The cases discussed in this week’s edition of the newsletter present some wins for policyholders as well as some lessons.
First, the California Supreme Court ruled that insureds may bring suit against insurers alleging unfair competition. In a clear win for policyholders, the Court ruled that unfair competition claims may be based on false advertising and poor claims handling practices, as long as they do not rely solely on California’s Unfair Insurance Practices Act or Insurance Code section 790.03 et seq. While the decision contains several caveats and its impact is as yet unknown, it is a favorable holding for policyholders.
Second, two policyholders named as additional insureds in a policy covering construction work in Illinois similarly fared well. Although the named insured failed to comply with the notice requirements of the policy, the court held the additional insureds should not shoulder the burden for the error, awarding coverage to the additional insureds for an employee’s personal injury suit.
In a third case, however, in a dispute seeking coverage for attorney’s fees, one insured was unsuccessful because the underlying case was a contract dispute – meaning no “wrongful act” was alleged against it under the policy. Therefore, the insurer was not obligated to provide coverage for the attorney’s fees awarded in connection with the underlying settlement.
Finally, a lawyer was entitled to coverage for a malpractice suit – despite the fact he had received a letter from the client three years prior calling his work “the laziest lawyering I have witnessed.” While the client was clearly not a fan of the attorney, he continued the representation, leading the court to conclude that the attorney-client relationship (dysfunctional as it was) did not put the lawyer on notice of a malpractice claim that he needed to inform his insurer about.