Kerns v. CSE Insurance Group

Opinion

Darlene Kerns appeals from summary judgment entered in favor of respondent CSE Insurance Group upon the latter’s motion pursuant to Code of Civil Procedure section 437c^[1] and the denial of her cross-motion for summary judgment. Appellant, the assignee of respondent’s insureds, had filed suit to enforce respondent’s alleged duty to defend its insureds in a previously settled personal injury lawsuit. At issue on this appeal are the following contentions: (a) the trial court acted in excess of its jurisdiction by entertaining and ruling on respondent’s motion for summary judgment when a different judge had previously denied the identical motion and the renewed motion was in violation of the controlling procedural requirements set forth in section 1008; (b) the trial court erred in determining as a matter of law that there was no potential for coverage under respondent’s policy and thus no duty to defend the insureds, appellant’s assignors; and (c) the undisputed facts demonstrate that appellant herself was entitled to summary judgment on the issue of respondent’s duty to defend.

On the procedural and factual record presented, we conclude that the trial court exceeded its jurisdiction by entertaining respondent’s renewed motion for summary judgment, because in so doing it violated the exclusive and controlling procedural prerequisites set by section 1008 for the reconsideration or renewal of a previously denied motion. The trial court left unaddressed and undecided important triable issues of material fact on the basis of which summary judgment had previously been denied. For these reasons, we must reverse.

Factual and Procedural Background

On February 12, 1997, respondent issued a personal homeowners policy (the Policy) to C. M., effective for the policy period from January 28, 1997, to January 28, 1998. In the portion dealing with coverage for personal

In the early morning hours of March 1, 1997, C. M.’s daughter, 16-year-old D. M., was arrested for vandalizing a house with a crowbar. When

D. was arrested outside appellant’s home. She told police that she had recently resumed her heavy methamphetamine use, and was feeling “paranoid” before the incident, as though people were following her. She entered appellant’s house because the hanging plants reminded her of a man who had sexually attacked her. A doctor who examined her at juvenile hall opined that she “may be psychotic.” D. entered a plea of no contest to attempted second degree murder with personal use of a deadly weapon and infliction of great bodily injury. She was sentenced to a California Youth Authority facility.

In September 1997, appellant filed a complaint against D. and her parents (the M. family), alleging four causes of action and seeking damages for assault, battery, negligence and negligent supervision.^[4] In the first cause of action, for assault, appellant alleged that D. “placed [her] in fear for her personal safety” by threatening her with bodily injury with a knife, and that “[i]n doing the acts as alleged above, [D.] intended to cause or place [appellant] in apprehension of a harmful and offense [.sic] contact with [appellant’s] person,” as a result of which appellant suffered injuries and damages. Each of the three subsequent causes of action incorporated by reference and thereby realleged these particular allegations of intentionality

Appellant also made additional specific allegations that D.’s behavior was intentional in the second cause of action, for battery. Thus, in count two appellant alleged that D. stabbed appellant multiple times in the area of appellant’s head and shoulders; “[i]n doing the acts as alleged above, defenants [,sic\, and each of them, acted deliberately and with the intent to make a contact with [appellant’s] person”; and “[t]he aforementioned conduct of [D.] . . . was willfull [sic] and malicious and was intended to oppress and cause injury to [appellant].” In the third cause of action, appellant realleged the earlier allegations that D. acted “deliberately and with the intent to make . . . contact” with appellant’s person, adding allegations that in doing so she “negligently injured” appellant and “negligently consumed drugs, alcohol, medication, or failed to consume medication, such that she was unable to control her own behavior.” Finally, in the fourth cause of action against D.’s parents for negligent supervision, appellant again realleged the earlier allegations that D.’s acts were intentional, and added specific allegations that her parents were “liable for the aforementioned intentional and negligent acts . . . based upon California Civil Code Section 1714.1.”^[5]

C. M. notified respondent of appellant’s claim against him and D. on March 28, 1997. On April 23, 1997, respondent sent Mr. M. a letter reserving its rights under the various applicable endorsements of the Policy, including the exclusions for bodily injury “expected or intended” by an insured or which is the foreseeable result of an act or omission intended by an insured, and for “any illegal act committed by or at the direction of an insured.” After an investigation, respondent informed its insured by letter dated October 8, 1997, that it would not defend or indemnify appellant’s claims and lawsuit. Respondent’s letter stated that it had “determined” that “the actions of D. were willful, intentional, malicious and illegal,” and therefore excluded by the provisions of the Policy and by Insurance Code section 533.^[6] On November 13, 1997, through his attorney, Mr. M. asked respondent to reconsider its decision not to defend. Respondent thereafter

Appellant’s case against the M. family proceeded to settlement. Mr. M.’s attorney notified respondent in writing of an impending settlement conference scheduled for April 9, 1998, and informed respondent that appellant had proposed a stipulated settlement judgment in the amount of $250,000, with a covenant not to execute against the M. family in exchange for an assignment of their rights against respondent. Mr. M.’s attorney, stated that he would recommend the M. family accept the offer, with a reservation of their right to seek attorney fees and costs from respondent. On the day of the settlement conference, appellant settled with the M. family without a trial on the merits, on the terms outlined in the letter of Mr. M.’s attorney to respondent. Thereafter, the trial court entered judgment in favor of appellant and against D. and Mr. and Mrs. M. in the amount of $250,000, pursuant to appellant’s covenant not to execute on or enforce the judgment and the concurrent assignment by the M. family of their rights against respondent, with the exception of their rights to attorney fees incurred as a result of respondent’s failure to defend them.

On December 1, 1998, appellant filed this action against respondent for declaratory relief, breach of contract and breach of the implied covenant of good faith and fair dealing, seeking to recover the amount of the underlying stipulated judgment from respondent based on the M. family’s assignment of rights against respondent. On July 2, 1999, respondent moved for summary judgment on the grounds it had no duty to defend or indemnify the M. family because the acts of D. on which appellant’s underlying claims were based were intentional and willful under section 533. In addition, respondent cited and relied upon the Policy exclusions for bodily injury “intended by an insured” or which is the foreseeable result of an act or omission intended by an insured, and for “any illegal act committed by or at the direction of an insured.” Respondent’s separate statement of undisputed facts, filed in connection with the motion, specifically set out these Policy exclusions for intentional and illegal acts. Appellant did not dispute respondent’s citation of these exclusions.^[7]

In opposition to the motion for summary judgment, appellant submitted argument and evidence to the effect that D. was “legally insane” at the time

By order filed September 15, 1999, the trial court denied respondent’s motion for summary judgment. In its decision, the trial court ruled that: (1) respondent’s objections to psychologist Murray’s declaration “go to the weight of the expert’s opinion” and would require an assessment of his credibility, which was “precluded” in the summary judgment context; (2) respondent failed to address the issue of whether D. “was capable at the time of the attack [of] distinguishing right from wrong”; and (3) even assuming “arguendo” that Murray’s declaration was inadmissible, there was sufficient evidence in the record to raise triable issues of material fact as to whether D. was legally insane when she attacked appellant, whether her conduct was willful for purposes of section 533, and therefore whether respondent owed the M. family a duty to defend or indemnify.^[8] Respondent did not seek reconsideration of this order. Instead, it filed a petition for writ of mandate to this court which we denied without opinion on October 29, 1999.

In April 2000, appellant and respondent filed cross-motions for summary judgment on the issue of coverage. Respondent’s second motion for summary judgment was a verbatim duplication of its earlier motion. Respondent’s separate statement of undisputed facts was also identical to the statement it filed in connection with its first motion for summary judgment. Both separate statements specifically called the trial court’s attention to the Policy exclusions for injuries “intended by an insured” and for “any illegal act committed by or at the direction of an insured.”

In her motion for summary judgment, appellant argued that Judge Zuniga’s prior denial of respondent’s earlier motion for summary judgment amounted to a dispositive ruling that respondent owed the M. family a duty to defend. In opposition to appellant’s motion, respondent argued that there was no potential for coverage under the Policy because appellant’s injury was not the result of an accident, D.’s conduct and actions were illegal, and D.’s subjective intent to harm someone other than appellant was irrelevant to the willfulness of her act. In reply to appellant’s procedural argument that

After the trial court issued a tentative ruling in favor of respondent, oral argument on the cross-motions took place on May 25, 2000. At the hearing, appellant’s attorney again argued that (1) respondent’s motion for summary judgment was procedurally barred by section 1008 as a tardy motion for reconsideration that failed to raise any new factual or legal arguments and was in fact identical to the earlier such motion; and (2) the undisputed facts of D.’s drug use and psychological instability at the time of the attack established at least a potential for coverage under the Policy, thereby triggering respondent’s duty to defend. Respondent replied that (1) its renewed motion for summary judgment was not procedurally barred because appellant had- stipulated to its filing; (2) the trial court was required to decide the issues raised by the motion because it was being heard at the outset of the bifurcated portion of trial on legal issues much like a motion to dismiss or for nonsuit; and (3) the evidence regarding D.’s mental condition did not contradict the fact that her acts and conduct were intentional, willful and illegal, and thus excluded from coverage both contractually and by statute.

Following the hearing, the trial court issued an order sustaining the tentative ruling. The trial court found that: (1) “as a matter of law” D.’s stabbing of appellant was “an illegal act,” coverage of which was “precluded by the illegal act exclusion” of the Policy; (2) her “pleas \sic\ of no contest to the charge of attempted murder is admissible in this action as an admission of an intentional act, since attempted murder is a specific intent crime”; (3) “[tjherefore, there was no potential for coverage, since the Policy excludes intentional acts”; and (4) respondent had no duty to defend or to indemnify.^[11] On this basis, Judge Kolin granted respondent’s motion for

Section 1008, subdivision (a) states the procedure for seeking reconsideration of a previous order. Section 1008, subdivision (b) sets out similar prerequisites for filing a renewed motion for an order that has previously been denied. Although the two subdivisions differ in certain minor details, each sets out the same essential requirements. Subdivision (a) provides that “any party affected” by a previous trial court order may, within 10 days after service of notice of entry of the order, make a motion for reconsideration thereof “based upon new or different facts, circumstances, or law,” on condition of filing an affidavit stating “what application was made before, when and to what judge, what order or decisions were made, and what new or different facts, circumstances, or law are claimed to be shown.” Similarly, subdivision (b) states that a party who has previously “made an application for an order which was refused in whole or part, or granted conditionally or on terms, may make a subsequent application for the same order upon new or different facts, circumstances, or law,” provided a showing is made to the court “by affidavit what application was made before, when and to what judge, what order or decisions were made, and what new or different facts, circumstances, or law are claimed to be shown.” Subdivision (d) in turn states that a violation of section 1008 “may be punished as a contempt and with sanctions.” Most significantly, subdivision (e) provides that section 1008 “applies to all applications to reconsider any order of a judge or court, or for the renewal of a previous motion,” and “specifies the court’s jurisdiction” with regard to this subject matter; and specifically declares that “[n]o application to reconsider any order or for the renewal of a previous motion may be considered by any judge or court unless made according to this section.”^[13]

Appellant contends that respondent’s second motion constituted a flagrant attempt to circumvent the trial court’s earlier order denying the same motion,

More recently, several courts have reconsidered and rejected this line of authority, concluding that to the extent it restricts a trial court’s inherent power to reconsider and correct its own interim rulings, section 1008 may be unconstitutional. (See Wozniak v. Lucutz (2002) 102 Cal.App.4th 1031 , 1042 [ 126 Cal.Rptr.2d 310 ] (Wozniak) [Second Dist., Div. Seven; “[w]e choose to follow that line of cases which recognizes that . . . section 1008 notwithstanding, the trial court retains the ability to reconsider its interim rulings and to change those rulings at any time prior to entry of judgment”]; Remsen v. Lavacot (2001) 87 Cal.App.4th 421 , 426 [ 104 Cal.Rptr.2d 612 ] (Remsen) [Fourth Dist., Div. Three; “the court’s inherent power to correct its own rulings is based on the California Constitution and cannot be impaired by statute”]; Case v. Lazben Financial Co., supra, 99 Cal.App.4th at pp. 178-179 [Second Dist., Div. Three; trial court’s inherent authority to reconsider its own earlier ruling sua sponte is derived from the California Constitution, and its jurisdiction to do so cannot be impaired by § 1008]; Hollander, supra, 98 Cal.App.4th at pp. 310-314 [Second Dist., Div. Four; courts have inherent constitutional power to control their order and business, including the power to correct their own interim rulings]; Darling, Hall & Rae v. Kritt (1999) 75 Cal.App.4th 1148 , 1156 [ 89 Cal.Rptr.2d 676 ] (Darling) [Second Dist., Div. Seven; “section 1008 does not govern the court’s ability, on its own motion, to reevaluate its own interim rulings,” and “trial court retains the inherent authority to change its decision at any time prior to the entry of judgment”]; People v. Costello (1998) 65 Cal.App.4th 1242 , 1246-1250 [ 77 Cal.Rptr.2d 314 ] [Fourth Dist., Div. One; a court has broad power, inherent in the California Constitution, to rehear, reconsider and correct its own interim rulings, and § 1008 cannot impair the exercise of this inherent power].)^[15]

Several of these cases have distinguished between a trial court’s inherent power to reconsider and correct its own prior rulings sua sponte, and the

Since Darling, however, at least two appellate courts have gone further and rejected the distinction between a court’s reevaluation of its interim orders upon its own motion, versus such a reconsideration upon the motion of the parties. In Remsen, supra, 87 Cal.App.4th 421 , the trial court had originally ruled that trust beneficiaries were entitled to interest on their bequests. Upon the motion of the trustees for reconsideration, the court later modified the order to hold the reverse. Acknowledging that the trustee’s motion for reconsideration of the prior order was on its face in violation of section 1008 because it was not based on new or different facts, circumstances or law, the Remsen court nevertheless affirmed the trial court’s modification and reversal of its own interim order upon the trustee’s motion. Division Three of the Fourth Appellate District specifically held that section 1008 could not restrict the trial court’s inherent power to reconsider and change its own interim ruling even though it did so upon the motion of a litigant, rather than upon its own motion sua sponte. (Remsen, supra, 87 Cal.App.4th at pp. 424-427.)^[17] Similarly, when Division Seven of the Second Appellate District revisited this issue recently in Wozniak, supra, 102

We agree with the principle enunciated in Darling, People v. Castello, and their progeny that trial courts have the inherent power to reconsider and correct their own interim decisions in order to achieve substantial justice. (Phillips v. Phillips (1953) 41 Cal.2d 869 , 874 [ 264 P.2d 926 ] [trial court may change its decision on law or facts at any time before judgment is entered]; Harth v. Ten Eyck (1941) 16 Cal.2d 829 , 833-834 [ 108 P.2d 675 ] [trial court had power to change previous order to serve the ends of justice, subject to review for abuse of discretion]; Bernstein, supra, 37 Cal.App.4th at p. 774 [same]; Nave v. Taggart (1995) 34 Cal.App.4th 1173 , 1177 [ 40 Cal.Rptr.2d 714 ] [same]; Ziller Electronics Lab GmbH v. Superior Court (1988) 206 Cal.App.3d 1222 , 1232 [ 254 Cal.Rptr. 410 ] (Ziller) [a trial court has jurisdiction “to reconsider and correct its erroneous interim rulings to achieve justice”].) It is clear to us that this power is derived from the California Constitution. (Cal. Const., arts. III, § 3, IV, § 1, V, § 1, VI, § 1 [providing for legislative, executive and judicial branches of government]; Manduley v. Superior Court (2002) 27 Cal.4th 537 , 557 [ 117 Cal.Rptr.2d 168 , 41 P.3d 3 ]; People v. Bunn (2002) 27 Cal.4th 1 , 14-16 [ 115 Cal.Rptr.2d 192 , 37 P.3d 380 ]; Case v. Lazben Financial Co., supra, 99 Cal.App.4th at pp. 183-185.)

Although the Legislature may enact statutes regulating the inherent powers of the courts, it may not do so in a way that would defeat or materially impair the courts’ exercise of their core constitutional powers and functions. (People v. Bunn, supra, 27 Cal.4th at pp. 14-16; Superior Court v. County of Mendocino (1996) 13 Cal.4th 45 , 52, 58-59 [ 51 Cal.Rptr.2d 837 , 913 P.2d 1046 ].) To the extent section 1008 bars trial courts from sua sponte reconsidering their own interim orders and decisions, it clearly hinders the core power of the judiciary to decide and resolve controversies between litigants. We agree with Division Three of the Second Appellate District that “if interpreted to eliminate a court’s jurisdiction to reconsider its interim orders on its own motion, section 1008 violates the separation of powers doctrine embodied in the California Constitution.” (Case v. Lazben Financial Co., supra, 99 Cal.App.4th at p. 185.)^[18] Consequently, we hold that the separation

Nevertheless, we must also conclude that by eliminating the distinction between a trial court’s action taken sua sponte and that made in response to a litigant’s motion, the more recent cases such as Remsen and Wozniak go too far toward eviscerating the clear jurisdictional language of section 1008, essentially rendering the provisions of the statute meaningless. We are constrained by two essential principles of statutory interpretation. First, in order to avoid encroaching on the legislative function, we may not simply disregard the language of a statute in defiance of the clear intent and policy judgments of the Legislature. (Kopp v. Fair Pol. Practices Com. (1995) 11 Cal.4th 607 , 661 [ 47 Cal.Rptr.2d 108 , 905 P.2d 1248 ]; Kollander, supra, 98 Cal.App.4th at p. 313; Razeto v. City of Oakland (1979) 88 Cal.App.3d 349 , 351 [ 151 Cal.Rptr. 791 ].) Second, if and when possible, a legislative enactment must be construed in such a way as to preserve its constitutionality. (Kraus v. Trinity Management Services, Inc. (2000) 23 Cal.4th 116 , 129 [ 96 Cal.Rptr.2d 485 , 999 P.2d 718 ]; Dyna-Med, Inc. v. Fair Employment & Housing Com. (1987) 43 Cal.3d 1379 , 1387 [ 241 Cal.Rptr. 67 , 743 P.2d 1323 ]; Case v. Lazben Financial Co., supra, 99 Cal.App.4th at p. 188; Kollander, supra, 98 Cal.App.4th at p. 313; Rowe v. Superior Court (1993) 15 Cal.App.4th 1711 , 1722 [ 19 Cal.Rptr.2d 625 ].)^[19]

Applying these principles, we conclude that section 1008 may reasonably be construed as intended to regulate the actions of parties to a

We believe that this construction of section 1008 may be reconciled with the reported decisions, largely from Division Two of this court, holding that the requirements of section 1008 are jurisdictional and exclusive. Significantly, all of these cases involved situations in which the disputed reconsideration, modification or reversal of a prior interim order was brought about upon the motion of a party litigant, and not by the trial court acting on its own motion. (Pazderka, supra, 62 Cal.App.4th at pp. 664-665, 669-670 [defendant moved for reconsideration of attorney fees award without compliance with § 1008]; Baldwin, supra, 59 Cal.App.4th at pp. 1197-1201 [same]; Garcia v. Hejmadi, supra, 58 Cal.App.4th at pp. 685-691 [trial court erroneously vacated summary judgment previously granted to defendant upon motion for reconsideration by plaintiff filed without a satisfactory showing of compliance with § 1008]; Gilberd v. AC Transit, supra, 32 Cal.App.4th at pp. 1498, 1502 [without complying with § 1008, trial court entered judgment dismissing plaintiff’s complaint after granting motion to reconsider previous order granting plaintiff relief]; Morite, supra, 19

In sum, and construing the language section 1008 in a manner consistent with the requirements of the California Constitution, we hold that the procedural prerequisites set forth for reconsideration of orders and renewal of motions previously denied are jurisdictional as applied to the actions of parties to civil litigation. As applied to the circumstances of this case—in which Judge Zuniga’s previous denial of summary judgment was clearly put in issue not on the trial court’s own motion but instead by the parties’ cross-motions for summary judgment and, more specifically, respondent’s verbatim reapplication for summary judgment—the provisions of section 1008 were jurisdictional and controlling.

On this record, then, we conclude that appellant’s jurisdictional argument is meritorious. The undisputed record shows there were no new facts, circumstances or legal authorities cited in respondent’s renewed motion for summary judgment filed in April 2000 which it had not previously presented in its original motion of July 1999. Significantly, respondent’s original motion for summary judgment before Judge Zuniga specifically cited the same two Policy exclusions for intentional and illegal acts upon which Judge Kolin subsequently based his decision granting the motion. Respondent gave no satisfactory explanation whatsoever for its failure to offer any new facts, circumstances or law, much less for its resubmission of the identical motion before a different judge. On their face, it is difficult to distinguish respondent’s proceedings below from the kind of brazen forum shopping section 1008 is specifically intended to bar. (Case v. Lazben Financial Co., supra, 99 Cal.App.4th at pp. 186-188.) We hold the trial court was jurisdictionally barred from considering respondent’s renewed motion for summary judgment, because it was not in compliance with the requirements of section 1008.

Substantive Error

Aside from the procedural and jurisdictional issues of its noncompliance with section 1008, the trial court’s grant of summary judgment upon respondent’s second motion also suffered from substantive errors which would independently require reversal. Because we must remand for further proceedings, we now address those issues for the guidance of the trial court.

In granting summary judgment, the trial court relied first on the Policy exclusion for “any illegal act commited [sz'c] by or at the direction of an insured” in determining “as a matter of law” that D.’s stabbing of appellant was “an illegal act” for which insurance coverage was precluded. Under the recent decisional authority of our Supreme Court, this determination can no longer stand: In Safeco Ins. Co. v. Robert S., supra, 26 Cal.4th 758 , the Supreme Court concluded that an insurance policy provision excluding coverage for an “illegal act”—for all intents and purposes identical to the one at issue in this case—was unenforceable under the controlling principles for the construction and interpretation of insurance contracts. The Supreme Court found the phrase “illegal act” may reasonably be construed either broadly to mean an act prohibited by any law, whether civil or criminal; or more narrowly, to imply a violation of criminal law only. On this basis, the Supreme Court concluded the exclusion was inherently ambiguous and incapable of being given any enforceable meaning. The court

In the first place, appellant offers no authority for the novel proposition that the denial of a defendant’s motion for summary judgment can affirmatively require entry of judgment for the plaintiff. At best, appellant points to case authority for the proposition that a duty to defend exists as long as there is any potential for coverage. (Buss v. Superior Court (1997) 16 Cal.4th 35 , 46-47 [ 65 Cal.Rptr.2d 366 , 939 P.2d 766 ]; Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287 , 295, 300-301 [ 24 Cal.Rptr.2d 467 , 861 P.2d 1153 ].) However, Judge Zuniga’s denial of respondent’s initial motion for summary judgment established nothing more than the existence of triable issues, of material fact to be finally determined at trial. The actual weighing of conflicting evidence by the factfinder is a process which can never take place in the context of a summary judgment motion. Only after the actual process of factfinding takes place can the ultimate issue be decided, i.e., whether the claim was actually covered. If the ultimate decision on that question is negative, then the duty to defend is necessarily also extinguished. Appellant is no more entitled than is respondent to entry of judgment on an issue that at this point remains to be decided.^[23]

Turning from appellant’s procedural arguments to those of substance, she contends the trial court erred in denying her own motion for summary judgment because respondent failed to demonstrate that the potential for indemnification coverage had been eliminated. In essence, she argues that respondent’s duty to defend the M. family was necessarily established by respondent’s failure to disprove the potential for coverage under the Policy, based on evidence of D.’s alleged mental disorder or incapacity. This argument, like appellant’s argument based on the denial of respondent’s motion for summary judgment, ignores the fact there has not yet been any final determination of the disputed factual issues upon which she bases her claim. The evidence of D.’s mental incapacity, whatever its strength, must be weighed against the opposing evidence, if any, respondent may offer.