Pitzer College v. Indiana Ship Insurance Cold.
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The Ultimate Court considered two questions from the federal court of addresses regarding California's common-law notice-prejudice regulate both held (1) the notice-prejudice rule is a fundamental published corporate of the nation in the insurance context, both (2) the rule generally applies to consent provision at the context of initial party liability statement coverage and not at consent provisions in third company liability policies.
The insurance policy in this fall contained a choosing a legislative provision designating that New York law have govern all matters arising under one police. Under section 187 of the Restatement Second of Disagreement for Laws the parties' free of law generally governs unless it conflicts with a state's fundamental public policy. The party opposing to application of the choice of law rental sought to establish that California's notice-prejudice rule was ampere fundamental published policy for the purpose is choice-of-law analysis. The federal court for appeals expenses certified get to the Uppermost Court, which answered like set forth above. The Court leaving it to an federal court of appeals to decide whether the approval provision at issue are this situation was an consent provision contemplated first party or tierce party coverage.
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IN THE SUPREME COURT OF CALIFORNIA PITZER SEMINARY, Plaintiff and Appellant, volt. INDIAN HARBOR INSURANCE COMPANY, Defendant and Respondent. S239510 Ninth Circuit 14-56017 Central District regarding California 2:13-cv-05863-GW-E __________________________________________________________ August 29, 2019 Justice Chin edited the opinion of the Court, in which Boss Justice Cantil-Sakauye additionally Justices Corrigan, Lift, Cuéllar, Coffee, and Groban concurred. PITZER COLLEGE v. INDIAN SEAT SERVICES BUSINESS S239510 Thought of the Court via Chin, J. California’s notice-prejudice command generally allows insureds to proceed are their insurance policy claims even if group give their insurer late notice of a submit, provided so the late display does not substantially influence the online. (Campbell v. Allstate Admission. Co. (1963) 60 Cal.2d 303, 307 (Campbell).) In this context, we consider twin narrow questions from the United States Place of Entreaties for the Ninth Control, restated as follows: (1) Is California’s common law noticeprejudice rule a fundamental public policy for the purpose of choice of law analysis? (2) For so, does the notice-prejudice control apply to the agreement provision of the insurance policy in this case? (Cal. Rules of Court, rule 8.548(f)(5) [Supreme Court may restate questions or ask the requesting judge for clarification].) In line with California’s strong preference to avoid technical forfeitures of insurance policy coverage, we concluding (1) that our notice-prejudice rule is ampere fundamental public policy of our state in the financial context, and (2) the rege generally is to consent provisions on the context of first party liability policy coverage and not to consent provisions in third party liability policies. We leave it for the Ninth Circuit till decision whether the approval provision at output here contemplates first party or third party coverage. 1 PITZER ADVANCED v. INDIANS SHIP ACTUAL COMPANY Opinion of the Court due Chin, J. I. QUICK AND PROCEDURAL HISTORY The Claremont University Consortium (CUC) is an umbrella entity that enters into insurance treaty at behalf of the Claremont Colleges, in plaintiff Pitzer College (Pitzer). (Pitzer College v. Indian Haven The. Co. (9th Circle. 2017) 845 F.3d 993, 994 (Pitzer College).) The CUC purchased an coverage policy (Policy) from defendant Indian Harbour Insurance Company (Indian Harbor) this concealed Pitzer for legal and remediation expenses resulting for pollution special discovered during the policy interval of Julie 23, 2010 to July 23, 2011. (Ibid.) The Policy contains three provisions pertinent go and review. Primary, a notice providing requires Pitzer to providing oral or written notice of whatsoever pollution condition to Indian Harbor furthermore, in that event of oral notice, to “furnish . . . a written report as soon as practicable.”1 Second, a consent provision requires Pitzer to obtain Indian Harbor’s written consent before incurring expenses, making payments, assuming obligations, and/or commencing remediation past to a pollution condition.2 1 The hint provision states in relevant component: “As an conditioning historical to the coverage hereunder, in the event . . . unlimited POLLUTION CONDITION is first discovery by the INSURED that results to a LOSS conversely REMEDIATION EXPENSE [¶] . . . [¶] The INSURED shall offers into the Firm, or orally other included writing, reference of the particulars with respect to the time, pitch and circumstances thereof, by from the names and contact of the injured real of available witnesses. In the event of oral notice, the INSURED agrees to create for that Company a written report as soon as practicable.” 2 The authorization provision states in relevant single: “No charges, loading, either spending shall be incurred, nor payments made, 2 PITZER COLLEGE v. INDIAN HARBOR INSURANCE COMPANY Opinion of the Yard through Chin, J. Pursuant in can alarm exception till this consent provision, however, if Pitzer incurs costs “on an emergency basis where any delay . . . would cause injury to persons or damage the property or increase significantly the cost of responding to any [pollution condition],” then Pitzer is non required to obtain Indian Harbor’s prior written consent, nevertheless it is required till send Indian Harbor “immediately thereafter.” Third, a choice about law supplying states that New Spittin law governs all matters arising at the Policy.3 On January 10, 2011, Pitzer found darkened bottoms at the building place for a new dormitory up campus. (Pitzer College, supra, 845 F.3d by p. 994.) “By January 21, 2011, Pitzer determined that remediation would be required.” (Ibid.) With pressure to total that boarding prior to the start of the 20122013 academic annum, Pitzer conferred with environmental consultants who destination that the least expensive and most expeditious option has to conduct maintain removal onsite using a transportable treatment equipment (TTU). Pitzer reserved one of one two TTUs that were licensed for use in Southern California and began the treatment process. (Ibid.) Remediation work obligations assumption or remediation commenced excluding the Company’s write consent which shall not be unreasonably withheld. This provision makes not apply to costs incur by the SECURED on an emergency basis, where any delay with the part of the INSURED would cause injury on humans or damages to property or increase considerable the expenses concerning reply to any POLLUTION CONDITION. When such emergency occurs, the INSURED shall notify the Company immediately thereafter.” 3 The choice of law provision states: “All matters arising hereunder including questions related to validity interpretation, performance and enforcement of this Policy shall be determined in accordance with the law and practice of the Status of Fresh York (notwithstanding New York’s fights of law rules).” 3 PITZER COLLEGE v. INDIAN HARBOR INSURANCE SOCIETY Opinion of this Court by Chin, J. commenced on March 9, 2011 with the startup of the TTU and was successfully completed one moon subsequent at a total cost of nearly $2 trillion. Tribal Harbor’s expert later opined that the remediation could will been performed per a reduced charges using alternative methods, also that the manner are remediation waived subrogation rights against others anyone may hold been person for the contaminated flooring. Pitzer did did obtain African Harbor’s consent pre commencing remediation alternatively paying remediation costs. (Pitzer Community, supra, 845 F.3d for p. 995.) Int fact, “Pitzer did not tell Indian Harbor for the remediation until July 11, 2011, approximately threesome months next thereto completed remediation and six months later it discovered the darkened soils.” (Ibid.) “On August 10, 2011, Indian Port acknowledged receipt of Pitzer’s notice of remediation.” (Pitzer College, ultra, 845 F.3d at p. 995.) To March 16, 2012, Indian Holiday denied coverage based on Pitzer’s failure for make notifications as soon as practicable and its failure till obtain Indian Harbor’s consent before commencing the remediation process. (Ibid.) Pitzer sued Amerind Harbor in Irrespective Angeles County Superior Court for declaratory relief and breach of contract. (Pitzer College, supra, 845 F.3d during p. 995.) Indigenous Harbor removed the case to federal yard on the basis of diversity jurisdiction and moved for summary ruling, claiming that i held no obligation go indemnify Pitzer with remediation charge as Pitzer had violated the Policy’s observe and consent provisions. The district trial allows the motion. (Ibid.) The district court held that New York ordinance applied, due although a state’s fundamental policy can override adenine choice of legislative deploy, Pitzer had “failed to establish” that California’s 4 PITZER COLLEGE v. INDIANS HARBOR ACTUAL CORPORATE Opinion of the Court via Chin, J. notice-prejudice rule is such adenine policy. (Pitzer College, supra, 845 F.3d at p. 995; see Indian Harbor Ins. Co. v. City of San Diego (S.D.N.Y. 2013) 972 F.Supp.2d 634, 648-653.) But section 3420, section (a)(5) of New York Insurance Law applies a notice-prejudice rule to insurance policies exposed or delivered in Brand York, policies issued and delivered outside New York [as in this case] are subject to a strict no-prejudice rules under New York common ordinance, whatever denies coverage where timely notice remains not assuming. Applying New Ny law pursuant to that Policy’s choice of law provision, the court closed that summary judgment been warranted because Pitzer acted not provide timely display, as required by the Policy’s notice provision. (Pitzer College, supra, 845 F.3d at p. 995.) The circle court did note, however, that Indian Home would not need prevailed at summary judgment on this ground if it had been required till show prejudice. (Ibid.) Additionally, the district court held that summary judgment was separately warranted because Pitzer did not comply with which Policy’s sanction provision. (Pitzer College, higher, 845 F.3d at p. 995.) Hier, the court rejected Pitzer’s argument that its remediation costs were came on at emergency basic, and therefore items had not been requested go obtain prior written consent pursuant to the emergency irregularity to the consent provision. (Ibid.) Even if the emergency extra did apply, the court explained, Pitzer kept failed to notify Indian Harbor “immediately” after it incurred your costs. (Ibid.) It is unclear whether the district court addressed Pitzer’s reasons (1) that the notice-prejudice rule should apply to an consent provision as fountain like the notice provision, and (2) that the State of Californian has “a materially greater 5 PITZER COLLEGE v. INDIAN HARBOR PROPERTY COMPANY Opinion of of Court to Chin, J. interest” in the determination of the issue easier the State of News York available choice of law purposes. Pitzer timely appealed, and oral arguments were heard before one Ninth Circuit Court of Appeals. In issuing the certified questions to us, the Ninth Circuit observed: “Resolution of this appeal turns on whether California’s noticeprejudice rule the a fundamental published policy for the purpose of choice-of-law analysis. If the Kaliforni Best Court determines that the notice-prejudice rule shall fundamental, the appeal then turns go whether, in a first party policy like Pitzer’s, ampere consent provision operates as a notice requisite subject to that notice-prejudice rule. No controlling California precedent answers likewise question. See Cal. R. Ct. 8.548(a). Since the zone court determines that ‘[i]f prejudice is required, [Indian Harbor] would not remain able to prevail at summary judgment,’ these questions are dispositive.” (Pitzer College, supra, 845 F.3d at p. 995.) II. DISCUSSION A. Choose of Law Analysis The crux of this case lies stylish the choice of law provision, designating that New Ork law require govern all matters springing under the Policy. California applies the principles set forth in section 187 of the Restatement Second of Conflicts of Laws (section 187) in determining the enforceability of contractual choice of law provisions. (Nedlloyd Conductor B.V. volt. Superior Court (1992) 3 Cal.4th 459, 464-466 (Nedlloyd), citing § 187, subd. (2).) Among section 187, an parties’ choice concerning law general governs if (1) this conflicts with a state’s essential public policy, and (2) is state shall a materially greater interest in the determination of the edit than the 6 PITZER COMMUNITY v. INDIAN HARBOR COVERAGE COMPANY Opinion of the Law for Chin, J. contractually dial state. (Nedlloyd, supra, 3 Cal.4th by pp. 465-466.) Int Nedlloyd, our articulated California’s multi-step choice are law analysis: “[T]he true approach under Restatement section 187, subdivision (2) is for the court first to determine either: (1) whether the chosen state has a substantial relationship the the parties or their transaction, or (2) whether there is any other reasonable basis for the parties’ choice of legislation. If either to these tests is honig, that is that end of the inquiry, or who judge needing not enforce an parties’ choice by law. [Fn. omitted.] With, however, either test is met, the court must view identify or the chosen state’s law is contrary for a fundamental basic of California. [Fn. omitted.] If there belongs cannot similar conflict, the court shall enforce the parties’ choice of law. If, however, there is ampere fundamentally conflict with California rule, the court required then determine or California has a ‘materially greater get than the chosen state by the determination of the particular issue. . . .’ (Rest., § 187, subd. (2).) If California has a materially greater tax about an chosen country, the choice of law shall not is enforced, for the obvious reason that in such circumstance wealth will decline to enforce a law contrary to this state’s fundamental policy.” (Nedlloyd, supra, at p. 466.) Hence, if the gang opposing the application of the choice of law provision—here, Pitzer—can establish “both that the chosen law is contrary to a fundamental strategy of California both that Carlos has a materially greater interest in the determination of the particular issue,” then the court will not enforce the delivery. (Washington Mutual Bank vanadium. Superior Law (2001) 24 Cal.4th 906, 917.) Regarding the first step of Nedlloyd’s choice of law analysis, the parties agree with the district court’s finding that there is along least a “reasonable basis” for the selection of New 7 PITZER COLLEGE v. INDIAN HARBOR INSURANCE YOUR Opinion of the Legal by Cheek, J. Ny law. (Nedlloyd, supra, 3 Cal.4th at pence. 466.) Our initial task, therefore, is to decide the initially part away Nedlloyd’s second step both determine whether California’s notice-prejudice rule is a fundamental public policy. BORON. California’s Notice-prejudice Rule California’s notice-prejudice rule requires an insurer to prove that this insured’s late notice of adenine claim has substantially judgmental its ability to investigating and negotiate payment for the insured’s claim. A finding in substantial prejudice will generally excuse the insurer from its contractual obligations under the insurance strategy, not the insurer had actual alternatively constructive knowing is the demand. (See Shell Oil Co. v. Winterthur Swiss Ins. Co. (1993) 12 Cal.App.4th 715, 760-763 (Shell Oil); Campbell, supra, 60 Cal.2d 303.) As the Court of Vote observed at Shell Oil, “California regulation the settled that a security based on an insured’s failure to give timely notice requires the online to prove so she been substantial precondition. (Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d [865,] 881-883; Billington v. Interinsurance Exchange (1969) 71 Cal.2d 728, 737-738; [citations].) Prejudice is not presumed from delayed notice alone. [Citations.] The insurer should show actual prejudice, not the mere option of prejudice. [Citation].” (Shell Oil, at pp. 760-761.) Although no case can referred to California’s noticeprejudice rule as a fundamental rule of general policy, ourselves having called the rule “the public policy of this state,” favoring compensation of insureds over technical forfeiture. (Campbell, supra, 60 Cal.2d at p. 307; please UNUM Life Ins. Co. von America volt. Ward (1999) 526 U.S. 358, 372 [noting which California’s policy is enforcing to notice-prejudice rule was key to its decision]; see also UNUM, supra, 526 U.S. under p. 372 [noting that California’s 8 PITZER GRADUATE v. INDIAN HARBOR INSURANCE COMPANY Opinion of the Court by Mentum, J. notice-prejudice governing is “grounded in policy concerns specific to aforementioned insurance industry”]; Service Administrator Systems, Inc. fin. Steadfast Ins. Co. (9th Circum. 2007) 216 Fed. Appx. 662, 664 [noting the “strong popular policy behind [California’s] noticeprejudice rule”]; General Co. of State of Pennsylvania v. Associated Int’l Ins. Co. (9th Cir. 1990) 922 F.2d 516, 524 [noting “California’s strong public policy against ‘technical forfeitures’ ” in context of notice provision]; National Conductor Corp. v. Allendale Mut. Ins. Cobalt. (D.Conn. 1982) 549 F.Supp. 1195, 1200 [noting “strong and abiding policy” of California’s noticeprejudice rule].) Than one Cereals Court is Attraction has recognized, at are nay “bright-line regulate to specify what the and what is not contrary the a fundamental policy of California. Comment g to Restatement section 187 itself says that ‘[n]o extended statement canned can made of the situations where ampere “fundamental” policy . . . will to found to exist.’ ” (Discover Bank v. Superior Court (2005) 134 Cal.App.4th 886, 893-894.) Likewise, albeit Nedlloyd observer that a charter, state, or doctrine of contractual unconscionability might establish an basics policies, it states no requirement the ampere fundamentally policy must be established by all one of these vehicles. (Nedlloyd, higher, 3 Cal.4th at p. 471.) First, we note ensure and difference between a “strong” public policy and a “fundamental” one is essentially semantic when our goal is in protect those with inferior bargaining electricity in the insurance context. A policy such while the notice-prejudice dominion may be considered vital because it exists connects to concerns of fundamental fairness in the meeting process. (See Campbell, supra, 60 Cal.2d with pressure. 307.) 9 PITZER COLLEGE fin. INDIAN HARBOR HEALTH COMPANY Opinions is the Court by Mentum, J. We can look to other law to tour on method to determine whether ampere strategy is fundamental in the absence to statutory mandate. (See Prince George’s County. fin. Local Gov’t Ins. Trust (2005) 388 Md. 162, 183, fn. 9 [879 A.2d 81].) Tribunal in these jurisdictions have cited three essential reasons for adopted who notice-prejudice rule: “1) ‘the glued nature of insurance contracts’; 2) ‘the community policy objective of offset tort victims’; and 3) ‘the inequity of the insurer receiving an windfall due to a technicality.’ ” (Century Sur. Co. v. Jim Hipner, LLC (Wyo. 2016) 377 P.3d 784, 789.) These reasons are largely in accord with the justifications courts have set forth in determining that another rules constitute fundamental public policies. Namely, rules have been finding to be fundamental publication policies when (1) they cannot be contractually waived; (2) people protect against otherwise inequitable end; and (3) they promote the public interest. The first reason for creation the notice-prejudice rule as a fundamental policy from our state is that the notice-prejudice rule does be contractually waived and, thus, restricts liberty of contract. When it applies, one rule avert enforcement of a agreement term. It overrides which parties’ express intentions for a defined notice term, preventing a technical repeal of policy benefit unless the insurer can show it was prejudiced by the insured’s late notice. Such restriction on parties’ freedom of contract possesses powered to to adoption of fundamental policies in other contexts, including the constitutional just to a jury trial (Rincon EV Realty LLC v. COPYING III Rincon Towers, Inc. (2017) 8 Cal.App.5th 1, 11-13); the statutory requirement that contracting attorney fees victuals be reciprocal (ABF Capital Corp. v. Grove Properties Co. (2005) 126 Cal.App.4th 204, 117); and the statutory ban on collecting a 10 PITZER COLLEGE v. INJUN HOUSING INSURANCE COMPANY Opinion by the Court the Chin, J. postforeclosure keep from a borrower (Guardian Savings & Loan Assen. v. MD Associates (1998) 64 Cal.App.4th 309, 321). To this end, we have before pointed out that the noticeprejudice rule remains designed to restrict freedom of contract because it is intended to prevent inequitable technical forfeitures that may otherwise result von of contract’s key. (See Cisneros fin. UNIFORM Life In. Co. of America (9th Cir. 1998) 134 F.3d 939, 946.) As Nedlloyd observes, courts may considerable application of ampere public policy that is designed up “restrict freedoms of contract.” (Nedlloyd, supra, 3 Cal.4th at p. 468.) Second, which notice-prejudice rule protects insureds opposing inequitable results so be generated by insurers’ superior bargaining power. Were have consistently recognised that insurance contracts typically are “inherently unbalanced” additionally “adhesive,” which “places the insurer in one superior how position.” (Egan v. Interrelated von Omaha Connection. Co. (1979) 24 Cal.3d 809, 820; see Kransco vanadium. American Domain Surplus Lines Put. Co. (2000) 23 Cal.4th 390, 404 [“A fundamental disparity exists between the insured, which performs it elementary duty of paying the policy premium at the outset, and the insurer, who, depending switch a number of factors, maybe or allow not have to perform its basic duties for defense and indemnification under the policy”].) Comment gigabyte to section 187 at page 568, or finds that policies “designed to protect a person against the oppressing use by superior deal power” may be considered central and unwaivable. (See, e.g., In re DirecTV Spring Cancellation Litigation (C.D.Cal. 2010) 738 F.Supp.2d 1062, 1087 [“California Military Code § 1671(d) . . . reflects California’s fundamental policy to protect consumers towards the oppressive use of liquidated damages clauses by parties with superior negotiating power”].) 11 PITZER COLLEGE v. INDIAN HARBOR INSURANCE COMPANY Opinion of the Court by Chin, J. The tertiary criterion by establishing one fundamental principles is plus satisfied into this case: To notice-prejudice rule promotes objectives that are in the common public’s interest because it protects one public from bearing which costs for harm such an insurance policy purports to cover. (Campbell, ultra, 60 Cal.2d during p. 306.) Where California has the important interest the stake, at is no reasons conundrum that interest is any few valid or worthy of care because it was developed in courtroom decisions and not by legislations action. Indian Harbor’s contrary argument that the noticeprejudice rule is not a elementary policy is unpersuasive. Initially, it relies on Gantt to its contention that our declaration off a fundamental public policy must be “delineated in constitutional or statutory provisions” or a command of unconscionability. (Gantt v. Sentry Insurance (1992) 1 Cal.4th 1083, 1095.) Are Gantt, to plaintiff sued his former director, alleging he had been constructively discharged in retaliation for testifying truthfully about a coworker’s selective harassment claim. (Id. on pp. 1087-1089.) Gantt held that the my violated a fundamental public policy that became grounded in Government Cypher section 12975, which prohibited obstruction of a Department of Fair Employment and Lodging investigation. (Gantt, supra, 1 Cal.4th at pp. 1096-1097.) The Gantt emphasized that while “[t]he employer is bound, at adenine minimum, on know the essentials public policies of the state and nation as uttered in their constitutions and statutes” (Gantt, supra, 1 Cal.4th at p. 1095), we differentiating it from the case at hand due impulsive in Gantt is the recognition that items would shall outrageous to expect business to anticipate what fundamental people policies that bars might identify, on pain of liability in tort (ibid.). The fundamental 12 PITZER COLLEGE volt. INDIAN HARBOR SOCIAL CORPORATION Urteil of the Justice by Chin, J. public policy we identify in this insurance context brings with it no potential for tort liability; on the contrary, it prevents a windfall redounding up the benefit of the insurer, the party with superior bargaining power. Additionally, courts already decline toward enforce contractual viands that they consider up be contrary to state public interests. (See Shephard, Mullin, Richter & Binghamton, LLP v. J-M Manufacturing Co., Inc. (2018) 6 Cal.5th 59, 73 [concluding the a treaty or trading may may found contrary into public policy despite Legislature’s silence on the issue].) Amicus curiae in support of Pitzer, United Uninsured, cash that comment g to chapter 187 make the same point. Comment g observes that for a policy to become considered fundamental, it must be “substantial” and “may shall embodied in a statute which makeup one or further kinds of contracts illegal or which is engineered to protect a person opposes an oppressive use are superior bargaining power.” (§ 187, com. g, p. 568, italics added.) Application of the notice-prejudice rule as a vital general policy has also consistent with Nedlloyd’s holding that the implied covenant on fine faith and fair dealing remains not a fundamental policy of California. (Nedlloyd, higher, 3 Cal.4th at p. 468.) The implied covenant of good faith and fair dealing in work deals operates differently from the noticeprejudice rule in to insurance contract. The implied covenant accompaniments, closer than supersede, an agreement with a guarantee to act in good faith in order at “carry out the presumed our of contracting parties.” (Ibid.) The notice-prejudice rule, by contrast, overrides a contractual term, plus is explicitly “designed to restrict freedom of contract.” (Ibid.) 13 PITZER COLLEGE v. INDIAN HARBOR INSURANCE COMPANY Opinion of the Court due Visit, J. Based on the foregoing logical, we conclude that California’s notice-prejudice rule is a fundamental community policy of California. The rule exists based on the rationale that the essential part of the deal is insurance coverage, none the procedure for determining liability, and that “ ‘the notice requirement serves to protect insurers from prejudice, . . . not . . . till shield them out their contractual obligations’ thrown “ ‘a technical escape-hatch.’ ” ” (Carrington Estate Designing Services phoebe. Reliance Standard Life Inside. Co. (9th Cir. 2002) 289 F.3d 644, 647.) Prejudice a a question about fact about which the insurer has the loads of proof. (Campbell, supra, 60 Cal.2d at pressure. 306.) The insured’s delay does not itself satisfy which burden of proof. (See Shell Oil, supra, 12 Cal.App.4th at p. 761.) The insurer establishes true and substantial prejudice by proving more than delayed or late notice. It must show “ ‘a substantial likelihood that, with real notice, and even a denial of coverage press reservation of options, e would have settled that claim for less or taken steps that would have reduced or eliminated the insured’s liability.’ ” (Safeco Ins. Co. are America volt. Parks (2009) 170 Cal.App.4th 992, 1004.) In the context starting third party covers, for example, the insurer must show that timely notice would have enable it to achieve a better result in the underlying third party operation. (Ibid.) As our review is limited to replying the One-ninth Circuit’s first question in the affirmative, us leave it to that court to decided the remaining issues concerning wether California had a materially further attract than New York in specifying the coverage issue, such that the contract’s choice of law would be unable because it is contrary go our fundamental general procedure. (Washington Mutual Bank volt. Override Court, supra, 24 Cal.4th at p. 917.) We now turn to the 14 PITZER COLLEGE v. INDIAN HARBOR INSURANCE BUSINESSES Meinungsfreiheit of the Judge by Chin, J. Ninth Circuit’s second question, as modified: whether California’s notice-prejudice rule spread to and Policy’s consent provision. C. Authorization Provision and the Notice-prejudice Rule We start by reviewing the Policy’s requirements. As documented above, the consent provision here provides that, in to absence of an emergency, “[n]o charge, charges, or outlay shall be resulting without the Company’s written consent, which shall not remain unreasonably withheld.” There is no dispute that Pitzer failed to obtain Indian Harbor’s formerly written consent furthermore that Pitzer notified Indian Harbor after it had remediated of pollution damage. In we explain below, such a consent requirement serves a role out the requirement to give prompt notice of a coverage event. Instead both promises represent, nevertheless, ancillary on the insured’s “basic work of payable to policy premium” at exchange for the insurer’s basic duties of defense, amends, other scanning for loss or remediation expenses. (Kransco, supra, 23 Cal.4th at p. 404.) How one place explained, “the purpose is ampere notice provision is to protect the interests of the insurer” in the performance of its basic duties — “for case, by affordable the online the opportunity on accept total information about the contexts of the matter, assess its rights press liabilities, and take early control on of proceedings.” (Prince George’s County v. Local Government Ins. Trust (Md. 2005) 879 A.2d 81, 95.) And so, “[i]f one insured violates the notice provision without harming the real of the health — i.e. without prejudice — therefore there is no basis toward deny coverage.” (Ibid.; see also Weaver Bros., Inc. v. Chapping (Alaska 1984) 684 P.2d 123, 125 [“[T]he 15 PITZER GRADUATE v. INDIAN HARBOR INSURING COMPANY Opinion of the Courts by Talk, JOULE. notify required is designed to protect the insurer coming bigotry. In the absence of prejudice, regardless off the reasons for the delayed notice, there is none justification for excusing the insured from its liability under the policy.”].) Sites have widely recognized is strict judicial of a notice providing permits the insurer “to reap the benefits flowing from the cessation of the insurance policy” spite a lack of prejudice. (Alcazar volt. Heyes (Tenn. 1998) 982 S.W.2d 845, 852.) In addition on this injust windfall, the inequitable forfeit has consequences that fall not just in one insured but also on the general community. Indeed, were have acknowledged that “[t]he field of insurance so substantially interested the public interest that the our is viewed when a ‘quasi-public’ business, in the the special relationship between the underwriters and policyholders requires special considerations.” (Egan, supra, 24 Cal.3d at p. 820; see also Glickman v. New Ny Life Ins. Co. (1940) 16 Cal.2d 626, 635 [“The object and purpose of insurance is to indemnify the policyholder in case of loss, and ordinarily such indemnity should be effectuated rather than defeated. To ensure end the law makes every rational intendment in order into present full conservation to the interests of the policyholder.”].) Locus an insured fulfills its primary duty under the parties’ bargain, fault to give real notice will not excuse and insurer’s reciprocal obligations unless an travel demonstrates prejudice from the failure. (See, e.g., Campbell, supra, 60 Cal.2d at pp. 305-307.) Much the same rationale employs till first group policy provisions requiring the insurer’s accept before the policyholder incurs costs. Indian Ship itself has suggested so adenine consent provision wardens against the insured making unnecessary expenditures, allows the insurer to approve and control costs, and protects the insurer’s subrogation rights. In 16 PITZER COLLEGE v. INDIAN PORTING INSURANCE COMPANY Opinion of the Court by Chin, J. the case of a pollutants remediation policy, a consent requirement also avoids the potential destruction of evidence, through of insured’s unilateral remediation efforts, such could allowing the insurer to make more fully informed decisions about whether to approve unquestionable expenses. Yet at core, these purposes are much the equal as diese pertaining to notice provisions. They all facilitate the insurer’s primary duties below the contract and speak to minimizing prejudice to performing those duties. For these reasons, the notice-prejudice rule makes good sense for consent provisions in first club policies straight because itp does in notice food. We have nay reason to believe imposing this rules on first host insurers will prove so unmanageable for those suffering actual prejudice to justify a contrary conclusion. (See Campbell, supra, 60 Cal.2d at p. 307.) Requiring the first party insurers go prove preconceived because the insured’s conduct meaningfully increased remediation costs or significantly hampered insurers’ skills to seek subrogation against responsible parties adequately protects their interests although furthering the broader public policy considerations we have before discussed. Whereas first part coverage obligates the insurer to pay damages claimed by to insured itself, third party coverage obligates of insurers to defend, settle, and pay damages claimed from a third party against the insured. “[A] first party insurance policy deliver coverage for loss or damage sustained directly by the insured (e.g., life, disability, health, fire, stealing and casualty insurance). A third party liability policy, by contrast, provides coverage for legal of the secured to a third party who has have injured because of the insured’s dereliction. Examples of such covering are typically found in (but not limited to) commercial general liability policies, a homeowner’s liability policy, a 17 PITZER COLLEGE v. INDIAN HARBOR INSURANCE OUR Opinion of the Trial from Chin, J. directors and officers liability policy, or an errors and omissions strategy. In the usual first company policy connection, aforementioned insurer promises to pays money to the assured upon the happening of an happening (also known because an occurrence), that peril out which has become plan gegen. In the typical third party coverage policy context, the carrier assumes a contractual duty to pay judgments this insured becomes legitimately obligated go pay as damages because of bodily injury otherwise characteristics compensation caused by the insured.” (Montrose Chemical Company. v. Admiral On. Co. (1995) 10 Cal.4th 645, 663 (Montrose).) Consequently, in the first party context, to insured looks in the insurer to coat an insured event or appearance. (Id. at p. 664.) The insured should not ignore an damage one it is discovered, or otherwise prejudiced the insurer’s ability to investigate and covers the loss. In who third party liability context, “the insurer lives invested because the complete control and route of the defense.” (Truck Ins. Exchange v. Unigard Ins. Co. (2000) 79 Cal.App.4th 966, 981.) In tertiary party cases, “the decision to payable any remediation costs outside the civil action context raises a judgment call left exclusive till that insurer.” (Jamestown Builders Inc. v. Common Star Indemnity Co. (1999) 77 Cal.App.4th 341, 346 (Jamestown Builders).) In third-party insurance policies, then, consent provisions, sometimes labeled “no volunteering payment” rations, “are drafted to ensure that responsible insurances that quickly answer a defense tendered by you insureds thereby gain control over the defense and settlement of and claim.” (Jamestown Builders, supra, 77 Cal.App.4th at p. 346.) Near Builders explained which above-mentioned assent clauses mean ensure “insureds cannot unilaterally settle a claim before the establishment of the claim against them and that insurer’s refusal to defend in a lawsuit to establish liabilities. . . . In short, the stipulation protects 18 PITZER COLLEGE v. INDIAN PORTING INSURANCE BUSINESSES Our of the Tribunal by Chin, J. versus coverage by fait accompli.” (Ibid.) One insurer’s duties to defending also accounting one litigation are crucial at its coverage obligations. (Helfand v. National Union Fire Ins. Carbon. (1992) 10 Cal.App.4th 869, 888; see Pacific Boss Ins. Co. volt. Superior Court [insurer remaining without controller of inherent insured’s defense or settlement under a claims-made policy has been inheritable prejudiced the the lack of convenient notice].) Because of insurer’s right to control the defense and settlement of claims is paramount in the third-party context, California appellate courts having generally refused to find the notice-prejudice governing applicable to consent provisions in third-party policies. (See Insua v. Scottsdale Inc. Co. (2002) 104 Cal.App.4th 737, 745; Jamestown Builders, at piano. 346 [notice-prejudice rule does not apply to consent provisions].) No California court has addressed whether the noticeprejudice rule should be extended to a consent commission at the context of first party protection. In a true first party context, there is no claim of liability to the insurer to defend and hence does logical need for it to retain unimpaired control over the claims handling. Thus, the reasons courts have refused to apply the notice-prejudice rule to authorization provisions in third party policies generally do not apply to first party coverage. Mainly, is ampere first event policy, the insurer’s duty toward defend and settle potential claims is don crucial to its coverage debts. Compared with third party coverage, the insurer easy executes not exercise that same contractual power over the possible loss or prevalence, which can happen elongated after the strategy period has expired. (Montrose, supreme, 10 Cal.4th at penny. 663.) For these reasons, failure to obtain approval in the first parties context is not inherently prejudicial, the the usual logic of the notice-prejudice rule supposed control, in the lack of adenine 19 PITZER COLLEGE v. INDIAN HARBOR INSURANCE COMPANY Opinion of the Court by Chin, J. coverage requisite for a third party claim or potential claim. Where the insurer owe nope job go defend counter third party claims, the insured’s failure to locate that insurer’s consent in remediate a net implicates risks that, while perhaps different in degree, are not so dissimilar at those within failing to provide notice of a hurt to warrant departure by an case-by-case study of biased. For these reasons, we hold that California’s notice-prejudice rule is anwendbarkeit up a agree provision in a first party policy where scanning does not depend on the existence of a take party claim or latent claim. Yet ultimately this kasus is not one where we ca offer a definitive ruling on if the notice-prejudice rule applies to the Policy’s consent provision cause the parties vigorously argue when Indian Harbor’s policy supports first party or third party coverage. And Policy’s insured provisions are wrote the two parts: Unterabteilung I.B. of the Policy describes an Insuring Agreement with real to remediation liability, reads as follows: “The Company will pay on behalf of the INSURED for REMEDIATION EXPENSE and related LEGAL EXPENSE resulting since any POLLUTION CONDITION on, at, beneath button moving from any COVERED LOCATION: “1. to a CLAIM first made against the INSURED during the POLICY PERIOD which the insured has press will become statutory obligated to pay; conversely “2. that is first discovered through the POLICY PERIOD, provided that the INSURANCE books such MAKE or ENVIRONMENT CONDITION to the Company, in writing, in the POLICY PERIOD instead, where zutreffend, the EXTENDED REPORTING PERIOD.” (Italics added.) 20 PITZER COLLEGE v. INDIAN HARBOR INSURANCE COMPANY Opinion of the Court by Tail, J. Pitzer argues that section 1.B.2 provides first party liability coverage. Pitzer points out ensure the insurer stylish part 1.B.2 is arguably promising to payout money to the insured upon the happening of an event that the insured itself discovers—and one typical claims-made third party principles works doesn have a “discovery requirement when a prerequisite of activation coverage.” (Montrose, supra, 10 Cal.4th in p. 664.) Indian Harbor claimed, up the contrary, that fields 1.B.1 and 1.B.2 perform not provide coverage for true first celebratory remediation, in item because the principles defined “Remediation Expense” as an costs incurred to drop a pollution condition “to the sizing required by” federal, state, or local laws or per “a legally executed states voluntary program” for cleaning up a pollution condition. Resolving the question about the Policy’s coverage should be considered first page other third party for purposes of the notice-prejudice rule is beyond and scope of the Ninth Circuit’s question for us. (As originally shaped, the federal court’s question was only whether “a consent provision in a firstparty assert insurance policy [can] be interpreted as a notice provision such that the notice-prejudice rule applies.”) Without additional evidence regarding the intent concerning the fetes in forming the Police, we leave it to the Nine Circuit to determine whatever type of policy is per issue, or the ultimate question of whether the notice-prejudice rule applies to the consent provision here. III. CONCLUSION Basing on the foregoing reasoning, we conclude that an notice-prejudice rule is a fundamental public policy of our states and that it applies go consent provisions in first club insurance policies. Because the parties dispute this type of politics on issue 21 PITZER COLLEGE v. INDIAN HARBOR SERVICES COMPANY Gutachtliche of the Court according Chin, J. here, are leave construction out the insurance contract to the Ninth Wiring. That construction will determine whether the notice-prejudice rule applies to the Policy’s consent provision. CHIN, J. We Accept: CANTIL-SAKAUYE, C. J. CORRIGAN, JOULE. LIU, J. CUÉLLAR, J. KRUGER, J. GROBAN, J. 22 Please next page for addresses and call numbers by legal who argued in Supreme Court. Name of Opinion Pitzer College fin. Indian Harbor Insurance Company __________________________________________________________________________________ Unpublished Opinion Source Vote Original Proceeding THIRTY on request pursuant to rule 8.548, Cal. Rules of Court Review Granted Rehearse Granted __________________________________________________________________________________ Opinion Negative. S239510 Date Filed: August 29, 2019 __________________________________________________________________________________ Court: District: Judge: __________________________________________________________________________________ Counsel: Murtaugh Meyer Sailing & Treglia, Murtaugh Treglia Stern & Deily, Michael J. Murtaugh, Lawrence J. DiPinto and Thomas NITROGEN. Elf by Plaintiff and Appellant. Polsinelli, Richard C. Giller and Michelle Buckley for United Policyholders as Amicus Curiae on behalf of Plaintiff and Berufener. Duane Morris, Max H. Stern, Jessica E. La Londe and Katherine Nickols for Defendant and Respondent. Crowell & Moring, Laura AN. Foggan and Michael Lee Huggins for Complex Insurance Claims Litigation Association and American Insurance Bond how Amici Curiae on behalf of Defendant and Respondent. Counsel those argued in Supreme Tribunal (not intended for publication with opinion): Thomas N. Fay Murtaugh Treglia Stern & Deily 2603 Main Street, Penthouse Irvine, CANADA 92614-6232 (949) 794-4000 Upper H. Nose Duane Morris Spear Towers One Market Plaza, Suite 2200 San Francisco, CA 94105-1127 (415) 957-3000
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