Carson v. Mercury Ins. Co.

Citation210 Cal.App.4th 409,148 Cal.Rptr.3d 518
Decision Date24 September 2012
Docket NumberNo. G045795.,G045795.
CourtCalifornia Court of Appeals
PartiesMelody CARSON, Plaintiff and Appellant, v. MERCURY INSURANCE COMPANY, Defendant and Respondent.

210 Cal.App.4th 409
148 Cal.Rptr.3d 518

Melody CARSON, Plaintiff and Appellant,
v.
MERCURY INSURANCE COMPANY, Defendant and Respondent.

No. G045795.

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

Sept. 24, 2012.



See 2 Witkin, Summary of Cal. Law (10th ed. 2005) Insurance, § 160.

148 Cal.Rptr.3d 521]Day Law Offices and Montie S. Day, for Plaintiff and Appellant.
O'Connor, Schmeltzer & O'Connor, Lee P. O'Connor and Timothy J. O'Connor, Irvine, for Defendant and Respondent.

[148 Cal.Rptr.3d 522]OPINION

O'LEARY, P.J.

[210 Cal.App.4th 412

Soon after purchasing her first new car, Melody Carson was involved in an automobile accident with a third party, who was at fault and who was insured. At the time of the accident, Carson's vehicle had a market value of $25,000. Her automobile insurance policy with Mercury Insurance Company provided it had the option of repairing or paying for Carson's vehicle, subject to several express liability limitations and exclusions. Rather than declaring the car a total loss and paying Carson $25,000 to

[210 Cal.App.4th 413]

replace the vehicle, Mercury elected to repair the car as the initial restoration estimates were approximately $8,000. During the repair process, additional damages were revealed and Mercury paid a total of $18,774 to repair the vehicle.

Unhappy with Mercury's decision to repair the car, and unsatisfied with the work performed at the repair shop, Carson sued Mercury for breach of contract and breach of the implied covenant of good faith and fair dealing. She asserted Mercury should have taken into consideration her financial interests, specifically that her repaired vehicle would have a diminished stigma value (the repaired Honda was only worth approximately $8,000). In addition, she asserted her new vehicle was constructed in a way that could never be repaired to its safe preaccident condition and value. Carson alleged Mercury was obligated to declare the car a total loss and it wrongfully asserted subrogation rights against the at-fault driver. She did not prevail at the court trial.

On appeal, Carson alleges the trial court wrongly eliminated most of her claims in its pretrial rulings and it failed to consider her argument the insurance policy was unenforceable as being against public policy. She also claims the court's conclusions based on the evidence presented at trial were “impossible,” which we deem to be a challenge to the sufficiency of the evidence. While we are sympathetic to her situation, we conclude all her contentions on appeal lack merit, and we affirm the judgment.

I

Sixty-five-year-old Carson purchased her first new car, a 2008 Honda Accord, on September 28, 2007, for a total cost of $31,344.60. She purchased an automobile insurance policy that provided collision coverage from Mercury.

Under the terms of the collision coverage portion of the policy, Mercury has the option of repairing, replacing, or paying for the 2008 Honda Accord if it was damaged in a collision. Specifically, the policy provided in “Part III,” titled physical damage: “Coverage E—Collision: The company, at its option, will repair, replace or pay for the owned automobile or part thereof, for loss caused by collision but only for the amount of each loss in excess of the deductible stated in the declarations.” In “Part III” the policy listed 23 exclusions to coverage, including as relevant to this appeal, the policy did not apply “to loss due to diminution in value of any motor vehicle repaired under coverages D or E.”

In addition, “Condition No. 3” of the policy set forth the “Limit of Liability; Settlement Options; Coverages D and E” and specified the policy

[210 Cal.App.4th 414]

would not cover depreciation: “The company's liability shall not exceed the lesser cost of the following options (1) repair or replace the motor vehicle or any part thereof, using original or non-original equipment manufactured parts, with deduction for depreciation[,] or (2) pay the agreed or appraised value of the motor vehicle.”

[148 Cal.Rptr.3d 523]In July 2008, Carson was involved in an automobile accident while driving in Victorville, California. Her car was struck by a Ford pickup truck driven by Guy L. Anderson, who was insured with Permanent General Assurance Corporation (Permanent General). His policy provided personal injury limits in the amount of $15,000 per person and $30,000 per accident. The property damage limits were $10,000.

Carson required medical attention and her car was taken to and inspected at Performance Paint & Body, a Mercury-approved repair facility in Victorville. The shop prepared a repair estimate in the amount of $7,918.48, and determined the actual cash preaccident value of the vehicle was $25,000. Alex Mingo, an automobile damage appraiser employed by Mercury, inspected the vehicle and prepared a repair estimate in the amount of $7,918.48.

Carson made arrangements to have her vehicle taken to a repair facility of her choice, Specialty Body Works. Jimmy Patopoff at Specialty Body Works prepared his own estimate to repair the vehicle, and determined it would cost $8,603.35 to repair.

During the repair process, Specialty Body Works found damage that was not visible when the original estimates were made. Patopoff prepared a supplemental estimate stating the repairs would cost $10,731.02. In the end, it cost a total of $18,773.62 to repair the vehicle, which included towing charges of $934.33. Mercury paid for the repairs, including Carson's $250 deductible.

Carson made a personal injury claim against Anderson's insurance. Permanent General paid her the policy limit of $15,000. Mercury pursued a subrogation claim against Permanent General for the amount it paid to repair Carson's vehicle. Permanent General paid Mercury the property damage limit ($10,000) and from this amount Carson was paid $509.91 to reimburse her for towing expenses. Carson signed Permanent General's release form.

On July 14, 2010, Carson filed a complaint against Mercury alleging causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing. She alleged the damage to her vehicle “was so substantial and major that the vehicle was unrepairable to its preaccident

[210 Cal.App.4th 415]

condition with respect to safety, reliability, mechanics and performance, and was in a condition which, for economical and practical reasons, reasonably required the vehicle to be ‘totaled.’ The vehicle was by any logical financial consideration a ‘total loss,’ meaning that the costs of repair, plus the post-accident and pre-repair salvage value of the vehicle, and the loss of value of the vehicle, even if repaired, would be greater than the total value of the vehicle after the vehicle was repaired.”

In the complaint, Carson maintained Mercury breached the terms of the policy and acted in bad faith by withholding benefits, including its failure to treat the vehicle as a total loss and paying the replacement value, failure to repair the vehicle to its preaccident condition, and asserting subrogation rights against the at-fault driver to her detriment.

A. Pretrial Motions

Mercury filed a motion for summary judgment, or alternatively, summary adjudication of the second cause of action for breach of the implied covenant of good faith and fair dealing. Mercury argued it was not required to declare Carson's vehicle as a total loss because the policy expressly provided it with the option of repairing or replacing the vehicle. Mercury also asserted it could not be held liable for failing to repair the vehicle to its preaccident[148 Cal.Rptr.3d 524]condition because Carson selected the repair facility. Finally, Mercury alleged it properly asserted subrogation rights against Permanent General, the insurer of the driver that hit Carson's vehicle.

In its tentative ruling, the trial court (Judge Kazuharu Makino) explained there was a triable issue of fact as to whether Mercury breached its duty to repair the vehicle to its preaccident safe, mechanical, and cosmetic condition, as required under Ray v. Farmers Insurance Exchange (1988) 200 Cal.App.3d 1411, 1418, 246 Cal.Rptr. 593 (Ray ). However, the court rejected Carson's assertion Mercury was required to take into account diminution in post-repair value in determining if the car was a total loss, stating, “there is a total loss only where costs of repair exceed the pre-repair value of the vehicle.” (Citing Martinez v. Enterprise Rent–A–Car Co. (2004) 119 Cal.App.4th 46, 54–56, 13 Cal.Rptr.3d 857.) The court denied the motion. However, in the minute order the court included a statement defining “total loss.”

The case was assigned to Judge Kirk H. Nakamura for trial. On the first day of trial, the trial court observed that based on the prior court's ruling on the summary judgment motion, the claims for trial were limited to whether Mercury repaired the vehicle to its preaccident safe, mechanical, and cosmetic condition. Carson argued there were two additional issues: First, Carson maintained it must be determined whether Mercury breached the

[210 Cal.App.4th 416]

implied covenant of good faith and fair dealing because it was obligated to declare the vehicle a total loss. The court disagreed, citing to the prior minute order defining total loss and to the policy's language giving Mercury the option to repair, replace, or pay for the automobile. Second, Carson asserted there was an issue about whether Mercury improperly asserted subrogation rights. Carson explained that because her vehicle suffered diminution in value, Mercury violated the “made whole” rule by pursuing subrogation. The court stated this claim was barred because it was undisputed Carson signed a release of her property damage claim in favor of Anderson, and therefore she could not make a claim for diminution in value against him before Mercury was entitled to subrogation. The court ruled the above two issues (the good faith and fair dealing claim and the subrogation claim) could not be...

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