Case Number: SC122236    Hearing Date: August 01, 2014    Dept: O

SC122236
OPTIMUSCORP v. PLIS ET AL

Defendants Demurrer to the 2nd and 3rd causes of action in the complaint are sustained without leave to amend. Neither negligent retention of counsel nor aiding and abetting breach of fiduciary duty are cognizable claims against an insurer in California. Because both neither claim exists under California law under the circumstances of this case, amendment would be futile.

ANALYSIS: Defendants demur to the 2nd and 3rd causes of action in the complaint only and assert that the 1st cause of action for Breach of Contract is the correct legal claim in this bad faith action for failure to provide coverage for an employee’s claim of sexual harassment by Plaintiff’s CEO. Defense argues that the 2nd cause of action lies exclusively in negligence and is based solely on the alleged legal malpractice of the defense counsel. Relying on Merritt v. Reserve Insurance Company (1973)34 Cal.App.3d 858, which holds that a, “carrier does not become liable for trial counsel’s malpractice…,” Defendants conclude that, as a matter of law, an insurer cannot be responsible for legal malpractice on the part of retained counsel. Id. at 880. As for the 3rd cause of action for “aiding and abetting fiduciary breach,” Defendants argue that no fiduciary relationship exists between an insurer and it’s insured under the circumstances of this case, citing Vu v. Prudential Prop. & Cas. Ins. Co., (2001)26 Cal.App.4th 1142. Although California courts have imposed special duties on insurers, the facts of this case do not fall within those limited circumstances. Finally, Defendants argue that Plaintiff has not pled any facts to satisfy the common law rule for aiding and abetting.

Plaintiff alleges that insurers have a duty to provide competent counsel to their insureds, and Zilberman’s conduct as counsel for Plaintiff was incompetent. In the alternative, Plaintiff asks for an opportunity to amend to allege breach of contract for failure to provide competent counsel. As for the 3rd cause of action, Plaintiff argues that the facts of the case show that Zilberman breached his fiduciary duty and Defendants aided and abetted by following his advice thereby ratifying his conduct. Plaintiff provides no legal support in support of this theory.

Defendants’ demurrer to the 2nd cause of action is properly sustained without leave to amend. There is not a separate cause of action for negligence against an insurer in California. The Merritt case is controlling on this issue and Plaintiff provides no authority to the contrary. Plaintiff’s complaint is devoid of any facts to support that Defendant failed to hire competent counsel, but rather that they disagreed conduct throughout the representation. Plaintiff’s request to file a second cause of action for breach of contract based on Defendants hiring of counsel would therefore be futile.

Defendants’ demurrer to the 3rd cause of action is similarly sustained without leave. There is no cognizable claim for breach of fiduciary duty by an insured against its insurer. Tran v. Farmers Group, Inc. (2002) 104 Cal.App.4th, 1202, 1212. Plaintiff did not even allege a duty in the body of the complaint and has provided no legal support in opposition. It follows, therefore, that there can be no aiding and abetting liability on the part of the Defendants.