In a legal battle of immense proportions, a California federal judge has refused to discard a crucial bad faith claim in Sempra Energy and its subsidiary Southern California Gas’ settlement coverage suit against CNA unit Continental Insurance Co. The decision was handed down by U.S. District Judge Sunshine S. Sykes, who declared that the companies had credibly argued that Continental’s denial of coverage was unreasonable.
Plausible Argument for Unreasonable Denial
Sempra and SoCalGas are pursuing a remarkable $50 million contribution from Continental, an attempt to gain some reimbursement in the wake of a staggering $1.78 billion natural gas leak settlement. Their contention revolves around their claim that the insurer, Continental, not only inadequately investigated but also denied their claim in bad faith. Court filings substantiate this bold assertion.
While the account of the investigation provided by the companies may seem somewhat fragmented, Judge Sykes held that their allegations sufficiently establish that Continental acted unreasonably in denying coverage. As a result, Judge Sykes ordered Continental to submit a response to the remainder of the second amended complaint by the end of October.
