Defendant car dealership challenged the decision of the Superior Court of Santa Clara County (California), which entered a judgment and punitive damages in favor of plaintiff car owner, in plaintiff’s action against defendant for fraudulent inducement concealment, negligence, breach of oral contract, and bad faith denial of contract.

Overview

Plaintiff car owner brought an action against defendant car dealership to recover proceeds from the sale of his car that was sold consignment. Plaintiff delivered the car to defendant, but the car was not sold by defendant, rather it was reconsigned to another car dealership, and that dealership sold the car. After selling the car, the other dealership filed for bankruptcy and commingled the proceeds from the sale of the car with its other assets. After defendant refused to pay plaintiff, plaintiff filed a suit against defendant for fraudulent inducement, negligence, breach of oral contract, and bad faith denial of contract. Ultimately, the jury returned a verdict for plaintiff awarding him compensatory and punitive damages. Defendant appealed, challenging only the punitive damages award. The court reversed the trial court’s punitive damage decision, holding that trial court erred by admitting evidence regarding defendant’s litigation tactics, because defense counsel’s action were not probative to the issue of bad faith. The court further held that evidence regarding the amount of defendant’s attorney’s fees was not relevant and should not have been admitted into evidence. Expert witness designation included employment lawyer for all parties during pretrial discovery.

Outcome

The court reversed the trial court’s decision to award plaintiff car owner punitive damages, holding that the trial court erred when it allowed evidence regarding defendant car dealership’s litigation tactics and when it admitted evidence regarding plaintiff’s attorney’s fees, because the evidence was not probative and was irrelevant.

Procedural Posture

Plaintiff injured person and defendant excess insurer challenged an order from the Superior Court of Los Angeles County (California), which granted summary judgment in a declaratory judgment action, holding that defendant was liable for plaintiff’s judgment only for the amount above $ 500,000, that defendant had notice of the possibility of an excess judgment, and that there were no issues of triable fact as to collusion in obtaining judgment.

Overview

In a declaratory judgment action involving defendant excess insurer and plaintiff injured person, the trial court granted summary judgment. It held that defendant was liable for plaintiff’s judgment only for the amount above $ 500,000, that defendant had notice of the possibility of an excess judgment, and that there were no issues of triable fact as to collusion in obtaining judgment. On appeal, the court affirmed as to the contract interpretation and notice issues, holding that the excess policy contemplated exhaustion of the underlying insurance only by payment. Therefore, defendant had no duty to provide first dollar coverage upon the insolvency of the primary insurer. The court held that defendant, as a matter of law, had sufficient knowledge of the underlying action as to amount to constructive notice its policy was likely to be involved, as the evidence before the trial court on the issue was not in dispute. The court reversed summary judgment as to the collusion issue, holding that triable issues of fact existed as to the manner in which the underlying action was tried.

Outcome

In a declaratory judgment suit between defendant excess insurer and plaintiff injured person, the court affirmed summary judgment on contract interpretation and notice issues, and reversed as to collusion in obtaining judgment. Defendant had no duty to provide primary coverage upon insolvency of a primary insurer, but had notice that its policy was likely to be involved. Issues of fact existed as to manner in which the judgment was obtained.