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November 06, 2023
Insured Must Get Excess Insurer’s Permission Before Settling Claim

Read the full article at https://lnkd.in/gRzyhTY5, see the full video at https://lnkd.in/gM4UjMtT and at https://lnkd.in/gdB6tnWv and at https://zalma.com/blog plus more than 4650 posts.

Excess Insurer Owes Nothing Until Primary Insurer’s Limits Are Exhausted

Vizio, Inc. appealed the district court’s order granting Arch Insurance’s motion to dismiss. Arch issued an insurance policy to Vizio and provided coverage excess to Navigators Insurance’s primary policy, meaning that Arch only covered losses that exceeded the $5 million limit of the Navigators Policy. The Arch Policy “followed form” to Navigators’ policy, so it has the same terms except for those specifically contradicted by the Arch Policy. Vizio also had a separate line of general liability coverage with Chubb.

In VIZIO, INC. v. ARCH INSURANCE COMPANY, et al., No. 22-55755, United States Court of Appeals, Ninth Circuit (October 30, 2023) Vizio sought coverage from an excess insurer after reaching a settlement with plaintiffs in a class action suit without first getting permission from the excess insurer.

FACTS

After consumers filed class action lawsuits against Vizio in connection with its Smart TV products (the “Smart TV Litigation”), Vizio notified both Navigators and Arch of its potential insurance claims in a February 2016 email. Arch requested more information, while Navigators denied coverage, citing a policy exclusion. Vizio twice forwarded Navigators’ denial letter to Arch, but Vizio never provided Arch with any substantive updates about the Smart TV Litigation. Arch, in turn, failed to convey a coverage decision, though internal records show that Arch decided to deny coverage.

About two years later, without seeking or receiving Arch’s consent, Vizio settled the Smart TV Litigation for $17 million. On Arch’s motion the district court dismissed Vizio’s fourth amended complaint with prejudice, holding (among other things) that Vizio failed to properly notify Arch of its claim after the underlying policy limit was exhausted.

The District Court Erred In Holding That Providing Notice Prior To Exhaustion Was Improper.

Finding that notice was given the district court incorrectly concluded Vizio failed to give proper notice but rightly determined that Arch at that time had no duty to defend or indemnify because the primary policy limit had not yet been exhausted. Vizio’s February 2016 email was adequate notice.

Vizio Failed To Comply With The Consent Provision Before Settling.
First, Vizio admits that it did not obtain Arch’s consent prior to settling the Smart TV Litigation as required under the Arch Policy. Since a following form excess policy has the same terms and conditions as the underlying primary policy and, therefore, the Navigators Policy’s consent provision is incorporated into the Arch Policy.

Second, Vizio argues that Arch’s policy conflicts with Navigators’ policy. Not so.

Lastly, Vizio argues that, if the consent provision applies, Vizio was excused from performing because Arch allegedly breached the policy first by not properly responding to Vizio’s February 2016 email. However, Vizio failed to allege facts that would plausibly show that Arch breached any of its duties under the policy. Moreover, even if Arch breached the policy as alleged, this would not excuse Vizio from seeking Arch’s consent to the settlement.

ANALYSIS

Insurance contracts in the state of California incorporate the terms of California’s insurance regulations. Vizio relies on California Code of Regulations Title 10, Section 2695.7(b) for the proposition that an insurer’s failure to accept or deny a claim within 40 days of tender is a breach of the insurance policy. But Section 2695.7(b) only applies after an insurer receives a “proof of claim,” which is defined as evidence of a claim that “reasonably supports the magnitude or the amount of the claimed loss.” 10 C.C.R. § 2695.2(s).

A “notice of claim” is not a proof of claims. Vizio’s February 2016 email to Arch was a notice of claim, not a proof of claim.

Vizio also alleged Arch breached the contract when it internally denied coverage and never informed Vizio. Arch’s alleged breach would only excuse Vizio’s non-consensual settlement if Vizio had requested and been denied coverage. But Arch never informed Vizio that it would deny coverage, and Vizio never followed up or provided Arch with any substantive updates about the Smart TV Litigation. Thus, Vizio, having never been notified of a denial of coverage, still had an obligation to obtain Arch’s consent to any settlement, notwithstanding Arch’s alleged breach. Without notice, Arch was denied the opportunity to participate in the settlement negotiations, which the insurance contract established as a prerequisite to Arch’s duty to pay.

Vizio’s Claim For The Breach Of The Implied Covenant Of Good Faith And Fair Dealing Fails.

Under California law, without a breach of the insurance contract, there can be no breach of the implied covenant of good faith and fair dealing. Because Vizio breached the policy by not soliciting Arch’s consent prior to settlement, no benefits were due, and Arch therefore did not breach the contract.

Vizio’s Equitable Contribution Claim Fails.

Equitable contribution is the right to recover, not from the party primarily liable for the loss, but from a co-obligor who shares such liability with the party seeking contribution. However, as a general rule, there is no contribution between a primary and an excess carrier.

Arch was indisputably an excess insurer because it only had an obligation to indemnify Vizio once the $5 million limit of the Navigators Policy was exhausted.

ZALMA OPINION

The Ninth Circuit read the two policies: the primary and the following excess policy. Both policies required that the insured advise the insurers of their intent to settle, obtain permission from the insurer, or lose the right to indemnity. The settlement of the class action may have been a wise decision by Vizio but its failure to seek the participation and consent of Arch cost them any possibility of obtaining contribution from Arch and deprived Arch of the ability to reject coverage or pay.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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00:09:39
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The indictment alleged that insurers reimburse only for medically necessary services. Navarro performed unnecessary respiratory pathogen panel (RPP) tests on nasal swabs collected from asymptomatic individuals for COVID-19 screening.

Navarro billed over $455 million to insurers for those additional RPP tests that she knew to be medically unnecessary. These allegations constituted a plain, concise, and definite written ...

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December 11, 2025
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In Town of Vinton v. Indian Harbor Insurance Company, Nos. 24-30035, 24-30748, 24-30749, 24-30750, 24-30751, 24-30756, 24-30757, United States Court of Appeals, Fifth Circuit (December 8, 2025) municipal entities including the Town of Vinton, et al sued domestic insurers after dismissing foreign insurers with prejudice. The insurers sought arbitration under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”) but the court held Louisiana law — prohibiting arbitration clauses in such policies—controls, as the Convention does not apply absent foreign parties who ...

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December 10, 2025
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Read the full article at https://lnkd.in/guC9dnqA, see the video at https://lnkd.in/gVxz-qmk and at https://lnkd.in/gUTAnCZw, and at https://zalma.com/blog plus more than 5200 posts.

In Illinois Department of Insurance, Insurance Compliance Department v.USA Water And Fire Restoration, Inc., And Nicholas Pacella, Individually And As Officer, Nos. 23WC021808, 18INC00228, No. 25IWCC0467, the Illinois Department of Insurance (Petitioner) initiated an investigation after the Injured Workers’ Benefit Fund (IWBF) was added to a pending workers’ compensation claim. The claim alleged a work-related injury during employment with the Respondents who failed to maintain workers’ compensation Insurance.

Company Overview:

USA Water & Fire Restoration, Inc. was incorporated on January 17, 2014, and dissolved on June 14, 2019, for failure to file annual reports and pay franchise taxes. It then operated under assumed names including USA Board Up & Glass Co. and USA Plumbing and Sewer. The business ...

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Zalma’s Insurance Fraud Letter – December 15, 2025

Zalma’s Insurance Fraud Letter

Read the full article at https://lnkd.in/dG829BF6; see the video at https://lnkd.in/dyCggZMZ and at https://lnkd.in/d6a9QdDd.

ZIFL Volume 29, Issue 24

Subscribe to the e-mail Version of ZIFL, it’s Free! https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkcitKvwMc3HNWiyrn6jw8ERzpnmgU_oNjTrm1U1YGZ7_ay4AZ7_mCLQBKsXokYWFyD_Xo_zMFYUMovVTCgTAs7liC1eR4LsDBrk2zBNDMBPp7Bq0VeAA-SNvk6xgrgl8dNR0BjCMTm_gE7bAycDEHwRXFAoyVjSABkXPPaG2Jb3SEvkeZXRXPDs%3D

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/

Zalma’s Insurance Fraud Letter

Merry Christmas & Happy Hannukah

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October 31, 2025
The Zalma Philosophy of Claims Handling – Part 9

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Posted on October 31, 2025 by Barry Zalma

An Insurance claims professionals should be a person who:

Can read and understand the insurance policies issued by the insurer.
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Are competent investigators.
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Understand medicine relating to traumatic injuries and are sufficiently versed in tort law to deal with lawyers as equals.
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October 20, 2025
The Zalma Philosophy of Claims Handling – Part I

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This is a change from my normal blog postings. It is my attempt. in more than one post, to explain the need for professional claims representatives who comply with the basic custom and practice of the insurance industry. This statement of my philosophy on claims handling starts with my history as a claims adjuster, insurance defense and coverage lawyer and insurance claims handling expert.
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When I was discharged from the US Army in 1967 I was hired as an insurance adjuster trainee by a professional and well respected insurance company. The insurer took a chance on me because I had been an Army Intelligence Investigator for my three years in the military and could use that training and experience to be a basis to become a professional insurance adjuster.

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