Renewal of Judgments in California where Debtor files for Bankruptcy Protection

by Michael Papuc

Attorney at Law

44 Montgomery Street, Suite 2405

San Francisco, California 94104

415-773-1755

Michael.Papuc@gmail.com

San Francisco Attorney Michael Papuc represents clients in collection and bankruptcy proceedings.

Under California law, a judgment can be enforced for 10 years from date of judgment, and can be renewed for subsequent 10 year periods, so long the judgment is renewed prior to expiration. (Code Civ. Proc. secs. 683.120(b), 683.150(a).)

When a judgment debtor files for bankruptcy protection, the automatic stay applicable to bankruptcy proceedings enjoins "commencement or continuation" of most debt enforcement proceedings, including "any act to create, perfect or enforce any lien" against the debtor's estate. Since federal bankruptcy law supersedes conflicting state law, judgment renewals are automatically stayed upon the debtor's filing of a bankruptcy petition. Thus, absent an applicable exception to or termination of the automatic stay (e.g., bankruptcy case is closed), the judgment creditor must obtain relief from the automatic stay before proceeding. (11 USC § 362; In re Lobherr (BC CD CA 2002) 282 BR 912, 915–916 (judgment renewal was continuation of proceeding against debtor under 11 USC § 362(a)(1).)

Where the 10–year enforcement period would otherwise expire during the automatic stay, the period is extended until 30 days after notice of termination or expiration of the automatic stay. (11 USC § 108(c); In re Spirtos (9th Cir. 2000) 221 F3d 1079, 1080–1082; In re Hunters Run Ltd. Partnership (9th Cir. 1989) 875 F2d 1425, 1428–1429.) Thus, if the 10 year period to renew the judgment expired during the course of the bankruptcy proceedings, the judgment creditor has only 30 days after termination of the automatic stay in bankruptcy re-new the judgment.

California Supreme Court upholds trial court's exclusion of expert testimony on speculative damages

by Michael Papuc

Attorney at Law

44 Montgomery St., Suite 2405

San Francisco, CA 94104

415-773-1755



San Francisco Attorney Michael Papuc has been practicing business litigation in California since 1987. Attorney Michael Papuc represents small businesses in complex litigation matters. The following is a summary of a recent California Supreme court case which upheld the exclusion of expert witness testimony on the grounds that the testimony was about speculative damges.

In Sargon Enterprises, Inc. v. University of Sothern California (11/26/12) No. S191550

a small dental implant company sued USC, which contracted with dental implant company to perform clinical testing on a new implant the company developed and patented. The company sought lost profits of between $200 million and $1 billion. The company claimed that but for USC’s breach of contract, the company would have been a world-wide leader in the dental implant industry. At trial, the trial court excluded the dental implant company’s expert witness on the grounds that his testimony on damages would have been speculative. The California Supreme Court affirmed, stating:

"This case is like Parlour Enterprises, supra, 152 Cal.App.4th 281. Except for Skorheim's belief that, like the Big Six and unlike the rest of the smaller companies, Sargon was innovative, Sargon was dissimilar to all of the Big Six. As the trial court noted, "Sargon is not similar to the industry leaders by any relevant, objective business measure." Skorheim did not base his lost profits estimates on any objective evidence of "past volume of business" or any "other provable data relevant to the probable future sales." (Grupe v. Glick, supra, "26 Cal.2d at p. 692.) {Slip Opn. Page 38} Instead, as the trial court further noted, Skorheim's lost profit projections were "wildly beyond, by degrees of magnitude, anything Sargon had ever experienced in the past."

. . .

"An accountant might be able to determine with reasonable precision what Sargon's profits would have been if it had achieved a market share comparable to one of the Big Six. The problem here, however, is that the expert's testimony provided no logical basis to infer that Sargon would have achieved that market share. The lack of sound methodology in the expert's testimony for determining what the future would have brought supported the trial court's ruling."


"...The trial court properly acted as a gatekeeper to exclude speculative expert testimony. Its ruling came within its discretion...."

The case was remanded to the trial court for further proceedsings consistent with this opinion. This case highlights the difficulty in calculating and presenting a damages claim on a new product which has not reached the market.

Good Faith Reliance on Advice of Counsel is a High Risk Defense Available to a Debtor who is Challenged on his or her Bankruptcy Filing

San Francisco Attorney Michael Papuc represents debtors and creditors in bankruptcy proceedings.

A debtor’s goal in filing for bankruptcy is to obtain a discharge of his or her debts. It is very important that the debtor be honest and forthright in completing bankruptcy papers, including the Petition, Schedules of Property Owned or Leased, Statement of Financial Affairs, including providing complete and accurate information of all Income and Expenses. The Debtor will be questioned under oath at the meeting of creditors. Failure to provide honest answers to questions posed in writing or orally under oath may result in denial of discharge, and possible criminal prosecution. Very often, the debtor will rely on his or her attorney’s advice in providing answers. When doing so, the debtor must act in good faith in dealing with his or her attorney, by providing complete information to the attorney, so that the attorney may properly advise the debtor on how to answer anticipated questions.

Under 11 U.S.C. § 727(a)(4), a debtor can be denied a discharge if it is proven by a preponderance of the evidence that the debtor made a false statement under penalty of perjury, that it was made knowingly and fraudulently, and that it was with respect to a material fact.

Sometimes the debtor will rely on the defense of good faith reliance on advice of counsel, in an attempt to negate the claim that the debtor knowingly and fraudulently made false statement under penalty of perjury. This is a high risk move, because the entire file of the debtor’s attorney, including all confidential communications between the attorney and client (debtor), becomes discoverable by the trustee or creditor bringing the adversarial proceeding.

The case of In re Adeeb, 787 F.2d 1339, 1343 (9th Cir. 1986) states:"Generally, a debtor who acts in reliance on the advice of his attorney lacks the intent required to deny him a discharge . . . However, the debtor’s reliance must be in good faith."

Thus, for a debtor to prevail on this defense, he or she must provide all information in debtor’s possession, custody or control which would be sufficient for the attorney to provide appropriate advice on what to write in the bankruptcy papers, or provide appropriate advice on what to testify to during the course of proceedings. If the debtor fails to provide complete information to his attorney, the defense good faith reliance on advice of counsel will fail.

Employer Liability for Inducing Prospective Employee to Change Residence under Fraudulent Pretenses

San Francisco Attorney Michael Papuc represents employers and employees in employment lawsuits.

In California, it is unlawful for an employer to induce an employee to change residences to change jobs under false pretenses. (Labor Code, sec. 970) If the employee proves her case, the employer will be liable for double damages. (Labor Code, se. 972.)

Further, this conduct is a misdemeanor, punishable by fine or imprisonment. (Labor Code, sec. 971.)

Landlords must provide reasonable accommodations to disabled tenants

Attorney Michael Papuc represent landlords and tenants in eviction matters in San Francisco.

Landlords must make reasonable accommodations to tenants who are disabled under the Fair Housing Act. Unlawful discrimination under the FHA includes "a refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford [handicapped] person[s] equal opportunity to use and enjoy a dwelling ... "[42 USC § 3604(f) (3)(B) (brackets added); see Gamble v. City of Escondido (9th Cir. 1997) 104 F3d 300, 307—statute requires "reasonable accommodation" for housing, not health care facilities; Giebeler v. M & B Assocs. (9th Cir. 2003) 343 F3d 1143, 1146–1147— landlords have affirmative duty under FHA to reasonably accommodate disabled persons' needs with regard to physical accommodation as well as administrative rental policies; Shapiro v. Cadman Towers (2nd Cir. 1995) 51 F3d 328, 333–334 (modification of landlord's first-come/first-served parking assignment policy to accommodate tenant suffering from multiple sclerosis); see also McGary v. City of Portland (9th Cir. 2004) 386 F3d 1259, 1263–1264—homeowner with AIDS stated "reasonable accommodation" claim against City for denying request for additional time to clean yard to comply with nuisance abatement ordinance and putting lien on house to pay for clean-up]

A question arises where a disabled tenant is terrifying other tenants in the building. When the tenant is committing a nuisance, the landlord has a right to evict the tenant. A landlord has a duty to provide quiet enjoyment of the premises to tenants who rent from the landlord. When a tenant disturbs the other tenants, by creating a nusiance, the landlord has an affirmative duty to correct the problem, even if correction may require the landlord to evict a disabled tenant. "[T]he covenant of quiet enjoyment requires a reasonable response by the landlord, which may include conducting an investigation and thereafter, taking appropriate action, which may include, inter alia, the issuance of a warning to the offending party, the pursuit of injunctive relief against the tenant to enjoin the violation, or, if necessary, the commencement of eviction proceedings." [Andrews v. Mobile Aire Estates, supra, 125 CA4th at 584, 597.]

Landlords' Ability to Evict Tenant from Illegal unit in San Francisco

by Michael Papuc

Attorney at Law

44 Montgomery Street, Suite 2405

San Francisco, California 94104

415-773-1755

Michael.Papuc@gmail.com

Attorney Michael Papuc represents landlords and tenants in eviction proceedings in San Francisco

Many landlords in San Francisco are subject to the San Francisco Rent Control Ordinance and accompanying regulations. Sometimes landlords rent out in-law units, which never received building permits, and are cited by the Department of Building Inspections to either legalize th unit or demolish it. In such instance, the landlord often evicts a tenant living in the illegal unit.

San Francisco Administrative Code, sec. 37.9(a)(10), allows a landlord to evict under the following circumstances:

"The landlord seeks to recover possession in good faith in order to demolish or to otherwise permanently remove the rental unit from housing use and has obtained all the necessary permits on or before the date upon which notice to vacate is given, and does so without ulterior reasons and with honest intent; ..."

A problem arises when the landlord evicts the tenant, does not legalize the unit and rents out to another tenant. In such instance, the eviction of the prior tenant becomes wrongful.

Under the San Francisco Rent Board Rules and Regulations, Rule 1.20,

"‘Wrongful Eviction’ means the serving of a notice to quit a rental unit, the making of a demand for possession of a rental unit, or the prosecution of an Unlawful Detainer action in violation of the Ordinance."

A tenant who brings a wrongful eviction against a landlord in San Francisco, who is subject to the Rent Control Ordinance, may make a claim for treble damages and attorneys fees. (San Francisco Administrative Code, sec. 37.9(f).)

A landlord who is cited by the Department of Building Inspections for illegal unit, should either legalize the unit, demolish the unit, or take the unit off the rental market under the Ellis Act.

Lessons learned from the Oakland Hills Fire Storm

Lessons learned from the Oakland Hills Fire Storm

Changes in Guaranteed Replacement Cost Policies

Things Policy Holders need to Consider

by Michael Papuc

Attorney at Law

44 Montgomery Street

Suite 2405

San Francisco, CA 94104

In October, 1990, the Oakland Hills fire storm destroyed over 2000 homes. Most insurers provided guaranteed replacement cost policies to the homeowners, with replacement cost coverage for personal property based on a percentage of the homeowners limits. Insurance Commissioner John Garamendi pressured insurers to re-write policies in place at the time of the fire-storm to provide guaranteed replacement cost coverage.

The guaranteed replacement cost policies guaranteed enough insurance to replace the home, regardless of the property damage limits in the policy. The limits were for the most part set by the insurer, after an inspection of the home, to make certain enough premiums were generated to cover the losses.

This practice was based on the assumption that only one or a few homes would be destroyed at a time. The cost to replace would be based on available market data for material and labor at the time of issuance of the policy. Many policies would have inflation guard, which would increase policy limits based on rate of inflation each year..

What the insurance carriers and homeowners did not anticipate was that in a firestorm destroying 2000 + homes, the demand for materials and labor will by far out-strip supply, and the cost to rebuild will be delayed, and increase substantially, often more than 100% of what the carrier anticipated to be the cost of the loss. There are only so many contractors, lumber yards, tool rental establishments, and hardware stores in a given area.

After the Oakland Hills fire, carriers began issuing new policies providing limits on coverage, and sometimes increasing the limits by as much as 50%.

Often, the insurance agents, who were looking at the potential loss of business, would represent to the policyholder to not worry about the change, because the insurer inspects the home and determines the amount it will cost to rebuild. This gives the insured the false impression that no matter what happens, there is enough policy limits to replace the home.

Another issue to be of concern is that the Additional Living Expense coverage is limited to one year, meaning that the house must be rebuilt within one year, or the insured is on the hook for additional costs of substitute housing beyond that time, while at the same time paying a mortgage on their home. When there is a shortage of labor and materials as a result of a fire-storm, there is a likelihood of exceeding the one year period for Additional Living Expense Coverage.

There should be a debate over gun control laws in light of Connecticut shootings

by Michael Papuc, Attorney at law

The shooting yesterday in Connecticut, killing 28 people, including 20 six and seven year olds is horrific. Gabby Giffords in Arizona, with a federal Judge, the Dark Knight movie slayings, Columbine. The common thread is unstable people and easy access to guns. There should at least be a waiting period to check out the buyers of guns, as well as a database of gun buyers, and what types of firearms they have purchased in the past.

Attorney Michael Papuc represents Students in Actions against School Districts

San Francisco Attorney Michael Papuc represents students in injury cases against School Districts

Attorney Michael Papuc represented a first grade special education student who was digitally molested in the school yard of a public school, by a student in her special education class, and was held back by other students in her class. The molestation occurred in the school yard during lunch, in an area away from the general population of students, under an outside stair case. Mr. Papuc claimed the school district was at fault for failure to monitor the area where the molestation occurred, and failure to provide a safe learning environment. Before the molestation incident, the girl who was harmed had been the subject of choking and other physical harm in the special education classroom. There were also kissing incidents in the classroom, discussions of sex in the classroom, attempts by boys in the class to force the girl into a bathroom stall, an incident in the class where a boy took out his penis to show the girl who was molested.

The case settled after the girl underwent an examination by a psychiatrist chosen by the school district. The school district attempted to place blame on molestation on an adult in the girl’s family. The school district’s child psychiatrist admitted that the type of molestation the girl was subjected to was child-on-child.

In these types of cases, police need to be notified as soon as the incident occurs, the child needs to be examined by CASARC (Child and Adolescent Sexual Abuse Resource Center) or similar agency, the child’s attorney will need to get as many witness statements as possible. The school nurse’s records are also very important. The attorney will need to retain appropriate experts, including school district standard of care expert, psychiatrist, neuro psychologist and pyschologist, to conduct appropriate testing of the child, and damages expert.

Attorney Michael Papuc represents policy holders in claims to have their policies re-witten to reflect the mutual intention of the parties. Insurance Contracts can be re-written (reformed) to include representations of coverage by captive agents of the carrier

by Michael Papuc

Attorney at Law

44 Montgomery St., Suite 2405

San Francisco, CA 94104

415-773-1755



San Francisco Attorney Michael Papuc has been practicing Insurance litigation in California since 1987. Attorney Michael Papuc represents policy holders ("insureds") in lawsuits against their insurance companies for bad faith claims handling.

When a claim is presented to an insurance carrier, the carrier will always rely on the terms of the written insurance contract. Some carriers have captive agents, who work only for a single insurance company, such as State Farm or Allstate. Often when the carrier undertakes to change policy language, resulting in reduction in homeowners coverage, the captive agent undertakes sales spin, promising that this is not a big deal because the insurer has its own people inspect the home, to make sure there are enough policy limits to cover the home int he event of total loss, even though the written insurance policy will say otherwise. Keep in mind that the captive agent is the agent of the insurance carrier, and not the gent of the policy holder insured. The representations of the captive agent will often bind the insurance carrier, and are subject to the insurance company’s duties to the insured.

This is where the law of reformation comes in. Reformation is an equitable remedy that allows a court to alter or rewrite a written agreement which fails to conform to the parties’ oral or other prior agreement as the result of fraud or mistake. Civil Code, sec, 3399 states as follows:

"When, through fraud or a mutual mistake of the parties . . . a written contract does not truly express the intention of the parties, it may be revised on the application of a party aggrieved, so as to express that intention...."

The California Supreme Court described the purpose of reformation as follows:

"The purpose of reformation is to correct a written instrument in order to effectuate a common intention of both parties which was incorrectly reduced to writing." (LeMoge Electric v. San Mateo County, 46 Cal.2d 659, 663 (1956).)

See also American Home Ins. Co. v. Travelers Indem. Co. 122 Cal.App.3d 951, 963 (1981) (purpose of reformation is "to make a written contract truly express the intention of the parties.") (Emphasis added.)

Civil Code, sec. 3401 provide as follows:
"In revising a written instrument, the court may inquire what the instrument was intended to mean, and what were intended to be its legal consequences, and is not confined to the inquiry what the language of the instrument was intended to be."

The representations of the captive agent, which are binding on the carrier can be construed to be part and parcel of the insurance policy, making the insurer liable for breach of contract, if it denies or withholds benefits of a claim the captive agent said would be fully covered, and liable for bad faith if it can be shown that the carrier unreasonabley withheld insurance policy benefits.

California Supreme Court upholds trial court’s exclusion of expert testimony on speculative damages

by Michael Papuc
Attorney at Law
44 Montgomery St., Suite 2405
San Francisco, CA 94104
415-773-1755
Michael.Papuc@gmail.com


San Francisco Attorney Michael Papuc has been practicing business litigation in California since 1987. Attorney Michael Papuc represents small businesses in complex litigation matters. The following is a summary of a recent California Supreme court case which upheld the exclusion of expert witness testimony on the grounds that the testimony was about speculative damges.

In Sargon Enterprises, Inc. v. University of Sothern California (11/26/12) No. S191550, a small dental implant company sued USC, which contracted with dental implant company to perform clinical testing on a new implant the company developed and patented. The company sought lost profits of between $200 million and $1 billion. The company claimed that but for USC’s breach of contract, the company would have been a world-wide leader in the dental implant industry. At trial, the trial court excluded the dental implant company’s expert witness on the grounds that his testimony on damages would have been speculative. The California Supreme Court affirmed, stating:

"This case is like Parlour Enterprises, supra, 152 Cal.App.4th 281. Except for Skorheim's belief that, like the Big Six and unlike the rest of the smaller companies, Sargon was innovative, Sargon was dissimilar to all of the Big Six. As the trial court noted, "Sargon is not similar to the industry leaders by any relevant, objective business measure." Skorheim did not base his lost profits estimates on any objective evidence of "past volume of business" or any "other provable data relevant to the probable future sales." (Grupe v. Glick, supra, "26 Cal.2d at p. 692.) {Slip Opn. Page 38} Instead, as the trial court further noted, Skorheim's lost profit projections were "wildly beyond, by degrees of magnitude, anything Sargon had ever experienced in the past."
. . .

"An accountant might be able to determine with reasonable precision what Sargon's profits would have been if it had achieved a market share comparable to one of the Big Six. The problem here, however, is that the expert's testimony provided no logical basis to infer that Sargon would have achieved that market share. The lack of sound methodology in the expert's testimony for determining what the future would have brought supported the trial court's ruling."

 "...The trial court properly acted as a gatekeeper to exclude speculative expert testimony. Its ruling came within its discretion...."

The case was remanded to the trial court for further proceedsings consistent with this opinion.

 This case highlights the difficulty in calculating and presenting a damages claim on a new product which has not reached the market.

Misrepresentation of Material Facts to Insurer about a Loss Justifies Denial of Coverage


by Michael Papuc

Attorney at Law

44 Montgomery St., Suite 2405

San Francisco, CA 94104

415-773-1755



San Francisco Attorney Michael Papuc has been practicing Insurance litigation in California since 1987. Attorney Michael Papuc represents policy holders ("insureds") in lawsuits against their insurance companies for bad faith claims handling.

A recent decision by the Second Appellate District, Hodjat v. State Farm Mutual Auto. Ins. Co., Case No. B233996 (October 29, 2012), confirms that a material misrepresentation made by the policy holder during the investigation of a claim justifies denial of coverage, and defeats any claim for bad faith claims handling.

In Hodjat, the insured purchase a damaged 2006 BMW M5 in 2007, which the insured intended to repair and sell. The car was insured with State Farm. The State Farm policy provided: "[t]here is no coverage under this policy if you or any other person insured under this policy has made false statements with the intent to conceal or misrepresent any material fact or circumstance in connection with any claim under this policy."

The car was reported stolen in March, 2009. Numerous inconsistent statements were made by the insured to the insurer during the course of the investigation, which led to the insurer ultimately denying the claim. The appellate court stated:

"Hodjat first told State Farm that he purchased the BMW for $65,000 when he reported the loss. In the affidavit of loss, however, the Hodjats stated they purchased the BMW for $28,000 from Manheim Riverside. In a recorded statement less than a month later, Allen Hodjat claimed they paid between $26,000 and $27,000. Meanwhile, the title documents for the car showed a sale price of $25,000 to $25,199. Hodjat's description of the condition of the car when he bought it also changed dramatically during the course of the investigation. In the recorded statement, he told State Farm that the car was drivable at the time he purchased it, but later he stated that it was not drivable and had to be towed to his business. Hodjat also made inconsistent statements regarding how much it cost to repair the BMW, providing estimates ranging from $1,800 to $5,040 to $8,000 during the course of the investigation. Hodjat's description of when he last saw the BMW and when he discovered it missing also changed each time he spoke with State Farm and the police. Every detail of the Hodjats' claim--from the condition of the car to the cost of the repairs to the discovery of the theft--was riddled with inconsistencies."


The appellate court affirmed summary judgment in favor of State Farm, stating:

"there is no coverage if the policyholder gives false statements regarding the claim. No reasonable jury could find in favor of the Hodjats on State Farm's defense of material misrepresentations. The Hodjats have failed to raise a triable issue of material fact about whether the denial of their claim was justified under the terms of the policy. They have also failed to raise a triable issue about whether State Farm's investigation and denial of the claim was made in bad faith."

Policy holders need to be very careful about what they say about a claim to an insurance company. The insurer will ultimately have an adjuster take a statement from the policyholder, a recorded statement from the policyholder, require the policyholder to produce documents, sometimes require the policyholder to submit to examination under oath, and give the insurer authority to obtain documents from different sources. The policy holder must be as consistent as possible about the facts of the claim. Any inconsistencies can be construed as misrepresentation, which would defeat the claim, and sometimes subject the policy holder to criminal charges for insurance fraud.

H-1B Non-immigrant Employees are Entitled to "Bench Pay" when non-productive status due to Employer decision

by Michael Papuc

Attorney at Law

44 Montgomery Street, Suite 2405

San Francisco, California 94104

415-773-1755

Michael.Papuc@gmail.com



San Francisco Attorney Michael Papuc represents employees in California who have been penalized for leaving their job for a competitor of their former employer. Many of his clients are H-1B non-immigrant employees who have been penalized by former employers for moving to another job. Attorney Michael Papuc has handled cases of employers’ failure to pay the H-1B "bench pay," when the H-1B is in non-productive status due to decision of the employer or failure of the employer to place the H-1B with an on-site client.

Under Federal law, 20 C.F.R. 655.731(c)(7), when an employer brings into the United States an H-1B non-immigrant employee from another country, and has no work for the H-1B, the H-1B non-immigrant employee is entitled to receive his entire wage, calculated as the prevailing wage the employer submits to the Department of Labor. This is commonly known as "bench pay."

There are many "body shops" which bring into the United States computer programers and engineers under H-1B status. The body shops often have company apartments (temporary housing) ready for the H-1Bs, where there may be as many as 5 to 10 people living in a two bedroom apartment until work is found for the H-1B. The employer will then contract out the H-1B to an end client where the H-1B will ultimately work on site. Under 20 C.F.R. 655.731(c)(7), the employer is responsible to pay the H-1B his or her entire wage during all down time periods, not due to fault of the H-1B, including "decision by the employer (e.g., because of lack of assigned work), lack of a permit or license, ...."

A claim for non-payment of wages may be brought to the Department of Labor or in a formal court action. These cases often lend themselves to class action status. However, fear of the H-1Bs of being black-listed by their employers and not being able to find work in the U.S. typically prevents any such action from taking place.

Limitations on Forced Flood Insurance Coverage by Mortgage Holders in California

Michael Papuc
Attorney at Law
44 Montgomery Street
Suite 2405
San Francisco, California 94104
415-773-1755
Fax: 415-723-9703

email:  Michael.Papuc@gmail.com

San Francisco attorney Michael Papuc represents policy holders in lawsuits against their insurance companies for bad faith claims handling.

Many homeowners in California who live near flood zones are faced with prospect of having to purchase flood insurance when the flood maps are re-drawn to place their homes within the flood districts. When this occurs, the mortgage holder typically has a clause in the deed of trust which allows the mortgage holder to require the homeowner to purchase flood insurance.

The National Flood Insurance Program, through private insurers, offers insurance policies for buildings, for contents, and for combined coverage for both structural damage to buildings and loss of contents. A residential building only policy covers up to a maximum of $250,000, while a contents only policy covers up to a maximum of $100,000. The combined coverage policy covers the building up to $250,000 and the contents up to $100,000.


Under California law, the mortgage holder can require the homeowner to purchase insurance to cover the building only up to the amount of debt on the property. "(T)he beneficiary of the deed of trust only has an interest in insurance proceeds ... when his security is impaired. Even then, his interest extends only to the extent of the impairment." (Kreshek v. Sperling (1984) 157 CA3d 279, 282; Washington Mut. Bank v. Jacoby (2009) 180 CA4th 639, 646.) "A mortgagee’s insurable interest under an insurance policy is limited to the amount of the debt." (Washington Mut. Bank v. Jacoby (2009) 180 Cal.App.4th 639, 646-647; Altus Bank v. State Farm Fire & Cas. Co. (C.D. Cal. 1991) 758 F.Supp. 567, 571.)

Thus, if the amount of the outstanding debt on the property is only $100,000, the lender cannot require the homeowner to purchase the maximum amount of insurance of $250,000 allowable under the National Flood Insurance Program. The maximum amount of flood insurance the lender can require the homeowner to purchase in California is the amount of the debt.

When lenders force coverage on a homeowner who is newly placed in a flood zone due to re-mapping, the language of the insurance policy the lender purchases will limit the lender’s recovery to the lender’s insurable interest in the property, which is the amount of debt on the property. This language will be found under the insurance policy’s "Conditions."

Homeowners in flood zones are free to purchase whatever amount of flood insurance they feel comfortable with. However, they are not required under California law to purchase more than the amount of the remaining debt on the mortgage on the property.

Non-Competition clauses in California Employment Agreements

by Michael Papuc
Attorney at Law
44 Montgomery Street, Suite 2405
San Francisco, California 94104
415-773-1755
Michael.Papuc@gmail.com

San Francisco Attorney Michael Papuc represents employees in California who have been penalized for leaving their job for a competitor of their former employer. Many of his clients are H-1B non-immigrant employees who have been penalized by former employers for moving to another job. The non-competition provisions are void and unenforceable, unless (1) necessary to protect trade secrets of the former employer, (2) part of an agreement for the sale of good will of a business, or (3) part of an agreement for dissolution of a partnership.

Business & Professions Code, sec. 16600, states:

"Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void."

In Muggill v. Reuben H. Donnelley Corp., 62 Cal.2d 239, 242-243 (1965), the California Supreme Court held that non-compete clauses in employment contracts are void, unless they are necessary to protect an employer’s trade secrets. The Muggill Court said:

"With certain exceptions not relevant here, section 16600 of the Business & Professions Code . . . invalidates provisions in employment contracts prohibiting employees from working for a competitor after completion of his employment or imposing a penalty if he does so [citations], unless they are necessary to protect the employer’s trade secrets [citations]. . . . . [I]n this case, the provision forfeiting plaintiff’s pension rights if he works for a competitor restrains him from engaging in lawful business and is therefore void." (Id. at 242-243; emphasis added.)

The "certain exceptions" to Section 16600, are set forth in sections 16601 and 16602. There are no other exceptions to Section 16600. That was made clear in by the appellate court in Kolani v. Gulska (1998) 64 Cal.App.4th 402, 406, which stated:

"Business and Professions Code sections 16601 and 16602 permit broad covenants not to compete in two narrow situations: where a person sells the goodwill of a business, and where a partner agrees not to compete in anticipation of dissolution of a partnership. The latter sections reinforce the conclusion that covenants not to compete in contracts other than for sale of good will or dissolution of partnership are void." (Emphasis added.)
Thus, by statute, covenants not to compete are permissible when a person sells the goodwill of a business, and where a partner agrees not to compete in anticipation of dissolution of a partnership. By case law, covenants not to compete are permissible to protect trade secrets of an employer. There are no other exceptions.

Homeowner Insurance Companies may require Insured to submit to Examination Under Oath as Condition to Payment of Claim

by Michael Papuc
Attorney at Law
44 Montgomery St., Suite 2405
San Francisco, CA 94104
415-773-1755
Michael.Papuc@gmail.com


San Francisco Attorney Michael Papuc has been practicing Insurance litigation in California since 1987. Attorney Michael Papuc represents policy holders ("insureds") in lawsuits against their insurance companies for bad faith claims handling. The following is a brief summary of California law concerning an insurer’s right to examine its insured under oath while investigating the claim.

Many property insurance policies (homeowners, earthquake, flood, landlord protection, renters) obligate the policy holer ("insured") to submit to an examination under oath if requested by the insurer in connection with any claim. The examination is normally conducted orally before a court reporter who administers the oath and transcribes the proceeding. A standard examination under oath provision is contained in Insurance Code, sec. 2071: "The insured, as often as may be reasonably required, shall ... submit to examinations under oath by any person named by this company, and subscribe the same ... "

An examination under oath is not a deposition. Depositions occur as part of a lawsuit. However, an examination under oath is similar to a deposition in that it is formal testimony of matters relevant to a claim. An examination under oath can occur before or even after a lawsuit is filed.

Examinations under oath are frequently conducted where a loss is undocumented or the circumstances of the loss are suspicious. The vast majority of losses do not trigger an insurance company to undertake the financial investment to conduct an examination under oath.

Once an examination under oath is requested by an insurer, the insured's submission to an examination becomes a condition precedent to the insurer's obligation to pay the claim. The insurer has the absolute right to require the insured to submit even if its purpose is to gather evidence to defeat the claim. (California Fair Plan Ass'n v. Sup.Ct. (Darwish) (2004) 115 Cal.App.4th 158, 167.)

Moreover, no bad faith action can be maintained because "(t)here can be no unreasonable delay until the insurer receives adequate information to process the claim and reach an agreement with the insureds." (Globe Indem. Co. v. Sup.Ct. (Guarnieri) (1992) 6 Cal.App.4th 725, 731.)

The insurer's right to demand an examination must be exercised in a reasonable manner. (Hickman v. London Assur. Corp. (1920) 184 Cal. 524, 529.) Any objection by the insured as to the reasonableness of the time, place or mode of examination must be timely raised or is waived. (Hickman v. London Assur. Corp., supra, 184 Cal. at 533.) An insured's stalling of a requested exam may be treated as a refusal. (Brizuela v. CalFarm Ins. Co. (2004) 116 Cal.App.4th 578, 588 (insured claimed unavailability on dates requested by insurer and failed for more than 6 months to propose any dates or to respond in a timely manner to insurer's proposed dates.).)

An insured may be required to submit to an examination under oath "concerning all proper subjects of inquiry." (Globe Indem. Co. v. Sup.Ct. (Guarnieri) (1992) 6 Cal.App.4th 725, 731.) Under statutory restrictions (applicable to fire insurance, residential property insurance and residential earthquake insurance (Ins.Code § 790.031)), questioning is limited to information that is "relevant and reasonably necessary to process or investigate the claim." (Ins .Code § 2071.1(a)(2).)

As long as the examination is on proper subjects of inquiry, the insurer's motives are irrelevant and the insured cannot refuse the examination. (Hickman v. London Assur. Corp. (1920) 184 Cal. 524, 530 (expressly approving insurer's right to take EUO, regardless of alleged improper motive).) The privilege against self-incrimination is not ground for refusing the insurer's demand for an examination under oath. (Hickman v. London Assur. Corp., supra, 184 Cal. at 529.)

If an insured fails to submit to an examination under oath reasonably requested by the insurer, or even refuses to answer relevant questions at the examination under oath, the insurer has a right to deny payment of the claim. A policy holder should retain an attorney knowledgeable in the area of insurance bad faith law when requested to submit to an examination under oath by his or her insurer.

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