Doctors' Co. Ins. Services v. Superior Court

• Decision Date: 03 December 1990
• Docket Number: No. C004651,C004651
• Citation: 275 Cal.Rptr. 674,225 Cal.App.3d 1284
• Court: California Court of Appeals Court of Appeals
• Parties: The DOCTORS' COMPANY INSURANCE SERVICES, Petitioner, v. The SUPERIOR COURT of Sacramento County, Respondent; Stacy Nichole MARCHAND, a Minor, etc., et al., Real Parties In Interest.

Page 674

275 Cal.Rptr. 674

225 Cal.App.3d 1284

The DOCTORS' COMPANY INSURANCE SERVICES, Petitioner, v. The SUPERIOR COURT of Sacramento County, Respondent Stacy Nichole MARCHAND, a Minor, etc., et al., Real Parties In Interest.

No. C004651.

Court of Appeal, Third District, California.

Dec. 3, 1990.

Review Denied March 28, 1991.

Bonne, Jones, Bridges, Mueller & O'Keefe, H. Gilbert Jones, Christopher B. Marshall, Los Angeles, Donahue and Callaham, Stephen J. Mackey, Sacramento, Greines, Martin, Stein & Richland, Alan G. Martin, Beverly Hills, for petitioner.

No appearance for respondent.

Bolling, Walter & Gawthrop, T.D. Bolling, Jr., Marjorie E. Manning, and George E. Murphy, Sacramento, for real parties in interest.

SIMS, Associate Justice.

Plaintiffs, minor Stacy Marchand and her parents Diane and Roderick Marchand, filed this action against defendant The Doctors' Company Insurance Services doing business as The Doctors' Company (Doctors'), alleging Insurance Code violations in connection with Doctors' handling of the Marchands' prior medical malpractice action against Doctors' insured, Dr. Raymond Blain. The complaint alleged Doctors' (and retained counsel) misrepresented the admitted liability of its insured by advising Dr. Blain and another doctor to lie at their depositions. After its demurrer to the second amended complaint was overruled, Doctors' petitioned for a writ of mandate, which we initially denied. Upon direction of the California Supreme Court, we have issued an alternative writ in light of (inter alia) Moradi-Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287, 250 Cal.Rptr. 116, 758 P.2d 58. We conclude

the complaint is barred by Moradi-Shalal and the litigation privilege of Civil Code section 47, subdivision (2) (hereafter section 47(2)). Therefore, we will issue a peremptory writ directing the trial court to enter an order sustaining Doctors' demurrer without leave to amend. ¹

FACTUAL AND PROCEDURAL BACKGROUND

Since this case arises on demurrer, "we assume the truth of all properly pleaded material allegations of the complaint [citations] and give the complaint a reasonable interpretation by reading it as a whole and its parts in their context [citation]." (Silberg v. Anderson (1990) 50 Cal.3d 205, 210, 266 Cal.Rptr. 638, 786 P.2d 365.)

The pleading at issue is the second amended complaint, filed March 24, 1988, from which the following facts are derived. The first cause of action alleges violation of Insurance Code section 790.03. A second cause of action alleges a conspiracy to violate the Insurance Code by Doctors' and others, including Dr. Achtel (a defendant in the malpractice case) and Norcal (Dr. Achtel's insurer). ² Only Doctors' is a named defendant in this action.

In March 1982, minor Stacy Marchand suffered brain damage while under Dr. Blain's medical care. In April 1983, the Marchands filed a medical malpractice action against several defendants including Dr. Blain.

Dr. Blain knew he had been negligent in his care and treatment of Stacy and knew his negligence had proximately caused her injuries. Dr. Blain admitted his liability to Doctors', which provided his malpractice insurance with policy limits of $1 million. Nevertheless, Doctors' failed to make any attempt to settle the Marchand's claims for more than three years after the malpractice action was filed. Instead, Doctors' "embarked on a course of conduct designed to conceal the admitted culpability of Dr. Blain and misrepresented to the plaintiffs and others that [Blain] was not at fault, all for the purpose of avoiding its contractual and statutory obligation to make a good faith attempt to effectuate a prompt, fair and equitable settlement of the plaintiffs' claim."

The specific allegations of misconduct are the following: "Prior to and during the deposition of Dr. Blaine [sic ] in Case No. 310595, defendant DOCTORS, through its authorized employees, agents and the attorney it retained to represent Dr. Blaine in Case No. 310595, advised Dr. Blaine to not tell the truth in his deposition and to avoid giving information concerning his recollection of conversations with Dr. Achtel, which would, if disclosed, establish the liability of Achtel. Defendant DOCTORS, through its authorized employees, agents and the attorney it retained to represent Dr. Blaine in Case No. 310595, on several occasions during Dr. Blaine's deposition in said action, halted the deposition, and in private conversations with Blaine advised him to answer questions in a specific manner so as to further the unlawful conspiracy. DOCTORS, through its employees, agents and the attorney it retained to represent Dr. Blaine in Case No. 310595, advised Blaine that if he would follow the aforesaid instructions, Achtel would avoid giving testimony in his deposition that would establish Dr. Blaine's liability, but if Blaine failed to follow said instructions, Achtel would give testimony in his deposition which would establish Blaine's liability. The above-described coercion exerted upon Dr. Blaine by DOCTORS and its co-conspirators "... One or more members of the aforesaid conspiracy advised Dr. Achtel to not tell the truth in his deposition and to avoid giving information concerning his recollection of conversations with Dr. Blaine and others, which would, if disclosed, establish the liability of Blaine. Achtel was advised by one or more members of the conspiracy that if he would follow said advice, Blaine would avoid giving testimony in his deposition that would establish Achtel's liability, but if he failed to follow said advice Blaine would give testimony in his deposition which would establish Achtel's liability. Achtel agreed to follow said advice, and in his deposition in Case No. 310595 he failed to disclose, when asked, that prior to commencement of Case No. 310595 he had stated to DIANE MARCHAND and other persons that Blaine had committed malpractice or "screwed up" in his care and treatment of STACY MARCHAND." (Original emphasis.)

resulted in Blaine giving inaccurate and misleading testimony in his deposition in Case No. 310595.

After Dr. Blain's deposition, the Marchands stated their intent to amend their malpractice complaint to add a fraud claim. Dr. Blain then retained independent counsel, who assertedly demanded that Doctors' settle the claim on Dr. Blain's behalf. Doctors' failed to do so for approximately one year, then unsuccessfully attempted to condition settlement on the Marchands' waiving any bad faith claims they had against Doctors'.

A settlement was ultimately reached in December 1986, whereby Doctors' paid the $1 million policy limits to the Marchands in exchange for dismissal of Dr. Blain from the malpractice action. ³

The pleading alleged Doctors' conduct violated its contractual and statutory obligations under Insurance Code section 790.03. ⁴ The Marchands' damages included loss of interest on the settlement proceeds, reduction of benefits due to increase in the cost of the annuity purchased with the settlement proceeds, and emotional distress.

Doctors' demurred to the second amended complaint on the grounds, inter alia, of failure to state facts sufficient to constitute a cause of action and failure to allege a cognizable claim for conspiracy.

After the trial court issued its order overruling the demurrer, Doctors' petitioned this court for a writ of mandate to compel the trial court to sustain the demurrer. It submitted the following grounds for the petition: (1) The entire action should be dismissed because the allegation that Dr. Blain believed himself at fault did not satisfy the requirement of Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880, 153 Cal.Rptr. 842, 592 P.2d 329 of an antecedent binding determination or admission of liability; (2) the conspiracy claim offended due process concerns and the litigation privilege of section 47(2); and (3) this action could not proceed before conclusion of the underlying action against Doctors' alleged co-conspirators.

We denied the petition for writ of mandate.

Thereafter, the California Supreme Court issued the following: "The above matter is transferred to the Court of Appeal, Third Appellate District, with directions to vacate its order denying mandate and to issue an alternative writ to be heard before that court when to [sic ] proceeding is ordered on calendar. (See Moradi-Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287, 313 [250 Cal.Rptr. 116, 758 P.2d 58]; Doctors Co. v. Superior Court (1989) 49 Cal.3d 39 [260 Cal.Rptr. 183, 775 P.2d 508]; ⁵ and Palma v. Industrial Fasteners We issued an alternative writ.

(1984) 36 Cal.3d 171 [203 Cal.Rptr. 626, 681 P.2d 893].)"

DISCUSSION

I. Moradi-Shalal

The Marchands "acknowledge that as presently pled, their complaint alleging violation of California Insurance Code § 790.03 is barred by the Supreme Court decision in Moradi-Shalal v. Fireman's Fund Insurance Companies (1988) 46 Cal.3d 287 [250 Cal.Rptr. 116, 758 P.2d 58]." ⁶ However, they cite Moradi-Shalal's caveat that, "the courts retain jurisdiction to impose civil damages or other remedies against insurers in appropriate common law actions, based on such traditional theories as fraud [and] infliction of emotional distress, ..." (Id. at pp. 304-305, 250 Cal.Rptr. 116, 758 P.2d 58.)

The Marchands seek leave to amend their pleading to assert common law claims. However, they do not represent that any additional facts can be alleged. Rather, they assert that the facts as presently pled state a cause of action under theories of (1) intentional interference with prospective economic advantage; (2) intentional spoliation of evidence; and (3) intentional infliction of emotional distress. Consequently, their request for leave to amend adds nothing to our determination of the viability of their action, which must stand or fall on the facts alleged in the second amended complaint. (See Alcorn v. Anbro Engineering, Inc. (1970) 2...