Transamerica Ins. Co. v. Superior Court

• Decision Date: 10 November 1994
• Docket Number: No. B081031,B081031
• Citation: 35 Cal.Rptr.2d 259,29 Cal.App.4th 1705
• Court: California Court of Appeals Court of Appeals
• Parties: TRANSAMERICA INSURANCE COMPANY, et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent, WESTERN INDUSTRIAL MANAGEMENT CORPORATION, et al., Real Parties in Interest.

Page 259

35 Cal.Rptr.2d 259

29 Cal.App.4th 1705

TRANSAMERICA INSURANCE COMPANY, et al., Petitioners, v. The SUPERIOR COURT of Los Angeles County, Respondent, WESTERN INDUSTRIAL MANAGEMENT CORPORATION, et al., Real Parties in Interest.

No. B081031.

Court of Appeal, Second District, Division 4, California.

Nov. 10, 1994.

Rehearing Denied Dec. 1, 1995.

Review Denied Jan. 25, 1995.

[29 Cal.App.4th 1708] Ragnhild Reif, Long Beach, for petitioner.

No appearance, for respondent.

LaTorraca & Goettsch and Raymond H. Goettsch, Long Beach, for real parties in interest.

HASTINGS, Associate Justice.

Petitioners, Fairmont Insurance Company (Fairmont) and Transamerica Insurance Company (Transamerica) (collectively referred to as petitioners), seek to have us reverse an order granting summary adjudication of a cause of action for declaratory relief relating to their duty to defend. In connection with their request, we issued an alternative writ. After considering the matter, including real parties' opposition to the petition, we now grant a writ of mandate commanding the trial court to vacate its order granting summary adjudication.

STATEMENT OF FACTS

On January 15, 1989, Fairmont issued a workers' compensation and employers' liability insurance policy (the Policy) to Western Industrial Management Corporation (Western) effective January 15, 1989 to January 15, 1990. ¹

The Fairmont policy provides two separate grants of coverage: (1) for "such benefits as are required by the Workers' Compensation Laws of the State of California to any person entitled thereto" (workers' compensation coverage) and (2) "employer's liability" which pays "all sums, except for punitive or exemplary damages, which the Employer shall become legally obligated to pay to its employee ... for ... bodily injury resulting from accident, sickness or disease ..." arising out of employment (employer's liability).

The policy includes an amendment that bodily injury "does not include emotional distress, anxiety, discomfort, inconvenience, depression, dissatisfaction or shock to the nervous system, unless caused by either a manifest physical injury or a disease with a physical dysfunction or condition resulting in treatment by a licensed physician and surgeon." (Emphasis added.)

Under item "VIII Discrimination," the "EXCLUSIONS" portion of the policy, no coverage exists "for any liability arising from any claim or action: (a) for wrongful termination brought by an employee or former employee; (b) for discrimination based upon sex ... brought by any employee or former employee...." This applies to both workers' compensation and employer's liability coverage. Also, under the employer's liability portion, pursuant to the policy amendment the following is excluded: "(b) for any obligation for which the insured or any carrier as his insurer may be held liable under any workers' compensation or occupational disease law, ...; (f) for bodily injury arising out of termination of employment; (g) for bodily injury arising out of the ... harassment or humiliation of, or discrimination of any kind against any employee."

The policy provides for defense of "claims or suits against the Employer for compensation or damages because of injuries insured On June 28, 1990, Susan Maurer (Maurer) filed a civil complaint against Western, Citizens Transportation Company (Citizens), Irven J. Francis (Francis) and Ronnie J. Goodin (Goodin) (collectively referred to as real parties in interest), in Los Angeles County Superior Court, which included causes of action for: (1) sex discrimination; (2) aiding and abetting sex discrimination; (3) wrongful termination; (4) violation of constitutional rights; (5) intentional infliction of emotional distress; (6) negligent infliction of emotional distress; and (7) unfair business practices (the civil action).

against hereunder, and to pay all cost of such defense...."

The complaint alleges that Maurer was hired by Weyers & Son on January 16, 1989, to drive a truck and deliver paper to the Los Angeles Times (Times); that Weyers & Son was delivering the paper to the Times pursuant to a contract between Weyers & Son and Citizens; that on March 3, 1989, Maurer was placed on the payroll of Western but continued driving the truck and delivering the paper to the Times under the direct supervision of Weyers & Son; that Citizen, at the request of Francis and Goodin, requested Western to terminate Maurer because "she was a female"; and that on March 31, 1989, she was laid off allegedly due to lack of work.

Maurer testified at her deposition that the wrongful termination resulted in stress which has caused her severe back pain and anxiety attacks. She indicated that the anxiety attacks are physically manifested by sweating, shakes, a feeling of weight on her chest, severe stomachaches, and infections resulting in open sores on her body. She has been treated by a medical doctor for these problems. ²

Maurer also filed a workers' compensation claim seeking compensation for emotional distress resulting from her March 31, 1989 termination of employment. Fairmont defended Western against the workers' compensation claim filed by Maurer.

Western tendered defense of the civil action to Fairmont. By letter dated December 27, 1990, the defense was denied. Western ultimately settled the civil claim, paying Maurer $380,000, and incurred attorneys fees and costs for defending the matter in the amount of $227,571.40, of which petitioners reimbursed Western $34,813.13. This was apparently the amount incurred prior to the time that defense of the civil claim was denied.

Real parties in interest then filed suit against petitioners, among others. In a second amended complaint, five causes of action are alleged against petitioners: The seventh cause of action sought a declaration that a duty to defend and indemnify real parties in interest existed for defense of the underlying civil suit; the eighth cause of action for breach of contract seeks damages for failure to defend and indemnify; the ninth cause of action seeks damages for tortious breach of the implied covenant of good faith and fair dealing resulting from a refusal to defend and indemnify; the tenth cause of action seeks damages for coverage on the theory that petitioners are barred from denying coverage by reason of promissory estoppel; and the eleventh cause of action seeks damages for coverage based upon the concept of waiver. Petitioners denied all of the allegations of the complaint, and raised nineteen separate affirmative defenses.

Western filed a motion for summary adjudication of issues as to the seventh and eighth causes of action seeking to adjudicate the following issues: "(1) that Fairmont owed Western a duty to defend the underlying action captioned Susan Maurer v. Western ...; [p] (2) that Fairmont breached its insurance contract with Western by refusing to provide a defense for Western in the underlying Western relied upon the recent case of Wong v. State Compensation Ins. Fund (1993), 12 Cal.App.4th 686, 16 Cal.Rptr.2d 1 for the proposition that because petitioners had potential liability for coverage under a workers' compensation claim, they owed a duty to defend Western for the civil action. By failing to defend, Western asserted that petitioners had breached the contract.

action ...; [p] (3) that Transamerica owed Western a duty to defend the underlying action ...; [p] (4) that [29 Cal.App.4th 1711] Transamerica breached its insurance contract with Western by refusing to provide a defense for Western in the underlying action...."

Petitioners opposed the motion, contending that Wong v. State Compensation Ins. Fund, supra, 12 Cal.App.4th 686, 16 Cal.Rptr.2d 1, was not applicable to this situation because they had provided a defense to the workers' compensation claim. They further contended that the exclusions relating to wrongful termination and for discrimination based upon sex also prevented coverage.

Western replied to the opposition, asserting that petitioners had failed to "conclusively eliminate a potential for liability' " once Western had established such potential, citing Montrose Chemical Corp. v. Superior Court (1993), 6 Cal.4th 287, 299, 24 Cal.Rptr.2d 467, 861 P.2d 1153, emphasis added. Western also cited the recent case of La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co. ^{3 *} (Cal.App.).

On December 17, 1993, the trial court granted summary adjudication on the seventh cause of action stating: "It is hereby ordered that Western's motion for summary adjudication is granted as to the seventh cause of action for declaratory relief in the second amended complaint. [p] It is further ordered, adjudged and decreed that [petitioners] owed Western a duty to defend the underlying action captioned Susan Maurer v. Western Industrial Management Inc. ..." The court denied summary adjudication of the eighth cause of action without prejudice on the ground that the moving party had failed to address the issue of damages and therefore summary adjudication would not resolve the entire cause of action.

Petitioners sought a writ of mandate asserting that the trial court was wrong as a matter of law regarding the duty to defend. We issued an alternative writ because the issue is one of importance to the public and the law is unsettled in the area.

In their return to the alternative writ, real parties in interest again argue that under the facts presented to the trial court, the terms of the policy, and under the authority of Wong v. State Compensation Ins. Fund, supra, 12 Cal.App.4th 686, 16 Cal.Rptr.2d 1 coverage exists for a defense. However, they also present us with new facts relating to the injuries claimed by Maurer and address the issues of waiver, estoppel and unclean hands. None of these issues was raised in the trial court in connection with the motion for summary adjudication. There are separate causes of action alleged in the second amended complaint...