Clarification of Answer by
weisstho-ga
on
19 Sep 2002 10:36 PDT
Dear Rand556-ga,
Thank you for providing the amplifying information. Let me try to
provide you with as much illumination as I can. Specifically, I would
like to address the jurisdictional question of suing in California,
the question of insurance contracts, and the ability to sue for
punitive damages.
MOST IMPORTANT ADVICE: THE CLOCK IS TICKING – make sure you are not
going to have a statute of limitation problem (discussed in the main
answer).
It is, indeed, unfortunate that insurance companies seem to generate
their reserves by NOT paying claims when submitted. The reality seems
to be that an aggressive legal action is necessary to protect your
rights and force the insurance company, who accepted your premiums, to
pay out under the contract that they entered into with you and your
borrower.
First of all – you should find some solace that you and the boat
“owner” (the corporation) are all domiciled in California. I have had
some experience litigating in the federal courts out there, and it is
an experience that an out-of-state attorney does not, and will not,
relish. This is very much in your favor. The California rules of civil
procedure will create leverage for your side – necessity for parties
to appear there (sometimes for even the most puny of reasons, for
example, scheduling conferences), and the strong interests of the
courts to generally maintain jurisdiction and venue.
Litigation is expensive, but the price mentioned by the attorney seems
high, very high. It is unlikely that a case like this would go to
trial – though it probably would require some discovery and a
declaratory action to sort out the rights of the parties – from that
point it should be pretty straight forward. The discovery on your
part may be limited to written requests, interrogatories, requests for
production, etc. I can’t imagine that you would have to go to London
and Germany to take depositions. Had someone walked into my office
with these facts, I would have estimated $50,000, tops.
To protect yourself on fees, you may want to establish certain tasks
and place a cap on the fees for that particular task. For example:
Draft complaint, file with court, and serve defendants: $__________,
max
Defend against defendants’ motion to dismiss for lack of jurisdiction:
$__________
Review defendants’ answer: $_________
Draft first level plaintiff’s discovery: $___
Respond to defendants’ discovery: hourly
Draft and file motion for summary judgment: $_____
Etc.
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DIVERSITY JURISDICTION IN FEDERAL COURT
If you are to bring suit against only the insurers, Lloyd’s and
Hamburger Versicherungs-Aktiengesellschaft, both foreign entities, you
should be able to bring that suit in federal court under the diversity
jurisdiction as discussed in the main body of my answer. Of course,
you could bring suit against them in state court as well, which
tactically might be interesting as they may CHOOSE and prefer to have
the matter transferred to federal court – costing them money and
inconvenience.
If you were to sue the insurance broker (Blue Water) as well, the
federal court is probably not an option, since diversity is destroyed
by naming a California defendant. Blue Water Insurance Services, Inc.
is a California corporation whose agent is Bruce Evans, 1440 M.
Harbor, Ste. 900, Fullerton, CA 92835.
http://kepler.ss.ca.gov/corpdata/ShowAllList?QueryCorpNumber=C2233652
Blue Water is also registered in Florida.
http://www.sunbiz.org/scripts/cordet.exe?a1=DETFIL&n1=P94000066573&n2=NAMFWD&n3=0000&n4=N&r1=&r2=&r3=&r4=BLUEWATERINSURANCE&r5=
Its registered agent is WHITE, CHARLES R, 725 NORTH A1ASUITE E-201,
JUPITER FL 33477.
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INSURANCE CONTRACTS
The California Supreme Court has stated that “while insurance
contracts may have special features, they are still contracts to which
ordinary rules of contractual interpretation apply. By applying these
ordinary rules of contractual interpretation, one "give[s] effect to
the mutual intention of the parties. (Civ.Code, § 1636.)" (Bank of the
West v. Superior Court, supra, 2 Cal. 4th at p. 1264, 10 Cal.Rptr.2d
538, 833 P.2d 545.)
Where the contractual language of the policy is clear and explicit,
the Supreme Court observed, it will govern. On the other hand, '[i]f
the terms of a promise are in any respect ambiguous or uncertain, it
must be interpreted in the sense in which the promisor believed, at
the time of making it, that the promisee understood it.' This rule, as
applied to a promise of coverage in an insurance policy, protects not
the subjective beliefs of the insurer, but, rather, 'the objectively
reasonable expectations of the insured.' " See West, supra at
1264-1265.
Although reading insurance policies has to be pretty low on any
person’s list of entertaining things to do, may I suggest that you fly
speck the policy language. In particular, identify any conditions that
must have been met, escape clauses, duties of the parties that are
identified, scope of the coverage, etc. These law suits are not
brain surgery – insurance company says “we are not responsible for
paying because insured did not comply with XYZ.” Once identified, the
plaintiff (you) are in a position to work on the defenses to the
contract claim.
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INSURER’S DUTY OF GOOD FAITH
I am including some California rules pertaining to this important
Insurer’s Duty of Good Faith – This is a difficult area, but can open
the door for awards for punitive damages.
To the extent that bad faith is exhibited, an action in Tort (as
opposed to Contract) may be possible, which may open the way for
punitive (exemplary) damages. (The general rule in law is that you may
only collect your direct loss in an action for breach of contract.)
“It has long been recognized in California that "[t]here is an implied
covenant of good faith and fair dealing in every contract that neither
party will do anything which will injure the right of the other to
receive the benefits of the agreement." (Comunale v. Traders & General
Ins. Co. (1958) 50 Cal. 2d 654, 658, 328 P.2d 198.) This principle
applies equally to insurance policies, which are a category of
contracts. Because the covenant is a contract term, in most cases
compensation for its breach is limited to contract rather than tort
remedies. (Foley v. Interactive Data Corp. (1988) 47 Cal. 3d 654, 684,
254 Cal.Rptr. 211, 765 P.2d 373 (Foley ).) But "[a]n exception to
this general rule has developed in the context of insurance contracts
where, for a variety of policy reasons, courts have held that [an
insurer's] breach of the implied covenant will provide the basis for
an action in tort." The availability of tort remedies in the limited
context of an insurer's breach of the covenant advances the social
policy of safeguarding an insured in an inferior bargaining position
who contracts for calamity protection, not commercial advantage.”
(Foley, supra, 47 Cal. 3d at pp. 684-685, 254 Cal.Rptr. 211, 765 P.2d
373; see also Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal. 3d 809,
819-820, 169 Cal.Rptr. 691, 620 P.2d 141.)
“The scope of the duty of good faith and fair dealing depends upon the
purposes of the particular contract because the covenant "is aimed at
making effective the agreement's promises." (Foley, supra, at p.
683, 254 Cal.Rptr. 211, 765 P.2d 373; In the context of an insurance
policy, "[t]he terms and conditions of the policy define the duties
and performance to which the insured is entitled." (Western Polymer
Technology, Inc. v. Reliance Ins. Co. (1995) 32 Cal.App.4th 14, 24, 38
Cal.Rptr.2d 78.) "One of the most important benefits of a maximum
limit insurance policy is the assurance that the company will provide
the insured with defense and indemnification for the purpose of
protecting him from liability. Accordingly, the insured has the
legitimate right to expect that the method of settlement within policy
limits will be employed in order to give him such protection."
(Commercial Union Assurance Companies v. Safeway Stores, Inc. (1980)
26 Cal. 3d 912, 918, 164 Cal.Rptr. 709, 610 P.2d 1038.)
BUT THIS IS A TOUGH STANDARD: The clear-and-convincing evidence
standard [read this as proving with, say, 70% certainty, as opposed to
the 51% preponderance of the evidence standard of normal civil
litigation] applied to evidence submitted in opposition to motion for
summary adjudication on claim for punitive damages; punitive damages
were recoverable only if malice, oppression, or fraud was shown by
clear and convincing evidence. Basich v. Allstate Ins. Co., 105
Cal.Rptr.2d 153, Cal.App. 2 Dist. (2001).
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SUMMARY –
You can sue foreign insurance companies in federal or state court in
California, and the courts should be able to establish jurisdiction
over these defendants without too much trouble. Certainly, the
question of jurisdiction is KEY, and paying a bright lawyer to
research this question might be a great place to start. Retain him/her
for the one and limited purpose of addressing jurisdiction over
Lloyd’s and Hamburger.
Study the insurance policy. Become familiar with it. Look for the
loopholes that the insurance company will depend on (did the pilot
need to be licenses for that size boat in those waters, was the boat
insured for those waters, was there an inspection required, etc.)
THIS ACTION IS JUST A SIMPLE MATTER OF WHAT THE CONTRACT SAYS. You
can’t study that policy closely enough or too often.
Take copious notes as to what was said to whom, when. Has the insurer
exhibited bad faith? If so, that may open the vault door to something
more than contractual damages.
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Good luck!!
One final thought – filing a law suit on this matter puts you in
charge. Momentum is a good thing.
weisstho-ga
