Opinion
Plaintiff Tilbury Constructors, Inc., sued its workers’ compensation insurance carrier, State Compensation Insurance Fund (State Fund), asserting causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, and three other claims. Tilbury’s complaint is primarily based on the contention that State Fund “performed an incompetent investigation into the responsibility for an accident suffered by one of Tilbury’s employees, and, as a result, [State Fund] unreasonably settled a third-party claim for less than one-fiftieth of the value of the employee’s claim. Because [State Fund] obtained almost no setoff from the responsible party, Tilbury’s premiums skyrocketed.” We shall conclude State Fund’s conduct does not give rise to a cause of action for breach of the insurance contract or a cause of action for the tortious breach of the covenant *471 of good faith and fair dealing. We shall affirm the judgment dismissing the action after the trial court sustained State Fund’s demurrer without leave to amend. 1
FACTUAL AND PROCEDURAL BACKGROUND
Our review of the trial court’s actions in sustaining State Fund’s demurrer without leave to amend is governed by well-settled principles. “
1
“We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.” [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff.’ ”
(Zelig
v.
County of Los Angeles
(2002)
Applying this standard of review here, Tilbury’s complaint alleges the following:
Tilbury entered into an insurance contract for workers’ compensation insurance with State Fund on April 1, 2000.
In September 2000, Tilbury was working on the expansion of California Dairies Inc.’s facilities in Turlock, California. Tilbury worked as a subcontractor for Golden State Steel Company, Inc., which in turn was a subcontractor to the general contractor on the project, Harris Company, Inc.
Most of Tilbury’s work took place in the creamery silo. Harris employees ordered Tilbury employees not to use Tilbury ladders in the silo. In fact, a *472 Harris employee installed its own portable metal extension ladder in the silo to provide access to the catwalk inside the silo. The Harris employee, however, failed to properly secure that ladder.
On September 25, 2000, Gary Alfrey, one of Tilbury’s employees, was working in the silo. A Harris employee directed Alfrey to climb to the catwalk and erect a safety line. Alfrey used Harris’s ladder to ascend to the catwalk when the ladder slipped out from under him and he fell 12 feet to the ground. Alfrey suffered severe injuries to his right leg and foot. His foot will never completely heal.
The California Department of Industrial Relations, Division of Occupational Safety and Health issued a citation to Tilbury for violating worker safety rules regarding unsecured ladders. Subsequently, that citation was deleted by the department for lack of evidence.
Alfrey sued Harris for his injuries. During that litigation, the Harris employee who placed the ladder and failed to secure it testified in his deposition that the ladder was not in place prior to the accident nor did he enter the silo in the days immediately prior to the accident. At trial, the employee recanted this testimony and claimed that he had lied during his deposition to avoid being blamed for the accident.
State Fund paid out workers’ compensation benefits to Alfrey in the amount of $219,387.90 and estimated his compensable future losses would amount to $282,512. State Fund has subrogation rights under the law and its policy is to recover these sums from third parties who caused the accident. State Fund investigated whether to pursue subrogation and ultimately decided to pursue a subrogation claim against Harris.
Ten days prior to the scheduled trial date, State Fund sold its subrogation rights to Harris for $10,000. Tilbury alleges that State Fund relied on three documents in its decision to settle the action: (1) a notice from the Division of Occupational Safety and Health that it decided not to cite Harris; (2) a citation against Tilbury for violation of the regulation requiring ladders to be safely secured (the primary charge in this citation had been deleted nine months prior); and (3) a mediation brief submitted by Harris’s attorneys to the superior court. Tilbury alleged that State Fund failed to take any steps to determine that the Occupational Safety and Health Appeals Board had deleted the accident-related determination in the citation issued against Tilbury. Before settling its subrogation claim with Harris, State Fund did not speak with any employees of Tilbury, including Alfrey, Tilbury’s general manager, or any employees on the job site the day of the accident. Further, State Fund *473 did not obtain any of the documents filed by Alfrey’s attorneys in the action. State Fund did not inform Tilbury of its decision to sell the lien to Harris until 30 days later.
At trial, Harris settled Alfrey’s legal claims against it for $1.2 million. To date, State Fund has paid and held in reserve at least $522,894 on behalf of Alfrey and received only $10,000 as an offset of that amount.
Tilbury’s workers’ compensation premiums are affected by its experience modification rating. Tilbury alleges as a result of State Fund’s conduct of failing to investigate and obtain a fair settlement from Harris, Tilbury’s experience modification factor has increased. In turn, its workers’ compensation insurance premiums have increased in the amount of $42,000 for the year April 1, 2002, through April 1, 2003, and will increase in an unknown amount in the following year. Other employers will also suffer an increase in premium periods as well. The increase in Tilbury’s workers’ compensation premiums has also forced Tilbury to raise its bidding rates and caused it to lose business opportunities and profits.
Tilbury alleges that State Fund has sought to obtain a credit against its obligations to pay Alfrey’s benefits based on the $1.2 million settlement. The net effect of this application will be to reduce State Fund’s out-of-pocket expenses, but will provide Tilbury with no relief from its increased premiums. In that application for credit, State Fund has taken the position that there was no finding that Tilbury had any fault in the accident.
Tilbury further alleges that State Fund failed to provide it with documentation of its subrogation handling for three months after Tilbury’s request. State Fund further refused to discuss altering any of Tilbury’s premiums.
Based on these allegations, Tilbury sued State Fund for breach of the insurance contract, breach of the covenant of good faith and fair dealing, violation of Business and Professions Code section 17200, interference with prospective economic advantage, and unjust enrichment. In short, Tilbury claims State Fund failed to properly investigate its subrogation claim and based on its failure to investigate, settled the claim for an unreasonably low amount.
State Fund filed a demurrer to the complaint. The trial court sustained that demurrer without leave to amend and entered judgment in favor of State Fund. Tilbury appeals.
*474 DISCUSSION
I
Tilbury Has Not Alleged an Actionable Breach of the Covenant of Good Faith and Fair Dealing
Tilbury argues the trial court erred in dismissing its cause of action for tortious breach of the covenant of good faith and fair dealing. Tilbury contends this tort “is available to prevent the insurer from taking unreasonable actions that will increase future premiums.” While this rule holds true in some circumstances, it does not apply here.
“Every contract imposes on each party an implied duty of good faith and fair dealing. [Citation.] Simply stated, the burden imposed is 1 “that neither party will do anything which will injure the right of the other to receive the benefits of the agreement.” ’ [Citations.] Or, to put it another way, the ‘implied covenant imposes upon each party the obligation to do everything that the contract presupposes they will do to accomplish its purpose.’ [Citations.] A ‘ “breach of the implied covenant of good faith and fair dealing involves something beyond breach of the contractual duty itself,” and it has been held that “ ‘[b]ad faith implies unfair dealing rather than mistaken judgment. . . .’ [Citation.]” [Citation.]’ [Citation.] For example, in the context of the insurance contract, it has been held that the insurer’s responsibility to act fairly and in good faith with respect to the handling of the insured’s claim ‘ “is not the requirement mandated by the terms of the policy itself—to defend, settle, or pay. It is the obligation . .. under which the insurer must act fairly and in good faith in discharging its contractual responsibilities.” [Citation.]’ [Citation.]”
(Chateau Chamberay Homeowners Assn. v. Associated Internat. Ins. Co.
(2001)
“Insurance contracts are unique in nature and purpose. [Citation.] An insured does not enter an insurance contract seeking profit, but instead seeks security and peace of mind through protection against calamity. [Citation.] The bargained-for peace of mind comes from the assurance that the insured will receive prompt payment of money in times of need. [Citation.] Because peace of mind and security are the principal benefits for the insured, the courts have imposed special obligations, consonant with these special purposes, seeking to encourage insurers promptly to process and pay claims. Thus, an insurer must investigate claims thoroughly [citation]; it may not deny coverage based on either unduly restrictive policy interpretations [citation] or standards known to be improper [citation]; it may not unreasonably delay in processing or paying claims [citation].”
(Love v. Fire Ins. Exchange
(1990)
In
Love,
the insureds sought to estop the insurance company from asserting the statute of limitations because the insurance company had an obligation to disclose that an excluded loss was a covered loss under certain circumstances.
(Love
v.
Fire Ins. Exchange, supra,
*476
State Fund relies on
New Plumbing Contractors, Inc. v. Nationwide Mutual Ins. Co.
(1992)
The
New Plumbing
court also separately examined the insured employer’s cause of action for breach of the covenant of good faith and fair dealing. The court stated, “neither the duty nor the covenant of good faith and fair dealing extends beyond the terms of the insurance contract in force between the parties.”
(New Plumbing Contractors, Inc. v. Nationwide Mutual Ins. Co., supra,
Here, the insurance contract provides, “We may enforce your rights, and the rights of persons entitled to the benefits of this insurance, to recover our payments from anyone liable for the injury. You will do everything necessary to protect those rights for us and to help us enforce them.” As demonstrated by New Plumbing, State Fund’s right to obtain subrogation under this provision, and under the relevant Labor Code provisions is just that, a right. Tilbury has alleged no defalcations in the manner in which State Fund handled the claim, paid out the benefits, or dealt with the claims handling portion of the case. The right of subrogation is not a duty under the contract, nor can it be transformed into a duty by virtue of tort law. Thus, because the decision of how and when it shall pursue subrogation, including the decision not to pursue subrogation at all, is State Fund’s right. Tilbury cannot state a cause of action for tortious breach of the covenant of good faith and fair dealing based on State Fund’s alleged failure to diligently and properly pursue its own right.
Tilbury further argues the insured employer has an interest in third party recoveries because Insurance Code section 11751.8 provides, in relevant part: “An insurer shall report to its rating organization as corrections or revisions of losses, pursuant to the unit statistical plan and uniform experience rating plans approved by the commissioner, if any of the following is applicable: . . . HQ (c) The carrier has recovered in an action against a third party.” This provision, however, does not require the carrier to pursue its subrogation rights, nor does it impose any duty on the carrier that runs contrary to the four separate options it is entitled to chose from when deciding whether and how to exercise its own subrogation rights.
Our conclusion is further buttressed by
Jonathan Neil & Assoc., Inc.
v.
Jones
(2004)
Similarly, here, most of the factors Jonathan Neil relies upon persuade us that Tilbury has not stated a claim. 2 First, and most importantly, State Fund has not denied Tilbury any benefits due to Tilbury under the insurance policy. None of its actions arise out of its conduct in fulfilling its obligations of defending, investigating, reserving, and settling claims. There are no allegations in the complaint that State Fund improperly handled the underlying claim in any manner. There are no allegations that State Fund failed to investigate the claim, delayed payment of the claim, or failed to defend and indemnify Tilbury. Thus, the subrogation failures did not deny Tilbury any benefits under the policy.
Second, State Fund’s alleged failures did not require Tilbury to sue to enforce its rights to benefits under the policy.
*479 Third, to the extent that Tilbury is dissatisfied with State Fund’s subrogation record, they can go out into the market and purchase workers’ compensation insurance from a separate carrier in future years. While its premiums may be higher in the first years after obtaining a new carrier, Tilbury will be able to reap the benefit of an insurer who pursues subrogation in a manner closer to Tilbury’s liking in the market.
Fourth, State Fund’s and Tilbury’s interests are not at odds in the context of subrogation, but rather are closely aligned. Both insurer and insured desire to recover as much as possible: State Fund to reduce its losses and Tilbury to reduce its premiums. Thus, it is not within State Fund’s interests to do a poor job of investigating and pursuing subrogation claims.
Tilbury also argues that a series of cases starting with
Security Officers Service, Inc.
v.
State Compensation Ins. Fund
(1993)
In Security Officers, the plaintiff insured sued State Fund for its systematic failure to process claims diligently and its unreasonable inflation of the reserves assigned to those claims. (Security Officers, supra, 17 Cal.App.4th at pp. 889-890.) State Fund’s bad faith delaying the resolution of claims and inflating its reserves operated to inflate the experience rating factor of its insured and permitted State Fund to charge excess premiums and pay less in dividends. (Id. at pp. 891-892.) The appellate court explained that this conduct, if true, established a breach of the implied covenant of good faith and fair dealing that gave rise to tort and contract damages. (Id. at pp. 894, 899.) Specifically, Security Officers held, “[w]e therefore conclude, in light of all of the authorities heretofore discussed, that the policy’s implied covenant of good faith and fair dealing required [State Fund] to conduct its functions of defending, investigating, reserving, and settling claims with good faith regard for their effect upon plaintiff’s premiums, as determined under the policy and governing regulations.” (Id. at p. 898.)
We reject Tilbury’s proffer of these cases for the same reasons that Jonathan Neil rejected their application to the postclaim billing of premiums. *480 (Jonathan Neil & Assoc. v. Jones, supra, 33 Cal.4th at pp. 940-941.) As the court noted, in each of those cases, “the overcharging of premiums was inextricably linked to the mishandling of claims—precisely the kind of bad faith behavior that goes to the heart of the special insurance relationship and gives rise to tort remedies. The premium overbilling alleged in this case is separate from any allegations of claims mishandling.” (Id. at p. 940, fn. omitted.) The same holds true here. It is not simply the increase in premium that gives rise to the tortious breach of the covenant of good faith and fair dealing. Rather, it is the underlying conduct that arises out of the insurance company’s duties to defend, investigate, reserve, and settle claims that gives rise to the tort. State Fund’s subrogation rights are independent and separate from those duties under the policy. Thus, the cases addressing the obligations of an insurer in the execution of its duties under the policy do not apply to its subrogation right.
The trial court, thus, properly sustained the demurrer without leave to amend as to this cause of action.
II
Tilbury Has Not Alleged an Actionable Breach of Contract
In addressing its cause of action for breach of contract, Tilbury argues, “the Courts of Appeal have repeatedly and consistently recognized that an employer has a remedy at law when its workers’ compensation insurance carrier takes an unreasonable discretionary action that increases the employer’s future premiums.” In support of this position, Tilbury cites
Lance Camper Manufacturing Corp.
v.
Republic Indemnity Co.
(2001)
A closer examination of these cases reveals that it is not the discretionary nature of the actions of the insurance company that gives rise to liability, but rather the fact that these actions take place in the context of the primary duties of the insurance company under the policy. In each of the cases mentioned
ante,
the insured employer’s claim of breach of contract related to how the insurance company handled claims asserted against its insured. In
Lance Camper II,
90 Cal.App.4th at pages 1155-1156, the insured claimed the insurance company inflated the reserves in bad faith. In
Notrica v. State Comp. Ins. Fund, supra,
Against this backdrop, where the core duties of the insurance company under its insurance contract are at issue, these courts have concluded, “an insurer’s pattern of failing to pay claims promptly, defend them diligently, or assign them reasonable reserves, followed by improperly failing to pay dividends to the insured, may constitute breach of the express and implied contractual terms in a workers’ compensation insurance policy.”
(Lance Camper II,
Here, for example, State Fund’s policy obligates it to “promptly pay when due to those eligible under this policy the benefits required of [Tilbury] by the workers’ compensation law.” The policy also provides that State Fund has the “duty to defend at our expense any claims or proceedings against [Tilbury] . . . .” It is precisely because these paragraphs of the policy impose affirmative duties on State Fund for the benefit of the insured that the contract and the contractual implied covenant of good faith and fair dealing require State Fund to undertake and perform these actions in good faith. It is for this same reason that State Fund is liable for contractual damages when it fails to meet this standard of good faith in the execution of these duties. The complaint before us does not allege any improprieties in these actions.
By contrast, in the context of subrogation, the policy provides that State Fund
“may
enforce [Tilbury’s] rights, and the rights of persons entitled to the benefits of this insurance, to recover [State Fund’s] payments from anyone liable for the injury.” This subrogation right inures to the benefit of State Fund. It is written with the word “may” indicating of the permissive nature of
*482
the right State Fund enjoys under the policy, and under the Labor Code. (See
New Plumbing Contractors, Inc. v. Nationwide Mutual Ins. Co., supra,
Ill
Tilbury Has Failed to Preserve Its Arguments As to Other Potential Claims
In a single sentence in its opening brief contained within its arguments about the covenant of good faith and fair dealing, Tilbury states: “Tilbury also has viable tort claims for unjust enrichment, interference with prospective economic advantage, and violations of Business and Professions Code sections 17200
et seq.
(unfair competition law), all of which provide a proper basis for suit when the offending party breaches its contractual or statutory duty to another and thereby causes injury.” It further cites three cases without any discussion of their application to this case. We shall disregard these legal contentions. First, “[e]ach point in an appellate brief should appear under a separate heading, and we need not address contentions not properly briefed. [Citations.]”
(Heavenly Valley v. El Dorado County Bd. of Equalization
(2000)
*483 DISPOSITION
The judgment is affirmed. State Fund shall recover its costs on appeal. (Cal. Rules of Court, rule 27(a)(1).)
Sims, Acting P. J., and Hull, J., concurred.
Notes
We deny State Fund’s request that we take judicial notice of two documents from the Workers’ Compensation Appeals Board as they are irrelevant to our disposition.
(Mangini v. R. J. Reynolds Tobacco Co.
(1994)
Obviously, State Fund is acting in a quasi-public role in providing insurance, and it appears that no other traditional tort remedies exist to redress the impact of increased premiums.
See also
Notrica
v.
State Comp. Ins. Fund
(1999)