Purdy v. Pacific Automobile Ins. Co.

• Decision Date: 12 June 1984
• Parties: David E. PURDY, et al., Plaintiffs, Appellants, v. PACIFIC AUTOMOBILE INSURANCE COMPANY, et al., Defendants, Appellant. Roger W. ROBERTS et al., Defendants and Respondents. Civ. 65427.
• Court: California Court of Appeals Court of Appeals

Page 524

203 Cal.Rptr. 524

157 Cal.App.3d 59

David E. PURDY, et al., Plaintiffs, Appellants, v. PACIFIC AUTOMOBILE INSURANCE COMPANY, et al., Defendants, Appellant Roger W. ROBERTS et al., Defendants and Respondents.

Civ. 65427.

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

June 12, 1984.

Richard R. Clifford, North Hollywood, and Arthur E. Schwimmer, Los Angeles, for plaintiffs, appellants and cross-complainants.

Chase, Rotchford, Drukker & Bogust and William C. Falkenhainer, Toni Rae Bruno, and Timothy J. Swift, Los Angeles, for defendants, appellants, and cross-respondents, Parker, Stanbury, McGee and Babcock.

Edward L. LeBerthon, Hollywood, and Gerald H.B. Kane, Jr., Redondo Beach, for defendant, appellant, and cross-respondent Pacific Auto. Ins. Co.

Lewis, D'Amato, Brisbois & Bisgaard, Roy M. Brisbois and Frank W. Spees, Jr., Los Angeles, for defendants, appellants L. THAXTON HANSON, Associate Justice.

and cross-respondents, Roger W. Roberts and Roberts, Mead & Harrison.

Action by and on behalf of an insured against an insurer for breach of the covenant of good faith and fair dealing contained in the insurance contract.

BACKGROUND

Plaintiffs David E. Purdy and Thomas C. Wood, Trustee for David E. Purdy, Bankrupt, filed a complaint alleging bad faith refusal to settle and professional negligence (legal malpractice). Named as defendants were the insurer, Pacific Automobile Insurance Company, a corporation (hereinafter Pacific), and Pacific's attorney, Roger W. Roberts, as well as two law firms in which Roberts was a partner during the actionable events, Parker, Stanbury, McGee and Roberts and Roberts, Mead & Harrison, and various Does.

The complaint pleaded four causes of action. In the first cause of action, plaintiff Wood, as plaintiff Purdy's bankruptcy trustee, sought compensatory damages for the alleged breach by Pacific resulting in economic loss by Purdy. The second cause of action, by plaintiff Purdy, also against Pacific, sought both compensatory damages for the emotional distress suffered by Purdy because of the breach, and punitive (exemplary) damages.

In the third cause of action, plaintiff Wood, as plaintiff Purdy's bankruptcy trustee, sought to hold the insurer's attorneys (hereinafter referred to as Roberts or the Roberts group) liable for compensatory damages, i.e., the economic loss sustained by Purdy due to the insurer client's refusal to settle. In the fourth cause, plaintiff Purdy sought compensatory damages for the emotional distress assertedly caused by the activities of the Roberts group in connection with their insurer client's refusal to settle.

Prior to trial of the case, John P. Stodd was substituted for Wood as Purdy's bankruptcy trustee and a party plaintiff. The trial court granted defendant Pacific nonsuit on Purdy's second cause of action against it for noneconomic, personal damages and for punitive damages. The trial court also granted defendant lawyers, the Roberts group, nonsuit on both the third and fourth causes of action by Purdy's trustee and Purdy alleging professional negligence. Only the first cause of action, by the plaintiff bankruptcy trustee, was submitted to the jury.

The jury awarded the plaintiff trustee, Stodd, $225,000 in compensatory damages and interest at the legal rate; the verdict thus totalled $341,900.

THE APPEALS

Pacific appeals from the jury verdict rendered in the case at bench. We affirm that verdict.

Plaintiff trustee, Stodd, appeals from the trial court's ruling granting nonsuit to the Roberts group on his cause of action for professional negligence. We also affirm that ruling.

Plaintiff Purdy appeals from the trial court's ruling precluding him from asserting a claim for emotional distress and for punitive damages against Pacific. We reverse the trial court's determination in this regard.

Finally, Purdy appeals from the trial court's grant of nonsuit to the Roberts group with respect to Purdy's claim against them for emotional distress damages. That ruling we affirm.

FACTS

We view the facts giving rise to this litigation as we must, in the light most favorable to sustaining the jury verdict rendered below.

We note that defendant Pacific has not directly challenged the sufficiency of the evidence supporting the verdict.

On Saturday, May 15, 1970, plaintiff Purdy, Marion "Buck" Partin, and various members of their respective families, went for an overnight campout on a dry lake in The campers arrived at the southwest end of Saugy Dry Lake in the late afternoon, and set up camp. Purdy had driven to the lake on Partin's motorcycle, but once there commenced operation on the dry lake bed of a motorcycle he had never driven before, a Yamaha owned by Carl Partin, Buck's cousin. Buck mounted a Harley-Davidson motorcycle owned by George Henricks, and also drove out on the dry lake bed. Neither Purdy nor Partin were wearing helmets. The two motorcycles collided violently; both men were injured, but more particularly Partin, who sustained severe and permanent injuries, including brain damage.

San Bernardino County. These two men had known each other since childhood in Missouri, and had renewed their association in California when both were employed by Philco-Ford in Newport Beach.

Both men suffered some degree of amnesia after the accident, and there was initial difficulty in determining how the collision had occurred. There were no actual eyewitnesses to the accident.

On May 5, 1971, Partin filed suit against Purdy, Carl Partin (the owner of the Yamaha) and Carl Partin's business, Partin Limestone Products, Inc. Partin was insured for liability by defendant insurer, Pacific. The policy limit was the sum of $100,000. Upon commencement of the Partin suit, Carl Partin notified Pacific, and Pacific undertook the defense of all three defendants named therein. Pacific's claims manager, Kenneth Bonar, was in charge of the matter. He hired Attorney Roger W. Roberts and his firm, Parker, Stanbury, McGee and Roberts, to defend. Pacific had obtained a statement from Purdy on November 16, 1970, in which Purdy declared that he and Partin had separated on the lake bed and that Purdy had been heading back toward the campsite at the southwest end of the dry lake when the collision occurred. Purdy was suffering from some retrograde amnesia, and did not remember seeing Partin just before the collision. A supplemental statement was taken from Purdy on December 7, 1971. In it, Purdy declared that he was heading back toward the campsite, driving southwest, when he heard Partin's cycle behind him, and heard it accelerate just before the two motorcycles impacted. Purdy gave a similar account in his deposition. Purdy's version of events was the foundation for the defense theory that Partin had caused the accident by accelerating and cutting in front of Purdy just before the collision.

However, it became abundantly clear by November 1972, when Partin's attorney made his first demand for settlement at policy limits, that Purdy's version of events was not supported by a substantial body of other evidence that had become known to Pacific. There appeared to be a gap in time, between Purdy's last recollection of heading back toward the camp and the collision. A number of witnesses who did not observe actual impact, nevertheless placed the collision point at the western side of the lake, and recalled that both drivers were headed away from the campsite, not toward it, at the time of the accident. The accounts of these witnesses were supported by a photograph taken of the tracks of the two cycles and the angle of impact.

On November 3, 1971, Pacific received the most comprehensive account to date of the accident, in a statement given by Garold Partin. Partin declared that prior to the accident, both cycles were headed away from the campsite; that Partin was ahead of Purdy on the Harley-Davidson and was driving at a moderate rate of speed, while Purdy was travelling much faster on the Yamaha. The collision had occurred, according to Garold Partin, when Purdy's vehicle overtook the Partin vehicle; this witness had observed the point of impact, on the left of the Harley-Davidson right behind the driver's seat. The seat had in fact been pushed up, as if the wheel of the Yamaha had struck it.

Garold Partin's statement was the subject of a letter written by Pacific's Bonar to Pacific's attorney, Roberts, in November 1971. Bonar conceded that Garold Partin's account was very revealing about Garold Partin's account of the accident was validated in May 1972 in a report of Truesdail Laboratories, Inc., the expert accident reconstruction firm retained by Pacific. On May 30, 1972, Attorney Roberts noted this fact in a letter to Bonar.

what had actually occurred at Saugy Lake. Attorney Roberts concurred in this estimate; in a letter to Bonar on November 14, 1971, Roberts declared that it appeared that Purdy had overtaken Partin and had in fact caused the collision by misjudging the distances involved.

It had long been apparent that due to Partin's severe injuries that any jury verdict for Partin would greatly exceed the $100,000 limit. Attorney Roberts had at least twice, in letters to Bonar dated September 30, 1971 and January 25, 1972, referred to this state of affairs, as evidence was accumulating that the defense theory was incorrect and the possibility that Partin would be found contributorily negligent was diminishing.

A mandatory settlement conference on the Partin-Purdy suit was held on November 15, 1972, and was attended by both Bonar and Roberts. Partin's attorney offered to settle the entire claim for the policy limits of $100,000. Bonar, who had the authority to settle to the policy limits, refused to do so.

Shortly thereafter, Bonar discovered that Partin's counsel had deposed Truesdail Laboratories' engineer, Ralph Engdahl, learning that Engdahl had come to the conclusion that Partin had not been contributorily negligent, but...