sdnlaw.com RECENT CASE REVIEWS FROM THE CALIFORNIA COURT OF APPEAL [ APRIL 8, 2011 JUNE 23, 2011 ] July 2011 Content INSURANCE INSURANCE

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1 July 2011 RECENT CASE REVIEWS FROM THE CALIFORNIA COURT OF APPEAL [ APRIL 8, 2011 JUNE 23, 2011 ] Content INSURANCE American Modern Home Insurance Company v. Fahmian et al. California Court of Appeal, Fourth District Case No. G April 8, 2011 NEGLIGENCE/PRODUCTS LIABILITY Garcia v. Becker Bros. Steel Co., et al. Second Appellate District Case No. B April 18, 2011 NEGLIGENCE/PUBLIC ENTITY DEFENSE Varshock et. al. v. California Department of Forestry and Fire Protection Fourth Appellate District Case No. D April 20, 2011 CIVIL PROCEDURE/DISCOVERY Doe v. The Superior Court of Los Angeles County Second Appellate District Case No. B April 20, 2011 DAMAGES Kimes v. Grosser California Court of Appeal, 1st District Case No. A May 31, 2011 FEHA SEXUAL HARASSMENT Kelley v. The Conco Companies California Court of Appeal, 1st District Case No. A June 6, 2011 LAW AND MOTION Cowan v. Krayzman California Court of Appeal, 2nd District Case No. B June 20, 2011 EMPLOYER DIRECT AND VICARIOUS LIABILITY, NEGLIGENT ENTRUSTMENT Diaz v. Carcomo Supreme Court of California Case No. S June 23, 2011 EVIDENCE/EXPERT WITNESS Bell v. Mason Second Appellate District Case No. B April 28, 2011 INSURANCE American Modern Home Insurance Company v. Fahmian et al. FACTS: Fahmian was sued for injuries suffered when a worker was shot in the eye with a nail gun on a home Fahmian and his company were building. Fahmian tendered this matter to his homeowner s insurance, American Modern which accepted the defense of the personal injury lawsuit subject to a sdnlaw.com 2010 SPINELLI DONALD NOTT. ALL RIGHTS RESERVED. 815 S Street, Second Floor, Sacramento, CA T F

2 reservation of rights. Fahmian did not read the reservation of rights letter. On July 1, American Modern determined a policy limits demand was reasonable, and notified Fahmian in writing that it intended to accept the settlement demand unless Fahmian would either take over the defense, or waive any later bad faith claim based on the failure to settle the action. In light of the worker s settlement demand expiring on July 8, American Modern requested Fahmian respond by July 6. Fahmian never read or responded to American Modern s letter. American Modern settled the worker s claim and sued Fahmian for reimbursement. A jury found there was no coverage for the personal injury under the policy. The jury also found that Fahmian did not have sufficient time to make a reasoned reply to American Modern regarding the settlement demand. Based upon this finding, the court denied American Modern s claim for reimbursement. HOLDING: Reversed. An insurance company may obtain reimbursement from its insured for a policy limits settlement when it is determined that the underlying claim was not covered by the policy if the insurance company 1) made a timely and express reservation of rights, 2) provided express notification to the insured of the insurer s intent to accept the proposed settlement, and 3) made an express offer that the insured could assume its own defense. There are no additional requirements that the insured be provided sufficient time to respond to the insurer s request for consent to accept a settlement demand within policy limits. NEGLIGENCE/PRODUCTS LIABILITY Garcia v. Becker Bros. Steel Co., et al. FACTS: In 1973, Becker Bros. bought a slitter line machine for use in its steel business. Becker Bros. only experienced one injury related to the use of the machine, the loss of a finger. 26 years later, Becker Bros. sold the slitter line to another company. That company closed business and a bank repossessed the slitter line machine. Garcia s employer then bought the machine. While operating the slitter line, Garcia s left index finger was amputated. Garcia sued Becker Bros. for strict products liability, negligence, wanton, reckless, and conscious disregard of safety because Becker Bros. failed to install a guard near the tensioner where the steel springs were cut as required by a 1982 amendment to the California Code of Regulations. The machine s manufacturer had also sent letters recommending Becker Bros. take immediate steps to safeguard the machine. Becker Bros. moved for summary judgment arguing it owed Garcia no duty and strict products liability did not apply. The trial court granted Becker Bros. motion stating that case law does not support liability on a theory of negligence or strict liability because Becker Bros. was not a manufacturer and did not have a duty to prevent Garcia s injury while he was working for a third party. The injury was not foreseeable and Becker Bros. is only an occasional seller. HOLDING: Affirmed. An occasional seller of used equipment is not a conduit for production or distribution of the product and therefore not subject to strict liability for its sale of a defective product. Further, an occasional seller of used machinery, sold to a third party, repossessed by a bank, and then purchased by another company, owes no duty of care to the employee. NEGLIGENCE/PUBLIC ENTITY DEFENSE Varshock et. al. v. California Department of Forestry and Fire Protection FACTS: During 2007, the Harris Ranch fire destroyed 450 structures and 90,000 acres in San Diego County, including the Varshock s mobile home. When the fire approached the property, the Varshocks evacuated the home and encountered a group of firefighters. Varschok and his son demanded the firefighters save the property. The firefighters proceeded to the mobile home, followed by Varshock and his son on their ATV. On the way to the mobile home, the ATV broke down and the Varshocks got inside the fire engine for safety. At the scene of the fire, while the firefighters attempted to save the mobile home, the

3 fire engine died and was surrounded by flames. Varshock was unable to exit the engine and died, his son and the firefighters suffered serious burns. Varshock sued the fire department for negligence and wrongful death. The fire department moved for summary judgment under sovereign immunity because the firefighters were acting in the course and scope of their employment in response to a fire when the engine died. Varshock opposed the motion under the exception provided by Vehicle Code that the injuries were caused by the negligent operation of a motor vehicle. The trial court granted the motion for summary judgment because the vehicle was used as a method to fight the fire. HOLDING: Affirmed. The exception to sovereign immunity provided by Vehicle Code is limited to injuries that result from a firefighter s negligent operation of a motor vehicle while proceeding to a fire in response to an emergency call. When an injury is caused by a firefighter s operation of a motor vehicle at the scene of a fire as part of efforts to rescue persons or property from the fire, or fight the fire, the vehicle is being used as rescue or fire-fighting equipment and sovereign immunity applies. CIVIL PROCEDURE/DISCOVERY Doe v. The Superior Court of Los Angeles County FACTS: Andrew Luster, an heir to the Max Factor fortune, raped Shawna Doe. In 2003, Andrew was convicted for Doe s rape, among other crimes and sentenced to prison for 124 years. In September 2003, Doe obtained a civil judgment against Andrew for sexual battery totaling $19 million. Luster declared bankruptcy; however, Doe believed he had transferred his assets to his mother, Elizabeth to avoid paying Doe s judgment. Doe then sued Elizabeth for fraudulent transfers under a fictitious name in order to preserve her anonymity as one of Andrew s rape victims. Elizabeth propounded discovery on Doe including interrogatories, requests for production of documents, and requests for admissions. Doe initially failed to provide verification statements to her discovery responses. Ultimately, Doe provided verifications signed in the name Shawna Doe. Elizabeth brought a motion to compel further response, and received an order that the verification statements must be signed in Doe s true name and an award for monetary sanctions. Doe then filed a petition for writ of mandate challenging the discovery order that required her to provide verifications in her true name. HOLDING: Reversed. When a party, proceeding under a fictitious name, signs a verification under that fictitious name, the party will be held to that declaration and cannot subsequently disclaim it on the basis that the name on the verification is not the party s true name. Further, the potential to enforce an award of sanctions does not justify abrogating Doe s anonymity in connection with discovery verifications. EVIDENCE/EXPERT WITNESS Bell v. Mason FACTS: Kelly Bell sold her home in 2003 to the Masons for $130,000. The Masons then evicted Bell from the property. Bell claims that the 2003 sale was a sham because prior to the transfer of funds, the parties had agreed that Bell would remain in the home. Following the eviction, Bell sued the Masons for fraud, deceit, conversion and other causes of action because they had taken advantage of her claimed mental retardation. At trial Bell established her mental incapacity through the expert opinion of a practicing psychologist, Catherin Scarf. Scarf based her opinion upon various performance and verbal tests she administered to Bell that determined Bell had an IQ of 62. The defense argued Bell was lying about being a helpless woman who knowingly entered into an arms-length transaction for the property. The defense sought to call their own expert witness, Black, to testify that Bell did not suffer from mental retardation and had average intelligence. Black was a licensed psychiatrist who had reviewed Scarf s trial testimony, the records Scarf produced that were the basis of Scarf s opinion and 15 hours of Bell s videotaped deposition.

4 Black did not personally examine Bell. Black explained psychiatrists commonly offer opinions based on information acquired through means other than personal examination. The trial court ruled that Black could not testify regarding Bell s mental retardation because the defense failed to lay a sufficient foundation for Black to testify as to Bell s IQ. Without a competing expert opinion, Bell prevailed at trial and received $700,000 plus $204,500 in attorney s fees. HOLDING: Reversed. The defense established a sufficient foundation for Black to testify regarding Bell s mental capacity and IQ, and excluding his testimony constituted a prejudicial evidentiary error. The mere fact that Black had not personally examined Bell did not preclude him from testifying as to her mental capacity because he relied upon information that is of a type that may be reasonably relied upon by a treating psychiatrist establishing mental capacity, the subject of his testimony. DAMAGES Kimes v. Grosser FACTS: Defendant neighbor allegedly shot plaintiff s pet cat, Pumpkin, with a pellet gun. Emergency surgery costing $6,000 saved Pumpkin s life, but left the cat partially paralyzed. Plaintiff incurred an additional $30,000 in expenses caring for Pumpkin because of the injury. Plaintiff sued to recover the cost of surgery, increased costs of care due to Pumpkin s paralysis and punitive damages. Defendant filed motions in limine to exclude evidence of plaintiff s expenses caring for Pumpkin, a cat they described as an adopted stray of low economic value. The trial court granted defendant s motions in limine and plaintiff declined to proceed, effectively conceding that Pumpkin had no market value justifying the expense of trial. The trial court dismissed the case; plaintiff s appeal is from the judgment of dismissal entered on his failure to prosecute. HOLDING: Reversed. Where property has no market value, the general rule limiting recovery to the loss of that value cannot apply because it would invariably preclude recovery. Instead, plaintiff may present evidence of costs incurred to save the cat s life and is entitled to recover the reasonable and necessary costs caused by someone who wrongfully injured the cat. Defendants are entitled to present evidence of why the costs were unreasonable. In addition, plaintiff can recover punitive damages under Civil Code Section 3340, which provides that exemplary damages may be given in cases involving wrongful injuries to animals committed willfully or by gross negligence FEHA SEXUAL HARASSMENT Kelley v. The Conco Companies FACTS: On July 30, 2006, Kelley, a male apprentice iron worker, was barraged with sexually demeaning and graphic comments, gestures and physical threats from a male supervisor after mixing up rebar. Kelley was later subjected to similar comments by male co-workers in retaliation for his complaints about his supervisor. Kelley changed work sites to separate him from his co-workers, but his union later suspended him from its apprenticeship program rendering him ineligible for employment. After the suspension expired, he was not rehired by Conco. Kelley filed suit against Conco and his former supervisor for sexual harassment in violation of FEHA, retaliation and other related causes of action. Conco moved for summary judgment on all claims which was granted. HOLDING: Affirmed except as to Kelley s retaliation claim. The Court of Appeal held that, even through the comments directed to Kelley were graphic, vulgar and sexually explicit and expressed sexual interest and solicited sexual activity, defendants did not subject Kelley to sexual harassment. There was no credible

5 evidence that the harassment was motivated by sexual desire. The mere fact that words may have sexual content or connotations, or discuss sex, is not sufficient to establish sexual harassment. The evidence also failed to show pervasive hostile conduct sufficient to establish a FEHA harassment claim. An employee cannot recover for harassment that is occasional, isolated, sporadic or trivial The Appellate Court reversed as to Kelley s retaliation cause of action because he reasonably believed that Conco s suspension was discriminatory and that his complaints were protected activity. LAW AND MOTION Cowan v. Krayzman FACTS: Defendant moved to vacate a default entered against him. After the court issued its tentative ruling denying the motion, defendant attempted to withdraw the motion before it was heard. Defendant s counsel checked in with the court clerk on the day of the hearing, but was not present when the case was called. The Court denied the Motion to Vacate. Later that day, counsel showed up saying he had left to make an appearance in another courtroom. The Court vacated its previous order and directed counsel to arrange for a new hearing date. Defendant then filed a second version of the motion. On the new hearing date, the Court adopted its tentative ruling denying the first version of the motion and did not consider the second version. Defendant contends the trial court erred by not considering his motion to vacate on its merits. HOLDING: Affirmed. Once the Court has made a tentative decision, it may refuse to allow the motion to be withdrawn and may rule on the motion. Although there may be some circumstances where it may be proper to withdraw a motion after an adverse tentative ruling, in this case the withdrawal was made to buy time to revise the motion before a final ruling. To allow a party to treat a tentative ruling as an advisory opinion would lead to excessive litigation and waste of judicial resources. EMPLOYER DIRECT AND VICARIOUS LIABILITY, NEGLIGENT ENTRUSTMENT Diaz v. Carcomo FACTS: Plaintiff sustained serious injuries when her vehicle was struck by a car that jumped the center divider on the 101 freeway following a collision with a company truck driven by the defendant Jose Carcamo. Plaintiff sued the driver of the car that struck hers, as well as Carcamo and his employer, Sugar Transport. Plaintiff alleged that Sugar Transport was vicariously liable as Carcamo s employer and independently negligent in its hiring and retention of Carcamo. The jury returned a verdict against each defendant awarding plaintiff over $22 million in damages and apportioning 20% of fault to Carcamo, 35% to Sugar Transport and the remainder to the third driver who struck the plaintiff. Sugar Transport appealed arguing that its admission of vicarious liability for Carcamo s conduct barred plaintiff from pursuing her claims for negligent entrustment, hiring and retention against it. Sugar Transport further argued that the lower court erred in allowing Diaz to introduce evidence of Carcoma s background and involvement in several prior accidents as support for her negligent hiring claim. The Court of Appeal rejected Sugar Transport s argument, finding that a defendant who is vicariously liable for another s action may also bear direct responsibility. Evidence of Carcamo s background was also properly admitted for the limited purpose of determining whether Sugar Transport was negligent in hiring or retaining Carcamo. Sugar Transport appealed to the Supreme Court of California. HOLDING: Reversed and remanded for retrial. The Court affirmed its holding in Armenta v. Churchill that an employer s admission of vicarious liability for an employee s negligent driving bars a plaintiff from pursuing a claim for negligent entrustment. Awareness, constructive or actual, that a person is unfit or

6 incompetent to drive underlies a claim that an employer was negligent in hiring or retaining that person as a driver. (CACI No. 426.) That same awareness underlies a claim for negligent entrustment. (CACI No. 724.) Thus, in a typical case like this, the two claims, vicarious liability and negligent entrustment, are functionally identical. Therefore, no damages can be sought against the employer beyond those for the employee s negligence. lsdnlaw.com 2011 LAPLANTE SPINELLI DONALD NOTT. ALL RIGHTS RESERVED. 815 S Street, Second Floor, Sacramento, CA T F