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Bad faith in California requires unreasonable conduct or conduct without proper cause



In hopefully the last appeal between the parties First One Lending Corporation and John Vescera (collectively "Appellants"), the district court appealed the summary judgment to The Hartford Casualty Insurance Company on its claim for a settlement to third parties. party and unbelief and punitive damages in First One Lending Corporation; John Vescera v. The Hartford Casualty Insurance Company No. 20-55016, United States Court of Appeals For The Ninth Circuit (March 19, 2021)

FACTS

The appellant's claim sought $ 1.5 million in compensation, amounts paid by the appellant to settle a previous lawsuit brought by the Neighborhood Assistance Corporation of America (NACA) against the appellant.

The NACA Settlement Agreement resolved NACA's claims against the Lanham Act and for damaging NACA's reputation. These were covered claims according to the insurance's provisions on personal and advertising damages. Hartford failed to create a genuine dispute over material facts by claiming that the NACA settlement included uncovered repayment. There is no suggestion that NACA itself received a refund from the residence. Nor did Hartford show that the NACA settlement included reimbursement for homeowners, which the insurance policy would not have covered. Homeowners were not parties to NACA's lawsuit against complainants, nor was there a "final assessment" in NACA's disputes about complainants' alleged wrongs against homeowners. It is also undisputed that nothing required NACA to use its liquidation to replace homeowners, even though NACA may have chosen to do so.

Hartford argued that Vescera's statements in his criminal case required a different conclusion under the doctrine of legal estoppel. Hartford has not explained how Vescera's statements could stop First One, which was not a party to the criminal proceedings. Nor has Hartford shown that Vescera's statements in the criminal proceedings were "clearly inconsistent" with the appellants' position in the case before the Ninth Circuit. In both cases, Vescera and the Appellants argued that NACA had no obligation to pay homeowners, even though they might have hoped that NACA would do so.

Hartford's alternative argument that California Insurance Code § 533 excludes coverage similarly fails. Section 533 states that “[a] n the insurer is not liable for a loss caused by the intentional act of the insured. . . . Cal. Ins. Code § 533. The Ninth Circuit has previously argued that the allegations in NACA's complaint were not covered by § 533 because the Lanham Act trademark claim did not require intent and at least some of the allegations in the complaint were not inextricably linked with intent.

includes an indemnity, the NACA settlement included payment for Lanham Act claims and Hartford has not shown that all or part of the $ 1.5 million settlement was for intentional conduct. The settlement also does not fall within the policy's exclusion of personal and advertising damage as a result of the provision of or failure to provide financial services. The NACA settlement agreement contained only covered claims and when arguing otherwise, Hartford points to the same evidence as we in a previous case with the same subjects.

The district court correctly granted a summary judgment to Hartford on the appellant's allegations that Hartford refused insurance coverage. in bad faith. In order to demonstrate an incredible denial of coverage, a plaintiff must prove that “(1) benefits due under the insurance are retained; and (2) the reason for withholding benefits was unreasonable or without proper cause. ” Guebara v . Allstate Ins . Co ., 237 F.3d 987, 992 (9 Cir. 2001). Although the Ninth Circuit previously concluded that Hartford had to defend the complainants in the NACA disputes and now concludes that Hartford must compensate complainants for the NACA settlement, Hartford did not act unreasonably to deny coverage, especially given Vescera's statements under his criminal proceedings.

Since Hartford failed to defend the plaintiffs, it has the burden of proof with a consideration of the evidence that the settlement payments were intended for claims that were not actually covered, but its defense is ineffective. the repayment of a misappropriated profit, Hartford did not prove that all or part of the NACA settlement was for non-covered repayment or otherwise excluded claims.

The district court's grant of a summary judgment to Hartford on the plaintiffs' claim for $ 1.5 million in damages was therefore reversed and the ninth district directed the district court to a judgment for the plaintiffs on this claim. The ninth, however, upheld the district court's grant of a summary judgment to Hartford on the appellants' infidelity and criminal claims, as its position on the claim, even if enforceable, was reasonable because of testimony from a person involved in a criminal case. [19659013] Even when an appellate court finds that an insurer has erroneously failed to defend its insured, this fact is not sufficient to allow an action for damages of disbelief if its actions were reasonable. In the light of a criminal conviction and testimony in a criminal trial, the insurer had a reasonable basis for denying defense. As Hartford could not provide sufficient evidence to establish excluded measures involved in the settlement reached by NACA, it was required to pay the settlement reached by NACA. This case teaches us that it would have been wise for Hartford to provide a defense during a reservation of rights and to be involved in the conciliation hearing so that it could have the evidence needed for compensation and would have saved several appeals. Defense should only be refused if there is absolute, convincing evidence that there was no cover for defense.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to the position of specialized insurance consultant. in insurance coverage, handling of insurance claims, cheating and insurance fraud almost

equally for insurers and policyholders. He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance industry. He is available at http://www.zalma.com and zalma@zalma.com.

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For the past 53 years, Barry Zalma has devoted his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to enable insurers and their claims staff to become insurance claims staff.

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