Lance Camper Mfg. Corp. v. Republic Indemnity Co. of America

LANCE CAMPER MFG. CORP., Plaintiff and Appellant, v. REPUBLIC INDEMNITY COMPANY OF AMERICA, Defendant and Appellant.
No. B131976 (Los Angeles County Super. Ct. Nos. BC063097, BC134996) California Court of Appeal Second Appellate District Division Two Filed July 23, 2001
CERTIFIED FOR PARTIAL PUBLICATION*
        APPEALS from a judgment of the Superior Court of Los Angeles County. Richard C. Hubbell, Judge. Affirmed as modified.
        Horvitz & Levy, Christina J. Imre, H. Thomas Watson; Crosby, Heafey, Roach & May, Christina J. Imre, Raymond A. Cardozo; Hancock, Rothert & Bunshoft, Ray L. Wong and Vipal Patel for Defendant and Appellant.
        Finnegan, Marks & Hampton, Michael A. Marks and Ellen Sims Langille for California Workers' Compensation Institute as Amicus Curiae on behalf of Defendant and Appellant.
        Mahoney, Coppenrath & Jaffe, Walter G. Coppenrath, Jr., Howard M. Jaffee, Arthur L. Martin; Sheldon & Mak, Marilyn M. Smith; Edward J. Horowitz for Plaintiff and Appellant.

INTRODUCTION         A workers' compensation insurer, Republic Indemnity Company of America (Republic), appeals after a jury awarded $6.3 million in compensatory and punitive damages in an insurance bad faith and breach of contract action brought by an insured employer, Lance Camper Manufacturing Corporation (Lance Camper).
        Contrary to the Republic's contentions, the award of contract damages is supported by substantial evidence, and no instructional error occurred regarding the concept of bad faith. There is no requirement that Lance Camper establish Republic's conduct in setting reserves was inconsistent with what another "reasonable insurer" might do. Rather, the standard as to reserves is that they must be set at the reasonable expectation of the claim's value. Nor is there any merit to Republic's invitation essentially to judicially legislate a new theory limiting the tortious breach of the implied covenant of good faith and fair dealing only to violations of a public duty independent of the contract. And the jury was properly instructed on punitive damages, which were supported by clear and convincing evidence.
        We also find largely unavailing Lance Camper's cross-appeal seeking prejudgment interest on certain attorney fees and recovery of several additional cost items. The trial court properly denied the requested prejudgment interest and did not abuse its discretion as to costs, except as to court reporter fees that are mandated by statute.
        In the published portion of this opinion, we address only breach of contract and tort damages issues. (See fn. *, ante, p. 1.)

FACTUAL AND PROCEDURAL SUMMARY         Lance Camper is a leading manufacturer of campers that fit on pickup trucks. The company employs approximately 320 people, many of whom have been with the company for over 20 years. Lance Camper has a formal safety program with, for example, regular safety meetings and safety instructions to its managers.

Summary of Lance Camper's insurance policies
        In the early 1980's, Lance Camper placed its workers' compensation insurance with State Fund. At that time, its premiums were approximately $30,000 per year. After five years, Lance Camper left State Fund when that company announced it would no longer pay dividends. Lance Camper then briefly had its policy with Safeco and thereafter with Republic, a company with California offices in Encino (the home office), San Francisco and San Diego.
        Lance Camper switched from Safeco to Republic after receiving an unsolicited call from an insurance agent, Ron Bloom, whose agency was the largest producer of premium business for Republic. Although Bloom acknowledged that dividends were not guaranteed, he asserted that Republic paid very good dividends, had an outstanding history of dividend payments, and would properly manage Lance Camper's claims.
        Beginning September 5, 1986, Lance Camper purchased a series of one-year policies from Republic. Lance Camper opted to pay Republic a 2.5 percent charge in addition to its annual premium, a total of $30,000 extra on the overall premiums, to include a provision in the policies that established three consecutive annual dividend calculation dates under each policy. Otherwise, there would have been only one calculation for each policy, 15 months after the end of each policy's year. The additional dividend calculations would have the effect of providing additional dividends to Lance Camper for claims closed after the first dividend calculation date and before the third annual calculation date.
        Each of the policies issued to Lance Camper provided: "[Republic has] the right and duty to defend at [Republic's] expense any claim, proceeding or suit against you for benefits payable by this insurance." The policies also provided: "[Republic] will pay promptly when due the benefits required of you by the Workers' Compensation Law."
        During the three and one-half years Lance Camper was insured by Republic, Lance Camper paid Republic $1,233,940 in premiums and received $245,451 in dividends. None of Lance Camper's policies for any year ever involved claim expenses that exceeded the premiums Lance Camper paid.
        During the years Lance Camper was insured by Republic, its experience modification factor (x-mod) ¹ dropped consistently. The first year's rating, 131, was based on the four years preceding the issuance of Republic's first policy. The second year's rating was 130, and did not involve any claims handled by Republic. The third year's rating was 101, and involved only four claims handled by Republic.
        After 1984, there were no serious work-related injuries at Lance Camper. Between September of 1986 and April of 1989, Bloom's insurance agency sent Lance Camper copies of current loss runs issued by Republic, noting that Lance Camper was doing well regarding its workers' compensation claims.
        Ultimately, Lance Camper's annual premiums with Republic were over $500,000. After three and one-half years with Republic, Lance Camper chose to become self-insured, effective February 5, 1990.

Republic's general administration of claims and setting of reserves and dividends
        Republic's board of directors had the responsibility to make decisions regarding dividends. However, there was no indication the board ever approved or discussed any of Republic's decisions concerning dividends as to any insured. Instead, dividend decisions were made by Republic's senior staff, and were never discussed, voted upon, or entered in the minutes of the board of directors. Meetings of the senior staff were informal, with no notes retained or minutes taken. And the bonus structure for the senior executives was based upon Republic's underwriting profits, as distinguished from its investment or other income.
        Republic had no written procedures concerning diary slips for claim files, and no training course as to how to handle claims files. Many (but not all) Republic employees acknowledged the absence of any written procedure or claims manual. It was considered very unusual for an insurance company not to have a claims manual. One of Republic's assistant claims managers asserted that Republic did not need a claims manual because "We believe in communication."
        A letter in August of 1987 from David Mitchell, senior vice-president of claims at Republic, to Jack Cole, president of Lance Camper, confirmed Republic's reliance on communications. Republic's letter acknowledged, in pertinent part, that although it attempted to provide the best claims service possible, "From time to time, it is possible that confusion between our companies can be created as a result of a lack of communication. We would encourage you to contact our company's claims administrator to assist you in handling any special problems or situations which may arise."
        However, Republic had an unwritten policy to refuse sit-down reviews with insureds that no longer had active policies with the company. Republic also denied its insureds the right to examine original claim files because, as one claims manager memo explained, it was "our first level of defense." Republic relied on the fact that nothing in the terms of its insurance policies required such disclosure, and the company claimed the contents of its files were privileged and confidential.
        According to several claims supervisors at Republic, the company had no written document on how to set reserves. ² Employees were sent to insurance education association schools to learn about setting reserves, and Republic had "no set policy" concerning procedures for setting reserves. One of the claims supervisors asserted that a senior vice-president of claims at Republic told him to set reserves to anticipate what the closure amount would be, based upon the facts in the file at the time of setting.
        One claims supervisor at Republic explained that he was not aware of any written policy or procedure that required examiners and supervisors to document any justifications for changing reserves. But he thought that anyone who changed a reserve should at least put the calculations in the file. Republic did receive complaints from various policyholders that it had changed reserves at times shortly before dividends were to be calculated.

Extra charges and the retroactive fee
        Republic had a policy, undisclosed to its insureds, of adding a $2,500 charge for expenses to every claim that remained open after a policy period had ended, other than a medical only or one-shot claim, regardless of the actual amount of administrative expenses involved in the claim. The $2,500 charge had been in effect for many years, though it was never approved by any resolution of the board of directors. Republic's dividend disclosure statements did not specifically refer to the practice. And since Republic multiplied all losses on Lance Camper's cases by the 1.15 loss conversion factor, the $2,500 charge actually totaled $2,875.
        Republic also imposed an incurred but not reported (IBNR) fee, which constituted a present charge for claims that might be submitted in the future. Other carriers often imposed such an additional reserve fee. But Republic initially stated it would not impose this fee. In December of 1987, Republic's senior vice-president sent a letter to the company's producers stating that Republic had "a very good year," with premiums exceeding $240 million, compared to only $69 million five years earlier. Although Republic acknowledged that the letter meant that it would not impose an IBNR charge, two months later Republic's senior staff (with no meeting of the board of director) imposed a retroactive IBNR charge of 7.8 percent against all insureds in Los Angeles, Orange and Ventura counties. Republic sent to its producers (but not its insureds) notice of the change to impose the IBNR charge.
        In August of 1988, Lance Camper learned for the first time from its insurance agent (i.e., Republic's producer, Bloom) of the 7.8 percent IBNR, which had been imposed six months earlier. Meanwhile, Lance Camper had already renewed its policy with Republic. The effect of the IBNR was to reduce the dividends payable under each dividend calculation.
        Republic's senior vice-president in a February 1988 letter to producers blamed the sudden change regarding the IBNR on late reported claims (with a combined ratio of 104.5, meaning a 4.5 percent underwriting loss on a calendar basis). However, a chief financial officer and member of the board of directors later acknowledged that Republic's combined ratio after dividends had dropped from 104.5 to 96.5 (meaning a 3.5 percent underwriting gain), according to other financial statements prepared by Republic. The combined loss ratio excluded any investment income.
        Republic had the following surpluses: $81.9 million in 1987, $116 million at the beginning of 1989, $147 million at the beginning of 1990, $154 million at the beginning of 1991, and $211 million by the end of 1992. Republic had surpluses every year between 1988 and 1994. Moreover, Republic's net income from underwriting and investments totaled $4.5 million in 1987, $21 million in 1988, $23 million in 1989, $29 million in 1990, $31 million in 1991, $42 million in 1992, and $62 million in 1993.
        In January of 1992, Republic announced to its producers the decision by its senior staff to increase the IBNR to 9 percent. Republic thereafter withdrew the IBNR charge, prospectively only, as to policies that were in effect on or after April 1, 1994.
        According to Lance Camper expert witness Wing Chew, an insurance analyst with expertise in chartered property casualty underwriting, insurance accounting, claims and reinsurance, Republic's financial statements "most definitely" established that Republic was profitable at the time it imposed the retroactive IBNR of 7.8 percent in February of 1988. And at no time from then until March of 1992, when it increased the IBNR, did Republic ever lose money. Chew also indicated that Republic was making profits and its surplus was rising at all times through April of 1994 (when the IBNR was removed), despite Republic's statement in a February 1988 letter asserting that the IBNR would be removed as soon as there were profitable results. According to Chew, there was in any event no reason for Republic to apply the IBNR retroactively. Moreover, although Republic's profits and surplus increased from 1987 through 1993, the dividends it paid did not increase proportionately.

Republic's reserves practices as to Lance Camper
        During the period Lance Camper was insured by Republic, Lance Camper employees filed a total of 43 claims, 15 during the first year of the policy, 14 during the second year, and 14 during the third year. None of the claims was for serious or life-threatening injuries. Nine or ten of the claims remained open after Lance Camper became self-insured in 1990. There were no claims on any loss runs that had been incurred in an earlier period but not reported until a later period.
        Beginning in 1988, Lance Camper's dividend calculation date was December 5 of each year. Republic's calculations were always late, typically by several weeks or months. With only one exception, every change in reserves made shortly before or after Lance Camper's dividend calculation date was an increase in the reserve, thus commensurately reducing dividends due to Lance Camper.
        Lance Camper points to numerous situations where Republic increased the reserves shortly before Lance Camper's dividend calculation date. Lance Camper also notes that 14 of its workers' claim files were destroyed by Republic in August of 1991, the month when Lance Camper had an unsatisfactory "sit-down claims review" session with Republic and then requested of Republic an independent review by Wramsco, a workers' compensation consulting firm.
        Lance Camper cites the Alicia Doyle claim as the most egregious example of an increase in the reserve. Republic's increase in the reserve for that claim went from approximately $33,000 to $104,000 and was increased on December 21, 1988, 16 days after the scheduled dividend calculation, but before the actual calculation was made on December 30, 1988. The effect of this single reserve increase, with the 1.15 loss conversion factor, was to eliminate the entire $75,000 dividend that otherwise Republic would have paid to Lance Camper. A single claims manager approved the increased reserve, though it was above the $100,000 limit of his authority. And the change occurred after Republic had authorized Bloom to notify Lance Camper that it would be receiving a substantial dividend and, indeed, after a dividend check had actually been prepared - though the check was ultimately voided and not sent to Lance Camper.
        On the other hand, reserves in settled claims often were not promptly addressed and conveniently lingered until after the dividend calculation date. For example, the Manuel Ortega claim settled for $3,000 on July 10, 1989, and a signed compromise and release was received by the December 5 dividend calculation date, but the reserves were left at $18,701 until December 21, 1989. Also, the Carlos Perez claim settled for $5,250 on October 4, 1988, but the reserves were left at $21,000 until December 29, 1988.

Expert testimony concerning the handling of Lance Camper's claims and damages
        Robert Drake, an independent consultant and former claims examiner and auditor, testified on behalf of Lance Camper. According to Drake, "These claims [with Republic] were badly mismanaged. That number of deficiencies [709 in 33 Lance Camper claim files] is higher than I have ever seen in hundreds of audits that I've conducted. The pattern repeated itself from claim to claim. It is somewhat indicative of a claim operation operating without a claims manual, without guidelines, without rules for the examiners." Because the pattern was too frequent, it was "not possible" for such deficiencies to be a mere coincidence. Republic's files were "simply the wors[t]" Drake had ever seen. Republic's files were "managed poorly, their reserving practices are not appropriate, they reserve high and the number of errors in claim management occurring throughout the lifetime of all these claims is higher than I have ever seen . . . ."
        According to Drake, a number of the reserve increases demonstrated that Republic reserved on the basis of a "worst-case scenario" and did so "without regard to the financial impact on Lance Camper." Drake found no merit to the increases in reserves that were made shortly before or at the time of dividend calculations, or to keeping the reserves at a worst-case scenario level. Drake explained that a worst-case scenario setting would occur where, as with many of Republic's files for Lance Camper employee claims, reserves were set or increased based only upon medical reports from the claimant, without a defense medical examination or report having been obtained. The custom and practice in the industry was to obtain a second opinion in response to a claimant's medical report and not to assume that the claim will settle at whatever the injured worker has first presented by way of medical reports.
        Drake further opined that to reduce the amount paid at closing of a claim, and to protect the dividends payable to the insured, the insurance company should keep the claims moving quickly through the system, have an effective diary system, have a second layer of supervision that becomes involved when claims are not moving properly, evaluate medicals at the earliest possible time, aggressively pursue settlement, and if the claimant does not want to settle, get the matter to a hearing as soon as possible. Republic did not use any of these procedures on a regular basis.
        In support of Drake's opinion, he prepared an approximately 600-page report and a chart depicting 16 audit categories of deficiencies he found when reviewing Republic's files. Of the 34 claim files Drake was able to review, they contained very few adjuster notes. Such notes should be included in files so anyone at the insurance company picking up a file could more quickly determine what had been done on the claim. Even though Republic also failed to produce a claims manual, Drake was able to perform his audit using other criteria. Drake was not aware of any company that operated without claims manuals or policies and procedures manuals.
        Drake determined that of the 34 files he reviewed, only 2 of them (which were summary matters) had no deficiencies. Thirty of the files were deficient in reserve and reserve analysis, 29 were deficient in the diary system, and 31 were deficient as to review supervision. In the 14 files in which it was appropriate to evaluate Republic's litigation management, 13 of the files had deficiencies.
        In only one instance did Drake find that a reserve had been set too low. Since individual files entailed multiple instances of setting reserves, Drake reviewed hundreds of reserve settings. In every instance, except one, he found that reserves had been set too high. In 12 files that Drake identified as illustrative of the deficiencies in Republic's handling of Lance Camper's claims, Drake specifically concluded, "The reserve was calculated at worst-case scenario. In addition to that, the reserves on these files were increased to that worst-case scenario prior to the calculation of the dividend."
        Consistent with Drake's opinion that Republic used a "worst-case scenario" basis for raising reserves, Republic's reserves at the time of closing the files in question were as much as 60 percent higher than the actual total expenses at the time of closing. And Republic's employees acknowledged that they gave no consideration to the interests of the policyholder in setting reserves.
        Moreover, in 13 of the 34 files, Republic should have reviewed the reserves for dividend calculation purposes since the files were open at that time. All 13 files needed a reduction in reserves at that time; none received a reduction and 3 actually had increases in the reserves. Drake also noted that 26 of the 34 files were pursued to litigation. This was a 76 percent litigation rate, as opposed to the highest statewide average during the same time period of approximately a 36 percent litigation rate.
        Lance Camper's other expert witness (on rebuttal), Frank Raab, testified that under the insurance industry standard, as a rule of thumb, reserves on a claim more than one year old should be no more than approximately 10 percent higher than the amount actually paid at the time of closing. Without taking into consideration the $2,500 fee automatically added on by Republic, Republic over-reserved Lance Camper's claims by approximately 45 percent at the time of closing. Factoring in the $2,500 fee, which applied in 24 files, Republic over-reserved by approximately 60 percent.
        Lance Camper also presented evidence on damages from expert witness Wing Chew. Based on Drake's determinations as to appropriate reserves, Chew arrived at mathematical calculations concerning underpayment of dividends. He also relied on Republic's own financial statements provided to the Department of Insurance. Chew identified three categories of damage to Lance Camper - underpayment of dividends, overpayment of premiums, and loss of use of funds. He also noted that Republic had provided inaccurate information the Workers' Compensation Rating Board, which resulted in Lance Camper's receiving a higher x-mod, and therefore paying higher premiums. According to Chew, Lance Camper's economic damages, including the prevailing rate of return, totaled $687,355.68.
        Republic also presented expert witnesses. Robert Hollingshead opined that Republic did not reserve on a worst-case scenario, that a large number of other carriers do not maintain claims manuals, and that he was unaware of any requirement as to how long files during the 1986 to 1992 period should have been kept before being destroyed. He also stated that it was the industry standard that at the time of closing, reserves should not exceed the actual closing cost by more than 20 percent. Apparently using different figures than Lance Camper's experts used, Hollingshead asserted that Republic's reserves were within approximately 12 percent of total costs at the time the claims were closed.
        Republic's actuarial expert, Michael McMurray, asserted that Republic's introduction of the IBNR in 1988 was an appropriate response to Republic's financial condition at the end of 1987, that Republic adequately disclosed the IBNR charge calculation statements, and that Lance Camper's expert on damages (Wing Chew) made erroneous calculations. McMurray was unaware at his deposition that the IBNR had been applied retroactively.

Lance Camper's complaints to Republic
        Lance Camper employee Sharon Mendelssohn testified regarding her efforts to have Republic take prompt and appropriate action on various claims from Lance Camper's employees. She detailed a myriad of situations where Republic regularly failed to respond to inquiries from Lance Camper about specific claims, gave incomplete or inaccurate responses to other inquiries, and failed to keep promises to return calls and to provide further information.
        After numerous requests, Republic finally agreed to a "sit-down claims review," which, however, was not satisfactory to Lance Camper. Such a claims review typically entails a face-to-face meeting between representatives of the insurer, usually including a management level employee, and representatives of the insured, as well as the producing agent. Because Republic advised Lance Camper that it would not allow Lance Camper's representative to see the files during the review, Lance Camper sought advice from Wramsco regarding what questions to ask at the review.
        A Republic claims supervisor conducted the review on August 7, 1991. Neither a management level representative from Republic nor the producing agent, Bloom, was present. The Republic claims supervisor brought many documents to the review. However, he was unable to answer most of the questions posed by the Lance Camper representative and asserted he would respond later with the answers. Since Lance Camper found that the review did not adequately answer its concerns, it requested an independent audit by Wramsco. Republic refused to conduct another claims review and offered only to meet and advise regarding the current status of open cases.

Litigation procedural history
        In 1992, Lance Camper then retained attorneys, but did not at that time file a lawsuit. Instead, its attorney wrote to Republic asking for access to nine open claims files that then existed. The request was refused, and the present lawsuit was filed in August of 1992.
        The complaint sought an accounting and declaratory relief, plus attorney fees. In a second amended complaint, after Republic turned over nine claims files it had previously refused to disclose, Lance Camper alleged breach of contract and breach of the covenant of good faith and fair dealing. A judgment of dismissal was entered in August of 1994, following the trial court's ruling that Lance Camper was required to exhaust administrative remedies before filing a lawsuit. This court then reversed the judgment of dismissal. (Lance Camper Manufacturing Corp. v. Republic Indemnity Company of America (1996) 44 Cal.App.4th 194, hereinafter, Lance Camper I.)
        In November of 1998, trial commenced on the causes of action for breach of contract and breach of the covenant of good faith and fair dealing. The jury returned unanimous verdicts for Lance Camper with damages totaling $1,729,839.68. The jury found by a preponderance of the evidence that Republic breached its contract with Lance Camper and breached the covenant of good faith and fair dealing, and by clear and convincing evidence that Republic acted with fraud, oppression and malice. The jury thereafter unanimously returned a verdict in favor of assessing punitive damages, which (by a vote of 9 to 3) it fixed at $4.6 million. Judgment was entered accordingly. The trial court denied posttrial motions for a new trial and judgment not withstanding the verdict.

DISCUSSION
Republic's Appeal
I.        The award of contract damages

        A.        Breach of contract
        Republic urges that the award of contract damages should be reversed because the jury's finding of breach of contract is not supported by substantial evidence. But the substantial evidence contention is novel because of Republic's theory that Lance Camper was required but failed to prove conduct inconsistent with what a reasonable insurer might do.
        We start from the undisputed premise that an insurer's pattern of failing to pay claims promptly, defend them diligently, or assign them reasonable reserves, followed by improperly failing to pay dividends to the insured, may constitute breach of the express and implied contractual terms in a workers' compensation insurance policy. (Lance Camper I, supra, 44 Cal.App.4th at p. 202; Tricor California, Inc. v. State Compensation Ins. Fund (1994) 30 Cal.App.4th 230, 234-235; Security Officers Service, Inc. v. State Compensation Ins. Fund (1993) 17 Cal.App.4th 887, 893.) As we stated in Lance Camper I, supra, 44 Cal.App.4th at page 202, "[A] failure to reasonably evaluate claims prior to setting reserves, inadequate monitoring of claims by the insurer, failure to minimize claims, failure to communicate with the insured, hiring of inadequate and incompetent legal and medical counsel, [and] unnecessary delays in closing claims" constitute claims handling practices that are actionable.
        We also acknowledge that, as to the major issue of the setting of reserves, it is a task that requires the exercise of judgment and is not an exact science. Insurers have discretion in setting reserves, and there is an acceptable range of reserves a carrier could set without incurring liability. "'[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. Republic's argument is that Lance Camper should have been required to establish that the reserves Republic set (and the incurred but not reported [IBNR] fee it imposed as a present charge for potential future claims) were outside the range of permissible decisions that other carriers could have made. This notion, for which there is no legal support directly on point, is without merit for several reasons.
        Republic's proposed rule would permit insurers deliberately to set reserves at the highest end of the spectrum, thus resetting the range of typical reserves and skewing it to the high end. Insurers could also conveniently put a legal rubber stamp of approval on their prevailing practices. Insurers could establish and self-validate their own prevailing practices of setting high reserves, without regard for the need to act in good faith and contrary to the insurer's "obligat[ion] to give the interests of the insured at least as much consideration as it gives to its own interests." (Silberg v. California Life Ins. Co. (1974) 11 Cal.3d 452, 460; see MacGregor, supra, 63 Cal.App.4th at p. 457.)
        For example, if the prevailing custom among insurers were to set reserves with a worst-case scenario analysis, those improperly high reserves would, according to Republic's reasoning, become reasonable and proper. That cannot be. Simply put, as a mother might say to her child, just because other insurers do it, does not necessarily make it right. We adhere to the current standard requiring that reserves be set at the reasonable expectation of the claim's value and decline the invitation to create by judicial fiat a new rule.
        Even assuming arguendo that Republic's proposed new rule applied, the evidence in the present case actually meets even the greater burden that Republic seeks to impose. Lance Camper expert witness Frank Raab testified that under the insurance industry's standards, as a rule of thumb, reserves on a claim more than one year old should be no more than approximately 10 percent higher than the amount actually paid at the time of closing. Even Republic's own expert witness, Robert Hollingshead, stated it was the industry standard that at the time of closing, reserves should not exceed the actual closing cost by more than 20 percent. But, as explained by Raab, Republic over-reserved Lance Camper's claims by approximately 45 percent at the time of closing. Taking into consideration Republic's $2,500 add-on fee, which applied in 24 of the 34 files for which records existed, the situation was even more egregious. Republic over-reserved by approximately 60 percent. Though Hollingshead came to a different conclusion using different figures, the jury was entitled to find that portion of his testimony not credible.
        Moreover, it is reasonable to infer that other insurers generally adhered to Raab's description of the insurance industry standard and rule of thumb on the range of typical reserves, otherwise it would not be a "standard" or "rule of thumb." Accordingly, Republic's over-reserves by approximately 45 or 60 percent were far beyond any acceptable range, i.e., far beyond the range of 10 percent above actual cost (or 20 percent according to Hollingshead), which other carriers would have set. It is thus apparent not just that Lance Camper's experts may have set reserves differently, but that substantial evidence and reasonable inferences therefrom established that Republic set reserves beyond the range generally acceptable in the industry.
        Lance Camper expert witness Robert Drake also specifically testified that Republic's increases in reserves, on the claims that resulted in the substantial reduction in dividends payable to Lance Camper, were (1) timed to eliminate or reduce those dividends, and (2) based upon a "worst-case scenario" analysis rather than the required reasonable expectation of the claim's value. Republic also ignores its improprieties that contributed to higher reserve settings over a longer period of time, and thus reduced dividends payable to Lance Camper. For example, Republic ignores substantial evidence that as to some claims it did not properly develop evidence in defense of claims, that it delayed for unreasonable periods of time taking action on claims (with claims sometimes open for years longer than they should have been), and that it unreasonably imposed charges such as the IBNR. All of these tactics contributed to reductions in the dividends to Lance Camper.
        Republic also inappropriately relies upon several statutory provisions. Republic urges that Drake improperly disregarded the medical opinion of the workers' doctors, contrary to California's public policy, as codified in Labor Code section 4062.9, which requires carriers to presume the medical reports prepared by the workers' treating physicians are correct unless those reports are rebutted by the preponderance of medical opinion from other qualified examiners. ³ First, this argument ignores the evidence that, in many cases where Republic should have obtained its own reports to rebut claimants' medical reports, it failed to do so. Second, there is no indication the statute in question was intended to discourage an insurer from obtaining rebuttal medical evidence, where appropriate. Indeed, as indicated by evidence at trial of the custom and practice in the industry and as noted in our prior opinion in Lance Camper I, supra, 44 Cal.App.4th at pages 201-202, to handle claims properly it may often be appropriate to retain medical advisors. Finally, even if Republic's inappropriately restrictive reading of the statute was correct, Labor Code section 4062.9 (added by Stats. 1993, ch. 121, § 33, eff. July 16, 1993) became effective after the operative period of time in the present case.
        Equally unavailing is Republic's fanciful reliance on Insurance Code section 11558, subdivision (a), to conclude that it must set reserves at a minimum of 65 percent of the premium charged for the policy, less the amounts already incurred for losses and expenses. ⁴ According to Republic, since Drake testified that Republic's reserves should have been between 37 percent, 39 percent and 29 percent, of the net available premium for, respectively, the policy years 1986, 1987 and 1988, had Republic used Drake's reserving standard, its reserves would have been far below the legal minimum.
        The above noted statute, however, does not apply to individual claims. Rather, it applies to all of a carrier's insurance in force, as indicated by the statute's reference to "the lines of business described in the annual statement." (Ins. Code, § 11558.) Indicative of the inapplicability of section 11558 is the potential mathematical impossibility of its application. For example, an insurer could not possibly set reserves at 65 percent of the net available premium, i.e., the premium charged for the policy less amounts already incurred for losses and expenses, if that individual claim or the total claims made were less than the 65 percent figure. Under Republic's reasoning, assuming a $450,000 premium paid (which was the average of the three premiums Lance Camper paid for each of the three policies), the total reserves on claims against the policy would have to be set at $292,500, beginning with the first claim made. The statute thus is inapplicable to the analysis of individual claims.
        Nor is there any merit to Republic's claim that Lance Camper expert witness Wing Chew failed to support Republic's liability as to the IBNR charge. An IBNR charge, of course, may be imposed when warranted, and other insurers during the time period in question imposed such a charge on their insureds. Republic asserts on appeal that it imposed the IBNR charge on Lance Camper "so it could remain solvent." But Republic's former senior vice-president did not assert insolvency as the reason for imposing the IBNR. He only asserted that "claims had deteriorated to the point that the dividends could not be paid as they had previously been quoted." To the extent there was such testimony that supported Republic's claim of feared insolvency, we must conclude that the jury rejected it on credibility grounds, as it apparently did with other testimony from Republic's witnesses.
        Republic also ignores evidence that it imposed the IBNR charge in a manner that reflected bad faith. Specifically, Republic imposed the charge by a decision of its senior staff, rather than its board of directors. Republic also imposed the charge retroactively to cover every claim ever made by a Lance Camper employee, even though the alleged financial crisis did not arise until months into Lance Camper's second insurance policy with Republic. And when Republic withdrew the IBNR charge, it did so only prospectively. Although Republic urges deference to a company's business judgment in imposing the IBNR, the business judgment must be made in good faith. (See Notrica v. State Comp. Ins. Fund (1999) 70 Cal.App.4th 911, 925.) Republic's liability was thus properly based in part on its imposition of the IBNR charge.
        Accordingly, substantial evidence supports Republic's breach of contract.

[This Part Is Not Certified for Publication]
        B.        No instructional error
        Republic contends that the trial court prejudicially erred in instructing the jury on the concept of the implied covenant of good faith and fair dealing because certain aspects of the instruction were "tantamount to creating a strict liability standard." ⁵ Lance Camper asserts that since Republic complains on appeal not that the instruction entirely misstated the law, but rather that the instruction was too general or incomplete in certain regards, Republic was required to object at trial to preserve the issue for appeal. (See Agarwal v. Johnson (1979) 25 Cal.3d 932, 948-949; Conservatorship of Gregory (2000) 80 Cal.App.4th 514, 520-521.) Even assuming arguendo Republic's failure to object at trial did not waive the issue for appeal, the instruction as given was a correct statement of the law.
        According to Republic, the instruction required the jury to find breach of the implied covenant if reserves did not actually reflect the amounts paid on claims plus the amount necessary for future expenses. Contrary to Republic's characterization, however, the instruction did not require Republic to "perfectly predict how much would be paid on every claim" to avoid breach of the implied covenant.
        Paragraph 2 of the instruction as given, which Republic only partially quotes, properly required Republic to "monitor the reserves periodically and consistently so that the reserves accurately reflected the amount paid out and amounts necessary for future expenses." Nothing in the instruction required perfect accuracy in setting reserves. Indeed, Paragraph 1 of the instruction merely required Republic to "evaluate [claims] adequately, reasonably and good faith" in setting reserves. And Paragraph 3 admonished that Republic had to "adjust the reserves adequately . . . to reflect the realistic value of each claim." There was thus no error as to this aspect of the instruction.
        Even if there was error, it would be nonprejudicial. Republic's final reserve settings at the time claims were closed were approximately six times greater than the 10 percent margin of error established by the industry standard. The jury thus could not have been misled by the instruction, even if the instruction had advised the jury as Republic asserts.
        Equally without merit is Republic's complaint about Paragraph 5 of the instruction, which required Republic, as a part of its good faith duties, to "minimize the number of litigated claims." According to Republic, the just quoted language in the instruction was vague and either meant Republic had a duty to prevent workers from hiring counsel to litigate their claims, or that Republic had an absolute duty to settle with the worker, paying whatever amount the worker demanded to avoid litigation. That is, however, a gross mischaracterization of the actual language of the instruction.
        And the good faith duty to minimize the number of litigated claims was an instruction warranted by the evidence. Substantial evidence indicated that Republic commonly caused claims to be litigated because of its failure to monitor files, its delays in obtaining available defense evidence, and its failure to settle some claims on a timely basis.
        Moreover, again contrary to Republic's mischaracterization, the instruction did not require Republic to consult qualified medical doctors in every case. Paragraph 7 of the instruction merely stated that one of Republic's good faith duties was to "seek timely assistance of qualified medical defense doctors." It did not state "in every case." Consistent with this common sense understanding of the instruction is its factual context. For example, Lance Camper expert Drake found only some specific, key instances where Republic should have but failed to consult a defense doctor (or delayed in doing so). Republic points to no evidence or argument that it was purportedly required to do so in every case. And the language of the instruction did not so advise the jury.
        Finally, the language of Paragraph 14 of the instruction did not require Republic to grant "unbridled access" to any claim files. The instruction did not use the term "unbridled," but merely explained that Republic had a duty "upon reasonable notice" to provide Lance Camper with access to claims files "in order to determine whether Republic was performing pursuant to its contractual obligation under its insurance policy." And the jury was instructed: "The wholesale and indiscriminate refusal to permit Lance Camper access to these claim files constitutes a breach of the implied covenant of good faith and fair dealing." The above instructions did not sanction the violation of any workers' privacy rights (see Lab. Code, § 3762, subd. (c)), and, indeed, largely paralleled the language regarding access to claims files in this court's prior opinion in MacGregor, supra, 63 Cal.App.4th at page 458.

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II.        The award of tort damages
        Republic attacks the tort damages by contending there was no competent evidence it breached any contractual duty owed to Lance Camper, and that any breach of the implied covenant of good faith and fair dealing is tortuous only if Republic acted unreasonably. (See Brandt v. Superior Court (1985) 37 Cal.3d 813, 819, hereinafter, Brandt; Love v. Fire Ins. Exchange (1990) 221 Cal.App.3d 1136, 1151.) Republic asserts that, as a matter of law, it acted reasonably because there was evidence its conduct was consistent with applicable statutes and regulations, industry practices, and the advice of counsel.
        Republic, however, essentially ignores Lance Camper's evidence and various admissions by Republic's own employees. Republic apparently seeks to avoid application of the substantial evidence standard on appellate review. And, as discussed above, its reliance on purported compliance with several statutes and industry practices is unavailing. Nor does Republic provide any authority for the notion that advice from counsel can insulate it from tort liability.
        Republic also urges, for the first time on appeal, the theory that it could only be liable in tort if it violated a public duty independent of the contract. Republic acknowledges that this court and others have repeatedly held, without the limitation now urged, that a workers' compensation insurer may be liable in tort for offending conduct that diminishes the employer's dividend or increases future premiums. (See, e.g., Notrica v. State Comp. Ins. Fund, supra, 70 Cal.App.4th at p. 924-925 (and cases cited therein); Security Officers Service, Inc. v. State Compensation Ins. Fund, supra, 17 Cal.App.4th at p. 899.) Republic urges this new limitation on tort liability, as indicated in its brief, "primarily to preserve it for Supreme Court review." We find the contention unavailing because it constitutes an unwarranted limitation on the sound and established case law noted above.
        There is also no merit to the related suggestion by amicus curiae (the insurers' California Workers' Compensation Institute) that our Supreme Court, in Charles J. Vacanti, M.D., Inc. v. State Comp. Ins. Fund (2001) 24 Cal.4th 800, hereinafter, Vacanti, has already purportedly limited insurer tort liability to exceptional circumstances where intentional acts violate a fundamental policy of the state. In Vacanti, a group of medical providers sued a group of workers' compensation insurers, alleging the insurers conspired to put them out of business by intentionally mishandling their lien claims before the Workers' Compensation Appeals Board, and seeking recovery for damages to their businesses.
        The court in Vacanti held that the exclusive remedy provisions of the Workers' Compensation Act, where the alleged injury is collateral to or derivative of a compensable injury, barred plaintiffs' damage claims based on mishandling of their lien claims and barred their causes of action for abuse of process and fraud. However, the Vacanti court permitted other causes of action; i.e., those seeking damages for Cartwright Act violations and RICO violations, as well as tortuous interference with contractual and prospective economic relations, and violations of unlawful competition laws. (Id. at pp. 812, 820.) And the court reiterated the longstanding rule that if an injury falls within the scope of the exclusive remedy provisions, it can only be taken outside the workers' compensation claims context and treated as an ordinary civil matter in "'some exceptional circumstances,'" such as where offending conduct is not a part of the normal employment relationship or the compensation claims process, or where the motive behind the misconduct violates a "'fundamental policy of this state.'" (Ibid., & pp. 820-823)
        In contrast to the situation in Vacanti, the present case has absolutely nothing to do with the doctrine of the general exclusivity of remedies within the workers' compensation claims system for injuries collateral to or derivative of a worker's compensable injury. The exclusivity doctrine applies to actions by an employee or by one whose rights are derivative from an employee's rights. The present case is an ordinary civil action between an insured and its direct insurer. Amicus's reliance on Vacanti is thus misplaced. ⁶

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III.        The award of punitive damages
        
        A.        Substantial evidence supporting punitive damages
        Proof of bad faith alone cannot justify a punitive damages award. (Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 922.) A plaintiff seeking punitive damages must prove by clear and convincing evidence that the defendant acted with malice, fraud or oppression. (Civ. Code, § 3294.) In reviewing whether substantial evidence supports a punitive damage award, an appellate court must determine if the record discloses clear and convincing evidence which is reasonable, credible, and of solid value to justify the award. (See In re Angelia P. (1981) 28 Cal.3d 908, 924; Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 891-892.) Punitive damages against insurance companies may be warranted, for example, where there is a continuous policy of nonpayment of claims, an established practice of claims stonewalling, a company policy instructing adjusters to focus on ways to defeat claims, or other consistent and egregious insurer misconduct. (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1286-1287; Mock v. Michigan Millers Mutual Ins. Co. (1992) 4 Cal.App.4th 306, 329.)
        Republic contends there is no substantial evidence to support any punitive damage award or, alternatively, at least that the evidence is as consistent with the conclusion that Republic acted reasonably in setting reserves, imposing an IBNR, and paying dividends as with the conclusion that the company acted maliciously, fraudulently, or oppressively. Republic now, as it essentially did before the jury, characterizes its decisions as, at worst, honest errors of judgment, where reasonable minds could differ in predicting how much the claim would ultimately cost or whether the company's solvency was threatened.
        Specifically, Republic claims that Lance Camper expert Drake would say only that he would have set reserves in different amounts and stopped short of stating that Republic exceeded the proper range of reserve amounts. However, as previously indicated, Lance Camper's other expert witness, Raab, testified that Republic's reserves were substantially higher than the insurance industry 10 percent standard or rule of thumb, and that Republic over-reserved claims by approximately 45 or 60 percent (depending on whether the $2,500 added fee is factored in).
        Republic also urges that it had no pattern of over-reserving, though Drake testified otherwise. Republic, for example, asserts on appeal that it used written training materials, apparently referring to isolated memos concerning the setting of reserves, purportedly requiring that reserves be set at the level the claim was realistically expected to cost. But at trial Republic's personnel repeatedly denied the existence of claims or reserve setting manuals. And, of course, substantial evidence established that regardless of any written materials, Republic's actual reserve setting practices largely ignored any proper written criteria.
        Republic also asserts that it permitted only its more senior and experienced personnel to set reserves. As Lance Camper points out, however, that was the problem. Republic's senior and experienced personnel committed the acts that provided the basis for the imposition of punitive damages. To the extent evidence supported Republic's assertion that it required frequent review of reserves, that requirement was largely ignored.
        Republic further asserts that it led the industry in keeping its reserve ratios low, paid among the highest dividends in the state, and reduced Lance Camper's x-mod. However, for the years in question Republic did not keep its reserve ratios low, but rather had reserve ratios far exceeding the 10 percent industry standard. Similarly, Republic may have at some time paid high dividends, but it did not do so during the years in question and certainly did not do so as to Lance Camper. Regarding the reduction in Lance Camper's x-mod, such reduction was based in large part on Lance Camper's success in reducing the number and seriousness of claims before it bought any policy from Republic.
        Accordingly, there is no merit to Republic's argument that this court should direct entry of judgment in its favor as to punitive damages or should order a new trial on punitive damages.

        B.        No prejudicially erroneous instructions on punitive damages
        Punitive damages may be awarded when "it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice" (Civ. Code, § 3294, subd. (a)), which is established when "an officer, director, or managing agent" committed, "authorized or ratified the wrongful conduct for which the damages are awarded." (Civ. Code, § 3294, subd. (b); see White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 569-573.) In the present case, as Republic acknowledges, the trial court properly defined clear and convincing evidence and instructed the jury that it could find malice, oppression or fraud only by clear and convincing evidence.
        Republic, however, complains for the first time on appeal that the trial court erroneously instructed the jury that Republic was responsible for this malfeasance if the jury found authorization or ratification by a mere preponderance of the evidence. Republic then concludes that the instruction improperly allowed Lance Camper to recover punitive damages by proving only by a preponderance of the evidence that an officer, director or managing agent ratified the wrongful conduct of a lower level adjuster.
        Republic's complaint is unfounded. Since Republic's officers and supervisory personnel were to a great extent those engaged in the malicious, oppressive or fraudulent conduct, the concept of ratification was not a determinative issue. Republic also assumes, without citation to any authority, that the clear and convincing evidence standard applies to the ratification of oppressive, fraudulent or malicious conduct. However, the plain language of Civil Code section 3294 requires proof "by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice," and does not specify that standard of proof on the issue of ratification of such misconduct. We decline to broaden and essentially to rewrite the statue in the manner urged by Republic.
        Finally, Republic contends the trial court erred in instructing that punitive damages were warranted if there was clear and convincing evidence of bad faith. The portion of the record cited by Republic is a comment by the court after it had completed formally instructing the jury. In the context of advising the jury that it would be given alternate jury forms, one set permitting a finding for Lance Camper and one for Republic, the court stated: "One of the findings will be that if you found for the plaintiff in that . . . the defendant violated the covenant of good faith and fair dealing, the question will be, were you able to make that determination by clear and convincing evidence. [¶] If you make that finding, then this triggers a second consideration by the jury later with respect to the issue of exemplary or punitive damages, which are not to be considered as a apart of this."
        As Lance Camper acknowledges, the trial court apparently misspoke in referring to the covenant of good faith and fair dealing with the standard of clear and convincing evidence. But the verdict form itself correctly stated that the clear and convincing evidence standard applied to Republic's malice, oppression or fraud. And several instructions given to the jury, as well as the arguments of counsel, correctly stated the rule. Moreover, the jury gave no indication it was confused by the trial court's apparent slip of the tongue. There is thus "no reasonable probability the jury was misled or the verdict affected." (Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 582; see People v. Crittenden (1994) 9 Cal.4th 83, 138-139.)
        Accordingly, there was no reversible instructional error on the issue of punitive damages.

Lance Camper's cross-appeal
Procedural summary
        The jury awarded Lance Camper, inter alia, $274,000 in contract damages, representing the dividends that were denied and the premiums that were excessively high. It also awarded Lance Camper approximately $1.04 million in attorney fees, pursuant to Brandt, supra, 37 Cal.3d 813 (attorney fees recoverable to the extent incurred in litigating an insurer's wrongful withholding of payment of the policy's benefits), as well as $413,000 for loss of use of funds.
        Lance Camper then sought a posttrial award of approximately $112,000 in prejudgment interest on the Brandt fees, and $293,270 in various costs. Republic opposed the request for prejudgment interest, arguing such interest is only allowed where the amount of fees is certain, or capable of being made so. Republic also moved to tax costs, claiming various deficiencies in Lance Camper's request for costs.
        The trial court awarded Lance Camper only $120,178 of its requested costs. The trial court denied the request for prejudgment interest on the Brandt fees, concluding that the amount of fees could not have been ascertained without judicial resolution, and thus the amount was unliquidated until the jury rendered its verdict.
        Lance Camper appeals from the denial of approximately $112,000 in prejudgment interest on the Brandt fees and from the award of costs to the extent it was in various regards less than the claimed costs.

I.        The trial court properly denied prejudgment interest on the Brandt fees
        Civil Code section 3287, subdivision (a), permits a party to recover interest where the amount owed is certain or capable of being made certain. ⁷ Because of this certainty requirement, the statute does not authorize prejudgment interest where the amount of damages depends on a judicial determination of conflicting evidence, or where the basis of computing damages is in dispute. (Esgro Central, Inc. v. General Ins. Co. (1971) 20 Cal.App.3d 1054, 1061-1063.) This is because "a person who does not know what sum is owed cannot be in default for failure to pay." (Chesapeake Industries, Inc. v. Togova Enterprises, Inc. (1983) 149 Cal.App.3d 901, 906.)
        In the present case, Republic cross-examined Lance Camper's attorney witnesses as to the hours the respective law firms devoted on Lance Camper's behalf, the firms' hourly rates, the value of such services, the expenses the firms incurred, and the 80/20 apportionment between recoverable (contract) and nonrecoverable (tort/bad faith) professional services and costs. Lance Camper questions the efficacy of the cross-examination. Such cross-examination may indeed have been largely ineffectual. But that does not mean that the facts regarding attorney fees were undisputed.
        It is thus unnecessary to address whether what Republic characterizes as conflicting evidence was in any way meaningful in disputing the attorney fees claimed by Lance Camper. We find the Brandt fees here constituted an unliquidated claim.
        "As a general rule interest in the form of damages is not allowed prior to rendition of judgment on an unliquidated claim or on the amount of a demand which cannot be ascertained either from the face of the agreement or by reference to well established market value. [Citing section 3287.] The rule applies to a claim . . . where the amount cannot be determined except by evidence of the reasonable value of the services rendered." (Garrie v. McCauley (1958) 163 Cal.App.2d 273, 276-277 [no prejudgment interest for legal services rendered under an oral agreement].)
        We hold that under the circumstances in the present case, the award of attorney fees pursuant to Brandt, as with the award of attorney fees generally, vested and the amount was fixed only when the trial court awarded such fees. Interest is allowable only from that date, pursuant to Civil Code section 3287, subdivision (a). (See Bear Creek Planning Com. v. Title Ins. & Trust Co. (1985) 164 Cal.App.3d 1227, 1249.)

II.        The trial court's denial of certain items of cost
        The trial court may award a prevailing party its costs provided that any items awarded are authorized by statute and are both reasonable in amount and reasonably necessary to the conduct of the litigation. (Code Civ. Proc., §§ 1032, 1033.5, subd. (c) (2), (3); see Perko's Enterprises, Inc. v. RRNS Enterprises (1992) 4 Cal.App.4th 238, 245.) Costs that are "merely convenient or beneficial" to a party's cause may be disallowed. (Code Civ. Proc., § 1033.5, subd. (c)(2).) Whether a cost item is "reasonably necessary" to the litigation presents a question of fact for the trial court that is reviewed on appeal only for abuse of the trial court's broad discretion. (See Ladas v. California State Auto. Assn. (1993) 19 Cal.App.4th 761, 774.)

        A.        Witness fees
        Because the jury verdict and judgment substantially exceeded the pretrial offers to settle (Code Civ. Proc., § 998) that were made by Lance Camper and ignored by Republic, Lance Camper claimed expert witness fees in the amount of $174,277.53. Lance Camper also sought recovery of ordinary witness fees in the amount of $4,589.68. The trial court, however, awarded total witness fees of $81,306.62, apart from the approximately $22,000 in expert fees awarded to Lance Camper pursuant to its Brandt claim.
        In Republic's motion to strike or tax costs, it objected to all the expert witness fees claimed and called for documentary substantiation, which was furnished as a part of Lance Camper's opposition to that motion. Republic also specifically objected to the fees claimed for the two main Lance Camper experts on liability and damages (Drake and Chew), urging that the amounts were excessive and disproportionate to the amount of compensatory damages proved at trial, and that both experts billed for an excessive amount of time at the courthouse, other than the time spent testifying. Republic also complains that the expert witness fee request included $88,000 for the services of Chew, who did no independent analysis and who simply reviewed Drake's numbers and produced a damages report that was merely 18 pages long.
        Under all the circumstances noted above, and despite the apparent efficacy of Lance Camper's expert witnesses, we cannot say the trial court abused its broad discretion in awarding "a reasonable sum to cover costs of the services of expert witnesses actually incurred and reasonably necessary." (Code Civ. Proc., § 998.)

        B.        Other fees
        The trial court awarded approximately $120,000 of other costs sought by Lance Camper, but struck (without explanation) over $30,000. Lance Camper now seeks modification of the award of costs to include $4,483.60 in court reporter fees, as well as $24,950 representing Lance Camper's share of fees paid to a referee and $1,476.07 representing half the cost of transcripts of the proceedings before the referee.
        The referee fees and referee transcript costs pertained to the trial court's appointment of an attorney as a discovery referee. Issues regarding the examination and disclosure of Republic's records, which Republic claimed were privileged, prompted the appointment of the referee in the midst of trial. As noted by Republic, Lance Camper then conducted discovery during trial regarding other lawsuits against Republic, though it ultimately used little if any of the information obtained.
        The court's order appointing the referee specified that the referee's fees and the costs of a reporter shall be paid by the parties, with the costs divided equally subject to any recommendation of the referee for reallocation of the reference costs and fees. The referee never recommended reallocation of the reference costs and fees.
        The trial court, however, subsequently reflected on the mid-trial discovery reference and characterized it as a "ridiculous adventure." Although the trial court at the outset deemed the referee's expenses reasonably necessary to the litigation, the trial court apparently changed its mind about the matter. It was entitled to do so. And the trial court did not abuse its broad discretion by thereafter impliedly modifying its initial order as to sharing the costs and fees of the referee and denying that aspect of Lance Camper's request for costs and fees.
        As to Lance Camper's request regarding other court reporter fees ($4,483.60), as the prevailing party it was entitled by statute to recover such fees as a matter of right. (Code Civ. Proc., §§ 1032, subd. (b), 1033.5, subd. (a)(11); see Heppler v. J.M. Peters Co. (1999) 73 Cal.App.4th 1265, 1298.)

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DISPOSITION         The trial court's award of costs to Lance Camper is modified to include court reporter fees ($4,483.60). In all other respects, the judgment is affirmed. Lance Camper is entitled to costs on appeal.


We concur:
        NOTT, J.
        COOPER, J.


*        Under California Rules of Court, rules 976(b) and 976.1, only the Introduction, the Discussion, parts I.A. and II. in Republic's Appeal, and the Disposition are certified for publication.

¹         The x-mod is a statistical figure that results in higher premiums to an employer if the factor rises and a lower premium if it declines. An x-mod compares a single insured with others in the same business. An x-mod of 110, for example, increases a $100 premium to $110. The x-mod is determined, in part, by the frequency of claims and how the insurance company handles the claims. The formula upon which an x-mod is based takes into account the previous four years of experience.

²         A reserve is the amount of money set aside by the insurer from premiums to cover the reasonably expected costs of an injured employee's claim. An increase in a particular reserve on or before a dividend calculation date reduces the dividend payable to the insured employer.

³         Labor Code section 4062.9, provides as follows: "In cases where an additional comprehensive medical evaluation is obtained under Section 4061 or 4062, the findings of the treating physician are presumed to be correct. This presumption is rebuttable and may be controverted by a preponderance of medical opinion indicating [a] different level of impairment. However, this presumption shall not apply where both parties select qualified medical examiners."

⁴         Insurance Code section 11558 provides, in pertinent part, as follows: "The minimum reserve requirements prescribed by the commissioner in regulations promulgated pursuant to Section 923.5 for outstanding losses and loss expenses for each of the most recent three years for coverages included in the lines of business described in the annual statement as workers' compensation, liability other than automobile bodily injury, and automobile liability bodily injury shall not be less than the following: [¶] (a) For workers' compensation, 65 percent of earned premiums during each year less the amount already paid for losses and expenses incidental thereto incurred during each such year."

⁵         The rather extensive instruction, as given to the jury, was as follows: "'In this case the implied covenant of good faith and fair dealing arising from the insurance policies Republic issued to Lance Camper required Republic to do all of the following: [¶] 1. To evaluate adequately, reasonably and in good faith all claims made prior to setting reserves and calculating dividends; [¶] 2. To monitor the reserves periodically and consistently so that the reserves accurately reflected the amount paid out and the amounts necessary for future expenses; [¶] 3. To adjust the reserves adequately and on a timely basis to reflect the realistic value of each claim, and not to arbitrarily or unreasonably increase loss reserves when the increase adversely affects the amount of a dividend that the insured will receive; [¶] 4. To conduct[] adequate and timely investigations when necessary; [¶] 5. To minimize the number of litigated claims; [¶] 6. To refer each claim to a competent and experienced claims adjustors and supervisors [sic] for the purpose of providing Lance Camper with an adequate defense; [¶] 7. To seek timely assistance of qualified medical defense doctors; [¶] 8. To evaluate timely, adequately, reasonably and in good faith all claims prior to the determination of their settlement value and pursuing settlement of such claims; [¶] 9. To provide Lance Camper with the experienced claims examiners and supervisors for the purpose of monitoring and administering the claims files and for the purpose of efficiently defending the interests of Lance Camper; [¶] 10. To communicate and coordinate regularly with Lance Camper regarding the status of the claims and provide an adequate defense and expeditious resolution of those claims; [¶] 11. To avoid unnecessary delays in defending and/or closing claims; and [¶] 12. To make timely payments from Lance Camper[] to employees; [¶] 13. To work closely with Lance Camper's personnel in coordinating claims and reducing future claims; [¶] 14. To allow Lance Camper and/or its agents, upon reasonable notice, access to any claims files for the purpose of reviewing, auditing and conducting an accounting of those claims files in order to determine whether Republic was performing pursuant to its contractual obligation under its insurance policy; and [¶] 15. To conduct the duties of defending, investigating, and reserving and settling claims [with] a good faith regard for their effect on the interests of Lance Camper, including its interests regarding premiums and dividends. [¶] In every insurance policy there is an implied obligation of good faith and fair dealing on the part of both parties.' [¶] That is, it is not written out in the contract, generally, but it is implied that in entering a contract each side agrees to act in good faith and deal fairly with the other side in completion of the contract. That is a part of the policy. It is integral to the policy, it is contained in the policy, it simply is not written. It is not an addition, it is not something besides the policy, it is in the policy itself. [¶] 'The implied covenant of good faith and fair dealing requires that neither the insurance company or the insured do anything that would harm the right of the other to receive the full benefits of the policy and each must act fairly and in good faith in discharging its expressed or implied contractual responsibilities.'"

⁶         To the extent other contentions raised by amicus were not raised in Republic's opening brief, we decline to address such contentions. "Amicus Curiae must accept the issues made and propositions urged by the appealing parties, and any additional questions presented in a brief filed by an amicus curiae will not be considered." (Eggert v. Pacific States S. & L. Co. (1943) 57 Cal.App.2d 239, 251; see Knetsch v. United States (1960) 364 U.S. 361, 370.) Otherwise, amicus, rather than the parties themselves, would control the issues litigated. It would also be inappropriate for amicus unilaterally to augment the scope and thus the cost of litigation to the opposing party.

⁷         Civil Code section 3287, subdivision (a) provides, in pertinent part, as follows: "Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day, except during such time as the debtor is prevented by law, or by the act of the creditor from paying the debt. This section is applicable to recovery of damages and interest from any such debtor, including the state or any county, city, city and county, municipal corporation, public district, public agency, or any political subdivision of the state."