Krupnick v. Hartford Accident & Indemnity Co., E006810

• Decision Date: 09 September 1994
• Docket Number: No. E006810,E006810
• Citation: 34 Cal.Rptr.2d 39,28 Cal.App.4th 185
• Court: California Court of Appeals Court of Appeals
• Parties: Judith KRUPNICK, et al., Plaintiffs and Appellants, v. The HARTFORD ACCIDENT AND INDEMNITY COMPANY, et al., Defendants and Respondents.

Page 39

34 Cal.Rptr.2d 39

28 Cal.App.4th 185

Judith KRUPNICK, et al., Plaintiffs and Appellants, v. The HARTFORD ACCIDENT AND INDEMNITY COMPANY, et al., Defendants and Respondents.

No. E006810.

Court of Appeal, Fourth District, Division 2, California.

Sept. 9, 1994.

As Modified Sept. 16, 1994.

Certified for Partial Publication ^*

[28 Cal.App.4th 187] Weldon Diggs, A Professional Law Corp., Upland, and Linda M. Wilde, Victorville, for plaintiffs and appellants.

Hawkins, Schnabel & Lindahl, Kelley K. Beck, Rena M. Denton and Tina M. Bailer, Los Angeles, for defendants and respondents.

OPINION

McDANIEL, Associate Justice (Assigned). ^*

After Judith and Albert Krupnick (plaintiffs) had settled their personal injury action against their tortfeaser, Roy Hester, for $295,000, they yet remained distraught over the manner in which Hester's insurance company, Hartford Accident and Indemnity Company, and its employee John McWorter (defendants) had conducted the settlement negotiations. As a result, they commenced the underlying litigation, seeking to recover money, beyond the settlement noted, as recompense for their purely emotional distress. Their action proceeded under a theory then viable under Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880, 153 Cal.Rptr. 842, 592 P.2d 329 (Royal Globe ). That theory, now discredited (post ), permitted a direct action by a third party against the adverse, first party's insurance carrier, in those instances where the carrier, in dealing with the third party, had engaged in unfair settlement practices as defined in the Insurance Code.

While plaintiffs' Royal Globe-type action was pending, the Supreme Court, in Moradi-Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287, 250 Cal.Rptr. 116, 758 P.2d 58 (Moradi-Shalal ), overruled Royal Globe. Moradi-Shalal held that the Insurance Code provisions which define unfair settlement practices were never intended by the Legislature to permit a third-party, civil action directly against an insurance company. (Id. at p. 304, 250 Cal.Rptr. 116, 758 P.2d 58.) In the course of its opinion, Moradi-Shalal otherwise observed, with regard to any presumed direct duty owed a third-party claimant by an insurer, that "[i]t tends to create a serious conflict of interest for the insurer, who must not only protect the interests of its insured, but also must safeguard its own interests from the adverse claims of the third party claimant. This conflict disrupts the settlement process and may disadvantage the insured." (Id. at p. 302, 250 Cal.Rptr. 116, 758 P.2d 58.)

As a consequence of the ruling in Moradi-Shalal, plaintiffs amended their complaint to seek damages at common law based on the same facts which they had alleged to constitute unfair settlement practices under the Insurance Code. The complaint, relying upon a single set of facts, which decried defendants' behavior in their conduct of settlement negotiations, sought damages for: 1) intentional infliction of emotional distress; 2) negligent infliction of emotional distress; and 3) "violation" of Civil Code section 1714. In response to such amended effort, the trial court, paying heed to the Moradi-Shalal pronouncement noted, granted defendants' motion for judgment on the pleadings as to all three counts.

Because the assignments of error as to counts one and three can be readily disposed of under established precedents, the published portion of this opinion will be confined to the issue of whether the pleaded facts under count two state a cause of action for negligent infliction of emotional distress.

Thus, in this post-Molien ¹ era, we are here called upon to review an unsuccessful effort in the trial court by third-party plaintiffs to recover money damages for purely emotional distress directly from their tortfeasor's insurance company. Such distress, as noted, allegedly arose because of the manner in which the settlement negotiations were conducted. In reality, this case, insofar as it involves a claim based on negligent infliction of emotional distress, amounts to a thinly disguised effort to persuade us, despite the overruling of Royal Globe, to include within the theories of common-law liability for negligence, a cause of action based upon precisely the same facts as were actionable under the Insurance Code pursuant to Royal Globe, before that case was overruled. Our review will explain why the trial court was correct in granting the motion for judgment on the pleadings as to count two.

As to one of plaintiffs' contentions, there is nothing in the Moradi-Shalal language itself which supports this latter-day effort to engraft upon the common law a cause of action grounded upon an insurer's conduct reflecting those unfair settlement practices held actionable by Royal Globe under the Insurance Code but now discredited.

As to another of plaintiffs' contentions, such a cause of action is not sanctioned by particular language contained in Moradi-Shalal, language by which California litigants were assured by the Supreme Court that its decision to overrule Royal Globe did not foreclose "jurisdiction to impose civil damages or other remedies against insurers in appropriate common law actions, based on such traditional theories as fraud, infliction of emotional distress, and (as to the insured) either breach of contract or breach of the implied covenant of good faith and fair dealing." (Moradi-Shalal, supra, 46 Cal.3d 287, 304-305, 250 Cal.Rptr. 116, 758 P.2d 58, italics added; hereinafter, the "reassuring language.") In our view, upon closer scrutiny, this "reassuring language" does not constitute a substantive holding; it only assures us, beyond the overruling of Royal Globe, that nothing has changed. As a consequence, it cannot and does not itself constitute recognition of a negligence action at common law, especially of the kind undertaken by plaintiffs here, unless such action were already recognized. That, of course, is what we are called upon to decide.

The trial court's ruling was correct, principally, because under precedent which has evolved since Molien, plaintiffs have failed to plead facts which bring them within that now-defined salient where claims for negligent infliction of purely emotional distress have come to be recognized. As a preface to later elaboration upon this conclusion, we must go back about 14 years to Molien. The Supreme Court in that decision extended the boundaries of negligence liability for purely emotional distress, unaccompanied by physical trauma, beyond the small beachhead earlier staked out by Dillon v. Legg (1968) 68 Cal.2d 728, 69 Cal.Rptr. 72, 441 P.2d 912. The Dillon foothold involved only special instances in so-called bystander cases. Since Molien, there have been at least 26 cases, sounding in negligence, in which the plaintiffs have sought recovery for purely emotional distress, foreseeable in every instance.

These cases are analyzed in Bro v. Glaser (1994) 22 Cal.App.4th 1398, 27 Cal.Rptr.2d 894 (Bro ) and are collected and classified in an appendix to the opinion. (Id. at p. 1444, 27 Cal.Rptr.2d 894.) Such analysis shows, in purely emotional distress cases based on negligence, that not all succeed. As appears in the Bro catalogue, only 9 succeeded; 17 failed. The Bro analysis draws on Supreme Court authority which makes clear, because emotional distress is always foreseeable, that any attempt to define duty in this kind of case in terms of foreseeability is useless, if not futile. (Burgess v. Superior Court (1992) 2 Cal.4th 1064, 1074, 9 Cal.Rptr.2d 615, 831 P.2d 1197 (Burgess ); Thing v. La Chusa (1989) 48 Cal.3d 644, 663-664, 257 Cal.Rptr. 865, 771 P.2d 814 (Thing ).)

In view of the foregoing, the required inquiry here is whether the facts plaintiffs have pleaded fall on the liability or non-liability side of the line. Such a line has emerged since Molien as a result of some claims for negligent infliction of emotional distress succeeding and others failing. (Bro, supra, 22 Cal.App.4th 1398, 1444, 27 Cal.Rptr.2d 894.) In short, just as in all negligence cases, to succeed, plaintiffs had to allege facts which raised a duty to exercise reasonable care in avoiding an impermissible infliction of emotional distress and a breach of that duty. This they failed to do.

More particularly, no one in this state has ever recovered damages for purely emotional distress in a negligence action unless he or she could first be characterized as a direct victim. (See Bro, supra, 22 Cal.App.4th 1398, 1417, 27 Cal.Rptr.2d 894.) Moreover, it was not until Burgess was decided in 1992 that the Supreme Court provided a simple, working definition of "direct victim." Burgess announced that the presence of a preexisting relationship between the parties is that "which defines the phrase 'direct victim.' That label signifies nothing more." (Burgess, supra, 2 Cal.4th 1064, 1074, 9 Cal.Rptr.2d 615, 831 P.2d 1197.)

Under such definition, because plaintiffs did not enjoy the precedent-prescribed relationship with defendants, no duty of care arose and they were foreclosed from having their claim for negligent infliction of emotional distress evaluated to determine if a protected interest had been impermissibly invaded, just as were the plaintiffs foreclosed in 11 of the post-Molien cases cited in Bro supra, 22 Cal.App.4th 1398, 1418, 27 Cal.Rptr.2d 894, and tabulated at p. 1444, 27 Cal.Rptr.2d 894. We shall affirm the judgment accordingly.

FACTUAL AND PROCEDURAL BACKGROUND

A. The Antecedent Traffic-Collision Action

Roy Hester "rear-ended" the vehicle in which plaintiffs were riding, and plaintiffs were injured as a result. Five months later, plaintiffs filed the antecedent, traffic-collision action to recover personal injury damages from Hester (the insured) and from National Car Rental Systems, Inc., the company from which the insured had rented the car he was driving at the time of the collision. About two and one-half years later, pursuant to...