MELLO v. OCCIDENTAL LIFE INSURANCE COMPANY OF CALIFORNIA (1982)

On these cross-appeals of plaintiff Francis V. Mello and defendant Occidental Life Insurance Company (Occidental Life), the record consists of an agreed statement of the parties.  (See Cal.Rules of Court, rule 7.)

By the complaint's first cause of action, plaintiff sought benefits due under a contract of disability insurance.   The second cause of action sounded in tort, for wrongful termination of the insurance contract.   A jury returned its verdicts in plaintiff's favor for $12,000 on the first cause of action, and for $7,000 on the second.   Occidental Life's motion to tax the costs of plaintiff's $5,415.85 cost bill was granted as to $3,217.82 and denied as to $2,198.03, and plaintiff's motion for attorney's fees was granted in the amount of $15,000.   Judgment was thereafter entered accordingly.

Plaintiff appeals from the judgment insofar as it limits his costs to $2,198.03.   Occidental Life appeals from that portion of the judgment awarding attorney's fees.

We consider first the appeal of plaintiff.

 Allowable costs are those “necessarily incurred” in the action.   (Civ.Code, § 1033;  Moss v. Underwriters' Report, Inc. (1938) 12 Cal.2d 266, 274, 38 P.2d 503;  4 Witkin, Cal.Procedure (2d ed.1971) Judgment, § 100(a), p. 3256.)

The disputed costs are described in their entirety in plaintiff's cost bill as follows:

 The settled statement is barren as to evidence whether the above additional costs, or any of them, were necessarily incurred by plaintiff, or as to findings of the trial court that they had been so necessarily incurred.   Nor are we, ourselves, able to determine that issue from the scant record furnished us.   And the burden of proof that they were necessarily incurred rested upon plaintiff.  (Murphy v. F.D. Cornell Co. (1930) 110 Cal.App. 452, 454, 294 P. 490.)  “Without a record that reveals error it will be presumed that there was no error.”  (Garrett v. Shenson Meat Co. (1970) 5 Cal.App.3d 69, 74, 85 Cal.Rptr. 65.)   We apply that presumption here.

We advert now to the appeal of Occidental Life from the judgment insofar as it awards plaintiff attorney's fees.

 By their award to plaintiff of $7,000 of damages on the complaint's second cause of action, the jury necessarily found that Occidental Life had tortiously and wrongfully terminated disability payments agreed to be made to plaintiff under an insurance policy.   Such conduct of an insurer, as here found by the jury, will sound in tort, and in breach of contract.  (Johansen v. California State Auto. Assn. Inter-Ins. Bureau (1975) 15 Cal.3d 9, 18, 538 P.2d 744;  Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 574, 510 P.2d 1032.)  (No support is found in the settled statement for Occidental Life's contention that in the superior court, or here, plaintiff had waived the tort theory of action.)

We note initially that the attorney's fee award was not expressly supported by agreement of the parties, or by statute;  the parties appear to be in accord.

Early pronouncements of the state's reviewing courts, exemplified by O'Morrow v. Borad (1946) 27 Cal.2d 794, 801, 167 P.2d 483, beyond any doubt had uniformly held, in an insurance policy context as elsewhere, “that in the absence of contract or statutory provision, the services of an attorney must be paid for by the client who employs him.”   But more recently California's courts appear to have departed from the strict concept that the right to attorney fees depends upon statute or an express contract therefor between an insurer and its insured.   The forerunner of this departure must reasonably be deemed the well-known case of Crisci v. Security Ins. Co. (1967) 66 Cal.2d 425, 58 Cal.Rptr. 13, 426 P.2d 173.

Crisci espoused the concept that an important consideration for the promises of an insurance policy, “as insurers are well aware, is the peace of mind and security it will provide” in the event of the happening of the peril insured against.  (66 Cal.2d p. 434, 58 Cal.Rptr. 13, 426 P.2d 173.)

 Crisci's premise has frequently been elaborated by the same court.   “The implied promise [of Crisci] requires [the insurer] to refrain from doing anything to injure the right of the [insured] to receive the benefits of the agreement.”  (Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 818, 169 Cal.Rptr. 691, 620 P.2d 141 [cert. den., 445 U.S. 912 (63 L.Ed.2d 597, 100 S.Ct. 1271) ], italics added;  and see Johansen v. California State Auto. Assn. Inter-Ins. Bureau, supra 15 Cal.3d 9, 20, 538 P.2d 744;  Silberg v. California Life Ins. Co. (1974) 11 Cal.3d 452, 460, 521 P.2d 1103.)   And as to the implied covenant of good faith, the lack of such good faith will be established when the insurer shall “erroneously,” or “improperly,” fail to abide by the policy's promises;  actual “bad faith” or “misconduct” is not essential.  (Neal v. Farmers Ins. Exchange, (1978) 21 Cal.3d 910, 921–922, fn. 5, 148 Cal.Rptr. 389, 582 P.2d 980;  Johansen v. California State Auto. Assn. Inter-Ins. Bureau, supra, 15 Cal.3d p. 16, fn. 4, 538 P.2d 744;  Gruenberg v. Aetna Ins. Co., supra, 9 Cal.3d 574, 510 P.2d 1032;  Crisci v. Security Ins. Co., supra, 66 Cal.2d 425, 430, 58 Cal.Rptr. 13, 426 P.2d 173;  State Farm Mut. Auto. Ins. Co. v. Allstate Ins. Co., (1970) 9 Cal.App.3d 508, 530, 88 Cal.Rptr. 246.)

 Recent cases have departed even further from the strict “contractual attorney fee relationship” rule of O'Morrow v. Borad, supra, 27 Cal.2d 794, 167 P.2d 483.   The relationship between the insurer and its insured is now deemed fiduciary in nature.  (Egan v. Mutual of Omaha Ins. Co., supra, 24 Cal.3d 809, 820, 169 Cal.Rptr. 691, 620 P.2d 141;  Spindle v. Chubb/Pacific Indemnity Group (1979) 89 Cal.App.3d 706, 712, 152 Cal.Rptr. 776.)   Such a relationship “may be said to exist whenever trust and confidence is reposed by one person in the integrity and fidelity of another.”  (Estate of Cover (1922) 188 Cal. 133, 143, 204 P. 583;  Main v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1977) 67 Cal.App.3d 19, 31, 136 Cal.Rptr. 378.)

 Upon the insurer's tortious violation of its covenant, it will be liable to its insured in “compensatory damages for all detriment proximately caused by that breach (see Civ.Code, § 3333).”  (Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d 910, 922, 148 Cal.Rptr. 389, 582 P.2d 980;  italics added.)   The insured in such a case is entitled to “ ‘the full amount which will compensate [him] for all the detriment caused by the insurer's breach of the express and implied obligations of the contract.’ ”  (Johansen v. California State Auto. Assn. Inter-Ins. Bureau, supra, 15 Cal.3d 9, 15, 538 P.2d 744.)   Manifestly, those damages will include the insured's attorney's fees, reasonably incurred, in an action such as that before us.   Anything less, we opine, would ignore the above-noted requirement of Civil Code section 3333, Johansen v. California State Auto. Assn. Inter-Ins. Bureau, supra, p. 15, 538 P.2d 744 and Neal v. Farmers Ins. Exchange (supra 21 Cal.3d p. 922, 148 Cal.Rptr. 389, 582 P.2d 980), that one situated as is the instant plaintiff be compensated for all detriment proximately caused by the insurer's “tortious breach ” of its insurance contract.

 Nor is Occidental Life aided by Insurance Code section 10111 which provides:  “In life or disability insurance, the only measure of liability and damage is the sum or sums payable in the manner and at the times as provided in the policy to the person entitled thereto.”   It has been regularly held that where the gravamen of an action against an insurer lies in tort, as well as in contract, section 10111 is inapposite.  (See Egan v. Mutual of Omaha Ins. Co., supra, 24 Cal.3d 809, 169 Cal.Rptr. 691, 620 P.2d 141, passim;  Fletcher v. Western National Life Ins. Co. (1970) 10 Cal.App.3d 376, 400–401, 89 Cal.Rptr. 78;  Wetherbee v. United Insurance Co. of America (1968) 265 Cal.App.2d 921, 927–929, 71 Cal.Rptr. 764;  McDowell v. Union Mut. Life Ins. Co. (C.D.Cal.1975) 404 F.Supp. 136, 138–145.)

 Based upon the above-noted authority, we find no error in the superior court's allowance to plaintiff of his attorney's fees.

We have read and considered opinions of the state's Courts of Appeal on which, to some extent, each of the parties relies.

Dinkins v. American National Ins. Co. (1979) 92 Cal.App.3d 222, 234, 154 Cal.Rptr. 775, permitted such attorney's fees “with respect to legal services attributable to any portion of plaintiff's recovery which [did not exceed] the amount due under the policy.”  Twentieth Century-Fox Film Corp. v. Harbor Ins. Co. (1978) 85 Cal.App.3d 105, 114, 149 Cal.Rptr. 313, found “that at least semantically there appears to be some justification for applying this [‘bad faith’] exception,” but finding no high court authority therefor (which, as noted, we do) declined to apply it.  Mustachio v. Ohio Farmers Ins. Co. (1975) 44 Cal.App.3d 358, 363, 118 Cal.Rptr. 581, stated the following:  “ ‘[W]hen the insurer unreasonably and in bad faith withholds payment of the claim of its insured, it is subject to liability in tort.’  [Citation.]  Moreover, ‘such conduct on the part of a[n] ․ insurer constitutes a tortious interference with a protected property interest of its insured for which damages may be recovered to compensate for all detriment proximately resulting therefrom, including economic loss․'  [Citations.]  It follows as a matter of course that if the insurer's tortious conduct makes it reasonable for the insured to seek the protection of counsel, the insurer is responsible for that item of damages.”  (The latter emphasis is ours.)

We find none of the foregoing cases to be at odds with the conclusion we have reached.

Contra, is the case of Austero v. Washington National Ins. Co. (1982) 132 Cal.App.3d 408, 413, 182 Cal.Rptr. 919, where in an action for damages for bad faith, failure to pay $24,678 claimed due under an insurance policy, the trial court additionally awarded $25,000 for emotional distress, $200,000 for attorney's fees, and $200,000 as punitive damages.   Reversing in part, a divided court stated:  “It must be conceded that Mustachio and Dinkins tend to support the propriety of a recovery of attorney fees in a bad faith action for that portion of the plaintiff's attorney's services necessary to recover the benefits due under the policy․  To the extent they do so, however, they were respectively misapplied and incorrectly decided on the attorney's fee issue.”   Dissenting, the court's presiding justice stated (p. 419, 182 Cal.Rptr. 919):  “The pertinent rule on the issue of attorney's fees in this case is that, ‘[f]or the breach of an obligation not arising from contract, the measure of damages, ․ is the amount which will compensate for all the detriment proximately caused thereby, ․’  (Civ.Code, § 3333.)   The attorney's fees incurred by plaintiffs in recovering the benefits due under the insurance policies was ‘detriment proximately caused’ by defendant's tortious conduct and plaintiffs should be compensated for those attorney's fees.   The general rule of section 1021 of the Code of Civil Procedure, that attorney's fees are not recoverable absent statutory authorization or agreement between the parties, does not require a contrary conclusion.   Like the insurance company in Mustachio v. Ohio Farmers Ins. Co. (1975) 44 Cal.App.3d 358 [118 Cal.Rptr. 581], the majority's ‘reliance on the general rule misinterprets the nature of this action.’ ”  (And see pp. 419–423, 182 Cal.Rptr. 919.)

Occidental Life further contends that in any event, a jury having been demanded in the case, only the jury and not the court were permitted to determine and award plaintiff his attorney's fees.   For several reasons, we find the contention invalid.

Rule 7(a), California Rules of Court, permitting appeals upon settled statements, as apposite here, declares—“the appellant shall state the points to be raised by him on appeal, and in such event shall be precluded from presenting any grounds for reversal not embraced within the points stated by him.”  (And see White v. Valenta (1965) 234 Cal.App.2d 243, 258, 44 Cal.Rptr. 241;  People v. Keligian (1960) 182 Cal.App.2d 771–772, 6 Cal.Rptr. 680;  Marogna v. Mitchell (1951) 104 Cal.App.2d 799, 805–806, 233 P.2d 70.)   The instant point of Occidental Life was not presented in the settled statement.

 We observe also, that the settled statement affirmatively shows that Occidental Life, in the superior court, made no contention that “only the jury and not the court were permitted to determine and award plaintiff his attorney's fees.”  “The general rule is here applicable that points not raised in the trial court may not be raised for the first time on appeal.”   (Damiani v. Albert (1957) 48 Cal.2d 15, 18, 306 P.2d 780.)

 Moreover, the settled statement is silent as to whether Occidental Life had requested the jury.   If it had not, it was in no way prejudiced by the superior court's determination of the instant issue.  “The burden is on the appellant in every case to show error and to show further that the error is prejudicial.”  (Vaughn v. Jonas (1948) 31 Cal.2d 586, 601, 191 P.2d 432.)   The rule is equally apposite where the appeal rests upon a settled statement.   (Williams v. Goldberg (1944) 66 Cal.App.2d 40, 46–47, 151 P.2d 853.)

The judgment is affirmed.

ELKINGTON, Associate Justice.

RACANELLI, P.J., and NEWSOM, J., concur.