Scope and Purpose of Insurance Code § 11580

Under California law, an insurance carrier who is not a party to an action can intervene on behalf of its insured when the insurance carrier could be subject to a subsequent action under Insurance Code § 11580. (See Reliance Ins. Co. v. Superior Court (2000) 84 Cal.App.4th 383, 386 [“An insurer’s right to intervene in an action against the insured, for personal injury or property damages, arises as a result of Ins. Code section 11580.”].) “Section 11580 provides that a judgment creditor may proceed directly against any liability insurance covering the defendant, and obtain satisfaction of the judgment up to the amount of the policy limits. Thus, where the insurer may be subject to a direct action under Insurance Code section 11580 by a judgment creditor who has or will obtain a default judgment in a third party action against the insured, intervention is appropriate.” (Id.; see also Jade K. v. Viguri (1989) 210 Cal.App.3d 1459, 1468 [permitting an insurer to intervene in lawsuit to litigate liability and damage issues].)

As a general matter, once a judgment has been obtained against an insured defendant, the plaintiff, i.e., the judgment creditor, has a statutory right under Section 11580, subdivision (b)(2), to enforce any liability insurance covering the defendant. (See Reliance Ins. Co. v. Superior Court (2000) 84 Cal.App.4th 383, 386.) There is no right to payment without suit, thus, the insured party may have to bring two lawsuits to obtain payment: the first against the insured to obtain the judgment, and then a separate action against the insurer to enforce that judgment. (Rose v. Royal Ins. Co. of America (1991) 2 Cal.App.4th 709, 718.) “The judgment creditor’s right to sue is not derivative or dependent upon any assignment from the insured.” (Shafer v. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone (2003) 107 Cal.App.4th 54, 68.) Under Section 11580, “a judgment creditor may proceed directly against any liability insurance covering the defendant, and obtain satisfaction of the judgment up to the amount of the policy limits.” (Reliance Ins. Co. v. Superior Court (2000) 84 Cal.App.4th 383, 386.)

Requirements Under the Statute

Section 11580 mandates that insurance policies which are subject to the statute contain a provision which provides for the aforementioned right, i.e., a direct right of action against the insurer. If the subject policy does not contain such a provision, it is construed to contain such a provision as a matter of law. (Ins. Code, Sec. 11580.)

Insurance policies which are subject to the statute include the following:

1. “for injury suffered by another person other than... a policy of workers’ compensation insurance” or
2. “for loss or damage to property caused by draught animals or any vehicle....”

(Ins. Code, Sec. 11580(a).)

The direct action provision described in subdivision (b) “allows an injured person who has secured a judgment in an action based upon bodily injury, death, or property damage to bring an action against the insurer on the policy.” (People ex rel. City of Willits, supra, 97 Cal.App.4th at 1130.)

“Intervention may . . . be allowed in the insurance context, where third party claimants are involved, when the insurer is allowed to take over in litigation if its insured is not defending an action, to avoid harm to the insurer.” Western Heritage Ins. Co. v. Superior Court (2011) 199 Cal. App. 4th 1196, 1205 (citation and internal quotations omitted). “[I]ntervention by an insurer is permitted where the insurer remains liable for any default against the insured, and it has no means other than intervention to litigate liability or damage issues.” (Reliance Ins. Co. v. Superior Court (2000) 84 Cal. App. 4th 383, 385.)

Standard of Review

“Whether the intervener’s interest is sufficiently direct must be decided on the facts of each case.... And section 387 should be liberally construed in favor of intervention.” (Simpson Redwood Co. v. State of Calif. (1987) 196 Cal. App.3d 1192, 1200.) “In order that a party may be permitted to intervene it is not necessary that his interest in the action be such that he will inevitably be affected by the judgment. It is enough that there be a substantial probability that his interests will also be so affected. 'The purposes of intervention are to protect the interests of those who may be affected by the judgment . . . .’” (Timberidge Enterprises, Inc. v. City of Santa Rosa (1978) 86 Cal. App. 3d 873, 881-82; see, e.g., Reliance Ins. Co. v. Superior Court (2000) 84 Cal. App. 4th 383, 385-387 [an insurer may intervene when its insured’s answer has been stricken because its corporate status has been suspended]).