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Berger Kahn's monthly e-publication 
The most important court decisions of the month
Welcome to Berger Kahn's monthly e-publication summarizing the most important California state and federal court decisions.

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Court Finds Carrier Has Duty To Defend Complaint Alleging Bodily Injuries Even Though Plaintiffs State They Will Not Seek Damages For Those Injuries
 
Hartford Fire Ins. Co. v. Tempur-Sealy Int’l, Inc.
(N. Dist. Ct.), filed January 20, 2016

Hartford insured Tempur-Sealy. Individual consumers filed a class action against Tempur claiming that they were not informed that the pillows and mattresses emitted chemical odors containing formaldehyde and triggered allergies and asthma attacks. Presumably to increase the likelihood of class certification, the complaint specifically cautioned that the plaintiffs were not seeking to recover for bodily injuries. Hartford initially agreed to defend, but it then filed a declaratory relief action. The parties filed cross-motions for summary judgment. The central dispute was whether the complaint alleged “damages because of ‘bodily injury’ or ‘property damage’ . . . caused by an occurrence.” Hartford argued that the complaint did not allege “specific claims for bodily injury or property damage.” But the Court disagreed, noting that the Underlying Complaint already included 18 pages of allegations detailing the factual basis for a potential covered claim.” Hartford argued that the policy excluded coverage for any property damage to products -- i.e. the mattresses. But the Court found that the exclusion did not apply because the complaint had alleged extensive damage, other than damage to the products themselves, including the odor the mattresses emitted. The Court also held that the “accidental sale of defective mattresses” was sufficient to be a covered “occurrence.” Most significantly, the District Court held that the plaintiffs’ disavowal of an intent to recover for bodily injury “is not dispositive,” apparently because they could amend the complaint at any time.






Coverage Cannot Be Excluded For A Loss Caused By A Combination Of Covered And Uncovered Perils Where The Covered Peril Was The Efficient Proximate Cause
 
Vardanyan v. Amco Insurance Co.
(Ct. App. 5th Dist.), filed December 11, 2015, ordered published on January 7, 2016

Artyun Vardanyan owned a rental home that Amco Insurance insured. Vardanyan submitted a claim for water damage and mold. An independent adjuster visited the property and noted substantial issues with the home. Amco denied coverage, citing multiple policy exclusions (including, mold, earth movement, negligence, water damage, and faulty workmanship). Vardanyan sued Amco, alleging breach of contract and bad faith. Vardanyan argued that the house collapsed and that the policy covered collapse. At trial, the evidence showed there were multiple causes of the damages to the home. Vardanyan claimed there was coverage if the predominant cause of the collapse was either hidden decay or hidden insect damage. Vardanyan requested the jury instruction explaining that, “when a loss is caused by a combination of covered and excluded risks, the loss is covered if the most important or predominant cause is a covered risk.” Amco’s requested jury instruction instead placed the burden on Vardanyan to prove that the house’s collapse was “caused only by one or more” of the perils listed in the “other coverage” provision. Amco argued that there would be no coverage “if the cause of the collapse involved any peril other than those listed.” When the trial court indicated that it intended to give part of Amco’s proposed instruction, Vardanyan argued that it would essentially be giving a directed verdict in Amco’s favor since there was no dispute the damage to the house was caused by perils in addition to those listed in “other coverage” under the policy. The trial court ultimately granted Amco’s motion for directed verdict. The Court of Appeal reversed. It explained the history behind the efficient proximate cause doctrine which made an insurer “liable for a loss of which a peril insured against was the proximate cause,” rather than a “remote cause” of the loss. The Court explained that the efficient proximate cause was the “predominant” or “most important cause” of the loss. The Court of Appeal found that the Vardanyan’s proposed instruction was consistent with the efficient proximate cause doctrine. It reasoned that to “the extent the term ‘caused only by one or more’ of the listed perils can be construed to mean the contribution of any unlisted peril, in any way and to any degree, would result in the loss being excluded from coverage, the provision is an unenforceable attempt to contract around the efficient proximate cause doctrine.”






New Attorney Fee Award Statute Applied To Pending Actions
 
USS-Posco Industries v. Case
(Ct. App. 1st Dist., Div. 1), filed January 26, 2016

Floyd Case voluntarily enrolled in a three-year, employer-sponsored educational program. He agreed that if he quit working at USS-POSCO Industries (“UPI”) within 30 months of completing the program, then he would return a prorated portion of his program costs. Two months after he finished the program, Case quit and refused to reimburse UPI. The company sued for breach of contract and unjust enrichment. Case cross-complained, claiming that the reimbursement was unenforceable. UPI successfully moved for summary judgment. On December 5, 2013, UPI moved for attorney’s fees in successfully defending against Case’s wage claims. Case opposed the motion arguing that on January 1, 2014, Section 218.5 would be amended to authorize fees only if the suit was brought in bad faith. The trial court applied the pre-2014 version of Section 218.5 and granted UPI’s fee motion. When the fee motion was decided, Section 218.5 had been amended to only allow attorney’s fees for defendants when the claims are brought in bad faith. The Court of Appeal affirmed the summary judgment ruling, but reversed the fee award. It found that the program was voluntary and optional. The Court held that the trial court erred in applying the pre-2014 version of Section 218.5. It emphasized that that the “general rule is that absent a clear, contrary indication of legislative intent, we interpret statutes to apply prospectively.” But it noted that the Courts of Appeal have “authoritatively held” that “in the absence of express legislative intent to the contrary, ‘a new statute authorizing an award of attorney fees’ or a statute increasing or decreasing litigation costs, including attorneys’ fees applies to actions pending at the time of enactment.” The case was remanded to the trial court to determine whether Case brought his cross-complaint in bad faith.






OTHER CASES OF INTEREST:


Federal Overtime Formula Lawful In Absence Of Binding California State Law
 
Alvarado v. Dart Container Corp. of California
(Ct. App. 4th Dist.), filed January 15, 2016

Hector Alvarado worked as a warehouse associate for Dart Container Corporation of California. Alvarado was terminated in January 2012. Dart paid attendance bonuses to any employee who worked a full weekend shift. The bonus was $15 a day regardless of the hours worked beyond the normal shift. Dart calculated overtime each pay period using a regular rate based on non-overtime work and extra pay bonuses. Alvarado sued Dart claiming unpaid overtime wages because the calculation excluded shift differential premiums and diluted the attendance bonus by distributing it among all hours as opposed to just regular hours (among other reasons). Dart moved for summary judgment, arguing that the formula it used calculating overtime on attendance bonuses was consistent with federal law and that California did not have a formula for calculating overtime on bonuses. The trial court granted Dart’s summary judgment motion. The Court of Appeal affirmed. It generally noted that federal law on bonus overtime would not preempt the more protective California law. It refused to adopt the DLSE standards, noting that it was not required to use the DLSE’s interpretation. The Court ultimately held that in “the absence of a formula for computing bonus overtime founded on binding state law, there is no law or regulation the trial court or this court can construe or enforce as a method for computing plaintiff’s overtime bonuses, other than the applicable federal regulation. . . .”  

 

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San Diego Principals Roberta Winston and Dale Amato Featured in Attorney Journal as "Top Rated Attorneys"
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