Moradi-Shalal v. Fireman's Fund Ins. Companies

• Decision Date: 25 April 1986
• Docket Number: P,MORADI-SHALA
• Court: California Court of Appeals Court of Appeals
• Parties: Previously published at 201 Cal.App.3d 1122 201 Cal.App.3d 1122 Parvanehlaintiff and Appellant, v. FIREMAN'S FUND INSURANCE COMPANIES, Defendant and Respondent. Civ. B013159.

Page 333

226 Cal.Rptr. 333

Previously published at 201 Cal.App.3d 1122

201 Cal.App.3d 1122

Parvaneh MORADI-SHALAL, Plaintiff and Appellant, v. FIREMAN'S FUND INSURANCE COMPANIES, Defendant and Respondent.

Civ. B013159.

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

April 25, 1986.

As Modified On Denial of Rehearing

May 15, 1986.

Review Granted July 31, 1986.

Olan & Friedman, Bennet Olan and Linda P. Horner, Los Angeles, for plaintiff and appellant.

Haight, Dickson, Brown & Bonesteel, Roy G. Weatherup and David F. Peterson, Santa Monica, for defendant and respondent.

McCLOSKY, Associate Justice.

Plaintiff, Parvaneh Moradi-Shalal, appeals from an order ¹ sustaining a demurrer without leave to amend to her first amended complaint for bad faith against defendant, Fireman's Fund Insurance Companies (hereinafter Fireman's Fund).

CONTENTION

Plaintiff contends that her suit for damages against the insured third party tortfeasor, which was settled and dismissed with prejudice, is concluded for purposes of commencing an action against the third party's insurer for violation of Insurance Code section 790.03, subdivision (h). ²

FACTS

On July 7, 1983, plaintiff was injured when the automobile she was driving was involved in an accident with another vehicle insured by Fireman's Fund. On April 24, 1984, and June 6, 1984, plaintiff's attorney wrote a letter to Fireman's Fund submitting evidence of damages and requesting settlement of the claim against its insured. Fireman's Fund did not acknowledge either of the demand letters and allegedly made no attempt to enter into a settlement.

On June 21, 1984, plaintiff filed suit against the insured to prevent the running of the statute of limitations. On September 21, 1984, a settlement was reached and the case was dismissed with prejudice on October 19, 1984.

On October 4, 1984, plaintiff commenced a bad faith action seeking compensatory and punitive damages against Fireman's Fund based on its alleged failure to effectuate a prompt, fair and equitable settlement of her claim in violation of section 790.03, subdivision (h). Fireman's Fund's general demurrer to the complaint was sustained with leave to amend.

On January 31, 1985, plaintiff filed her first amended complaint "For Damages for Unfair and Deceptive Insurance Business Practices." In that complaint, plaintiff alleged the following: Fireman's Fund was an insurer which had issued a liability policy to its insured covering injuries and damages resulting from the operation of motor vehicles; that plaintiff had sustained bodily injuries, medical expenses, and other damages when, on July 7, 1983, the automobile of Fireman's Fund's insured negligently struck plaintiff's vehicle; that plaintiff on April 24, 1984, and June 6, 1984, mailed letters to Fireman's Fund submitting evidence of her damages and requesting settlement of her claim; and alleged that Fireman's Fund did not acknowledge or act upon [those communications], did not promptly investigate or process the claim, and did not attempt in good faith to effectuate a prompt, fair, and equitable settlement of the claim, in which liability was reasonably clear.

On March 29, 1985, Fireman's Fund's demurrer to plaintiff's first amended complaint was sustained without leave to amend. The court based its decision primarily on the fact that plaintiff's failure to obtain a final judgment against the insured precluded her from maintaining an action against Fireman's Fund. The court also noted that its ruling was not in conflict with Rodriguez v. Fireman's Fund Ins. Co. (1983) 142 Cal.App.3d 46, 190 Cal.Rptr. 705.

DISCUSSION

"Notwithstanding facts unclearly stated, lack of precise form or language, insertion of irrelevant facts and requests for inappropriate relief, the rule is that if, upon consideration of all the facts therein stated, liberally construed, it appears plaintiff is entitled to any judicial relief against defendant, the complaint will withstand the demurrer." (Air Quality Products, Inc. v. State of California (1979) 96 Cal.App.3d 340, 347, 157 Cal.Rptr. 791.)

"For purposes of this appeal, those factual allegations of the [first amended] complaint which are properly pleaded are deemed admitted by defendant's demurrer." (Thompson v. County of Alameda (1980) 27 Cal.3d 741, 746, 167 Cal.Rptr. 70, 614 P.2d 728.)

I

Plaintiff contends that her bad faith action against Fireman's Fund is not precluded by her failure to obtain a "final judgment" against the insured. Relying on Rodriguez v. Fireman's Fund Ins. Co., supra, 142 Cal.App.3d 46, 190 Cal.Rptr. 705, she maintains that "a 'final judgment' was not required under Royal Globe, and that an underlying action which is settled and dismissed with prejudice is 'concluded' for purposes of commencement of an action against the insurer for breach of statutory duties under section 790.03."

In Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880, 884, 153 Cal.Rptr. 842, 592 P.2d 329, the Supreme Court held that a third party may sue an insurer for violating the duty imposed by section 790.03, subdivision (h), only after the action between the injured party and the insured is "concluded." The Royal Globe court concluded, however, that plaintiff could not sue the insurer and the insured in the same action (Id., at p. 891, 153 Cal.Rptr. 842, 592 P.2d 329) and went on to state: "[U]nless the trial against the insurer is postponed until the liability of the insured is first determined, the defense of the insured may be seriously hampered by discovery initiated by the injured claimant against the insurer. In addition, damages suffered by the injured party as a result of the insurer's violation of subdivisions (h)(5) and (h)(14) may best be determined after the conclusion of the action by the third party claimant against the insured. Thus, plaintiff's claim against defendant was brought prematurely and the trial court should have sustained defendant's demurrer and granted the motion for judgment on the pleadings on that ground." (Id., at p. 892, 153 Cal.Rptr. 842, 592 P.2d 329.) Respondent argues that "[t]he decision of the California Supreme Court in Royal Globe Insurance Company v. Superior Court, 23 Cal.3d 880, 153 Cal.Rptr. 842, 592 P.2d 329 (1979), should be overruled." It is not for a Court of Appeal to "overrule a decision of the California Supreme Court." (Auto Equity Sales v. Superior Court (1962) 57 Cal.2d 450, 455, 20 Cal.Rptr. 321, 369 P.2d 937.)

The obvious purpose of requiring the "conclusion" set forth in the Royal Globe case is to avoid prejudicing the defense of the insured in the underlying case and to ascertain the amount of the damages, if any, suffered by the injured plaintiff, not to shield an errent insurer from the consequences of its tortious breach of its duties to that injured claimant. The language in Royal Globe "until the liability of the insured is first determined" was not necessary to and did not serve the purpose of determining any of the facts or issues of that case which deferred the determination of the 790.03 action until after the conclusion of the underlying action.

The word "concluded" as used in Royal Globe was first interpreted in Nationwide Ins. Co. v. Superior Court (1982) 128 Cal.App.3d 711, 714, 180 Cal.Rptr. 464, a case not involving a settlement or release, but rather a judgment in an underlying case against a Nationwide insured, which judgment was still on appeal at the time a writ of mandate was sought by Nationwide to compel the San Bernardino Superior Court to vacate its order overruling Nationwide's demurrer to the third party's section 790.03 complaint on the ground that the judgment in the underlying action was not final because that case was still on appeal and that, therefore, that case had not been "concluded." Division Two of the Fourth District of the Court of Appeal issued the writ.

A year later in Rodriguez v. Fireman's Fund Ins. Co., supra, however, Division Five of this district of the Court of Appeal expanded the definition of the term "concluded" to include a situation, where the liability of the insured is admitted and the underlying lawsuit is settled and dismissed with prejudice. (142 Cal.App.3d at p. 53, 190 Cal.Rptr. 705.)

The factual setting of Rodriguez is similar to the instant case. In Rodriguez, the plaintiff's car was rear ended by a vehicle insured by Fireman's Fund. The plaintiff suffered serious injuries in the collision and sued the insured. Fireman's Fund failed to acknowledge the plaintiff's settlement demands for three years. It then offered her a $200,000 statutory settlement pursuant to the provisions of Code of Civil Procedure section 998. She accepted the statutory offer but advised Fireman's Fund that she was "reserving" her rights to proceed against it for "bad faith and tortious conduct" arising from the handling of her claim. Thereafter, the action against the insured was voluntarily dismissed with prejudice.

The plaintiff, Rodriguez, then filed a Royal Globe action alleging that Fireman's Fund made no attempt to effectuate a prompt, fair and equitable settlement of her claim. Fireman's Fund's demurrer to the complaint was sustained by the trial court without leave to amend. The trial court ruled that a third party claimant could not bring action against an insurer without first obtaining a judgment against the insured.

The appellate court reversed the trial court's order, holding that "[w]hile a preferred conclusion of an action is by final judgment, in cases where the liability of the insured is admitted and the underlying lawsuit is concluded by the statutory acceptance of an offer (Code Civ.Proc., § 998) followed by a judgment entered thereafter or an injured plaintiff's motion to dismiss with prejudice, the requirements of Royal Globe are satisfied." (Rodriguez v. Fireman's Fund Ins. Co., supra, 142 Cal.App.3d at p. 53, 190 Cal.Rptr. 705; emphasis in original; see also Heninger v. Foremost Ins. Co. (...