Procedural Posture
Appellant reinsurer challenged a decision of the Superior Court of Santa Clara County (California), which found that appellant acted unreasonably or in bad faith in connection with appellee insurer's claim. Appellant contended that investor losses of the type suffered, which appellee settled, were not covered under its policy of reinsurance, and that it had no duty to defend until appellee's original insurance coverage was exhausted.
Overview
Appellant reinsurer covered a portion of appellee insurer's exposure in a comprehensive general liability policy. Appellee insured an investment services company, which had filed for bankruptcy. Insured and a group of its investors sued appellee for acts and omissions in preparing and executing title documents that were used to defraud insured. Appellee tendered the claims to appellant, who denied coverage. Appellee then settled and filed action against the reinsurers, and was awarded a jury verdict against appellant, who challenged, contending that appellee had no right to recovery under the bodily injury clause of its policy for indemnification because damages flowed from financial losses, for which there was no coverage. On appeal, the court, in interpreting the policy language, reasoned that the plain and unambiguous limitation to injury, sickness or disease did not contemplate trauma to investors as a result of financial losses. The court applied the plain and intended meaning of the policy terms and held that finding bodily injury coverage under the circumstances was not a reasonable construction of the policy. The court reversed the trial court's judgment.
Outcome
The court reversed the trial court's judgment in favor of appellee insurer, holding that as a matter of law appellant reinsurer owed no primary duty to appellee because there was no coverage for the type of losses sustained, trauma to investors as a result of financial losses. Therefore, no breach of duty to defend could be found. The litigants during pretrial discovery retained business attorneys to prepare for jury trial.
Procedural Posture
Both parties sought review of the decision of the Superior Court of Los Angeles (California). Defendant partner appealed from the judgment and order that denied his motion for judgment notwithstanding the verdict based on the lack of substantial evidence that a restrictive covenant was reasonable and enforceable. Plaintiff firm appealed from the order that granted a new trial to determine whether plaintiff had good cause to expel defendant.
Overview
Defendant partner signed a partnership agreement when he joined plaintiff firm's practice. The agreement included a choice of New York or California law clause, a restrictive five-year covenant, and a liquidated damage provision. After defendant was expelled from plaintiff's partnership, he formed his own practice. When plaintiff sought damages pursuant to the liquidated damages provision, defendant claimed the damages were unreasonable. The court affirmed the lower court's finding of defendant's liability but reversed the actual damages determination pursuant to Cal. Civ. Code § 1671(b). Given the presumption of § 1671(b) and defendant's burden of proof, there was no public policy reason to void the damage clause. The court reversed the lower court's order granting a new trial because the validity of the restrictive covenant did not rest on good cause for expulsion. The court refused to consider defendant's new theory that restrictive covenants were void pursuant to Cal. Bus. & Prof. Code § 16600. Defendant could not use a choice of law tactical decision to claim prejudicial error. The action was remanded for a determination of damages in accordance with the partnership agreement.
Outcome
The court reversed the order that granted a new trial in favor of plaintiff firm because the restrictive covenant was enforceable under New York law regardless of why defendant partner was expelled. The court affirmed the denial of defendant's motion for judgment notwithstanding the verdict. The court directed the trial court to determine damages according to California law and the partnership agreement's liquidated damage provision.
