McKee v. National Union Fire Ins. Co., No. B062944

• Decision Date: 28 April 1993
• Docket Number: No. B062944
• Citation: 15 Cal.App.4th 282,19 Cal.Rptr.2d 286
• Parties: Dwayne McKEE, Plaintiff and Respondent, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

Page 286

19 Cal.Rptr.2d 286

15 Cal.App.4th 282

Dwayne McKEE, Plaintiff and Respondent, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., Defendant and Appellant.

No. B062944.

Court of Appeal, Second District, Division 1, California.

April 28, 1993.

Rehearing Denied May 18, 1993.

Schaffer & Lax, Stephen A. Lax and Elizabeth A. Moussouros, Los Angeles, for defendant and appellant.

Glickman & Glickman, David R. Glickman and Steven C. Glickman, Beverly Hills, for plaintiff and respondent.

MIRIAM A. VOGEL, Associate Justice.

The question in this case is whether a judgment creditor may sue a judgment debtor's insurance company under subdivision (b)(2) of section 11580 of the Insurance Code before an appeal from the judgment in the underlying action is resolved or the time within which to pursue an appeal has passed. Our answer is no.

FACTS

In 1985, 14-year-old Dwayne McKee was shot and injured by 13-year-old Jeffrey Townsend while the boys were playing at the home where Jeffrey lived with his parents, David and Marilyn Townsend. The gun belonged to David Townsend and the house belonged to David Townsend's business, Anafuel Corporation of America. Anafuel and the Townsends were both insured by State Farm Fire & Casualty Company (there were two policies, each with Dwayne (through his parents as guardians ad litem) sued the Townsends and Anafuel (Super.Ct. L.A. County, 1985, No. NWC10436). Before trial, Dwayne offered to settle with State Farm and National Union for policy limits. National Union declined but State Farm accepted and paid $200,000 to Dwayne. As part of the settlement, Dwayne promised that, if he prevailed, he would not enforce his judgment against the Townsends or Anafuel, but would look solely to National Union for payment. The case was thereafter tried, with National Union providing a defense to Anafuel, subject to a reservation of rights. Dwayne prevailed and on June 14, 1990, a judgment was entered in his favor and against Anafuel in the amount of $8,496,841. Anafuel appealed from that judgment.

liability limits of $100,000). In addition, Anafuel had a general liability policy issued by National Union Fire Insurance Company of Pittsburgh, with policy limits of $1 million.

In early 1991, while Anafuel's appeal in the underlying case was still pending, Dwayne sued National Union, alleging a single cause of action under subdivision (b)(2) of section 11580 of the Insurance Code. ¹ Dwayne alleged that his efforts to collect from National Union had been unsuccessful and he prayed for Anafuel's policy limits of $1 million. National Union answered and alleged, among other affirmative defenses, that Dwayne's complaint was premature because his judgment against National Union's insured was not yet final.

At the trial of this action, the parties stipulated that National Union's policy was in effect at the time Dwayne was shot and that, except for the fact the judgment in the underlying action was not yet final, the judgment against Anafuel was otherwise within the coverage provided by National Union's policy. The trial court found this action was not premature and entered judgment in favor of Dwayne in the amount of $1 million. National Union appealed from the judgment entered in this case.

While this appeal was pending, we affirmed the judgment in the underlying case (McKee v. Anafuel Corporation of America (Sept. 30, 1992) B051463 [nonpub. opn.] ) and the Supreme Court thereafter denied Anafuel's petition for review (McKee v. Anafuel Corporation of America (Jan. 27, 1993) S029703). Although Dwayne has suggested this appeal is now moot, we disagree and therefore address the merits of the issue raised by National Union.

DISCUSSION

The only issue is whether this action was premature when filed and tried. For the following reasons, we hold that it was.

A.

Under subdivision (b)(2) of section 11580, every liability insurance policy issued in this state must include a "provision that whenever judgment is secured against the insured ... in an action based upon bodily injury, death, or property damage, then an action may be brought against the insurer on the policy and subject to its terms and limitations, by such judgment creditor to recover on the judgment." In conformance with the statute, National Union's policy provides that "[n]o action shall lie against [National Union] ... until the amount of the insured's obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and [National Union]." As we will explain, the statute and the standard policy language permit an action against an insurer only when the underlying judgment is final and "final," for this purpose, means an appeal from the underlying judgment

has been concluded or the time within which to appeal has passed.

B.

In Jennings v. Ward (1931) 114 Cal.App. 536, 300 P. 129, the plaintiff recovered a judgment for personal injuries against two insureds. While the insureds' appeal from that judgment was pending, the plaintiff attempted to execute against the insureds, without success. At a judgment debtor examination, the plaintiff learned about an insurance policy and, by motion filed in the personal injury action, asked the court to compel the insurer to satisfy the judgment. The policy contained language substantially similar to the provision in National Union's policy--"[n]o action shall lie against the company to recover upon any claim or for any loss under this policy unless brought after the amount of such claim or loss shall have been fixed and rendered certain either by final judgment against the Assured after trial of the issue or by agreement between the parties...."--and the trial court therefore denied the motion. (Id. at pp. 536-537, 300 P. 129.)

In affirming, the Court of Appeal explained it is "the settled rule in California ... that a judgment is not final so long as an appeal is pending therefrom, even though a ... bond has not been furnished. [Citations.] [p] It follows that during the pendency of the appeal the amount of such claim or loss has not been fixed and rendered certain by final judgment as required by ... the policy so as to authorize an action thereon against the company." (Id. at p. 537, 300 P. 129.) In our view, the slight difference in the policy language in Jennings does not affect its application to this case--because (as we explain in Part C, post ) the basic rule is that, so long as an appeal is pending, a judgment is not final. ²

Although Jennings v. Ward, supra, 114 Cal.App. 536, 300 P. 129, is the only case factually on all fours with this case, a number of courts have reached similar results in similar situations. For example:

--In Fireman's Fund Ins. Co. v. City of Turlock (1985) 170 Cal.App.3d 988, 1004, 216 Cal.Rptr. 796, the court held that an action under subdivision (b)(2) of section 11580 cannot be maintained "[u]ntil such time as a final judgment [is] entered" against the insured. (Emphasis added.)

--In Laguna Pub. Co. v. Employers Reinsurance Corp. (C.D.Cal.1985) 617 F.Supp. 271, 272, an action against an insurer under subdivision (b)(2) of section 11580, the court held (with regard to a claimant whose judgment had been set aside) that under " 'the law of California ... a direct action against the insurer ... is not allowable until after the claimant shall have secured a final judgment against the insured.' " (Emphasis added.)

--In Mathews Cadillac, Inc. v. Phoenix of Hartford Ins. Co. (1979) 90 Cal.App.3d 393, 397, 153 Cal.Rptr. 267, an action against an insurer under section 11580, subdivision (b)(2), was dismissed because no judgment was ever entered against the insured, the court holding that "no liability accrues as an enforceable claim against the insurer until recovery of a final judgment against the [insured]." (Emphasis added.)

--In Zander v. Texaco, Inc. (1968) 259 Cal.App.2d 793, 807, 66 Cal.Rptr. 561, an action by a judgment creditor against an insurer, the court rejected the insurer's claim that the action was barred by limitations, explaining that the cause of action "did not arise until a final judgment against the insured had been entered." (Emphasis added.)

--In Tashire v. State Farm Fire and Casualty (9th Cir.1966) 363 F.2d 7, 10 (reversed on a federal procedure issue, State Farm Fire & Cas. Co. v. Tashire (1967) 386 U.S. 523, 87 S.Ct. 1199, 18 L.Ed.2d 270), an interpleader action filed by an insurer, the court held that, under California law, "a direct action against the insurer is not allowable until after the claimant shall have secured a final judgment against the insured." (Emphasis added.)

--In Chamberlin v. City of Los Angeles (1949) 92 Cal.App.2d 330, 332, 206 P.2d 661, a claimant's action against an insurer, the court held that "it is a condition precedent to any action against the insurer that a final judgment be obtained against the assured." (Emphasis added.)

--In Malmgren v. Southwestern Auto. Ins. Co. (1932) 126 Cal.App. 135, 139, 14 P.2d 351, an action against an insurer by the insured's judgment creditor, the court held that the cause of action against the carrier brought after the time to appeal from the underlying judgment had expired "arose as soon as the judgment [in the underlying action] became final." (Emphasis added.)

--In Levy v. Superior Court (1925) 74 Cal.App. 171, 175, the court held that policy language virtually identical to National Union's policy means that a judgment creditor cannot maintain an action "against the insurer until the recovery of a final judgment against the insured...." (Emphasis added.)

Without a doubt, a final judgment is required.

C.

And, without a doubt, "final" means after an appeal is concluded or the time within which to appeal has passed. (Woolett v. American Employers Ins. Co. (1978) 77 Cal.App.3d 619, 624, 143 Cal.Rptr. 799 [a cause of action under section 11580, subdivision (b)(2),...