195 Cal. App. 4th 431
Cal. Ct. App.2011Background
- Richardses owned Jack London Lodge insured for liquor liability; Morris lawsuit filed against Richardses and Lodge for allegedly serving alcohol to a minor who died; Richardses tendered defense February 29, 2006; Sequoia sent March 8, 2006 letter referring defense to coverage counsel and advising insureds to hire own counsel at their expense; Richardses lacked funds and retained counsel to represent themselves with help from Richardses (licensed attorneys); Sequoia later accepted defense March 17, paid defense fees and settled Morris suit at Sequoia’s expense; Richardses pursued settlement demands for denial of defense/indemnity and claimed damages for time spent researching the case and other costs; trial court granted summary judgment in Sequoia’s favor, finding no cognizable damages for either breach of contract or bad faith claim; on appeal, court affirmed focusing on lack of economic damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Richardses can recover damages for time spent defending themselves. | Richardses seek recovery of time spent; argues breach caused economic loss. | Sequoia did not authorize payment for self-representation; not insurable expense. | No recoverable damages for self-representation. |
| Whether insurer delaying/denying defense constitutes breach of contract. | Delay harmed insureds by delaying defense and increasing costs. | Insurer acted reasonably; defense deferred pending opinion. | No actionable damages; delay did not create contract damages. |
| Whether bad-faith claim requires economic loss and establishes damages. | Denial caused emotional distress and other damages beyond defense costs. | Absent economic loss, no bad-faith claim; no emotional-distress damages recoverable. | Summary judgment proper for lack of economic loss. |
Key Cases Cited
- Trope v. Katz, 11 Cal.4th 274 (Cal. 1995) (insurer-defendant's duties; self-representation not compensable as fees under 1717)
- Emerald Bay Community Assn. v. Golden Eagle Ins. Corp., 130 Cal.App.4th 1078 (Cal. App. 5th Dist. 2005) (damages measure for defense costs and settlements; economic loss required for bad-faith)
- State of California v. Pacific Indemnity Co., 63 Cal.App.4th 1535 (Cal. App. 4th Dist. 1998) (contract damages to place insured in position as promised; measure of damages for defense costs)
- Gray v. Zurich Insurance Co., 65 Cal.2d 263 (Cal. 1966) (scope of coverage determined by reasonable expectations of insured)
- Continental Ins. Co. v. Superior Court, 37 Cal.App.4th 69 (Cal. App. 2d Dist. 1995) (economic loss requirement for bad-faith claim; no personal-injury style recovery)