Zalma on Insurance
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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.
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August 13, 2025
Duty to Defend is Broad but not Unlimited

Exclusions Defeat Claim for Defense & Indemnity

Genuine Dispute Dispels Claim of Bad Faith

Post 5167

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In Diversified Restaurant Group, LLC, et al. v. Houston Casualty Company, et al., No. 25-cv-02344-EMC, United States District Court, N.D. California (July 31, 2025) Diversified Restaurant Group, LLC (DRG) and Golden Gate Bell, LLC (GGB) sued Houston Casualty Company (HCC), Pennsylvania Manufacturers Indemnity Company (PMIC), and Manufacturer’s Alliance Insurance Company (MAIC) around the denial of insurance coverage for a lawsuit filed by a former employee who alleged sexual harassment and assault by a supervisor.
Insurance Policies and Denial of Coverage:

DRG and GGB had insurance policies with PMIC and MAIC, which included general liability, workers’ compensation, and employer’s liability coverage. Both PMIC and MAIC denied coverage for the underlying lawsuit, citing various exclusions in their policies.

Exclusions:

The PMIC policy included Employment Related Practices (ERP) and Employment Liability (EL) exclusions, while the MAIC policy had a C.7 exclusion. These exclusions were used to justify the denial of coverage for the claims made in the underlying lawsuit.

UNDERLYING LAWSUIT:

The former employee’s lawsuit included claims of negligence, workplace sexual harassment, discrimination, and other related issues. The document details the specific allegations and the legal arguments surrounding the applicability of the insurance policy exclusions.

DUTY TO DEFEND:

The court emphasized that the duty to defend is broader than the duty to indemnify, but it is measured by the nature and kinds of risks covered by the policy. The court concluded that the insurers had no duty to defend the insureds in the underlying lawsuit due to the applicability of the exclusions .

The insurer’s duty to defend is not extinguished until the insurer negates all facts suggesting potential coverage. Thus, an insurer may be excused from a duty to defend only when the third party complaint can by no conceivable theory raise a single issue which could bring it within the policy coverage. However, the duty to defend is not not unlimited; it is measured by the nature and kinds of risks covered by the policy.
Insurance Coverage Interpretation

Under California law, interpretation of an insurance policy is a question of law and follows the general rules of contract interpretation. Therefore, the mutual intention of the parties at the time the contract is formed governs interpretation. If the policy language is clear and explicit, it governs. The clear and explicit meaning of these provisions, interpreted in their ordinary and popular sense, unless used by the parties in a technical sense or a special meaning is given to them by usage, controls judicial interpretation.

In determining whether a claim creates the potential for coverage under an insurance policy, the court is guided by the principle that interpretation of an insurance policy is a question of law and the mutual intention of the parties at the time the contract is formed governs interpretation.

DISCUSSION

Finally, although Insureds attempt to impose a new carve-out to the “arising out of” phrase in the ERP Exclusion, arguing that only claims between an employee and an employer (as opposed to harassment between two co-employees) are “employment related,” the Insureds fail to cite to any case that imposes such an exception. Instead, courts have repeatedly construed “arising out of” broadly, even when it is present in an exclusion.

Because all alleged conduct in the Underlying Action against Moreno falls under the ERP Exclusion coverage, the Insureds have failed to establish any potential coverage under the PMIC Agreement and thus have failed to state a claim for breach of contract with PMIC.
The False Imprisonment and Sexual Assault Claims are subject to the ERP Exclusion

The Court need not address Insurers’ argument contesting whether the claims of the Underlying Action are “occurrences” within the scope of coverage under Coverage A: whether or not they are “occurrences,” they would still be precluded by the ERP Exclusion.
Breach of Implied Contract and Breach of the Implied Covenant of Good Faith and Fair Dealing

A bad faith claim is subject to dismissal if the insurer shows a genuine dispute as to coverage. Given that ERP Exclusion and EL Exclusion of the PMIC Agreement and C.7 Exclusion of the MAIC Agreement apply to exclude coverage to DRG and GGB, the Insurers’ denial to continue defense and indemnification under its policy was reasonable and legally justified. As such, the Insureds cannot maintain a statutory bad faith claim against Insurers for its refusal to defend and indemnify. Accordingly, the claims for breach of implied contract and claim for breach of the implied covenant cannot proceed against MAIC or PMIC.

Court’s Decision:

The court granted the motion to dismiss filed by PMIC and MAIC, agreeing that the exclusions in the insurance policies precluded coverage for the claims made in the underlying lawsuit.

ZALMA OPINION

The USDC in an exceedingly long opinion reached the decision called for by the clear and unambiguous exclusions in the policies issued by the three insurer defendants resulting in the dismissal of the suit. The mere fact that a plaintiff sues for the tort of bad faith is not enough, facts and evidence, are required. Since the exclusions created a genuine dispute thereby eliminating the cause of action for bad faith.

You can find a permanent public version of the document here: https://public.fastcase.com/jaEE2PXzRXmZ99jOLMt1Iqfrihk%2bzXYKQAQqMk84Z%2bGq%2fci2oKl%2bGLBe8SNEAKEvYQtwr1H8F%2bUlbzuvGUGvLQ%3d%3d

(c) 2025 Barry Zalma & ClaimSchool, Inc.

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00:08:51
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September 26, 2025
No Way Out After Murder Conviction

Intentionally Shooting a Woman With A Rifle is Murder

Post 5196

See the full video at and at and at https://zalma.com/blog and more than 5150 posts.

You Plead Guilty You Must Accept the Sentence

In Commonwealth Of Pennsylvania v. Mark D. Redfield, No. 20 WDA 2025, No. J-S24010-25, Superior Court of Pennsylvania (September 19, 2025) the appellate court reviewed the case of Mark D. Redfield, who pleaded guilty to third-degree murder for killing April Dunkle with malice using a rifle.

Affirmation of Sentence:

The sentencing court’s judgment was affirmed, and jurisdiction was relinquished, concluding no abuse of discretion occurred.

Reasonable Inference on Trigger Pulling:

The sentencing court reasonably inferred from the guilty plea facts that the appellant pulled the trigger causing the victim’s death, an inference supported by the record and consistent with the plea.

Guilty Plea Facts:

The appellant admitted during the plea hearing...

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September 25, 2025
Prelitigation Communications Privileged

The Judicial Proceedings Privilege
Post 5196

Posted on September 25, 2025 by Barry Zalma

See the full video at and at

Judicial Proceeding Privilege Limits Litigation

In David Camp, and Laura Beth Waller v. Professional Employee Services, d/b/a Insurance Branch, and Brendan Cassity, CIVIL No. 24-3568 (RJL), United States District Court, District of Columbia (September 22, 2025) a defamation lawsuit filed by David Camp and Laura Beth Waller against Insurance Branch and Brendon Cassity alleging libel based on statements made in a letter accusing them of mishandling funds and demanding refunds and investigations.

The court examined whether the judicial proceedings privilege applieD to bar the defamation claims.

Case background:

Plaintiffs Camp and Waller, executives of NOSSCR and its Foundation, sued defendants Insurance Branch and Cassity over a letter alleging financial misconduct and demanding refunds and audits. The letter ...

00:07:56
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September 24, 2025
Untrue Application for Insurance Voids Policy

Misrepresentation or Concealment of a Material Fact Supports Rescission

Post 5195

Don’t Lie to Your Insurance Company

See the full video at and at https://rumble.com/v6zefq8-untrue-application-for-insurance-voids-policy.html and at https://zalma.com/blog plus more than 5150 posts.

In Imani Page v. Progressive Marathon Insurance Company, No. 370765, Court of Appeals of Michigan (September 22, 2025) because defendant successfully established fraud in the procurement, and requested rescission, the Court of Appeals concluded that the Defendant was entitled to rescind the policy and declare it void ab initio.

FACTS

Plaintiff's Application:

Plaintiff applied for an insurance policy with the defendant, indicating that the primary use of her SUV would be for "Pleasure/Personal" purposes.

Misrepresentation:

Plaintiff misrepresented that she would not use the SUV for food delivery, but records show she was compensated for delivering food.

Accident:

Plaintiff's SUV was involved in an accident on August ...

00:07:48
September 09, 2025
The Dishonest Chiropractor/Physician

How a Need for Profit Led Health Care Providers to Crime
Post 5185
Posted on September 8, 2025 by Barry Zalma

See the full video at https://lnkd.in/gePN7rjm and at https://lnkd.in/gzPwr-9q

This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers.

The Dishonest Chiropractor/Physician

How a Need for Profit Led Health Care Providers to Crime

See the full video at and at

This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help 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.

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September 08, 2025
The Dishonest Chiropractor/Physician

How a Need for Profit Led Health Care Providers to Crime
Post 5185
Posted on September 8, 2025 by Barry Zalma

See the full video at https://lnkd.in/gePN7rjm and at https://lnkd.in/gzPwr-9q

This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers.

The Dishonest Chiropractor/Physician

How a Need for Profit Led Health Care Providers to Crime

See the full video at and at

This is a Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help 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.

How Elderly Doctors Fund their ...

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September 03, 2025

Barry Zalma: Insurance Claims Expert Witness
Posted on September 3, 2025 by Barry Zalma
The Need for a Claims Handling Expert to Defend or Prove a Tort of Bad Faith Suit

© 2025 Barry Zalma, Esq., CFE

When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.

On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive ...

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