Aim Insurance Co. v. Culcasi

Decision Date10 April 1991
Docket NumberNo. H006828,H006828
Citation229 Cal.App.3d 209,280 Cal.Rptr. 766
PartiesAIM INSURANCE COMPANY, Plaintiff, Cross-Defendant and Respondent, v. James CULCASI, Defendant, Cross-Complainant and Appellant.
CourtCalifornia Court of Appeals Court of Appeals

Raymond Coates, Geneva Wong Ebisu, Low, Ball & Lynch, Redwood City, for plaintiff, cross-defendant and respondent.

George S. Roberts, Pacific Grove, for defendant, cross-complainant and appellant.

CAPACCIOLI, Acting Presiding Justice.

Statement of the Case

Defendant James Culcasi (Culcasi), dba Rosine's, a restaurant, appeals from a judgment entered after the trial court granted plaintiff Aim Insurance Company's (Aim) motion for summary judgment. He claims the court erred in granting the motion. We affirm the judgment.

Scope of Review

The trial court may properly grant a motion for summary judgment only if there are no triable issues of fact and, as a matter of law, the moving party is entitled to judgment. (Blankenheim v. E.F. Hutton & Co. (1990) 217 Cal.App.3d 1463, 1470, 266 Cal.Rptr. 593.)

The Undisputed Facts

In October 1986, Culcasi hired Noemi Grijalva as a waitress at Rosine's. At that time, Culcasi made health insurance available to his employees. Around July 24, 1986, Grijalva submitted an application for insurance coverage to Culcasi, who accepted it and undertook to forward it to the insurer. According to Culcasi, the application "was entrusted by her to [me] for the purpose of transmitting the same to the group health insurance company and plan administrator." 1

In January 1989, Grijalva sued Culcasi and others, for negligent breach of fiduciary duty, breach of contract, and infliction of emotional distress. In her complaint, she alleged that eligibility for insurance was part of the compensation Culcasi paid his employees, and this potential eligibility induced Grijalva to apply for and accept the job at Rosine's.

She alleged that on July 24, 1987, she filled out an application and gave it to Culcasi. He, in turn, represented that she would be properly enrolled in the health insurance program and undertook the obligation "to insure that her application and documents were promptly and properly forwarded to the health plan and that her premium payment would result in the expected coverage."

Grijalva alleged that she met all the requirements for enrollment in the plan, premiums were deducted from her paycheck, she believed she was so enrolled in the plan, and, as a result, she did not attempt to purchase other health insurance. However, according to Grijalva, Culcasi negligently failed "to properly complete her enrollment in the plan despite his assurances that she was so enrolled." Thereafter, he requested and obtained another application, which he told her to back date to July 24, 1987.

On September 6, 1987, Grijalva was injured in an automobile accident. In late September 1987, the insurer received her second application and enrolled her in the health plan as of October 1, 1987. However, this enrollment date precluded recovery for the injuries she suffered in early September. Thus, she alleged that Culcasi's conduct deprived her of insurance coverage and as a result she had to pay her own medical expenses and suffered great emotional distress.

Culcasi tendered his defense action to Aim, which had issued a liability insurance policy (the Policy) to him. Under it, Aim agreed to "pay on behalf of [Culcasi] all sums which [he] shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies" and to "defend any suit against [Culcasi] seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent[.]"

Aim assumed the defense under a reservations of rights. On April 4, 1989, it filed the instant action, seeking a declaration that it had no potential duty to indemnify Culcasi in the event Grijalva prevailed and no duty to provide his defense. Culcasi answered and filed a cross-complaint seeking a declaration that Aim had a duty to defend and, if necessary, indemnify him.

Thereafter, Aim filed a motion for summary judgment. After a hearing, the trial court granted the motion and entered judgment in favor of Aim. In a minute order, the court explained that any duties Culcasi might have had regarding the handling of Grijalva's medical plan application could only be based on their employment contract, and, therefore, Culcasi would be liable for damages only if he breached this contract. However, the court found that the Policy covered only tort, not contractual, liability. Consequently, Aim had no duty to defend against Grijalva's contract action.

The Trial Court's Rationale

The Policy provided indemnification for amounts Culcasi "shall become legally obligated to pay as damages." Courts have construed this language to limit coverage to tort liability only. (Fragomeno v. Insurance Co. of the West (1989) 207 Cal.App.3d 822, 828, 255 Cal.Rptr. 111; Insurance Co. of the West v. Haralambos Beverage Co. (1987) 195 Cal.App.3d 1308, 1317, 241 Cal.Rptr. 427; Fireman's Fund Ins. Co. v. City of Turlock (1985) 170 Cal.App.3d 988, 997-998, 216 Cal.Rptr. 796; International Surplus Lines Ins. Co. v. Devonshire Coverage Corp. (1979) 93 Cal.App.3d 601, 610-611, 155 Cal.Rptr. 870.) Thus, we agree with the trial court's conclusion that Aim had no duty to defend Culcasi against an action for breach of contract.

However, we disagree with the trial court's conclusion that Grijalva's complaint sounds only in contract. The complaint clearly purports to state a cause of action for negligence, i.e., the breach of a duty of care.

Generally, "[a] person who has not created a peril is ordinarily not liable in tort merely for failure to take affirmative action to assist or protect another, no matter how great the danger in which the other is placed, or how easily he could be rescued, unless there is some relationship between them which gives rise to a duty to act." (6 Witkin, Summary of Cal.Law (9th ed. 1988) Torts, § 858, p. 220, and cases cited there; emphasis in original.) However, there is an exception to this rule based on a voluntary or gratuitous undertaking. (Id., § 868, p. 234, and cases cited there; Bloomberg v. Interinsurance Exchange (1984) 162 Cal.App.3d 571, 575, 207 Cal.Rptr. 853; Schwartz v. Helms Bakery Limited (1967) 67 Cal.2d 232, 238, 60 Cal.Rptr. 510, 430 P.2d 68.)

Particularly instructive here is Valdez v. Taylor Automobile Co. (1954) 129 Cal.App.2d 810, 278 P.2d 91. There, the defendant, a car dealer, advertised that the purchase price of a car would include the cost of a premium on a liability insurance policy for the new owner. (Ibid.) Plaintiff bought a car and informed the salesman he wanted "full coverage insurance to protect myself" and "that covers up the next party in case you have an accident." (Id. at p. 812, 278 P.2d 91.) The salesman said he would obtain this type of insurance and prepared the various documents for the sale and insurance. (Id. at p. 813, 278 P.2d 91.)

The plaintiff was in a car accident, in which others were injured. (Valdez, supra, 129 Cal.App.2d at p. 814, 278 P.2d 91.) They sued, and the plaintiff tendered his defense to the car dealer. It declined, and a money judgment was rendered against the plaintiff. (Ibid.) He then sued the dealer for failing to obtain insurance for him, asserting causes of action for, among other things, breach of contract, negligence, and fraud. (Id. at p. 812, 278 P.2d 91.) The jury apparently rejected plaintiff's contract claim, but nevertheless found in his favor. (Id. at p. 815, 278 P.2d 91.)

On appeal, the car dealer claimed that since the jury found there was no contract to obtain the insurance the plaintiff had requested, it had no duty to procure such insurance; and in the absence of a contractual duty, plaintiff could not recover for the dealer's negligent failure to do so. (Valdez, supra, 129 Cal.App.2d at p. 817, 278 P.2d 91.) The appellate court disagreed, stating, "It is well established that a person may become liable in tort for negligently failing to perform a voluntarily assumed undertaking even in the absence of a contract to do so. A person may not be required to perform a service for another but he may undertake to do so--called a voluntary undertaking. In such a case the person undertaking to perform the service is under a duty to exercise due care in performing the voluntarily assumed duty, and a failure to exercise due care is negligence. Dean Prosser says, '[I]f the defendant enters upon an affirmative course of conduct affecting the interests of another, he is regarded as assuming a duty to act, and will thereafter be liable for negligent acts or omissions,' and 'If the defendant receives the plaintiff's property or papers, and undertakes, without consideration, to obtain insurance, ... he assumes a duty to use proper care in the performance of the task.... In many cases the court has laid stress upon the fact that the plaintiff has relied upon the conduct of the defendant to his damage, and has indicated that this is essential to liability. Notwithstanding an early New York case to the contrary, there is authority that where the defendant has reason to expect such reliance to the plaintiff's detriment, even a mere gratuitous promise will be enough to create a duty, for the breach of which a tort action will lie.' " (Id. at pp. 817-818, 278 P.2d 91; see also Smith v. Minnesota Mut. Life Ins. Co. (1948) 86 Cal.App.2d 581, 585, 195 P.2d 457; Stark v. Pioneer Casualty Co. (1934) 139 Cal.App. 577, 580, 34 P.2d 731; Annot. (1953) 32 A.L.R.2d 487, 511-517, and Later Case Service.)

In this case, Grijalva's complaint alleges that she entrusted her health plan application and supporting documents to Culcasi, who told her she would be properly enrolled in the...

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