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Posts Tagged ‘fire’

Despite Causing Wildfires, PG&E Avoids Punitive Damages

Posted on: August 2nd, 2018

By: Carlos Martinez-Garcia

On July 2, 2018, the Third Appellate District of California awarded Pacific Gas and Electric Company (PG&E) its first critical victory in defending itself against fire claims caused by its power lines: Butte Fire Cases, (2018) 24 Cal. App. 5th 1150. In 2015, the “Butte Fire” started after a gray pine came into contact with one of PG&E’s power lines, burning more than 70,868 acres, damaging hundreds of structures, and claiming two lives. The subsequent lawsuits, which were consolidated in a judicial council coordinated proceeding in Sacramento Superior Court, are comprised of 2,050 plaintiffs who sought punitive damages under Civil Code § 3294.

The master complaint alleged that the utility company and two contractors failed to properly maintain the power line and adjacent vegetation, warranting punitive damages. The Third Appellate District disagreed, striking Plaintiffs’ prayer for a punitive damages award.

In California, punitive damages may be recovered under section 3294 “where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice.” (Civ. Code § 3294) Malice is defined by section 3294, subdivision (c)(1) as “conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.”

In seeking summary adjudication, PG&E submitted evidence that it devotes significant resources to vegetation management programs intended to minimize the risk of wildfire, spending more than $190 million per year on vegetation management operations. The operations include routine annual patrols, quality assurance and control programs, and a public safety and reliability program. PG&E also contracted with ACRT, Inc. to conduct inspections and vegetation management, Quantum Spatial, to collect data using LiDAR to identify dead or dying trees, and Trees, Inc. to trim noncompliant trees. No inspections identified the subject tree as a danger.

The Third District was unpersuaded by Plaintiffs’ contention that PG&E’s vegetation management program was “window dressing”, PG&E’s vegetation management methodologies were defective, or that PG&E evinced a cavalier attitude towards public safety evidenced by the infamous San Bruno pipeline explosion and a 1994 “Rough and Ready” fire caused by PG&E.

Plaintiffs failed to demonstrate the existence of a triable issue of material fact that showed PG&E acted despicably, or with willful and conscious disregard for the rights and safety of others. PG&E’s nondelegable duty to safely maintain the power lines does not alter the analysis of punitive damages under § 3294. There was nothing despicable in the utility company’s assumption that contractors were training their employees as required, and any criticisms of PG&E’s methodologies do not amount to clear and convincing proof that PG&E acted with malice. At most, plaintiffs’ evidence showed mere carelessness or ignorance.

If you have any questions, or would like more information, please contact Carlos Martinez-Garcia at [email protected].

Insurer Entitled To Prejudgment Attachment Against Insured Upon Establishing Probable Validity of Coverage and Recession Defenses

Posted on: January 29th, 2018

By: Rebecca J. Smith

A California Appellate Court recently ruled that an insurer was entitled to a prejudgment attachment on the property of its insured when the insurer provided what the court deemed to be ample evidence to support its argument that an exclusion in a policy barred coverage under the intentional non-compliance exclusion.

Allied World National Assurance Company (“Allied”) issued a primary environmental liability insurance policy for $2 Million and an umbrella policy for $5 Million to Santa Clara Waste Water (“SCWW”). Intentional non-compliance provisions were included which excluded coverage for damage resulting from the intentional disregard of or deliberate willful or dishonest non-compliance with laws or regulations.  In 2014, a huge explosion at the SCWW plant occurred and SCWW made a claim to Allied for payment to clean up the facility from the damages resulting from the chemical spill, explosion and subsequent fire.

Allied initially denied the claim; however, ultimately agreed to pay $2.5 million to cover the facility owner’s cleanup costs with the caveat that the plant owner would have to reimburse the insurer if a court later determined that the policy’s coverage did not apply.  SCWW then sued for the full amount, triggering Allied to file a cross-complaint.  Allied then sought a prejudgment attachment against SCWW for the $2.5 Million plus costs and interest to protect their ability to recover from SCWW should they prevail at trial.  The application for a right to attach order and writ of attachment was granted by the trial court.

Under the statute governing attachments, a party seeking a prejudgment attachment must demonstrate the probable validity of prevailing on its claim.  In affirming that decision, the Second District Court of Appeal recognized that where an insurer pays an amount not covered under the policy, it has a right that is implied at law under an unjust enrichment theory.  The court declared that Allied had established the probable validity under both their unjust enrichment and recession claim because substantial evidence supported the trial court’s finding that SCWW failed to report their Hazardous Materials Plan under the Health and Safety Code, concealed chemicals from inspectors and misrepresented and concealed a material fact – that being that they did not accept, process, transport or discharge hazardous waste.

Accordingly, upon return to the trial court, Allied may attach the property of SCWW pending ultimate determination of the action for the amount they paid, plus pre-judgment interest.

If you have any questions or would like more information, please contact Rebecca Smith at [email protected].