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FORD & SERVISS is a proud sponsor of Court Appointed Special Advocates or CASA (of Los Angeles).  CASA is a national network of programs that are recruiting, training and supporting volunteers to represent the best interests of abused and neglected children in the courtroom and other settings.

CASA volunteers are appointed by judges to watch over and advocate for such children, to make sure they don’t get lost in the overburdened legal and social service system or languish in inappropriate group or foster homes.

Today, we salute our very own SHIRLEY FORD.  You probably know Shirley as our firm’s administrator. But did you know she’s also a CASA volunteer?

Since 1999 Shirley has been a tireless and passionate voice for “her kids” and we salute and thank her (and all the CASA volunteers) for making a difference.

Please visit CASA of Los Angeles website for more information on how you can “be a powerful voice in a child’s life”

http://www.casala.org/home.php

To report child abuse, neglect or abandonment contact the Los Angeles County Child Protection Hotline at 1-800-540-4000.

CLICK ON THE PHOTOS BELOW TO VIEW THEIR STORIES

As a coverage firm, this is a proud day for us! We represent the very prestigious UNITED POLICYHOLDERS in connection with an Amicus brief that we filed today. UP, of course, is a non-profit 501(c) (3) organization that is an independent information resource and a voice for insurance consumers in all 50 states.

Our brief was filed in the case Hakimfar v. ROC Design, Inc. (Demler, Armstrong & Rowland, Real Party in Interest), Case No. B228541.  UP (and several others) are asking the Court of Appeal, Second District, Div. 5, not to allow dismissal of an appeal  which Lexington Insurance  has made moot by settling with plaintiffs during the appeal. Why should the case not be dismissed? Because the record of this case establishes that insurer-selected counsel, as a matter of industry-wide, pattern and practice, choose not to comply with the California Rules of Professional Conduct, Rule 3-310. These are the “rules of the road” for lawyers. They include the duties to (a) identify and (b) disclose in writing conflicts of interest and (c) to not accept or continue representation of clients absent an informed written consent by both the insured and the insurer. UP says “policyholders are entitled to expect transparent fidelity.”

Here’s the way our brief put it: “Given Lexington’s admission of the existence of conflicts, the [insurer-selected] firm’s refusal to explain the conflicts and the actual and reasonably foreseeable adverse consequences puts the insured in the position of being a passenger in the backseat of a car in which the muted “driver” will not disclose the hoped-for destination, the planned route or even the likely road hazards along the way.”

Early in my legal career, I was lucky to have worked under the watchful eye of the late Edgar L. (“Ted”) Fraser. As many will attest, Ted was the real deal—brilliant, funny and always the consummate gentleman. One day, Ted taught me this:

“When a client comes to see you, the client comes to see you.”

Ted’s simple eloquence meant that clients actually have the right to expect more than “just” a lawyer’s skills, expertise, experience and training. (That’s only the brain thing.)

Clients also have the right to expect compassion. Compassion: the “sympathetic consciousness of others’ distress together with a desire to alleviate it.”

We’ll get back to all the legal stuff soon. For now, have a nice weekend!

You are a subcontractor or an attorney representing a subcontractor, which laid the foundation for a commercial building. Now, with the building almost complete, the owners claim the entire building must be demolished and rebuilt because of the defective foundation.

The owner sues the subcontractor. Subcontractor’s insurer denies coverage.

The old way of thinking was there was no insurance coverage for subcontractor because the building was not yet complete and the demolition arose from the subcontractor’s defective work.  Not necessarily.

Recent federal cases have held the defective workmanship exclusion, “j(6),” applies only to the actual defective work.  Insurers have a duty to defend the subcontractor and may have to cover the cost of removing and replacing all the non-defective work in order to allow repair or replacement of the defective work.

In construction defect cases, the cost of removing and replacing work which itself is not damaged can be quite significant and insurers frequently resist this cost. In some instances, such as the defective foundation, the demolition and subsequent rebuild required to gain access to the defective work is far more costly than the replacement of the defective work, which is not covered. Insurers’ arguments should not be accepted.

“Burning Limits?” Here’s the hot 4-1-1!

 Since at least the early 1980’s, most professional liability policies, director and officer (D&O) policies and employment practices liability (EPL) policies, among others, are “Defense Within Limits” (DWL) in nature. These are often called “burning limits” policies because the available limit is reduced or “burned” down by defense expenses such as attorneys’ fees, experts and other litigation costs.

We think Courts across the country will embrace exactly the following rule:

Where the amount of a claim against the policyholder (or other insured) under a DWL policy combined with the amount of reasonably foreseeable defense expenses might exceed the available limit, the insurer must relinquish control of the defense and pay for independent counsel selected by the insured, unless an informed, written consent has been obtained from both the insured and the insurer.

To read more, see Bill Ford’s paper, “Defense within limits: “Burning” Ethical Issues for Defense Counsel Selected by the Insurer.  ABA (TIPS) February 2011© presented in Phoenix. (Or, heck, just call.)

In Wednesday’s 5-4 decision, our U.S. Supreme Court dealt consumers a painful upper cut. SCOTUS ruled companies may require consumers to individually arbitrate their claims rather than join a class-action lawsuit. AT&T Mobility LLC v. Concepcion, No. 09-893, arose in California. The Concepcions had signed a cellphone contract with a “free” phone. The contract included an arbitration clause that required claims to be brought individually, not as a part of a class action. When the consumers learned they had been charged a $30 tax for their “free” phone, they sued as representatives of a potential class. The U.S. District Court and the 9th Circuit applied California law, (See, Discover Bank v. Sup. Ct. , a case holding such arbitration clauses unconscionable.) The class action litigation was permitted despite the contract language.

“Because it ‘stands as an obstacle’” to the objectives of Congress, Justice Scalia, joined by Chief Justice Roberts, and Justices Kennedy, Thomas and Alito, held California’s law was preempted by the Federal Arbitration Act. Each consumer will now have to arbitrate, individually, if at all. Justice Breyer, in a dissenting opinion, noted California courts had found “that the terms of consumer contracts can be manipulated to insulate an agreement’s author from liability for its own frauds by `deliberately cheat[ing] large numbers of consumers out of individually small sums of money.’” “The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.” We say “well said!”

Arbitration started out to be the faster and cheaper alternative to litigation. It has become, sadly, a costly “favored” industry. With AT&T Mobility, consumers will not be able to escape even unconscionable contracts of adhesion, at least in federal court. First, don’t sign a contract which includes an arbitration clause. We know—that’s not realistic if one actually wants a cell phone or a credit card or, well, a life in the 21st Century! Second, attorneys representing a party to an arbitration clause should strive mightily to stay the heck out of federal court. (File in state court if you can.) Third, if the defendant participates in discovery or otherwise delays in moving to compel arbitration, oppose the motion to arbitrate on the basis defendant has waived the right to arbitrate. Our firm recently was successful in obtaining exactly that kind of ruling in Zamora v. Lehman (2010) 186 Cal.App.4th 1, 111 Cal.Rptr.3d 335. Check it out.

Claudia J. Serviss

Courts have said insurers “deny a defense duty at their ‘peril’.” They could just as well have said “perils”?  We’ve thought about these “perils.” Here’s a short string: 

 (1) the insured no longer has to “cooperate” with the insurer; (2) the “no action” clause is gone; (3) the insurer loses control the defense; (4) the insurer may have to reimburse the insured for defense fees paid or incurred; (5) if the insured enters into a non-collusive settlement, she or he enjoys presumptions the amount paid was both fair and reasonable; and (6) if the insurer’s erroneous denial of a defense also proves to have been unreasonable, the insured may  recover fees and costs in pursuit of the lost policy benefits. There’s actually more but this is a short blog. (You enjoyed the “pearls,”right?)

Did you know your insurance company must usually defend claims against you even if “groundless, false or fraudulent?” This means that, as an insured, you don’t have to prove the potentially covered claim against you is valid in law or in fact or that it would support even one penny of damages.

Judges can, and do, “get it wrong” on matters of coverage. But a prior erroneous ruling by a court does not mean the insurance company must have acted “reasonably” in denying your claim.  After your successful appeal, the insurer may be subject to bad faith liability. That’s because the focus is on when the insurer erroneously denied the claim–not when a court made the same mistake.

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