Stankova v. Metropolitan Property and Casualty Ins. Co., 788 F.3d 1012 (9th Cir. 2015)
The clients' mountainside home was destroyed by runoff water and mudslides that occurred months after a wildfire had denuded the terrain above their home. Their insurer denied coverage, arguing that the loss was not a "direct loss by fire" and, in any event, was explicitly excluded by water and earth movement exclusions. The Ninth Circuit Court of Appeals concluded that the loss could have been a "direct loss by fire" and that, if so, the exclusions were invalid under Arizona law. The case is important because the Court interpreted “direct loss by fire” to be much broader than this insurer, and indeed many insurers, interpret the phrase. It illustrates that no matter how clear a policy provision or exclusion may seem to an insured, it is important to have an insurance law practitioner carefully review the policy, circumstances of the loss and the appropriate state law to determine whether a denial of coverage is justified.
Employers Mut. Cas. Co. v. DGG & CAR, Inc., 218 Ariz. 262, 183 P.3d 513 (2008)
This Arizona Supreme Court case interprets employee dishonesty coverage under a business policy. A DGG employee embezzled $584,000 over five years by way of 284 forged checks. EMC provided coverage of $50,000 per occurrence and defined “occurrence” as “all loss caused by, or involving, one or more ‘employees,’ whether the result of a single act or series of acts.”
EMC paid only $50,000. DGG sued for breach of contract and bad faith, contending EMC owed up to $50,000 for each of the 284 forged checks.
EMC hired a different firm to defend. The trial judge ruled that the policy was ambiguous, that DGG could recover up to $50,000 for each forgery and, in addition, could proceed on its bad faith claim. At that point EMC turned to our firm. To limit both EMC’s potential exposure and its attorney fees, we arranged for a stipulated judgment against EMC, subject to EMC’s right to appeal the “occurrence” issue.
This proved to be a successful strategy when the Court of Appeals reversed. The Arizona Supreme Court accepted DGG’s petition for review because the case presented an issue of first impression in Arizona and this definition of occurrence is common in employee fidelity/commercial crime policies. The Court rejected all of DGG’s many arguments that the policy was ambiguous, concluding that EMC owed only the $50,000 per occurrence limit. Thus, our work saved EMC well over $1,500,000.