And where there's no fire contamination, there's no physical injury under the policy at issue in Shirley v. Allstate Ins. Co., ___ F. App'x ___, No. 19-56066, 2020 WL 5991156 (9th Cir. Oct. 9, 2020) (case involves California substantive law).
While the policy at issue, apparently a homeowner's policy, covered fire contamination there was no evidence in the record of fire contamination.
In the trial court, there was evidence from four different inspections of the policyholders' home. Four inspectors from three different outfits examined the policyholders' home. They took samples. Not one of them found any evidence of fire contamination, "including soot and ash." Shirley, 2020 WL 5991156, at *1.
There was evidence in the record, however, of excluded coverage for loss caused by "vapors" or "fumes." Shirley, 2020 WL 5991156, at *1.
On this record, the appellate court affirmed the trial court's summary judgment of no coverage.
That holding resolved the policyholders' claim for insurance bad faith as well. The policyholders correctly argued, as the appellate court observed, that a covenant of good faith and fair dealing is implied under California law in every insurance contract. Shirley, 2020 WL 5991156, at *1.
However, both the trial court and the appellate court nonetheless followed California State law that where there is no insurance coverage, there is no insurance bad faith in such a case as this. Shirley, 2020 WL 5991156, at *1.
The implied covenant of good faith and fair dealing in every contract including insurance contracts is discussed in 1 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 1.01 (Thomson Reuters West 3d ed. & 2020 Supps); holdings that where there is no insurance coverage, there is no insurance bad faith are addressed in id., Volume 1, § 3:28 (third-party cases), and in id., Volume 2, §§ 9:1 & 9:14 (first-party cases, such as the Shirley case).
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