Breach of Insurance Contract Law Definition Elements Defense Lawyer

Definition.

The essential elements of a claim for breach of insurance contract are: (1) the existence of a valid policy of insurance between the parties; (2) the insured’s performance or excuse for non-performance; (3) the insurer’s failure to perform; and (4) damage to the insured caused by the breach. (See Howard v. American Nat’l Fire Ins. Co. (2010) 187 Cal.App.4th 498.)

---

Free legal advice. Call now: 800-484-4610

Nakase|Wade law firm represents companies, businesses, and employers – exclusively.

We invite your attention to our disclaimer.

---

Element 1: Valid Insurance Contract

 

An insurance policy is a contract between an insurer and an insured. (McMillin Homes Construction, Inc. v. Nat’l Fire & Marine Ins. Co. (2019) 35 Cal.App.5th 1042). The existence of an insurance contract is subject to the rules governing the formation of a contract in general. (Ibid.)

     
Offer and Acceptance

The existence of an insurance contract is subject to the rules governing the formation of a contract in general; for example, there must be proof of mutual assent supported by lawful consideration. (See Employers Reinsurance Co. v. Superior Court (2008) 161 Cal.App.4th 906.)

An oral contract is enforceable if an authorized agent orally agrees to accept the risk on behalf of the insurer while promising to deliver the policy later. (See Safeco Ins. Co. of America v. Robert S. (2001) 26 Cal.4th 758.)

    
        Effective Date

An insurance binder may temporarily obligate the insurer to provide insurance coverage pending issuance of the policy if the insurer’s agent is authorized to issue binders. Ahern v. Dillenback, 1 Cal. App. 4th 36, 48, 1 Cal. Rptr. 2d 339, 346 (1991); Parlier Fruit Co. v. Fireman’s Fund Ins. Co., 151 Cal. App. 2d 6, 20, 311 P. 2d 62, 70 (1957); Insurance Code, §382.5(a).

A policy may be effective before delivery to the insured if the insurer intends the policy to be effective immediately and unconditionally. Golden Eagle Ins. Co. v. Foremost Ins. Co., 20 Cal. App. 4th 1372, 1388, 25 Cal. Rptr. 2d 242, 253 (1993) (where insurer, in renewing policy, followed practice of automatically issuing policy, debiting agent’s account for premium due, and leaving it to agent to collect premium, renewal was effective even though agent never forwarded policy to insured and insured did not pay premium). See also Wilson v. Western National Life Ins. Co., 235 Cal. App. 3d 981; 1 Cal. Rptr. 2d 157 (1991). (Interim life insurance arises at the time a purchaser pays the initial premium and coverage exists if the insured dies before the company issues the policy.)

Insurable Interest

The insured must have an insurable interest in the subject of the insurance both when the policy takes effect and when the loss occurs. Cal. Ins. Code §§280, 286; Banerian v. O’Malley, 42 Cal. App. 3d 604, 614, 116 Cal. Rptr. 919, 925-26 (1974) (insured had no insurable interest where insured had sold real property covered by policy prior to loss involving that property). The insurer is the only party with standing to challenge whether an insured has an insurable interest. Woodmen of World v. Rutledge, 133 Cal. 640, 65 P. 1105 (1901).

 
Cancellation

There is no valid contract where the policy is canceled by mutual agreement before the loss occurs. Ohio Casualty Ins. Co. v. Northwestern Mutual Ins. Co., 17 Cal. App. 3d 204, 208-09, 94 Cal. Rptr. 586, 588 (1971) (no coverage for loss that occurred after policy was returned by insured at insurer’s request and canceled based upon misrepresentations in the insured’s application). Cancellations operate prospectively and cannot affect insurer’s liability for claims arising before cancellation. Barrera v. State Farm Mut. Auto. Ins. Co., 71 Cal. 2d 659; 79 Cal. Rptr. 106 (1969).

---

Element 2: Performance by Insured

The insured must comply with all policy terms and provisions (Hall v. Travelers Ins. Co., 15 Cal. App. 3d 304, 308-09, 93 Cal. Rptr. 159, 161 (1971)), or be excused from non-performance (Downey Savings & Loan Ass’n v. Ohio Casualty Ins. Co., 189 Cal. App. 3d 1072, 1089, 234 Cal. Rptr. 835, 844 (1987)).

 
Payment of Premium

Payment of the premium is a condition precedent to the effectiveness of the policy. Cal. Ins. Code §480; see Guerin v. California Western States Life Ins. Co., 229 Cal. App. 2d 325, 329-30, 40 Cal. Rptr. 344, 347-48 (1964) (life insurance policy was not effective until first premium was received, even though the application bore an earlier effective date).

 
Notice of Claim

The insured’s failure to comply with policy conditions requiring notice of the claim and/or the insured’s cooperation may defeat coverage if the insurer is substantially prejudiced by the insured’s failure to comply. Northwestern Title Security Co. v. Flack, 6 Cal. App. 3d 134, 141, 85 Cal. Rptr. 695, 696-98 (1970) (insurer was substantially prejudiced by insured’s 13-month delay in providing notice of claim). Cf. Burns v. International Ins. Co., 929 F. 2d 1422 (9thCir. 1991) (Criticizes Flack and refuses to follow its rule.)

An insurer’s receipt of notice of a claim four years after suit was filed against the insured and three months after entry of a judgment in excess of $1 million against the insured may have substantially prejudiced insurer. Select Ins. Co. v. Superior Court, 226 Cal. App. 3d 631, 638-39, 276 Cal. Rptr. 598, 601-02 (1990). Compare Shell Oil Co. v. Winterthur Swiss Ins. Co., 12 Cal. App. 4th 715 (1993) (Insurer must show that but for the late notice, there was a substantial likelihood that insurer could have prevailed in the action brought against the insured, or settled the case for a smaller sum).

---

Element 3: Breach of Insurer’s Duty

An insurer is liable for breach of contract where it erroneously refuses to defend or indemnify the insured or refuses to perform any other obligation under the policy. See California Shoppers, Inc. v. Royal Globe Ins. Co., 175 Cal. App. 3d 1, 34-37, 221 Cal. Rptr. 171, 186-88 (1985); Comunale v. Traders & General Ins. Co., 50 Cal. 2d 654, 659-60, 328 P. 2d 198, 201 (1958); McMillin Scripps North Partnership v. Royal Ins. Co., 19 Cal. App. 4th 1215, 1220, 23 Cal. Rptr. 2d 243 (1993).

Duty to Indemnify:

             
When Duty Arises

The duty to indemnify arises if a loss or damage falls within the general insuring agreement of the policy and is not otherwise excluded or limited by other policy provisions. Royal Globe Ins. Co. v. Whitaker, 181 Cal. App. 3d 532, 537, 226 Cal. Rptr. 435, 437 (1986). Cal. Civil Code section 2778.

The duty to indemnify is determined only after liability is established. Montrose Chem. Corp. v. Admiral Ins. Co., 10 Cal. 4th 645; 42 Cal. Rptr. 2d 324 (1995); CNA Casualty of California v. Seaboard Surety Co., 176 Cal. App. 3d 598, 605, 222 Cal. Rptr. 276, 279 (1986).

             

Burden of Proof

The insured has the burden of demonstrating that a claim is within the coverage afforded by the insuring clause of the policy. Royal Globe Ins. Co. v. Whitaker, 181 Cal. App. 3d 532, 537, 226 Cal. Rptr. 435, 437 (1986) (contractor’s alleged promise to complete construction and close escrow on a certain date with no intent to do so was not an “accident” under insuring clause).

The insurer has burden of proving that a covered claim falls within an exclusion in the policy. Clemmer v. Hartford Ins. Co., 22 Cal. 3d 865, 880, 151 Cal. Rptr. 285, 292 (1978) (insured’s murder of another may not fall within the intentional acts exclusion of policy).

The insured has the burden of proving that exceptions to exclusions apply. Aydin Corp. v. First State Ins. Co., 18 Cal. 4th 1183; 77 Cal. Rptr. 2d 537 (1998).

             
Covered Peril Must Be Proximate Cause of Loss

First party claims are covered if an insured peril is the efficient proximate cause of the loss. Garvey v. State Farm Fire & Casualty Co., 48 Cal. 3d 395, 412, 257 Cal. Rptr. 292, 302 (1989) (where third party negligence (a covered peril) was the predominating or efficient proximate cause of loss, the loss was covered even though mud slides (an excluded peril) contributed to the loss).

Damage to an insured’s house was covered where the efficient proximate cause of loss was the failure of public entities to preserve the area, even though the policy excluded the perils of earth movement and rising groundwater which contributed to the loss. State Farm Fire & Casualty Co. v. Von Der Lieth, 54 Cal. 3d 1123, 1133, 2 Cal. Rptr. 2d 183, 190 (1991).

First party losses are not covered where an excluded peril is the efficient proximate cause of the loss. See Mission Nat’l Ins. Co. v. Coachella Valley Water Dist., 210 Cal. App. 3d 484, 495, 258 Cal. Rptr. 639, 645 (1989) (buckling of insured’s flood control channel was not covered where the efficient proximate cause of loss was defective design of the channel and policy excluded damage caused by error in design, plan or specification).

See also Julian v. Hartford Underwriters Ins. Co. (July 30, 2002) Div. 7, B149088, Cal. App. 4th. (No coverage where policy contains an exclusion for each of the possible efficient proximately causes of insured’s loss.)

        
Exclusions

An insurer has no duty to indemnify for the willful acts of the insured. Cal. Ins. Code §533. See J.C. Penney Casualty Ins. Co. v. M.K., 52 Cal. 3d 1009, 1019, 278 Cal. Rptr. 64, 68 (1991) (no coverage for sexual molestation of a child); Western Mutual Ins. Co. v. Yamamoto, 29 Cal. App. 4th 1474, 1486, 35 Cal. Rptr. 2d 698, 704 (1994) (no duty to indemnify for juvenile insured’s unprovoked assault without legal justification); Coit Drapery Cleaners, v. Sequoia Ins. Co., 14 Cal. App. 4th 1595, 1603-04, 18 Cal. Rptr. 2d 692, 698 (1993) (no coverage for acts of sexual harassment).

An insurer owes no duty to provide coverage for fines or penalties or for restitution in a criminal proceeding. Cal. Ins. Code §533.5; Jaffe v. Cranford Ins. Co., 168 Cal. App. 3d 930, 934, 214 Cal. Rptr. 567, 570 (1985) (no coverage under malpractice policy for psychiatrist criminally prosecuted for Medi-Cal fraud and theft).

Duty to Defend

         Scope

The duty to defend is broader than the duty to indemnify. The duty to defend arises whenever the insurer ascertains facts from the complaint or any other source which give rise to a potential for coverage under the policy. Gray v. Zurich Ins. Co., 65 Cal. 2d 263, 276-77, 54 Cal. Rptr. 103, 113 (1966); CNA Casualty of Cal. v. Seaboard Surety Co., 176 Cal. App. 3d 598, 606, 222 Cal. Rptr. 276, 279 (1986); Horace Mann Ins. Co. v. Barbara B., 4 Cal. 4th 1076; 17 Cal. Rptr. 2d 210 (1993). The California Supreme Court, in Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, noted that in order to trigger an insurer’s duty to defend, “the insured need only show that the underlying claim may fall within policy coverage,” while “the insurer must prove it cannot.” 6 Cal.4th 287 at 300.

An insurer has a duty to defend where one of several concurrent causes of an accident is covered under the policy. State Farm Mutual Auto. Ins. Co. v. Partridge, 10 Cal. 3d 94, 102-05, 109 Cal. Rptr. 811, 818-19 (1973) (shooting accident in vehicle, caused by insured’s negligence in filing gun’s trigger to make it a “hair trigger” and his negligence in driving off paved road, was covered under insured’s homeowners policy even though policy excluded injuries arising out of use of an automobile, because insured’s negligence in filing trigger of gun was a concurrent proximate cause of loss).

If an insurer has a duty to defend, it must defend all claims against the insured, even if some ultimately may not be covered under the policy. Hogan v. Midland Ins. Co., 3 Cal. 3d 553, 564, 91 Cal. Rptr. 153, 159 (1970); Cal. Union Ins. Co. v. Club Aquarius, 113 Cal. App. 3d 243, 248, 169 Cal. Rptr. 685, 687 (1980); Buss v. Superior Court, 16 Cal. 4th 35; 65 Cal. Rptr. 2d 366 (1997).

             
When Duty Arises

The duty to defend is measured at the outset of the litigation against the insured. CNA Casualty Co. of California v. Seaboard Surety Co., 176 Cal. App. 3d 598, 605, 222 Cal. Rptr. 276, 847 (1986) (although insured bank was sued for “antitrust violations,” which were excluded under the policy, insurer had duty to defend bank because of potential that alleged antitrust violations were unfair competition, which was covered under policy).

An insured may maintain an action for breach of contract where the insurer fails to defend a third party liability lawsuit against the insured. See Comunale v. Traders & Gen. Ins. Co., 50 Cal. 2d 654, 659, 328 P. 2d 198, 201 (1958).

        
Exclusions

An insurer has no duty to defend an insured in a criminal action. Cal. Ins. Code §533.5(b); Perzik v. St. Paul Fire & Marine, 228 Cal. App. 3d 1273, 1276, 279 Cal. Rptr. 498, 500 (1991) (no duty to defend physician in federal grand jury investigation and prosecution for illegal dispensation of drugs).

Under a comprehensive general liability policy covering “accidental” losses, the insurer had no duty to defend or indemnify the insured in a wrongful termination action. Dyer v. Northbrook Property & Casualty Ins. Co., 210 Cal. App. 3d 1540, 1546-49, 259 Cal. Rptr. 298, 302-04 (1989).

The insurer had no duty to defend insured against an action for fraud, negligent misrepresentation and breach of contract where the insuring clause required an accidental occurrence resulting in bodily injury or property damage. Hurley Constr. Co. v. State Farm Fire & Casualty Co., 10 Cal. App. 4th 533, 541, 12 Cal. Rptr. 2d 629, 633 (1992).

        
Costs

Where the insurer defends non-covered claims under a reservation of rights to seek reimbursement of defense fees on those claims, the insurer may recover for the defense costs that can be specifically allocated to the non-covered claims. Buss v. Superior Court, 16 Cal. 4th 35, 55-56, 65 Cal. Rptr. 2d 366, 374-76 (1997); see also Aerojet-General Corp. v. Transport Indemnity Co., 17 Cal. 4th 38, 68-76, 70 Cal. Rptr. 2d 118 (1997).

Policy Interpretation:

        
General Rules of Construction

An insurance policy will be given its plain meaning. The terms must be read in their “ordinary and popular sense” in the context of the policy as a whole. Ambiguities in the policy must be resolved in accordance with the insured’s reasonably objective expectations at the time the policy was issued. AIU Ins. Co. v. Superior Court, 51 Cal. 3d 807, 821-22, 274 Cal. Rptr. 830, 831 (1990) (policy covering all sums that insured is “legally obligated to pay as damages” covered costs of reimbursing governmental agencies and court-ordered clean-up of environmental contamination, but not costs of prophylactic measures taken before any release of hazardous waste).

Parol evidence is admissible to aid in the interpretation of ambiguous provisions. Garcia v. Truck Ins. Exch., 36 Cal. 3d 426, 435, 204 Cal. Rptr. 435, 438-39 (1984) (General rule that ambiguities should be resolved against the insured does not apply when the insured is sophisticated and the policy was jointly drafted). Montrose Chemical Corp. v. Admiral Ins. Co., 10 Cal. 4th 645; 42 Cal. Rptr. 2d 324 (1995).

A policy of insurance should be interpreted to give effect to the reasonable expectations of the insured. Gyler v. Mission Ins. Co., 10 Cal. 3d 216, 219, 110 Cal. Rptr. 139, 141 (1973) (lawyer’s malpractice policy, providing coverage “against any claim or claims for breach of professional duty as lawyer which ‘may’ be made” against insured, covered claims maturing during policy period, but not asserted until after policy period ended).

The California Supreme Court has indicated that the fundamental goal of insurance policy interpretation should be to determine the mutual intention of the parties at the time the contract was formed. AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807. Cf. MacKinnon v. Truck Ins. Exchange (2003) 31 Cal.4th 635.

Interpretation of an insurance policy is a question of law. Merced Mutual Ins. Co. v. Mendez, 213 Cal. App. 3d 41, 45, 261 Cal. Rptr. 273, 276 (1989).

             
Scope of Coverage/Exclusions

Exclusions from coverage must be conspicuous, plain and clear. Gray v. Zurich Ins. Co., 65 Cal. 2d 263, 271, 54 Cal. Rptr. 104, 108 (1966) (insurer’s obligation to defend insured in civil action for assault and battery was unclear where policy provided coverage for bodily injury, except if caused intentionally, and required insurer to defend any suit alleging bodily injury, even if allegations were groundless, false or fraudulent).

An exclusion in an automobile liability policy for injuries “to the insured” was not sufficiently clear to avoid liability for injuries suffered by the owner of an insured vehicle while the vehicle was being driven by a permissive user. State Farm Mutual Auto. Ins. Co. v. Jacober, 10 Cal. 3d 193, 201-02, 110 Cal. Rptr. 1, 6 (1973).

Under the “reasonable expectation” rule, a motorcycle liability policy was found to cover the insured’s liability for fire damage to a house caused by ignition by a water heater pilot light of gasoline fumes from the covered motorcycle that the insured was repairing near the house. Miller v. Elite Ins. Co., 100 Cal. App. 3d 739, 753, 161 Cal. Rptr. 322, 329 (1980).

---

Element 4: Resulting Damages

The insured must show that he or she suffered loss or damage that was proximately caused by the insurer’s breach. Cal. Civ. Code §3300; Reliance A. Corp. v. Hooper-Holmes Bureau, 139 Cal. App. 607, 613, 34 P. 2d 762, 765 (1934). Cf., California Shoppers, Inc. v. Royal Globe Ins. Co., 175 Cal. App. 3d 1; 221 Cal. Rptr. 171 (1985) (Consequential damages for breach of contract are something much more limited in scope than that applied in tort cases where foreseeability of risk is only one of many factors comprising proximate cause).

An insurer’s refusal to defend the insured might not cause the insured any damage if the insured is provided a timely defense by another insurance carrier. See Ceresino v. Fire Insurance Exchange, 215 Cal. App. 3d 814, 823, 264 Cal. Rptr. 30, 35 (1989).

If an insurer breaches its contractual duty to defend an insured, the insured may make a reasonable settlement of the claim in good faith, and may then maintain an action against the insurer to recover the amount of the settlement. Earth Elements, Inc. v. National Amer. Ins. Co. of California, 41 Cal. App. 4th 110, 114, 48 Cal. Rptr. 2d 399, 402 (1995) (insurer who breached its duty to defend and indemnify insured was liable for value of insured’s counter-claim against third party which insured agreed to dismiss in order to settle the third party claim). An insurer can recover damages for inadequate defense. Travelers Ins. Co. v. Lesher, 187 Cal. App. 3d 169; 231 Cal. Rptr. 791 (1986).

---

Remedies

• Rescission for Misrepresentation (Imperial Casualty & Indemnity Co. v. Sogomonian, 198 Cal. App. 3d 169, 178-79, 243 Cal. Rptr. 639, 643 (1988) (insurer may rescind policy where insured makes material misrepresentations or concealments in the application, e.g., fails to disclose prior cancellation, non-renewal, and loss history on application for homeowners policy).
  
  
• Rescission for Mistake, Duress, Menace, Fraud or Undue Influence (see Cal. Civ. Code §1689(b)(1) (either party may rescind policy where its consent was given by mistake or obtained through duress, menace, fraud, or undue influence exercised by the other party)).
  
  
• Rescission for Mistake (Merced County Mutual Fire Ins. Co. v. State of California, 233 Cal. App. 3d 765, 771-72, 284 Cal. Rptr. 680, 683-84 (1991) (insurer could rescind policy where state agent incorrectly advised insured that the state must be named as an additional insured)).
  
  
• Rescission for Fraud (Cummings v. Fire Ins. Exch., 202 Cal. App. 3d 1407, 1419, 249 Cal. Rptr. 568, 574 (1988) (insurer could rescind policy where insured presented fraudulent vandalism claim in which the damage was done by insured’s son in insured’s presence)).
  
  
• Reformation (American Surety Co. v. Heise, 136 Cal. App. 2d 689, 695-96, 289 P. 2d 103, 107 (1955) (reformation of auto policy was appropriate where adult insured represented that he was the sole owner of the insured vehicle but insured’s minor son was the actual owner and sole operator)). Employers Casualty Co. v. Northwestern Nat. Mut. Ins. Group, 109 Cal. App. 3d 462; 167 Cal. Rptr. 296 (1980) (disapproved on other grounds, In Re Marriage of Arceneaux, 51 Cal. 3d 1130; 275 Cal. Rptr. 797 (1990). (See also, Cal. Civ. Code, §3399).
  
  
• Compensatory Damages (Cal. Civ. Code §§3300, 3301).
  
  
• Measure of Damages (Amato v. Mercury Casualty Co., 53 Cal. App. 4th 825, 831, 61 Cal. Rptr. 2d 909, 912-13 (1997) (where insurer breached duty to defend and default was taken against insured, who could not afford to mount a defense and thus incurred no attorneys fees or costs, proper measure of damage was default judgment amount even though insurer had no duty to indemnify)).
  
  
• Must Be Reasonably Foreseeable (Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 514, 28 Cal. Rptr. 2d 475, 481 (1994) (damages are limited to those within contemplation of parties when contract was entered into or which were reasonably foreseeable at that time); California Shoppers, Inc. v. Royal Globe Ins. Co., 175 Cal. App. 3d 1, 58, 221 Cal. Rptr. 171, 204 (1985) (insured could not recover difference between sale price and actual value of a business which insured contended it had to sell because insurer refused to defend a liability claim against it, because such loss was not within parties’ reasonable contemplation when policy was issued)).
  
  
• Attorney’s Fees Generally Not Recoverable (United Serv. Auto. Ass’n v. Dalrymple, 232 Cal. App. 3d 182, 187, 283 Cal. Rptr. 330, 332 (1991) (attorney fees expended by insured to obtain policy benefits for breach of contract are not recoverable absent an attorney’s fees clause, which few policies have). Cf. Brandt v. Superior Ct., 37 Cal. 3d 813; 210 Cal. Rptr. 211 (1985) (Attorneys fees incurred to compel insurer to pay policy benefits tortiously withheld in bad faith are recoverable)).
  
  
• Emotional Distress Generally Not Recoverable (Applied Equip. Corp. v. Laden Saudi Arabia, Ltd., 7 Cal. App. 4th 503, 514, 28 Cal. Rptr. 2d 475, 481 (1994) (damages for mental suffering and emotional distress generally are not recoverable)).
• Unpaid Defense Costs (Barratt American, Inc. v. Transcontinental Ins. Co., 102 Cal. App.4th 848 (2002) (developer’s costs of preemptive voluntary repairs to the homes of those homeowners who did not join in the lawsuit against the developer can constitute defense costs where “reasonable and necessary”)).
  
  
• Punitive Damages Not Recoverable (Applied Equip. Corp. v. Litton Saudi Arabia, Ltd., 7 Cal. 4th 503, 514, 28 Cal. Rptr. 2d 475, 481 (1994) (punitive damages are not recoverable for breach of contract); see also Cal. Civ. Code §3294)).

---

Statute of Limitations

If the claim is based on a written policy, the statute of limitations is four years from the time the claim is unconditionally denied. State Farm Fire & Casualty Co. v. Superior Court, 210 Cal. App. 3d 604, 609, 258 Cal. Rptr. 413, 416; Cal. Civ. Proc. Code §337(1). If the claim is based on an oral agreement, the statute of limitations is two years from the date that the breach occurs. Cal. Civ. Proc. Code §339(1).

Note: Provisions in the policy may limit the time to sue to shorter than the four-year statute of limitations for written contracts. See Prudential-LMI Commercial Ins. v. Superior Court, 51 Cal. 3d 674, 686, 274 Cal. Rptr. 387, 395 (1990) (policy provision requiring action against insurer to be commenced within 12 months after inception of loss is valid).

---

Affirmative Defenses

• Statute of Limitations (see above).
• Failure to File Within Limitations Period of Policy (Cal. Ins. Code §2071; Prudential-LMI Commercial Ins. v. Superior Court, 51 Cal. 3d 674, 683, 274 Cal. Rptr. 387, 392 (1990)).
  
  
• Material Misrepresentations in Application for Insurance (Cal. Ins. Code §2071; Imperial Casualty & Indemnity Co. v. Sogomonian, 198 Cal. App. 3d 169, 178-79, 243 Cal. Rptr. 639, 643 (1988)).
  
  
• False or Fraudulent Statements in Proof of Loss (Cal. Ins. Code §556; Singleton v. Hartford Fire Ins. Co., 127 Cal. App. 635, 16 P. 2d 293 (1932)).
• Waiver (Waller v. Truck Ins. Exch., 11 Cal. 4th 1, 31-32, 44 Cal. Rptr. 2d 370, 387 (1995)).
  
  
• Estoppel (Chase v. Blue Cross of Cal., 42 Cal. App. 4th 1142, 1157, 50 Cal. Rptr. 2d 178, 188 (1996)).
  
  
• Mistake (Merced County Mutual Fire Ins. Co. v. State of California, 233 Cal. App. 3d 765, 771-72, 284 Cal. Rptr. 680, 683-84 (1991)).
  
  
• Fraud (Cummings v. Fire Ins. Exch., 202 Cal. App. 3d 1407, 1419, 249 Cal. Rptr. 568, 574 (1988)).
  
  
• Duress (Cal. Civ. Code §1669(b)(1)).
  
  
• Menace (Cal. Civ. Code §1669(b)(1)).
  
  
• Undue Influence (Cal. Civ. Code §1669(b)(1)).

---

Form Complaints

Breach of Contract, Breach of Implied Covenant of Good Faith and Fair Dealing

Name of Firm

Attorneys for Plaintiff

[        ] COURT OF THE STATE OF CALIFORNIA

                     ,           )     Case No.

                         )

                         )

Plaintiff,                   )     COMPLAINT FOR:

  )

vs.                            ) 1. BREACH OF CONTRACT;

                         )

  )     2. BREACH OF THE IMPLIED

   )     COVENANT OF GOOD FAITH

   )     AND FAIR DEALING

                    ,              )

     )

Defendants.                )

                                    )

COMES NOW plaintiff [name of insured], and for causes of action against defendant and Does 1 through 50, inclusive, alleges as follows:

General Allegations

 

1. Plaintiff [name of insured] is now, and at all times relevant herein, has been, [describe plaintiff’s capacity to sue, e.g., a resident of the State of California, County of Los Angeles].

2. Defendant [name of insurer] and Does 1 through 10, inclusive, are and at all times herein mentioned were, [state capacity to be sued, e.g., corporations or business entities licensed to do and doing business as insurance companies in all of the counties of the State of California].

3. Plaintiff does not know the true names or legal capacities of the defendants sued herein as Does 1 through 50, inclusive, and therefore sues said defendants by such fictitious names.

4. Plaintiff is informed and believes, and thereupon alleges, that each of the defendants designated herein as a Doe is legally responsible in some manner for the matters herein alleged, and is legally responsible in some manner for causing the injuries and damages to plaintiff as hereinafter alleged.

5. Plaintiff is informed and believes and thereupon alleges, that each defendant whether specifically named or designated herein as a Doe, was the agent, representative, servant, employee, principal, joint venturer, co-conspirator, management company and/or representative of each of the remaining co-defendants, and in doing the acts hereinafter alleged, was acting within the course and scope of said agency, employment, joint venture, conspiracy, agreement, management company agreement and/or service with the approval, knowledge, authority, permission and/or consent of the remaining defendants.

Common Allegations

 

6. On or about [date], defendant [name of insurer] issued to plaintiff a [describe policy type, e.g., automobile policy] bearing policy number [ ] effective for the policy term of [date] through [date]. A copy of this policy is attached hereto as Exhibit A.

7. Under the terms of the aforementioned insurance policy, defendant agreed to defend and indemnify plaintiff with regard to any civil action or suit seeking such damages, as more fully described in Exhibit A.

8. On or about [date] plaintiff in an underlying suit [name of third party plaintiff] filed a complaint for personal injuries in the Superior Court for the State of California, County of [ ] bearing case number [_________] (hereinafter the “action”), naming [name of insured] as a defendant. A true and correct copy of the complaint in the underlying action is attached hereto as Exhibit B.

9. In his/her complaint [name of third party plaintiff] alleged that [generally describe operative effects of complaint].

10. Plaintiff was served with a complaint on [date] and thereafter tendered the defense of the underlying action to defendant.

11. In breach of its obligations under defendant’s insurance policy as issued to plaintiff, defendant declined to accept the tender of the underlying action, and otherwise refused to provide a defense or to indemnify plaintiff for any damages that might be awarded with regard to the underlying action.

12. As a result of defendant’s conduct, plaintiff was forced to [describe consequences, e.g., hire personal counsel to defend him in the underlying action].

13. On or about [date], plaintiff in the underlying action made a settlement demand on plaintiff in the amount of [$ ] in exchange for a full settlement of the underlying action against plaintiff. Defendant refused to accept the demand and/or continued to deny any obligation to indemnify plaintiff in the underlying action.

14. As a result of defendant’s failure to settle the underlying action [alleged consequences, e.g., the jury in the underlying action awarded a judgment in favor of third party plaintiff and against plaintiff in the instant action, in the amount of [$ ], with a judgment being entered on [date] . .

FIRST CAUSE OF ACTION

(Breach of Contract)

15. Plaintiff realleges and incorporates by reference each and every allegation contained in paragraphs 1 through 14 of this complaint, and incorporates same by reference as though set forth here in full.

16. Plaintiff has duly performed each and every condition of the policy of insurance issued by defendant under which he is obligated to perform.

17. Defendant [name of insurer] has breached the policy of insurance in that it failed and refused to [describe breach, e.g., provide plaintiff with a defense in, and to timely settle, the underlying action].

18. As a direct and proximate result of defendant’s breach of its contractual duties, plaintiff has incurred attorney’s fees and costs in defending the underlying action, and has suffered a judgment in the amount described above.

SECOND CAUSE OF ACTION

(Breach of Implied Covenant of Good Faith and Fair Dealing)

19. Plaintiff realleges and incorporates by reference each and every allegation contained in paragraphs 1 through 18 of this complaint, and incorporates same by reference as though set forth here in full.

20. Defendant [name of insurer] at all times relevant herein, had a duty to act fairly and in good faith with plaintiff in meeting its responsibilities under the policy of insurance issued by defendant [name of carrier] to plaintiff.

21. Implied in the insurance policy is defendant’s obligation to act fairly and in good faith with plaintiff by promptly investigating any claims and to avoid unfairly denying plaintiff the benefits to which it is entitled under the insurance policy issued by defendant [name of insurer] to plaintiff.
22. Defendant breached its obligation to act fairly and in good faith toward plaintiff by:
23. [List all facts or conduct constituting unreasonable conduct and breach of the implied covenant of good faith and fair dealing].

23. As a direct and proximate result of defendant’s breach of the implied covenant of good faith and fair dealing, plaintiff has suffered damages including but not limited to attorney’s fees and costs incurred in defending the underlying action, the costs of judgment rendered in the underlying action, as well as having suffered, and continuing to suffer, emotional and mental distress.

24. In committing the aforementioned acts, defendant acted with oppression, fraud and malice with the intent to willfully injure, harass, vex, and annoy plaintiff with a conscious disregard for plaintiff’s rights. All of the aforementioned alleged acts were done or ratified by defendant’s management-level employees, who acted with knowledge that defendant’s conduct would cause plaintiff harm. Plaintiff is therefore entitled to recover punitive damages pursuant to Civil Code §3294.

WHEREFORE, plaintiff prays for judgment against defendants, and each of them as follows:

First Cause of Action for Breach of Contract

 

1. General damages according to proof;
2. Special damages according to proof;
3. Costs of suit incurred herein; and
4. For such other and further relief as this Court deems just and proper.

Second Cause of Action for Breach of the
Implied Covenant of Good Faith and Fair Dealing

 

1. General damages according to proof;
2. Special damages according to proof;
3. Punitive damages in an amount sufficient to punish defendants according to each defendant’s net worth;
4. For costs of suit incurred herein; and
5. For such other and further relief as this Court deems just and proper.

Dated: __________________             Name of Firm

By:       ____________________________

Attorneys for Plaintiff

Forms contributed by:

Gary A. Bague

Haight, Brown and Bonesteel, L.L.P.

Los Angeles