California Civil Jury Instructions (CACI)

2360. Judgment Creditor's Action Against Insurer - Essential Factual Elements

[Name of plaintiff] claims that [name of defendant] must pay [all or part of] a judgment against [name of insured]. To establish this claim, [name of plaintiff] must prove all of the following:

1. That [name of plaintiff] brought a lawsuit for [personal injury/wrongful death/property damage] against [name of insured] and a judgment was entered against [name of insured];

2. That [all or part of] [name of insured]'s liability under the judgment is covered by an insurance policy with [name of defendant]; and

3. The amount of the judgment [covered by the policy].

Directions for Use

The instructions in this series assume the plaintiff is the insured and the defendant is the insurer. The party designations may be changed if appropriate to the facts of the case.

This instruction is intended for a judgment creditor's action against an insurer to collect on an insurance policy pursuant to Insurance Code section 11580(b)(2). This instruction should be used only where there are factual issues on any of the above elements. This instruction may need to be augmented with instructions on specific factual findings.

Note that Insurance Code section 11580 requires that the policy be "issued or delivered to [a] person in this state." This issue should be added as an element if it is disputed in the case.

Sources and Authority

Insurance Code section 11580(b)(2) provides, in pertinent part, that a liability policy must contain, and will be construed as containing if it does not: "[a] provision that whenever judgment is secured against the insured or the executor or administrator of a deceased insured in an action based upon bodily injury, death, or property damage, then an action may be brought against the insurer on the policy and subject to ts terms and limitations, by such judgment creditor to recover on the udgment."

"A direct action under section 11580 is a contractual action on the policy to satisfy a judgment up to policy limits." (Wright v. Fireman's Fund Insurance Co. (1992) 11 Cal.App.4th 998, 1015 [14 Cal.Rptr.2d 588].)

"[I]t is not necessary for property damage to be caused by a vehicle or draught animal in order to bring a direct action against an insurer under section 11580." (People ex rel. City of Willits v. Certain Underwriters at Lloyd's of London (2002) 97 Cal.App.4th 1125, 1131- 1132 [118 Cal.Rptr.2d 868].)

"Because the insurer's duties flow to its insured alone, a third party claimant may not bring a direct action against an insurance company. As a general rule, a third party may directly sue an insurer only when there has been an assignment of rights by, or a final judgment against, the insured." (Shaolian v. Safeco Insurance Co. (1999) 71 Cal.App.4th 268, 271 [83 Cal.Rptr.2d 702], internal citations omitted.)

"Under section 11580 a third party claimant bringing a direct action against an insurer should . . . prove 1) it obtained a judgment for bodily injury, death, or property damage, 2) the judgment was against a person insured under a policy that insures against [the] loss or damage . . ., 3) the liability insurance policy was issued by the defendant insurer, 4) the policy covers the relief awarded in the judgment, 5) the policy either contains a clause that authorizes the claimant to bring an action directly against the insurer or the policy was issued or delivered in California and insures against [the] loss or damage . . . ." (Wright, supra,11 Cal.App.4th at p. 1015.)

"Under Insurance Code section 11580, a third party creditor bringing a direct action against an insurer to recover the proceeds of an insurance policy must plead and prove not only that it obtained a judgment for bodily injury, but that 'the judgment was against a person insured under a policy . . .' and 'the policy covers the relief awarded in the judgment . . . .' " (Miller v. American Home Assurance Co. (1996) 47 Cal.App.4th 844, 847-848 [54 Cal.Rptr.2d 765], italics in original, internal citation omitted.)

"[Insurance Code Section 11580(b)(2)] and the standard policy language permit an action against an insurer only when the underlying judgment is final and 'final,' for this purpose, means an appeal from the underlying judgment has been concluded or the time within which to ppeal has passed." (McKee v. National Union Fire Insurance Co. of Pittsburgh, PA. (1993) 15 Cal.App.4th 282, 285 [19 Cal.Rptr.2d 286].)

"[W]here the insurer may be subject to a direct action under Insurance Code section 11580 by a judgment creditor who has or will obtain a default judgment in a third party action against the insured, intervention is appropriate. . . . Where an insurer has failed to intervene in the underlying action or to move to set aside the default judgment, the insurer is bound by the default judgment." (Reliance Insurance Co. v. Superior Court (2000) 84 Cal.App.4th 383, 386-387 [100 Cal.Rptr.2d 807], internal citations omitted.)

"The [standard] 'no action' clause gives the insurer the right to control the defense of the claim—to decide whether to settle or to adjudicate the claim on its merits. When the insurer provides a defense to its insured, the insured has no right to interfere with the insurer's control of the defense, and a stipulated judgment between the insured and the injured claimant, without the consent of the insurer, is ineffective to impose liability upon the insurer." (Safeco Insurance Co. of America v. Superior Court (1999) 71 Cal.App.4th 782, 787 [84 Cal.Rptr.2d 43], internal citations omitted.)

A standard "no action" clause in an indemnity insurance policy "provides that [the insurer] may be sued directly if the amount of the insured's obligation to pay was finally determined either by judgment against the insured after actual trial or by 'written agreement of the insured, the claimant and the company.' " (Rose v. Royal Insurance Co. of America (1991) 2 Cal.App.4th 709, 716-717 [3 Cal.Rptr.2d 483].)

"[A] trial does not have to be adversarial to be considered an 'actual trial' under the 'no action' clause, or to be considered binding against the insurer in a section 11580 proceeding. . . . [W]e conclude that the term 'actual trial' in the standard 'no action' clause has two components: (1) an independent adjudication of facts based on an evidentiary showing; and (2) a process that does not create the potential for abuse, fraud or collusion." (National Union Fire Insurance Co. v. Lynette C. (1994) 27 Cal.App.4th 1434, 1449 [33 Cal.Rptr.2d 496].)

"A defending insurer cannot be bound by a settlement made without its participation and without any actual commitment on its insured's part to pay the judgment, even where the settlement has been found to be in good faith for purposes of [Code of Civil Procedure] section 877.6." (Hamilton v. Maryland Casualty Co. (2002) 27 Cal.4th 718, 730 [117 Cal.Rptr.2d 318, 41 P.3d 128].)

"[W]hen . . . a liability insurer wrongfully denies coverage or refuses to provide a defense, then the insured is free to negotiate the best possible settlement consistent with his or her interests, including a stipulated judgment accompanied by a covenant not to execute. Such a settlement will raise an evidentiary presumption in favor of the insured (or the insured's assignee) with respect to the existence and amount of the insured's liability. The effect of such presumption is to shift the burden of proof to the insurer to prove that the settlement was unreasonable or the product of fraud or collusion. If the insurer is unable to meet that burden of proof then the stipulated judgment will be binding on the insurer and the policy provision proscribing a direct action against an insurer except upon a judgment against the insured after an 'actual trial' will not bar enforcement of the judgment." (Pruyn v. Agricultural Insurance Co. (1995) 36 Cal.App.4th 500, 509 [42 Cal.Rptr.2d 295].)

Secondary Sources

4 California Insurance Law & Practice, Ch. 41, Liability Insurance in General, §§ 41.60-41.63 (Matthew Bender)

2 California Liability Insurance Practice: Claims & Litigation (Cont.Ed.Bar 2002) Claimant's Direct Action for Recovery of Judgment, §§ 27.1-27.7, 27.17-27.27, pp. 1006-1014, 1017-1026.1

Croskey et al., California Practice Guide: Insurance Litigation (The Rutter Group 2002) ¶¶ 15:1028-15:1077, 15:1123-15:1136, pp. 15-185-15-194, 15-200.1-15-200.2

26 California Forms of Pleading and Practice, Ch. 308, Insurance (Matthew Bender)

12 California Points and Authorities, Ch. 120, Insurance, §§ 120.186, 120.198, 120.206 (Matthew Bender)

(New September 2003)