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An appellate court in California has ruled that an auto insurer was not responsible under the “tort of another” doctrine for attorneys’ fees incurred by a couple whose car allegedly had been damaged by its insured.

The Case

According to Wesley and Julia Yu, Venkat Iyer negligently drove his car into a parked Hyundai Tucson leased by the Yus. The Yus were not present, and no one was injured, but Mr. Iyer left a note acknowledging fault and indicating he was insured by GEICO.

Mr. Yu notified GEICO of the accident and obtained a claim number. The Yus said that GEICO promised Mr. Yu it would “handle the claim and pay for all the damages” that they sustained.

Mr. Yu then had the vehicle towed to Final Touch Collision Center.

Mr. Yu and Final Touch entered into an agreement in which Final Touch promised to inspect Mr. Yu’s vehicle for an estimated $5,391, comprising $3,500 for “tear down,” $466 for “tow,” $250 for “load & unload,” $200 for “debris clean up,” $200 for “non-driveable/moveable,” $150 for “wrap and store components,” $175 for “dolly fee,” and $450 for “transfer to & from offsite storage.” Mr. Yu authorized the work and acknowledged that Final Touch would place a lien on the car to secure the cost of inspection and repairs.

Mr. Yu also agreed that should he “not pick up [the] vehicle within 48 [hours] of notice of completion or stoppage of work, additional storage charges [would] accrue at $125.00 per day. Should no repairs be performed . . . for whatever reason,” Mr. Yu agreed that “storage charges [would] accrue at $125.00 a day for each day [the] vehicle [was] in the shop.”

Three days after the accident, GEICO inspected the car and approved and paid for the pre-repair inspection.

Nineteen days later, Final Touch requested that GEICO reinspect the car. GEICO did so, and deemed it to be a total loss. Final Touch then submitted an itemized list of charges to GEICO. The insurer disputed some of the charges as being for unnecessary or unperformed services. It authorized only $2,422.29 and requested a refund from the amount it previously had paid.

Final Touch refused to refund any money to GEICO, and instead demanded an additional payment to cover storage costs that had been accruing at a rate of $125 per day. Final Touch also claimed a garageman’s lien on the vehicle, refused to release the car until storage charges were paid, and sued the Yus and Hyundai Lease Titling Trust to enforce its lien.

The Yus resisted enforcement of the lien and cross-complained against Final Touch for breach of contract and conversion, alleging that Final Touch had overcharged for repairs and had deliberately delayed repairs to drive up storage charges. The Yus also cross-complained against Mr. Iyer and GEICO, alleging that their negligence had caused the Yus to incur attorneys’ fees prosecuting their cross-complaint and defending against the Final Touch lien foreclosure complaint.

The trial court granted nonsuit in favor of Mr. Iyer and GEICO, concluding that Mr. Iyer’s driving had not been the proximate cause of the Final Touch lawsuit and that GEICO owed no duty to the Yus because it was not their insurer.

The Yus appealed, arguing that the nonsuit was improper because Mr. Iyer’s and GEICO’s negligence had proximately caused them to incur attorneys’ fees defending against the Final Touch lawsuit, fees for which Mr. Iyer and GEICO were liable pursuant to the “tort of another” doctrine, which holds that when a tortfeasor’s negligence caused the victim to become involved in litigation with a third party, the victim may recover from the tortfeasor attorneys’ fees incurred in that litigation.

The Appellate Court’s Decision

The appellate court affirmed.

In its decision, the appellate court first rejected the Yus’ contention that Mr. Iyer was liable under the tort of another doctrine for their attorneys’ fees spent defending against the Final Touch lawsuit because the Final Touch lien was a natural and proximate consequence of Mr. Iyer’s allegedly negligent driving.

The appellate court reasoned that Mr. Iyer’s allegedly negligent driving subjected him to liability for damage to the Yus’ car, but not for attorneys’ fees they might incur in a lawsuit to recover those damages. Final Touch, the appellate court continued, was “even further removed, as its transaction involved not damage to the car but failure to repair the damage.” The tort of another doctrine did not extend to the “litigation expenses incurred by all persons, however connected to any tortious event, whom the injured plaintiff elects to sue who succeed in establishing lack of liability.”

The appellate court added that attorneys’ fees incurred in litigation caused by the tort of another may be recovered only when the litigation was the “natural and proximate consequence” of the tort. Here, it ruled, the only natural and proximate consequence of Mr. Iyer’s allegedly negligent driving was damage to the Yus’ vehicle. He could not foresee, and it was thus not a “natural” consequence, that the Yus would thereafter abandon their vehicle at a mechanic’s shop and refuse to pay for repair and storage, the appellate court stated.

The appellate court then rejected the Yus’ negligence cause of action against GEICO based on a duty of care arising from its alleged promise – directly to the Yus – to pay for repairs to their car. The appellate court reasoned that the Yus alleged that GEICO owed them an obligation to pay for repairs to their car – an obligation that sounded only in contract. The tort of another doctrine did not apply because the Yus alleged no facts giving rise to a tort duty, the appellate court ruled.

Finally, the appellate court rejected the Yus’ argument that a duty of care arose when GEICO voluntarily undertook to pay for repairs. It reasoned that the Yus’ offer to prove that GEICO had promised as Mr. Iyer’s insurer to pay for repairs to their car, if proven, would establish only that GEICO’s promise “was preemptive, not that it was voluntary.”

Therefore, the appellate court concluded, nonsuit had been properly granted by the trial court.

The case is Yu v. Geico General Ins. Co., No. B270303 (Cal. Ct.App. Dec. 13, 2017). Attorneys involved include: Law Offices of Roger C. Hsu, Roger C. Hsu, and Joseph M. Liu for Cross-complainants and Appellants. Gilbert, Kelly, Crowley & Jennett, Freeman Mathis & Gary, Timothy W. Kenna, Rebecca J. Smith, and Kristin A. Ingulsrud for Cross-defendant and Respondent Venkat Iyer. Tharpe & Howell, Charles D. May, and Eric B. Kunkel for Cross-defendant and Respondent GEICO Insurance Company.

About The Author

Steven A. Meyerowitz, Esq., is the Director of FC&S Legal, the Editor-in-Chief of the Insurance Coverage Law Report, and the Founder and President of Meyerowitz Communications Inc. As FC&S Legal Director, Mr. Meyerowitz, a member of the team that conceptualized FC&S Legal, provides daily analysis and commentary on the most significant insurance coverage law decisions from courts across the country and news regarding legislative and regulatory developments. A graduate of Harvard Law School, Mr. Meyerowitz was an attorney at a prominent Wall Street law firm before founding Meyerowitz Communications Inc., a law firm marketing communications consulting company.