On a claim for disability benefits by plaintiff employee, the Superior Court of Los Angeles County, California, dismissed a claim against defendant, the third party claims administrator for a group long-term disability insurance policy; granted summary judgment for defendant employer, with costs and attorney fees under Code Civ. Proc., § 1038, and granted summary judgment for defendant insurer. The employee appealed.
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Overview
After her job was eliminated, the employee was placed on temporary disability for depression. Benefits were terminated after two years. The court found no merit in the claims against the employer, which were based on the insurer’s failure to extend benefits. On the contract claim against the insurer, a triable issue of fact existed as to whether benefits were properly terminated. The term “mental disorder” in a disability policy exclusion was necessarily ambiguous when mental symptoms arose from a separate physical causal event, or physical symptoms arose from a separate mental causal event. Looking to the employee’s reasonable expectations, the court found that if the disability was caused solely by depression, and if her physical problems, including fibromyalgia, were neither a cause nor a symptom, the limitation applied; if the physical problems contributed or were a cause or symptom, the limitation did not apply. There was sufficient evidence to show that the employee suffered from a non-mental disability within the policy period and remained totally disabled from any occupation. Under the genuine dispute doctrine, summary adjudication was proper on the bad faith claim.
Outcome
The court dismissed the appeal as to the administrator because the employee did not file a notice of appeal from that judgment. The court affirmed the judgment and fee award for the employer and remanded to allow the employer to seek costs and fees on appeal. As to the insurer, the court reversed the summary judgment and remanded with directions to deny summary judgment but to grant summary adjudication as to bad faith and intentional torts. The litigants appellant and respondent through their counsel California class action lawyers engaged in a strongly contested trial.
Procedural Posture
Plaintiff insurer appealed a judgment of the San Francisco County Superior Court, California, dismissing its action for subrogation against defendant tortfeasor demolition subcontractor after sustaining the demolition subcontractor’s demurrer. The insurer alleged that the demolition subcontractor had breached its contract with a general contractor by failing to defend and indemnify the general contractor in an underlying personal injury action.
Overview
The court held that the insurer’s subrogation complaint, based on its insured’s contractual indemnification claim against the demolition subcontractor, was not barred by the demolition subcontractor’s good faith settlement in the underlying litigation. The insurer’s allegations concerning the demolition subcontractor’s negligence pertained neither to the legal theory of the indemnity claim nor the amount or nature of the damages alleged. The general contractor suffered a loss for which the demolition subcontractor was liable. The insurer compensated the insured for the loss and had a cause of action against the demolition subcontractor. The insurer suffered damages arising from the demolition subcontractor’s act or omission. The demolition subcontractor’s equities were not equal to or superior to those of the insurer as a matter of law. The insurer’s receipt of premiums to cover the type of loss that occurred, although a factor to be considered, did not preclude it from being in an equitably superior position to another party that contractually agreed to indemnify. The court concluded that public policy favored equitable subrogation under the facts alleged.
Outcome
The court vacated the judgment and reversed the order sustaining the demurrer to the insurer’s first amended complaint. The trial court was to enter a new order overruling the demurrer.
