Defense attorneys hope a published opinion issued last week by a California appellate court will curb a tactic used by plaintiff’s attorneys to steer minor cases to small claims court in hopes of winning default judgments that carriers won’t bother to appeal.
The California Fourth District Court of Appeal ruled Thursday in a published opinion that insurers have a right to appeal small claims court decisions when a default judgment is entered against a policyholder.
Insurance defense attorney Harry W.R. Chamberlain II said that principle is already clearly established in statute, but plaintiff’s attorneys are also well aware that sometimes judges get it wrong. Chamberlain said that’s exactly what happened after Vanessa Gonzalez filed a small claims action against Jonathan Johnson for damages in a motor vehicle accident in Orange, California.
Johnson did not show up for the hearing so the small claims judge awarded Gonzalez $10,000, the maximum amount allowed in small claims, plus $140 in costs. Johnson’s carrier, Pioneer Pacific Insurance Co. appealed that ruling toOrange County Superior Court, but temporary Judge Carmen Luege ruled that Code of Civil Procedure section 116.710(d) precludes defendants from appealing small claims judgments.
Chamberlain said it probably would have been easy for Pioneer Pacific to pay the claim and move on, but instead they filed an “extraordinary writ of mandate” asking the appellate court to intervene. Chamberlain said ordinarily, small claims actions cannot go beyond the superior court.
But in this case, attorneys Dwayne S. Beck and James W. Colfer decided to fight back. “They didn’t want to be shaken down every six months on this,” Chamberlain.
Chamberlain joined the effort by filing an amicus brief on behalf of the Association of Southern California Defense Counsel.
The defense lawyers said in their briefs — and the Fourth District agreed — that the legislature recognized insurers are at a disadvantage when defending claims in small claims court because they are not allowed to send attorneys. Subsection (d) of the statute states that the defendant cannot appeal a decision in small claims if he or she failed to attend a hearing. But subsection (c) states that an insurer can appeal a default judgment of more than $2,500 to the superior court.
The 4th District opinion said lawmakers recognized when they adopted the current small claims statute in 1990 that insurers needed a way to defend themselves against default actions. “The Legislature expressed its intent that insurers be able to protect themselves in situations where their insureds are ‘unable or not motivated’ to defend a small claims action,” the opinion states.
Plaintiff’s attorney Shaun Bauman of Los Angeles said the appellate court has got it wrong. He said Pioneer Pacific should have filed a petition to vacate the Superior Court’s ruling instead of taking the case up to the appellate court.
Bauman said a previous attorney had sent notice to Pioneer Pacific about Gonzalez’s claim. If the carrier had done its due diligence, it would have sent a reservation of rights letter to the policyholder informing him that it would not accept liability for the claim if he didn’t defend himself in small claims court, he said.
Bauman said the impact of the 4th District’s opinion will be to give insurers greater rights than claimants.
“We are going to appeal this decision because it doesn’t make sense,” he said.
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