FARAH v. WILSON (1989)

In this proceeding, Nemeh Farah, Fadel Mubaraka and Youssief Alsaddi, petitioners, seek a writ of mandate directing the superior court, respondent, to vacate its order sustaining the demurrer of Frank Wilson, real party in interest, to the first count of their complaint against him alleging violations of Insurance Code section 790.03 ¹ (hereinafter the Unfair Trade Practices Act or the act) which proscribes certain claims settlement practices.

The basis of the superior court's order was that the Unfair Trade Practices Act is inapplicable to claims adjusters like Wilson who was, at all times relevant to petitioner's action, the branch claims manager for Transport Indemnity Company, another named defendant.²  The question before this court is whether the act regulates the activity of employee adjusters making them personally liable for their violations of the act.   Two decisions have concluded that the act is applicable to independent adjusters.  (Davis v. Continental Ins. Co. (1986) 178 Cal.App.3d 836, 224 Cal.Rptr. 66;  Bodenhamer v. Superior Court (1986) 178 Cal.App.3d 180, 223 Cal.Rptr. 486.)

Perceiving no significant differences between employee adjusters and independent adjusters, we grant the relief sought.

The facts are these:  On October 2, 1980, petitioners were involved in a car accident with another vehicle insured by Transport Indemnity Company (insurer).   Petitioners presented claims to the insurer for injuries they sustained in the accident.   Their claims were handled almost exclusively by real party in interest, Frank Wilson (Wilson), the insurer's branch claims manager.

In November 1983, petitioners offered to settle their respective claims in the amounts of $27,500, $300,000, and $30,000.   The insurer delayed for a year before ultimately rejecting the offers.   Instead, on November 8, 1984, the insurer through Wilson offered to settle all those claims for $100,000.   When petitioners asked for an explanation of the offer, Wilson made a statement indicating that the offers reflected racism.

On April 24, 1985, after a trial at which a verdict was returned in petitioners' favor, the insurer settled petitioners' claims for an amount substantially similar to those demanded in November 1983.   Thereafter, on February 12, 1986, petitioners filed a complaint against both the insurer and Wilson.   The complaint consisted of two counts.   In count one, petitioners alleged the insurer's and Wilson's breach of statutory duties set forth in section 790.03.   Specifically, petitioners alleged a breach of an insurer's duty to attempt to effectuate a good faith settlement of claims as to which liability has become reasonably clear.  (§ 790.03, subd. (h)(5).)   Petitioners also alleged a breach of an insurer's duty to provide a prompt and reasonable explanation of the basis for denial of a settlement offer.  (§ 790.03, subd. (h)(13).)   The second count of petitioners' complaint alleged the intentional infliction of emotional distress against both the insurer and Wilson.

Wilson demurred to both counts of the complaint.³  On April 11, 1986, the superior court granted Wilson's demurrer as to count one only without leave to amend.   The basis of respondent's ruling was its belief that the Unfair Trade Practice Act is inapplicable to insurance adjusters.

On May 12, 1986, this petition was filed.   Thereafter, on July 28, 1986, we issued an alternative writ of mandate.

We then granted the writ of mandate sought by petitioners directing the trial court to overrule real party's demurrer.   Review of our decision was granted by the Supreme Court.   On December 8, 1988, 764 P.2d 699 the case was retransferred to this division with directions to vacate our previous opinion and reconsider the matter in light of Moradi–Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287, 250 Cal.Rptr. 116, 758 P.2d 58.

We have complied with the direction of the Supreme Court and, as modified, reassert our opinion as originally set forth granting the petition.

In Moradi–Shalal v. Fireman's Fund Ins. Companies, supra, 46 Cal.3d 287, 250 Cal.Rptr. 116, 758 P.2d 58, the Supreme Court overruled its prior decision in Royal Globe Ins. Co. v. Superior Court (1979) 23 Cal.3d 880, 153 Cal.Rptr. 842, 592 P.2d 329.  (Moradi–Shalal, supra, 46 Cal.3d at p. 292, 250 Cal.Rptr. 116, 758 P.2d 58.)  Royal Globe had held that Insurance Code section 790.03, subdivision (h), created a private right of action against insurers who committed the unfair practices enumerated in that section.   Further, this right of action was available to third party claimants, as well as the insurer's insureds, subject to the limitation that “the third party's suit may not be brought until the action between the injured party and the insured is concluded.”  (Royal Globe, supra, 23 Cal.3d at p. 884, 153 Cal.Rptr. 842, 592 P.2d 329.)

Moradi–Shalal abolished such actions but was made “prospective only, that is, applicable only to cases filed after the date our opinion herein becomes final.”  (Moradi–Shalal, supra, 46 Cal.3d at p. 292, 250 Cal.Rptr. 116, 758 P.2d 58.)   Surviving Royal Globe actions, however, became subject to the further requirement that “there must be a conclusive judicial determination of the insured's liability before the third party can succeed in an action against the insurer under section 790.03.”  (Moradi–Shalal, supra, at p. 306, 250 Cal.Rptr. 116, 758 P.2d 58.)

In adopting this requirement of a judicial predetermination of the insured's liability, the Moradi–Shalal court intended to resolve a dispute among divisions of the Court of Appeal.   That dispute concerned the proper interpretation of Royal Globe's language, quoted above, that the underlying action be concluded.  Moradi–Shalal overruled decisions by certain divisions of the Court of Appeal, including this court, which had held that a settlement was a sufficient conclusion to the underlying action against the insured to permit the third party to proceed with a Royal Globe action.  (Moradi–Shalal, supra, 46 Cal.3d at pp. 310–313, 250 Cal.Rptr. 116, 758 P.2d 58.)   Rather, “the applicable rule is that the insured's liability must be judicially determined before a Royal Globe action can be brought.”  (Moradi–Shalal, supra, at p. 313, 250 Cal.Rptr. 116, 758 P.2d 58.)

The impact of Moradi–Shalal on the case before us is two-fold.   We must first determine whether anything in that decision compels a different result on the central issue of this writ proceeding, to wit, is the Unfair Trade Practices Act applicable to in-house insurance adjusters.   Second, assuming that Moradi–Shalal does not compel a different result, we must then address the question of whether there was a conclusive judicial determination of the insured's liability in the underlying action.

I

 Real party argues that the language in Moradi–Shalal permitting the continuation of preexisting Royal Globe actions “against the insurer” (Moradi–Shalal, supra, 46 Cal.3d at p. 305, 250 Cal.Rptr. 116, 758 P.2d 58), was intended to preclude such actions against the insurer's in-house adjusters.   We disagree.

“Language used in any opinion is of course to be understood in the light of the facts and the issue then before the court, and an opinion is not authority for a proposition not therein considered.  [Citation.]”  (Ginns v. Savage (1964) 61 Cal.2d 520, 524, fn. 2, 39 Cal.Rptr. 377, 393 P.2d 689.)

Insofar as it affects surviving Royal Globe actions, the only issue before the Supreme Court in Moradi–Shalal was whether a settlement constituted a conclusion of the underlying action against the insured.  “[W]e must now decide whether settlement of the third party's underlying claim against the insured ‘concludes' the action within the meaning of Royal Globe, so that after settling the underlying claim a claimant can bring a subsequent suit against the insurer under section 790.03, subdivision (h).”  (Moradi–Shalal, supra, 46 Cal.3d at pp. 305–306, 250 Cal.Rptr. 116, 758 P.2d 58.)

Nowhere in that decision does the Supreme Court consider, expressly or by necessary implication, the applicability of the Unfair Trade Practices Act to in-house insurance adjusters.   Since Moradi–Shalal is silent on the issue, we are not inclined to resort to conjecture in interpreting its impact.   Moradi–Shalal does not compel a particular resolution of this issue under the principles of stare decisis expounded in Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455, 20 Cal.Rptr. 321, 369 P.2d 937.   After review of our prior resolution of this issue, we remain convinced of its correctness, and continue to adhere to it.⁴  We set it forth in its entirety:

Whether the Unfair Trade Practices Act is applicable to in-house insurance adjusters has been addressed in the context of the bad faith liability of independent adjusters in two recent opinions both of which extended that liability.  (Davis v. Continental Ins. Co., supra, 178 Cal.App.3d 836, 224 Cal.Rptr. 66;  Bodenhamer v. Superior Court, supra, 178 Cal.App.3d 180, 223 Cal.Rptr. 486.)   Hence, the field we enter has been partially ploughed.

The contentions of the parties center around two questions of statutory construction.   The first is whether, by necessary implication, adjusters are among those statutorily defined persons, to whom the statute applies.   The second is whether adjusters are persons engaged in the business of insurance so as to trigger application of the act though they are not specifically named as such persons.   While closely related, these questions are not identical.   In approaching them, we are guided by any number of rules of statutory construction;  we set forth those most relevant to this case.

“Words of a statute must be given such interpretation as will promote rather than defeat the general purpose and policy of the law.  [Citation.]”  (People v. Centr–O–Mart (1950) 34 Cal.2d 702, 704, 214 P.2d 378.)  “In ascertaining [legislative intent], a statute must be read and considered as a whole, and each section must be reconciled with the other and given effect, if possible.  [Citations.]”  (Marrujo v. Hunt (1977) 71 Cal.App.3d 972, 977, 138 Cal.Rptr. 220.)  “ ‘That construction of a statute should be avoided which affords an opportunity to evade the act, and that construction is favored which would defeat subterfuges, expediencies, or evasions employed to continue the mischief sought to be remedied by the statute, or to defeat compliance with its terms, or any attempt to accomplish by indirection what the statute forbids.’   [Citations.]”  (Freedland v. Greco (1955) 45 Cal.2d 462, 468, 289 P.2d 463.)  “[A]lthough the courts are not at liberty to impute a particular intention to the Legislature when nothing in the language of the statute implies such intention, where the main purpose of the statute is expressed the courts will construe it so as to effectuate that purpose by reading into it what is necessary or incident to the accomplishment of the object sought.   [Citations.]”  (Rushing v. Powell (1976) 61 Cal.App.3d 597, 604, 130 Cal.Rptr. 110.)

A.

The first question before us arises from the fact that adjusters are not explicitly named in the section of the act that lists those to whom it applies.  (§ 790.01.)   Petitioners argue that we must imply the term based on ejusdem generis, a rule of statutory construction.   Real party argues that the term was intentionally omitted and cannot be read back into the act.   Before entering into this debate, a bit of background is necessary.

 The Unfair Trade Practices Act was adopted in 1959 and was patterned after the National Association of Insurance Commissioners' model legislation.   (Royal Globe, supra, 23 Cal.3d p. 885, 153 Cal.Rptr. 842, 592 P.2d 329.)   The stated purpose of the act is “to regulate trade practices in the business of insurance ․ by defining ․ such practices in this State which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined.”  (§ 790.)   In 1972, the act was amended, consistent with the amendment to the model legislation, to specifically prohibit unfair claims settlement practices.  (Royal Globe, supra, 23 Cal.3d at p. 885, 153 Cal.Rptr. 842, 592 P.2d 329.)   It is clear, therefore, that the act was intended by the Legislature to remedy a perceived evil in certain practices of the insurance industry including unfair claims settlement practices.

The specific controversy as to the applicability of the act to adjusters centers around the language of section 790.01.   Section 790.01 states that the act is applicable to “reciprocal and interinsurance exchanges, Lloyds insurers, fraternal benefit societies, fraternal fire insurers, grants and annuities societies, insurers holding certificates of exemptions, motor clubs, nonprofit hospital associations, agents, brokers, solicitors, surplus line brokers and special lines surplus line brokers as well as all other persons engaged in the business of insurance.”  (Emphasis added.)

 Petitioners contend that, under the doctrine of ejusdem generis, the omnibus concluding language of section 790.01 must be construed to include adjusters.   The doctrine of ejusdem generis provides that “ ‘where general words follow specific words in an enumeration, the general words are construed to embrace things similar in nature to those things enumerated by the preceding specific words.’ ”  (Davis v. Continental Ins. Co., supra, 178 Cal.App.3d at p. 839, 224 Cal.Rptr. 66, quoting People v. Hernandez (1978) 90 Cal.App.3d 309, 315, 155 Cal.Rptr. 1.)   Hence, petitioners argue adjusters are, by necessary implication, among those “persons engaged in the business of insurance” to whom the statute applies based on the similarity of their functions to those persons and entities specifically listed in the statute.⁵

Real party relies on another rule of statutory construction, a variation of the adage expressio unius est exclusio alterius.   Real party points out that when the act was adopted, in 1959, the model legislation on which it was based included the phrase “agents, brokers and adjusters” among those persons to whom it applied.   Real party argues that the omission of adjusters from the act was a deliberate manifestation by the Legislature that they were not to be subject to its provisions.

 Faced with this same argument, the court in Bodenhamer v. Superior Court, supra, 178 Cal.App.3d at page 184, 223 Cal.Rptr. 486, concluded:  “What we deem significant is that the mention of ‘adjusters' in the model act is only by way of illustration of those who are ‘engaged in the business of insurance’ and that the Act in section 790.01 uses very similar language in taking the same approach:  its many examples are not exclusive.   That an adjuster is clearly seen by the drafters of the model act to be within the definition of ‘any other legal entity engaged in the business of insurance’ could not have escaped the California Legislature which simply used another list of examples.   Thus we do not regard this minor difference between the model act and the Act as indicative of an intent to exclude adjusters.”

Whatever was intended in 1959, the Legislature's adoption of the 1972 amendment extending the act to claims settlement practices requires us to read section 790.01 as including adjusters among those persons engaged in the business of insurance for the purposes of the act.   As petitioners' complaint illustrates, adjusters are an integral part of the settlement process and in a position to engage in the very practices proscribed by the statute.

This construction of section 790.01 is consistent with one of the remedial purposes of the statute which is to root out unfair claims settlement practices.   Since adjusters are intimately connected with claims settlement, we must read the act to include them as those to whom the act's proscriptions apply.   By contrast, to adopt real party's argument would permit evasion of the purpose of the act, defeat its stated policy, and allow adjusters to violate its specific provisions with impunity.   Such a result would be completely insupportable.

B.

 The next question before us is whether adjusters are persons “engaged in the business of insurance.”   It is plain that for the purposes of the act they are.

In Illinois Commercial Men's Assn. v. State Bd. of Equalization (1983) 34 Cal.3d 839, 849, 196 Cal.Rptr. 198, 671 P.2d 349, the Supreme Court stated:  “[T]he investigation and settlement of claims is an integral and crucial aspect of the business of insurance.”   Though not made in the context of a bad faith action, the court's conclusion is directly relevant to cases arising under the Unfair Trade Practices Act.   In Richardson v. GAB Business Services, Inc. (1984) 161 Cal.App.3d 519, 525, 207 Cal.Rptr. 519, an early case discussing the applicability of the act to independent adjusters, the court assumed without deciding that the act applied to employee adjusters “because claims investigation, processing and handling are inextricably wound up with the business of an insurance company․”  In Davis v. Continental Ins. Co., supra, 178 Cal.App.3d at page 841, 224 Cal.Rptr. 66, extending liability for violations of the act to independent adjusters, the court observed:  “From the perspective of the policyholders who have faithfully paid their premiums, the most essential part of the business of insurance is the prompt and forthright investigation and payment of their claims.”

Additionally, under the rule that statutes themselves are manifestations of legislative intent, the mere fact that the Legislature chose to proscribe certain claims settlement practices makes it clear that claims settlement is part of the business of insurance for the purposes of the act.   Since it would be entirely incongruous to regulate the practices without also regulating the practitioners, it is plain that the act applies to adjusters.

Nonetheless, real party contends that adjusters are not in the business of insurance because they are not personally required to indemnify policyholders in the event of loss.   In support of this argument, real party relies mainly on Metropolitan Life Ins. Co. v. State Bd. of Equalization (1982) 32 Cal.3d 649, 186 Cal.Rptr. 578, 652 P.2d 426, and California Physicians' Service v. Garrison (1946) 28 Cal.2d 790, 172 P.2d 4.   It is apparent that real party has confused those who are insurers generally with those who are engaged in the business of insurance for the regulatory purposes of the act.   That the two are not synonymous is evident from the inclusion in section 790.01 of “agents, brokers, solicitors, surplus line brokers and special lines surplus line brokers” none of whom, as real party concedes, are obligated to personally indemnify policyholders and yet are subject to the act.   The two cases cited by real party address only the question of who is an insurer and are not remotely definitive of what is the business of insurance under the act.

The issue in the Garrison case was summarized in the Metropolitan Life decision as follows:  “[W]hether [the California Physicians' Service] was an ‘insurer’ and hence subject to statutory financial responsibility requirements or a mere ‘health care service plan’ exempt from the statutory requirements.”  (Metropolitan Life Ins. Co. v. State Bd. of Equalization, supra, 32 Cal.3d at p. 656, 186 Cal.Rptr. 578, 652 P.2d 426.)   The issue in Metropolitan Life was whether employers to whom Metropolitan Life claimed to have shifted 90 percent of the obligation for medical benefit coverage for their employees were themselves insurers or merely agents for Metropolitan Life.   The question arose in connection with whether the state franchise tax on the gross premiums received by insurers should be levied on only those premiums paid directly to Metropolitan Life by the employer which Metropolitan Life claimed mandated a 90 percent reduction in its tax liability.

As is evident from these brief summaries of the two cases, they do not relate to our issue.

Equally inapposite is Wilson v. Household Finance Corp. (1982) 131 Cal.App.3d 649, 182 Cal.Rptr. 590.   In Wilson, the plaintiff borrowed money from a finance company which, acting as an agent for an insurer, issued a group disability insurance certificate.   The insurance certificate provided basically that if the plaintiff became disabled, the insurer would pay benefits in the amount of the borrower's monthly installment payment.   The borrower's claim was to be made through the creditor's office to which the borrower's payments were made.   The borrower became totally disabled and made a claim under the insurance certificate.   The benefits were never paid and the finance company sued to recover payments on the loan.   The borrower then sued both the finance company and the insurer under the Unfair Trade Practices Act.   A demurrer was sustained without leave to amend to such causes of action against the finance company.   On appeal, the order was affirmed and the action dismissed because the finance company “did not obligate itself to pay the claim and was not an insurer.”  (Id., at p. 653, 182 Cal.Rptr. 590.)

Wilson holds, simply, that a finance company that assists a borrower in securing a disability policy as an incident to a loan does not thereby become an insurer subject to the Unfair Trade Practices Act.   Real party seeks to extend Wilson to himself, arguing that since he personally does not indemnify policyholders, he is not an insurer to whom the act applies.   Clearly, the act does not require one to be an insurer, but to be engaged in the business of insurance as defined by the practices which the act regulates.

Regardless of whether real party has a personal obligation to indemnify policyholders, the fact remains that he is employed by an insurer which is so obligated, and that his employment involves the settlement of claims, an area regulated by the Unfair Trade Practices Act.  Wilson is, therefore, of no assistance to him.   We conclude that an employee claims adjuster like an independent adjuster is a person engaged in the business of insurance, the regulation of whose conduct is essential to the act.

C.

(1)

Real party also argues that the use by the Legislature of the word adjuster in other provisions of the Insurance Code (§§ 761, 770, and 816) unrelated to the Unfair Trade Practices Act evinces an intention that adjusters not be included within the ambit of the act.   This argument is without merit.   First, as discussed in parts II and III of this opinion, we are required to construe the statute so as to effectuate its remedial purpose and serve the policies upon which it is based.   The construction that real party urges upon us is utterly inconsistent with this duty.   Second, the use of the word adjuster in unrelated provisions scattered throughout the code and which were not adopted contemporaneously with the Unfair Trade Practices Act is simply not relevant to the issue of whether adjusters are subject to the act.⁶

(2)

Real party also argues that applying the Unfair Trade Practices Act to employee adjusters would create an “unbearable conflict of interest” between such adjusters and their employers, the insurance companies.   The implication of this argument is that if an adjuster is told to engage in unfair settlement claim practices by his employer, it would create a conflict of interest to subject him to personal liability for such practices because he would be torn between what his employer requires and what the law demands.   While this argument is illuminating by its implications, it is, to say the least, unpersuasive.   Those who live under the law's protections are required to comply with its mandates.   If extending liability under the Unfair Trade Practices Act to employee adjusters promotes compliance with the law, then this is an argument for such extension, not against it.

D.

Other than this claim of a conflict of interest, real party makes no argument why liability under the act should not be extended to employee adjusters as opposed to independent adjusters to whom it has already been extended in Bodenhamer v. Superior Court, supra, 178 Cal.App.3d 180, 223 Cal.Rptr. 486, and Davis v. Continental Ins. Co., supra, 178 Cal.App.3d 836, 224 Cal.Rptr. 66.   In Bodenhamer, the independent adjuster argued that liability under the act, if applicable to adjusters at all, should apply only to those who are employees of insurers.   The court observed it “would be odd ․ to construe the Act as prohibiting unfair settlement practices by employees of an insurance company but ․ not prohibiting identical acts when perpetuated by an independent adjuster working for an insurance company.”   (Bodenhamer v. Superior Court, supra, 178 Cal.App.3d at p. 184, 223 Cal.Rptr. 486.)   Likewise, there is no reason to impose liability on independent adjusters for practices proscribed by the act without also imposing it on an employee adjuster who engages in the same practices.   Moreover, as petitioners' point out, it may be that an employee adjuster's conduct, though a violation of the statute, was beyond the scope of his authority and not ratified by his employer.   By not allowing suit against the employee adjuster, the plaintiff would be left without a viable action, a result hardly consistent with the purpose of the act.

II

 The second issue presented by the Supreme Court's decision in Moradi–Shalal is whether there was a “conclusive judicial determination of the insured's liability” (Moradi–Shalal, supra, 46 Cal.3d at p. 306, 250 Cal.Rptr. 116, 758 P.2d 58) in this case, so as to permit petitioners to maintain their bad faith action.⁷

It is alleged in petitioners' complaint, and undisputed by Wilson, that there was a jury determination of the insured's liability in a bifurcated trial.   The case was settled only after the verdict on liability had been rendered.   Petitioners maintain that the jury verdict satisfied the Moradi–Shalal requirement.   Real party contends that a final judgment is required.   We conclude that there was a conclusive judicial determination of the insured's liability in the underlying action sufficient to satisfy the Moradi–Shalal requirement.

Moradi–Shalal instructs by negative example, rather than by affirmative statement, as to what is meant by the phrase “conclusive judicial determination of the insured's liability.”   In part VI of its opinion, which is the relevant section, the court holds that a settlement and dismissal, even with an admission of liability by the insurer, is an insufficient conclusion to the underlying action.  (46 Cal.3d at p. 310, 250 Cal.Rptr. 116, 758 P.2d 58.)   The remaining discussion explains the holding.

Preliminarily, we examine the reasons given by the court for rejecting settlement as a sufficient conclusion of the underlying action to see whether these reasons apply with equal force to the facts before us, and to better understand the meaning of “conclusive judicial determination.”

The court gave six reasons in support of its holding:  (1) allowing determination of the insurer's liability during the bad faith trial would necessarily require proof of the underlying insurance policy contrary to Evidence Code section 1155;  (2) “existence of a previous settlement would improperly influence a jury's evaluation of the insured's liability”;  (3) litigation of the insured's liability after settlement would defeat the very purpose of such settlement which is to avoid litigating fault;  (4) third party claimants would enjoy an unfair advantage if they could retain settlement proceeds and then sue for additional compensation based on the failure of the insurer to provide a larger settlement;  and (5) arguably, a “settlement combined with a dismissal with prejudice legally precludes litigating the liability of the insured.”  (Moradi–Shalal, supra, 46 Cal.3d at pp. 311–312, 250 Cal.Rptr. 116, 758 P.2d 58.)

Each of these reasons is directed at litigation of liability in the Royal Globe action where there has been no prior determination of the insured's liability.   In the case before us the insured's liability has been determined by jury verdict eliminating the need for further relitigation of the issue.   The court's concerns, therefore, are inapplicable to our situation.

Real party insists, however, that what is required by Moradi–Shalal is not simply a final judicial determination of the insured's liability, but a final judgment.   This argument ignores both the language of Moradi–Shalal and the fact that, for purposes of the insured's liability, there does exist the equivalent of a final judgment in this case.

It is true that the Supreme Court stated that it was adopting “the reasoning of Nationwide [Ins. Co. v. Superior Court (1982) 128 Cal.App.3d 711, 180 Cal.Rptr. 464], requiring a final judgment determining the insured's liability before the institution of a Royal Globe action.”  (Moradi–Shalal, supra, 46 Cal.3d at p. 311, 250 Cal.Rptr. 116, 758 P.2d 58.)   The court's express holding, however, makes no reference to a requirement of a final judgment;  “[w]e will hold ․:  there must be a conclusive judicial determination of the insured's liability” prior to institution of a Royal Globe action.  (Id., at p. 306, 250 Cal.Rptr. 116, 758 P.2d 58.)

Additionally, when we examine the “reasoning” behind the Nationwide court's requirement of a final judgment, we find that the court's concern with finality relates to a res judicata issue which is not present in the case before us.

The court in Nationwide stated:  “When a court speaks of a final determination of liability it has reference to a judgment that is final for res judicata purposes ․ [otherwise] the insurer would not be collaterally estopped by the judgment from relitigating in the third party actions facts relating to the question of liability and damages.”  (Nationwide Ins. Co. v. Superior Court, supra, 128 Cal.App.3d at p. 715, 180 Cal.Rptr. 464.) ⁸

In Nationwide, the Royal Globe action was filed while the appeal of the underlying action was still pending, making the underlying judgment vulnerable to reversal and retrial.   Since reversal would vacate the prior judgment and reopen the issue of the insured's liability, that judgment was not final for res judicata purposes.   In the instant case, however, the jury's finding of liability suffers no such vulnerability and is final for purposes of res judicata.  (Louie Queriolo Trucking, Inc. v. Superior Court (1967) 252 Cal.App.2d 194, 200, 60 Cal.Rptr. 389;  Sandoval v. Superior Court (1983) 140 Cal.App.3d 932, 937–938, 190 Cal.Rptr. 29.)

In Louie Queriolo Trucking, Inc. v. Superior Court, supra, 252 Cal.App.2d 194, 60 Cal.Rptr. 389, the Fifth District held that a retraxit (settlement plus dismissal with prejudice) coming after a jury verdict finding the defendant liable amounts to a judgment on the merits in plaintiff's favor for purposes of res judicata.  (Id., at p. 200, 60 Cal.Rptr. 389.)   Subsequently, in Sandoval v. Superior Court, supra, 140 Cal.App.3d at pages 937–938, 190 Cal.Rptr. 29, the Fifth District reiterated and adhered to its earlier decision, declining to follow a contrary decision, Lea v. Shank (1970) 5 Cal.App.3d 964, 85 Cal.Rptr. 709.

The existence of a prior judicial determination of the insured's liability distinguishes this case from those cases, condemned by the Moradi–Shalal decision, in which there was a settlement and dismissal with prejudice but without adjudication of the liability issue.  Moradi–Shalal holds that such settlements without adjudication of liability are not a sufficient conclusion of the underlying action under Royal Globe.  (Moradi–Shalal, supra, 46 Cal.3d at p. 310, 250 Cal.Rptr. 116, 758 P.2d 58.)   The court's use of the phrase “judicial determination of the insured's liability” is nowhere expressly equated with a final judgment.   Instead, it seems to require a judicial determination of liability as opposed to an admission of liability as a condition of settlement or simple settlement and dismissal with prejudice and without a determination of liability.

In the case before us the settlement and dismissal came after a jury verdict finding the insured liable.   This, for purposes of res judicata, is tantamount to a judgment on the merits in favor of the third party claimant.   Accordingly, in this case not only is it unnecessary to relitigate the issue of the insured's liability because of the prior jury verdict but such relitigation is precluded by the res judicata effect of that verdict on this action.   We cannot conceive of a more final or conclusive judicial determination of the insured's liability.

We hold, therefore, that the jury verdict establishing the insured's liability sufficiently concludes the underlying action so as to permit a subsequent bad faith action against the insurer.⁹

Let a peremptory writ of mandate issue directing respondent to vacate its order of April 11, 1986, in Los Angeles Superior Court case No. C 587140, entitled Nemeh Farah, Fadel Mubaraka and Youssief Alsaddi v. Transport Indemnity, Transport Insurance Company, Mission Insurance Company, Frank Wilson, et al., sustaining defendant Frank Wilson's demurrer to the first count of the complaint without leave to amend and make a new and different order overruling that demurrer.   Petitioners to recover costs.

We concur:

FOOTNOTES

1.   All statutory references are to the Insurance Code.

2.   Also named as defendants in the complaint are Transport Indemnity, Transport Insurance Company, and Mission Insurance Company.   These defendants are not part of this proceeding.

3.   Real party's demurrer to count two was overruled, and it is not a part of the present proceeding.

4.   Real party cites us to Isaacson v. California Ins. Guarantee Assn. (1988) 44 Cal.3d 775, 244 Cal.Rptr. 655, 750 P.2d 297, which he concedes is outside the scope of Moradi–Shalal.   The Supreme Court's retransfer was quite clear, directing us to vacate our previous opinion and reconsider it solely in light of Moradi–Shalal.   Since, however, Isaacson is a decision of our highest court, we have also examined it and find it distinguishable from the case before us.Isaacson involved a bad faith action against the California Insurance Guarantee Association (CIGA).   The Supreme Court held that CIGA was exempt from the provisions of the Unfair Practices Act for reasons which make Isaacson inapposite here.   The court observed that CIGA “is not, and was not created to act as, an ordinary insurance company” (Isaacson, supra, 44 Cal.3d at p. 786, 244 Cal.Rptr. 655, 750 P.2d 297), and, further, its “ ‘business' is providing insureds with a limited form of protection from financial loss occasioned by the insolvency of their insurer.”   (Isaacson, supra, at p. 787, 244 Cal.Rptr. 655, 750 P.2d 297.)   Moreover, the legislation creating CIGA specifically limits its liability (Ins.Code, § 1063.12, subd. (a)) evincing “a legislative intent that CIGA not be subject to tort liability for its conduct relating to the handling of claims, ․” (Isaacson, supra, at p. 785, 244 Cal.Rptr. 655, 750 P.2d 297.)   These unique considerations simply do not exist with respect to insurance adjusters and Isaacson is, therefore, of no assistance to real party.

5.   We do not find it necessary to rely on the doctrine of ejusdem generis to resolve this issue.Real party argues that the persons and entities listed in section 790.01 are similar because each requires a license or certificate to do business while employee adjusters do not.   This argument is without merit for two reasons.   First, whether a person is licensed to transact insurance is not determinative of whether that person engages in the business of insurance.   Second, the insurance companies for whom employee adjusters work are licensed, obviating the need for the licensing of individual employees.

6.   Sections 761, 770, and 816 were first adopted in, respectively, 1935, 1951, and 1965.

7.   This issue was not discussed in our original opinion.

8.   Though not a problem in the case before us, the Nationwide court also lists as reasons for its requirement of a final judgment in the underlying action, Royal Globe's concerns, that otherwise, “defense of the insured may be hampered by discovery against the insurer and damages may best be determined after conclusion of the action against the insured.”   (Nationwide Ins. Co. v. Superior Court, supra, 128 Cal.App.3d at p. 714, 180 Cal.Rptr. 464.)

9.   Real party argues that a conclusive judicial determination of the insured's liability as the phrase is used by Moradi–Shalal also requires a verdict on damages.   The reasoning of the decision fails to support this argument.

ARLEIGH M. WOODS, Presiding Justice.

McCLOSKY and GOERTZEN, JJ., concur.