Opinion
NOT TO BE PUBLISHED
APPEALS from judgments of the Superior Court of Los Angeles County. Elizabeth A. Grimes, Judge.
Ronald S. Barak for Plaintiff and Appellant.
Nemecek & Cole, Michael McCarthy, Mark Schaeffer, and Tommy Q. Gallardo for Defendant and Respondent Jackson & Wallace.
Hager & Dowling, John V. Hager and Benjamin J. Carman for Defendants and Respondents Fireman’s Fund Insurance Company and The American Insurance Company.
WOODS, J.
INTRODUCTION
Plaintiff Ben Eisenberg Properties—New Mart Building Inc. (Eisenberg), a commercial landlord, purchased insurance from defendants American Insurance Company and Fireman’s Fund Insurance Company (Fireman’s). Fireman’s retained the law firm of Jackson & Wallace (JW) to represent Eisenberg in two lawsuits (the underlying actions). The gravamen of Eisenberg’s complaint is that defendants entered into a secret retention agreement (RA) which created a conflict of interest such that Fireman’s lost the right to control Eisenberg’s defense in the underlying actions and resulted in negligent representation by JW, which in turn obligated Fireman’s to pay for the attorney’s fees Eisenberg incurred in retaining independent counsel, the Law Offices of Ronald S. Barak, to defend the underlying actions and to prosecute two related affirmative actions.
American is a wholly owned subsidiary of Fireman’s.
Barak is Eisenberg’s counsel on this appeal.
The court granted summary judgment in favor of JW on the basis there was no triable issue as to whether JW was the legal cause of Eisenberg’s damages (i.e., the attorney’s fees paid to Barak). The court granted summary adjudication in favor of Fireman’s on the basis it had no duty to defend or indemnify the related affirmative actions. The case proceeded to trial against Fireman’s on the questions of whether JW provided a negligent defense and whether conflicts of interest required Fireman’s to pay the fees of appellant’s personal attorney. The jury returned a defense verdict.
Eisenberg contends that the court erred in granting summary judgment in favor of JW when it ruled Eisenberg could not prove damages as the court ignored the “tort of another” doctrine. Eisenberg contends the court erred in granting summary adjudication in favor of Fireman’s because Eisenberg was required to pay for a defense of the underlying actions, including the affirmative actions “conducted against liability, ” as a direct result of JW’s malfeasance and because Fireman’s lost the right to control the litigation due to conflicts and numerous breaches of its duties. With respect to Fireman’s, Eisenberg also contends the court erroneously rejected jury instructions requested by Eisenberg and erroneously excluded evidence of its damages. We affirm.
GENERAL BACKGROUND
I. The Insurance Policy
Fireman’s issued a general commercial policy to Eisenberg. The policy gave Fireman’s the right and duty to defend against any suit seeking damages covered by the policy and the right to “investigate any occurrence and settle any claim or suit that may result.” (Emphasis deleted.) No provision in the policy required Fireman’s to fund or prosecute actions for affirmative relief filed by the insured.
II. Underlying Actions
A. Anne’s Place Actions
Eisenberg owned the New Mart Building, a large commercial property located in the garment district of Los Angeles. In 2003, Eisenberg leased suite 1201 to Anne’s Place, Inc. Ricardo Guido signed the lease as president of Anne’s Place. In May 2005, Anne’s Place sold its capital stock to West Coast Holdings and Management, LLC (West Coast). Guido acquired a one-third interest in West Coast. That transaction led to four lawsuits over the right to tenancy of suite 1201.
1. Forcible Detainer Action
In November 2005, Anne’s Place and West Coast filed a forcible detainer action against Guido. In December 2005, the court entered judgment in favor of Anne’s Place and West Coast for $105,000.
2. Anne’s Place Action
One week after the filing of the forcible detainer action, Anne’s Place and West Coast sued Eisenberg, alleging numerous causes of action including breach of contract, wrongful eviction, and interference with business relations (AP Action). On February 9, 2006, Eisenberg tendered its defense to Fireman’s. A few days later, Eisenberg retained Ronald Barak as personal counsel. Fireman’s agreed to defend without reserving any rights. On March 16, 2006, Fireman’s appointed JW to represent Eisenberg, and JW associated in as counsel on April 6.
In January 2007, the AP Action settled. The $105,000 settlement (the amount of the forcible detainer action against Guido) was paid by Fireman’s.
B. Unlawful Detainer Action (UD Action)
In December 2005, Eisenberg filed an unlawful detainer action against Anne’s Place, West Coast and Guido. The July 2006 judgment awarded Eisenberg $25,000 as damages ($20,000 for attorney’s fees and approximately $5,000 as costs). Eisenberg claimed that to prosecute the unlawful detainer action, he incurred $285,499 in fees to Barak. Eisenberg requested that Fireman’s pay those fees. Fireman’s refused on the ground the action had been brought by Eisenberg.
C. Guido Action
In January 2006, Guido sued Eisenberg, Anne’s Place and West Coast for dispossession from suite 1201. Eisenberg cross-complained against Anne’s Place, West Coast and Guido for breach of contract and related causes of action. Eisenberg tendered its defense to Fireman’s, and Fireman’s defended without any reservation of rights. Fireman’s agreed to pay JW to litigate the cross-complaint, but there was no agreement to pay Barak’s firm to litigate the cross-complaint. The court dismissed the Guido Action as to Eisenberg. Eisenberg settled with certain cross-defendants. In January 2008, following a jury trial, Eisenberg obtained a judgment in its favor on its cross-complaint.
III. Current Action
A. Allegations
The first amended complaint (FAC), the operative complaint, alleged causes of action for breach of fiduciary duty and professional negligence against JW and for breach of insurance contract and breach of the covenant of good faith and fair dealing against Fireman’s. The FAC alleged both defendants breached their duties or acted negligently with respect to the AP, UD and Guido Actions. As damages, Eisenberg sought attorney’s fees for its independent counsel and costs for all of those actions as well as punitive damages.
The gravamen of the claims against Fireman’s was the allegation it breached its duty to defend by retaining JW subject to a fee agreement and, as a result, JW provided a substandard defense. The FAC also alleged Fireman’s breached the covenant of good faith by failing to disclose to Eisenberg the terms of payment for JW’s services.
B. Summary Judgment (SJ) and Summary Adjudication (SAI)
The court granted JW’s motion for SJ, finding no evidence JW was the legal cause of Eisenberg’s alleged damages. The court entered judgment in favor of JW, and Eisenberg filed a timely notice of appeal from that judgment.
Fireman’s sought SAI as to its duty to defend and indemnify the AP Action, the UD Action and the Guido Action and cross-complaint. The court granted SAI in favor of Fireman’s as to its refusal to fund the prosecution of the UD Action and the Guido cross-complaint.
C. Jury Trial
Eisenberg presented evidence pertaining to the alleged breach of contract and bad faith resulting from a purportedly negligent defense by JW and a purported conflict of interest requiring Fireman’s to pay the attorney’s fees of Barak. Eisenberg utilized expert witnesses to argue that Fireman’s breached its duties as an insurer by failing to pay Barak’s fees, failing to disclose the existence of a conflict of interest and retaining JW to represent Eisenberg.
The jury rendered a defense verdict. The court entered judgment in favor of Fireman’s. Eisenberg filed a timely notice of appeal from that judgment.
This court consolidated the two appeals.
DISCUSSION
APPEAL AS TO JW
I. Background
A. SJ Facts
Pursuant to the insurance policy issued to Eisenberg, Fireman’s appointed JW to defend Eisenberg in the AP and Guido Actions. Fireman’s agreed to defend Eisenberg without a reservation of rights in those actions. Fireman’s initially agreed to have JW litigate the Guido cross-complaint. Subsequently, in December 2006, Fireman’s reserved its rights regarding the Guido cross-complaint.
The insurance contract provided that Fireman’s had the right to appoint counsel to defend covered actions and to control the defense of such actions. The contract did not require Eisenberg’s consent to settle covered actions. The contract did not provide for an obligation by Fireman’s to pay for two sets of counsel to defend Eisenberg unless Fireman’s issued a reservation of rights. Eisenberg was bound by those terms as they pertained to the two underlying actions. The insurance contract does not contain a provision requiring appointed counsel (JW) to pay for other counsel to defend.
Eisenberg was sued in the AP and Guido Actions for intentional torts and negligence. The claims against Eisenberg totaled $2.65 million in actual damages plus claims for punitive damages. Eisenberg’s insurance policy limited coverage to $1 million per occurrence.
In the AP Action, Barak represented Eisenberg beginning on or before February 14, 2006. After being appointed by Fireman’s, JW associated in as counsel in April 2006. On about January 10, 2007, the case settled within the policy limits. Eisenberg did not pay any of the settlement funds to the plaintiffs in the AP Action. The settlement was fully funded by Fireman’s, and the case was dismissed with prejudice on January 26, 2007. At the time, Eisenberg was still being represented by JW.
In the Guido Action, Barak represented Eisenberg beginning on or before February 14, 2006. Eisenberg, through Barak, filed a defensive cross-complaint in the Guido Action on March 6, 2006. After being appointed by Fireman’s, JW associated in as counsel in April 2006.
On March 22, 2007, JW filed a motion to withdraw as counsel because Eisenberg had filed this malpractice action against JW on March 8. Eisenberg opposed the motion, stating it wanted to keep JW as its counsel. On March 28, Klinedinst PC (appointed by and paid by Fireman’s) was associated in as counsel for Eisenberg. The court granted JW’s motion to withdraw on April 9.
On April 11, the plaintiff in the Guido Action settled his claims. The Guido Action was settled with no payment of settlement money by Eisenberg.
Eisenberg, through Klinedinst, continued to prosecute the cross-complaint after the complaint had settled. Eisenberg reached a partial settlement with some cross-defendants. The court approved the settlement, and Eisenberg filed a dismissal with prejudice against the settling cross-defendants. Eisenberg tried the cross-complaint against Guido, the remaining cross-defendant. The jury reached a verdict in favor of Eisenberg. As of the date of the filing of JW’s summary judgment motion, the Guido Action was on appeal.
Regarding the UD Action, Barak was Eisenberg’s counsel. Although Eisenberg tendered the prosecution of the UD Action to Fireman’s, Fireman’s took the position that it did not have a duty under the policy to prosecute the action on Eisenberg’s behalf, and it did not appoint JW to prosecute that action. Eisenberg did not retain JW to prosecute the UD Action.
B. Court Ruling
In granting summary judgment, the court found there was no triable issue that JW was the legal cause of Eisenberg’s alleged damages (i.e., the fees paid to Barak) as it had not presented admissible evidence showing it would have obtained a better result in those lawsuits but for JW’s negligence or breach of fiduciary duty as the third party claims settled within policy limits. Citing Lazy Acres Market, Inc. v. Tseng (2007) 152 Cal.App.4th 1431, 1436, the court noted an insurance company’s attorney does not have to pay for a second attorney. The court also noted the doctrine of the tort of another did not entitle Eisenberg to recover from JW the fees paid to Barak as there was no evidence Eisenberg was forced to bring or defend an action against a third party as a consequence of JW’s alleged breaches of duty. The court noted that because JW was not retained to represent Eisenberg in the UD Action, it had no duty to enforce the judgment obtained by Eisenberg.
Damages caused by negligence or breach of fiduciary duty are an element of causes of action for professional negligence and for breach of fiduciary duty respectively. (Budd v. Nixen (1971) 6 Cal.3d 195, 200; Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1086.)
“‘The grant and denial of summary judgment or summary adjudication motions are subject to de novo review.’” (Orrick Herrington & Sutcliffe v. Superior Court (2003) 107 Cal.App.4th 1052, 1056.)
II. Discussion
Eisenberg contends the court erred in granting SJ in favor of JW as the court mistakenly relied on Lazy Acres and ignored the tort of another doctrine. As Eisenberg itself acknowledges, the court expressly found the tort of another doctrine did not apply. Thus, the court did not ignore that doctrine. Eisenberg reasons that it incurred attorney’s fees (and costs) in defending the underlying third party suits, including affirmative actions “conducted against liability, ” as a direct result of JW’s malfeasance, i.e., the pattern of JW’s incompetent representation (the tort of another). Eisenberg also claims JW had little incentive to adequately represent it and reason not to do so because of the RA and argues JW breached its fiduciary duty by not informing Eisenberg of the RA and the resulting conflict.
We note that in theory there are essentially two types of damages that can be recovered because of the negligence of litigation counsel. First, if the former client can prove a better result would have been achieved but for the attorney’s negligence, i.e., a case-within-a-case, the difference is properly recovered as damages. (See Viner v. Sweet (2003) 30 Cal.4th 1232, 1244.) To recover damages in such a case for legal malpractice, the plaintiff must prove “that but for the alleged malpractice, it is more likely than not that the plaintiff would have obtained a more favorable result.” (Original italics.) (Ibid.) “In both litigation and transactional malpractice cases, the crucial causation inquiry is what would have happened if the defendant attorney had not been negligent. This is so because the very idea of causation necessarily involves comparing historical events to a hypothetical alternative.” (Original italics.) (Id. at p. 1242.) Even though Eisenberg conceded it did not seek this type of damages as the litigation settled within policy limits, it argued the court improperly relied on Lazy Acres.
Second, if the former client incurred additional attorney’s fees as a result of the first attorney’s negligence, those fees are also recoverable. (Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 750-751 [attorney’s fees incurred as direct result of another attorney’s tort, e.g., to untangle the first attorney’s error, are recoverable damages].) It is this second category of damages that Eisenberg sought via the aegis of the tort of another.
A. Lazy Acres
Lazy Acres hired Premier, a security company, to protect against shoplifters. Under their contract, Premier promised to indemnify Lazy Acres respecting its services. Premier was insured by Western Heritage, and Lazy Acres was an additional insured. A Premier employee arrested a Lazy Acres customer for shoplifting, and the customer sued Lazy Acres and Premier. Western Heritage appointed a single attorney (Tseng) to represent both Lazy Acres and Premier. (Lazy Acres Market, Inc. v. Tseng, supra, 152 Cal.App.4th at p. 1433.) Tseng did not disclose the potential conflict in representing both Premier and Lazy Acres or that in the event of a conflict, Western Heritage would be required to pay the cost of independent counsel to represent Lazy Acres. (Id. at p. 1434.) When appointed counsel advised Lazy Acres about the potential conflict, after the court denied a motion to disqualify her, Tseng resigned and Lazy Acres replaced her with independent counsel. (Ibid.) Just as here, Lazy Acres sued Tseng for legal malpractice and breach of fiduciary duty, seeking to recover the fees it paid to independent counsel. (Id. at p. 1435.)
As here, the insurance company agreed to defend the insured without a reservation of rights, the insured hired its own attorney to represent it because it believed the insurance company’s attorney had a conflict of interest, and the insurance company settled the suit which was dismissed against the insured. (Lazy Acres Market, Inc. v. Tseng, supra, 152 Cal.App.4th at p. 1433.) The Court of Appeal held the insured did not have a cause of action against the insurance company’s attorney, reasoning, “The insurance company gave the insured a safety net. The insurance company’s attorney does not have to pay for a second one. There is no causal relation between the attorney’s alleged breach of duty and damages. (Ibid.) The court noted the elements of the two causes of action were the same in that case and assumed without deciding that Tseng had breached her duty to inform Lazy Acres of the conflict. (Id. at pp. 1435-1436.) The court then further noted that the matter settled without any contribution from Lazy Acres and that the complaint, which alleged Western Heritage had a duty to pay the fees and costs of defending the action, did not allege facts showing Tseng did, or failed to do, anything which influenced Western Heritage’s decision not to pay Lazy Acres attorney’s fees and did not suggest how Lazy Acres could have achieved a better result in the underlying actions but for Tseng’s breach of duty. (Id. at pp. 1436-1437.)
Eisenberg posits that Lazy Acres is inapposite as Lazy Acres sued the wrong party in that it did not sue the insurer and that the case cannot trump Prenticev. North Amer. Title Guar. Corp. (1963) 59 Cal.2d 618 and applicability of the tort of another doctrine. However, the court there acknowledged Prentice, but found the case was inapposite because “none of Tseng’s alleged errors required Lazy Acres to bring an action against a third party.” (Lazy Acres Market, Inc. v. Tseng, supra, 152 Cal.App.4th at p. 1437.) Similarly, Eisenberg did not have to bring an action against a third party due to JW’s alleged negligence and/or conflict.
This court granted JW’s request we take judicial notice of court documents showing Lazy Acres sued the insurer.
As did the trial court, without deciding whether there was negligent representation or a conflict of interest, we conclude that Lazy Acres is apposite to the case at bar in that Eisenberg has not demonstrated it could have achieved a better result in the underlying actions but for JW’s alleged negligence or conflict interest as those actions were settled within policy limits. Moreover, Eisenberg adduced no facts showing JW did anything which influenced Fireman’s decision not to pay the attorney’s fees Eisenberg incurred in the underlying actions.
B. Tort of Another
Eisenberg argues that because of a clear pattern of incompetent representation by JW and the refusal of JW (and Fireman’s) to correct the situation, Eisenberg found it necessary to engage independent counsel to protect its interests and that necessity was the direct result of JW’s incompetent representation.
In Prentice v. North Amer. Title Guar. Corp., supra, 59 Cal.2d at page 620, the seminal case for this doctrine, the court noted: “General rule: In the absence of some special agreement, statutory provision, or exceptional circumstances, attorney’s fees are to be paid by the party employing the attorney. [¶] Exception: A person who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover compensation for the reasonably necessary loss of time, attorney’s fees, and other expenditures thereby suffered or incurred.” (Citations omitted; italics deleted.)
“Fees recoverable as damages under ‘tort of another’ doctrine: Attorney fees are recoverable compensatory damages where the plaintiff client incurred attorney fees instituting an action against a third party, or defending an action brought by a third party, as a direct result of attorney malpractice.” (Emphasis deleted.) (Vapnek et al., Cal. Practice Guide: Professional Responsibility (The Rutter Group 2009) § 6:326.)
In Sindell v. Gibson, Dunn & Crutcher (1997) 54 Cal.App.4th 1457, 1460, Harold retained Gibson to draft an estate plan, but Gibson neglected to obtain the consent of Harold’s second wife Kathleen to the characterization of certain property as Harold’s separate property which resulted in a suit against Harold’s children by Kathleen. The court noted “that the plaintiffs [Harold’s children] have already sustained injury by virtue of having to litigate issues which, but for defendants’ negligence, would have been resolved.” (Ibid.) The court held: “Under California law, it is a well-established principle that attorney fees incurred through instituting or defending an action as a direct result of the tort of another are recoverable damages. We see no reason not to apply this principle to legal malpractice actions. Defendants’ alleged malpractice certainly would amount to a tort which has resulted in plaintiffs’ having to defend the pending litigation initiated by Kathleen.” (Id. at p. 1470.)
In Orrick Herrington & Sutcliffe v. Superior Court, supra, 107 Cal.App.4th 1052, the court found the doctrine did not apply. Malcom, who had retained Orrick in connection with a marital settlement agreement, asserted that Orrick had left out certain critical terms in the settlement agreement which exposed him to claims by his former wife and the tax authorities. (Id. at p. 1055.) Malcom sued Orrick for legal malpractice seeking the attorney’s fees he incurred in an unsuccessful attempt to overturn the settlement agreement. (Id. at pp. 1055-1056.) Citing Prentice, the court stated, “If Orrick’s alleged errors had required Malcom to act to protect his interests by bringing or defending an action against a third person, he might have a tort cause of action against Orrick. The undisputed facts, however, show neither his ex-wife nor his current wife, nor the taxing authorities nor the securities regulators have made any claims against Malcom. Nothing compelled Malcom to spend hundreds of thousands of dollars in his futile attempt to overturn the settlement.” (Id. at p. 1060.) The court ordered the trial court to grant summary adjudication on the professional negligence and breach of fiduciary duty claims finding there was no evidence Malcom could have achieved a better result. (Id. at pp. 1057-1061.)
In the case at bar, Eisenberg did not have to defend the underlying actions because of JW’s alleged negligence and/or conflict, he had to defend those actions because of his own alleged errors, i.e., Eisenberg did not defend an action brought by a third party as a direct result of JW’s negligence. In addition, when Eisenberg sued JW, JW requested leave to withdraw, but Eisenberg opposed that request. When JW withdrew, Fireman’s appointed new counsel (Klinedinst PC) to represent Eisenberg. Eisenberg was fully represented at no cost to himself after JW withdrew. Thus, any fees Eisenberg paid to Barak were not “caused” by JW’s negligence or withdrawal. We agree with the trial court that the tort of another doctrine did not entitle Eisenberg to recover from JW the fees Eisenberg paid to Barak. Accordingly, summary judgment in favor of JW was proper.
APPEAL AS TO FIREMAN’S
I. Background
A. Tender
In February and March 2007, Eisenberg tendered to Fireman’s the defense of the AP and Guido Actions and prosecution of the UD Action and the Guido Cross-Complaint. On March 29, Fireman’s unconditionally accepted defense of the AP and Guido Actions and prosecution of the Guido Cross-Complaint and conditionally agreed to reimburse Eisenberg for its prosecution of the UD Action if Fireman’s agreed in advance and the prosecution was beneficial to any of the other underlying actions.
B. Alleged Destruction of The UD Judgment
In the UD Action, Eisenberg obtained a judgment for possession and unpaid rent. In January 2007, acting as Eisenberg’s counsel, JW engaged in settlement negotiations with the AP plaintiffs, which resulted in a payment by Fireman’s to the AP plaintiffs equal to the full amount of their demand, which rendered the UD judgment worthless.
C. JW’s Alleged Deficient Litigation
Eisenberg claims a “pattern of seriously substandard J&W performance emerged” and then lists many citations to the record without any effort to explain how those citations show a substandard performance. (Emphasis deleted.) It is not the job of this court to construct a party’s argument for it. (See Guthrey v. State of California (1998) 63 Cal.App.4th 1108, 1115-1116.) Thus, we will only consider the examples actually illustrated in Eisenberg’s brief and the arguments actually presented by Eisenberg. (Ibid.)
Following retention of JW to represent Eisenberg in the AP and Guido Actions, independent counsel Barak ceased working on those matters, other than reviewing JW’s performance, and resumed working on those matters only when Eisenberg believed JW’s deficiencies began to appear.
Eisenberg gave the following illustrations of alleged substandard performance:
In May 2006, “J&W transmitted to Eisenberg a one page opposition to a Guido Cross Complaint demurrer. The opposition was without substance, simply stating that the demurrer should be denied.”
In July 2006, “J&W served Eisenberg’s First Amended Guido Cross Complaint (‘FACC’) missing one of its exhibits.”
On July 26, 2006, “J&W provided to Eisenberg a virtually unintelligible proposed Second Amended Guido Cross Complaint (‘SACC’).”
On August 28, 2006, “J&W served deficient discovery responses adopting an ill advised stonewall approach that Eisenberg had previously criticized to avoid having to spend time to investigate and respond properly.”
On August 4, 2006, “J&W filed and served the deficient SACC without correcting the deficiencies previously identified to J&W by Eisenberg.”
On September 3, 2007, “J&W emailed to Barak a copy of Guido’s motion to strike portions of Eisenberg’s SACC along with a purported draft ‘opposition’ thereto. Examination of the ‘opposition’ revealed that while labeled an opposition, it was actually a memorandum in support of the motion to strike.”
On September 21, 2007, “J&W transmitted to Eisenberg proposed responses to form interrogatories served on Eisenberg in the Guido Action setting forth wholly incorrect answers identifying unrelated Asian parties having nothing to do with any Eisenberg matter. These responses purported to be verified by Eisenberg but were served before being shown to Eisenberg.” (Emphasis deleted.)
On September 24, 2007, “J&W transmitted to Barak an ‘early draft’ of a Third Amended Guido Cross Complaint (‘TACC’) and informed Barak that it was due on 10/3/2007. Barak reviewed the document and found it literally unreadable, and replete with errors and bad grammar. Barak responded on 10/1/2007 with numerous factual corrections and other revisions, but J&W ignored all of these corrections, claiming that it discovered that it had to file on 9/29/2009. In fact, it was not filed until 10/3/2007, but Barak’s corrections were still ignored.”
These dates do not match the dates on the cited sources.
“J&W repeatedly neglected or refused to inform Eisenberg of events taking place in the litigation, particularly where bad J&W results were involved.”)
Eisenberg then asserts that as a result of the pattern of JW’s deficiencies and failures to keep Eisenberg informed, Eisenberg concluded it was not receiving effective representation from JW and, therefore, Eisenberg found it necessary to re-engage Barak to resume a proactive role in these actions as Eisenberg’s independent counsel.
Eisenberg further asserts Fireman’s failed to pay certain promised litigation expenses for more than 18 months, concealed the terms of the RA, did not disclose that under Insurance Code section 533, it could not reimburse Eisenberg for any intentional torts, failed to reimburse Eisenberg for any expenses of the UD Action, and ignored Eisenberg’s repeated written complaints that it was not receiving a vigorous defense.
Eisenberg does not describe how its defense was harmed by those alleged deficiencies or what Barak’s role was as Eisenberg was still represented by appointed counsel in the AP and Guido Actions.
II. Summary Adjudication
In granting summary adjudication, the court ruled that “plaintiff may not recover any damages caused by insurers’ declining to fund plaintiff’s prosecution of the unlawful detainer case and funding of plaintiff’s litigation of its cross complaint in the Guido action.” In other words, the court ruled Fireman’s had no duty to defend the underlying affirmative actions (the UD Action and the Guide cross-complaint). Although Eisenberg complains about what it perceives as inconsistencies in the court’s ruling, the basis for Eisenberg’s claim the court erred in granting summary adjudication is unclear. Eisenberg asserts Fireman’s had conflicts of interest, including a claim Fireman’s did not inform Eisenberg about the provision of Insurance Code section 533, which prohibits an insurer from indemnifying an insured’s willful acts, and a claim the RA created a conflict of interest. Eisenberg also lists what it considers to be Fireman’s breaches of its duties. Eisenberg asserts that because of those conflicts and breaches, Fireman’s lost the right to control the defense, which in turn forced Eisenberg to retain independent counsel. However, even if Fireman’s lost the right to control the defense, that does not explain why it should pay for Eisenberg’s prosecution of the affirmative actions; Eisenberg does not claim the policy provided for such coverage.
Generally, a liability insurer is not obligated to fund or prosecute cross-complaints even if they are factually intertwined with the action against its insured. (See James 3 Corp. v. Truck Ins. Exchange (2001) 91 Cal.App.4th 1093, 1104 [“‘The duty to defend could not extend to require the insurer to take affirmative action to recover money.’”]; Emerald Bay Community Assn. v. Golden Eagle Ins. Corp. (2005) 130 Cal.App.4th 1078, 1095 [“Liability insurance policies impose on an insurer the obligations to defend and indemnify an insured, but these policies do not impose an obligation to pursue claims for affirmative relief against third parties.”]; 3250 Wilshire Boulevard Bldg. v. Employers Ins. of Wausau (1995) 39 Cal.App.4th 1277, 1280 [The liability provision of the insurance policy did not obligate the insurer to provide a defense to its tenant’s counterclaim for damages in the insured’s action for breach of lease because the defenses pleaded in the counterclaim had no potential to result in a judgment holding the insured liable to pay damages].)
In James 3, the court noted: “For independent counsel to be required, the conflict of interest must be ‘significant, not merely theoretical, actual, not merely potential.” (James 3 Corp. v. Truck Ins. Exchange, supra, 91 Cal.App.4th at p. 1101.) The court lists examples of situations in which appointment of independent counsel might be required. (Ibid.) Eisenberg asserts that the applicable example is “any other situation where an attorney who represents the interests of both the insurer and the insured finds his or her ‘representation of the one is rendered less effective by reason of his [or her] representation of the other.’” (Ibid.) Eisenberg argues that in this case because intentional torts were alleged against it in the underlying actions, appointed counsel could steer the litigations toward those claims meaning there would be no insurance coverage. However, the court clarified “independent counsel is required where there is a reservation of rights ‘and the outcome of that coverage issue can be controlled by counsel first retained by the insurer for the defense of the claim.’” (Original italics) (Id. at p. 1102.) Fireman’s defended the AP and Guido Actions without a reservation of rights.
Eisenberg asserts that because of what it perceives as Fireman’s conflicts of interest and breaches of duty, Eisenberg had the right to control the defense and because it had the right to control the defense, it had the right to chose whether or not to prosecute the Guido cross-complaint and the UD Action as cases against liability. Eisenberg posits it was Fireman’s duty to fund those prosecutions unless it could overcome the presumption those prosecutions were reasonable.
In Aerojet-General Corp. v. Transport Indemnity Co. (1997) 17 Cal.4th 38, 60, the court noted: “The insurer has a duty to defend. In fulfilling its duty, it must undertake reasonable and necessary efforts to avoid or at least minimize liability. To that end, it must incur reasonable and necessary costs.” The issue in Aerojet was whether the insured’s site investigation expenses constituted defense costs the insurer had to incur to fulfill its duty to defend. (Ibid.)
The court set forth three requirements which had to be satisfied if the investigation expenses were to constitute defense costs the insurer had to incur. “First, the site investigation must be conducted within the temporal limits of the insurer’s duty to defend, i.e., between tender of the defense and conclusion of the action. Second, the site investigation must amount to a reasonable and necessary effort to avoid or at least minimize liability. Third and final, the site investigation expenses must be reasonable and necessary for that purpose.” (Aerojet-General Corp. v. Transport Indem. Co., supra, 17 Cal.4th at p. 61.)
Eisenberg states that Larkin v. ITT Hartford (N.D.Cal. 1999, C96-1575CRB) 1999 WL 459351, sets out the test to determine if the defense of a cross-complaint was “conducted against liability.” Based on Aerojet, the Larkin court noted that the question there was whether the prosecution of the cross-complaint “‘would be conducted against liability by a reasonable insured under the same circumstances.’” (Id. at *7; original italics.) However, that statement fell under the court’s analysis of Aerojet’s third requirement for determining if investigation expenses constituted defense costs. (Ibid.) The court found the prosecution of the cross-complaint did not meet the Aerojet requirements. (Ibid.) The court concluded: “Hartford did not have a duty to fund the prosecution of the [cross-complaint]. Plaintiffs have not cited a single case in which an insurer was held to have a duty to fund the prosecution of a separate action for damages in which the insured is a plaintiff. The Court declines to extend California law to create a duty to pay litigation expenses incurred in prosecuting an action for damages on the ground that a finding in favor of the plaintiff in that damages action might be used by the plaintiff to successfully defend a separate lawsuit.” (Id. at *6.)
Eisenberg notes that although Larkin refused to extend investigation expenses to the costs of prosecuting cases “conducted against interest, ” a California court did so in Barratt American, Inc. v. Transcontinental Ins. Co. (2002) 102 Cal.App.4th 848, 860. In Barratt, the issue was whether the costs plaintiff incurred to repair homes owned by individuals who had not joined the underlying construction defect lawsuit qualified as recoverable defense costs. (Id. at p. 852.) Without any analysis or discussion of Aerojet’s requirements, Eisenberg implies that its attorney’s fees in prosecuting the Guido cross-complaint and the UD Action are analogous to the investigation and repair costs addressed in Larkin and Barratt. We disagree. Thus, even if there were conflicts or breaches which would have required the appointment of independent counsel to defend the underlying actions (the AP and Guido Actions), Eisenberg has not established it would have been entitled to recover the attorney’s fees it incurred in prosecuting the affirmative actions (the UD Action and the Guido cross-complaint).
Eisenberg then argues that even if Fireman’s had no obligation to prosecute the affirmative actions as a matter of law, Fireman’s was bound to do so by its promise to prosecute those actions. As support for the alleged promise to prosecute the UD Action, Eisenberg quotes from an e-mail from Michael Asbury, the Fireman’s claims adjuster assigned to this matter. In more complete form, the e-mail stated:
Fireman’s Fund has accepted the defense of both of these matters (Anne’s Place and Guido). Diane Coe has been assigned to defend Eisenberg Properties. As part of that defense, crossclaims are sometimes necessary. Ms. Coe will also handle any crossclaims that are deemed appropriate to the defense of the underlying matter. [¶] Ms. Coe will not be handling any separate unlawful detainer actions (as mentioned in our first conference call), unless it is agreed upon with me in advance, and it has direct bearing on the defense of the underlying matter. Fireman’s Fund considers those actions as part of the normal course of business of our insured, barring unusual circumstances.
Eisenberg claims Fireman’s subsequently agreed the prosecution of the UD Action was crucial to “those defenses” (of the underlying actions). E-mails from JW and Fireman’s acknowledged the appellate court decision in the UD Action had resolved key issues in Eisenberg’s favor and the decision could be argued as collateral estoppel in the AP Action and could be used to show Guido’s claims were meritless. Eisenberg suggests Asbury’s had to give his consent as a matter of good faith. However, any promise by Fireman’s had two conditions precedent -- Asbury’s prior approval and Fireman’s agreement handling the cross-complaint was appropriate. The first condition was not satisfied as Asbury did not approve Fireman’s assumption of paying the costs of prosecuting the UD Action. Consequently, Fireman’s had no obligation to prosecute the UD Action.
Eisenberg argues that because Fireman’s undertook the defense of the Guido cross-complaint without reservation, it was bound to do so. However, Fireman’s subsequently reserved its rights regarding the Guido cross-complaint, and it never agreed to reimburse Eisenberg for Barak’s fees for his role in litigating that cross-complaint.
III. Claimed Instructional and Evidentiary Errors
Eisenberg contends the court erroneously excluded instructions Eisenberg requested stating the court’s rejection was predicated on the court’s erroneous summary judgment/adjudication assumptions. Having determined that those motions were properly granted, we conclude this contention is without merit.
Finally, Eisenberg contends that due to erroneous rulings and an erroneous evidentiary sanction the court erroneously excluded evidence of the costs of independent counsel and Brandt (Brandt v. Superior Court (1985) 37 Cal.3d 813) damages for the costs it was incurring on an ongoing basis for vindicating its contractual rights. Eisenberg’s claim is again based on the alleged erroneous summary judgment/adjudication rulings, which this court has held were not erroneous.
If a party consistently fails to provide information relevant to a claim, an order precluding the claim is a permissible form of sanction, and if a party violates a court order, terminating sanctions are appropriate. (Sauer v. Superior Court (1987) 195 Cal.App.3d 213, 228-230; see also Karlsson v. Ford Motor Co. (2006) 140 Cal.App.4th 1202, 1219.) Orders imposing discovery sanctions are reviewed “under the deferential abuse of discretion standard.” (Karlsson, at p. 1217.)
Eisenberg argues the sanctions were unwarranted and improper because there was nothing egregious about its conduct and no pattern of inappropriate conduct. Eisenberg suggests the court should have imposed the alternative it suggested in its opposition, i.e., temporarily delaying the trial, and notes it volunteered to reimburse Fireman’s for any damages Fireman’s could demonstrate from the short trial delay.
In September 2007, in response to an interrogatory about the basis and amount of the damages being claimed, Eisenberg filed a heavily redacted table that redacted the dollar amounts of fees claimed as damages. Following extensive discovery disputes, the court referred the dispute to a discovery referee. The referee issued a recommended order (adopted by the court) that Eisenberg be compelled to answer the subject interrogatory in a specific manner without redaction, i.e., that it itemize its damages in a clear manner and identify what it claimed as Brandt damages with an updated amount of damages.
On May 5, 2008, the court issued an order requiring a detailed listing of attorney’s fees sought as damages, including a statement of the specific services rendered in the underlying actions. The court ordered the response was due by May 20. Eisenberg states it did not learn of the order until May 16, only four days before it was due. Eisenberg admits that the response it served did not comply with the court’s order, but claims that it complied on July 14. Fireman’s brought a motion for evidentiary sanctions on June 27. On August 18, the court issued an order granting evidentiary sanctions excluding all Brandt damages and other damages accrued after May 31, 2008.
In its reply brief, Eisenberg states that as of May 31, 2008, its total damages claim was $1,168,653.
Noting that Fireman’s requested and was granted additional time to comply with the court’s order, Eisenberg suggests sanctions were inappropriate because, if it had requested additional time, the court would have given it time. The point being of course that Eisenberg did not request additional time. Moreover, the sanction was not a doomsday sanction, as Eisenberg claims, as it was still able to pursue the attorney’s fees of $614,000 that it previously identified in response to an interrogatory. Thus, the court did not abuse its discretion when it imposed an order excluding certain damages.
DISPOSITION
The judgments are affirmed. Fireman’s and JW to recover costs on appeal.
We concur: PERLUSS, P. J. ZELON, J.