Rodriguez v. Fireman's Fund Ins. Co.

• Decision Date: 20 April 1983
• Citation: 190 Cal.Rptr. 705,142 Cal.App.3d 46
• Parties: Gloria RODRIGUEZ, Plaintiff and Appellant, v. FIREMAN'S FUND INSURANCE COMPANIES, INC., a corporation, et al., Defendants and Respondents. Civ. 63681.
• Court: California Court of Appeals Court of Appeals

Page 705

190 Cal.Rptr. 705

142 Cal.App.3d 46

Gloria RODRIGUEZ, Plaintiff and Appellant, v. FIREMAN'S FUND INSURANCE COMPANIES, INC., a corporation, et al., Defendants and Respondents.

Civ. 63681.

Court of Appeal, Second District, Division 5, California.

April 20, 1983.

Hearing Denied June 15, 1983.

Caplan & Overlander, Inc., Harvey L. Goldhammer and Thomas F. Overlander, Los Angeles, for plaintiff and appellant.

Haight, Dickson, Brown & Bonesteel, Michael J. Bonesteel and Roy G. Weatherup, Los Angeles, for defendant and respondent Fireman's Fund Ins. Co.

No appearance for defendant and respondent Thomas Ector.

STEPHENS, Acting Presiding Justice.

Gloria Rodriguez appeals from a judgment of dismissal entered after a demurrer to her second amended complaint was sustained without leave to amend.

Ms. Rodriguez' complaint sought both compensatory and punitive damages against Fireman's Fund for its allegedly unfair settlement practices in violation of Insurance Code section 790.03, subdivision (h). At issue is whether a personal injury claimant who accepts an allegedly unreasonable settlement arguably coerced by the unfair practices of a liability insurer, is barred from suing that insurer for bad faith because the underlying action was concluded by settlement, rather than a final judgment. We believe one should not be barred and therefore reverse the trial court's order of dismissal.

Assuming the truth of appellant's allegations, ¹ on March 21, 1977, Ms. Rodriguez was in her car stopped at a traffic light when it was rear ended by a vehicle insured by Fireman's Fund. As a result, Ms. Rodriguez suffered serious injuries. A lawsuit alleging negligence and naming the driver of the vehicle and his employer (Fireman's insured) as defendants was filed. Defendants answered, generally denying all liability. From the date of the initiation of this lawsuit, up to the final settlement date, some three years, Fireman's failed to acknowledge any demand letters for the policy limits nor made any attempt to enter into a settlement.

On June 17, 1980, pursuant to Code of Civil Procedure section 998, Fireman's offered Ms. Rodriguez $200,000 for settlement of her claim against it and its insured. ² On July 9, 1980, Ms. Rodriguez, by her attorney, accepted the offer but notified Fireman's that she was reserving her right to proceed against it and was releasing only its insured from any further liability. The action against the insured was thereafter voluntarily dismissed with prejudice. On July 16, 1980, an acknowledgment of full satisfaction of judgment against Fireman's insured was filed.

On July 17, 1980, Ms. Rodriguez instituted an action against Fireman's Fund seeking recovery for bad faith and intentional infliction of emotional distress. Ms. Rodriguez alleged that Fireman's made no attempt to effectuate a prompt, fair and equitable settlement of her claim while it knew of the hardship, pain, and suffering she had incurred as the direct result of its insured's negligence. It was further alleged that Fireman's knowingly failed to act in an attempt to reduce and diminish her bargaining power and position and coerce her into accepting the $200,000 settlement offer.

Prior to any appearances, this pleading was superseded by a first amended complaint on August 28, 1980. Fireman's general demurrer was sustained to this first amended complaint with leave to amend. ³

On November 18, 1980, Ms. Rodriguez filed her second amended complaint. In that complaint Ms. Rodriguez alleged that Fireman's Fund was an insurer which had issued a liability policy to a corporation and its employees covering injuries and damages resulting from the operation of motor vehicles; that plaintiff had sustained "severe and permanent disabling physical and psychiatric injuries in a motor vehicle accident" which had been caused by the "sole negligence" of Fireman's Fund insured; that Fireman's Fund had "made no attempt to effectuate a prompt, fair and equitable settlement" of the personal injury claim against its insured, knowing that "delay would increase the strain and hardship" on the plaintiff and reduce and diminish her "bargaining power and position." This conduct was allegedly designed to coerce Ms. Rodriguez into "accepting an unreasonable, inadequate and unequitable amount to settle her claim." Plaintiff additionally alleged that Fireman's Fund violated Insurance Code section 790.03 by failing to settle her claim "promptly and equitably where liability had become apparent," by making known a practice of appealing judgments and awards, and by advising plaintiff not to obtain the services of an attorney. Furthermore, plaintiff insisted that Fireman's Fund had refused to enter into negotiations or discussions for some three years; that the offer of $200,000.00 made to plaintiff was "unreasonable and grossly disproportionate to the reasonable value of the injuries and damages sustained" by Ms. Rodriguez and that she was wrongfully "compelled" to accept the $200,000.00 statutory offer "out of need for funds." Finally, it was alleged that at the time of her acceptance of the settlement proposal, she advised Fireman's Fund that she was "reserving her right to proceed" against Fireman's Fund for any claims she might have for "bad faith and tortious conduct" arising in the handling of her claim.

Fireman's Fund demurred to this second amended complaint ⁴ as well as requested that judicial notice be taken of various documents from the court file.

On December 30, 1980, Fireman's Fund's demurrer was sustained without leave to amend. The court determined that no action by a third party claimant against an insurer should lie unless a judgment is first entered against the insured. It felt that upholding a cause of action where the third party has accepted a statutory offer of compromise, would subvert both the offer of compromise and settlement process. Moreover, no insurer, having settled with a third party claimant could ever be sure that the litigation had ended. In gaining this result, the court relied upon Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880, 153 Cal.Rptr. 842, 592 P.2d 329 and Doser v. Middlesex Mutual Ins. Co. (1980) 101 Cal.App.3d 883, 162 Cal.Rptr. 115. The court additionally held that Ms. Rodriguez' reservation of rights to proceed against Fireman's Fund had no legal effect. From this decision, Ms. Rodriguez has filed this appeal.

DISCUSSION

In Royal Globe Ins. Co. v. Superior Court, supra, 23 Cal.3d at p. 884, 153 Cal.Rptr. 842, 592 P.2d 329, the Supreme Court concluded that a third party claimant may sue an insurer for violating Insurance Code section 790.03, subdivision (h) after the action between the injured party and the insured has been "concluded." Fireman's Fund maintains that a "concluded" action encompasses only terminations by final judgment. It finds support for such a limited construction in the cases of Doser v. Middlesex Mutual Ins. Co., supra, 101 Cal.App.3d 883, 162 Cal.Rptr. 115 and Nationwide Insurance Co. v. Superior Court (1982) 128 Cal.App.3d 711, 180 Cal.Rptr. 464. Those cases, we believe, should be constrained to their factual situations and therefore do not conclusively limit a "concluded action" to final judgments.

In Doser the insured was sued by a third party for wrongful death. The parties agreed before trial to compromise the claim in the amount of $980,000 in return for a general release. The limits of the insured's liability policy was $100,000. The parties additionally agreed that in lieu of the $980,000 agreed upon, the insured would assign all claims and causes of action which the insured might have against the insurer to the plaintiff. Thereafter, the wrongful death action was dismissed and plaintiff sued the insurer for $980,000, alleging a bad faith breach of the insurance contract. A judgment at the trial level was entered in favor of the insurer. On appeal, the appellate court affirmed the judgment. It emphasized the requirement that the insurance carrier's liability to its insured must be determined either from the insurance contract or by a binding judgment.

Fireman's Fund contends, based upon the following observation, that the Doser court recognized the existence of a judgment as a requirement for a bad faith cause of action.

In Doser the court stated as follows:

"The rationale of the cases requiring a judgment as a condition precedent to an insured's cause of action against an insurer becomes manifest when we deal with the issue of damages in this case. We are concerned here not only with the fact of damages being clearly established, but the certainty of the amount thereof as well....

"No judge or jury ever considered the facts of the wrongful death case and came up with an appropriate verdict on which a judgment could be based. No agreement as to damages was ever reached in which a representative of the insurance company participated." (Doser v. Middlesex Mutual Ins. Co., supra, 101 Cal.App.3d at p. 892, 162 Cal.Rptr. 115.)

Accepting Fireman's premise without reservation, we are still faced with the fact that when read contextually, the Doser court was overly concerned with what it considered the "unprecedented manner" in which the Doser heirs obtained a damage figure. Therefore, while the passage itself is an acceptable statement of the law, it was made and thus limited by the facts then to be addressed by that court. ⁵

In Nationwide Insurance Co. v. Superior Court, supra, 128 Cal.App.3d 711, 180 Cal.Rptr. 464, the insured was protected by a policy of automobile liability insurance with $25,000 coverage. Plaintiff's car ran into the rear end of a vehicle driven by the insured. Insured denied liability and cross-complained against plaintiff. The action resulted in a jury award for plaintiff in excess of the insured's coverage. While plaintiff's appeal was pending, plaintiff filed an action against Nationwide alleging bad faith for failing to negotiate a...