St. Joe Minerals Corp. v. Zurich Ins. Co.
| Decision Date | 28 September 1999 |
| Docket Number | No. G018280.,G018280. |
| Citation | 75 Cal.App.4th 261,89 Cal.Rptr.2d 101 |
| Parties | ST. JOE MINERALS CORPORATION, Plaintiff and Respondent, v. ZURICH INSURANCE COMPANY, Defendant and Appellant. |
| Court | California Court of Appeals Court of Appeals |
Kinsella, Boesch, Fujikawa & Towle, Edmund J. Towle III and Michael D. Howald, Los Angeles, for Defendant and Appellant.
Latham & Watkins, David L. Mulliken, Kristine L. Wilkes, Dorn G. Bishop, Diana L. Strauss, San Diego, Jared G. Flinn, Michael W. Ellison, Leigh A. White, Irvine, and Barry J. Shotts, San Diego, for Plaintiff and Respondent.
Bien & Summers and Elliot L. Bien, San Francisco, for Amicus Curiae Insurance Environmental Litigation Association.
This case forces us to confront what happens when the one final judgment rule in appellate procedure collides with the piecemeal adjudication of a liability insurer's two basic duties to its insured—the duty to defend a lawsuit brought against the insured, and the duty to indemnify if the insured loses that lawsuit. As we explain below, the one final judgment rule is a statutorily based system of rationing access to the appellate courts. Here, we have a purported "appeal" by an insurance company from a minute order adjudicating only one of four of the plaintiff insured's four causes of action against the company. We are no doubt going to disappoint both sides and amicus curiae by dismissing this appeal: They might not be able to agree on much of anything else, but they all want us to reach the merits of the insurer's contentions.
However, fidelity to the rationing scheme enacted by the Legislature requires us to dismiss. The rules of appellate procedure should not be bent just because two well-funded litigants can generate a tremendous amount of paper at the trial level. Of course, the winners of this encounter are not before us, at least directly. They are the many other litigants who have appeals in this court who will not have their matters bumped back in the queue because we bent the rules so that a fraction of an insurance coverage matter could go ahead of them.
The "one final judgment rule" describes the operation of section 904.1 of the Code of Civil Procedure, which specifies the sorts of trial court actions (either "orders" or "judgments") from which an appeal may be taken. The leading case on the one final judgment rule is our Supreme Court's decision in Morehart v. County of Santa Barbara (1994) 7 Cal.4th 725, 29 Cal.Rptr.2d 804, 872 P.2d 143, where the high court took to task a number of appellate decisions originating with Schonfeld v. City of Vallejo (1975) 50 Cal.App.3d 401, 123 Cal.Rptr. 669, which had adopted a rule that if a cause of action was "separate and independent" (or some permutation of those words) from the remaining causes of action and could be deemed "severed" from the remaining causes of action, there was a final judgment on that cause of action from which an appeal might be taken. (See Morehart, supra, 7 Cal.4th at pp. 739-740, 29 Cal.Rptr.2d 804, 872 P.2d 143.) Indeed, the Morehart court noted that some appellate decisions had not even bothered to ask whether the cause of action deemed severed was separate and independent from the remaining undecided issues. These appellate decisions had cited Schonfeld to justify appellate jurisdiction on the simple theory that the cause of action had "in fact" been severed. (See Morehart, supra, 7 Cal.4th at p. 740, 29 Cal.Rptr.2d 804, 872 P.2d 143.)
Morehart put a stop to the practice of circumventing the one final judgment rule by deeming causes of action "severed" from the balance of the action. After noting that a party has the right to have an interlocutory judgment reviewed on appeal from a final judgment, the court declared: (Morehart, supra, 7 Cal.4th 725, 743, 29 Cal.Rptr.2d 804, 872 P.2d 143, fn. omitted, emphasis added.)
A moment's reflection will show that the one final judgment rule is not necessary to a functioning system of justice which provides for appellate review of trial court decisions. Unlike, say, the rules which govern the time in which to file appeals (see Cal. Rules of Court, rules 2 and 3), there is no structural or systemic reason for the rule. (Without rules providing for time limits in which to appeal, there would be no final judgments, and without final judgments, you might as well not even have a judicial system—nothing would be certain.) Theoretically at least, one could design a perfectly functional system of justice in which the litigants would be entitled to appellate review from every trial court decision, and efforts are sometimes made in the Legislature to provide for interlocutory appeals. For example, in the juvenile dependency area (where time is extraordinarily critical because the litigation directly affects children's lives) the Legislature has actually provided for a form of interlocutory appeal (or quasi-appeal) by requiring appellate courts to decide certain writ petitions clearly preliminary to the final judgment "on the merits by written opinion" absent extraordinary circumstances. (Cal. Rules of Court, rule 39.1B(o).)1
Bernard Witkin, the great maven of California law and particularly appellate procedure,2 called the one final judgment rule a "fundamental principle of appellate practice in the United States." (See 9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, § 58, p. 113.) However, the theory behind the rule is not that it is necessary to a functioning system of justice, but the oppressiveness and cost of "piecemeal" disposition and review. (Ibid.; see e.g., In re Matthew C, supra, 6 Cal.4th at p. 393, 24 Cal.Rptr.2d 765, 862 P.2d 765; Rao v. Campo (1991) 233 Cal.App.3d 1557, 1565, 285 Cal.Rptr. 691; Kibrej v. Fisher (1983) 148 Cal.App.3d 1113, 1115, 196 Cal.Rptr. 454.)
The "cost" rationale for the rule needs some elaboration, because the cost of piecemeal review is not confined to the litigants themselves, and sometimes may be willingly and eagerly borne by them. In the case before us, for example, each side is well-funded and eager to pay the additional costs of piecemeal disposition; we doubt, however, that the united front presented by appellant and respondent here would be the case if one or both of the litigants were much poorer. It takes little imagination to think of a situation where the allowance of piecemeal interlocutory appeals could readily serve to "oppress" the poorer side by driving its costs up.
But quite apart from the costs to the litigants is the cost to the taxpayers and other litigants. The Court of Appeal is what is sometimes referred to as a "court of error." (Unlike the Supreme Court, which is a "court of review.") The entitlement to an appeal to a panel of three judges who must state the reasons for their decision in writing (see Cal. Const, art. VI, § 14) affords litigants a vital protection against prejudicial error. That entitlement, however, is a right which requires tax dollars, and tax dollars are finite. Allowing for interlocutory appeals as a matter of right in addition to appeals from final judgments obviously increases the required work of the appellate courts and the commitment of resources necessary to do that work. The one final judgment rule, then, represents the outcome of what is, quintessentially, a legislative policy decision to limit access to the Courts of Appeal in the context of finite limits on the tax dollars which the state can devote to its appellate court system. If the Legislature wanted to amend section 904.1 of the Code of Civil Procedure to provide for interlocutory appeals, it could certainly do so and gain the thanks of many litigants; but there would be costs, significant delays in other cases if no extra money were committed to the appellate court, and money might have to be taken from other projects. As it is, the Legislature has chosen to ration the right to appeal by limiting it to the one final judgment in a case, orders after that final judgment, and several miscellaneous categories of orders.
Second, we must review a few basics in the law of liability insurance coverage; when we do so the problem posed by the one final judgment rule in appellate law becomes clear.
Liability insurance is often referred to as "third party" insurance because, unlike other insurance which is bought to protect the insured's life, health or property, liability insurance is purchased to protect the insured (or "policyholder") against certain kinds of claims made by a third party.3 Typically, and certainly where comprehensive general liability (CGL) insurance policies are involved, liability insurance entails two distinct obligations of the insurer, each of which, however, is triggered under different circumstances. (For a much more comprehensive statement of the rules governing these two duties, see Buss v. Superior Court (1997) 16 Cal.4th 35, 45-9, 65 Cal.Rptr.2d 366, 939 P.2d 766.)
First there is the duty to defend. When this duty properly arises, it comes into existence upon a request for a defense, and lasts until the underlying lawsuit is concluded. (Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 295, 24 Cal.Rptr.2d 467, 861 P.2d 1153 [...
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