Court Opinion

ID: 5664429
Source: CourtListenerOpinion
Date Created: 2022-01-12 03:36:33.92753+00
Date Added: 2024-06-11T08:38:15.369928
License: Public Domain

HASTINGS, J.,
I dissent.
The facts are uncontradicted and accurately reflected in the majority opinion. I briefly summarize the pertinent facts.
Appellant, Arch Woodliff (Woodliff), seeks to collect from the California Insurance Guarantee Association (CIGA) the monetary value of a judgment he obtained against his insurance carrier, LMI Insurance Company (LMI). In 1995, LMI refused a tender of defense by Woodliff on a claim admittedly *1709covered by a policy of insurance issued by LMI to Woodliff. As a result, Woodliff personally incurred attorney fees and costs to defend the claim. Woodliff sued LMI and in 1999 obtained the judgment for breach of contract in the amount of $47,386 plus interest, which represents the attorney fees and costs incurred by Woodliff as a result of LMI’s failure to defend. In 2000, before satisfying the judgment, LMI declared insolvency and a liquidator was appointed.
Woodliff tendered his judgment to CIGA which denied the tender. It contended that the attorney fees and costs reflected in the judgment were incurred prior to insolvency of LMI and were thus not “covered claims” as defined within Insurance Code section 1063.2.1 Woodliff filed suit against CIGA seeking declaratory relief that the judgment did qualify as a “covered claim” within section 1063.2. The parties filed cross-motions for summary judgment and the trial court agreed with CIGA and issued a ruling explaining its decision as set out in the majority opinion. I agree with the ruling by the trial court.
As pertinent, section 1063.2 states:
“(a) The association shall pay and discharge covered claims and in connection therewith pay for or furnish loss adjustment services and defenses of claimants when required by policy provisions.... H] ... [][]
“(h) ‘Covered claims’ shall not include any loss adjustment expenses, including adjustment fees and expenses, attorney fees and expenses, court costs, interest, and bond premiums, incurred prior to the appointment of a liquidator.”
The majority opinion focuses solely on the phrase “loss adjustment expense” from this section. Citing authorities interpreting the term,2 the majority concludes that the phrase “loss adjustment expense” can only mean attorney fees and costs incurred by a carrier that accepts its duty to defend, not attorney fees and costs incurred by the insured when the carrier refuses to defend. Based on this interpretation, the majority concludes that section 1063.2 does not apply to this claim. This is a much too narrow reading of section 1063.2.
First, I have no doubt that the term “loss adjustment expense” is generally understood to refer to attorney fees and expenses incurred by the carrier in either defending or settling claims against the insured. But I do not agree with *1710the conclusion that the phrase can refer only to attorney fees and costs when they are incurred by the carrier. Here, the insured incurred the “loss adjustment expense” LMI would have incurred had it not refused tender of the defense. Except for the authorities cited for the general proposition of what that phrase references, the majority cites no authority to support the distinction drawn between expenses incurred by the carrier and expenses incurred by the insured when the carrier refuses a tender of defense.
Based on its interpretation of the phrase “loss adjustment expense,” the majority concludes that section 1063.2 has no application to this case. But it is section 1063.2, subdivision (a), which appellant cites and relies on for the proposition that CIGA has a duty to pay the judgment. I agree with appellant that section 1063.2 is the authority that controls the outcome of this case. I must admit I am at a loss to understand why the majority concludes that section 1063.2 has no application to the case.
The obligations of CIGA are limited to those legislatively mandated under sections 1063.1and 1063.2. (Industrial Indemnity Co. v. Workers’ Comp. Appeals Bd. (1997) 60 Cal.App.4th 548, 556-557 [70 Cal.Rptr.2d 295].) “CIGA is authorized only to ‘pay and discharge covered claims.’ (Ins. Code, § 1063.2, subd. (a).) It is only ‘in connection therewith’ that CIGA is to ‘pay for or furnish loss adjustment services and defenses of claimants when required by policy provisions ....’ (Ibid., italics added.)” (Saylin v. California Ins. Guarantee Assn. (1986) 179 Cal.App.3d 256, 262 [224 Cal.Rptr. 493].)
CIGA admits that the underlying claim made by Woodliff, upon which he demanded a defense from LMI, was a “covered claim” under the provisions of the LMI policy and within the meaning of section 1063.1. The majority recognizes this concession and recognizes that the claim meets the definition of “covered claim” within section 1063.1. But it is section 1063.2 that delineates the duties CIGA must provide when a claim falls within section 1063.1. (Saylin v. California Ins. Guarantee Assn., supra, 179 Cal.App.3d at p. 262.) The duties include payment of “loss adjustment expenses” in connection with “covered claims,” but excludes from the definition of “covered claim” “loss adjustment expenses, including adjustment fees and expenses ... incurred prior to the appointment of a liquidator.” (§ 1063.2, subd. (h), italics added.) The judgment here was rendered prior to the date the liquidator was appointed and reflects attorney fees and costs incurred prior to that date.
The majority discusses legislative history in connection with its opinion. To me, section 1063.2 is unambiguous and does not require resort to the rules of legislative interpretation. But assuming for sake of argument that the majority is correct that the reference to “loss adjustment expenses” in section 1063.2, *1711subdivision (h) should be interpreted to mean expenses incurred only by the carrier, the majority ignores the remaining language of subdivision (h). After the phrase “loss adjustment expenses, including adjustment fees and expenses,” subdivision (h) lists “attorney fees and expenses [and] court costs.”
“We begin with the fundamental rule that a court ‘should ascertain the intent of the Legislature so as to effectuate the purpose of the law.’ [Citation.] In determining such intent ‘[t]he court turns first to the words themselves for the answer.’ [Citation.] We are required to give effect to statutes ‘according to the usual, ordinary import of the language employed in framing them.’ [Citations.] ‘If possible, significance should be given to every word, phrase, sentence and part of an act in pursuance of the legislative purpose.’ [Citations.] ‘When used in a statute [words] must be construed in context, keeping in mind the nature and obvious purpose of the statute where they appear.’ [Citations.] Moreover, the various parts of a statutory enactment must be harmonized by considering the particular clause or section in the context of the statutory framework as a whole. [Citations.]” (Moyer v. Workmen’s Comp. Appeals Bd. (1973) 10 Cal.3d 222, 230-231 [110 Cal.Rptr. 144, 514 P.2d 1224].)
Reviewing the language of sections 1063.1and 1063.2 together, and in the context of the overall CIGA legislation, the only reasonable conclusion I can draw is that the judgment, reflecting attorney fees, expenses and costs incurred for defense of a covered claim, but prior to liquidation, does not qualify as a covered claim. I would affirm the summary judgment in favor of CIGA.
A petition for a rehearing was denied September 4, 2003, and respondent’s petition for review by the Supreme Court was denied November 12, 2003. Kennard, 1, was of the opinion that the petition should be granted.

 All further references will be to the Insurance Code unless otherwise noted.

 None of the authorities cited interpret the term in connection with the statutory language of section 1063.2.