Zalma on Insurance
Education • Business
Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
Interested? Want to learn more about the community?
October 05, 2023
Giving Up Right of Subrogation Cost Insurer $25 Million

Insurer Should Get Premium for Waiver of Subrogation

Barry Zalma
Oct 5, 2023

Read the full article at https://lnkd.in/g7Sbh7Jp and see the full video at https://lnkd.in/gvzb8SdX and at https://lnkd.in/g6N-AUFH and at https://zalma.com/blog plus more than 4650 posts.

Evanston Insurance appealed from a judgment entered after the trial court granted summary judgment in favor of Southern California Edison Company (SCE) and against Evanston Insurance Company (Evanston) as to Evanston’s claims for equitable subrogation, equitable indemnity, restitution, and declaratory relief.

In Evanston Insurance Company v. Southern California Edison Company, B320392, California Court of Appeals, (September 29, 2023) Evanston contributed $25 million to settle claims by property owners against its insured, The Original Mowbray’s Tree Service, Inc. (Mowbray’s), which was a subcontractor of Utility Tree Service, Inc. (UTS) under UTS’s contract with SCE to manage certain vegetation proximate to SCE’s equipment.

According to Evanston, the property owners’ claims arose out of a wildfire they alleged was caused by a tree hitting power lines that were owned and operated by SCE. Evanston asserted that the wildfire resulted solely from SCE’s negligence.

In its motion for summary judgment, SCE argued that the following waiver provision in Mowbray’s subcontract with UTS barred Evanston’s claims: “Subcontractor [(Mowbray’s)] waives and will require all of its insurers to waive all rights of recovery against Contractor [(UTS)] or the Owner [(SCE)], their affiliates, their directors, officers and employees, whether in contract, tort (including negligence and strict liability) or otherwise.” The trial court agreed and entered judgment in SCE’s favor.

On appeal, Evanston contended the waiver provision is ambiguous and that the trial court erred in failing to analyze separately whether SCE’s waiver defense applied to Evanston’s equitable indemnity and restitution causes of action. Regardless, the Court of Appeals concluded that the plain language and context of the waiver provision demonstrated that the provision unambiguously precludes Evanston’s equitable subrogation claim against SCE.

FACTUAL BACKGROUND

In February 2015, a wildland fire ignited in Bishop, California on property owned by the Los Angeles Department of Water and Power (Round Fire). Evanston alleged that property owners and their subrogated insurers filed at least 10 lawsuits in the aftermath of the Round Fire to recover damages. Evanston asserts that the plaintiffs in the lead action (underlying action) alleged that the fire was caused by a tree (subject tree) that contacted power lines owned and operated by SCE.

The subcontractor agreement included the obligation to carry $41 million per occurrence in insurance coverage.

Evanston alleged that during the underlying action, SCE, which claimed to be an additional insured under the policy, repeatedly threatened to bring a bad faith action if Evanston did not pay the full amount of the policy and it under pressure agreed to contribute the $25 million policy limit to a settlement and reserved its rights to pursue full recovery from SCE ignoring the waiver provision of the contract and Evanston’s policy wording.

The trial court heard and granted SCE’s motion for summary judgment.

APPLICABLE INSURANCE LAW

A judgment or order of a lower court is presumed to be correct on appeal, and all intendments and presumptions are indulged in favor of its correctness. Evanston bore the burden of rebutting the presumption of correctness accorded to the trial court’s decision, regardless of the applicable standard of review.

APPLICABLE SUBROGATION PRINCIPLES

In the case of insurance, subrogation takes the form of an insurer’s right to be put in the position of the insured in order to pursue recovery from third parties legally responsible to the insured for a loss which the insurer has both insured and paid.

An insured’s contractual waiver defeats an insurer’s subrogation claim.

DISCUSSION

The waiver provision at issue appears in exhibit B of the agreement, which is a two-page document entitled “Insurance.” On the first page and under the subheading “Subcontractor’s Insurance” (boldface & underscoring omitted), the subcontract required the “Subcontractor” to “obtain and maintain” certain specified “policies of insurance ….” It provided that the subcontractor waived all of its rights against SCE and that its insurer agreed to the waiver.

The context of the waiver provision supports the conclusion that it encompasses claims against SCE that Mowbray’s would otherwise have been able to transfer to its insurers. In sum the plain language of the waiver provision unambiguously foreclosed Evanston’s equitable subrogation claim against SCE.

The waiver provision was presumably available for Evanston’s review when it underwrote the insurance policy for Mowbray’s and it agreed to support the waiver.

Because The Waiver Provision Is Unambiguous, The Court Rejected Evanston’s Arguments Supporting Its Construction Of The Provision

When a dispute arises over the meaning of contract language, the first question to be decided is whether the language is “reasonably susceptible” to the interpretation urged by the party. If it is not, the case is over. Because the Court of Appeals concluded for the reasons set forth above that the waiver provision’s reference to “all rights of recovery against Contractor or the Owner” unambiguously included Evanston’s equitable subrogation rights against SCE.

The judgment was affirmed. Respondent Southern California Edison Company is awarded its costs on appeal.

ZALMA OPINION

Insurers like Evanston issuing general liability policies often, if not invariably, agree to waive the insurer’s right to subrogation. Evanston’s policy allowed for the waiver and had no more rights than its insured who had waived the right by a clear and unambiguous contract and caused its insurer, Evanston, to include the waiver. Evanston tried to change the meaning of the contract on appeal but was unable to explain why it had agreed to the waiver before the issuance of the policy.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

Subscribe to Excellence in Claims Handling at locals.com at https://zalmaoninsurance.locals.com/subscribe or at substack at https://barryzalma.substack.com/publish/post/107007808

Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01

Follow me on LinkedIn: http://www.linkedin.com/comm/mynetwork/discovery-see-all...

Daily articles are published at https://zalma.substack.com.

Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – http://zalma.com/blog/insurance-claims-library

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog.

https://lnkd.in/gus8Mzkq to

Go to the Insurance Claims Library – https://lnkd.in/gwEYkxD

00:10:30
Interested? Want to learn more about the community?
What else you may like…
Videos
Posts
20 hours ago
Allegations That Establish Breach of a Condition Defeats Suit

Notice of Claim Later than 60 Days After Expiration is Too Late

Post 5089

Injury at Massage Causes Suit Against Therapist

Read the full article at https://lnkd.in/gziRzFV8, see the full video at https://lnkd.in/gF4aYrQ2 and at https://lnkd.in/gqShuGs9, and at https://zalma.com/blog plus more than 5050 posts.

Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.

In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.

FACTUAL BACKGROUND

Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...

00:08:31
June 02, 2025
Zalma’s Insurance Fraud Letter – June 1, 2025

ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma

Post 5087

See the full video at and at

Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf

Zalma’s Insurance Fraud Letter – June 1, 2025

See the full video at https://lnkd.in/gw-Hgww9 and at https://lnkd.in/gF8QAq4d, and at https://zalma.com/blog plus more than 5050 posts.

ZIFL – Volume 29, Issue 11

The Source for the Insurance Fraud Professional

Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...

00:08:42
placeholder
May 30, 2025
Plain Language of Policy Enforced

No Coverage if Home Vacant for More Than 60 Days

Failure to Respond To Counterclaim is an Admission of All Allegations

Post 5085

See the full video at https://lnkd.in/gbWPjHub and at https://lnkd.in/gZ9ztA-P, and at https://zalma.com/blog plus more than 5050 posts.

In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.

BACKGROUND

On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.

Plaintiff filed suit ...

00:06:50
May 15, 2025
Zalma's Insurance Fraud Letter - May 15, 2025

ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional

See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:

Health Care Fraud Trial Results in Murder for Hire of Witness

To Avoid Conviction for Insurance Fraud Defendants Murder Witness

In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...

May 15, 2025
CGL Is Not a Medical Malpractice Policy

Professional Health Care Services Exclusion Effective

Post 5073

See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.

This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.

In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:

Insurance Coverage Dispute:

Travelers issued a Commercial General Liability ...

April 30, 2025
The Devil’s in The Details

A Heads I Win, Tails You Lose Story
Post 5062

Posted on April 30, 2025 by Barry Zalma

"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime."

Immigrant Criminals Attempt to Profit From Insurance Fraud

People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.

The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...

post photo preview
See More
Available on mobile and TV devices
google store google store app store app store
google store google store app tv store app tv store amazon store amazon store roku store roku store
Powered by Locals