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National Union Fire Ins. Co. v. Cambridge Integrated Services (2009)

February 11, 2009

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In this appeal, Horvitz & Levy LLP represented National Union, which provides workers comp excess insurance to Bank of America. 

Bank of America hired a third-party claims administrator, Cambridge, to administer the bank’s workers comp claims. Cambridge mishandled one of those claims, authorizing an unnecessary surgery for an injury that was not even covered by workers comp. The surgery went badly and the claimant was paralyzed. National Union ended up paying over $1 million on that claim. It sued Cambridge alleging various legal theories of recovery, but the trial court sustained Cambridge’s demurrer, ruling that Cambridge had no duty to National Union under any legal theory.

The California Court of Appeal reversed. It ruled that the complaint alleged sufficient facts to support causes of action for negligence, breach of contract (on a third-party beneficiary theory), and equitable subrogation. In particular, the court focused on the facts that: (a) Cambridge contracted to adjust all of Bank of America’s claims, including the claims that exceeded the bank’s self-insured retention, and (b) Cambridge continued adjusting claims after they exceeded the self-insured retention, and reported to National Union about those claims.

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