"A binder is a contract of insurance that provides coverage pending the issuance of the insurance policy." Chicago Title Insurance Co. v. AMZ Insurance Serv's, Inc., Download Chicago Title Insurance Co. v. AMZ Insurance Serv's, Inc. (Cal. 4th DCA, Div. 3, Case No. G041188, Opinion Filed September 9, 2010) PUBLIC ACCESS also published as 2010 WL 3506365 *1 (Cal. 4th DCA September 9, 2010)(Westlaw subscription required to access Westlaw). In that case, the Trial Court and the Appellate Court both held as a matter of law that an "Evidence of Property Insurance" document was an enforceable binder of Homeowner's Insurance as against Pacific Specialty Insurance Company, for a fire loss incurred by the putative Policyholder, Ms. Cheryl Mustain. Id. This was bad news for PSIC.
After the Trial Court determined that the EOI was an enforceable binder as a matter of law, the matter was given to a Jury to determine fact questions concerning "whether AMZ had actual or ostensible authority to issue binders on behalf of PSIC and whether the EOI was lawfully cancelled before Cheryl Mustain's loss." The Jury determined not only that the EOI document was not lawfully cancelled, and that AMZ had actual or ostensible authority from PSIC to issue the EOI, but further determined that "PSIC acted in bad faith by failing to properly investigate the loss and pay proceeds under the policy." Id.
That was not the end of PSIC's bad day, however. "The court awarded Chicago Title [assignee of Ms. Mustain's rights against PSIC] a stipulated amount of recovery under the EOI and its attorney fees." Id.
First-Party Bad Faith Claims are addressed in Chapter 9 of Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" (Shepard's/McGraw-Hill Second Edition; West Publishing Co. 2010 Supplement). Defenses to First-Party Bad Faith Claims are examined in Chapter 11, id., and various issues including Responsibilities of the Insured in Presenting First-Party Claims (Chapter 10) and Discovery (Chapter 12) are also major topics of discussion, id.
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