Friday, June 26, 2009
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C.A.: Insurer Not Liable for Legal Fees in False Imprisonment Case
By KENNETH OFGANG, Staff Writer
An insurer whose insureds were found to have held their domestic servant a virtual slave in their home is not liable for $87,000 in damages or for more than $730,000 in attorney fees, the Court of Appeal for this district ruled yesterday.
Div. Three held that State Farm General Insurance Co., which issued homeowners’ and umbrella insurance policies to Dennis and Dina Lam, is not obligated to pay tort damages awarded to Mimin Mintarsih. The court said the damages arose from a willful act, and are therefore not covered, even though Mintarsih prevailed on both intentional tort and negligence claims.
The court further ruled that because the attorney fees were only recoverable under Mintarsih’s successful Labor Code claim, for which there was no coverage, the insurer does not have to pay them. The ruling limits State Farm’s responsibility to a $160,000 cost award, plus interest on that amount.
Mintarsih, who was 17 when she left Indonesia to work for the Lams, claimed the couple forced her into involuntary servitude at their Pasadena home and paid her $1.96 an hour and made her work 14 hours a day, seven days a week with no meal breaks and no vacations for seven years.
Partial Nonsuit Granted
The Lams claimed that Mintarsih was never kept at their home against her will. Superior Court Judge Victor Chavez granted nonsuit as to several of plaintiff’s involuntary servitude claims, but allowed the case to go the jury on four tort theories—negligence, negligence per se, false imprisonment and fraud—as well as on Labor Code claims. The negligence claims dealt with allegations that Mintarsih suffered from medical and dental problems because the Lams delayed allowing her to see a doctor and a dentist.
The jury found for the plaintiff on all of those claims and awarded $75,000 in economic and $12,000 in non-economic damages on the tort causes of action, $5,000 in punitive damages, and more than $740,000 on the labor claims. Chavez later added the attorney fee and cost awards to the judgment.
State Farm, which had defended the Lams under a reservation of rights, filed a declaratory action against Mintarsih and the Lams. Judge Mark Mooney, following a nonjury trial, ruled that the insurer was required to pay the compensatory damages portion of the tort award, and the court costs, but did not have to pay the attorney fees because they were tied to the non-covered Labor Code claims.
Mooney subsequently ruled that State Farm was required to pay postjudgment interest in the underlying action, but only on the portion of the judgment that it was required to pay.
The Lams dismissed their appeal from the underlying judgment in a settlement under which they assigned their rights against their insurer to Mintarsih. Both Mintarsih and State Farm appealed the judgment in the declaratory action.
‘Mixed Claims’
Justice Walter Croskey, writing yesterday for the Court of Appeal, explained that Mintarsih’s suit against the Lams was a “mixed claims” case, one that combined claims as to which there was at least a potential of insurance coverage with claims as to which there was no such potential.
When costs, which may include attorney fees, are awarded to the plaintiff in a mixed claims case, the defendants’ insurer is liable for such award only to the extent that the costs relate to a claim as to which there was a potential for coverage, Croskey explained. Based on that principle, he concluded, State Farm was correct in asserting that it had no duty to pay the attorney fee award.
The justice rejected the argument that policy language requiring the insurer to pay “costs taxed against an Insured in suits we defend” obligated State Farm to pay the entire cost award in a mixed claims case.
He analogized to an earlier case in which the Court of Appeal held that—under similar policy language—there was no duty to pay an attorney fee award in a case where the insurer provided a defense, but later won a judicial declaration that it had no duty to do so as a matter of law.
Since the plaintiff did not argue that there was potential coverage for the Labor Code claims, and since the attorney fee award related solely to those claims, the trial judge was correct in holding that State Farm has no obligation to pay it, Croskey said.
The trial judge erred, however, in holding that State Farm must pay the tort damages, the justice went on to say, citing Insurance Code Sec. 533. The statute precludes indemnity for damages relating to a willful act.
An award of negligence damages will not give rise to an obligation to indemnify, Croskey explained, if the negligence is inseparable from related intentional misconduct.
“The evidence presented to the jury in this case shows that the Lams failed to provide timely medical and dental care to their domestic servant during the time that they intentionally deprived her of freedom of movement,” the justice wrote. “Their negligent conduct was intimately connected with their intentional misconduct, both temporally and spatially.
“...In our view, the Lams’ negligence was so closely related to their intentional misconduct as to constitute the same course of conduct for purposes of Insurance Code section 533.”
The case is State Farm General Insurance Company v. Mintarsih, 09 S.O.S. 3901.
Copyright 2009, Metropolitan News Company