Appellants, corporations and agents, challenged the judgment of the Superior Court of Los Angeles County (California), which held that appellee insurer was not liable for indemnification on a malicious prosecution claim, but was liable for a duty to defend under Cal. Ins. Code § 533, and appellee also challenged the ruling, arguing that it was entitled to reimbursement for a portion of the award it paid to end the litigation. The parties were represented by California business and employment attorney.
Overview
Appellants, limited partnership and its agents, sued a third-party on a lease and lost the case. The third-party sued appellants for malicious prosecution, and appellants sought coverage under its insurance policy with appellee insurer. Appellee agreed to defend the claim, but reserved all rights for indemnification under Cal. Ins. Code § 533. Eventually, appellee settled the third-party’s claim, and sued for recovery of the money was paid from appellants. The trial court held that appellee was not liable for indemnification of the malicious prosecution claim, but was liable for the duty to defend, and could not recoup the money it paid to end the litigation. Both parties challenged the ruling, and the court held that due to §533, public policy prevented an insurance company for being liable for the wilful acts of the insured. The court stated that appellee had no duty to pay a claim for malicious prosecution, as it was a wilful act, but that did not prevent appellee from having a duty to defend the claim. The court determined that appellee was entitled to be reimbursed for the money it paid to the third-party to settle the claim, but not for costs related to the duty to defend.
Outcome
The court affirmed in part and reversed in part the judgment of the lower court, and held that appellee insurer was not liable for indemnification on a malicious prosecution claim made against appellants, but was liable for a duty to defend. The court ordered that appellee was entitled to reimbursement for the money that it paid to settle the claim, but not for costs associated with the duty to defend.
Procedural Posture
Defendant insurer appealed the judgment from the Superior Court of Los Angeles County (California) which awarded plaintiffs insureds compensatory and punitive damages in plaintiffs’ action against defendant for breach of implied covenant of good faith and fair dealing and violation of Cal. Ins. Code § 790.03(h).
Overview
Plaintiffs insured homeowners submitted a claim for damage to their home from landslides in their area. Defendant insurer delayed payment even after it had the geologist’s report detailing the damage to the home, and after it had plaintiffs’ demand for payment on the claim. Plaintiffs sued for breach of implied covenant of good faith and fair dealing and violation of Cal. Ins. Code § 790.03(h). The jury returned compensatory damages from a date much earlier than the date defendant received the geologist’s report, and also awarded punitive based on malice. On review the court held that the date of the award of the compensatory damages was in error as defendant had no real obligation to pay until it received the report detailing the damages. The court also held that the finding of malice was in error because the jury instructions were erroneous on the law. The court therefore affirmed the finding of liability but reversed and remanded for a new trial on the issue of damages.
Outcome
The jury’s finding of liability was affirmed, however, the calculation of damages was reversed and remanded for a new trial because the date of the beginning of the calculations for compensatory damages was in error and the jury instructions regarding malice for punitive damages were incorrectly given causing prejudice to defendant.
