Green v. Travelers Indemnity Co.

• Decision Date: 16 September 1986
• Parties: Jennie GREEN et al., Plaintiffs and Appellants, v. TRAVELERS INDEMNITY COMPANY et al., Defendants and Respondents. Jennie GREEN et al., Petitioners, v. The SUPERIOR COURT of Contra Costa County, Respondent; TRAVELERS INDEMNITY COMPANY et al., Real Parties in Interest. A024035, A023986.
• Court: California Court of Appeals Court of Appeals

Page 13

230 Cal.Rptr. 13

185 Cal.App.3d 544

Jennie GREEN et al., Plaintiffs and Appellants, v. TRAVELERS INDEMNITY COMPANY et al., Defendants and Respondents.

Jennie GREEN et al., Petitioners, v. The SUPERIOR COURT of Contra Costa County, Respondent;

TRAVELERS INDEMNITY COMPANY et al., Real Parties in Interest.

A024035, A023986.

Court of Appeal, First District, Division 4, California.

Sept. 16, 1986.

George W. Kilbourne, Law Offices of George W. Kilbourne, Martinez, Bryce C. Anderson, Atty. at Law, Concord, for plaintiffs and appellants.

Howard M. Garfield, Marsha L. Morrow, Guy D. Calladine, Ralph M. Tener, Long & Levit, San Francisco, Gibbons, Lees & Schaefer, John Lees, A. Byrne Conley, Robert L. Collins, Richard E. Dodge, Risa Salat, Susan Jeffries, McNamara, Houston, Dodge, McClure & Ney, Walnut Creek, Raymond Coates, Low, Ball & Lynch, Menlo Park, Gibson, Dunn & Crutcher, John L. Endicott, Fred L. Gregory, Randolph P. Sinnott, David K. Ringwood, R. Jeff Carlisle, Lynberg & Nelsen, Los Angeles, Donald W. Rees, S. Mitchell Kaplan, Gordon &amp Rees, Patrick A. Cathcart, Gordon I. Endow, Hancock, Rothert & Bunshoft, San Francisco, Michael E. Dowd, Dowd & Dowd, Ltd., Chicago, Ill., Robert A. Muhlbach, Kirtland & Packard, Los Angeles, Christine Hevener, Farbstein & Brown, San Mateo, Jonathan P. Reynolds, Russ & Reynolds, Donald E. Dorfman, Michael P. Schibly, Lillick, McHose & Charles, Jeff Haney, Bishop, Barry, Howe & Reed, San Francisco, Robert H. Berkes, Bodkin, McCarthy, Sargent & Smith, Alan H. Barbanel, Buchalter, Nemer, Fields, John G. Niles, Martin S. Checov, O'Melveny & Myers, Los Angeles, for defendants and respondents and real parties in interest.

ANDERSON, Presiding Justice.

Plaintiffs Jennie Green and Thomas J. Flavetta (appellants) appeal from a judgment of dismissal entered after demurrers to the first amended complaint were sustained without leave to amend, and from a subsequent order staying all proceedings in the above entitled matter.

This dispute is but another chapter in the asbestos litigation that arose between Johns-Manville Products Corporation, Pittsburg, California (hereafter Manville) and some 17,000 individual plaintiffs claiming asbestos-related personal injuries which are being litigated in approximately 12,000 pending lawsuits. The relevant facts leading to the present appeal may be summarized as follows:

The original action in this case was commenced by appellants against Manville in 1981. Appellant Green, the surviving widow of James Green, brought a wrongful death action against the company, charging that her husband died from the effects of asbestos-related disease he contracted while working at Manville's Pittsburg plant from 1948 to 1981 (Jennie Green et al. v. Manville Corporation, action No. 233426). Appellant Flavetta, an ex-employee of Manville, brought the action on his own behalf alleging that he was suffering from asbestos-related disease which was aggravated by his employment at the plant (Thomas Flavetta v. Johns-Manville Corporation et al., action No. 219323).

On August 26, 1982, the Manville companies jointly filed a petition for reorganization under section 301 of the Bankruptcy Code. (11 U.S.C. § 101 et seq.) Pursuant to its statutory power the bankruptcy court stayed all litigation pending against Manville. (11 U.S.C. §§ 105, 362.) Four days later, on August 30, 1982, appellants filed the present action against 27 insurance companies who provided primary, as well as excess and reinsurance coverages for Manville. The complaint alleged that the defendant insurance carriers (hereafter respondents) breached their duties owed to appellants under INSURANCE CODE, SECTION 790.03¹ and asked for a declaration of said duties. After the trial court sustained respondents' demurrers to the complaint with leave to amend, appellants amended their complaint.

The first amended complaint filed on April 29, 1983, sought declaratory relief as well as damages specifically pleading breaches of section 790.03, subdivision (h), ² both before and after August 26, 1982. Thus, it was alleged, inter alia, that respondents breached their statutory duty towards appellant third party claimants: (1) by failing to acknowledge and act promptly with respect to appellants' claims arising under the Manville insurance policies (subd. (h)(2), first and second cause of action); (2) by failing to adopt and implement reasonable standards for investigation and processing claims (subd. (h)(3), third and fourth causes of action); (3) by a failure to affirm or deny coverage within a reasonable time (subd. (h)(4), fifth and sixth causes of action); (4) by a failure to effectuate a prompt, fair and equitable settlement in good faith (subd. (h)(5), seventh and eighth causes of action); (5) by delaying the investigation or payment of claims (subd. (h)(11), ninth and tenth causes of action); (6) by failing to settle claims promptly where liability has become clear (subd. (h)(12), eleventh and twelfth causes of action); and (7) by a failure to give a reasonable explanation for the denial of the claim or for the offer of compromise settlement (subd. (h)(13), thirteenth and fourteenth causes of action). Lastly, in the fifteenth and sixteenth causes of action appellants prayed compensatory and punitive damages for the above stated violations.

Respondents demurred to the first amended complaint claiming that the action at bench was premature inasmuch as the insured's liability toward appellants has not been determined yet (Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880, 153 Cal.Rptr. 842, 592 P.2d 329); that the declaratory relief in this case was inappropriate due to an absence of actual controversy between the parties; and that the action was barred by the stay order of the bankruptcy court. The trial court sustained the demurrers without leave to amend and dismissed the action against respondents. Subsequently, the trial court issued an order staying all proceedings pending resolution of both the Manville bankruptcy litigation (Johns-Manville Corporation et al. v. Asbestos Litigation Group et al., Adversary Proceeding No. B 82-6377A, Bankruptcy Court, S.D.N.Y.) and the coordinated insurance coverage litigation in the San Francisco Superior Court (In re Asbestos Insurance Coverage Cases, Judicial Council Coordination Proceeding No. 1072). Appellants filed a notice of appeal from both the judgment of dismissal and the subsequent stay order. In addition, appellants challenged the validity of the stay order also by a petition for writ of mandate and/or prohibition filed in this court (No. A023986). By an order previously issued, we determined that appellants' writ petition will be considered together with this appeal.

Appellants contend that the trial court erred both in sustaining the demurrers without leave to amend and in staying the proceedings. More specifically, appellants claim that the causes of action predicated upon section 790.03 were actionable despite a lack of final judgment against Manville because the bankruptcy proceeding has removed Manville from the civil litigation as effectively as if there had been a settlement or civil judgment in the case. In the alternative, appellants urge that respondents should have been estopped from asserting the absence of final judgment because their own wrongful denial of coverage forced Manville into bankruptcy which, in turn, prevented a conclusion of the underlying action; and that, at any rate, appellants should have been allowed to obtain at least declaratory relief based on equitable grounds. The second prong of appellants' argument (which is repeated in their writ petition) is that the stay order issued by the trial court is not supported by the bankruptcy court order and, hence, invalid. In their counterargument respondents maintain that the ruling of the trial court was correct in both respects because (1) a third party claimant may not bring an action against the insurer until the insured's liability has been determined and the action between the claimant and the insured has been concluded (Royal Globe Ins. Co. v. Superior Court, supra, 23 Cal.3d 880, 153 Cal.Rptr. 842, 592 P.2d 329; Williams v. Transport Indemnity Co. (1984) 157 Cal.App.3d 953, 203 Cal.Rptr. 868; Rodriguez v. Fireman's Fund Ins. Co. (1983) 142 Cal.App.3d 46, 190 Cal.Rptr. 705; Nationwide Ins. Co. v. Superior Court (1982) 128 Cal.App.3d 711, 180 Cal.Rptr. 464); (2) estoppel as a theory cannot be raised for the first time on appeal (California Teachers' Assn. v. Governing Board (1983) 145 Cal.App.3d 735, 193 Cal.Rptr. 650; Roam v. Koop (1974) 41 Cal.App.3d 1035, 116 Cal.Rptr. 539) and in addition, it is unsupportable by the facts of this case (Hill v. Kaiser Aetna (1982) 130 Cal.App.3d 188, 181 Cal.Rptr. 564; Muraoka v. Budget Rent-A-Car, Inc. (1984) 160 Cal.App.3d 107, 206 Cal.Rptr. 476); (3) declaratory relief is inappropriate in the present instance since it would be based on a hypothetical contingency, i.e., Manville's potential liability (Selby Realty Co. v. City of San Buenaventura (1973) 10 Cal.3d 110, 109 Cal.Rptr. 799, 514 P.2d 111), and would address only past wrongs (Babb v. Superior Court (1971) 3 Cal.3d 841, 92 Cal.Rptr. 179, 479 P.2d 379; Travers v. Louden (1967) 254 Cal.App.2d 926, 62 Cal.Rptr. 654); and (4) the stay order is supported by both the bankruptcy court's order and the circumstances of the instant case. For the reasons that follow we agree with respondents and affirm the judgment.

I. Appellants' Unfair Claims Practices Action is Premature.

The trial court sustained respondents' demurrers on the ground that appellants' first amended complaint failed to state facts sufficient to constitute a cause of action under Royal Globe Ins. Co. v. Superior Court, supra, 23 Cal.3d 880, 153 Cal.Rptr. 842, 592 P.2d 329 and Rodriguez v. Fireman's Fund Ins. Co., supra, 142 Cal.App.3d 46, 190 Cal.Rptr. 705 (i.e., the action was premature). We believ...