California Shoppers, Inc. v. Royal Globe Insurance Co. (175 Cal. App. 3d 1, 1985)

Opinion

McDANIEL, J.

The appeal here is from a money judgment based upon six specific jury awards, including both contract damages for breach of an insurance contract and tort damages for breach of the implied covenant of good faith and fair dealing. The cross-appeal is from the trial court’s post-judgment order striking the award of punitive (exemplary) damages.

The underlying action was brought by California Shoppers, Inc., (California Shoppers or the insured) and four of its shareholders against its insurance carrier, Royal Globe Insurance Company (Royal Globe or the insurer) to recover damages allegedly resulting from the breaches of two duties arising under the policy. One such breach was the refusal to indemnify the insured for a judgment awarded against it in a third-party action (the Uneedus action) brought by a competitor. The other was the failure to defend the Uneedus action. The main action also included a count for wilful breach of the implied covenant of good faith and fair dealing allegedly occurring in connection with the failure to defend, as well as a count for fraud allegedly occurring at the time the insurance was purchased.

In the course of the jury trial, the individual shareholder plaintiffs were nonsuited with reference to the counts noted as well as those for negligent and intentional infliction of emotional distress.

The trial resulted in a verdict awarding itemized damages of: (1) expenses of $86,500 incurred by California Shoppers in satisfying the judgment awarded against it in the Uneedus action; (2) expenses of $39,000 incurred by California Shoppers in the defense of the Uneedus action; (3) so-called past inflation loss of $50,000; (4) attorney’s fees of $59,493 necessarily expended (by California Shoppers in the litigation here) to procure benefits due under the policy; (5) damages for economic or business loss, $3 million; (6) punitive (exemplary) damages of $2 million; (7) prejudgment interest of $21,963.

Royal Globe moved: (1) for a new trial; and (2) for judgment notwithstanding the verdict. The first was denied, and the second was granted only as to the exemplary damages. In ruling on the latter motion, the court recited that “the evidence considered in its entirety is legally insufficient to justify or support an award of punitive damages against the defendant Royal Globe. There is no showing that the defendant was guilty of oppression, fraud or malice, or that the defendant acted with intent to vex, injure or annoy, or that it acted with a conscious disregard of plaintiff’s rights.” The court ordered that the award of exemplary damages be stricken, and, “as to the claim and cause of action of plaintiff for punitive damages, that judgment be entered in favor of defendant. . . and against the plaintiff.” (Italics added.)

Royal Globe appealed from the judgment, from the order denying its motion for judgment notwithstanding the verdict as to the issues other than exemplary damages (a nonappealable order), and from the order denying its motion to tax costs. California Shoppers, for its part, cross-appealed from the postjudgment order which struck the exemplary damage award, and from “all other appellable [sic] adverse rulings, orders and judgments including but not limited to evidentiary rulings,” and two specific orders.

Based on interpretation of the policy, particularly the so-called shield clause, we shall affirm the award of contract damages for the refusal to indemnify. For reasons recited infra, we shall also affirm the contract damages for failure to defend.

Otherwise, the undisputed evidence does not support any permissible inferences of tortious behavior necessary to uphold the award of compensatory damages for so-called bad faith. Additionally, because of its speculative nature, the evidence offered to prove tort damages was insufficient, and certain of the instructions given on bad faith were erroneous. On these three grounds, alternatively, the award of tort damages for the alleged economic loss will be stricken. The absence of evidence establishing tort liability also eliminates the basis for awarding attorney’s fees. Finally, with no evidence to support the compensatory damages in tort, a fortiori the exemplary damages were properly stricken by the trial court.

The triggering event leading to the litigation here was Royal Globe’s failure to provide a defense for the Uneedus action brought against California Shoppers. Such failure was solely the consequence of Royal Globe’s mistaken belief, contributed to by California Shoppers, according to uncon-tradicted testimony, that defense of the Uneedus action had been tendered not by California Shoppers but by another corporate entity (Adco), one actually not even named as a defendant in the Uneedus action.

In attempting to uphold on appeal that portion of the judgment awarding compensatory tort damages, California Shoppers continues in this court an effort it successfully pursued in the trial court, where it characterized Royal Globe as having grossly violated some vaguely defined duty of good faith and fair dealing, and where it urged the jury in polemic if not inflammatory terms that Royal Globe should be punished for that behavior in the form of a sufficiently large compensatory award to justify a commensurately large award of exemplary damages. That vagueness fails in this court to obscure the manifold prejudicial errors which abound in this record.

As observed in this vein by Justice Kaufman in Merlo v. Standard Life & Acc. Ins. Co. (1976) 59 Cal.App.3d 5 [130 Cal.Rptr. 416], “Nevertheless, ‘ “[w]hen the award as a matter of law appears excessive, or where the recovery is so grossly disproportionate as to raise a presumption that it is the result of passion or prejudice, the duty is then imposed upon the reviewing court to act. ” ’ (Cunningham v. Simpson, 1 Cal.3d 301, 308-309 [81 Cal.Rptr. 855, 461 P.2d 39]; accord: Bertero v. National General Corp., supra, 13 Cal.3d [43] at p. 64 [118 Cal.Rptr. 184, 529 P.2d 608, 65 A.L.R.3d 878]; Forte v. Nolfi, supra, 25 Cal.App.3d [656] at p. 688 [102 Cal.Rptr. 455].)” (Id., at p. 17, italics added.)

On the tort liability issue, even accepting the failure to defend as having been a breach of contract, an insurer’s responsibility to act fairly and in good faith in handling an insured’s claim “is not the requirement mandated by the terms of the policy itself—to defend, settle, or pay. It is the obligation . . . under which the insurer must act fairly and in good faith in discharging its contractual responsibilities.” (Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 573 [108 Cal.Rptr. 480, 510 P.2d 1032], italics added.) In other words, per Gruenberg, the elements of the tort cannot be defined by the terms of the policy; for there to be a breach of the implied covenant, the failure to bestow benefits must have been under circumstances or for reasons which the law defines as tortious. As confirmed in Hanson v. The Prudential Ins. Co. of America (9th Cir. 1985) 772 F.2d 580, “[t]he mere denial of benefits, however, does not demonstrate bad faith.” (Id., at p. 584.) On this record, with reference to alleged bad faith, all that is shown is a denial of benefits in the form of a failure to defend because of a mistake induced by the insured.

Finally, there was no showing whatsoever of any entitlement to what California Shoppers characterized as damages for “past inflation loss,” and so they too will be stricken.

Synopsis of the Facts

As noted, there was no dispute in the direct (Evid. Code, § 410) evidence presented at the trial; here is what it shows. Adco Advertising, Inc. (Adco), not a party to these proceedings, was the publisher of the “Pennysaver,” a very successful “give-away” type, advertising newspaper published and distributed in Orange County. Some of the principals of Adco decided to launch a similar venture in Riverside County, and, with that objective, they invested $35,000 in the venture and caused California Shoppers to be organized as a corporation, with the result that certain of these Adco principals were also principals of California Shoppers. In any event, in this mode, California Shoppers commenced publication and distribution of the “California Shopper” in Riverside County.

Royal Globe, which, through the Jay and Renfro agency in Newport Beach, had written Adco’s business liability insurance coverage otherwise for several years, upon overtures from California Shoppers, issued a similar insurance policy (the policy) to California Shoppers, also through that same agency, with an effective date of March 1, 1975. That policy, the one here sued upon, recited in pertinent part:

“1. Personal Injury and Advertising Offense Liability Coverage

“(A) The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of personal injury or advertising offense sustained by any person or organization and arising out of the conduct of the named insured’s business . . . and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such injury or even if any of the allegations of the suit are groundless, false or fraudulent . . .

“(B) This insurance does not apply: . . .

“(2) to personal injury or advertising offense arising out of the wilful violation of a penal statute or ordinance committed by or with the knowledge or consent of any insured. . . .

“ ‘advertising offense’ means injury occurring in the course of the named insured’s advertising activities, if such injury arises out of libel, slander, defamation, violation of right of privacy, piracy, unfair competition, or infringement of copyright, title or slogan.”

On March 5, 1975, California Shoppers distributed the first edition of “California Shopper” in five communities in Riverside County. The following week, “California Shopper” offered free “reader ads,” “for a limited time only” (the ad), which, as explained below, became the basis for the third-party litigation, alleged by California Shoppers to have been within the risk of its policy coverage by Royal Globe.

At this same time, another such give-away type newspaper called the “Hi-Liter” was being published by Uneedus Corporation (Uneedus) and distributed in the same five Riverside County communities as was “California Shopper.” On May 14, 1975, because of the ad, Uneedus filed against California Shoppers the third-party action above noted, alleging that California Shoppers had violated the Unfair Practices Act, particularly as contained in Business and Professions Code section 17043, in that it was selling below-cost advertising “with the intent to injure [Uneedus].” (Italics added.)

The named defendants in the Uneedus complaint were California Shoppers and five individuals, including Herb Sutton, who was the 100 percent stockholder of Adco, and also was a 21 percent stockholder in California Shoppers.

After California Shoppers was served, Sutton sent the summons and complaint to Jay and Renfro, the agency which had sold to California Shoppers the policy noted. Inexplicably, however, the summons and complaint were sent by Sutton to Jay and Renfro without a cover letter of explanation, and in an Adco envelope bearing Adco’s imprinted return address. Roy Gibson, the office manager at Jay and Renfro, then sent the summons and complaint on to a Royal Globe claims office and, because he assumed that this service of process had been upon Adco (Gibson testified: “When I received [the Uneedus] summons all I saw was Herb Sutton. Herb Sutton, Adco, and the ‘Pennysaver’ were all synonymous as far as I was concerned because we had quite a few claims with them”), Gibson referred to Adco’s policy number in his covering correspondence to Royal Globe’s claims manager in Tustin. That claims manager sent the correspondence and litigation papers on to Royal Globe’s Riverside claims office.

On June 6, 1975, R. S. Scott, Royal Globe’s claims manager in Riverside, wrote the following letter, addressed to “Adco Advertising Inc.[,] dba Pennysaver[,] 27742 Forbes Road[,] Laguna Niguel, Ca. 92677[.] Re: Summons and Complaint #112236 [the Uneedus action]. Gentlemen: [¶] Attached find Summons and Complaint Case number 112236. We have reviewed the allegations and contentions of the plaintiff and we have also reviewed your policy. It is our opinion that there would be no coverage for this suit and we, therefore, return it to you so that you may obtain counsel and handle as you see fit. [¶] Should you have any further questions, please do not hesitate to call. Very truly, Royal Globe Insurance!,] R.S. Scott[,] Claims Manager[,] Claims Dept.[,] RSS/pw, cc/Jay and Renfro[.]” (Italics added.) The record is not clear just how the contents of this letter were actually transmitted by Adco to California Shoppers, if at all.

Necessarily anticipating the disagreement among the panel concerning the significance of what Scott did or did not do before writing the letter of June 6, 1975, we deem it imperative to set forth pertinent excerpts of the record, first, testimony from Gibson, the person at Jay and Renfro who received from California Shoppers the summons and complaint, without covering letter, in an Adco envelope, and who later sent it on to Royal Globe’s claims manager Fred Pelosi in Tustin, and then testimony from Scott.

By Mr. Austero, to Mr. Gibson:

“Q. Did you read the names of the persons that were being sued on the complaint?

“A. Yes, I did.

“Q. Did you see that California Shoppers was being sued?

“A. They—the name I saw was Herb Sutton.

“Q. So I take it you didn’t recognize that California Shoppers was being sued?

“A. Well, their name, but I never heard of them.

“Q. Did you make an investigation in your office to determine if Jay and Renfro had ever sold insurance to California Shoppers?

“A. I didn’t.

“Q. And did you at any time after sending this letter to Royal Globe have a conversation with Dick Scott [defendant’s claims manager in Riverside, supra] ?

“A. Several.

“Q. And did you send the summons and complaint directly to Dick Scott?

“A. I did not.

“Q. Who did you send it to?

“A. I sent it to Fred Pelosi in Tustin. We have instructions to send all of our claims to the Tustin office since they moved down here from Los Angeles.

“Q. And then did Fred Pelosi ever contact you about the summons and complaint you had sent to them?

“A. He did. He said he was sending it to Dick Scott in Riverside.

“Q. Did you have a conversation with Dick Scott as to whether Royal Globe was going to accept or reject coverage under the—with respect to the complaint you sent them?

“A. I don’t remember.

“Q. At the time your deposition was taken, do you recall having a conversation with Mr. Scott as to whether there was coverage or not?

“A. Well, I probably did, yes, ’cause he wasn’t sure, if I recall, he wasn’t sure there was coverage.

“Q. And did—didn’t he tell you that he was going to have to review it to determine if there was coverage?

“A. Yes.

“Q. And isn’t it a fact, sir, that he in fact told you that there was no coverage under—

“A. Later you mean?

“Q. Well, on the telephone prior to June 3rd ’75?

“A. That there was no coverage?

“Q. Yes.

“A. I’ve got to say I can’t remember.

“Q. Some time after?

“A. Because I really don’t.

“Q. Sometime after June 3rd ’75 did he tell you on the telephone or any personal conversation with him that there was no coverage?

“A. I’m sure he did because he was going to contact Adco’s attorneys.

“Q. And your impression at that time, sir, that the reason Royal Globe was denying coverage was because the claim wasn’t encompassed within the policy provisions; isn’t that true?

“A. Yes.

“Q. And it was your impression, isn’t it true, sir, that you in no way at that time understood Royal Globe’s position to be that California Shoppers was not an insured under a Royal Globe policy; isn’t that true?

“A. It was never brought up.

“Q. Did you ever have conversation with anybody from California Shoppers at all?

“A. Yes.

“Q. Who was that with?

“A. Not California Shoppers, no. Adco.

“Q. (By Mr. Austero) Sir, you understood that Royal Globe was denying coverage to Adco Advertising, right?

“A. Right.

“Q. You have no recollection as to whether Royal Globe ever told you what the reasons for denying coverage were?

“A. No.

“Q. Do I understand you to say you have no recollection if they ever told you what the reasons for denial of coverage were?

“A. All I know is they said there was no coverage under the policy.

“Q. Sir, was, to your knowledge, California Shoppers in fact an insured with Royal Globe on May of—in May of ’75?

“A. With us, no. I had never heard of California Shoppers.

“Q. Prior to [the time you received the summons in the present case] you had no knowledge that California Shoppers was insured by Royal Globe?

“A. I really don’t think I did.

“Q. When Royal Globe advised you that there was no coverage, did you call anybody on behalf of Adco or Herb Sutton for the purpose of investigating or determining who California Shoppers was?

“A. California Shoppers had never even been mentioned.

“Q. Their name was on the cover of the complaint.

“A. It was on the cover. When I received that summons all I saw was Herb Sutton. Herb Sutton, Adco and the ‘Pennysaver’ were all synonymous as far as I was concerned because we had quite a few claims with them.

“Q. Now Mr. Gibson, when you were advised by Royal Globe that they were denying coverage, did you question in your own mind why coverage was being denied?

“A. I turned it over to Mac Renfro. And that’s when he told me to send it to Fireman’s Fund which had their umbrella policy.

After the Scott letter of June 6, 1975 (supra), was read into evidence, the questioning proceeded:

“Q. . . . first time you were aware of the complaint against Herb Sutton was when you actually received it in your office about May of ’75?

“[A.] Yeah. We received it from Adco.

“Q. Adco was not named on a complaint, were they?

“A. The one we looked at the other day?

“Q. The complaint that you forwarded to the company, yes.

“A. I don’t believe so.”

Later in the trial, Scott testified extensively, including answers to the following questions by Mr. Hafif.

“Did you make any investigation as to whether any of the named defendants in [the Uneedus] complaint were listed as insureds under [Adco’s] policy?

“A. ... I cannot tell you specifically on that specific case. It has been too many years, but I can again tell you what my routine was: That it probably would have struck me as very strange that the policy was sent to me as Adco Advertising and yet they were not a named defendant. My routine would have been to check and see if any of the individuals under the Adco policy were an additional named insured, assuming that was the reason it was sent to me.

“Q. But you denied coverage to everybody?

“A. I denied it to Adco.

“Q. ... without checking as to whether any of these individuals had coverage under the Adco policy, you denied coverage as to whoever, didn’t you?

“A. They never made a demand on me, counselor. I never got a suit from an individual. I got a suit from a corporation called Adco. No individual has ever said they had been served for demand upon me to cover them or provide them with a defense.

“Q. Well, you got a copy of the complaint and you were asked to handle the claim?

“A. That’s correct.

“Q. From that you couldn’t tell whether the individual had been served or not served, could you?

“A. That’s correct.

“Q. But you didn’t make any inquiry to find out, did you?

“A. That’s correct.

“Q. You didn’t make any inquiry to find out whether some of those individuals might be covered under an Adco policy, did you?

“A. Say again?

“Q. You didn’t make any inquiry to determine whether those individuals named in there might also be covered under the Adco policy, assuming you were misunderstanding which policy was being claimed?

“A. I don’t believe I made that statement. In fact, I think I said just the contrary.

‘“[From Scott’s deposition, read by Mr. Hafif] Q. Did you specifically to the best of your recollection tell Mr. Gibson that the reason you were not going to be able to handle the matter is that Adco was not a named defendant?

“‘A. Well, if you realize the specifics of it, the policy that was sent to me was under Adco. And obviously I could not set up a claim under Adco’s policy since they were not a party to the action. So therefore, all I can say is that I probably and in most likelihood said to Mr. Gibson “Since Adco isn’t a named party, I can’t set it up under California Shoppers.” ’ ”

Otherwise, Scott testified that he had “no knowledge that Royal [Globe] insured anybody named California Shoppers”; also, that he “had to have a policy number in order to obtain specific information regarding an insured, because there was no alphabetical listing at that time.”

Affording an insight into certain background aspects of this litigation, Michael Harding, California Shopper’s house counsel, testified that on February 2 or 4, 1976, he was told about Royal Globe’s denial of coverage, and that he proceeded to undertake a “fact finding” mission for California Shoppers by: (1) showing a copy of its policy without any names on it to a friend in the insurance business and asking for the friend’s opinion as to whether Royal Globe should defend the suit; (2) having people in his, Harding’s, office research the Insurance Code; (3) reading the policy himself; and (4) sending the policy to Odgers (one of California Shopper’s attorneys in this suit) for an opinion. Harding testified that he contacted Odgers because “I knew he did a lot of appellate work and . . . did a lot of research in the area of bad faith.”

Harding also testified that he had a financial interest in the outcome of the present suit, and that he had an agreement with California Shoppers whereby he, Harding, was to get “25 percent of whatever is recovered as attorney fees . . . .”

In any event, California Shoppers handed over the defense of the Uneedus action to Adco’s attorneys, Kindel and Anderson, and retained Odger’s firm to file the present suit against Royal Globe on June 7, 1976. On June 8, the day after the suit here was filed, Harding made his first attempt to contact Royal Globe by calling Gibson. Harding testified: “I asked [Gibson] what did Royal Globe tell him they were relying on in the policy so I could show it to my client . . . and he said, well, you got the letter and they just said there’s no coverage. And he said the guy to get ahold of is a guy named Scott. And I could never find Mr. Scott. And until I heard from Mr. Ibold [defendant’s attorney, in August, 1976, infra], that was the only contact I’d had with Royal Globe.”

On July 7, 1976, a month after the complaint here was filed and about two months before the Uneedus trial was scheduled to begin, California Shoppers for the first time served upon Royal Globe a copy of the original summons and complaint in this action.

Quite apart from any litigation thus far noted, on July 28, 1976, California Shoppers was otherwise sued by Adco no less on several theories, in-eluding defamation and unfair competition, this notwithstanding that California Shoppers and Adco had several common principals. Despite the fact that California Shopper’s house counsel Harding “could never find Mr. Scott” in processing the Uneedus action against California Shoppers, this same attorney did not report any difficulties in transmitting to defendant the summons and complaint filed in the Adco action against California Shoppers, along with a cover letter referring to California Shoppers’ policy number and to California Shoppers as “your insured,” and requesting that Royal Globe provide a defense to the Adco action, all in marked contrast to how the Uneedus summons and complaint served on California Shoppers had been earlier handled. Moreover, Royal Globe did undertake defense of the Adco action against California Shoppers.

Harding, California Shoppers’ house counsel, as noted, at the request of Charles Ibold, Royal Globe’s attorney, arranged a meeting on August 30, 1976, with Stephen Odgers, the attorney who was handling California Shoppers’ suit against Royal Globe. It was held in Harding’s office, and the purpose of the meeting was to discuss settlement of this litigation here as well as California Shoppers’ tender of the Adco action for defense. Ibold testified, without contradiction, that at that meeting he actually offered, on Royal Globe’s behalf, to assume California Shoppers’ defense of the Unee-dus action, the trial of which was then set to begin in about a week. Ibold also testified that Odgers’ response to this offer was that Royal Globe could “defend and control the suit” on condition that California Shoppers’ then attorneys in that case would be retained by Royal Globe and would continue to handle the defense, that Royal Globe agree to indemnify California Shoppers for any judgment, and that Royal Globe forthwith pay California Shoppers $100,000, in addition to the attorney’s fees incurred up to then in the Uneedus action.

With reference to the August 30, 1976, meeting, Harding testified that “[w]e were very firm that anything that got resolved [in this litigation] would be with attorney fees.” Then the following exchange took place between Harding and Mr. Hafif:

“Q. Now following that meeting did you receive a copy of a letter from Mr. Odgers to Mr. Ibold outlining the meeting itself? Why don’t you take time to read that?

“A. Yes, I received this letter.

“Q. Okay. And did it outline—the circumstances of the discussions that you recall conform to that letter?

“A. Yes.”

James Coffran, one of the principals of California Shoppers, was present during a part of the meeting, and he testified on direct examination that Ibold had offered to handle the defense of the Uneedus action. More exactly, he testified, “[a]nd I think the way it came out that they would, you know, that they would take over the case, but they wouldn’t cover us if a judgment came down, you know, because of, you know, their defense work. And obviously I wouldn’t be comfortable with that.”

In sum, responding to Royal Globe’s offer to defend the Uneedus action, California Shoppers then demanded, not only that the defense be continued with counsel of California Shoppers’ choice and that coverage of the Unee-dus risk be accepted, but also that Royal Globe pay California Shoppers its legal expenses actually incurred in defense of the Uneedus action plus $100,000 in settlement of the action California Shoppers had filed against Royal Globe here.

Four days later, Odgers sent a letter to Ibold primarily with reference to settlement of this litigation here as follows:

“September 3, 1976

“Mr. Charles R. Ibold, Jr.

Ibold, Anderson, Mercer & Gallagher Attorneys at Law

2600 Wilshire Blvd., Suite 222 Los Angeles, California 90057

“RE: California Shoppers, et al, vs. Royal Globe Ins., et al

Uneedus vs. California Shoppers, et al

ADCO vs. California Shoppers

“Dear Mr. Ibold:

“After our meeting on Monday, August 30, I thought I would follow it up with this letter. I enclose an extra copy so that you might send it to the appropriate officials of Royal Globe at the headquarters.

“The potentiality of this lawsuit [the one here under litigation] is such that I’m sure you wish to bring the factual situation to the top management of Royal Globe.

“As I indicated to you at our meeting, I think that Royal Globe, in order to avoid making a bad situation worse, should definitely immediately assume the defense of California Shoppers on the lawsuit recently brought by ADCO, and also coverage. My understanding of this lawsuit is that it falls squarely within the coverages of the policy bought by California Shoppers.

“I reiterate that our demand for settlement at this time on the lawsuit brought by California Shoppers against Royal Globe Insurance Company is as follows:

“1. Pay attorneys’ fees thus far expended by California Shoppers in the full amount;

“2. Pay attorneys’ fees for the remainder of the defense of the lawsuit;

“3. Pay for any judgment returned against California Shoppers; and

“4. Offer $100,000 for settlement of the claims for emotional distress and general damages alleged in the complaint on behalf of the four or five plaintiffs against Royal Globe.

“I’m sure you realize that the above things are separable and that failure to remedy the situation is going to put Royal Globe in a situation from which it will be even more difficult to extricate itself than the one it is now in.

“I’m sure you appreciate the fact that California Shoppers does not desire to have any other counsel substituted in place of Kindel & Anderson, as Royal Globe told California Shoppers to hire its own attorneys, which it did. At this late stage, it would be most difficult for other attorneys to acquire the thorough knowledge of the case that Kindel & Anderson have, and it would be equally difficult to ask the judge for a continuance on the day set for trial, since the judge would undoubtedly become most upset.

“Again, I would like to take this opportunity to reiterate my understanding of Royal Globe’s position is that it did not know California Shoppers was involved in a lawsuit and that you are going to be treating the first notice as of about the date of our meeting as being completely untenable.

Yours truly,

Law Offices of Herbert Hafif

By

Stephen L. Odgers

SLO:dl

Enc.

P.S. This offer will expire on September 18, 1976.” (Italics added.)

Odgers did not testify at the trial about either the meeting or the intend-ments of the letter. In any event, as a result of the meeting between Ibold, Odgers and Harding and the quoted letter from Odgers, Royal Globe, as noted earlier, actually did undertake defense of the Adco action against California Shoppers. Otherwise, Royal Globe did not respond to Odgers’ solicitation of an offer to settle the action here under litigation. As to the third feature of the letter, only implied by the next to last paragraph, i.e., Royal Globe’s possible handling of the defense of the Uneedus action, nothing ever developed in this regard, for California Shoppers, by means of this letter, never really made a demand that Royal Globe take over defense of the Uneedus action. Obviously, Royal Globe did not accept coverage. As a consequence, the Uneedus action went forward with California Shoppers’ defense in the hands of counsel it had retained soon after the letter of June 6, 1975.

On June 6, 1977, and after the intended decision in the Uneedus action was announced, California Shoppers sold its assets for $1.5 million.

Otherwise, with reference to California Shoppers’ alleged theory of economic loss arising because “defendant consciously and knowingly” (from California Shoppers’ complaint, infra) refused to defend the Uneedus action, California Shoppers contends that it was “immediately” and proximately injured by such refusal to defend. The facts just related show that the sale of California Shoppers’ assets did not take place until two years after Scott’s letter of June 6, 1975, and nine months after the Odgers letter.

In any event, two months after the sale noted, judgment was entered in the Uneedus action in favor of Uneedus for $25,000 in general damages and $10,000 in attorney’s fees. Uneedus’ request for treble damages was denied by the trial court, on the ground that California Shoppers’ acts “were not done with malice or oppression towards [Uneedus] nor were they of such magnitude to warrant the imposition of treble damages.” Uneedus appealed, claiming that the failure to award treble damages was error. Royal Globe did provide counsel to represent California Shoppers as the judgment debtor in its response to the appeal of the Uneedus judgment.

In Uneedus v. California Shoppers, Inc. (1978) 86 Cal.App.3d 932 [150 Cal.Rptr. 956] (Uneedus), this court held that “a private plaintiff who has proved actual damages under the California Unfair Practices Act is entitled to mandatory treble damages,” and that “the issue of whether [California Shoppers] acted maliciously or whether its acts ‘were ... of such magnitude to warrant the imposition of treble damages’ is not present in the case.” (Id., at p. 936.) We ordered the judgment modified to treble the damages accordingly.

On April 2, 1979, about a month after the California Supreme Court denied a hearing in Uneedus, Royal Globe wrote a letter to California Shoppers which recited in part: “We have now been instructed by our client to inform your office that they are formally refusing to indemnify your client for settlement monies expended. It’s clear from a reading of Business and Professions Code Section 17043 that the law which your clients were accused of willfully violating constitutes a penal statute. The decision of the Appellate Court in determining the treble penalty provision of the law is mandatory in application, confirms the penal nature of the law. And as you’re aware, the special shield endorsement for the policy specifically ex-cliides willful violations of a penal statute involving an advertising offense. And this is exactly what your clients have been found liable for.

“Notwithstanding the above, we recognize that a faint possibility exists that Royal may have owed your client a defense, although not indemnification.”

About two years later, the case here under review proceeded to a jury trial with the results earlier noted.

Issues, Contentions and Discussion

In pursuing its appeal, Royal Globe has made numerous assignments of error. Moreover, besides appealing from the judgment, Royal Globe has asked that we review the trial court’s order after judgment to the extent that it did not grant Royal Globe’s motion for judgment notwithstanding the verdict.

This procedural posture of the case provides a convenient way to deal with certain of the assignments of error as to the tort damages, including the attorney’s fees. In other words, we shall address these items of the verdict in terms of the propriety of the trial court’s ruling on the motion for judgment notwithstanding the verdict, doing so, of course, in conformity with the standard of review thereto applicable. Treatment of the cross-appeal will also proceed similarly, for the motion was granted as to the exemplary damages.

The standard of review noted is the subject of frequent recitation. In Hauter v. Zogarts (1975) 14 Cal.3d 104 [120 Cal.Rptr. 681, 534 P.2d 377, 74 A.L.R.3d 1282], the Supreme Court quotes from Brandenburg v. Pac. Gas & Elec. Co. (1946) 28 Cal.2d 282, 284 [169 P.2d 909], that, “ ‘[a] motion for judgment notwithstanding the verdict of a jury may properly be granted only if it appears from the evidence, viewed in the light most favorable to the party securing the verdict, that there is no substantial evidence to support the verdict. If there is any substantial evidence, or reasonable inferences to be drawn therefrom, in support of the verdict, the motion should be denied.’” (Id., at p. 110.)

Broadly at issue are three areas of asserted liability. The first is whether there was a breach of the contractual duty to indemnify California Shoppers for the judgment awarded against it in an earlier action (the Uneedus or third-party action), such duty allegedly arising from the insurance policy written by Royal Globe. The second is whether there was a breach of the contractual duty to defend California Shoppers in the Uneedus action, also arising from the policy. The third is the propriety of the tort damages awarded. Its resolution depends in turn on several subsidiary issues, namely: (1) whether the breach of the contractual duty to defend, if it occurred, was for reasons which could characterize such breach as also being the tort of bad faith; (2) whether the misleading nature of the jury instructions on bad faith and on the measure of damages amounted to prejudicial error; and (3) whether the evidence of such damages was speculative. In addition, with reference to the cross-appeal, there is the issue of whether there is any evidence in the record of additional circumstances present in connection with breach of the duty to defend, to show oppression, fraud or malice, so as to expose Royal Globe to liability for exemplary damages.

In our view, as earlier noted, the record supports the jury’s findings that there were breaches of both contractual duties, and that there were damages suffered attributable thereto, i.e., the amount of the final judgment awarded against California Shoppers in the Uneedus action in which it was defendant, together with prejudgment interest here, plus the cost of retaining other counsel to defend the Uneedus action.

However, also as earlier noted, we hold that the award of the $3 million in tort damages, plus the attorney’s fees now otherwise recoverable per Brandt v. Superior Court (1985) 37 Cal.3d 813 [210 Cal.Rptr. 211, 693 P.2d 796] (under circumstances not present in this record), was improper: (1) because there were no permissible inferences to be drawn from the undisputed, direct evidence such as could factually establish liability for such damages; (2) because of the speculative nature of and hence insufficient evidence offered to prove such damages; and (3) because of prejudicial errors in the jury instructions.

More specifically, as to the impropriety of tort damages, because of No. 1 above, based on the analysis infra, we hold, solely on these facts, that there was no evidence of behavior attending Royal Globe’s breach of its duty to defend showing any tortious behavior by Royal Globe amounting to a breach of the implied covenant of good faith and fair dealing. We do not hold that breach of the duty to defend can never, under any circumstances, be accompanied by other behavior such as would constitute the tort of bad faith in addition to the breach of contract. Such a holding is not necessary to our decision here, and we expressly disclaim it. Likewise, we do not hold, if such a disclaimer be necessary, that liability in tort for breach of the implied covenant of good faith and fair dealing can only be proved by direct evidence.

Otherwise, on the cross-appeal, we hold that the trial court properly struck the exemplary damages because, as the trial court observed, in light of the undisputed evidence, and the only permissible inferences to be drawn therefrom, that there was no egregious conduct by Royal Globe, within the ambit of Civil Code section 3294, for which the jury could have properly awarded such damages.

I

Breach of the Contractual Duty to Indemnify

It is Royal Globe’s contention, under the terms of the policy, that the undisputed facts do not provide the occasion for it to indemnify California Shoppers for the Uneedus judgment, this for the reason that California Shoppers engaged in certain statutory unfair trade practices which led to that judgment.

Stated in the language of Royal Globe’s black-letter point I in its opening brief, “Plaintiff’s willful violation of a penal statute with intent to injure its competitor precludes it from receiving any insurance benefits.” In its brief, Royal Globe continues, “Applying the reasoning of these authorities to the instant action, it is plainly evident that Royal has no duty to indemnify California Shoppers for the damages awarded in the Uneedus action. California Shoppers’ selling of advertising space below cost and its giving away of free reader advertisements, with the intent to destroy and injure the business of Uneedus, fall squarely within the definition of a ‘willful’ act.”

Otherwise, Royal Globe points to section 533 of the Insurance Code which provides that, “An insurer is not liable for a loss caused by the wilful act of the insured; but he is not exonerated by the negligence of the insured, or of the insured’s agents or others.” Royal Globe argues, under either the terms of the policy or the provisions of section 533, that it has no legal obligation to indemnify California Shoppers for what the latter paid to satisfy the Uneedus judgment.

Both contentions are unmeritorious. The Uneedus action against California Shoppers was in the nature of a civil antitrust action brought pursuant to Business and Professions Code section 17043 and the judgment imposed was in the nature of a civil remedy, i.e., damages. The fact that the Unfair Practices Act provides for penal sanctions as well (Bus. & Prof. Code, § 17100) underscores the characterization of the underlying action here as civil rather than penal. California Shoppers was neither charged with nor convicted under any “penal statute or ordinance” and no court has made such a finding. “[T]he burden of bringing itself within any exculpatory clause contained in the policy is on the insurer (American Home Assurance Co. v. Essy, 179 Cal.App.2d 19, 23 [3 Cal.Rptr. 586]).” (Executive Aviation, Inc. v. National Ins. Underwriters (1971) 16 Cal.App.3d 799, 806 [94 Cal.Rptr. 347].) Royal Globe has failed to carry this burden and to demonstrate that the policy’s language, according to its literal terms, excludes coverage of the treble damages.

As for Insurance Code section 533, Royal Globe ignores the “clear line of authority in this state to the effect that even an act which is ‘intentional’ or ‘willful’ within the meaning of traditional tort principles will not exonerate the insurer from liability under Insurance Code section 533 unless it is done with a ‘preconceived design to inflict injury.’” (Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 887 [151 Cal.Rptr. 285, 587 P.2d 1098], citing Walters v. American Ins. Co. (1960) 185 Cal.App.2d 776, 783 [8 Cal.Rptr. 665].) More specifically, as the court in Capachi v. Glens Falls Ins. Co. (1963) 215 Cal.App.2d Supp. 843, 849 [30 Cal.Rptr. 323], pointed out, “the word ‘wilful’ as used in [§ 533] may be said to connote an act done with malevolence.” Other courts have suggested that the culpability contemplated within the term “wilful tort” as used in section 533 is synonymous with “malice in fact,” i.e., a wish to vex, annoy, or injure another person. (See, e.g., City Products Corp. v. Globe Indemnity Co. (1979) 88 Cal.App.3d 31, 36, fn. 3 [151 Cal.Rptr. 494].)

Consistent with the requirement of a specific intent to injure, the courts have recognized an exception to the rule that section 533 precludes coverage of exemplary damages where the prohibited acts are attributable to the insured vicariously. (See Arenson v. Nat. Automobile & Cas. Ins. Co. (1955) 45 Cal.2d 81, 84 [286 P.2d 816].) A similar exception has been made where the insured acts intentionally but without malice. Thus, in Capachi v. Glens Falls Ins. Co., supra, 215 Cal.App.2d Supp. 843, the insured was found liable for false arrest, but the jury also found that the insured had acted without ill will or intent to injure, i.e., without malice. Accordingly, the Capachi court ruled that section 533 did not exclude coverage for the damages. (Id., at p. 849.)

The rule which emerges from the cited cases is: Insurance Code section 533 clearly excludes coverage of those “wilful” acts committed with the specific intent to injure, but not those nonmalicious acts committed with the sole intent to do the act which caused the harm.

In light of the foregoing, it is evident that section 533 does not exclude coverage of the treble damages imposed here. The trial court in the Uneedus action specifically found that “the acts of the defendants [California Shoppers] were not done with malice or oppression towards [Uneedus] nor were they of such magnitude to warrant the imposition of treble damages.”

This court later ruled that the trial court had erred in failing to award treble damages because such damages are mandatory under Business and Professions Code section 17082, irrespective of whether California Shoppers acted with malice.

However, the mandatory award of treble damages under Business and Professions Code section 17082 is an issue separate and apart from the question of whether California Shoppers acted with the requisite malice to invoke the exclusion of section 533.

California Shoppers was found to be liable for the treble damages, because the “purpose to harm” requirement under section 17043 may be presumed solely from the act of selling below cost together with proof of the injurious effect of such act. (Bus. & Prof. Code, § 17071; Tri-Q, Inc. v. Sta-Hi Corp. (1965) 63 Cal.2d 199, 208 [45 Cal.Rptr. 878, 404 P.2d 486].) Liability attaches when the evidence shows that a defendant intended to do the act of selling below cost in order to attract customers, and in the process caused an injurious effect to his competitors. (See McCarthy, Whatever Happened to the Small Businessman? The California Unfair Practices Act (1968) 2 U.S.F.L.Rev. 165, 192-193.)

Although California Shoppers was found to be responsible for damages under the statute, the absence-of-malice finding by the court in the Uneedus action conclusively established that California Shoppers did not pursue a “preconceived design to inflict injury” (Clemmer v. Hartford Insurance Co., supra, 22 Cal.3d 865, 887). Therefore, section 533 did not exclude coverage of the exposure for which California Shoppers was assessed treble damages.

Beyond the statutory exclusion contained in section 533, however, Royal Globe argues that the public policy of this state, as articulated in numerous court decisions, prohibits insurance coverage for exemplary damages. It has frequently been observed that to allow offenders to shift liability for exemplary damages to their insurers would undermine the theoretical purposes of such damages, i.e., to punish the offender and to deter others from engaging in like conduct. (Peterson v. Superior Court (1982) 31 Cal.3d 147, 155 [181 Cal.Rptr. 784, 642 P.2d 1305]; Fletcher v. Western National Life Ins. Co. (1970) 10 Cal.App.3d 376, 409 [89 Cal.Rptr. 78, 47 A.L.R.3d 286]; City Products Corp. v. Globe Indemnity Co., supra, 88 Cal.App.3d 31, 41.)

However, where the primary purpose of multiplying damages is to provide additional compensation to the victim rather than to punish the offender, it can hardly be maintained that extending insurance coverage to such multiple damages undermines the theoretical purpose of exemplary damages or offends public policy.

Because neither the insurance policy itself nor the statutes and public policy of this state preclude coverage for the treble damages, it necessarily follows that Royal Globe had and continues to have a duty to indemnify California Shoppers for the full amount of the Uneedus judgment.

Having defined the duty to indemnify, an issue of law, we hold there is no question of breach here as an issue of fact. Royal Globe has not indemnified California Shoppers for the Uneedus judgment, declining to do so, of course, on the ground that it has no legal duty to do so.

Turning to damages arising from the breach, James Coffran, already identified as a principal of California Shoppers, testified that he paid Uneedus a total of $89,000. The coverage here applicable under the policy provided for a $2,500 deductible. We assume that this was the reason the jury awarded $86,500 here instead of what California Shoppers actually paid to satisfy the Uneedus judgment.

In sum, as damages for breach of the duty to indemnify, the jury rightly awarded California Shoppers $86,500, plus prejudgment interest of $21,963, calculated from the time the indemnity should have been paid up to the date of the judgment.

Before leaving this point, it is appropriate to consider, as it applies here, Royal Globe’s contention that it was error for the trial court to submit to the jury the task of interpreting provisions of the insurance policy. Such contention, based on section 310 of the Evidence Code, is well taken. That section reads, in pertinent part, “All questions of law (including but not limited to questions concerning the construction of statutes and other writings . . .) are to be decided by the court.” Applying this statute, it is well established that the interpretation of written contracts, including insurance policies, is an issue of law to be decided by the court and not the jury. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865 [44 Cal.Rptr. 767, 402 P.2d 839].) In light of the foregoing, on the issue of coverage, Royal Globe challenges the propriety of California Shoppers’ instructions No. 10, No. 17, No. 18, No. 19 and No. 20. Academically, Royal Globe is right in its challenge.

However, no prejudice resulted from the erroneous instructions. On the uncontradicted, direct evidence, there is no dispute about what happened. California Shoppers’ conduct was fully exposed and litigated in the Uneedus action and was the subject of findings by that trial court. As a consequence, Royal Globe’s liability on the coverage issue, solely an issue of law, should have been the subject of a motion for a directed verdict, or, more logically, of a motion for partial summary adjudication in advance of the trial for the reasons already set forth in our legal interpretation of the policy coverage. In other words, the jury, in applying the instructions to the undisputed facts, reached the same result as the law-imposed duty dictated anyway.

In view of our discussion and holding on the issue of coverage, it necessarily follows that the trial court’s denial of the motion for judgment notwithstanding the verdict on this point was correct, and the judgment thereon will be affirmed.

II

Breach of the Contractual Duty to Defend

Now, we take up Royal Globe’s contention that this duty as such was not breached. The applicable provision of the policy reads “(A) The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of personal injury or advertising offense sustained by any person or organization and arising out of the conduct of the named insured’s business . . . and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such injury or even if any of the allegations of the suit are groundless, false or fraudulent . . . .”

Defining the nature of the duty to defend ordinarily requires first a legal interpretation of the applicable policy provision. In this regard, the usual observation, as a result, is that the duty to defend is broader than the duty to cover. In the case here, however, Royal Globe never reached the point of having to make this differential evaluation. It declined to accept tender of the defense, ostensibly by Adco, based solely on the fact that Adco was not a defendant in the Uneedus action. As earlier noted, Scott testified, “Well, if you realize the specifics of it. . .1 could not set up a claim under Adco’s policy since they were not a party to the action.”

Actually, Royal Globe argues that it did not breach its duty to defend, urging in particular that an absence of notice to Royal Globe and/or California Shoppers’ failure to exercise due diligence in making inquiry as to why coverage was denied, operated to preclude even raising Royal Globe’s duty to defend. We do not agree.

We have already variously noted that the direct evidence of how transmittal of the Uneedus summons and complaint was handled went undisputed. After California Shoppers was served, the summons and complaint were mailed to the insurance agent, Jay and Renfro, with no covering letter of explanation and in an envelope imprinted in the upper left-hand corner with the name “Adco” above its return address. Upon receipt of summons and complaint thus transmitted, Jay and Renfro reached the conclusion that the mailing had been from Adco, and, in forwarding the papers to the Tustin claims office of Royal Globe, affirmatively stated in a covering letter that the defense had been tendered by Adco, and referenced Adco’s policy number.

As a result of his checking the Adco policy, Scott wrote to Adco under date of June 6, 1975, as quoted earlier in our synopsis of the facts, i.e., that such policy provided no coverage, meaning implicitly: you have not been sued, and California Shoppers is not covered by your policy. Thus, it is undisputed, as a matter of direct evidence, plus the only permissible inferences to be drawn therefrom, that Royal Globe’s claims manager did not by means of the letter of June 6, 1975, actually refuse to provide California Shoppers a defense to the Uneedus action; he declined to provide Adco such defense based on the mistaken belief that it had sought such defense. However, that is not dispositive on the issue.

The question remains as to whether the contractual duty imposed by the terms of California Shoppers’ policy called upon Scott to do more than he did. A clue can be found in Scott’s own testimony also earlier quoted. At the trial, in trying to answer, when he had no specific recollection of how he had handled this matter but could recall the routine generally followed in such instances, he testified that “it probably would have struck me as very strange that the policy was sent to me as Adco Advertising and yet they were not a named defendant.”

We hold that the facts confronting the claims manager Scott were such as to put him on notice of the contractual duty to make a further inquiry. If he had made this further inquiry, he would have discovered that it was actually California Shoppers who had tendered the summons and complaint for defense, and then Royal Globe would have offered to defend as it finally did a year or so later when it was served in this action. In the aggregate, this represents a classic case of constructive notice which raised the contractual duty to defend. In other words, given the appropriate circumstances, the law will charge a party with notice of all those facts which he might have ascertained had he diligently pursued the requisite inquiry. (See Civ. Code, § 19 defining constructive notice, and Sterling v. Title Ins. & Trust Co. (1942) 53 Cal.App.2d 736, 748-749 [128 P.2d 31], citing cases in which parties are charged with constructive notice because their situations impose a duty to pursue the inquiry suggested.) In short, the duty to defend, ordinarily arising after receipt of actual notice to do so, arose here upon receipt of constructive notice.

This contractual duty to inquire further, provided the legal framework within which the jury found that Royal Globe had breached its duty to defend, for, of course, there was no question on the evidence but that Royal Globe did not provide a defense to the Uneedus action in June of 1975.

Notably, however, as will figure in our analysis of the bad faith issue, infra, we observe parenthetically that there was no direct evidence, including permissible inferences to be drawn therefrom, of a conscious decision on Royal Globe’s part to repudiate its duty to defend California Shoppers, a party not identified to Scott as the one seeking a defense. The mixup, according to undisputed evidence, arose solely as a result of Royal Globe’s mistaken belief that Adco had no exposure in the Uneedus action. Moreover, this mistake had been induced by California Shoppers because of the way it had forwarded the summons and complaint to Jay and Renfro. They were also named as defendants, but the jury here exonerated Jay and Renfro as the cause of any damages.

As for California Shoppers’ supposed duty to inquire why coverage had been denied, Royal Globe argues that “the insurance contract imposes a duty of good faith and fair dealing on the insured, as well as the insurer,” (citing Samson v. Transamerica Ins. Co. (1981) 30 Cal.3d 220, 240 [178 Cal.Rptr. 343, 636 P.2d 32]), and that “[t]he only logical reason for plaintiff choosing not to respond to the letter from [defendant] was its desire to attempt to create a bad faith scenario in this case.” However, Royal Globe points to no authority supporting its argument that California Shoppers had a duty to inquire why coverage was denied, and it ignores the fact that this alleged duty arose only because, in the first instance, it never inquired of Adco why defense and coverage were sought. In any event, the principle, that any duty to provide notice which an insured owes its insurer ceases when the insurer denies coverage (Samson v. Transamerica Ins. Co., supra, 30 Cal.3d 220, 238), applies here even though one step removed, i.e., even though the denial of coverage was as to Adco and not California Shoppers, providing the basis for constructive notice of the claim to Royal Globe.

In sum, because Royal Globe, after constructive notice, breached its contractual duty to make the necessary inquiries which would have led to its offer to defend California Shoppers in the Uneedus action, as it offered in August of 1976, regardless of the coverage issue, the jury’s verdict (that Royal Globe was not excused from performing that duty by any of California Shoppers’ acts or omissions with reference to the fact of notice) must stand.

Here again, by way of digression, it is necessary to address Royal Globe’s contention that interpretation of the insurance contract (here, as to the duty to defend) was improperly submitted to the jury. As noted under point I, interpretation of the policy is not a question of fact to be decided by the jury; it is a question of law. As a consequence, Royal Globe’s contention that portions of instruction No. 30 were improper is also well taken on the contractual duty-to-defend issue.

However, no prejudice resulted from giving the faulty instruction, for there is no question, as a matter of legal interpretation, that the policy terms plus the constructive notice of California Shoppers’ tender raised a duty to defend the Uneedus action. In other words, it was not prejudicial to Royal Globe that the jury was afforded an opportunity to find a duty to defend which we hold was present anyway under the terms of the policy.

The consequences of breach of the duty to defend are set forth in Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654 [328 P.2d 198, 68 A.L.R.2d 883]. “Where there is no opportunity to compromise the claim and the only wrongful act of the insurer is the refusal to defend, the liability of the insurer is ordinarily limited to the amount of the policy plus attorneys’ fees and costs.” (Id., at p. 659.)

There was no opportunity afforded Royal Globe to settle with the third-party claimant before trial, and there were no policy limits. Thus, the application of the foregoing rule to the facts here is so evident a proposition that Royal Globe has conceded, if in fact there were a breach of the duty to defend, that it is obligated to pay the attorney’s fees California Shoppers incurred in defending the Uneedus action. The evidence shows without dispute that such fees amounted to $39,000, and so the trial court’s denial of Royal Globe’s motion for judgment notwithstanding the verdict on this point was correct; thus, the judgment thereon will be also affirmed.

Ill

Other Damages Awarded

This brings us to a discussion of the latter three items of damage awarded by the verdict. Referring to the verdict numbers, such other damages awarded, after the order on the motion for judgment notwithstanding the verdict, were: (3) so-called past inflation loss, $50,000; (4) attorney’s fees incurred by California Shoppers in procuring benefits due under the policy, $59,493; and (5) damages for economic or business loss, $3 million.

A. The $50,000 Past Inflation Loss

With reference to its possible liability to indemnify California Shoppers for the Uneedus judgment and for the cost of the defense leading to it, Royal Globe contends that to allow California Shoppers recovery for past inflation loss, in addition to prejudgment interest, amounts to a double recovery. On the other hand, California Shoppers argues that these two awards do not constitute a double recovery. More particularly