Smith v. Parks Manor

• Decision Date: 18 December 1987
• Citation: Smith v. Parks Manor, 243 Cal.Rptr. 256, 197 Cal.App.3d 872 (Cal. App. 1987)
• Court: California Court of Appeals
• Parties: Robert L. SMITH, a minor, By and Through his Guardian ad Litem, Laura L. SMITH, and Laura L. Smith, Plaintiffs, v. PARKS MANOR, a corporation, and Don Stinson, Defendants. ALLIANZ INSURANCE COMPANY, Intervenor and Appellant, v. COUNTY OF LOS ANGELES, Defendant and Respondent. Civ. B012223.

Page 256

243 Cal.Rptr. 256

197 Cal.App.3d 872

Robert L. SMITH, a minor, By and Through his Guardian ad Litem, Laura L. SMITH, and Laura L. Smith, Plaintiffs, v. PARKS MANOR, a corporation, and Don Stinson, Defendants.

ALLIANZ INSURANCE COMPANY, Intervenor and Appellant, v. COUNTY OF LOS ANGELES, Defendant and Respondent.

Civ. B012223.

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

Dec. 18, 1987.

As Corrected Jan. 14, 1988.

Review Denied March 2, 1988.

Gilbert, Kelly, Crowley & Jennett and Clifford H. Woosley, Peter J. Godfrey and Tracy W. Goldberg, Los Angeles, for intervenor and appellant.

Bonne, Jones, Bridges, Mueller & O'Keefe, Greines, Martin, Stein & Richland and Martin Stein and Pamela Victorine, Los Angeles, for defendant and respondent.

SPENCER, Presiding Justice.

INTRODUCTION

Intervenor Allianz Insurance Company appeals from an order dismissing its complaint in intervention after the trial court sustained without leave to amend defendant County of Los Angeles' demurrer to its complaint in intervention. ¹

STATEMENT OF FACTS

On March 31, 1979, plaintiff Robert Lewis Smith was struck and injured by an automobile. At the time, plaintiff was a minor and a resident of defendant Parks Manor, a home for developmentally disabled persons. On August 10, 1979, plaintiff filed a complaint through his guardian ad litem, joined by his mother, Laura Smith, alleging his negligent supervision by defendants Parks Manor and Don Stinson. On the date of plaintiff Robert Smith's injury, defendant Parks Manor was insured by intervenor. Consequently, intervenor undertook the defense of the action, causing defendants to file a notice of intention to commence action against health care provider on December 30, 1980. In addition, at intervenor's behest, defendants filed cross-complaints for apportionment of fault, Parks Manor on September 28, 1981 and Don Stinson on August 2, 1982, seeking comparative and equitable indemnity from cross-defendant County of Los Angeles. The cross-complaints alleged Martin Luther King Hospital was negligent in its medical treatment of plaintiff Robert Smith following his injury on March 31, 1979, as a consequence of which his injuries were aggravated. Cross-defendant answered, placing the matter at issue.

On August 4, 1983, defendants settled their dispute with plaintiffs for the approximate sum of $630,000. Intervenor paid the agreed-upon settlement on defendants' behalf. Thereafter, on November 8, 1983, defendants filed a claim for money or damages with cross-defendant; the claim was rejected on December 27, 1983. Subsequently, cross-defendant moved for judgment on the pleadings on the cross-complaints, asserting cross-complainants failed to state a cause of action for indemnity, in that intervenor had indemnified them for the settlement with plaintiff and they had failed to comply with the claims filing procedures of the Government Tort Claims Act. The motion was granted on the ground intervenor had become subrogated to the rights of cross-complainants and Don Stinson had failed to comply with claims filing procedures.

On October 19, 1984, intervenor sought leave to intervene; leave was granted and intervenor's complaint in intervention was deemed filed and served on November 13, 1984. On December 21, 1984, defendant in intervention County of Los Angeles demurred to the complaint in intervention, alleging intervenor had failed to comply with the claim presentation requirement of the Government Tort Claims Act and the action was barred by the statute of limitations. The demurrer was sustained without leave to amend on January 17, 1985, and the instant appeal followed.

CONTENTIONS

I

Intervenor contends the trial court erred in sustaining the demurrer without leave to amend, in that intervenor, as defendants and cross-complainants' subrogee, was not required to file a separate and redundant claim within the time limits specified in Government Code section 911.2 in order to satisfy the requirements of the Government Tort Claims Act.

II

Intervenor further contends the trial court erred in sustaining the demurrer without leave to amend, in that the complaint in intervention is not barred by the statute of limitations.

DISCUSSION

I

Intervenor contends the trial court erred in sustaining the demurrer without leave to amend, in that intervenor, as defendants and cross-complainants' subrogee, was not required to file a separate and redundant claim within the time limits specified in Government Code section 911.2 in order to satisfy the requirements of the Government Tort Claims Act. We agree.

Generally, an insurer of one who has paid damages arising out of a tort for which its insured is liable is subrogated to the rights of the party injured. (Continental Cas. Co. v. Phoenix Constr. Co. (1956) 46 Cal.2d 423, 428, 296 P.2d 801.) Hence, an insurer who has paid a claim by an insured whom it is required by contract to indemnify is subrogated to its insured's right to indemnity from a third party who has contributed to the loss suffered by the insured. (Cf. California Food Service Corp. v. Great American Ins. Co. (1982) 130 Cal.App.3d 892, 898, 182 Cal.Rptr. 67; Patent Scaffolding Co. v. William Simpson Constr. Co. (1967) 256 Cal.App.2d 506, 512, 64 Cal.Rptr. 187.) An insurer's subrogated right is "to be put in the position of its insured ... for the loss which the insurer has both insured and paid. [Citation.]" (Commercial Union Assurance Co. v. City of San Jose (1982) 127 Cal.App.3d 730, 733, 179 Cal.Rptr. 814.) In other words, the insurer as subrogee stands in the same position as does an assignee--in the shoes of the subrogor or assignor.

Defendant County nevertheless argues subrogation is not at issue here, relying on Liberty Mut. Ins. Co. v. Altfillisch Constr. Co. (1977) 70 Cal.App.3d 789, 139 Cal.Rptr. 91. Liberty Mut. Ins. Co. holds the right of subrogation "remains inchoate before loss and only matures into a legal concept after a loss to the insured property occurs." (At p. 796, 139 Cal.Rptr. 91.) Defendant County asserts cross-complainants never suffered a loss in the instant matter; on their behalf, intervenor reached a settlement with the injured plaintiffs, so the only entity which suffered a loss was intervenor which directly paid the sum settled upon. This line of reasoning misses the point. Intervenor reached a settlement agreement with the injured plaintiffs on behalf of its insured, cross-complainant Parks Manor, and the insured's employee, cross-complainant Stinson; that agreement obligated cross-complainants to pay a certain sum or, stated otherwise, created a settlement debt equivalent to a judgment debt. At that point, cross-complainants had suffered a loss which intervenor was obligated by contract to indemnify; intervenor did so.

It was not necessary for cross-complainants actually to pay the settlement sum out-of-pocket, then secure reimbursement, to suffer a loss. The creation of the obligation by execution of the settlement agreement was in itself a sufficient loss to give rise to a mature right of subrogation. The fundamental requirements for such a right are: "(1) Payment must have been made by the subrogee to protect his own interest. (2) The subrogee must not have acted as a volunteer. (3) The debt paid must be one for which the subrogee was not primarily liable. (4) The entire debt must have been paid. (5) Subrogation must not work any injustice to the rights of others." (Grant v. de Otte (1954) 122 Cal.App.2d 724, 728, 265 P.2d 952.) Indisputably, intervenor meets all of the above requirements. Hence, unquestionably, upon paying its insured's claim in extinguishment of the settlement debt, intervenor became subrogated to the insured's right to seek equitable indemnity from defendant County. As the subrogee, intervenor stood in cross-complainants' shoes. ( Commercial Union Assurance Co. v. City of San Jose, supra, 127 Cal.App.3d at p. 733, 179 Cal.Rptr. 814.)

Government Code section 911.2 requires a party to give notice to a governmental entity within 100 days of accrual of a cause of action; this is an essential prerequisite to the maintenance of an action against that entity for equitable indemnification. (State of California v. Superior Court (1983) 143 Cal.App.3d 754, 757, 192 Cal.Rptr. 198; see also Williams v. Horvath (1976) 16 Cal.3d 834, 842, 129 Cal.Rptr. 453, 548 P.2d 1125.) "The primary function of the claims act is to apprise the governmental body of imminent legal action so that it may investigate and evaluate the claim and where appropriate, avoid litigation by settling meritorious claims. [Citations.] The act should not be applied to snare the unwary where its purpose has been satisfied [citations]; consequently courts employ a test of substantial rather than strict compliance in evaluating whether a plaintiff has met the demands of the claims act. [Citations.] If the claim satisfies the purpose of the act without prejudice to the government, substantial compliance will be found. [Citations.]" (Elias v. San Bernardino County Flood Control Dist. (1977) 68 Cal.App.3d 70, 74, 135 Cal.Rptr. 621; accord, City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 455, 456-457, 115 Cal.Rptr. 797, 525 P.2d 701.) In determining whether there has been substantial compliance, the courts will ask, "Is there sufficient information disclosed on the face of the filed claim to reasonably enable the public entity to make an adequate investigation of the merits of the claim and to settle it without the expense of a lawsuit?" ( Id., at p. 456, 115 Cal.Rptr. 797, 525 P.2d 701.)

Where the claim is one for indemnification or contribution, it accrues when the indemnitee or party seeking contribution suffers a loss through payment of a judgment debt (or settlement) or through payment of more than his fair share of damages. (People ex rel. Dept. of Transportation v. Superior Court (1980) 26 Cal.3d 744, 757, 163 Cal.Rptr. 585, 608 P.2d 673.) In...