Gulf Ins Co v. TIG Ins Co.
| Decision Date | 22 January 2001 |
| Citation | 103 Cal.Rptr.2d 305,86 Cal.App.4th 422 |
| Court | California Court of Appeals Court of Appeals |
| Parties | (Cal.App. 2 Dist. 2001) GULF INSURANCE COMPANY, Plaintiff and Appellant, v. TIG INSURANCE COMPANY et al., Defendants and Appellants. B135799 Filed |
APPEAL from a judgment of the Superior Court of Los Angeles County, David D. Perez, Judge. Affirmed.
Jean Ballantine and Larry A. Rothstein for Plaintiff and Appellant.
Haines, Brydon & Lea and James G. Boedecker, James E. Gibbons, and Patrick M. Quigley for Defendants and Appellants.
CERTIFIED FOR PUBLICATION
I.
INTRODUCTION
Plaintiff, Gulf Insurance Company ("Gulf") appeals after a final judgment was entered in its favor and against defendants, TIG Insurance Company and TIG Insurance Company of Michigan ("TIG"). The appeal is from an order sustaining demurrers to Gulf's claims for breach of contract and of the implied covenant of good faith and fair dealing in the original complaint. The only issues raised in the appeal relate to the claim for violation of the implied covenant of good faith and fair dealing. The claims arose as a result of Gulf acting as surety on a performance bond. The performance bond was issued in connection with a construction contract entered into between Gulf's principal, Santa Susana Construction (Santa Susana), and the obligee, the County of Los Angeles (the county).
After the demurrer was sustained to the breach of contract and implied covenant of good faith and fair dealing causes of action, the case proceeded to a court trial on Gulf's remaining claims for declaratory relief, equitable indemnity, and contribution. Eventually, judgment was entered in Gulf's favor in the sum of $43,593. TIG cross-appeals from the judgment entered on Gulf's claims in the first amended complaint for declaratory relief, equitable indemnity, and contribution. TIG's cross-appeal is based on the ground that no judgment should have been entered against it. This, it is argued, is because the evidence established that Gulf did not comply with TIG's claims reporting procedure in a timely manner. We affirm the judgment in all respects.
Gulf's appeal concerns the cause of action for breach of the implied covenant of good faith and fair dealing in the original complaint, which was brought against TIG and American International Specialty Lines Insurance, on December 9, 1997. In reviewing the dismissal, all well-pleaded factual allegations must be assumed as true. (Haggis v. City of Los Angeles (2000) 22 Cal.4th 490, 495-496; Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967; Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The complaint alleged the following facts. On November 2, 1994, Santa Susana entered into a contract with the county. Santa Susana agreed to construct and replace pipe culverts and other work on Las Flores Heights Road. On October 31, 1994, Gulf executed public works performance and payment bonds No. GE5645108 for Santa Susana as principal and the county as obligee. During the course of the construction work, Santa Susana damaged adjacent real property belonging to Louis E. Hill. The damage consisted of the erosion of a ditch backfilled by Santa Susana, which washed out retaining walls, a greenhouse, and an access road located on the Mr. Hill's property.
On March 15, 1996, the county declared Santa Susana in default under the construction contract. The county demanded that Gulf perform Santa Susana's remaining obligations under its October 31, 1994, performance bond. It was alleged that the remaining obligations, as required by the county, included the repair and restoration of the damage caused to Mr. Hill's property. Gulf retained Dorfman Construction (Dorfman) to complete Santa Susana's contractual obligations.
It was alleged that, at times pertinent to this action, Santa Susana maintained commercial general liability insurance written by TIG. It was further alleged that the insurance was primary and covered the type of loss or damage to Mr. Hill's property and the county was an additional insured under the policy. In addition, Gulf's performance bond was not a commercial general liability policy and was not intended to cover the type of damage done to Mr. Hill's property. In January 1997, Gulf paid Dorfman the sum of $46,793 to repair and restore damage to Mr. Hill's property, which had been caused by Santa Susana. As a result of the payment to Dorfman, Gulf, it was alleged, became subrogated to Santa Susana's and the county's rights as insureds under the TIG policy. Gulf alleged that TIG: failed to undertake the necessary repairs or to reimburse it; delayed in acknowledging the claim; refused to provide a copy of the policy; refused to conduct any investigation; requested documentation that had already been provided; refused to accept or deny coverage within a reasonable amount of time; refused to provide reasons for denying coverage; and failed to provide information upon request. Gulf asserted causes of action for: contract breach (first); declaratory relief (second); and breach of implied covenant of good faith and fair dealing (third).
On March 6, 1998, TIG filed a demurrer to the causes of action for breach of contract and of the implied covenant of good faith.1 The only issue raised on appeal relates to the third cause of action in the original complaint for breach of the implied covenant of good faith and fair dealing. TIG argued that Gulf lacked standing to pursue the contract breach causes of action because: (1) TIG had no contractual relationship with Gulf; (2) Gulf did not qualify as a third party beneficiary under the law; and (3) as a non-contracting party, Gulf could not pursue claims for tort and punitive damages in what was essentially an action for equitable indemnity or contribution. TIG further argued that the Gulf's remedy was in equity and not tort. Accordingly, TIG argued relief including punitive damages claims and attorney fees under Brandt v. Superior Court (1985) 37 Cal.3d 813, 816-820 were not recoverable by Gulf, a third party.
Gulf opposed the demurrer on the ground that it was subrogated to the rights of Santa Susana, which was a TIG policyholder and to those rights of the county as an additional insured. Gulf argued that, as a subrogee or assignee of Santa Susana, it possessed an insured's right to state causes of action for breach of contract and of the implied covenant of good faith and fair dealing.
In reply, TIG argued that Gulf was only an equitable subrogee; not a first party to any insurance contract with TIG and, as such, was only entitled to assignable rights. It was further argued: the complaint did not allege an assignment of rights; the right to punitive damages was personal and not assignable under California law; the cause of action for breach of the covenant of good faith and fair dealing was personal and was not assigned to Gulf; and Gulf and TIG were not in privity of contract.
The trial court sustained the demurrers with leave to amend. Gulf amended the complaint to allege causes of action for declaratory relief (first), equitable indemnity (second), and contribution (third). These three causes of action in the first amended complaint were the subject of a trial, judgment, and the cross-appeal.
Gulf argues on the appeal that the trial court erred in sustaining the demurrer to its claim for breach of the implied covenant of good faith and fair dealing in the third cause of action in the original complaint.2 An appellate court's "'only task in reviewing a ruling on a demurrer is to determine whether the complaint states a cause of action.'" (People ex. rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 300; Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.) The reviewing court assumes the truth of allegations in the complaint which have been properly pleaded and gives it a reasonable interpretation by reading it as a whole and with all its parts in their context. (Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 558; People Ex. rel. Lungren v. Superior Court, supra, 14 Cal.4th at pp. 300-301; Aubry v. Tri-City Hospital Dist., supra, 2 Cal.4th at pp. 966-967.) However, the assumption of truth does not apply to contentions, deductions, or conclusions of law and fact. (Moore v. Regents of University of California supra, 51 Cal.3d at p. 125.) Furthermore, any allegations that are contrary to the law or to a fact of which judicial notice may be taken will be treated as a nullity. (Interinsurance Exchange v. Narula (1995) 33 Cal.App.4th 1140, 1143; Fundin v. Chicago Pneumatic Tool Co. (1984) 152 Cal.App.3d 951, 955-956.) For the reasons stated below, we conclude the trial court did not err in sustaining the demurrer to Gulf's claim for bad faith.
As Gulf concedes in its opening brief, there is no authority which supports its claim that a surety may bring a bad faith action against a general liability carrier. Rather, Gulf asks us to extrapolate from other general insurance law principles to conclude that a surety can plead a cause of action against a commercial general liability "carrier for breach of the covenant of good faith and fair dealing implied in every insurance contract, including claims for punitive damages and attorney fees. . . ." The general rule is that parties who are not entitled to benefits under the policy cannot maintain a cause of action for an implied covenant. (Murphy v. Allstate Ins. Co. (1976) 17 Cal.3d 937, 944; see also Coleman v. Gulf Ins. Group 1986) 41 Cal.3d 782, 794-795; Seretti v. Superior Nat. Ins. Co. (1999) 71 Cal.App.4th 920, 928-929.) As the Supreme Court explained in Murphy v. Allstate Ins. Co., supra, 17 Cal.3d at page 944, "A third...
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