California Law Update
Christine Reed, Partner, Monterey Office
Kurt Bridgman, Partner, San Francisco Office
Chavez v. 24 Hour Fitness USA, Inc.
(2015) 238 Cal.App.4th 632
Facts:
Plaintiff suffered a traumatic brain injury when the back panel of a “Free Motion” cable
cross-over machine came loose and struck her head at a 24 Hour Fitness facility. When
plaintiff joined the 24 Hour Fitness facility, she signed a Membership Agreement that
included a release of liability. Under the release provision, plaintiff agreed that 24 Hour
Fitness would not be liable for any injury she suffered as a result of 24 Hour’s negligence.
Plaintiff and her husband sued 24 Hour Fitness for ordinary and gross negligence,
premises liability and strict products liability. 24 Hour Fitness moved for summary
judgment, arguing that the release in the Membership Agreement barred plaintiffs’ claims
for negligence and premises liability. The trial court granted summary judgment, and
plaintiffs appealed.
Appellate Court Decision:
The Court of Appeal reversed. The Court found that plaintiffs had raised a triable issue of
material fact as to whether 24 Hour Fitness’ conduct constituted gross negligence. The
evidence showed regular maintenance was not performed, which the owner’s manual
required. Also, the machine was missing brackets which could have prevented the
incident. On that basis, 24 Hour Fitness failed to exercise scant care or demonstrated
passivity and indifference toward results.
Jimenez v. 24 Hour Fitness USA, Inc.
(2015) 237 Cal.App.4th 546
Facts:
Plaintiff Jimenez was a member of 24 Hour Fitness USA, Inc. Plaintiff was found unconscious at
a 24 Hour Fitness facility near a treadmill machine. Plaintiff could not remember what
happened. She hired an accident reconstruction expert who opined that she sustained injuries
after falling backwards while using a treadmill. When plaintiff joined 24 Hour, she signed a
Membership Agreement in English, which contained a liability release provision. Plaintiff only
spoke Spanish. 24 Hour filed a motion for summary judgment on the grounds that plaintiff’s
claims were barred by the liability release provision in the Membership Agreement. The trial
court granted the motion for summary judgment, and plaintiff appealed.
Appellate Court Decision:
The Court of Appeal reversed. The Court of Appeal found that there was a triable issue of fact
as to whether 24 Hour was grossly negligent. Plaintiff’s accident reconstruction expert
determined that the space between the treadmill and the wall did not comply with the minimum
space required in the treadmill manufacturer’s owner’s manual and assembly guide. Also, the
Court found that there was a triable issue of fact as to whether plaintiff’s signature on the
agreement was procured by fraud. Plaintiff spoke Spanish and did not read or speak English.
The 24 Hour manager who signed plaintiff’s agreement did not speak Spanish. Plaintiff
contended that the manager made gestures implying that if plaintiff paid the membership fee,
she could use the facility. Plaintiff interpreted the gestures as meaning that the agreement only
set forth what she needed to pay to use the facility. The Court found that there was a triable
issue of fact as to whether the manager’s gestures could constitute a fraudulent
misrepresentation of the terms of the agreement.
Eriksson v. Nunnink
(2015) 233 Cal.App.4th 708
Facts:
Plaintiffs were parents of a 17-year-old girl who died during an equestrian competition. Plaintiffs claimed
their daughter’s trainer negligently permitted their daughter to participate in a competition that was above
her level on an injured horse. When the daughter began training with the coach, the coach had the
parents sign a Release of Liability Agreement. The parents filed a wrongful death action against the
coach, who filed a motion for summary judgment, which was granted by the trial court. The parents
appealed.
Appellate Court Decision:
The Court of Appeal affirmed the trial court’s ruling. The Court held that the release was enforceable.
Although the release did not specify that heirs and parents would have their claims released if the
daughter was injured, the release would bar the parents’ claim. Because the parents could not show that
the coach was grossly negligent, the release barred the parents’ claims.
Eriksson v. Nunnink
(2015) 233 Cal.App.4th 708
Facts:
Plaintiffs were parents of a 17-year-old girl who died during an equestrian competition. Plaintiffs claimed
their daughter’s trainer negligently permitted their daughter to participate in a competition that was above
her level on an injured horse. When the daughter began training with the coach, the coach had the
parents sign a Release of Liability Agreement. The parents filed a wrongful death action against the
coach, who filed a motion for summary judgment, which was granted by the trial court. The parents
appealed.
Appellate Court Decision:
The Court of Appeal affirmed the trial court’s ruling. The Court held that the release was enforceable.
Although the release did not specify that heirs and parents would have their claims released if the
daughter was injured, the release would bar the parents’ claim. Because the parents could not show that
the coach was grossly negligent, the release barred the parents’ claims.
Fazio v. Fairbanks Ranch Country Club
(2015) 233 Cal.App.4th 1053
Facts:
Plaintiff was hired to perform at Fairbanks Ranch Country Club (the “Club”).
While plaintiff was setting up his equipment on the stage, he stepped off the
stage and fell into a gap by the stage. Plaintiff sued the Club for negligence.
The Club filed a motion for summary judgment, arguing it owed no duty to
plaintiff because plaintiff assumed the risk of potential dangerous conditions on
a stage on which he was performing. The trial court granted the motion for
summary judgment and found the doctrine of primary assumption of the risk
barred plaintiff’s claim. Plaintiff appealed.
Appellate Court Decision:
The Court of Appeal reversed. While the Court recognized that falling off a
stage is an inherent risk of all stage performers, the Court concluded that the
summary judgment motion should not have been granted because there had
not been a sufficient showing that the Club had not increased the inherent risk
plaintiff assumed as a stage performer. Particularly, the Club had not
presented sufficient evidence to refute plaintiff’s claim that the Club’s
construction of the stage had not increased the risk of harm. The jury should
be deciding whether the Club increased the risk of falling.
Nealy v. City of Santa Monica
(2015) 234 Cal.App.4th 359
Facts:
Plaintiff was a recycling worker with the City of Santa Monica (“City”). Plaintiff injured his knee at work. After knee
surgeries, plaintiff was released to light duty work with restrictions against heavy lifting. The City unsuccessfully
attempted to locate a job complying with plaintiff’s physical limitations. Eventually, plaintiff applied for a position as
a City Planning Staff Assistant, but the City determined that plaintiff did not meet the minimum qualifications for the
position because plaintiff did not have two years of recent paid work experience performing clerical support duties.
The City eventually sent plaintiff a letter stating the City was unable to provide plaintiff with reasonable
accommodation into an alternative position because plaintiff was not minimally qualified for the only position
available that was not a promotion. After receiving a Right-to-Sue Notice from the California Department of Fair
Employment and Housing, plaintiff filed a lawsuit against the City, claiming that the City violated California Fair
Employment and Housing Act for disability discrimination, failed to provide reasonable accommodation, failed to
engage in the interactive process and retaliated against her. The City successfully made a motion for summary
judgment, and plaintiff appealed.
Appellate Court Decision:
The Court of Appeal affirmed. Plaintiff could not perform the essential functions of his original employment
position. Plaintiff’s contention that the City could have restructured his old position to accommodate his disability
was rejected because plaintiff’s proposal would have eliminated an essential function, which cannot be a
reasonable accommodation. Because plaintiff was not qualified to perform the other positions which he felt should
have been offered to him, plaintiff could not contend that the City was not providing a reasonable accommodation
by failing to allow him to have one of those positions. Because plaintiff could not demonstrate that the City had
failed to reasonably accommodate his disability, plaintiff could not maintain his disability and failure to engage in
interactive process causes of action.
Navarrete v. Meyer
(2015) 237 Cal.App.4th 1276
Facts:
Brandon Coleman (“Coleman”) was driving a vehicle at a high rate of speed in a residential
neighborhood. He lost control of the vehicle and struck a parked vehicle which contained three children
and their parents. The collision killed the father and injured the mother and the three children. The
accident occurred on a residential street which had dips in the road. The front seat passenger (Meyer)
encouraged the driver to driver fast on the street so the vehicle could jump in the air when it struck the
dips. Coleman lost control of his vehicle after he hit one of the dips. The mother and the children filed a
wrongful death action against Coleman and Meyer. As to Meyer, they alleged that she violated Vehicle
Code § 21701 and civil conspiracy. Vehicle Code § 21701 states in pertinent part that “No person shall
wilfully interfere with the driver of a vehicle or with the mechanism thereof in such manner as to affect the
driver's control of the vehicle.” Meyer moved for summary judgment. The trial court granted Meyer’s
motion for summary judgment, and the plaintiffs appealed.
Appellate Court Decision:
The Court of Appeal reversed. The Court compared this case to the case of Agovino v. Kunze (1960)
181 Cal.App.2d 591, in which both participants in an illegal drag race on a city street could be held liable
for an injury which he sustained when he was struck by only one vehicle involved in the race. So, Meyer
could potentially be liable for civil conspiracy and violating Vehicle Code § 21701. Regarding the alleged
violation of Vehicle Code § 21701, the Court held that one can “willfully interfere” with the driver of a
vehicle without touching the driver, hindering the driver’s ability to see or drive or tampering with the
vehicle.
Conti v. Watchtower Bible & Track
Society of New York
(2015) 235 Cal.App.4th 1214
Facts:
Two elders of the Jehovah’s Witness Congregation were made aware that a member of the
congregation had molested his stepdaughter. This known child molester was allowed to
continue to perform field services in the church. Plaintiff was a member of the church and
claimed that she was molested by the known child molester. The congregation had a policy of
restricting the molester’s activities with children and attempted to make sure that the child
molester was watched. The elders did not inform the congregation that the child molester had
molested a child. Plaintiff testified that the child molester had been with her many times when
neither of her parents were present. At trial, the jury found the congregation and Jehovah’s
Witness liable. They appealed the trial verdict.
Appellate Court Decision:
The Court of Appeal affirmed. While the Court held that the congregation had no legal duty to
warn the general congregation about the child molester’s past conduct, the Court found that
defendants had established policies to ensure that the child molester would not be placed in a
position of molesting children, which established a duty of care to minors in the congregation to
ensure that the child molester would not be in a position to molest children. The Court did not
overturn the jury’s finding that the Jehovah’s Witness organization had breached its duty of care
to the minor to ensure that she was not in a position where she could be molested.
Johnson v. United States Steel
Corporation
(2015) 240 Cal.App.4th 22
Facts:
Plaintiff worked as an auto mechanic. He was diagnosed with acute myeloid leukemia and claimed that his cancer
was caused by benzene in paints, solvents or other products to which he was exposed while working as an auto
mechanic. Among those products was Liquid Wrench, which plaintiff used almost daily to loosen rusted machine
components. Liquid Wrench was formulated by Radiator Specialty Company (“RSC”), and one formulation
contained coal raffinate, a by-product of steel production that U.S. Steel supplied to RSC. U.S. Steel did not
dispute that the raffinate it sold to RSC between 1960 and 1978 contained benzene, but it presented evidence that
RSC also sold a petroleum-based formulation of Liquid Wrench during that time and currently that does not contain
benzene. U.S. Steel moved for summary judgment, claiming the evidence was insufficient to show plaintiff was
exposed to raffinate-formula Liquid Wrench. The trial court granted the motion for summary judgment, and plaintiff
appealed.
Appellate Court Decision:
The Court of Appeal reversed. The Court analyzed the Component Parts Doctrine, which provides that component
parts manufacturers are not liable for injuries caused by the finished product unless the component itself was
defective and caused harm. U.S. Steel could be liable if the raffinate was defective and its defect caused plaintiff’s
injuries. Resolution of this issue turned on the reasonable expectations of the consumer. Applying the Consumer
Expectations Test, the Court emphasized that the product in question was raffinate, not benzene. While raffinate
may be a substance with which ordinary consumers were unfamiliar and had no expectations concerning its
properties or effects, if the evidence demonstrated that the incorporation of raffinate into Liquid Wrench or any
finished product caused the product to be less safe than ordinary consumers would expect, the product could be
shown to contain a design defect under the Consumer Expectations Test. As the moving party for summary
judgment, it was U.S. Steel’s burden to present evidence negating the existence of a design defect in the raffinate.
U.S. Steel failed to do so.
Kahn v. The Dewey Group
(2015) 240 Cal.App.4th 227
Facts:
Plaintiff sued twenty defendants for personal injury. Seven months before trial, all twenty
defendants jointly made a Code of Civil Procedure § 998 Offer to Compromise to plaintiff in the
sum of $75,000. The case went to trial. The trial court granted a non-suit as to fourteen of the
twenty defendants. The jury was deadlocked as to the remaining six defendants, and the trial
court declared a mistrial. The re-trial was still pending when the fourteen dismissed defendants
filed a Memorandum of Costs seeking 70% of the collectively incurred costs of $358,341. These
defendants claimed that they had received a judgment more favorable than 70% of the C.C.P. §
998 offer. Plaintiff filed a motion to strike or tax costs. The trial court denied plaintiff’s motion
and ruled the defendants were entitled to recover their expert witness fees. Plaintiff appealed.
Appellate Court Decision:
The Court of Appeal reversed. The Court ruled it was unable to conclude whether these
defendants could recover pursuant to the joint C.C.P. § 998 offer by comparing only the actual
recovery of plaintiff against some of the defendants, since the outcome was uncertain for the six
remaining defendants. The reasonableness of the offer must be determined by comparing the
actual recovery to plaintiff for all of the offering defendants. The Court ruled the fourteen settling
defendants must wait for the final judgment against the six remaining defendants to determine if
costs including expert fees would be awarded pursuant to the joint C.C.P. § 998 offer.
Litt v. Eisenhower Medical Center
(2015) 237 Cal.App.4th 1217
Facts:
Plaintiff sued Eisenhower Medical Center (“EMC”) for negligence after he sustained personal injuries as a result of
his head becoming stuck in a partially closed gate at EMC’s cafeteria. Several months before trial, the medical
center served a C.C.P. § 998 offer on Litt for $15,000. Plaintiff did not accept the offer. After the expiration date of
the offer, plaintiff amended his complaint to add Compass Group USA, Inc. (“Compass”) as a defendant.
Compass operated the EMC cafeteria under a contract with EMC. Compass did not serve a C.C.P. § 998 offer on
Litt. EMC and Compass jointly retained several medical experts. Compass paid all of EMC’s costs and expert
expenses pursuant to an indemnity provision between them. The jury returned a verdict for Litt and against the
defendants jointly and severally for $3,000. After the trial, EMC and Compass jointly requested reimbursement of
expert fees pursuant to EMC’s unaccepted C.C.P. § 998 offer. Plaintiff moved to strike and/or tax costs, arguing in
part that EMC could not recover expenses incurred after it served its C.C.P. § 998 offer, because Compass had
actually incurred and paid them. Also, plaintiff contended that Compass could not recover the incurred expert fees
because it had not served the C.C.P. § 998 offer. Plaintiff requested reimbursement of costs. EMC and Compass
jointly moved to strike and/or tax on the grounds that plaintiff could not recover any costs post-dating EMC’s C.C.P.
§ 998 offer, because EMC and Compass were the prevailing parties. The trial court allowed plaintiff to recover his
costs incurred before EMC served its C.C.P. § 998 offer. The trial court did not allow EMC to recover any costs
after the C.C.P. § 998 offer because those costs had been paid by Compass. EMC and Compass appealed the
post-trial orders.
Appellate Court Decision:
The Court of Appeal reversed the trial court decision striking EMC’s recovery of C.C.P. § 998 offer costs and
expert fees. The Court held that it was irrelevant that Compass had actually paid those costs and expert fees.
The Court refused to agree with EMC and Compass that both of them should have been treated as prevailing
parties, which precluded plaintiff from recovering his costs.
Lee v. Silveira
(2015) 236 Cal.App.4th 1208
Facts:
Plaintiff was injured in an automobile accident. Plaintiff’s attorney served defendants with a C.C.P. § 998
Offer to Compromise in the amount of $1 million. At trial, all counsel stipulated that the amount of the
billed medicals was $274,514, and the amount of the paid medicals was $109,251. The jury awarded
plaintiff damages totaling $1,027,014, including $274,514 in past medical expenses. Defendants filed a
post-trial motion for reduction of jury verdict, contending that the judgment should be reduced by the
difference between the billed medicals and paid medicals. Plaintiff contended that the reduction should
not occur until after the court determined whether plaintiff should recover her expert fees and prejudgment interest under Civil Code § 3291, because defendants failed to obtain a more favorable
judgment than plaintiff’s C.C.P. § 998 offer. Eventually, the trial court agreed with defendants and
reduced the judgment to $887,098, which reflected an award of the past paid medical bills. A judgment
was entered in the amount of $887,098, which excluded plaintiff’s expert witness fees and pre-judgment
interest. Plaintiff appealed.
Appellate Court Decision:
The Court of Appeal affirmed. The Court agreed that the judgment should be reduced to reflect paid
medical bills, not billed. Once the judgment had been properly modified to reflect the award of
reasonable past medical expenses, plaintiff had not received a judgment more favorable than her C.C.P.
§ 998 offer.
Centex Homes v. St. Paul Fire & Marine
Ins. Co.
(2015) 237 Cal.App.4th 23
Facts:
Centex Homes (“Centex”) was a developer of single-family residences and was sued by homeowners for
construction defects. Centex tendered its defense to St. Paul Fire & Marine Ins. Co. and St. Paul
Mercury Insurance Company (“Travelers”) as an additional insured under a policy issued to one of
Centex’s subcontractors. Travelers accepted the defense under a reservation of rights, including the
right to choose defense counsel. Travelers appointed panel counsel to defend Centex. Centex sued its
subcontractors and their insurers for among other things breach of contract for failing to appoint
independent counsel and apportion defense fees and costs among all Centex insurers. Travelers
demurred to the complaint, arguing that no actual facts had been pled to demonstrate manipulation of
Centex’s defense, and any allocation was premature because the underlying case was ongoing. The trial
court sustained Travelers’ demurrer without leave to amend. Centex appealed.
Appellate Court Decision:
The Court of Appeal affirmed. The Court found that there were not enough facts about liability and
damages or the cost of defense for the trial court to decide the rights and obligations of the parties.
Generally, an insurer has a right to control the defense, and a general reservation of rights is not
sufficient alone to trigger the right to independent counsel. The Court found that Travelers and Centex
had the same interests in defending the underlying claim for both insureds; so, Travelers’ reservation of
the right for reimbursement of defense costs did not give panel counsel an incentive to control the
defense adverse to Centex. Also, the amount of defense fees which Travelers could potentially seek to
have reimbursed pursuant to the reservation of rights letter was not a ripe issue.
Nolte v. Cedars Sinai Medical Center
(2015) 236 Cal.App.4th 1401
Facts:
Plaintiff received treatment from a physician at a facility owned by Cedars Sinai Medical Center
(“Cedars”). Plaintiff signed a contract promising to pay Cedars for any services Cedars provided to him,
but plaintiff was never told by the doctor or by Cedars that after his doctor’s visit he would be charged a
fee by Cedars for setting up a new patient account on its computer system. Also, plaintiff had not been
informed that the facility had contracted with Cedars to perform that overhead task, and that Cedars
would issue plaintiff a bill for that service. Plaintiff filed a class action complaint contending that being
charged a facility fee by Cedars was an unfair business practice under Business and Professions Code §
17200 et seq. and a deceptive practice under the Consumer Legal Remedies Act, Civil Code § 1750 et
seq. Cedars filed a demurrer. The trial court sustained the demurrer without leave to amend, and
plaintiff appealed.
Appellate Court Decision:
The Court of Appeal affirmed. Plaintiff could not maintain a Business and Professions Code § 17200
cause of action. The facility’s fee charge was not specifically prohibited by law. There was no law
requiring the facility to explicitly and individually disclose the facility’s fee. Plaintiff claimed that Cedars
was “cramming” charges onto the bill of a business transaction between unaffiliated third parties, which is
prohibited under California law. The Court decided that Cedars was not an unaffiliated third party, and
plaintiff had agreed to separate billing for those services. The agreement did not provide that Cedars
must seek, and plaintiff must give, plaintiff’s informed consent to every bill or charge.
Velasquez v. Centrome
(2015) 233 Cal.App.4th 1191
Facts:
Plaintiff was an undocumented immigrant. Plaintiff claimed he contracted a rare lung disease from his
exposure to chemicals at his employment. Plaintiff filed a complaint against the manufacturers and
distributors of the chemical compounds used to make the chemicals at his employment. At trial, plaintiff
filed a motion in limine to exclude any evidence of his immigration status. Defendants opposed the
motion in limine, arguing that evidence of his immigration status was admissible for questioning experts
on plaintiff’s ability to receive a lung transplant. Pre-trial discovery had disclosed that plaintiff’s status as
an undocumented immigrant could be a factor in a hospital potentially denying a lung transplant to
plaintiff. The trial court denied the motion in limine. At trial, a physician from the hospital where plaintiff
had applied to receive a transplant testified that in a recent policy change, the hospital would not consider
plaintiff’s immigration status when making a decision on transplant approvals. After this testimony, the
trial court ruled that evidence about plaintiff being in the United States illegally would be excluded. The
jury returned a special verdict in favor of defendants. Plaintiff appealed.
Appellate Court Decision:
The Court of Appeal reversed. The Court held that the trial court should have granted plaintiff’s motion in
limine and not allowed any testimony concerning plaintiff’s status as an undocumented immigrant into
evidence. Typically, a personal injury plaintiff’s status as an illegal immigrant is inadmissible evidence at
trial unless the plaintiff is claiming damages for lost earnings or earning capacity. Because the plaintiff’s
immigration status would create strong potential prejudice, the trial court should have granted the motion
in limine.
David L. Blinn, Partner, San Francisco Office
I.
II.
III.
IV.
V.
SIGNIFICANT DECISIONS – SUPREME COURT
SIGNIFICANT PENDING SUPREME COURT CASES
SIGNIFICANT 9TH DISTRICT COURT OF APPEAL DECISIONS
LIABILITY INSURANCE
A.
MISCELLANEOUS
B.
AUTOMOBILE INSURANCE
C.
DUTY TO DEFEND
D.
BAD FAITH
E.
PROCEDURAL ISSUES
PROPERTY INSURANCE
Hartford Casualty Insurance Co. v. Swift Distribution
(2014) 59 Cal.4th 277
There can be no coverage under “advertising injury” for trade
disparagement where the insured does not mention the competing
product or company by name, and does not clearly derogate that
product or business.
Hartford Casualty Insurance Co. v. JR Marketing, LLC.
(2015) 61 Cal.4th 988
Carrier did not meet its obligations to defend case upon tender
and thereafter provided court ordered Cumis counsel. Carrier was not
barred from bringing unjust enrichment claim against Cumis counsel for
fraudulently or otherwise manifestly and objectively wasteful and
useless costs.
Gradillas v. Lincoln General Insurance Company
(2015) ___Cal.4th ___ (Cert. Grntd 8/12/15, 792 F.3d 1050)
U.S. Court of Appeals for 9th Circuit has asked a question to be
certified to the California Supreme Court as to the correct test to apply in
determining whether an injury arose out of use of an automobile for purposes
of determining coverage under an automobile insurance policy.
188)
Nickerson v. Stonebridge Life Ins.
(2015) ___ Cal.4th ___ (Rev. Grntd 12/11/13, 219 Cal.App.4th
Carrier lost at trial on bad faith claim over denial of coverage under
hospital indemnity policy. Provision relied upon calling for “necessary
treatment” only was found to have been unenforceable as not conspicuous,
plain and clear. Case is up to Supreme Court for review of issue of punitive
damages. (Jury awarded $19 million against $31,500 in policy proceeds,
Court of Appeal affirmed lowering this to 10:1 ratio of damages).
Encompass Ins. Co. v. Coast National Ins. Co.
(2014) 764 F.3d 981
Where defendant passer-by pulled passenger from
wreckage of vehicle after single vehicle accident, causing further
injury to passenger, this was “unloading” and thus a ‘use” of a
vehicle for purposes of the defendant’s automobile policy.
American States Ins. Co. v Travelers Property & Cas. Co. of
America
(2014) 223 Cal.App.4th 495
Food catering truck was considered “mobile equipment,” rather
than an auto, and thus not excluded from coverage under commercial
general liability policy.
Regional Steel Corp. v Liberty Surplus Ins. Corp.
(2014) 226 Cal.App.4th 1377
Where alleged defective component parts of buildings did not
result in damage to some other portion of structure, this did not
constitute “property damage” for purposes of coverage under a CGL
policy.
Dameron Hosp. Ass’n v. AAA Northern Calif.
(2014) 229 Cal.App.4th 549
Healthcare provider may protect its right to pursue from third
party the difference between bill for services and amount paid by
insurer, as long as language in agreement with insurer is clear on this
point.
Centex Homes v. St. Paul Fire and Marine Ins. Co.
(2015) 237 Cal.App.4th 23
General Contractor’s attempt to incorporate declaratory relief
claims on additional insured status and its right to Cumis counsel into its
cross-complaint against subcontractors for indemnity failed, as neither
claim was “ripe” or “actual.”
Underwriters v. Probuilders Specialty Ins. Co.
(2015) ___ Cal.App.4th ___
Summary judgment in favor of one carrier insuring builder
based on “escape clause” was overturned, as courts favor modern
trend of requiring equitable contributions on a pro-rata basis
from all primary insurers.
Maslo v Ameriprise Auto & Home Ins.
(2014) 227 Cal.App.4th 626
Where insurer made no offer on Uninsured Motorist case prior
to arbitration, where liability and some level of damages were
otherwise clear, insurer was exposed to complaint for bad faith.
Scottsdale Ins. Co. v National Continental Ins. Co.
(2014) 229 Cal.App.4th 1166
Under Insurance Code section 11580.9(d), a policy that
specifically describes a vehicle involved in an accident is primary to a
policy that does not describe any vehicle, despite the language of
section 11580.9(h) which relates to persons in the business of trucking.
Mercury Casualty Co. v Chu
(2014) 229 Cal.App.4th 1432
Under exclusion in auto policy, carrier did not provide coverage
for bodily injury to anyone included in the policy’s definition of “an
insured.” In this case, that included “all residents” who “inhabited the
same dwelling” as the named insured. No coverage for non-related
passenger who shared residence with driver-named insured.
Elliot v. Geico Insurance Co.
(2014) 231 Cal.App.4th 789
Insured not entitled to Underinsured Motorist benefits when she
received monies in excess of the policy limits from the underinsured
motorist’s carrier and the motorist’s employer under a separate general
liability policy.
Transport Insurance Co. v Superior Court (R.R. Street & Co.)
(2014) 222 Cal.App.4th 1216
When interpreting the term “underlying insurance,” for purposes
of whether excess policy owed duty to defend the additional insured,
the relevant “reasonable expectations” as to coverage were those of
additional insured, rather than the named insured.
Davler v. Arch Insurance
(2014) 229 Cal.App.4th 1025
Employee Related Practices Exclusion in CGL policy effectively
excluded insured’s coverage under Personal & Advertising Injury for
alleged false imprisonment of employees.
Gonzalez v. Fire Insurance Exchange
(2015) 234 Cal.App.4th 1220
Insured sued for alleged sexual assault and false imprisonment,
invasion of privacy and slander per se and other claims from alleged
group assault on young woman at party. Where policy relates both
bodily and personal injury claims to “occurrences” defined as an
“accident,” there was no potential coverage under the policy.
Upasani v. State Farm General Ins. Co.
(2014) 227 Cal.App.4th 509
Insureds were sued for allegedly conspiring with a child’s
mother to abduct the child from the father. There was no basis for
coverage and no duty to defend because a conspiracy requires that the
defendant knowingly and intentionally participate in the conspiracy.
Crown Capital Securities v. Endurance American Specialty
Ins. Co.
(2015) 235 Cal.App.4th 1122
Carrier could properly deny coverage on claims that
“arose out of the same events” as those involved in a claim insured
disclosed on its application, and thus, “the facts underlying the
undisclosed claims” should have been disclosed and would not
have been covered.
Bock v. Hansen
(2014) 225 Cal.App.4th 215
Claims Adjuster potentially individually liable for
fraudulent misrepresentation of claims benefits made to insured.
Graciano v. Mercury General Insurance
(2014) 231 Cal.App.4th 414
Carrier was not liable for bad faith as to settlement of
insured’s third party claim where plaintiff’s demand letters
identified incorrect insured and incorrect policy as being involved
in the accident. Once the carrier learned of the correct
insured/policy it attempted to settle in a timely fashion.
McMillin Companies, LLC v. American Safety Indemnity Co.
(2015) 233 Cal.App.4th 518
Where a general contractor named as additional insured under
subcontractor’s policy settles with one or more carriers and receives
more than their total defense costs (contract damages), they are still
entitled to prove at trial that the settlement funds are allocated either
to defense costs or to their tort claim for bad faith against nonparticipating carrier.
Albert v. Mid-Century Insurance
(2015) 236 Cal.App.4th 1281
Summary judgment was proper on behalf of carrier sued for
breach of policy for failure to defend when all claims raised in the
underlying action against the insured arose from non-accidental conduct.
21st Century Ins. Co. v Sup. Ct.
(2015) 240 Cal.App.4th 322
Stipulated settlement between plaintiff and insured not
binding on carrier in bad faith action where carrier had been
defending the insured under the policy listing insured and the
insured vehicle, but not on two other policies claimed to have
coverage.
Douglas v. Fidelity National
(2014) 229 Cal.App.4th 392
In trial for bad faith involving claims of material
misrepresentations on policy of insurance, carrier is entitled to instruction
as to whether independent insurance agency obtaining policy for
insured was agent of insurer or broker for the insured.
Snyder v. CIGA
(2014) 229 Cal.App.4th 1196
Three year statute of limitations for bringing an action against
CIGA for failure to accept a claim does not accrue until all events
necessary to create a covered claim have occurred, giving rise to the
insured’s right to demand payment from CIGA.
Greenwell v Auto-Owners Insurance Co.
(2015) 233 Cal.App.4th 783
A Michigan wrote policy of property insurance for California
resident covering apartment building in Arkansas. Although carrier thus
“availed itself of California’s forum benefits” for jurisdictional purposes,
bad faith claim arising out of damage to Arkansas property had no
substantial nexus to the carrier’s forum activities, such that it could not
be sued in California.
National Union Fire Ins. Co. v Tokio Marine and Nishido Fire Ins.
Co. (2015) 233 Cal.App.4th 1348
Where indemnitee settles a third party claim, it is entitled to
present evidence acquired post-settlement in its equitable indemnity
claim against non-participating carrier.
Najah v. Scottsdale
(2014) 230 Cal.App.4th 125
Insureds who had sold property and taken second mortgage, later reacquired the property by making a full credit bid at foreclosure sale by the
lender in first position was not entitled to recover pre-foreclosure damage to
the property. That insured held two mortgages made no difference.
Stephens & Stephens XII v. Fireman’s Fund Ins. Co.
(2014) 231 Cal.App.4th 1131
Where policy provided that insured under property damage
coverage was entitled to recover the full cost of repair if repairs were actually
made, insured was still entitled to recover conditional judgment awarding the
full cost of repair based on the insured being hindered in making repairs by
carrier’s decision to decline coverage for those benefits not in dispute.
Lee v. California Capital Insurance Company
(2015) 237 Cal.App.4th 1154
In fire loss case, it was error to compel the appraisal panel to
assign loss values to items simply because they were listed in the
insured’s scope of loss, and regardless of whether inspection revealed
they were undamaged or never existed.
Grebow v. Mercury Insurance Company
(2015) ___ Cal.App.4th ___
Plaintiff homeowners were not entitled to reimbursement for
costs spent to repair rear deck and residence from “imminent collapse”
when policy specifically referred to actual collapse and had a
definition of the same.
RECOVERABLE MEDICAL SPECIALS
IN PERSONAL INJURY ACTIONS
By Laura S. Flynn
Low, Ball & Lynch
California Jury Instruction 3903A
 To recover damages for past medical expenses,
plaintiff must prove the reasonable cost of
reasonably necessary medical care he/she has
received.
 To recover damages for future medical
expenses, plaintiff must prove the reasonable
cost of reasonably necessary medical care
plaintiff is reasonably certain to need in the
future.
Reasonable and Incurred
 A plaintiff may recover as economic damages no more
than the reasonable value of the medical services received
and is not entitled to recover the reasonable value if his or
her actual loss was less. Howell v. Hamilton (2011) 52 Cal.4th
541, 555.
 “Reasonable” compensation for past medical expenses
may not exceed the amount actually paid or incurred
whether by private insurance, Medi-Cal, Medicare,
plaintiff’s employer or any collateral source.
Collateral Source Rule
 Under the collateral source rule, medical benefits
received by plaintiff from sources wholly independent
of the defendant, e.g., under plaintiff’s health,
disability or accident insurance, or social security or
disability benefits, are not deducted from damages
otherwise recoverable.
 Rule reflects public policy of encouraging “prudent
investment in insurance” and ensuring victims are
made whole.
Offset for Payments Made by or on
Behalf of Defendant
 Collateral source rule only operates with regard to
payments from a source with which defendant had
nothing to do with and to which defendant did not
contribute.
 If, prior to trial, plaintiff is paid pursuant to a no-fault
medical coverage provision, plaintiff’s recoverable
damages are diminished to that extent. Evidence of
such payments is therefore admissible. Dodd v.
Bucknum (1963) 214 Cal.App.2d 206.
Payments by Joint Tortfeasor
 Collateral source rule does not apply to bar an offset
for benefits received from a joint tortfeasor because
the source is not “wholly independent” of defendant.
Gratuitously Written Off
 Where a medical provider has: 1) rendered medical
services to a plaintiff, 2) issued a bill for those
services, and 3) subsequently written off a portion of
the bill gratuitously, the amount written off
constitutes a benefit that may be recovered by the
plaintiff under the collateral source rule. Sanchez v.
Strickland (2011) 200 Cal.App.4th 758, 769.
Private Insurance
 A plaintiff whose medical expenses are paid through
private insurance may recover as economic damages
no more than the amounts paid by the plaintiff or his
or her insurer for the medical services received or still
owing at the time of trial.
 Not a modification of collateral source rule. Just a
determination the discount medical providers offer
the insurer is not a benefit provided to the plaintiff in
compensation for his or her injuries.
Medicaid Beneficiary
 Because the provider can no longer assert a lien for
the full cost of its services, the Medicaid beneficiary
may only recover the amount payable under Medicaid
as his or her medical expenses. Olszewski v. Scripps
(2003) 30 Cal.4th 798, 827.
 Plaintiff not entitled to full amount billed as the
reasonable value of medical services when Medi-Cal’s
actual payment for services was less. Hanif v. Housing
Authority (1988) 200 Cal.App.3d 635, 639-644.
Workers’ Compensation
 An employee injured on the job may not recover
medical expenses from a third-party tortfeasor
exceeding the discounted amount that plaintiff’s
employer paid under workers’ compensation.
Sanchez v. Brooke (2012) 204 Cal.App.4th 126, 140-143.
Uninsured Plaintiff with Unpaid Bills
 Measure of damages will turn on an inquiry into the
reasonable value of medical services provided because
uninsured plaintiffs will typically incur standard,
nondiscounted charges that will be challenged as
unreasonable by defendants.
 Can’t rely solely on evidence of unpaid medical charges to
meet burden of proof.
 Need proof of reasonable value, not just what amount was
incurred by plaintiff. Bermudez v. Cioleki (filed 6/22/15,
California Court of Appeal, Fourth District)
Purchasing of Lien by Third Party
 The intervention of a third party in purchasing a
medical lien does not prevent a plaintiff from
recovering the amounts billed by the medical
provider, as long as the plaintiff legitimately incurs
those expense and remains liable for their payment.
Katiuzhinsky v. Perry (2007) 152 Cal.App.4th 1288, 1291.
Tortfeasor is a Government Entity
(Govt. Code §985)
 Still not entitled to introduce evidence of collateral
source benefits and jury can’t reduce plaintiff’s
recovery based on payments from collateral source.
However, governmental entity has specified
procedural rights to post-trial set-off adjustments
against its share of the verdict if the verdict returned
against the entity includes over $5,000 in collateral
source benefits paid or obligated to be paid by
plaintiff.
Discovering Amount Recoverable





Form and Special Interrogatories
Request for Production of Documents
Subpoenas for Medical Billings/Payments
Documents Relating to Lien Agreements
Retain expert as to reasonable value of services
provided
 Depositions of Medical Providers/Experts
 Deposition of Lien Holder
Evidence to Establish Past Medical
Expenses
 Evidence of amount actually incurred or paid to
medical providers is relevant to prove plaintiff’s
damages for past medical expenses and , assuming it
satisfies other rules of evidence, is admissible at trial.
 However, evidence that the payments were made in
whole or in part by an insurer generally remains
inadmissible under the collateral source rule.
Evidence of Future Medical Specials
 Must have expert testimony to establish the need for
future treatment is reasonably certain.
 Expert must also testify as to probable costs.
 Economist can discuss the effect of inflation on such
costs.
 Ultimate award must be reduced to present cash
value.
 If plaintiff requires lifetime care, plaintiff must submit
competent evidence of his remaining life expectancy.
Admissibility of Billed/Undiscounted
Amount
 Where, by prior agreement, the medical provider has
accepted a discounted amount as full payment, evidence
of the full (undiscounted) amount is not relevant and not
admissible to prove past medical specials, future medical
expenses or noneconomic damages.
 Undiscounted charges for medical services vary
tremendously from provider to provider and do not
necessarily reflect the cost of providing those services or
their market value. Corenbaum v. Lampkin (2013) 215 Cal.
App.4th 1308, 1327-1330.
Circumstances Under Which Billed
Amount Might be Admissible
 If plaintiff was uninsured at the time of the incident
and his medical bills remain unpaid, undiscounted
medical bills might form a valid basis for estimating
past medical expenses.
 Where a collection agency purchases a medical
provider’s lien at a discount and the plaintiff patient
still remains liable for the undiscounted charges, i.e.,
the full lien amount.
Testimony by Treating Physicians
 Treating physicians can testify about the nature and
extent of the injuries, the treatment and medication
prescribed, the need for treatment and medication,
and the reasonableness of charges.
 Request Evidence Code §802 hearing to determine if
treating physician is qualified to testify to reasonable
and customary charges for services provided.
Medical Records
 Medical records can document the diagnosis and
treatment of the plaintiff’s condition and verify that
claimed services were provided and for what reason.
 Documents must be authenticated. Evid. Code §1401(a).
 Contents are subject to hearsay exceptions if not within
the purview of the “business records” exception.
Evidence Code §§ 1270-1272.
 Opinions of experts not in the courtroom are not
admissible.
In or Out?
 Plaintiff without medical insurance contracted with
medical providers to treat her in exchange for a lien on
whatever she might recover from defendant in the lawsuit.
 MedFin, a third party assignee, purchased the lien from
medical providers at a discounted amount.
 Plaintiff remained liable for full amount.
 Court denied motion to exclude evidence of billed
amounts.
 Does amount MedFin pay come into evidence?
Uspenskaya v. Meline
(filed 10/28/15,Court of Appeal, Third Appellate District)
 Amount paid by MedFin had a tendency to prove reasonable
value and was therefore relevant.
 However, need evidence that the payment represented a
reasonable value for the treatment in order to be admissible.
Without such evidence, minimal probative value.
 Amount MedFin paid was not based on reasonable
approximation of the value of medical services. It represented a
reasonable approximation of the collectability of the debt.
 In deciding what price to offer medical providers for the right to
recover full payment from an injured person, MedFin evaluates
the risk of collectability and bets on whether and how much the
person will receive in a pending lawsuit.
Uspenskaya v. Meline
(filed 10/28/15,Court of Appeal, Third Appellate District)
 Evidence precluded pursuant to Evidence Code §352.
 In absence of evidence to show what MedFin paid was the
reasonable value of plaintiff’s treatment, the probative
value was outweighed by danger of creating undue
prejudice as well as danger of confusing and misleading
jury.
 Substantial danger of prejudice because jury could rely
solely on third party payment to fashion its award which
might not represent the reasonable value of a plaintiff’s
treatment and result in a situation where the plaintiff is not
made whole, but rather remains liable to the third party for
the entire debt.
Insured Plaintiff Sent to Lien
Providers - Duty to Mitigate
 Plaintiff has health insurance, but receives treatment from
medical provider outside coverage and signs lien with third
party financing company accepting liability for full amount.
 No authority on point.
 Duty to mitigate – avoid unnecessary damages.
 Amount paid is relevant to reasonable value.
 Amount billed? Only if testimony it reflects reasonable
value.
 Argue not collateral source because funds not paid for
medical treatment. Funds used to obtain collectible asset.
Gathering Evidence to Support
Failure to Mitigate




Form Interrogatory 4.1.
Request for Admission – had insurance, referred by attorney
Copy of Health Insurance Policy and Card
Medical Billing Expert prepare reimbursement schedule of
plaintiff’s insurance plan for the care provided.
 Depose outside provider regarding acceptance of patients with
plaintiff’s health coverage.
 Confirm same treatment could have been provided under
plaintiff’s health insurance.
 Determine basis for not receiving treatment by a provider
covered by health insurance.
THE END