Filed 01/30/20

                             CERTIFIED FOR PUBLICATION

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                               FOURTH APPELLATE DISTRICT

                                      DIVISION THREE


 PACIFIC PIONEER INSURANCE
 COMPANY,

     Petitioner,
                                                        G057326
         v.
                                                        (Super. Ct. No. 30-2018-00987364)
 THE SUPERIOR COURT OF ORANGE
 COUNTY,                                                OPINION

     Respondent;

 VANESSA GONZALEZ,

     Real Party in Interest.



                 Original proceedings; petition for a writ of mandate to challenge an order of
the Superior Court of Orange County, Carmen Luege, Temporary Judge. (Pursuant to
Cal. Const., art. VI, § 21.) Petition granted.
                 Dwayne S. Beck and James W. Colfer for Petitioner.
                 Buchalter and Harry W.R. Chamberlain II for Association of Southern
California Defense Counsel as Amicus Curiae on behalf of Petitioner.
                 No appearance for Respondent.
                 Shaun Bauman and Thanos Simoudis for Real Party in Interest.
                  In this case of first impression, we determine that insurers have the right to
appeal a small claims default judgment entered against their insureds. We conclude the
insured’s failure to appear in small claims court does not annul the appeal right conferred
upon the insurer by Code of Civil Procedure section 116.710, subdivision (c).1
                  The background of the case is prosaic: Vanessa Gonzalez sued Jonathan
Johnson in small claims court after an auto accident in Orange. Johnson did not show up
for the small claims hearing, and the small claims court entered a default judgment
against him for $10,000, plus $140 in costs. Johnson’s auto insurer is Pacific Pioneer
Insurance Company.
                  Pacific Pioneer filed a timely notice of appeal. The trial court struck the
notice of appeal, and Pacific Pioneer sought to set aside that order. This prompted the
trial court to compose a minute order explaining why it had struck the notice. The court
reasoned subdivision (d) of section 116.710 precludes a non-appearing “defendant” –
which the court equated with Pacific Pioneer – from appealing a small claims judgment.
                  Pacific Pioneer then filed this writ petition, challenging the trial court’s
reading of the relevant statutes. This court set an order to show cause to consider the
merits of the petition. We now issue the requested writ and direct the trial court to
reinstate Pacific Pioneer’s notice of appeal. We conclude all three levels of analysis
outlined in Halbert’s Lumber, Inc. v. Lucky Stores, Inc. (1992) 6 Cal.App.4th 1233, 1238
– (1) statutory text, (2) legislative intent, and (3) policy – militate in favor of an insurer’s
right to appeal from a small claims judgment brought on by its insured’s default.
                  First, we examine the text of the statutory scheme: Section 116.710
governs the appeal of small claims actions. We quote the entirety of the statute in the




         1        All further statutory references are to the Code of Civil Procedure. All references to any statutory
subdivision are to section 116.710 of that code.


                                                          2
margin.2 Subdivision (c) expressly gives “the insurer of the defendant” the right to
appeal any small claims judgment over $2,500, while subdivision (d) precludes “[a]
defendant” who did not appear at the hearing from appealing the judgment.
                  Gonzalez’ theory is that subdivision (c) giveth a right to appeal, then
subdivision (d) taketh it away by restricting that right to only those cases where the
defendant appears. We believe this argument incorrectly conflates the words “insurer of
the defendant” in subdivision (c) with the words “defendant who did not appear at the
hearing” in subdivision (d).
                  “Ordinarily, where the Legislature uses a different word or phrase in one
part of a statute than it does in other sections or in a similar statute concerning a related
subject, it must be presumed that the Legislature intended a different meaning.”
(Campbell v. Zolin (1995) 33 Cal.App.4th 489, 497.) Here, the Legislature used two
different sets of words: “insurer of the defendant” in subdivision (c) and “the defendant”
in subdivision (d). We find no reason to believe the two sets of words should be equated.
On their face they refer to two different kinds of persons involved in litigation: the actual
defendant in a small claims action and that person’s insurance company, who would not
ordinarily be sued in small claims, but who still is on the hook for the judgment. The fact
the defendant gives up the right to appeal by failing to appear says nothing about the
insurer’s right to appeal.



          2         “(a) The plaintiff in a small claims action shall have no right to appeal the judgment on the
plaintiff’s claim, but a plaintiff who did not appear at the hearing may file a motion to vacate the judgment in
accordance with Section 116.720.
                    “(b) The defendant with respect to the plaintiff’s claim, and a plaintiff with respect to a claim of
the defendant, may appeal the judgment to the superior court in the county in which the action was heard.
                    “(c) With respect to the plaintiff’s claim, the insurer of the defendant may appeal the judgment to
the superior court in the county in which the matter was heard if the judgment exceeds two thousand five hundred
dollars ($2,500) and the insurer stipulates that its policy with the defendant covers the matter to which the judgment
applies.
                    “(d) A defendant who did not appear at the hearing has no right to appeal the judgment, but may
file a motion to vacate the judgment in accordance with Section 116.730 or 116.740 and also may appeal the denial
of that motion.” (Italics added.)


                                                           3
               We note that subdivisions (c) and (d) are easily reconciled if we do not
equate “the insurer” with the “the defendant.” (See Moyer v. Workmen’s Comp. Appeals
Bd. (1973) 10 Cal.3d 222, 230-231 [importance of reading statutes to be consistent with
each other].) But to equate them requires the insertion of implied words into subdivision
(d), contrary to the stricture set out in section 1858 that “the office of the Judge is . . . not
to insert what has been omitted.” If the Legislature had wanted subdivision (d) to read
“If a defendant does not appear at the hearing, neither the defendant nor the defendant’s
insurer has a right to appeal the judgment . . .” it could have said so.
               Another approach to this problem seems unnecessary given our analysis of
the words of the statute, but we find it instructive nonetheless. Subdivision (c) was
enacted in 1990 as part of Assembly Bill 3916, after a Senate amendment. The Assembly
Judiciary Committee concurred in the Senate’s amendment, noting: “The Senate
amendments permit insurers to appeal small claims judgments against their insureds.
Insurance companies argued that the right to appeal is necessary because their insureds
might be either unable or not motivated to competently defend what is ultimately the
insurer’s interest.”3
               We rarely see such clear statements of legislative intent. (See J.A. Jones
Construction Co. v. Superior Court (1994) 27 Cal.App.4th 1568, 1579 [importance of
clear statement of intent in legislative history].) The Legislature expressed its intent that
insurers be able to protect themselves in situations where their insureds are “unable or not
motivated” to defend a small claims action. That intent informs and reinforces our
reading of the language discussed above.
               Finally, we consider whether an analysis of the first two considerations
advances or hinders the policy of the statutory scheme. Gonzalez raises the specter of
insurance companies wearing down small claims plaintiffs by appealing from small

      3       Assembly Judiciary Committee Concurrence in Senate Amendments AB 3916 (Lempert) – As
Amended: August 28, 1990.


                                                  4
claims judgments. We recognize this as an argument of some force against allowing
insurers to appeal small claims actions. However, the weight the Legislature might have
given this argument is largely offset by section 116.790, which imposes monetary
liability on insurers who try to wear down small claims plaintiffs. Such insurers are
exposed to real costs by way of awards for attorney fees and lost wages. And section
116.790 encompasses not only frivolous appeals, but also appeals brought specifically to
“encourage” plaintiffs to abandon their claims.4
                  Beyond the lack of substance behind the specter raised by Gonzalez, there
occur to us common sense reasons the Legislature would want to give “insurers of the
defendant” the chance to appeal. The first of these is deterrence of inflation of damages.
In the present case, for example, we note that Gonzalez obtained a judgment for the
maximum amount allowed by statute from a small claims court: $10,000. (§ 116.221.)
It is a truism that plaintiffs have no incentive to minimize their damage claims when the
defendant defaults. (See Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267,
281 [discussing plaintiffs’ lack of incentive to be temperate when claiming default
damages].) But in the small claims context, it is also true that defendant insureds may not
have much of an incentive to fight inflated damage claims, knowing an insurer will pick
up everything over their deductible, if any. The dangers of a situation in which neither
side has an interest in carefully delimiting the damage claim requires little discussion.
Allowing an appeal protects the insurer from the unmotivated insured’s lack of initiative
and assures that someone will be scrutinizing the damage claim.




         4        The statute reads in its entirety: “If the superior court finds that the appeal was without substantial
merit and not based on good faith, but was intended to harass or delay the other party, or to encourage the other
party to abandon the claim, the court may award the other party (a) attorney’s fees actually and reasonably incurred
in connection with the appeal, not exceeding one thousand dollars ($1,000), and (b) any actual loss of earnings and
any expenses of transportation and lodging actually and reasonably incurred in connection with the appeal, not
exceeding one thousand dollars ($1,000), following a hearing on the matter.” (Italics added.)


                                                           5
                 Similarly, allowing insurers to appeal curbs any temptation to collude.
Giving the insurer an appellate remedy for such conduct diminishes the likelihood the
plaintiff and defendant will agree to split an inflated award.5
                 Gonzalez argues, ironically, that insurers can cheaply protect themselves
simply by sending reservation of rights letters to their insureds, threatening to refuse to
pay any small claims judgments unless those insureds show up. Her theory is that by
defaulting, a defendant would be violating the cooperation clause found in all liability
policies. She contends this militates against the Legislature intending to give insurers the
special option of appealing a small claims judgment in the event the insured defaults.
                 We cannot agree. A prudent insurer would not think a form paragraph to
that effect would solve the problem. Insurance Code section 11580 allows a direct action
against the insurer by a judgment creditor, and insureds often assign their claims –
including any bad faith claims they might have or think they have – to judgment
creditors. “[I]t is not uncommon for judgment creditors to assert, in a single lawsuit
against an insurer, both damages claims assigned to them by the insured as well as a
direct claim on the judgment under Insurance Code section 11580.” (Hearn Pacific
Corp. v. Second Generation Roofing, Inc. (2016) 247 Cal.App.4th 117, 143.) At the very
least, an insurer who receives notice of a small claims judgment against an insured would
have to: (1) investigate its own records to make sure the insured never notified it of the
small claims suit; and (2) contact the insured and investigate to make sure that the insured
was properly served before it would dare issue a denial based on the insured’s
noncompliance with a policy cooperation clause. The Legislature could reasonably
conclude that rather than put insurers to such expense, their resources would be better put
to either paying a default judgment or appealing the default judgment so the case could
be decided on its merits. We are reluctant to ascribe to the Legislature a “remedy” that

          5        We emphasize that there is nothing in our record here which suggests such collusion. But the
possibility of such conduct in 21st Century America cannot be gainsaid.


                                                         6
could clog court dockets with collateral litigation about whether their insureds complied
with cooperation clauses. (See generally Buss v. Superior Court (1997) 16 Cal.4th 35
[exploring complexities of reservation of rights and reimbursement litigation].)
              The trial court thus erred in striking Pacific Pioneer’s notice of appeal. Let
a writ issue directing the trial court to vacate its order striking Pacific Pioneer’s notice of
appeal, and to reinstate its appeal from the small claims judgment in favor of Gonzalez.
Since our decision is essentially interlocutory – for all we know Gonzalez’ claims will
stand up when they are tried at the superior court level – both sides will bear their own
costs.




                                                   BEDSWORTH, ACTING P. J.

WE CONCUR:



GOETHALS, J.



DUNNING, J.*




*Retired judge of the Orange County Superior Court, assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.


                                               7
