STONE v. NEW ENGLAND INSURANCE COMPANY

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Court of Appeal, Second District, Division 3, California.

Milton STONE, et al., Plaintiffs, Respondents and Cross–Appellants, v. NEW ENGLAND INSURANCE COMPANY, et al., Defendants, Appellants, and Cross–Respondents.

No. B063103.

Decided: March 30, 1995

Horvitz & Levy, S. Thomas Todd and David S. Ettinger for defendant, appellant and cross-respondent New England Ins. Co., Kroll & Anderson and Robert D. Anderson, for defendants, appellants and cross-respondents George Mouro and GMA Ins. Adjusters. Dale F. Myers for plaintiffs, respondents and cross-appellants.

This appeal arises from a dispute between an insurer and its insured and involves claims of breach of the implied covenant of good faith, statutory bad faith and intentional infliction of emotional distress.   The defendants New England Insurance Company (“New England”) and George Mouro and GMA Insurance Adjusters (collectively, “Mouro”) appeal from the partial new trial order issued by the trial court following a judgment entered against them upon a jury verdict in a total amount exceeding four million dollars.   The plaintiffs, Tru–Toon Products, Inc. (“Tru–Toon”) and Milton Stone (“Stone”) cross-appeal from the order granting the new trial.

For the reasons described below, we conclude that:  (1) a new trial order was proper but was prejudicially limited to damages only, (2) the defendant Mouro, as an independent insurance agent, cannot be held liable for common law or statutory bad faith, (3) the evidence was not insufficient, as a matter of law, to support a punitive damage claim against the defendants but (4) the instructions with respect to punitive damages were prejudicially erroneous.   We therefore reverse and remand with directions for a new trial on all remaining issues.

FACTUAL AND PROCEDURAL BACKGROUND 1

On March 13, 1986, Stone was the owner and president of Tru–Toon, a financially troubled furniture manufacturing company.2  Tru–Toon was insured by New England (a non-admitted carrier which sold policies in California through a surplus lines broker) under an all risk policy providing a total coverage of $1,435,000 for physical loss or damage to the real and personal property located at Tru–Toon's facility at 5732 Duarte Street, Los Angeles, California.   Coverage was also provided for business interruption and inventory loss.   The limits of liability on these coverages (with a $2,500 deductible on all relevant risks) was:  (1) $675,000 for loss or damage to the real property (100% coinsurance percentage), (2) $550,000 for loss or damage to personal property (90% coinsurance percentage), (3) $160,000 for business interruption (no coinsurance percentage) and (4) $50,000 cost of inventory (no coinsurance percentage).3

On March 13, 1986, a van parked next to Tru–Toon's facility was set on fire.   The fire was extinguished by the fire department.   Four days later, on March 17, the same van was again set on fire and again the fire department responded and extinguished the blaze.   The van had been parked next to a vent which opened into Tru–Toon's building.   Tru–Toon's facility sustained damage as a result of these fire fighting activities including interior water damage;  in addition, rain which came in through holes in the roof caused by embers from the first fire also contributed to the damage.4

As a result of these fires, Tru–Toon claimed damage to its building, to its inventory (primarily wood used to make its furniture products) and to its business from disruption of production.   Tru–Toon promptly reported its loss to the surplus lines broker which had sold the New England policy to Tru–Toon (Cannon Insurance Service, Beverly Hills, California).5  Cannon, in turn, mailed a formal notice of the claim to New England on March 18, 1986, one day after the second fire.   New England received telephone notice of the claim on Friday, March 21, 1986, and the mailed notice on the following Monday.

New England had no California offices and it therefore hired Mouro, a local independent adjuster, to handle the claim.   He was assigned on March 25, 1986 and thereafter Tru–Toon and its agents dealt exclusively with him, not New England.   On the same day that he was assigned, Mouro contacted Stone by telephone to introduce himself as the adjuster assigned to the matter and to make an appointment to inspect the damage at Tru–Toon.

During that telephone conversation, Stone explained to Mouro that Tru–Toon's wood inventory had sustained substantial water damage and could not be used to build furniture, thus precluding Tru–Toon from filling customer orders.   He stated that numerous furniture orders were cancelled because Tru–Toon's competitors were telling its customers that Tru–Toon would be shipping products made from damaged materials.   At this time, Stone made an oral request on behalf of Tru–Toon for a $50,000 advance on policy benefits in order to buy new inventory.   Mouro stated that he would forward the request to New England.

Stone also testified that Mouro told him that he had “done his homework,” had checked into who Stone was and expressed doubt as to whether Tru–Toon's inventory had sustained any damage.   Mouro also stated to him that he “knew what your kind of people are like.”   Stone, who is Jewish, interpreted these comments as anti-Semitic and as a condemnation of him personally.   Following this telephone discussion, Stone, on the advice of his personal insurance broker, hired a public adjuster to assist Tru–Toon in the settlement of its claim.

Mouro, after conducting an inspection of the Tru–Toon's facility on March 26, 1986, claimed he could not see any damage.   He conveyed this impression to New England and the requested $50,000 advance was not made.   However, two weeks later, Mouro had an expert examine the inventory.   That expert confirmed that water damage had in fact occurred even though it might not be readily visible.   Based on this information, Mouro advised New England that at least $25,000 in damages had been sustained and recommended an advance to Tru–Toon in that amount.   As a result, a check for $25,000 was delivered to Tru–Toon on April 23, 1986, about 40 days after the first fire damage was sustained and nearly 30 days after Tru–Toon's initial request.

Tru–Toon claimed at trial that New England should have made this advance sooner and for the full $50,000.   New England's failure to do so, it is claimed, resulted in lost business which caused damage to Tru–Toon.   Stone testified that in the 40 days from the date of the first fire until the receipt of the $25,000 advance, Tru–Toon's financial condition “started to worsen,” apparently the result of cancelled orders.   He also testified that if the full $50,000 advance had been made, Tru–Toon would have suffered no drop in sales.6

As a result of the fires, Tru–Toon asserted three different damage claims:  (1) water damage to the walls and ceilings of its building, (2) inventory damage and (3) loss of income due to business interruption.   Tru–Toon contended New England undervalued these damages and unreasonably delayed the handling of the claim.   New England, on the other hand, claimed Tru–Toon's demand was too high.   The disputes were resolved eight months after the loss by an appraisal arbitration proceeding that determined the actual values of these claims to be in between the values assigned by New England and Tru–Toon.7  The public adjuster who had been hired to help Tru–Toon press its claims testified that Tru–Toon's and New England's disagreement was “a classic example of one which is too high and one in my opinion is too low.”   We discuss each of these briefly in order to provide context for the bad faith and punitive damage claims ultimately asserted by Tru–Toon.

1. Damage to Tru–Toon's Building

The walls and ceiling of Tru–Toon's building were made of plywood and did sustain some water damage.   New England, on Mouro's recommendation, viewed the damage as simply water stains which could be corrected by repainting at an estimated cost of $2000.   Tru–Toon insisted that the plywood had to be replaced at a cost of $9,000.   Unlike the other two claims of more substantial damage discussed below, this dispute was not resolved at an appraisal arbitration, but was submitted to the jury at trial.   Stone testified that there was substantial damage to the walls and ceilings including dry rot.   The jury ultimately accepted Tru–Toon's evidence and awarded $9,050.20 on this claim.   Tru–Toon's expert cited New England's failure to submit this claim to the second appraisal arbitration as an additional act evidencing insurer bad faith.8

2. Inventory Damage

The inventory claim arose from the loss which Tru–Toon sustained as a result of water damage to its raw wood inventory.   In early May, 1986, a salvage company prepared an inventory of the damaged wood together with prices therefore.   The total damages reflected in that inventory were approximately $95,000.   Tru–Toon accepted this valuation and submitted a proof of loss which included that amount.   Thereafter, New England retained an accountant to assess the value of the damaged inventory and he came to the conclusion that the amount of the loss was only $15,000.   Based on his report, New England offered to pay Tru–Toon approximately $11,000.9  After Tru–Toon rejected this offer and the matter subsequently went to arbitration, the arbitrators assessed the loss of inventory value at $45,000.

3. Business Interruption Loss

On or about May 9, 1986, Tru–Toon asserted a business interruption loss claim of $160,000.   To support the claim, it submitted financial statements and sales records.   After its accountants examined these records, New England came to a drastically different conclusion about the value of the claimed loss and offered the sum of approximately $8,000.10  The difference appears to have arisen primarily due to the valuation method applied.   Tru–Toon based its claim on its past sales history, while New England's offer was based solely on an examination of available orders for Tru–Toon's products that were cancelled after the fires.   While there was testimony that, in ordinary circumstances, this might be the most accurate method of evaluation of such a loss, Tru–Toon did not have records for all of its cancelled orders during this period.   New England was aware of this fact at the time of its offer, but made no allowance for it.

This dispute was also resolved in the November 1986 arbitration hearing.   The arbitrators determined that a proper valuation of Tru–Toon's business interruption claim was in the sum of $45,000.11  Both Tru–Toon and New England acknowledged that they were bound by the appraisal awards made by the arbitration panel.   After the awards were made, New England promptly paid the designated amounts to Tru–Toon.

By this time, however, Tru–Toon's business had collapsed and, within six months after these payments, it went bankrupt.   It is Tru–Toon's position in this action that its financial difficulties and ultimate demise were caused by New England's unreasonable claims handling practices.   New England, of course, argues that the delay in the payment of the relatively modest sum of $90,000 awarded by the arbitrators had no significant impact on a company already in serious financial trouble (see fn. 2, ante ).12  In any event, New England claims the delay in the making of such payments was caused by a legitimate dispute as to the proper valuation of claimed losses.   The policy-prescribed procedure for resolving that dispute was followed and that necessarily took some period of time to conclude.

In July of 1987, Tru–Toon and Stone, as plaintiffs, filed this action in which it was alleged that New England had breached the policy and both New England and Mouro had engaged in bad faith claims settlement practices.   They sought both compensatory and punitive damages.   By the time various motion matters were concluded, their operative pleading was the second amended complaint.   It was denominated as a complaint for “Tortious Breach of Insurance Contract.”   It contained four alleged causes of action:  (1) breach of the duty of good faith and fair dealing [common law bad faith], (2) breach of fiduciary duties, (3) breach of statutory duties (Ins.Code, § 790.03, subd. (h)) [statutory bad faith] and (4) intentional infliction of emotional distress.   Prior to the time of trial, count two was dismissed and the case ultimately went to the jury on the remaining three causes of action.

At trial, the parties presented contradictory evidence as to each of the disputed claims handling activities of New England.   Essentially, there were fourteen specific alleged acts of misconduct.   Tru–Toon asserted 13 that New England unreasonably and without proper cause:  (1) delayed (from March 13 to March 25, 1986) in assigning an adjuster (Mouro) to handle Tru–Toon's claims, (2) failed to check into Mouro's background and experience before assigning him to the case, and failed to investigate Tru–Toon's subsequent objection to his assignment after it was made, (3) delayed (for nearly one month) in providing Tru–Toon an advance benefit payment;  (4) failed to pay a sufficient advance (i.e., $25,000 instead of the requested $50,000), (5) failed to make a prompt and timely investigation of Tru–Toon's inventory claim, (6) submitted an offer on the inventory claim which was too low in the circumstances, (7) failed to make a prompt and timely investigation of the business interruption claim, (8) limited its offer on the business interruption claim to available records of cancelled orders and ignored past sales history, (9) applied a 25% coinsurance penalty to the business interruption claim when no such penalty was required under the policy, (10) calculated the coinsurance penalty applicable to the inventory loss by use of replacement cost value rather than the actual cost value to which Tru–Toon, at its option, was entitled, thus resulting in a higher than justified coinsurance penalty, (11) knew about, but ignored, the $200,000 overstatement of the personal property value in Tru–Toon's financial records when determining the size of the coinsurance penalty applicable to the inventory claim (recognition of a prior theft loss of $200,000 would have resulted in a lower total property value and thus in a lower applicable penalty), (12) delayed removal of damaged wood from Tru–Toon's facility, thus interfering with its operations and ongoing business, (13) failed to pay for the replacement of the damaged plywood in Tru–Toon's ceilings and walls and (14) failed to submit the dispute about the damaged plywood to an appraisal arbitration.

For each of these charges, New England presented evidence which purported to explain its position or actions.   Similarly, the expert witnesses presented by each party disagreed as to whether New England's actions, or any of them, amounted to bad faith.14

This was also true of Stone's claim against Mouro for intentional infliction of emotional distress.   That claim was based upon (1) the worry and anxiety sustained by Stone due to Tru–Toon's financial troubles after the fires, as well as the humiliation of losing his business and having to go to work as an employee of someone else, and (2) the anti-Semitic remarks and conduct which Stone testified that Mouro made and engaged in during the period when the claim was being adjusted.   In addition to the initial remarks which Mouro allegedly made to Stone in the telephone conversation on March 25, 1986 (which we have already described), Stone also testified as to other, more serious statements.   Two months later, in May of 1986, he overheard Mouro say to another (unnamed) person, “don't worry about the Jew boy.   You know, I'll take care of that Kike.”   Also, Stone testified that Mouro stated to him during one of his visits to Tru–Toon that, “with what is happening here you might win the battle.   I will win the war.   I will put you out of business.”

This evidence, however, was directed solely at Mouro's actions and statements.   There was no evidence that New England was ever told about these accusations until long after the claim handling activities were finished.   Moreover, there was no evidence New England ever had any knowledge or should have known that Mouro was capable of the behavior of which he was accused.   Indeed, the evidence was to the contrary.   All witnesses who testified on the subject vouched for Mouro's good reputation and character and lack of past accusations of bigotry.

Finally, according to the trial judge, as reflected in his minute order granting a new trial, there was prejudicial misconduct by both counsel, although the conduct of Dale Myers, counsel for Tru–Toon and Stone, “was far more extensive and pervasive” than that of counsel for the defendants.15  The court noted that at one point counsel's misconduct was so palpable that the court specifically invited a mistrial motion from the defendants' counsel, but he declined to make it.   This suggested to the trial court a passive indifference to the outrageous behavior of plaintiffs' attorney which “contributed materially to the atmosphere that permeated the trial.”   Indeed, the court noted, “․ that in 29 years as a trial lawyer and in 4 years on the bench, that [he] has never observed attorney conduct as wretched as that perpetrated in this case.” 16

At the conclusion of the case it was submitted to the jury.   Following instructions, the jury deliberated for four days and then returned a verdict in favor of Tru–Toon and Stone as follows:

1. $9,050.20 in favor of Tru–Toon and against New England for breach of the policy by not paying for the damage to the walls and ceilings of Tru–Toon's facilities;

2. $1,620,000 in favor of Tru–Toon and against New England for the insurer's violation of its duty of good faith and fair dealing;  the jury determined, however, that Tru–Toon did not violate its duty of good faith and fair dealing;

3. $125,000 in favor of Tru–Toon and against New England and Mouro for the violation of their statutory duties under Insurance Code section 790.03 by not adopting and implementing reasonable standards for the prompt investigation and processing of Tru–Toon's claim and by not attempting in good faith to effectuate prompt, fair, and equitable settlement of Tru–Toon's claim;  and

4. $800,000 in favor of Stone and against Mouro for intentional infliction of emotional distress.

The jury also concluded that New England and Mouro were guilty of fraud, malice or oppression.   After further evidence, argument, and instructions, the jury awarded punitive damages in the sum of $2,000,000 against New England and in favor of Tru–Toon;  in addition, Stone was awarded punitive damages in the sum of $10,000 against Mouro.

Judgment was then entered on these verdicts.   Subsequently, the judgment was corrected to reflect that Tru–Toon was entitled to recover from New England the total sum of $1,773,703 in compensatory damages 17 and $2,000,000 in punitive damages;  Stone was entitled to recover from Mouro the total sum of $925,000 in compensatory damages and $10,000 in punitive damages.

New England and Mouro moved for a new trial on several grounds including:  (1) prejudicial misconduct of counsel for the plaintiffs, (2) excessive damages and (3) insufficiency of the evidence to support the verdicts.   After extensive argument, during which the trial judge repeatedly and unsuccessfully asked plaintiff to point to any evidence which even approximately supported the jury's compensatory damage awards, the trial court concluded that such evidence did not exist and a new trial was required.   The court's ruling, in pertinent part, states:

“1. The jury found that plaintiff Tru–Toon suffered compensatory damages of $1,745,000 as the result of the bad faith denial by New England of an insurance claim worth less than $100,000.   There is no evidence to support an award in that amount, and there is no credible evidence to support the contention that the failure to pay the insurance claim was a substantial factor in causing Tru–Toon to go out of business or into bankruptcy.   The uncontroverted evidence shows that Tru–Toon had been consistently losing money and was in serious financial difficulty at the time of the insured loss and there was no evidence to show that such losses were non-recurring.   Such evidence convinces the Court that the amount awarded to Tru–Toon as compensatory damages was excessive and that there is insufficient evidence to support such award.

“2. The jury found that plaintiff Stone suffered compensatory damages of $800,000, as the result of emotional distress intentionally inflicted upon him by defendant Mouro.   Said damages are excessive to the extent that they represent the distress and humiliation suffered as the result of his business failure and the necessity to go to work as an employee.   As stated above the uncontroverted evidence that the business was consistently losing money and that Mr. Stone had to repeatedly invest his private funds in the business to keep it going convinces the Court that defendant Mouro did not cause such business failure or the emotional distress that plaintiff Stone suffered as a result thereof.   There is no basis other than sheer speculation for the Court to ascertain what portion of the $800,000 award was attributable to emotional distress caused by the business failure and what portion was caused by the anti-Semitic remarks and conduct attributed to defendant Mouro․”

However, the trial court, after some hesitancy, finally concluded that the new trial, as to both compensatory and punitive damages, should be limited to a retrial of damage issues only.18

CONTENTIONS OF THE PARTIES

New England and Mouro contend that the trial court properly granted a new trial as there was insufficient evidence to support the damages awarded by the jury;  however, they each argue that the trial court erred in limiting that new trial solely to damages.   They assert two principal reasons for their position:  (1) a partial new trial would be prejudicial to them as it cannot be determined on which of the many claims of bad faith asserted by the plaintiffs the jury based its determination of liability and (2) under Civil Code section 3295, subdivision (d), the “same trier of fact” which finds liability must also be the one to determine punitive damages.

In addition, New England and Mouro both argue that prejudicial instructional errors were committed by the trial court with respect to punitive damages.   Finally, New England contends that, in any event, the evidence was insufficient to justify, as a matter of law, the claim of punitive damages asserted against it.   New England argues that (1) there was no “clear and convincing” evidence of fraud, malice or oppression and (2) it cannot be held liable in punitive damages for the acts of its independent adjuster Mouro who was not a “managing agent.”  (Civ.Code, § 3294, subd. (b).)

Mouro urges three additional points on his own behalf.   He argues that (1) as an independent adjuster, who is not a party to the contract of insurance but merely the independent agent of the insurer, he can have no liability for common law or statutory bad faith, (2) Stone cannot assert a claim for emotional distress arising from economic losses sustained by a corporation in which he is merely a shareholder and (3) Stone cannot base his emotional distress claim on evidence of anti-Semitic remarks since such matters were never pleaded and, in any event, the evidence offered was insufficient to demonstrate the “outrageous conduct” or severe emotional injury necessary to establish a claim for the intentional infliction of emotional distress.19

Tru–Toon and Stone dispute each of these contentions and, by their cross-appeal, argue that the trial court erroneously granted a new trial in that there was no substantial evidence to support the trial court's findings regarding excessive damage awards and, in any event, the trial court failed to comply with the technical requirements of Code of Civil Procedure section 657.   Therefore, they argue, the trial court's limited new trial order should be reversed and the matter remanded with directions to reinstate the judgment.   However, they conceded at oral argument that if this court affirms the order granting a new trial then it should be on all issues, not a partial new trial limited to damages.

DISCUSSION

1. Standard of Review

Plaintiffs attack the new trial order by asserting that the basis therefore is not factually supported.   Such an argument necessarily bears a very heavy burden.  “ ‘On appeal, all presumptions are in favor of the order as against the verdict, and the appellate court will reverse only if a manifest and unmistakable abuse of discretion is shown.  [Citations.]’  [Citations.]”   (Martinides v. Mayer (1989) 208 Cal.App.3d 1185, 1197, 256 Cal.Rptr. 679.)

The Supreme Court has spoken on this question on more than one occasion.  “The determination of a motion for a new trial rests so completely within the court's discretion that its action will not be disturbed unless a manifest and unmistakable abuse of discretion clearly appears.   This is particularly true when the discretion is exercised in favor of awarding a new trial, for this action does not finally dispose of the matter.   So long as a reasonable or even fairly debatable justification under the law is shown for the order granting the new trial, the order will not be set aside.  [Citations.]”   (Jiminez v. Sears, Roebuck & Co. (1971) 4 Cal.3d 379, 387, 93 Cal.Rptr. 769, 482 P.2d 681.)

 The Supreme Court has further stated that, “when a trial court grants a new trial on the issue of excessive damages, ․ the presumption of correctness normally accorded on appeal to the jury's verdict is replaced by a presumption in favor of the order.”  (Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d at p. 932, 148 Cal.Rptr. 389, 582 P.2d 980.)   Thus, “the court's new trial order will be upheld on appeal if there is any substantial evidence in the record to support the specified reasons [Citation].”  (Widener v. Pacific Gas & Electric Co. (1977) 75 Cal.App.3d 415, 438, 142 Cal.Rptr. 304, disapproved on unrelated grounds in McCoy v. Hearst Corp. (1986) 42 Cal.3d 835, 846, fn. 9, 231 Cal.Rptr. 518, 727 P.2d 711;  see Code Civ.Proc., § 657 [reversal “only if there is no substantial basis in the record for any of such reasons”].)  “The reason for this is that the trial court, in ruling on the motion, sits not in an appellate capacity but as an independent trier of fact.”  (Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d at p. 933, 148 Cal.Rptr. 389, 582 P.2d 980.)

 With respect to New England's argument that the evidence was insufficient to support the award of punitive damages against it, and with respect to Mouro's similar objection to the award against him for intentional infliction of emotional distress, we are required to accept as true all of the evidence which supports those awards and to draw all inferences in favor of the awards.   When the evidence is in conflict as it was here we are required to consider that evidence in the light most favorable to Tru–Toon and Stone as the prevailing parties, giving such evidence the benefit of every reasonable inference and resolving all conflicts in support of the awards.  (Crawford v. Southern Pacific Co. (1935) 3 Cal.2d 427, 429, 45 P.2d 183;  9 Witkin, Cal.Procedure (3d ed. 1985) Appeal, § 278, p. 289.)

 However, as to the arguments asserted by both New England and Mouro that there was instructional error with respect to the punitive damage awards, our review standard is just the opposite.   In the face of such claim of error we are not required to make inferences in favor of the awards but, to the contrary, must assume that the jury, had it been given proper instructions, might have drawn different inferences more favorable to the defendants on the punitive damage claims.  (Henderson v. Harnischfeger Corp. (1974) 12 Cal.3d 663, 674, 117 Cal.Rptr. 1, 527 P.2d 353.)

2. The Trial Court Did Not Abuse Its Discretion In Granting A New Trial

a. Evidentiary Basis For Grant of New Trial

 Our review of this record demonstrates that there was a substantial basis for the trial court's conclusion that the evidence was insufficient to support the compensatory damage awards of $1,745,000 in favor of Tru–Toon and $800,000 in favor of Stone.

With respect to the award to Tru–Toon, the trial judge tried repeatedly to get counsel to show where in the record there was any support for that award.   He told counsel, “I can find no rational basis for the jury to have come up with that number;  therefore, I conclude that it was derived as a result of passion and prejudice engendered by the manifold misconduct that occurred during the trial.”   Counsel responded by insisting that the testimony of one expert witness (a Dr. Vinso) provided a sufficient basis for the jury's verdict.   However, when the trial judge summarized his notes on the record 20 and stated that Dr. Vinso's testimony did not support damages of more than $662,294 (and that figure would have to adopt the fiction that Tru–Toon was without debts), counsel had no effective explanation as to how the jury could have used such testimony to make an award of more than $1.7 million.

Similarly, the trial court's explanation of its concern about the $800,000 emotional distress award to Stone fully supports the conclusion that these damages were also excessive.   The court had already concluded that defendants' conduct did not cause the financial distress of Tru–Toon or its subsequent bankruptcy.   However, Stone had argued that the demise of Tru–Toon was one of the two major sources of the emotional distress which he suffered.   Thus, an inability to be able to determine how much of the award was due to a circumstance not chargeable to either defendant raised a valid doubt as to whether the award should stand.   As the trial judge explained it, “The point that I was trying to make with the emotional distress damages is that Mr. Stone testified that he suffered emotional distress damages really from two separate causes.  [¶] One was the anti-Semitic remarks and actions of Mouro, and he testified as to how those made him feel and the effect that those had on him.   And he also testified as to his humiliation and distress at the loss of his business and his having to go to work as an employee.  [¶] There is no basis upon which I can distinguish between how much of his jury award of $800,000 is attributable to the other, and if I find that the actions of Mouro were not what caused the loss of the business, then I think I'm left in a position of not knowing how much of this $800,000 award can be rationally supported.”

This state of the record is, of itself, more than sufficient to justify the court's order.   Certainly, it would not permit us to conclude that no substantial basis existed for the granting of a new trial for the reasons stated.

b. Jurisdictional Objections To New Trial Order

 The plaintiffs also attack the jurisdictional sufficiency of the new trial order.   The basis of this argument is that the order was not signed by the trial judge and bears no file stamp proving that it was, in fact, filed with the clerk.   These objections are totally without merit.

We specifically dealt with this precise issue in Kolar v. County of Los Angeles (1976) 54 Cal.App.3d 873, 127 Cal.Rptr. 15, where we affirmed a new trial order based upon excessive damages.   We stated, “Code of Civil Procedure section 660 provides that the motion is determined by an order being entered in the permanent minutes or an order signed by the court and filed with the clerk.  [Citations.]”  (Id., at p. 876, 127 Cal.Rptr. 15, emphasis added.)   Here there is no question that the new trial order was entered in the permanent minutes.

Code of Civil Procedure section 657 does require that a specification of the reasons be signed by the judge and filed with the clerk, but only if the specification is prepared separately from the new trial order.  “[A] careful reading of section 657 leaves no room for doubt that the reasons required to be specified by that section must be contained either in the order granting a new trial or in a separately prepared and signed statement in writing filed with the clerk within 10 days after the filing of the order.  [Citation.]”   (Kolar v. County of Los Angeles, supra, 54 Cal.App.3d at p. 877, 127 Cal.Rptr. 15.)   Here, as the record plainly shows, the trial court's specification of the reasons for the new trial were set out in the order itself.   Nothing more was required.

3. Plaintiffs Concede That If A New Trial Is Ordered It Should Be On All Issues

 After concluding that a new trial was required, the trial court decided to limit that new trial solely to damages, both compensatory and punitive.   A trial court clearly has the power to grant a new trial as to some issues, while refusing it to others.  (Code of Civ.Proc., § 657 [“a new or further trial [may be] granted on all or part of the issues”];  Little v. Superior Court (1961) 55 Cal.2d 642, 645, 12 Cal.Rptr. 481, 361 P.2d 13;  Leipert v. Honold (1952) 39 Cal.2d 462, 466–467, 247 P.2d 324.)

However, the Supreme Court has made it clear that a trial court should approach with caution a decision to grant only a limited retrial.   In Liodas v. Sahadi (1977) 19 Cal.3d 278, 137 Cal.Rptr. 635, 562 P.2d 316, the court stated, “ ‘The decision on limiting a new trial to the issue of damages rests in the first instance in the sound discretion of the trial judge.   A new trial limited to the damage issue may be ordered where it can be reasonably said that the liability issue has been determined by the jury.   An abuse of discretion must be shown before a reviewing court will reverse the trial judge's decision.’  [Citations.]  [¶] However, even when it appears that the issue of liability was correctly determined, a new trial limited to damages ‘should be granted ․ only if it is clear that no injustice will result.  [Citations.]  ․ [I]t has been held that a request for such a trial should be considered with the utmost caution [citations] and that any doubts should be resolved in favor of granting a complete new trial.’  [Citation.]   In short, ‘When a limited retrial might be prejudicial to either party, the failure to grant a new trial on all of the issues is an abuse of discretion.’  [Citation.]”  (Id., at pp. 285–286, 137 Cal.Rptr. 635, 562 P.2d 316, emphasis added;  brackets used by the Supreme Court in its adaptation of the Court of Appeal's opinion deleted.)

 We find ourselves in agreement with the defendants' argument that the record in this case provides ample basis for doubt as to the fairness of a new trial limited solely to damages.21  As already indicated, plaintiffs also agree.   They expressly urged us at oral argument to reverse the order limiting the new trial to damages only if a new trial was to be had.   We therefore need say nothing further on this issue.

4. Sufficiency of the Evidence to Support the Award of Punitive Damages Against the Defendant New England

Civil Code section 3294, subdivision (a), now requires that a party seeking punitive damages must prove the existence of fraud, malice or oppression by “clear and convincing” evidence.   This represents an important change in the law and is in line with a number of procedural and substantive changes which have been made by the Legislature over the past 15 years to limit and make more burdensome the recovery of punitive damages.  (College Hospital, Inc. v. Superior Court (1994) 8 Cal.4th 704, 712–713, 34 Cal.Rptr.2d 898, 882 P.2d 894;  Mock v. Michigan Millers Mutual Ins. Co. (1992) 4 Cal.App.4th 306, 332–333, 5 Cal.Rptr.2d 594.) 22  Thus, Tru–Toon, in order to recover punitive damages, had the burden of proving that New England was guilty of fraud, malice or oppression by “clear and convincing” evidence.

There were two bases urged by Tru–Toon for the recovery of punitive damages against New England.   The first was direct liability based upon New England's claims handling activities which Tru–Toon characterizes as demonstrating malice and oppression.   The second is liability for the acts of an agent, based upon the conduct of Mouro.   New England contends that with respect to both theories the evidence is insufficient as a matter of law.

a. Direct Liability of New England

 In reviewing the evidence to address New England's evidentiary insufficiency argument, we must “review the whole record in the light most favorable to the judgment below to determine whether it discloses substantial evidence—that is, evidence which is reasonable, credible, and of solid value—such that a reasonable trier of fact could find [that the presence of oppression, malice or fraud was established by clear and convincing evidence].”  (In re Angelia P. (1981) 28 Cal.3d 908, 924, 171 Cal.Rptr. 637, 623 P.2d 198.)   While it is true that the trial court burden of “clear and convincing” evidence does not alter the substantial evidence standard of appellate review (Patrick v. Maryland Casualty Co. (1990) 217 Cal.App.3d 1566, 1576, 267 Cal.Rptr. 24), our review cannot ignore the higher proof standard required in the trial court.  (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1287, 31 Cal.Rptr.2d 433;  Stewart v. Truck Ins. Exchange (1993) 17 Cal.App.4th 468, 482, 21 Cal.Rptr.2d 338.)   That is, the record must reflect that there was substantial evidence presented which in fact met that higher standard.

 The evidence upon which Tru–Toon relied to prove punitive damages was the same evidence upon which it relied to show bad faith.   However, “[e]vidence that an insurer has violated its duty of good faith and fair dealing does not thereby establish that it has acted with the requisite malice, oppression or fraud to justify an award of punitive damages.  [Citations.]   In order to establish that an insurer's conduct has gone sufficiently beyond mere bad faith to warrant a punitive award, it must be shown by clear and convincing evidence, that the insurer has acted maliciously, oppressively or fraudulently.”  (Mock v. Michigan Millers Mutual Ins. Co., supra, 4 Cal.App.4th at p. 328, 5 Cal.Rptr.2d 594.)

In this case, the evidence of New England's bad faith is composed of the 14 separate claims handling actions which we have previously described.   None of these evidence any intent to cause injury to Tru–Toon;  therefore, the jury's conclusion that either malice or oppression 23 was present can only be sustained if these acts constitute clear and convincing evidence of “despicable conduct” which (1) was carried out by New England with a wilful and conscious disregard for the rights of Tru–Toon (malice) or (2) subjected Tru–Toon to cruel and unjust hardship in conscious disregard of its rights (oppression).   To establish either malice or oppression, despicable conduct must be shown.   Despicable conduct is defined in BAJI 14.72.1 [Eighth edition 1994] as “conduct which is so vile, base, contemptible, miserable, wretched, or loathsome that it would be looked down upon and despised by ordinary decent people.”

Given the statutory definitions of malice and oppression (Civ.Code, § 3294, subd. c(1) & (2)), it follows that Tru–Toon's burden was to clearly and convincingly prove that New England's conduct was “despicable” and carried on in a “conscious disregard” of Tru–Toon's rights.  “ ‘The phrase conscious disregard is something used to describe the highly culpable state of mind which justifies an exemplary award.’  [Citation.]   The term is ‘an appropriate description of the animus malus which may justify an exemplary damage award when nondeliberate injury is alleged.’  [Citations.]  ‘In order to justify an award of punitive damages on this basis, the plaintiff must establish that the defendant was aware of the probable dangerous consequences of his conduct, and that he wilfully and deliberately failed to avoid those consequences.  [Citations.]’  [Citation.]” 24  (Mock v. Michigan Millers Mutual Ins. Co., supra, 4 Cal.App.4th at pp. 328–329, 5 Cal.Rptr.2d 594.)

 Viewed in the light most favorable to Tru–Toon, this record easily demonstrates claims handling practices which were inept, careless and inconsistent and which were filled with admitted “inadvertencies” and “miscalculations.”   This was sufficient to support the jury's conclusion that New England was guilty of bad faith conduct;  that is, it acted unreasonably or without proper cause in handling Tru–Toon's claim.   But does it also support the jury's conclusion that malice or oppression was established?   Given the error in the jury instructions, which we discuss below, the jury's verdict could not stand in any event.   However, New England asks us to go one step further and conclude that Tru–Toon's evidence was insufficient to prove malice or oppression as a matter of law.

Tru–Toon primarily relies on seven specific acts which, it argues, constituted not only bad faith on the part of New England, but also demonstrated the required malice or oppression:  (1) New England incorrectly and improperly applied a non-existent co-insurance penalty to Tru–Toon's business interruption claim;  (2) New England failed to submit to arbitration Tru–Toon's claim for damage to its ceilings and walls;  (3) New England undervalued Tru–Toon's inventory claim;  (4) New England calculated Tru–Toon's business interruption claim based on available cancelled orders rather than on Tru–Toon's sales history;  (5) New England submitted an offer on Tru–Toon's business interruption claim which was significantly less than an evaluation prepared by an accountant which New England had hired;  (6) New England calculated Tru–Toon's inventory loss claim based upon replacement cost rather than actual cash value, thus resulting in a lower offer;  and (7) New England failed to investigate why Tru–Toon had requested that Mouro be removed as the adjuster on the claim.

While it is true that New England offered benign explanations for each of these claims and that undoubtedly any one or two of them, standing alone, would not support a finding of malice or oppression, we cannot conclude as a matter of law that all or a combination of them, taken together and viewed in the light most favorable to Tru–Toon, are not sufficient.   A reasonable and properly instructed jury could well choose to disbelieve New England's explanatory evidence and might reasonably infer from all of the evidence that the statutory threshold of malice or oppression has been reached.

We have considerable reservations about the merits of Tru–Toon's case for punitive damages.   To say the least, it is not a strong one.   Indeed, we endorse the footnote comment made by the court in Tomaselli:  “ ‘[P]unitive damages should not be allowable upon evidence that is merely consistent with the hypothesis of malice, fraud, gross negligence or oppressiveness.   Rather some evidence should be required that is inconsistent with the hypothesis that the tortious conduct was the result of a mistake of law or fact, honest error of judgment, over-zealousness, mere negligence or other such noniniquitous human failing.’ ”  (Tomaselli v. Transamerica Ins. Co., supra, 25 Cal.App.4th at p. 1288, fn. 14, 31 Cal.Rptr.2d 433;  emphasis added.  [quoting from Travelers Indem. Co. v. Armstrong (Ind.1982) 442 N.E.2d 349, 362].)

Nonetheless, where the evidence demonstrates a course of conduct from which a jury could reasonably draw inferences favorable to Tru–Toon's punitive damage claim, we may not usurp that fact finding function.   We could only do so where we can say with confidence that no reasonable jury could find any basis for the punitive damage claim and that “ ‘no other reasonable conclusion is legally deducible from the evidence, and that any other holding would be so lacking in evidentiary support that [we] would be impelled to reverse it.  ․  [Citations.]’ ”  (Miller v. Elite Ins. Co. (1980) 100 Cal.App.3d 739, 757, 161 Cal.Rptr. 322.)   We have no such confidence here and believe that a jury must resolve the issue of New England's direct liability for punitive damages.   We do, however, reach a different conclusion with respect to New England's exposure to punitive damages based on the conduct of Mouro.

b. Punitive Damage Liability of New England For Acts Of An Agent

As we discuss below, the jury may upon retrial find that Mouro intentionally engaged in conduct designed to injure Tru–Toon and Stone because of anti-Semitic feelings or hostility toward Stone;  if so, then a clear basis for an award of punitive damages against him would exist.   However, the question we now address is whether there is any evidentiary basis to hold New England liable in punitive damages for such acts by Mouro.

“California has traditionally allowed punitive damages to be assessed against an employer (or principal) for the acts of an employee (or agent) only where the circumstances indicate that the employer himself was guilty of fraud, oppression, or malice.   Thus, even before section 3294, subdivision (b) was added to the Civil Code in 1980,25 the courts required evidence that the employer authorized or ratified a malicious act, personally committed such an act, or wrongfully hired or retained an unfit employee.   For corporate or other large organizations, such conduct must have been performed by an ‘ “agent ․ employed in a managerial capacity and ․ acting in the scope of employment,” ’ or ratified or approved by a ‘ “managerial agent” ’ of the organization.  [Citations.]”  (College Hospital, Inc. v. Superior Court, supra, 8 Cal.4th at p. 723, 34 Cal.Rptr.2d 898, 882 P.2d 894.)

 Mouro was an independent adjuster who owned his own adjusting company.   Although the jury apparently found that he committed the hostile acts which Tru–Toon contends support a punitive award, there was no evidence that New England ever knew of these acts or that it directed or approved them.   Moreover, there was no evidence that Mouro, as an independent adjuster working on a specific assignment, was a “managing agent” of New England.   A managing agent is an employee of a corporation who is vested with a sufficient degree of discretion in making decisions so as to ultimately determine company policy.   (Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 822–823, 169 Cal.Rptr. 691, 620 P.2d 141;  Kelly–Zurian v. Wohl Shoe Co. (1994) 22 Cal.App.4th 397, 420–422, 27 Cal.Rptr.2d 457.)

This record reflects no evidence that Mouro was given any discretion to do more than investigate and make recommendations.   Thus, there is no basis for holding New England liable for punitive damages based on the acts of its agent Mouro.   Upon remand, New England is entitled to an order adjudicating this issue in its favor.

5. Mouro's Liability, As An Independent Adjuster, For Common Law Or Statutory Bad Faith

In the first and third causes of action, Tru–Toon asserts bad faith claims against Mouro.   These are the same allegations as those asserted against New England and involve the claim that Mouro, by his conduct with respect to the handling of Tru–Toon's claim, (1) breached the implied covenant of good faith and fair dealing (common law bad faith) and (2) violated provisions of Insurance Code section 790.03, subdivision (h) (statutory bad faith).   Mouro argues that he cannot be held liable on either theory, as a matter of law.   We agree.

 Mouro is clearly not a party to the insurance contract between New England and Tru–Toon.   Therefore, there is no implied duty of good faith and fair dealing owed by him to Tru–Toon.  (Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 576, 108 Cal.Rptr. 480, 510 P.2d 1032.)   Similarly, as an independent adjuster, hired by New England to adjust Tru–Toon's claim, there is no separate right of action against him under Insurance Code section 790.03, subdivision (h).  (Henry v. Associated Indemnity Corp. (1990) 217 Cal.App.3d 1405, 1416, 266 Cal.Rptr. 578.)26

Mouro is therefore entitled to entry of judgment on each of these claims.   This leaves, as the only remaining theory against him, the fourth cause of action asserted by Stone for intentional infliction of emotional distress.

6. Stone's Claim Against Mouro For Intentional Infliction of Emotional Distress

In the fourth cause of action, (which is asserted against Mouro only), Stone alleges that Mouro is liable for intentional infliction of emotional distress for the manner in which he handled the adjustment of Tru–Toon's claim while he was at all times aware that (1) Stone was Tru–Toon's majority and controlling shareholder, (2) Stone depended on that business for his livelihood and (3) there was “a high degree of probability” that Stone would suffer emotional distress.   Stone also alleged that Mouro's conduct was intentional, malicious and outrageous and was done for the purpose of causing Stone “to suffer humiliation, mental anguish and emotional and physical distress.”

“The elements of the tort of intentional infliction of emotional distress are:  ‘ “(1) extreme and outrageous conduct by the defendant with the intention of causing, or reckless disregard of the probability of causing, emotional distress;  (2) the plaintiff's suffering severe or extreme emotional distress;  and (3) actual and proximate causation of the emotional distress by the defendant's outrageous conduct․”   Conduct to be outrageous must be so extreme as to exceed all bounds of that usually tolerated in a civilized community.’  [Citation.]   The defendant must have engaged in ‘conduct intended to inflict injury or engaged in with the realization that injury will result.’  [Citation.]”  (Christensen v. Superior Court (1991) 54 Cal.3d 868, 903, 2 Cal.Rptr.2d 79, 820 P.2d 181.)

 The evidence presented at trial, viewed in the light most favorable to Stone, demonstrated that Mouro was prejudiced against Jewish people in general and was biased against Stone in particular.   Indeed, Stone's evidence showed that Mouro took some actions (and failed to take other actions in a timely manner or at all) for the express purpose of putting Stone and his company out of business and that he was motivated in so doing by a substantial animus towards Stone because Stone was a Jew.   It is of no moment to this separate and independent claim of tortious misconduct that Mouro's alleged actions were not, as the trial court expressly found, a legal cause of any economic injury to the already financially distressed Tru–Toon.   Stone's claim for emotional distress does not depend upon evidence that Mouro's actions actually resulted in financial losses to Tru–Toon, but rather on the fact that Mouro engaged in the described acts with the intent to inflict upon Stone severe emotional distress.

In the civilized and multi-cultural society in which we live, such behavior is outrageous and cannot be condoned.   Such conduct on Mouro's part would clearly satisfy the elements of this tort as well as the requirements under Civil Code section 3294 for punitive damages.   Indeed, we not only have a case involving charges of unacceptable bigotry, but also one where the jury could reasonably conclude that Mouro acted on his prejudices with the specific intent of harming Stone.   Thus, we reject Mouro's argument that there was not sufficient evidence to support the jury's verdict of liability for compensatory and punitive damages on this cause of action.

 We also reject Mouro's argument that the trial court improperly received this evidence because it was not specifically alleged in the complaint.  “ ‘It has long been settled law that where (1) a case is tried on the merits, (2) the issues are thoroughly explored during the course of the trial and (3) the theory of the trial is well known to court and counsel, the fact that the issues were not pleaded does not preclude an adjudication of such litigated issues and a review thereof on appeal.  [Citations.]’  [Citation.]”  (Frank Pisano & Associates v. Taggart (1972) 29 Cal.App.3d 1, 16, 105 Cal.Rptr. 414;  see also Wishart v. Claudio (1962) 207 Cal.App.2d 151, 154, 24 Cal.Rptr. 398.)   In addition, such specific allegations were unnecessary as Mouro was (or should have been) fully aware from pretrial discovery just what evidence Stone would rely on to prove his general allegation that Mouro had acted intentionally and maliciously to inflict upon him emotional distress.   Moreover, such evidence was properly received as proof of Mouro's motive and state of mind which were clearly relevant to the issue of liability for punitive damages.

7. Erroneous Instructions On Punitive Damages

As this matter will be remanded for a full retrial on all remaining issues, including the plaintiffs' claims for punitive damages, it is necessary for us to discuss, for the guidance of the trial court, the arguments raised by defendants with respect to the instructions on punitive damages.   Defendants assert that the trial court erroneously rejected their requested instruction on “clear and convincing” evidence and then (1) failed to give any instruction at all on that higher standard of proof and (2) failed to tell the jury that “despicable” conduct is a necessary element of oppression.   These objections to the trial court's instruction of the jury are all well taken.   We discuss each of them in turn.

a. Clear and Convincing Evidence

As we have already noted, one of the important changes in the law made by the Civil Liability Reform Act of 1987 was to increase the evidentiary threshold that must be met to recover punitive damages.   Clear and convincing evidence is now required.   That standard is one of the three proof burdens recognized in Evidence Code section 115.27  However, it has been imposed in California in only limited cases 28 and then as a reflection of “the degree of confidence our society thinks [a factfinder] should have in the correctness of factual conclusions for a particular type of adjudication.”  (In re Winship (1970) 397 U.S. 358, 370, 90 S.Ct. 1068, 1076, 25 L.Ed.2d 368 (Harlan, J., concurring).)   As the United States Supreme Court stated in Addington v. Texas (1979) 441 U.S. 418, 99 S.Ct. 1804, 60 L.Ed.2d 323, “The standard [of proof] serves to allocate the risk of error between the litigants and to indicate the relative importance attached to the ultimate decision.  [¶ s] ․ One typical use of the [clear and convincing] standard is in civil cases involving allegations of fraud or some other quasi-criminal wrongdoing by the defendant.   The interests at stake in those cases are deemed to be more substantial than mere loss of money and some jurisdictions accordingly reduce the risk to the defendant of having his reputation tarnished erroneously by increasing the plaintiff's burden of proof.”  (Id., at pp. 423–424, 99 S.Ct. at 1808.)   By the 1987 legislation, California has elevated a claim for punitive damages to this higher level of public concern.

 For nearly 100 years, California has applied a consistent definition to this very high standard of proof.  “ ‘Clear and convincing’ evidence requires a finding of high probability.   This standard is not new.  [The Supreme Court] described such a test, 80 years ago, as requiring that the evidence be ‘ “so clear as to leave no substantial doubt”;  “sufficiently strong to command the unhesitating assent of every reasonable mind.” ’   (Sheehan v. Sullivan (1899) 126 Cal. 189, 193 [58 P. 543].)  It retains validity today.  [Citation.]”  (In re Angelia P., supra, 28 Cal.3d at p. 919, 171 Cal.Rptr. 637, 623 P.2d 198;  emphasis added;  see also, Lillian F. v. Superior Court, supra, 160 Cal.App.3d at p. 320, 206 Cal.Rptr. 603;  In re Terry D. (1978) 83 Cal.App.3d 890, 899, 148 Cal.Rptr. 221.)

When the Legislature determined in 1987 to impose this much higher burden of proof in punitive damage cases it did so in the context of this uninterrupted and consistent line of decisions which have accepted and followed the Supreme Court's definition of the term “clear and convincing” in its 1899 Sheehan decision.  (Sheehan v. Sullivan (1899) 126 Cal. 189 [58 P. 543].)  “ ‘It is a generally accepted principle that in adopting legislation the Legislature is presumed to have had knowledge of existing domestic judicial decisions and to have enacted and amended statutes in the light of such decisions as have a direct bearing upon them.  [Citations.]’  [Citations.]”   (Estate of McDill (1975) 14 Cal.3d 831, 839, 122 Cal.Rptr. 754, 537 P.2d 874;  see also, Anderson v. I.M. Jameson Corp. (1936) 7 Cal.2d 60, 67, 59 P.2d 962;  Estate of Maron (1986) 183 Cal.App.3d 707, 712–713, 228 Cal.Rptr. 402.)

 When the defendants made a timely motion asking the trial court to include this judicially endorsed language in its instruction to the jury defining the term “clear and convincing evidence,” 29 the trial court refused to modify BAJI 2.62.   The trial judge apparently believed that such a restrictive definition was perhaps appropriate for a case involving the possible loss of parental rights but it had no place in an “ordinary” punitive damage action against an insurance company.30  We disagree.

In Evidence Code section 115, the Legislature describes just three different standards of proof, not three or more depending on circumstances.   This statutory declaration, taken together with nearly a century of consistent judicial definition given to the clear and convincing standard, compels the conclusion that this heavier burden of proof, must necessarily be given the same definition in punitive damage cases as it has been given in all manner of cases since 1899.   We therefore conclude that the Legislature's application of this proof burden to punitive damage cases was intended to have the same meaning and impact that its application did in other cases.

As this court has previously stated on three other occasions, the language of BAJI No. 2.62 as it presently reads is both misleading and unnecessarily limited.   It seems to suggest an evidentiary test which is significantly less rigorous than the one which the Supreme Court has repeatedly defined in much stronger and more explicit terms.  (In re Marriage of Weaver, supra, 224 Cal.App.3d at p. 487, fn. 8, 273 Cal.Rptr. 696;  see also, Mock v. Michigan Millers Mutual Ins. Co., supra, 4 Cal.App.4th at pp. 332–333, 5 Cal.Rptr.2d 594;  DuBarry Internat., Inc. v. Southwest Forrest Industries, Inc. (1991) 231 Cal.App.3d 552, 566, fn. 19, 282 Cal.Rptr. 181.)   However, in each of those cases, our comments were only dicta.   In this case, which is the first one to directly present the issue, we hold that while BAJI No. 2.62 is not an incorrect statement of the law (Mock, supra, 4 Cal.App.4th at p. 333, fn. 29, 5 Cal.Rptr.2d 594;  Roberts v. Ford Aerospace & Communications Corp. (1990) 224 Cal.App.3d 793, 804, 274 Cal.Rptr. 139), it does not go far enough;  and, when requested by a party, it should be modified to reflect the more explicit language used by the courts to define the term clear and convincing evidence.   Such a request was timely submitted in this case and it should have been granted.   The modification to BAJI NO. 2.62 requested by the defendants properly utilizes the Supreme Court's century old definition and should aid in making clearer to the jury just how heavy a burden of proof has now been legislatively imposed upon parties seeking punitive damages.31

b. The Trial Court Erroneously Failed to Give Any Instruction on Clear and Convincing Evidence

 Apparently as a result of the trial court's denial of defendants' request for a special instruction defining clear and convincing evidence and the plaintiffs' subsequent withdrawal of their request that the court read BAJI 2.62 to the jury, no definition at all of that term was given.   This left the jury totally in the dark as to the increased burden of proof by which they were to determine the existence of malice or oppression.

Under the provisions of Civil Code section 3294, subdivision (e), a proper definitional instruction should be given in all cases where punitive damages are sought and the initial trial date is on or after January 1, 1988.   This is clearly such a case.   Given the significance of this increase in the burden of proof (Stewart v. Truck Ins. Exchange, supra, 17 Cal.App.4th at p. 482, fn. 27, 21 Cal.Rptr.2d 338), it was clearly necessary that such burden be defined for the jury.  (DuBarry Internat. Inc. v. Southwest Forest Industries, Inc., supra, 231 Cal.App.3d at p. 566, fn. 19, 282 Cal.Rptr. 181.)   The trial court's failure to do so was error.

c. Despicable Conduct Was Erroneously Omitted From the Instruction on Oppression

 The punitive awards were based on the jury's finding that the defendants were guilty of malice or oppression.   The trial court defined “oppression” for the jury as “conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.”   However, the Legislature has defined the “oppression” necessary for a punitive award to be “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.”  (Civ.Code, § 3294, Subd. (c)(2), emphasis added.)   Defendants and plaintiffs both proposed jury instructions including “despicable conduct” in the definition of “oppression,” but defendants' proposal was modified by the judge to delete the word “despicable” and plaintiffs' proposal was withdrawn.   The omission of the word “despicable” from the definition of “oppression” was error.

In Mock v. Michigan Millers Mutual Ins. Co., supra, 4 Cal.App.4th at page 331, 5 Cal.Rptr.2d 594, we held it was error not to include the “important term” “despicable conduct” in an instruction describing “malice.”   The Legislature added that term in 1987 to the definitions of both “malice” and “oppression.”  (Civ.Code, § 3294, Subds. (c)(1) & (c)(2).)   As we explained in Mock, “The instruction [without ‘despicable conduct’ in the definition of ‘malice’] would have been perfectly proper for a case tried prior to the effective date of the 1987 amendment.  [Citation.]

However, we cannot assume that the Legislature did not intend to make an important change by its addition of the requirement of ‘despicable conduct’․   In order for us to disregard this change we would have to ignore the well established rule of statutory construction which mandates that significance be given, if possible, to every word, phrase, sentence and part of a legislative enactment.  [Citation.]  [¶] While the Legislature made no effort to define the term ‘despicable conduct,’ that does not mean it is without significant meaning or that the evidentiary burden necessary to obtain punitive damages is not substantially heavier.”  (Mock, supra, (4 Cal.App.4th at p. 331, 5 Cal.Rptr.2d 594.)

More recently, the Supreme Court has stated, “․ the statute's reference to ‘despicable’ conduct seems to represent a new substantive limitation on punitive damage awards.   Used in its ordinary sense, the adjective ‘despicable’ is a powerful term that refers to circumstances that are ‘base,’ ‘vile,’ or ‘contemptible.’  (4 Oxford English Dict. (2d ed. 1989) p. 529.)   As amended to include this word, the statute plainly indicates that absent an intent to injure the plaintiff, ‘malice’ requires more than a ‘willful and conscious' disregard of the plaintiffs' interests.   The additional component of ‘despicable conduct’ must be found.  [Citations.]”   (College Hospital Inc. v. Superior Court, supra, 8 Cal.4th at p. 725, 34 Cal.Rptr.2d 898, 882 P.2d 894.)

There is no reason to conclude the term “despicable conduct” is any less important in describing “oppression” than it is in describing “malice.”   Leaving the term out of the instruction on the meaning of “oppression” was error.32

d. These Instructional Errors Were Prejudicial To Defendants

 Whatever the impact of these errors standing alone, we have no doubt that their cumulative impact was prejudicial to the defendants.   Their presence certainly provides further support, if any were required, for the trial court's order granting a new trial.   However, as that order was not based upon such errors, but is fully justified on other grounds, there is no reason for us to be detained long on the issue of prejudice.

As we stated in Mock, “[I]f a review of the entire record demonstrates that the improper instruction was so likely to have misled the jury as to become a factor in the verdict, it is prejudicial and a ground for reversal.   To put it another way, where it seems probable that the jury's verdict may have been based on the erroneous instruction prejudice appears and this court should not speculate upon the basis of the verdict.”  (Mock v. Michigan Millers Mutual Ins. Co., supra, 4 Cal.App.4th at p. 335, 5 Cal.Rptr.2d 594, citations, internal quotation marks, and brackets omitted.)

Our Supreme Court has noted “[t]he clear and convincing standard of proof is an exacting standard.   When there is sharply conflicting evidence, as in this case, it is very difficult for a party to meet this high standard.”  (Weiner v. Fleischman (1991) 54 Cal.3d 476, 490, 286 Cal.Rptr. 40, 816 P.2d 892.)   Without a proper description of “clear and convincing” evidence, it is highly unlikely the heightened standard was correctly applied by the jury in this case.

This becomes especially clear when evaluating the effect of other instructions, a factor in determining prejudice.  (See Mock v. Michigan Millers Mutual Ins. Co., supra, 4 Cal.App.4th at pp. 335, 336, 5 Cal.Rptr.2d 594.)   The only standard of proof that was defined for the jury was the lower “preponderance of the evidence” standard.   Since it was never explained how the two standards differed or even that they differed at all, there is a substantial risk the jury applied only the “preponderance of the evidence” standard, the one standard that was described.   It is difficult enough for a jury to apply two different standards of proof in the same trial when the two standards are both properly defined.   When only one standard is defined, the chances of a correct application of the undefined standard are at best problematic.

Another important factor is the conflict in the evidence on the punitive damage issues.  (Mock v. Michigan Millers Mutual Ins. Co., supra, 4 Cal.App.4th at p. 335, 5 Cal.Rptr.2d 594.)   In reviewing the evidence to determine whether an erroneous instruction was prejudicial, “we must assume that the jury, had it been given proper instructions, might have drawn different inferences more favorable to [the defendants] and rendered a verdict in [their] favor on the issues as to which it was misinstructed.  [Citation.]”  (Id. at p. 322, 5 Cal.Rptr.2d 594;  see also pp. 336–337.)

The other instructional error—failure to include “despicable conduct” in the definition of “oppression”—also was prejudicial.   The conflict in the evidence strongly supports an inference of prejudice.   Moreover, other instructions served to magnify the error.   Although the trial court deleted “despicable conduct” from the definition of “oppression,” it included it in the definition of malice.   In Mock, where “despicable conduct” was included in the description of “oppression,” but omitted from the description of “malice,” we found the omission to be reversible error, noting that “the inclusion of ‘despicable conduct’ in the oppression instruction, combined with its absence from the malice instruction, essentially reinforced the probable jury conclusion that malice did not require such a rigorous test.”  (Mock v. Michigan Millers Mutual Ins. Co., supra, 4 Cal.App.4th at p. 336, 5 Cal.Rptr.2d 594.)   The same kind of reinforcement occurred here.

CONCLUSION

For all of the reasons stated there will have to be a new trial on all remaining issues.   The trial court's order for a new trial was proper but its attempt to limit that new trial to damages only is, in this case, prejudicially unfair to both New England and Mouro.   Not all of the issues before the court during the first trial will be there during the second.   New England may be held liable on the first and third causes of action for common law and statutory bad faith, including the claim for punitive damages;  however, New England can have no vicarious punitive damage liability for the acts of Mouro, its independent agent.   Mouro cannot be liable on either of the bad faith causes of action;  however, he may be held liable for both compensatory and punitive damages on Stone's fourth cause of action for intentional infliction of emotional distress.

DISPOSITION

The portion of the new trial order of October 17, 1991 which limited such new trial to damages only is reversed;  the said order is otherwise affirmed.   The matter is remanded to the trial court with directions to conduct further proceedings not inconsistent with the views expressed herein.   Each party shall bear their own costs on appeal.

FOOTNOTES

1.   In our review of an order for a new trial, we must view the evidence in the light most favorable to that order and need only find the presence of substantial evidence supporting it in order to affirm.   (Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 933, fn. 18, 148 Cal.Rptr. 389, 582 P.2d 980.)   However, with respect to New England's claims regarding the sufficiency of the evidence supporting the punitive damage award and Mouro's contentions relating to Stone's cause of action for the intentional infliction of emotional distress, we view the facts in the light most favorable to the plaintiffs.

2.   In what the trial court characterized as “uncontroverted evidence,” the record shows that Tru–Toon's financial troubles substantially predated the claimed fire damage which is the subject of this action.   Stone conceded that in 1984 and 1985, the two years before the fire damage, Tru–Toon operated at large losses.   During those two years, Tru–Toon's net worth was a negative $142,000.   The company's tax return for the year ending September 1985 showed negative income of $199,085.   Its 1984 profit was $170,000 below the industry average and its 1985 earnings were $41,000 below the industry average.   Stone admitted that Tru-toon was in financial distress in 1983 and 1984 and that he had to make large personal loans to the company to keep it in business.

3.   By specific endorsement the following coinsurance clause was included in the policy as part of the Replacement Cost Endorsement:“Coinsurance Clause:  This Company shall not be liable for a greater proportion of any loss to the property covered than the amount of insurance under this policy for such property bears to the amount produced by multiplying the replacement cost (without deduction for depreciation) of such property at the time of the loss by the coinsurance percentage applicable (specified on the first page of this policy, or by endorsement), nor for more than the proportion which this policy bears to the total insurance thereon․  [¶] 5.   The insured may elect to make claim under this policy in accordance with its provisions, disregarding this endorsement;  ․ [¶]․”  (Emphasis added.)This endorsement gave Tru–Toon the option of choosing a higher value for some of its damaged property;  that is, an amount sufficient to replace the property rather than the actual cash value of the property.   But in such event the coinsurance provision required Tru–Toon to purchase insurance for at least 90% (the percentage applicable to personal property) of the value of its total personal property (which value would also be determined by its replacement cost) or incur a penalty which decreased the percentage of the total loss which would be paid.   Thus, valuing a loss at the higher replacement cost could lead to lesser policy benefits if the replacement cost was high enough, relative to the amount of insurance purchased, to incur a coinsurance penalty, while at the same time the actual cash value was within coinsurance limits.

4.   A rainstorm occurred during the four-day period between the two fires.

5.   Tru–Toon presented the testimony of its own general agent (Richard Masters, who had originally negotiated and arranged for purchase of the New England policy in November 1985) that Cannon Insurance Services was telephonically notified of the loss from the first fire on the same day, March 13, 1986.   Tru–Toon emphasizes, as critical to its claimed business losses, the unnecessary 5–day delay in New England's response to the claim which thereby resulted.

6.   This claim was seriously contested.   Defendants emphasize the undisputed fact that when Tru–Toon received the $25,000 check it went to pay unpaid bills, not to buy inventory.   Further, a defense economist testified the failure to advance $50,000 in March or April did not adversely impact Tru–Toon's long-term performance.

7.   Under paragraph 12 of the “Conditions” section of the policy, disagreements concerning loss valuations were required to be submitted to an appraisal panel consisting of an appraiser selected and paid by each side and a neutral umpire selected by the two appraisers.   A final binding valuation could be made on the vote of any two of the three panel members.   In this case, the appraisal proceeding was conducted in late November 1986 and the panel issued its decision in early January 1987.   New England then paid the appraisal award which both parties agreed was binding.

8.   The record reflects that Tru–Toon first asserted its demand for replacement of the walls and ceilings rather than repainting at the initial appraisal hearing.   Although Tru–Toon requested that it be submitted to the second appraisal arbitration, New England failed to do so.   The issue was ultimately resolved by the jury in the trial below.

9.   New England's offer was less than its own accountant's value because of the application of a coinsurance penalty.

10.   This offer included the application of a coinsurance penalty which reduced the amount of the offer, using New England's method of valuation, by about $1,500.   New England later conceded that the coinsurance penalty had been erroneously applied to this loss and paid an additional $1,500 to Tru–Toon.   This event was also later cited as part of the evidence of New England's bad faith claims handling.

11.   New England's offer of $8,000 was clearly too low.   Even New England's accountant using Tru–Toon's past sales records, determined that the loss should be valued at $56,000.

12.   As we note below, the trial court expressly found that there was “no credible evidence to support the contention that the failure to pay the insurance claim was a substantial factor in causing Tru–Toon to go out of business or into bankruptcy.”

13.   Stone had no standing to assert any claim for breach of contract on common law or statutory bad faith.   Only an insured (or an assignee of an insured) can assert such claims and Tru–Toon, not Stone, was the insured party.

14.   New England does not dispute that this evidence, viewed in the light most favorable to Tru–Toon, clearly supports the jury's conclusion that New England had engaged in bad faith conduct.   However, there is a dispute as to whether this evidence is sufficient to provide any triable issue as to the existence of malice, oppression or fraud.   We examine that question below by again viewing the evidence in the light most favorable to Tru–Toon.

15.   We have examined the record and must sadly agree with the descriptions and characterizations made by the trial judge:  “Misconduct by [Dale] Myers, plaintiff's counsel in this case was persistent, flagrant and outrageous, and permeated the trial from beginning to end.   He repeatedly shouted at adverse witnesses, adopted a sneering and contemptuous tone in his cross-examination of them and demonstrated to the jury in tone of voice and gesture his contempt for the veracity of their testimony.   He also made personal attacks on opposing counsel in front of the jury.   Despite repeated admonitions from the court he persisted in such conduct throughout the trial.   The trial ended in fact with Mr. Myers in his final summation, standing with his back to the jury and shouting derogatorily at opposing counsel at the top of his lungs while jabbing his finger accusatorially at counsel․  [¶]․  He suggested to the jury in closing argument that they should find that defendant Mouro refused to promptly pay the plaintiff's claim because his mother was born in Syria, and the Syrians are the sworn enemies of the Israelis and that Mr. Mouro was obviously anti-Semitic.”In plaintiffs' brief on appeal, Mr. Myers described his trial conduct somewhat more benignly:  “What we have here is simply an aggressive trial attorney whose manner unfortunately caused Judge Yaffe some difficulty.”

16.   We take special note of these circumstances and particularly the comments of the trial judge.   While he expressly refused to base his subsequent new trial order on this misconduct, he expressed the view that the pervasive appeals to the jury's passion and prejudices produced the results which he concluded could not be justified by the evidence.

17.   The reason for the “correction” raising the compensatory award to this higher total amount (and apparently absorbing the $9,050.20 award for damage to Tru–Toon's walls and ceilings) is not clear from the record.

18.   Originally, the trial judge, in the oral announcement of his intended decision on the new trial motion, indicated that there would be a new trial on all issues.   However, after plaintiffs' attorney argued for a new trial limited to damages only, he changed his mind.   When counsel for the defendants objected and expressed doubt as to how that could be done as a practical matter the trial judge responded, “As a practical matter, I do not know how you are going to do it either, but we can sort that out at some future time.”

19.   Mouro makes a number of other technical or evidentiary assignments of error.   However, we will have no need to address them as they are made moot either by our rulings on other issues or by our decision to send this matter back for a new trial on all issues.   We trust that the same technical or evidentiary circumstances will not arise in a second trial.

20.   In the colloquy with Tru–Toon's counsel, the trial judge referred to his notes, relating to the expert's testimony, the accuracy of which counsel at no time questioned, and stated, “Let me read you my notes on Dr. Vinso's testimony.   They may not be accurate, but he testified that the value of the equity in Tru–Toon was $188,369, using the balance sheet method adjusted for intangibles.   The opinion of the fair market value of the Tru–Toon stock was $270,000.   The value of Goodwill, $228,000.   During cross-examination I have a note that he said the estimate of the value of the assets of Tru–Toon was $581,102.   Total value of the assets, including Goodwill, was $662,294.   His opinion of the market value of the tangible assets was $434,294.   The liabilities were $392,733.   The difference between the assets and liability, being $41,561.  [¶] All of the values he was giving seem to be in that same range.   My question is, how does the jury rationally get from that testimony to an award of compensatory damages to Tru–Toon in the sum of $1,745,000?”

21.   In addition, a retrial on all issues is compelled by statute.   The Civil Liability Reform Act of 1987 (Stats.1987, ch. 1498) included sweeping changes in the law governing punitive damages.   One of those changes was the addition of subdivision (d) to Civil Code section 3295, allowing a defendant to require a bifurcated trial so evidence of the defendant's finances is not put before the jury until after the jury has found the defendant guilty of fraud, malice or oppression.   In specifying the procedure for a bifurcated trial, section 3295, subdivision (d) also provides, “Evidence of profit and financial condition shall be presented to the same trier of fact that found for the plaintiff and found one or more defendants guilty of malice, oppression, or fraud.”  (Emphasis added.)This language requires that a jury awarding punitive damages be the same jury that found the defendant liable to the plaintiff in the first place.   “ ‘[I]f the Legislature had intended to allow different juries to make the liability and punitive damage decisions, then the last sentence of Section 3295(d) would have read as follows:  “Evidence of profit and financial condition shall be presented to the same trier of fact that found one or more defendants guilty of malice, oppression or fraud.”   But the Legislature included the phrase “found for the plaintiff and.”   This additional phrase shows that profit and financial condition evidence must be presented to the same trier of fact which had already made the two preliminary findings of [1] liability and [2] malice, oppression or fraud.’ ”  (Medo v. Superior Court (1988) 205 Cal.App.3d 64, 68, 251 Cal.Rptr. 924.)   Given the claim of punitive damages asserted by plaintiffs, the effect of this statute would be to require a single jury to hear all of the issues.

22.   In College Hospital, the Supreme Court recently summarized these changes:  “Beginning in 1979, various procedural restrictions were enacted.   The Legislature limited the circumstances under which evidence of the defendant's financial condition could be discovered and admitted, authorized bifurcation of the punitive damages phase of trial, and barred disclosure of the amount of punitive damages sought in the complaint.  (Civ.Code, § 3295, subds. (a)–(e).)   These provisions were apparently intended to curtail use of such claims as a tactical ploy.   The pretrial discovery limits ensure that defendants are not coerced into settling suits solely to avoid unwarranted intrusions into their private financial affairs, while the evidentiary restrictions minimize potential prejudice to the defense in front of a jury.  [Citations.]  [¶] In 1980, the Legislature began modifying the substantive elements of punitive damage awards.   It limited the circumstances under which an employer could be held liable for punitive damages ‘based upon acts of an employee.’  (Civ.Code, § 3294, subd. (b).)  At the same time, the concepts of ‘oppression,’ ‘fraud,’ and ‘malice’ were given specific definitions.  (Id., § 3294, subd. (c).)  ․ [¶] Additional requirements were imposed by the [1987 Reform Act].  [It] amended Civil Code section 3294 by increasing the plaintiff's burden of proving punitive damages at trial to ‘clear and convincing evidence.’   The definition of ‘malice’ was also refined.   For plaintiffs attempting to prove malice by showing a ‘conscious disregard’ of their rights as opposed to an actual intent to harm, the [statute] imposed additional requirements of ‘despicable’ and ‘willful’ defense conduct.  [¶] [Finally, it] also added section 425.13 to the Code of Civil Procedure.  [That] statute imposes certain pretrial procedural requirements on plaintiffs attempting to plead a punitive damages claim against a health care provider.   It is not the only statute of its kind.   Between 1988 and 1992, several similar provisions, covering both compensatory and punitive damage claims, were added to the Code of Civil Procedure.  (§§ 425.14 [punitive damages claim against religious corporation], 425.15 [negligence claim against volunteer director or officer of nonprofit corporation], 425.16 [‘SLAPP’ suit affecting right of petition/free speech];  see also Civ.Code, §§ 1714.10 [conspiracy claim against attorney], 3295, subd. (c) [discovery in punitive damages action].)”  (College Hospital, Inc. v. Superior Court, supra, 8 Cal.4th at pp. 712–713, 34 Cal.Rptr.2d 898, 882 P.2d 894.)

23.   An insured's claim for punitive damages for failure to pay or properly administer an insurance claim is ordinarily based on claims of “malice” or “oppression” rather than on the third possible ground for the award, “fraud.”  (Tomaselli v. Transamerica Ins. Co., supra, 25 Cal.App.4th at p. 1286, 31 Cal.Rptr.2d 433.)   That would appear to be the case here.

24.   As we said in Mock, 4 Cal.App.4th at p. 329, fn. 25, 5 Cal.Rptr.2d 594:  “It should be noted that a number of the reported decisions arose in a factual context where the plaintiff suffered a physical, as opposed to an economic, injury;  thus the reference to the term ‘safety of others' or probable ‘dangerous' consequences.   We see no logical reason not to recognize that the term ‘safety of others' is the equivalent of ‘rights of others' and the term ‘dangerous' could also be read as ‘harmful.’  (See G.D. Searle & Co. v. Superior Court (1975) 49 Cal.App.3d 22, 32 [122 Cal.Rptr. 218].)”

25.   Civil Code section 3294, subdivision (b) provides:  “An employer shall not be liable for damages pursuant to subdivision (a), based upon acts of an employee of the employer, unless the employer had advance knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights or safety of others or authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud, or malice.   With respect to a corporate employer, the advance knowledge and conscious disregard, authorization, ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or managing agent of the corporation.”

26.   We acknowledge a division of authority on this point.  (Compare Davis v. Continental Ins. Co. (1986) 178 Cal.App.3d 836, 224 Cal.Rptr. 66 and Bodenhamer v. Superior Court (1986) 178 Cal.App.3d 180 with Santiago v. Employee Benefits Services (1985) 168 Cal.App.3d 898, 214 Cal.Rptr. 679 and Richardson v. GAB Business Services, Inc. (1984) 161 Cal.App.3d 519, 207 Cal.Rptr. 519.)   However, we agree with the Henry court that the Davis and Bodenhamer cases, which extended statutory bad faith liability to independent adjusters, were decided prior to the Supreme Court's decision in Moradi–Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287, 250 Cal.Rptr. 116, 758 P.2d 58 and are now of doubtful validity.

27.   Evidence Code section 115 provides:  “ ‘Burden of proof’ means the obligation of a party to establish by evidence a requisite degree of belief concerning a fact in the mind of the trier of fact or the court.   The burden of proof may require a party to raise a reasonable doubt concerning the existence or nonexistence of a fact or that he establish the existence or nonexistence of a fact by a preponderance of the evidence, by clear and convincing proof, or by proof beyond a reasonable doubt.  [¶] Except as otherwise provided by law, the burden of proof requires proof by a preponderance of the evidence.”

28.   The following is a summary of the evidentiary circumstances where California has recognized or imposed a clear and convincing burden of proof standard.   They include:  (1) Deed absolute in form is actually a mortgage.  (Beeler v. American Trust Co. (1944) 24 Cal.2d 1, 7, 147 P.2d 583;  Wehle v. Price (1927) 202 Cal. 394, 396–397, 260 P. 878.);  (2) Deed absolute in form is actually a conveyance subject to a trust.  (See Sheehan v. Sullivan (1899) 126 Cal. 189, 192–193, 58 P. 543;  Adams v. Young (1967) 255 Cal.App.2d 145, 155, 62 Cal.Rptr. 877;  Spaulding v. Jones (1953) 117 Cal.App.2d 541, 545, 256 P.2d 637.);  (3) Oral agreement to make a will.  (See Lynch v. Lichtenthaler (1948) 85 Cal.App.2d 437, 441, 193 P.2d 77, disapproved on another point in Brown v. Superior Court (1949) 34 Cal.2d 559, 565, 212 P.2d 878.);  (4) Property acquired after marriage is nevertheless separate property (overcoming the strong presumption in favor of community property).  (See Estate of Nickson (1921) 187 Cal. 603, 605, 203 P. 106.);  (5) Proof to overcome rebuttable presumptions of paternity.  (Fam.Code, § 7612.);  (6) Establishment of a probate conservatorship.  (Conservatorship of Sanderson (1980) 106 Cal.App.3d 611, 620, 165 Cal.Rptr. 217.);  (7) Proceedings to terminate parental rights.  (In re Laura F. (1983) 33 Cal.3d 826, 839, 191 Cal.Rptr. 464, 662 P.2d 922;  In re Angelia P., supra, 28 Cal.3d at p. 919, 171 Cal.Rptr. 637, 623 P.2d 198.);  (8) Proof of malice in defamation of public official or public figure.  (Tague v. Citizens for Law & Order, Inc. (1977) 75 Cal.App.3d Supp. 16, 25, 142 Cal.Rptr. 689.);  (9) Proof of obscenity in public nuisance abatement action.  (People ex rel Cooper v. Mitchell Brothers' Santa Ana Theater (1982) 128 Cal.App.3d 937, 940, 180 Cal.Rptr. 728.);  (10) Proof to support an order that a conservatee lacks the capacity to give a written, informed consent to convulsive treatment.  (Lillian F. v. Superior Court (1984) 160 Cal.App.3d 314, 323–324, 206 Cal.Rptr. 603);  (11) Proof of oral transmutation of separate property into community property.  (See In re Marriage of Weaver (1990) 224 Cal.App.3d 478, 487, 273 Cal.Rptr. 696;  Evid.Code, § 662.   See also 1 Witkin, Cal.Evidence (3d ed. 1986) Burden of Proof and Presumptions, §§ 160–161 at pp. 137–139.)

29.   Defendants, at the outset of the trial, requested that the judge give to the jury the following modification of BAJI 2.62 (the additional language requested by the defendants is underscored):“The plaintiff has the burden of proving by clear and convincing evidence all of the facts necessary to establish:“ ‘Clear and convincing’ evidence means evidence of such convincing force that it demonstrates, in contrast to the opposing evidence, a high probability of the truth of the fact[s] for which it is offered as proof.   Such evidence requires a higher standard of proof than proof by a preponderance of the evidence.  (BAJI No. 2.62, supra.)“The evidence must be so clear as to leave no substantial doubt.   It must be sufficiently strong to command the unhesitating assent of every reasonable mind.“Proof by clear and convincing evidence is a more exacting standard than proof by a preponderance of the evidence, which only requires that the fact [s] [is] [are] more probably true than not true.“You should consider all of the evidence bearing upon every issue regardless of who produced it.”

30.   At the time of argument on defendants' written motion for a special instruction on the proper definition of “clear and convincing evidence,” the trial judge stated, “The request by defendant for a jury instruction regarding clear and convincing evidence to modify the BAJI instruction 2.62 is also denied.   This basis for the request is an appellate court case regarding the termination of parental rights, which is about as basic and fundamental a right as one can have, the right to rear one's own child.   There is really no reason for the court to conclude that the burden of proof in a case like that should be the same as the burden of proof in a ordinary punitive damages case against an insurance company.   And there really is no reason to believe that the concept of clear and convincing evidence as it is defined in a case like that could be defined in exactly the same way in a case like this.   I think that's what the BAJI committee had in mind when they mentioned that case in the notes to its new—BAJI instruction 2.62 but did not adopt the holding in the case as part of the instruction.”

31.   We summarily dismiss plaintiffs' argument that since the record reflects that this special instruction was “withdrawn” by defendants, they have waived their right to assert error on appeal in its denial.   First, defendants filed a written motion requesting the instruction at the outset of trial which the court specifically denied.   They also repeated their view of the importance of and need for this instruction in their trial brief.   Nothing further was required of them.   The housekeeping “withdrawal” of the instruction at the close of the trial cannot be considered a voluntary abandonment of their request.   Second, the Supreme Court has expressly rejected a waiver argument in punitive damage cases, given that “the primary interest that must be protected is the public interest in punitive damage awards in appropriate amounts.  [The courts] cannot allow the public interest to be thwarted by a defendant's oversight or trial tactics.”  (Adams v. Murakami (1991) 54 Cal.3d 105, 115, fn. 5, 284 Cal.Rptr. 318, 813 P.2d 1348.)

32.   Plaintiffs argue that since defendants failed to expressly object to the court's proposed instruction on oppression which omitted any reference to despicable conduct they cannot raise the issue on appeal.   We disagree.   Under Code of Civil Procedure section 647, the failure to object to an instruction which is not correct in law does not constitute a waiver of an appellant's right to argue on appeal that the instruction was prejudicially erroneous.  (Mock v. Michigan Millers Ins. Co., supra, 4 Cal.App.4th at pp. 333–334, 5 Cal.Rptr.2d 594.)

CROSKEY, Associate Justice.

KLEIN, P.J., and ALDRICH, J., concur.