Jonathan Neil & Associates, Inc. v. Jones
| Decision Date | 14 May 2002 |
| Docket Number | No. F029400.,No. F030300.,F029400.,F030300. |
| Citation | 98 Cal.App.4th 434,119 Cal.Rptr.2d 660 |
| Court | California Court of Appeals Court of Appeals |
| Parties | JONATHAN NEIL & ASSOCIATES, INC., Plaintiff and Appellant, v. Freddie JONES, Defendant, Cross-Complainant and Appellant; Mildred Jones et al., Cross-Complainants and Appellants. Cal-Eagle Insurance Company, Cross-Defendant and Appellant; Johnsey Insurance Company, Cross-Defendant and Respondent. |
Fried, Frank, Harris, Shriver & Jacobson, Richard A. Brown and E. Randol Schoenberg; Greines, Martin, Stein & Richland, Irving H. Greines, Robin Meadow, Beverly Hills, Tyna Thall Orren, Pasadena, and Peter 0. Israel, Beverly Hills, for Plaintiff and Appellant and Cross-defendant and Appellant.
McCormick, Barstow, Sheppard, Wayte & Carruth, James P. Wagoner, Fresno, and Wendy S. Loyd, for Defendant, Cross-complainant and Appellant Freddie Jones and Cross-complainants and Appellants Mildred Jones and Fred Jones Trucking, Inc.
Emerson, Corey & Barsotti, Fresno, for Cross-defendant and Respondent.
This appeal and cross-appeal follow a judgment in favor of a trucking company and its owners, and against the company's assigned-risk liability insurer. We find the facts do not support a tort cause of action for breach of the duty of good faith and fair dealing and that the trial court erred when it failed to stay proceedings while the parties exhausted administrative remedies before the Insurance Commissioner. As a result of these conclusions, the judgment must be reversed and the matter remanded for further proceedings.
In 1990 and 1991, Freddie and Mildred Jones owned a trucking company, known as Fred Jones Trucking. In August of 1992, the Joneses formed a corporation, Fred Jones Trucking, Inc., and assigned to it all of their interest in Fred Jones Trucking. We will refer to the Joneses' individual and corporate identities as "the Joneses," unless the particular context requires a further distinction. The Joneses operated under the authority of the California Public Utilities Commission (PUC).1 They performed both contract and job-lot hauling consisting mostly of day trips of less than 200 miles.
The Joneses owned two tractor units and five trailers. Of their gross receipts of about $680,000 per year in 1991, about $365,000 was paid to subhaulers. Subhaulers are individual owner-operators who have their own PUC certificates of authority and their own liability insurance, required as a condition of certification by the PUC.
The PUC also requires the insurer of any regulated trucker to cover any injury or damage to third parties caused by any PUC-regulated vehicle used in the trucker's business, although this coverage permits the insurer to seek reimbursement from its insured if the risks have not been disclosed to the insurer. Thus, because the Joneses were themselves holders of a PUC certificate for their trucking company and subhaulers held their own certificates, two insurance companies could be responsible for payment if a subhauler had an accident while hauling for the Joneses.
The Joneses had liability insurance for the 1990 policy year with Edison Insurance. Edison went out of business and the Joneses needed to find a new insurer. Their insurance agent, Johnsey Insurance Company (Johnsey), suggested they obtain insurance through the state's assigned risk plan because it might save the Joneses some money. The Joneses agreed.
Johnsey obtained an application for the assigned risk plan. The application contained a statement to the effect that any policy issued as a result of the application would be subject to the rules and regulations of the assigned risk program:
The Joneses' application was assigned to Cal-Eagle Insurance Company (Cal-Eagle) by the assigned-risk program office. Cal-Eagle issued a policy in a form required by the Department of Insurance. It charged the Joneses an initial estimated annual premium of $14,088, based on the Joneses' use of their own, specified vehicles in the business. (Cal-Eagle added the minimum permissible premium of $299 for the PUC endorsement coverage, based on the information set out in the Joneses' application.) Over the term of the policy, Cal-Eagle assessed additional premiums as the Joneses added equipment to their fleet. The total of premiums charged and paid during the policy year was $21,752.
The Cal-Eagle policy issued to the Joneses included the following language:
After the policy expired, Cal-Eagle did a routine audit of the Joneses to make sure all of the vehicles used in the business had been accounted for in the calculation of premiums. The audit took place pursuant to the following provision of the policy:
The auditor discovered the Joneses' extensive use of subhaulers, and Cal-Eagle assessed the Joneses (under old Rule 23 of the California Commercial Automobile Assigned Risk Plan Manual of Rules and Rates, explained below) another $111,523 in insurance premiums for the coverage period that had just expired. This additional premium was subsequently adjusted to $51,294 under new Rule 23, also explained below.
The Joneses declined to pay the additional premium. Cal-Eagle assigned its claim to Jonathan Neil & Associates, Inc., a collection agency, which sued Freddie Jones for the balance due on the premium. The Joneses responded with a cross-complaint, initially for bad faith and subsequently amended to state other tort causes of action.
The Commercial Automobile Insurance Procedure (CAIP)
Section 11620 of the Insurance Code requires the Insurance Commissioner to "approve or issue a reasonable plan" to provide liability insurance for those "who are in good faith entitled to but are unable to procure that insurance through ordinary methods." In general, the plan assigns such insureds to the various companies who write insurance in California and regulates the premiums that can be charged to such insureds. This assigned-risk insurance is generally issued at the minimal levels required by the financial responsibility law. (See Ins.Code, § 11622.)
Prior to adoption by referendum in 1988 of Proposition 103, the assigned risk plan was operated by a governing committee formed by the insurers, "subject to review by the Insurance Commissioner." (See former Ins.Code, § 11623, amended by Stats.1990, ch. 1132, § 1.) This committee is known as the CAARP committee, an acronym reflecting the name of the program it administers, the California Automobile Assigned Risk Program.
After 1990, the CAARP committee became advisory to the Insurance Commissioner (see Ins.Code, § 11623, subd. (a)). The Insurance Commissioner is required to "consult with the advisory committee on a regular basis on policy matters affecting the operation of the plan." (Ins.Code § 11623, subd. (a).) Nevertheless, the committee "with the approval of the commissioner shall appoint a manager to carry out the purposes of this article, employ sufficient personnel to provide services necessary to the operation of the plan, and contract for the provision of statistical and actuarial services." (Ibid.) The CAARP committee apparently has contracted with an organization called AIPSO to manage the plan. AIPSO is a nationwide operator of such plans; AIPSO provides policy and endorsement forms, as well as interpretive advice.
The CAARP committee is, by statute, composed of eight employees of insurance companies that write assigned-risk policies, four public members, two representatives of insurance agencies, and the Insurance Commissioner or his/her designee. (Ins.Code, § 11623, subd.(a).) Curiously, "[notwithstanding this act, which changes the status of the governing committee to that of an advisory committee, the committee shall have the right to retain counsel of its choice .... and the right and necessary standing to bring and defend actions in judicial and administrative proceedings related to the plan in the name of the plan. ..." (Ins.Code, § 11623, subd. (b).)
The Commercial Assigned Risk Procedure.
There are certain classes of vehicle users whose financial exposure (and potential danger to the public) is much greater than is contemplated by the ordinary assigned-risk placement. Among these is the class of commercial truckers. In order to accommodate these higher risk vehicle users, the Insurance Commissioner in 1978 promulgated (by regulation at Cal.Code Regs., tit. 10, § 2432 et seq.) the Commercial Automobile Insurance Procedure (CAIP). The assigned risk plan for truckers is also administered...
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