Cooper v. Equity Gen. Insurance
| Decision Date | 27 April 1990 |
| Docket Number | No. A043231,A043231 |
| Court | California Court of Appeals Court of Appeals |
| Parties | Daniel COOPER et al., Plaintiffs and Respondents, v. EQUITY GENERAL INSURANCE, Defendant and Appellant, Robert A. Seligson, Inc. and Goldstein, Barceloux et al., Cross-Defendants and Respondents. |
Mark P. Robinson, John D. Rowell, Robinson, Robinson & Phillips, Los Angeles, for defendant and appellant.
John J. Dacey, James M. Sitkin, Goldstein, Barceloux & Goldstein, San Francisco, for plaintiffs and respondents (Goldstein, Barceloux & Goldstein).
Robert A. Seligson, Robert A. Seligson, Inc., Piedmont, for plaintiffs and respondents (Robert A. Seligson et al.).
Equity General Insurance Company (Equity) appeals from a judgment of dismissal after the trial court sustained demurrers to Equity's cross-complaint against respondents Robert A. Seligson, Inc. and Robert A. Seligson (collectively Seligson) and against respondent Goldstein, Barceloux & Goldstein (GB & G) without granting Equity leave to amend. Equity's sole contention on appeal is that it should have been granted leave to amend the cross-complaint. We affirm the judgment.
Equity is an Illinois Corporation in the insurance business. During 1980 and 1981, Equity provided professional liability coverage to Daniel Cooper Cooper), a San Francisco real estate broker, and to Allied American Properties (Allied), the real estate brokerage firm of which Cooper was president.
On January 29, 1981, Charles, Helga, Sidney, Marie, Robert and Nancy Schonfeld (the Schonfelds) filed two lawsuits in San Mateo County Superior Court, naming Cooper and Allied as defendants. These suits were later consolidated. Respondent GB & G is the San Francisco law firm which represented Cooper and Allied in these actions.
In 1983, the Schonfelds entered into an agreement with Cooper and Allied. By the terms of this agreement, Cooper and Allied admitted the truth of the allegations in the In 1983, Equity filed a declaratory relief action in San Francisco Superior Court No. 808330, naming Allied, Cooper, and the Schonfelds as defendants. Equity's amended complaint in that case sought a declaration that it had had no duty to defend or indemnify Cooper and Allied in the Schonfeld actions. Equity also alleged that Allied, Cooper, and the Schonfelds had acted in collusion to inflate the judgment in the Schonfeld actions far in excess of the real value of the claim. Thus, appellant claimed that the judgment had been fraudulently obtained and that appellant should not be liable under the policy.
Schonfeld complaints, and assigned to the Schonfelds any rights which Cooper and Allied might have had against Equity because of the policy. In exchange, the Schonfelds agreed not to execute against Cooper and Allied any judgment the Schonfelds might be awarded in the lawsuits. On June 3, 1983, after an uncontested trial at which the only issue was the amount of damages, the Schonfelds were awarded a judgment of $19,445,929.
An order specifying issues without substantial controversy was entered on November 15, 1985, and a partial adjudication of some of the issues in the case was filed on September 9, 1987. After a trial, partly before a jury and partly before the court, a judgment in Equity's declaratory relief action was filed on July 12, 1989. Both Equity and the Schonfelds appealed from the judgment.
Meanwhile, on September 4, 1987, Cooper and Allied began the present lawsuit by filing a complaint alleging Equity had breached its duty of good faith and fair dealing in its handling of the Schonfeld actions. Specifically, Cooper and Allied claimed Equity had refused to defend the actions, failed to investigate the claim, and refused to indemnify them.
On March 9, 1988, Equity filed the amended cross-complaint which is before us, naming as cross-defendants not only Cooper and Allied, but also GB & G, Seligson, and Ralph Golub, an attorney employed by GB & G who had represented Cooper and Allied in the Schonfeld actions.
Respondents Seligson and GB & G demurred to the cross-complaint. On May 25, 1988, the trial court sustained the demurrers of both respondents without leave to amend. Accordingly, the court filed a judgment of dismissal in favour of cross-defendants GB & G and Seligson on Equity's amended cross-complaint.
On August 3, 1988, Equity filed a notice of appeal from the judgment in favor of cross-defendants GB & G and Seligson. On January 5, 1989, this court dismissed the appeal for lack of a timely filed notice of appeal. Equity petitioned the California Supreme Court for review, and on March 23, 1989, the Supreme Court transferred the matter to this court with directions to vacate our order of dismissal, reinstate the case, and consider it upon the merits.
On December 19, 1989, we granted Equity's motion that this court take judicial notice of further pleadings and records in the declaratory judgment action, including the final judgment and notices of appeal.
In the cross-complaint, Equity alleges that the Schonfelds entered into a conspiracy with Cooper and Allied. Other alleged conspirators were GB & G, as Cooper's and Allied's counsel, and Robert Seligson, another lawyer. Equity claimed that Seligson had been hired, on a contingent fee basis, to manipulate the litigation of the Schonfeld actions in such a way as to "set up" Equity so that Equity could be sued for breach of the covenant of good faith and fair dealing, and violation of Insurance Code section 790.03. 1 For his work with According to Equity, the conspiracy resulted in the following acts: (1) Seligson redrafted the Schonfelds' complaints so as to trigger coverage under the policy, and so the complaints demanded damages in the amount of the policy limit; (2) when the amended complaints were served on Cooper and Allied, the defense was tendered to Equity as if the parties were in an adversarial relationship, whereas in fact they had agreed not to litigate the merits of the case; (3) Equity was refused the opportunity to defend the actions, because, one day after the purported "tender," the parties to the suit reached an agreement whereby Cooper and Allied admitted liability and causation and assigned to the Schonfelds all the rights which Cooper and Allied had had against their Insurer, Equity, in return for which the Schonfelds agreed not to execute on the judgment against Cooper or Allied directly; and (4) at the uncontested trial before a court commissioner on June 3, 1983, the Schonfelds were awarded a judgment in excess of $19 million.
respect to the projected "bad faith" action, Seligson was to receive a fee contingent on its recovery. Equity alleged that this conspiracy violated Cooper and Allied's duty of good faith and fair dealing to their insurer.
Respondents GB & G and Seligson demurred to the cross-complaint on the following grounds: (1) neither respondent owed Equity a duty of good faith and fair dealing because neither respondent was a party to the insurance contract; (2) there was no legal basis for a recovery of damages in a "reverse bad faith" claim; (3) no proximate cause had been alleged in the cross-complaint; (4) the insureds, Cooper and Allied, owed Equity no duty of good faith and fair dealing after Equity had refused to defend the Schonfeld actions; (5) the cross-complaint was barred by the statute of limitations; and (6) the cross-complaint was a subterfuge to avoid the effect of the summary adjudications in Equity's declaratory judgment action.
In support of their demurrers, respondents GB & G and Seligson requested the court to take judicial notice of part of the record of Equity's declaratory judgment action, specifically the summary adjudication and the order specifying issues without substantial controversy.
Equity opposed all the grounds stated by GB & G and Seligson in support of their demurrers. In its opposition to the demurrers, Equity additionally contended that the statute of limitations had been tolled because the wrongful conduct of GB & G and Seligson had not been discovered until the deposition of attorney Golub on April 30, 1987.
Respondents assert that they cannot be liable as a matter of law because they owed no legal duty of good faith and fair dealing to Equity.
Parties to an insurance contract are subject to a legally implied duty to act in good faith and deal fairly with one another. (Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 573, 108 Cal.Rptr. 480, 510 P.2d 1032.) Breach of this obligation will give rise to tort liability. (Ibid.) Those who are not parties to the contract, but who act merely as agents of the parties, are not subject to this legal duty, and thus not liable for conspiracy to violate the duty. (Id. at p. 576, 108 Cal.Rptr. 480, 510 P.2d 1032 [].) Thus, an attorney acting solely as an agent of an insured cannot be liable for conspiracy to violate the duty of good faith and fair dealing.
At the time of the filing of cross-complaint and the demurrers, Equity claimed that GB & G and Seligson could be liable for conspiracy to violate their clients' duty of good faith and fair dealing because of the holding in Wolfrich Corp. v. United Services Automobile Assn. (1983) 149 Cal.
App.3d 1206, 197 Cal.Rptr. 446. 2 Here, Equity has alleged that Cooper and Allied owed Equity a duty of good faith and fair dealing "pursuant to the [insurance] contract." Thus, Wolfrich never was relevant to our case. Moreover, in Doctors' Co. v. Superior Court (1989) 49 Cal.3d 39, 46, 260 Cal.Rptr. 183, 775 P.2d 508, the California Supreme Court overruled Wolfrich and re-affirmed the Gruenberg rule, that an attorney...To continue reading
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