INSURANCE-RELATED COURT CASES
Digested from case reports published online
Fraud doesn’t pay
After a fire destroyed the house of Frayba and William Tipton, they filed a claim in which they overstated losses related to the contents of their home. Their homeowners insurer, Nationwide Insurance Company of America, alleged in court filings that among the overstated losses was the claimed loss of an original Vincent Van Gogh “Starry Night” painting.
The Tiptons pled guilty to a felony insurance fraud allegation and no contest to a felony perjury allegation, and the trial court placed them on five years of formal probation. After informing the Tiptons of their right to have a judicial determination of the amount of restitution that would be owed to Nationwide and holding an evidentiary hearing to determine the amount, in 2016 the trial court ordered the Tiptons to pay $792,597.22 in victim restitution to Nationwide.
Around the same time, Nationwide obtained an award of over $1.2 million in civil litigation between the parties. Although the Tiptons were later able to have the award against them discharged in federal bankruptcy proceedings, the order of discharge explained that “debts for most fines, penalties, … or criminal restitution obligations” were not discharged.
In 2020, the probation department informed the parties that it would cease its efforts to collect restitution because probation had expired. In that same letter, the probation department advised that Nationwide “may wish to consider civil recovery options.”
Nationwide filed and served on the Tiptons a noticed motion petitioning the civil court to “convert into civil judgments” the victim restitution orders from the Tiptons’ criminal judgments. Nationwide argued that conversion would ensure the company “ha[d] all resources available to it to enforce the unsatisfied portion of the restitution.”
“For example,” the company explained, “because a civil judgment had not been entered,” the trial court clerk’s office had rejected Nationwide’s application to set judgment debtor examinations of the Tiptons.
The Tiptons opposed, arguing that Nationwide “failed to cite any provision of law” or any case permitting the civil division of the trial court to “enforce or ‘convert’ criminal court restitution orders” into civil judgments, and principles of res judicata (once a claim has been subject to final judgment it cannot be relitigated) and collateral estoppel barred Nationwide’s petition because of prior civil litigation between the parties.
The trial court agreed with Nationwide after the hearing: “Petitioner’s Motion to Convert Criminal Restitution Orders into Civil Judgment is granted, and the Criminal Restitution Orders against Respondents are now converted into Civil Judgment, Penal Code section 1214[, subdivision] (b).” The court entered civil judgments against each of the Tiptons in favor of Nationwide for over $1 million (accounting for the outstanding unpaid restitution, plus 10% annual interest). The Tiptons appealed.
On appeal, the California court of appeal held that section 1214, subdivision (b), means what it says—a restitution order is equated to a civil money judgment as it relates to enforcement, including after a defendant’s probationary period ends. The court affirmed the judgments of the trial court.
Nationwide Insurance Company of America v. Tipton—Court of Appeal of the State of California, Third Appellate District—May 26, 2023—No. 2021-0003959.