January 6, 2012

Ninth Circuit request for Supreme Court answer to insurance law questions

It’s been more than six months since the Ninth Circuit asked the Supreme Court to answer a question of California law under rule 8.548. Until now, that is, when the court filed yesterday’s request from the federal Court of Appeals in Sierra Pacific Power Co. v. Hartford Steam Boiler Inspection and Insurance Co.

According to the Ninth Circuit, the Supreme Court has not ruled, and the California Courts of Appeal are in conflict, on these questions: “1. Whether, under California insurance law, a building ordinance or law exclusion, found in the Perils Exclusions section of a property insurance policy, effectively excludes coverage for increased costs caused by complying with ordinances and regulations if the underlying loss was caused by a covered peril. 2. Whether, under California insurance law, the costs of obtaining building permits or conducting required environmental impact studies are considered costs excluded by a building ordinance or law exclusion, or whether these costs are better considered as part of the replacement cost under the policy.”

One interesting factor is whether the underlying case raises an issue of California law at all. The action arises from the Nevada federal district court, which at least initially decided that the case was governed by Nevada law. A footnote in the Ninth Circuit’s request recognizes this, but concludes, “We find that based upon Nevada’s choice of law provisions, California law applies to the dispute . . . .” I guess the Ninth Circuit didn’t want to first certify the choice-of-law question to the Nevada Supreme Court.

The rules don’t provide a deadline for the Supreme Court to decide whether it will answer a Ninth Circuit request, but the court seems to usually use the petition-for-review timeline as a guide. So, we should see an answer (about whether there will be an answer) by the beginning of March.

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