Procedural Posture

Plaintiff health insurance company sought review of summary judgments from the Superior Court of Los Angeles County (California) in favor of defendants, the company’s professional liability insurers, finding no coverage for underlying consolidated actions in federal court brought against the company by health plan members.

Overview

The professional liability policies covered wrongful acts and excluded dishonest acts. The underlying actions alleged that the company had used outdated databases in determining the usual, customary, and reasonable charges it paid for services; that the company had violated state regulations in adjusting claims; and that the company had violated provisions of the Employee Retirement Income Security Act of 1974 (ERISA). As a sanction for the company’s discovery misconduct, the federal court ordered that it was deemed established that the company had knowingly and willfully used outdated data. The court determined that the underlying actions alleged some wrongful acts within the scope of coverage. Although the dishonest act exclusion might preclude coverage for claims relating to the company’s willful use of outdated data, the exclusion did not preclude coverage for other claims alleging systematic flaws in the databases and misconduct unrelated to the databases. Unpaid benefits arose from contractual obligations, not wrongful acts, and thus were not covered. ERISA penalties were not covered. The liability insurers had a duty to reimburse defense costs for potentially covered claims. The litigants were counseled by California class action attorneys in their civil litigation matter.

Outcome

The court reversed the summary judgments and remanded with directions to the trial court to make further determinations regarding potentially covered claims.

Procedural Posture

Appellant, boyfriend of respondent, sought review of a jury verdict from the Superior Court of Orange County, California, that found respondent’s services benefitted appellant’s company, under the doctrine of quantum meruit, in the amount of $ 84 million.

Overview

Appellant boyfriend and respondent girlfriend held themselves out as a married couple, respondent used appellant’s name, they lived together and worked together at appellant’s company. The value of the company increased during the 20 years they worked together, in part due to respondent’s efforts. Respondent filed suit upon the breakup and sued, alleging, among other things, breach of contract, breach of fiduciary duty, and quantum meruit. The trial court’s instructions allowed the jury to award respondent $ 84 million, which the appellant contested. The court reversed and remanded because the lower court had given instructions that led the jury to improperly value the benefit of respondent’s services to the company rather than determine the value of the services under quantum meruit. Respondent had attempted to show the existence of an implied-in-fact contract that would have given her some equity in the company but the jury instructions did not accurately convey the law, the court held. Further, the court held that there could be no breach of fiduciary duty since the jury found there was no contract that appellant would share the business with respondent.

Outcome

The court reversed and remanded because the trial court improperly instructed the jury as to the definition of quantum meruit as well as the elements of an implied-in-fact contract.