Opinion ID: 2633511
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Heading: Does the Maximum Liability Provision of Insurance Code Section 11580, Subdivision (p)(4) Limit a Cost Award Pursuant to Code of Civil Procedure Section 998?

Text: Insurance Code section 11580.2, subdivision (p)(4) (hereinafter Insurance Code, section 11580.2(p)(4)) provides that [w]hen bodily injury is caused by one or more motor vehicles, whether insured, underinsured, or uninsured, the maximum liability of the insurer providing the underinsured motorist coverage shall not exceed the insured's underinsured motorist coverage limits, less the amount paid to the insured by or for any person or organization that may be held legally liable for the injury. Farmers argues that this maximum liability provision precludes court awarded costs to an insured when, as in the present case, the costs plus the damages awarded the insured would exceed the coverage limit. We agree with the Court of Appeal that this argument should be rejected. In Murillo v. Fleetwood Enterprises, Inc. (1998) 17 Cal.4th 985, 73 Cal.Rptr.2d 682, 953 P.2d 858 ( Murillo ), we considered whether the cost-shifting provisions of Civil Procedure sections 998 could be impliedly overridden by a contrary statute. We recognized that Code of Civil Procedure section 1032, which authorizes costs to prevailing parties, provides in subdivision (b), that `[e]xcept as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.' ( Murillo, supra, 17 Cal.4th at p. 989, 73 Cal.Rptr.2d 682, 953 P.2d 858, italics added.) Turning to Code of Civil Procedure section 998, we stated: Section 998 explicitly states that it `augment[s]' section 1032(b). Thus, the requirements for recovery of costs and fees under section 998 must be read in conjunction with section 1032(b), including the requirement that section 998 costs and fees are available to the prevailing party `[e]xcept as otherwise expressly provided by statute.' (§ 1032(b), italics added.) ( Murillo, supra, 17 Cal.4th at p. 1000, 73 Cal.Rptr.2d 682, 953 P.2d 858.) We then determined that the statute in question, Civil Code section 1794, subdivision (d), (hereafter Civil Code section 1794(d)), did not expressly provide an exception to Code of Civil Procedure sections 998 and 1032. Civil Code section 1794(d), part of the Song-Beverly Act, states: If the buyer prevails in an action under this section, the buyer shall be allowed by the court to recover as part of the judgment a sum equal to the aggregate amount of costs and expenses, including attorney's fees based on actual time expended, determined by the court to have been reasonably incurred by the buyer in connection with the commencement and prosecution of such action. The act has no comparable provision for prevailing sellers. We concluded: Although Civil Code section 1794(d) gives a prevailing buyer the right to recover `costs and expenses, including attorney's fees,' the statute makes no mention of prevailing sellers. In other words, it does not expressly disallow recovery of costs by prevailing sellers; any suggestion that prevailing sellers are prohibited from recovering their costs is at most implied. Accordingly, based on the plain meaning of the words of the statutes in question, we conclude Civil Code section 1794(d) does not provide an `express' exception to the general rule permitting a seller, as a prevailing party, to recover its costs under section 1032(b). ( Murillo, supra, 17 Cal.4th at p. 991, 73 Cal.Rptr.2d 682, 953 P.2d 858.) We came to the same conclusion with respect to Code of Civil Procedure section 998. ( Murillo, supra, 17 Cal.4th at p. 1000, 73 Cal.Rptr.2d 682, 953 P.2d 858.) We also rejected the plaintiff's argument that the legal dictionary definition of expressly supported his position. The word expressly has been defined as `[i]n an express manner; in direct or unmistakable terms; explicitly; definitely; directly. . . . The opposite of impliedly.' (Black's Law Dict. (5th ed.1979) p. 522, col. 1.) This definition is actually contrary to buyer's position, for Civil Code section 1794(d)'s silence with regard to prevailing sellers does not `explicitly' or `directly' disable sellers from recovering their costs pursuant to section 1032. ( Murillo, supra, 17 Cal.4th at p. 991, 73 Cal.Rptr.2d 682, 953 P.2d 858.) The Murillo court also rejected the argument that its interpretation of Civil Code section 1794(d) defeated the purpose of the statute: We could not, of course, ignore the actual words of the statute in an attempt to vindicate our perception of the Legislature's purpose in enacting the law. `This court has no power to rewrite the statute so as to make it conform to a presumed intention which is not expressed.' ( Murillo, supra, 17 Cal.4th at p. 993, 73 Cal.Rptr.2d 682, 953 P.2d 858.) The court also held that the provision for attorney fees to prevailing buyers but not sellers sufficiently preserved the statute's proconsumer objectives. ( Ibid. ) In Murillo, the court found no express override of Code of Civil Procedure section 998 when there was a reference to plaintiff's costs but not defendant's. Insurance Code section 11580.2, at issue in the present case, makes no mention of costs whatever. Its main focus is on defining rules for uninsured or underinsured motorist insurance policies involving bodily injury liability insurance covering liability arising out of the ownership, maintenance, or use of any motor vehicle. . . . (Ins.Code, § 11580.2, subd. (a)(1).) Insurance Code section 11580.2(p)(4)'s maximum liability provision clearly means to limit liability of the insurer arising out of the ownership, maintenance, or use of any motor vehicle. But it is not at all clear that the statute intends to exempt the insurer from the general cost rules found in Code of Civil Procedure section 998, i.e., from the obligation to pay costs arising out of its behavior as a litigant. In other terms, Insurance Code section 11580.2(p)(4)'s reference to maximum liability does not `explicitly' or `directly' disable an insured from recovering costs above such liability when the conditions of Code of Civil Procedure section 998 are met. ( Murillo, supra, 17 Cal.4th at p. 991, 73 Cal.Rptr.2d 682, 953 P.2d 858.) This conclusion finds additional support in another case relied on by Pilimai, and by the Court of Appeal below, Harris v. Northwestern National Ins. Co. (1992) 6 Cal.App.4th 1061, 1065, 8 Cal.Rptr.2d 234 ( Harris ). In that case, involving the breach of a bond, the defendant argued that it could not be assessed costs pursuant to Code of Civil Procedure section 1032, based on the Bond and Undertaking Law (Code Civ. Proc., § 995.010 et seq.). It argued that a provision of that law, Code of Civil Procedure section 996.470, subdivision (a) which provides, [n]otwithstanding any other statute . . ., the aggregate liability of a surety to all persons for all breaches of the condition of a bond is limited to the amount of the bond, precluded cost awards that, combined with damages, exceeds the amount of the bond. The Harris court, rejecting this argument, stated: This language, however, refers only to liability for `breaches of the condition of the bond.' It does not limit liabilities of a surety which are imposed by statute rather than for breach of the condition of the bond. [Citation.] [¶] This was made clear by the subsequent enactment of Code of Civil Procedure section 996.475, which provides `[n]othing in this chapter is intended to limit the liability of a surety pursuant to any other statute.' ( Harris, supra, 6 Cal.App.4th at p. 1065, 8 Cal. Rptr.2d 234.) As the Harris court concluded: The obligation of appellant to pay costs is imposed by Code of Civil Procedure section 1032 based upon appellant's status as a party litigant, not for breach of the condition of the bond. Here, although appellant admitted its execution of the bond, it denied liability and litigated whether its principal, the notary, breached the condition of the bond. As a losing party litigant, appellant is properly subjected to costs in addition to the amount of the bond. ( Harris, supra, 6 Cal.App.4th at pp. 1065-1066, 8 Cal.Rptr.2d 234.) Farmers correctly notes that Harris is distinguishable from the present case inasmuch as it concerned a statute that explicitly provided that the limitation on liability applied only to `breaches of the . . . bond' and was not intended to limit liability pursuant to `any other statute.' ( Harris, supra, 6 Cal.App.4th at p. 1065, 8 Cal.Rptr.2d 234.) But Harris does call attention to the distinction between [t]he obligation of appellant to pay costs . . . imposed by Code of Civil Procedure section 1032 based upon appellant's status as a party litigant and breach of the obligation set forth in the statute in question. ( Ibid. ) As observed above, it is not clear that Insurance Code section 11580.2(p)(4)'s maximum liability provision applies to costs imposed on an insurance company through its behavior as a litigant, specifically its failure to settle, rather than damages assessed against it as a liability insurer. Nor are we persuaded otherwise by the fact that the arbitration provisions of Insurance Code section 11580.2 are intended to provide `inexpensive resolution' of disputes. ( Orpustan v. State Farm Mut. Auto. Ins. Co. (1972) 7 Cal.3d 988, 992, 103 Cal.Rptr. 919, 500 P.2d 1119.) Such inferences, based on general legislative purpose, do not constitute express exceptions to Code of Civil Procedure sections 1032 and 998. ( Murillo, supra, 17 Cal.4th at p. 994, 73 Cal.Rptr.2d 682, 953 P.2d 858.) We therefore conclude that the maximum liability provision of Insurance Code section 11580.2(p)(4) does not preclude an award of costs pursuant to Code of Civil Procedure section 998, even if the costs, in addition to the damage award, would exceed the insurance policy's maximum coverage.