Perez v. Century Indem. Co.

1

RAQUEL PEREZ et al., Plaintiffs and Appellants, v. CENTURY INDEMNITY COMPANY et al., Defendants and Respondents.

A167536

California Court of Appeals, First District, Second Division

May 24, 2024

NOT TO BE PUBLISHED

Alameda County Super. Ct. No. RG19025399.

Mayfield, J. ^[*]

The family of Antonio Perez, Sr., who died in 2015 of mesothelioma caused by workplace exposures to asbestos appeal a summary judgment in favor of two insurance companies. In the 1980s, the companies provided insurance to Universal Fleet Supply, Inc. (Universal), which sold asbestoscontaining brakes to Perez's employer. In 2003 Universal's corporate powers were suspended.

When Perez fell ill in 2013, plaintiffs filed a personal injury action against Universal, followed in 2016 by a wrongful death action. Each was tendered to the insurers. They declined to provide a defense, asserting plaintiffs' claims fell within a policy exclusion. Plaintiffs then secured default judgments against Universal totaling $41,000,000.

Plaintiffs next filed the present action against the insurers. They asserted a direct cause of action to recover on the judgments up to the policy limits. (Ins. Code, § 11580.) They also asserted causes of action assigned to them by Universal for bad faith denial of coverage, by which they sought to recover the full amount of the judgments.

The trial court granted summary judgment in favor of the insurers. It held that Universal, as a suspended corporation, lacked capacity to assert the bad faith claims; that plaintiffs, as its assignees, suffered the same incapacity; and that the limitations periods on the claims had thus expired. As for the direct claims, the court held they were barred by policy exclusions. We will affirm.

BACKGROUND

I. Underlying Alleged Facts

In the 1980s, Perez worked as a container chassis mechanic on the Oakland waterfront. His employer from 1982 to 1987, Transport System Services (Transport), purchased brakes with asbestos-containing pads from Universal. Universal employees delivered the brakes in a van. The brakes were often on a pallet, packed "pad to pad." As the van vibrated in transit, the pads rubbed together, releasing asbestos fibers.

Perez often unloaded brakes from Universal's delivery vans. Transport's facility was on a very windy estuary. When Perez would open the delivery vans' back doors, the wind would blow asbestos dust onto him. When he stepped into the vans to unload the brakes, he was further exposed to asbestos the brakes had released in the van. He also was exposed to asbestos by working with the brakes. The exposures were substantial factors contributing to his risk of developing mesothelioma.

For four years in which Perez was thus exposed, Universal had a primary insurance policy and either an excess or an umbrella policy (jointly secondary policy) issued by Century Indemnity Company and Ace Property &Casualty Insurance Company (the insurers). The policy limits for the four years total $6 million.

Each primary policy had an exclusion for harm caused by Universal's "products," defined as products it had "turned over to others." Each secondary policy had a similar exclusion for harm arising from "products hazard," defined as harm occurring "after physical possession of such products has been relinquished to others." Each primary policy also had an exclusion for harm arising from "use, maintenance, repair, or loading or unloading" of an automobile, while each secondary policy had an exclusion for "completed operations hazard," including harm arising "out of a condition in or on a vehicle created by the loading or unloading thereof." (We refer to the products and product hazard exclusions collectively as the product exclusions and the automobile use and completed operations hazard exclusions collectively as the vehicle exclusions.)

In 2003, Universal's corporate powers, rights, and privileges were suspended for nonpayment of taxes. (See Rev. &Tax. Code, § 23301 (section 23301).)

II. The Underlying Actions and Default Judgments

Plaintiffs^[1] pursued two actions against Universal: one for personal injury filed in 2013 while Perez was still alive, and one for wrongful death filed after Perez died in 2015.

A. The Personal Injury Action

In 2013, Perez was diagnosed with mesothelioma. He and his wife filed a personal injury action against Universal and others, claiming that exposure to asbestos from their products caused his mesothelioma. Two paragraphs of the complaint are relevant here. One alleged that Perez "was exposed to asbestos-containing dust from the inspection, adjustment, maintenance, repair, installation and replacement of asbestos-containing friction materials on container chassis" at workplaces including Transport (paragraph IX). Another alleged more broadly that in "the course and scope of his attendance and work, [Perez] was exposed to asbestos products and asbestos-related materials of defendants, which . . . proximately caused him to develop . . . mesothelioma" (paragraph X).

In 2014, Ron Short, a former vice president of Universal, tendered the personal injury action to the insurers. The insurers declined to provide a defense, citing the products exclusions.

Universal defaulted, and plaintiffs filed a request for entry of a default judgment. Shortly before a June 2015 prove-up hearing, plaintiffs submitted supplemental or amended declarations that described a theory of exposure which had not been articulated in the complaint. Plaintiffs contended Perez was exposed to asbestos fibers from Universal's brakes not only when installing, repairing, and replacing them, as alleged in paragraph IX, but also as he prepared to unload them from Universal's delivery van. At the prove-up hearing, plaintiffs offered supporting testimony from Perez's coworker Everett Darwin. Darwin described how, when Perez opened the door of and entered the van, he was exposed to asbestos that had been released as the brakes, packed in the van "pad to pad," rubbed together in transit.

The trial court entered a default judgment against Universal in June 2015 for nearly $19.5 million (later modified to roughly $19.3 million to reflect credits for plaintiffs' settlements with other defendants). The judgment described the complaint as alleging that Universal supplied asbestos brake products; that its brakes came in contact with Perez and his coworkers; that Perez" 'was exposed to asbestos-containing dust from the inspection, adjustment, maintenance, repair, installation and replacement' of Universal's 'asbestos-containing friction materials' "; and that the exposures" 'caused him to develop' mesothelioma." The judgment stated, "Universal's failure to answer the complaint, allowing instead its default [to] be taken, constitutes an 'admission' of these material facts." A section headed "Liability Evidence" stated, among other things, that on "numerous occasions," Perez "helped unload Universal's dusty brakes when they were delivered." A section headed "Findings" stated, "On liability, the Court accepts the truth of plaintiffs' factual allegations and finds that those allegations are supported by the evidence presented at the hearing (as summarized above)."

B. The Wrongful Death Action

Perez died in September 2015. In 2016, his widow and children filed a wrongful death action against Universal. The insurers again declined to provide a defense, citing the product exclusions. Universal again defaulted, and plaintiffs requested entry of a default judgment "under principles of issue preclusion" based on the personal injury judgment.

In June 2017, the trial court entered a default judgment. It described the wrongful death complaint as alleging Universal "supplied brake products that exposed . . . Perez to asbestos" in a way increasing his risk of mesothelioma, and it held that Universal's default "constitutes an 'admission' of these material facts." Under "Findings," the judgment stated, "On liability, this Court accepts the truth of Plaintiffs' factual allegations and [of] the findings set forth in the Amended Default Judgment" in the personal-injury action. The court awarded plaintiffs just over $22 million in damages.

III. The Present Action

On July 1, 2019, Universal purportedly assigned to plaintiffs any claims it had against the insurers for breach of the implied covenant of good faith and fair dealing based on their refusal to defend the personal injury and wrongful death actions. On the same date, plaintiffs filed this action against the insurers.

The operative third amended complaint, filed in 2021, asserted two direct causes of action and three assigned causes. The direct claims sought recovery on the default judgments up to the relevant policy limits (Ins. Code, § 11580, subd. (b)) and damages for the insurers' refusal to pay the default judgments against their insured, which assertedly made the insurers liable for the fees and costs plaintiffs incurred to enforce those judgments. (See Brandt v. Superior Court (1985) 37 Cal.3d 813.) The assigned claims sought damages for the insurers' breach of the duty of good faith and fair dealing owed to Universal based on their failure to defend and settle the underlying actions.

A. Summary Adjudication of the Assigned Causes of Action

In November 2021, the insurers moved for summary adjudication of the assigned causes of action based on the statute of limitations. The insurers contended that at the time plaintiffs filed this action in July 2019, the suspension of Universal's corporate privileges deprived it of capacity to sue and plaintiffs, as Universal's assignees, stood in its shoes and also lacked capacity to assert the assigned claims. The limitations periods on Universal's claims had thus expired in ...