California Ins. Guarantee Assn. v. Liemsakul

• Citation: 193 Cal.App.3d 433,238 Cal.Rptr. 346
• Court: California Court of Appeals
• Decision Date: 08 July 1987
• Parties: CALIFORNIA INSURANCE GUARANTEE ASSOCIATION, Plaintiff and Appellant, v. Visute LIEMSAKUL, Defendant and Respondent. Civ. B020873.

Page 346

238 Cal.Rptr. 346

193 Cal.App.3d 433

CALIFORNIA INSURANCE GUARANTEE ASSOCIATION, Plaintiff and Appellant, v. Visute LIEMSAKUL, Defendant and Respondent.

Civ. B020873.

Court of Appeal, Second District, Division 3, California.

July 8, 1987.

Clausen, Harris & Campbell, Marie D. Clause and Gregory P. Orland, Los Angeles, for plaintiff and appellant.

Howard J. Stechel, Los Angeles, for defendant and respondent.

KLEIN, Presiding Justice.

Plaintiff and appellant California Insurance Guarantee Association (CIGA) appeals Because CIGA is entitled to a credit in the full amount of Liemsakul's uninsured motorist (UM) coverage, the trial court erred in limiting the credit to the amount actually recovered under said coverage. However, for the reasons stated, the appeal is dismissed. ¹

from a declaratory judgment in favor of defendant and respondent Visute Liemsakul (Liemsakul).

FACTUAL & PROCEDURAL BACKGROUND

On July 6, 1982, a car driven by Liemsakul collided with a truck being driven by Manuel Barrios (Barrios) and owned by Custom Truck Service, a corporation (Custom), Barrios' employer.

On July 14, 1982, Liemsakul filed a complaint for personal injuries, naming as defendants Custom, Barrios, and others not relevant here. At the time of the accident, Custom and Barrios were insured by Western Carriers Insurance Exchange (Western). Subsequently, on May 12, 1983, Western was declared insolvent and ordered liquidated, giving rise to the involvement of CIGA. ²

At the time of the subject accident, Liemsakul was an insured of State Farm Mutual Insurance Company (State Farm) under a policy that included UM coverage. ³ Although that coverage had a limit of $25,000, on January 13, 1984, Liemsakul settled his claim with State Farm for $15,000.

On February 28, 1985, CIGA filed a complaint for declaratory relief to reduce Liemsakul's "covered claim" against CIGA by the amount of his UM coverage. CIGA sought a declaration that pursuant to Insurance Code section 1063.2, subdivision (c)(1), ⁴ it was entitled to a $25,000 credit, the amount potentially "recoverable" under Liemsakul's State Farm policy, not the $15,000 Liemsakul actually recovered in settlement.

The matter was tried August 5, 1985. The trial court held CIGA and Western's insureds, Custom and Barrios, were entitled to a credit in the sum of $15,000 against any judgment obtained by Liemsakul in his personal injury action then pending against Custom and Barrios.

CIGA appeals. ⁵

CONTENTIONS

CIGA contends (1) any claim Liemsakul may make upon it must be reduced by the full amount of Liemsakul's UM coverage with State Farm; and (2) the trial court's allowing Liemsakul's attorney to testify why the claim against State Farm was settled for less than the policy limits was prejudicial error.

DISCUSSION

1. Standard of review.

"The governing law is stated in Mefford v. City of Tulare [1951] 102 Cal.App.2d 919 However, the interpretation of a statute is a question of law, and we are not bound by the trial court's interpretation. (California Teachers Assn. v. San Diego Community College Dist. (1981) 28 Cal.3d 692, 699, 170 Cal.Rptr. 817, 621 P.2d 856; Shoban v. Board of Trustees (1969) 276 Cal.App.2d 534, 541, 81 Cal.Rptr. 112.)

[228 P.2d 847], at page 922, as follows: 'The purpose of declaratory relief is to liquidate uncertainties and controversies which might result in future litigation and whether a determination is proper in an action for declaratory relief is a matter within the trial court's discretion. Unless a clear abuse of discretion is shown, the trial court's decision will not be disturbed on appeal.' " (Roberts v. Reynolds (1963) 212 Cal.App.2d 818, 827, 28 Cal.Rptr. 261.) ⁶

Utilizing these principles, we look anew at the statute with due consideration being given to the trial court's interpretation.

2. Entire amount of UM coverage applies to reduce liability of CIGA.

a. Introductory statement.

CIGA was created in 1969 to protect policyholders of insolvent insurers and third parties claiming under policies issued by insurers that become insolvent. (§ 1063 et seq.; E.L. White, Inc. v. City of Huntington Beach (1982) 138 Cal.App.3d 366, 370-372, 187 Cal.Rptr. 879; 1 California Insurance Law (1987 Rev.) § 7.10, p. 7-54.) Each time an insurer becomes insolvent, CIGA assesses its member insurers to the extent necessary to pay covered claims of the insolvent insurer as well as adjustment costs. (§ 1063.5.) CIGA's role is somewhat akin to that of the Federal Deposit Insurance Corporation in banking, and serves to enhance public confidence in the insurance industry. (1 California Insurance Law, supra, § 7.10, p. 7-54.)

The essential duty of CIGA is to pay "covered claims" of insolvent insurers. (§ 1063.2.) However, "covered claims" are not coextensive with an insolvent insurer's obligations under its policies. (Saylin v. California Ins. Guarantee Assn. (1986) 179 Cal.App.3d 256, 262, 224 Cal.Rptr. 493.) Section 1063.1, subdivision (c) defines "covered claims" and also enumerates various claims which may arise but which are not covered.

Section 1063.2, subdivision (c)(1), on which this case turns, provides a further limitation on "covered claims." Said subdivision states in relevant part: "If damages against uninsured motorists are recoverable by the claimant from his or her own insurer, such damages recoverable shall be a credit against a covered claim payable under this article." (§ 1063.2, subd (c)(1), italics added.)

The salient question before us is the definition of the term "recoverable" as used in the statute. CIGA argues "recoverable" refers to the amount capable of being recovered, that is to say, the full amount of the UM coverage. Contrarily, Liemsakul maintains the credit is limited to the amount he actually recovered from State Farm.

b. Principles of statutory construction.

"It is a settled principle in California law that 'When statutory language is ... clear and unambiguous there is no need for construction, and courts should not indulge in it.' " (In re Waters of Long Valley Creek Stream System (1979) 25 Cal.3d 339, 348, 158 Cal.Rptr. 350, 599 P.2d 656.) However, despite the general rule that ambiguity is a condition precedent to interpretation, " '[t]he literal meaning of the words of a statute may be disregarded to avoid absurd results or to give effect to manifest purposes that, in the light of the statute's legislative history, appear from its provisions considered as a whole.' " (County of Sacramento v. Hickman (1967) 66 Cal.2d 841, 849, fn. 6, 59 Cal.Rptr. 609, 428 P.2d 593.)

c. Application here.

Our research has not disclosed any cases that have construed the meaning of "recoverable" Webster's New International Dictionary (2d ed. 1942) at page 2081, defines "recoverable" as "[c]apable of being recovered, or of recovering; that may be recovered." Further, 1 Eisler, California Uninsured Motorist Law (4th ed. 1986) section 8.70, page 8-41, assigns "recoverable" its plain and usual meaning. Eisler observes: "It is noteworthy that the statute uses the term 'recoverable,' implying any recovery that might have been possible, not just recovery that was actually made." (Ibid.)

as used in section 1063.2, subdivision (c)(1).

Because the statute is not ambiguous, our remaining task is to determine whether an interpretation based on the literal meaning of "recoverable" leads to a result which is absurd or inconsistent with the purpose of the statute. For the reasons set forth below, we conclude the plain meaning of "recoverable" comports with the CIGA scheme (§ 1063 et seq.), while the interpretation urged by Liemsakul would cause mischief.

Were we to adopt Liemsakul's proffered interpretation of "recoverable" as meaning "actually recovered," a claimant could settle with his or her own insurer for a nominal sum, with the expectation of ultimately being fully compensated by CIGA. However, CIGA exists to protect the public from losses occasioned by an insolvent insurer, and to serve as an insurer of last resort, when no secondary insurer is available. (Central National Ins. Co. v. California Ins. Guarantee Assn., supra, 165 Cal.App.3d at p. 458, 211 Cal.Rptr. 435.) "CIGA covers only claims which are not covered by other private insurance. (Ins. Code, §§ 1063.2, subd. (a), 1063.1, subd. (c)(7)(a).)" (Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 814, fn. 7, 180 Cal.Rptr. 628, 640 P.2d 764.) It is not CIGA's role to serve as an alternative to the claimant's pursuing the matter with his or her own allegedly recalcitrant insurer.

Liemsakul argues that to compel a claimant to obtain the maximum possible under the available UM coverage is to impose a great hardship on a tort victim. However, his position overlooks the existence of the contingent fee, as well as the powerful deterrent of the cause of action of insurance bad faith. ⁷ If Liemsakul settled too cheaply with State Farm, he cannot recover from CIGA that which he allegedly should have obtained from his own insurer.

To relieve a claimant from the burden of maximizing his or her UM recovery would serve as a windfall to the UM insurer. In creating CIGA, however, it was the Legislature's intent to protect the public, not to confer a benefit upon any insurance company. (E.L. White, Inc. v. City of Huntington Beach, supra, 138 Cal.App.3d at pp. 371-372, 187 Cal.Rptr. 879.) Were the credit here limited to the $15,000 actually recovered, and were Liemsakul to receive a judgment of $50,000, CIGA would be compelled to pay $35,000 as a "covered claim," rather than the required $25,000. Under such a scenario, CIGA would in effect be subsidizing State Farm, a solvent insurer, to the tune of $10,000, a result antithetic to the CIGA scheme.

3. Liemsakul's further arguments unavailing.

Liemsakul challenges CIGA's standing to seek a declaratory judgment that Custom and Barrios are entitled to a credit of $25,000 as to any judgment later obtained against them by Liemsakul...