Court Opinion

ID: 9723216
Source: CourtListenerOpinion
Date Created: 2023-08-26 10:07:16.743612+00
Date Added: 2024-06-11T13:16:08.029413
License: Public Domain

*703KERRIGAN, J., Concurring and Dissenting.
I am in full accord with the majority decision reversing the judgment notwithstanding the verdict. Similarly, I have no difficulty in concurring with the decision to retry the general damage issue as there may be some question as to the amount of compensatory damages awarded by the jury and that issue could be simply and quickly resolved in the trial forum.
But I strongly disagree with the majority in depriving the insured (plaintiff) of the $200,000 punitive damage award against the insurer (Farmers) and in further depriving the insured of the $3,000 punitive damage award against the claims supervisor (Penasa). Simply stated, the punitive damage awards should be upheld.
The jury impliedly found that the claims manager acted oppressively, maliciously and in bad faith in the handling of plaintiff’s claim. The trial judge also so found. In addition, the majority correctly notes that there is substantial evidence supporting that determination. Notwithstanding the findings and the evidence, the trial judge and the majority rationalize that Farmers failed to authorize or ratify the tort and is therefore not punitively liable. The majority go further and conclude that not even the supervisor can be held punitively responsible.
I cannot argue with the proposition that Farmers did not ratify the supervisor’s tort. Indeed, it would be a startling event if any corporate insurer sanctioned the intentional tort of its agent when the result would be to expose itself to liability for punitive damages. Rather, the crucial question is whether the insurer may be held liable punitively for the tort of oppression, malice or bad faith in the handling of a claim by its claims supervisor. I would hold the insurer liable where the supervisor is acting in a managerial capacity at the time of the commission of the tort.
In a tort action where the defendant has been guilty of oppression, fraud or malice, the plaintiff, in addition to actual damages', may recover punitive damages. (Civ. Code, § 3294.) Generally, however, an employer is not liable in punitive damages for the torts of his agents or employees unless he has authorized the tortious acts. The rationale for the general rule is simply that punitive damages will have no deterrent effect if awarded against one who is not responsible for the tort. (4 Witkin, Summary of Cal. Law (1974) Torts, § 855, p. 3147.) But there are two exceptions to the nonliability rule: (1) where the employer knowingly ratifies the tort after its commission (Davis v. Local Union No. 11, Internat. etc. of Elec. Workers, 16 Cal.App.3d 686, 697 [94 Cal.Rptr. 562]; 4 Witkin, Summary of Cal. Law (1974) Torts, § 856, pp. 3147-3148) or (2) where the tort was committed by an employee or agent acting in a managerial capacity (Lowe *704v. Yolo County etc. Water Co., 157 Cal. 503, 511-513 [108 P. 297]; Toole v. Richardson-Merrell Inc., 251 Cal.App.2d 689, 711-712 [60 Cal.Rptr. 398, 29 A.L.R.3d 988]).
While many jurisdictions extend the employer’s liability in punitive damages to the intentional torts of any employee, the rule in California is that liability without ratification or authorization should be limited to those acting in a managerial capacity. (Kuchta v. Allied Builders Corp., 21 Cal.App.3d 541, 549-550 [98 Cal.Rptr. 588]; Rest., Torts, § 909.)
Penasa was the claims supervisor of Farmers’ Santa Ana claims office. He had broad authority to approve or reject medical and property damage claims. His territory extended over the southern half of Orange County— a major metropolitan area. He reviewed all claims and signed all drafts. In addition, he had the responsibility of assigning the personal injury claims submitted to his office to investigators in the field. In other words, he exercised considerable control over Farmers’ operations and was therefore acting within a “managerial capacity” within the meaning of the Restatement. Consequently, the jury properly determined that Farmers was liable in punitive damages for its supervisor’s tortious acts.
Finally, the majority hold as a matter of law that Penasa may not be held liable in punitive damages for his tortious conduct.1 In doing so, the majority relies primarily on Gruenberg v. Aetna Ins. Co., 9 Cal.3d 566 [108 Cal.Rptr. 480, 510 P.2d 1032]. Without detailing the facts, I would submit that Gruenberg is distinguishable from the case under review for several reasons.
First, the individual defendants in Gruenberg were not permanent, managerial employees of the defendant-carriers. They were independent contractors (adjusters and attorneys) retained by the insurance companies only to investigate and litigate plaintiffs insurance claims. They only had a tenuous relationship with the policy of insurance out of which plaintiff’s tort claim of “bad faith” arose. Since they had no authority to deny the claimant the benefit of his policy, they could in nowise commit the tort of “bad faith.” Here, however, Penasa was a permanent managerial employee of Farmers, with ultimate corporate authority to dispose of Hale’s claim. Penasa’s “contacts” with the insurance policy in question make it clear that he was as much a “party” to this agreement as if his name had appeared on the policy. Thus, he was subject to an implied duty of good faith and fair-dealing, and ought to be held liable for his willful breach of that duty.
*705Second, the extension of the Gruenberg rule protecting independent contractors from punitive damage liability makes little sense in the present context for it would mean that any employee of an insurance company who willfully and in bad faith denies a claimant payment on his policy of insurance would be insulated from the punishment of exemplary damages for his conduct. One’s sense of justice cannot help but be affronted when the application of abstract legal doctrine yields such a result in practice. The Gruenberg court could not possibly have intended to insulate intentional tortfeasors from exemplary liability merely because they happen to work for an insurance carrier.
Third, Gruenberg was a pleading case, following the sustaining of a demurrer. Here, there was a trial on the merits and a determination made that the tort was committed, resulting in actual and punitive damages. Penasa should be held individually liable for the amount of the punitive award.
I would uphold the $200,000 punitive damage award against the insurer (Farmers) and I would also sanction the $3,000 punitive damage award against the claims supervisor (Penasa).
A petition for a rehearing was denied November 15, 1974, and the petition of plaintiff and appellant for a hearing by the Supreme Court was denied January 23, 1975. Mosk, J., was of the opinion that the petition should be granted.

I have no quarrel with the decision to reverse the $1,500 punitive damage award against" the claims examiner (Sally Lawrence) inasmuch as there is no substantial evidence that she was acting in a managerial capacity.