Plaintiff employer appealed a decision from the Superior Court of Los Angeles County (California) that dismissed its action against defendant insurer alleging breach of contract and breach of the implied covenant of fair dealing on the grounds that plaintiff failed to exhaust its administrative remedies.

Overview

Plaintiff employer purchased workers' compensation and employer's liability insurance from defendant insurer. Plaintiff contended that defendant failed to evaluate claims made against plaintiff, to communicate with plaintiff regarding claims, and conduct timely investigation of claims. Plaintiff initiated an action against defendant based on breach of contract, breach of the implied covenant of fair dealing and unfair business practices. The trial court dismissed plaintiff's action because plaintiff had to first pursue administrative review before initiating such action. On appeal, the court reversed the decision. Plaintiff's contract and bad faith claims were not subject to administrative review. The power of the Insurance Commissioner to regulate and supervise the insurance industry did not include the power to resolve contract and bad faith claims. Such claims were traditionally pursued in the court system and defendant did not provide any reasons as to why they should be pursued administratively.

Outcome

The appellant and respondent through their counsel California class action lawyer submits their briefs to the court.  The court reversed the decision because plaintiff employer did not have any administrative remedies to exhaust. Plaintiff's action set forth claims for breach of contract and bad faith. Such claims were pursued in the court system and were not subject to administrative review.

Procedural Posture

Plaintiff insured appealed an order from the Superior Court of San Diego County (California), which granted summary judgment to defendant insurer, denied plaintiff's insurance claim for investigative costs and various breach of contract causes of action, and overruled plaintiff's formal and evidentiary objections.

Overview

Plaintiff insured submitted a claim for investigation costs incurred in determining whether a gas leak existed on its property, which defendant insurer refused to pay on the ground that no contractual provision required reimbursement of these costs where there was no covered claim. Plaintiff then filed a complaint against defendant for breach of contract, bad faith, misrepresentation, and negligence. Defendant moved for summary judgment. The lower court granted summary judgment to defendant because no property damage covered by the policy existed and there was no contractual provision for reimbursement of investigative costs. The court affirmed the grant of summary judgment to defendant, concluding that Cal. Ins. Code § 790.03(h)(3) did not provide for private rights of action and that no breach of the implied covenant of good faith and fair dealing existed where no policy benefits were due on a covered claim and where the insured did not intentionally impede the insured from submitting its claim. Therefore, plaintiff's formal and evidentiary objections were moot.

Outcome

The court affirmed the grant of summary judgment to defendant insurer, holding that plaintiff insured's policy did not provide for reimbursement of investigation costs incurred in determining whether property damage existed and therefore no breach of contract or breach of good faith and fair dealing claim was sustainable.