In Barnes v. Western Heritage Insurance Company, No. C066002 (Cal. Ct. App., June 18, 2013) (Third Appellate District), the California Court of Appeal held an injured party’s recovery from a tortfeasor for negligence and from the tortfeasor’s insurer for breach of contract would not constitute impermissible double recovery and would also not violate the collateral source rule.
Facts & Holding
Plaintiff filed a claim against Shingletown Activities Council after he was injured during an activity sponsored by the council. Western Heritage Insurance Company, the council’s insurer, paid $1,478 to plaintiff’s medical care providers. Plaintiff then filed a personal injury action against the council and others, alleging negligence and premises liability, which was settled. Western Heritage was not a party to the settlement.
Over a year after the accident, plaintiff sought additional medical payments from Western Heritage. Western Heritage refused claiming the policy required the damages be reported within a year of any covered incident. Plaintiff was not previously informed of this limitation, and sued Western Heritage for breach of contract. The trial court granted summary judgment in favor of Western Heritage, finding plaintiff was collateral estopped because the personal injury settlement resolved the issue of the payments due plaintiff for medical expenses under the policy.
The court of appeal reversed, holding plaintiff’s recovery in his personal injury action did not bar recovery against Western Heritage. The court reasoned the insurer’s obligation to indemnify its insured under the liability provision of an insurance policy is separate and distinct from its obligation to pay for medical expenses under a medical payment provision of the same policy. Given plaintiff sued Western Heritage for its alleged breach of obligations owed to plaintiff under the medical payment provision of the council’s policy. Plaintiff now claims Western Heritage wrongfully denied him additional coverage. The settlement that plaintiff obtained in the personal injury action was compensation for the alleged negligence by the defendants in that case, which included the council but did not include Western Heritage.
The court of appeal also determined plaintiff’s recovery from Western Heritage was not barred by the collateral source rule – which provides that if an injured party receives compensation for his injuries from a source wholly independent of the tortfeasor, that payment should not be deducted from the damages which the plaintiff would otherwise collect from the tortfeasor. Plaintiff first brought a personal injury action against the council, and then brought a separate lawsuit against the Western Heritage regarding the insurer’s alleged wrong doing. Thus, the collateral source rule did not bar plaintiff’s lawsuit against Western Heritage.