Case Number: BC365455 Hearing Date: June 18, 2019 Dept: 47

Gail Hollander, et al. v. XL Capital Ltd.

MOTION FOR AN ORDER ADDING INTEREST TO THE AMOUNT AWARDED BY THE JURY IN THE JUDGMENT; MOTION FOR AN OFFSET OF THE $250,000 SETTLEMENT PLAINTIFFS RECEIVED FROM DEFENDANT LA PACKING AND FOR A DETERMINATION THAT XL SPECIALTY INSURANCE IS THE “PREVAILING PARTY” FOR COSTS

MOVING PARTY: (1) Plaintiff Gail Hollander, individually and in her representative capacities.

(2) Defendant XL Specialty Insurance Company

RESPONDING PARTY(S): (1) Defendant XL Specialty Insurance Company. (2) Plaintiff Gail Hollander

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

This is an insurance bad faith action regarding failure to pay policy benefits for certain Kippenberger Paintings. Defendant L.A. Packing, Crating and Transport, Inc. damaged Plaintiffs’ Kippenberger Paintings while installing the artwork at their newly remodeled home. Attempts to restore the paintings did not bring them back to their pre-damage condition, and their market value was less than the insured value. Plaintiffs and their insurer disagreed on the valuation process. Once Plaintiffs had the painting sold at auction, Defendant refused to pay the difference between the policy benefits and the sale price, as demanded by Plaintiffs.

On May 13, 2019, the Court entered judgment on a jury verdict in favor of Plaintiffs and against Defendant XL Specialty Insurance Company awarding Plaintiffs $19,950.

Plaintiff Gail Hollander now moves for an order adding interest to the jury’s award. Defendant XL Specialty Insurance Company moves for an offset of the $250,000 settlement that Plaintiff received from Defendant LA Packing and to be declared the prevailing party.

TENTATIVE RULING:

Plaintiff’s motion to add interest to the jury’s award is DENIED.

Defendant XL Specialty Insurance Company’s motion for an offset of the $250,000 settlement that Plaintiff received from Defendant LA Packing and to be declared the prevailing party is DENIED. Defendant’s motion for a determination that it is the “prevailing party” for costs is DENIED without prejudice to renew the motion without relying on the success of its offset arguments.

DISCUSSION:

Motion For Order Adding Interest To Jury Award

Plaintiff Gail Hollander argues that she is entitled to interest on her $19,500 judgment against Defendant XL Specialty Insurance Company at 10% per annum beginning on October 31, 2006, when Defendant first offered to settle the Plaintiffs’ property claim for $19,950.

“A person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in the person upon a particular day, is entitled also to recover interest thereon from that day, except when the debtor is prevented by law, or by the act of the creditor from paying the debt.” (CCP § 3287(a).)

“A primary purpose of section 3287 is to ensure that a plaintiff awarded money by a court receives, in addition, the lost time value of that money.” (City of Clovis v. County of Fresno (2014) 222 Cal.App.4th 1469, 1480.) Damages are deemed “certain or capable of being made certain” when there is essentially no dispute between the parties concerning the basis of computation of damages, if any are recoverable, and their dispute instead centers on the issue of liability giving rise to damage. (Duale v. Mercedes-Benz USA, LLC (2007) 148 Cal.App.4th 718, 729.) The test is “whether the defendant knew the amount of damages owed to the claimant or could have computed that amount from reasonably available information.” (Howard v. American National Fire Ins. Co. (2010) 187 Cal.App.4th 498, 535.) Courts “generally apply a liberal construction in determining whether a claim is certain, or liquidated.” (Ibid.)

On the other hand, where the amount of damages cannot be resolved except by verdict or judgment, prejudgment interest is not appropriate. (Wisper Corp. v. California Commerce Bank (1996) 49 Cal.App.4th 948, 960.) Moreover, “where there is a large discrepancy between the amount of damages demanded in the complaint and the size of the eventual award, that fact militates against a finding of the certainty mandated by Civil Code section 3287.” (Id. at 961.)

Plaintiff argues that damages were certain here because the parties’ dispute was as to liability, not the amount of damages for breach of contract. Plaintiff relies on Defendant’s offer to settle the claim for $19,950 on October 31, 2006, which was reiterated in January 2008 and February 2008, to argue that Defendant knew what it owed Plaintiff.

Yet Plaintiffs themselves disputed that $19,950 was the proper amount of damages. Otherwise, they presumably would have accepted that amount in 2006. Rather, in July 2006, Plaintiffs claimed they were owed $269,500 under the policy – the policy limit of $399,000 less their asserted value of $129,500 for the restored paintings. (Complaint ¶ 24.) In the same July 2006 letter to Defendant, Plaintiffs stated that if Defendant was “not in agreement” that their damages were $269,500, they would be putting the paintings up for auction and would expect Defendant to reimburse them for the “difference between the net sum we receive from the sale . . . and the $399,000 insured value.” (Ibid.) Defendant did not agree with this amount and instead made what it considered a “generous” offer in October 2006: 5% of the insured value of the paintings, or $19,950. (Complaint ¶ 40.) Defendant also noted that it disputed Plaintiffs’ claimed loss of value, based on an expert appraisal that had determined that the loss of value was no more than 2.5% of the insured value, or $9,975. (Ibid.) Needless to say, Plaintiffs did not agree with that assessment and did not accept the offer of $19,950 – an amount that neither party claimed represented the Plaintiffs’ true losses. Defendants routinely choose to settle cases for amounts that do not precisely reflect their anticipated liability at trial. Here, Defendant chose to offer an amount that was above its own calculation of the Plaintiffs’ losses but significantly below their claimed losses. The fact that a jury awarded a similar amount thirteen years later does not transform this offer into a sum certain.

Accordingly, the Court finds that Plaintiff’s damages were not certain or capable of being made certain until trial and as such, the Plaintiff’s motion for prejudgment interest is DENIED.

Motion For Offset

Request For Judicial Notice

Defendant requests that the court take judicial notice of the following documents: (A) the Settlement Agreement and General Release between Plaintiff and LA Packing (Trial Exhibit 2329); (B) the Stipulation for Entry of Judgment between Plaintiffs and LA Packing filed July 16, 2009 (Trial Exhibit 3011); (C) Partial Judgment filed July 17, 2009 (Trial Exhibit 3010); and (D) relevant portions of Plaintiffs’ Motion in Limine No. 1, which was filed May 16, 2011. These requests are GRANTED per Evid. Code § 452(d) (court records).

Opposition’s Violation of Local Rules

Although Defendant refers to the local rule by an incorrect number (3.113(g)), Defendant is correct that the Court may refuse to consider Plaintiff’s opposition because it violates Rules 2.107 and 2.108. (CRC 3.1113(g).) Nevertheless, because Defendant addresses Plaintiff’s opposing arguments in its Reply, the Court elects to consider Plaintiff’s opposition.

Analysis

Defendant XL Specialty Insurance Company moves for an order offsetting Plaintiffs’ July 2009 settlement with Defendant LA Packing Crating & Transport in the amount of $250,000 against the $19,500 jury verdict obtained by Plaintiffs at trial, resulting in a net zero recovery for Plaintiffs. Defendant also seeks a determination that it is the prevailing party for an award of costs.

Offset

Code of Civil Procedure § 877 provides, in relevant part, “[w]here a release, dismissal with or without prejudice, or a covenant not to sue or not to enforce judgment is given in good faith before verdict or judgment to one or more of a number of tortfeasors claimed to be liable for the same tort, or to one or more other co-obligors mutually subject to contribution rights, it shall have the following effect: (a) It shall not discharge any other such party from liability unless its terms so provide, but it shall reduce the claims against the others in the amount stipulated by the release, the dismissal or the covenant, or in the amount of the consideration paid for it, whichever is the greater.” (Code Civ. Proc. § 877, emphasis added.) Thus, a settlement with a joint tortfeasor or co-obligor provides the remaining defendants with an offset against the plaintiff’s award in the amount specified or the amount of the consideration, whichever is more. (CCP §877(a); Engle v. Endlich (1992) 9 Cal.App.4th 1152, 1163.) The nonsettling tortfeasors are entitled to an offset for the full amount of the settlement, rather than by an amount measured by the settling tortfeasor’s proportionate responsibility for the injury. (Erreca’s v. Superior Court (1993) 19 Cal.App.4th 1475, 1489.)

Plaintiff first argues that Defendant is not entitled to an offset because Plaintiffs did not receive anything from the $250,000 settlement, in that the settlement amount “went directly to the attorneys’ fees and costs of suit.” (Oppo., at p.4.) This argument is belied by the fact that the Settlement Agreement and General Release, of which this Court has taken judicial notice, indicates that the amount does not include costs of suit or attorneys’ fees. Plaintiffs may have used the $250,000 settlement to pay their attorneys, but that does not transform the settlement into an award of attorneys’ fees and not damages.

Plaintiff also argues that Defendant is not entitled to seek subrogation from LA Packing because it never paid their claim, and therefore Defendant is not entitled to offset based on the amount paid by LA Packing. This argument is also without merit, as the amount owed was in dispute, and Defendant therefore had the right to seek resolution of its subrogation rights by way of a Cross-Complaint against LA Packing. (CCP § 1060.)

Next, Plaintiff argues that Defendant and LA Packing are not “joint tortfeasors” for purposes of CCP § 877. Neither Plaintiff nor Defendant cites a case that is directly on point. Nevertheless, although Defendant is correct that the term “joint tortfeasor” is broadly construed, the term still requires joint tortfeasors. The judgment against Defendant here was on Plaintiff’s breach of contract claim, not the insurance bad faith claim. Breach of contract is a non-tortious claim, whereas LA Packing was sued for the tort of negligence (and therefore is not a co-obligor with Defendant of a contractual obligation). Because the judgment against Defendant was not with regard to any cause of action in tort, Defendant and LA Packing cannot be considered joint “tortfeasors.”

Defendant’s reliance on May v. Miller (1991) Cal.App.3d 404 is misplaced. Defendant cites May for the proposition that “there shall be but one satisfaction accorded for the same wrong” and that “when the injury arises from a single act, [the plaintiff] cannot, secure more than one compensation for the same injury.” (Id. at 410.) However, Defendant quotes May out of context; the court in May so stated because the relevant judgment and settlement agreement both pertained to causes of action in tort. The same is not true here.

Accordingly, Defendant’s motion for offset is DENIED.

Prevailing Party

Defendant also argues that it is the “prevailing party” for an award of costs under CCP § 1032. Because this argument is almost exclusively based on Defendant’s assumption that it is entitled to an offset, the argument fails for the reasons discussed above.

Defendant also briefly argues that it is the “prevailing party” because it tendered a larger amount than Plaintiff’s jury verdict. Defendant had offered $450 more than the verdict before Plaintiffs filed suit and maintained that tender until just before trial. Under the circumstances, then, Defendant argues that Plaintiffs sued it “without cause.” (DeSaulles v. Community Hospital of Monterey Peninsula (2016) 62 Cal.4th 1140, 1147.) This argument has some potential, but it has not been fully developed.[1] Accordingly, Defendant’s motion for a determination that it is the “prevailing party” for costs is DENIED without prejudice to renew the motion without relying on the success of its offset arguments.[2]

Moving party to give notice.

IT IS SO ORDERED.

Dated: June 18, 2019 ___________________________________

Randolph M. Hammock

Judge of the Superior Court

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept47@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.

[1] The problem for the Defendant would be that on its face, the Plaintiffs appeared to have the right to sell the paintings at an auction, per the policy, and seek the difference of $181K. Hence, was the action actually filed “without cause”?

[2] For example: If there was a valid and enforceable CCP 998 offer to compromise made by the defendant, this could result in the defendant becoming the “prevailing party” in this action. This, of course, remains to be seen.