Hughes v. Mid-Century Insurance (38 Cal. App. 4th 1176, 1995)

Opinion

KREMER, P. J.

Defendant Mid-Century Insurance Company appeals a portion of the judgment favoring plaintiff Gary Hughes on his third party complaint against Mid-Century for benefits under its liability insurance policy issued to Hughes’s judgment debtor. Mid-Century contends the superior court erred in concluding the policy’s language involving supplementary cost payments was ambiguous and thus entitled Hughes to recover costs he incurred in his suit against Mid-Century’s insured. We strike that portion of the judgment.

Hughes appeals the portion of the judgment sustaining without leave to amend Mid-Century’s demurrer to his claim for breach of the implied covenant of good faith and fair dealing. Hughes contends the superior court should have concluded he adequately pleaded a bad faith cause of action based upon Mid-Century’s asserted wrongful withholding of insurance benefits from Hughes after Hughes obtained a judgment against Mid-Century’s insured. We affirm that portion of the judgment.

I

Introduction

While insured by Mid-Century, Phillips was involved in a motor vehicle accident with Hughes. Hughes obtained a judgment against Phillips exceeding Mid-Century’s policy limits. The judgment also awarded Hughes costs against Phillips. On Phillips’s behalf, Mid-Century paid Hughes the policy limits. However, when Mid-Century did not pay Hughes the court-awarded costs or interest on the amount of the judgment within policy limits, Hughes sued Mid-Century for those items and further alleged Mid-Century breached the policy’s implied covenant of good faith and fair dealing.

Finding policy language involving supplementary payments to be ambiguous, the superior court determined Hughes was entitled to recover from Mid-Century as policy benefits the costs Hughes incurred in suing Phillips and interest on the amount of the judgment against Phillips within policy limits. The superior court also sustained Mid-Century’s demurrer to Hughes’s alleged cause of action for breach of the implied covenant of good faith and fair dealing. On this record we do not disturb the portion of the judgment sustaining Mid-Century’s demurrer. Further, we conclude the court erred in ordering Mid-Century to reimburse Hughes for costs he incurred in suing Phillips.

II

Facts

In January 1990 Mid-Century issued an automobile liability insurance policy to Phillips. The policy was subject to a $25,000 bodily injury liability limit per person. The policy’s supplementary payments clause provided in part: “In addition to our limit of liability, we will pay these benefits as respects an insured person: [