Sohail Rahman ("Insured") was sued for injuries suffered by a worker at his residence. The Insured tendered the lawsuit to his householder's insurance carrier, American Modern Home Insurance Company ("American Modern"). American fashionable accepted the defense of the personal injury case, subject to a reservation of rights.
The injured employee created a $300,000 policy limits demand to the Insured and to American fashionable. American fashionable sophisticated the Insured, in writing, that it intended to settle for the policy limits demand unless the Insured either took over his own defense or waived any future bad religion claim based mostly on Yankee Modern's failure to settle the action inside limits. American fashionable provided the Insured with a point in time that was 3 days before the blistered worker's policy limits demand was set to expire. On the deadline set by Yankee fashionable, the Insured asked American Modern's coverage counsel to send the settlement letter to him via email thus he may forward the letter to counsel. Although its coverage counsel sent the letter to the Insured via email, American fashionable received no response. American fashionable then accepted the blistered worker's policy limits demand.
American fashionable after sued the Insured, seeking a declaration that the personal injury action was excluded under the policy, and for reimbursement of what it paid to settle the action. The case proceeded to trial. The jury determined that American fashionable created a timely reservation of rights, that American fashionable expressly notified the Insured of its intent to settle for the settlement provide, and that American fashionable suggested the Insured that he may assume his own defense if he disagreed with the planned settlement. Even though the action wasn't coated below the policy, the trial court also found that Yankee fashionable wasn't entitled to compensation as a result of it had not provided the Insured "sufficient time" to create a reasoned reply to the settlement demand. American fashionable appealed.
The court of appeal reversed and ordered the trial court to enter judgment in favor of Yankee fashionable. The court found that, under Blue Ridge insurance underwriter v. Jacobsen, (2001) 25 Cal. 4th 489, an insurance company might acquire compensation from its insured for settlement of uncovered claims if the insurer: (1) created a timely and categorical reservation of rights; (2) provided categorical notification to the insured of the insurer's intent to simply accept the planned settlement offer; and (3) suggested the insured of his or her right to assume the defense.
The court of appeal explained that the determinative issue was the insurer's timely reservation of rights. Blue Ridge merely needs that the insurance firm gives notice the insured of its intent to settle and of the insured's right to assume his or her own defense. The demand of "sufficient time" for the insured to think about a settlement provide isn't a requirement below the Blue Ridge Mountains.
Finally, the court of appeal discovered that the time frame in dispute within the Blue Ridge Mountains case was almost like the deadlines in dispute during this case. In Blue Ridge, the insurer gave the insured six days to respond to the letter, two days before the provide invalid. Here, American fashionable gave the Insured 5 days to respond to the letter, two days before the provide invalid.