Pacific Gas & Electric Co. v. Superior Court

The “collateral source rule” provides that where a person “suffers personal injury or property damage by reason of the wrongful act of another, an action against the wrongdoer for the damages suffered is not precluded nor is the amount of damages reduced by the receipt by him of payment for his loss from a source wholly independent of the wrongdoer. . . .” (Anheuser-Busch, Inc. v. Starley (1946) 28 Cal.2d 347, 349 [ 170 P.2d 448 , 166 A.L.R. 198 ], citations omitted.) This petition asks whether a particular insurance source is “wholly independent” of the wrongdoer within the meaning of the rule.

Pacific Gas and Electric Company (PG&E) received $1 million in settlement from National Union Fire Insurance Company (National Union) because of a National Union “fidelity” policy insuring PG&E against losses due to employee dishonesty. The superior court, finding the source of the payment not “wholly independent,” concluded nonemployees who allegedly conspired with an employee in defrauding PG&E may take a $1 million credit for PG&E’s settlement. We hold the collateral source rule applies to this situation and bars credit. We direct issuance of a peremptory writ of…