Valdez v. Oregon Mutual Insurance Company
Published: Jun. 12, 1999 | Result Date: May 26, 1999 | Filing Date: Jan. 1, 1900 |Case number: 112830 Bench Verdict – $0
Facts
On April 29, 1995, Andrew Valdez, 25, was accidentally shot and killed by his next door neighbor, Jerry Verwolf, age 25. The plaintiffs are Andrew's surviving parents. The plaintiffs initially filed a wrongful death action against Jerry Verwolf and his mother, Susan Verwolf in connection with the shooting. Oregon Mutual Insurance Company is the Verwolfs' homeowner's insurance carrier. The plaintiffs brought this action against Oregon Mutual pursuant to an assignment of rights from Jerry Verwolf after Oregon Mutual refused to provide a defense to Jerry against the plaintiffs' wrongful death action and after the plaintiffs obtained a default judgment in the wrongful death action against Jerry in the amount of $1,516,455. The shooting occurred in the front yard of the Verwolf's home in Castroville, Monterey County. Jerry Verwolf was a reputed gang member, drug dealer and recent parolee from state prison on a prior conviction for armed robbery. At the time of the shooting, he had been a resident of his mother's household for six months. On April 29, 1995, a person named Johnny Ramirez came to the Verwolf home for the purpose of purchasing drugs from Jerry. He had purchased illegal drugs from Jerry in the past. Jerry was angry that Ramirez had come to the family home to purchase drug. He confronted Ramirez outside the home and told him to leave. Ramirez was either drunk or stoned. He refused to leave. Jerry and Ramirez got into a fight. Jerry claimed that Ramirez took a swing at him with a knife or a screwdriver. Jerry went back into the house, retrieved a handgun and came back outside. He pointed the gun at Ramirez and ordered him to leave. Jerry claimed that Ramirez again lunged at him with a knife or screwdriver. Jerry then hit Ramirez over the head with the butt of the pistol. The pistol accidentally discharged and the bullet struck and killed Andrew Valdez who had walked across the street to break up the fight. Jerry pled guilty to involuntary manslaughter and was sentenced to 15 years in State Prison in connection with the shooting. The Valdez family made claims under the policy against Jerry on a negligence theory and against his mother, Susan Verwolf, on a theory of negligent supervision in permitting Jerry to use and sell drugs at the home and permitting him to maintain weapons there. The plaintiffs' counsel provided Oregon Mutual with all police reports concerning the incident which included Jerry's statement that he hit Ramirez in self defense and the reporter's transcript of the recitation of plea in the criminal case which confirmed that the shooting was accidental. Oregon Mutual never interviewed or spoke to Jerry. The plaintiffs' counsel made a settlement demand of $300,000 policy limit in exchange for a settlement of all claims. Oregon Mutual, through counsel retained by it for the benefit Susan Verwolf, rejected the demand contending that the value of the case was less than six figures. The wrongful death lawsuit was then filed. Jerry and Susan tendered defense of the lawsuit to Oregon Mutual. Oregon Mutual rejected the defense of Jerry. It provided for Susan's defense under a reservation of rights. In its coverage disclaimer letter to Jerry and Susan, it conceded that the shooting was accidental but it asserted that, as to Jerry, there was no potential for coverage and no duty to defend based on the policy's "business pursuits" exclusion and based on Civil Code º1668 which provides that "all contracts which have for their object to exempt anyone from responsibility for . . . willful injury to person . . . or violation of law whether willful or negligent, are against the policy of law." As to the "business pursuits" exclusion, it asserted that because Jerry was engaged in a drug sales transaction at the time of the shooting and because he regularly sold drugs, he was engaged in a business activity. *** FOR CONTINUATION OF FACTS
Settlement Discussions
The plaintiffs offered to settle the wrongful death claim before coverage was denied for the $300,000 policy limits.
Damages
In the underlying wrongful death claim, the plaintiffs incurred $7,120.82 in medical expenses and $8,591.32 in funeral and burial expense.
Other Information
The award was reached approximately one year and five months after the case was filed. In opposition to plaintiff's summary judgment motion, defendant contended that even assuming the duty to defend was breached, a factual issue was presented as to whether the refusal to defend was unreasonable and tortious such that summary judgment for a mere contractual breach could not be granted for an amount in excess of the $300,000 policy limit. Based on Amato v. Mercury Casualty Ins. Co. (1997) 53 Cal.App.4th 825, the plaintiffs argued that the default judgment was a foreseeable and expectable result of the breach of the duty to defend and, the full amount of the default judgment was recoverable as consequential damages for the breach of contract. The trial court agreed and entered judgment for the full amount of $1,516,455 default judgment plus all accrued interest thereon.
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