Cd Inv. Co. v. Cal. Ins. Guarantee Assn.

• Decision Date: 27 November 2000
• Docket Number: No. B134895.,B134895.
• Citation: 84 Cal.App.4th 1410,101 Cal.Rptr.2d 806
• Court: California Court of Appeals Court of Appeals
• Parties: CD INVESTMENT COMPANY et al., Plaintiffs and Appellants, v. CALIFORNIA INSURANCE GUARANTEE ASSOCIATION, Defendant and Respondent.

101 Cal.Rptr.2d 806

84 Cal.App.4th 1410

CD INVESTMENT COMPANY et al., Plaintiffs and Appellants, v. CALIFORNIA INSURANCE GUARANTEE ASSOCIATION, Defendant and Respondent.

No. B134895.

Court of Appeal, Second District, Division 1.

November 27, 2000.

As Modified on Denial of Rehearing December 27, 2000.

Review Denied February 14, 2001.

Zemanek & Mills, John D. Zemanek and Stephan A. Mills, Los Angeles, for Plaintiffs and Appellants.

Black, Compean & Hall, Frederick G. Hall and Daniel Eli, Los Angeles, for Defendant and Respondent.

MALLANO, J.

In prior litigation, a money judgment was entered against the plaintiffs in this action. To pay the judgment, plaintiffs looked to their insurers, two of which had become insolvent. With respect to those two, plaintiffs sought recovery from the California Insurance Guarantee Association ("CIGA"), which is required by statute to pay a "covered claim" on behalf of an insolvent insurer, up to a maximum of $600,000. CIGA refused to make any payments, and this action followed.

CIGA contends that there is no "covered claim" because the payments made by the solvent insurers ($1.5 million) exceed its $500,000 cap. We hold that, under the CIGA statutes, the insureds have a "covered claim" under each of the five successive policies issued by the insolvent insurers and that CIGA's statutory cap applies separately to each policy. We also hold that the payments by the solvent insurers do not offset the amount CIGA is obligated to pay under the policies of the insolvent insurers.

BACKGROUND

In 1982, CD Investment Company designed and built a three-story parking garage for the City of Anaheim. In August 1988, Anaheim filed an action against CD Investment, alleging property damage caused by alleged defects in the design and construction of the garage (City of Anaheim v. Ertzan (Super.Ct. San Bernardino County, 1988, No. 246402). Also named as defendants were CD III, Lazben Anaheim Company, Naftali Deutsch, and Overland Plumbing, Inc. (We refer to these parties collectively as "CD Investment" throughout this opinion.)

The case was tried before a jury in late 1991 and early 1992. The jury returned a verdict in favor of Anaheim and awarded $4,027,000 in damages. On September 2, 1992, the trial court entered judgment on the verdict and awarded Anaheim $92,036.62 in costs. CD Investment appealed.

In December 1994, while the appeal was pending, Anaheim and CD Investment settled the case. Three of CD Investment's insurers (Fireman's Fund Insurance Company, Northern Insurance Company, and Aetna Insurance Company) each paid $500,000 toward the settlement. CD Investment contributed $875,000 of its own funds and incurred an additional $87,858.94 in costs and attorneys' fees.

Meanwhile, on or about February 24, 1987, two of CD Investment's insurers—Mission National Insurance Company and Enterprise Insurance Company—became insolvent and were subject to ongoing insolvency proceedings under the Insurance Code (Ins.Code, §§ 1010-1062). A liquidator was duly appointed to wind up the business of both insurers.

CD Investment had a total of five policies from the insolvent insurers: Mission National provided coverage for one year, and Enterprise subsequently issued policies covering three and one-half years. According to CD Investment, the policies covered five successive periods, from July 29,1981, to January 1,1986.

In the insolvency proceedings, CD Investment asserted a separate claim as to each of the five policies, alleging that (1) each claim had arisen before the applicable insurance policy had terminated and before the liquidator was appointed, (2) none of the claims had been paid, (3) the claims were not covered by any other insurance, (4) CD Investment was a resident of California at the time of the insured occurrence under each policy, (5) the assets of the insolvent insurers would not be sufficient to.discharge the claims in full, (6) the obligations of the insolvent insurers arose under their respective insurance policies while they were authorized to transact business in California, (7) liability on the claims was imposed by law and came within the coverage of the policies, and (8) the jury did not award punitive damages in the underlying case.

CD Investment demanded that CIGA honor the obligations of the insolvent insurers by reimbursing it for approximately $963,000 in out-of-pocket expenses: the $875,000 settlement payment and $87,858.94 in costs and attorneys' fees. CIGA denied the claims on the ground that the solvent' insurers had already paid $1.5 million, which exceeded CIGA's $500,000 cap.

On November 30, 1998, CD Investment filed this action against CIGA, seeking reimbursement for its out-of-pocket expenses. CD Investment alleged that CIGA's statutory cap applied separately to each of the five policies (resulting in $2.5 million of coverage) and that CIGA was obligated to make payment under those policies.

On May 28, 1999, CIGA filed a motion for judgment on the pleadings. CD Investment filed opposition. The trial court granted the motion and entered judgment in CIGA's favor. CD Investment filed a timely appeal.

DISCUSSION

"A motion for judgment on the pleadings is analogous to a general demurrer.... The task of this court is to determine whether the complaint states a cause of action. All facts alleged in the complaint are deemed admitted, and we give the complaint a reasonable interpretation by reading it as a whole and all of its parts in their context.... We are not concerned with a plaintiffs possible inability to prove the claims made in the complaint, the allegations of which are accepted as true and liberally construed with a view toward attaining substantial justice.... [¶] ... `[W]e are not bound by the determination of the trial court, but are required to render our independent judgment on whether a cause of action has been stated.'" (Lance Camper Manufacturing Corp. v. Republic Indemnity Co. (1996) 44 Cal. App.4th 194, 198, 51 Cal.Rptr.2d 622, citations omitted.)

"`The fundamental rule of statutory construction is that the court should ascertain the intent of the Legislature so as to effectuate the purpose of the law....' ... In determining that intent, we first examine the words of the statute itself.... Under the so-called `plain meaning' rule, courts seek to give the words employed by the Legislature their usual and ordinary meaning.... However, the `plain meaning' rule does not prohibit a court from determining whether the literal meaning of a statute comports with its purpose.... If the terms of the statute provide no definitive answer, then courts may resort to extrinsic sources, including the ostensible objects to be achieved and the legislative history." (Bodell Construction Co. v. Trustees of Cal. State University (1998) 62 Cal.App.4th 1508, 1515-1516, 73 Cal. Rptr.2d 450, citations omitted.)

In this case, we also keep in mind that "[t]he legislative intent [for creating CIGA] was to [ensure] protection for the public against insolvent insurers when no secondary insurer is available.... [¶] ... [¶] ... A remedial or protective statute should be liberally construed to promote the underlying public policy...." (Bunner v. Imperial Ins. Co. (1986) 181 Cal.App.3d 14, 20-21, 225 Cal.Rptr. 912, citations omitted.) And, although CIGA's interpretation of a statute may be entitled to great weight, the ultimate responsibility for the interpretation of the law rests with the courts. (Id. at p. 22, 225 Cal.Rptr. 912.)

A. Purpose of CIGA

"CIGA was created in 1969 as a compulsory association of state-regulated insurance companies.... Its purpose is `to provide insurance against loss arising from the failure of an insolvent insurer to discharge its obligations under its insurance policies.' ... CIGA assesses its members when another member becomes insolvent, thereby establishing a fund from which insureds whose insurers become insolvent can obtain financial and legal assistance. ... Member insurers then recoup assessments paid to CIGA by means of a surcharge on premiums to their policy holders.... In this way the insolvency of one insurer does not impact a small segment of insurance consumers, but is spread throughout the insurance consuming public, which in effect subsidizes CIGA's continued operation.

"While CIGA's general purpose is to pay the obligations of an insolvent insurer, it is not itself an insurer.... `CIGA is not in the "business" of insurance.... CIGA issues no policies, collects no premiums, makes no profits, and assumes no contractual obligations to the insureds.' Rather it is authorized by statute to pay only `covered claims' of an insolvent insurer, those determined by the Legislature to be in keeping with the goal of providing protection for the insured public.... [¶] ... CIGA is an insurer of last resort and does not assume responsibility for claims where there is any other insurance available." (R.J. Reynolds Co. v. California Ins. Guarantee Assn. (1991) 235 Cal. App.3d 595, 599-600, 1 Cal.Rptr.2d 405, citations and italics omitted.)

In general, the CIGA statutes cover workers' compensation, automobile, and other lines of property and casualty insurance. (Ins.Code, § 1063, subd. (a).) They do not apply to (1) life, annuity, health, or disability insurance, (2) mortgage guaranty, financial guaranty, or other forms of insurance offering protection against investment risks, (3) fidelity or surety insurance including fidelity or surety bonds, or any other bonding obligations, (4) credit insurance, (5) title insurance, (6) ocean marine insurance or ocean marine coverage under any insurance policy, or (7) any claims servicing agreement or insurance policy providing for certain kinds of retroactive coverage. (Ibid.; see id., § 1063.1, subd. (c)(3)(i)-(vii).) (All further statutory references are to the Insurance Code unless otherwise indicated.)

B. Statutory Obligations of CIGA

Turning to the applicable statutes, CIGA "shall pay and...