Calhoun v. State Farm Mut. Auto. Ins. Co., No. 23588

• Court: California Court of Appeals
• Writing for the Court: AGEE; SHOEMAKER, P.J., and TAYLOR
• Citation: 62 Cal.Rptr. 177,254 Cal.App.2d 407
• Parties: Lucille CALHOUN, Plaintiff and Respondent, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a corporation, Defendant and Appellant. Civ.
• Decision Date: 18 September 1967
• Docket Number: No. 23588

Page 177

62 Cal.Rptr. 177 254 Cal.App.2d 407 Lucille CALHOUN, Plaintiff and Respondent,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a corporation, Defendant and Appellant. Civ. No. 23588. Court of Appeal, First District, Division 2, California. Sept. 18, 1967.

[254 Cal.App.2d 408] Berry, Davis, Lewis & McInerney, Samuel H. Berry, Phillip S. Berry, Oakland, for appellant.

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Newman, Marsh & Furtado, Hayward, for respondent.

AGEE, Associate Justice.

In this declaratory relief action the defendant-insurer appeals from a judgment in favor of the widow of its named insured, Carl M. Calhoun. ¹

Mr. Calhoun died on April 29, 1963 from injuries received on April 20, 1963 in a collision in New Mexico between an automobile driven by him and one driven by James Bach, also killed in the same accident.

[254 Cal.App.2d 409] The insurer had issued an automobile liability insurance policy on the Calhoun automobile containing the usual uninsured motorist coverage as provided for by Insurance Code section 11580.2, ² with liability for the death of one person limited to $10,000. Bach's liability insurance policy was issued by an out-of-state insurer and was limited to $5,000 for the death of one person.

While in Tucumcari, New Mexico, making arrangements with a mortician, Mrs. Calhoun met with the insurer's representative and filled out a form report for him.

After returning home, Mrs. Calhoun consulted with her personal attorney regarding recovery of damages for the death of her husband. The attorney caused an investigation to be made as to whether Bach, who lived in Texas, left any estate.

In July, 1963, Mrs. Calhoun called the insurer's representative and informed him of the result of the investigation. She advised him that Bach 'only had $5,000 insurance' and that, under its 'U' coverage (uninsured automobile coverage), 'State Farm had to make the difference.' The representative told her he would report the claim and call back.

One week later, the insurer's representative called Mrs. Calhoun and informed her that his company denied coverage on the ground that Bach was not an Uninsured motorist. She advised him that she 'was going to settle for the $5,000 with * * * the party that was responsible for the accident, settle for that $5,000, and I was looking to State Farm for the other five.'

The representative advised her 'to go after the collateral that these people might have.' To this she replied that 'they didn't have anything, therefore I was settling it that way.' As she later put it, 'there wasn't any point in doing anything else. * * *'

In December 1963 Mrs. Calhoun's attorney concluded settlement of the Bach claim for his policy limit of $5,000.

On February 21, 1964 the law with respect to whether Bach was an uninsured motorist was clearly stated in Taylor v. Preferred Risk Mut. Ins. Co., 225 Cal.App.2d 80, 37 Cal.Rptr. 63. (Hearing by Supreme Court unanimously denied.)

It was therein held that an 'uninsured motor vehicle,' under section 11580.2, is one carrying insurance with limits of [254 Cal.App.2d 410] Less than the financial responsibility requirement of the Vehicle Code. To hold otherwise, as Presiding Justice Draper pointed out, would mean that 'the insurer of the injured party would have no liability whatever as surety for the financially irresponsible wrongdoer if the latter carried insurance of $1,000, $500, or even $1.00, rather than the $10,000/20,000 limits contemplated by the

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act.' (In Taylor, as here, the uninsured motorist's limits were only $5,000/10,000.)

On March 20, 1964 Mrs. Calhoun's counsel wrote the insurer as follows: 'This letter is to make formal demand upon you under the uninsured motorists provision of the above policy for damages for wrongful death Carl Calhoun. * * * Demand is now made upon you for the difference between the said limits of $5,000.00 and the limits of the uninsured automobile coverage of the above described policy. Would you please respond to this letter in an effort to determine whether the insured is legally entitled to recover such damages and if so, the amount therof.'

Not receiving any response by April 20, 1964, the one-year anniversary of the accident, Mrs. Calhoun filed the within declaratory relief action, asking that the court declare 'the rights and duties of the respective parties * * * with respect to the said policy. * * *'

Despite the Taylor case, the insurer continued to deny coverage. On August 7, 1964, it filed an answer to Mrs. Calhoun's complaint, alleging as 'a full and complete defense,' the following: 'That the motorist whose acts caused the death of CARL CALHOUN was not an uninsured motorist within the meaning of the Insurance Code of the State of California.'

The Facts upon which the insurer based the above defense were at all times known to the insurer. Although it protests good faith in its denial of coverage, this is somewhat open to question, particularly when the Taylor case was by that time over five months old and the Supreme Court had unanimously denied a hearing.

In any event, the insurer has abandoned this point and now relies for a reversal upon two other points: 'First, see (Mrs. Calhoun) settled the wrongful death action without the consent of appellant insurer. Second, she failed to meet the time limitations provided in § 11580.2(h).'

Acceptance of Bach's Policy Limit As Release of Calhoun's Insurer

The Calhoun policy, as does the statute (§ 11580.2, [254 Cal.App.2d 411] subd. (c), subsec. (3)), provides that the uninsured motorist coverage does not apply if the insured, Without the written consent of the insurer, either (1) makes any settlement with, or (2) prosecutes to judgment any action against, the one legally liable for the injury to the insured.

Here Mrs. Calhoun failed to obtain the written consent of the insurer to make the Bach settlement. Relying solely upon Travelers Indem. Co. v. Kowalski, 233 Cal.App.2d 607, 43 Cal.Rptr. 843, the insurer contends in its brief that this failure 'deprives the insured of uninsured motorist coverage even though no prejudice by the carrier is shown.'

Kowalski is readily distinguishable. There the insured 'filed suit and prosecuted his action to judgment without the knowledge or consent of appellant (insurer).' The insurer in Kowalski had not denied coverage under the policy and did not do so until After the above acts of the insured had occurred and been brought to its attention.

The same situation obtained in Portillo v. Farmers Ins. Exchange, 238 Cal.App.2d 58, 47 Cal.Rptr. 450. There the plaintiffs obtained a wrongful death judgment of $65,000...