Ninth Circuit Sanctions Lawyer for Repeating Previously Rejected Coverage Arguments

    The Ninth Circuit affirmed the district court's ruling against the insured and imposed sanctions on the insured's lawyer for pursuing a coverage argument the court had previously rejected. Uyanik v. Wawanesa General Insurance Co., 2023 U.S. App. LEXIS 31642 (9th Cir. Nov. 30, 2023).

    The Ninth Circuit affirmed dismissal of Uyanik's breach of contract claim. The claim was grounded in the incorrect assertion that California law required insurers to cover all losses, including diminution of vehicle value and loss of vehicle use because policy exclusions were "void and unenforceable under California law as against public policy and contradict the statutes passed by the California Legislature." This was a meritless argument because insurers had to a right limit policy coverage and could limit the nature of the risk they undertook to assume.

    Uyanik's tort and stautory claims were all grounded in fraud, making them subject to Rule 9 (b)'s heightened pleading standard. Uyanik's conclusory assertion that Wawanesa "marketed, advertised, and sold its policy as 'Insurance'" but "did not intend to indemnify insureds such as [Uyanik] for all loss, damage, or liabiltiy as required by California law" did not meet Rule 9 (b)'s pleading standard. Uyanik failed to plead specific details of fraud in his complaint. Dismissal of these claims was also affirmed. 

    Finally, the court granted Wawanesa's motion for sanctions. Fed. R. App. Proc. 38 permited the court to award just damages if an appeal was frivolous. An appeal was considered frivolous when the result was obvious  or the appellant's arguments were wholly without merit. Uyanik's counsel had filed multiple cases in state and federal court advancing the same unsuccessful legal theory advanced here – that insurance policies in California were requried to cover dimninution of vehicle value and other losses. The attorney should have known that the legal claims and arguments that he asserted were frivolous based on the prior cases that he had handled. Therefore, the attorney was ordered to pay $5,000 to Wawanesa.