Kruck v. Colony Insurance Company
Pillsbury & Coleman was contacted by attorneys at the firm of Rouda, Feder, Tietjen & McGuinn to evaluate a coverage denial in a catastrophic personal injury action it had filed for its client, Harley Squires. Squires had suffered a severe brain injury when a tree limb fell on him while he was assisting on a tree trimming project. Through the Rouda Feder firm, Squires sued C&B Tree Service and its owner, Brad Kruck, but their liability insurer, Colony Insurance Company, refused to defend them. Colony relied on a common policy exclusion, excluding coverage for bodily injury to employees and claimed that Squires was a C&B Tree Service employee or contractor.
We reviewed the denial and available facts and determined that Colony’s refusal to defend was wrongful. Although the policy excluded coverage for bodily injury to employees, it afforded coverage for injury to “volunteer workers,” and the facts surrounding Squires’ employment status were in conflict and indicated the possibility that Squires was a volunteer worker at the time of the accident. California law imposes a broad duty to defend on liability insurers. A defense must be supplied if there is any potential for coverage. When an insurer seeks to avoid a defense based on a policy exclusion, the insurer has the burden of proving, through conclusive and undisputed evidence, that the exclusion applies in all possible worlds. We determined Colony did not abide by California law when it denied coverage, leaving its insured without a defense and the grievously injured Squires without compensation for the lifetime of care that he would require.
After Squires obtained a $63 million judgment against Kruck and C&B Tree Service in the underlying personal injury action, we sued Colony in Alameda County Superior Court on behalf of Kruck and C&B Tree Service for breach of contract and insurance bad faith. Under California law, an insurer that wrongfully refuses to defend its insured is liable for all detriment caused to insured, including the entire judgment entered against its insured. We moved for summary adjudication on the duty to defend. The trial court granted our motion. In a 26-page order that adopted all of the arguments that we advanced, the Court ruled that Colony breached its insurance contract by refusing to provide C&B Tree Service and Kruck a defense in the underlying action. Following this key victory, the case settled on a confidential basis.