Anne Marchant obtained the dismissal of a client from a premises liability case involving a horrible hit and run accident in a grocery store parking lot.  The plaintiff, a recent Ivy League graduate, sustained a serious brain injury and post traumatic stress disorder, requiring hundreds of thousands of dollars in medical care and rehabilitation.  Through investigation and the judicious use of depositions of key witnesses and police, it was determined that the incident was an intentional, criminal act and that nothing the grocery store could or should have done would have prevented the horrible crime.  Plaintiff agreed to dismissal of the action prior to the filing of a motion for summary judgment.

Jonathan Allan Klein and Anne F. Marchant obtained a defense verdict on May 11, 2011, following a bench trial in San Mateo County Superior Court.  Plaintiff claimed she has been crushed in between a motorized industrial dolly and a produce bin in a Redwood City grocery store and demanded $1.9M for claimed severe back and abdominal injuries.

Judge Buchwald found in favor of the grocery store, finding that Plaintiff had failed to establish negligence, causation or damages.  In addition, the court awarded the grocery store its costs, totaling over $12,000.

Anne Marchant successfully defended a client’s decision to terminate an employee under its Collective Bargaining Agreement in a binding arbitration heard before Arbitrator Michael Prihar.  The case, which was heard in August, 2010, involved allegations that an employee was terminated for “just cause” under the CBA.  A copy of the March, 2011 decision can be found here.  (See Miller award.)

By Jonathan Allan Klein

Last weekend’s horrible violence in Tucson, AZ claimed many victims – including Gabriel Zimmerman, who served as US Representative Gabrielle Giffords’ Director of Community Outreach.  He was only thirty years old, and had devoted his life to public service.

Gabe was a UC Santa Cruz graduate — my alma mater.  He was a 2002 Sociology graduate (with Honors), and worked for Representative Gabrielle Giffords since 2006.

A few other UCSC alumnus and I have created a scholarship in Gabe’s name.  I’ve written a check to help fund this scholarship, and I hope you will consider making a contribution as well.  The scholarship will go to ensure that needy UCSC students who are committed to social justice, and planning a career in public service will be able to fulfill their dream – and while doing so, will continue in the path of Gabe’s ideals.  I didn’t know Gabe, but his death struck me particularly hard – a guy who was in the wrong place, at the wrong time, for the right reasons.

You can contribute directly through the University’s website at

https://secure.imodules.com/s/1069/index-2-column.aspx?sid=1069&gid=1&pgid=761&cid=1722.

NOTE: — As of early April, 2011, the University raised over the minimum $50,000 to make the scholarship endowed.  If you have any relationship to UCSC, to Gabe Zimmerman or Congresswoman Giffords, or are just concerned about Gabe’s passion of social justice, please consider a donation.

Please make sure to specify, under “Other”, that your donation is for the Gabriel Zimmerman Scholarship Fund.

While I didn’t know Gabe, I am proud of his idealism and his commitment, and I hope we can all join together to honor his memory – and build for the future.

By Rebecca Aherne

On December 10, 2010, the Fourth Appellate District filed its opinion in Advanced Network, Inc. v. Peerless Insurance Company holding that an action for the replacement of cash stolen by an employee of the insured was not a claim for damages for the loss of use of property within the meaning of the CGL policy issued to the insured, and thus, the insurer had no duty to defend or indemnify the insured.

Factual and Procedural Background

Advanced Network, Inc. (ANI) contracted with a credit union to service its cash distribution machines.  It was subsequently discovered that one of ANI’s employees had stolen approximately $2 million in cash from the credit union.  The credit union made a demand on its bond holder, Cumis Insurance Society, which paid the claim.  Cumis sought reimbursement from ANI.  ANI tendered the defense of the claim to its CGL carrier Peerless.  The Peerless policy covered third party property damage caused by an occurrence during the policy period.  Property damage was defined as “physical injury to tangible property, including all resulting loss of use of that property . . . and loss of use of tangible property that is not physically injured.”  Peerless denied the claim, and ANI brought this action against Peerless for breach of contract and breach of the implied duty of good faith and fair dealing.  The trial court found in favor of ANI on its breach of contract cause of action.  The bad faith claim was submitted to the jury which awarded attorney fees and punitive damages to ANI.  The appellate court reversed the judgment of the trial court.

Judicial Holding and Analysis

The trial court erred by finding coverage under the Peerless policy on the ground the underlying action was for loss of use of the cash ANI’s employee stole from the credit union.  Under California law, the term “loss of use” cannot reasonably be interpreted to include the permanent loss of property through conversion.  The terms “loss” and “loss of use” are not interchangeable for insurance purposes.  “Loss of use” is narrower than “loss” of property.  Loss of use is intended to compensate for a temporary loss and is thereby determined by rental value while loss of property is intended to compensate for a permanent loss and is determined by replacement cost.  Coverage for “loss of use” does not apply to an underlying action in which the claimant seeks only the replacement value of converted property.  While the “loss of use” provision is not modified by the term “temporary,” the impermanent nature of “loss of use” damages is implicit.  The measure of damages of stolen property cannot be its rental value ad infinitum on the ground there was a permanent “loss of use” of the property.  Interpreting the term “loss of use” to include a permanent loss would lead to absurd results.  The stolen cash was irretrievable.  The underlying action was for the replacement value of the cash, and did not seek any “loss of use” damages.

Comments and Implications

In reaching its decision, the court relied primarily on Collin v. American Empire Insurance Company (1994) 21 Cal App 4^th 787, wherein it was held the conversion of furniture was not property damage under the “loss of use” provision.  Collin explained that “loss of use” is different than “loss” of property, stating:  “assume that an automobile is stolen from its owner.  The value of the ‘loss of use’ of the car is the rental value of a substitute vehicle; the value of the ‘loss’ of the car is its replacement cost.  The nature of ‘loss of use’ damages is described in California Jurisprudence Third as: ‘The measure of damages for the loss of use of personal property may be determined with reference to the rental value of similar property which the plaintiff can hire for use during the period when he is deprived of the use of his own property.’”  The insureds in Collin did not lose the use of their property.  The damages they recovered were not “loss of use” damages, but the value of the property itself.

Summary by Rebecca B. Aherne, Esq.

On November 18, 2010, the California Supreme Court filed its decision in Ameron International Corporation v. Insurance Company of the State of Pennsylvania et al., holding a federal administrative adjudicative proceeding before an administrative law judge of U.S. Department of Interior Board of Contract Appeals (IBCA) which involved 22 days of trial, numerous witnesses, and substantial evidence, was a “suit” for purposes of the duty to defend under policies that do not define the term “suit.”

Factual and Procedural Background

In this action, Ameron sought coverage from primary and excess carriers, which issued it general liability policies between 1978 and 1995, for the settlement of a contract dispute with the federal government and related defense costs.  The underlying action was an administrative proceeding involving the IBCA.  Ameron manufactured concrete siphons to be used in an Arizona aqueduct system.  The siphons were defective requiring replacement or repair.  Ameron challenged the government’s $40 million demand for damages before the IBCA and later settled the claim for $10 million.

In the coverage action, Ameron alleged that, because the IBCA acts in a “judicial capacity” when conducting hearings and deciding contested factual issues, the IBCA action was the functional equivalent of a lawsuit for which the policies provided coverage.  The insuring language of the policies at issue in this appeal provided the insurers will pay all sums the insured becomes obligated to pay as damages and defend any suit seeking damages.  The term “suit” was not defined in the policies.  The trial court sustained the insurers’ demurrers and motion for judgment on the pleadings on the ground the government’s action against Ameron was not covered by the subject policies because the damages and expenses were not incurred in a “suit” – a civil action prosecuted in a court of law.  The appellate court agreed that if the term “suit” is not defined in a policy, it means a civil action commenced by a complaint.  The Supreme Court reversed, holding that the IBCA action, a quasi-judicial proceeding, employed to resolve government demands against interested parties, is a “suit” as a reasonable insured would understand that term.

Judicial Holding and Analysis

The trial and appellate courts relied on Foster-Gardner, Inc. v. National Union Fire Ins. Co. (1998) 18 Cal. 4^th 857, which held that an environmental agency’s order identifying the insured as a party responsible for remediating environmental pollution was not a “suit” that would trigger an insurer’s duty to defend its insured.  The Order required Foster-Gardner to monitor contamination at its site, to prepare and submit a remediation plan, and implement the plan to remediate the site.  Foster-Gardner tendered its proposed defense to the Order to its insurers who refused to defend or agreed to defend subject to a reservation of rights.  Applying a literal interpretation of the policies, the Supreme Court held that the policy term “suit” referred to a proceeding brought in a court of law by the filing of a complaint.  The Court consciously drew this “bright-line rule” to reduce the need for future litigation.  The insurers relied on Foster-Gardner to argue that because the IBCA is not a court of law, any hearing before it is not the trial of a “suit” unless specifically indicated as such in the policy.  Ameron argued that Foster-Gardner is not controlling because, unlike the pollution remediation order in Foster-Gardner, the IBCA proceeding was a “suit” as a reasonable insured would understand the term.

The IBCA is a quasi-judicial administrative agency board which holds hearings in which it considers and determines appeals from contracting officer decisions relating to contracts made by the Department of the Interior or other executive agency.   IBCA proceedings, which require the filing of a complaint, involve the hearing and determination of a controversy by an administrative law judge who issues a decision and may award damages.  The parties may subpoena witnesses who are subject to cross-examination.  The judges are empowered to grant the same relief available to litigants asserting claims in the Court of Federal Claims, and their role is comparable to that of trial judges.

The IBCA proceeding provides contractors with their “day in court.”  This case proceeded in a 22-day IBCA hearing in which witnesses testified and were cross-examined.  The Court held that a reasonable insured would recognize such proceedings as a “suit” and would expect to be defended and indemnified by its insurer.  The Court concluded that it is reasonable for the parties to a policy, which does not define the term “suit,” to expect a federal adjudicative administrative agency board proceeding to trigger the defense and indemnity provisions of the policy.  Unlike the Order in Foster-Gardner, the IBCA proceeding was not merely a threat to take legal action; it was an administrative adjudicative action which triggered the insurers’ duty to defend and indemnify.

Comments and Implications

Justice Kennard, who filed a dissent in the Foster-Gardner case, filed a concurring opinion in this case, stating that Foster-Gardner “lies far outside the mainstream of American insurance law,” because when it was decided, it represented the minority view in the U.S., and since then, no court has adopted its “literal meaning approach,” or its resulting “bright line rule” in construing the term “suit.”  She also stated that, in her opinion, the Ameron decision did not merely distinguish Foster-Gardner, but implicitly rejected its reasoning that the term “suit” unambiguously refers only to court proceedings.

Summary by Rebecca B. Aherne, Esq.

On June 24^th, 2010, the First Appellate District filed its opinion in Ana Silva Yanez v. SOMA Environmental Engineering, Inc., 185 Cal. App. 4^th 1313, holding that the collateral source rule entitled plaintiff to recover the entire amount of billed medical expenses without reduction for the amount not incurred because of the discount given to plaintiff’s insurer by her health providers.

The plaintiff sued SOMA for injuries suffered in an automobile accident. The jury awarded her $150,000 in damages, including $44,519.01 for past medical expenses.  SOMA moved to reduce the award to $18,368.24, the amount accepted by plaintiff’s medical providers as payment in full under their contracts with Aetna and Healthnet, her private insurers.  The trial court granted the motion and reduced the damages award.

On appeal, plaintiff argued the trial court violated the collateral source rule by limiting her recoverable damages to the amounts she and her insurers paid for her medical care.  She claimed the portions of the bills written off by the providers were collateral source benefits that could not be deducted from her recoverable damages. The appellate court agreed with plaintiff and directed the trial court to enter a new judgment restoring the original amount of damages awarded by the jury.

Under the collateral source rule benefits received by the plaintiff from a source independent of and collateral to the wrongdoer will not diminish the damages otherwise recoverable from the wrongdoer.  Courts apply the rule even when it confers a windfall on the plaintiff, because “not applying the rule allows the wrongdoer to profit from the victim’s investment in purchasing insurance or from the generosity of those who come to the victim’s aid.”  The court cited Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal. 3d 1, for the proposition that a defendant should not be able to avoid full compensation for the injury inflicted merely because the victim had the foresight to provide himself with insurance.  Rate discounts negotiated between health insurers and providers are collateral benefits which, under the collateral source rule, should accrue to the insured plaintiff, not the defendant.

Howell v. Hamilton (2009) 179 Cal. App. 4^th 686, also held that amounts written off by a health provider pursuant to its contract with a private health insurer may be recovered as damages under the collateral source rule. However, that decision has been accepted for review by the Supreme Court.   The court distinguished Hanif v. Housing Authority (1988) 200 Cal.App.3d 635.  Hanif was a personal injury action brought on behalf of a minor struck by an automobile on the defendant public housing authority’s property.  The court concluded the plaintiff was entitled to recover up to, and no more than, the actual amount expended or incurred for past medical services so long as that amount is reasonable, and thus held his entitlement to damages for past medical services was limited to the actual amount paid by Medi-Cal, rather than the total amount billed. Hanif did not address the situation in which patients covered by private health insurance are charged reduced rates by the provider for their care as an insurance benefit negotiated between the insurer and the health care provider.  In Nishihama v. City and County of San Francisco (2001) 93 Cal. App. 4^th 298, the plaintiff was injured when she tripped and fell on a crosswalk maintained by the city.  The jury awarded plaintiff the sum of $17,168 for past medical expenses even though the hospital accepted from plaintiff’s private health insurer the amount of $3,600 as payment in full.  The court of appeal held the trial court erred in permitting the jury to award the plaintiff an amount in excess of $3,600 for the services provided by the hospital.  The court refused to follow Nishihama, because it was based on the decision in Hanif which the court believed should not be extended beyond the Medi-Cal context.

By Jonathan Klein

At first glance, litigation in the 21st Century seems just like litigation in the 20th.  We file or answer Complaints, we serve or answer discovery, and we move forward towards settlement or trial.  While lawyers have always complained about civility in the profession, the lack thereof has, to me at least, become so prevalent that one must wonder what happened?  How did we get here?

Maybe it’s just me.  As a young lawyer, I’m sure I was known for getting into some disagreements with opposing counsel.  Yet, as I’ve grown more experienced, I see argument, discourtesy, and a lack of professional courtesy at every turn.  Worse, this change is no longer limited to relationships with opposing counsel — even judges are getting into the act with alarming regularity!

A recent example is just par for this long course…  My partner recently had a case in a not-to-be-named federal court.  The pre-trial conference was set for a few weeks before trial, except that he was actually in trial hundreds of miles away.  So, he filed an “emergency” motion, on the Thursday before the Monday pre-trial hearing, seeking to “continue” the pre-trial conference because he’s in trial and scheduled to make closing arguments on the day in question.  Without explanation, the federal judge DENIED the request.

The federal court requires the lawyer who will try the case to attend the pre-trial conference.  I thought it was obvious (maybe not?) that he couldn’t be in two places at once.  There is no solution — he could skip giving closing argument (right), or just not show up for the pre-trial conference and get sanctioned.

I’m 100% certain that the judge involved was a lawyer earlier in his career.  He must know that circumstances arise where lawyers simply can’t do what the judge’s calendar dictated.  He must know that this situation could not be avoided, and that we have done everything we could (cases settle, so we waited until the week before trial) to avoid the conflict.

Why not, at least, give an explanation of why the request was merely DENIED?  Why not offer some glimpse into the murky world of judicial decision-making, and help us understand what we should do next time, so that the system works better for everyone?

Unfortunately, this example is but a mere leaf in a forest of regular issues.  Opposing counsel seem to find it part of their job description to be downright mean, if not wholly uncivil, when this does not one thing to improve their client’s position in the case.  (Or does it?  Some lawyers certainly believe that being a jerk makes their opposing counsel more likely to tell their clients about it, and more likely to get the case to resolve for more money.)  But it completely undermines the nature of the profession (an interesting blog on our profession can be found here), and makes everyone (plaintiffs, defendants, the lawyers, the judges, even the clerks in the courthouse) sour on what we strive to do — help our clients with often significant legal disputes.

I’m looking for answers.  Are their enforceable measures that can be implemented to help? How can judges play a role?  What can we do?

Summary by Rebecca B. Aherne, Esq.

On June 17, 2010, the California Supreme Court filed its opinion in Minkler v. Safeco Insurance Company holding the insurer had a duty to defend an insured’s mother in an action by a minor against the son for sexual molestation and against the mother for negligent supervision.

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On May 13, 2010, Jonathan Allan Klein and Anne F. Marchant successfully obtained summary judgment on behalf of Safeway Inc. in a premises liability case in San Mateo County Superior Court.  The case involved serious personal injuries to an elderly customer who slipped and fell upon entering a Safeway store.  The trial court found that Safeway met its burden establishing that it exercised reasonable care in inspecting the retail floor areas on the date of Plaintiff’s slip and fall, including the lobby where Plaintiff fell and that Plaintiff had not met his burden to present competent, admissible evidence showing that a triable issue of material facts existed.  (Code of Civ. Proc. § 437c(p)(2).)  See attached order.