In American Modern Home Insurance Co. v. Fahmian, 2011 WL 1334959 (Cal. 4th DCA, Div. 3, April 8, 2011) a California District Court of Appeal affirmed and directed awards to American Modern Home Insurance Company which include reimbursement from its Policyholder, Mr. Fahmian, whom it defended in an underlying lawsuit. The reimbursement award included $300,000 paid by American Modern to settle the underlying lawsuit on behalf of Mr. Fahmian and his business; fees and defense expenses "that the trial court determines are reimbursable under the terms of the policy," i.e., that were not covered by the policy; plus prejudgment interest. Id. at *10.
The California Appellate Court applied what it called these "binding" rules concerning reimbursement claims and causes of action by liability insurance companies against their policyholders and other insureds:
Under binding California Supreme Court authority, an insurance company may obtain reimbursement from its insured for a policy limits settlement, when it is determined the underlying claim was not covered by the policy, if the insurance company (1) made a timely and express reservation of rights, (2) provided express notification to the insured of the insurer's intent to accept the proposed settlement offer, and (3) made an express offer that the insured could assume its own defense. In this case, American Modern did all of the foregoing. We decline to add any additional requirements.
Id. at *1.
The "additional requirement" that the California Appellate Court did not add in this particular case was a requirement added by the Trial Court in denying American Modern's claim for reimbursement against Mr. Fahmian. The Jury in that case found as a fact, and the Trial Judge incorporated that finding into his ruling, "that Fahmian did not have sufficient time to make a reasoned reply to American Modern." Id.
The American Modern Home Insurance Co. v. Fahmian decision is discussed from the perspective of Good Faith and Fair Dealing issues raised by some practitioners in a post today on Insurance Claims and Bad Faith Law Blog, "Can There Be Bad Faith in Reimbursement Claims Against Insureds?" (no password or registration required to access).
The Fahmian case is also the subject of a post I recently wrote for the Defense Research Institute Official Blogger at www.dri.org (no password or registration required to access it). The case is also receiving comments at the "Insurance Coverage" Group on LinkedIn (registration believed to be required for access to www.linkedin.com).
Dennis Wall is the principal in Dennis J. Wall, Attorney at Law, A Professional Association in Winter Springs and Orlando, Florida. He also is the Author of LITIGATION AND PREVENTION OF INSURER BAD FAITH (Shepard's/McGraw-Hill Second Edition; West Publishing Company 2010 Supplement and Third Edition 2011 in process). Reimbursement causes of action by insurers from insureds are discussed in §3:4 of the Second Edition and 2010 Supplement, and in the Third Edition in §3:6, "Informing the Insured: Insurer Assertion of Rights to Reimbursement From the Insured of Clearly Noncovered Indemnity and Defense Expense."
Please Read The Disclaimer.
Comments