A California federal court has held that the potential for coverage underlying lawsuits arising from the September 2020 Bobcat Wildfire “is clear” and requires Greenwich Insurance Company to defend Southern California Edison Co. as an additional insured under a policy it issued to a vegetation management company whose negligence allegedly caused the wildfire.

Facts and Analysis

Under California law, a liability insurer owes a broad duty to defend its insured against claims that create a potential for coverage.[i] This broad duty encompasses claims that are “merely potentially covered” considering the facts alleged[ii] and does not require a showing of actual liability or evidence supporting the claims alleged.[iii]

In an opinion issued in January,[iv] the Eastern District of California held that detailed allegations of negligence in 20 underlying lawsuits against Utility Tree Service (UTS) establish the potential for coverage under the policy.

Edison contracted with UTS to manage vegetation maintenance around its power lines to prevent potential tree-to-conductor contact which allegedly occurred in September 2020 according to the lawsuits. The contract required UTS to have insurance with excess coverage for wildfire liability that lists Edison as an additional insured if UTS negligently performed maintenance.

Greenwich argued that it had no duty to defend Edison without any allegations of negligence levied against the named insured, UTS.

The Court disagreed, reasoning that a bare possibility of liability is all that is required to obtain coverage—saying that it was “reasonable to infer that [SCE’s] liability (if any) may arise from UTS’s acts or omissions” which triggers Greenwich’s duty to defend under the contract.[v]

Takeaway

This decision echoes the chorus California courts have maintained for decades: construe the duty to defend broadly and in favor of policyholders wherever possible. If there is any possibility for coverage under an insurance policy based on the complaint’s allegations, the insurer must defend its insured against the entire lawsuit unless it can prove with undisputed facts to the contrary.

Keep Reading

Cannabis Workers Allege Quota to Trim 4 Pounds a Day Violates the California Labor Code The Ninth Circuit Reminds Us: Every Word Matters NO WAY, PRO SE! The Consequences of Abusing the Judicial System as a Pro Se Litigant in Colorado Victim of Financial Mismanagement or Unlawful Retaliation? New Jersey City University Program Founder Claims School Retaliated After Reporting Alleged Sexual Harassment “Real Housewives” Gets a Reality Check Missing a Chapter: Insufficiency of Expert Deposition Testimony in Medical Malpractice Litigation Crash Course: Why Summary Judgment Misses the Mark in Illinois Multi-Cause Limousine Crash Collision Bitter Truths: Lead, Cadmium, and Defective Pleadings in California Chocolate Class Action The Law of Unintended Consequences: Including Insurance Brokers in Litigation Strategy Communication May Waive the Attorney-Client Privilege

More by this author

Modern Headache: Actress Sofia Vergara is Sued for $1.7 Million by Former Contractor A League of Their Own: Sports Leagues’ Novel Argument Fails to Persuade California Appellate Court Up In Smoke: Insurer Sues Landlord For Failure to Obtain Liability Insurance from Tenant  The Truck Stops Here: Dispute Over Trucking Company’s Liability Makes Its Final Stop at the Ninth Circuit You’re It: California Federal Court Tags Insurer to Defend in Habitability Case That’s a Wrap: California Appellate Court Shutters Theater Chain’s COVID-19 Business Interruption Bid Out of This World! California Supreme Court Agrees to Review COVID-19 Business Interruption in Another Planet Ent., LLC Trial and No Error: California Jury Shows the Good that Can Come from Effective Defense Strategies California Federal Court Maintains Broad Duty of Insurer to Defend

Sources

[i] Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076, 1081.

[ii] Buss v. Superior Court, (1997) 16 Cal.4th 35, 46.

[iii] Isaacson v. Cal. Ins. Guarantee Ass’n (1988) 44 Cal. 3d 775, 793.

[iv] Southern Cal. Edison Co., et al. v. Greenwich Ins. Co. (E.D. Cal. Jan. 18, 2023) No. 2:22-cv-05984-JFW-JEM.

[v] Id.