Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_15-cv-00124/USCOURTS-caed-1_15-cv-00124-12/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 12:635 Breach of Insurance Contract

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

PAUL EVERT’S RV COUNTRY, 

INC.; PAUL EVERT; and CHARLES 

CURTIS,

Plaintiffs,

v.

UNIVERSAL UNDERWRITERS 

INSURANCE COMPANY; and DOES 

1-25, inclusive,

Defendant.

CIV. NO. 1:15-00124 WBS SKO

ORDER RE: CROSS-MOTIONS FOR 

SUMMARY JUDGMENT

AND RELATED COUNTERCLAIMS. 

----oo0oo----

Plaintiffs Paul Evert’s RV Country, Inc., Paul Evert, 

and Charles Curtis (collectively “Evert’s RV”) brought this 

action against defendants Universal Underwriters Insurance 

Company (“Universal”) and Does 1-25, inclusive, for breach of 

Case 1:15-cv-00124-WBS-SKO Document 108 Filed 11/18/16 Page 1 of 4
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contract and breach of the implied covenant of good faith and 

fair dealing arising from an underlying state court action as 

Evert’s RV’s insurer. Pursuant to Federal Rule of Civil 

Procedure 56, Universal moves for summary judgment against 

Evert’s RV and cross-defendant Aaron Lyon, and Evert’s RV moves

for partial summary judgment against Universal. 

The court finds sufficient evidence to go to the jury 

on all claims and cross-claims with the exception of Evert’s RV’s 

claim that Universal breached the insurance policy when it 

refused to indemnify Evert’s RV for the punitive damage award in 

the underlying action.

With respect to Evert’s RV’s claim for punitive 

damages, California law and public policy bars the insurer from 

indemnifying the insured for punitive damages awards. Thus 

Universal cannot be required to indemnify Evert’s RV and Lyon for 

the punitive damages award. California law generally bars an 

insurer from indemnifying the insured for an award of punitive 

damages. PPG Indus. Inc. v. Transamerican Ins. Co., 20 Cal. 4th 

310, 317-18 (1999). 

This applies even if the policy does not exclude an 

award of punitive damages from coverage. Id. at 319. To allow 

such recovery would (1) violate the policy of not allowing 

liability for intentional wrongdoing to be offset by the 

negligence of another; (2) defeat the purpose of punitive 

damages--to punish and deter the wrongdoer; and (3) violate the 

public policy against indemnification for punitive damages. Id.; 

see Certain Underwriters at Lloyd’s of London v. Pac. S.W. 

Airlines, 786 F. Supp. 867, 869 (C.D. Cal. 1992). “Thus, 

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California has prohibited such indemnification.” Certain 

Underwriters, 786 F. Supp. at 869. 

A breach of the implied covenant of good faith and fair 

dealing alone does not provide a basis for the insured to recover 

punitive damages. PPG Indus., 20 Cal. 4th at 318-19. An insurer 

is liable for punitive damages only if the insurer’s egregious 

misconduct was the basis for the damages. Id. at 319. For 

example, if the insurer “itself engaged in conduct that is 

oppressive, fraudulent, or malicious, the insured may recover 

punitive damages from the [insurer].” Id. Even if Universal was 

negligent during the Fresno RV action, negligence is not enough. 

See Ferguson v. Lieff, Cabraser, Heimann & Bernstein, 30 Cal. 4th 

1037, 1047-48 (2003) (“Making a negligent attorney liable for 

lost punitive damages would not serve a societal interest, 

because the attorney did not commit and had no control over the 

intentional misconduct justifying the punitive damages award.”).

Even if Universal breached the implied covenant of good 

faith and fair dealing, there is no triable issue of material

fact related to whether Universal engaged in egregious misconduct 

and whether such conduct was the basis for the punitive damages 

award. Similar to the insurer in PPG Industries, Universal 

decided not to settle at a rate within the policy limits after 

the intentionally wrongful conduct of the insured. (Curtis Dep. 

30:13-25, 52:10-16, 52:24-55:1 (Docket No. 66-27).) Universal 

rejected the settlement after relaying the settlement offer to 

Evert’s RV, who “were shocked” at the settlement offer because it 

was “very exorbitant” and “a ridiculous amount.” (Cantrell Dep. 

32:2-6, 33:23-34:8 (Docket No. 85-8).) 

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While Evert’s RV argues there was more misconduct by 

Universal than a failure to settle, the reasoning in PPG 

Industries against indemnification of punitive damages applies to 

any negligence by the insurer--not just negligence in a failure 

to settle. See PPG Indus., 20 Cal. 4th at 316 (“[T]here is the 

policy of not allowing liability for intentional wrongdoing to be 

offset or reduced by the negligence of another.”). Universal was

not oppressive, fraudulent, or malicious in any of its actions as 

a matter of law. Absent egregious misconduct by the insurer, 

California law prohibits Universal from indemnifying punitive 

damages awards. Id. at 319.

Accordingly, the court finds as a matter of law that

Universal had no obligation under the policy to indemnify Evert’s 

RV or Lyon for the punitive damage award in the underlying 

action. 

IT IS THEREFORE ORDERED that defendant’s motion for 

summary judgment against Evert’s RV and Lyon be, and the same 

hereby is, GRANTED with respect to Universal’s obligation to 

indemnify Evert’s RV and Lyon for the punitive damages award in 

the underlying action;

AND IT IS FURTHER ORDERED that in all other respects 

defendant’s motion for summary judgment and Evert’s RV’s motion 

for partial summary judgment be, and the same hereby are, DENIED.

Dated: November 17, 2016

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