DocketNumber： E006810
Citation Numbers： 28 Cal. App. 4th 185, 34 Cal. Rptr. 2d 39, 94 Daily Journal DAR 12808, 94 Cal. Daily Op. Serv. 7009, 1994 Cal. App. LEXIS 915
Judges： McDaniel
Filed Date： 9/9/1994
Status： Precedential
Modified Date： 11/3/2024
Opinion
After Judith and Albert Krupnick (plaintiffs) had settled their personal injury action against their tortfeaser, Roy Hester, for $295,000, they yet remained distraught over the manner in which Hester’s insurance company, Hartford Accident and Indemnity Company, and its
While plaintiffs’ Royal Globe-type action was pending, the Supreme Court, in Moradi-Shalal v. Fireman’s Fund Ins. Companies (1988) 46 Cal.3d 287 [250 Cal.Rptr. 116, 758 P.2d 58] (Moradi-Shalal), overruled Royal Globe. Moradi-Shalal held that the Insurance Code provisions which define unfair settlement practices were never intended by the Legislature to permit a third party, civil action directly against an insurance company. (Id. at p. 304.) In the course of its opinion, Moradi-Shalal otherwise observed, with regard to any presumed direct duty owed a third party claimant by an insurer, that “[i]t tends to create a serious conflict of interest for the insurer, who must not only protect the interests of its insured, but also must safeguard its own interests from the adverse claims of the third party claimant. This conflict disrupts the settlement process and may disadvantage the insured.” (Id. at p. 302.)
As a consequence of the ruling in Moradi-Shalal, plaintiffs amended their complaint to seek damages at common law based on the same facts which they had alleged to constitute unfair settlement practices under the Insurance Code. The complaint, relying upon a single set of facts, which decried defendants’ behavior in their conduct of settlement negotiations, sought damages for: 1) intentional infliction of emotional distress; 2) negligent infliction of emotional distress; and 3) “violation” of Civil Code section 1714. In response to such amended effort, the trial court, paying heed to the Moradi-Shalal pronouncement noted, granted defendants’ motion for judgment on the pleadings as to all three counts.
Because the assignments of error as to counts one and three can be readily disposed of under established precedents, the published portion of this opinion will be confined to the issue of whether the pleaded facts under count two state a cause of action for negligent infliction of emotional distress.
As to one of plaintiffs’ contentions, there is nothing in the Moradi-Shalal language itself which supports this latter-day effort to engraft upon the common law a cause of action grounded upon an insurer’s conduct reflecting those unfair settlement practices held actionable by Royal Globe under the Insurance Code but now discredited.
As to another of plaintiffs’ contentions, such a cause of action is not sanctioned by particular language contained in Moradi-Shalal, language by which California litigants were assured by the Supreme Court that its decision to overrule Royal Globe did not foreclose “jurisdiction to impose civil damages or other remedies against insurers in appropriate common law actions, based on such traditional theories as fraud, infliction of emotional distress, and (as to the insured) either breach of contract or breach of the implied covenant of good faith and fair dealing.” (Moradi-Shalal, supra, 46 Cal.3d 287, 304-305, italics added; hereinafter, the “reassuring language.”) In our view, upon closer scrutiny, this “reassuring language” does not constitute a substantive holding; it only assures us, beyond the overruling of Royal Globe, that nothing has changed. As a consequence, it cannot and does not itself constitute recognition of a negligence action at common law, especially of the kind undertaken by plaintiffs here, unless such action were already recognized. That, of course, is what we are called upon to decide.
The trial court’s ruling was correct, principally, because under precedent which has evolved since Molien, plaintiffs have failed to plead facts which bring them within that now-defined salient where claims for negligent infliction of purely emotional distress have come to be recognized. As a preface to later elaboration upon this conclusion, we must go back about 14 years to Molien. The Supreme Court in that decision extended the boundaries of negligence liability for purely emotional distress, unaccompanied by
These cases are analyzed in Bro v. Glaser (1994) 22 Cal.App.4th 1398 [27 Cal.Rptr.2d 894] (Bro) and are collected and classified in an appendix to the opinion. (Id. at p. 1444.) Such analysis shows, in purely emotional distress cases based on negligence, that not all succeed. As appears in the Bro catalogue, only nine succeeded; seventeen failed. The Bro analysis draws on Supreme Court authority which makes clear, because emotional distress is always foreseeable, that any attempt to define duty in this kind of case in terms of foreseeability is useless, if not futile. (Burgess v. Superior Court (1992) 2 Cal.4th 1064, 1074 [9 Cal.Rptr.2d 615, 831 P.2d 1197] [Burgess]; Thing v. La Chusa (1989) 48 Cal.3d 644, 663-664 [257 Cal.Rptr. 865, 771 P.2d 814], [Thing].)
In view of the foregoing, the required inquiry here is whether the facts plaintiffs have pleaded fall on the liability or nonliability side of the line. Such a line has emerged since Molien as a result of some claims for negligent infliction of emotional distress succeeding and others failing. (Bro, supra, 22 Cal.App.4th 1398, 1444.) In short, just as in all negligence cases, to succeed, plaintiffs had to allege facts which raised a duty to exercise reasonable care in avoiding an impermissible infliction of emotional distress and a breach of that duty. This they failed to do.
More particularly, no one in this state has ever recovered damages for purely emotional distress in a negligence action unless he or she could first be characterized as a direct victim. (See Bro, supra, 22 Cal.App.4th 1398, 1417.) Moreover, it was not until Burgess was decided in 1992 that the Supreme Court provided a simple, working definition of “direct victim.” Burgess announced that the presence of a preexisting relationship between the parties is that “which defines the phrase ‘direct victim.’ That label signifies nothing more.” (Burgess, supra, 2 Cal.4th 1064, 1074.)
Under such definition, because plaintiffs did not enjoy the precedent-prescribed relationship with defendants, no duty of care arose and they were foreclosed from having their claim for negligent infliction of emotional distress evaluated to determine if a protected interest had been impermissibly invaded, just as were the plaintiffs foreclosed in 11 of the post Molien cases cited in Bro, supra, 22 Cal.App.4th 1398, 1418, and tabulated at page 1444. We shall affirm the judgment accordingly.
A.
The Antecedent Traffic-collision Action
Roy Hester “rear-ended” the vehicle in which plaintiffs were riding, and plaintiffs were injured as a result. Five months later, plaintiffs filed the antecedent, traffic-collision action to recover personal injury damages from Hester (the insured) and from National Car Rental Systems, Inc., the company from which the insured had rented the car he was driving at the time of the collision. About two and one-half years later, pursuant to section 998 of the Code of Civil Procedure, the insured served plaintiffs with a statutory offer of compromise. Plaintiffs accepted the offer, and defendants promptly paid the amount offered in exchange for plaintiffs’ dismissal with prejudice of the antecedent, traffic-collision action.
B.
Synopsis Of Trial Court Proceedings
The following year, plaintiffs here, who, as already noted, were the complaining party plaintiffs in the antecedent traffic-collision action, commenced the underlying litigation directly against defendants, pursuant to Royal Globe, supra, 23 Cal.3d 880, alleging breach of duties then perceived to be imposed upon civil litigants by section 790.03, subdivision (h) of the Insurance Code (unfair settlement practices). Defendants answered the complaint with a general denial of all the complaint’s allegations, together with allegation of several affirmative defenses.
About a year later, while the underlying action was awaiting trial, the California Supreme Court, as noted, handed down Moradi-Shalal, supra, 46 Cal.3d 287. In Moradi-Shalal, also as earlier noted, the court overruled Royal Globe (Moradi-Shalal, supra, 46 Cal.3d 287, 304-305); however, the decision’s impact was made prospective. The court ruled, with regard to cases then pending, that a third party could continue to maintain a Royal Globe-type statutory action against his tortfeasor’s insurer only if the third party’s antecedent action had, gone to judgment. (Id. at p. 306.) Here, because they had chosen to settle their antecedent action by accepting a Code of Civil Procedure section 998 offer (ante), plaintiffs were barred by the applicable holding in Moradi-Shalal from pursuing further their statutory cause of action against defendants. (46 Cal.3d at pp. 304-305; Laxague v. Fireman’s Fund Ins. Co. (1990) 220 Cal.App.3d 530, 535 [269 Cal.Rptr. 456], review den.)
In count one plaintiffs alleged: 1) the fact of the liability policy issued to the insured by defendants; 2) the collision with the insured on April 29, 1983, resulting from his negligence and proximately causing their personal injuries; 3) at all times the insured’s liability for the consequences of the collision was reasonably clear; 4) defendants were aware of plaintiffs’ injuries, of their suffering and of their attendant financial hardship; 5) on September 25, 1985, defendants refused to make an offer to settle plaintiffs’ claim, instead insisting to opposing counsel that plaintiffs had experienced preexisting injuries while defendants yet had no reasonable basis to believe such statements were true; 6) finally in April of 1986, defendants, through the insured and pursuant to section 998 of the Code of Civil Procedure, made a statutory offer of compromise in the amount of $295,000; 7) plaintiffs accepted the offer; 8) again, defendants at all times (before making the settlement offer) knew that the insured’s liability was reasonably clear; 9) in July of 1985 defendants were in possession of sufficient medical and wage-loss information to enable them to make a settlement offer; 10) at all times defendants knew that plaintiffs were suffering severe emotional distress; 11) defendants’ conduct in declining to settle was “outrageous and despicable,” was “intentional and malicious” and was done for the purpose of causing plaintiffs mental anguish and emotional distress; and 12) defendants’ conduct was done with a conscious disregard of plaintiffs’ rights and with intent to vex, injure or annoy plaintiffs, such as to constitute oppression, fraud or malice pursuant to Civil Code section 3294.
In count two, plaintiffs incorporated all of the foregoing and went on to allege: 1) defendants at all times knew that the insured’s liability was reasonably clear, giving rise to a duty to effectuate a prompt, fair and equitable settlement; 2) defendants knew that plaintiffs had a deep-rooted emotional and financial need to be quickly compensated for their injuries arising from the collision with the insured; 3) defendants knew that their own refusal to effectuate a prompt settlement was causing severe emotional distress to plaintiffs; 4) defendants’ conduct was intentional and malicious and done for the purpose of causing mental anguish and physical distress; 5) plaintiffs as third parties were entitled to insurance benefits arising from the negligence of the insured, and plaintiffs were owed a duty of care by
In count three, plaintiffs incorporated all of the allegations of counts one and two and then went on to repeat them variously within the context of a claim made purportedly within the scope of Civil Code section 1714, subdivision (a).
Defendants’ answer to the amended complaint posed a general denial under section 431.30 of the Code of Civil Procedure, plus four affirmative defenses, including that each of plaintiffs’ counts failed to state facts constituting a cause of action.
Defendants then pressed another motion for judgment on the pleadings. This time, defendants argued that their delay in offering to settle did not amount to the kind of outrageous conduct necessary to justify a cause of action for intentional infliction of emotional distress. Otherwise, defendants argued they owed plaintiffs no duty to settle; hence, they argued further, any delay in offering to settle did not provide the factual predicate to state a cause of action for negligence, under either the common law or section 1714 of the Civil Code.
After a hearing on defendants’ motion, at which plaintiffs’ counsel did not appear, the motion was granted. A formal order was then filed, granting the motion and entering judgment for defendants. This appeal followed.
Discussion
In pursuing their appeal, plaintiffs make three assignments of error which they present in the form of questions. “1. Can appellants state a cause of action for intentional infliction of emotional distress? [¶] 2) Can appellants state a cause of action for negligent infliction of emotional distress? [¶] 3) Can appellants state a cause of action for violation of Civil Code section 1714?” (Italics added.) We shall address each assigned error in turn in parts I, II, and III of this opinion; only part n of these three meets the criteria for publication under rule 976(b) of the California Rules of Court.
Can Plaintiffs State a Cause of Action for Intentional Infliction of Emotional Distress?
II.
Can Plaintiffs State a Cause of Action for Negligent Infliction of Emotional Distress?
In this part of the opinion, we shall undertake to demonstrate why the trial court was correct in granting defendants’ motion for judgment on the pleadings as to count two. In that count, plaintiffs proceeded under a common law theory of entitlement to damages for negligent infliction of emotional distress.
A.
Contrary to Plaintiffs’ Contention, Nothing in Moradi-Shalal “Sanctions” a Common Law Action for Negligent Infliction of Emotional Distress
In their opening brief, plaintiffs contend that Moradi-Shalal “specifically sanctioned” a common law cause of action for negligent infliction of emotional distress in third party cases. That decision did no such thing. More particularly, in their opening brief, invoking Moradi-Shalal, plaintiffs assert that, “the insurer has a duty to third-party claimants to effectuate a prompt, fair settlement when liability becomes reasonably clear.” At this point, plaintiffs’ opening brief refers us to pages 307-308 of Moradi-Shalal. Plaintiffs have misread the cited pages. In Moradi-Shalal, supra, 46 Cal.3d 287, the Supreme Court, after overruling Royal Globe (id. at p. 304), was confronted with the question of how the ruling would be applied to pending cases. Thus, beginning at page 305, the court was solely concerned with deciding which pending Royal Globe-type cases would be permitted to proceed. It was in this limited context that the foregoing observation about a duty to settle was made. On such issue, the court finally concluded, based on Nationwide Ins. Co. v. Superior Court (1982) 128 Cal.App.3d 711, 714 [180 Cal.Rptr. 464], that only in those pending cases, where the antecedent, third party action had proceeded to final judgment, could plaintiffs continue with prosecution oftheir statutory cause of action, regardless of the duty to settle in a Royal Globe context. (Moradi-Shalal, supra, 46 Cal.3d 287, 309-311.)
In sum, it is clear that nothing in the Moradi-Shalal language itself supports a contention that it “specifically sanctioned” a cause of action, on the pleaded facts, for negligent infliction of emotional distress. It did not.
Implicit in plaintiffs’ contention is that the “reassuring language” of Moradi-Shalal necessarily imports conclusions that either: (1) a right of action based on negligent infliction of emotional distress existed before the decision, or (2) ipse dixit, the decision created a new right of action where none existed before. We seriously doubt the latter proposition. In the decision itself, the Supreme Court in that portion of the opinion entitled, “Royal Globe Should Be Overruled,” stated plainly, “. . . nothing we hold herein would prevent the Legislature from creating additional civil or administrative remedies, including, of course, creation of a private cause of action for violation of section 790.03. We hold, however, that thus far the Legislature has not manifested an intent to create such a private cause of action.” (Moradi-Shalal, supra, 46 Cal.3d 287, 305.)
Otherwise, the thrust of the “reassuring language” was just that, i.e., overruling Royal Globe did not foreclose jurisdiction to impose remedies based on such traditional theories as “infliction of emotional distress.” (Moradi-Shalal, supra, 46 Cal.3d 287, 305.) As observed in our discussion of intentional infliction of emotional distress (ante), the traditional theory alluded to in the cited passage did not specify either intentional or negligent infliction of emotional distress. Thus, in that part of the opinion, we simply marshalled the authorities involving intentional infliction of emotional distress and rationalized the result reached on the basis of those authorities. A similar exercise is called for in this part of the opinion.
In other words, we interpret the “reassuring language” as not making a substantive statement. It simply recited assurances that whatever remedies existed at common law, within the listed subject matter areas, remained unaffected by the overruling of Royal Globe. Thus, our decisional task here is to determine whether plaintiffs’ claim belongs among those post-Molien decisions where recovery was allowed or belongs among those where recovery was denied, regardless of Moradi-Shalal.
B.
Only Since 1980 Has California Recognized Claims for Negligent Infliction of Emotional Distress
The decisional task noted calls first for an inquiry into the historical origin of a claim for negligent infliction of emotional distress and what has
In his Summary of California Law, Witkin discusses a group of emotional distress cases decided since Molien. In this group, he has identified, on the one hand, the few cases where recovery was allowed, including Marlene F. v. Affiliated Psychiatric Medical Clinic (1989) 48 Cal.3d 583 [257 Cal.Rptr. 98, 770 P.2d 278] (Marlene F.) and Burgess, supra, 2 Cal.4th 1064, and, on the other, the larger number of cases where recovery was denied, including Anderson v. Northrop Corp. (1988) 203 Cal.App.3d 772 [250 Cal.Rptr. 189], and Schwarz v. Regents of University of California (1990) 226 Cal.App.3d 149 [276 Cal.Rptr. 470]. (6 Witkin, Summary of Cal. Law, supra, Torts, §§ 853, 854, pp. 213-217, and 1994 supp. pp. 74-82.) In Anderson and Schwarz, although pr&-Burgess cases, both plaintiffs yet failed because of their inability to establish duty for want of being “direct victims” (post).
C.
Since Molien, More Have Failed to Recover Than Have Succeeded
In a recent case published by this division, we had occasion to pass upon a claim for purely emotional distress in which the parents, despite the absence of medical malpractice, were yet distressed over the manner in which their child had been presented to them by the defendant doctor, following her birth by caesarean section. (Bro, supra, 22 Cal.App.4th 1398, 1401.) In the course of the decision, we analyzed 26 post-Molien cases, presenting claims for purely emotional distress, to determine if there were a common ratio decidendi among them. We discovered that there was not. (Id. at p. 1417.)
However, we did find statistical confirmation for Witkin’s classification of cases into those where recovery was allowed and those where recovery was denied. In our 26-case catalogue, 9 allowed recovery; 17 did not. (Bro, supra, 22 Cal.App.4th 1398, 1444.) Reflecting these results, we emphasize again that our decisional task here is to decide whether plaintiffs’ claim belongs among those where recovery was allowed or belongs among those where recovery was denied.
Plaintiffs Have Not Alleged Facts Which Imposed a Duty of Care on Defendants
1. Their Theory of Duty Is Mistakenly Based on Rowland v. Christian
In urging that their complaint states a cause of action for negligent infliction of emotional distress, plaintiffs invoke Rowland v. Christian (1968) 69 Cal.2d 108 [70 Cal.Rptr. 97, 443 P.2d 561, 32 A.L.R.3d 496] (Rowland), a pre-Molien case which derived from a mundane set of facts. Plaintiff, a social invitee in defendant’s apartment, suffered physical injury to the tendons and nerves of his right hand while using what turned out to be a defective faucet handle on a bathroom fixture. Summary judgment in favor of the defendant apartment dweller was reversed by the Supreme Court which, as a starting point for rationalizing its decision, invoked Civil Code section 1714. In doing so, it noted that “[t]his code section . . . states a civil law and not a common law principle.” (Id. at p. 112.) Rowland then recited language which has been widely quoted ever since. “Although it is true that some exceptions have been made to the general principle that a person is liable for injuries caused by his failure to exercise reasonable care in the circumstances, it is clear that in the absence of statutory provision declaring an exception to the fundamental principle enunciated by section 1714 of the Civil Code, no such exception should be made unless clearly supported by public policy.” (Id. at p. 112.)
After announcing this principle, Rowland proceeded to recite the considerations, above noted, which should be taken into account to determine in a given instance whether, as a public policy matter, an exception should be made to the imposition of liability otherwise required by Civil Code section 1714 if the conditions therein recited be met. In their reliance on Rowland, plaintiffs describe it as holding, “whether an actionable duty exists depends upon judicial weighing of the policy considerations for and against the imposition of liability under the circumstances.” Plaintiffs then apply these policy considerations to reach their position “that the insurer owed the insured claimants a duty [of] care in the settlement of their case.”
The foregoing distorts and therefore misapplies Rowland, even accepting that it is relevant here, which we do not. The discussion in Rowland springs from that decision’s reliance on section 1714, subdivision (a) of the Civil Code. As pertinent here, that statute provides that “every one is responsible ... for an injury occasioned to another by his want of ordinary care or skill in the management of his property or person . . . .” (Italics added.)
At this juncture, we are compelled to point out that Rowland was a personal injury case. To assess the precedential relevance of Rowland (and Civil Code section 1714) to the pleaded facts, it is necessary to determine Rowland's actual holding.
According to Witkin, “[t]he ratio decidendi [holding of case] is the principle or rule which constitutes the ground of the decision, and it is this principle or rule which has the effect of a precedent. It is therefore necessary to read the language of an opinion in the light of its facts and the issues raised, to determine (a) which statements of law were necessary to the decision, and therefore binding precedents, and (b) which were arguments and general observations, unnecessary to the decision, i.e., dicta, with no force as precedents.” (9 Witkin, Cal. Procedure (3d ed. 1985) Appeal, § 783, p. 753.)
One of the cases cited by Witkin in this section of his volume dealing with appeals which illustrates the principle described is Security Pacific National Bank v. Wozab (1990) 51 Cal.3d 991 [275 Cal.Rptr. 201, 800 P.2d 557] (Security Pacific). That case incisively stated the principle involved. “1 “It is the general rule that the language of an opinion must be construed with reference to the facts presented by the case, and the positive authority of a decision is coextensive only with such facts. . . .'" ” (Id. at pp. 1003-1004, italics added.)
As above pointed out, the plaintiff in Rowland had suffered a personal (physical) injury. The contested issue, for which Rowland fashioned the seven considerations with regard to the application of Civil Code section 1714, was whether liability for a personal injury should be imposed on the defendant apartment dweller and in favor of the plaintiff invitee. Justice Burke’s dissent, as a matter of stare decisis, came down on the side of continuing to exempt the apartment dweller from duty and hence liability. Thus, the ratio decidendi in Rowland was that in cases of personal (physical) injury, the duty of care expressed in section 1714 will be extended to occupiers of real property vis-á-vis their invitees. As a matter of judicial precedent, Rowland had absolutely nothing to do with the negligent infliction of emotional distress. In other words, because its holding can only be coexistensive with its facts, Rowland is inapposite to the issue before us. (Security Pacific, supra, 51 Cal.3d 991, 1004.) Plaintiffs concede as much in
The foregoing view of Rowland is confirmed by a footnote in Thing, supra, 48 Cal.3d 644, discussed (post) on another point. As relevant here, the footnote recites, “. . . that Rowland v. Christian [citation] should extend to actions for negligent infliction of emotional distress lacks support in our decisions. Neither Rowland v. Christian nor the other cases cited by the [Thing] dissent [including Tarasoff v. Regents of University of California (1976) 17 Cal.3d 425 (131 Cal.Rptr. 14, 551 P.2d 334, 83 A.L.R.3d 1166), and Weirum v. RKO General, Inc. (1975) 15 Cal.3d 799 (123 Cal.Rptr. 468, 539 P.2d 36)] are cases in which damages for negligently inflicted emotional distress were in issue. Recovery of this type of damage, when no other injury is present, has never been subject only to the general principles of foreseeability applied in Rowland v. Christian . . . .” (48 Cal.3d at p. 668, fn. 11.)
Based upon the foregoing analysis, there is nothing in Rowland to support plaintiffs’ position that it is authority for imposing a duty of care to avoid unintentionally inflicting emotional distress on plaintiffs in the course of negotiating settlement of their third party claim.
By invoking Rowland, whose holding (supra) includes reliance upon Civil Code section 1714, plaintiffs cannot rationalize their position logically without a key assumption. Such assumption is that what plaintiffs experienced here was an “injury.” We respectfully suggest that is precisely the issue which we are called upon to decide.
We have already noted that, in pertinent part, section 1714, subdivision (a), of the Civil Code provides that “[e]very one is responsible ... for an injury occasioned to another by his want of ordinary care or skill in the management of his property or person . . . .” This concise statutory pronouncement imports the concept of both duty and breach. The mandate of this duty is to act with ordinary care and skill in the management of one’s property and person. Breach of that duty occurs when a want of ordinary care in such management causes an injury. The result is liability, i.e., “responsibility.”
Thus, consideration of the seven Rowland factors can only occur if it first be determined that there is a duty present and that it has been breached. We insist again that that is what this case is all about, not a Rowland evaluation to determine if an exception to liability, already determined, shall be allowed.
In personal injury (physical trauma) cases, foreseeability, going back to Palsgraf v. Long Island R. Co. (1928) 248 N.Y. 339 [162 N.E. 99, 59 A.L.R. 1253], has long been the key factor in fixing duty. However, when the claim is for purely emotional distress, it is our view that foreseeability is essentially useless. Emotional distress is always foreseeable. Moreover, the cases, decided since Molien introduced the notion of a compensable claim for purely emotional distress, show that in more instances than not claims advanced on this theory fail. (Bro, supra, 22 Cal.App.4th 1398, 1444.) Such results therefore provide the basis for a deductive conclusion that foreseeability, because always present, as noted, is of little use in the search for duty in purely emotional distress cases. If it were of any use in this search, every post -Molien suitor would have recovered. As shown in Bro, they did not.
This deduction of the useless nature of foreseeability in this kind of case is reflected in decided authority. In Thing, supra, 48 Cal.3d 644, a post-Dillon, bystander case, Justice Eagleson took occasion to clarify the right to recover for negligent infliction of emotional distress. He wrote, “[t]he Dillon experience confirms, as one commentator observed, that ‘[f]oreseeability proves too much. . . . Although it may set tolerable limits for most types of physical harm, it provides virtually no limit on liability for nonphysical harm.'’ ” (Id. at p. 663, italics added.) He then stated that, “[i]t is apparent that reliance on foreseeability of injury alone in finding a duty, and thus a right to recover, is not adequate when the damages sought are for an intangible injury.” (Id. at p. 664.) Confirming our earlier observation that not every claim for purely emotional distress is compensable, Thing then stated, “In order to avoid limitless liability out of all proportion to the degree of a defendant’s negligence, and against which it is impossible to insure without imposing unacceptable costs on those among whom the risk is spread, the right to recover for negligently caused emotional distress must be limited.” (Id. at p. 664.) In view of the foregoing, we cannot resist recalling that Witkin is oft wont to lyricize, in the course of his many and storied public orations, “on a clear day some courts can foresee forever.”
The repudiation in Thing of foreseeability in emotional distress cases, as a practical matter, was echoed three years later in Burgess. In its discussion of Molien, Burgess observed that “[t]he great weight of this criticism [of Molien] has centered upon the perception that [it] introduced a new method for determining the existence of a duty, limited only by the concept of foreseeability. To the extent that Molien . . . stands for this proposition, it should not be relied upon and its discussion of duty is limited to its facts. As
3.
The Presence of Duty Finally Depends on Public Policy Factors
We have already recounted historically that it has only been since 1980, when Molien was decided, that claims for purely emotional distress in favor of nonbystanders have been recognized. Since Molien, there have been at least 26 attempts to recover damages under the Molien theory. Of these, 11 failed because the plaintiffs did not articulate persuasive pubic policy reasons why a duty of care was owed by the respective defendants. (Bro, supra, 22 Cal.App.4th 1398, 1444.)
Plaintiffs here urge that a new predicate for recovering damages for negligent infliction of emotional distress be recognized. They contend that a duty of care is owed a third party claimant by his or her tortfeasor’s liability insurance carrier in negotiating settlement of the third party’s claim. No such duty has been yet recognized in this state, and so we come to the proposition that it is incumbent upon plaintiffs to articulate why, as a legal proposition, a common law duty of care was owed them by defendants, who acted as Hester’s liability insurance carrier.
That is the way common law tort theories have evolved. Actually, the initial recognition of a cause of action based on negligence was, pure and simple, a policy decision of the common law, i.e., the court created a duty of care to strangers where none before had existed.
When Dillon v. Legg, supra, 68 Cal.2d 728, introduced liability for purely emotional distress in so-called bystander cases, Justice Tobriner did not make the assumption at the outset that Mrs. Dillon had suffered an injury and then go through a Rowland-like litany in trying to decide whether liability for the injury should be excepted. On the contrary, he recited an elaborate array of policy reasons why a duty of care should be recognized. As to duty, he stated, “ ‘[i]t [duty] is a shorthand statement of a conclusion, rather than an aid to analysis in itself. . . . But it should be recognized that “duty” is not sacrosanct in itself, but only an expression of the sum total of those considerations of policy which lead the law to say that the particular
Justice Mosk employed a similar technique in Molien when he extended the Dillon beachhead to purely emotional distress cases. He realized full well that an extension of the concept of duty was an issue when he stated that “[w]e thus reach the crucial question whether adherence to the venerable rule [of requiring physical impact] that would bar recovery in this case is warranted.” (Molien, supra, 27 Cal.3d 916, 927.) He then went on to explain why California should not adhere to the “venerable rule.” In doing so, Justice Mosk relied upon an observation by Justice Gardner in his concurring opinion in our decision in Allen v. Jones (1980) 104 Cal.App.3d 207 [163 Cal.Rptr. 445] (a mortuary case) and a Hawaii case, Rodrigues v. State (1970) 52 Hawaii 156 [472 P.2d 509]. In Molien, Justice Mosk wrote, “. . . the Rodrigues court further noted the ‘multiplication of psychic stimuli’ that society presently faces, and the ‘increasing widespread knowledge of the debilitating effect mental distress may have on an individual’s capacity to carry on the functions of life.’ (Ibid.) Accordingly, the court recognized that ‘the interest in freedom from negligent infliction of serious mental distress is entitled to independent legal protection. We hold, therefore, that there is a duty to refrain from the negligent infliction of serious mental distress.’ (Ibid.)" (27 Cal.3d at p. 928.)
We can ask no less of plaintiffs here. We repeat, it is not enough to assume a duty of care and to assume a breach and then, based on such assumptions, to invoke the Rowland considerations of whether liability should be excepted. Rather, it is incumbent on plaintiffs, as noted, to come forward with policy reasons why a duty of care in their favor should be recognized by the common law. This they have failed to do.
Plaintiffs’ statement of their position that count two states a cause of action for negligent infliction of emotional distress is circular at best. They first contend that they are “direct victims” under Molien. (Under the Burgess definition, post, they were not direct victims.) They then jump ahead to the conclusion that “one can see that all the elements of the tort itself are present . . . (1) a legal duty to use due care; (2) a breach of such legal duty; (3) damage or injury; and (4) the breach as the proximate cause or legal cause of the resulting damage or injury.” They then cite to Witkin, 4 Summary of California Law (8th ed. 1974) section 488, page 2749 and to Jarchow v. Transamerica Title Ins. Co. (1975) 48 Cal.App.3d 917, 938 [122 Cal.Rptr. 470]. The citation to Witkin has nothing to do with actions for negligent
In their failure to articulate reasons why a duty of care should be imposed on defendants, what plaintiffs overlook is that defendants had a contract of indemnity with their insured Hester, not with plaintiffs. Under that contract, defendants’ only duty was to indemnify Hester for any judgment entered against him on account of his negligence. After the collision, plaintiffs had no claim against defendant insurers; they had a claim only against the insured, Hester. With the parties in this posture, there was no legal reason or requirement for the insurance carrier ever to have anything to do with plaintiff third party claimants. In other words, defendants, acting within their legal rights, could have stood back and allowed the antecedent traffic-collision action to take its course. Should that case have gone to judgment against Hester, defendants would then have been required to indemnify Hester under the insurance contract.
However, when, as here, third party claims are settled by an insurer before judgment, the reality is that such settlement does not depend upon a duty to settle but derives from the insurer’s educated gamble that it is probably cheaper to settle than to risk allowing the case against its insured to go to trial and judgment, especially if the judgment is likely to exceed policy limits. (See Johansen v. California State Auto. Assn. Inter-Ins. Bureau (1978) 15 Cal.3d 9, 17, fn. 7 [123 Cal.Rptr. 288, 538 P.2d 744].) In light of the foregoing, plaintiffs’ view of this case is wholly out of touch with the economic goals which give rise to contracts of insurance in the first place. Insurance companies exist to provide a critical financial indemnity for the risks of their insureds, not to salve the feelings of displeased third party claimants. As an actuarial matter, there is no way to factor in the emotional distress of third party claimants in trying to compute the premiums to be charged for the risks faced by the insured policy holders. Thus, it is reasonable to conclude that the overruling of Royal Globe by Moradi-Shalal served to reinforce the realities of the casualty insurance market place, not to, change them.
Under Current Precedent, Plaintiffs Have Failed to Demonstrate They Were Owed a Duty of Care by Defendants
In the course of our opinion in Bro, we reported the precedential history that “to recover damages for purely emotional distress in nonbystander cases, it is first necessary to be a direct victim.” (Bro, supra, 22 Cal.App.4th 1398, 1407.) This statement was followed by an inquiry into where the “direct-victim” concept came from.
That inquiry proceeded through several cases, culminating in an analysis of Burgess. (Bro, supra, 22 Cal.App.4th 1414-1416.) Such analysis included our commentary that “. . . the Burgess court, as earlier noted, pointedly discounted foreseeability [original italics] as a meaningless guideline for measuring duty in this kind of case (Burgess, supra, 2 Cal.4th 1064, 1074), and then concluded nevertheless that ‘. . . other principles derived from Molien ... are sound: (1) damages for negligently inflicted emotional distress may be recovered in the absence of physical injury or impact, and (2) a cause of action to recover damages for negligently inflicted emotional distress will lie, notwithstanding the criteria imposed upon recovery by bystanders, in cases where a duty arising from a preexisting relationship is negligently breached.’ (Id. at p. 1074, italics added, citing Marlene F.) In sum, Burgess reaffirmed the Molien seminal pronouncement that actions by direct victims of negligently inflicted emotional distress are viable. (Burgess, supra, 2 Cal.4th 1064, 1074.)” (Id. at p. 1415, italics in original.)
In Burgess, there is certain language cited from Marlene F., postulating that a direct victim may be anyone to whom the defendant owed a duty of care because such duty was “ ‘assumed by the defendant or imposed on the defendant as a matter of law, or . . . [arose] out of a relationship between the two.’ ” (Burgess, supra, 2 Cal.4th 1064, 1073, quoting from Marlene F., supra, 48 Cal.3d 583, 590.) As a result of this language, if it be argued that there are three ways in which a duty of care can arise in favor of a third party claimant against his or her tortfeasor’s insurance company, we reject such argument.
In Marlene F. the relationship was patient and psychotherapist; in Burgess, it was patient and obstetrician. Thus, the language which talked about a duty imposed by law or assumed by a defendant was unnecessary to the decision. As such, that language was dicta.
We note again the Security Pacific rule which was applied in our earlier discussion of Rowland. That rule stated plainly that the holding of a decision “ ‘ “must be construed with reference to the facts presented
As above demonstrated, the only precedential holding in Burgess, as it related to the definition of a direct victim, is that one must have had a preexisting relationship with the defendant in order to have a protected interest in being free from unintentionally caused emotional distress. There was no such relationship between the parties here. The only relationship that ever developed between them, if it can be called such, was the result of this litigation, initiated by plaintiffs. As a consequence, plaintiffs could never be or become direct victims of defendants’ unintentional behavior.
As earlier noted, there is no California case, sounding in negligence, including Molien, where a person has recovered on a claim for purely emotional distress unless he or she first qualified as a direct victim. (See Bro, supra, 22 Cal.App.4th 1398, 1444.) Because plaintiffs were never direct victims, they were never owed a duty of care. Thus, they are precluded from pursuing their emotional distress claim based on negligence, just as the plaintiffs, who were found not to be direct victims in 11 of the post-Molien cases, were so precluded. (See Bro, supra, 22 Cal.App.4th 1398, 1418, 1444.)
Parenthetically, we hark back to our observation that the true holdings in both Burgess and Marlene F., with reference to the predicate for duty, were that the duty in each of those cases arose from preexisting relationships of obstetrician and psychotherapist, respectively. Here, we observe further, even if it be accepted that the holdings of those two cases could be enlarged to recite that duty can be present where “ ‘assumed by the defendant or
First, defendants did not assume any duty of care to plaintiffs. More important, even if the law stands ready to impose a duty of care on defendants here, before it does so, plaintiffs must show why the law should impose a duty. Actually, in terms of the legal dynamics which underlie these cases, where there is a preexisting relationship, because of that posture of the parties, the law “imposes” a duty of care. There can be no imposition of duty in a vacuum; there has to be a reason for it. As we have already noted, plaintiffs have failed to articulate a reason why the law should impose a duty of care on defendants in negotiating settlement of plaintiffs’ third party claim.
Beyond the no-direct-victim rationale above explained, plaintiffs are confronted with decided cases where third parties have failed in their efforts to recover damages from their tortfeasor’s insurance company for negligent infliction of emotional distress.
Soto, earlier referred to briefly, was a case on similar facts decided by this division in favor of the defendant insurance company. In that case, an employee and his family brought an action against his employer’s workers’ compensation carrier, alleging both intentional and negligent infliction of emotional distress. The plaintiffs’ grievance arose from a delay in the carrier’s payment of a workers’ compensation award, a delay occurring after the carrier had stipulated to the award in the course of a Workers’ Compensation Appeals Board (WCAB) proceeding. The later complaint included counts based on alleged violation of those Insurance Code provisions defining unfair settlement practices, as well as on alleged breach of the implied covenant of good faith and fair dealing. Of more interest to us here was the count for negligent infliction of emotional distress alleged by the plaintiff family members.
The trial court sustained the defendant insurance carrier’s demurrer to all counts without leave to amend. On appeal, we affirmed the judgment of dismissal.
In rationalizing the result we reached, we noted that the alleged willful delay in payment did not provide the plaintiff employee with a viable claim based on a supposed exception to the exclusive remedy rule specified in section 3602 of the Labor Code such as was recognized by Unruh v. Truck Insurance Exchange (1972) 7 Cal.3d 616 [102 Cal.Rptr. 815, 498 P.2d 1063]. As to the claim of the family members, who were foreseeably and
While Soto is not precisely “on all fours” with the facts here under review, because the family members are one step removed from being third parties, their posture is close enough to provide an arguably analogous precedent. In Soto, the count of the third party claimant (employee) was ruled out because of the exclusive remedy (under the Labor Code) rule. The trial court also ruled against the count of his family members against the workers’ compensation insurance carrier. Their emotional distress arose by reason of the delay in payment of the award the carrier had stipulated to. We see no difference between the aggravation experienced by the employee in Soto and that experienced by his family. More important, the family members, like the employee, could not point to a preexisting relationship with the insurance company. Thus, they likewise were precluded from being direct victims. For this reason, Soto is persuasive authority adverse to plaintiffs’ contention that defendants owed them a duty of care in negotiating their third party claim.
In Lee v. Travelers Companies (1988) 205 Cal.App.3d 691 [252 Cal.Rptr. 468] (Lee), after the plaintiffs had settled their legal malpractice claim against the insureds for $800,000, they (plaintiffs) filed suit against the defendant insurers alleging, as did plaintiffs here, that the insurers had engaged in unfair settlement practices as defined in section 790.03 of the Insurance Code. As examples thereof, they pointed to the insurers’ initial offer of only $51,500 and to the fact that the insureds’ liability had been well known to the insurers for five years before the claim was finally settled. (Id. at pp. 693-694.) After the trial court sustained the defendants’ demurrer without leave to amend, the case was dismissed. On appeal, the order of dismissal was affirmed. (Id. at p. 696.)
In rationalizing the result it reached, the Lee court first observed that Moradi-Shalal had come down from the Supreme Court while the appeal was pending. (Lee, supra, 205 Cal.App.3d 691, 694.) With reference to the count pleaded under the Insurance Code, the court then observed, because of the termination of the third party action by means of an agreed settlement in which liability remained disputed, there had not been a judicial determination of the insureds’ liability. As a result, Lee held plaintiffs’ Royal Globe-type count did not survive Moradi-Shalal. (Id. at p. 694.)
In Lee, besides a Royal Globe count, the complaint, as here, included common law counts for both intentional and negligent infliction of emotional distress. (Lee, supra, 205 Cal.App.3d 691, 693.) The reviewing court,
F.
Plaintiffs Have Failed to State a Cause of Action for Negligent Infliction of Emotional Distress
In a nutshell, plaintiffs’ theory of duty, as they have argued it in their briefs, amounts to this: “Defendants upset us in the conduct of the settlement negotiations. Because defendants could foresee that what they were doing would upset us, they were under a duty to avoid doing so.” As we have explained, because foreseeability must be discounted, such a theory is circular and assumes the key question to be decided, i.e., whether the facts pleaded import a duty of care devolving upon defendants.
The reality is that plaintiffs are seeking to persuade us to recognize a duty of care here where none has before been recognized. To be persuasive, it is incumbent upon plaintiffs to come up with reasons, including policy reasons, why this new area of liability should be recognized. This they have failed to do. In this connection, plaintiffs’ reliance on Rowland is wholly misplaced. In Rowland, duty and breach were established in a personal injury context, and the significance of the decision involved a weighing of policy considerations to determine whether liability should be excepted. Thus, although Rowland expanded the duty of householders to their invitees, its significant holding, based on policy considerations, dealt with proximate cause.
More important, in this post-Molien era, a new factor has emerged on the scene which can be determinative in emotional distress cases based on negligence. This factor is the concept of a direct victim. Plaintiffs were not direct victims here because they had no preexisting relationship with defendants. Because they could not qualify as direct victims, no duty of care ever arose in their favor.
Finally, Soto and Lee held against their respective plaintiffs who had ventured upon the same gambit which plaintiffs have here. Thus, based both
III.
Can Plaintiffs State a Cause of Action on the Theory That Defendants “Violated” Civil Code Section 1714?
IV.
Conclusion
Based upon the foregoing analysis, we hold that all three assignments of error (ante) are without merit. More specifically, we hold that defendants’ motion for judgment on the pleadings, which “performs the function of a general demurrer and is to be treated in the same fashion on appeal. . . .” (Board of Regents v. Davis (1975) 14 Cal.3d 33, 37, fn. 4 [120 Cal.Rptr. 407, 533 P.2d 1047]), was properly granted.
Finally, because plaintiffs’ action, proceeding on several theories, was predicated solely on purely emotional distress arising from defendants’ delay, and the reasons therefor, in offering to settle a third party claim, there was no prospect that they could ever amend their complaint to state a cause of action. Accordingly, the trial court’s ruling above noted, even though it did not afford an opportunity to amend, was not an abuse of discretion. (See Harman v. City and County of San Francisco (1972) 7 Cal.3d 150, 157 [101 Cal.Rptr. 880, 496 P.2d 1248], which describes the circumstance, not present here, where not affording a chance to amend is an abuse of discretion.)
Disposition
The judgment is affirmed.
Dabney, Acting P. J., concurred.
Retired Associate Justice of the Court of Appeal, Fourth District, senior judge status (Gov. Code, § 75028.1), sitting under assignment by the Chairperson of the Judicial Council.
Molien v. Kaiser Foundation Hospitals (1980) 27 Cal.3d 916 [167 Cal.Rptr. 831, 616 P.2d 813, 16 A.L.R.4th 518] (Molien).
See footnote, ante, page 185.
See footnote, ante, page 185.