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California State Automobile Association Inter-Insurance Bureau v. Parichan10/31/2000
ia State Auto. Assn. Inter-Ins. Bureau v. Bales (1990) 221 Cal.App.3d 227 is not on point because it does not address this issue.
In its reply, Parichan relies on several cases that establish that an individual's bad faith, in contexts outside of the realm of insurance bad faith, cannot be established by imputing another's knowledge to the individual. Thus, both Chalmers v. Raras (1962) 200 Cal.App.2d 682, 690 [involving good faith purchase of property by subsequent purchaser who recorded deed before prior purchaser] and Snook v. Netherby (1954) 124 Cal.App.2d 797 [considering whether additional damages could be awarded for bad faith breach of contract to convey realty under Civil Code, section 3306] hold that in the specific contexts of those cases, an individual's bad faith must be established through subjective knowledge rather than imputed knowledge. These cases are distinguishable from this one, most fundamentally because an insurance company is not an individual.
In sum, therefore, the trial court properly instructed the jury that Parichan's knowledge could be imputed to CSAA.
C. CSAA'S Comparative Negligence
Parichan contends that the trial court improperly refused to instruct the jury that any damages awarded to CSAA should be reduced by the amount of its own negligence. In other words, Parichan argues that CSAA was also negligent in rejecting the section 998 offer and this negligence should have been taken into account. We disagree. Such an instruction would have been warranted only if there was evidence in the record to support it. (LeMons v. Regents of University of California (1978) 21 Cal.3d 869, 875 [instructions on points of law not applicable to the issues in a case tend to mislead and confuse the jury and should not be given].) There was not.
CSAA, while undertaking its independent duty to evaluate the section 998 offer, properly relied on Parichan's advice in rejecting this offer. (Garner v. American Mut. Liability Ins. Co. (1973) 31 Cal.App.3d 843, 848 [insurer's duty to evaluate claim "is exercised normally in conjunction with the judgment of counsel defending the cases against the insured"]; Mutuelles Unies v. Kroll & Linstrom (9th Cir. 1992) 957 F.2d 707, 712 ["client [insurer] who retains an attorney is entitled to assume that the attorney is competent, and to rely on the attorney's advice"].) As appellant points out, CSAA had evidence that the claim might be in excess of the policy limits. However, when Parichan advised CSAA that Magill did not intend to pursue the claim for psychological damage, CSAA properly relied on the information it received from Parichan and agreed to reject the section 998 offer. In so doing, it did not behave negligently and no contributory negligence instruction was warranted.
D. Prejudgment Interest
Finally, CSAA contends in a cross-appeal, that it was entitled to prejudgment interest under Civil Code section 3287, subdivision (a) (§ 3287 (a)). We disagree.
Section 3287 (a) itself provides that prejudgment interest is awardable when, but only when, damages are either "certain, or capable of being made certain by calculation." (§ 3287 (a).) As our seminal decision in Levy-Zentner Co. v. Southern Pac. Transportation Co. (1977) 74 Cal.App.3d 762, 794-799 noted, there is no absolute bar to the recovery of prejudgment interest in tort cases. However, in general that section relates to liquidated and contractual claims as distinquished from claims sounding in tort which are generally covered by section 3288. (Greater Westchester Homeowners Assn. v. City of Los Angeles (1979) 26 Cal.3d 86, 102.) Thus, in Canavin v. Pacific Southwest Airlines (1983) 148 Cal.App.3d 5
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