Declarations and Exclusions

Katrina [w/ Updates]

New Orleans lawyer Ernest Svenson's weblog, Ernie The Attorney, was one of the pivotal inspirations for my launching my own pair of weblogs.   Ernie attempted to leave the city in advance of Hurricane Katrina, managed to travel less than 15 miles in four hours and turned back to ride out the storm.   He made it, even managing a handful of posts, but as the city continues to fill with water he is making a break for it.  Here's hoping that he, and all those affected throughout the region, will see their way through this no more scathed than they already are.   No doubt it is much easier to be an optimist from thousands of miles away than it is in the thick of the destruction.

Given its speed and success in rallying donations in the wake of the September 11 attacks and last year's Asian Tsunami, I am surprised that Amazon has not yet launched a page for Hurricane Relief donations to the American Red Cross.  The Red Cross' own servers seem a bit slow just now -- perhaps precisely because of an upsurge in Hurricane Relief donations -- but here is a link to their Online Contribution page.

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UPDATE [083105]: Ernie has made it out of New Orleans and is now able to post again on his own behalf.  He has even found the mental and emotional wherewithal to take an initial run at waxing philosophical over the long-term implications of the past few days' events.  He suggests that "[t]his catastrophe will change America and we don't yet grasp how that will happen."  He is almost certainly right.

Despite the helicopters and other high-end contemporary equipment being brought to bear in the initial phases of rescue and recovery, this disaster feels like something out of another era -- pre-industrial, almost medieval in some sense.  Evan Schaeffer reports on crossing paths with a New Orleans solo lawyer whose escape path led him to St. Louis:

He said that his office had been demolished but even if it had survived, it wouldn't have mattered very much: his practice wouldn't survive in any case.  He said he doubted that some portions of New Orleans would even be rebuilt.  He talked about the refugee camps that would have to be established in other parts of the state.  He criticized the local government for not planning well enough for the disaster and not ordering an evacuation soon enough.  Very angry about what had happened, he mulled over possible causes of action as we talked, more out of frustration than anything else.

While we have taken in any number of displaced persons from abroad over the course of our history, internal refugees is not something we're used to in this country, at least not since the era of the Dust Bowl.  One has to suspect that these events are enough of a blunt force to set our societal tectonic plates to shifting, and that the process is probably already at work, if only imperceptibly.  Where and how those plates will reach a point of rest is beyond my own meager predictive skills.

Don't forget to click through the Red Cross link above before you go.

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FURTHER UPDATE - Relief Links [090105]: Amazon -- a bit slower than expected, but better late than never -- now has a direct page for Donating To The American Red Cross.  The extreme slowness of the Red Cross servers over the past few days has been relieved by a new donation site -- linked on the Red Cross home page -- provided by Yahoo.

A growing list of other routes for aid is also accumulating in this post at Instapundit.

More Attorneys Behaving Badly: A Red Card for a Wreckless Referee

See if you can predict how this case will come out, based on the first sentence of the Third District Court of Appeal's opinion:

This case presents the issue of whether a judicial officer enjoys absolute immunity from civil liability for assaulting and battering a litigant.

If you think the answer is "no" and that the aforementioned "judicial officer" needs to learn that physical force is rarely an acceptable dispute resolution technique, you may advance to the head of the class.  Here are the details:

Jerome Regan sued Jennifer Martin in Placer County.  (The exact nature of that lawsuit is not revealed in the appellate decision.)  Disputes arose during the discovery process, and the judge hearing the case decided that a discovery referee should be appointed to control the process and to make appropriate recommendations to the court concerning those disputes.  The court appointed attorney David Price as referee.  Price in short order found himself in a personality clash with Regan's attorney, Robert Kingslan.  At one point, Price accused Kingslan of having "stolen" certain documents that had been produced at a deposition.  In light of that accusation (which he denied), Kingslan concluded that Price was not able to act as a fair and impartial referee and that he would request the court to appoint a replacement.  Kingslan prepared a letter notifying Price of that decision, and brought it with him to deliver at the deposition of Jennifer Martin, which was to be held in Price's office.  According to the complaint (as summarized by the Court of Appeal), the situation deteriorated rapidly:

At the time of the scheduled deposition, Kingslan and Regan entered Price’s office and hand-delivered the letter to Price in the outer office.  Regan and Kingslan stood there for a moment while Price read the one-paragraph letter.  Kingslan and Regan then went into the deposition room, where Kingslan handed [Martin's] Attorney Tyrell a copy of the letter.  As Kingslan and Regan turned to leave the room, Price appeared, blocking the door.  At this point, Kingslan handed Price copies of the documents (belonging to Regan) that Price had previously accused him of stealing.  Kingslan and Regan then attempted to leave the room by stepping around Price.  Instead of allowing them to leave the room, Price shut the door and blocked it with his body.  Kingslan then grabbed the door and forced it partially open, but Price kept exerting force in the opposite direction.  Kingslan finally managed to open the door and escape.  When Regan attempted to follow Kingslan out of the room, Price slammed the door against Regan’s body, injuring him in the shoulder and neck area, where Regan had had radical cancer surgery.

Regan, who was 63 at the time, filed suit against Price seeking damages for "false imprisonment, assault, battery, negligence and infliction of emotional distress."  Price argued that in his capacity as a court-appointed discovery referee he was acting as a "judicial officer" and that he was therefore protected by an absolute immunity from civil liability.  The trial court agreed and dismissed the case; the Court of Appeal reversed and remanded the case to proceed forward on its merits.

The appellate court concurs in two of Price's main premises: Judicial officers, particularly judges, have for centuries enjoyed broad immunity from civil liability for the consequences of their official acts, even when those acts are corrupt or malicious.  Moreover, as a court-appointed referee, Price qualified as a "judicial officer" and thus "is cloaked with the same immunity as if he had been a sitting judge."  The decisive question, however, is whether Price's actions in the deposition room were "judicial" or "non-judicial" in nature.

Price claims he is protected by absolute judicial immunity because all of the alleged tortious acts in the deposition room were undertaken 'in the course of Price’s exercise of his authority as a judicially appointed referee.'  He characterizes his conduct as judicial in nature because its purpose was 'to preserve order in the proceeding -- to prevent a party from leaving a properly noticed deposition he was appointed to referee.'  Regan counters that physically assaulting a litigant can never be a judicial function.  The law supports Regan’s position, except in extraordinary cases.

After discussing several decisions in which judges who entered into physical confrontations with litigants were held to have stepped beyond their proper "judicial" role, the Court of Appeal finds that Price is not entitled to use his quasi-judicial position as a shield to avoid the consequences of his alleged attack on Regan, which was "not a judicial act under any sensible meaning of the term."

A judge’s robe is not a king’s crown.  The object of judicial immunity is to ensure '"that a judicial officer, in exercising the authority vested in him, shall be free to act upon his own convictions, without apprehension [of civil liability]."'  [Citation.]  It was never intended to protect acts of thuggery against litigants merely because the assailant happens to be a judge.

Amen to that and thank you, your Honor.

~~~

The decision in Regan v. Price (August 17, 2005), Case No. C047980, can be accessed at these links in PDF and Word formats. [Note: Links expire approximately 120 days following issuance of the opinions; the opinions should still be accessible thereafter by substituting "archive" for "documents" in the URL.]

The Return of "Attorneys Behaving Badly": Just Because It Said What It Said, Don't Pretend You Didn't Know What It Meant to Say

"Selective Literalism Syndrome" [SLS] is a condition affecting many practicing attorneys.  The principal clinical sign is an aggravated tendency on the part of the attorney to shut down those language centers of his or her brain that would otherwise draw meaning from the context in which a statement is made, and to stimulate instead the neural pathways that focus on the interpretation of a text that will be least likely to conform to its author's intent.  There is as yet no proven treatment for this condition.  Recent experimental studies suggest, however, that a liberal administration of Sanctions Therapy may eventually produce results in some who suffer under the burden of SLS.

The Court of Appeal for the Second District provides an enlightening SLS case study arising from an insurance dispute.

Retailer Sears, Roebuck & Co. is enmeshed in litigation with its insurer, National Union Fire Ins. Co., over National Union's refusal to pay Sears' claim that it lost $20 Million through theft committed by Focus Media, an advertising agency Sears had hired.  Attorney Geoffrey Mousseau represented several of Focus Media's principals, who were witnesses in (but not parties to) the insurance litigation.  Sears concluded that Mousseau had assisted National Union in formulating defenses to Sears' claims under the insurance policy, and sought to obtain records from Mousseau to prove or disprove that theory.

Sears' attorneys served Mousseau with five subpoenas, some for production of records and some to compel his appearance for questioning in a deposition.  Mousseau did not respond.  Sears sought court orders to enforce its subpoenas.  The trial court appointed Malcolm Lucas, the retired Chief Justice of the California Supreme Court, to serve as a referee to oversee and resolve the various disputes over production of evidence.  Mousseau first unsuccessfully challenged the appointment of Justice Lucas.  He next succumbed to advanced SLS, triggered by an innocent clerical error in Sears' subpoenas:

Mousseau’s later opposition to the merits of the discovery motion was based on a typographical error in Sears’ document production subpoenas: although those subpoenas directed Mousseau to produce the requested documents at the address of Sears’ lawyers, they also directed him to produce the documents to the deposition officer, then mistakenly identified Mousseau as the deposition officer.  According to Mousseau, he fully complied with the document subpoenas because, in accordance with their instructions, he delivered the specified documents to himself. . . .  Mousseau [also] contended . . . that Sears canceled the deposition when a proposed deal calling for Mousseau’s advance production of the requested documents fell through.

Declarations and correspondence submitted in Sears’ moving and reply papers told a different story.  When synthesized, they show Sears’ lawyers trying to pin down Mousseau regarding whether he would appear for the September 29 deposition as scheduled, with the lawyers agreeing to Mousseau’s alternate date of October 1, 2003, as well.  Sears’ evidence showed that the deposition was canceled in order to avoid unnecessary costs only because Mousseau refused to confirm whether he would attend.  They also show frantic attempts to contact Mousseau and ask why he missed the September 20 document production deadline.  During phone conversations with one of Sears’ lawyers during the week of September 22, 2003, Mousseau acknowledged his failure to produce the documents on time and promised to deliver them by courier on September 26.  He did not.  On October 2, 2003, Mousseau faxed to Sears’ lawyers a letter dated September 25 stating that he had complied with the document subpoenas by producing the documents to himself.  In response to an October 17 letter from Sears’  lawyers that recounted these events, Mousseau sent a fax on November 6 that stated: 'Your letter . . . requested my assistance. I presumed my silence would have spoken sufficiently loudly to you. Since you did not get the message, let me be more clear: I decline.' The faxed letter restated Mousseau’s insistence that he had complied with the document subpoenas and that Sears had canceled his deposition due to a scheduling conflict.  At no time before October 2 did Mousseau express any doubts about his obligations under the document production subpoenas.

[Italics in original; underscoring added.  All dates mentioned were in 2003; cf. Hamlet, Act 3, scene i, re: "the law's delay".]

Mousseau's arguments did not succeed: Not only was he ordered to comply fully with his obligations under the subpoenas, the referee and trial court imposed monetary sanctions of more than $20,000 on Mousseau, payable to Sears.  Mousseau appealed from all of the orders against him; the Court of Appeal affirmed the orders, showing little sympathy for Mousseau's condition:

Mousseau’s reliance on Sears’ mistaken designation of him as the deposition officer to whom he should deliver the subpoenaed documents is not a good-faith contention.  Not only did the subpoenas call for production at the address of Sears’ lawyers, Mousseau, as a lawyer himself, must have known what was intended.  Simply put, his contention that he could comply by delivering the documents to himself is preposterous.  Second, regardless of what Mousseau should have known, the evidence shows that he in fact understood his obligations under the subpoenas.  According to the evidence from Sears’ lawyers, Mousseau acknowledged his failure to deliver the documents on time and promised to do so quickly.  From this, we infer that Mousseau in fact knew he was obliged to produce the documents to Sears’ lawyers.  His repeated failures to do so were sanctionable.

[Underscoring added.]

It is to be hoped that someone learned a lesson or two from this experience, and that it will spur further research toward a cure for the debilitating and embarrassing illness that is SLS.
~~~
The decision in Sears, Roebuck and Co. v. National Union Fire Ins. Co. of Pittsburgh (August 15, 2005), Case No. B176666, can be accessed at these links in PDF and Word formats.
[Note: Links expire approximately 120 days following issuance of the opinions; the opinions should still be accessible thereafter by substituting "archive" for "documents" in the URL.]

Prior instances of Attorneys Behaving Badly can be found in the Decs&Excs "Law of Lawyering" archive.

Insurance Fraud: How Do You Like Them Waffles?

Regular readers of this weblog may have received the impression that Decs&Excs is unduly critical or skeptical when it comes to the policies of California Insurance Commissioner John Garamendi.   So, to be sure that credit is being given where it appears to be due, it must be said that under Commissioner Garamendi's leadership, the California Department of Insurance seems to be at least as serious about pursuing those who attempt to defraud insurance companies as it is in pursuing wrongdoing by insurance professionals.  Which is as it should be.

Here is a good example, as described in a Press Release just issued by the Department.  See if you can spot the errors in the scheme of this would-be fraudulent claimant:

LOS ANGELES -- A woman pleaded guilty and was sentenced to serve two years in state prison and ordered to pay $6,500 in restitution to State Farm Insurance Company following an investigation by the California Department of Insurance (CDI).   Paula Serese Teate, 35, pleaded guilty last month in Los Angeles Superior Court to one felony count of insurance fraud. . . .

'When a person defrauds the system—acting solely on greed, it is an added and unnecessary cost that hurts all businesses in California,' said Insurance Commissioner John Garamendi.  'Our department is particularly disappointed when people try to rip-off insurance companies for personal gain.   My investigators worked closely with the businesses involved to end this scam, and we won’t stop there in our efforts against insurance fraud.'

According to CDI investigators, Teate, a public relations director for Roscoe’s House of Chicken & Waffles filed a bogus $9,616 claim with State Farm Insurance Company, in Culver City.   Teate purportedly placed after-market custom tires and chrome wheels on her vehicle and claimed it was stolen from the parking lot of Roscoe’s House of Chicken & Waffles Restaurant and subsequently destroyed by fire.   However, the salesperson at the store Teate claims to have purchased the after-market accessories stated he gave her a written quote only.   The investigation showed Teate altered the quote to look like she bought the tires and chrome wheels when in fact she did not. Additionally, during the post prosecution phase of the investigation, it was revealed that the OZ Comanche wheels and tires she purportedly purchased in September 1999 hadn’t even been manufactured yet. . . .

"Well done" to the Department's fraud staff -- although it would be nice if these cases could be processed in under six years.

Roscoe's, by the way, is a Los Angeles institution, and the conviction of its employee in this case is no reflection on its chicken, its waffles, or any of the other soulful Southern delicacies on its menu.

Pay It Back: Liability Insurer Entitled to Recover All Defense Costs When Coverage Never Existed

The California Supreme Court has revisited the issue of a liability insurer's right to seek reimbursement from its insured for costs expended defending non-covered claims.  The Court holds that when the insurer notifies the insured that it may seek reimbursement and then obtains a determination that there is not, and never has been, a potential for coverage under the policy, the insured can be required to reimburse all defense costs paid by the insurance company from the inception of the claim.

In the case before the Court, Scottsdale Insurance Company insured MV Transportation.  MV was sued by Laidlaw Transit Services, which claimed that MV -- with the help of a number of former Laidlaw officers and employees -- had engaged in an array of unfair and unlawful competitive practices.  MV sought a defense from Scottsdale, relying on a 9th Circuit decision that had found that trade secret misappropriation could be covered under the rubric of "advertising injury."  Scottsdale disagreed with that analysis, but it agreed to provide a defense.  The defense was provided subject to an explicit reservation of Scottsdale's right to seek recovery of all defense costs that could be attributed to non-covered claims.

• Scottsdale relied on the state Supreme Court's1997 decision in Buss v. Superior Court, in which the Court first recognized an insurer's right to obtain reimbursement of defense costs to the extent those costs could be shown to relate entirely to claims that were never potentially covered.  A liability insurer must defend any claim that raises a potential for an award of covered damages, the Court reasoned in Buss, but it is not required to defend claims that are conclusively shown to have contained no such potential and -- having "done the right thing" by defending those non-covered claims along with the potentially covered claims -- is entitled to recover those expenses from the insured, which would otherwise receive a windfall.

While defending MV against Laidlaw, Scottsdale filed an action seeking a declaratory judgment to determine whether any portion of the MV/Laidlaw litigation was potentially covered under its policies.  While the declaratory judgment action was pending, the MV/Laidlaw action was settled.  Scottsdale continued forward with its action, only to have the trial court rule that Scottsdale did owe a duty to defend.  Scottsdale appealed.  The Court of Appeal's decision was a case of "good news/bad news" for the insurer: the Court agreed with Scottsdale that there was never any potential for coverage for any of the Laidlaw claims, but held that its determination of non-coverage did not operate retroactively and that Scottsdale could not recoup any of the costs that it had expended prior to obtaining the Court of Appeal's ruling in its favor -- which is to say, since the underlying case has been fully litigated and resolved by this point and all of the related defense costs have already been paid, that Scottsdale wins but recovers nothing.  (I, for one, do not envy the attorney who was chosen to report that result to the client . . . )

Scottsdale, unsurprisingly, petitioned the Supreme Court for review.  The Supreme Court, much to the relief of Scottsdale and its counsel, not only granted review, it effectively expunged the "but" from the Court of Appeal's decision.  Justice Baxter, writing for a unanimous 6-member Court [Justice Brown having been recently elevated to the D.C. Circuit] sums it up as follows:

The third party action ended in settlement.  Thereafter, in the insurance action, the superior court found a potential for coverage, but the Court of Appeal ultimately disagreed.  For reasons of law, the Court of Appeal held that the allegations in the third party’s complaint never triggered any possibility of coverage under Scottsdale’s policies.  Nonetheless, the Court of Appeal concluded that Scottsdale was not entitled to reimbursement.  The Court of Appeal reasoned, in essence, that its no-potential-coverage determination 'extinguished' Scottsdale’s defense duty only from that time forward. Hence, the Court of Appeal determined, Scottsdale could not 'retroactively' recover defense costs expended before its duty was 'extinguished.'

We disagree.  By ruling, as a matter of law, that the third party action never presented any possibility of coverage by Scottsdale’s policies, the Court of Appeal established not that the duty to defend was thereupon prospectively 'extinguished,' but that it never arose.  Therefore, Scottsdale may recover amounts it expended in defending the insured under its reservation of rights.  To the extent the Court of Appeal held otherwise, its judgment must be reversed.

(Italics in original.) Or, to state it as a quasi-syllogism

• If there is a potential for coverage, the insurer must defend
• If there is no potential for coverage, the insurer need not defend
• If there was never a potential for coverage, the insurer never needed to defend,

AND THEREFORE

• All expenses incurred in defending a never-covered claim are recoverable by the insurer.

~~

The decision in Scottsdale Insurance Company v. MV Transportation (July 27, 2005), Case No. S123766, can be accessed at these links in PDF and Word formats.
[Note: Links expire approximately 120 days following issuance of the opinions; the opinions should still be accessible thereafter by substituting "archive" for "documents" in the URL.]