Vaillette v. Fireman's Fund Ins. Co.

• Decision Date: 31 August 1993
• Docket Number: No. G012152,G012152
• Citation: 18 Cal.App.4th 680,22 Cal.Rptr.2d 807
• Court: California Court of Appeals Court of Appeals
• Parties: David A. VAILLETTE, Plaintiff and Appellant, v. FIREMAN'S FUND INSURANCE COMPANY, Defendant and Respondent.

Page 807

22 Cal.Rptr.2d 807

18 Cal.App.4th 680

David A. VAILLETTE, Plaintiff and Appellant, v. FIREMAN'S FUND INSURANCE COMPANY, Defendant and Respondent.

No. G012152.

Court of Appeal, Fourth District, Division 3, California.

Aug. 31, 1993.

Review Denied Dec. 30, 1993.

Larry L. Curran & Associates and Larry L. Curran, Orange, for plaintiff and appellant.

Haight, Brown & Bonesteel, Roy G. Weatherup, Denis J. Moriarty and Ronald B. Axelrod, Santa Monica, for defendant and respondent.

SONENSHINE, Associate Justice.

David A. Vaillette appeals from a judgment of dismissal of his breach of contract/bad faith/fraud action against Fireman's Fund Insurance Company (Fireman's Fund). The case was dismissed after the court sustained the insurer's demurrer to Vaillette's second amended complaint without leave to amend.

The appeal presents the following issue: When an insurer pays a plaintiff policy limits and the plaintiff covenants not to execute on any judgment against the insured or to assert any further claim arising out of the subject incident, may the plaintiff subsequently recover from the insurer costs of suit, including statutory attorney fees? The answer is no. The subject agreement is not amenable to any reasonable interpretation that would allow the plaintiff to seek further compensation of any nature from the insurer.

Factual and Procedural Background

In March 1984, Vaillette was rendered a quadriplegic and his passenger, James Downing, was killed when a drunk driver, Hugh Robinson, ¹ crashed his limousine into the rear end of Vaillette's vehicle. Vaillette sued Robinson and numerous other defendants. On March 31, 1986, one of Robinson's insurers, Fireman's Fund, agreed to pay Vaillette $1,000,000 in exchange for Vaillette's covenant not to execute on any potential judgment or prosecute against the insured or insurer any further claim arising from the accident.

Because we must construe the effect of the 14-page document, we set out its relevant terms at considerable length. The agreement provides:

(1) "This Agreement for Policy Payment and Covenant Not to Execute ... is entered into between David A. Vaillette ... and all of the Insureds of [certain] Fireman's Fund Insurance policies ... and Fireman's Fund Insurance Companies."

(2) "The Policy was in full force and effect at all relevant times ... covering the liability of the Insureds ... for a total of One Million, One Hundred Thousand Dollars ... which coverage is the subject of this Agreement. Upon completion of this Agreement the Policy funds available for distribution will be exhausted...."

(3) "[P]ursuant to agreement by counsel for all parties, the sum of Fifty Thousand Dollars ... was 'advanced' by and through Fireman's Fund Insurance Companies under the Policy to Vaillette."

4) "On or about March 13, 1986, a hearing concerning the available funds under the Policy was held ... for the specific purpose of allocating the funds available under the policy between Vaillette and the Downing heirs, ... and as a result of the recommendation of the [judge] Vaillette has and does accept the sums herein specified and the Downing heirs jointly have agreed to accept the sum of One Hundred Thousand Dollars ... from the Policy proceeds as their ... allocated shares."

(5) "This Agreement between Vaillette and the Insured is entered into for the purpose of the payment of the funds herein stated to Vaillette and to protect the Insureds' ... personal assets and other things of money's worth from the possibility of Vaillette obtaining a Judgment in excess of all presently known insurance coverage and thereby subjecting said Insureds, and each of them, to payment of any such Judgment with their ... personal assets."

(6) "[I]n consideration of the mutual covenants, promises, conditions and terms herein set forth the parties hereto, Vaillette, the Insureds, and Fireman's Fund Insurance Companies, agree as follows: [p] A. Vaillette shall receive the following consideration: [p] (1) An advance of Four Hundred Fifty Thousand Dollars ...; [p] (2) Payments of Four Thousand Five Hundred Thirty-Eight Dollars ... per month, for life, with a ten ... year guarantee.... [p] (3) The reservation of any and all rights Vaillette has or may have to the proceeds of any and all other Insurance policies of the Insureds, or any of them, excepting only the Policy here. [p] (4) The reservation of any and all rights Vaillette has or may have against any and all other persons, entitles, [sic] or otherwise, who are not Insured."

(7) Vaillette "covenants and agrees that at no time will Vaillette ... seek to execute on any Judgment in the aforesaid [action] and on any potential claim, including Wrongful Death, arising out of the acts and conduct set forth in paragraph 1 above, if Judgment is rendered against the Insureds ... except as is specifically reserved to Vaillette herein."

(8) "... [T]he acceptance of the benefits of the Policy herein is accepted as a Policy payment and partial satisfaction as against any total damages sustained by Vaillette for his injuries and damages as a result of the occurrences and events as are set forth [in] the Lawsuit as may be amended from time to time."

(9) "Vaillette intends to and will continue to pursue Vaillette's interests by way of continuing to prosecute the Lawsuit."

(10) "Nothing herein is intended to waive the rights of Fireman's Fund Insurance Companies to seek reimbursement for defense fees and costs from other applicable insurance policies."

11) "... Vaillette agrees to execute this Agreement with the Insureds, and each of them, and with Fireman's Fund Insurance Companies."

(12) "[I]n making this Agreement it is understood and agreed that Vaillette relies wholly upon Vaillette's own judgment, belief, and knowledge of the nature, extent and duration of Vaillette's injuries, and that Vaillette has not been influenced to any extent whatsoever in making this Agreement by any representations or statements regarding said injuries, or regarding any other matters, made by the Insureds, or any of them, or by Fireman's [F]und Insurance Companies...."

(13) "[S]uch payment is made by compromise and as a Policy payment and partial satisfaction toward any Judgment Vaillette may obtain."

(14) "This Agreement shall be construed without regard to the draftor [sic ] of the same and shall be construed as though all parties hereto participated equally in the drafting of this Agreement, and shall be construed pursuant to the laws of the State of California."

(15) "Each party hereto states that they ... have carefully read the foregoing Agreement and know the contents thereof, that they ... have been advised by legal counsel of their ... choice, and that they ... sign this Agreement [freely], and that it is their ... intention to be legally bound by this Agreement. Except as otherwise agreed to herein, nothing contained in this Agreement and/or by the execution hereof shall be deemed a waiver, release, discharge, dismissal, and/or admission by Vaillette as to the Insureds, Fireman's Fund Insurance Companies, or any of them, and Vaillette retains and reserves any and all other rights and interests he has or may have in the Lawsuit and/or to other actions he may and does have as to any person and/or entity."

Vaillette's action against Robinson proceeded to trial. In January 1989, the court awarded him nearly $3.5 million in damages. On Vaillette's motion, it further allowed him as part of his costs more than $1.2 million in attorney fees pursuant to Code of Civil Procedure section 1021.4. ²

Vaillette then filed the suit out of which this appeal arises, naming, inter alia, Fireman's Fund, Robinson and Robinson's other insurers, State Farm Mutual Automobile Insurance Company (State Farm), Industrial Indemnity Company (Industrial Indemnity) and Aetna Casualty & Surety Company (Aetna). He alleged the compromise agreement allowed him not only to proceed with his lawsuit through judgment, but to recover his costs, including attorney fees, and interest from Fireman's Fund. He stated four theories of recovery against the insurer based on its refusal to pay these items.

The court sustained the demurrer of Fireman's Fund to Vaillette's second amended complaint without leave to amend. In dismissing the action, the trial court found the March 31, 1985 agreement barred Vaillette from recovering anything further from the insurer.

Discussion

There is a strong policy in favor of a hearing on the merits (Shamblin v. Brattain (1988) 44 Cal.3d 474, 478, 243 Cal.Rptr. 902, 749 P.2d 339), and in reviewing an order sustaining a demurrer without leave to amend, we accept as true all properly pleaded facts. (Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 170, 164 Cal.Rptr. 839, 610 P.2d 1330.) Where there is a reasonable possibility an amendment will cure a defective pleading, it is ordinarily an abuse of discretion to deny a party the chance to cure the defect (Greenberg v. Equitable Life Assur. Society (1973) 34 Cal.App.3d 994, 998, 110 Cal.Rptr. 470); however, leave to amend should not be granted where, in all probability, amendment would be futile. (La Jolla Homeowners' Assn. v. Superior Court (1989) 212 Cal.App.3d 1131, 1141, 261 Cal.Rptr. 146.)

The gravamen of Vaillette's second amended complaint is his allegation that in the agreement with Robinson and Fireman's Fund, he reserved the right to obtain from them his costs of the lawsuit and interest accruing on any judgment. On this basis, he claims Fireman's Fund wrongfully refused to pay him $1,284,540.54 in attorney fees in the underlying action, $344,600 additional attorney fees awarded to him in the appeal therefrom, interest on both of those amounts, and $900,000 interest on the underlying judgment for damages against Robinson. Alleging a conspiracy between the insurer and its insured, he attempts to recover against Fireman's Fund on theories of fraud, breach of contract and breach of the...