HARRY R. HIBBS et al., Plaintiffs and Appellants, v. ALLSTATE INSURANCE COMPANY, Defendant and Appellant.
Trial Court's Ruling
The trial court granted Allstate's motion for summary adjudication on the causes of action for breach of contract and breach of the covenant of good faith and fair dealing. It denied Allstate's motion for summary adjudication on the conversion cause of action. The court determined there is a triable issue of fact on whether Jessica authorized the repairs. The Hibbs then dismissed their conversion cause of action with prejudice. The trial court ruled against Allstate on its motion for costs pursuant to Code of Civil Procedure section 998.
Both parties appeal.
A party may move for summary adjudication as to one or more causes of action if the party contends the cause of action has no merit. (Code Civ. Proc., § 437c, subd. (f)(1).) The procedure is the same as that of a motion for summary judgment. (Id. at subd. (f)(2).)
Summary judgment is properly granted only if all papers submitted show there is no triable issue as to any material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) The court must draw all reasonable inferences from the evidence set forth in the papers except where such inferences are contradicted by other inferences or evidence that raises a triable issue of fact. (Ibid.) In examining the supporting and opposing papers, the moving party's affidavits or declarations are strictly construed and those of his opponent liberally construed, and doubts as to the propriety of granting the motion should be resolved in favor of the party opposing the motion. (Szadolci v. Holly Park Operating Co. (1993) 14 Cal.App.4th 16, 19.)
The moving party has the initial burden of showing that one or more elements of a cause of action cannot be established. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768.) Where the moving party has carried that burden, the burden shifts to the opposing party to show a triable issue of material fact. (Ibid.) Our review of the trial court's grant of the motion is de novo. (Id. at p. 767.)
The first question is whether the Hibbs authorized repair of their van. The trial court found the question of authorization presents a triable issue of fact.
Business and Professions Code section 9884.9,1 subdivision (a) provides in part: “The automotive repair dealer shall give to the customer a written estimated price for labor and parts necessary for a specific job. No work shall be done and no charges shall accrue before authorization to proceed is obtained from the customer.” Subdivision (c) of the section provides: “In addition to subdivision[ ] (a) ․, an automotive repair dealer, when doing auto body or collision repairs, shall provide an itemized written estimate for all parts and labor to the customer. The estimate shall describe labor and parts separately and shall identify each part, indicating whether the replacement part is new, used, rebuilt, or reconditioned. Each crash part shall be identified on the written estimate and the written estimate shall indicate whether the crash part is an original equipment manufacturer crash part or a nonoriginal equipment manufacturer aftermarket crash part.”
A dealer who fails to comply with section 9884.9 may not recover under any theory. (See Donaldson v. Abot (1987) 194 Cal.App.3d 817, 820.)
Allstate relies on the form Jessica signed at Body Tech. The form contains both a tear down authorization and a repair authorization signed by Jessica. Both authorizations bear the date April 14, 2004. Jessica and Koch each believed Jessica was only authorizing a tear down.
It is undisputed that a tear down was necessary before an accurate estimate of repair costs could be made. Koch's affidavit states he called Jessica and orally went over the estimate line-by-line on April 15, 2004. Thus it appears an itemized estimate was not available to Jessica until the day after she signed the authorization to repair. Any repair authorization obtained prior to an itemized estimate would be void because it would not comply with section 9884.9. Moreover, Koch declared that he went over the estimate with Jessica in a telephone call and got her oral approval. Section 9884.9, subdivision (c) requires an itemized written estimate prior to approval. An oral review of the estimate with a customer over the telephone does not satisfy the statute. Thus there is a triable issue of fact on the question whether the Hibbs authorized the repairs.
Allstate argues that by submitting a claim under the policy, the Hibbs impliedly authorized it to proceed with repairs. Allstate cites no authority in support of its argument. The Hibbs submitted a claim under the policy in the expectation that the van would be declared a total loss. That Allstate elected to repair instead, did not give it the power to proceed with the repairs without the Hibbs's consent. The Hibbs owned the van, not Allstate.
The Hibbs contend the trial court erred in its determination there is no triable issue of fact on whether they were entitled to the cost of repairs.
Allstate's insurance policy states in part: “Allstate will pay for the loss in money, or may repair or replace the damaged ․ property at our option.”
Allstate takes the position that once it has elected to repair, the insured's refusal to authorize repairs relieves it of its obligation under the policy. The Hibbs argue they have a right to be paid the cost of repairs if they so elect.
The parties cite no California case on point, and we have found none. There will be one now. Cases from other jurisdictions on this issue are instructive.
In Beals v. Home Insurance Company (1867) 36 N.Y. 522, an insurance policy on a building gave the insurer the option to replace loss or damaged property or to repair the building. The insurer opted to repair but the insured refused to allow the repairs. The appellate court held that the insured could not recover the cost of repairs. It reasoned that when the insurer opted to repair, its insurance policy was converted to a binding contract. Under such a contract, the insured could not recover where he refuses to allow the erection of the building. (Id. at p. 526.)
Other more modern cases reach a different result. In Williams v. Farm Bureau Mutual Insurance Company of Missouri (1957) 299 S.W.2d 587, the insurer exercised its option to repair a damaged automobile. The insured refused to allow the repairs. Instead, she demanded payment of the cost. The court recognized that a rule relieving the insurer of liability where the insured refuses to allow repairs might be supported by “cold logic.” (Id. at p. 590.) Th court stated, however, that such a rule “would neither comport with our conception of substantial justice nor be consonant with the primary purpose of all insurance coverage, i.e., indemnification against loss.” (Ibid.) The court allowed the insured to recover the amount of the lower repair bid.
Under similar circumstances, the court in Home Mutual Insurance Company of Iowa v. Stewart (1940) 105 Colo. 516, stated “[t]hat plaintiff should be penalized by a refusal to grant him any reparation under the policy, for which he paid a premium, would not meet with our conception of justice.” (Id. at p. 522.)
In most cases an insurer should have no objection to paying its insured the cost of repair. But nothing in Allstate's policy gives the insured such a right. Even Williams concedes that relieving the insurer of its obligation under the policy is supported by “cold logic.” (Williams v. Farm Bureau Mut. Ins. Co. of Mo., supra, 299 S.W.2d at p. 590.) The policy clearly and unequivocally provides that Allstate has the option to repair. Where, as here, Allstate chooses the option to repair, the Hibbs's prevention of Allstate's performance excuses Allstate's obligation under the policy. (See Civ.Code § 1511(1).)
Unlike the facts in the out-of-state cases we cited Allstate, the insurer, has not withheld a benefit due the insured. Allstate performed as it was required under its policy. Moreover, potential problems, we hesitate to conjure up here, could arise should Allstate pay to the Hibbs the cost of the repairs, and return to them what could be an unsafe vehicle.
The Hibbs point to evidence that Baker told Harry he had the “unconditional right” to the repair costs instead of the repaired van. They do not contest that an adjuster lacks the authority to change the terms of the policy. (See Chatton v. National Union Fire Ins. Co. (1992) 10 Cal.App.4th 846, 865 [admission by insurer's employees does not establish liability under an insurance policy].) They argue, however, that as Allstate's adjuster, Baker had the authority to settle their claims by choosing to pay them instead of having the van repaired. (Citing Seigel v. Ohio Millers' Mut. Fire Ins. Co. (8th Cir.1929) 29 F.2d 988, 992.)
But telling Harry he had the “unconditional right” to payment, refers to rights under the policy, not simply a choice among options for settling his claim. Moreover, the Hibbs cite no California authority that an adjuster is irrevocably bound by her choice of methods for settling the claim absent a showing of estoppel.
The Hibbs contend the trial court erred in granting Allstate summary adjudication on the bad faith cause of action.
An insurer breaches the implied covenant of good faith and fair dealing when it unreasonably withholds policy benefits. (Jordan v. Allstate Ins. Co. (2007) 148 Cal.App.4th 1062, 1072.) The performance of an act specifically authorized by the policy cannot, as a matter of law, constitute bad faith. (New Hampshire Ins. v. Rideout Roofing Co. (1998) 68 Cal.App.4th 495, 504-505.)
The Hibbs argue Allstate acted in bad faith when it authorized the repairs. But they cite no authority that authorizing the repairs constitutes bad faith. Any authorization by Allstate would be subject to further authorization by the Hibbs under section 9884.9. That Body Tech may have proceeded without the Hibbs's authorization, does not show Allstate's bad faith.
The Hibbs argue Allstate breached the covenant of good faith by ignoring their requests for a mechanical and safety inspection to ensure the van was safe. But the Hibbs point to nothing in the policy that obligated Allstate to conduct the expert inspections they were demanding. Nor can they show that the van was not in fact, repaired to a safe condition. It is undisputed that Allstate was willing to guarantee the repairs.
The Hibbs argue Allstate failed to respond to Harry's letter of May 17, 2005, in which he made a settlement demand. But the demand was for the full market value of the van. Allstate was under no obligation to pay the full market value. (See Ray v. Farmers Ins. Exchange (1988) 200 Cal.App.3d 1411, 1417-1418.)
Finally, there is however a triable issue of fact concerning Allstate's good faith in prosecuting its subrogation claim. Assuming the Hibbs did not consent to the repairs, Body Tech was not due any compensation. (See Donaldson v. Abot, supra, 194 Cal.App.3d at p. 820.) Thus payment Allstate made to Body Tech was voluntary. To have a right to subrogation, the subrogee must not have acted as a volunteer. (American Contractors Indemn. Co. v. Saladino (2004) 115 Cal.App.4th 1262, 1268.) Thus Allstate had no right to subrogation. Prior to settling with Brooks's insurer, Allstate knew the Hibbs were claiming they had not consented to the repairs, and had warned Allstate not to proceed with subrogation.
Allstate claims the Hibbs were not prejudiced by its subrogation action. It professes not to know why the Hibbs did not sue Brooks for all their losses, including any stigma damages. But Allstate concedes that Brooks would have a set-off for any amounts paid to Allstate in subrogation. However one analyzes it, Brooks's right to a set-off would be a detriment to the Hibbs in any cause of action they might bring against Brooks. The Hibbs were prejudiced by Allstate's subrogation action. There is a triable issue of fact on whether Allstate breached its covenant of good faith.
We reverse and remand for trial on the issue of bad faith. We need not consider Allstate's appeal of the trial court's ruling under Code of Civil Procedure section 998. Costs on appeal are awarded to the Hibbs.
CERTIFIED FOR PUBLICATION.
Ken W. Riley, Judge
Steven E. Hintz, JudgeSuperior Court County of Ventura
C. William Kircher, Jr., for Plaintiffs and Appellants Harry R. Hibbs and Jessica J. Hibbs.
Lewis Brisbois Bisgaard & Smith LLP, Richard B. Wolf, Gerard A. Lafond, Jr., for Defendant and Appellant Allstate Insurance Company.
FN1. All statutory references to section 9884.9 are to the Business and Professions Code.. FN1. All statutory references to section 9884.9 are to the Business and Professions Code.