Chubb/pacific Indemnity Group v. Insurance Co. of North America

• Decision Date: 08 January 1987
• Citation: 188 Cal.App.3d 691,233 Cal.Rptr. 539
• Court: California Court of Appeals Court of Appeals
• Parties: CHUBB/PACIFIC INDEMNITY GROUP, Plaintiff, Cross-Defendant and Appellant, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant, Cross-Complainant and Respondent. B015640.

Page 539

233 Cal.Rptr. 539

188 Cal.App.3d 691

CHUBB/PACIFIC INDEMNITY GROUP, Plaintiff, Cross-Defendant and Appellant, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant, Cross-Complainant and Respondent.

B015640.

Court of Appeal, Second District, Division 5, California.

Jan. 8, 1987.

Fidler & Bell and Michael A. Bell, Los Angeles, for plaintiff, cross-defendant and appellant.

Wise, Wiezorek, Timmons & Wise and Michael J. Pearce and Anthony F. Wiezorek, Long Beach, for defendant, cross-complainant and respondent.

FEINERMAN, Presiding Justice.

This appeal involves four cases which were consolidated for trial. Each of these four consolidated cases concerns an insured physician who purchased primary malpractice insurance, up to a given policy limit, from appellant, Chubb/Pacific Indemnity Group (Pacific Indemnity) and excess insurance, for the same policy period, from respondent Insurance Company of North America (INA). The insured physician was sued for medical malpractice falling within the period of the Pacific Indemnity and INA coverage. Pacific Indemnity appointed an attorney to defend the physician and initially paid the defense costs, but later, while the litigation against the physician was still pending, Pacific Indemnity contacted INA, demanded that INA take over responsibility for the defense of the insured, and offered to pay its policy limit to INA if INA would accede to that demand. INA refused Pacific Indemnity's demands Jury trial of the consolidated cases was waived and the matters were submitted for adjudication by the trial court upon agreed statements of facts and written trial briefs. The agreed statements of facts included the following:

that it take over the defense, citing the relevant provisions from the INA and Pacific Indemnity insurance policies. Pacific Indemnity continued to defend the insured physician until either the case was settled or judgment was entered against the insured, but it brought the present actions against INA, claiming a right to reimbursement from INA for the attorneys' fees and litigation expenses incurred after it made demand upon INA to take charge of the defense.

In the first of the cases, a $437,821 settlement of claims against the parties' mutual insured, Dr. Austel, was reached after trial and the underlying action against Dr. Austel was dismissed on June 2, 1980. On February 8, 1979, during pendency of the litigation, appellant had sent a letter to respondent stating, "[W]e stand ready to cede our full policy limits of $100,000 to your company.... We expect that if you do not accomplish settlement within a reasonable time period, that you will then take over the responsibility for the future defense costs of this action." Appellant incurred $7,534 in defense fees and costs from the time it sent this letter until the case settled.

In the second case, suit was brought against the parties' mutual insured, Dr. Jacques, on October 1, 1971. On November 14, 1979, appellant sent respondent a letter "making available [its] policy limit of $100,000 for settlement purposes." On January 16, 1980, appellant sent a second letter to respondent stating, "if and when a defense verdict is realized, our present offer to extend to INA our $100,000 for settlement purposes shall be deemed immediately withdrawn."

Following a February 11, 1980 jury verdict against Dr. Jacques, judgment was entered against him in the amount of $821,000. Thereafter, Dr. Jacques informed the parties, in writing, that he wished to appeal the verdict against him. Appellant did not feel that an appeal was justified and refused to finance one. Respondent "had reasonable grounds to believe that an appeal was justified...." Respondent paid Dr. Jacques' legal fees and costs on appeal. The judgment against Dr. Jacques was affirmed on appeal. Respondent thereupon made demand upon appellant for payment of $133,632.02 to the plaintiff in the Jacques lawsuit, representing appellant's policy limit of $100,000, the plaintiff's trial costs of $8,293.20, post-judgment interest thereon, and the plaintiff's costs on appeal of $4,561.37. Appellant paid $108,293.20, the policy limit, plus the plaintiff's trial costs, but refused to pay post-judgment interest or costs on appeal.

Respondent paid these amounts to the plaintiff in the Jacques action in satisfaction of the judgment against Dr. Jacques. Respondent then filed a cross-complaint against appellant in the within action to recover $4,561.37, the plaintiff's costs on appeal in the Jacques action, $20,877.45, post-judgment interest in the Jacques action, and $24,462 representing attorneys' fees and expenses on appeal incurred on behalf of Dr. Jacques.

In the third of the consolidated actions, suit was brought against the parties' insured, Dr. Innes, on April 20, 1976. On February 28, 1979, appellant sent respondent a letter "ceding our $300,000 policy limit to your company on the above file.... As we discussed ... your company intends to try to negotiate a structured settlement on this case.... Since we are ceding our policy limits to you and thereby the control of this case, we are hereby asking that your company also take over the future defense costs on this matter, effective March 1, 1979." Respondent, by letter, denied any obligation to assume defense of Dr. Innes. The Innes case was tried and resulted in a jury verdict in favor of Dr. Innes on January 17, 1980. Appellant incurred $45,472.74 in attorney's fees and costs in defending Dr. Innes between March 1, 1979 and the date its file in the case was closed.

In the fourth of the consolidated cases, Ford Motor Company sued the parties' insured, Dr. Huston, on October 9, 1979, for indemnification for damages which Ford Motor Company had been ordered to pay to James Hasson in a separate lawsuit for personal injuries and which Ford Motor Company claimed were the result of medical malpractice by Dr. Huston.

On October 18, 1983, appellant sent respondent a letter making available its policy limit of $100,000 for settlement purposes and sought clarification of whether respondent preferred that appellant tender the policy limit directly to Ford Motor Company. The letter further requested that respondent assume complete defense of Dr. Huston. Respondent refused to do so. The suit against Dr. Huston was awaiting trial at the time the instant lawsuit was submitted for adjudication. Appellant had incurred legal fees and expenses of $49,668.78 as of the date the agreed statement of facts was prepared.

Each of the Pacific Indemnity policies involved in the present litigation includes the following pertinent provisions: "Defense, Settlement, Supplementary Payments [p] As respects the insurance afforded by the other terms of the policy, as evidenced by this certificate, the company shall: [p] (a) defend in his name and behalf any suit against the insured alleging such damages, even if such suit is groundless, false or fraudulent, but the company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient provided, however, no claim or suit shall be settled without the written consent of the individual named insured whose rendering of or failure to render professional services either by himself or through an assistant caused the injury alleged; .... [p] (c) pay all expenses incurred by the company, all costs taxed against the insured in any such suit and all interest accruing after entry of judgment until the company has paid, tendered or deposited in court such part of such judgment as does not exceed the limit of the company's liability thereon;.... [p] The amounts incurred under this insuring agreement, except settlements of claims and suits, are payable by the company in addition to the applicable limit of liability of the policy." (Emphasis added.)

Each of the INA policies involved in this litigation contains the following pertinent provisions: "C. The insurance afforded by this certificate shall follow that of the primary insurance except: [p] (1) anything in this certificate or the primary insurance to the contrary notwithstanding, INA shall not be obligated to assume charge of the settlement or defense of any claim or suit...