Ernest Hanes v. Armed Forces Ins. Exchange
670 F. App'x 918
| 9th Cir. | 2016Background
- Ernest and Okhoo Hanes held a homeowners policy issued by Armed Forces Insurance Exchange (AFI).
- The Haneses were sued in California state court by neighbors (the Bishops); the state court found the Haneses acted willfully and awarded the Bishops attorneys’ fees and litigation expenses.
- AFI defended the Haneses under a reservation of rights and later sought reimbursement of some defense costs; the Haneses sued AFI for indemnification and refusal to cover certain amounts.
- The district court granted AFI summary judgment on indemnification claims and ordered partial reimbursement; the Haneses appealed.
- The Ninth Circuit considered (1) AFI’s duty to indemnify for the state judgment and mediation results, and (2) AFI’s duty to defend during various phases (mediation, trial, and appeal).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether AFI must indemnify the Haneses for the state-court judgment awarding Bishops' attorneys’ fees and litigation expenses | Hanes: insurer must indemnify judgment against them | AFI: exclusions and Cal. law bar coverage for willful conduct and related fees | Held for AFI — no indemnity for willful conduct-based judgment |
| Whether AFI must indemnify amounts arising from pre-trial mediation | Hanes: insurer must cover obligations from mediation resolution | AFI: mediation demand sought action, not damages; no potentially covered claim | Held for AFI — no duty to indemnify mediation result |
| Whether AFI had a duty to defend the Haneses during the state-court trial and until appeal deadline passed | Hanes: insurer failed to defend fully | AFI: willfulness and pleadings negated potential for coverage so no duty | Held for Hanes on this point — AFI had a duty to defend through trial and until appeal deadline |
| Whether AFI had duty to defend or fund pre-suit mediation and the Haneses’ appeal | Hanes: insurer should have funded mediation defense and appeal | AFI: mediation raised no potentially covered claims; after dismissal no duty to fund appeal | Held for AFI — no duty to defend mediation or fund appeal |
Key Cases Cited
- Curley v. City of N. Las Vegas, 772 F.3d 629 (9th Cir.) (appellate review may affirm on any ground supported by the record)
- Waller v. Truck Ins. Exch., Inc., 900 P.2d 619 (Cal. 1995) (insurer duty to defend arises when complaint or facts disclose potential for coverage)
- Combs v. State Farm Fire & Cas. Co., 49 Cal. Rptr. 3d 917 (Cal. Ct. App. 2006) (Cal. Ins. Code § 533 bars coverage for willful conduct and related supplemental coverages)
- Cutler-Orosi Unified Sch. Dist. v. Tulare Cty. Sch. etc. Auth., 37 Cal. Rptr. 2d 106 (Cal. Ct. App. 1994) (insurer not liable for costs of complying with injunctive relief when excluded)
- State Farm Gen. Ins. Co. v. Mintarsih, 95 Cal. Rptr. 3d 845 (Cal. Ct. App. 2009) (factual disputes material to coverage do not eliminate duty to defend)
- Phillips v. Cooper Labs., 264 Cal. Rptr. 311 (Cal. Ct. App. 1989) (interrogatory responses are evidentiary admissions, not binding judicial admissions)