Filed 10/30/15 Bennett v. Progressive Casualty Ins. Co. CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
STEPHEN H. BENNETT et al.,
Plaintiffs, Cross-defendants and G049243
Appellants, (Consol. with G049990 & G050146)
v.
(Super. Ct. No. 30-2011-00497143)
PROGRESSIVE CASUALTY
INSURANCE COMPANY, OPINION
Defendant, Cross-complainant and
Respondent,
CU BANCORP,
Cross-defendant, Cross-complainant
and Respondent.
Appeal from a judgment and postjudgment orders of the Superior Court of
Orange County, Andrew P. Banks, Judge. Affirmed.
Law Offices of Mary A. Lehman and Mary A. Lehman for Plaintiffs,
Cross-defendants and Appellants.
Foley & Lardner, Kathryn M.S. Catherwood and Nicholas J. Fox for
Defendant, Cross-complainant and Respondent.
Rutan & Tucker and Ira G. Riven for Cross-Defendant, Cross-complainant
and Respondent.
* * *
Stephen H. Bennett and Richard T. Letwak (collectively, Plaintiffs) are
certified public accountants who investigated allegations that Premier Commercial
Bancorp, N.A. (Premier)1, made “accounting misrepresentations” and breached certain
warranties when it sold an Arizona bank in which it held a controlling interest. Letwak
was one of Premier’s directors and the chair of its audit committee. With Bennett’s
assistance, he undertook the investigation on his own initiative and without the approval
of Premier or its insurer, Progressive Casualty Insurance Company (Progressive), which
had accepted Premier’s tender of the claim arising out of the sale subject to a reservation
of rights.
After Premier settled the underlying claim, Plaintiffs billed Premier for
nearly $170,000 as the cost of their investigation. Plaintiffs asked Premier to submit the
bill to Progressive as a defense cost under Premier’s insurance policy. Premier refused to
submit the bill because Premier never hired Plaintiffs to conduct the investigation and it
was concerned Progressive might view the bill as collusive or possibly even fraudulent.
Premier thereafter settled their insurance claim with Progressive and released Progressive
from all liability under the insurance policy, including all defense costs.
1
CU Bancorp acquired Premier while this action was pending. We refer to
the party as Premier because that was the entity’s name at the time of the underlying
events.
2
Plaintiffs then sought to recover directly from Premier, claiming Premier
was liable for refusing to submit the bill to Progressive. Plaintiffs and Premier eventually
settled their dispute over the bill, with Premier agreeing to pay Plaintiffs $99,000 in
exchange for Plaintiffs releasing Premier and its “insurers” from liability relating to the
bill. Plaintiffs also agreed not to contact Premier’s “insurance carrier” regarding the bill.
Nonetheless, Plaintiffs contacted Progressive and demanded it pay the bill. Plaintiffs
filed this action when Progressive refused to pay.
Plaintiffs’ operative complaint alleged a single cause of action seeking a
judicial declaration of Plaintiffs’ right under the insurance policy to recover directly from
Progressive for the investigation Plaintiffs conducted on Premier’s behalf. Plaintiffs
offered a number of arguments on why the insurance policy required Progressive to pay
Plaintiffs’ bill, but the trial court concluded those arguments were irrelevant because
Plaintiffs released Progressive from liability when it entered into the settlement with
Premier. The trial court therefore granted Progressive summary judgment on Plaintiffs’
complaint, finding their claim for declaratory relief was moot and therefore it did not
matter how the court interpreted the insurance policy. For the same reasons, the trial
court also granted Progressive summary adjudication on its cross-complaint against
Plaintiffs for breach of the settlement agreement between Plaintiffs and Premier, and
granted Premier summary adjudication on its cross-complaint seeking a judicial
declaration that the settlement agreement barred Plaintiffs’ claim against Progressive.
We affirm. The plain language of the settlement agreement conclusively
showed Plaintiffs and Premier intended to make Progressive a third party beneficiary of
that agreement when Plaintiffs released Progressive from “any and all . . . liabilities”
relating to the cost of the investigation Plaintiffs conducted on Premier’s behalf.
Plaintiffs do not dispute these conclusions nor do they offer an alternative interpretation
of the settlement agreement. Instead, Plaintiffs argue certain provisions in the insurance
policy prevent Progressive from asserting its status as a third party beneficiary under the
3
settlement agreement. As explained below, however, the plain language of the policy
does not support Plaintiffs’ contentions.
Plaintiffs also appeal from two postjudgment orders awarding Progressive
and Premier attorney fees and costs under an attorney fee provision in the settlement
agreement. Plaintiffs’ sole argument is that Progressive and Premier are not prevailing
parties entitled to attorney fees if we reverse the trial court’s judgment against Plaintiffs.
Because we affirm the trial court’s judgment, we also affirm its attorney fee awards.
I
FACTS AND PROCEDURAL HISTORY
Letwak and Bennett are certified public accountants and the owners of
Letwak & Bennett, an accountancy corporation (L&B). Premier is a national banking
institution that owns and operates community banks, and Letwak was one of its founding
directors and the chair of its audit committee. Progressive insured Premier under a
“Directors & Officers/Company Liability Insurance Policy for Financial Institutions”
(Policy).
Under the Policy, Progressive agreed to pay on Premier’s behalf all losses
resulting from a covered claim, but not to defend the claim. Instead, Premier undertook
the duty to defend itself and Progressive agreed to pay Premier’s “Defense Costs,”
including all “reasonable and necessary legal fees and expenses incurred in defending or
investigating any Claim and the cost of appeal, attachment or similar bonds.” The Policy
also provided, “[Premier] shall not incur Defense Costs, admit liability for, settle, or offer
to settle any Claim without [Progressive’s] prior written consent, which shall not be
unreasonably withheld.”
Premier held a controlling interest in an Arizona bank that it sold to PCBA
Acquisition, LLC (PCBA), which continued to operate the bank under the name Valley
Capital Bank, N.A. (Valley). In 2008, PCBA and Valley filed an arbitration against
4
Premier (hereinafter, the Valley Arbitration), alleging Premier made accounting
misrepresentations and breached certain warranties in selling the bank. Premier tendered
the Valley Arbitration to Progressive for coverage under the Policy. Progressive
acknowledged receipt of the tender and the potential for coverage on some of the claims,
but Progressive also reserved its right to deny coverage as more information became
available.
Letwak, with Bennett’s assistance, investigated the accounting
misrepresentations alleged in the Valley Arbitration. He did so on his own initiative
purportedly in his capacity as a Premier director and chair of its audit committee. No one
else at Premier asked Letwak to undertake the investigation and no one obtained
Progressive’s prior written consent for the investigation. Neither Letwak nor L&B had a
contract with Premier engaging them to conduct the investigation or otherwise setting
forth the terms of their compensation for any work they performed. Letwak also testified
he always intended to look exclusively to Progressive to pay their bill.
In September 2008, Premier negotiated a settlement of the Valley
Arbitration. Under the proposed settlement, Premier agreed to pay PCBA and Valley
$775,000, with $675,000 of that amount designated as damages on the alleged accounting
misrepresentations claims. Premier asked Progressive to consent to the settlement.
While Progressive was reviewing the proposed settlement, Letwak and Bennett sent
Progressive a letter summarizing their investigation and concluding the Policy covered
the accounting misrepresentation claims. Progressive nonetheless refused to consent to
the settlement because it concluded the Policy did not cover any of the claims asserted in
the Valley Arbitration, but Progressive agreed it would not assert its lack of consent to
the settlement as an additional basis for denying coverage. Progressive therefore entered
into the settlement with PCBA and Valley to resolve the Valley Arbitration.
Shortly after Premier settled the Valley Arbitration, L&B sent Premier a
bill for $168,750, representing nearly 11 months of work Plaintiffs allegedly performed
5
to investigate the accounting misrepresentation claims in the Valley Arbitration
(hereinafter, the L&B Bill). Plaintiffs asked Premier to submit the L&B Bill to
Progressive as part of its claim for defense costs under the Policy, but Premier refused
because it never hired Letwak to conduct an investigation, and it believed a bill from
Letwak’s accounting firm would appear collusive or even fraudulent.
In December 2008, Premier and Progressive settled their coverage dispute
regarding the Valley Arbitration. In their settlement agreement (hereinafter, the
Premier/Progressive Settlement Agreement), Progressive agreed to pay Premier $350,000
under the Policy, and Premier released Progressive from all claims arising out of or in
any way involving the Valley Arbitration or Premier’s settlement with PCBA and Valley,
including “any claim by Premier for reimbursement of any past, present, or future
attorneys’ fees and costs incurred by Premier arising out of, based upon, by reason of, or
in any way involving the [Valley] Arbitration and/or the Settlement Agreement [with
PCBA and Valley].”
After Premier settled with Progressive and released its claim to any further
benefits under the Policy, Plaintiffs demanded that Premier pay the L&B Bill directly,
suggesting that Premier was liable for refusing to submit the L&B Bill to Progressive. In
June 2009, Premier reached an agreement with Plaintiffs over the L&B Bill, with Premier
agreeing to pay $99,000 for a full release and Letwak’s resignation from Premier’s board
of directors. In the settlement agreement (hereinafter, the Plaintiffs/Premier Settlement
Agreement), Plaintiffs, on their own behalf and on L&B’s behalf, “fully release[d] and
discharge[d] [Premier] and each of [its] past and current . . . insurers . . . from and against
any and all debts, obligations, losses, costs, demands, actions, causes of action, claims,
damages, contracts, agreements and liabilities of every nature and kind, both in law or in
equity, which [Plaintiffs and L&B] . . . now have or have ever had, whether known or
unknown, which relate to, are connected with or arise from in any manner, shape or form
the Dispute.”
6
The Plaintiffs/Premier Settlement Agreement defined the “Dispute” as that
certain dispute “aris[ing] from the nature, extent and content of [the] services [described
in the L&B Bill], the scope and amount of said billings and any and all issues and all
claims that may arise therefrom or be connected therewith.” Finally, under the
Plaintiffs/Premier Settlement Agreement, Plaintiffs and L&B “agree[d] not to contact or
address Premier’s insurance carrier or attorneys, on any matter connected to, related to or
arising from the Dispute.”
In October 2009, despite agreeing not to contact Premier’s insurance carrier
regarding the L&B Bill, Plaintiffs contacted Progressive and demanded it pay the
L&B Bill on Premier’s behalf. Based on the releases in both the Premier/Progressive
Settlement Agreement and the Plaintiffs/Premier Settlement Agreement, Progressive
refused to pay the L&B Bill. Plaintiffs filed this action against Progressive, alleging in
the operative first amended complaint a single cause of action seeking a judicial
declaration of Plaintiffs’ rights under the Policy to receive payment directly from
Progressive for the work they performed to investigate the Valley Arbitration claims.2
Progressive answered the first amended complaint and filed a
cross-complaint against Plaintiffs for breach of the Plaintiffs/Premier Settlement
Agreement, specific performance of that same agreement, and injunctive relief.
Progressive alleged it is a third party beneficiary under the release in the
Plaintiffs/Premier Settlement Agreement, and Plaintiffs breached that agreement by suing
Progressive for declaratory relief regarding a claim barred by the release. Progressive
also alleged claims against Premier for breach of the Premier/Progressive Settlement
Agreement, specific performance, and implied contractual indemnity because Premier
2
The first amended complaint also includes allegations regarding a dispute
between Plaintiffs and Progressive over whether the Policy covered a lawsuit filed
against Premier in Arizona. Plaintiffs, however, have abandoned those allegations on
appeal.
7
had denied Progressive’s request that Premier indemnify Progressive for the cost of
defending Plaintiffs’ lawsuit.
Based on Progressive’s indemnification request, Premier filed a
cross-complaint against Plaintiffs and L&B for breach of contract, specific performance,
and declaratory relief. Premier alleged Plaintiffs and L&B breached the
Plaintiffs/Premier Settlement Agreement by suing Progressive to collect the L&B Bill.
Premier sought a judicial declaration that Plaintiffs’ claims against Progressive are barred
by the Plaintiffs/Premier Settlement Agreement.
All parties filed motions for summary judgment or summary adjudication:
(1) Plaintiffs sought summary judgment on their declaratory relief complaint against
Progressive; (2) Progressive sought summary judgment on Plaintiffs’ declaratory relief
complaint and summary adjudication on its breach of contract claim against Plaintiffs;
and (3) Premier sought summary adjudication on its declaratory relief claim against
Plaintiffs.
The trial court denied Plaintiffs’ motion on several procedural grounds,
including that the notice of motion sought summary judgment on claims not alleged in
the operative complaint. The court granted Progressive’s motion, finding (1) the
Plaintiffs/Premier Settlement Agreement barred Plaintiffs from seeking payment for the
L&B Bill under the Policy, and therefore Plaintiffs’ claim for declaratory relief regarding
their right to recover under the Policy was moot, and (2) Progressive was a third party
beneficiary under the Plaintiffs/Premier Settlement Agreement and Plaintiffs breached
that agreement by bringing their declaratory relief action against Progressive. Finally, the
court granted Premier’s motion, finding Premier was entitled to a judicial declaration that
the Plaintiffs/Premier Settlement Agreement barred Plaintiffs’ action against Progressive.
Following the trial court’s rulings, Progressive and Premier dismissed all
remaining claims alleged in their cross-complaints and the trial court entered judgment in
their favor against Plaintiffs. Progressive and Premier then separately moved for an
8
award of attorney fees under the attorney fee provision in the Plaintiffs/Premier
Settlement Agreement. The trial court granted both motions, awarding Progressive
approximately $731,000 in attorney fees and costs and Premier approximately $300,000
in attorney fees and costs.
Plaintiffs separately appealed from the judgment and the two orders
awarding attorney fees and costs. We consolidated the three appeals.
II
DISCUSSION
A. The Summary Judgment and Summary Adjudication Motions
Plaintiffs challenge the trial court’s rulings on (1) Progressive’s motion for
summary judgment on Plaintiff’s first amended complaint for declaratory relief;
(2) Progressive’s motion for summary adjudication on the breach of contract claim
alleged in its cross-complaint; and (3) Premier’s motion for summary adjudication on the
declaratory relief claim alleged in its cross-complaint. Plaintiffs do not challenge the trial
court’s ruling denying their motion for summary judgment on the first amended
complaint. (See Telish v. State Personnel Bd. (2015) 234 Cal.App.4th 1479, 1487, fn. 4
(Telish) [“An appellant’s failure to raise an argument in the opening brief waives the
issue on appeal”].)
1. Governing Summary Judgment Principles
“‘“‘The purpose of a summary judgment proceeding is to permit a party to
show that material factual claims arising from the pleadings need not be tried because
they are not in dispute.’ [Citation.]”’ [Citation.] A party may seek summary
adjudication on whether a cause of action, affirmative defense, or punitive damages claim
has merit or whether a defendant owed a duty to a plaintiff. [Citation.] ‘A motion for
summary adjudication . . . shall proceed in all procedural respects as a motion for
9
summary judgment.’” (California Bank & Trust v. Lawlor (2013) 222 Cal.App.4th 625,
630 (Lawlor).)
“The moving party ‘bears an initial burden of production to make a prima
facie showing of the nonexistence of any triable issue of material fact.’ [Citation.] To
meet that burden, a plaintiff seeking summary adjudication on a cause of action must
present evidence sufficient to establish every element of that cause of action. A
plaintiff’s initial burden, however, does not include disproving any affirmative defenses
the defendant asserts.” (Lawlor, supra, 222 Cal.App.4th at pp. 630-631.) “‘A defendant
moving for summary judgment . . . can meet [its initial] burden by either showing the
plaintiff cannot establish one or more elements of his or her cause of action or there is a
complete defense to the claim.’” (Swanson v. Morongo Unified Sch. Dist. (2014)
232 Cal.App.4th 954, 962 (Swanson).) The moving party’s evidence must establish it is
entitled to judgment as a matter of law. (Ibid.)
Once the moving party meets its initial burden, the burden shifts to the
opposing party to present evidence establishing a triable issue exists on one or more
material facts. (Swanson, supra, 232 Cal.App.4th at p. 963.) “A triable issue of material
fact exists ‘“if, and only if, the evidence would allow a reasonable trier of fact to find the
underlying fact in favor of the party opposing the motion in accordance with the
applicable standard of proof.” [Citation.] Thus, a party “cannot avoid summary
[adjudication] by asserting facts based on mere speculation and conjecture, but instead
must produce admissible evidence raising a triable issue of fact. [Citation.]”
[Citation.]’” (Lawlor, supra, 222 Cal.App.4th at p. 631.)
“We review de novo a trial court’s ruling on a summary adjudication
motion. [Citation.] ‘“[I]n practical effect, we assume the role of a trial court and apply
the same rules and standards that govern a trial court’s determination of a motion for
summary [adjudication].” [Citation.] “Regardless of how the trial court reached its
decision, it falls to us to examine the record de novo and independently determine
10
whether that decision is correct.” [Citations.]’” (Lawlor, supra, 222 Cal.App.4th at
p. 631.)
2. The Trial Court Properly Granted Progressive Summary Judgment on
Plaintiffs’ Complaint for Declaratory Relief
a. Progressive Met Its Initial Summary Judgment Burden
In their first amended complaint, Plaintiffs alleged a single cause of action
seeking a judicial declaration that the Policy granted them an independent right of action
against Progressive to recover for the services described in the L&B Bill because those
services constituted defense costs on the Valley Arbitration claim.3 Progressive sought
summary judgment on Plaintiffs’ complaint, arguing the declaratory relief claim was
moot because Plaintiffs released all claims relating to the L&B Bill when they entered
into the Plaintiffs/Premier Settlement Agreement, and therefore Plaintiffs may not
recover no matter how the court interpreted the Policy. To meet its initial summary
3
In their opening brief, Plaintiffs contend they “seek a determination on
whether, notwithstanding the [Plaintiffs/Premier Settlement Agreement] or the
[Premier/Progressive Settlement Agreement], under the Policy, Progressive must pay the
Defense Costs incurred investigating and defending the [Valley Arbitration].” Plaintiffs’
operative first amended complaint seeks no such determination. Indeed, the first
amended complaint does not even mention the Plaintiffs/Premier Settlement Agreement
or the Premier/Progressive Settlement Agreement, let alone request a judicial
determination that the releases included in those agreements do not prevent Plaintiffs
from recovering directly from Progressive for the work described in the L&B Bill.
Moreover, Plaintiffs did not argue this version of their claim in the trial court.
A party may not seek or oppose summary judgment on a claim, defense, or issue
that is not alleged in the operative pleading. Neither the moving nor opposition papers
may act as a substitute for an amendment to the operative pleading and the failure to
timely amend the pleading to allege the new claim, defense, or issue waives the right to
do so. (Hutton v. Fidelity National Title Co. (2013) 213 Cal.App.4th 486, 493.)
Similarly, a party waives a claim by failing to raise it in the trial court; a claim may not
be raised for the first time on appeal. (Greenwich S.F., LLC v. Wong (2010)
190 Cal.App.4th 739, 767.)
11
judgment burden, Progressive points to the language of the release included in the
Plaintiffs/Premier Settlement Agreement and argues it is a third party beneficiary of that
release.
“[T]he 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 (1993) 12 Cal.App.4th 435, 439 (General Motors).) “‘Under
statutory rules of contract interpretation, the mutual intention of the parties at the time the
contract is formed governs interpretation. [Citation.] Such intent is to be inferred, if
possible, solely from the written provisions of the contract. [Citation.] The “clear and
explicit” meaning of these provisions, interpreted in their “ordinary and popular sense,”
unless “used by the parties in a technical sense or a special meaning is given to them by
usage” [citation], controls judicial interpretation. [Citation.] Thus, if the meaning a
layperson would ascribe to contract language is not ambiguous, we apply that meaning.
[Citations.]’” (Santisas v. Goodin (1998) 17 Cal.4th 599, 608.)
“A contract, made expressly for the benefit of a third person, may be
enforced by him at any time before the parties thereto rescind it.” (Civ. Code, § 1559.)
“‘[T]he third party need not be identified by name. It is sufficient if the claimant belongs
to a class of persons for whose benefit it was made. [Citation.] A third party may qualify
as a contract beneficiary where the contracting parties must have intended to benefit that
individual, an intent which must appear in the terms of the agreement. [Citation.]’”
(Brinton v. Bankers Pension Services, Inc. (1999) 76 Cal.App.4th 550, 558; see
Performance Plastering v. Richmond American Homes of California, Inc. (2007)
153 Cal.App.4th 659, 667 (Performance Plastering); General Motors, supra,
12 Cal.App.4th at p. 444.)
In Performance Plastering, the Court of Appeal held an insurance company
was a third party beneficiary entitled to enforce a release between its insured and a party
making a claim against the insured. There, a developer and a subcontractor entered into a
12
settlement agreement resolving a dispute over the work the subcontractor performed at
the developer’s housing project. In exchange for a monetary payment, the developer
agreed to “‘release[] and forever discharge[] Subcontractor and its insurers’” from any
and all claims relating to the work the subcontractor performed. (Performance
Plastering, supra, 153 Cal.App.4th at p. 663, italics added.)
When the developer later demanded additional money from the
subcontractor based on the same work, the subcontractor’s insurer sought a judicial
declaration that the earlier release barred the developer from seeking additional money.
The insurer brought the action because the subcontractor’s corporate status had been
suspended and the insurer would be liable for any additional money the subcontractor
owed. The trial court sustained the developer’s demurrer to the insurer’s claim,
concluding the insurer lacked standing because it was not a party to the settlement
agreement. (Performance Plastering, supra, 153 Cal.App.4th at p. 664.) The Court of
Appeal reversed, finding the insurer was a third party beneficiary with standing to
enforce the settlement agreement because the agreement released the subcontractor “and
its insurers.” (Id. at p. 667, italics omitted.) The appellate court concluded this language
established the subcontractor’s insurer “was one of a class for whose benefit the . . .
settlement agreement[ was] made.” (Ibid.; see General Motors, supra, 12 Cal.App.4th at
pp. 439-441, 444 [automobile manufacturer among class of persons entitled to enforce
release between drivers involved in automobile accident because release broadly
discharged everyone from liability arising out of the accident by stating it applied to
“‘any and all persons, firms and corporations, whether herein named or referred to or
not’”].)
Here, as quoted above, the Plaintiffs/Premier Settlement Agreement’s plain
language states Plaintiffs released not only Premier, but also its “insurers,” from all
claims and liabilities relating to the L&B Bill and the services described therein. It is
undisputed Plaintiffs were aware of Progressive’s status as Premier’s insurer and
13
Progressive’s potential liability for the L&B Bill when Plaintiffs entered into the
Plaintiffs/Premier Settlement Agreement. Several months earlier, Plaintiffs had
submitted the L&B Bill to Premier and repeatedly asked Premier to include the bill in its
claim for the Valley Arbitration defense costs under the Policy. When Premier denied
those requests and settled its coverage dispute with Progressive, Plaintiffs attempted to
collect the L&B Bill from Premier. Those efforts culminated in Premier agreeing to pay
Plaintiffs $99,000 in exchange for Plaintiffs releasing all claims they had relating to the
L&B Bill, including all claims against Premier’s “insurers.” By presenting these facts,
Progressive met its initial burden to show Plaintiffs’ declaratory relief claim was moot
because Plaintiffs’ released Progressive from all liability relating to the L&B Bill and
therefore Plaintiffs may not recover from Progressive no matter how the Policy is
interpreted. (See Gabaldon v. United Farm Workers Organizing Committee (1973)
35 Cal.App.3d 757, 762 [declaratory relief claim moot when court cannot grant effective
relief].)
b. Plaintiffs Failed to Establish a Triable Issue of Fact
Plaintiffs do not dispute the Plaintiffs/Premier Settlement Agreement’s
plain language establishes Progressive is a third party beneficiary under that agreement
and the release bars Plaintiffs from asserting any claim against Progressive relating to the
L&B Bill. Instead, Plaintiffs contend “Progressive is barred from claiming it is a third
party beneficiary” under the Plaintiffs/Premier Settlement Agreement based on three
separate provisions in the Policy.4 Plaintiffs’ contentions lack merit and fail to establish a
triable issue.
4
In their reply, Plaintiffs also contend Progressive is barred from claiming it
is a third party beneficiary under the Plaintiffs/Premier Settlement Agreement because
Progressive dismissed its cross-complaint against Premier with prejudice. According to
Plaintiffs, that cross-complaint also raised the question whether Progressive is a third
party beneficiary, and therefore Progressive’s voluntary dismissal of that pleading with
prejudice operates as “a final and binding determination that Progressive is not a third
14
First, Plaintiffs contend Progressive cannot claim the benefit of the
Plaintiffs/Premier Settlement Agreement’s release because Progressive failed to offer
evidence it complied with section IX(A)(2) of the Policy, which required Progressive to
consent to the settlement. Plaintiffs further contend Civil Code section 2313 and various
case authorities prevent Progressive from retroactively giving its consent. (See Malinski
v. Wegman’s Nursery & Landscaping, Inc. (1980) 102 Cal.App.3d 282, 290; Hooker v.
American Indemnity Co. (1936) 12 Cal.App.2d 116, 123.) Plaintiffs misconstrue the
Policy.
Section IX(A)(2) of the Policy states, “The Insured shall not . . . settle . . .
any Claim without the Insurer’s prior written consent.” The Policy defines “Claim” as
“any of the following instituted against an Insured Person or against the Company, but
only to the extent coverage is granted to the Company: [¶] (1) a written or oral demand
for monetary damages or non-monetary relief; [¶] (2) a civil proceeding commenced by
party beneficiary” based on the doctrines of retraxit and res judicata. (Some
capitalization omitted.) This contention fails.
First, Plaintiffs forfeited it by waiting until the reply brief to raise it.
(L.A. Taxi Cooperative, Inc. v. The Independent Taxi Owners Assn. of Los Angeles (2015)
239 Cal.App.4th 918, 927, fn. 7 [“contention forfeited where raised for the first time in
reply brief without a showing of good cause”].) Second, the only claims Progressive
dismissed with prejudice were its claims against Premier for breach of the
Premier/Progressive Settlement Agreement, specific performance of that same
agreement, and implied contractual indemnity based on that same agreement. None of
these claims are based on the Plaintiffs/Premier Settlement Agreement or allege
Progressive is a third party beneficiary of that agreement. Third, the dismissal occurred
after the trial court already had granted Progressive summary adjudication on its claim
against Plaintiffs for breach of the Plaintiffs/Premier Settlement Agreement on the theory
Progressive was a third party beneficiary of that agreement. The doctrines of retraxit and
res judicata bar subsequent litigation on a claim dismissed with prejudice. The doctrines
do not apply to prior litigation. (See Alpha Mechanical, Heating & Air Conditioning,
Inc. v. Travelers Casualty & Surety Co. of America (2005) 133 Cal.App.4th 1319, 1330
[“‘A retraxit is a judgment on the merits preventing a subsequent action on the dismissed
claim’”].)
15
the service of a complaint or similar pleading; [and ¶] . . . [¶] (4) an arbitration or
mediation proceeding in which monetary damages are sought; [¶] . . . [¶] for a Wrongful
Act including any appeal from such proceeding.” (Italics added.)
Plaintiffs concede their request to have Progressive pay the L&B Bill as
part of Premier’s defense costs for the Valley Arbitration is not a “Claim” under the
Policy. Indeed, Plaintiffs acknowledge that under the Policy the Valley Arbitration claim
is the only claim based on a purported wrongful act by an insured. Accordingly,
Progressive was not required to consent to the settlement between Plaintiffs and Premier
regarding the L&B Bill, and section IX(A)(2) does not prevent Progressive from
asserting the Plaintiffs/Premier Settlement Agreement’s release as a third party
beneficiary.
Next, Plaintiffs contend the Policy’s “‘Insured Versus Insured’ exclusion”
prevents Progressive from claiming to be a third party beneficiary under the
Plaintiffs/Premier Settlement Agreement. According to Plaintiffs, this exclusion prevents
Progressive from deriving any benefit from the Plaintiffs/Premier Settlement Agreement
and its release because both Letwak, in his capacity as one of Premier’s directors, and
Premier are insureds under the Policy, and the Plaintiffs/Premier Settlement Agreement
resolves a dispute between those two insureds. Again, Plaintiffs misconstrue the Policy.
The Policy’s “Insured vs. Insured Exclusion” provides, “The Insurer shall
not be liable to make any payment for Loss in connection with any Claim by, on behalf
of, or at the behest of the Company . . . or any Insured Person in any capacity.” This
exclusion excludes from the Policy’s coverage any “Claim” made by a person insured
under the Policy. As explained above, Plaintiffs concede their request for payment on the
L&B Bill is not a “Claim” under the Policy, and therefore this exclusion does not apply.
Moreover, this exclusion relieves Progressive of the obligation to pay a claim it otherwise
would be required to pay under the Policy. If the exclusion applied here, it would excuse
Progressive from paying the L&B Bill and any damages resulting from Premier’s refusal
16
to submit the bill to Progressive; the exclusion would not prevent Progressive from
asserting the protection of a release that was clearly intended for its benefit.
As further support for this argument, Plaintiffs cite Longoria v. Hengehold
Motor Co. (1983) 142 Cal.App.3d 1059 (Longoria), for the proposition that “an insurer is
prohibited from being involved in disputes between its two insureds or, at the very least,
from taking advantage of such disputes.” According to Plaintiffs, Progressive’s reliance
on the Plaintiffs/Premier Settlement Agreement’s release violates the Longoria rule
because it “creates a conflict of interest by pitting Progressive against its own insured,
Letwak.” We disagree.
In Longoria, a husband was involved in an automobile accident with his
wife while he was driving his employer’s vehicle and she was driving the couple’s
vehicle. The couple’s insurer paid for the damage to their vehicle and then brought a
subrogation action against the husband’s employer under a statute holding a vehicle’s
owner liable for damage negligently caused by a permissive user. The employer
demurred to the insurer’s complaint based on a related statute authorizing the owner to
recover from the permissive user for any liability imposed on the owner based on the
user’s negligent use of the vehicle. (Longoria, supra, 142 Cal.App.3d at p. 1060.)
According to the employer, the combined effect of these two statutes allowed the insurer
to obtain subrogation from its own insured for a loss covered by the underlying policy
and thereby permit the insurer to avoid the coverage that the insured purchased. The trial
court agreed and sustained the demurrer without leave to amend. The Longoria court
affirmed based on established case law prohibiting an insurer from obtaining subrogation
from its own insured. (Id. at p. 1061.) Contrary to Plaintiffs’ contention, the Longoria
court did not address whether an insurer could profit from disputes between its insureds.
Nor was an insured versus insured exclusion at issue in Longoria.
Here, we are not concerned with a subrogation claim. Nor does the record
show Progressive attempted to obtain payment from an insured for a loss covered under
17
the Policy. On its own, Premier rejected Plaintiffs’ request that it submit the L&B Bill to
Progressive as part of Premier’s defense costs for the Valley Arbitration. After
Progressive received all of Premier’s documentation regarding its defense costs,
Progressive and Premier negotiated a settlement of their coverage dispute regarding the
Valley Arbitration. That settlement resulted in Progressive making a significant payment
to Premier under the Policy in exchange for Premier releasing all claims it had against
Progressive relating to the Valley Arbitration, including all claims for defense costs.
Because Premier released Progressive from all of its claims for defense costs, Plaintiffs
then looked to Premier directly for payment of the L&B Bill. Eventually, Plaintiffs and
Premier reached a settlement, with Premier agreeing to pay a majority of the L&B Bill in
exchange for Plaintiffs releasing all claims relating to that bill. Plaintiffs present no
evidence to show Progressive either involved itself in the dispute between Plaintiffs and
Premier or took advantage of that dispute. Rather, the undisputed evidence shows
Progressive merely asserted a release that was intended for its benefit to prevent Plaintiffs
from recovering twice for the L&B Bill. Longoria does not apply to these facts.
Finally, Plaintiffs contend Progressive cannot assert the Plaintiffs/Premier
Settlement Agreement’s release as a bar to liability for the L&B Bill because the Policy is
a “‘pay on behalf of’” policy that required Progressive to pay all defense costs directly to
the vendors who provided the services. According to Plaintiffs, the policy’s terms made
Progressive directly liable for all defense costs, and therefore any release Plaintiffs
executed to discharge Premier from liability for the defense costs described in the
L&B Bill is irrelevant to Progressive’s liability for those costs. Not so.
In making this argument, Plaintiffs focus on the Policy term that requires
Progressive to pay defense costs “on behalf of [the insured]” and also the Policy’s
definition of the term “Loss.” Plaintiffs, however, ignore the Plaintiffs/Premier
Settlement Agreement’s plain language. Even if we assume the Policy required
Progressive to pay Plaintiffs directly for the defense costs described in the L&B Bill,
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Plaintiffs provide no explanation why the release does not discharge Progressive from
liability for those costs. As described above, the Plaintiffs/Premier Settlement
Agreement’s release discharges not only Premier, but also its “insurers,” from all
liabilities relating to the L&B Bill. The Plaintiffs/Premier Settlement Agreement also
prohibits Plaintiffs from even contacting “Premier’s insurance carrier” about the
L&B Bill. Accordingly, no matter what liability the Policy imposed on Progressive
regarding the L&B Bill, Plaintiffs released Progressive from that liability by signing the
Plaintiffs/Premier Settlement Agreement.
We therefore conclude Plaintiffs failed to establish a triable issue on their
declaratory relief claim and the trial court properly granted Progressive’s summary
judgment motion. Because we conclude the Plaintiffs/Premier Settlement Agreement’s
release renders Plaintiff’s declaratory relief claim moot, we do not address the numerous
other challenges Progressive asserted, including whether Plaintiffs had standing to pursue
declaratory relief under the Policy and whether the release included in the
Premier/Progressive Settlement Agreement barred Plaintiffs from recovering from
Progressive for the L&B Bill.
3. The Trial Court Properly Granted Progressive and Premier Summary
Adjudication on their Cross-Complaints Against Plaintiffs
In its cross-complaint, Progressive alleged a breach of contract claim
against Plaintiffs on the theory Progressive was a third party beneficiary under the
Plaintiffs/Premier Settlement Agreement and Plaintiffs breached that agreement by suing
Progressive to recover on a claim they released when they entered into the agreement.
Similarly, in its cross-complaint, Premier sought a judicial declaration the release in the
Plaintiff/Premier Settlement Agreement barred Plaintiffs’ declaratory relief claim against
Progressive.
Progressive and Premier sought summary adjudication on these claims
based on the plain language of the release in the Plaintiffs/Premier Settlement Agreement
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and Plaintiffs’ declaratory relief claim. The trial court granted these motions and
Plaintiffs appealed. Plaintiffs, however, do not state any separate challenges to the trial
court’s ruling on these motions. Instead, Plaintiffs merely incorporate the challenges they
stated to the trial court’s ruling granting Progressive summary judgment on Plaintiffs’
declaratory relief claim. Accordingly, Plaintiffs waived all other challenges to these
rulings (Telish, supra, 234 Cal.App.4th at p. 1487, fn. 4), and we affirm for the reasons
set forth above.
B. The Attorney Fee Motions
After the trial court entered judgment against Plaintiffs, it granted
Progressive’s and Premier’s motions for attorney fees and awarded each of them
substantial fees and costs under the attorney fee provision in the Plaintiffs/Premier
Settlement Agreement. Plaintiffs challenge those awards, but they based their argument
solely on the assumption we will reverse the judgment. Plaintiffs otherwise do not
challenge Progressive’s or Premier’s entitlement to attorney fees or the reasonableness of
the amounts the trial court awarded. Indeed, Plaintiffs do not include any of the moving
or opposition papers for the attorney fee motions in the record. Plaintiffs therefore
waived all other challenges to the attorney fee awards. (Telish, supra, 234 Cal.App.4th at
p. 1487, fn. 4 [waive appellate challenge by failing to raise it in opening brief]; Oliveira
v. Kiesler (2012) 206 Cal.App.4th 1349, 1362 [failure to provide adequate record for
review requires issue to be resolved against appellant].) We affirm the awards because
we affirm the judgment.
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III
DISPOSITION
The judgment and postjudgment orders are affirmed. Progressive and
Premier shall recover their costs on appeal.
ARONSON, ACTING P. J.
WE CONCUR:
IKOLA, J.
THOMPSON, J.
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