Summary
In Burton v. Lumbermans Mutual Casualty Company (N.D.Cal. Nov. 15, 2004, No. C04-01614 HRL) 2004 U.S. Dist. LEXIS 23609, at page 11, the federal district court held that Edwards did not apply because the definition of the "claims" to be released was limited to "all claims or demands for underinsured motorist benefits under [the policy]... to recover for damages Releasor alleges he suffered in the motor vehicle accident that occurred on May 22, 1999."
Summary of this case from Mistretta v. Mid-Century Ins. Co.Opinion
No. C04-01614 HRL, Re: Docket No. 34.
November 15, 2004
ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT
On November 9, 2004, this court heard the motion for summary judgment filed by defendant Lumbermans Mutual Casualty Company ("defendant"). Plaintiff Jeff Burton ("plaintiff") opposed the motion. Based on the papers submitted by the parties, as well as the arguments of counsel, the motion is denied.
Pursuant to 28 U.S.C. § 636(c) and Fed.R.Civ.P. 73, all parties have expressly consented that all proceedings in this matter may be heard and finally adjudicated by the undersigned.
I. BACKGROUND
For purposes of the present motion, the following facts are not materially disputed by the parties.
This is a bad faith insurance action. Plaintiff claims that on or about May 22, 1999, while in the course and scope of his employment with RJR Nabisco, he was injured in an automobile accident caused by an uninsured/underinsured driver. Plaintiff's lawsuit against the driver was settled for $50,000. Plaintiff also filed a workers compensation claim against RJR Nabisco and his other employer, Albertson's (Lucky Stores). The workers compensation cases were settled on July 17, 2001 for $93,000.
According to plaintiff, both workers compensation cases concerned the May 22, 1999 automobile accident, as well as a work-related accident that occurred in June 2000 while plaintiff was employed with Albertson's (Lucky Stores).
With respect to the claim at issue in this action, plaintiff made an uninsured/underinsured motorist's ("UIM") claim under RJR Nabisco's automobile insurance policy ("Policy") with defendant. His claim was settled at a July 11, 2003 mediation for $215,000. The parties, who were each represented by counsel at the mediation, entered into a "Memorandum of Full and Final Settlement Through Mediation." Plaintiff subsequently signed a "Release of All Claims" ("Release") on August 2, 2003.
On December 23, 2003, plaintiff initiated the instant bad faith action against defendant in Santa Clara County Superior Court. He subsequently filed a First Amended Complaint ("FAC"), and defendant removed the matter to this court under 28 U.S.C. § 1441(b), asserting diversity jurisdiction. Plaintiff contends that defendant knew that he was entitled to compensation under the Policy but deliberately delayed payment of the $215,000 in bad faith. He seeks, among other things, the alleged economic loss from the date the $215,000 "should have been paid" through July 11, 2003, as well as punitive damages.
Defendant now moves for summary judgment on the ground that plaintiff's bad faith claim is barred by the prior settlement and Release.
II. LEGAL STANDARD
A motion for summary judgment should be granted if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c)); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). The moving party bears the initial burden of informing the Court of the basis for the motion, and identifying portions of the pleadings, depositions, answers to interrogatories, admissions, or affidavits which demonstrate the absence of a triable issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party meets its initial burden, the burden shifts to the non-moving party to present specific facts showing that there is a genuine issue of material fact for trial. FED. R. CIV. P. 56(e); id. at 324. The evidence and all reasonable inferences must be viewed in the light most favorable to the nonmoving party. T.W. Elec. Service, Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630-31 (9th Cir. 1987). Summary judgment is not appropriate if the nonmoving party presents evidence from which a reasonable factfinder could resolve the material issue in his favor. Barlow v. Ground, 943 F.2d 1132, 1136 (9th Cir. 1991).
III. DISCUSSION
The question at hand is whether plaintiff's claim for bad faith/tortious breach of insurance contract is barred by the parties' prior settlement and release in the underlying UIM matter. Defendant contends that the parties' July 11, 2003 settlement memorandum and the August 2, 2003 Release clearly and unambiguously bar any action for bad faith. It further argues that the court should not look to any extrinsic evidence to interpret the parties' agreement. Here, it vigorously objects to the declarations and other extrinsic evidence submitted by plaintiff and his counsel in opposition to the motion. Plaintiff argues that the settlement and release apply only to claims for his alleged personal injuries and property damage suffered in the May 22, 1999 accident.
Contract interpretation is a question of law. See generally De Guere v. Universal City Studios, Inc., 65 Cal. Rptr.2d 438, 450-51 (Cal.App. 1997). Interpretation of a release or settlement agreement is governed by the same principles applicable to any other contractual agreement. General Motors Corp. v. Superior Court, 15 Cal.Rptr.2d 622, 625 (Cal.App. 1993). In disputes over the interpretation of a contract, the first question to be decided is whether the language is "reasonably susceptible" to the interpretation being urged by a party. People v. R.J. Reynolds Tobacco Co., 132 Cal.Rptr.2d 151, 157 (Cal.App. 2003). "`If the court decides the language is reasonably susceptible to the interpretation urged, the court moves to the second question: what did the parties intend the language to mean?'" Id. at 157-58 ( quoting Oceanside 84, Ltd. v. Fidelity Federal Bank, 66 Cal. Rptr.2d 487 (Cal.App. 1997)). In interpreting an unambiguous contractual provision, the court is bound to give effect to the plain and ordinary meaning of the language used by the parties. Id. "Thus, where `contract language is clear and explicit and does not lead to absurd results, we ascertain intent from the written terms and go no further.'" Id. at 158 ( quoting Shaw v. Regents of University of California, 67 Cal. Rptr.2d 850 (Cal.App. 1997)). "`If the contract is capable of more than one reasonable interpretation, it is ambiguous . . ., and it is the court's task to determine the ultimate construction to be placed on the ambiguous language by applying the standard rules of interpretation in order to give effect to the mutual intention of the parties. . . ." Id. ( quoting Badie v. Bank of America, 79 Cal. Rptr.2d 273 (Cal.App. 1998)).
While the intention of the parties is to be ascertained from the writing alone, if possible (Cal. Civ. Code §§ 1638, 1639), "[a] contract may be explained by reference to the circumstances under which it was made, and the matter to which it relates" ( id., § 1647). The "clear and explicit" meaning of these provisions, interpreted in their "ordinary and popular sense," controls interpretation "unless used by the parties in a technical sense, or unless a special meaning is given to them by usage." Id., §§ 1638, 1644.
It is the outward expression of agreement, rather than a party's subjective unexpressed intent, that is to be enforced. Edwards v. Comstock Ins. Co., 252 Cal.Rptr. 807, 810 (1988). "`The law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. It judges of his intention by his outward expression and excludes all questions in regard to his unexpressed intention.'" Id. ( quoting Crow v. P.E.G. Constr. Co., Inc., 319 P.2d 47 (Cal. 1957)). "`If his words or acts, judged by a reasonable standard, manifest an intention to agree in regard to the matter in question, that agreement is established, and it is immaterial what may be the real but unexpressed state of his mind on that subject.'" Id. "However broad may be the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract." Cal. Civ. Code § 1648.
In this case, the parties' July 11, 2003 settlement memorandum indicates that:
• the $215,000 settlement is a "total settlement in full to all claims of JEFFREY BURTON arising out of the accident that occurred on May 22, 1999 at the intersection of the Lawrence Expressway off ramp and El Camino Real in San Jose while claimant was in the course and scope of his employment with Nabisco"; and
• it was understood that "[b]y this settlement there is no further obligation, responsibility or exposure on behalf of any of the respondents, their insurance company or their agents or employees, to claimant, JEFFREY BURTON, under the underinsured motorist coverage benefitting claimant. . . ."
(Sozio Decl., Ex. F).
The settlement memorandum further provides:
A Full and Final Release will be prepared and signed, a Request for Dismissal with prejudice of the entire action will be signed and filed. It is understood and agreed that this is a full and final release of any and all claims described as aforesaid, as they pertain to Released Party, and Releasing Party agrees that it shall apply to all unknown, unanticipated, unsuspected and undisclosed claims, demands, liabilities, actions or causes of action, as well as those which are now known, anticipated, suspected or disclosed.Id. The settlement memorandum documented plaintiff's knowing waiver of the benefits of California Civil Code section 1542. Id.
California Civil Code Section 1542 provides that "[a] general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor."
On August 2, 2003, plaintiff executed a "Release of All Claims" ("Release") which provides:
This Release of All Claims (the "Release Agreement") is a full and final release applying to all RELEASOR'S Claims for unknown and unanticipated injuries or damages arising out of the Incident, if any, as well as to those now known or disclosed. . . .
(Sozio Decl., Ex. C). The Release again documented plaintiff's waiver of California Civil Code section 1542. ( See id.)
Defendant argues that the broad language of the settlement memorandum combined with the Release terms describing the Release as a "full and final release applying to all Releasor's Claims for unknown and unanticipated injuries or damages arising out of the Incident" clearly and unambiguously bar plaintiff's bad faith claim in the instant action. As such, it contends that it is entitled to judgment as a matter of law under Edwards v. Comstock Ins. Co., 252 Cal. Rptr. 807 (1988). In Edwards, the California appellate court affirmed summary judgment in favor of the defendant insurer, and concluded that (1) the parties' settlement and release clearly and unambiguously barred plaintiffs' claims for bad faith; and (2) extrinsic evidence of the plaintiffs' subjective, unexpressed intent not to release their bad faith claims was inadmissible to contradict the terms of the parties' agreement. See id.
If the language defendant quotes from the Release were the only description of the covered claims, the court might be inclined to agree. However, the explicit terms of the Release indicate that it applied only to claims for injuries and damages plaintiff alleges he sustained in the accident. Here, the Release defines the "Claims" to be released as:
all claims or demands for underinsured motorist benefits under Lumbermen's insurance policy number F5D 006 119-01 issued to Releasor's employer, RJR Nabisco, Inc. (collectively, "the Claims") to recover for damages Releasor alleges he suffered in the motor vehicle accident that occurred on May 22, 1999. . . .
(Sozio Decl., Ex. C). Moreover, the fact that defendant prepared the Release after the July 11, 2003 was executed indicates that the parties agreed that the "Full and Final Release" referenced in the settlement memorandum encompassed only those "claims or demands for underinsured motorist benefits under the [policy] to recover for damages [plaintiff] alleges he suffered in the [accident]."
Accordingly, the court concludes that the parties' agreement is not reasonably susceptible to the interpretation urged by defendant, and further that it is not ambiguous. As such, the court need not look to extrinsic evidence to interpret the agreement, and defendant's objections to plaintiff's extrinsic evidence are overruled as moot. Moreover, at the hearing both sides conceded that (1) neither party disclosed or discussed any intent it may have had to exclude or include bad faith claims in the settlement and Release; and (2) extrinsic evidence of unexpressed intent is inadmissible to construe the clear and unambiguous the terms of the contract. See Edwards, 252 Cal. Rptr. at 810. In any event, even if the court were to consider the extrinsic evidence proffered by plaintiff, it would not alter the result here.
IV. ORDER
Based on the foregoing, it is ordered that defendant's motion for summary judgment is denied.