California Civil Jury Instructions (CACI) (2017)

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

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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].
New September 2003
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
• Judgment Creditor’s Action Against Insurer. Insurance Code section
• “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].)
• “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],
original italics, 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 appeal 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 Ins. Co.
of Am. 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
Croskey et al., California Practice Guide: Insurance Litigation (The Rutter Group)
¶¶ 15:1028–15:1077, 15:1123–15:1136
2 California Liability Insurance Practice: Claims & Litigation (Cont.Ed.Bar)
Claimant’s Direct Action for Recovery of Judgment, §§ 27.1–27.7, 27.17–27.27
4 California Insurance Law & Practice, Ch. 41, Liability Insurance in General,
§§ 41.60–41.63 (Matthew Bender)
26 California Forms of Pleading and Practice, Ch. 308, Insurance (Matthew
12 California Points and Authorities, Ch. 120, Insurance, §§ 120.186, 120.198,
120.206 (Matthew Bender)