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Court of Appeal, Second District, Division 2, California.

Frank V. PLACIDO, Plaintiff and Appellant, v. UNITED STATES FIDELITY & GUARANTY COMPANY, a corporation, Defendant and Respondent.

No. B015634.

Decided: April 17, 1986

Michael S. Fields, Los Angeles, for plaintiff and appellant. Parkinson, Wolf, Lazar & Leo, and Christine T. Hoeffner, Los Angeles, for defendant and respondent.

This is an appeal by plaintiff Frank V. Placido from a trial court's granting of summary judgment in favor of defendant insurer United States Fidelity and Guaranty Company, a corporation [USF & G].  We affirm.

The instant litigation arises from an underlying lawsuit for negligence.   Briefly, on December 14, 1981 a vehicle driven by one of USF & G's insured made a left-hand turn and broadsided Placido's truck, a 1972 Ford Courier, as the latter, allegedly having a green light, was traveling in the opposite direction through the intersection.   As a result of the accident, Placido suffered both property damage and bodily injuries.   The insured at trial was found to be liable to Placido in the sum of $40,944.1  USF & G has paid the award.

Thereafter, Placido filed the instant lawsuit alleging that USF & G had breached its statutory duty under Insurance Code section 790.03, subdivision (h),2 when it engaged in certain unfair claims settlement practices.

As part of a statutory scheme to regulate the insurance industry, section 790.03 provides:  “The following are hereby defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance․”  Listed alphabetically are eight subdivisions.   Subdivision (h) prohibits insurers from “[k]nowingly committing or performing with such frequency as to indicate a general business practice” 15 categories of what are termed unfair claims settlement acts.3

“The sufficiency of the [pleadings submitted for summary judgment] is reviewable on appeal and is determinative of the validity of the judgment.   [Citations.]  Because the summary judgment procedure is drastic, the papers filed on behalf of the moving party are strictly construed and those of his opponent are liberally construed.  [Citations.]  Every reasonable doubt must be resolved in favor of the complaint.  [Citations.]”  (Hooks v. Southern Cal. Permanente Medical Group (1980) 107 Cal.App.3d 435, 442, 165 Cal.Rptr. 741.)   “Where no triable issues of fact are presented, and the sole remaining question is one of law, it may appropriately be determined on a motion for summary judgment [citations].”  (Leo F. Piazza Paving Co. v. Foundation Constructors, Inc. (1981) 128 Cal.App.3d 583, 589, 177 Cal.Rptr. 268.)

Applying the above rules, we first recite the evidence alleged in Placido's opposition papers.   Approximately four months after the accident Placido initiated the underlying lawsuit for negligence against USF & G's insured.   In response to interrogatories propounded by USF & G, Placido on October 5, 1982 stated that he had sustained property damages in the sum of $3,500 and as then an unascertainable amount of damages for loss of its use.   The statement also listed amounts for incurred medical expenses ($2,049.56), loss of wages ($1,560) and towing charges ($57).

Placido's statement of damages was followed on November 8, 1982 with a written demand.   It stated:  “Demand is hereby made that the payment of Mr. Placido's property damage with regard to the above captioned matter be paid forthwith.   [¶ ]  Enclosed are two estimates, showing a total loss for his 1972 Ford Courier, which had a value of $3,500 at the time of the accident.”

The two estimates stated that the work required to repair the truck exceeded its value.   They did not, however, provide the costs for the needed repairs or the vehicle's replacement price.   Placido's $3,500 damage claim was based on his own valuation of the truck's worth at the time of the accident.

Sometime in November 1982 Placido's counsel contacted USF & G and informed it that Placido's truck was necessary for the conduct of his newly purchased dairy business.

On December 3, 1982 USF & G wrote to Placido's counsel.   Relevant to this appeal, it stated:  “We requested an independent appraisal of [the truck's] value, and in order to expedite matters will instruct material damage appraisers to contact you directly in this regards.   The vehicle has never been made available for viewing, and apparently additional information, such as mileage at time of loss, is needed to complete an adequate comparative market evaluation.”

In his declaration, Placido's counsel summarily concluded that he “cooperated with and promptly responded to defendant's claim for need of further information to resolve the property damage claim.”   He did not, however, present any evidentiary facts to support his claim.  (See 6 Witkin, Cal. Procedure (3d ed. 1985) § 297, p. 594.)

On January 20, 1983, Placido's attorney sent the following letter to counsel for USF & G:  “It is quite obvious [․] United States Fidelity has no intention of paying for my client's vehicle.   It has been over one (1) year since the accident.  [¶]  Additionally, you know all of the damages to my client, but still there has been no offer.  [¶]  [USF & G] has acted and continues to act in bad faith.   I can assure you that my client will be advised of all of his rights against [USF & G].  [¶]  As you know, my client needs to leave his dairy and travel to the arbitration.   Your continued refusal to enter into negotiations is unfair to my client.”

On January 24, 1983 USF & G responded by letter.   In pertinent part, the correspondence stated:  “[We] have received, via telephone information this same date, a report of the appraisal of your client's vehicle and am prepared to offer $8,000.00 as full and complete settlement of your client's claims regarding this accident.  [¶]  You have repeatedly asserted a demand of $3,500.00 as the amount of property damage sustained to your client's vehicle;  however, the appraisal received places repair estimates for damage related to this accident at just over $1,500.00, and comparative values seem to range from approximately $900.00 to $1,300․ [¶]  Obviously, this settlement offer is based upon the information contained in our file at this time.   If, for example, you have some basis for the $3,500.00 evaluation which you have placed on your client's vehicle, we will be more than happy to consider that information in discussing settlement with you.”

No further negotiations occurred between the parties until the matter was submitted to arbitration on February 17, 1983.   In that proceeding, the arbitrator made an award to Placido in the sum of $13,164.   USF & G informed Placido that it was willing to satisfy the award.   Placido, however, rejected the arbitrator's decision and filed for a trial de novo.

Again no negotiations took place between the parties.   Then on November 4, 1983 at a Mandatory Settlement Conference USF & G contended that Placido had been comparatively negligent and that its final offer to settle before trial was $16,000.

Turning to USF & G's papers in support of its motion for summary judgment, the record shows that they do not dispute Placido's evidence.   They do, however, present the following additional facts.

Less than one week after the accident, USF & G sent Placido a letter stating:  “In reference to the [accident] please assist us in expediting this claim by completing the enclosed accident report and returning it to this office along with two (2) estimates for the repairs to your vehicle.”

Sometime in November 1982, an adjuster for USF & G determined that Placido's claim of property damage was inflated.   This determination was based on a review of the October through December 1981 edition of the “Kelley Blue Book Official Guide for Older Cars.”   According to this authority, a 1972 Ford Courier was worth between $1,450 to $2,205.   In January 1983, USF & G received its own appraiser's estimate that it would cost $1,536.51 to repair the vehicle.4

Between the months of January and October of 1983, Placido's counsel made three statutory offers to compromise the entire matter ranging in amount from $19,500 to $50,000.   At the Mandatory Settlement Conference, after USF & G made its offer for $16,000 to settle, Placido's attorney made a counter-offer in the amount of $20,000.

The basis of Placido's action against USF & G is that it purportedly failed to deal with him in good faith.   He asserts that the insurance company knew the truck was required for his dairy business and that he could not afford on his own to replace it.   Hence, by refusing to segment its settlement offer into separate payments for his personal injury and property damage, Placido argues, USF & G attempted to coerce him into accepting an unreasonably low compromise of both his claims.   We find as a matter of law that the proffered evidence does not support such a contention.

 Placido's argument that USF & G acted in bad faith is built upon a purported inference derived from the contrast between the insurance company's settlement offers and the actual jury award which was in the amount of $40,944.   We are convinced that such an inference, if existing at all, does not raise a triable issue of material fact.   The record reveals that USF & G's settlement offers cannot be said to have been unreasonable in light of the physical and medical evidence made available to it.   To rely on the fact that the jury returned an award that was twice the size of the amount Placido himself would have settled for before trial is to place too much weight on hindsight.

After all, the basic issue is simply one of whether an insurer has unreasonably and in bad faith refused to settle.   Insurers still have the right to litigate where they reasonably believe that a demand for compensation is unreasonable or unfounded.

We have not yet reached the point where the mere filing of a lawsuit or the lodging of a claim requires the insurer to simply “pay up.”

Here an impartial arbitrator had found that the entire claim was only $13,164.   Plaintiff, himself, had offered to accept $20,000.   In light of that we cannot say that the USF & G's offers were so unreasonable as to indicate bad faith.

Having concluded that USF & G did not act in bad faith, we next consider whether there was, nonetheless, a violation of any particular provision of section 790.03, subdivision (h) which could provide the basis for a cause of action.

It was not until our Supreme Court in Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880, 153 Cal.Rptr. 842, 592 P.2d 329, held that section 790.03, subdivision (h) creates a private cause of action in third-party claimants that an injured party who was a stranger to the insurance contract could sue an insurer for violations of selected subdivisions of the statute.   Prior to Royal Globe, decisional law had held that a third-party claimant lacked standing to sue an insurer for unfair settlement claim practices because there was no privity of contract between the parties.  (See Murphy v. Allstate Ins. Co. (1976) 17 Cal.3d 937, 132 Cal.Rptr. 424, 553 P.2d 584.)   Nor could he sue the insurer under a third-party beneficiary theory.  (Ibid.)  His only recourse came if an insurer in bad faith refused to settle with him for an amount within the insured's policy coverage.   If subsequently at trial the third-party claimant received a judgment in excess of the policy, the insured could assign to him the insured's cause of action for breach of the implied covenant of good faith and fair dealing.  (Id., at p. 942, 132 Cal.Rptr. 424, 553 P.2d 584.)

The Royal Globe Court examined the 15 categories of unfair claims settlement practices and found that:  “[T]he language of subdivision (h) demonstrates that it was intended to prohibit unfair settlement practices by insurers directed against both claimants and insureds.   For example, the subdivision prohibits misrepresenting the facts regarding policy coverage to claimants (subd. (h)(1)), misleading a claimant as to the applicable statute of limitations (subd. (h)(15)), and advising a claimant not to obtain the services of an attorney (subd. (h)(14)).   Some of the subdivisions refer to claimants and insureds separately (subds. (h)(10), (h)(11)), and others only to insureds (subds. (h)(6), (h)(7)).   Thus, the subdivision by its own terms extends certain of its protections to claimants, some to insureds, and others to both claimants and insureds.”  (Id., 23 Cal.3d at p. 888, 153 Cal.Rptr. 842, 592 P.2d 329.)   Notably, missing from the Court's analysis is any reference to subdivision (h)(3) and (12)

It appears to us that subdivisions (h)(3) and (12) extend protection only to insureds and do not in and of themselves provide third-party claimants with the right of action over and above the general right of action under the Royal Globe rationale.

The judgment is affirmed.


1.   The record does not reveal whether Placido was found to be comparatively negligent.

2.   All further references are to the Insurance Code unless otherwise indicated.

3.   Placido has singled out three of these categories as applicable here:“(1) Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies.   (§ 790.03, subd. (h)(3).)“(2) Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear.   (§ 790.03, subd. (h)(5));  and“(3) Failing to settle claims promptly, where liability has become apparent, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.  (§ 790.03, subd. (h)(12).)”

4.   To further demonstrate its good faith in trying to settle with Placido, USF & G points to the fact that in his deposition Placido stated he purchased the truck in 1975 for only $2,700 and that in the six years before the accident had driven the vehicle 60,000 miles.

COMPTON, Associate Justice.

ROTH, P.J., and BEACH, J., concur.

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