INSURANCE-RELATED COURT CASES
Digested from case reports published online
No joy for driver in
Nshan Simonyan alleged that on October 18, 2017, he came to a stop near an intersection and was rear-ended by a truck. He alleged that the impact forced his car to hit the car in front of him.
Simonyan filed a claim with his insurer, Nationwide Insurance Company of America. He alleged that, after taking his statement about what happened, Nationwide made an internal decision that he was liable for causing the accident.
In December 2017, Simonyan filed suit against the driver of the truck that hit him.
In May 2018, Simonyan notified Nationwide that he had been sued by the driver of the car that he had hit. Under the terms of the policy, Nationwide agreed to “pay damages for ‘bodily injury’ or ‘property damage’ for which any ‘insured’ becomes legally responsible because of an auto accident.”
Simonyan requested that Nationwide appoint Gavrilov & Brooks as counsel. Simonyan argued that there was a conflict of interest between him and Nationwide because Nationwide had already determined that he was liable for the accident. Further he argued that Gavrilov & Brooks was already familiar with the case.
Nationwide denied that there was a conflict of interest and agreed to appoint outside counsel “as an accommodation to the insured’s concerns.” Nationwide appointed the law firm of Porter Scott.
Simonyan complained that this failed to correct the alleged conflict of interest and created a new conflict of interest because Nationwide often retained Porter Scott, and the law firm “would have an incentive to litigate in a way that would cause [Nationwide] to send the firm more work.” Simonyan further contended that representation by two law firms would hinder his ability to receive fair treatment at trial and would complicate the discovery process.
Nationwide replied that it would not pay for Gavrilov & Brooks as counsel and demanded that Simonyan cooperate with Porter Scott and Nationwide, or else Nationwide would decline to pay any defense costs or judgments against him in the defense action. Nationwide stated that its internal decision that Simonyan was at fault for the collision was not a final decision and it had a financial interest in vigorously defending him.
In October 2018, Nationwide raised Simonyan’s premiums based on its determination that he was at fault for the October 2017 collision and removed several discounts.
Nationwide demurred to the second amended complaint on the grounds that neither cause of action stated facts sufficient to constitute a cause of action. The trial court sustained the demurrer without leave to amend.
In the interim Simonyan had initiated the action against Nationwide. The original complaint and the second amended complaint both alleged two causes of action: (1) breach of the implied covenant of good faith and fair dealing, and (2) breach of contract.
Simonyan filed a motion for reconsideration based on Porter Scott’s subsequent refusal to sign a substitution of attorney allowing Gavrilov & Brooks to withdraw from the action. The court denied the motion.
The court dismissed Simonyan’s second amended complaint with prejudice. Simonyan appealed.
On appeal, Simonyan argued that he sufficiently pled a breach of contract claim based on Nationwide’s refusal to provide independent counsel. The second amended complaint alleged that this refusal was a breach of Nationwide’s contractual duty to defend.
Simonyan argued that a conflict of interest existed because there was a “significant risk” that Porter Scott’s representation of his interests would be “materially limited.” According to the court, “The critical questions are the likelihood that a difference in interests exists or will eventuate and, if it does, whether it will materially interfere with the lawyer’s independent professional judgment in considering alternatives or foreclose courses of action that reasonably should be pursued on behalf of each client.”
The court held that Simonyan had not alleged facts sufficient to show such a likelihood.
Simonyan argued that a conflict of interest existed because “[h]e thought the driver who rear-ended him was at fault for the collision and filed an action against the driver, whereas Nationwide determined Simonyan was at fault.” Simonyan alleged that Nationwide raised his premiums and removed his driving discounts based on this determination.
According to the court, he cited no authority that concludes that when an insurance company raises premiums based on its belief of fault, it now has a conflict of interest. Regardless of Nationwide’s belief of Simonyan’s fault, it is required by the policy to pay for his defense and any damages. Simonyan acknowledged that Nationwide did not reserve its rights and agreed to defend the claim fully. Thus, Nationwide’s interest in the litigation was to defeat liability and minimize any damages.
According to the court, the potential harms Simonyan identified are not protected by the implied covenant of good faith and fair dealing in his policy. Simonyan argued that Nationwide breached this implied covenant in part by reminding him of his duty to cooperate under the terms of the policy. Further he argued that having two law firms represent him would increase litigation fees and costs. He asserted that two law firms “would needlessly complicate the discovery process and trial presentation” and “create problems because the trial court would likely not allow two attorneys who both represent Simonyan to conduct voir dire, cross-examine a single witness, and deliver an opening statement and a closing argument.”
The court explained that it “finds that Porter Scott’s ‘refusal’ to represent plaintiff in his capacity as a personal injury claimant creates no conflict of interest which justifies the reconsideration of the … order sustaining the demurrer to the [second amended complaint] without leave to amend … .”
The appellate court agreed with the trial court’s analysis. Simonyan failed to establish that the court abused its discretion in denying his motion for re-consideration or in denying him leave to amend his complaint.
The judgment of the trial court was affirmed. Nationwide will recover its costs on appeal.
Simonyan v. Nationwide Insurance Company of America—Court of Appeal of the State of California, Third Appellate District—May 16, 2022—No. C091100.