Maryland Casualty Co. v. Andreini & Co.

81 Cal. App. 4th 1413, 2000 Cal. Daily Op. Serv. 5614, 97 Cal. Rptr. 2d 752, 2000 Daily Journal DAR 7405, 2000 Cal. App. LEXIS 537
California Court of Appeal·Decided July 7, 2000·No. No. B124064·Published·Cited by 27 cases

Opinion

Opinion

ARAGON, J.*

In this insurance action, an insured sued an insurer and a broker. The insurer cross-claimed against the broker for indemnity. The insured and the broker settled. The trial court found that the settlement was [1416] made in good faith and dismissed the insurer’s cross-claims against the broker. The insurer sought relief by way of a petition for writ of mandate, which was summarily denied.

After the entry of final judgment, the insurer filed this appeal, challenging the good faith settlement determination and the dismissal of its cross-claims. The broker has filed a motion to dismiss the appeal on the ground that a determination of good faith can be reviewed only by writ of mandate, not postjudgment appeal. We conclude that, in conjunction with its appeal as to the dismissed cross-claims, the insurer can challenge the determination of good faith. Accordingly, we deny the motion to dismiss.

Background

Edward Dempsey owns two companies engaged in concrete coring and cutting. In 1990, he approached William von Henkle, an insurance broker, to obtain a policy for his businesses. At the time, von Henkle worked for Granger-Hanna Insurance Associates, a brokerage. Von Henkle obtained a policy for Dempsey from Highlands Insurance Company, effective until April 1, 1991.

In early 1991, von Henkle left Granger-Hanna and went to work for Andreini & Company of Southern California. He took Dempsey’s account with him. Shortly thereafter, Highlands Insurance Company notified Dempsey that it would not renew his policy. On Dempsey’s behalf, von Henkle completed an insurance application, commonly called an “ACORD,” and sent it to several insurers. After receiving the ACORD, Maryland Casualty Company agreed to provide coverage subject to its receipt of additional information, including a “loss control” survey (i.e., a history of prior insurance claims). Maryland Casualty proceeded to bind coverage.

Less than a month later—and before Maryland Casualty had obtained the additional information—a fire destroyed the business premises. Dempsey’s son, Mike, accepted blame for the fire, stating that he had accidentally started the blaze while trying to refuel his speedboat.

Dempsey submitted a claim under the insurance policy for approximately $1.7 million, which later rose to $4.2 million. Maryland Casualty investigated the loss and discovered that Dempsey’s ACORD contained false statements. For example, the application indicated that (1) Dempsey’s business operations did not involve exposure to flammable material, and (2) Dempsey had never had an insurance policy cancelled or not renewed. By letter dated May 24, 1991, Maryland Casualty informed Dempsey that it was [1417] rescinding the policy, based on the “discovery of fraud or material misrepresentations by . . . [¶] . . . the insured or his or her representative in obtaining the insurance. . . .”1

On July 25, 1991, Dempsey filed this action against Maryland Casualty and Andreini & Company, alleging several causes of action, including breach of contract, breach of the covenant of good faith and fair dealing, and negligence.2 For its part, Andreini & Company filed a cross-complaint against Maryland Casualty based on a theory of contractual indemnity.3 Maryland Casualty, in turn, cross-complained against Dempsey, Andreini & Company, and von Henkle, alleging claims for rescission, breach of contract, fraud, indemnification, and conspiracy, among others.

In November 1993, Dempsey and Andreini reached a settlement. The terms were simple; Andreini’s insurer would pay Dempsey $650,000. The deal was contingent upon the trial court’s determination that the settlement was made in “good faith” for purposes of section 877.6 of the Code of Civil Procedure (hereafter section 877.6).4

Within days of the tentative settlement, Andreini filed a motion under section 877.6, seeking a determination of good faith and the dismissal of Maryland Casualty’s cross-claims. Maryland Casualty filed opposition. The trial court, Judge Ernest George Williams presiding, denied the motion without prejudice and directed that the motion be renoticed for hearing on December 2, 1993. Before the second hearing, the parties filed additional [1418] papers. On December 2, Judge Williams again denied the motion without prejudice.5

On January 3, 1994, Andreini filed a third motion seeking a determination of good faith. The motion was supported by a supplemental declaration from Andreini’s attorney. In addition, Andreini submitted evidence to the effect that, in binding coverage for Dempsey, Maryland Casualty had violated its own internal guidelines and the standards in the insurance industry by failing to conduct a timely loss control survey. Maryland Casualty filed opposition.

On January 24, 1994, Judge Williams granted the motion, stating that the declarations in support of the two prior motions “didn’t contain competent evidence that there was a sufficient settlement. That has been taken care of by these [new] declarations.” The trial court’s signed order, filed on January 28, 1994, recited that the settlement was made in good faith and that Maryland Casualty’s cross-claims against Andreini were barred.

On January 31, 1994, Maryland Casualty filed with this court a petition for writ of mandate, asserting that the trial court had erred in barring its cross-claims.6 On February 2, 1994, we summarily denied the petition (Maryland Casualty Co. v. Superior Court (Jan. 31, 1994, B081515) [nonpub. opn.]). On April 27, 1994, the California Supreme Court denied Maryland Casualty’s petition for review (S037964).

Meanwhile, Dempsey’s claims against Maryland Casualty went forward. In that regard, Andreini & Company’s cross-complaint against Maryland Casualty was severed and placed on hold, pending the outcome of the Dempsey-Maryland trial. Dempsey’s claims were tried to a jury from September to October 1994, with Judge William A. Drake presiding.

On October 31, 1994, the jury returned a verdict in favor of Dempsey, awarding him $3 million in compensatory damages and $58 million in punitive damages. Maryland Casualty brought a motion for new trial, which [1419] Judge Drake granted, finding that the evidence was insufficient to support liability and that the award of damages was excessive. Dempsey and Maryland Casualty filed notices of appeal. Before briefing the case, they decided to settle the matter for $8.6 million. The appeal was voluntarily dismissed. On July 31, 1996, Dempsey filed a dismissal in the trial court.

In April 1998, Andreini & Company’s cross-complaint against Maryland Casualty was tried to the court, Judge Macklin Fleming presiding. By its cross-complaint, Andreini & Company sought to be indemnified for the attorneys’ fees and expenses it had incurred in defending the claims brought by Dempsey and Maryland Casualty. Judge Fleming found in favor of Maryland Casualty.

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Maryland Casualty Co. v. Andreini & Co., 81 Cal. App. 4th 1413, 2000 Cal. Daily Op. Serv. 5614, 97 Cal. Rptr. 2d 752, 2000 Daily Journal DAR 7405, 2000 Cal. App. LEXIS 537 (Cal. Ct. App. 2000).

81 Cal. App. 4th 1413 (Maryland Casualty Co. v. Andreini & Co.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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