21st Century Insurance v. Superior Court
192 Cal. Rptr. 3d 530
Cal. Ct. App.2015Background
- Teen driver Cy Tapia caused a crash that injured (and later killed) passenger Cory Driscoll; Driscoll and his mother sued.
- Tapia was insured under Melissa McGuire’s 21st Century policy ($100,000) which listed the vehicle and Tapia; Tapia’s aunt and grandmother had separate 21st Century policies ($25,000 each) that did not list Tapia or the truck.
- Plaintiff offered to settle for $150,000 (total of three policies); 21st Century disputes timely receipt but later offered $150,000; plaintiff rejected and served large CCP §998 offers; Tapia stipulated to judgments and assigned his rights against 21st Century to plaintiff with a covenant not to execute.
- Plaintiff sued 21st Century for bad faith/claims handling as assignee of Tapia; 21st Century moved for summary judgment arguing (1) the post‑settlement assignment cannot sustain bad faith because the stipulated judgment lacked insurer participation (Hamilton), and (2) there was no duty to defend under the two $25,000 policies because the truck was regularly available to Tapia (so no coverage beyond $100,000).
- Trial court denied summary judgment; appellate court granted writ, directing entry of summary judgment for 21st Century.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a stipulated judgment entered by the insured without insurer consent can be used by an assignee to prove damages for bad faith | Tapia’s assignee can rely on the stipulated judgment to show damages because insurer failed to accept settlement/offered defense under some policies | Hamilton controls: a defending insurer is not bound by a stipulated judgment made without its participation and no actual commitment by insured to pay | The stipulated judgment cannot be used to prove damages against the insurer under these circumstances (Hamilton applies); summary judgment for insurer granted |
| Whether 21st Century had a duty to defend under the two $25,000 policies | Plaintiff: 21st Century denied coverage/defense under the two policies, so Tapia could enter a binding stipulated judgment against those insurers | 21st Century: the policies exclude vehicles "available for regular use" by a resident; Tapia regularly used the truck so those policies did not provide coverage or a duty to defend | No duty to defend under the two $25,000 policies because the truck was regularly available to Tapia; insurer justified in refusing defense under those policies |
| Whether partial defense by one policy excuses breach of duty by another insurer | Plaintiff: defense under the $100k policy did not negate harm from refusal to defend under other policies; insurer’s failure could increase risk of excess judgment | 21st Century: defending under the $100k policy rendered any partial breach immaterial because total exposure and defense were effectively handled | Court distinguished Risely/Wint facts and found partial defense here did not increase harm; insurer’s defense under $100k was sufficient |
| Whether insurer’s belated payment under all three policies constitutes waiver of coverage defenses | Plaintiff: payment of all policies means insurer conceded coverage or waived defenses | 21st Century: voluntary payment to limit exposure does not concede coverage or waive rights; allowing that rule would create a Catch‑22 | Payment did not constitute concession or waiver; insurer may pay to avoid exposure without conceding coverage |
Key Cases Cited
- Hamilton v. Maryland Cas. Co., 27 Cal.4th 718 (stated that a defending insurer is not bound by a stipulated judgment entered without its participation)
- Wint v. Fidelity & Cas. Co., 9 Cal.3d 257 (an insurer’s defense under a low‑limit policy does not excuse another insurer’s failure to defend when multiple policies are at issue)
- Risely v. Interinsurance Exchange of the Auto Club, 183 Cal.App.4th 196 (permitted assignee to rely on stipulated judgment where insurer defended under one policy but denied coverage under another)
- Archdale v. Am. Int’l Specialty Lines Ins. Co., 154 Cal.App.4th 449 (discussed insurer liability for failure to accept reasonable settlement offers)
- Safeco Ins. Co. v. Super. Ct., 71 Cal.App.4th 782 (on collusion risk and assignment mechanics when insured settles without insurer)
- Hartford Cas. Ins. Co. v. Swift Distribution, Inc., 59 Cal.4th 277 (duty to defend is broader than duty to indemnify)