Pacific Std. Life Ins. Co. v. Tower Industries, Inc.

• Citation: 12 Cal.Rptr.2d 524,9 Cal.App.4th 1881
• Decision Date: 07 October 1992
• Docket Number: No. B057953,B057953
• Parties: PACIFIC STANDARD LIFE INSURANCE CO., Plaintiff and Respondent, v. TOWER INDUSTRIES, INC., and Tower Mechanical Products, Inc., Defendants and Appellants.
• Court: California Court of Appeals Court of Appeals

Page 524

12 Cal.Rptr.2d 524

9 Cal.App.4th 1881

PACIFIC STANDARD LIFE INSURANCE CO., Plaintiff and Respondent, v. TOWER INDUSTRIES, INC., and Tower Mechanical Products, Inc., Defendants and Appellants.

No. B057953.

Court of Appeal, Second District, Division 7, California.

Oct. 7, 1992.

As Modified Oct. 16, 1992.

Rehearing Denied Nov. 5, 1992.

[9 Cal.App.4th 1883] Julian A. Pollok, Los Angeles, for defendants and appellants.

Finkle, Hersh, Stoll & Collett, David G. Finkle and Michelle Leight, Los Angeles, for plaintiff and respondent.

FRED WOODS, Associate Justice.

I. INTRODUCTION

This action arises out of a dispute over the parties' respective duties and obligations pursuant to a group life insurance policy ("the Policy") issued by plaintiff/respondent Pacific Standard Life Insurance Company ("Pacific") to defendants/appellants Tower Industries, Inc. and Tower Mechanical Products, Inc. (collectively referred to herein as "Tower") for the benefit of Tower's employees.

II. STATEMENT OF FACTS

Under the terms of the Policy, an employee was covered so long as he worked. In the case of sick leave or leave of absence, those benefits could be extended, subject to two requirements: (1) the leave of absence could be for six months only; and (2) before Tower could grant a leave of absence, it had to adopt a plan, satisfactory to Pacific, establishing a uniform policy for such leaves.

An employee whose coverage terminated because his leave of absence had ended without his returning to work was entitled to convert from group to individual coverage. Tower was required by the Policy to notify the affected employee that he had such conversion rights.

Howard Johnson was an employee of Tower and was covered by the policy in the principal sum of $100,000. In February 1985, Johnson was granted an indefinite medical leave of absence. He returned to work briefly in January 1986 and then went on an indefinite leave from February 1986 until his death on February 26, 1987.

It is undisputed that Tower never submitted a uniform leave of absence policy to Pacific. Instead, Tower granted such leaves arbitrarily and in the discretion of Tower's president, Richard B. Slater. Tower never told Johnson that he could remain covered for only six months while on leave or that he had conversion rights when those six months elapsed.

From February 1985 through February 1987, Tower submitted computer-generated printouts to Pacific which showed Johnson as a full-time employee, not on leave of absence, thus eligible for coverage. Tower continued to pay premiums to Pacific on behalf of Johnson throughout this period.

Tower's policy was part of a group of subscribing policyholders operating as the Group Retirement Employer's Affiliated Trust ("Trust"). The Trust performed the ministerial duties of the employer in connection with the Policy.

The Trust sent reports to Tower concerning eligible employees, and Tower would send back updates as to who was eligible for coverage.

In reliance on those representations, Pacific accepted premiums from Tower on Johnson's behalf.

After Johnson died, Pacific learned for the first time of Johnson's two year leave of absence and Tower's continual misrepresentations as to his status. Johnson's widow filed a claim under the Policy for benefits of $100,000, a claim which Pacific initially disputed, insisting that Tower only was liable for the claim. Pacific paid the claim in order to avoid a bad faith claim by Mrs. Johnson.

III. PROCEDURAL HISTORY

This action was commenced on April 13, 1989. On September 25, 1989, Pacific filed its motion for summary judgment or, in the alternative, summary adjudication of issues. By minute order, dated November 9, 1989, the Honorable Vernon G. Foster granted summary adjudication as to the following issues:

1. Tower was Pacific's agent in performing the administrative function of notifying employees of their conversion rights under the policy;

2. Tower was Pacific's fiduciary in administering the policy to the same extent as determined by issue no. 1;

3. Tower misrepresented to Pacific that Howard Johnson was a full-time employee eligible for coverage;

4. Tower's misrepresentations concerning Johnson's eligibility for group coverage were material misrepresentations;

5. Pacific justifiably relied on Tower's misrepresentations concerning Johnson's eligibility for group coverage;

6. As a proximate result of Pacific's reliance on Tower's misrepresentations, Pacific was injured as alleged in the complaint;

7. Tower breached its contract with Pacific by failing to notify Johnson of his conversion rights;

8. Tower breached its contract with Pacific by providing misleading data to Pacific concerning Johnson's eligibility for group coverage;

9. Pacific was damaged as alleged in its complaint by Tower's breach of contract;

10. The contract of insurance between Tower and Pacific contained an implied covenant of good faith and fair dealing;

11. Tower's conduct breached the implied covenant of good faith and fair dealing (the breach was limited to contract damages);

12. Pacific was potentially liable to Johnson's widow on her claim made under the policy of insurance;

13. Pacific was not a volunteer in paying Mrs. Johnson's claim.

On October 24, 1990, Tower filed a motion for summary adjudication of the issue regarding the amount of damages recoverable by Pacific. The Honorable Jerry K. Fields denied the motion on November 28, 1990.

On December 7, 1990, the final status conference in this matter was held, and on that day, Pacific submitted a motion for judgment based upon the fact that no further evidence was needed or admissible because of the court's previous granting of Pacific's motion for summary adjudication. Pacific's motion was granted and judgment was entered on December 27, 1990. Tower timely appealed the judgment.

IV. DISCUSSION

A. The trial court followed the appropriate procedure in granting Pacific's motion for judgment.

Tower employs a three-step analysis to support its argument that the trial court erred in granting Pacific's motion for judgment:

(1) In granting summary adjudication of issues, the trial court failed to state any reasons for its conclusions and failed to make any reference to the evidence to support those conclusions;

(2) When the court ultimately entered judgment for Pacific, it also failed to specify (3) The motion for judgment was essentially a motion for summary judgment and was not brought upon proper notice.

any reasons or refer to any evidence to support its determination;

Assuming that Tower is correct in contending that the motion for judgment was actually a motion for summary judgment, the Honorable Jerry K. Fields did state his reasons for granting the motion. He did so, in part, on the basis of Judge Foster's earlier ruling on Pacific's motion for summary adjudication.

Once summary adjudication has been granted as to an issue, that issue shall be deemed established and the action shall proceed as to the issues remaining. (Code Civ.Proc., § 437c, subd. (f).) ¹ When summary adjudication of issues is granted by one judge and the remaining issues are tried by a different judge, the second judge is bound by the first judge's determination, and the losing party may not seek relitigation of the decided issues before the second judge. (See Conway v. Bughouse, Inc. (1980) 105 Cal.App.3d 194, 202-203, 164 Cal.Rptr. 585.)

Judge Fields also determined that the reason Judge Foster did not grant summary adjudication was because Pacific failed to address the affirmative defenses in the motion. However, Judge Fields also determined that the affirmative defenses were inapplicable. Since all issues had been determined, he then properly granted Pacific's motion for judgment.

In effect, not only did Judge Fields explain his reasons for granting this motion, he was legally bound to accept Judge Foster's previous findings.

Moreover, Tower has waived its right to complain of insufficient notice of the motion for judgment. When the motion was heard at the final status conference on December 7, 1990, the court asked Tower's counsel if he wished to be heard before the court ruled. Counsel declined, stating that Tower's position had already been stated and that he had no further argument to make. Counsel did not object to the motion on the ground of lack of notice.

Carried to its logical conclusion, Tower would have this court remand the action to the trial court so that a so-called properly noticed motion for judgment could be brought. However, the result would be the same because no triable issue of fact remains and judgment for Pacific would, again, be the necessary result. An alternative procedure would be to remand the case for trial. Plaintiff could then file a motion in limine to preclude Tower from offering any evidence in defense and judgment would properly follow for Pacific. Either procedure is wasteful. The action taken by Judge Fields was correct.

B. Review of the relevant Policy provisions establishes that they are clear and unambiguous.

Tower next asserts that because the insurance contract at issue is an adhesion contract, this court must exercise a de novo review of the Policy provisions and resolve all ambiguities regarding Tower's obligations in its favor.

A review of the relevant policy provisions shows that they are clear and unambiguous. To demonstrate, provision 2.025 sets forth the requirements for eligibility under the Policy:

"The Employee must be actively at work at his regular place of business for full time and full pay, unless the Entry Date otherwise determined is not a regular working day. In this event, the Employee must be actively at work at his regular place of business for full time and full pay on the last regular work day preceding such Entry Date."

Such coverage terminates whether or not written notice has been made by the employer to Pacific on:

"The date specified by the Employer (up to a...