Procedural Posture

Posted by Saim Khan on June 14th, 2021

Petitioner insureds sought a writ of mandate to have respondent, the Superior Court of Los Angeles County (California), restore a Racketeering Influenced Corrupt Organizations Act, 18 U.S.C.S. § 1961, cause of action in petitioners' suit against real party in interest, insurer, for breach of contract, fraud, and bad faith.

Overview: how to calculate paga penalties

Petitioner insureds bought a directors' and officers' liability insurance policy from insurer, real party in interest, which insurer eventually cancelled and offered instead a new policy excluding coverage for losses arising from directors' and officers' attempts to prevent a hostile takeover. Petitioners sued insurer for breach of contract, fraud, bad faith, and eventually added a Racketeering Influenced Corrupt Organizations Act (RICO), 18 U.S.C.S. § 1961 cause of action. The trial court sustained a demurrer to the cause of action and petitioners sought a writ of mandate to restore its cause of action against insurer for the RICO violation. The court found the complaint was specific in pleading fraud; insurer owed petitioners a duty to disclose its intent to cancel the policy upon a hostile takeover attempt; concealment of such intent to cancel for the purpose of obtaining premiums for coverage not actually provided and to place insureds in a disadvantaged bargaining position so higher premiums could be extracted violated the federal mail fraud statute. The court issued the peremptory writ against respondent court to restore the RICO cause of action to petitioners' complaint.

Outcome

The court issued petitioners' peremptory writ of mandate directing respondent to vacate its order sustaining without leave to amend real party in interest's demurrer, and reinstate petitioners' Racketeering Influenced Corrupt Organizations Act (RICO) cause of action because petitioners were deprived of an opportunity to plead their RICO cause of action.