State court ruled CGL policy exclusion was too ambiguous to enforce
The law firm of Pillsbury & Coleman LLP prevailed again in ongoing litigation against Traveler’s Insurance on behalf of a commercial policyholder. A California state court ruling, the first of its kind, declared that Travelers could not rely on a vague policy exclusion to shirk its duty to defend its insured.
There have been several key victories in this case. This latest ruling has positive implications for other businesses in disputes with their insurers over commercial general liability policies. The court ruled that residential exclusions — which are standard in virtually every CGL policy issued by Travelers — are too broad and ambiguous.
We held Travelers and its negligent adjuster accountable
Pillsbury & Coleman LLP regularly represents commercial clients in insurance coverage litigation in the Bay Area and statewide. We are commonly sought out by business law attorneys and corporate counsel who realize they need outside expertise in insurance law.
Tucker v. The Travelers Indemnity Co. reached the California Court of Appeals before it was ultimately decided in the Superior Court of San Francisco County in favor of our client. Attorney Terry Coleman represented Don Tucker and Martin Aguilar (dba Don Tucker & Son), a construction contractor who was sued for a personal injury accident at a job site. Travelers declined to defend Tucker, which left him exposed to an $18.5 million judgment.
We sued Travelers for breach of contract, namely failure in its legal duty to defend an insured. The complaint, filed in state court, also named the insurance adjuster as a defendant. The adjuster had told Mr. Tucker that his business was not covered for the injury because of a “full residential exclusion” in his policy. Yet the adjuster knew or should have known there was no such exclusion. As a result of the material misrepresentation, Mr. Tucker spent thousands of dollars on additional unnecessary insurance in an effort to protect his enterprise.
Insurance adjusters can be sued individually for misrepresentations
This case was an important affirmation of a California Court of Appeals decision (Bock v. Hansen) that insurance adjusters can be individually liable for misrepresentation or other forms of fraud. Previously, adjusters were considered immune as third parties to the contract between the insurer and insured.
For policyholders, the Bock and Tucker rulings are another tool in the bag to hold insurance companies and their representatives accountable for bad faith insurance practices. Adjusters cannot hide behind the insurance companies, and vice versa.
Policy exclusion was ambiguous
By defeating the defense motion to remove the adjuster from the lawsuit, we prevented Travelers from removing the case to federal court on the premise of diversity jurisdiction. After the Court of Appeals remanded the case to Superior Court, we prevailed in the underlying action against Travelers. The state court granted in entirety our motion for summary adjudication.
The court declared that the residential exclusion in the CGL policy was ambiguous – in essence, unenforceable. In other words, the supposed exclusion did relieve Travelers of its duty to defend, and it must cover the underlying $18.5 judgment that resulted from its bad faith refusal.
This is a huge win, not just for our client, but because Travelers has used a similar policy exclusion in most of its CGL underwriting. Those exclusions are now susceptible to legal challenge.