Unpublished Disposition, 928 F.2d 1137 (9th Cir. 1987)

MEMORANDUM^* 

Donald E. Cannon, a chiropractor, appeals the district court's award of summary judgment in favor of National Chiropractic Mutual Insurance Company ("NCMIC") in NCMIC's interpleader action seeking declaratory judgment absolving NCMIC of further liability under malpractice insurance policies issued to Cannon, and absolving NCMIC of any liability arising from Cannon's asserted counterclaims. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

"A grant of summary judgment is reviewed de novo to determine whether, viewing the evidence in a light most favorable to the nonmoving party, there are any genuine issues of material fact and whether the district court applied the relevant substantive law." Tzung v. State Farm Fire & Cas. Co., 873 F.2d 1338, 1339-40 (9th Cir. 1989) (citation omitted).

In this case, the district court found that NCMIC had breached its duty under the terms of the policies to defend Cannon in the underlying state court malpractice suit by failing to advise Cannon of a conflict of interest and his right to seek independent counsel of his own choice. The court also found, however, that Cannon had breached his duty of cooperation under the terms of the policy by, along with other unreasonable conduct, failing to attend his underlying malpractice trial. As a result, the court concluded, as a matter of law, that damages claimed by Cannon "were not proximately caused by NCMIC failing to provide Cannon with independent counsel at NCMIC's expense." Instead, the court found that Cannon's conduct alone resulted in the malpractice verdict award, namely his (1) failure to attend trial, (2) termination of trial counsel, (3) failure to substitute new counsel, and (4) refusal to consent to settlement.

Damages arising from an insurer's breach of its duty to defend an insured, "whether within or above the policy limit, must proximately result from the breach." State Farm Mut. Auto. Ins. Co. v. Allstate Ins. Co., 9 Cal. App. 3d 508, ---, 88 Cal. Rptr. 246, 259 (1970). In this case, Cannon does not dispute that he did not attend the trial, but asserts that there exist disputed material facts as to whether his nonattendance was reasonable. Specifically, Cannon attempts to justify his nonattendance based on his belief that his filing of a petition for removal of the state court malpractice action to federal court divested the state court of jurisdiction to proceed with trial.

We conclude the district court properly found Cannon's nonattendance unreasonable as a matter of law. NCMIC produced evidence that, prior to his January 12, 1987 state court trial date, Lawrence Wengel, counsel for NCMIC, expressly advised Cannon, on several occasions, to attend the trial. Moreover, Cannon's "Complaint for Removal" failed to comply with the procedures for removal mandated by 28 U.S.C. § 1446, and instead constituted another in a series of attempts by Cannon to prevent the state court from properly holding trial on the malpractice suit. Indeed, a federal district court later ruled that removal was improper and that the state court, as of the January 12, 1987 date of the malpractice trial, was not divested of jurisdiction. We conclude the district court properly found that Cannon's failure to attend trial was unreasonable as a matter of law.

We also conclude the district court properly found that Cannon unreasonably terminated trial counsel. Contrary to Cannon's contentions, we find that NCMIC produced uncontroverted evidence that Cannon fired his trial counsel a short time prior to commencement of the January 12, 1987 malpractice trial. On November 3, 1986, Cannon filed a "Notice and Demand for Counsel of Choice" in state court where he asserted that his "licensed representation ha [d] failed in the preparation of the defense in [his] case, [and] [t]herefore, it [was] imperative that [he] become 'Counsel' of [his] choice to protect and to insure [his] 'Due Process of law.' " Moreover, Cannon's trial counsel filed an affidavit on December 19, 1986 stating that Cannon had "stated unequivocally that he was firing me as his attorney," that Cannon had agreed to sign a Substitution of Attorneys form allowing him to proceed pro se, and had "clearly expressed his wish that I no longer act as his attorney in this case." Indeed, Cannon admitted in his November 4, 1986 "Complaint for Civil Rights ..." that he had dismissed his attorney. We therefore find Cannon's arguments to the contrary to be without merit.

We similarly conclude that Cannon's failure to obtain substitute counsel was unreasonable as a matter of law. NCMIC produced uncontroverted evidence that, despite NCMIC's urgings for Cannon to hire independent substitute counsel at NCMIC's expense, Cannon refused to hire replacement counsel. Based on this uncontroverted evidence, the district court properly found that Cannon was solely responsible for failing to obtain substitute counsel.

Finally, we conclude that whether Cannon unreasonably refused to settle the malpractice case is immaterial to the district court's determination of proximate cause. It is undisputed that, despite NCMIC's offer to pay the entire $100,000 amount of the policy limits, Cannon refused to authorize any payment by NCMIC to settle the malpractice case at any time. Thus, NCMIC satisfied its obligation to attempt to settle the case, and it was consequently Cannon's failure to attend trial, his termination of counsel shortly before trial, and his failure to hire substitute counsel, that constituted the proximate cause of the malpractice award.

The Rowens contend the district court erred in ruling that NCMIC was not obligated to pay either post-judgment or pre-judgment interest.

The NCMIC/Cannon policies provide for post-judgment interest as follows:

Supplementary Payments

The company will pay, in addition to the applicable limit of liability:

(a) all expenses incurred by the company, all costs taxed against the insured in any suit defended by the company and all interest on the entire amount of any judgment therein which accrues after entry of the judgment and before the company has paid or tendered or deposited in court that part of the judgment which does not exceed the limit of the company's liability thereon.

The jury returned their verdict award on January 15, 1987. It is undisputed that NCMIC did not pay its $100,000 policy limits to the Rowens until December 1988. Under the terms of the policy, however, NCMIC is no longer liable for post-judgment interest once it "has paid or tendered or deposited in court" the extent of its liability limits. NCMIC has presented uncontroverted evidence that, prior to the verdict and at the Rowens' specific request, it deposited the full $100,000 into an interest-bearing savings bank trust account for the Rowens' benefit. NCMIC's general counsel testified that, at the Rowens' request, the deposit was made with a bank rather than the court so as not to subject the money to the jurisdiction of the bankruptcy court.

Thus, we conclude that the Rowens, at their own request, received post-judgment interest to the extent of NCMIC's liability limits from prior to the entry of judgment at trial to the date of disbursement. The Rowens are therefore not entitled to any further post-judgment interest award.

The Rowens also are not entitled to an award of prejudgment interest for interest accruing from the date of their proposed settlement to the date of entry of the jury verdict. Although the policies themselves do not authorize such an award, California law authorizes an award of costs and interest to a plaintiff who has made a settlement offer that has been rejected by a defendant who failed to obtain a more favorable judgment. Cal.Civ.Code Sec. 3291 (West Supp.1991); Cal.Civ.Proc.Code Sec. 998 (West Supp.1991).

In this case, it is undisputed that, prior to trial, NCMIC tendered its full liability limits to the Rowens to settle the case. We conclude that NCMIC did everything it could to effectuate a settlement in this case and is not therefore obligated to pay the Rowens a pre-judgment interest award. See State Farm Mut. Auto. Ins. Co. v. Crane, 217 Cal. App. 3d 1127, ----, 266 Cal. Rptr. 422, 427 (1990).

AFFIRMED.