CCC contends the law is well established that an employer can sue its workers' compensation insurance carrier for breach of contract and the implied covenant of good faith and fair dealing, where the carrier has failed to provide benefits under the policy and has done so in bad faith. CCC relies on Security Officers Service, Inc. v. State Compensation Ins. Fund (1993) 17 Cal.App.4th 887 [ 21 Cal.Rptr.2d 653] ( Security Officers), and its progeny, including MacGregor Yacht Corp. v. State Comp. Ins. Fund (1998) 63 Cal.App.4th 448 [ 74 Cal.Rptr.2d 473] ( MacGregor Yacht). SCIF contends these cases are inapplicable.
Claim reserves also impact whether an insured receives a dividend or not." ( MacGregor Yacht Corp. v. State Comp. Ins. Fund (1998) 63 Cal.App.4th 448, 457 [ 74 Cal.Rptr.2d 473], review den. July 29, 1998.) By implication, the jury in the instant case found SCIF had failed to estimate reasonable claim reserve levels, resulting in Notrica paying higher premiums and receiving lower dividends.
It does not apply to the carrier's right of subrogation. See also Notrica v. State Comp. Ins. Fund (1999) 70 Cal.App.4th 911 [ 83 Cal.Rptr.2d 89]; MacGregor Yacht Corp. v. State Comp. Ins. Fund (1998) 63 Cal.App.4th 448 [ 74 Cal.Rptr.2d 473]; Lance Camper Manufacturing Corp. v. Republic Indemnity Co. (1996) 44 Cal.App.4th 194 [ 51 Cal.Rptr.2d 622]; Tricor California, Inc. v. State Compensation Ins. Fund (1994) 30 Cal.App.4th 230 [ 35 Cal.Rptr.2d 550]. In Security Officers, the plaintiff insured sued State Fund for its systematic failure to process claims diligently and its unreasonable inflation of the reserves assigned to those claims.
Plaintiffs assert that the evidence clearly shows dividends were promised to shareholders and expected, and thus were part of the benefit-of-the-bargain, and that lost dividends are generally available in cases of corporate wrongdoing. Pls.' Mot. for Rec. at 8 n.11 (citing MacGregor Yacht Corp. v. State Comp. Ins. Fund, 74 Cal.Rptr.2d 473 (Cal.Ct.App. 1998); Patton v. Nicholas, 279 S.W.2d 848, 854, 857 (Tex. 1955); Lehman v. Eldridge, 2013 WL 12059613, at *3 (S.D. Fla. Dec. 11, 2013)).
Still other cited cases do not involve tort damages. ( MacGregor Yacht Corp. v. State Comp. Ins.Fund (1998) 63 Cal.App.4th 448, 456-458 [ 74 Cal.Rptr.2d 473] [contract damages for improper claims handling and premium assessments]; Mission Ins. Group, Inc. v. Merco ConstructionEngineers, Inc. (1983) 147 Cal.App.3d 1059, 1062 [ 195 Cal.Rptr. 781] [equitable accounting ordered to determine how insurer calculated the dividend].) The holding thus applies only to retroactive billing cases in which the billing is separate and distinct from any allegations of claims mishandling.
While SCIF apparently did not raise section 11758 as a defense in that case, the court rejected SCIF's tort immunity claim, and stated the "insurer may be liable if it processes claims and sets reserves without good faith regard for their impact on the insured's premiums." ( Security Officers Service, at pp. 890, 892; see Notrica v. State Compensation Ins. Fund (1999) 70 Cal.App.4th 911, 921, 925, 956 [reversing punitive damages award but otherwise affirming judgment against SCIF, including jury's implicit finding SCIF had failed to estimate reasonable claim reserves, resulting in Notrica's paying higher premiums and receiving lower dividends]; MacGregor Yacht Corp. v. State Compensation Ins. Fund (1998) 63 Cal.App.4th 448, 453, 456-459 [upholding trial court ruling that SCIF breached the implied covenant of good faith and fair dealing by improperly overestimating claims reserves and ineffectively investigating claims leading to higher experience modification factor and thus higher premiums]; Lance Camper Mfg. Corp. v. Republic Indemnity Co. of America (1996) 44 Cal.App.4th 194, 197, 203 [insured challenging claims-handling practices that increased the insurer's reported losses, which resulted in higher premiums, higher reserves, and lower dividends, could pursue breach of contract and implied covenant of good faith and fair dealing claims without exhausting administrative remedies]; Tricor California,Inc. v. State Compensation Ins. Fund (1994) 30 Cal.App.4th 230, 233, 242 [claim that SCIF engaged in bad faith in settling individual policy claims to artificially inflate its reserves and Tricor's premiums, and deflate Tricor's dividends was not a rate-setting dispute, and could be pursued as a civil claim without exh
"`[A] particular reserve amount may be substantially more or less than the amount ultimately paid on a particular claim.'" ( MacGregor Yacht Corp. v. State Comp. Ins. Fund (1998) 63 Cal.App.4th 448, 457, hereinafter, MacGregor.) Republic's theory of the lack of substantial evidence of its breach of contract, however, goes where no case has gone before.
Peoples Security Life Ins. Co. v. Monumental Life Ins. Co., 991 F.2d 141, 148 (4th Cir. 1993) ("Actuarial tables are the life's blood of the life insurance industry. It is disingenuous for [the defendant] to question the accuracy of the very methodology employed by the industry in issuing its policies simply because actuarial tables were used to determine [an adverse award]."); MacGregor Yacht Corp. v. State Compensation Ins. Fund, 63 Cal.App.4th 448, 460, 74 Cal.Rptr.2d 473 (1998) ("There was nothing speculative about the actuary's damage analysis. He used the same formulas used by the insurance industry. . . .").
The tort of bad faith is not predicated on negligence, and for this reason subsequent courts of appeal have held the Lesher "trial-within-a-trial" rule inapplicable where the judgment against the insured has resulted not "upon negligent malpractice of a defense actually undertaken," but on the bad faith failure to provide any defense at all. Amato, 61 Cal.Rptr.2d at 917; see MacGregor Yacht Corp. v. State Comp. Ins. Fund, 74 Cal.Rptr.2d 473, 479 (Ct.App. 1998), rev. denied. The distinction is a reasonable one.
(See Sonic Manufacturing Technologies, Inc. v. AAE Systems, Inc., supra, 196 Cal.App.4th at p. 466.) Instead, Transnational merely rehashes the evidence. (See Paterno v. State of California (1999) 74 Cal.App.4th 68, 102 [plaintiff's attack on the defendants' evidence at trial was "no more than a rehash of arguments about the strength of the evidence, which is not open on appeal"]; MacGregor Yacht Corp. v. State Comp. Ins. Fund (1998) 63 Cal.App.4th 448, 458 [defendant's improper "attempts to rehash conflicts in the evidence" ignored "the well[-]established principle that an appellate court may not reweigh the evidence or determine the credibility of witnesses where the evidence at trial was in conflict"].) Transnational also argues the trial court failed to address certain of its challenges to Pegasus's "claimed unpaid ferry flights," but the court in its statement of decision found Pegasus substantiated its claim that 334.4 hours were for unpaid repositioning flights.