Commercial Union Assurance Co. v. City of San Jose

• Decision Date: 12 January 1982
• Citation: Commercial Union Assurance Co. v. City of San Jose, 179 Cal.Rptr. 814, 127 Cal.App.3d 730 (Cal. App. 1982)
• Court: California Court of Appeals
• Parties: COMMERCIAL UNION ASSURANCE CO., Plaintiff and Appellant, v. CITY OF SAN JOSE, Defendant and Respondent. Civ. 47844.

Page 814

179 Cal.Rptr. 814

127 Cal.App.3d 730

COMMERCIAL UNION ASSURANCE CO., Plaintiff and Appellant, v. CITY OF SAN JOSE, Defendant and Respondent.

Civ. 47844.

Court of Appeal, First District, Division 1, California.

Jan. 12, 1982.

Hearing Denied March 10, 1982.

Norman Lariviere, Carl W. Hartman, Lariviere & Dickerson, San Jose, for plaintiff and appellant.

Robert J. Logan, City Atty., Mary Jo Levinger, Deputy City Atty., San Jose, for defendant and respondent.

SIMS, Associate Justice. ^*

Appellant insurer has appealed from a judgment of dismissal entered following its failure to amend its complaint for damages within the time allowed after the trial court had sustained the defendant city's demurrer with leave to amend. The demurrer had been sustained on the ground that more than six months had elapsed between the date of rejection of the claim for the damages alleged in the complaint and the commencement of the action. (See Gov.Code, § 945.6, subd. (a)(1).)

The salient facts as revealed by the allegations of the complaint are as follows: On February 5, 1978, the insurer's insured suffered property damage from falling tree branches, allegedly caused by the negligence of the city. The damage was covered by an insurance policy then in force between the insurer and its insured. On April 14, 1978, the insured presented a claim for $30,000 damages to the city. (See Gov.Code, § 905.) On May 18, 1978, the city rejected the claim in its entirety and gave notice thereof to the claimant. (See Gov.Code, § 913.) On June 27, 1978, by reason of its obligations under the policy, the insurer paid its insured $550 for lost rents. No action was taken by either the insured or the insurer to prosecute the claim until January 4, 1979, when the insurer notified the city that it would be pursuing its subrogation rights against the city after paying repair costs estimated in the range of $15,000 to $20,000. On January 30, 1979, the city served a "Notice of Insufficiency and/or Non-Acceptance of Claim" on the insurer. On February 3, 1979, the insurer filed its complaint as subrogee to recover damages to be ascertained.

We point out below that generally the insurer's subrogated right is its right to be put in the position of its insured against third parties legally responsible to its insured for the loss which the insurer has both insured and paid. (See Liberty Mut. Fire Ins. Co. v. Auto Spring Supply Co. (1976) 59 Cal.App.3d 860, 864, 131 Cal.Rptr. 211.) The tortfeasor is usually permitted to assert all defenses available against the insured including the statute of limitations.

The insurer's claim of error rests on the assertion that it has no cause of action until it and its insured agree on the amount of the loss and such sum is paid to the insured. It asserts that its letter of January 4, 1979, was a timely claim for its own independent rights within the provisions of section 911.2 of the Government Code, and was inferentially recognized as such by defendant city in its notice of January 30, 1979; and that in any event, principles established in connection with the statutory rights of subrogation of uninsured motorist insurers establishes that plaintiff's action was not barred.

We find no merit in appellant's contentions. The general rule is applicable and the judgment must be affirmed.

I

With exceptions not pertinent here, section 945.6 of the Government Code provides: "(a) ... any suit brought against a public entity on a cause of action for which a claim is required to be presented ... must be commenced: (P) (1) If written notice (of rejection) is given in accordance with Section 913, not later than six months after the date such notice is personally delivered or deposited in the mail."

Under the foregoing provision the insured's right to commence an action against the city for damages to his premises expired on or about November 18, 1978. (Tubbs v. Southern Cal. Rapid Transit Dist. (1967) 67 Cal.2d 671, 675, 63 Cal.Rptr. 377, 433 P.2d 169; Smith v. City and County of San Francisco (1977) 68 Cal.App.3d 227, 230-231, 137 Cal.Rptr. 239; Stanley v. City and County of San Francisco (1975) 48 Cal.App.3d 575, 578-583, 121 Cal.Rptr. 842; Chas. L. Harney, Inc. v. State of California (1963) 217 Cal.App.2d 77, 90-91, 31 Cal.Rptr. 524.)

The right of an insurer to be subrogated to the rights of its insured is generally distinguished from a claim for contribution or indemnity or statutory subrogation. (See Annot. Statute of Limitations-Subrogated Insurer (1979) 91 A.L.R.3d 844, 847; cf. generally with Annot. Contribution, Indemnity Claims-Timeliness (1974) 57 A.L.R.3d 866. Note: Liberty Mut. Ins. Co. v. Fales (1973) 8 Cal.3d 712, 716-717, 106 Cal.Rptr. 21, 505 P.2d 213; Phoenix of Hartford Ins. Companies v. Colony Kitchens (1976) 57 Cal.App.3d 140, 144, 128 Cal.Rptr. 893; Interinsurance Exchange v. Harmon (1968) 266 Cal.App.2d 758, 762, 72 Cal.Rptr. 352; 7 Witkin, Summary of Cal.Law (8th ed. 1974) Equity, §§ 122-124, pp. 5341-5343.) In the former cases the rule is that equity will enforce subrogation only when the action is brought within the time in which an action could have been brought to enforce the original obligation to which the right of subrogation is sought. (Phoenix Ins. Co. v. Pacific Lumber Co. (1905) 1 Cal.App. 156, 159, 81 P. 976; note: Automobile Ins. Co. v. Union Oil Co. (1948) 85 Cal.App.2d 302, 304-305, 193 P.2d 48; and Annot., supra, 91 A.L.R.3d 844, 850-854.) ¹ This is also the general rule for common law subrogation as distinguished from indemnity or contribution. (See Iusi v. City Title Ins. Co. (1963) 213 Cal.App.2d 582, 588, 28 Cal.Rptr. 893 and Howell v. Dowling (1942) 52 Cal.App.2d 487, 498-499, 126 P.2d 630.) The same limitation is applied to an employer's statutory right to subrogation against a tortfeasor for workers' compensation benefits paid to an employee for injuries caused by the tortfeasor's negligence. (County of San Diego v. Sanfax Corp. (1977) 19 Cal.3d 862, 871-872, 140 Cal.Rptr. 638, 568 P.2d 363; and Aetna Cas. etc. Co. v. Pacific Gas & Elec. Co. (1953) 41 Cal.2d 785, 787-788, 264 P.2d 5; note Pacific Tel. & Tel. Co. v. County of Riverside (1980) 106 Cal.App.3d 183, 193-194, 165 Cal.Rptr. 29.)

We conclude that in the absence of special considerations, the insurer's right to recover on the insured's cause of action against the alleged tortfeasor for the damages to the insured's property was barred when the statutory period ran on the insured's claim.

II

The insurer points out that its notice to the city dated January 4, 1979, was filed within the one-year period for filing claims for damages to real property (Gov.Code, § 911.2; Wheeler v. County of San Bernardino (1978) 76 Cal.App.3d 841, 846, 143 Cal.Rptr. 295); and that its action was filed within six months after the city, by notice dated January 30, 1979, advised it of the insufficiency or non-acceptance of the claim. (Gov.Code, § 945.6, subd. (a) (1).) It asserts that its right as subrogee is a new claim, and that in order to avoid subverting provisions of law designed to give the governmental entity notice and an opportunity to investigate and settle meritorious claims without litigation, it gave notice of its potential subrogation rights before a cause of action had accrued. (See Allstate Ins. Co. v. County of Alameda (1973) 33 Cal.App.3d 418, 423, 109 Cal.Rptr. 53.)

In the case last cited the court reversed a summary judgment that had been rendered in favor of a governmental agency against the subrogated insurer of an uninsured motorist on the ground that the insurer's claim had not been filed within the 100-day period required by Government Code section 911.2. That court did state: "(T)he fact remains that the insurer does not have a cause of action, and therefore has no basis for a claim, until it makes payment to its insured upon the latter's claim...." (33 Cal.App.3d at p. 422, 109 Cal.Rptr. 53.) Examination of the entire opinion and of the opinion in the case upon which it rests, reflects that the decision is limited to the construction of the provisions of subdivision (g) (formerly subd. (f)) of section 11580.2 of the Insurance Code that expressly create the insurer's right to be subrogated to the rights of its insured when it pays a claim under an uninsured motorist endorsement, and that expressly designate the period in which that right may be enforced. ²

In Allstate Ins. Co. v. County of Alameda, supra, 33 Cal.App.3d 418, 109 Cal.Rptr. 53, the court noted that the statute creates "an exception to the well-established doctrine that the subrogee has no greater right than the subrogor." (Id., at p. 421, 109 Cal.Rptr. 53.) In Liberty Mut. Ins. Co. v Fales, supra, 8 Cal.3d 712, 106 Cal.Rptr. 21, 505 P.2d 213, the court noted: "Under settled principles, an insurer in its role as subrogee has no greater rights than those possessed by its insured, and its claims are subject to the same defenses. (Iusi v. City Title Ins. Co. (1963) 213 Cal.App.2d 582, 588 (28 Cal.Rptr. 893) ....)" (Id., at p. 717, 106 Cal.Rptr. 21, 505 P.2d 213.) The cause of action granted the insurer of the uninsured motorist under the Insurance Code is statutory and not derivative. (See Phoenix of Hartford Ins. Companies v. Colony Kitchens, supra, 57 Cal.App.3d 140, 145-147, 128 Cal.Rptr. 893; Interinsurance Exchange v. Harmon, supra, 266 Cal.App.2d 758, 761, 72 Cal.Rptr. 352.)

We conclude that the insurer's reliance on Allstate, supra, is misplaced.

III

The insurer, recognizing that Allstate Ins. Co. v. County of Alameda, supra, 33 Cal.App.3d 418, 109 Cal.Rptr. 53, deals with a statutory period of limitations, also urges that we should follow the reasoning of that case insofar as it rests on the principle that the subrogee may lose its rights if the limitation period prescribed for action by the insured passes before the insurer can perfect its cause of action. (Id., at p. 422, 109 Cal.Rptr. 53; and Liberty Mut. Ins. Co. v. Fales, supra,...