand there is a second phase, this testimo-ny will be very helpful to address theamount of punitive damages the juryshould award.

The phase II trial Trying cases is kind of like being in a

boxing match. You’re fighting every dayand whether you think it’s going well ornot, you just don’t know if you’re aheador behind on the jury’s scoring card.That’s why, like a boxer, no matter ifyou’ve had a good or bad day in trial,you shake it off and go into the next dayto fight again.

But all of that changes when the juryhas made a finding of malice, oppressionor fraud and you find yourself now inphase II of the bifurcated trial. My part-ner and mentor, Mike Bidart, taught meearly on that when you get to the secondphase, you have to remember that thejury is on your side and has found, byclear and convincing evidence, that the insurance company’s conduct was

“despicable” or fraudulent. So, as Mikesaid to me, your demeanor needs to belike the heavyweight champion who isbeing interviewed after defending histitle. You no longer need to be theaggressive fighter who is zealously argu-ing every issue. The jury has alreadyfound that the conduct is really bad, nowit’s the time to calmly reason with thejury about what to do about it. I remindthe jury that we are doing this collective-ly, on behalf of society, to make sure thisbad conduct is both punished, and moreimportantly, not repeated.• Phase II opening statement

Phase II is really a mini trial in itself.Accordingly, I always give a short open-ing statement before the beginning ofthe second phase. Contrary to a lot ofother lawyers, I’m not big on thankingthe jurors, even after they have ruled inmy client’s favor on phase I. I’m not real-ly sure why I don’t like it but maybe it’sbecause I’ve served on two juries myselfand when the lawyer constantly thankedus during closing argument I justthought it was patronizing. So instead, Ijump right into the purpose of the sec-ond phase. I will start off by saying some-thing like this:

Ladies & gentlemen, we have nowcompleted phase I of this case withyour verdict. As I stated, the purposeof the first phase was to compensatemy client, and you’ve now done that.But we now leave my client, and thefocus is now 100 percent on the defen-dant and its conduct. The purpose ofthis second, and most important,phase is to determine what we as asociety are going to do about punish-ing this conduct, and making sure thatit doesn’t happen again. And this is avery, very serious and solemn proceed-ing. You have found the conduct ofthis company to amount to malice,oppression and fraud by clear and con-vincing evidence. That is the highestform of misconduct you can find in acivil case like this so, as you can imag-ine, this is a very serious proceeding todetermine the appropriate punishmentfor this conduct.


Task continues

Because Verdicts are NewsEssential Online Verdict Reports

Your verdicts will get the attention they deserveVerdict alerts will be sent by e-mail and social media to 13,000 California trial attorneys in bothNorthern and Southern California. Each case summary will include a link to the full verdict reporton our new Web site: www.juryverdictalert.com.

Report your verdicts

Unlike traditional weekly or monthly verdict reporters, we will send a verdict alert as soonas practical. It’s a 24-hour news cycle. Why should verdicts be any different? Starting today,promptly report your verdicts to us — it’s not news a week after it happens. Reporting formsare on the Web site: www.juryverdictalert.com. You can also submit older verdicts to beincluded in our online database but not announced with an alert.

Sign up – it’s freeThere is no charge for receiving the verdict alerts or viewing the full verdictreports (although we will offer advertising on the Web site and emailalerts.) Go to the Web site and add yourself to the list.

Verdicts & Arbitration Awards

What about settlements? Today, we’re onlyreporting jury verdicts, bench verdicts andbinding arbitration awards. With the heavy tollthe state budget has taken on the trial courts,trials are becoming rarer and each case thatmakes it to trial is therefore more newsworthy.

[email protected]

Southern California Northern California

760.721.2500 415.431.1117

From the publisher of AdvocateRichard Neubauer, Publisher Jean Booth, Editor


Because Verdicts are NewsEssential Online Verdict Reports

Your verdicts will get the attention they deserveVerdict alerts will be sent by e-mail and social media to 13,000 California trial attorneys in bothNorthern and Southern California. Each case summary will include a link to the full verdict reporton our new Web site: www.juryverdictalert.com.

Report your verdicts

Unlike traditional weekly or monthly verdict reporters, we will send a verdict alert as soonas practical. It’s a 24-hour news cycle. Why should verdicts be any different? Starting today,promptly report your verdicts to us — it’s not news a week after it happens. Reporting formsare on the Web site: www.juryverdictalert.com. You can also submit older verdicts to beincluded in our online database but not announced with an alert.

Sign up – it’s freeThere is no charge for receiving the verdict alerts or viewing the full verdictreports (although we will offer advertising on the Web site and emailalerts.) Go to the Web site and add yourself to the list.

Verdicts & Arbitration Awards

What about settlements? Today, we’re onlyreporting jury verdicts, bench verdicts andbinding arbitration awards. With the heavy tollthe state budget has taken on the trial courts,trials are becoming rarer and each case thatmakes it to trial is therefore more newsworthy.

[email protected]

Southern California Northern California

760.721.2500 415.431.1117

From the publisher of AdvocateRichard Neubauer, Publisher Jean Booth, Editor


Experience a new kind of community.

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Consumer Attorneys Association of Los Angeles 800 W. 6th St. Suite #700 L.A. CA 90017 tel: 213 487-1212 [email protected] caal

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Task — continued

I tell the jury that the only new evi-dence that they will hear is the financialcondition of the insurance company. Iexplain that the second phase is so sacredthat we are not even allowed to talk aboutthe money the defendant has duringphase I because we don’t want it to in anyway influence their decision about whetherthe conduct was malicious, oppressive orfraudulent. Simply put, we wanted a pris-tine and objective finding from themabout the conduct, which we now have.

I usually finish the brief opening byletting the jury know that after they getthe evidence of the worth of the insur-ance company, there will be closing argu-ments at which time I will be recom-mending an amount they should awardto accomplish the purpose of punish-ment and deterrence. • Evidence of financial condition

The only new evidence to presentduring the punitive-damage phase is ofthe company’s financial condition.Getting the financial information of aninsurance company is very simplebecause they are required to lodge thatinformation with the Department ofInsurance (“DOI”). I usually will obtaincertified copies of at least five years ofthe company’s financial statements filedwith the DOI. Also, because the financialdocuments are certified by the DOI, theyare self-authenticated.

Usually, I will have retained a foren-sic economist to explain what the num-bers in the financial documents mean tothe jury. While there are many ways toevaluate the financial condition of thecompany, the most common way is tolook at the company’s surplus. The docu-ments obtained from the DOI will setforth the company’s assets, liabilities andsurplus. Notably, the liability will list notonly the actual losses paid but alsoreserved losses so that the remaining sur-plus is net of even potential claims thecompany has reserved for future pay-ments. Once the financial condition evi-dence is presented, it is time for the finalclosing argument. • The phase II final closing

While you know that the jury thinksthe company’s conduct was really bad by

the second phase, you don’t know whatthey are willing to do about it. It is yourjob as the trial lawyer to motivate thejury to “send a message”, not just to thedefendant in your case, but also to theinsurance industry as a whole. The start-ing point is to make sure you explain thepurpose of punitive damages which istwofold: to punish & deter. Cite to thejury instruction as follows:

The purposes of punitive damagesare to punish a wrongdoer for the con-duct that harmed the plaintiff and todiscourage similar conduct in thefuture.

(CACI 3949)It is important that the jury under-

stand that punitive damages aredesigned to protect the public, whichincludes the members of the jury. Oneway to accomplish this task is to refer thejury back to the law. For example, inCalifornia, one powerful jury instructionis the following:

The purpose of punitive damages ispurely a public one. The public’s goal isto punish wrongdoing, and therebyprotect itself from future misconduct,either by the same defendant or otherpotential wrongdoers. In determiningthe amount of punitive damages to beawarded, you are not to give any con-sideration as to how the punitive dam-ages will be distributed.

(Adams v. Murakami (1991) 54 Cal.3d 105,110; Neal v. Farmers Ins. Group (1978) 21Cal.3d 910, 928, fn 13) (emphasis added).

Thus, in the punitive phase, portrayyour role as being one of a public ser-vant. You are advancing the “public’sgoal” which is, in part, to punish thedefendant’s misconduct. Ultimately, thejury should understand that their puni-tive verdict will protect not just an indi-vidual or some special-interest group, butrather, will protect everyone from futureabuses. The jury must understand theimportance of their role of protecting thepublic in the punitive phase.

It is important that the jury under-stand that they have the power to send awarning to the insurance industry thatmisconduct will not be tolerated by thepublic. The jury can do this by setting an

example of the defendant. Again, oneway to accomplish this is to refer back tothe jury instructions, such as the follow-ing from the United States SupremeCourt:

In addition to actual or compensa-tory damages which you have alreadyawarded, the law authorizes the jury tomake an award of punitive damages inorder to punish the wrongdoer for itsmisconduct or to serve as an example orwarning to others not to engage in suchconduct.

(TXO Production Corp. v. Alliance ResourcesCorp. (1993) 509 U.S. 443, 459, 463,emphasis added (“TXO”).)

The punitive damages that the juryawards will not only send a message tothe defendant on how it should do busi-ness in the future, but it will also serve asan example or a warning to other com-peting companies that the public will nottolerate such misconduct. Give the juryexamples of warnings they see everyday:if a swimming pool is too shallow, itshould have a warning; if a product isdangerous, it should have a warning; if afloor is slippery, it should have a warn-ing, etc. Warnings like these must beprominently displayed in order to havean impact. In your case, the punitivedamage award will serve as a warning toother insurance companies and so itmust be a meaningful amount to beprominently displayed to the industry.

I like to emphasize the second pur-pose of punitive damages which is deter-rence. The jury’s verdict should not onlydeter future wrongdoing by the defen-dant, but also by the industry as a whole.Another effective jury instruction toestablish this point is the following:

The object of [punitive] damages isto deter the defendant and others fromcommitting like offenses in the future.Therefore, the law recognizes that to infact deter such conduct, may require alarger fine upon one of larger meansthan it would upon one of ordinarymeans under the same or similar cir-cumstances.

(TXO, 509 U.S. at p. 463, emphasisadded).


See Task, Page 72


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g



Task — continued

Once the jury understands the“purely public” purpose of punitivedamages, it is then time to turn to theamount of punitive damages to assess.The guidelines for the assessment ofpunitive damages include the following:1.) how reprehensible was the conduct?2.) is there a reasonable relationshipbetween the amount of punitive damagesand the harm? and 3.) in view of thefinancial condition of the defendant,what amount is necessary to punish anddiscourage future wrongful conduct? (See, CACI 3949)

Naturally, the evidence under eachof these guidelines will largely depend onthe facts of a given case as to the repre-hensibility of the conduct, the defen-dant’s financial condition, and the plain-tiff ’s actual injury. These facts must bepresented in evidence and then arguedspecifically to the jury. In addition tothese general guidelines, there are otherauthorities that speak more specifically tothe amount of punitive damages. Takethe following jury instruction:

In determining the amount of puni-tive damages to be assessed against adefendant, you may consider the fol-lowing factors: One factor is the partic-ular nature of the defendant’s conduct.Different acts may be of varyingdegrees of reprehensibility, and themore reprehensible the act, the greater theappropriate punishment. Another factorto be considered is the wealth of thedefendant. The function of deterrence andpunishment will have little effect if thewealth of the defendant allows it to absorbthe award with little or no discomfort.”

(Neal v. Farmers Ins. Exchange (1978) 21Cal.3d 910, 928) (emphasis added).

These jury instructions convey credi-bility to your argument on the amount ofpunitive damages the jury should award.In other words, the jury should be toldthat the law requires a greater punitivedamage award where the conduct is par-ticularly reprehensible, and that the lawrequires that the amount the jury awardsin punitive damage must cause somefinancial “discomfort”, in order to servethe public purpose of deterrence as dis-cussed earlier. Naturally, determining

what amount will cause the appropriate“discomfort” will depend on the financialcondition of the defendant. This conceptis further set forth in another juryinstruction:

The wealthier the wrongdoingdefendant, the larger the award of puni-tive damages needs to be in order toaccomplish the objectives of punish-ment and deterrence of such conductin the future.”

(Adams v. Murakami, (1991) 54 Cal.3d105, 110) (emphasis added).

When asking for an amount of puni-tive damages, I like to remind the jurythat this corporate defendant must betreated the same as an individual in theeyes of the law. I refer to the followinginstruction:

A corporation, ABC InsuranceCompany, is a party in this lawsuit.ABC Insurance Company is entitled tothe same fair and impartial treatmentthat you would give to an individual.You must decide this case with the samefairness that you would use if you weredeciding the case between individuals.

(CACI 104) (emphasis added).When arguing this instruction I tell

the jury that we all know what it meansto treat the defendant the “same.” Wedon’t treat them any worse, but we don’ttreat them any better either. We treatthem the “same.”

I ask the jury to consider that ifinstead of this insurance company thatcheated my client out of money it was anindividual who had a net worth of$100,000. What would they say? Well, itcomes down to three things. First, wewould say, “give the money back.” Iremind the jury that the purpose ofphase I was just that; to give the moneyback to my client. The second thing wewould say to that individual is “you’regoing to jail.” Why? Because people whocheat other people out of money go tojail. It’s called a white-collar crime. I tellthe jury that we can’t put a corporationin jail so, at least to that extent, we reallycan’t treat them the same as an individ-ual. The third and final thing we wouldsay is that the individual must be pun-ished with a penalty. Some penalty to

make sure the misconduct is not repeat-ed.

I explain that to an individual with anet worth of $100,000, a minor penaltyof $5,000 or even $10,000 amounts to 5percent to 10 percent of that person’s networth. Yet, that same 5 percent or 10percent is a much greater amount to an insurance company that has a networth/surplus in the millions or even bil-lions. But, equating what a reasonablepunishment would be to an individual, towhat it would be to the insurance compa-ny, is treating the insurance company the“same” as an individual. No better andno worse.

Conclusion Getting a punitive-damage verdict in

a bad-faith case is not an easy task. Itrequires a great deal of preparation and organized thought before trial.Hopefully, this article will help you indealing with the issue of punitive dam-ages during the trial of a bad-faith casefrom start to finish.

Ricardo Echeverria is a partner with thelaw firm of Shernoff Bidart EcheverriaBentley LLP specializing in liability, proper-ty, and HMO cases within the firm’s HMOLitigation & Property/Casualty department.Ricardo Echeverria was the 2010 ConsumerAttorneys of Los Angeles Trial Lawyer of theYear and was nominated for the award in2006, 2007, 2008 and 2009. He was also a finalist for the Consumer Attorney ofCalifornia’s Consumer Lawyer of the Year in2007 and 2009. He also serves as the currentVice Chair of CAALA’s Education Committee.He has litigated a diverse variety of cases,including bad faith, construction defect, earth-quake, wrongful death, personal injury andprofessional negligence against an insuranceagent.


�

Thank You!From CAALA’s Political Action Committee to all our valued

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To join the CAALA PAC, contact Bill Smith at 213.487.1212 or [email protected]

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From CAALA’s Political Action Committee to all our valued2013 PAC Fund Contributors


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Carolyn TanMark Algorri

All personal injury lawyers willundoubtedly face the unfortunate case ofsigning up a client who has sufferedastronomical damages, only to be disap-pointed with a defendant carrying mini-mal policy limits. Many assume nothingmore can be done except to wait for thecarrier to deliver the measly draft uponreceipt of your demand letter. You arethen left to explain to your client that thecase has come to a bitter end and both ofyou walk away disappointed.

Upon confirmation of a defendant’spolicy limits, it is common practice tosend a written, time-sensitive demandletter to the carrier, along with pertinentinformation, such as the accident investi-gation report, loss of earnings documentsand medical records. If the carrier failsto accept your demand and you secure ajudgment in excess of your offer, the car-rier may be held accountable for the totaljudgment. (Comunale v. Traders & GeneralIns. Co. (1958) 50 Cal.2d 654.)

Traditionally, the only hope of “open-ing” an inadequate policy, that is, obtain-ing more than the policy limits, is to waitfor the carrier to mishandle the claim byunreasonably rejecting your demand andexposing its insured to excess liability.This surfaces during the underlying case,where the carrier either realizes its sins, orafter your client receives an excess verdictagainst their insured. After an excess judg-ment has been rendered, the insured canassign his rights to your client in anexchange for a covenant not to execute, oreven better, a stay of execution.

Although it is rare for a carrier toovertly conduct itself in such a recklessmanner, there are also more subtle waysfor the carrier to open itself up to a

potential bad-faith claim. Provided youdefine the parameters of negotiation andthe terms of acceptance from the onset ofthe claim, you may be able to recoverwhat your client deserves.

Demanding disclosure

If you believe you have an excesscase on your hands, immediately send aletter of representation to the defen-dant’s carrier, demanding the disclosureof the policy limits within a reasonableamount of time, such as 15 days. If avail-able, include the police report and anymedical specials you have to date. Makeit clear that upon receipt of the policy-limits information, your client is pre-pared to make an offer capable of accept-ance. The next move is theirs. Anyunreasonable delay may provide you withammunition to open the policy.

Many carriers will ignore yourrequest and stall with multiple lettersstating that they are “evaluating yourclaim,” “need your client’s statement,” or“are awaiting a demand package.” Whereliability is at issue, they will claim thatthey need further time to conduct aninvestigation. Hardly ever will theyimmediately disclose the limits and mayassert, whether true or not, that theirinsured has not given them permission torelease this information. The smart carri-er will cooperate and provide the policyinformation or request an extension inwhich to comply.

The carrier may later argue thatInsurance Code section 791.13 and theholding in Griffith v. State Farm Mut. AutoIns. Co. (1991) 230 Cal.App.3d 59, pro-tects a policyholder’s privacy and pre-vents disclosure of the policy limits

absent the insured’s consent. However, ifyou have a policy-limits case, logic andcase law dictate that the carrier’s duty tosettle necessarily requires such disclosureif it, in fact, offers the policy. Even sec-tion 791.13(g) allows disclosure when“[o]therwise permitted or required bylaw.”

Importantly, a standard liability policy gives the carrier the unfettereddiscretion to settle a case for policy lim-its, even without the insured’s consent (withthe exception of professional-liabilitypolicies). The insurer is entitled to takecontrol of the settlement negotiationsand the insured is precluded from inter-fering. Not only is the insured’s consentunnecessary, it is “usually superfluous.”(Fiege v. Cooke (2004) 125 Cal.App.4th1350, 1354.)

If a settlement were dependent onthe insured’s permission to disclose thelimits, a carrier could indefinitely sit onits opportunity to settle, falsely blamingits insured for stalling. This would placethe claims authority in the hands of a layinsured which we know is ludicrous on itsface. If the insured continues to refusedisclosure, it is the carrier’s duty to keepthe insured apprised of the situation andfully inform her of all relevant issues,including excess exposure. (See Heredia v.Farmers Insurance Exchange (1991) 228Cal.App.3d 1345, 1360 (internal citationsomitted.)

Further, an insurer’s duties to itsinsured include the duty to promptlyinvestigate and process a claim, and toattempt to effectuate a prompt and fairsettlement. (Ins.Code, § 790.03 (h)). Theimplied covenant of good faith and fair


“OPEN, Sesame!”Is there a magic word to open up the insurer’s policy limits? A look at thenuances of litigation that can result in the lid being taken off the policy.

Policy Limits, continued




Policy Limits — continued

dealing obligates the insurer to acceptreasonable settlement demands withinthe policy limits whenever there is a sub-stantial likelihood of a recovery in excessof the limits. (Comunale, supra, 50 Cal.2dat p. 659.) Where there is great risk of arecovery beyond the policy limits, andsettlement within policy limits is the mostreasonable choice, the insurer should set-tle the claim. The insurer must conductitself as though it were liable for theentire amount of the judgment. (Crisci v.Security Ins. Co. of New Haven, Conn.(1967) 66 Cal.2d 425.) Therefore, a carrier’s right of settlement control,axiomatically, allows the disclosure of thepolicy limits if it is necessary to facilitatea policy-limits offer and subsequent set-tlement. This obligation to protect theinsured by fulfilling its duty to settleshould trump any privacy rights, and, infact, is in accordance with the privacyclause in section 791.13(g).

An even stronger case for bad-faithconduct is when the carrier has a “blan-ket rule” of refusing to contact its policy-holders to determine whether they wanttheir limits disclosed, thereby preventingthem from ever giving permission. Such

was the case in Boicourt v. Amex AssuranceCo. (2000) 78 Cal.App.4th 1390, whichheld that a blanket rule against pre-litiga-tion disclosure creates a conflict of inter-est between the insurer and insured. Theinsured is left to worry about the uncer-tainty of litigation, while the insurer self-ishly saves on administrative costs, andgains a tactical advantage by forcing theclaimant to make pre-litigation offers “inthe dark.” (Id. at p.1398.) If the carrierhas this type of blanket rule which ele-vates its own interests above its insured, itmay not even matter whether a formalsettlement demand was made in order topursue a bad-faith claim upon obtainingan excess verdict. (See id. at p. 1399.)

If the carrier fails to disclose the lim-its within the requested time, or within areasonable time period if further investi-gation is warranted, you should file suitand commence discovery. The carrier willbe forced to formally disclose the limitsin response to Form Interrogatory 4.1.(Superior Ins. Co. v. Superior Court (1951)37 Cal.2d 749.) If indeed the limits arelow relative to your damages and youhave at least a plausible liability argu-ment, you may still be able still reject a

belated policy-limits offer on the groundsthat it missed its opportunity to settlepre-litigation. (Critz v. Farmers Ins. Group(1964) 230 Cal.App.2d. 788, 798.)

Therefore, your bad-faith claim willhinge on your assertion that the carrier’sfailure to disclose the limits preventedyour client from making an informedoffer capable of acceptance. The merits ofyour claim will boil down to the following:• Did the insurer timely contact theinsured to request disclosure of the lim-its?• Did the insurer sufficiently inform theinsured of settlement discussions and thepossible ramifications of not disclosingthe limits?• Did the carrier have any rules orguidelines on pre-litigation disclosure oftheir insured’s limits or a general policyof not contacting the insured for permis-sion to disclose the limits?

This information will form the basisof your claim and will likely be found inthe carrier’s claims file, manuals, trainingmaterials, and correspondence betweenthe adjusters and insured, which you canobtain during discovery in the bad-faithsuit.


�e defense has an appellate department. Now, so do you.

“When defense counsel threatens to appeal, just tell them you have to review the ma�er with your appellate department. �en call me.”

Steven B. StevensCerti�ed Specialist in Appellate Law, State Bar of California Board of Legal Specialization

Certi�ed in Medical Professional Liability Law • CAALA Appellate Lawyer of the Year (2001)28 Years as Plainti� ’s Counsel

Appeals • Writs • Law & Motion310-474-3474 • SBStevens@�eStevensFirm.com

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Drafting an offer-to-settle Another avenue for obtaining recov-

ery above the policy limits is post-negoti-ation, when the carrier’s draft andrelease do not comply with the terms ofyour demand letter. Therefore, yourdemand (or more appropriately termed“offer-to-settle”) should convey clear, butreasonable, deadlines and requirementswhich the carrier is capable of accepting,thereby initiating a settlement contract.

An offer-to-settle and its acceptanceby the carrier are governed by basic con-tract law. (Hess v. Ford Motor Co. (2002) 27Cal.4th 516, 524 (applying contract lawto interpretation of release).) While the“mirror image rule” (requiring theacceptance to “mirror” the terms in the

offer) has been modified in the UniformCommercial Code governing exchange ofgoods, it should fully apply in the insur-ance venue as between a carrier andthird party under common-law contractprinciples.

Therefore, if the carrier wishes toaccept your client’s offer by way of therelease, it must necessarily includeacceptance of the reasonable terms setforth in the offer. If the carrier refuses toagree to those terms or issues a releasethat does not conform to your offer, theirresponse is not an acceptance and youcan later argue that they missed their set-tlement opportunity.

A practical offer-to-settle shouldinclude the following terms:

• The settlement draft be made payable toonly your client and law firm

Most carriers have the nasty habit ofincluding non-permissible payees on thesettlement draft, such as private health-care providers and spouses. They are notthe claimants and it is reasonable for youto demand that the draft be payable onlyto your client and your firm, subject tothe resolution of any mandatory liens.Inclusion of gratuitous payees stalls thenegotiation of the draft by creating a dis-pute between the lienholder and yourclient. There will be a delay in obtainingthe money because you must determinewhether the payees have viable claims,and if they do, they will need to sign thecheck. The carrier strategically makes a


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Policy Limits — continued

float on the promised settlement fundsthrough this delay.

The one important caveat here, how-ever, is that you must make sure that youhave resolved any mandatory liens, suchas those by the county, emergency room,Medicare, Medi-Cal, and worker’s com-pensation. In these cases, a carrier hasthe right to name a legitimate lienholderon the draft. (Coe v. State Farm MutualAuto Ins. Co. 66 Cal.App.3d 981, 994(carrier must include necessary lienhold-ers in order to protect insured).) It maybe more efficient and prudent to requestthe carrier to issue two drafts. If possible,you should negotiate these liens prior tosettlement in order to minimize anydelay. Alternatively, some carriers willagree to put a hold-harmless agreement

in the release, holding your clientresponsible for any outstanding liens.This is ideal in cases where you want thedraft immediately, but have not yet nego-tiated the liens.

Should the carrier send you thedraft with gratuitous payees or better,refuse to remove a gratuitous payee fromthe draft upon your request, you mayhave a viable argument that your offerwas rejected.• Release of only the insured(s) (and theiragents, representatives, heirs, andassigns)

Global release: The other dirty trickis issuing a global release. This effectivelyreleases the world, not just the insured(and heirs, assigns, etc.). Although it maybe easily missed upon a cursory reading,

releasing “all others” can make the dif-ference between a $15,000 case and amulti-million dollar recovery. [Note thatthis “global release” terminology differsfrom a valid “global settlement,” in whichthe insurer tenders the policy limits tomultiple claimants, who can then appor-tion the funds amongst themselves.]

The problem with a global release isthat it cuts off claims against everyoneelse including other potential tortfeasors,which can cost you a bundle down theroad. (Rodriguez v. Ono (2013) 212Cal.App.4th 1020, 1027 (holding that aglobal release prevented plaintiffs frombringing an action against driver’semployer).) For example, although youmay intend to release only the driver,allowing your client to sign a globalrelease may cut off a viable and prof-itable products-liability claim or roadway-design case. Although it is not necessaryto have a slam-dunk case against theother potential defendant, you shouldhave at least a plausible tortfeasor to bol-ster your argument that your client wasprejudiced by the global-release lan-guage.

A carrier may send a global releasefor various reasons. In cases where theremay be other potential tortfeasors, it isusually trying to prevent further defensecosts incurred by possible future indem-nity cross-complaints. However, if thecarrier is worried about a later cross-complaint popping up, it can still protectits insured by securing a good faith set-tlement barring later claims against theinsured. (Code Civ Proc., § 877.6.)Consequently, it can be argued that thecarrier has not acted reasonably becauseit has put its own interest in saving deminimis litigation costs ahead of protect-ing its insured. (Comunale, supra, 50Cal.2d at p.659) (insurer must take intoaccount the interest of the insured andgive it at least as much consideration as itdoes to its own.) However, if the adjusteradmits to making an inadvertent mistake,the court may revise the release. (Hess,supra, 27 Cal.4th at p. 524) (globalrelease did not release third-party manu-facturer where adjuster and attorneydemonstrated mutual mistake).)


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• Conditional acceptanceFinally, be on the lookout for a con-

ditional acceptance of your client’s offer.This usually manifests itself throughimproper indemnity language. Forinstance, the release may require thatyour client indemnify the carrier forclaims subsequently made by anothertortfeasor involved in the case.Acceptance of this language by yourclient would render the settlement hollow.

Further, as your client’s representa-tive, you must read every release careful-ly. Do not assume that the release hasbeen drafted in your client’s best interest.If your client signs a release and youlater realize that the terms are not whatyou intended, a court may not alwaysgive you the benefit of the doubt. “[Theparties’] ‘actual intent,’ for purposes ofcontract law, is that to which they mani-fested assent by executing the agree-ment.” (Rodriguez, supra, Cal.App.4th atp.1027.)

ConclusionThe lesson here is that when an

excess case graces your doorstep, youshould timely request disclosure of thepolicy limits in order to give the carrierthe opportunity to settle. The offer-to-settle letter should then clearly set forthspecific, reasonable terms, such as theones explained above. Upon receipt ofthe draft and release, if the carrier’s

“acceptance” does not mirror the term ofyour offer, you do not have to settle. Tellthe carrier the deal is off and continuelitigating the underlying case until youforce their hand into settling for some-thing above the policy limits, or until you

get an actual judgment, presumably farexceeding the limits. If you get that win-ning excess judgment in the underlyingcase, you are ready to team up with theinsured, discuss assignment, and pursueyour bad-faith action.


Mark Algorri is the founder and man-aging partner of DeWitt Algorri & Algorri,in Pasadena, CA (www.daalaw.com). He spe-cializes in catastrophic injury and insurancebad faith and has tried over 65 cases to juryverdict. Prior to law school, he managed rockbands, including Van Halen. He is a memberof ABOTA.

Carolyn Tan is a senior associate atDeWitt Algorri & Algorri and second-chairs trials with Mark Algorri. Ms. Tanattended UCLA for her undergraduate stud-ies in psychology and English. She receivedher J.D. from Loyola Law School in 2009,where she served as a Production Editorfor the Loyola International andComparative Law Review.


Jully C. PaeRobert S. Gianelli

Disputes often arise over whether aparticular seller of insurance is an “agent”or a “broker.” The genesis of these dis-putes typically is found in an insurer’sdenial of coverage for some claim madeby the purchaser of the policy. If theinsurer’s denial of coverage is determinedto be correct, the inquiry inevitably turnsto who can be held responsible and whyfor the uninsured loss? Attendant to thesequestions is what may become the biggerissue – can the insurer be held liable foran agent’s or broker’s negligence?

The terms “agent” and “broker” are more descriptive of the conclusionone reaches about the status of the insurance seller after an examination of that person’s relationship with theinsurer and the insured as well as thespecifics of the insurance sale at issue.Some helpful guideposts are discussedbelow.

Agent or broker?An “insurance agent” means “a per-

son authorized, by and on behalf of an

insurer, to transact all classes of insur-ance other than life, disability, or healthinsurance, on behalf of an admittedinsurance company.” (Ins. Code, § 31.)An “insurance broker” means “a personwho, for compensation and on behalf ofanother person, transacts insurance otherthan life, disability, or health with, butnot on behalf of, an insurer. (Ins. Code, §33.) The primary difference between thetwo is that an agent has the authority tobind an insurer to coverage because hetypically acts on behalf of an insurer; a


What’s in a name?Insurance agent or insurance broker:A distinction with a difference


broker has no such authority, as he typi-cally acts on behalf of the insured. (MarshMcLennan of Calif., Inc. v. City of LosAngeles (1976) 62 Cal.App.3d 108, 117-18.)

An agent has the authority to do anyact that the insurer might do. (Preis v.American Indem. Co. (1990) 220Cal.App.3d 752, 761.) Unless the insuredis provided notice (actual or constructive)of any limits on authority, an agent maybind the insurer by any actions, represen-tations, or promises that fall within thescope of the employment even if theyviolate any restrictions on the agent’sauthority. (Troost v. Estate of DeBoer (1984)155 Cal.App.3d 289, 298.) Thus, forexample, an agent may bind the insurerto his interpretation of ambiguous policyterms (Shade Foods, Inc. v. InnovativeProducts Sales & Marketing, Inc. (2000) 78Cal.App.4th 847, 874) or to misrepresen-tations expanding coverage (Hartford FireIns. Co. (1987) 196 Cal.App.3d 1320,1325).

A broker’s primary obligation is torepresent insureds during the applicationprocess and negotiate with insurancecompanies about the terms of coverage,including premiums. (Krumme v. MercuryIns. Co. (2004) 123 Cal.App.4th 924,929.) Because insurers are not liable for abroker’s misconduct, brokers must postand maintain a $10,000 bond, which willbe used to resolve any disputes withinsureds. (Ins. Code, §§ 1662, 1665.) Apresumption of a seller as a broker isautomatically rebutted upon a showingthat there is a notice of appointment onfile by an insurer and the individual haswritten authority to bind the insurer onthe risk without prior approval. (Ins.Code, § 1623(c).) Even without a noticeof appointment or written authority, abroker may be considered an agent basedon the “totality of the circumstances.” (Id.at § 1623(d), (e).)

While agents and brokers are legallydistinct, in practice, these roles tend tomerge to create a “dual” agency, wherethe seller represents both the insurer andthe insured during the application pro-cess. In fact, for certain lines of insur-ance, such as automobile and homeowner’s

insurance, the license issued by theCommissioner of Insurance reference thelicensee as a “broker-agent.” (Ins. Code,§§ 1625 [referencing property and casu-alty broker-agent licenses]; 1625.5 [refer-encing personal lines broker-agent].)

A dual agency may arise where, forexample, an agent appointed withnumerous insurers chooses a particularinsurer but in doing so also representsthe insured’s interests. (Eddy v. Sharp(1988) 199 Cal.App.3d 858, 865.) Anappointed agent may also be a dualagent where he holds himself out to theinsured as an expert in the area of insur-ance for which a policy is sought. Bytouting his expertise, the agent assumesa special duty to the insured. (Kurtz,Richards, Wilson & Co. v. InsuranceCommunicators Marketing Corp. (1993) 12 Cal.App.4th 1249, 1257.)

Often, both brokers and agents willpresent themselves as an “independentinsurance agent.” Do not let the refer-ence to “agent” fool you – you must lookbehind the label and determine whether,based on the individual’s statements andconduct, he was acting as an agent, a broker, or both. (Loehr v. Great Republic(1990) 226 Cal.App.3d 727, 734.)

Standard for agent liabilityEven though, under general agency

principles, an agent owes the insured ageneral duty to use reasonable care, dili-gence, and judgment in procuring thecoverage requested, an agent’s violationof this duty does not give rise to personalliability. As a general rule, where anagent acts within the scope of hisemployment and discloses the agencyrelationship, he cannot be held personal-ly liable for failing to obtain the request-ed coverage because such liability ulti-mately attaches to the insurer as theprincipal. (Lippert v. Bailey (1966) 241Cal.App.2d 376, 382 [granting summaryjudgment for agents as insured knew ofagency relationship]; see Lab. Code, §2802.)

Nor can an agent be held personal-ly liable for failing to spontaneously rec-ommend additional coverage, obtainadditional, unrequested coverage, or

advise that such additional coverage isavailable. For example, in Fitzpatrick v.Hayes (1997) 57 Cal.App.4th 916, 927-928, even though the insureds hadworked with the State Farm agent for 20years, they could not hold the agentpersonally liable for failing to recom-mend a “personal umbrella” policy thatwould cover damages above the unin-sured motorist limits of their automobileinsurance policy.

The limitations on an agent’s duty,however, do not apply in three circum-stances that give rise to a special duty.The first is where the agent affirmativelymisrepresents the nature, extent, orscope of coverage, or fails to disclose amaterial fact regarding coverage. Thesecond occurs when the insured requestsa specific type or extent of (not just “ade-quate”) coverage. And the third circum-stance arises when the agent eitherexpressly agrees to assume additionalduties or holds himself out as an expertin the particular area of insurance inwhich coverage is sought. (Paper Savers,Inc. v. Nacsa (1996) 51 Cal.App.4th 1090,1095-1098.)

To illustrate, in Paper Savers, theinsured purchased a “replacement costcoverage” endorsement based on theagent’s representations that, in the eventof a total loss, the additional coveragewould replace all the business equip-ment. After the business was completelydestroyed by a fire and the benefits theinsurer paid on the claim did not coverthe cost of replacement, the insuredsued the agent, claiming that heassumed a special duty based on misrep-resentations and could be held personal-ly liable. The court agreed and reversedthe grant of summary judgment for theagent. (Id. at 1101; see also, Westrick v.State Farm Ins. (1982) 137 Cal.App.3d685, 691-692 [reversing directed verdictfor agent because his failure to disclosethat auto policy did not cover six-wheeltruck constituted a misrepresentation forwhich he could be held tortiouslyliable].)

The same result obtained in Butcherv. Truck Ins. Exchange (2000) 77Cal.App.4th 1442, where the agent both



Name — continued

failed to obtain the personal injury cov-erage the insured had specificallyrequested and misrepresented that suchcoverage existed. After judgment wasentered against the insured in a mali-cious prosecution case (which TruckInsurance had refused to defend), theinsured sued the agent and TruckInsurance for indemnity. The courtupheld the denial of the agent’s summa-ry judgment motion because there weretriable issues of fact as to whether theagent assumed a special duty and couldbe held personally liable. (Id. at 1462-1465.)

Williams v. Hilb, Rogal & Hobbs Ins.Servs. of Calif. (2009) 177 Cal.App.4th624 provides a good example of liabilitybefalling an agent who claims specificexpertise. There, the owners of RhinoLinings of Santa Fe Springs obtained aCGL policy from an agent who had tout-ed her familiarity with the Rhino Liningsdealerships and her expertise in obtain-ing coverage that met the business’sneeds. After an employee got severelyinjured on the job, the insurer deniedthe insureds’ claim, advising that theirCGL policy did not include workers’compensation coverage. The Court of

Appeal affirmed the trial court’s conclu-sion that the evidence showed the agenthad assumed (and breached) a specialduty by touting her expertise. (Id. at637.)

A common argument the insurersmade in Paper Savers, Butcher, andWilliams is the general rule set forth inHadland v. NN Investors Life Ins. Co.(1994) 24 Cal.App.4th 157 – that aninsured has a duty to read the policy andis bound by its clear and conspicuousterms. In each case, the court rejectedthis contention, finding that where anagent affirmatively misleads the insuredas a result of his negligence, the Hadlandrule does not apply. (Paper Savers, supra,51 Cal.App.4th at 1101-1102; Butcher,supra, 77 Cal.App.4th at 1463; Williams,supra, 177 Cal.App.4th at 637-639.)Indeed, as the court in Paper Saversnoted, the Hadland rule’s applicabilityappears limited to the interpretation-of-policy-terms context where the insuredsues the insurer for coverage. (Id., 51Cal.App.4th at 1102.)

Standard for broker liabilityIf the “independent insurance

agent” turns out to be a broker and the

presumption of broker status is notrebutted, the broker may be held person-ally liable for an uninsured loss resultingfrom a breach of a duty owed to theinsured. Liability cannot be imputed tothe insurer. (Ins. Code, § 33.)

But since many brokers have agencyagreements with various insurers, moreoften than not, a broker will be a dualagent where liability may attach to theinsurer. (See, e.g., Greenfield v. InsuranceInc. (1971) 19 Cal.App.3d 803 [brokeragefirm had agency agreements with numer-ous insurers and was thus a dual agent];Kurtz, Richards, Wilson & Co. v. InsuranceCommunicators Marketing Corp. (1993) 12Cal.App.4th 1249 [insured sued bothbroker and insurer for uninsured loss].)

While a broker represents theinsured’s interests, the duties owed to theinsured are not boundless. For instance,like an agent, a broker has no duty tospontaneously recommend adequate cov-erage or advise the insured about specificinsurance matters. (Jones v. Grewe (1987)189 Cal.App.3d 950, 954 [“The generalduty of reasonable care which an insur-ance [broker] owes his client does notinclude the obligation to procure a policyaffording the client complete liability


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protection, as appellants seek to imposehere.”]; Wallman v. Suddock (2011) 200Cal.App.4th 1288, 1313-1315 [findingthat broker had no duty to adviseinsureds to obtain excess coverage overexisting and past primary policies thatcovered liability as insureds never dis-closed need for such coverage].)

And because a broker’s duties to aninsured are limited to the procurement ofthe policy, brokers have no duty to notifyinsureds of an insurer’s insolvency (orchange in financial condition) or that thepolicy has been cancelled. (Pacific RimMechanical Contractors, Inc. v. Aon Risk Ins.Services West, Inc. (2012) 203 Cal.App.4th1278, 1283 [no duty to notify of insurer’sinsolvency]; Kotlar v. Hartford Fire Ins. Co.(2000) 83 Cal.App.4th 1116, 1123 [noduty to notify of policy cancellation].)

There are three circumstances inwhich a broker breaches the duties owedto an insured: (1) the broker misrepre-sents the nature, scope, or extent of cov-erage; (2) the insured requests a particu-lar type or extent of coverage; and (3)where the broker either expressly agreesto assume additional duties or holds him-self out as an expert. (Pacific RimMechanical Contractors, Inc., supra, 203

Cal.App.4th at p.1283.) In ascertainingwhether a broker has breached a duty,courts consider additional factors such asthe length of the relationship andwhether the broker knew of the risksinvolved in the insured’s business.

Thus, in Greenfield v. Insurance, Inc.(1971) 19 Cal.App.3d 803, 809-810, thecourt upheld the judgment against thebroker because the record showed thatthe insured had relied on the broker forover a decade for his business insuranceneeds; the broker knew of the risksinvolved in the insured’s business if therewere gaps in coverage; the insured hadspecifically requested that the policycover the costs of any mechanical break-down of the business’s equipment; andthe broker had represented to theinsured that such coverage was providedunder the policy it had procured.

Third Eye Blind, Inc. v. Near NorthEntertainment Ins. Servs. (2005) 127Cal.App.4th 1311 presented the circum-stance of a broker who was found liablefor touting its expertise. There, the band,Third Eye Blind, obtained a CGL policyfrom the broker and was thereafter suedby a former band member for trademarkinfringement. After the insurer denied

the claim, citing the trademark infringe-ment exclusion, the band sued both thebroker and the insurer.

The insurer ultimately settled withthe band and covered the loss. The bro-ker argued that, in light of the settle-ment, its liability for the loss was there-fore precluded and the case should bedismissed. The court disagreed, findingthat because the broker, which had tout-ed its expertise, failed to “secure moredirect, and certain, coverage,” it could beheld liable for the attorneys’ fees theband had incurred in bringing the cover-age action. (Id. at 1323, 1324.)

Of note, there is no indication thatthe holding in Third Eye Blind is limitedto brokers. If an agent, therefore,assumes a special duty to an insured or isa dual agent and the insurer ultimatelycovers the loss, the insured should try torecover from the agent all damages stem-ming from his negligence.

Like agents, brokers also tend toraise the duty-to-read argument to avoidliability. This is no defense. “Absent somenotice or warning, an insured should beable to rely on a [broker’s] representationsof coverage without independently verify-ing the accuracy of those representations


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Name — continued

by examining the relevant policy provi-sions.” (Clement v. Smith (1993) 16Cal.App.4th 39, 45.)

Insurer’s liability for agent’s misconductUnder respondeat superior, an

insurer may be held vicariously liable foran agent’s misconduct committed duringthe course and scope of employment.(Desai v. Farmers Ins. Exch. (1996) 47Cal.App.4th 1110, 1118.) Even if theinsurer did not specifically authorize theagent’s acts, it may still be held liable if itratifies those acts (e.g., by retaining thepremiums). (R&B Auto Ctr., Inc. v. FarmersGroup, Inc. (2006) 140 Cal.App.4th 327,344.)

In Desai, the insured specificallyrequested that any earthquake, fire, andhazard policy provide 100 percentreplacement cost coverage. The policythe agent obtained, however, containedno such coverage. The court held theinsurer could be held liable under thetheory of ratification (as well as ostensibleauthority) for the agent’s negligence infailing to provide the specifically request-ed coverage. (Desai, supra, 47Cal.App.4th at 1119-1121.)

An insurer can, likewise, be heldliable for its agent’s misrepresentationsregarding coverage. In R&B Auto Center,the agents represented to the insured, aused car dealership, that the policy pro-vided lemon-law coverage for used carswhen, in reality, coverage only extendedto new cars. After the insurer refused todefend the insured in a lawsuit broughtby a customer, the insured sued theinsurer and the agents for fraud, amongother things. The Court of Appeal con-cluded that the insurer could be held vic-ariously liable for the agents’ misrepre-sentations. (Id. at 345-346.)

Particularly interesting was thecourt’s statement that, upon remand, theinsureds could assert a claim for reforma-tion of the policy so that it providedlemon-law coverage for used cars. Theinsurer could then be held liable forbreaching the contract as reformed. (Id. at349, fn. 11.)

Like agents and brokers, insurerscommonly raise the insured’s duty toread as a defense. While several courtshave held that a duty to read is nodefense to an agent or broker’s misrepre-sentations (e.g., Paper Savers, supra;

Westrick, supra), some courts have heldthe opposite. In Hadland v. NN InvestorsLife Ins. Co. (1994) 24 Cal.App.4th 1578,1589, for instance, the court found theinsured had unjustifiably relied on theagent’s representations because the poli-cy’s clear and unambiguous terms contra-dicted the representations. But if the pol-icy terms are neither clear nor unam-biguous, the Hadland rule has no applica-tion.

Robert Gianelli is a partner in the LosAngeles law firm of Gianelli & Morris, spe-cializing in insurance-related class actionsand insurance bad- faith cases. He has suc-cessfully prosecuted insurance-related classactions in state and federal courts. He alsoserves as a Contributing Editor for the RutterGroup publication California PracticeGuide: Insurance Litigation.

Jully Pae is an associate at Gianelli &Morris who specializes in representingaggrieved life, health, and disability policyowners in individual and class action law-suits. She works on the firm’s bad-faith andUCL cases in both state and federal courts.


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As Congress begins examining theillegal immigration issue, there is almostno controversy larger and more volatile inCalifornia. A majority oppose licensingillegal immigrants with “driving privilegecards” or provisional licenses because itmay ease the path towards citizenship

and create a draw for increased illegalimmigration. Regardless of whether onesides with various liberal immigrationpolicies or stricter (yet seldom enforced)guidelines, it is now inescapable that ille-gal immigration is a major public safetyconcern on our roadways.

Illegal immigrants cannot obtain aCalifornia driver’s license and thereforecannot obtain liability insurance. So,more than a million unlicensed drivershit the roads anyway in order to get to work without the slightest trainingand without regard for California’s

Should California provide drivers’ licensesregardless of immigration status? A public safety and uninsured-motorist coverage perspective

Barry P. Goldberg


California — continued

Compulsory Financial ResponsibilityLaw. As a direct result, Californians areat a substantial risk every time theyleave their homes for being hit by ille-gal, unlicensed and uninsuredmotorists.

The statistics can no longer beignored. When the “never been licensed”drivers are added to the regular pool ofuninsured motorists, it is estimated thatalmost 1 in 5 drivers in California isuninsured, in some areas the numbersjump to well over 1 in 2. Over 50 percentof all hit and run accidents involve anuninsured driver. The most recentDepartment of Motor Vehicle study con-firmed some of our worst fears – illegal,unlicensed and uninsured are three timesmore likely to be involved in fatal acci-dents. A 2011 study by the AmericanAutomobile Association (“AAA”) foundthat unlicensed drivers were nine timesmore likely to leave the scene of a fatalcrash. It is only logical – if there is no“certification” or licensing process, therewill be drivers on our highways that haveneither taken a written nor driving test,let alone have received so-called manda-tory driver’s training.

Forget for a moment whether or notthese illegal drivers passed a test. We aretalking about people who may not beable to read road signs, know and under-stand the rules of the road, or even howto operate their vehicles. Assuming these

illegal drivers are minimally competentto drive, it is not a stretch to also con-clude that these drivers are part of aneconomically challenged class. They arefar more likely to be working long hours,driving late at night, and operating sub-standard vehicles. These “illegal” vehiclesmay well have inoperable lights, wornbrakes and other safety problems.

Unlicensed driversWith no ability to obtain a driver’s

license, there is simply no incentive tocomply with much of the other safetyinfrastructure in place to teach drivers,test drivers and obtain insurance. InCalifornia, the premise that “driving is aprivilege not a right” has been replacedwith “driving is a civil rights issue.”Everyone knows that in Los Angeles, youneed to drive to survive.

Technically, in order to drive in theState of California, one must be a legalcitizen of the United States or legallyresiding or visiting the United States.Driving without a license is a punishableoffense under California Vehicle Codesection 12500, subd.(a), officially makingit a crime to be an unlicensed driver. TheCalifornia Compulsory FinancialResponsibility Law requires every driverand every owner of a motor vehicle tomaintain financial responsibility (mini-mum liability coverage) at all times.

Unfortunately, these laws have beenand continue to be ignored in the name of“fairness” in order to make way for motorist-endangering unlicensed drivers. In 1994,the California Legislature concluded that;“There are over 1 million drivers operatingautomobiles in California having neverbeen issued a license (Legislative Findings,1994).” It is now estimated that that num-ber has doubled to 2 million drivers operat-ing automobiles in California having neverbeen issued a license!

A 2008 AAA study found that one infive fatal crashes in Los Angeles involvedan unlicensed driver. Consider that as of2012, the DMV has upped that numberto one in three fatal crashes involved anunlicensed driver. This is a staggeringincrease in a very short period of time.There is no program or plan in place to

slow this pace or solve this terrible threatto our California families, friends andneighbors. California is only one of threestates out of 50 where traffic fatalities areactually increasing.

Back in 1994 the Legislature real-ized that driving without a license wascausing death and destruction at rates far higher than licensed drivers.Recognizing the danger to public safety,the California legislature passed a strictlaw to get these drivers off the road:Vehicle Code section 14607.4. ItsLegislative Findings stated:

(f) It is necessary and appropriate totake additional steps to prevent unli-censed drivers from driving/ includingthe civil forfeiture of vehicles used byunlicensed drivers. The state has a crit-ical interest in enforcing its traffic lawsand in keeping unlicensed drivers fromillegally driving. Seizing the vehiclesused by unlicensed drivers serves a significant governmental and publicinterest/namely the protection of the health/safety/and welfare ofCalifornians from the harm of unli-censed drivers/who are involved in adisproportionate number of trafficincidents/and the avoidance of theassociated destruction and damageto lives and property.

Public safetyThe significant number of impound-

ed vehicles has become a “political hotpotato.” Typically, the vehicles were heldfor 30 days and were released uponshowing a valid identification, an autoinsurance policy, payment of storagecharges and no previous citations forunlicensed driving.

In March 2011, Los Angeles PoliceChief Charlie Beck, with support fromnumerous political supporters rangingfrom the assembly to Mayor Villaraigosa,decided that it was unfair to impoundcars of unlicensed drivers who never hada license before. The Los Angeles Timesrecently reported that the LAPD impound-ed 39 percent less vehicles in 2012. This isobviously an attempt to make illegal immi-grants “more welcome” in California andallow them the opportunity to work here.


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It is obvious that the police chief wouldlike to see every driver in his jurisdictionlicensed. Not only would this streamlinethe administration of justice, but it wouldincrease the skill and safety level of thecurrent illegal driving pool.

It is chilling that Chief Beck and ourpolitical representatives appear willing torisk public safety and horrendous per-sonal losses in order to influence achange in public policy towards licensingillegal immigrants. Make no mistakeabout it –that is exactly what is happen-ing in California.

Since unlicensed drivers are provento be an epidemic in not only LosAngeles, but California, the installationand enforced utilization of driving-privi-lege cards and provisional licenses are theonly logical method of improving publicsafety. Public safety would be increasedthrough these methods as long as lawenforcement would follow the laws andget unsafe drivers off our roads once andfor all. Unlicensed drivers would basicallybecome licensed and monitored, decreas-ing the likelihood of erratic driving andlife threatening behavior.

In addition, this combination oflicensing and enforcement would requireacquisition of automobile liability insur-ance. This is an essential element in protecting the public and in encouragingsafe driving. Moreover, by insisting thatdrivers obtain liability insurance and byenforcing that requirement, it is consistentwith California’s Compulsory FinancialResponsibility Law.

North Carolina is set to implementdriving-privilege cards over protest fromboth tough-on-immigration advocatesand from immigration-amnesty support-ers. Again, one side argues that this is a“de facto” legalization of immigrationand smoothes the way for those hereillegally to side-step legal immigrationprocedures. On the other hand, immi-gration supporters complain that thenew cards unfairly identify illegal immi-grants as marked “without legal status.”Further, the cards provide the govern-ment with the illegal immigrants’ exact address and location for futuredeportation. California will be watching

North Carolina’s experience with criticalinterest.

For the time being, this new drivingreality creates a departure fromCalifornia’s Compulsory FinancialResponsibility Law – every driver andevery owner of a motor vehicle is notrequired to maintain financial responsi-bility (liability coverage) at all times.

The genesis of California’s automo-bile insurance structure really took flightback in 1959 under similar circumstanceswith the enactment of Insurance Codesection 11580.2 (“The Uninsured-Motorist Statute”). The Uninsured-Motorist Statute was really required bythe motoring public due to the high inci-dences of uninsured drivers who caused severeaccidents and injuries. Without insuranceand without sufficient personal assets,victims were left without adequaterecourse. Before 1959, Californiamotorists were free to choose to carry lia-bility insurance – or not. In fact,California’s Financial Responsibility Lawrequiring liability insurance did not comeinto effect until 1974. The parallels to1959 and today are obvious – high inci-dences of uninsured drivers who caused severeaccidents and injuries.

California drivers must accept thataccidents with unlicensed and uninsureddrivers are likely to occur and increase innumber. While death and mayhem on theroadways will never be acceptable, every

effort should be made to make certainthat sufficient Uninsured Motorist cover-age is purchased and maintained by allCalifornia drivers. With the “newly real-ized” catastrophic risk which has devel-oped over the last couple of years, drop-ping Uninsured Motorist coverage shouldnot be an option. Further, it must be antic-ipated that a high percentage of accidentswill involve uninsured motorists. There-fore, California drivers should “selfinsure” to the extent that they would fortheir own liability coverage.

The immigration question is complexand beyond the scope of this analysis.However, from a public-safety standpoint,Californians should not risk the lives oftheir own family and friends to illegal, unli-censed and uninsured drivers. The installa-tion and enforced utilization of driving-privilege cards and provisional licenses arethe only logical method of improving pub-lic safety. This can be accomplished consis-tent with California’s automobile insuranceinfrastructure and The CompulsoryFinancial Responsibility Law.

Barry P. Goldberg is a trial lawyer in his 29th year practicing in Woodland Hills,California. He has handled hundreds ofUninsured and Underinsured Motorist casesand is a frequent author and lecturer on thetopic. His article, “The Strange Case of theUM/UIM Arbitration,” was published in theAdvocate in August 2011.


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Kim Collins

Under the standard insuring agree-ment, a liability insurer has a contractualobligation to defend its insured where thefactual allegations of the complaintagainst its insured potentially triggerindemnity under the policy. The insurer isgiven the right to choose counsel and con-trol defense. There are two separate situa-tions where the law requires the insurer torelinquish control of defense and pay forthe insured’s choice of counsel.

The first is codified in CaliforniaCivil Code section 2860. This conflictinvolves a third-party suit where multipletheories are pled and the conduct of theinsured is the focus of both liability andinsurance indemnity and the insurer hasissued a Reservation of Rights letter.

The second prong of the law govern-ing independent counsel requires theinsurer to relinquish control and pay forthe insured’s choice of counsel when theinsurer has “no economic motive” in theoutcome of the case. When the insurer’sReservation of Rights eliminates its eco-nomic interest in the third-party suit, theinsurer’s desire to exclusively controldefense must yield to its contractual obli-gation to give its policy-holder a full andvigorous defense.

This “second prong” that requiresindependent counsel is founded inSupreme Court decisions and was notsuperseded by the California Civil Codesection 2860, the so-called “Cumis”statute. The recent increase in manu-script policies and hand-drafted endorse-ments, particularly in construction,brings this important issue to the fore.

In 1964, the California SupremeCourt in Tomerlin v. Canadian IndemnityCompany, (1964) 61 Cal.2d 638 set forththe legal basis for independent counsel.The case involved the classic conflict of“willful” versus “negligent” conduct relat-ing to an alleged assault by the insured.The insured hired its own counsel to joinin the defense with the insurer’s counsel.Before trial began, the insurer’s counsel

told the independent counsel that theReservation was now moot. Independentcounsel withdrew in reliance. Eventhough the trial proceeded only on will-ful theories of conduct, the insured wastold coverage was available. The Courtheld the insurer was estopped to rely onits Reservation for the uncovered judg-ment, and ordered reimbursement ofindependent counsel’s fees. The reim-bursement of fees was based on theCourt’s finding of two inherent conflicts,separately stated:

Similarly, in cases involving multipleclaims against the insured, some ofwhich fall within the policy coverageand some of which do not, the insurermay be subject to substantial tempta-tion to shape its defense so as to placethe risk of loss entirely upon theinsured. (Cf. O’Morrow v. Borad, (1946)27 Cal.2d 794, 798.) Moreover, sincedefendant here had previously deniedall liability under the policy, its soleeconomic motive of prosecuting a vig-orous defense had been eliminated.

(Tomerlin, Id. at p. 647).A like duty must arise in the instant

case in which potential conflictstemmed not only from the multipletheories of the Villines complaint andthe propriety of settlement, but fromthe total absence in defendant of anyeconomic interest in the outcome ofthe suit.

(Tomerlin, Id. at p. 647). Defendant argues, however, that

Best’s withdrawal caused plaintiff nodetriment because in any event defen-dant retained the right, under the poli-cy, to conduct the defense. Defendant’scontention rests upon the erroneousassumption that it could exclusivelycontrol the case even though it lackedan economic interest in its outcome. Inactions in which the insurer lacks aneconomic motive for a vigorousdefense of the insured, or in which theinsurer and insured have conflicting

interests, the insurer may not compelthe insured to surrender control of thelitigation.

(Tomerlin, Id. at p. 648).In 1971, the appellate court in

Executive Aviation, Inc. v. National Ins.Underwriters, (1971) 16 Cal.App.3d 799,addressed the extent of the insurer’s obli-gation under a conflict of interest createdby a Reservation of Rights. It held thedefense attorney should be selected bythe insured and paid for by the insurer.The court stated representation by twodifferent attorneys promotes and protectsthe interests of each, guarantees ade-quate representation and removes thedeleterious effect of the conflict placedupon a single attorney attempting to rep-resent both the insurer and the insured’sinterests.

The facts of Executive Aviationinvolved a policy of airplane insurancewith an endorsement requiring the pilotto be commercially licensed if the acci-dent occurred during a commercialflight. The insured said the flight was aprivate sales demonstration, but theinsurer reserved its rights to disclaim allcoverage if found to be a commercialflight.

The insurer was required to relin-quish control of defense and pay inde-pendent counsel selected by the insured.The coverage issue was not determinedin the underlying wrongful-death suitresulting from the accident, but in a sep-arate declaratory relief action.

We hold, therefore, that in a conflictof interest situation, the insurer’sdesire to exclusively control thedefense must yield to its obligation todefend its policy holder. Accordingly,the insurer’s obligation to defendextends to paying the reasonable valueof the legal services and costs per-formed by independent counsel, select-ed by the insured. While an insurermay be dismayed at having to pay thecost of two attorneys for one action, we

Independent Cumis counsel: The second prongWhen the insured is given the right to choose counsel and control its defense



are cognizant that the necessity for thisaction stems from its failure to providewith any degree of clarity for this con-flict of interest contingency in draftingthe terms of its contract.

(Executive Aviation, at p. 810).The Ninth Circuit addressed the issue

of independent counsel in Previews, Inc. v.California Union Ins. Co. (9th Cir. 1981)640 F.2d 1026 applying California law.The case involved a class action againstthe insured and the insurer reservedrights that each member of the class wassubject to a single “claim” deductibleunder its endorsement. As is common, theinsurer had not defined the word “claim”in its deductible. Even though the cover-age reservation would not be decided inthe defense of the underlying action, theNinth Circuit found a conflict in the insur-er’s complete lack of economic motiveunder the reservation of rights.

California law provides that in a con-flict of interest situation, the insurer’sdesire to control exclusively thedefense must yield to its obligation todefend the policyholder. Accordingly,the insurer’s obligation to defendextends to paying the reasonable valueof the legal services and costs per-formed by independent counsel select-ed by the insured.

(See Executive Aviation, Inc. v. National Ins. Underwriters (1st Dist. 1971) 16Cal.App.3d 799, 810; Outboard MarineCorp v. Liberty Mutual Ins. Co. (7th Cir.1976) 536 F.2d 730, 737 applyingCalifornia Law). (See also, Tomerlin v.Canadian Indemnity Company, (1964) 61Cal.2d. 638 (where insurer lacks an eco-nomic motive for vigorous defense of theinsured or where there is a conflict ofinterest, the insurer may not compel theinsured to surrender control of the litiga-tion). (Previews, Inc. v. California Union Ins.Co. (9th Cir 1981) 640 F.2d 1026, 1028.)

In 1984, San Diego Navy FederalCredit Union v. Cumis Ins. Society, Inc.,(1984) 162 Cal.App.3d 358 exploded outof the Fourth Appellate District andchanged the face of insurance defensethereafter. At the time I was in charge ofone of the largest coverage/bad-faithdepartments in California, the Haight

firm, and there I was called upon to lec-ture and otherwise guide the insuranceindustry through this very broadly writ-ten opinion on independent counsel.

The author of the Cumis case, JudgeGamer, was sitting by assignment. Thecase was a broadside against large inde-pendent firms with multiple insuranceclients: “Insurance companies hire rela-tively few lawyers and concentrate theirbusiness. A lawyer who does not look outfor the Carrier’s best interest might soonfind himself out of work.” (Cumis, Id. at p.364). Now an insured is represented by“law divisions” of the insurer or boutiquefirms servicing but one insurer-client.

The Cumis case was by its facts a clas-sic conflict situation. The insurer’s reser-vation of rights on multiple theoriesinvolved wrongful misconduct. The Cumisopinion left the plaintiff ’s bar with thebelief and position that any reservation,or speculative set of facts, would requireindependent counsel.

The issue of the scope of independ-ent counsel in the “multiple theory” con-flict case was not clarified until 1987 whenthe Legislature defined and set guidelinesfor its application to independent counsel.(See Cal. Civ. Code, § 2860).

Civil Code section 2860, sometimesreferred to as the “Cumis” statute, wasnever intended to address all possibleconflicts or to preclude judicial determi-nation concerning the insured’s right toindependent counsel. (See Gafton, Inc. v.Ponsor & Assoc., (2002) 98 Cal.App.4th1388, 1421).

It is important to note the Cumis caseitself cited both Tomerlin and ExecutiveAviation for the understanding that a con-flict can stem from both “multiple theo-ries” and lack of “economic motive.”(Cumis, Id. at p. 369). The Cumis courtstated that payment of independentcounsel was implicit in the Tomerlin opin-ion: “If the insurer must pay for the costof defense and, when a conflict exists, theinsured may have control of the defense ifhe wishes, it follows the insurer must payfor such defense conducted by independ-ent counsel” (Cumis, Id. at p. 369).

Over the years the CaliforniaSupreme Court has clarified many issues.

In general, the Court has strongly backedthe right of the insurer to draft its con-tract and not have speculative ambiguityserve as a basis for independent counsel.The Court has also taken the view, in myopinion, that settlement is the primaryobject or goal in insurance contract inter-pretation.

Settlement is not thwarted by inde-pendent counsel. The insurer is not pre-vented from exercising its contractualright to settle as it deems expedient. (SeeWestern Polymer Technology, Inc. v. RelianceIns. Co., (1995), 32 Cal.App. 14, 22.)When the insurer’s reservation of itsrights effectively eliminates economicmotive, the desire to prosecute the actionon behalf of the insured is affected.When two counsel are participating insettlement issues, the settlement processis, in fact, facilitated. (See Cal. Civ. Code,§ 2860(f), Novak v. Low, Ball & Lynch,(1991) 77 Cal.App.4th 278.)

When no economic motive rests withthe insurer to prosecute a vigorousdefense for its insured, only inherentconflict and unnecessary tension can bethe result. The insured may wish to movequickly so a problem or issue does notget out of hand, while the insurer has noeconomic motive to settle. The insuredmay wish a vigorous defense, but theinsurer’s hired counsel may be told toput a tight lid on defense expenses.

I am not an expert on the ethicalissues relating to the Rules ofProfessional Conduct. However, as aninsurance expert, I know that afterissuance of a reservation of rights letterthat effectively eliminates economicmotive in the insurer to defend or settlea case, the insurer may be required torelinquish control of defense and pay forthe insured’s choice of counsel.

Kim Collins of Auburn, California is atrial expert in the standard of care/coveragebad-faith lawsuits. He founded the badfaith/coverage department at the Haight firmgrowing to over twenty attorneys. He was thefounder of Attorney Insurance Mutual forlarge firm E&O insurance, writing the policyand handling the underwriting and claims asa board member.



Insurance is the engine that drivesthe settlement. In 95 percent of themediations I have participated in overthe years, insurance coverage, bad faith,duty to defend and insurance-defenseissues are frequently the catalysts for set-tlement. The bottom line is that insur-ance controls the settlement dynamic,and the ultimate decisions regarding thetiming and amount of settlements arealmost always made by insurance compa-nies.

In light of these undisputed facts,one would imagine that all plaintiffs’attorneys would be experts on insurancecoverage principles. After all, if insur-ance companies are ultimately payingyour mortgage or childrens’ college fund,one should understand how insuranceworks. However, in my experience, mostplaintiffs’ lawyers do not have anywherenear the level of expertise they shouldhave in order to meaningfully negotiatewith insurance companies at mediation.

Ultimately, a plaintiffs’ lawyer withan extensive understanding of insurancelaw and insurance principles is anextremely powerful negotiator. A signifi-cant factor in settlement at mediation isunderstanding the psychology of insur-ance carriers. Further, in many circum-stances, insurance coverage issues willmake or break a settlement. Being ableto specifically address insurance coverageissues – perhaps even by way of a sepa-rate mediation brief on insurance issues– can be dispositive to settlement.

This article will survey and summa-rize some of the fundamental insuranceissues that arise at mediation and impacton settlement of personal-injury cases.Further, this article will provide specificadvice and strategies for dealing withcommon insurance issues. It is my hopethat the article will provide a roadmapfor plaintiffs’ lawyers to settle more casesat mediation.

Timing of mediation

The first issue is when is the besttime to conduct mediation and try to set-tle cases involving insurance companies.Every plaintiff ’s attorney dreams of the“early mediation,” that settles a case withminimal effort. But it is extremely rarefor an insurance company to ever paytop money for settlement without goingthrough the litigation process. In light ofthis reality, in order to have a meaningfulmediation yielding maximum value, themediation should, in virtually every case,be held at the later stages of litigation.

Insurance adjusters deal with facts,not potentialities. Most carriers will notprovide a true bottom line until theyhave completed all discovery and haveconducted an analysis of the experts onthe other side. If your case does haveexperts, the most meaningful mediationsare those where the actual expert’sreports are prepared and attached to themediation brief. Even if those expertshave not yet been deposed, if their opin-ions are set in stone and are communi-cated to the other side, the carrier willknow what that expert witness will say attrial and can adjust its analysis of thecase accordingly.

Conversely, if a mediation is heldtoo early, the mediation brief will merelyconsist of arguments and contentions andwill not be able to incorporate factualevidence and documents. That will notbe persuasive to the line adjuster or evensupervisor, who must always justify thepayment of money with detailed analysis,frequently with reports from defensecounsel and defense experts. Theadjuster must “paper the file” or theirjudgment in paying a settlement will belater questioned.

In addition, the carrier and defensecounsel must put the plaintiff ’s lawyerand plaintiff “through the paces.” There

is no free lunch for plaintiffs. Moreover,many plaintiffs and their counsel getimpatient or even give up during thelengthy litigation process. Insurancecompanies understand this psychology,and seek to exploit it.

Ultimately, however, it is fundamen-tal that “trial dates settle cases.” Savvytrial judges know this, and will frequentlymanifest it in denying motions to contin-ue trial. This principle is borne out bythe many settlements that are literallyachieved on the “courthouse steps,” oron the eve of trial. A pending date with12 jurors puts enormous pressure onboth parties. Plaintiffs suddenly get veryrealistic in their expectations. Insurancecarriers revert to the true, inner self –being risk averse and conservative.

A corollary to this fundamental ruleis that the most effective way to achievesettlement is if plaintiff ’s counsel hasextensive trial experience. One of the keyquestions that an insurance company willask is whether the plaintiff ’s lawyer or lawfirm has a track record of conductingactual trials in front of a jury. If the plain-tiff ’s lawyer or firm lacks a track record ofjury trials, the defense insurer will feel nofear or pressure of an adverse trial out-come, and the case may not settle.

Settlement is a powerful weapon inthe arsenal of the trial lawyer. It is one ofthe true ironies of litigation that the bestsettlements come from the lawyer who isan expert at trials and has prepared hiscase for trial. The trial lawyer who pre-pares his case for trial is the lawyer whogets the best settlements.

Choosing the right mediator Once the decision is made to go to

mediation, it is critical to choose theright mediator. There are many excellentmediators in California. There are veryfew mediators, however, who have signifi-cant insurance expertise.

Edward Susolik

Insurance strategies for mediation and settlementA look at the fundamental insurance issues that arise at mediation


In my experience, it is highly prefer-able to select a mediator with extensiveinsurance experience and understanding,as well as expertise in the particular areaof law at issue in the mediation. Thereare many reasons for this. However, oneneed go no further than a reading of thisarticle. Given the prevalence of insuranceissues that permeate mediation and thesettlement process, it would be truly iron-ic if the one person who is to effectuateand facilitate such settlement was anovice in insurance issues. Such a neu-tral will be unpersuasive when dealingwith the insurance company because heor she is unable to communicate effec-tively with the carrier or its counsel.Accordingly, a plaintiff ’s lawyer shouldconduct significant due diligence andmake sure that the mediator beingselected has extensive insurance back-grounds and experience.

The mediation briefMany lawyers fundamentally misun-

derstand and fail to appreciate the critical

power of the mediation brief to the set-tlement process. Specifically, the media-tion brief is the one chance that plaintiffcounsel has of communicating directlywith the decision makers at the insurancecompany prior to trial. Such communica-tion is unfiltered by anything that thedefense lawyer can do.

Success in mediation is based onleverage. Leverage is acquired throughinformation that is conveyed to the other side. The most powerful and effec-tive way to convey that information isthrough a detailed, thorough and persua-sive mediation brief. Without a powerfuland persuasive mediation brief, you willnever be able to maximize your settle-ment results.

A successful mediation brief hasnumerous procedural and substantiverequirements. • Procedural considerations

With respect to procedure, there area number of critical procedural factors.

First, it is critically important toserve the mediation brief on the insur-

ance company and the defense wellbefore the mediation. One week beforethe mediation is the absolute minimum.Two weeks or more is the optimal time.The reason is simple. If you want yourbrief to be persuasive and to be consid-ered by the decision-makers for theopposing party, you must give them suffi-cient time to read, analyze, critique anddigest your brief.

Further, the more significant yourcase, the busier are the individuals onthe other side who will be consideringyour arguments. Therefore, you mustconsider the frequently busy schedulesof the decision-makers on the otherside. There is no worse mistake thanwalking in on the day of mediation andhanding a brief to the mediator and theother side. Your brief will fall on deafears.

Second, your mediation brief musthave a highly professional appearance. Itsends a strong message to the other sideabout your level of competence andattention to detail. You are trying to


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Strategies — continued

impress upon the other side that you willbe a powerful force and opponent attrial. A brief full of misspellings, unper-suasive arguments or incompletethoughts sends exactly the wrong mes-sage. Conversely, a persuasive, well-edit-ed and highly polished mediation briefsends a message to the other side thatyour approach at trial will be equallypowerful.

Even matters such as formatting andcopying are important in communicatingyour message of strength. Rather thanusing staples or fasteners, I will frequent-ly use spiral binding or other sophisticat-ed printing techniques to bind the briefin order to give the document the mostprofessional look possible.

When serving the brief on the otherside, you should make multiple copiesfor the service. If you go through theexpense of putting together a highly pol-ished mediation brief and merely allowthe other side to make their own photo-copies, you’ll be eliminating much of the“shock and awe” effect of receiving anexpensively bound brief.

Estimate the number of parties,counsel and insurance carriers on theother side; make multiple copies, andhave them delivered by hand to counsel.For example, a simple rule is to make tencopies of the mediation brief for oppos-ing counsel so they can in turn be deliv-ered to the relevant decision-makers.Remember, this is your opportunity to

have an “ex parte” communication withthe insurance adjuster on the other side.Given that they will be personally review-ing your work, it pays to put your bestfoot forward by preparing a professionalcopy of the mediation brief, as opposedto having defense counsel’s photocopydepartment make rough copies.• Substantive considerations

The extensive amount of time youspend preparing such a brief will pay div-idends many times over if the brief issuccessful in persuading the other side toadjust their settlement position in ameaningful manner. By way of example,in a recent case, our office spent over sixweeks writing a brief in a personal injurycase. That brief ended up containing 82pages of text, plus 300 pages of exhibits.The case ultimately settled in seven fig-ures. I am absolutely certain that our 82-page mediation brief, when compared tothe 11-page brief prepared by thedefense, made a huge impression on theinsurance companies on the other sideand motivated their decision to settle thecase at top value.

Equally important, substantively, arethe facts and information one shares withthe opposing party. First and foremost,the concept of a “confidential” mediationbrief is completely contrary to meaning-ful mediation. Defendants are especiallyfond of submitting confidential media-tion briefs. In my opinion, that is a fun-damental mistake. It is obviously impossi-ble to motivate a plaintiff to lower itsdemands based on weakness and short-comings in its case if the defense doesnot share such an analysis with plaintiff.It is almost as if those defendants haveno desire to settle.

From my perspective, the most fruit-ful way to a successful mediation result isto share your best and most persuasivearguments with the other side. The onlyexception is if you truly have some strongand powerful facts or arguments (such asa damaging sub rosa tape) that the otherside is not yet aware of. In that case, Iwould encourage a separate, confidentialmediation brief discussing such issues.For example, in a recent multi-milliondollar insurance bad-faith case, we


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Along similar lines, too many media-tion briefs are long on argument, con-tention and hyperbole, but short on actu-al facts. Insurance adjusters have a built-in BS detector built up over years anddecades of handling claims. You mustovercome that inherent skepticism. Apowerful mediation brief should also sys-tematically set forth all evidence anddocuments in the case. Furthermore, fac-tual assertions and legal arguments inthe brief should be supported by specificreference to an appendix of exhibits. Ifthere are evidentiary issues relating tosuch evidence, these issues should beaddressed in the brief in order to per-suade the other side that the evidencewill indeed be presented to the jury.

One of the most difficult aspects ofany mediation is proper evaluation of thesettlement value of a case. Perhaps themost powerful tools for determining set-tlement value are verdicts and settle-

ments from similar cases. A good media-tion brief will include a detailed analysisof related verdicts and settlements fromother similar cases, together with copiesof the actual verdict and settlementforms. Those related verdicts and settle-ments will remove some of the guessworkfrom estimating the settlement value of acase. More importantly, it will emphasizeto the risk-averse insurance companysome of the worst downsides of not set-tling the case and going to trial.

Fundamental insurance issues There are many critical insurance

issues that may face a plaintiff ’s attorneyat a mediation, especially in high-valuecases where there are multiple defen-dants and multiple policies. While it isdifficult to address all such possibilities,here are some of the key issues for plain-tiff ’s lawyers.

In cases involving a continuous lossthat has occurred over a number ofyears, it is important to make sure thatall insurers that insured the defendantfrom the time the loss began have beengiven notice of the claim, because

California applies the “continuousinjury” trigger of coverage, in the contextof a third-party liability policy, “bodilyinjury” or “property damage” that is con-tinuous or progressively deteriorating sothat such “bodily injury” or “propertydamage” is potentially covered by allpolicies in effect during the period whenthe injury or damage occurred. (MontroseChemical Corp. v. Admiral Ins. Co. (1995)10 Cal.4th 645, 685-689.) Under the “allsums’ rule adopted in Aerojet-GeneralCorp. v. Transport Indemnity Co. (1997) 17Cal.4th 38, 55-57, an insurer on the riskwhen continuous or progressively deteri-orating property damage or bodily injury first manifests itself is required toindemnify the insured for the whole ofthe ensuing damage or injury. Recently,in State of California v. Continental Ins. Co.(2012) 55 Cal.4th 186, 202, the SupremeCourt held that absent an antistackingprovision in the policy or a statute thatforbids stacking, policy limits can bestacked.

It is important to get copies of all ofthe defendant’s potentially applicablepolicies for all potentially applicable


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policy years, and not just the most recentpolicy, because there may have been sig-nificant changes that have been made incoverage, even if the policies have beenissued by the same insurer. For instance,many insurers have recently eliminatedcoverage for attorney’s fees awardedagainst the insured by excluding attor-ney’s fees from the definition of “costs”under the supplementary payments pro-vision of their general liability policies,but earlier applicable policies may stillcover such fees.

In cases involving intentional acts byan insured which would not be coveredbecause of an intentional acts exclusionor Insurance Code section 533, it isimportant to emphasize the separate lia-bility of innocent co-insureds in light ofthe holding in Minkler v. Safeco Ins. Co. ofAmerica (2010) 49 Cal.4th 315, 319, thatunder a policy containing a “separateinsurance” clause, each insured’s cover-age should be analyzed separately.

If there are excess/umbrella policiesinvolved, it is important to determinewhat underlying policies need to beexhausted in order for each excess/umbrella policy to come into play. The“horizontal exhaustion” rule requires allprimary insurance to be exhausted beforean excess insurer must drop down todefend an insured, including in cases ofcontinuing loss. The “vertical exhaus-tion” rule allows an insured to seek cov-erage from an excess insurer as long asthe specific underlying insurance policyor policies identified in the excess havebeen exhausted. Under California law,unless the excess insurance describes theunderlying insurance policy and onlyagrees to cover a claim when that specificunderlying insurance policy is exhausted,the horizontal exhaustion rule appliesand all primary insurance must beexhausted before an excess insurer mustdrop down to defend an insured, espe-cially in cases of continuing loss. (PadillaConstruction Co., Inc. v. Transportation Ins.Co. (2007) 150 Cal.App.4th 984, 986-987.)

If one or more of the defendants isan additional insured on another defen-dant’s policy, there may be issues arising


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out of trying to settle out only the namedinsured or only the additional insured.The insurance company cannot settle outone insured without obtaining a releaseof the other insured, without the otherinsured’s consent. (See, American MedicalInternational, Inc. v. National Union FireIns. Co. of Pittsburgh (9th Cir. 2001) 244F.3d 715, 720-721.) One way to settle outonly the named insured or only the addi-tional insured is to try to get the insur-ance company, with the consent of boththe named insured and the additionalinsured, to offer a portion of the policylimits to settle out the named insured oradditional insured.

Most professional liability policieshave “burning limits,” i.e., limits that areeroded by defense fees and costs. Thismeans that by the time the parties are atmediation, the remaining limits of thedefendant’s “burning limits” policy willbe less than stated policy limits, and apolicy limits demand would have to beless than the stated policy limits. Oneway to make a policy limits demand on a“burning limits” policy is to demand theremaining limits of the policy, as long asthe amount of the remaining limits isover a specified amount. Some “burninglimits” policies also provide additionalexcess “burning limits” coverage fordefense fees and costs incurred by theinsured. Depending on the exact termsof the policy, it could be argued that as

long as defense fees and costs are lessthan the excess “burning limits” coveragefor defense fees and costs, the fullamount of the primary limits is available.Some “burning limits” policies also pro-vide additional coverage for attorney’sfees and costs awarded against theinsured. If plaintiff is entitled to attor-ney’s fees and costs, plaintiff should con-sider making a demand for the primarylimits plus an additional amount basedon the fees and costs that plaintiff couldrecover.

Using insurance bad-faith principles The “golden ticket” for settlement of

cases which involve an insurance companyis the threat of extra-contractual liability,or bad faith. Being able to “pop the topoff the policy” is every plaintiff lawyer’sdream, and every insurance company’snightmare. The following are some of thecritical principles that govern bad faith inthe context of settlement discussions.

California insurance law requires aninsurer owes a good-faith duty to initiatesettlement discussions. (See, Garner v.American Mut. Liab. Ins. Co. (1973) 31Cal.App.3d 848; Brown v. Guarantee Ins.Co. (1957) 155 Cal.App.2d 679, 689; andShade Foods, Inc. v. Innovative ProductsSales & Marketing, Inc. (2000) 78Cal.App.4th 847, 906.) In fact, CaliforniaInsurance Code section 790(h)(5)requires insurers to attempt “in good


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faith to effectuate . . . settlements ofclaims in which liability has become rea-sonably clear.” Section 790(h)(5) imposesa duty on the insurer to actively attemptto settle a claim by making, and byaccepting, reasonable settlement offersonce liability has become reasonablyclear. (Pray By & Through Pray v. ForemostIns. Co. (9th Cir. 1985) 767 F.2d 1329,1330.)

An insurer has an implied duty toaccept reasonable settlement demands oncovered claims within the policy limits.(Kransco v. American Empire Surplus LinesIns. Co. (2000) 23 Cal.4th 390, 40.) Indeciding whether or not to settle a claim,the insurer must take into account theinterests of the insured. (Comunale v.Traders & General Ins. Co. (1958) 50Cal.2d 654, 658-661.) In other words, aninsurer that breaches its duty of reason-able settlement is liable for all of theinsured’s damages proximately caused bythe breach, regardless of policy limits.(Hamilton v. Maryland Cas. Co. (2002) 27 Cal.4th 718, 725 (citing PPGIndustries, Inc. v. Transamerica Ins. Co.(1999) 20 Cal.4th 310, 315 and Comunalev. Traders & General Ins. Co., supra, 50Cal.2d at p. 661.)

The only thing an insurer can con-sider in determining the reasonablenessof a settlement demand is “whether, inlight of the victim’s injuries and theprobable liability of the insured, the ulti-mate judgment is likely to exceed the set-tlement offer.” (Johansen v. California StateAuto. Assn. Inter-Ins. Bureau (1975) 15Cal.3d 9, 16.) An insurer’s good faith butincorrect belief there is no coverage isnot a defense to liability for its refusal toaccept a reasonable settlement demand.(Id., at 15-16.)

Even though the case law talks of aninsurer’s liability breach of the duty ofreasonable settlement, which wouldimply that the insurer has to have actedin breach of the implied covenant ofgood faith and fair dealing, an insurermay be liable for the full amount of thejudgment based on breach of contract.(See Archdale v. American Internat. SpecialtyLines Ins. Co. (2007) 154 Cal.App.4th449, 468.)

Thus, in light of these black-letterprinciples, the most powerful strategythat a plaintiff can follow at mediation isto make a policy-limits settlementdemand. A plaintiff must make sure thatthe carrier has all the facts and informa-

tion to reasonably consider such a policy-limits demand, and the demand must bekept open a reasonable time, but if thecarrier fails to reasonably settle a casewithin policy limits, it may be exposed tobad-faith liability.

The process of obtaining an assign-ment of bad-faith rights is outside thescope of this article; the reader shouldconsult a learned treatise, such as theRutter Guide on Insurance Litigation forthe practice and procedure of effectuat-ing such an assignment.

One final important point toremember is that the mediation privilegeis very broad. Thus, in order to guaran-tee that policy-limits settlement demandsare admissible in a later bad-faith trial,make sure that such settlement commu-nications are formally made (in writing)outside of the mediation context as well.

Intra-insurance bad faith In cases involving multiple insurers

and multiple layers of coverage, theremay be an obstinate insurer that refusesto offer its policy limits, even thoughinsurers higher up on the coverage lad-der may want to offer their limits. Insuch a case, it often helps to point out to


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the recalcitrant insurer the potential consequences of refusing to offer its poli-cy limits. For example, a primary insurerfaces the prospect of being liable for thefull amount of any judgment. A primaryinsurer has a good-faith duty to take intoaccount the interests of the excess insurerequally with its own and must conductthe defense of an action, including settle-ment negotiations, so as not to exposethe excess insurer to unwarranted liabili-ty. (Diamond Heights Homeowners Assn v.National American Ins. Co. (1991) 227Cal.App.3d 563, 579.) Upon paying anexcess judgment, the excess insurer isequitably subrogated to the insured’srights and remedies against the primaryinsurer. (Fireman’s Fund Ins. Co. v.Maryland Cas. Co. (1994) 21 Cal.App.4th1586, 1601; see also Continental Cas. Co.v. Royal Ins. Co. (1990) 219 Cal.App.3d111, 117.)

If the primary insurer unreasonablyrefused to settle within its policy limits,the excess insurer may recover from theprimary insurer the full amount of anyjudgment against the insured that theexcess insurer is compelled to pay,regardless of the primary insurer’s policylimits. (Northwestern Mut. Ins. Co. v.Farmers Ins. Group (1978) 76 Cal.App.3d1031, 1050; see also Highlands Ins. Co. v.Continental Cas. Co. (9th Cir. 1995) 64F3d 514, 518.) Since an excess insurerthat refuses to offer its policy limits maybe liable for any judgment in excess of itslimits, that excess insurer should be liableto the higher layer excess insurers. (See,Kelley v. British Commercial Ins. Co. (1963)221 Cal.App.2d 554, 563).

Dealing with denial of coverageI will frequently mediate cases with

insurance companies after they havedenied coverage for a claim, and I havetaken aggressive steps in obtaining adefault judgment or assignment of bad-faith rights. In those circumstances, Ihave maximum leverage against the car-rier in mediation, assuming the underly-ing PI case is significant and the cover-age issues are strong. The following aresome of the principles involved when thecarrier denies coverage.

If the defendant’s insurer has deniedcoverage, it may be worthwhile to eithersettle with the defendant by agreeing to astipulated judgment, with a covenant notto execute and an assignment of theinsured’s claims against the insurer, orobtain a default judgment against thedefendant and then try to get an assign-ment. After obtaining the stipulated judg-ment or default judgment and assumingthe policy in question is one that is subjectto the judgment creditor statute, which allpolicies covering bodily injury and prop-erty damage are, the plaintiff could bringan action against the insurer as a judg-ment creditor under Insurance Code sec-tion 11580(b)(2) and as an assignee of anyclaims assigned by the insured.

An advantage of obtaining a stipu-lated judgment, with a covenant not toexecute and an assignment of theinsured’s claims against the insurer, asopposed to obtaining a default judg-ment, is that the plaintiff can negotiatethe assignment from the insured as partof the settlement. An advantage ofobtaining a default judgment, with acovenant not to execute is that if plain-tiff can get an assignment from theinsured, the plaintiff could rely on Amatov. Mercury Casualty Co. (1997) 53Cal.App.4th 825, 833, to argue that theinsurer is liable for the full amount ofthe default judgment as damages causedby the insurer’s bad faith denial of cov-erage, regardless of whether there is


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coverage for the judgment under thepolicy.

In obtaining an assignment of rightsfrom the insured, the plaintiff shouldconsider the fact that the right to attor-ney’s fees and costs incurred in obtainingcoverage is assignable, but claims forpunitive damages and emotional distressdamages are not. A partial assignment ofthe insured’s assignable rights wouldallow the insured to keep the claims forpunitive damages and emotional distressdamages. Plaintiff ’s counsel could thenseek a conflict waiver and represent boththe insured and the plaintiff in one suitagainst the insured. A possible complica-tion that could arise in the case of adefault judgment is that the insurercould seek to set aside the default anddefault judgment and move to intervene.

ConclusionAs explained above, virtually every

settlement of litigation involves insuranceand insurance issues. A plaintiff ’s lawyerwith an extensive understanding of insur-ance law and insurance principles is anextremely powerful negotiator. I hopethat this article was able to provide someinsight and advice on some of the funda-mental insurance issues that arise atmediation and impact on settlement ofpersonal injury cases.

Edward Susolik is the partner in chargeof the insurance department at Callahan &Blaine. He specializes in complex insurancelitigation, and has filed over 1000 insurancebad-faith lawsuits during his career. In addition, he is an adjunct professor at USC Law School, and can be reached at [email protected]. Callahan& Blaine’s Web site is found atwww.callahan-law.com.


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Standard Fire Ins. v. Knowles (2013) __ U.S. __, 133 S.Ct. 1345 (U.S.Supreme)

Who needs to know about this case?Lawyers bringing class-action lawsuits try-ing to avoid removal to federal courtunder the Class Action Fairness Act(“CAFA”) by limiting the amount in con-troversy to less than $5 million.

Why it’s important: Holds that thistactic is not effective in keeping classactions out of federal court.

Synopsis: CAFA gives federal districtcourts original jurisdiction over classactions in which, among other things, thematter in controversy exceeds $5 millionin sum or value, 28 U.S.C. § 1332(d)(2),(d)(5), and provides that to determinewhether a matter exceeds that amountthe “claims of the individual class mem-bers must be aggregated.” (§ 1332(d)(6).)To avoid removal under CAFA, someplaintiffs were agreeing in their com-plaints that their recovery would notexceed $5 million. Some circuits hadexpressly held that this approach wouldpreclude removal under CAFA. (Rolwingv. Nestle Holdings, Inc. (8th Cir. 2012) 666F.3d 1069, 1072 [“a binding stipulationlimiting damages sought to an amountnot exceeding $5 million can be used todefeat CAFA jurisdiction”.]) The NinthCircuit appeared to follow this rule. (See,e.g., Lowdermilk v. U.S. Bank National Ass’n(9th Cir. 2007) 479 F.3d 994, 999, n 5.)

In Standard Fire Ins., a unanimousU.S. Supreme Court abrogated Rolwingand held that a class plaintiff ’s stipula-tion that the amount of the class’s dam-ages would not exceed $5 million is bind-ing only on the class representative – andnot on the unnamed class members. “[A]plaintiff who files a proposed class actioncannot legally bind members of the pro-posed class before the class is certified.”Because the pre-trial stipulation does notbind anyone but the class representative,

it is not effective to reduce the value ofthe putative class’s claims, and cannot beused to defeat removal under CAFA.

US Airways v. McCutcheon(2013) __ U.S.__, 133 S.Ct. 1537 (U.S.Supreme)

Who needs to know about this case?Lawyers handling personal-injury casesfor clients who have health insurance.

Why it’s important. Holds that ifthe insurance was subject to ERISA(which most health coverage is), and theplan contains a reimbursement provision,that provision has to be enforced as writ-ten, and cannot be modified by equitabledefenses. Such defenses can, however, beused as “gap fillers” to interpret ambigu-ous provisions.

Synopsis: McCutcheon, a U.S.Airways employee, was injured in a caraccident with a third party. The U.S.Airways health plan paid $66,866 inmedical costs. The plan contained thefollowing reimbursement provision:

“If [US Airways] pays benefits forany claim you incur as the result of negli-gence, willful misconduct, or otheractions of a third party, ... [y]ou will berequired to reimburse [US Airways] foramounts paid for claims out of anymonies recovered from [the] third party,including, but not limited to, your owninsurance company as the result of judg-ment, settlement, or otherwise.”

McCutcheon settled the case againstthe third party for $110,000, and paidhis attorney a 40 percent contingencyfee. Hence he netted $66,000. USAirways sought reimbursement of theentire amount of its costs. WhenMcCutcheon refused to pay, the planfiled suit against him under § 502(a)(3)of ERISA, seeking “appropriate equitablerelief.” McCutcheon defended with twoequitable defenses – the “made whole”rule, arguing that the plan had no right

to reimbursement before he had beenmade whole for all his damages; and thecommon-fund doctrine, arguing that theplan’s reimbursement had to be reducedto reflect the amount of the attorney’sfees incurred to produce the settlement.The district court ruled in favor of theplan; the Third Circuit reversed based onthe equitable defenses, and the U.S.Supreme Court reversed.

The Court held that the equitablemade-whole rule could not trump thelanguage of the plan, which conferred areimbursement right on the plan. Butbecause the plan was silent on about howthe costs of recovery would be paid, thecommon-fund rule would be used as arule of “interpretation” to fill that inter-pretive gap. The Court made clear, how-ever, that if plans included language thataddressed the way costs of recoverywould be addressed, that language wouldcontrol. It also noted that if plans soughtto avoid the common-fund rule, it wouldlead subscribers to decline to enforcetheir rights, forcing the plans to attemptto collect.

Corenbaum v. Lampkin (2013) __ Cal.App.4th __ (2d Distr., Div.3.)

Who needs to know about this case?Lawyers handling personal-injury claimswhere the client’s medical bills have beenpaid by insurance.

Why it’s important. Addresses sever-al questions left open by Howell v.Hamilton Meats concerning the use of the“billed” amount for healthcare expenseswhen an insurer has paid a lower negoti-ated amount – including whether expertscan rely on such amounts. (Nope.)

Synopsis: Corenbaum and Carterwere injured when a vehicle driven byLampkin collided with the taxi they wereriding in. At trial, the jury awardedCorenbaum $1.8 million, and Carter


From theEditor


By Jeffrey Isaac EhrlichEditor-in-Chief

Aboutthis Issue

Jeffrey Isaac Ehrlich

Aboutthis Issue

Book Review

Appellate Reports and cases in briefRecent cases of interest to members of the plaintiffs’ bar



Appellate — continued

$1.4 million in compensatory damages.Although their medical expenses werepaid by health insurance, at trial the jurywas presented with the full “billed”amount of the medical bills, not the dis-counted amount that the providers hadagreed to accept from the insurer as fullpayment. Lampkin filed a post-trialmotion to reduce the compensatory dam-ages based on the discounted medicalbills, but the trial court did not rule on itbefore its jurisdiction to deal with post-trial motions expired. Howell was decidedafter the verdict. On appeal, Lampkinraised a number of issues relating to theadmission of the full billed amount of thebills. The Court of Appeal ruled on thoseissues as follows:

1. Evidence of the full billed amountis not relevant to the amount of pastmedical expenses. The court held thatthe reasoning of Howell ultimately leadsto the result that, where medicalproviders agree to accept a discount fromtheir full billed amount as full paymentfor their services, evidence of the fullamount billed is not relevant for any pur-pose concerning the plaintiff ’s past med-ical expenses. But the evidence of theamount that the providers have agreed toaccept is admissible, as long as the sourceof the payment is not presented to thejury (and satisfies other rules of evi-dence).

2. Evidence of the full billed amountfor past medical services is not relevantto the determination of the damages forfuture medical expenses. While Howelldid not reach this issue, and seemed toleave open the possibility that the fullamount of billed expenses might be rele-vant to other issues, including futuremedical expenses, the reasoning theSupreme Court relied on in Howell pre-cludes this type of use. The Howell courtheld that the full billed amount of pastmedical expenses “is not an accuratemeasure of the value of medical services”in light of the way the market for medicalservices functions. Accordingly, theamount billed is not relevant and there-fore not admissible.

3. Experts cannot rely on the fullbilled amount to offer an opinion on


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future medical expenses. Since theamount of expenses billed has no rele-vance to the value of those services, it isnot information that experts can rely onto formulate opinions that may be pre-sented to the jury. (Ed. note – the opin-ion does not however, say that expertsmust assume that a plaintiff will continueto have insurance that will cover futuremedical expenses at the same discountedrate as the past expenses; only that theundiscounted amount of the past expens-es is not relevant to future expenses.)

The court held that the admission ofthe full billed amount was prejudicialerror that could not be cured with a post-judgment reduction. It ordered a newtrial on the amount of compensatorydamages.

Hernandez v. Amcord, Inc. (2013) __ Cal.App.4th __ (2d Dist. Div.1.)

Who needs to know about this case?(1) lawyers who handle asbestos cases; (2)lawyers who rely on medical evidence forcausation issues; (3) lawyers in caseswhere there is evidence that the defen-dant lobbied a regulator (which showsthe defendant’s knowledge of the harm-fulness of its conduct)

Synopsis: The family of ArnulfoHernandez filed a wrongful-death actionafter he died of mesothelioma. At trial,the family introduced the testimony ofRichard Lemen, Ph.D., an epidemiolo-gist – a field of medicine that is thestudy of disease patterns and popula-tions. He testified that an epidemiologiststudies what causes disease, and thenuses that information to implement dis-ease prevention. He opined that a work-er who poured a 94-lb sack of asbestos-containing gun plastic cement would beat risk of developing mesothelioma if theasbestos fibers were respirable and air-borne. The family also introduced thetestimony of Richard Kradin, M.D., whotestified that based on Mr. Hernandez’sexposure at work to various asbestos-containing products, including thedefendant’s plastic gun cement, that it was his opinion to a reasonable degree of medical probability that Mr.


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Appellate — continued

Hernandez’s mesothelioma was causedby asbestos.” The trial court granted thedefendant’s nonsuit motion, finding thatbecause Dr. Lemen was not an M.D., hecould not offer an opinion on causation,and that Dr. Kradin failed to offer anopinion that the defendant’s product wasa substantial factor in causing the dece-dent’s illness. Reversed.

In asbestos cases, causation is a two-part inquiry. Plaintiff must first set forthsufficient evidence to show some thresh-old exposure to the defendants’ asbestos-containing product. Second, plaintiffmust establish to a reasonable medicalprobability that exposure to the defen-dant’s product was a substantial factor inbringing about the injury. The court heldthat the plaintiff ’s evidence met thisstandard. The evidence showed that Mr.Hernandez used the defendant’s product“lots of times” and the product was pack-aged in 94-lb sacks, which would createsubstantial dust when they bag was cutopen and when the contents weredumped in a mixer. Testimony from Dr.Lemen was admissible to satisfy the sec-ond factor, even though he was not anM.D. “Qualifications other than a licenseto practice medicine may qualify a wit-ness to offer a medical opinion.”Collectively, the testimony of plaintiff ’switnesses was sufficient to allow the juryto find that exposure to defendant’sproduct was a substantial factor in caus-ing the decedent’s asbestos-related dis-ease. No recitation of specific words orphrases is necessary to establish causa-tion.

At trial, the plaintiffs sought tointroduce evidence that defendant hadlobbied Cal.OSHA for an exemption tothe 1975 statutory provisions banningasbestos-spray construction products.Plaintiffs argued that this evidence wasrelevant to show that defendant negli-gently took steps to continue to sell aproduct that it knew was dangerous. Thetrial court excluded the evidence of lob-bying under the Noerr-Pennington doc-trine, which shields defendants from lia-bility based on their legitimate right topetition government officials. This waserror, because the Noerr-Pennington



doctrine is not a rule of evidence; it is aliability shield. This means that a corpo-ration’s petitioning government officialsmay not itself form the basis of liability –but that petitioning activity may beadmissible if otherwise relevant to showthe purpose and character of otheractions by the corporation.

Short(er) takes

Sanctions, frivolous appeals:Kleveland v. Seigel & Wolensky, LLP (2013)__ Cal.App.4th __ (4th Dist., Div. 1.) Scott Leach challenged the way thatKleveland handled a trust, as trustee. Hisprobate action spawned two priorappeals. In appeal 1, the court affirmedthe trial court’s ruling that Leach’s peti-tion to remove Kleveland as trustee wasfiled in bad faith, and for an improperpurpose. In appeal 2, the court affirmedthe trial court’s approval of an account-ing and plan to distribute trust assets.Kleveland then sued Leach and his attor-neys, Seigel & Wolensky, for maliciousprosecution arising out of the prior pro-bate litigation. The attorney defendantsfiled an anti-SLAPP action, which thetrial court denied, finding that Klevelandwas likely to prevail on the merits. Theattorneys appealed the denial. The Court

of Appeal affirmed the denial, and sanc-tioned the attorneys for filing a frivolousappeal. The Court found that openingbrief for the attorneys omitted criticalfacts – such as the prior finding thatLeach’s probate action had been deter-mined to have been filed in bad faithand for an improper purpose. The courtfound that the attorney defendants alsomisrepresented the record, and ignoredestablished case law without explanationor justification. Because the appeal of thedenial of the anti-SLAPP motion indis-putably had no merit, and any reason-able attorney would agree that theappeal was “totally and completely with-out merit,” the court sanctioned theattorney defendants, ordering them topay Kleveland’s attorney’s fees of$52,727, as well as a sanction to the courtof $8,500.

Civil Rights, Unruh Act, HIV status,discrimination: Maureen K v. Tuschka(2013) __ Cal.App.4th __ (2d Dist., Div. 6.)

Plaintiff was HIV positive. Becauseshe had experienced severe side effects,she had stopped taking her anti-retrovi-ral medication, under the supervision ofthe doctor treating her for HIV condi-tion. She needed treatment to repair anumbilical hernia. Minutes before surgery,the anesthesiologist noted that she wasHIV positive and not taking anti-viral


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medications. He refused to proceed withthe surgery and plaintiff was turned away.She sued him for violating the UnruhAct, which prohibits discriminationagainst individuals with disabilities,including their HIV status. At trial, thecourt submitted the issue of whether theplaintiff was disabled for the purposes ofthe Unruh Act to the jury, whichreturned a verdict in favor of the anes-thesiologist. Reversed. Under the statuto-ry framework, people with HIV are con-sidered disabled as a matter of law. Therewas no issue in this regard to present tothe jury. The court explained, “No med-ical doctor should have liability for refus-ing to perform a procedure that he orshe believes will harm the patient. Thatis not what happened here. Here, anHIV-positive patient was denied medical-ly necessary surgery because an anesthe-siologist unreasonably feared for his ownsafety and that of the operating roomstaff. That denial was based on her HIV-positive status and was a violation of theUnruh Civil Rights Act.”

Jeffrey Isaac Ehrlich is the principal ofthe Ehrlich Law Firm, with offices in Encinoand Claremont, California. He is a cum laudegraduate of the Harvard Law School, a certi-fied appellate specialist by the CaliforniaBoard of Legal Specialization, and a memberof the CAALA Board of Governors. His prac-tice emphasizes appellate support for theSouthern California trial bar and insurancebad-faith litigation. He is the editor-in-chiefof Advocate magazine and a contributingauthor of the Rutter Group’s InsuranceLitigation practice guide.


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Appellate — continued from Previous Page



Last month, I mentioned that myattention had recently been drawn toanniversaries and milestones in light ofthe fact that OCTLA turned fifty this year.Perhaps predictably, another anniversarycaught my eye this month: A 38th anniver-sary. Why would anyone focus on a 38thanniversary? After all, as momentous occa-sions go, 38 is about as meaningless as itgets. At 38, you’re usually just waiting for(or perhaps dreading) the big 4-0. So,what’s the deal with 38?

Well, it turns out that this is year willmark the 38th anniversary of the passageof one of the most unfair laws inCalifornia history. Thirty-eight years ago –in 1975 – the California Legislaturepassed, and then-Governor Jerry Brownsigned, the Medical Injury CompensationReform act, or MICRA as we all know it.As just about everyone reading this maga-zine knows, MICRA, among other things,capped the amount of non-economicdamages for medical malpractice cases at$250,000.

In 1975, California’s minimum wagewas $2, a gallon of gas cost 57 cents, anda first-class postage stamp would set youback only 10 cents. You don’t need to bean economist to know that the cost –thedollar value – of everything has risen dra-matically with inflation since 1975. Thevalue of everything, that is, except thevalue of human life as defined byCalifornia law. Adjusted just for inflation,that $250,000 in 1975 is the equivalent ofapproximately $1.08 million today. Yet,the MICRA cap remains $250,000.

Why is that? While you can surmisehow it might be politically difficult toabolish the cap entirely, surely any reason-able person would agree that the capshould at least keep up with inflation sothat the law would mean the same todayas when it was passed. Unfortunately, rea-son and logic sometimes do not carry theday in Sacramento. In order to preventany modification of MICRA, the insurance

industry is using the same sort of scaretactics and unsupported rhetoric theyused to pass it in 1975 and have beenusing ever since to thwart any attempts atrepeal or reform.

As was recently announced, however,“38 is too late.” On May 2, CAOC andother consumer rights, patient safety andhealth groups held a press conferenceannouncing a push to reform MICRA thisyear. The coalition has set up a Web site:www.38istoolate.com, and a Facebookpage: www.facebook.com/38IsTooLate.These sites contain persuasive factual datathat (1) debunk the many pro-MICRAmyths peddled over the years, and (2)provide powerful evidence of the inherentinjustice of MICRA.

Personal storiesPerhaps more importantly, the Web

sites contain stories and photos. These arethe heartbreaking accounts and pictures ofover 35 medical malpractice victims andtheir families who have been harmed byMICRA (more are being added regularly).Some have had jury verdicts overridden by this 1975 law that nullifies what 12Californians think someone’s injury or lifeis worth. Many others cannot even get to acourthouse because attorneys cannot takethese costly cases in light of the cap on thepotential recovery. I’m sure many of youhave had to give potential clients this terri-ble news, and the reaction is almost alwaysthe same, regardless of the person’s politi-cal persuasion – disbelief and then angerthat such an unjust law is on the books.

This universal reaction is why it is soimportant to get beyond the numbers andtell the stories of these victims. We needthose who have not been victims of MICRAto understand the devastation it can causeand also to realize that it could happen tothem or their family. Unfortunately, itsometimes takes a personal tragedy beforepeople realize the inequity of the law andhow it harms the most vulnerable among

us. Personal stories are one of the best waysto bring home this reality and get peoplepast the misleading sound bites used by theother side.

So, what can you do? Get involved inany way you can. At a minimum, if you’reon Facebook, you can “like” the 38 Is TooLate Facebook page. It takes less than 30seconds, and people in the Capitol payattention to this type of social media met-ric. (As of this writing, the page has over7,100 likes.) There’s also a page on the 38Is Too Late Web site where you can signyour name on a message to the Governor(www.38istoolate.com/act/). You can alsopoint your friends, family and clients (cur-rent and former) to these pages and askthem to do the same. The politicians needto know that there’s a groundswell of sup-port for this movement. Finally, if youknow of a victim of malpractice who wasalso victimized by MICRA, send that per-son’s story and photo to J.G. Preston([email protected]) and Eric Bailey([email protected]) at CAOC so that it canbe considered for the collection of storiesthat will hopefully turn the tide in this warthat has dragged on far too long.

Please get involved even if you don’thandle medical malpractice cases. Youshould do this, first, because it’s simplythe right thing to do for a cause that isjust. You should also do it because thisfight is about more than just MICRA andmed mal cases – it’s about the core ofwhat you do as a trial lawyer. The oppo-nents will use every dirty misrepresenta-tion in their playbook, including (as we’vealready seen in the first attack ad after 38Is Too Late was launched) – cartoons oftrial lawyers as filthy, greedy pigs liningup at the money trough (literally). So,we’re fighting not just for the medicalmalpractice victims, but for our corebeliefs and our continuing ability to dowhat is right in representing our clients.Now is the time. Thirty-eight is indeedtoo late.

Scott CooperOrange County Trial Lawyers Association

From thePresident

Join in the fight against MICRASupport “38 is too late”


Consumer Attorneys Association of LA800 West Sixth Street,#700Los Angeles, CA 90017(213) 487-1212 www.caala.org

July 10, 2013Trying Cases Under the New CourtConsolidation Plan6:00pm - 8:15pmCAALA Conference CenterDowntown Los Angeles

August 29, 2013 - September 1, 2013CAALA Vegas ConventionThe WynnLas Vegas

Board & Committee MeetingsExecutive Committee – CAALA OfficesDowntown Los Angeles, 6:00pmJune 6, July 11, Aug 1

Board of Governors – CAALA OfficesDowntown Los Angeles, 6:00pmJune 20, July 18

Education Committee – CAALA OfficesDowntown Los Angeles, 5:00pmJune 20, July 18

New Lawyers Committee - CAALA OfficesDowntown Los Angeles, 6:00pmJune 18, July 16

Orange County Trial Lawyers Assn.

25602 Alicia Parkway, #403Laguna Hills, CA 92653(949) 916-9577www.octla.org

June 27, 2013Confidential Settlements6:00 - 8:00pmTustin Ranch Golf Club12442 Tustin Ranch RoadTustin

July 25, 2013How to spot a potential cross-over in your PI case6:00 - 8:00pmTustin Ranch Golf Club12442 Tustin Ranch Road, Tustin

September 8, 2013Bench v. Bar Softball Game & PicnicGame Time 11:00amPicnic Lunch 12:30 -2:00pmGrant Howald Field & Park3000 Fifth AvenueCorona Del Mar

Advertiser’s Index

Advertiser’s IndexContents CalendarCalendar

Advertiser’s Index

Advertising

CAALAConsumer AttorneysASSOCIATION OF LOS ANGELES



ADR ProvidersCarrington, R.A. . . . . . . . . . . . . . . . . . . . . . . . . . . . .100Daniels, Jack . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92DiCaro Mediation . . . . . . . . . . . . . . . . . . . . . . . . . . . .18Fields ADR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .104First Mediation Corp - Jeffrey Krivis . . . . . . . . . . . . . .66Gage, Sandy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7Graver, Darryl . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20Jossen, Sanford Law Office . . . . . . . . . . . . . . . . . . .102Judicate West . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58Mehta, Steven G. Mediation . . . . . . . . . . . . . . . . . . .42Pasadena Mediation Group . . . . . . . . . . . . . . . . . . . .97PMA Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . .96

Announcements and Career OpportunitiesCAALA Membership . . . . . . . . . . . . . . . . . . . . . . . . . .71CAALA PAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73CAALA Vegas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75Jury Verdict Alert . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69

Attorneys – AppealsBader, Donna . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .98Ehrlich Law Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67Steven B. Stevens . . . . . . . . . . . . . . . . . . . . . . . . . . . .79

Attorneys - Accepting ReferralsBailey Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33Banifsheh, Danesh & Javid, PC . . . . . . . . . . . . . . .22-23Bisnar | Chase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5Bronstein, Peter . . . . . . . . . . . . . . . . . . . . . . . . . . . . .103Cheong Denove Rowell Bennett & Karns . . . . . . . . . .65Cook, David . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82-83Dordick Law Offices . . . . . . . . . . . . . . . . . . . . . . .54-55Edzant, Barry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92Engstrom, Lipscomb & Lack . . . . . . . . . . . . . . . . . . . .29Galipo, Dale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63Girardi | Keese . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61Greene Broillet & Wheeler . . . . . . . . . . . . . . . . . . . . . .1Hodes Milman Liebeck Mosier . . . . . . . . . . . . . . . . .38Kesluk & Silverstein . . . . . . . . . . . . . . . . . . . . . . . . . . .78Law Offices of Lisa Maki . . . . . . . . . . . . . . . . . . . . . .45Makarem & Associates . . . . . . . . . . . . . . . . . . . . . . . .25McNicholas & McNicholas . . . . . . . . . . . . . . . . . . . . .9Metzger Law Group . . . . . . . . . . . . . . . . . . . . . . . . . .57Michels & Watkins . . . . . . . . . . . . . . .Inside Back CoverNemecek & Cole . . . . . . . . . . . . . . . . . . . . . . . . . . . .64Panish Shea & Boyle . . . . . . . . . . . . . . . . . .Back CoverRichard Harris Law Firm . . . . . . . . . . . . . . . . . . . . . . . .4Rizio & Nelson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10Shernoff Bidart Echeverria Bentley LLP . . . . . . . . . . . .19Shook & Stone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35Taylor & Ring, LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . .11The Traut Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3Vartazarian Law Firm . . . . . . . . . . . . . . . . . . . . . . . . .28

Court ReportersAtkinson Baker Court Reporting . . . . . . . . . . . . . . . . .46Kusar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41Personal Court Reporters . . . . . . . . . . . . . . . . . . . . . .94

Defense Medical Exam ObservationAdvantage Representatives . . . . . . . . . . . . . . . . . . .100Haiby, Michael . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32PRIME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30

Expert Witnesses – MedicalForensic Autopsy Services . . . . . . . . . . . . . . . . . . . . .95Graboff, Dr. Steven . . . . . . . . . . . . . . . . . . . . . . . . . . .44Luckett, Karen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .98Roughan & Associates at LINC, Inc. . . . . . . . . . . . . .37

Expert Witnesses - Technical & DamagesFeldman, Phillip . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

Financial ServicesCalifornia Attorney Lending . . . . . . . . . . . . . . . . . . . .77CPT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .103EPS Settlements Group . . . . . . . . . . . . . . . . . . . . . . . .26Farber, Patrick (Struct. Settlemnts) . . .Inside Front CoverFast Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .91Fund Capital America . . . . . . . . . . . . . . . . . . . . . . . . .27Lawsuit Financial . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84RD Legal Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . .56Ringler & Associates – Michael Zea . . . . . . . . . . . .104Summit Structured Settlements . . . . . . . . . . . . . . . . . .95The James Street Group (Structured Settlements) . . .79

Graphics/Presentations/VideoCVisualEvidence LLC . . . . . . . . . . . . . . . . . . . . . . . . . .31 Court Graphix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48Executive Presentations . . . . . . . . . . . . . . . . . . . . . . . . .7High Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17Juris Productions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53Verdict Videos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42VaheandVache.com . . . . . . . . . . . . . . . . . . . . . . . . . .21

Insurance ProgramsLawyers Mutual Insurance Company . . . . . . . . . . . . .51Lawyer’s Pacific Insurance . . . . . . . . . . . . . . . . . . . . .15Narver Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .59

InvestigatorsHudson Investigations . . . . . . . . . . . . . . . . . . . . . . . . .52Shoreline Investigations . . . . . . . . . . . . . . . . . . . . . .101Tristar Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . .60

Legal Nurse ConsultantsCross, Kathy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87

Legal ResearchQuo Jure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .94

Legal Support Services4 Corners Deposition Summaries . . . . . . . . . . . . . . . . .8USA Express Legal & Investigative Services . . . . . . .93

Medical & Dental Service ProvidersBuena Vista Pharmacy . . . . . . . . . . . . . . . . . . . . . . . .49Doctors on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2Glendale Surgery Center . . . . . . . . . . . . . . . . . . . . . .43Injury Institute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39Landmark Imaging . . . . . . . . . . . . . . . . . . . . . . . . . . .40Massihi, Allen, DPM . . . . . . . . . . . . . . . . . . . . . . . . . .16North Valley Eye Medical Group . . . . . . . . . . . . . .101Parehjan & Vartzar Chiropractic, Inc. . . . . . . . . . . . .34Power Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

OrganizationsCAOC – PAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102




CAALAResource Center

The Consumer Attorneys Association of Los Angeles waspleased to offer several FREE educational webinars this year. If youmissed them, they are now available On-Demand at your convenience24/7 for FREE as well. Please visit the Legal Education Center on theCAALA Web site and click on the “On-Demand Programs” tab; thenbrowse for these free program titles under the “Event Date” tab:

February 13, 2013How to Use PowerPoint – Advice from Bruce BroilletThe program will focus on taking advantage of PowerPoint and effec-tively utilizing it during openings, closings, and during examination ofwitnesses. It will cover dangers and pitfalls that occur withPowerPoint, getting certain PowerPoint™ presentations admitted intoevidence, recovering costs associated with creating presentations, andsome of the technology used to easily and cost effectively integratedeposition testimony and other video into a PowerPoint presentation.

March 13, 2013Business for New Lawyers• Starting Your Practice: Naming your firm; organizing your firm; estab-lishing your office; renting office space; office furniture and equipment• Finances: Choosing a bank; General account; Client Trust Account;Accounting software; Outside financial services; Business loans• Budgeting: Establishing a budget; setting reasonable goals; monthlyand annual reviews; meeting with your CPA• Insurance: Property; General Liability; Professional Liability• Office Automation: Computer systems; phones; copiers, printers,and more; essential software; case organizing tools, e.g., Case Map• Professional Outside Services: Online legal research services; depo-sition reporting services; court reporting services; attorney services;copying services; medical records retrieval

April 10, 2013Looking Over Your Shoulder: Common Injuries, Treatment Options andEffective Claim Handling• Anatomical Examination of the Shoulder: Bones to Muscles and Tendons• Congenital and Developmental Conditions that Affect the Shoulder Jointand its Function• Fractures and Dislocations: Humerus, Scapula, Glenoid, Coracoid,Acromion and Clavicle• Understanding Changes: New Injuries and Exacerbations of ExistingConditions• Treatment Choices: Conservative and Medical to Radical andReconstructive Surgery• Results: Common Positive and Negative Prognostic Indicators for theNear and Long Term

May 22, 2013Using iPads for Trial Presentations• Essential Accessories: Cases, Keyboards, Stylus, VGA connector,ChargeCard, Apple TV• Remote Access to Your Computer: Applications, LogMeIn, Benefits andDrawbacks• Applications for Lawyers: Note-taking, Creating and Editing Documents,PDFs, Dropbox, Find my iPhone, Dictating, Scanner, Research and LegalReference Materials• Trial Applications: TranscriptPad, TrialPad, iJury, Jury Star, Jury Tracker,Exhibits• Books and Resources Regarding iPads and Applications• Tricks: Multi-Task Bar, Keyboard

Consumer Attorneys Association of LA800 West Sixth Street,#700Los Angeles, CA 90017(213) 487-1212 www.caala.org

July 10, 2013Trying Cases Under the New CourtConsolidation Plan6:00pm - 8:15pmCAALA Conference CenterDowntown Los Angeles

August 29, 2013 - September 1, 2013CAALA Vegas ConventionThe WynnLas Vegas

Board & Committee MeetingsExecutive Committee – CAALA OfficesDowntown Los Angeles, 6:00pmJune 6, July 11, Aug 1

Board of Governors – CAALA OfficesDowntown Los Angeles, 6:00pmJune 20, July 18

Education Committee – CAALA OfficesDowntown Los Angeles, 5:00pmJune 20, July 18

New Lawyers Committee - CAALA OfficesDowntown Los Angeles, 6:00pmJune 18, July 16

Orange County Trial Lawyers Assn.

25602 Alicia Parkway, #403Laguna Hills, CA 92653(949) 916-9577www.octla.org

June 27, 2013Confidential Settlements6:00 - 8:00pmTustin Ranch Golf Club12442 Tustin Ranch RoadTustin

July 25, 2013How to spot a potential cross-over in your PI case6:00 - 8:00pmTustin Ranch Golf Club12442 Tustin Ranch Road, Tustin

September 8, 2013Bench v. Bar Softball Game & PicnicGame Time 11:00amPicnic Lunch 12:30 -2:00pmGrant Howald Field & Park3000 Fifth AvenueCorona Del Mar

CAALA Webinar Library – Resources FREE for Members

New CAALA Affiliate VendorsOur Affiliate Vendors are an excellent resource to help improve your practice. They provide goods or services specifically for plaintiff trial lawyers.

Please support our Affiliate Vendors by contacting them for your business needs and projects.

Downtown Physical Therapy & Pilates Studio626 Wilshire Blvd., Ste. 460Los Angeles, CA 90017(213) 689-1679Contact: Ann BassE-mail: [email protected] site: downtownpt.com

Glen-Park 24/7 Home Care1220 S. Mariposa StreetGlendale, CA 91205(818) 844-0775Contact: Paola MataE-mail: [email protected] site: glenpark247homecare.com

LawCash245 Main Street, Suite 313Venice, CA 90291(718) 875-0605Contact: Jonathan MitzmanE-mail: [email protected] site: lawcash.net

Lifeforce Sportsmedicine Chiropractic, Inc78435 Singing Palms DriveLa Quinta, CA 92253(310) 592-5479Contact: Jon D. FranksE-mail: [email protected]

Marrick Medical FinanceP.O. Box 461061Denver, CO 80246(303) 981-5463Contact: Natalie LittleEmail: [email protected] site: marrickmedical.com


Lisa MakiConsumer Attorneys Association of Los Angeles

From thePresident

Sweet or Savory? Potato or Potatoe?Nature vs. Nurture? Dog Person or CatPerson? Sitting Bull stated, “[i]t is throughthis mysterious power that we too have ourbeing, and we therefore yield to our neigh-bors, even to our animal neighbors, thesame right as ourselves to inhabit this vastland.”

Let’s add a little more confusion tothe discussion: “In the long history ofhumankind (and animal kind, too) thosewho learned to collaborate and improvisemost effective have prevailed.” CharlesDarwin said that.

If you want a friend, get a dog, shesays, quoting Gordon Gekko. Or a cat orany living non-human creature for thatmatter, and love it to death. Even if you area trial attorney, because most of them Iknow have, love and help animals.

As trial attorneys, we are constantlyunder a tremendous amount of stress andanxiety. By nature, it’s an adversarial pro-fession. We all need a way to relax and becomforted at the end of the day. It’s amaz-ing how many CAALA members haveshared stories with me about how muchtheir pets have given them that comfort.To me, pets are magical. They can add somuch to your life.

Getting through the hard timesThis column is for all the pet and ani-

mal lovers out there in our CAALA com-munity. I’ve been a huge animal lover sinceI was a child and wanted to share some ofmy favorite stories about how these specialanimals helped me get through some ofthe most challenging times in my life.

“One day, I was sitting on a log,” Itold my parents when I was five-years old,“and this little cat came up to me, and Ibrought her home.” This began a series ofmany four- and two-legged animal familymembers. I am owned by two cats, fourlarge dogs, two rabbits and 12 chickens (Ithink four are roosters). I will not namethem all, but would like to note a few:Scooper Bar Jay the most incredibleQuarter Horse in the world, and my bestfriend; Timu, my Labrador who got me

through a divorce and into a new life;Nibble, my hamster that was paralyzed bymy sister’s hamster, Fat Apricot, during afight. (That taught me that life was not fair.He died in a shoe box on top of the refrig-erator when I was at piano lessons withMrs. Gerber. That was also not fair.); GreyFoot was a rabbit killed by the neighbor’sdog. (My sister and I never spoke to themagain.); Levon, the goose my sister broughthome for the summer that used to wake mymom and dad and everyone else when Iwould try to sneak in late at home duringhigh school. Grrr.

A tale of two catsTwo more true cat stories: During law

school, I told my boyfriend as we sat in ourlittle guest house that I really wanted atabby kitten, and I’d name it Ira becausethat was my favorite name. Two minuteslater a small tabby kitten appeared at ourback door, a stray of course which I namedIra, but really? Yes, really. Ira got cancer.When I was supposed to be studying forthe bar, I was taking him back and forth tothe vet. He died. He was one of the bestcats I’ve ever had.

A few months later I visited my sisterwho worked at a vet clinic. They had blooddonor cats there. One of them was whiteand had spots that made him look like acow. So I went home to my boyfriend inthe little guest house and started talkingabout how I really wanted to get Cow, thecat, and that I was ready after Ira, and if Icould only have him. The next day, Iopened the guest house door and saw aflash of white. Hmmm. I got home frombar review and saw it again and realized itwas a small cat. I put some turkey out onthe porch. The next day the turkey wasgone. I did this again the next day andagain the food was gone. In a day or so, helet me pet him. It was a kitten version ofCow the cat that I met at my sister’s work. Islowly tamed him. He started coming upthe steps, day by day. He finally let metouch him a little. He then started to peekhis little head in the door to the guesthouse, and I would leave it open during

the day. Cow became part of my family,and one of the best cats in the world. Hewas fierce and could climb chain linkfences and hide from the owls and hawksand coyotes in Malibu. I loved him.

Cow got super fat in a healthy wayand snuggly. He got me through the barand starting a business. Eventually we hadto move to another place. I didn’t want tolive where we ended up, but that’s anotherstory. My sister visited, and I decided tofinally get some “adult” furniture for thenew place. We left but I couldn’t find Cowto bring him in. We looked around andaround. Oh well, we decided, I left him outsometimes. Driving down the street I sawsome shiny colorful rocks on top of a blackplastic garbage bag. I stopped the car. Mysister and I got out and we walked over.There was a note on top that said, “Herelies the most majestic cat I’ve ever seen.” Itwas Cow. He had been literally ripped inhalf, running from the coyotes, eyes open.Some incredible spirit I never met coveredhim up with dignity and grace.

Saying “Goodbye”We lost Peter yesterday. He was a tiny

bunny – one of the two rabbits mentionedabove. He was a little deformed, never ableto eat enough despite hand feedings everyfour hours by myself and friends and mywonderful neighbors. He only weighed alittle over a pound. He was loved.

I cried and thought about the princeand the fox in The Little Prince by Antoinede Saint-Exupéry:

“Goodbye,” he said. “Goodbye,” said the fox. “And now

here is my secret, a very simple secret: Itis only with the heart that one can seerightly; what is essential is invisible tothe eye.”

Thank you, Peter.If you are lucky enough to have a pet

that gives you the unconditional love, com-fort and support we all need, please sharea photo with us. E-mail your pet photos toCindy Cantu (owned by Gigi the tuxedocat): [email protected]. We plan to create a“Pet Corner” page on the CAALA Web site.


OVER TEN FIGURES INVERDICTS & SETTLEMENTS

7-FigureVerdict

Brain Damage

8-FigureVerdict

Cerebral Palsy

8-FigureSettlement

Wrongful Death

SHIRLEY WATKINSPHILIP MICHELS

7-FigureArbitration Award

Misdiagnosis

7-FigureVerdict

Spinal Cord Injury

7-FigureSettlementBirth Injury

7-FigureSettlementBaby Injury

7-FigureSettlementTransplant

TRIAL LAWYER OF THE YEARCONSUMER ATTORNEYS ASSOCIATION OF LOS ANGELES

“Michels & Watkins is one of the premier California Med Mal law firms. No stone is left unturned.”

- Michael Bidart, Shernoff Bidart Echeverria Bentley LLP

“They increased the value of one of my cases by successfully defeating an arbitration clause. I’ve received over 7 figures in referral fees from Michels and Watkins.”

- S. Z., Chicago, Illinois

“Thanks for my six figure referral fee. I didn’t think it was possible!”- G. K., Philadelphia

- Brian J. Panish, Panish Shea & Boyle LLP “When it comes to Med Mal, there is no one better. This winning team has impeccable trial skills, preparation and experts.”

11755 WILSHIRE BLVD. #1300 LOS ANGELES, CA 90025-1540 (310) 444-1200 www.michelswatkins .com

Cerebral PalsyerdictV

8-Figure

VERDICTS & SETTLEMENTS

Cerebral Palsyerdict

8-FigureSettlement

8-Figure


TEN FIGURES INVERO

Brain DamageerdictV

7-Figure

rongful DeathSettlement

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TEN FIGURES IN

Brain Damageerdict

7-Figure

MisdiagnosisArbitration A

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MisdiagnosiswardArbitration A

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Spinal Cord InjuryerdictV

7-Figure

Spinal Cord Injuryerdict

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Birth InjurySettlement

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Baby InjurySettlement

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ransplantSettlement

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atkins is one of the premier California Med Mal law firms. No stone is left unturned.”“Michels & W

TRIAL LA

- Michael Bidart, Shernoff Bidart Echeverria Bentley LLPatkins is one of the premier California Med Mal law firms. No stone is left unturned.”


TION OF LOS ANGELESWYER OF THE YEAR

preparation and experts.”“When it comes to Med Mal, there is no one better

“Thanks for my six figure referral fee. I didn’

clause. I’ve received over 7 figures in referral fees from Michels and W“They increased the value of one of my cases by successfully defeating an arbitration

- Brian J. Panish, Panish Shea & Boyle LLP

- G. K., Philadelphia

- S. Z., Chicago, Illinois clause. I’ve received over 7 figures in referral fees from Michels and W“They increased the value of one of my cases by successfully defeating an arbitration

. This winning team has impeccable trial skills,- Brian J. Panish, Panish Shea & Boyle LLP

t think it was possible!”

“They increased the value of one of my cases by successfully defeating an arbitration

11755 WILSHIRE BL

VD. #1300 LOS ANGELES, CA 90025-1540 (310) 444-1200 www11755 WILSHIRE BL


VD. #1300 LOS ANGELES, CA 90025-1540 (310) 444-1200 www

.michelswatkins .comVD. #1300 LOS ANGELES, CA 90025-1540 (310) 444-1200 www

.michelswatkins .com

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OVER TEN FIGURES INVERDICTS & SETTLEMENTS

7-FigureVerdict

Brain Damage

8-FigureVerdict

Cerebral Palsy

8-FigureSettlement

Wrongful Death

SHIRLEY WATKINSPHILIP MICHELS

7-FigureArbitration Award

Misdiagnosis

7-FigureVerdict

Spinal Cord Injury

7-FigureSettlementBirth Injury

7-FigureSettlementBaby Injury

7-FigureSettlementTransplant

TRIAL LAWYER OF THE YEARCONSUMER ATTORNEYS ASSOCIATION OF LOS ANGELES

“Michels & Watkins is one of the premier California Med Mal law firms. No stone is left unturned.”

- Michael Bidart, Shernoff Bidart Echeverria Bentley LLP

“They increased the value of one of my cases by successfully defeating an arbitration clause. I’ve received over 7 figures in referral fees from Michels and Watkins.”

- S. Z., Chicago, Illinois

“Thanks for my six figure referral fee. I didn’t think it was possible!”- G. K., Philadelphia

- Brian J. Panish, Panish Shea & Boyle LLP “When it comes to Med Mal, there is no one better. This winning team has impeccable trial skills, preparation and experts.”

11755 WILSHIRE BLVD. #1300 LOS ANGELES, CA 90025-1540 (310) 444-1200 www.michelswatkins .com

Cerebral PalsyerdictV

8-Figure


Cerebral Palsyerdict

8-Figure

rongful DeathWWrongful DeathSettlement

8-Figure


TEN FIGURES INVERO

Brain DamageerdictV

7-Figure

rongful DeathSettlement

8-Figure


TEN FIGURES IN

Brain Damageerdict

7-Figure

MisdiagnosisArbitration A

7-Figure


MisdiagnosiswardArbitration A

7-Figure

Spinal Cord InjuryerdictV

7-Figure

Spinal Cord Injuryerdict

7-Figure


7-Figure


7-Figure


7-Figure


7-Figure

ransplantTTransplantSettlement

7-Figure

ransplantSettlement

7-Figure

atkins is one of the premier California Med Mal law firms. No stone is left unturned.”“Michels & W

TTORNEYS ASSOCIACONSUMER ACONSUMER ATTORNEYS ASSOCIATRIAL LA


TION OF LOS ANGELESTTORNEYS ASSOCIATTORNEYS ASSOCIATION OF LOS ANGELESWYER OF THE YEARTRIAL LATRIAL LAWYER OF THE YEAR


TION OF LOS ANGELESWYER OF THE YEAR

preparation and experts.”“When it comes to Med Mal, there is no one better

“Thanks for my six figure referral fee. I didn’

clause. I’ve received over 7 figures in referral fees from Michels and W“They increased the value of one of my cases by successfully defeating an arbitration

. This winning team has impeccable trial skills,“When it comes to Med Mal, there is no one better“When it comes to Med Mal, there is no one better. This winning team has impeccable trial skills,- Brian J. Panish, Panish Shea & Boyle LLP

- G. K., Philadelphiat think it was possible!”“Thanks for my six figure referral fee. I didn’“Thanks for my six figure referral fee. I didn’t think it was possible!”

- S. Z., Chicago, Illinois clause. I’ve received over 7 figures in referral fees from Michels and W“They increased the value of one of my cases by successfully defeating an arbitration

. This winning team has impeccable trial skills,- Brian J. Panish, Panish Shea & Boyle LLP

t think it was possible!”

atkins.” clause. I’ve received over 7 figures in referral fees from Michels and W clause. I’ve received over 7 figures in referral fees from Michels and Watkins.”“They increased the value of one of my cases by successfully defeating an arbitration

11755 WILSHIRE BL

VD. #1300 LOS ANGELES, CA 90025-1540 (310) 444-1200 www11755 WILSHIRE BL


VD. #1300 LOS ANGELES, CA 90025-1540 (310) 444-1200 www

.michelswatkins .comVD. #1300 LOS ANGELES, CA 90025-1540 (310) 444-1200 www

.michelswatkins .com

A message for pet and animal loversSharing your stories about special pets

