Beware of Insurance Policy Language that Can Defeat Coverage

May 29, 2012, Los Angeles - The need for reliable insurance coverage is a fact of life for all businesses. Third party liability policies that businesses typically purchase, such as Commercial General Liability policies, often require payment of a significant self-insured retention (“SIR”) before coverage is triggered. This seems like a straightforward proposition. The insured party pays the SIR amount specified in the policy, and then the insurance carrier steps in and provides coverage. However, cleverly crafted SIR provisions limiting who may satisfy the SIR requirement, and how it may be paid, could deprive coverage to unwary businesses.For instance, an SIR provision may state that only the named insured, and no other party, may satisfy the SIR requirement, and may do so only with its own funds, not other insurance proceeds or third party funds. Under such a provision, if the named insured is unwilling or unable to satisfy the SIR requirement, no other party, not even an additional insured, would be permitted under the policy to satisfy the SIR. Coverage for a covered loss would go un-triggered, and the carrier would have no coverage obligation.In Forecast Homes, Inc. v. Steadfast Ins. Co., 181 Cal. App. 4th 1466 (2010), homebuilder Forecast tendered its defense of five construction defect lawsuits to Steadfast, a carrier that had insured Forecast as an “additional insured” under its subcontractors’ policies. Steadfast denied Forecast’s tender on the ground that only the named insureds, not additional insured Forecast, could satisfy the SIR pursuant to the language in the policies’ SIR provisions written by the carrier.The California Court of Appeal agreed with Steadfast. In reaching its decision, the court construed two different policy forms. One form stated: “[p]ayments by others, including but not limited to additional insureds or insurers, do not serve to satisfy the self-insured retention.” The other form contained less explicit language, stating only that the named insured, must “make actual payment” of defense costs and/or damages. The court construed both provisions as prohibiting anyone other than the named insured from paying the SIR.The impact of the Forecast Homes decision is beginning to reach other jurisdictions, and the impact is not just upon unwary “additional insureds,” as in Forecast Homes, but upon policyholders under their very own policies as well.In a case out of Florida, ,Intervest Const. of Jax, Inc. v. Gen. Fid. Ins. Co., 662 F.3d 1328 (11th Cir. 2011), homebuilder ICF was sued for injuries sustained by a homeowner while using stairs installed by a subcontractor. ICF settled an indemnification claim against its subcontractor by accepting $1 million from the subcontractor’s carrier. ICF then sought to use those proceeds toward a $1.6 million settlement reached with the plaintiff, in satisfaction of ICF’s $1 million SIR requirement. However, ICF’s carrier, General Fidelity, refused to pay the remaining $600,000 of the settlement amount on the ground that ICF could not satisfy the SIR with proceeds from a third party because the policy required ICF to satisfy the ICF with its own funds. Moreover, the carrier also argued that General Fidelity, not ICF, was entitled to the $1 million dollar indemnity proceeds under a provision assigning ICF’s subrogation rights to the carrier.Finding Forecast Homes persuasive, the trial court agreed with General Fidelity, holding ICF did not satisfy its SIR because its proceeds were derived from a third party, and not from ICF’s “own account,” as required under its policy. ICF appealed to the Eleventh Circuit Court of Appeals, and on November 21, 2011, the Eleventh Circuit issued an opinion certifying for resolution by the Florida Supreme Court whether General Fidelity’s policy allows ICF to apply proceeds received from a third party to satisfy its $1 million SIR under Florida law.Although the Florida Supreme Court has yet to decide the matter as of this writing, the lessons to be taken from Forest Homes and Invervest are clear. Businesses should make sure that neither their own policies, nor policies in which they are listed as “additional insureds” contain language that limit (1) who may satisfy the SIR (i.e. only the named insured), or (2) how the SIR may be met (i.e. from the named insured’s own funds).Because insurance brokers may not be aware of, or have the expertise to deal with this issue, businesses should consult an insurance coverage attorney to review proposed SIR provisions when considering new policies or policy renewals offered by carriers. Likewise, businesses that rely upon vendors and/or subcontractors should consult with an insurance coverage attorney when drafting insurance coverage requirements in vendor/subcontract agreements.If you would like to discuss SIR retention provisions in particular, or need assistance with the enforcement of insurance coverage in general, please contact a Lim Ruger attorney.

Arnold Barba is a trial attorney and partner with LimRuger in Los Angeles,   California, where he practices complex, business, real estate and insurance   coverage litigation. His practice includes representation of corporate   insurance policyholders in connection with insurance enforcement and recovery   disputes. Arnold is also an Adjunct Professor of Law at Pepperdine University   School of Law in Malibu, California, where he teaches an upper division   course on civil trial preparation and settlement.

Congratulations to 2012 Mid-Year Lim Ruger Scholars

May 29, 2012, Los Angeles
120529_2012_scholars_ab[1]Alisha Burgin
  • Recipient of the Lim Ruger Foundation scholarship from John M. Langston Bar Association
  • UCLA School of Law, J.D. Candidate 2012
  • Alisha’s future endeavor is to promote green space in urban areas to help prevent childhood obesity.
120529_2012_scholars_lc[1]Luong Chau
  • Recipient of the Lim Ruger Foundation scholarship from Korean American Bar Association
  • USC Law School, J. D. Candidate 2013
  • Luong hopes to pursue public interest work for the betterment of her community.
120529_2012_scholars_tz[1]Theresa Zhen
  • Recipient of the Lim Ruger Foundation scholarship from Southern California Chinese Lawyers Association
  • UCLA School of Law, J.D. Candidate 2014
  • Theresa aspires to be a policy director of a community-based resource center for underrepresented minorities.
120529_2012_scholars_ki[1]Karyn Ihara
  • Recipient of the Lim Ruger Foundation scholarship from Japanese American Bar Association
  • Loyola Law School, J.D. Candidate 2014
  • Karyn hopes to deliver employment law assistance to underserved workers.

Hats Off to John Lim - Recipient of the KABA Community Leadership Award

May 29, 2012, Los Angeles - Last month John Lim was presented with the KABA Community Leadership Award by The Korean American Bar Association of Los Angeles for his dedication to helping the victims of the L.A riots in 1992.  Mr. Lim, with over eighty volunteer lawyers, intervened with insurance companies, financial institutions, landlords and government officials to help Angelenos rebuild their lives and their community.  Mr. Lim continues to devote time towards providing access to legal services for the underprivileged both in private and through the Asian Pacific American Legal Center (APALC) where he has served as a board member for eighteen years.

120529_kaba_leadership[1]

Lim Ruger Guides Purchase of Online Video Game Company

May 29, 2012, Los Angeles - As part of growing consolidation in the multi-billion dollar online video game industry, Lim Ruger advised a prominent Korean video game company in its successful acquisition of an international video game distributor in a multi-million dollar stock deal.  The target company distributes first-person shooter and other online video games.  Lim Ruger negotiated agreements with the selling shareholders and guided the client through a number of complex cross-border issues in order to complete the transaction.  Lim Ruger attorneys Richard Ruger and Paul Kim represented the acquiring company.

Lim Ruger Lawyer Appointed to the Bench

May 22, 2012, Los Angeles- Bruce G. Iwasaki, a Senior Partner of Lim, Ruger & Kim, LLP's Litigation Practice Group, was appointed to the Superior Court of California by Governor Edmund (Jerry) G. Brown Jr.
120523_judge_bruce[1]Bruce Iwasaki has had an impressive legal career.  An experienced trial attorney, Mr. Iwasaki has handled a wide variety of complex commercial and tort litigation in both state and federal courts including environmental litigation, business and commercial disputes, fraud, and consumer class actions.  He has been a partner of the Lim Ruger firm since 2006.  Prior to joining Lim Ruger, Mr. Iwasaki served as the Executive Director at the Legal Aid Foundation of Los Angeles (LAFLA), the oldest and largest law firm serving the underserved in California.
After beginning his career in public service for the San Fernando Valley Neighborhood Legal Services, Mr. Iwasaki worked in the litigation department at O'Melveny & Myers LLP from 1988 to 1997.He has received many honors including the Judge John Minor Wisdom Public Service and Professionalism Award from the American Bar Association Section of Litigation and the Loren Miller Legal Services Award, the State Bar's highest honor."I have been very fortunate to practice with such talented colleagues as those at Lim Ruger," said Iwasaki. "It is a firm of excellence and ethics, and I will miss it.""We will miss an extraordinary lawyer, wonderful partner and a dear friend but the greater legal community will benefit with the addition of an excellent judge with both wisdom and heart,” commented John Lim, managing partner of Lim Ruger.  “The Lim Ruger family extends our warmest of wishes and congratulations to our friend Bruce."
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