Watch the full video at https://youtu.be/bormu86k3ys and at https://rumble.com/v2n1s66-panel-rehearing-denied-by-ninth-circuit.html
Readers of Zalma on insurance read a summary of the earlier version of this case at http://zalma.com/blog/?s=BERNAL. That decision was reversed by the Ninth Circuit to say that “The trial court shall enter judgment for MBIC.” Otherwise, the appellant’s request for a panel hearing was rejected. No further petitions for reconsideration will be entertained.
IN Massachusetts Bay Insurance Company v. Neuropathy Solutions, Inc., dba Superior Health Centers and Rigoberto Bernal, an individual; et al., No. 22-55272, United States Court of Appeals, Ninth Circuit (May 5, 2023), the Ninth Circuit refused to hear and reiterated its decision allowing the insurer to recover its insured money paid under a reservation of rights.
Decision
In this California law diversity action, Massachusetts Bay Insurance Company (MBIC) sought damages for $2 million it paid under a reservation of rights to settle disputes against its insured, Neuropathy Solutions, Inc. (Neuropathy).
To the extent that the underlying Bernal action falls within the coverage provisions of the policy (ie, to the extent neuropathy liability arose out of an accidental “occurrence”), coverage is excluded under the policy’s “Professional Services” exclusion.
Based on California case law, the text of the policy and the operative complaint in Bernal action, neuropathy liability i Bernal fall within the “Professional Services” exception. Starting with the very first sentence i Bernal complaint, it is clear that Neuropathy incurred liability as a result of the professional services it provided.
The “Professional Services” exclusion extends to errors in monitoring and supervising others in the provision of professional services, and Neuropathy incurred liability due to the provision of professional advertising and medical services, not inadequate record keeping or poor customer service. Finally, the complaint’s allegation that Neuropathy engaged in discriminatory “marketing techniques and high-pressure sales tactics” falls within the “Professional Services” exception for advertising services and health advice or instruction.
Neuropathy liability i Bernal The action was thus excluded from coverage, and MBIC is entitled to a refund of the $2 million it paid to settle that lawsuit. The district court must rule in favor of MBIC.
The Ninth Circuit reiterated for the second time that an insurer that paid a settlement with a reservation of rights and determined that there was no coverage for the alleged loss because of a clear and unambiguous exclusion was entitled to reimbursement of the funds it spent settling the lawsuit . The insured, neuropathy, owes MBIC $2 million plus interest.
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Barry Zalma, Esq., CFE, can be found at http://www.zalma.com and zalma@zalma.com
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