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Golden Eagle Insurance Co. v. Century Surety Company12/8/2003
in the arbitration demand, they constituted only legal opinion, and were irrelevant to establish the facts regarding Century's duty to defend. (See Quan v. Truck Ins. Exchange (1998) 67 Cal.App.4th 583, 602; Chatton v. National Union Fire Ins. Co. (1992) 10 Cal.App.4th 846, 865.) To the extent that these statements may have rested upon facts from an undisclosed source, they lacked any indicia of certainty. In either case, Pratali's characterization of the alleged damages, on its face, was tentative and subject to possible revision.
Century suggests that Pratali's statements or, alternatively, related allegations in Golden Eagle's complaint, amount to judicial admissions about the nature of the damages in the Solemint action. We disagree. Absent special circumstances, statements by a party are evidentiary admissions but are not conclusive, and may be rebutted by contradictory evidence. (1 Witkin, Cal. Evidence (4th ed. 2000) Hearsay, § 91, pp. 794-795.) However, statements in a pleading may rise to judicial admissions, which are conclusive concessions on the truth of a matter. (Id. at § 97, p. 799.)
Here, Pratali's statements occurred outside of any pleading or judicial forum, and as we have explained, they cannot be regarded as conclusive on the nature of the damages in the Solemint action. Furthermore, although Golden Eagle's unverified complaint against Century refers to allegations of continuous and progressive damage in the Solemint action, it also broadly characterizes the Solemint action as potentially seeking damages covered by the Century policy. Generally, ambiguous allegations in unverified complaints do not rise to judicial admissions, when, as here, the plaintiff has subsequently clarified these allegations. (Kirby v. Albert D. Seeno Construction Co. (1992) 11 Cal.App.4th 1059, 1066-1067.)
During oral argument, Century contended that an insurer that refuses to defend an action proceeds at its own risk, but it does not incur any liability for its refusal unless it is later shown that coverage, or potential coverage, existed under the policy (see, e.g., American Internat. Bank v. Fidelity & Deposit Co. (1996) 49 Cal.App.4th 1558, 1571; Mullen v. Glens Falls Ins. Co. (1977) 73 Cal.App.3d 163, 173). In view of this principle, it argued that even if Pratali's letters do not adequately support its refusal to defend the Solemint action, other facts existed at the time of the refusal that Century could have discovered, and that conclusively vindicated its refusal.
On this matter, Century pointed to a declaration from Barry MacNaughton, who represented Solemint in the arbitration with Cal Coast. He stated that Solemint took the position throughout the arbitration that its damages were continuous and progressive. MacNaughton added: "I would have advised anyone who inquired of this position." In view of MacNaughton's declaration, Century argued that any inadequacies in its investigation of Cal Coast's claim were harmless.
Century is mistaken, for two reasons. First, as our Supreme Court stated in Montrose II, supra, 6 Cal.4th at page 295, the duty to defend "`may exist even where coverage is in doubt and ultimately does not develop.'" (Quoting Saylin v. California Ins. Guarantee Assn., supra, 179 Cal.App.3d at p. 263.) Under this principle, an insurer that has refused to defend on the basis of inadequate facts in its possession cannot cure its error by pointing to other facts existing at the time of its refusal that could have vindicated the refusal, had the insurer established these facts. (Mullen v. Glens Falls Ins. Co., supra, 73 Cal.App.3d at pp. 172-174; Perkins v. Allstate Ins. Co. (C.D. Cal. 1999) 63 F.Supp.2d 1164, 1174-1175.)
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