Civil Service Employees Ins. Co. v. Superior Court

Decision Date28 September 1978
Docket NumberS.F. 23483
Citation22 Cal.3d 362,584 P.2d 497,149 Cal.Rptr. 360
CourtCalifornia Supreme Court

Bronson, Bronson & McKinnon, Jerald R. Cochran, San Francisco, and Capps, Bishop, Marraccini & Ducey and Rodney A. Marraccini, Walnut Creek, for petitioner.

No appearance for respondent.

Sager & Grassi, Ronald M. Grassi, Lewton & McGuinn and Michael Lewton, San Francisco, for real party in interest.

TOBRINER, Justice.

In 1971, plaintiff Donna R. Schlichting instituted the underlying class action against defendant Civil Service Employees Insurance Company, seeking to recover damages resulting from the defendant's refusal to pay benefits allegedly owed under a "medical expense" clause contained in an insurance policy. Plaintiff's complaint alleged that although defendant had agreed to reimburse insureds for all medical expenses incurred as a result of a covered automobile accident, defendant had adopted the practice of refusing to pay any such medical expenses that were also covered by separate health insurance, such as Blue Shield. In response, the insurer defended its practice on two grounds: (1) that in agreeing "to reimburse" insureds for medical expenses, it had clearly and unambiguously limited its obligation to out-of-pocket medical expenses, and (2) that Blue Shield and other health insurance plans constituted "automobile medical payments insurance" within the meaning of an exclusionary clause of its policy.

In the present proceeding, defendant insurer seeks a writ of mandate or prohibition to compel the trial court to vacate two pretrial orders rendered in favor of the plaintiff class in the underlying action. In the initial of the two orders, the trial court granted plaintiff's motion for partial summary judgment, rejecting as a matter of law defendant's proposed interpretation of the insurance policy. In the second order, rendered concurrently with the partial summary judgment order, the court ruled, inter alia, that defendant should initially bear the cost of notifying absent class members of the pendency of the action.

Defendant maintains that each of the challenged orders is constitutionally defective under principles of federal due process. Defendant argues that the partial summary judgment order is invalid on the ground that due process precludes a court from ever rendering a decision "on the merits" in a class action before notification to absent class members of the pendency of the action. Defendant asserts that the order requiring it initially to bear the cost of notice fails on the ground that requirements of due process prohibit a trial court from ever compelling a defendant "to finance" a lawsuit against itself.

As we shall explain, we have concluded that, contrary to defendant's assertions, neither court order at issue here succumbs to constitutional attack. First, although defendant now claims that the trial court should have deferred a decision on the partial summary judgment motion until absent class members had been notified of the action, defendant never raised such an objection prior to the trial court's ruling on the motion. Instead, defendant confined its opposition to a substantive argument on the merits of plaintiff's motion. Under these circumstances, we conclude that defendant waived whatever constitutional right it may have enjoyed to require the court to postpone determination of the summary judgment motion until after class notification.

Second, while defendant maintains that a trial court lacks authority to order a defendant to bear the initial burden of notifying absent class members of the pendency of the suit, as we explain both a statutory provision of the California Consumer Legal Remedies Act (Civ.Code, § 1781, subd. (d)), and this court's seminal decision in Vasquez v. Superior Court (1971) 4 Cal.3d 800, 820, 94 Cal.Rptr. 796, 809, 484 P.2d 964, 977, explicitly recognize that in a class action proceeding in this state, trial courts are empowered to "direct Either party to notify each class member" of the pendency of the action. (Emphasis added.) Although defendant further contends that this statutorily authorized procedure violates its due process rights, the relevant constitutional authorities establish that the trial court order clearly conformed with governing principles of both substantive and procedural due process.

Accordingly, we conclude that the requested writ should be denied.

1. The facts and proceedings below.

In April 1971, plaintiff Donna R. Schlicting was injured in an automobile accident in Daly City, California. At the time of the accident, plaintiff held a comprehensive automobile and personal liability policy issued by defendant insurance company. Under Part II of the policy, entitled "Expenses for Medical Services," the insurer agreed "(t)o reimburse (the named insured) for all reasonable (medical) expenses incurred within one year from the date of (an) accident" (emphasis added) for bodily injuries sustained in such an accident. An additional provision of Part II, entitled "Other Insurance," provided, however, that "(i)f the insured has Automobile medical payments insurance with another insurer against a loss covered by Part II" (emphasis added), the insurer's liability would be reduced in proportion to such other available automobile medical payments insurance.

At the time of the accident, plaintiff did not have any other automobile insurance to cover her medical expenses. She had, however, purchased health insurance from California Physicians' Service (Blue Shield), and under that insurance plan Blue Shield paid a portion of the medical expenses which plaintiff incurred as a result of the automobile accident.

In May 1971, plaintiff filed a claim with defendant insurer requesting payment of all medical expenses incurred as a result of the accident, including approximately $350 in medical expenses which were covered under the Blue Shield policy. The insurer, while agreeing to pay the out-of-pocket medical expenses which plaintiff had personally paid, rejected the $350 claim for the expenses covered by Blue Shield, taking the position that the medical payment coverage of its policy did not encompass such expenses.

In October 1971, plaintiff filed the underlying class action against defendant insurer on behalf of herself and similarly situated insureds who, within the preceding four years (the applicable statute of limitation period), had had claims for medical payment reimbursement denied by defendant under similar circumstances. 1 The complaint set forth the facts described above, attached the insurance policy under which plaintiff was assertedly covered, and alleged that the insurer had breached the contract in failing to pay All medical expenses plaintiff had incurred as the result of a covered accident.

Shortly thereafter, defendant filed an answer to the complaint, conceding that plaintiff was insured under the policy attached to the complaint and interposing a general denial to the remainder of the complaint's allegations. In addition, defendant set forth in its answer a number of ostensible "affirmative defenses" to the action; only two of these affirmative defenses are of significance for this proceeding. 2 In its twelfth affirmative defense, defendant asserted that plaintiff's complaint rested on a misinterpretation of the insuring clause of the medical expense section of the policy, and alleged that the policy's use of the term "reimburse" made it clear that the insurer's liability was limited to out-of-pocket medical expenses paid by its insured. In its thirteenth affirmative defense, defendant alleged that plaintiff's Blue Shield policy constituted "other automobile medical payments insurance" within the meaning of the "other insurance" clause of the policy.

After the filing of the pleadings, the parties repeatedly attempted to agree upon a mutually acceptable stipulation of facts upon which the legal issues of the case could be decided, 3 but defendant in June 1975 finally indicated that it would not concur in any such stipulation. Plaintiff's attorneys thereafter began the task of attempting to identify the members of the class in preparation for bringing the case to trial. For several weeks during the summer of 1975, plaintiff's attorneys examined defendant's insurance records for the years 1969-1971 and identified 172 insureds who had had claims rejected under circumstances similar to the plaintiff's case. At this time, however, defendant informed plaintiff that, despite the pendency of the action, defendant had destroyed all records pertaining to pre-1969 medical payment claims.

Shortly thereafter, plaintiff filed the two pretrial motions that ultimately gave rise to the instant writ proceeding. On November 28, 1975, plaintiff filed a motion for certification of the suit as a class action and for an order notifying class members of the suit's pendency. In this motion, plaintiff advised the court that her attorney had, through review of the records made available by defendant, identified 172 members of her class, but additionally informed the court that defendant had destroyed the relevant records with respect to pre-1969 claims; plaintiff accordingly requested that, at least with respect to notifying potential class members who could not readily be identified because of the destruction of records, defendant should bear the cost of notice, by means of publication or otherwise.

The following week, plaintiff filed an additional pretrial motion, pursuant to section 437c of the Code of Civil Procedure, seeking partial summary judgment with respect to the issues raised by defendant's twelfth and thirteenth affirmative defenses. As a practical matter this motion requested the court to resolve the principal...

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