Panel Rehearing Denied by Ninth Circuit
Barry Zalma
May 12, 2023
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Readers of Zalma on Insurance read a digest of the earlier version of this case at http://zalma.com/blog/?s=BERNAL. That decision was amended by the Ninth Circuit to state that “The district court shall enter judgment for MBIC.” Appellee’s petition for panel rehearing was otherwise denied. No further petitions for rehearing will be accepted.
In Massachusetts Bay Insurance Company v. Neuropathy Solutions, Inc., dba Superior Health Centers, and Rigoberto Bernal, an individual; et al., No. 22-55272, United States Court of Appeals, Ninth Circuit (May 5, 2023) the Ninth Circuit refused rehearing and reiterated its decision allowing the insurer to recover from its insured money paid under a reservation of rights.
Decision
In this diversity action under California law, Massachusetts Bay Insurance Company (MBIC) sought reimbursement of $2 million that it paid under a reservation of rights to settle litigation brought against its insured, Neuropathy Solutions, Inc. (Neuropathy).
To the extent that the underlying Bernal action falls within the coverage provisions of the insurance policy (i.e., to the extent Neuropathy’s liability arose out of an accidental “occurrence”), coverage is excluded under the policy’s “Professional Services” exclusion.
Based on California case law, the insurance policy’s text, and the operative complaint in the Bernal action, Neuropathy’s liability in Bernal fell within the “Professional Services” exclusion. Starting from the very first sentence of the Bernal complaint, it is evident that Neuropathy incurred liability as a result of the professional services it provided.
The “Professional Services” exclusion extends to wrongdoing in the supervision and monitoring of others in the provision of professional services, and Neuropathy incurred liability because of its provision of professional advertising and medical services, not inadequate record keeping or poor customer service. Finally, the complaint’s allegation that Neuropathy engaged in discriminatory “marketing techniques and high-pressure sales tactics” falls within the “Professional Services” exclusion for advertising services and health advice or instruction.
Neuropathy’s liability in the Bernal action was thus excluded from coverage, and MBIC is entitled to reimbursement of the $2 million it paid to settle that lawsuit. The district court shall enter judgment for MBIC.
ZALMA OPINION
The Ninth Circuit, for the second time, reiterated that an insurer that paid a settlement under a reservation of rights and established that there was no coverage for the loss alleged because of a clear and unambiguous exclusion, was entitled to reimbursement of the funds it spent to settle the law suit. The Insured, Neuropathy owes $2 million plus interest to MBIC.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected]
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Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected]
Follow me on LinkedIn: https://lnkd.in/guWk7gfM
Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://lnkd.in/gSwXaUhz; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://lnkd.in/gV9QJYH; Go to Barry Zalma on YouTube- https://lnkd.in/g2hGv88; https://lnkd.in/gYqJ_JcC to the Insurance Claims Library – https://lnkd.in/gWVSBde.
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Can read and understand the insurance policies issued by the insurer.
Understands the promises made by the policy.
Understand their obligation, as an insurer’s claims staff, to fulfill the promises made.
Are competent investigators.
Have empathy and recognize the difference between empathy and sympathy.
Understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals.
Understand how to repair damage to real and personal property and the value of the repairs or the property.
Understand how to negotiate a fair and reasonable settlement with the insured that is fair and reasonable to both the insured and the insurer.
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