Court Opinion

ID: 9721560
Source: CourtListenerOpinion
Date Created: 2023-08-26 09:02:20.329616+00
Date Added: 2024-06-11T18:24:27.193994
License: Public Domain

*966DALSIMER, J. J., Concurring and Dissenting.
I concur in the majority opinion insofar as it affirms the summary judgment against Phyllis Williams (Mrs. Williams) in her individual capacity, but I respectfully dissent from the affirmance of the summary judgment against Mrs. Williams as the personal representative of the estate of her deceased husband, Jackson Williams.
The purpose of subdivision (h)(5) of section 790.03 of the unfair practices act of the Insurance Code (§ 790 et seq.) is to require that insurance companies attempt in good faith to negotiate prompt, fair settlements once liability has become reasonably clear.
Defendants’ motion for summary judgment against Mrs. Williams as personal representative of the estate of Jackson Williams should have been denied. Liability became reasonably clear as soon as the insurer received and evaluated a copy of the accident report stating the decedent was rear-ended by the insured who was driving with defective brakes and at an excessive speed. Although liability had become reasonably clear, defendants did not attempt to effectuate a prompt, fair settlement of decedent’s personal injury claim. The only settlement offer made to decedent by defendants for decedent’s personal injury claim was for an amount less than decedent’s special damages. This offer was made just days before decedent’s death at a time when decedent urgently needed money to pay for medical treatment.
The phrase “in which liability has become reasonably clear” as used in Insurance Code section 790.03, subdivision (h)(5), was recently construed in Jackson v. State Farm Mutual Auto. Ins. Co. (1983) 148 Cal.App.3d 1179 [196 Cal.Rptr. 474], In that case the complaint alleged that the insurer offered $25 in settlement of a claim for loss of a car valued at between $900 and $1,200 at a time when the insurer’s investigation revealed that the reasonable value of the car substantially exceeded the amount of the settlement offer. Division Four of this court held that the plaintiff’s pleading that the insurer offered $25 in settlement at a time when the insurer had completed sufficient investigation, discovery, and analysis necessary to apprise it that the reasonable value of the plaintiff’s claim greatly exceeded that sum was sufficient to allege that the insurer did not attempt a good faith settlement at a time when it had facts from which liability had become reasonably clear. (Id., at p. 1186.) I believe that Division Four’s construction of the phrase “in which liability has become reasonably clear” is correct. To hold that an action against the insured must be concluded before liability is reasonably clear would defeat the very purpose of Insurance Code section 790.03, subdivision (h)(5). (Also see Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880, 888-891 [153 Cal.Rptr. 842, 592 P.2d 329].)
*967The purpose of Royal Globe was to provide for judicial enforcement by third party claimants of the mandate of the Unfair Practices Act (Act). (Royal Globe Ins. Co. v. Superior Court, supra, 23 Cal.3d 880, 888.)
In Royal Globe the third party claimant had sued the insured for personal injuries and the insurer for violation of the Act in the same lawsuit. Under those circumstances the court held that the third party claimant’s lawsuit against the insurer could not be brought until the liability of the insured was first determined. (Royal Globe Ins. Co. v. Superior Court, supra, 23 Cal.3d 880, 892.) A primary reason for that holding was that, unless the trial against the insurer was postponed until the conclusion of the lawsuit against the insured, “the defense of the insured may be seriously hampered by discovery initiated by the injured claimant against the insurer.” (Id., at p. 892.) Since here no action was brought by the injured third party claimant or his estate against the insureds within the limitations period (Code Civ. Proc., § 340, subd. (3)), that rationale has no application. There exists no problem of hampering the defense of the insureds, since the statutory period for filing an action against the insureds had expired before this action was commenced.
Two additional policy reasons were recited by the Royal Globe court on the question of the timing of the lawsuit by the claimant against the insurer. First, the court noted that a joint trial against the insured and insurer would violate Evidence Code section 1155, which provides that evidence of insurance is inadmissible to prove negligence or wrongdoing. (Royal Globe Ins. Co. v. Superior Court, supra, 23 Cal.3d 880, 891.) Because, due to the expiration of the statute of limitations, the estate cannot bring an action against the insureds, this policy reason also has no application to the estate’s right to pursue the remedy recognized by Royal Globe.
Second, the Royal Globe court stated that “damages suffered by the injured party as a result of the insurer’s violation of subdivision^ (h)(5) . . . may best be determined after the conclusion of the action by the third party claimant against the insured.” (Royal Globe Ins. Co. v. Superior Court, supra, 23 Cal.3d 880, 892, italics supplied.) A strong inference of that statement is that the damages suffered by the injured party as a result of such violation may also be determined in the absence of an action by the third party claimant against the insured. Since no action may now be brought against the insureds, no policy reason exists to delay a determination of the damages suffered by the third party claimant as a result of defendants’ tortious conduct. None of the reasons mentioned by Royal Globe for deferring the action against the insurer requires or even justifies foreclosing such action under the present circumstances.
*968Nothing in the Royal Globe decision indicates any intention to preclude the estate of a third party claimant from suing an insurer for violation of Insurance Code section 790.03, subdivision (h)(5), after the statute of limitations has run on the claimant’s causes of action against the insured. While a contrary view was expressed by the court in Carr v. Progressive Casualty Co. (1984) 152 Cal.App.3d 881 [199 Cal.Rptr. 835], that case is distinguishable because there the third party claimant had initiated a lawsuit against the insured during his lifetime, and judgment was entered after his death. Thus, the Carr court was not confronted with the issue now before this court.
In our case the decedent’s cause of action against defendants arose no later than January 1980. Defendants breached their duty to promptly, fairly, and equitably settle decedent’s claim when they offered him less than his medical specials although they well knew of his severe personal injuries and terminal condition and liability had become reasonably clear.
Section 790.03, being remedial in nature, should be liberally construed. (See Tammen v. County of San Diego (1967) 66 Cal.2d 468, 480 [58 Cal.Rptr. 249, 426 P.2d 753].) This was recognized by the Royal Globe court in its holding that the phrase “with such frequency as to indicate a general business practice” (Ins. Code, § 790.03, subd. (h)) does not apply to an action against the insurer by a third party claimant. (Royal Globe Ins. Co. v. Superior Court, supra, 23 Cal.3d 880, 891; cf. Rodriguez v. Fireman’s Fund Ins. Companies, Inc. (1983) 142 Cal.App.3d 46, 53 [190 Cal.Rptr. 705].)
Extension of the Royal Globe limitation to foreclose an action under the circumstances pleaded in this case would encourage insurers to engage in the very type of conduct alleged—the calculated refusal to negotiate in good faith once it is learned that the claimant is gravely ill. The insurer is well aware of Probate Code section 573, which provides that “When a person having a cause of action dies before judgment, the damages recoverable by the executor or administrator are limited to such loss or damage as the decedent sustained or incurred prior to his death . . . and shall not include damages for pain, suffering or disfigurement.” Appellant alleges that defendants, knowing of the fatal nature of decedent’s illness and knowing that it was not likely that decedent would survive his impending hospitalization, manifested their intent to take full advantage of decedent’s condition to avoid paying the actual settlement value of the claim. Knowing of the effect of Probate Code section 573, defendants intended to avoid paying any amount for decedent’s general damages and offered an amount which was even less than the medical specials as a full settlement of the case. It was also because of decedent’s impending death and the effect of Probate Code *969section 573 that defendants were quite unconcerned with any potential liability to decedent for emotional distress caused by their reprehensible conduct in violating Insurance Code section 790.03, subdivision (h)(5). I cannot believe that the limitation of Royal Globe was intended to preclude an action against the insurer for violation of the Act under such outrageous circumstances as are here alleged. The limitation of Royal Globe should not be extended to bar an action against the insurer when, due to the death of the third party claimant before the expiration of the limitations period, general damages caused by the accident could not be recovered from the insured. A new cause of action arose in favor of the third party claimant when defendants breached their statutory duty, and that cause of action survived the decedent’s death.
This is not a case in which a healthy third party claimant is attempting to sue the insurer under the Act after having allowed the limitations period for bringing an action against the insured to expire. Only five months of the limitations period had expired when decedent died. Since decedent was in extremely poor health and the expiration of the limitations period was not imminent, there was no reason for decedent to commence an action against the insureds. After decedent died, his estate could sue only for the amount of decedent’s special damages. (Prob. Code, § 573.) It would not have been economically feasible for the estate to file a complaint against the insureds in municipal court in view of the costs of such litigation in relation to the small amount of the probable recovery. Although the insureds’ liability would have been determined in such an action, it was not necessary for the estate to commence an action against the insureds because a clear case of liability existed in view of the accident report described ante at page 966.
These circumstances present a compelling exception to the usual situation in which “damages suffered by the injured party as a result of the insurer’s violation of subdivision [] (h)(5) . . . may best be determined after the conclusion of the action by the third party claimant against the insured.” {Royal Globe Ins. Co. v. Superior Court, supra, 23 Cal.3d 880, 892.) Where there exists no economic incentive for the estate to first sue the insureds and where damages in such an action would be limited to the decedent’s specials, an action against the insureds should not be required before the estate may sue the insurer and its claims adjuster for violation of the Act in the manner alleged in this case. An underlying rationale of the Royal Globe limitation is to protect the insured from being prejudiced by a jury’s inflated determination of the amount of general damages upon the jury’s learning that the defendant has insurance. Where, as here, the maximum damages that could have been obtained in an action against the insureds was limited to the decedent’s specials, that rationale does not apply.
*970I would reverse the judgment against Phyllis Williams as representative of the estate of Jackson Williams.
Appellant’s petition for a hearing by the Supreme Court was denied August 22, 1984. Bird, C. J., was of the opinion that the petition should be granted.