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Kumar v. Lords Insurance Agency, Inc.

California Court of Appeals, First District, Second Division
Jul 19, 2010
No. A127296 (Cal. Ct. App. Jul. 19, 2010)

Opinion


CHARAN J. KUMAR, Plaintiff and Respondent, v. LORDS INSURANCE AGENCY, INC., Defendant and Appellant. A127296 California Court of Appeal, First District, Second Division July 19, 2010

NOT TO BE PUBLISHED

Lake County Super. Ct. No. CV405401

Lambden, J.

Charan J. Kumar owned and operated the Lakeport Express, a gas station and mini-market (gas station or garage station) in Lakeport. He contracted with Lords Insurance Agency, Inc. (Lords) to obtain liability insurance for the business and paid Lords the premium for a policy to cover the year 2007. Lords cashed Kumar’s check but failed to purchase a liability insurance policy for him. Subsequently, a kerosene fuel spill occurred at the gas station and Kumar discovered that Lords never ordered the policy. He therefore had no coverage for his cleanup costs.

Kumar sued Lords. After Lords failed to respond to the complaint, Kumar requested a default judgment and the trial court held a prove up hearing. Ultimately, the trial court entered a default judgment against Lords and awarded Kumar a total of $59,371.22 in economic damages, which included prejudgment interest of $11,823, 38. The court also awarded Kumar attorney fees in the amount of $21,196.82 for the fees and costs he incurred in other litigation related to the kerosene fuel spill at his gas station.

Lords appeals from the default judgment entered against it. Lords contends that the trial court exceeded its jurisdiction under Code of Civil Procedure section 580, subdivision (a), when awarding damages, prejudgment interest on the damages, and attorney fees. We reject Lord’s arguments and affirm the judgment.

All further unspecified code sections refer to the Code of Civil Procedure.

BACKGROUND

Kumar owned a gas station where he sold kerosene fuel. The kerosene fuel was dispensed out of a 1, 000-gallon underground tank (the tank).

In April 2008, Kumar filed a first amended complaint against Lords, Redwood Coast Petroleum, Inc. (Redwood), and Allied Property and Casualty Insurance Company (Allied). The first cause of action was for negligence against Redwood. Kumar asserted that on February 28, 2007, and March 1, 2007, Redwood’s employees negligently overfilled the tank and caused the tank to leak approximately 23 gallons of kerosene onto the ground and possibly into nearby waterways. Kumar retained Dillard Environmental Services (Dillard) to perform the cleanup. Kumar alleged that he paid $47,544.84 to Dillard and the California Department of Fish and Game (the DFG) for cleanup costs.

The original complaint is not in the record on appeal.

In the pleading, Kumar refers to Dillard as Dillard Trucking, Inc.

In his second cause of action, Kumar alleged breach of contract and breach of the covenant of good faith and fair dealing against Allied and Lords. He also claimed Lords was negligent. He avowed that he had entered into an oral contract with Lords on December 22, 2006, and that Lords agreed to provide general commercial liability insurance on the premises of his gas station in the amount of $2 million. On this same date, Lords provided Kumar with a binder stating that a liability policy was in effect. The binder, according to the allegations in the pleading, provided Kumar’s gas station with insurance from December 22, 2006, through December 22, 2007, “against loss or damage by reason, among other things, of environmental pollution resulting from errors and omissions of the insured or the insured’s agents or employees.” Kumar paid the premium of $1,838 directly to Lords. Lords cashed Kumar’s premium check in January 2007, but did not purchase a policy for Kumar.

Kumar attached the binder to his first amended complaint. The binder indicated that Lords was the producer and that Allied was to provide the business owner’s policy. The binder stated that Kumar had $2 million of insurance for “commercial general liability aggregate, ” “commercial [building] coverage, ” “commercial [building] coverage flood, ” and contents coverage.

Under his cause of action for breach of contract, negligence, and breach of the covenant of good faith and fair dealing against Lords, Kumar incorporated by reference all of the allegations asserted against Redwood. Additionally, Kumar stated that in June of 2007, Lords refused to pay for the kerosene spill cleanup and insisted that coverage under the insurance policy started on March 8, 2007, seven days after the kerosene fuel spilled. He further alleged: “As a proximate result of defendants’ failure and refusal as herein alleged, [Kumar] has been sued by Dillard..., the contractor providing the cleanup services, for the sum of $40,945.53, together with interest, attorney’s fees and costs (see Action No. C08-00296 in the Superior Court of Contra Costa County....)” He also asserted: “As a further proximate result of defendants’ breach, as herein alleged, claims have been made in connection with the kerosene spill incident by the [DFG], as herein before alleged, for damages that would have been covered by the insurance policy defendants purported to sell to” Kumar.

In his prayer for damages, Kumar asked for the sum of $47,544.84 under the first cause of action against Redwood. With regard to the second cause of action against Lords, he requested the cost to cleanup the premises and any additional costs or penalties to the extent they would have been covered by his Allied insurance policy. He also asked for damages according to proof in connection with his loss of business and incidental expenses to the extent they would have been covered by the Allied insurance policy. He wanted punitive damages, attorney fees, and further relief as the court deemed proper. Under both causes of action, he prayed “[f]or such other and further relief as the court may deem proper.”

Kumar served Lords with the first amended complaint on April 15, 2008. Lords did not respond. On July 15, 2008, the clerk of the superior court entered a default in the amount of $128,838.14 against Lords.

On September 24, 2008, Kumar requested a court judgment in the amount of $108,845.12, which was comprised of $97,468.21 in damages, $559.41 for costs, and $10,817.50 for attorney fees. The court on two separate occasions requested clarification, and Kumar filed a letter and memorandum responding to the court’s concerns.

On November 7, 2008, the court ordered a default judgment in favor of Kumar against Lords. The court awarded Kumar $43,826.72 plus interest for economic damages related to the cleanup services provided by Dillard, $6,599.31 for economic damages related to the DFG, $3,568.50 for economic damages related to the County of Lake services, $30,955.57 for economic damages for the loss of business related to the inability to dispense kerosene at the gas station for eight months, and $1,868.11 in damages for lost business related to the three days that the business was shut down. The court also awarded Kumar $11,376.91 in attorney fees and costs.

After signing the judgment, the trial court held a hearing on December 8, 2008, and expressed concern that a portion of the judgment was not supported by the demands of the complaint. The court provided Kumar with time to consider this issue. On December 12, 2008, Kumar sent the court a letter asserting that Lords’s had notice of at least $72,544.84 in damages plus attorney fees as specifically stated in the complaint. He also requested that the court sign and enter a new judgment for $58,921.75 to provide Kumar with some recovery money.

On December 16, 2008, the court signed a default judgment for $40,945.53 in economic damages related to the cleanup provided by Dillard, $6,599.31 in economic damages paid to the DFG, prejudgment interest, and $11,376.91 in attorney fees and costs.

On March 11, 2009, Lords filed a motion for new trial. The trial court on May 8, 2009, granted Lords’s motion for a new trial and ordered the default judgment against Lords vacated. The court noted that Lords was advancing a number of contentions that went to the merits of the action and, in light of the default judgment entered in the case, these contentions were substantively and procedurally barred. The court noted that it had pointed out to Lords that its remedy was to file a motion to set aside the default under section 473, but it failed to file such a motion. The court stated that it had some responsibility to protect defaulting defendants from a judgment based upon false allegations and therefore it was reexamining the proof presented by Kumar in support of the default judgment. The court found that the declarations submitted by Kumar were insufficient to support the admitted allegations of the complaint.

On August 24, 2009, Kumar filed a second request for a default judgment and submitted the declaration of Melissa Roach, the Vice President of Dillard. Roach declared that, prior to doing any cleanup work at the gas station, she spoke to Pamela Mulder of Lords. Mulder told Roach that the gas station had current, active premise liability insurance coverage that would cover Dillard’s cleanup activities. Mulder completed a form providing authorization for Dillard to proceed for emergency response services. Roach stated that Dillard would not have agreed to perform the cleanup services or would have required another form of payment guarantee had Mulder not told her that the gas station had insurance that would cover the fees and costs for the cleanup of the kerosene spill.

Additionally, counsel for Kumar submitted a declaration. The declaration indicated that prosecuting the case against Lords resulted in attorney fees of $13,150.75 and costs of $150.80. Counsel stated that there were also attorney fees in the amount of $18,588.66 and costs in the amount of $2,608.16 attributable to Kumar’s defense of the DFG’s claims against him and related to his prosecution of a cross-complaint and complaint against Redwood.

On September 17, 2009, the court signed a default judgment in favor of Kumar against Lords in the amount of $40,945.53 for economic damages for the cleanup by Dillard and $6,599.31 for economic damages related to the DFG. The court awarded Kumar $11,823.38 in legal interest “(10 percent of economic damages per annum from one month after [the] incident or April 2007, when obligations to Dillard... and [the DFG] became due)” and $21,196.82 in attorney fees and costs “associated with this case.” The court reduced the total award by $5,000 to offset the settlement amount paid by Redwood.

Lords filed a second motion for a new trial. The court did not rule on this motion.

Lords filed a timely notice of appeal from the default judgment.

DISCUSSION

I. Standard of Review

When appealing from a default judgment, the defendant may not argue the merits of the case and the default operates as an express admission of well-pleaded factual allegations in the complaint. (Steven M. Garber & Associates v. Eskandarian (2007) 150 Cal.App.4th 813, 823-824 (Garber).) Where, as here, the defaulting party takes no steps in the trial court to set aside the default judgment, appeal from the default judgment presents for review only the questions of jurisdiction, the sufficiency of the pleadings, whether the relief granted exceeds the damages sought in the complaint, and procedural issues relating to the entry of default, the default judgment, and motions for relief from default. (Id. at pp. 823-824.) When the damages require proof, the damages awarded on a default judgment may be reversed not only where the award is so excessive that it “shocks the conscience” and is the result of “passion [or] prejudice, ” but also where “the damages awarded are unsupported by sufficient evidence.” (Scognamillo v. Herrick (2003) 106 Cal.App.4th 1139, 1150.)

When a ruling is challenged on appeal for lack of substantial evidence in support of the award of damages, the appellate court’s power begins and ends with a determination of whether there is any substantial evidence, contradicted or uncontradicted, to support the trial court’s findings. (Thompson v. Tracor Flight Systems, Inc. (2001) 86 Cal.App.4th 1156, 1166.) We must view the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference and resolving all conflicts in its favor. (Ibid.) When two or more inferences can reasonably be deduced from the facts, a reviewing court does not substitute its deductions for those of the trial court. (Shapiro v. San Diego City Council (2002) 96 Cal.App.4th 904, 912.)

II. Lords’s Claim that the Damages Awarded Were Excessive

Kumar received $40,945.53 for economic damages incurred for cleanup provided by Dillard and $6,599.31 for economic damages paid to the DFG. Lords argues that these damages were excessive because the pleading did not allege insurance coverage for the type of damages awarded, a standard commercial general liability policy would not cover the damages awarded Kumar, and the damages exceeded those alleged in the first amended complaint. We examine each of these complaints.

A. The Damages Awarded and the Insurance Coverage Alleged in the Pleading

Lords contends that Kumar’s pleading does not allege any coverage for the type of damages he suffered and therefore the trial court’s award of damages was excessive.

Kumar alleged in his first amended complaint that on December 22, 2006, he “entered into an oral contract” with Lords, “whereby Allied and Lords agreed to provide general commercial liability insurance on the Premises in the amount of $2 million to [Kumar] and [Kumar] agreed to promptly pay the premiums for such insurance. On said date, that oral agreement was memorialized in writing by the issuance and deliverance” of a binder, “a copy of which is attached as Exhibit A.... In the Binder, defendants agreed to insure the premises and plaintiff for the period from December 22, 2006[, ] through December 22, 2007[, ] against loss or damages by reason, among other things, of environmental pollution resulting from errors and omissions of the insured or the insured’s agents or employees.” The binder, identified the policy as a “BOP Policy [business owner’s policy]” and lists the coverage as “Commercial General Liability Aggregate, Commercial Bldg[.] Coverage, Commercial Bldg[.] Coverage Flood and BPP Contents Coverage.”

Lords asserts that Kumar’s first amended complaint is therefore “clearly erroneous” when it alleges that the binder shows that Lords agreed to insure against environmental pollution. Lords argues that the binder does not state that it was providing environmental pollution coverage. The allegations in the pleading must be discounted, according to Lords, because facts appearing in exhibits to a complaint take precedence over conflicting allegations in the complaint. (See Holland v. Morse Diesel Internat., Inc. (2001) 86 Cal.App.4th 1443, 1447, superseded by statute on another issue.)

We do not agree that the binder contradicts the allegations in Kumar’s first amended complaint. There is no allegation that the binder sets forth everything to be covered by the policy. Rather, the allegations in the first amended complaint inartfully state that the binder establishes Lords’s agreement to insure the gas station for a specific time period. The allegation in the pleading specifies that the parties agreed that Kumar would be covered for environmental pollution. Obviously, the attached binder does not specify the risks covered by the policy or the risks excluded by the policy. The binder merely contains a general description of the broad categories of coverage issued such as liability and property damages and sets forth the policy limits for the coverage.

Under the allegations of Kumar’s pleading, Lords never provided him with a policy or coverage. Kumar alleged that Lords agreed to provide him with a policy that covered environmental pollution and that such a policy would have covered his damages from the kerosene fuel spill. Under the allegations of Kumar’s complaint, Lords was obligated to provide a policy to cover environmental pollution, as that was the coverage promised.

Lords is essentially arguing that Kumar was not entitled to any damages. This contention goes to the merits of the action, and such an argument is barred. “ ‘[T]he judgment by default is said to “confess” the material facts alleged by the plaintiff, i.e., the defendant’s failure to answer has the same effect as an express admission of the matters well pleaded in the complaint. The judgment is, in consequence, res judicata on the issue of the right to the relief awarded.’ [Citation.]” (Garber, supra, 150 Cal.App.4th at p. 823, fn. omitted.)

Under the allegations of his pleading, Kumar was entitled to coverage for the costs to cleanup his kerosene oil spill under the Allied policy. Lords cannot now improperly attempt to argue that the policy would not have provided Kumar with coverage.

Lords maintains that the lower court had to resolve the issue of coverage because the determination of whether an insurance policy provides coverage for a particular occurrence is a question of law to be decided by the court (see Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18), and the trial court has an obligation to ensure that the allegations in the pleading are supported by the evidence. The court does not have an obligation to determine the question of coverage as that goes to the merits of Kumar’s claim and was not before this court. The issue presented to the court was––given the allegation presumed true that Lords promised to provide Kumar with coverage for environmental pollution––what damages did he suffer as a result of Lords’s denying him coverage for the kerosene spill.

We conclude that Kumar’s pleading adequately pleaded that he should have received an insurance policy that covered the damages he suffered. Consequently, the court’s award of damages for Kumar’s costs to cleanup environmental pollution was proper.

B. The Damages Awarded and a Standard Commercial General Liability Policy

Lords also maintains that a standard commercial general liability policy would not have provided coverage for the costs awarded by the default judgment. Lords argues that such a policy does not normally provide coverage for cleanup of a kerosene spill on the insured’s own property, but provides coverage for losses by a third party. Lords also argues that a standard commercial general liability policy would exclude coverage for environmental pollution.

Lords, again, is improperly attempting to argue the merits of the case. Lords is contending that Kumar is not entitled to relief; it is not arguing that the relief awarded was excessive. In any event, no policy was ever provided and Kumar did not allege that he was to receive a standard commercial general liability policy. Rather, as already emphasized, Kumar alleged that he was promised coverage for environmental pollution and that he paid his premium believing that he had such coverage.

Lords maintains that it never admitted liability, but by its default simply admitted that it agreed to provide commercial general liability insurance to Kumar for his garage station. That is not accurate. The default results in Lords’s admitting all of the allegations in Kumar’s first amended complaint; Kumar alleged that Lords promised to provide him with a policy that covered pollution for the period when the kerosene spill occurred and that he paid his premium for such coverage. “ ‘The judgment which follows upon this sort of admission is, in contemplation of law, a complete adjudication of all the rights of the parties embraced in the prayer for relief and arising from the facts stated in the complaint, including the facts in his favor as well as those against him. The defendant here is presumed to have acceded to the proposition embraced in the complaint and to have consented that plaintiff should obtain the relief therein prayed for, upon the conditions and facts set forth in the complaint.’ ” (Garber, supra, 150 Cal.App.4th at p. 823, fn. 10, citing Brown v. Brown (1915) 170 Cal. 1, 5.)

Not surprisingly, given Lords’s attempt to argue the merits of its case, Lords does not even cite Garber, supra, 150 Cal.App.4th 813, which makes it clear that its contentions in this appeal are improper.

The following criticism of the defendants in Garber, applies to Lords in this appeal: “In sum, appellants’ efforts to argue the merits of their case are barred substantively by the default judgment, which operates as an admission of the allegations of the complaint, and are also barred procedurally by the entry of a default. Appellants failed to avail themselves of the only remedy that could have been of any assistance to them, which was a successful motion under Code of Civil Procedure section 473 to set aside the default.” (Garber, supra, 150 Cal.App.4th at p. 824.)

C. The Damages Demanded in the First Amended Complaint

Under section 580, subdivision (a), the damages awarded cannot exceed the specific amounts demanded in the complaint. According to the California Supreme Court, “[t]he notice requirement of section 580 was designed to insure fundamental fairness.... Consequently, a prayer for damages according to proof passes muster under section 580 only if a specific amount of damages is alleged in the body of the complaint. [Citation.]” (Becker v. S.P.V. Construction Co. (1980) 27 Cal.3d 489, 494, fn. omitted.)

The purpose of section 580, subdivision (a) is “to ensure that a defendant who declines to contest an action does not thereby subject himself to open-ended liability.” (Greenup v. Rodman (1986) 42 Cal.3d 822, 826.) “Reasoning that a default judgment that exceeds the demand would effectively deny a fair hearing to the defaulting party, the Courts of Appeal have consistently read the code to mean that a default judgment greater than the amount specifically demanded is void as beyond the court’s jurisdiction.” (Ibid.)

Here, Kumar prayed for the cost to cleanup the premises of his garage station and any additional costs or penalties to the extent they would have been covered under the Allied insurance policy. He also prayed for damages according to proof in connection with his loss of business and incidental expenses to the extent these costs would have been covered under the Allied insurance policy.

In the body of Kumar’s complaint, under his second cause of action against Lords, Kumar alleged damages for the cleanup performed by Dillard in the amount of $40,945.53. He also alleged damages in connection with the DFG in his second cause of action against Lords. Elsewhere in his complaint, under his first cause of action against Redwood, which he incorporated by reference in his cause of action against Lords, he stated that the sum owed to the DFG was $6,599.31. At the prove up hearing, the court found that the economic damages owed to Dillard was $40,945.53 and the economic damages owed to the DFG was $6,599.31. Thus, the evidence submitted to the court supported the allegations of specific damages set forth in the body of Kumar’s pleading.

Lords repeats his argument that the pleading provided no notice for damages resulting from pollution coverage and, as already discussed, this argument is without merit. Lords also argues that it had no notice of a claim that it was obligated for the costs of cleanup by the DFG. This argument is somewhat incomprehensible but, as already discussed, the pleading did provide notice that Kumar was claiming damages for cleanup.

To the extent that Lords is arguing that it did not receive adequate notice of the amount of the potential judgment because the allegations of damage were buried in the body of the complaint rather than cited in the prayer, we disagree that this voids the default judgment. A defective prayer for damages may be cured if the body of the complaint alleges specific amounts of damages. (Greenup v. Rodman, supra, 42 Cal.3d at p. 829; see Becker v. S.P.V. Construction Co., supra, 27 Cal.3d at p. 494, fn. 2.)

The trial court awarded Kumar damages that did not exceed the amounts claimed in the body of his first amended complaint. Thus, Lords received sufficient notice of its potential exposure and the court did not exceed its jurisdiction in its award of damages in the default judgment.

III. Evidence in Support of the Damages

Lords maintains that Kumar submitted insufficient evidence at the prove up hearing to support the trial court’s award of damages. Rather than challenge any of the evidence submitted at the prove up hearing, Lords again simply argues that none of the damages sought would have been covered by a commercial general liability policy. This argument is irrelevant to the question before the court, which was whether Kumar presented evidence to support the amount of damages requested.

Kumar submitted a bill from the DFG that stated the costs to Kumar for cleanup were $6,599.31. He also provided the court with the promissory note for $43,826.72, whereby he promised to pay this amount to Dillard.

Additionally, in the second prove up hearing, Roach, the Vice President of Dillard, provided a declaration. She stated that on March 1, 2007, she was contacted by telephone by Mulder, an insurance agent of Lords. Mulder reported that Kumar did have liability insurance and that Dillard’s fees and costs for the cleanup of the kerosene spill at the gas station would be covered by that policy. Roach provided Mulder with an authorization to proceed for emergency response services and Mulder returned the signed authorization form to Dillard on March 1, 2007. Kumar submitted this authorization form to the court in support of his request for a default judgment.

The foregoing evidence supported the amount of damages awarded and Lords has completely failed to establish that insufficient evidence supported the award of damages.

IV. Attorney Fees and Costs

Kumar requested attorney fees in his first amended complaint, but did not specify an amount and did not request fees pursuant to section 1021.6. He wanted attorney fees “to the extent they may be available under law or contract.”

When asking for a default judgment, Kumar asked for attorney fees under section 1021.6. Kumar also argued, “An award of attorney’s fees is justified primarily because [Kumar] was forced to defend against Dillard’s Contra Costa County Complaint, the State’s Complain and even prosecute the Complaint and Cross-Complaint against Redwood... as a necessary and proximate result of Lords’s negligence in procuring an insurance policy that would have provided indemnity and defense (including the insurance company hiring an attorney and paying attorney’s fees).”

Kumar requested attorney fees of $13,150.75 and costs of $150.80 related to his prosecution of his claims against Lords. He also requested attorney fees and litigation costs of $18,588.66 and $2,608.16, respectively, for defending the DFG’s lawsuit and prosecuting the claim against Redwood. The trial court awarded Kumar attorney fees and costs for a total of $21,196.82.

Lords maintains that Kumar cannot collect the attorney fees and costs associated with litigation involving third parties. These fees, according to Lords, were not demanded in the complaint; thus, Lords declares the award of these fees violates section 580, subdivision (a). Lords urges us to reverse the award of attorney fees and conclude that Kumar is not entitled to any fees because the lower court did not award any fees in the underlying action.

The award of $21,196.82 appears to be the sum of the attorney fees and litigation costs attributable to litigation with third parties ($18,588.66 + $2,608.16).

Neither party addresses the applicable standard of review. “ ‘On appeal this court reviews a determination of the legal basis for an award of attorney fees de novo as a question of law.’ ” (Dell Merk, Inc. v. Franzia (2005) 132 Cal.App.4th 443, 450.) We review the trial court’s finding and amount of award for an abuse of discretion. (Kurinij v. Hanna & Morton (1997) 55 Cal.App.4th 853, 871.) In the present case, the trial court does not explain the basis for its award of attorney fees. We therefore determine whether there is a legal basis for the award and, if so, whether the amount awarded was an abuse of discretion.

Section 1021.6 provides as follows: “Upon motion, a court after reviewing the evidence in the principal case may award attorney’s fees to a person who prevails on a claim for implied indemnity if the court finds (a) that the indemnitee through the tort of the indemnitor has been required to act in the protection of the indemnitee’s interest by bringing an action against or defending an action by a third person and (b) if that indemnitor was properly notified of the demand to bring the action or provide the defense and did not avail itself of the opportunity to do so, and (c) that the trier of fact determined that the indemnitee was without fault in the principal case which is the basis for the action in indemnity or that the indemnitee had a final judgment entered in his or her favor granting a summary judgment, a nonsuit, or a directed verdict.”

We agree that an award of attorney fees and costs under section 1021.6 is not proper. Section 1021.6 governs fee requests in implied indemnity actions. (See, e.g., Fidelity Mortgage Trustee Service, Inc. v. Ridgegate East Homeowners Assn. (1994) 27 Cal.App.4th 503, 513.) “The duty to indemnify for the expenditure of attorney’s fees arises out of a duty to provide complete indemnity which includes the duty to provide a defense to another. In such a case the failure to provide a defense gives rise to a duty to recompense for the costs of the defense, which include attorney’s fees.” (Watson v. Department of Transportation (1998) 68 Cal.App.4th 885, 895, fn. 8.) A party seeking attorney fees under section 1021.6 must plead and prove a right to implied indemnity separate and apart from section 1021.6. (See Watson, at p. 890 [“Section 1021.6 does not establish the criteria for an implied indemnity. It presupposes the existence of ‘a claim for implied indemnity’ on which the party seeking attorney’s fees has prevailed”].) Ordinarily, a party claiming a right to indemnity may seek to establish that claim by filing a cross-complaint for indemnity in the principal action or by filing a separate complaint for indemnity. (See, e.g., Uniroyal Chemical Co. v. American Vanguard Corp. (1988) 203 Cal.App.3d 285, 295.) In the present case, Kumar did not allege a claim based on implied indemnity.

Kumar, however, also argued that Lords was obligated to pay the attorney fees in his litigation involving third parties because these lawsuits were caused by Lords’s negligence in failing to provide him with coverage for the kerosene spill. “Under California law, it is a well-established principle that attorneys fees incurred through instituting or defending an action as a direct result of the tort of another are recoverable damages.” (Sindell v. Gibson, Dunn & Crutcher (1997) 54 Cal.App.4th 1457, 1470, citing Prentice v. North Amer. Title Guar. Corp. (1963) 59 Cal.2d 618, 620-621.) When a defendant’s tortious conduct requires the plaintiff to sue a third party, or defend a suit brought by a third party, attorney fees the plaintiff incurs in this third party action “are recoverable as damages resulting from a tort in the same way that medical fees would be part of the damages in a personal injury action.” (Sooy v. Peter (1990) 220 Cal.App.3d 1305, 1310.)

Here, Kumar did allege that Lords violated a tort duty as a result of Lords’s failure to provide Kumar with insurance coverage and the pleading included a cause of action against Redwood and stated that Kumar was forced to defend a lawsuit by the DFG. The lower court therefore did not err in awarding attorney fees and costs associated with litigation arising out of Lords’s negligence. (See Sindell v. Gibson, Dunn & Crutcher, supra, 54 Cal.App.4th at p. 1471; see also Third Eye Blind, Inc. v. Near North Entertainment Ins. Services, LLC (2005) 127 Cal.App.4th 1311, 1325-1326.)

Lords argues that the attorney fees awarded exceeded the trial court’s jurisdiction under section 580, subdivision (a), because the body of the first amended complaint never specified the exact amount of fees being sought. The amount of fees ultimately owed could not be known when the complaint was filed as the costs and fees associated with the third party litigation was still ongoing. Kumar’s complaint stated that he intended to seek attorney fees and damages, which included the attorney fees in other litigation, caused by Lords’s actions. Thus, the pleading provided sufficient notice that these attorney fees, as part of the damages, were being sought. (See, e.g., Feminist Women’s Health Center v. Blythe (1995) 32 Cal.App.4th 1641.) No additional notification was necessary. (See Cadle Co. v. World Wide Hospitality furniture, Inc. (2006) 144 Cal.App.4th 504, 515.)

Lords does not argue that the amounts claimed by Kumar were incorrect and the record contains the declarations of Kumar’s counsel and billing statements, which support the amount of fees claimed. Accordingly, we will not reverse the award of attorney fees and costs.

V. Prejudgment Interest

Lords objects to the trial court’s award of prejudgment interest in the amount of $11,823.38 on Kumar’s economic damages. Lords does not contest actual interest rate charged, but claims that prejudgment interest is not a cost pursuant to section 1033.5 and the prayer did not request prejudgment interest. Lords maintains that this award therefore exceeded the amount demanded in the complaint in violation of section 580, subdivision (a).

Kumar’s first amended complaint requested in the prayer “such other and further relief as the court may deem proper.” In the body of his first amended complaint, he specifically stated that his damages as a result of Lords’s failure to cover his clean up costs was “$40,945.53, together with interest, attorney’s fees and costs....”

Prejudgment interest “is in the nature of damages which the law allows for the wrongful detention of money which should be turned over to the person entitled to it.” (Sears, Roebuck & Co. v. Blade (1956) 139 Cal.App.2d 580, 595.) Prejudgment interest may be recovered when “damages [are] certain, or capable of being made certain by calculation” and the right to recover such damages was vested in the plaintiff on a particular day. (Civ. Code, § 3287, subd. (a).)

Civil Code section 3288 provides: “In an action for the breach of an obligation not arising from contract, and in every case of oppression, fraud, or malice, interest may be given, in the discretion of the jury.” Although this provision expressly grants authority to award prejudgment interest only to the jury, the trial court, when acting as the trier of fact, may also award prejudgment interest under the statute. (Bullis v. Security Pac. Nat. Bank (1978) 21 Cal.3d 801.) Here, the trial court, which awarded prejudgment interest on Kumar’s claim of clean up costs owed to Dillard, acted as the sole trier of fact in ruling on Kumar’s default prove up.

Kumar’s pleading did not specifically pray for prejudgment interest. However, when interest is allowable and interest is mentioned in the body of the pleading, a judgment may include it even if interest is not prayed for in the complaint. (Deaux v. Trinidad Bean & Elevator Co. (1935) 8 Cal.App.2d 149, 152; see also Perry v. Magneson (1929) 207 Cal. 617, 622.) We therefore conclude that the lower court correctly awarded prejudgment interest.

DISPOSITION

The judgment is affirmed. Lords is to pay the costs of appeal.

We concur: Haerle, Acting P.J., Richman, J.


Summaries of

Kumar v. Lords Insurance Agency, Inc.

California Court of Appeals, First District, Second Division
Jul 19, 2010
No. A127296 (Cal. Ct. App. Jul. 19, 2010)
Case details for

Kumar v. Lords Insurance Agency, Inc.

Case Details

Full title:CHARAN J. KUMAR, Plaintiff and Respondent, v. LORDS INSURANCE AGENCY…

Court:California Court of Appeals, First District, Second Division

Date published: Jul 19, 2010

Citations

No. A127296 (Cal. Ct. App. Jul. 19, 2010)