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Home Insurance Co. v. Zurich Insurance Co.2/7/2002
CERTIFIED FOR PUBLICATION
Home Insurance Company appeals from a judgment of dismissal in favor of Zurich Insurance Company after a demurrer to its first amended complaint for fraud, declaratory relief, and subrogation or indemnity was granted without leave to amend. Home's action is premised on an alleged misrepresentation by counsel for Zurich's predecessor. Counsel allegedly misrepresented the available insurance policy limits to induce settlement of a lawsuit. Since any such statement is absolutely privileged under the litigation privilege of Civil Code section 47, subdivision (b), it will not support a direct fraud action for damages.
In addition, such a misrepresentation constitutes intrinsic, not extrinsic, fraud and provides no basis for equitable relief. We affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
The following facts are derived from the complaint since we assume the truth of all properly pleaded material allegations in reviewing a ruling on a demurrer. (Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 170.) This case arises from an automobile accident. On November 5, 1993, Michelle Canfield, the daughter of Patricia and Norman Fahrner, was driving their car with their consent and permission. She was negligent and inattentive and rear-ended Luana Pinasco's car.
The Fahrners had an automobile liability policy with Maryland Casualty Company (Maryland Casualty) with policy limits of $500,000 per automobile accident. Pinasco and her husband, Norman Main, had an automobile liability policy with Home Insurance Company (Home) with limits of $500,000 per accident.
Pinasco and Main sued Canfield for damages and Maryland Casualty assumed the defense. The lawsuit was settled for $15,000 and Pinasco and Main executed a full release. Pinasco and Main then made a claim against Home under the provisions of their underinsured motorist coverage. The claim was arbitrated, resulting in a net award to Pinasco and Main of $222,465.82, which Home paid.
Maryland Casualty was acquired by Zurich Insurance Company (Zurich).
Home brought suit against Zurich to set aside the release, and for fraud, a declaration of rights, and indemnity and subrogation. Home alleged that during the course of the lawsuit of Pinasco and Main, Maryland Casualty advised counsel for Pinasco and Main that Canfield was a permissive user only and that the financial responsibility limits of Vehicle Code section 17151 applied to restrict the policy limits to $15,000. Relying on these representations, Pinasco and Main settled the case for $15,000, although their damages were greater. Home further alleged that Canfield, as a permissive user, was an insured under the Fahrners's policy and the agents and employees of Maryland Casualty knew the applicable policy limits were $500,000. The misrepresentation of the policy limit was made to induce Pinasco and Main to settle their suit for less than the actual value of their claims.
Home agreed to arbitrate the underinsured motorist claim, believing the settlement and release were valid. The fraudulently induced release precluded Home from pursuing an indemnity or subrogation claim against Canfield or Maryland Casualty. This fraudulent conduct damaged Home in the amount of $222,465.82, plus $33,549.19 in attorney fees incurred during the arbitration, plus additional attorney fees.
Home also sought a declaration that the release executed by Pinasco and Main was obtained through fraud and was null and void. Finally, Home claimed the release could not bar Home from pursuing its claim against Canfield and Maryland Indemnity and it was entitled to recoup the funds it pai
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