21st Century Ins. v. Super. Ct.

Filed 6/14/07 21st Century Ins. v. Sup. Ct. CA4/1
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COURT OF APPEAL - FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
21 ST CENTURY INSURANCE
COMPANY,
Petitioner,
v.
THE SUPERIOR COURT OF SAN
DIEGO COUNTY,
Respondent;
D049430
(San Diego County
Super. Ct. No. GIC857010)
SILVIA QUINTANA,
Real Party in Interest.
PROCEEDINGS in mandate after the superior court denied petitioner's demurrer
to first amended complaint. Kevin A. Enright, Judge. Petition granted.
21st Century Insurance Company (21st Century) petitions for a writ of mandate
challenging the trial court's denial of its demurrer to the first amended complaint filed by
Sylvia Quintana. The legal issue in this case is identical to the issue in Allstate Insurance

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Company v. Superior Court (Delanzo) (2007) __ Cal.App.4th ___, filed simultaneously
with this opinion. Based on Delanzo, we conclude the court erred in overruling 21st
Century's demurrer. We thus grant 21st Century's petition for writ of mandate, and order
the court to vacate its order overruling 21st Century's demurrer and enter a new order
sustaining the demurrer.
FACTUAL AND PROCEDURAL BACKGROUND
Quintana filed a class action complaint against 21st Century, her former
automobile insurer. As amended, the complaint alleged that Quintana's former
automobile policy with 21st Century included first party, no-fault medical payments
insurance coverage (med-pay coverage).
On December 8, 2003, Quintana allegedly suffered injuries resulting from an
automobile accident with a third party. Under the policy's med-pay coverage provisions,
21st Century paid $1,000 to Quintana. Quintana then settled her claim against the third
party tortfeasor for $6,000, and received the settlement payment in full. Quintana
allegedly incurred attorney fees of $2,000 and costs of $106.50 (for a total of $2,106.50)
to obtain this settlement.
21st Century then requested that Quintana repay the $1,000 under 21st Century's
reimbursement provision, which states: "REIMBURSEMENT TO US - PART II [¶] If
we make any payment under this Part and the person insured or for whom the payment is
made recovers damages from another person or organization, the person insured shall:
[¶] 1. hold in trust for us the proceeds of the recovery; and [¶] 2. reimburse us to the
extent of our payment." (Boldface omitted.)

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In response, Quintana paid 21st Century $600, which 21st Century agreed was in
full satisfaction of its claim. 21st Century agreed to the reduction based on the "common
fund" rule that an insurer is required to deduct from its reimbursement a pro rata portion
of the insured's attorney fees incurred to recover covered losses against a third party
tortfeasor when the insurer had knowledge of, but did not participate in, the litigation.
(See Lee v. State Farm Mut. Auto. Ins. Co. (1976) 57 Cal.App.3d 458, 466-469.)
Based on these facts, Quintana alleged four causes of action: (1) violation of
Business and Professions Code section 17200, (2) conversion, (3) unjust enrichment, and
(4) declaratory relief. The legal basis for each cause of action was Quintana's assertion
that 21st Century's claim for reimbursement was improper and unlawful because
Quintana was not first "made whole" by the third party settlement ($6,000) plus the
amount received from 21st Century ($1,000), when taking into account the attorney fees
and costs incurred to obtain the settlement ($2,106.50). Quintana did not dispute that the
third party settlement ($6,000) reflected full compensation for her injuries, but alleged
she was not made whole by this amount because her total gross recovery of $7,000
($6,000 from the settlement plus $1,000 from 21st Century), minus the costs and attorney
fees ($2,106.50), was less than $6,000.
Quintana sought to represent the class of "all California insureds, past and present,
of [21st Century] who: 1) were not made whole after deducting attorney's fees and costs
from the money they received from the resolution of their claims against third party
tortfeasors; 2) the amount paid by [21st Century] to or on behalf of such insureds
pursuant to the medical payments coverage contained in their personal automobile

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insurance policies was less than the amount paid by such insureds for such attorney's fees
and costs; and 3) such insureds paid [21st Century] money in response to its demand for
reimbursement of payments it paid under such medical payments coverage."
21st Century demurred to the complaint, arguing that Quintana's claims did not
state a cause of action under any legal theory because, under California law, the made-
whole doctrine does not include a consideration of attorney fees and costs in determining
whether a med-pay insured was made whole. 21st Century argued that Quintana's view
of the made-whole rule as including a consideration of these expenses was improper
because it conflicted with the settled "equitable apportionment" or "common-fund" rule
that an insurer's reimbursement is subject to the requirement that it pay a proportionate
amount of the insured's attorney fees incurred in obtaining the recovery. The trial court
overruled the demurrer.
21st Century filed a petition for writ of mandate, challenging the court's order.
The parties asserted the same arguments as those asserted in the Delanzo case. Quintana
was represented by the same counsel as was the insured in the Delanzo case and 21st
Century was represented by the same counsel as was the insurer in the Delanzo case. We
issued an order to show cause, and issued an order stating 21st Century's writ petition
would be considered with the Delanzo case, as well as with three other writ petitions
raising the identical legal issue.

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DISCUSSION
In Delanzo, supra, __ Cal.App.4th __, this court held that, in applying the made-
whole doctrine in the context of med-pay coverage, the insured's attorney fees and costs
incurred to obtain a recovery from a third party are not deducted from the insured's total
recovery amount for purposes of determining whether the insured was made whole for
his or her losses. Each of Quintana's claims are predicated on Quintana's assertion that
she was not made whole because she was required to bear her attorney fees and costs in
settling with the third party. Under Delanzo, Quintana's claims do not state a valid cause
of action under California law. We thus grant 21st Century's petition for writ of mandate,
and order the court to vacate its order overruling defendant's demurrer and enter a new
order sustaining the demurrer.1
1 As in Delanzo, we deny Quintana's request that we take judicial notice of 21st
Century's insurance filings. Because we do not consider 21st Century's argument that
including attorney fees in the made -whole calculation will result in higher premium rates
for med-pay coverage, the judicial notice materials are not relevant to our determination
in this case.

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DISPOSITION
Petition for writ of mandate granted. This court issues a writ of mandate directing
the superior court to vacate its order overruling 21st Century's demurrer and enter a new
order sustaining the demurrer. The parties to bear their own costs in the writ proceeding.
The stay issued on November 3, 2006 is vacated.
HALLER, J.
I CONCUR:
M C DONALD, J.

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NARES, Acting P.J., dissenting:
For the reasons expressed in my dissent in Allstate Insurance Company v.
Superior Court (Delanzo) (2007) __ Cal.App.4th ___, I respectfully dissent from the
majority's opinion.
NARES, Acting P. J.

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