Walker v. Pacific Indem. Co.

• Decision Date: 04 August 1960
• Citation: 6 Cal.Rptr. 924,183 Cal.App.2d 513
• Parties: Elaine WALKER, Plaintiff and Respondent, v. PACIFIC INDEMNITY COMPANY et al., Defendants, George Robert Fulmore, Defendant and Appellant. Civ. 19034.
• Court: California Court of Appeals Court of Appeals

Page 924

6 Cal.Rptr. 924

183 Cal.App.2d 513

Elaine WALKER, Plaintiff and Respondent, v. PACIFIC INDEMNITY COMPANY et al., Defendants George Robert Fulmore, Defendant and Appellant.

Civ. 19034.

District Court of Appeal, First District, Division 2, California.

Aug. 4, 1960.

Bert W. Levit, David C. Bogert, Herbert G. Hawkins, Long & Levit, San Francisco, for appellant.

Dilley & Eymann, Kenneth Eymann, Santa Rosa, for respondent.

DRAPER, Justice.

When does a cause of action accrue against an insurance broker who negligently secures automobile liability insurance in an amount less than that ordered by the car owner? That is the sole question presented by this appeal.

On March 17, 1952, one Merrill ordered an insurance policy covering operation of his logging truck with limits up to $50,000 for bodily injury to one person. Defendant Fulmore, Merrill's broker, accepted the order but secured a policy with limits of only $15,000. On July 9, 1952, Merrill's truck collided with an automobile, causing injury to Elaine Walker. Shortly thereafter, an action was filed by Mrs. Walker against Merrill seeking damages of more than $100,000 for such injuries. This action was tried before a jury, which, on December 16, 1955, returned a verdict for $100,000. The insurer, Pacific Indemnity Co., paid $15,000 plus costs and interest, on account of the ensuing judgment.

Merrill assigned his claim against the broker, Fulmore, to Mrs. Walker who, on December 14, 1956, brought this action alleging that Fulmore 'negligently and carelessly' procured coverage of $15,000 rather than $50,000. The insurer was joined on the theory that Fulmore, as its agent, had obligated it to issue the larger policy. Judgment upon jury verdict was against Fulmore for $35,000 but in favor of the insurer. Plaintiff did not appeal from the latter judgment, and Pacific Indemnity Co. therefore is not a party to this appeal. Fulmore does appeal from the judgment against him.

Appellant pleaded Code of Civil Procedure, §§ 337, 338 and 339 in bar of the action. He demurred, moved for judgment on the pleadings, for nonsuit and for directed verdict, all on the ground of the statute of limitations. All were determined adversely to him. He asserts the bar of the statute as his sole ground of appeal.

This case presents no problem as to what period of limitation applies. Defendant-appellant contends that the cause of action accrued March 17, 1952, when he procured for Merrill a policy having limits of $15,000 rather than $50,000, or, at the latest, on July 9, 1952, when the accident occurred. Plaintiff argues that the cause of action accrued December 16, 1955, when the verdict for $100,000 was returned. If defendant is correct, this action was brought too late under any of the pleaded statutes, some one of which concededly applies. If plaintiff is correct, the action is within the time under any of the periods of limitation. Thus the only question is when some statute of limitations began to run.

The parties agree that both wrong or breach of duty and injury or damage are essential to the accrual of a cause of action. There is no dispute that the wrong here occurred March 17, 1952, when defendant 'negligently and carelessly' procured a policy with limits of $15,000, rather than $50,000.

But was there any injury or damage then? We think not. It is true that Merrill then received less than he had ordered. But it is difficult to conceive what action he could then have brought. Complaint for defendant's negligent failure to procure additional coverage would, in view of the ready availability of automobile insurance, have been demurrable (1 Cal.Jur.2d, Actions, § 16). Until an accident occurred, bodily injury was inflicted on another, and a liability in excess of the $15,000 coverage incurred, there was no injury to Merrill in the absence of possible special facts which do not appear here.

After occurrence of the accident, Merrill obviously could no longer insure against that contingency. When the complaint in the personal injury action was filed (at a date not disclosed in the record before us) he knew only that he was exposed to a liability in excess of $15,000. It is true that he had then suffered a loss of security or protection, but whether that loss would constitute any ultimate injury or damage remained to be determined. Unless he showed that his credit rating was adversely affected by the mere existence of the unindemnified liability, or that some other special situation imposed present damage, he had not yet suffered a loss which would sustain an action against the broker. It is perhaps true that he could have filed an action for declaratory relief, but a principal function of that statutory relief is to permit declaration of rights and duties before actual loss occurs. Hence it cannot be said that a right to declaratory relief shows the accrual of a cause of action in the sense of commencing the running of a statute of limitations.

At that stage, Merrill had incurred no recoverable loss. He had merely suffered an exposure to liability beyond his insurance coverage--a mere possibility that he might suffer liability beyond the indemnity afforded him. The lesser coverage afforded him defense of the claim against him, and he was not injured by being required to provide or incur liability for such defense. Beyond this right to be defended, his insurance policy was a mere indemnity agreement, a contract to pay a liability which might be imposed upon him. Whether a deficiency in the amount of that indemnification injured him depended wholly upon determination of the amount of liability to which the indemnity applied. Whether liability would be imposed, and if so, whether it would result in loss by exceeding his indemnification, was to be determined by the uncertainties of the personal injury litigation.

Appellant suggests no action which plaintiff could have brought against the broker before that determination, save one for nominal damages. But the mere possibility that one will be required to pay damages to a third party does not warrant even nominal damages (Pacific Pine Lumber Co. v. Western Union Telegraph Co., 123 Cal. 428, 431, 56 P. 103). Further, a judgment for mere nominal damages would, whether in the Superior Court or the Municipal Court, carry costs only in the discretion of the trial court (Code Civil Proc. §§ 1032 (d), 1031). Since no permanent right would have been involved, failure to award mere nominal damages would not be reversible error (Sweet v. Johnson, 169...