TOPA INSURANCE COMPANY VS EDWARDO VALDEZ, ET AL.

Tentative Rulings

Case Number: 19STLC06886    Hearing Date: April 6, 2021    Dept: 25

HEARING DATE: Tue., April 6, 2021 JUDGE /DEPT: Blancarte/25

CASE NAME: Topa Insurance Company v. Valdez, et al. COMPL. FILED: 07-25-19

CASE NUMBER: 19STLC06886 DISC. C/O: NONE

NOTICE: OK DISC. MOT. C/O: NONE

PROCEEDINGS: MOTION FOR SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION

MOVING PARTY: Defendants Eduardo Valdez and Saul Valdez

RESP. PARTY: Plaintiff Topa Insurance Company

MOTION FOR SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION

(CCP § 437c)

TENTATIVE RULING:

Defendants Eduardo Valdez and Saul Valdez’s Motion for Summary Judgment is DENIED. Defendants’ request for summary adjudication is GRANTED IN PART AND DENIED IN PART. Summary adjudication is DENIED as to the twenty-seventh affirmative defense. However, summary adjudication as to the fifth affirmative defense is GRANTED AS PROVIDED BY INSURANCE CODE SECTION 1063.1, SUBDIVISION (C)(5).

SERVICE:

[X] Proof of Service Timely Filed (CRC 3.1300) OK

[X] Correct Address (CCP 1013, 1013a) OK

[X] 75/80 Day Lapse (CCP 12c and 1005 (b)) OK

OPPOSITION: Filed on March 9, 2020 [ ] Late [ ] None

REPLY: Filed on March 29, 2020 [ ] Late [ ] None

ANALYSIS:

1. Background

On July 25, 2019, Plaintiff Topa Insurance Company (“Plaintiff”) filed an action against Eduardo Valdez (“Eduardo”) and Saul Valdez (“Saul”) (collectively, “Defendants”). Defendants filed a joint Answer on April 14, 2020.

On January 15, 2021, Defendants filed the instant Motion for Summary Judgment or, in the Alternative, Summary Adjudication of Issues (the “Motion”). Plaintiff filed an Opposition on March 9 and Defendants filed a Reply on March 29.

1. Legal Standard

A party seeking summary judgment has the burden of producing evidentiary facts sufficient to entitle him/her to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c); Vesely v. Sager (1971) 5 Cal.3d 153.) The moving party must make an affirmative showing that he/she is entitled to judgment irrespective of whether or not the opposing party files an opposition. (Villa v. McFerren (1995) 35 Cal.App.4th 733.)

When a Defendant or Cross-Defendant seeks summary judgment, he/she must show either (1) that one or more elements of the cause of action cannot be established; or (2) that there is a complete defense to that cause of action. (Code Civ. Proc., § 437c, subd. (p)(2).) When a Plaintiff or Cross-Complainant seeks summary judgment, he/she must produce admissible evidence on each element of each cause of action on which judgment is sought. (Code Civ. Proc., § 437c, subd. (p)(1).) The moving party’s “affidavits must cite evidentiary facts, not legal conclusions or ‘ultimate’ facts” and be strictly construed. (Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1519; Hayman v. Block (1986) 176 Cal.App.3d 629, 639.)

The opposing party on a motion for summary judgment is under no evidentiary burden to produce rebuttal evidence until the moving party meets his or her initial movant’s burden. (Binder v. Aetna Life Insurance Company (1999) 75 Cal.App.4th 832.) Once the initial movant’s burden is met, then the burden shifts to the opposing party to show, with admissible evidence, that there is a triable issue requiring the weighing procedures of trial. (Code Civ. Proc., § 437c, subd. (p).) The opposing party may not simply rely on his/her allegations to show a triable issue but must present evidentiary facts that are substantial in nature and rise beyond mere speculation. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151.) As to any alternative request for summary adjudication of issues, such alternative relief must be clearly set forth in the Notice of Motion and the general burden-shifting rules apply but the issues upon which summary adjudication may be sought are limited by statute. (Code Civ. Proc., § 437c, subd. (f)(1).) “A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Code Civ. Proc., § 437c, subd. (f)(1).)

1. Discussion

Plaintiff seeks to recover damages from Defendants arising out of an automobile accident. Plaintiff alleges Defendant Eduardo was the driver and that Defendant Saul was the owner of the vehicle that was involved in the collision. (Compl., ¶ 6.) Defendants seek summary judgment, or in the alternative summary adjudication, on the basis that Plaintiff’s action is barred by the CIGA Statute. (Mot., p. 2:1-16.)

1. First Cause of Action – Subrogation

The material facts in this case are undisputed. The parties agree on the following: (1) that on May 15, 2017, Defendant Eduardo collided with Plaintiff’s insured’s parked vehicle; (2) that the May 15, 2017 collision triggered collision coverage from Plaintiff and Plaintiff issued collision coverage payments to its insured; (3) that Defendants were covered by an automobile liability insurance policy through Access Insurance; (4) that after the collision, Plaintiff filed the instant action for damages against Defendants in subrogation for the amount of $18,037.15; (5) that after the collision, Defendants’ insurer, Access Insurance, was declared insolvent; (6) that after Access Insurance was declared insolvent and liquidated, CIGA assumed the handling and administration of the claim; and (7) that Plaintiff is a member of CIGA. (Plf. Sep. Statement, UMF Nos. 1-8.)

The parties’ arguments are purely legal. Defendants argue that Insurance Code section 1063.2, subdivision (c)(2) bars liability against them. (Mot., p. 5:4-11.)

“ ‘CIGA [California Insurance Guarantee Association] is an involuntary, unincorporated association of insurers, admitted to transact business in California. Each liability insurer, as a condition of its authority to transact business in this state, is required to participate in the association.’ [Citation.] ‘The statutory duty of CIGA is to provide for each member insolvency insurance to pay some (but not all) claims arising out of an insurance policy of an insolvent insurer.” (Black Diamond Asphalt, Inc. v. Superior Court (2003) 114 Cal.App.4th 109, 115-16.)

Insurance Code section 1063.1 sets forth what is, and what is not, a “covered claim” under the statute. Covered claims are those claims for which CIGA is responsible for paying and discharging. (Ins. Code, § 1063.2, subd. (a).) “ ‘Covered claims’ does not include an obligation to insurers, insurance pools, or underwriting associations, nor their claims for contribution, indemnity, or subrogation, except as otherwise provided by this chapter.” (Ins. Code, § 1063.1, subd (c)(5)(A).) An insurer…may not maintain, in its own name, or in the name of its insured, a claim or legal action against the insured of the insolvent insurer for contribution, indemnity, or by way of subrogation, except insofar as, and to the extent only, that the claim exceeds the policy limits of the insolvent insurer’s policy. In those claims or legal actions, the insured of the insolvent insurer is entitled to a credit or setoff in the amount of the policy limits of the insolvent insurer’s policy, or in the amount of the limits remaining, when those limits have been diminished by the payment of other claims.” (Ins. Code, § 1063.1, subd. (c)(5)(B). (Emphasis added.)

Section 1063.2, subdivision (c)(2), on which Defendants rely, provides:

“A claimant having collision coverage on a loss that is covered by the insolvent company’s liability policy shall first proceed against his or her insurance carrier. That claimant or the collision carrier, if it is a member of the association, does not have the right to sue or continue a suit against the insured of the insolvent insurance company for that collision damage.” (Emphasis added.)

Defendants argue that, under a plain reading of the statute, Section 1063.2, subdivision (c)(2) bars Plaintiff from maintaining this action against them as they are insureds of an insolvent carrier. (Mot., pp. 6:4-7:3.) However, Defendants’ interpretation of the statute would require the Court to read Section 1063.2, subdivision (c)(2), in isolation and ignore other provisions of the CIGA statute that help determine whether Plaintiff may maintain an action against Defendants for damages over their policy limits with Access Insurance.

First, the plain language of Section 1063.2, subdivision (c)(2), provides that an insurer cannot sue or maintain an action against an insured of an insolvent insurance company for a loss that is covered by the insolvent insurer’s liability policy. It does not provide one way or another as to claims that exceed the policy limits of an insured’s policy with an insolvent insurer.

In Black Diamond Asphalt, Inc. v. Superior Court (2003) 114 Cal.App.4th 109, 118, the court of appeals examined the holding in E.L. White, Inc. v. City of Huntington Beach (1982) 138 Cal.App.3d 366, stating:

“E.L.White held that, by plain and unambiguous statutory language, the company’s insurer was precluded from pursuing a subrogation claim against CIGA. [Citation.] The court further held that, by necessary implication, the insurer was precluded from maintaining a subrogation action against the city as the insured under a policy of an insolvent insurer. Otherwise, the court reasoned, either CIGA would be required to pay the insurer, in contravention of the express provisions of the law, or the city would be required to pay the insurer, in contravention of the legislative purpose of protecting insureds of insolvent insurers.”

However, as the Court in Black Diamond explains, the holding in E.L.White was addressed by amending section 1063.1(c)(5). (Id. at p. 119.) By doing so,

“the Legislature adopted in part the holding in E.L. White, but only up to the policy limits that the insured obtained for himself. This puts the insured in the same position as though his insurer had not become insolvent, but not in a better position. By the plain and unambiguous terms of the statute, a claim can be maintained against the insured for any sums in excess of the policy limits of his insurance policy, regardless whether the claim is by, on behalf of, or will inure to the benefit of an insurer. Any suggestion to the contrary in E.L. White or its progeny has been superseded by statute.” (Id.)

Thus, Black Diamond makes clear that an insurer may maintain an action against the insured of an insolvent insurer for the amount that exceeds the insured’s policy limits.

In Reply, Defendants argue that Black Diamond is entirely inapplicable because it involved personal injuries and wrongful death, not collision coverage. (Reply., p. 1:22-26.) However, nothing in the Black Diamond case suggests its applicability should be limited to personal injury and wrongful death actions. Nor have Defendants pointed to any language in that case that suggests otherwise.

Relying on Central National Insurance Company v. California Insurance Guarantee Assn. (1985) 165, Cal.App.3d 453, 458, Defendants also argue that “Plaintiff is a ‘secondary insurer [that] received a premium for the risk [of a Member going insolvent] and [it,] not CIGA, should be responsible for the coverage of the loss. (Reply, p. 2:14-16.) (Emphasis added.) However, Central National is distinguishable because it involved a claim against CIGA, not against an insured to recover damages in excess of an insolvent insurer’s policy. (Central National Insurance Company v. California Insurance Guarantee Assn., supra, 165, Cal.App.3d at 456-58.)

Thus, read together, Insurance Code section 1063.1, subdivision (c)(5) and section 1063.2, subdivision (c)(2), permit a subrogation action against the insured for damages in excess of the policy limits with a now insolvent insurer.

Accordingly, the Motion for Summary Judgment is DENIED.

2. Affirmative Defenses

In the alternative, Defendants request summary adjudication of their fifth and twenty-seventh affirmative defenses.

Their fifth affirmative defense states, “CIGA Provisions. This [sic] answering Defendants’ insurer is insolvent. The instant claim is being administered by the California Insurance Guarantee Association (“CIGA”) and the claim against these answering Defendants is subject to the protections, restrictions, and limitations set forth under Insurance Code section 1063, et seq.” (Answer, ¶ 5.)

The twenty-seventh affirmative defense states, “Insurance Code and Collision Coverage. The Plaintiff’s claim is barred by California Insurance Code section 1063.2, subdivision (c)(2) providing that a claimant that is holding collision coverage must first proceed against the collision carrier. Neither that claimant nor the collision carrier, if it is a member of the association, shall have the right to sue or continue a suit against the insured of an insolvent insurance company for that collision damage.” (Answer, ¶ 27.)

For the reasons discussed above, summary adjudication is DENIED as to the twenty-seventh affirmative defense. However, as also discussed above, Section 1063.1, subdivision (c)(5), provides a limitation to the potential recovery against Defendants, namely, that any recovery is limited to the excess of Defendants’ policy limits with the insolvent insurer, Access Insurance. Thus, summary adjudication as to the fifth affirmative defense is GRANTED AS PROVIDED BY INSURANCE CODE SECTION 1063.1, SUBDIVISION (C)(5).

1. Conclusion & Order

For the foregoing reasons, Defendants Eduardo Valdez and Saul Valdez’s Motion for Summary Judgment is DENIED. Defendants’ request for summary adjudication is GRANTED IN PART AND DENIED IN PART. Summary adjudication is DENIED as to the twenty-seventh affirmative defense. However, summary adjudication as to the fifth affirmative defense is GRANTED AS PROVIDED BY INSURANCE CODE SECTION 1063.1, SUBDIVISION (C)(5).

Moving party is ordered to give notice.