Duty To Defend: Howard v. Federated Mutual Insurance Company

In this case, we filed a breach of contract and bad faith action against Federated Mutual Insurance Company to recover an underlying $16.9 million judgment entered against Federated’s additional insured A.W. Miller Enterprises after Federated refused to provide A.W. Miller a defense against two lawsuits resulting from a catastrophic jobsite injury.

In 2016, A.W. Miller engaged Gold Star Plumbing to perform work on a home renovation project in Murphys, California.  Before starting work on the project, A.W. Miller required Gold Star to add it as an additional insured under Gold Star’s commercial general liability policy.  During the project, Matthew Howard, a Gold Star employee, suffered catastrophic injuries after he fell through a second-floor temporary plywood walkway at the jobsite.

Following the accident, two lawsuits were filed against A.W. Miller in Calaveras County Superior Court, one by Howard and one by Gold Star’s workers’ compensation carrier.  Federated denied A.W. Miller a defense to the lawsuits.  Federated’s insurance contract required a contract or agreement in writing between its named insured and an additional insured, and Federated claimed that there was no written documentation of an agreement between Gold Star and A.W. Miller to add A.W. Miller as an additional insured.

Without coverage from Federated, A.W. Miller could not afford to defend the lawsuits.  To avoid bankruptcy, A.W. Miller agreed to settle Howard’s claim.  Under the terms of the settlement, A.W. Miller assigned Howard its claims against Federated and agreed to allow Howard’s claims against it to proceed through an uncontested trial to determine liability, causation and damages.  In return, Howard agreed not to execute any judgment against A.W. Miller.

In February 2022, Howard’s personal injury suit proceeded to trial.  After a 5 day bench trial, the Calaveras County court found A.W. Miller liable for Howard’s injuries and entered a $16.9 million judgment against it.

In August 2022, on behalf of both Howard and A.W. Miller, we filed breach of contract and bad faith claims against Federated in San Francisco County Superior Court.  We argued that the documentation provided to Federated established in writing that Gold Star agreed to add A.W. Miller as an additional insured under Federated’s policy and that Federated was liable for the underlying judgment entered against A.W. Miller.  Federated argued that there was no evidence of a written contract or agreement between Gold Star and A.W. Miller to add A.W. Miller as an additional insured and that its denial was proper.

On January 3, 2024, the San Francisco County Superior Court granted our motion for summary adjudication, ruling that Federated breached its insurance contract by refusing to provide A.W. Miller a defense in the underlying actions.  The Court found that the documentation provided to Federated evinced an agreement, confirmed in writing, to have A.W. Miller added as an additional insured under Gold Star’s policy.

The Court’s summary adjudication ruling narrowed the remaining issues in the case to bad faith and damages.  In advance of the February 26, 2024 trial date, the parties settled the case in mediation for a confidential amount.

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