Court Opinion

ID: 9561393
Source: CourtListenerOpinion
Date Created: 2023-08-21 18:09:21.85272+00
Date Added: 2024-06-11T09:13:46.744631
License: Public Domain

KENNARD, J.,Dissenting.
When, as here, liability and damages are not in dispute, may an insurer refuse to pay an insured’s claim for uninsured motorist benefits until there has been a determination of the insured’s separate claim in a workers’ compensation proceeding arising from the same accident? The majority holds that because the insured failed to fully comply with certain statutory procedures relating to arbitration, and because the insurer would not be entitled to a lien against the insured’s workers’ compensation recovery, the insurer had no duty to pay the insured’s claim until the workers’ compensation proceeding concluded eight and one-half years after the injury to the insured.
I disagree. The insured was not required to comply with the statutory arbitration procedure, because the statute applies only when there is a dispute between the insured and the insurer as to the liability of the uninsured motorist or the amount of damages the insured is entitled to recover from the uninsured motorist. There was no such dispute in this case. The majority penalizes the insured for supposed noncompliance with an inapplicable statute. Moreover, the fact that the insurer is not entitled to a lien against the insured’s eventual workers’ compensation recovery is irrelevant. The insurer’s interests are amply protected by its right of action to recover any excess proceeds; the absence of a statutory alternative to this right of action does not justify the insurer’s disregard of the insured’s rights to prompt payment when liability and damages are reasonably clear.
Background
Plaintiff Alice Casarez Rangel (Rangel) was insured by defendant Inter-insurance Exchange of the Automobile Club of Southern California (Inter-insurance) when she sustained injuries in a hit-and-run accident caused by an uninsured motorist in February 1978. Rangel promptly filed a claim with Interinsurance. She also filed a workers’ compensation claim. Interinsurance did not at any time dispute either the liability of the uninsured motorist who *19injured Rangel, or the extent of Rangel’s damages. But Interinsurance refused to pay any uninsured motorist benefits to Rangel on the basis that her employer’s workers’ compensation insurance carrier was liable for medical expenses.
Six and one-half years after the accident, in September 1984, Interinsurance issued a $15,000 draft payable to Rangel contingent on her execution of a release and agreement for a lien to be filed in the pending workers’ compensation proceeding. The workers’ compensation proceeding concluded in September 1986, eight and one-half years after Rangel’s injury.
In September 1985, Rangel sued Interinsurance for breach of the duty of good faith and fair dealing and for breach of statutory duties under the Unfair Practices Act. In January 1988, Interinsurance made a motion for summary judgment, arguing that “as a matter of law, [it] had no duty to pay plaintiff any uninsured motorist benefits until after her workers’ compensation claim was determined.” The trial court denied the motion; citing Silberg v. California Life Ins. Co. (1974) 11 Cal.3d 452, 459-461 [113 Cal.Rptr. 711, 521 P.2d 1103], the court found Interinsurance’s argument “contrary to existing decisional law."
The case was then transferred to a second judge. Interinsurance next brought a motion for judgment on the pleadings, making the same legal argument as before, and contending that the first judge’s ruling on the motion for summary judgment was erroneous. The second judge granted the motion.
Rangel appealed and the Court of Appeal reversed the trial court’s judgment, holding that the Insurance Code did not authorize the insurer to await the final resolution of its insured’s workers’ compensation claim before carrying out its duty to pay benefits due under the policy.1
*20Discussion
1. The Uninsured Motorist Law
The primary dispute in this case concerns the Uninsured Motorist Law, Insurance Code section 11580.2 et seq. 2 California courts have made clear that section 11580.2 is “a remedial statute enacted for the purpose of forcing insurers to make available coverage by which insureds can protect themselves from the menace of uninsured motorists. Ambiguous language in the statute must be given a construction that advances, not thwarts, its remedial purpose.” (National Auto. & Casualty Ins. Co. v. Frankel (1988) 203 Cal.App.3d 830, 836, fn. 2 [250 Cal.Rptr. 236]; accord, e.g., Hefner v. Farmers Ins. Exchange (1989) 211 Cal.App.3d 1527, 1530-1531 [260 Cal.Rptr. 221]; State Farm Mut. Auto Ins. Co. v. Lykouresis (1977) 72 Cal.App.3d 57, 61 [139 Cal.Rptr. 827].)
The majority concludes that an insurer has no duty to pay uninsured motorist benefits to its insured—even when liability and the extent of damages are not disputed—until there has been a determination of the insured’s workers’ compensation claim. This conclusion is based on the majority’s interpretation of subdivision (f) of section 11580.2.
That subdivision, however, does not justify a delay in payment when there is no dispute that is subject to mandatory arbitration. It provides, in pertinent part: “The policy or an endorsement. . . shall provide that the determination as to whether the insured shall be legally entitled to recover damages, and if so entitled, the amount thereof, shall be made by agreement between the insured and the insurer or, in the event of disagreement, by arbitration. . . . If the insured has or may have rights to benefits . . . under any workers’ compensation law, the arbitrator shall not proceed with the arbitration until the insured’s physical condition is stationary and ratable. In those cases in which the insured claims a permanent disability, the claims shall, unless good cause be shown, be adjudicated by award or settled . . . before the arbitration may proceed. Any demand or petition for arbitration shall contain a declaration . . . stating whether (i) the insured has a workers’ compensation claim; (ii) the claim has proceeded to . . . award or settlement. . . ; and (iii) if not, what reasons amounting to good cause are grounds for the arbitration to proceed immediately.” (§ 11580.2, subd. (f), italics added.)
In a previous decision, this court has stated: “[T]he word ‘damages’ in this section means the damages which the insured is entitled to recover from the *21uninsured motorist,” not damages that the insured may recover from the insurer. (Freeman v. State Farm Mut. Auto. Ins. Co. (1975) 14 Cal.3d 473, 480 [121 Cal.Rptr. 477, 535 P.2d 341].) The statute “requires arbitration of two issues only: (1) whether the insured is entitled to recover against the uninsured motorist and (2) if so, the amount of the damages.” (Ibid.)
In January 1979, Rangel filed a demand for arbitration on a form supplied by the American Arbitration Association; the demand specifically requested that the arbitration commence. The printed form included a “declaration in accordance with section 11580.2[, subdivision] (f) of the California Insurance Code.” Rangel checked the boxes indicating that she had a workers’ compensation claim, and that “[t]he claim has not proceeded to findings and award on all issues reasonably contemplated to be determined in that claim for the following reasons amounting to good cause.” She declared that the good cause was that she had not completed all medical treatment to reach a permanent and stationary condition. The majority reasons that Rangel failed to adequately comply with section 11580.2, subdivision (f) because she gave no reason why the arbitration should commence immediately.3
The problem with this reasoning is that Rangel was not required in any event to comply with the procedures of section 11580.2, subdivision (f). Because there was no disagreement between the parties that the uninsured motorist statute required to be arbitrated, the arbitration provision of section 11580.2 did not apply.
There was no dispute between insurer and insured “whether the insured shall be legally entitled to recover damages” from the uninsured motorist. Nor was there any dispute regarding “the amount thereof.” Because there was no dispute as to either liability of the uninsured motorist or the amount of damages that Rangel was entitled to recover from the uninsured motorist, there was no dispute as to which arbitration was statutorily required. (Freeman v. State Farm Mut. Auto. Ins. Co., supra, 14 Cal.3d at p. 480.) Indeed, although Rangel did file a demand for arbitration of nonstatutory issues, Interinsurance finally paid Rangel the maximum benefit of $15,000 without any arbitration taking place.
*22The majority also makes much of the fact that the policy in this case provides for arbitration of issues other than those required by section 11580.2, subdivision (f). This is correct, but immaterial. The subdivision is concerned solely with the two issues it requires to be arbitrated in the event of a dispute: the uninsured motorist’s liability to the insured, and the amount of damages the insured is entitled to recover from the uninsured motorist. As this court has emphasized, “[cjases involving such arbitration agreements [covering additional issues] must be distinguished from those which are concerned only with the statutory language.” (Freeman v. State Farm Mut. Auto. Ins. Co., supra, 14 Cal.3d at p. 481.) Section 11580.2, subdivision (f) simply does not implicate other issues that may or may not be arbitrable under separate policy provisions.
The majority attempts to avoid the Legislature’s limits on section 11580.2, subdivision (f), asserting that “[e]ven when the policy expands the scope of arbitration beyond the minimum statutory requirements, the provisions of section 11580.2 continue to apply,” and citing Freeman v. State Farm Mut. Auto Ins. Co., supra, 14 Cal.3d 473 in support of this assertion. But the majority’s assertion does not withstand analysis. The one-year statute of limitations of section 11580.2, subdivision (i) that the court found applicable to nonstatutory arbitrations in Freeman applied to any “cause of action . . . under any policy or endorsement provision . . .”, regardless whether the cause of action arose on statutory or nonstatutory grounds. Subdivision (i) is on its face broader than subdivision (f), which does not include nonstatutory arbitrations within its ambit.
Nor does Fisher v. State Farm Mut. Auto. Ins. Co. (1966) 243 Cal.App.2d 749 [52 Cal.Rptr. 721] support the majority’s view. That case merely held that when the parties to an uninsured motorist insurance contract have agreed to arbitrate additional issues beyond those section 11580.2, subdivision (f) requires to be arbitrated, the contractual arbitration clause should be enforced. But that proposition is not at issue here. The question is not whether Rangel and Interinsurance were required to arbitrate a dispute made arbitrable by the contract; they were. The question is whether their contractual dispute was subject to the requirement of section 11580.2, subdivision (f) that the insured set forth “what reasons amounting to good cause are grounds for the arbitration to proceed immediately.”
Accordingly, even if Rangel had failed to file a demand under section 11580.2, subdivision (f), it would be unjust to penalize her for this. To hold otherwise, as the majority does, expands the coverage of the subdivision beyond what the Legislature intended, and allows a delay in payment when liability and damages are clear, resulting in a construction that thwarts the remedial purpose of the statute.
*23Anomalously, the majority’s approach gives insureds whose claims for uninsured motorist benefits are disputed greater rights to speedy recovery than those insureds whose claims are undisputed. Under the statute, when there is a dispute between the insured and insurer regarding the liability of the uninsured motorist, the insured may demand that the arbitration proceed in the absence of a determination of workers’ compensation benefits. (§ 11580.2, subd. (f).) But when there is no arbitrable controversy between insurer and insured, under the majority’s approach the insured may not recover uninsured motorist benefits until after the final resolution of the workers’ compensation proceeding. This result, in my view, does not make sense.
The majority also claims support for its conclusion in the language of subdivision (h) of section 11580.2. That subdivision provides, in pertinent part: “An insured entitled to recovery under the uninsured motorist endorsement or coverage shall be reimbursed . . . without being required to sign any release or waiver of rights to which he or she may be entitled under any other insurance coverage applicable; . . . Any loss payable under the terms of the uninsured motorist endorsement or coverage to or for any person may be reduced: [f] (1) By the amount paid and the present value of all amounts payable . . . under any workers’ compensation law . . . .”
But this subdivision does not mean that an insurer has no duty to pay uninsured motorist benefits if a possible future workers’ compensation award could cover the amount paid. The first sentence of subdivision (h) of section 11580.2 provides that the insured “shall be reimbursed” by the insurer and shall not be required to waive any rights under “any other insurance coverage applicable.” This broad language includes workers’ compensation insurance. As for subdivision (h)(1), the cases have held that it is meant to “ 'permit[] the parties to an uninsured motorist insurance policy to contract for a reduction of the loss payable’ ” by the amount paid and the present value of amounts payable under workers’ compensation. (Interinsurance Exchange v. Marquez (1981) 116 Cal.App.3d 652, 656-657 [172 Cal.Rptr. 263]; Coltherd v. Workers’ Comp. Appeals Bd. (1990) 225 Cal.App.3d 455, 459 [275 Cal.Rptr. 130]; Waggaman v. Northwestern Security Ins. Co. (1971) 16 Cal.App.3d 571, 579 [94 Cal.Rptr. 170].) It does not give the insurer a unilateral right to withhold payments.
2. The Loss-payable Reduction Clause
In this case, the uninsured motorist provisions of the insurance contract contained a clause stating that “any loss payable to or for any person shall be reduced by the amounts paid and the present value of all amounts payable to *24such person under any worker’s compensation or workmen’s compensation law, exclusive of non-occupational disability benefits.” The language of this clause is similar to that of section 11580.2, subdivision (h)(1). The critical question in this case is what effect this clause in the contract has on the duties of the insurer and the insured when there is no controversy between the parties that is subject to statutorily required arbitration, and the insured’s claim for workers’ compensation benefits has not been resolved.
Interinsurance contends that its contractual duty to pay benefits cannot mature until the amounts paid and payable under the insured’s workers’ compensation claim have been determined. Because such amounts had not been determined when Interinsurance paid Rangel’s claim, Interinsurance contends that it breached no duty to Rangel. Careful examination, however, shows that this argument is unmeritorious.
Waggaman v. Northwestern Security Ins. Co., supra, 16 Cal.App.3d 571, is instructive. There, the court considered the meaning of a loss-payable reduction clause under section 11580.2, subdivision (h)(1) in a case in which the insurer contended that an arbitrator had erroneously refused to deduct the present value of benefits that had not yet been determined in the insured’s workers’ compensation proceeding. The language in the policy at issue was in substance identical to the policy language in this case. It provided: “ ‘Any loss payable under the terms of the uninsured motorist endorsement or coverage to or for any person shall be reduced: (1) By the amount paid and the present value of all amounts payable to him under any workmen’s compensation law exclusive of non-occupational disability benefits.’ ” (Waggaman, supra, at p. 574, italics omitted.) The Waggaman court held that this clause referred to “ ‘instances where the claimant has already secured an amount pursuant to agreement (compromise and release) or by order (permanent disability rating), but which amount, although fixed and determined, has not yet been paid to the claimant at the time of the arbitration hearing.’ ” (Id. at p. 577, italics added.) The court then confirmed the arbitrator’s award. (Id. at p. 580.)
Nothing in the language of the insurance policies in Waggaman or in this case expressly indicates that the insurer is entitled to delay payment of an undisputed claim for uninsured motorist benefits merely because the insured’s claim for workers’ compensation has not yet been determined. Although Interinsurance does not explicitly say so, in essence it contends that the loss-payable reduction clause in the policy makes determination of the insured’s claim for workers’ compensation benefits an implied condition precedent to the insurer’s duty to pay uninsured motorist benefits.
Should the policy be construed to contain such an implied condition precedent? This question can be resolved under familiar principles of insurance contract interpretation. California courts generally resolve ambiguities *25in insurance contracts in favor of coverage, and construe exceptions and limitations narrowly. (See, e.g., AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 822 [274 Cal.Rptr. 820, 799 P.2d 1253]; Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 807-808 [180 Cal.Rptr. 628, 640 P.2d 764].) Here, Interinsurance asks this court to imply into the contract a provision making the insurer’s duty to pay benefits conditional on resolution of the insured’s workers’ compensation claim. This contention is analytically similar to arguments that exclusionary clauses should be broadly, not narrowly, construed. Yet, “ ‘[a]s we have declared time and again, “any exception to the performance of the basic underlying obligation must be so stated as clearly to apprise the insured of its effect” . . . .’” (Reserve Insurance Co. v. Pisciotta, supra, 30 Cal.3d at p. 808.) Under this rule, a court may not broadly construe a policy exception so as to defeat coverage. By the same token, a court should not imply into a policy a condition precedent that would defeat the insured’s reasonable expectation of a prompt recovery.
Thus, I conclude that when as here the parties have contracted for a reduction of the loss payable, this clause gives the insurer the right to deduct only the amounts received by the insured and the present value of amounts awarded but not yet paid. The insurer has no right to withhold payment on the theory that there might be a workers’ compensation recovery in the future; instead, the insurer must compensate its insured under the policy and seek recovery of the workers’ compensation offset when that amount is ascertained. (Waggaman v. Northwestern Security Ins. Co., supra, 16 Cal.App.3d at pp. 577-578; Coltherd v. Workers’ Comp. Appeals Bd., supra, 225 Cal.App.3d at p. 460, fn. 4.) Consistent with the standard principles of insurance contract interpretation, this court should not imply a contrary condition precedent into an otherwise silent policy.
3. The Insurer’s Remedy
In Silberg v. California Life Ins. Co., supra, 11 Cal.3d 452, this court held that a medical insurer that failed and refused to pay an insured’s claim for hospital benefits on the assertion “that it was entitled to wait until the pending [workers’] compensation proceeding was concluded” had, as a matter of law, breached the duty of good faith and fair dealing. (Id. at p. 461.)
In Silberg, there was “no question” that if the insurer had made payments, it “could have asserted a lien in the [workers’] compensation proceeding to recover the payments it had made and it would have been entitled to payment from the proceeds of the award.” (Silberg v. California Life Ins. Co., supra, 11 Cal.3d at p. 461.) The majority distinguishes Silberg on the basis *26that the insurer in this case had no statutory or other ground to assert a lien against any possible workers’ compensation recovery by Rangel. (Maj. opn., ante, pp. 14, 15.) It reasons that liens against workers’ compensation awards are available only if the Labor Code expressly permits them, and there is no Labor Code provision authorizing a lien by uninsured motorist carriers. (Maj. opn., ante, p. 15.)
This is correct but irrelevant. The fact that an insurer is not entitled to obtain a lien against a workers’ compensation recovery does not mean it has no recourse. When a policy providing uninsured motorist coverage contains a loss-reduction provision authorized by section 11580.2, subdivision (h)(1), and the insurer has paid benefits before determination of the insured’s workers’ compensation claim, the insurer may proceed against the insured who retains any excess amounts that should be offset under the uninsured motorist policy, seeking remedies for breach of contract. As the court explained in Coltherd v. Workers’ Comp. Appeals Bd., supra, 225 Cal.App.3d at page 460, footnote 4, when a policy of insurance contains a loss-reduction provision, the insured’s “retention of, or claim to, any such excess amounts [resulting from a workers’ compensation award] would not be a ‘double recovery,’ but a possible breach of [the insured’s] contractual obligations under the policy, for which [the insurer] can pursue its remedies in a civil action.” From the insurer’s standpoint, this right of action may not be as desirable as a lien, but it is the recourse to which the insurer is entitled.4
4. The Insurer’s Duty
The majority’s preoccupation with the insurer’s remedies against the insured is misguided for another and more fundamental reason. Even if the insurer had no means of recovering uninsured motorist benefits paid to an insured who later receives workers’ compensation (as I have explained, the insurer has a remedy that the majority chooses to ignore), this lack of remedy would not excuse the insurer from its duty to its own insured. For instance, if an insured is injured in an automobile accident completely unconnected with the insured’s employment, the insured will have no workers’ compensation claim. If an uninsured motorist is liable for the injuries, *27and the amount of the insured’s damages are reasonably clear, even the majority would agree, I assume, that the insurer must pay uninsured motorist benefits promptly. The duty to pay would not be impliedly conditioned on whether the insurer can recover from the motorist who caused the accident.
Under the statutory scheme, the insured’s right to payment matures when the insured has been injured by an uninsured motorist and there is no dispute regarding the liability of the motorist and the extent of damages. “The statutory scheme contemplates that once the uninsured motorist coverage comes into play, the injured insured has resort to the full coverage for which he [or she] has paid.” (Kirkley v. State Farm Mut. Ins. Co. (1971) 17 Cal.App.3d 1078, 1082 [95 Cal.Rptr. 427].)
Accordingly, in this case Interinsurance had no right to withhold payments to Rangel when liability and the extent of damages caused by the uninsured motorist were not disputed. Contrary to the majority’s conclusion, section 11580.2 does not give the insurer a unilateral right to withhold benefits pending determination of a workers’ compensation proceeding.
“[A]n insurer holds itself out as a fiduciary.” (Frommoethelydo v. Fire Ins. Exchange (1986) 42 Cal.3d 208, 215 [228 Cal.Rptr. 160, 721 P.2d 41].) When an insurer “ ‘fails to deal fairly and in good faith with its insured by refusing, without proper cause, to compensate its insured for a loss covered by the policy, such conduct may give rise to a cause of action in tort for breach of an implied covenant of good faith and fair dealing.’ ” (Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 920 [148 Cal.Rptr. 389, 582 P.2d 980], quoting Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 574 [108 Cal.Rptr. 480, 510 P.2d 1032].)
Here, Rangel waited six and one-half years for payment of a claim that Interinsurance was not entitled to delay. A delay of this length may cause serious harm to the insured, who has purchased insurance to obtain prompt compensation for covered injuries. The asserted justification—the pendency of workers’ compensation proceedings—provides no excuse for the insurer’s withholding of policy benefits when there is no dispute as to liability or damages. The trial court therefore erred in granting the motion for judgment on the pleadings, and the Court of Appeal properly reversed the trial court’s ruling.
*28I would affirm the judgment of the Court of Appeal.
Mosk, J., concurred.

 This case comes to us after the trial court granted what Interinsurance labeled a motion for judgment on the pleadings. Ordinarily, review of a judgment rendered on a motion for judgment on the pleadings is limited to the face of the pleadings. (See, e.g., Hughes v. Western MacArthur Co. (1987) 192 Cal.App.3d 951, 954-955 [237 Cal.Rptr. 738].) But here, Interinsurance asked the trial court in ruling on its motion for judgment on the pleadings to consider all the evidence and papers it had submitted in connection with its earlier motion for summary judgment. The trial court did so. When a trial court considers matters outside the pleadings in ruling on a motion for judgment on the pleadings, resulting judgments are reviewed as judgments arising from motions for summary judgment. (See, e.g., O’Neil v. General Security Corp. (1992) 4 Cal.App.4th 587, 594, fn. 1 [5 Cal.Rptr.2d 712]; Christian v. County of Los Angeles (1986) 176 Cal.App.3d 466, 468 [222 Cal.Rptr. 76].) It is therefore *20appropriate on review to consider the evidence Interinsurance adduced in support of its motion in the trial court.

All further unlabeled statutory references are to the Insurance Code.

Notably, the printed form supplied to Rangel failed to conform to the statute. Section 11580.2, subdivision (f) requires the insured to state “what reasons amounting to good cause are grounds for the arbitration to proceed immediately.” But the form supplied to Rangel, which on its face purported to be a declaration in compliance with subdivision (f), required the insured to respond to a different inquiry: “The claim has not proceeded to findings and award on all issues reasonably contemplated to be determined in that claim for the following reasons.” Instead of asking why the arbitration should proceed immediately, in conformance with the statute, the form asked why the workers’ compensation proceeding had been delayed. Rangel supplied the information she was requested to supply; any defect in her showing of good cause is attributable to the defects of the form she was required to execute.

Califomia is in the minority of jurisdictions in allowing the insurer even this recourse. Among those jurisdictions that have considered whether an insurer can rely on a clause in an uninsured motorist policy to reduce payments by the amount of other insurance benefits, the majority has found such clauses void or unenforceable. (See 2A Larson, Workmen’s Compensation Law (1992) § 71.23(b), pp. 14-26 to 14-30 and fns. 31-32 [collecting cases].) By holding that an insurer need not pay an uninsured motorist claim until workers’ compensation proceedings have been resolved—even when there is no dispute regarding liability or damages—the majority moves this state’s minority position even farther to the extreme, depriving automobile insurance purchasers of the protection they reasonably anticipate.