California Case Law Update

Author: Robert Tyson

TOXIC TORT/EVIDENCE
Wilfredo Velasquez v. Centrome Inc. d.b.a. Advanced Biotech, No. B247080 (2015)

Facts
:
Wilfredo Velasquez worked at the Commerce, California plant of Gold Coast. He brought a suit against Advanced Biotech, Inc., a supplier of raw food materials, alleging that he contracted a rare and typically fatal lung disease called bronchiolitis obliterans, otherwise known as “popcorn lung” as a direct result of exposure to “significant concentrations” of diacetyl, a flavoring chemical, and other toxic chemicals. According to medical testimony, his condition is severe and will likely require a lung transplant. Velasquez filed suit in 2007 seeking $27 million in damages, but the jury ultimately ruled in favor of Advanced Biotech.

Holding:
The appeals court found that although the trial court did considerably weigh the value and potential ramifications of admitting Velasquez’s immigration status, the judge erred because he did not rely on sufficient testimony to admit the information and he did not grant a motion for mistrial after it became apparent that Velasquez’s status was irrelevant. The panel concluded the previous ruling in Wilfredo Velasquez’s case against Advanced Biotech should be reversed and remanded back to a trial court because the lower court erred when it made his immigration status admissible at trial. The appeals court agreed with Velasquez that admission of this fact was irrelevant to the case and could have prejudiced jurors.

CONSTRUCTION DEFECT
McMillin Companies LLC v. American Safety Indemnity Co., No. D063586 (2015)

Facts:
In October 2007, more than 100 homeowners in three of the projects filed suit against McMillin and others, alleging construction defect claims. McMillin served as the general contractor on several real estate development projects in Temecula, Calif., while B&B Framing Inc. served as the framing subcontractor. ASIC issued two commercial general liability policies to B&B covering the periods spanning Jan. 18, 2002 through Jan. 18, 2004, and McMillin asserted that it was an additional insured under the policies. McMillin and several related entities in February 2009 sued ASIC and 11 other insurers of subcontractors on the projects, alleging that each insurer breached a contract of insurance and its implied covenant of good faith and fair dealing by denying tender of the defense in the underlying litigation. Judge Lorna Alksne initially granted McMillin’s motion as to the duty to defend issue. As to the settlement issue, the judge granted ASIC’s motion in limine, “necessarily” allocating $309,957 of the $416,000 sum to McMillin’s breach of contract claim against the settling insurers and offsetting all of its contract damages against ASIC. The parties agreed that, as a result of Judge Alksne’s rulings, McMillin could not prove any contract damages and therefore also could not maintain its tort claim. They allowed the court to enter judgment in ASIC’s favor while reserving their rights to appeal.

Holding:
The appellate panel held that Judge Alksne erred in granting McMillin’s motion in limine on the duty to defend issue based on ASIC’s failed summary judgment motion. The decision denying ASIC summary judgment didn’t find a factual dispute that “necessarily established a possibility of coverage,” according to the panel. The panel further found that the proceeds of McMillin’s settlement with the other insurers do not alter the company’s damages. Rather, the settlement proceeds that the trial court found as offsets only affect McMillin’s right to recover the damages in full. “The fact that the 11 other insurer defendants settled with McMillin should not, and does not, affect whether ASIC breached the duty to defend or the implied covenant of good faith and fair dealing… At best, the settlement proceeds from the other 11 insurers may reduce (by way of offset) the amount ASIC ultimately owes McMillin for contract or tort damages,” the panel concluded.

DUTY TO DEFEND
Victaulic Co. v. American Home Assurance Co., No. RG12642929

Facts:
Three AIG units provided Victaulic Co., a pipe fitting manufacturer, with comprehensive general liability insurance from 1998 to 2012. The parties disputed the coverage provided under the policies with respect to nine underlying actions filed against Vitaulic in six states. Vitaulic filed suit against AIG in 2012. The trial court granted Victaulic’s motion for summary adjudication and, in doing so, found each of the claimants sought to hold Vitaulic liable for “property damage “caused by an “occurrence,” giving rise to the potential for coverage. The court reasoned that because AIG failed to provide admissible evidence to eliminate the possibility of coverage, they had a duty to defend Vitaulic against those claims.

Holding:
The court found guidance under Indalex, Inc. v. National Union Fire Insurance Co. of Pittsburgh, which conflicted with existing case law stating that breach of contract and breach of warranty claims over alleged faulty workmanship did not trigger an occurance. The Indalex court concluded that the aforementioned decision did not eliminate coverage for tort-based personal injury and property damage claims. The judge denied the AIG units’ motion for summary adjudication entirely, while also denying Victaulic’s motion for summary adjudication as to whether the insurers have a duty to indemnify the company in connection with the settlements of two of the underlying suits.

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