Consumer Advocate Legal Update : Class Action Lawyers & Attorneys : Khorrami Pollard & Abir Law Firm : Mass Torts, Products Liability

When can spoliation of evidence be actionable? Litigants can rejoice that a promise , once it is made, cannot be broken with impunity. In Cooper v. State Farm Mutual Auto Insurance Co. (2009, 4th Dist. , Div 2)) 177 Cal. App. 4th 876, an insurer promised its insured that it would preserve vital evidence that was required for the insured to prosecute a personal injury action against a tire manufacturer that was the alleged tortfeasor. The insurer failed to preserve the evidence.

The insured sued the insurer for the damages he could have recovered if the evidence had been preserved by the insurer, despite the fact that there is no tort for intentional spoliation of evidence in California. The claim is too speculative. See Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1, 74 Cal Rptr.2d 248 and Temple Community Hospital v. Superior Court (1999)20 Cal.4th 464, 84 Cal.Rptr.2d 852.  (Here's a good blog on the topic.)

However, the Court in Cooper determined that the insured may proceed with a suit against the insurer to recover damages that might have been recovered if the evidence had been preserved with the actionable claim being based on a theory of voluntary undertaking or promissory estoppel. The mere fact that the evidence wasn’t preserved did not, per se, render the plaintiff’s legal claims speculative.

Bryan Cooper was a State Farm insured who was involved in a single vehicular accident allegedly caused by tread separation. State Farm retained a tire expert who, after his inspection of the tire, opined that it had been defectively manufactured. State Farm informed its insured accordingly and settled Mr. Cooper’s claim for insurance benefits based on its expert’s conclusion.

Despite the fact that State Farm agreed to maintain the tire for Mr. Cooper, so that he could use it as evidence in his product liability case against the tire manufacturer, State Farm sold the vehicle for salvage inclusive of the tire. Mr. Cooper was prevented from pursuing his products liability case, and he sued State Farm on several theories. State Farm’s motion for a nonsuit after opening statement was granted and the Court of Appeal reversed.

In Temple, the Supreme Court extended the legal axiom of no tort action for intentional spoliation of evidence. However, the Court recognized that it was possible that a duty to preserve evidence could arise independently, either from statute or contract. In Cooper, the Court factually distinguished Cedars-Sinai and Temple on the basis that neither of those cases involved a defendant who had agreed to preserve the evidence at issue. The Cooper Court determined that State Farm owed a duty to Mr. Cooper based on its agreement with him, and not on general tort principles.

Since State Farm obtained an opinion from an expert that the tire was defectively manufactured, Cooper’s claim was not unduly speculative. Coupled with State Farm’s promise to preserve the evidence, there was a sufficient factual basis for the jury to rely on to rule in Cooper’s favor, and a nonsuit was improper.
 

• Email This
• Print
• Comments
• Trackbacks

On September 30, 2009, the Fourth District Court of Appeal affirmed the trial court's denial of class certification in Kaldenbach v. Mut. of Omaha Life Ins. Co., 2009 Cal. App. Unpub. LEXIS 7907 (Cal. App. 4th Dist. Sept. 30, 2009). The Court’s opinion, which is unpublished, recognized that In re Tobacco II precluded focus on issues relating to class member reliance and injury. The Court's analysis is seem ingly contrary to the Second District's unpublished opinion in Cohen v. Direct TV (discussed previously here). Notwithstanding this finding, however, the Court ultimately concluded that the trial court did not abuse its discretion insofar as the court's findings regarding predominance were supported on other grounds.

A more detailed discussion of the Kaldenbach opinion is addressed at the Bailey Class Action Daily.

• Email This
• Print
• Comments
• Trackbacks

In California, you can legally drive a Chevy Suburban, but state law only requires you to carry $15,000/$30,000 liability insurance. Where is the sense in that? Your vehicle is capable of wreaking havoc in even the most minor of accidents.   Moreover, if you cause a serious injury because of your negligence, and are “judgment proof,” as many people driving on California roads are, there is a very low likelihood that the person you hit is going to be adequately compensated from your minimal insurance policy. Put the shoe on the other foot. What if you are walking to dinner, and struck in a cross-walk by an inattentive person driving their brand new Cadillac Escalade carrying the minimum insurance required by law, and you sustain a broken femur. Is $15K going to adequately compensate you for the months of physical therapy you will have to undergo to rehabilitate from that injury? What if you have to take of months of work? You would be seeking your loss of earnings from that same $15,000 policy.

One of the more frustrating (and sometimes heartbreaking) things that I often come across representing catastrophically injured parties is either the total lack of uninsured motorist (UM) coverage or totally inadequate limits, such as a $15,000/$30,000 UM policy.  I think back to a recent wrongful death case where the plaintiff’s decedent was struck by an underinsured SUV that ran a stoplight, and the family had only a $15,000.00 insurance policy to chase. They ended up losing their home because there simply was not a viable defendant to pursue for that loss.

What is even more frustrating to me is that consumers are unaware of the relatively low cost to “up your coverage.” Oftentimes, for less than another$60- $100/year in premiums, you can purchase 100K/100K UM coverage or even higher. I actually recommend carrying at least 500/500 UM coverage if you drive in California. There are many uninsured drivers out there. Remember, it is your responsibility to protect yourself in advance. Think about what kind of money you would need to tide your life over while you recover from a major injury if the person who injures you is uninsured/underinsured. Even the most aggressive personal injury plaintiffs’ lawyer will not be able to extract blood from a turnip if there are inadequate assets to pay a judgment.

• Email This
• Print
• Comments
• Trackbacks

The linchpin of a bad faith claim is that the denial of coverage was unreasonable.  Before an insurer can be found to have acted in bad faith for its delay or denial in the payment of policy benefits, it must be shown that the insurer acted unreasonably or without proper cause.  The courts created a defense for the insurance companies, the genuine-dispute doctrine, which allows the judge, not the jury, to decide whether an insurer was “reasonable” in denying a claim.  In other words, if an insurance company can show that a genuine dispute existed as to coverage, then it is entitled to summary adjudication of the bad-faith cause of action.  The jury never hears evidence of the insurer’s conduct in adjusting the claim. 

The genuine-issue defense has been firmly cemented in California after the decisions in Fraley v. Allstate Ins. Co. (2000) 81 Cal.App.4th 1282 [97 Cal.Rptr.2d 386], Guebara v. Allstate Ins. Co. (9th Cir. 2001) 237 F.3d 987, and Chateau Chamberay Homeowners Association v. Assoc. International Ins. Co (2001) 90 Cal.App.4th 335 [108 Cal.Rptr.2d 776]. Guebara was the first decision to take a hard look at the doctrine. There the Ninth Circuit held that the doctrine could be applied to both legal and factual disputes. Chateau Chamberay was the California appellate equivalent to Guebara, also found that the doctrine was applicable to both factual and legal disputes, and adopting the list of factors that would allow a court not to apply the doctrine in a particular case.  As defense attorneys salivated, the courts applied the doctrine with increased frequency and broad in scope. It seemed that no insurance bad faith case would survive.

Then came the trifecta of cases Wilson v. 21st Century Insurance Company (2007) 42 Cal. 4th 713, Brehm v. 21st Century Insurance Company (2008) 166 Cal. App. 4th 1225, and most recently McCoy v. Progressive West Insurance Co., 171 Cal. App. 4th 785, 793-794 (2009). Each case has slowly chipped away at the great insurance defense. Under Wilson and Brehm, an insurance company may not rely on the genuine-dispute doctrine if it failed to conduct a thorough investigation into an insured’s claim in a motion for summary adjudication or demurrer.   

McCoy was the final nail on the coffin.  The Court of Appeal found there was no authority for any instruction on the genuine-dispute doctrine  and upheld the trial court’s refusal to issue special jury instructions proposed by the insurance company because the genuine-dispute doctrine issues were subsumed by the reasonableness instructions, set forth in CACI 2331 and 2332, that were provided to the jury.  The Court further found that there was abundant evidence to support the jury’s finding of bad faith and the award of punitive damages. The Court of Appeal has sent the clear message that key issue in bad faith cases is whether insurance company’s actions were reasonable. 

This case has hopefully slam shut the door for the defense use of the genuine-dispute doctrine as a legal defense to bad faith claims. The message from the Court of Appeal is that absent undisputed evidence an insurer acted reasonably, a jury may act properly in finding to the contrary. 

It will be interesting to see how the big insurance defense firms will now devise creative ways to sneak the genuine-dispute doctrine back into their defense repertoire. Stay tuned.

The linchpin of a bad faith claim is that the denial of coverage was unreasonable. “Before an insurer can be found to have acted in bad faith for its delay or denial in the payment of policy benefits, it must be shown that the insurer acted unreasonably or without proper cause.” (Jordan v. Allstate Ins. Co. (2007)148 Cal.App.4th 1062, 1072

Wilson was an underinsured-motorist (UIM) bad-faith case. The claimant, Regan Wilson, was a 21-year old woman who suffered neck injuries in an auto accident when she was struck by a drunk driver. She demanded policy limits of $100,000 from her UIM carrier.The trial court granted summary judgment for the carrier, finding that there was a genuine dispute about the extent of her injuries. The Court of Appeal reversed in a published decision. The Supreme Court affirmed the Court of Appeal’s decision.

• Email This
• Print
• Comments
• Trackbacks