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Welcome to Berger Kahn's monthly e-publication summarizing the most important California state and federal court decisions.
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Sexual Assault May Be A Potentially Covered Claim
Gonzalez v. Fire Insurance Exchange
(Ct. App. 6th Dist.) Filed February 5, 2015
Jessica Gonzalez sued Stephen Rebagliati and other De Anza College baseball team members who she claimed sexually assaulted her at a party after she had been given multiple shots of hard liquor. Fire Insurance Exchange and Truck Insurance Exchange, Rebagliati’s parents’ insurers, denied coverage. Rebagliati settled with Gonzalez, and assigned Gonzalez his rights against his insurance companies. Gonzalez then sued the insurance companies for “bad faith.” The trial court granted Fire Insurance Exchange and Truck Insurance Exchange’s summary judgment motions, finding no duty to defend. On appeal, the Court of Appeal held that Fire Insurance Exchange did not have a duty to defend because none of Gonzalez’ claims alleged an accident that could trigger potential coverage. The Court recognized that the Fire Insurance Exchange policy only obligated it to defend against an “occurrence,” which was defined as an “accident.” It also rejected Gonzalez’ argument that the false imprisonment, invasion of privacy, slander per se, and negligence causes of action qualified as “accidental conduct” under the policy. On the other hand, the Court held that summary judgment was improperly granted as to Truck Insurance Exchange. The Truck Insurance Exchange policy did not require an accident for the “personal injury” coverage to apply. Coverage would turn on the “expected or intended” and molestation exclusions, rather than the insuring provision’s “accident” requirement. The Court found that it was unclear whether the sexual molestation exclusion barred coverage for Gonzalez’ claims since the policy only excluded molestation by the insured and the complaint raised the possibility that the other defendants may have physically assaulted Gonzalez --not just Rebagliati. The Court decided that the “expected or intended” damages exclusion might not apply because Rebagliati could have committed an intentional act without expecting or intending the resulting damage. The Court also refused to apply the criminal acts exclusion. When the lawsuit was tendered, it was not established that Rebagliati actually assaulted Gonzales and committed a crime. Finally, the Court rejected the argument that all claims were excluded because they were inseparably intertwined with the sexual assault and should be excluded. The Court reversed summary judgment as to Truck Insurance Exchange, affirmed summary judgment for Fire Insurance Exchange, and remanded the case to the trial court.
Failure To Prevent Sexual Harassment Claim Requires A Viable Harassment Claim
Dickson v. Burke Williams Inc.
(Ct. App. 2d Dist.) Filed March 6, 2015
Former spa massage therapist, Domaniqueca Dickson, filed a lawsuit against Burke Williams, alleging she was harassed and discriminated against by two clients. At trial, Burke Williams requested a special verdict form that allowed the jury to skip Dickson’s failure to prevent harassment and discrimination cause of action, if the jury found that there was no corresponding liability finding on the harassment claim. The jury ultimately found for Burke Williams on sex discrimination, sexual harassment racial harassment, retaliation and failure to take steps to prevent race harassment. The jury found that while Dickson was subjected to unwanted harassment, the conduct was not “severe or pervasive.” The jury, however, found that the Burke Williams was liable for failure to take steps necessary to prevent sexual harassment or sex discrimination. Dickson was awarded $35,000 in compensatory damages and $250,000 in punitive damages. Burke Williams filed a judgment notwithstanding the verdict motion, arguing that the special verdict was too inconsistent to be enforced. It also argued that Dickson had no evidence to support her punitive damages award. The trial court denied the motion, and also found that the 7-to-1 punitive damages ratio was not excessive. The Court of Appeal reversed. It emphasized that there was “no logic that says an employee who has not been discriminated against can sue an employer for not preventing discrimination that didn’t happen, for not having a policy to prevent discrimination when no discrimination occurred.” Dickson argued that the jury’s finding was that unwanted harassment -- albeit, not pervasive -- occurred. But the Court of Appeal disagreed. It held that “there can be no claim for failure to take reasonable steps to prevent sexual harassment when an essential element of sexual harassment liability has not been established.” The Court reasoned that under Dickson’s theory, “an employee could maintain an action for failing to take reasonable steps necessary to prevent any conduct that the employee perceives is harassing even if that conduct amounts to nothing more than non-actionable teasing, an offhand comment, or an isolated incident.”
Insurer’s Delay Waived Right To Rescind Policy
DuBeck v. California Physicians’ Service
(Ct. App. 2d Dist.) Filed March 5, 2015
California Physicians’ Services (dba “Blue Shield”) cancelled Bonnie DuBeck’s medical insurance policy, claiming that DuBeck made a material misrepresentation in her application when she concealed that she had undergone a breast procedure before submitting her application. Blue Shield had previously paid the medical claims it now deemed a preexisting condition. The cancellation letter said that Blue Shield was cancelling DuBeck’s coverage prospectively (rather than rescinding), and that any claims before the cancellation were covered. DuBeck sued Blue Shield for failing to pay the covered claims while the policy was in force. Blue Shield argued that it had the right to rescind the policy and the trial court granted summary judgment for Blue Shield. The Court of Appeal reversed. The Court of Appeal recognized that an insurer “has the right to rescind a policy when the insured has misrepresented or concealed material information in seeking to obtain insurance.” But the Court also emphasized that the right to rescind could be waived. Here, Blue Shield had the sufficient information to rescind DuBeck’s policy for over 2 years, but instead it continued to affirm her coverage. It was not until DuBeck filed her lawsuit that Blue Shield decided to rescind the policy. Therefore, the Court of Appeal held that “Blue Shield’s conduct was wholly inconsistent with the assertion of its known right to rescind” and the case was remanded.
OTHER CASES OF INTEREST:
Physician’s Harassment Claim Survives Anti-SLAPP Motion
DeCambre v. Rady Children’s Hospital-San Diego
(Ct. App. 4th Dist.) Filed March 11, 2015
Dr. Marvalyn DeCambre filed a lawsuit against Rady Children’s Hospital and other affiliated entities, alleging that she had been discriminated against for her race and gender. In response, Rady filed a special motion to strike (“anti-SLAPP”) that DeCambre’s causes of action arose from the Rady’s decision not to renew DeCambre’s contract after a protected peer review process. The trial court granted the motion and denied DeCambre’s request for leave to amend. On appeal, the Court agreed that the defendants’ decision not to renew DeCambre’s contract resulted from the peer review process. It also emphasized that peer review was included in the California Supreme Court’s definition of a protected proceeding as an “official proceeding authorized by law.” The Court noted that the retaliation, discrimination, failure to prevent discrimination and wrongful termination causes of action would be subject to anti-SLAPP. It also found that DeCambre failed to meet her burden under the UCL and Cartwright Act claims because she did not present any evidence to support either liability theory. However, the Court of Appeal reversed the trial court’s decision as to the harassment, intentional infliction of emotional distress, and defamation claims. The Court noted that the none of the causes of action “was based on an act in furtherance of the defendant’s right of petition or free speech.” Since the complaint alleged acts that occurred independent of the peer review proceedings, they would not be protected and subject to an anti-SLAPP motion. The Court also held that DeCambre had abandoned her intentional infliction of emotional distress claim since she failed to address it on appeal. It held that DeCambre’s defamation claim failed because any statements regarding her performance were non-actionable opinion statements and were protected by the common interest privilege applicable to job performance communications. Finally, the Court remanded the case back to the trial court to determine any applicable attorney’s fees based on its order.
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