Dietz International Public Adjusters of California, Inc. v. Evanston Insurance
796 F. Supp. 2d 1197
C.D. Cal.2011Background
- Dietz, an independent public insurance adjuster, sought coverage for funds paid to clients after Estrada’s embezzlement, under Evanston’s professional liability policy.
- The 2006/2007 policy treated two or more related claims as a single claim, with a single liability limit and notice/claims-handling cooperation requirements.
- Estrada forged endorsements and diverted funds; Dietz paid $2.17 million across 49 non-Medina claims to satisfy clients’ losses.
- Medina litigation arose from Estrada’s acts; Evanston defended Medina under a reservation of rights and paid $135,000 on Dietz’s behalf, with Sands & Associates as independent counsel at $185/hour billing cap.
- Dietz later tendered non-Medina claims to Evanston in June 2009; Evanston denied coverage for those claims on July 31, 2009, asserting no-voluntary-payments and other defenses.
- Dietz filed suit seeking full reimbursement for non-Medina settlements and related fees, plus indemnification for Medina-related defense costs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Waiver of no-voluntary payments defense | Evanston failed to raise the clause earlier, implying waiver. | No waiver; denial letters reserved rights and asserted multiple defenses. | No waiver established; no-voluntary payments defense preserved. |
| Coverage for the forty-nine non-Medina claims | Policy should cover related claims arising from Estrada’s embezzlement; all related claims treated as single tender. | No-voluntary payments clause bars reimbursement for pre-tender settlements and related expenses. | No coverage for non-Medina settlements; no-voluntary payments provision bars reimbursement. |
| Ambiguity/prejudice in no-voluntary payments clause | Clause is ambiguous due to proximity to cooperation clause; prejudice should be shown. | Clause is unambiguous; no prejudice required to enforce no-voluntary payments. | Clause is unambiguous; prejudice not required to enforce—it bars recovery. |
| Voluntariness of the payments | Payments were involuntary due to economic necessity to preserve Dietz’s business. | Payments were voluntary; Dietz had time to tender and did not. | Payments were voluntary as a matter of law; no coverage for pre-tender payments. |
| Medina indemnification and post-tender fees | Evanston must indemnify further for Medina-related defense costs and costs not tied to Medina. | Only post-tender costs within Medina were covered; pre-tender defense costs are barred. | Evanston had no duty to reimburse pre-tender expenses; post-tender fees require evidence of reasonable rates and charges. |
Key Cases Cited
- Faust v. Travelers, 55 F.3d 471 (9th Cir. 1995) (no-voluntary payments defense upheld for pre-tender costs)
- Jamestown Builders, Inc. v. General Star Indem. Co., 77 Cal.App.4th 341 (Cal. Ct. App. 1999) (no-voluntary payments provision enforced; pre-tender payments barred)
- Insua v. Scottsdale Ins. Co., 104 Cal.App.4th 737 (Cal. Ct. App. 2002) (no-voluntary payments provision enforceable without prejudice; notice provisions differ)
- Waller v. Truck Ins. Exchange, Inc., 11 Cal.4th 1 (Cal. 1995) (waiver requires intentional relinquishment of a known right)
- Low v. Golden Eagle Ins. Co., 110 Cal.App.4th 1532 (Cal. Ct. App. 2003) (no-voluntary payments bar applies post-tender where insurer not informed or consented)
- Northern Ins. Co. of New York v. Allied Mut. Ins. Co., 955 F.2d 1353 (9th Cir. 1992) (Cal. no-voluntary payments doctrine recognized; insurer control over defense)