Walker v. 20th Century Ins. Co.
| Citation | 65 Cal.Rptr.2d 95,56 Cal.App.4th 74 |
| Decision Date | 30 June 1997 |
| Docket Number | No. B104166,B104166 |
| Court | California Court of Appeals |
| Parties | Previously published at 56 Cal.App.4th 74 56 Cal.App.4th 74, 97 Cal. Daily Op. Serv. 5250, 97 Daily Journal D.A.R. 8460 Patricia A. WALKER, Plaintiff and Appellant, v. 20TH CENTURY INSURANCE COMPANY, Defendant and Respondent. |
Law Offices of Frederick H. Bysshe, Jr., Frederick H. Bysshe, Jr. and Terence Geoghegan, Ventura, for Plaintiff and Appellant.
Horvitz & Levy, Lane J. Ashley and David S. Ettinger, Encino, Sedgwick, Detert, Moran & Arnold and Kathleen Caswell Vance, Los Angeles, for Defendant and Respondent.
Plaintiff, Patricia A. Walker, appeals from a judgment in favor of defendant, 20th Century Insurance Company, after a court trial on a complaint for breach of the implied covenant of good faith and fair dealing and negligence. The issue in this appeal is whether the trial court properly concluded defendant was not required to pay that portion of an excess judgment involving attorneys fees imposed against one of its insureds. The fees had been awarded to plaintiff pursuant to CODE OF CIVIL PROCEDURE SECTION 1021.41 in an underlying lawsuit against one of defendant's policyholders based upon the fact the insured had been convicted of felony driving under the influence of alcohol. (Veh.Code, § 23153.) The insured's estate assigned its rights to sue defendant, the insurer, for a breach of the covenant of good faith and fair dealing to plaintiff. We conclude a convicted felon, in this case defendant's insured, may not recover attorney fees imposed in an underlying action pursuant to section 1021.4 as an element of damage pursuant to Civil Code section 3333 in a subsequent suit against an insurer for a breach of the implied covenant of good faith and fair dealing. We are in complete accord with the experienced and knowledgeable trial judge's conclusions in this regard and affirm the judgment.
In the complaint, plaintiff alleged she was the assignee of defendant's insured, Sydney Jane Allen, who was at fault in a high-speed collision. Ms. Allen ran a red light and hit plaintiff's car on February 17, 1987. At the time of the accident, Ms. Allen was intoxicated with a blood alcohol level of .26%. Defendant provided liability coverage for bodily injury limited to $100,000 per person for damages arising out of the vehicle Ms. Allen was driving. On January 14, 1988, plaintiff sued Ms. Allen and Michelle Belvedere, the owner of the car. The action resulted in a judgment entered against the estate of Ms. Allen for $455,037.88. Ms. Allen, defendant's insured, had died after the action was filed.
Prior to January 14, 1988, defendant had the opportunity for six months to settle all of plaintiff's claims within the $100,000 policy limits. It was alleged defendant repeatedly and unreasonably refused to accept the policy-limit settlement offers. Defendant had more than sufficient information to evaluate the liability and damages of the case. In the cause of action for breach of the implied covenant of good faith and fair dealing, plaintiff alleged that, notwithstanding the information, defendant breached its duty to its insured, Ms. Allen, by failing to advise her of: the potential for an excess judgment; the resultant conflict of interest; and the availability of independent counsel. Defendant failed to initiate any settlement negotiations and unreasonably rejected and refused plaintiff's repeated policy-limits settlement offers. Plaintiff also claimed defendant negligently and carelessly failed to promptly investigate and process the insured's claims.
Ms. Allen, who was being treated for cancer, died on August 13, 1988. She had only personal assets and the potential cause of action against her insurer for a bad faith violation of the implied covenant of good faith and fair dealing occasioned by its refusal to settle her case. Thereafter, Richard T. Sykes was named as the administrator of Ms. Allen's estate in a probate action.
On March 18, 1992, a judgment in the amount of $455,037.88 was entered against Ms. Allen's estate. As a partial satisfaction of judgment, defendant paid the sum of $100,000 plus interest of $4,411.40 to plaintiff. Defendant made an additional payment of $11,383.38 plus interest of $633.36, to plaintiff when it paid a portion of her costs. Defendant refused to make any additional payments to satisfy the judgment the balance of which was $343,654.50. The complaint alleged that defendant's breach of its duties to its insured, Ms. Allen, during her lifetime caused her estate to be liable for the unpaid judgment plus interest.
The matter proceeded to a court trial on the following stipulated facts. At the time of the accident, Ms. Allen was a permissive driver of an automobile owned by Ms. Belvedere. Ms. Allen entered the intersection illegally against a red light in violation of Vehicle Code section 21453. She had been involved in another accident earlier in the evening where the car she was driving struck another automobile. She left the scene of the accident. Ms. Allen had been involved in another accident on August 14, 1986, when a car she was driving struck another automobile. She was charged with driving under the influence in connection with that accident and was convicted of reckless driving. At the time of the accident in this case, Ms. Allen was an additional insured under the terms of the policy issued by defendant to Ms. Belvedere. Plaintiff, whose vehicle was struck on the driver's side door, suffered serious injuries. Ms. Allen suffered only minor injuries.
By no later than April 1, 1987, defendant obtained a copy of the police report of the accident which reported that Ms. Allen caused the collision when she drove through a red light at a high rate of speed when she had a blood alcohol level above the legal limit. Ms. Allen was arrested for and convicted of driving while under the influence in violation of Vehicle Code section 23153. On May 1, 1987, defendant received a letter from plaintiff's uncle, David Walker, who was a lawyer, dated April 20, 1987. On June 24, 1987, defendant received another letter from Mr. Walker dated June 19, 1987, in which he made an offer to settle plaintiff's claims against Ms. Allen and Ms. Belvedere for $100,000, which was within the limits of the automobile liability insurance policy. On August 27, 1987, defendant received from Mr. Walker an authorization signed by plaintiff for defendant to inspect and copy her employment and medical records. On September 10, 1987, defendant received a letter dated August 31, 1987, from Mr. Walker, reiterating plaintiff's offer to settle within the $100,000 policy limits. Another offer to settle was made by letter dated December 21, 1987, which defendant received on December 30, 1987. Prior to January 14, 1988, defendant did not communicate to Mr. Walker or any other person any acceptance of the offers to settle.
After plaintiff filed the underlying action on January 14, 1988, the offer to settle within the policy limits was withdrawn and defendant engaged counsel to represent Ms. Allen, the insured, and Ms. Belvedere. On March 18, 1992, after a jury trial, judgment was entered against Ms. Allen's estate for $335,000. On April 3, 1992, plaintiff filed a memorandum of costs requesting in part, attorney fees pursuant to section 1021.4 in the amount of $111,655.50. The motion was opposed on the grounds the amount requested was unreasonable. The trial court granted the motion and awarded the attorney fees pursuant to section 1021.4, based on the conviction for driving under the influence of alcohol. On February 11, 1994, Mr. Sykes, the administrator of Ms. Allen's estate, assigned certain causes of action to plaintiff. The estate's claims were premised on the defendant's failure to settle within the insurance policy limits. Further, it was agreed plaintiff would not execute on any property of the estate. Plaintiff further agreed to pay Ms. Allen's estate 15% of the gross amount of any recovery from defendant.
The parties stipulated that defendant's failure to accept the policy limit demands was a breach of the covenant of good faith and fair dealing. They further agreed that defendant was liable for all damages legally caused by the failure to settle unless the doctrine enunciated in Shapero v. Allstate Ins. Co. (1971) 14 Cal.App.3d 433, 439, 92 Cal.Rptr. 244 applied to the facts of the case. The parties previously settled plaintiff's claim for $305,000. The settlement did not include the $111,655.50 in attorney fees awarded pursuant to section 1021.4.
The parties asked the trial court to determine whether: (1) the Shapero doctrine defeated the action for bad faith and negligence; (2) plaintiff can recover under a negligence cause of action; and (3) plaintiff is entitled to recover the underlying attorney fee award from the insurer. The trial court entered a judgment in favor of defendant. 2 Relying on Baker v. Mid-Century Ins. Co. (1993) 20 Cal.App.4th 921, 924-925, 25 Cal.Rptr.2d 34, the trial court determined plaintiff was not entitled to recover attorney fees from the insurer because they had been awarded pursuant to section 1021.4. Plaintiff's theory, which was rejected by the trial judge, was that an award for the unpaid section 1021.4 attorney fees was a permissible item of damages under Civil Code section 3333 because the instant action was not based on the contract of insurance. Rather, plaintiff reasoned, the present suit was based on the intervening unreasonable conduct of the insurer in refusing to settle which led to both the excess judgment and the award of attorney fees. Plaintiff filed a timely appeal from the judgment.
Because the case was decided on the basis of undisputed facts...
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Walker v. 20th Century Ins. Co.
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