Wilkinson v. Norcal Ins. Co.

Decision Date31 October 1979
Citation159 Cal.Rptr. 416,98 Cal.App.3d 307
CourtCalifornia Court of Appeals Court of Appeals
PartiesJack E. WILKINSON, M. D., Plaintiff and Appellant, v. NORCAL MUTUAL INSURANCE COMPANY, Defendant and Respondent. Civ. 3719.

GEORGE A. BROWN, Presiding Justice.

This appeal is pursued by Jack E. Wilkinson, M. D., from a summary judgment and judgment of dismissal granted in favor of the defendant, Norcal Mutual Insurance Company, a medical malpractice insurance carrier. The sole issue is whether Wilkinson exhausted his administrative remedies pursuant to Insurance Code section 1858 et seq. and section 11587 1 before filing his second amended complaint.

Wilkinson is a licensed physician and surgeon who has practiced his profession in Fresno for approximately 25 years, and prior to the events herein he enjoyed staff privileges at the major hospitals in the Fresno area.

Appellant had been insured by Travelers Insurance Company; that company canceled his policy. After a period of time appellant's staff privileges were terminated at various Fresno hospitals because he was not covered by professional liability insurance. Thereafter he applied to Norcal for insurance which, after first denying the application, on April 30, 1976, issued a policy of medical malpractice insurance subject to the following conditions: (1) the policy would contain a deductible of $10,000 per claim, (2) a 100 percent premium surcharge would be required, (3) coverage for neurosurgery and orthopedic surgery would be excluded. Appellant objected to the conditions, and under protest paid the premium. From all that appears the policy or renewals thereof is still in effect. Appellant's staff privileges with the limitation that he would not perform neurosurgery or orthopedic surgery were reinstated at the several hospitals.

On May 13, 1976, appellant filed his complaint for an unspecified amount of damages against Norcal by reason of the conditions imposed in the policy. 2

On March 21, 1977, appellant filed his second amended complaint in which he alleged for the first time that he had exhausted all administrative remedies against Norcal.

Norcal moved for a summary judgment on two grounds: (1) that appellant had not exhausted the intra-company remedies by way of appeal provided by Norcal's underwriting guidelines, and (2) that appellant had not exhausted his governmental administrative remedies under sections 1858 et seq. and 11587. The trial court granted the summary judgment solely on ground (2), holding as to ground (1) that an issue of fact existed with respect to whether appellant did in fact exhaust Norcal's internal remedies. Since we will affirm the judgment on ground (2) we shall confine our discussion to that ground.

It is established by the declarations that on March 10, 1977, 11 days before filing the second amended complaint, appellant's counsel wrote to the Department of Insurance requesting a hearing before the Insurance Commissioner pursuant to section 1858 on the "following grounds":

"1. Dr. Wilkinson is a person aggrieved by the rate charged;

"2. Dr. Wilkinson is a person aggrieved by the rating plan;

"3. Dr. Wilkinson is a person aggrieved by the rating system;

"4. Dr. Wilkinson is a person aggrieved by the underwriting rule followed by Norcal;

"5. Dr. Wilkinson is a person aggrieved by the underwriting rule adopted by Norcal.

"And, in particular that the insurance premium charged is excessive, inadequate, and/or unfairly discriminatory."

This request was never answered in writing nor did the Insurance Commissioner take formal action in response thereto. However, in a declaration filed by Paul A. Eisler, counsel for appellant, in opposition to the motion for summary judgment, he states:

"Since the writing of my letter of March 10, 1977 (Exhibit 'K') to the Department of Insurance I have had several telephone conversations with Mr. Loeb, and I was advised by him that any further action by the Department of Insurance either under Insurance Code § 1858 or § 11587 would not benefit the Plaintiff, Dr. Wilkinson, in this matter and that, therefore, the Department of Insurance feels that no further action should be taken by it as the administrative remedy, if any there is, would not aid Plaintiff but possibly cause Plaintiff further detriment as NORCAL had the choice of cancelling Plaintiff's insurance."

In sum, appellant contends on this appeal that the trial court erred in granting Norcal's motion for summary judgment because:

(1) Appellant exhausted all available governmental remedies; in any event it would have been futile to pursue the administrative remedies further because

(a) The Department of Insurance told appellant's counsel in a telephone conversation that it did not intend to pursue the matter further and that the department could do nothing further for him.

(2) Were appellant to have pursued an administrative remedy under section 11587 any further he would have suffered irreparable injury and was therefore not required to continue with it.

(3) Section 1858 does not provide an adequate or effective administrative remedy to an aggrieved individual, and appellant was therefore not required to pursue one under it.

(4) In any event summary judgment is improper because there was a triable issue of fact as to whether the administrative remedies were exhausted.

(5) Assuming summary judgment was proper, the action should have been abated and not dismissed.

It is well settled that a jurisdictional prerequisite to review by the courts is the exhaustion of all administrative remedies. (Abelleira v. District Court of Appeal (1941) 17 Cal.2d 280, 109 P.2d 942.) As the Abelleira court stated:

"The rule itself is settled with scarcely any conflict. It is not a matter of judicial discretion, but is a fundamental rule of procedure laid down by courts of last resort, followed under the doctrine of Stare decisis, and binding upon all courts. We are here asked to sanction its violation, either on the ground that a valid exception to the rule is applicable, or that despite the uniformity with which the rule has been applied, it may be disregarded by lower tribunals without fear of prevention by the higher courts. This last point cannot be too strongly emphasized, for the rule will disappear unless this court is prepared to enforce it. To review such action of a lower court only on appeal or petition for hearing would permit interference with the administrative proceeding pending the appeal or hearing, with the effect of completely destroying the effectiveness of the administrative body. The writ of prohibition can alone operate surely and swiftly enough to prevent this unfortunate result; and only if we recognize that the rule is jurisdictional will it be uniformly enforced. Bearing in mind the analysis of jurisdiction which has heretofore been made, and examining the authorities dealing with the rule, we are necessarily led to the conclusion that exhaustion of the administrative remedy is a jurisdictional prerequisite to resort to the courts." (Id., at p. 293, 109 P.2d at p. 949-950.)

(See also Mountain View Chamber of Commerce v. City of Mountain View (1978) 77 Cal.App.3d 82, 88-89, 143 Cal.Rptr. 441; Bleeck v. State Board of Optometry (1971) 18 Cal.App.3d 415, 431-432, 95 Cal.Rptr. 860.)

It is also established that the exhaustion of administrative remedies "requires not merely the initiation of prescribed administrative procedures; it requires pursuing them to their appropriate conclusion and awaiting their final outcome before seeking judicial intervention." (Woodard v. Broadway Fed. S. & L. Assn. (1952) 111 Cal.App.2d 218, 221, 244 P.2d 467, 469; see McHugh v. County of Santa Cruz (1973) 33 Cal.App.3d 533, 538-539, 109 Cal.Rptr. 149; Reich v. Webb (1963) 218 Cal.App.2d 862, 868, 32 Cal.Rptr. 803.)

Turning to appellant's contentions seriatim, he relies primarily upon the hearsay statement to his counsel by telephone from the employee of the Department of Insurance to the effect that they could not help his client to support his argument that appellant exhausted his administrative remedies and that further efforts to exhaust the administrative remedy would have been futile. (See People v. Superior Court (Tidwell ) (1979) 91 Cal.App.3d 95, 102, 154 Cal.Rptr. 54 futility exception is a narrow one.) Appellant claims that it would have been futile because the state's machinery could provide no "practical benefit."

It is first to be noted that section 1858.05 gives the Insurance Commissioner 30 days either by order to deny the hearing or proceed to hearing. 3 It further provides that complainant may petition the court for an order to compel compliance with the section. In the case at bench appellant neither waited the 30 days nor petitioned the court to compel compliance. Instead he filed his second amended complaint 11 days after mailing the letter of March 10. It is apparent that the provision for a petition to compel compliance is part of the administrative remedy which was not exhausted.

Moreover, the statement from an employee of the insurance company to the attorney for appellant is hearsay and inadmissible to prove the truth of the facts therein asserted, and the trial court was justified in disregarding it. Code of Civil Procedure section 437c provides in relevant part that "(s) upporting and opposing affidavits or declarations shall be made by any person on personal knowledge, shall set forth admissible evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein." Hearsay statements are inadmissible, and there can be no waiver by silence of the right to object on appeal to inadmissible evidence in a summary judgment...

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