In a case involving a Wrongful Denial of Defense under a Directors and Officers Liability Insurance Policy, a Federal Court held that there was a question of Waiver which should be resolved by a Jury as a question of Fact -- even if Insurance Coverage was constructed in the process which was expressly excluded under the Policy. California Dairies, Inc. v. RSUI Indemnity Co., Download PUBLIC FREE ACCESS California Dairies, Inc. v. RSUI Indemnity Co. (E.D. Cal. Case No. 1.08cv00790, Opinion Filed April 16, 2010) also published as 2010 WL 1541230 (E.D. Cal. April 16, 2010)(Westlaw subscription required to access Westlaw).
The D&O Carrier denied a duty to defend but its Disclaimer Letter apparently left out another reason for denying all Coverage under the D&O Liability Policy. Exclusion Number 7 was the unmentioned basis for Denial under that Policy and which was at issue in that case. California Dairies, Inc. v. RSUI indemnity Co., 2010 WL 1541230 at *4. Under California substantive law, as in many other jurisdictions, the Courts follow a "general rule" that a Denial of Coverage on one ground does not make for a waiver of other grounds not mentioned in the Denial or Disclaimer Letter. However, California Law adds the caveat that the general rule applies "'absent clear and convincing evidence to suggest otherwise'". Id. at *11.
The Federal Court held that under California law, the Insurance Company's Motion for Judgment on the Pleadings itself called for denial. "[T]he operation of implied waiver is a question of fact that cannot be decided on the pleadings, but rather suggests factual development, even if the waiver sought would create coverage where coverage is expressly excluded by the insurance contract." Id. at *16. [Emphasis added.]
The burden of proving Implied Waiver of bases for Coverage Denials which are not mentioned in Insurance Disclaimer Letters, by clear and convincing evidence or otherwise, may be imported by other jurisdictions if this line of case law is extended even more. Until then, this development is at rest in the California Dairies case for now. The Pacer Online Docket reflects that a 33-page Order was entered on June 25, 2010 Granting the Defendant Insurance Company's Motion for Summary Judgment on all Claims which remained against it in that case. Download FREE PUBLIC ACCESS California Dairies, Inc. v. RSUI Indemnity Co. (E.D. Cal. Case No. 1.08cv00790, Memorandum Decision Granting Def's MSJ).
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