Interins. Exchange v. Super. Ct.

Filed 6/14/07 Interinsurance Exchange v. Sup. Ct. CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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COURT OF APPEAL - FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
INTERINSURANCE EXCHANGE OF
THE AUTOMOBILE CLUB,
Petitioner,
v.
THE SUPERIOR COURT OF SAN
DIEGO COUNTY,
Respondent;
D049831
(San Diego County
Super. Ct. No. GIC856160)
MICHELLE MONTPETIT,
Real Party in Interest.
PROCEEDINGS in mandate after the superior court denied petitioner's demurrer
to the first amended complaint. Richard E. L. Strauss, Judge. Petition granted.
Interinsurance Exchange of the Automobile Club (Interinsurance Exchange)
petitions for a writ of mandate challenging the trial court's denial of its demurrer to the
first amended complaint filed by Michelle Montpetit. The legal issue in this case is

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identical to the issue in Allstate Insurance Company v. Superior Court (Delanzo) (2007)
__ Cal.App.4th ___, filed simultaneously with this opinion. Based on Delanzo, we
conclude the court erred in overruling Interinsurance Exchange's demurrer. We thus
grant Interinsurance Exchange's petition for writ of mandate, and order the court to vacate
its order overruling Interinsurance Exchange's demurrer and enter a new order sustaining
the demurrer.
FACTUAL AND PROCEDURAL BACKGROUND
Montpetit filed a class action complaint against Interinsurance Exchange, her
former automobile insurer. As amended, the complaint alleged that Montpetit's former
automobile policy with Interinsurance Exchange included first party, no-fault medical
payments insurance coverage (med-pay coverage).
On September 15, 2000, Montpetit allegedly suffered injuries resulting from an
automobile accident with a third party. Under its policy's med-pay coverage provisions,
Interinsurance Exchange paid $2,000 to Montpetit. Montpetit then settled her claim
against the third party tortfeasor for $12,500, and received the settlement payment in full.
Montpetit allegedly incurred unrecovered attorney fees of $5,000 and costs of $1,083.70
(for a total of $6,083.70) to obtain this settlement.
Interinsurance Exchange then requested that Montpetit repay the $2,000 under
Interinsurance Exchange's reimbursement provision, which states: "REIMBURSEMENT
TO US - COVERAGE C [¶] If we pay to or for a person who is insured under
COVERAGE C, we shall, to the extent of our payment, be entitled to the proceeds of any
settlement or judgment that may result from that person's exercise of any rights of

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recovery against any person or organization legally responsible for the bodily injury
because of which we made payment. These proceeds must be held in trust for us and
reimbursed to us to the extent of our payment. These proceeds must be reimbursed to us
within 30 days of the receipt of such proceeds by or for a person insured. [¶] If there is
full compliance with this provision, the amount of reimbursement due us will be reduced
by our pro rata share of the attorney's fees incurred by or for a person insured in the
exercise of any rights of recovery against any legally responsible person or organization.
[¶] If there is not full compliance with this provision, the amount of reimbursement due
us will not be reduced." (Boldface omitted.)
In response, Montpetit paid Interinsurance Exchange $1,200, which Interinsurance
Exchange agreed was in full satisfaction of its claim. Interinsurance Exchange 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, Montpetit 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 Montpetit's assertion
that Interinsurance Exchange's claim for reimbursement was improper and unlawful
because Montpetit was not first "made whole" by the third party settlement ($12,500)
plus the amount received from Interinsurance Exchange ($2,000), when taking into

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account the attorney fees and costs incurred to obtain the settlement ($6,083.70).
Montpetit did not dispute that the third party settlement ($12,500) constituted full
compensation for her injuries, but alleged she was not made whole by this amount
because her total gross recovery of $14,500 ($12,500 from the settlement plus $2,000
from Interinsurance Exchange), minus the costs and attorney fees ($6,083.70), was less
than $12,500.
Montpetit sought to represent the class of "all California insureds, past and
present, of [Interinsurance Exchange] 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 [Interinsurance Exchange] to or on
behalf of such insureds pursuant to the medical payments coverage contained in their
personal automobile insurance policies was less than the amount paid by such insureds
for such attorney's fees and costs; and 3) such insureds paid [Interinsurance Exchange]
money in response to its demand for reimbursement of payments it paid under such
medical payments coverage."
Interinsurance Exchange demurred to the complaint, arguing that Montpetit'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. Interinsurance Exchange
argued that Montpetit'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

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it pay a proportionate amount of the insured's attorney fees incurred in obtaining the
recovery. Interinsurance Exchange alternatively argued that the made-whole rule applies
only "when the parties have not contracted otherwise," and here "the parties expressly
contracted to share attorney fees pro rata."
The trial court sustained the demurrer with leave to amend on Montpetit's
conversion and unjust enrichment claims, but overruled the demurrer with respect to her
Business and Professions Code section 17200 claim and declaratory relief claim.
Interinsurance Exchange filed a petition for writ of mandate, challenging the
portion of the court's order overruling the demurrer. The parties asserted the same
arguments as those asserted in the Delanzo case. Interinsurance Exchange also
contended that the policy provision pertaining to Interinsurance Exchange's obligation to
bear pro rata attorney fees precluded the application of the made-whole doctrine.
Montpetit was represented by the same counsel as was the insured in the Delanzo case
and Interinsurance Exchange 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
Interinsurance Exchange'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 Montpetit's claims are predicated on Montpetit'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, Montpetit's claims do not state a valid cause
of action under California law. Based on this ruling, we need not reach Interinsurance
Exchange's alternative contract-based argument. We grant Interinsurance Exchange'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
DISPOSITION
Petition for writ of mandate granted. This court issues a writ of mandate directing
the superior court to vacate its order overruling Interinsurance Exchange's demurrer and
1 As in Delanzo, we deny Montpetit's request that we take judicial notice of
Interinsurance Exchange's insurance filings. Because we do not consider Interinsurance
Exchange'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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enter a new order sustaining the demurrer. The parties to bear their own costs in the writ
proceeding. The stay issued on November 29, 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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