74 Cal. App. 4th 138 | Cal. Ct. App. | 1999
Lead Opinion
Opinion
Plaintiff Orlando Aliberti appeals from the judgment entered in favor of defendants Allstate Insurance Company and Alvin Williams. Allstate has cross-appealed from a pretrial order denying its motion for leave to file a cross-complaint. For the reasons set forth below, we reverse the judgment. As a result, we dismiss as premature Allstate’s cross-appeal.
Facts and Procedural History
Plaintiff and appellant Orlando Aliberti (Aliberti) owned a six-unit apartment building on Rambla Vista Road in Malibu (the building). His personal home was located nearby on the same piece of land. As of April 1990, both the building and Aliberti’s home were insured for fire loss under separate policies issued by defendant and respondent Allstate Insurance Company (Allstate). Aliberti obtained the policies through defendant and respondent Alvin Williams of Allstate, his insurance agent since 1986.
Both the building and Aliberti’s home were destroyed on November 2, 1993, by a brushfire which raged through the Malibu area. Aliberti notified Allstate of his loss on November 3, 1993. Allstate brought in adjuster Bobby Alphin from Texas to handle Aliberti’s claim.
Aliberti and Alphin met on November 9, 1993, to discuss Aliberti’s claim. When Alphin mentioned that the apartment policy’s limit was $317,000, Aliberti said that was not enough to rebuild.
On November 10, 1993, Allstate issued a check to Aliberti for the apartment policy’s $317,000 limit. The check bore the notation “paid in
Throughout this time, Alphin repeatedly said Allstate could not pay more than the apartment policy limit of $317,000. Elaine argued that Allstate owed an additional 10 percent under an inflation protection clause in the apartment policy. Even though that clause did not in fact apply, Allstate issued another check for $31,700 on December 23, 1993. Alphin’s claim diary for December 21, 1993, states that the additional payment was approved “due to the circumstances and insured’s apparent feelings over limits . . .” in order to give him “the benefit of the doubt ... in a good faith effort to satisfy insured.” During that phone conversation, Elaine requested a copy of Aliberti’s original application for the apartment policy.
Elaine phoned Alphin again on January 28, 1994. According to Alphin’s claim diary, she still contended the policy contained a replacement cost guarantee. Alphin explained that it did not and told her he could not pay any more on the building. After that date, Alphin had no further conversations with either Aliberti or Elaine about the structural limits on the apartment policy and considered that claim closed as of the time he issued the second check for $31,700. Even so, Alphin and Allstate still continued to adjust Aliberti’s claim for lost rental income under another coverage portion of the apartment policy. An Allstate computer printout form shows that Allstate made its final payment on the lost rental claim on September 7, 1994, and closed the file at that time. Aliberti also testified that Allstate was still adjusting his claim for the loss of his home during that period.
On December 22, 1993, one day after Alphin said he considered the structural damage claim closed, he wrote Elaine about the lost rental coverage, asking her to contact him about the payment of such benefits during the restoration period after she found a builder. That letter was prefaced, however, by Alphin’s statement that he was including a copy of Aliberti’s original 1990 application for the apartment policy, noting that the amount of insurance requested was $271,000. He concluded the letter by stating: “Give me a call at any time if you have any questions on this loss.” It is undisputed that Allstate never gave written notice it was denying any claim by Aliberti
Aliberti filed a complaint against Allstate with the California Department of Insurance in May 1995, contending that he had been underinsured. On November 1, 1995, Aliberti sued Allstate and Williams for fraud, negligent misrepresentation, negligence and breach of fiduciary duty. The gist of the complaint was that respondents improperly valued the building and that he relied on their advice when selecting his coverage limits.
Pursuant to Insurance Code section 2071, the apartment policy provided that Aliberti had one year after the inception of any covered loss to bring an action on the policy.
Aliberti opposed the motion to bifurcate on the following grounds: (1) his action for Allstate’s conduct in underinsuring the building was not an action on the policy within the meaning of section 2071; and (2) even if it were, the one-year period was still equitably tolled when he filed the complaint since it was undisputed that Allstate never denied his claim in writing, as required by Prudential.
The trial was eventually scheduled to begin October 22, 1996. Allstate’s bifurcation motion was argued on October 22 and October 23, 1996. Aliberti’s lawyer told the court the case pivoted around a conversation between Aliberti and Williams at the time Aliberti applied for the apartment policy where Aliberti asked for adequate insurance and Williams assured him of such coverage. Combined with the fact that the policy limits had been paid in full, Aliberti contended his action was not on the policy within the meaning of section 2071.
The court then asked respondents’ lawyer whether the bifurcated trial would be on the elements of Aliberti’s negligence claim. Respondents’ lawyer replied: “No. That would only be if plaintiff gets over the statute of limitations issue . . . [with the issue being] ... is there evidence that Allstate said something or did something that would leave [sic] a reasonable insured to believe that we are going to pay some more money or somehow the claim is going to stay open indefinitely and that’s a simple discrete issue.”
Aliberti’s lawyer said he wanted any order to reflect that the court had been asked to determine whether the action was on the policy under section 2071. After further argument on that point, the following exchange took place between the court and Aliberti’s lawyer: “[Aliberti’s lawyer]: But it didn’t change this provision, your Honor, that requires a finding by this Court that the action is on the policy. [¶] The Court: That’s the finding.” The court then granted the bifurcation motion and began its trial of the statute of limitations issue.
During the presentation of Aliberti’s case, he submitted briefs and put on evidence about the alleged conversation with Williams in which Aliberti sought and Williams promised to provide adequate insurance coverage for the building. It is undisputed that this evidence, and its attendant inferences, were very much in conflict.
The court issued its statement of decision on May 8, 1997, finding that Allstate, through Alphin, had unambiguously communicated its refusal to pay any more under the apartment policy’s structural damage coverage on each of the following three dates: (1) December 23, 1993, when Allstate paid an additional 10 percent under the apartment policy’s inflation protection clause; (2) January 28, 1994, when Alphin’s claim diary showed he told Elaine Allstate would pay no more on the building; or (3) September 7, 1994, when Allstate made its final payment under the apartment policy’s loss of rental income coverage. Nothing Allstate did or said could have led Aliberti to conclude that Allstate had not made a final decision on his claim, the court found. As a result, the court found that Aliberti’s action was barred under section 2071 by the apartment policy’s one-year limitations period.
The statement of decision went on to consider the evidence about Aliberti’s adequacy of coverage discussion with Williams at the time Aliberti first took out the apartment policy. Before reaching those disputed factual issues, the court addressed the propriety of doing so: “[G]iven that plaintiff argued the special duty issue in the context of the statute of limitations, plaintiff had ample opportunity to elicit evidence relevant to the issue and plaintiff actually proffered testimony and documentary evidence on the issue, it is fair and appropriate to consider the duty issue at this time in light of an
Judgment for Allstate and Williams was entered May 8, 1997. This timely appeal followed. While numerous issues were raised on appeal, we address only the two which we hold are dispositive and compel reversal: (1) whether the court erred in deciding the factual issues surrounding Aliberti’s alleged conversation with Williams which gave rise to this action; and (2) whether Allstate properly notified Aliberti it was denying his claim for inadequate coverage.
Discussion
1. A Jury Trial Was Required on the Duty Issue
2. Allstate’s Failure to Deny the Claim in Writing
The purpose behind the shortened limitations period required by section 2071 is to relieve insurance companies of the burden imposed by defending old, stale claims. (Prudential, supra, 51 Cal.3d at p. 684.) It was designed “to obtain the advantage of an early trial of the matters in dispute and to make more certain and convenient the production of evidence on which the rights of the parties depended .... [Citation.]” (Id. at p. 691, citing Bollinger v. National Fire Ins. Co. (1944) 25 Cal.2d 399, 408-410 [154 P.2d 399].) The statute was based on the “Model New York Standard Fire Form Policy” (Sen. Bill No. 1282 (1949 Reg. Sess.)) and was eventually adopted by California and a majority of state legislatures. (Prudential, supra, 51 Cal.3d at pp. 682-683.)
The section was not intended, however, “to achieve a technical forfeiture of the insured’s rights by enforcing the limitation provision when the insured has given timely notice of a claim to his insurer. [Citation.]” (Prudential, supra, 51 Cal.3d at p. 691.) Since it would be anomalous to bar an insured’s suit against an insurer because the one-year limitations period ran while the claim was being investigated, the Prudential court held that the limitations period was equitably tolled “from the time the insured files a timely notice, pursuant to policy notice provisions, to the time the insurer formally denies
The court held that equitable tolling would not contravene the policy of encouraging early trials “or work a hardship on the insurer, whose investigation will necessarily have preceded the denial of coverage.” (Prudential, supra, 51 Cal.3d at p. 691.) Instead, equitable tolling would nicely balance the interests of both insured and insurer. First, the claims process would function normally since the insured would not have to file suit before the insurer completed its investigation. Second, the insured’s reasonable expectations would be met, since the carrier would have to investigate the claim rather than defeat it by invoking a technical rule. Third, equitable tolling would encourage settlement and discourage needless litigation. (Id. at p. 692.)
The question we must decide is whether the Prudential court meant what it said when it held that the one-year statute was tolled “to the time the insurer formally denies the claim in writing.” (Prudential, supra, 51 Cal.3d at p. 678, italics added.) We hold that it did.
In establishing the rule of equitable tolling, the Prudential court expressly chose one line of out-of-state cases over another and adopted the reasoning of the New Jersey Supreme Court in Peloso v. Hartford Fire Ins. Co. (1970) 56 N.J. 514 [267 A.2d 498] (hereafter Peloso). In construing New Jersey’s own one-year policy limitations period, the Peloso court advanced the same policy reasons for the equitable tolling doctrine which the Prudential court later adopted. (Id. at pp. 520-521 [267 A.2d at p. 501].) To effectuate those policies, the Peloso court held that the one-year limitations period was tolled “from the time an insured gives notice until liability is formally declined” and held the statute was tolled until the date “when plaintiffs were notified in writing that liability was denied.” (Id. at pp. 520-522 [267 A.2d at pp. 501-502].)
Later decisions interpreting Peloso make clear that the insurer must unequivocally deny a claim in writing to halt the equitable tolling period.
California decisions interpreting Prudential and Peloso strongly suggest that the insurer must deny a claim in writing to halt the equitable tolling period. The court in Forman v. Chicago Title Ins. Co. (1995) 32 Cal.App.4th 998, 1002-1004 [38 Cal.Rptr.2d 790], applied the Prudential-Peloso reasoning in holding that the two-year statute of limitations (Code Civ. Proc., § 339, subd. 1) was equitably tolled until a title insurer sent its insured a letter denying liability. In Singh v. Allstate Ins. Co. (1998) 63 Cal.App.4th 135 [73 Cal.Rptr.2d 546] (hereafter Singh), the court considered whether the equitable tolling period applied to an insurer’s decision to reconsider a previous unequivocal written denial of its insured’s claim. The plaintiffs’ claim in Singh was held to have been unequivocally denied when the insurer sent a letter denying the claim, which stated the reasons for the denial and informed the insured of the one-year limitations period. (Id. at pp. 138, 148.)
Respondents point to only one reported decision to support their contention that no written notice of denial was required—San Jose Crane, supra, 227 Cal.App.3d 1314. The insured in San Jose Crane submitted a claim to its insurer on February 16, 1986. The insurer orally denied the claim on June 5, 1986, again on August 25, 1986, and yet again on December 30, 1986. The claim was denied in writing once—on October 30, 1986. In reversing a summary judgment for the insurer, the appellate court stated that the policy’s limitations period had been equitably tolled from the time the claim was filed until the “insurer denied liability 109 days later.” (Id. at pp. 1318-1319.) Because the insurer’s June 5 oral denial was 109 days after the claim was filed, respondents contend that Allstate’s oral denials of Aliberti’s claim were sufficient to stop the equitable tolling period.
The two key issues before the court in San Jose Crane were: (1) whether Prudential could be applied to commercial all-risk insurance policies as well as homeowners insurance policies; and (2) if so, whether Prudential should be applied prospectively to claims submitted after that decision. The defendant insurer conceded that the plaintiff’s action had been timely filed if the equitable tolling doctrine of Prudential were applicable. (San Jose Crane, supra, 227 Cal.App.3d at pp. 1315-1316.) Thus, any statement by the San Jose Crane court about the required form of an insurer’s notice of denial is at best dicta.
We therefore choose to take the Supreme Court at its word when it adopted Peloso and held that the section 2071 limitations period is tolled from the time a claim is filed with the insurer “to the time the insurer formally denies the claim in writing.” (Prudential, supra, 51 Cal.3d at p. 678.) The facts of this case illustrate why this promotes the policy reasons behind the equitable tolling rule.
First, Aliberti claimed that even though the policy limits were being paid, respondents had breached their duties under Free v. Republic Ins. Co. (1992) 8 Cal.App.4th 1726 [11 Cal.Rptr.2d 296] by providing inadequate coverage. Alphin’s statements that Allstate would not pay more because of the policy
While respondents contended and the trial court agreed that the evidence showed Aliberti knew his claim had been denied, the need to resolve such evidentiary conflicts is entirely eliminated by requiring the insurer to deny a claim clearly and unequivocally in writing. Doing so places little or no burden on the insurer, which obtains in return the certainty of knowing that the equitably tolled period has ended. Accordingly, we hold the trial court erred in finding that the apartment policy’s one-year limitations period expired before Aliberti filed his complaint. Instead, that period remained equitably tolled because Allstate never formally and unequivocally denied Aliberti’s claim in writing.
3. Allstate’s Cross-appeal
Disposition
For the reasons set forth above, the judgment is reversed. Allstate’s cross-appeal is dismissed. Appellant and cross-respondent Aliberti to recover his costs on appeal.
Grignon, J., concurred.
We will sometimes refer to Allstate and Williams collectively as respondents.
It is undisputed that the apartment policy limits were well below the cost of rebuilding. Aliberti contends those costs will exceed $1 million.
For ease of reference, we will refer to Elaine Aliberti as Elaine.
Alphin was not the adjuster handling Aliberti’s separate claim for the loss of his home.
Insurance Code section 2071 sets forth numerous provisions, which must be included as part of the standard form fire insurance policy, including the contractual, one-year limitation period at issue here: “No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within 12 months next after inception of the loss.” For ease of reference, we will hereafter refer to Insurance Code section 2071 as section 2071.
It is undisputed that the court and not a jury should have tried this equitable issue. (Getty v. Getty (1986) 187 Cal.App.3d 1159, 1176 [232 Cal.Rptr. 603].) The court’s decision to bifurcate that issue has also not been challenged on appeal.
In addition to Aliberti’s testimony about his conversation with Williams, Williams denied ever making the statement attributed to him in Alphin’s claim diary that Aliberti was fully aware of the initial $271,000 policy limit since Aliberti requested it. Williams also testified that he calculated the $271,000 figure. When examined by Allstate’s counsel, however, Williams testified that Aliberti applied for $271,000 in coverage back in 1990. Respondents’ cross-examination of Aliberti revealed that even though Allstate insured several properties for him, Aliberti only sought assurances that the building would receive adequate coverage. He did so in 1990 based on a 1988 incident which left the building uninsured.
Respondents do not contend that Aliberti’s complaint would have been barred in any event by some other limitations period if his action had not been on the policy under section 2071. Were we to hold that the action was not on the policy, we would be compelled to reverse the
That section permits a party in a court trial to make a motion for judgment after the opposing party finishes its presentation of the evidence. (Code Civ. Proc., § 631.8, subd. (a).)
See footnote, ante, page 138.
Respondents do not contend that Aliberti did not timely and properly make a claim based on allegations that he was inadequately insured. There was also evidence at trial to show that Allstate was aware Aliberti made such a claim, including the entries in Alphin’s claim diary, which we set forth in the statement of facts. For purposes of our decision, we therefore assume that Aliberti properly notified Allstate of his claim.
Aliberti contends that an insurer’s formal written denial must include the same information contained in the Singh denial letter. Since no formal written notice of denial was given here, we need not decide that question. Allstate’s failure to send any formal, written denial compels reversal even absent the other information.
“Furthermore, the San Jose Crane court noted that the Prudential court adopted the reasoning of Peloso, which required “formal denial” of a claim, then expressly adopted the reasoning of Prudential. (San Jose Crane, supra, 227 Cal.App.3d at pp. 1318-1320.) To the extent San Jose Crane can be read as properly holding that an insurer’s oral denial of a claim is sufficient to end the period of equitable tolling, we decline to follow it.
For example, Alphin first had Allstate issue a check stating the claim was paid in full, then reissued a check bearing a notation that the “Undisputed Amount, Policy Limits” had been paid in order to assure Elaine that Aliberti would not waive any rights he might have against Allstate. Later, after first saying Allstate would not pay more than the policy limits, Allstate agreed to pay an additional 10 percent under coverage it considered inapplicable “due to the circumstances and insured’s apparent feelings over limits . . . .” At the same time Alphin was saying Allstate would only pay the policy limits, he was continuing to adjust the rest of Aliberti’s claim for lost rental income under another section of the apartment policy. Two days after making the additional 10 percent payment for structural damage, Alphin sent a letter which addressed both the lost rental and inadequate coverage claims by including a copy of Aliberti’s 1990 application for the apartment policy, stating that Aliberti had applied for $271,000 in coverage, then going on to address the fiiture resolution of the lost rental income claim.
See footnote, ante, page 138.
Concurrence Opinion
I concur in the entirety of my colleagues’ opinion and the judgment. I.believe though it bears emphasis that defendants have forfeited, by the failure to brief the issue, the right to argue the issue of whether plaintiff waived his jury trial arguments by not raising them before the trial
The petition of defendants and appellants for review by the Supreme Court was denied November 10, 1999. Mosk, J., was of the opinion that the petition should be granted.
