The Letter of The Law: September 2013


PERSONAL INJURY: Event Data Recorders and Automobile Accident Litigation

INSURANCE: An Unpaid Self-Insured Retention

An Unpaid Self-Insured Retention

By: Brendan J. Coughlin

Earlier this year the United States District Court, Southern District of California, issued a decision that will undoubtedly influence the issue of self-insured retentions (“SIR’s”) and insurance coverage in our state.  In Phillips v. Noetic Specialty Insurance Co. (2013) 919 F.Supp.2d 1089, it was held that under certain circumstances the failure to pay a SIR, which is the amount paid before there is coverage, did not prevent the insurance from being triggered.

In August 2006, a representative of Electric Mobility Corporation (“EMC”) visited Mr. Phillips’ home and sold him a motor scooter.  In 2008, while he was riding the motorized scooter, it toppled over.  Among other injuries, Mr. Phillips’ hip was crushed in the accident.

Noetic Specialty Insurance Co. (“Noetic”) insured EMC.  When Mr. Phillips filed a lawsuit, Noetic assumed control of EMC’s defense.  However, in 2011 EMC became insolvent.  Defense counsel’s subsequent motion to withdraw as EMC’s counsel was granted.  Thereafter, EMC’s Answer was struck and default was entered.  On June 16, 2011, the Court entered judgment against EMC and in favor of Mr. Phillips for $1,052,982.10.

Then Mr. Phillips died.  The judgment against EMC became an asset of his estate, with his wife as executor and sole trustee of their joint revocable trust.  Mrs. Phillips submitted the judgment to Noetic for payment, less EMC’s unpaid $500,000 SIR.  Noetic refused to pay the judgment.  The widow sued Noetic.

In interpreting California insurance and contract law, the federal Court denied Noetic’s Motion to Dismiss.  The Court found that the insurance contract between EMC and Noetic did not include terms sufficiently specifying payment of the SIR as a condition precedent to coverage.  The Court further found language stating that EMC’s insolvency would not relieve Noetic of its policy obligations.

We must anticipate that California state courts will be mindful of this federal interpretation of California laws as issues of coverage and SIR’s continue to be litigated.  One lesson to be learned from this case is that small variations in insurance contract language can have million dollar differences in litigation results.  Prompt engagement of experienced, knowledgeable legal counsel, and safe use of motor scooters, are two good ways to proceed.

New Associate Joins Kring & Chung’s Irvine, CA Office
Kring & Chung is pleased to announce that Richard W. Park has joined its Irvine, CA office as an Associate attorney. Park’s practice focuses on business litigation. Prior to joining Kring & Chung, Park worked as a judicial law clerk for the Honorable James R. Lambden of the California Court of Appeal, 1st District.

The 2013 Kring & Chung Newport Beach Triathlon is Approaching!
The Kring & Chung Newport Beach Triathlon will take place on October 20, 2013 in the Back Bay of Newport Beach, California. The course includes a 1/2 mile swim, 15 mile cycle, and a three mile run.

Visit for more information and to register.