Wilson v. Kiewit Pac. Co., 2010 U.S. Dist. LEXIS 133304 (N.D. Cal. Dec. 6, 2010) - Claims by workers for allegedly unreimbursed expenses on personal vehicles used to travel to off-site conventions and seminars, under California Labor Code §2802;
Lemus v. H&R Block Enters., LLC, 2010 U.S. Dist. LEXIS 133697 (N.D. Cal. Dec. 6, 2010) - Claims by employees for alleged failure to provide correct wage statements and to disburse all earnings due at time of termination, under California Labor Code §§226, 203; and
Stiller v. Costco, 2010 U.S. Dist. LEXIS 140297 (S.D. Cal. Dec. 13, 2010) - Claims by workers for allegedly being refused pay while obligated to remain on-premises after the finish of their work day.
›Ninth Circuit Holds Insurance Company Wrongfully Declined to Defend Claim Against Insured Company; Reaffirms Broad Duty to Defend in California - Companies buy liability insurance for the objective of accessing finances to pay a judgment or settlement in the event the business is successfully sued. In addition, such policies obligate the insurer to pay the cost of defending against the court procedings - i.e., pay for defense lawyers to represent the insured.
This duty is known as the "duty to defend." In California, it has long been accepted that the duty to defend is complex. In Montrose Chem. Corp. of Cal. v. Superior Court, 6 Cal. 4th 287 (1993), the California Supreme Court ruled that "a liability insurer owes a broad duty to defend its insured against claims that create a potential for indemnity. . . . [T]he carrier must defend a suit which potentially seeks damages within the coverage of the policy." Thus, when the insured is sued on claims which only have the potential to cause the insurer's duty to pay a judgment, the insurer is obligated to defend the suit.
Not long ago, in Hudson Ins. Co. v. Colony Ins. Co., 624 F.3d 1264 (9th Cir. 2010), the Ninth Circuit Court of Appeals reaffirmed the breadth of the duty to defend. In the ligitation, the insurance policy in question allowed coverage if the insured was ever sued for slogan infringement, but did not include coverage for trademark infringement. The insured business was sued for trademark infringement. The claim against the insured, however, while failing to include a formal claim for "slogan infringement," did allege evidence that could potentially support a claim for slogan infringement. The details indicated the plaintiff's belief in its right to retain ownership of a certain slogan, and its belief that the insured defendant was using it unlawfully. But for the reason that the complaint failed to contain a formal claim for slogan infringement, the insurer refused to provide a defense.
The court held that this was wrong. This was because the insurer's obligation to defend depends not on the labels on the claims in the lawsuit, but on the facts alleged within. Again, these facts suggested a suit for slogan infringement was feasible - thus the insurer was required to impart a defense. The court reiterated the rule that any indecision in the complaint in the proceedings against the insured must be settled in favor of finding coverage.
Hudson is a long-awaited decision for California businesses that may require broad defense coverage under their liability policies. The verdict limits the insurer's capability to legally deny coverage based on the technical labels of the claims in the suit filed versus the insured.
This article is intended to convey accurate general information concerning the subject matter covered, but should not be construed as legal advice, which would be dependent upon the specific circumstances of the client.
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Article Added on Tuesday, February 15, 2011
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