Appellant insurer sued its insured and respondent

Appellant insurer sued its insured and respondent

Jun 22, 2021, 11:27:40 AM News

Procedural Posture

Appellant insurer sued its insured and respondent, the insured's assignee, seeking a declaration as to its duty to defend in an underlying action that led to a judgment for the assignee. The assignee cross-complained for bad faith under the assignment. The trial court awarded the assignee damages but it denied Brandt attorney fees. The Court of Appeal, California, affirmed the judgment but reversed the denial of fees. The insurer appealed.


Overview

The court of appeal held that when an insured assigned a bad faith cause of action against an insurer, the assignee received the right to recover the policy benefits in full, including Brandt fees. The California Supreme Court agreed and, to the extent that it was inconsistent, disapproved Xebec Development Partners, Ltd. v. National Union Fire Ins. Co. (1993) 12 Cal.App.4th 501 [15 Cal.Rptr.2d 726]. In suing on the assigned claim for tortious breach of the duty to defend, the assignee did not seek damages for emotional distress, punitive damages, EEOC attorney injury to reputation, or other personal interests. What the assignee sought to recover as tort damages was the monetary value of the policy benefits wrongfully withheld by the insurer. When an insurer's tortious conduct reasonably compelled the insured to retain an attorney to obtain the benefits due under a policy, the fees incurred for those attorney services were an economic loss -- damages -- proximately caused by the tort. The assignee stood in the shoes of the insured and so could assert his right to recover any Brandt fees incurred in prosecuting the assigned claim.


Outcome

The court affirmed the judgment of the court of appeal.

Published by lauradern

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