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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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Appraisal Scope Is Not As Limited As Sharma And Kacha Might Have Suggested
Li-Lin Sung Lee v. California Capital Insurance Company
(Ct. App., 1st Dist., Div. 3), filed June 18, 2015

A fire damaged an apartment building Li-Lin Sung Lee owned. California Capital insured Lee. It made a $46,755 payment. Lee then hired a public adjuster who submitted a substantially larger claim (over $800,000). Lee petitioned to compel an appraisal. The trial court ordered an appraisal. The appraisal resulted in two sets of values -- one for the insured’s scope of loss (over $800,000 for replacement cost, and over $780,000 for actual cash value) and one for the insurer’s scope of loss (which was less than $200,000 for replacement and actual cash value). California Capital petitioned to vacate/correct the appraisal award, arguing that the panel exceeded its authority by issuing two vastly different valuations of the same fire loss. The trial court denied California Capital’s petition and instead, granted Lee’s request to confirm the appraisal award. The trial court commented that the appraisal panel was not to decide whether “particular items were actually damaged in the fire or replaceable under the policy, or even whether they existed at the time of the fire.” The Court of Appeal distinguished Kacha v. Allstate Ins. Co., 140 Cal.App.4th 1023 (2006), and reversed. The Court of Appeal noted that Insurance Code section 2071 requires the parties “to participate in an informal appraisal proceeding in the event there is a disagreement about the actual cash value or the amount of the loss and the insurer or insured makes a written request for an appraisal.” The Court found that the trial court did not necessarily err “in compelling appraisal of disputed items when the disputes turn on issues such as coverage, causation, or policy interpretation.” Rather, the Court noted, “an appraisal panel may assign a value to items as to which coverage is disputed with the disclaimer that the award does not establish coverage or the insurer’s liability to pay.” In Kacha, the panel assigned a zero value to many items. Some of those zero values were at least arguably based on the lack of coverage under the policy, as opposed to the lack of actual damage. Here, the appraisers assigned a value to everything. But the Court still found that the award was “fundamentally deficient” because it assigned values “to items that may not have been damaged or never existed...” If the proof established that an item was not damaged, or that it never existed, the appraisal panel should have assigned a zero value.

Sealed Oil Container Retrieval Not Covered Under Pollutant Policy Provision
Guam Industrial Services Inc. v. Zurich American Insurance Co.
(Ct. App. 9th Cir.), filed June 1, 2015

Guam Industrial Services, Inc. owned a dry dock in Guam. It had two insurance policies: (1) Hull and Machinery, covering damage to the dock (underwritten by Zurich and Starr Indemnity) and (2) Ocean Marine, covering pollutant caused damage (underwritten by Zurich). As a condition for coverage under the Hull and Machinery policy, Guam Industrial was required to obtain a Navy Certification to show that the dock had a certain level of structural integrity. But Guam Industrial never obtained the Navy Certification. While trying to repair the dock to qualify for a commercial certification, the dock sank. When it sank, it took containers filled with 113,000 gallons of oil with it. The Coast Guard ordered Guam Industrial to remove the containers. Guam Industrial made a claim under the Hull and Machinery Policy, which was denied since Guam Industrial failed to get the Navy Certification. Guam Industrial also made a claim under the Ocean Marine Policy for property damage, which was also denied because no actual toxins were discharged. Guam Industrial sued Zurich and Starr. But summary judgment was granted in Zurich and Starr’s favor. On appeal, Guam Industrial argued that the insurers had waived strict compliance with the requirements since they had also accepted commercial certification (rather than Navy). But the Ninth Circuit disagreed, noting that the insurers “did not waive their right to insist on at least commercial certification.” Similarly, the Ninth Circuit agreed that the oil containers themselves were not pollutants within the scope of the Ocean Marine policy. Affirming the District Court’s ruling, the Ninth Circuit noted, “since there was no actual discharge of pollutants, even though the containers of oil were submerged after the sinking, Guam Industrial’s costs of retrieving the containers from the sea were not covered by the policy’s allowance of coverage for cleanup after the ‘discharge, dispersal, release, or escape’ of pollutants.”

Applicant’s Religious Headscarf Could Not Be A Factor In Employer’s Hiring Decision
EEOC v. Abercrombie & Fitch Stores, Inc.
(U.S. Sup. Ct.) Argued February 25, 2015

Practicing Muslim Samantha Elauf applied for a position at an Abercrombie & Fitch store. While Elauf passed Abercrombie’s hiring criteria, the assistant store manager was concerned that Elauf’s headscarf would conflict with the store’s “Look Policy.” The “Look Policy” prohibited “caps” as too informal for Abercrombie’s image. The decision went up the chain to the district manager who decided that the headscarf would violate the Look Policy and instructed that Elauf not be hired. The EEOC sued Abercrombie, claiming that its refusal to hire Elauf violated Title VII for failing to accommodate a religious practice. The Tenth Circuit held that “an employer cannot be liable under Title VII for failing to accommodate a religious practice until the applicant (or employee) provides the employer with actual knowledge of his need for an accommodation.” The Supreme Court disagreed. It noted, “an applicant need only show that his need for an accommodation was a motivating factor in the employer’s decision.” The general rule for disparate-treatment claims was that “an employer may not make an applicant’s religious practice, confirmed or otherwise, a factor in employment decisions.” In reversing the Tenth Circuit’s decision, the Supreme Court cautioned, “an employer who acts with the motive of avoiding accommodation may violate Title VII even if he has no more than an unsubstantiated suspicion that accommodation would be needed.”


Joint Employers Are Both Liable For Misclassifying Workers
Noe v. Superior Court
(Ct. App. 2d Dist., Div. 7), filed June 1, 2015

Anschutz Entertainment Group (“AEG”) contracted with Levy Premium Foodservice Limited Partnership to provide food and beverage services for entertainment venues. Levy then contracted with the Canvas companies to provide vendors to sell the food and beverage items to spectators. Canvas vendors filed a wage and hour class action against AEG, Levy, and Canvas as “joint employers.” The vendors also sought recovery under Labor Code section 226.8 for “voluntarily and knowingly misclassifying an individual as an independent contractor.” AEG and Levy moved for summary judgment, claiming that they were not the vendors’ joint employers and could not have any Section 226.8 liability. They also argued that the decision to classify the vendors solely belonged to Canvas. The trial court granted summary adjudication to the Section 226.8 claim finding that there were triable issues of fact as to whether AEG and Levy were joint employers. But the trial court noted that although AEG and Levy knew the vendors should have been employers (and not independent contractors), Canvas had made the misclassifying decision alone. The Court of Appeal found that Section 226.8 was not limited to the employers who made the misclassification decision. The Court found that when “a joint employer knowingly acquiesces in a [co-joint] employer’s decision to willfully misclassify their joint employees [it] has necessarily ‘involved’ itself in that misclassification decision.” The Court also noted that since Section 226.8 was intended to be a civil penalty, there was no private right to enforce it. But the Court commented that its analysis would not prevent the plaintiffs from enforcing Section 226.8 through their private attorney general action claim.

Passenger Potentially Liable For Fatal Accident After Encouraging Driver To Speed Over Dips
Navarrete v. Meyer
(Ct. App. 4th Dist. Div. 1), filed June 22, 2015

Haley Meyer was sitting in the front passenger seat in Brandon Coleman’s car. Levi Calhoun was in the back seat. Meyer told Coleman to turn onto a residential street as a “shortcut.” Meyer knew that the street had a 25 mph speed limit with many dips. While Calhoun cautioned Coleman, Meyer encouraged Coleman to drive fast on the dips. Suddenly, Coleman lost control of the car and hit Esteban Soto who was putting his child in a car seat. As a result, Soto’s legs were severed and he was instantly killed. Soto’s wife, Miriam Navarette, sued Coleman and the County of Riverside. Navarette also sued Meyer (for willful interference under Vehicle Code section 21701 and civil conspiracy). Meyer filed a summary judgment motion, arguing that she did not interfere with Coleman’s control of the vehicle and that there was no tacit agreement between her and Coleman. The trial court granted the motion, finding that while Meyer encouraged Coleman to drive faster, there was no evidence that this affected Coleman’s ability to control the vehicle and it was also insufficient to show a civil conspiracy. On appeal, Navarette sought leave to amend to add a cause of action for “aiding and abetting an exhibition of speed.” The Court of Appeal reversed the judgment. It allowed the amendment, finding that “where a passenger encourages a driver to speed on road that the passenger knows can render the speeding car airborne, it is for a trier of fact to decide whether the passenger’s actions constitute interference...” The Court of Appeal found that although Meyer was only a passenger, her encouragement to speed over the dips was evidence that she and Coleman “jointly engaged in a series of acts that led directly to the collision with Navarrete’s vehicle.” The evidence also could allow a reasonable jury to “infer that Coleman accelerated the vehicle at Meyer’s request so Meyer...could observe and experience the car ‘gain air,’ as she had experienced in past trips along that road.” In regards to the civil conspiracy claim, the Court emphasized that the law imposed on Meyer “an independent duty not to encourage or assist Coleman in engaging in an unlawful exhibition of speed.” Finally, the Court noted that as a matter of law, it could not find that Meyer’s conduct was outside the scope of willful interference to affect Coleman’s control under Vehicle Code § 21701.



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