21st Century Insurance v. Superior Court

*515 Opinion

Silvia Quintana (Quintana) was injured in an automobile accident with a third party. She maintained an auto insurance policy with 21st Century Insurance Company (21st Century) that included first party, no-fault medical payment (med-pay) insurance coverage in case of an accident. 21st Century paid Quintana $1,000 under her insurance policy’s med-pay provision. Quintana then separately pursued a damages claim against the third party and settled the action for $6,000, which sum represented her total damages. In obtaining the settlement, she incurred approximately $2,000 in attorney fees and costs (collectively attorney fees). Insurance policies typically have, and her policy did have, a provision requiring her to reimburse her insurer for monies she recovered from a third person that duplicated her recovery under her policy. Underlying these provisions, the basic idea is that insureds should not recover the same amount twice, once from their insurance company and again from a third party. In sum, insureds are entitled to be “made whole” from the insurance proceeds and tort recovery, but they are not entitled to a double recovery.

The narrow issue before us in this…

Concurring. — The majority holds that an automobile insurer’s contractual right of reimbursement for medical payment benefits is subject to the equitable common law “made-whole” rule, and that the rule is satisfied when the insurer has contributed its pro rata share of the litigation costs that the insured has incurred to recover personal injury damages from a third party tortfeasor.

I agree with the majority’s conclusions; I write separately to explain why. In brief, the position urged by the insured in this case is contrary to established California law, it is inconsistent not only with the “American rule” that parties normally bear their own litigation costs but also with the scheme for reimbursement of workers’ compensation benefits, it would convert medical payment coverage into legal expense coverage, and it would result in higher premiums for California purchasers of automobile insurance coverage.

I

In December 2003, plaintiff Silvia Quintana was injured in an automobile accident with a third party. Her automobile insurer, defendant 21st Century Insurance Company (21st Century), paid her $1,000 under the policy’s no-fault medical payment coverage. Plaintiff then settled…

Concurring. — I agree with the majority that the made-whole rule 1 does not bar 21st Century Insurance Company (21st Century) from seeking reimbursement for the no-fault medical payment (med-pay) insurance proceeds it paid Silvia Quintana, subject to deduction under the common fund doctrine for its share of the attorney fees Quintana expended to obtain payment from the tortfeasor. I write separately to offer an alternative rationale for that conclusion.

As the majority notes (maj. opn., ante, at p. 517), Quintana argues that attorney fees and costs should be deducted from an insured’s recovery before determining whether the insured has been made whole and is obligated to reimburse the insurer; in contrast, 21st Century argues attorney fees should be disregarded. As I shall explain, the rale Quintana advocates creates significant disparities in the treatment of similarly situated insurers, as well as anomalies in the treatment of insureds. The rale 21st Century advocates, in contrast, promotes uniformity of outcomes and is consistent with the nature and purpose of med-pay insurance.

I

The conclusion that 21st Century is correct can be seen by considering the relationship between…