*1 July No. 24881. 1986.] [S.F. FROMMOETHELYDO, v. Plaintiff and Respondent,
CLYDELHO al., EXCHANGE et Defendants Appellants. FIRE INSURANCE *4 Counsel Downs, F. Tolson, Thornton,
Jerome S. Greg Linda J. & Lynch, Taylor Downs, Davis, Roberts, Raoul D. Peter W. A. Kennedy, James James C. Martin, M. Jacqueline Roach & Jauregui Crosby, Heafey, May for Defendants and Appellants.
Louis A. Highman, Lawrence Ball and Leonard Sacks for Plaintiff and Respondent.
Opinion BROUSSARD, J. $15,271 obtained a for judgment general Plaintiff $250,000 distress, for damages, $1.25 emotional million for punitive in this action for damages misconduct anof insurer in a dealing with claim stolen for The property. issue raised is principal whether the insurer’s report to the Bureau of Fraudulent (hereinafter Claims Bureau) was privileged so as to for preclude recovery injuries sustained a as result a criminal We conclude that the proceeding. was and that privileged while we affirm judgment stolen, extent of $8,871, the value of the property deductible, $100 less should judgment be reversed as the additional the record a damages. Although supports finding breached duties, the breach did not cause the additional damages—they were due to incurred Bureau and criminal proceeding. we affirm the insofar as Accordingly, judgment it awards $8,771, permitting as it awards additional damages, but reverse insofar judgment suffered, were due which seek additional if damages any, to the insurer’s report. 1978, a home and he submitted burglarized,
In was August $17,185. $10,784. The claim for insurer ultimately paid a was Plaintiff claimed again. In late June house burglarized $8,871, $3,000 stereo and video assertedly including equipment loss TV and Stereo. Plaintiff attached pink copy from Matthew’s bought one of a sworn of loss. The was five- page bill of sale his proof copy in the date left- handwriting upper form. The “1/03/79” appeared page corner, on the right-hand the cash date side had hand but register printout four of the bill of sale had a and obliterated. other copies been erased “7/19/79,” which was after the second date of burglary. cash register printout hired investigator subsequently private A claims examiner The salesman who made at Matthew’s. employees insurer interviewed they because worked together with plaintiff sale acquainted July *5 him salesman said that told plaintiff earlier. The years at IBM a number of to take the because he wanted equipment a backdated receipt he wanted the consulted credit manager, duties. The salesman abroad and avoid custom sales who was not manager The a she authorized the backdating. and that the confirmed had been receipt to the transaction witness percipient revealed sales to records plaintiff of Matthew’s altered. While a search second, record was found of a no sale and after the before the first burglary between the burglaries.1 for an oral examination for plaintiff the insurer set
An hired attorney by 1979,. 7, 8, insurer submitted the the On September September he the same purchased said At oral examination plaintiff Bureau. occasions, first once burglary, again on prior similar three equipment He said third after the second that burglary. between burglaries, for a he asked the salesman he his recent duplicate when made most purchase, in the and that the made earlier salesman year of his purchase receipt Plaintiff with his loss claim. left the oral he submitted him the gave receipt investigator did not interview the private the claims examiner and the cashier 1Apparently at documents. The latter testified trial that manager who initialed the sale she or the credit only backdated sale document she this was the had remembered the transaction because delivery slip of a sales to a once authorized blank customer although she had authorized that, plaintiff testified that it was made clear to avoid customs duties. She who wanted written, document would also date would be the sales contain the cash although January of the true date. register printout examination in the middle of it. At trial he testified that he left because the were hostile and of a nature and he was confused. questions personal letter that the insurer The advised would attorney by plaintiff The not act until sworn was letter also stated that statement completed. Matthew’s reflected a July said that the rather personnel receipt purchase than January and examination purchase urged plaintiff complete with him further documentation. This was the first bringing mention to that the advised was defective. He was not that a receipt resumed, had been made to the When the examination Bureau. to his version he had asked for a of a copy
adhered receipt and denied that he asked a backdated January purchase for tax receipt In November the insurer denied the claim in its purposes. entirety of lack of verification fraud. grounds Bureau determined to investigate one of its assigned senior who had investigators handled over 200 insurance fraud cases for the Bureau. He spoke Matthew’s He personally concluded employees. that it that insurance fraud had occurred in appeared violation of Insurance Code He 556. requested and after the prosecution, district con- attorney filed, cluded should be charges investigator signed complaint. was
Plaintiff arrested at the fire where worked in station he March 1980 investigator. He continued to maintain that he had purchased the at same Matthew’s on three equipment occasions. He separate spent the in jail was harassed by and other In night guards addition, prisoners. returned he to work he when firemen. harassed other He became *6 and his suffered marriage withdrawn ending separation. was to held answer at a where preliminary hearing
Plaintiff he did not His evidence. any attorney convinced the subsequently dis- present deputy that the latter could not attorney prove beyond trict reasonable doubt that claim, as the was false. The opposed district receipt, deputy the attorney 8, 1980, on the criminal the charges September morning dismissed of trial. the of dismissal was that had apparently plaintiff basis witnesses The who and seeing of stereo video testify large quantities equipment would two months the second and that false prior burglary his house documen- not a of a valid claim was violation Insurance of Code tation section 556.2 contract 2Insurance cause of insurance. be Code presented . . .” 556 false provides: or fraudulent “(a) It is unlawful to: claim for the payment [11] (1) Knowingly present of a loss under 214 the of the existence of witnesses until after insurer was not advised
The thereafter attorney the criminal Plaintiff’s criminal charges. dismissal of $3,000, waiving the insurance claim disputed to compromise offered that a on the material rejected ground compromise but of entire The in a claim rescission justifies policy. misrepresentation did not interview witnesses.3 insurer this action his insurer. The against complaint orig-
Plaintiff commenced contract, breach of the insurance breach of of good asserted inally fraud, and and breach of violation of fiduciary duty, faith fair dealing, trial, On the of of the Insurance Code. morning section 790.03 causes action breach of the insurance contract and for dismissed the of for trial, that the cash At the a document examiner testified register fraud. the cash along had been erased from the with register date pink copy printout that the cash with carbon register tape of certain other and figures, printout on the other figures. been used to trace back the pink copy then paper records. cash of the Matthew’s tape The register part breach of the duty causes of action for The found jury of of violation fiduciary duty, faith and fair breach dealing, good the cost The awarded are damages equal section 790.03. economic loss $500, bailbond, counsel in criminal the fee charged plaintiff’s $8,871, claim, case, $6,000, less insurance of the original amount distress, $250,000 for emotional awarded $100. deductible of also jury all emotional damages. Substantially $1.25 million punitive to the criminal distress was due proceeding.
Discussion in every insurance implied A faith and fair dealing covenant 870, (1985) 40 Cal.3d 885 (White Title Insurance Co. v. Western contract. 509, 309]; (1973) v. Aetna Ins. Co. Gruenberg P.2d 9 Cal.Rptr. [221 1032].) 480, 510 P.2d The implied Cal.Rptr. promise Cal.3d [108 doing to refrain from anything each contracting party injure requires fulfill to receive benefits. To agreement’s of the other implied right insurer must at least as much consideration to the *7 give an interests obligation, the insured as it to its own interests. When insurer gives of the unreasonably insured, the of its it in bad faith withholds of claim payment and is subject occurring after the dismissal of the action and 3Evidence as to matters criminal the insurer’s attorney’s may of settlement have been omitted. While there have rejection the been repre offer, by rejection the insurer after the of the such hensible conduct settlement conduct did damages in of the for the awarded excess value of the property. not form basis stolen unnecessary with subsequent respect matters is also to Reference to the award of the property. of the value stolen
215 an liability to tort. And insurer cannot and in faith reasonably good deny to its insured without payments fully investigating for its denial. grounds (1979) 809, v. Mutual Omaha Ins. Co. (Egan Cal.3d 818-819 [169 141].) 620 P.2d Cal.Rptr. In an addition insurer holds itself out With the fiduciary. as public trust, trust must go private responsibility consonant with the including qual ities of decency and humanity inherent in the of a responsibilities fiduciary. (Id,., 820.) at 790.03, p. Insurance Code section (h)(3) subdivisions and (h)(5), make it an unfair to practice business for an insurer fail to adopt reasonable implement standards for the investigation and prompt processing of claims and not to faith to attempt effectuate fair and prompt, settlements equitable of claims in which has liability become reasonably clear.
However, these duties to the insured are in the of the insur- applied light er’s other duties imposed statute. by
Insurance Code section 12992 that an provides insurer “which believes shall, a fraudulent claim is made being within 60 days after determi- nation insurer by that the claim claim, to be appears a fraudulent send Claims, to the Bureau of Fraudulent on a form prescribed by the depart- ment, the information requested by the . form . . .” The Bureau shall un- dertake such investigation itas deems necessary, and the Insurance Com- missioner, fraud, if satisfied that deceit or intentional has misrepresentation occurred, shall such report any insurer, violations law to the to the ap- propriate licensing agency and to the district attorney. If the commissioner fraud, is satisfied that deceit or intentional has not been misrepresentation committed, he shall to the insurer. The is insurer required Bureau if subsequent shows that the investigation claim is not or fraudulent if the insurer has reached with claimant as agreement the amount of the claim and does not have reasonable to believe grounds the claim is fraudulent.4 “(a) Any provides: 4Section 12992 company write licensed to insurance in this state which shall, that a being days
believes fraudulent claim is made within after determination claim, appears the insurer that the claim be fraudulent send the Bureau of Fraudulent Claims, prescribed by on form department, requested the information the form and such additional information relative the factual parties circumstances the claim and the claiming damages may require. loss as commissioner The Bureau of Fraudulent shall review each Claims undertake such further as it deems nec essary proper validity allegations. to determine the Whenever the commissioner fraud, deceit, or misrepresentation intentional of any satisfied kind has been com claim, report any mitted in the submission of he shall such violations of law insurer, licensing agency appropriate attorney and the district county in which committed, provided by provisions such offenses were as of Sections 12928 and 12930. *8 liability to civil not be subject an insurer shall that 12993 provides Section of virtue by of action relevant tort cause libel, or other any slander “for information, without malice, other furnishing or without of filing reports, under the the commissioner malice, by article dr by required this required in this article.”5 authority granted Bureau, to the insurer pro known the facts
When it reported had been unable fraud. Matthew’s insurance inference of vided a reasonable 1979; had submitted an ob in January of a sale to find record altered in order been receipt, apparently receipt backdated viously claim, of the stereo of ownership and no other proof to validate plaintiff’s presented. had been and video equipment does not furnish provide with a statutory report
Compliance complete. is accurate and as the information long for tort so liability basis of document of the sales that the copy The evidence is undisputed pink pink and that the in January, occurring was altered to reflect sale July sale in loss occurring a claim of of was submitted by plaintiff support copy insurer omitted Bureau the It not claimed that in reporting June. have exonerated which might in its possession material information any malice, a true and complete Even in the plaintiff. presence is not Bureau actionable. information, the Bureau contains false transmitted to
When the report an insurer the absence of malice provides section 12993 expressly libel, slander or other “for relevant liability any civil subject shall not be the code by information furnishing required of action” tort cause fraud, deceit, misrepresentation not or intentional has If the commissioner is satisfied by committed, prosecution If to the insurer. he such determination been shall days receipt begun of the commissioner’s attorney is not within 60 district concerned as to the reasons attorney inform the commissioner and the insurer report, the district shall reported prosecution regarding the violations. for the lack of “(b) require to the bureau the information an insurer to submit This section shall (a) following: specified in either of the in subdivision “(1) which potentially indicated a fraudulent claim but The insurer’s initial investigation revealed not to be fraudulent. further “(2) agreement to the amount of the claim insurer and the claimant have reached as grounds not have reasonable to believe claim be fraudulent. insurer does existing “(c) obligations in this article of its Nothing contained shall relieve an insurer agencies. appropriate of law to local law enforcement suspected violations also papers, all “(d) agency or law shall furnish docu- Any other enforcement police, sheriff Claims, ments, or to the Bureau of Fraudulent reports, complaints, or other facts evidence bureau.” cooperate assist and with the and shall otherwise requested, when so insurer, insurer, any employees agents or or the shall provides: “No 5Section 12993 libel, relevant cause of liability for slander or other tort action civil subject be malice, information, furnishing or without filing reports, without other virtue authority granted malice, required by the commissioner under the required this article ” in this article.
217 or the are, Insurance Commissioner. Libel and slander causes of action course, the traditional remedies for false information. publishing Section insurers, 12993 only the conditional applies thereby privilege provided to insurers action applies against premised misrepre- in sentation made a to the Bureau.6 report evidence,
Under the it could be concluded that the insurer transmitted false information to the Bureau. The trier of fact could conclude that plaintiff the video purchased and stereo between the two equipment burglaries, that he had asked the Matthew’s salesman for a of that receipt purchase, that the Matthew’s salesman him a purported give such and that receipt, the Matthew’s salesman stated falsely asked for a backdated receipt for customs purposes. fact that the insurer have may accurately reported the salesman’s statements does not mean that the insurer not be held may responsible for those statements. When one another’s person repeats de- statement, famatory he be held may liable for the same republishing libel (Gilman or slander. 606, v. (1896) McClatchy 241]; 111 Cal. 612 P. [44 Arditto v. Putnam (1963) 633, 639, 214 fn. 2 Cal.App.2d Cal.Rptr. [29 700]; Torts, 2d A, § Rest. e.) 581 com.
The issue then becomes whether there is of malice on the evidence 48a, “Section part. 4(d), defines subdivision of the Civil Code ‘actual malice’ as ‘that state of mind from hatred or ill will toward arising however, plaintiff; that such a state of mind occasioned a provided, by good faith belief on the defendant in the truth of the libelous part publication or broadcast at the time it or broadcast shall not is constitute published actual malice.’ A court has held that recently California ‘The appellate malice to defeat a is “actual malice” which necessary qualified privilege is established that the was motivated hatred or by showing publication by ill will towards the that the defendant showing lacked in truth grounds reasonable for belief therefore publication (citations).’ (Roemer disregard rights acted reckless v. 926, (1975) 82], Retail Credit Co. 44 936 italics Cal.App.3d Cal.Rptr. [119 see also White v. State 17 original; California, supra, Cal.App.3d 621, 628-629.)” (Sanborn (1976) 406, v. Chronicle 18 Pub. Co. Cal.3d 402, 764].) 413 556 P.2d Cal.Rptr. [134 47, absolutely privileged insurer claims is Civil 6The under Code section 2 as á proceeding subdivision communication made in an official authorized law and that only which can an action be maintained based on its action for malicious (See 119, (1983) Hogen Valley Hospital v.
prosecution. Cal.App.3d 147 122-123 [195 5]; (1983) 450, Stanwyck Cal.Rptr. 228].) v. Cal.App.3d Cal.Rptr. Horne 146 457-459 [194 However, absolutely privileged if the under section Insurance Code section reports providing privilege conditional for the would serve no useful purpose. The provision special granting only privilege reports prevail a conditional must for the over the provision general granting privilege. an absolute *10 had aware the Matthew’s salesman that the insurer was not It does appear insurer, or between the salesman and lied, collusion that there any the salesman was from apart to suspect lying reason the insurer a sale doc- asked for of the copy January that he had assertion one. he had received and believed uments insurer stood to malice is shown because the asserts that
Plaintiff fraud, for the insurer’s em was successfully prosecuted if plaintiff profit in a manner to result in likely his report intentionally prepared ployee files, in the Bureau’s the insurer did than in lost being rather prosecution the insurer did not interview manager, the cashier credit interview of its Bureau or advise him intent to report to the before reporting plaintiff Bureau, document examiner. expert did not consult an and the insurer to However, matters are not sufficient to show have concluded that these we case where an insurer a reports case if not every In almost every malice. Bureau, stands to the insurer to be fraudulent to profit believed claim to If warranted a profit is successfully prosecuted. ability insured if malice, to would be guarantee required accuracy of finding act at its whenever it infor- reported obtained and to peril information Bureau, would be statutory and the privilege meaningless. mation on in- that the insurer may escape liability Accordingly, potential Rather, to show malice. is not sufficient requirement claim sured’s be viewed as determination that the the statute must a legislative malice interest more does not make the action- report without pecuniary insurer’s able. an insurer has evidence cause to believe an providing probable
Once Bureau, has fraud occurred and determines to make report insurance make its is the fact that report, designed may properly it does not show malice so as the does not long prosecution secure known inaccuracies and is not incomplete. contain is that the should major argument insurer have investigated Plaintiff’s it had Notwithstanding that cause to believe that an in- probable further. committed, asserts, had been the insurer had a duty fraud surance to determine further whether there was evidence investigate insured to its fraud. In so out that urging, points explain apparent would is not to the Bureau if a an insurer required under that the insured was not or if revealed fraudulent subsequent insurer does not believe the claim to be a settlement there covenant out that the implied Plaintiff points fraudulent. insured, its statutory duties fiduciary dealing, fair faith all encompass duty investigate. practices in fair business to engage duty Code, (See, 790.03, § e.g., (h)(3); Ins. subd. v. Mutual Egan Omaha Co., 809, 817-819.) Ins. 24 Cal.3d supra, investigate to actions based Application an report by insurer to the be in Bureau would conflict with the established privilege seen, section 12993 nonmalicious As have reports. we the privilege *11 the unless insurer acts out or applies of hatred ill will or in reckless disregard of the insured’s rights. There is no evidence that the insurer acted out of or hatred ill will or in reckless of the insured’s disregard rights. Permitting for an recovery inaccurate on the basis report of a lesser standard—a duty to covenant, further on investigate based the implied or fiduciary duty, the to in fair duty engage mean the practices—would that is privilege illusory.
We conclude that when an insured seeks the on basis of damages an insurer’s Bureau, to the the report privilege 12993 must take precedence case, over the ordinary duty to In the instant investigate. has plaintiff failed to evidence that present the insurer acted in maliciously making report to the Bureau.
This does not mean that an insured not recover may damages for failure to in investigate covenant, violation of the implied fiduciary duty the to duty fair engage practices. The insured recover may for such damages violations where the recovery not predicated due to a upon injury to the Bureau but other upon injuries.
Moreover, there was no breach of the to investigate causing injury prior to Bureau. The credit of Matthew’s manager testified salesman, in substantial accord with the Matthew’s and thus had the credit been interviewed it would manager have been harmful prior report, rather than did helpful plaintiff. The cashier not and it is mere testify, that the cashier could shed favorable to speculation light on plaintiff the matter. The document examiner testified that erasure of the cash date was to the naked printout Although visible he also stated register eye. register that the cash was used some of the tape replace figures erased, had which been this pink copy apparently mistakenly testimony Matthew’s, that the alteration at not showed occurred did show that insurance there was no fraud. further that have might only precluded is if the insurer had located the witnesses who seen large
Bureau amounts video home between the burglaries. of stereo and equipment plaintiff’s not were known the insurer. The witnesses Plaintiff obviously the existence of the witnesses until did advise insurer of after dismissed, failure to discover them were charges criminal investigate. failure to adequately be viewed as a cannot earlier to the extent be upheld cannot that the judgment We conclude to the Bureau to the report attributable damages injuries was awarded criminal proceeding. the subsequent hand, that after dismissal shows the evidence the other On v. investigate. (Egan its duty breached charges the criminal 809, 817-819.) Co., In Egan the 24 Cal.3d supra, Ins. Omaha Mutual of investigate insurer failed properly that the was undisputed evidence claim, correctly trial court instructed that the and we held and fair faith dealing covenant of the a breach implied jury case, once the insurer 819.) In the instant (24 at Cal.3d p. was established. who had observed witnesses equipment existence of advised *12 house, to determine whether fairly investigate it had a duty in plaintiff’s that the insurer is failed undisputed The evidence a valid claim. plaintiff it learned of of the criminal charges after dismissal when investigate evidence establishes breach of The undisputed of the witnesses. existence covenant. the cost of the bail bond and the fees attorney awarded for damages The to the on the insurer’s Bureau. The report were based criminal case in on evidence relating are based damages period distress emotional the dismissal of the criminal and for charges arrest and plaintiff’s between of the insurer’s to the Bureau and the report as a result received injuries The award of punitive damages may criminal proceeding. subsequent (See must be set aside. damages most of the compensatory since be upheld 910, 927-928 (1978) 21 Cal.3d Exchange Ins. Cal.Rptr. v. Farmers [148 Neal be 980].) The must reversed insofar as it awards judgment P.2d 582 loss, for economic as damages The insofar are damages. they above value of the stolen can be The record shows goods, on the upheld. based breached its after it was advised of the investigate insurer loss, By witnesses. for economic awarding damages plaintiff’s existence addition, In determined that had suffered the loss. obviously plaintiff the jury damages, should be seek a further trial to recover other permitted plaintiff it learned of resulting from insurer’s failure to after investigate if any, witnesses. $8,771. all other In affirmed insofar as it awards judgment plaintiff it Each on is reversed. side shall bear its costs appeal. respects J., Bird, J., Jr., J., Mosk, J., concurred. (Earl), C. and Warren Reynoso, * Court, Council. the Judicial Chairperson of *Judge, Municipal assigned by Sacramento GRODIN, J., I concurin the Concurring Dissenting. con- majority’s that the in the record is insufficient clusion evidence to demonstrate that with the insurer acted malice in Bureau of making Fraudulent notes, (Bureau). As which Claims the majority submitted receipt contained, face, the insurer of his claimed loss on its an support altered, indication that the relevant been date have may insurer’s confirmed that the had in fact been receipt backdated. There is no evidence to that the insurer realized when it suggest the matter reported to the Bureau that the insured’s claim was valid or that actually it made the to avoid obligations. facts, its contractual On report simply these I agree Code that Insurance precludes insurer from being held liable for damage may have suffered as a result of either the to the Bureau or the subsequent criminal Since, proceedings. out, as the the substantial majority points awarded damages jury attributable, this case were at least in large part, of the filing and the manner in which the criminal proceeding against defendant was handled, the bulk of the award must damage be reversed. I however,
Where with the part company majority, is in its conclusion the above that—despite error—the jury’is imposition liability breach covenant faith and fair should dealing nonetheless (Ante, 220.) be affirmed. In p. conclusion, this reaching the majority states *13 that evidence “the shows that after the of dismissal the criminal charges breached insurer its duty (Ante, investigate.” 220.) The p. jury, however, never was asked to determine whether the insurer’s “post-dis missal”—or, more perhaps precisely, nonprivileged1—conduct, considered alone, constituted breach of the covenant of faith and fair good dealing. noted, As much of the evidence at presented trial related to the events the insurer’s of the surrounding filing with the reports Bureau and the criminal resulting that, proceeding, was not jury instructed whether the insurer had violated determining faith and good fair it could consider the insurer’s dealing, privileged conduct or the con that flowed from such conduct. sequences do I
Nor
think that we can
find on this record that
properly
the insurer’s
conduct
constituted tortious breach of the covenant of
nonprivileged
faith and fair
as a matter
law.
dealing
Contrary
inti-
majority’s
mation,
(1979)
v.
Ins. Co.
Egan Mutual
Omaha
which statement, of good breaches the covenant invariably proof-of-loss a false investigation to undertake further failing fair dealing faith and simply the insured. under some Although belatedly new evidence presented anof an failure to additional pursue circumstances conduct, it surely to constitute bad faith claim be found might insured’s fact to for the trier of that determination be appropriate making would insurer and the efforts of the investigatory into account the earlier take or to It is not prejudge of the insured. foreclose proper relative culpability here. that inquiry If
Thus, entirety.2 should be reversed in its conclude that the judgment I matter, be retried and sub- the case should chooses to pursue under legal to the jury proper principles. mitted J., Lucas, concurred. was denied 1986. rehearing September petition
Respondent’s *14 judgment properly affirm the I not think we can 2Contrary majority’s suggestion, do $8,771.” (Ante, 220.) facts p. majority’s As the statement “insofar as it awards breach of contract (ante, 214), plaintiff dismissed his beginning of trial p. indicates at the contrasted claim; on breach contract—as consequence, jury as a was not instructed $8,771 Thus, if the dealing—principles. faith and fair with breach of the covenant sustained, damages obtainable portion of the only upheld proper as a is to be it can be award whether yet determined jury has not Because the insurer’s breach of the covenant. for the covenant, however, we a breach nonprivileged conduct amounted to a breach. on such any damages predicated were affirm cannot