COVERAGE ALERT: 21st Century Ins. Co. v. Superior Court, 47 Cal.4th 511 (2009)
Silvia Quintana suffered injuries in an automobile accident with a third party. Her insurer, 21st Century, paid her $1,000 under her insurance medical payments (or med-pay) provision. Quintana subsequently sued the third party tortfeasor and settled for $6,000. In obtaining the settlement, she incurred in excess of $2,000 in attorney fees. 21st Century subsequently requested that Quintana repay the $1,000 it had paid her. Quintana paid 21st Century $600 and 21st Century eventually agreed that this amount fully satisfied its reimbursement claims as it accounted for 21st Century’s pro rata share of the attorney fees expended in collecting damages from the tortfeasor.
Quintana subsequently filed a class action lawsuit against 21st Century, alleging violation of Business and Professions Code section 17200, conversion, unjust enrichment and declaratory relief. Quintana argued that 21st Century could not lawfully require reimbursement because she had not been made whole by the settlement when her attorney fees exceeded $2,000. 21st Century demurred to the complaint, but the trial court overruled the demurrer. 21st Century then filed a petition for writ of mandate with the Court of Appeal, which writ was granted. The Court of Appeal held that the made-whole rule does not require an insurer seeking reimbursement to consider the attorney fees the insured expended in recouping his or her losses from the tortfeasor. Quintana petitioned for review to the California Supreme Court.
THE COURT’S RULING
In affirming the Court of Appeal, the California Supreme Court concluded that although the made-whole rule requires that the insured be made whole as to all damages proximately caused by the injury before an insurer can recover amounts paid under its med-pay provisions, liability for attorney fees is not included. Instead, such fees are subject to a separate equitable apportionment rule (or pro rata sharing) that is analogous to the common fund doctrine.
THE EFFECT OF THE COURT’S RULING
Where an insurer makes payments under a medical payments provision, and the insured is subsequently made whole by way of settlement with the tortfeasor, the insurer will be entitled to reimbursement of the med-pay payment amount, in spite of the fact the insured incurred attorney fees in pursuing the tortfeasor, subject to a pro rata sharing of the attorney fee burden.
This opinion is not final. It may be withdrawn from publication, modified upon rehearing, or review may be granted by the California Supreme Court. These events would render the opinion unavailable for use as legal authority.
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