Judgment After Actual Trial

There is some authority for the proposition that where there is evidentiary support for a judgment, such a judgment may satisfy the "judgment after actual trial" provision of a no action clause. The court in National Union Fire Ins. Co. v. Lynette C. (1994) 27 Cal. App. 4th 1434, after surveying the existing case law, found that a trial need not be adversarial to be considered an "actual trial" against an insurer. Rather, "in deciding whether a judgment involving the injured party and the insured is binding on the insurer, courts focus on whether the facts have been adjudicated independently in a process that does not create the potential for abuse, fraud or collusion. This concern is heightened when the injured party provides the insured with a covenant not to execute. From this distillation, we conclude that the term 'actual trial' in the standard 'no action' clause has two components: (1) an independent adjudication of facts based on an evidentiary showing; and (2) a process that does not create the potential for abuse, fraud or collusion." (Id. at p. 1449.) The rationale behind binding an insurer to a judgment reached after something less than a full adversarial trial, also is missing here. Thus, it has been recognized that a sound reason exists for binding a non-participating insurer to a final judgment entered after significant adjudicatory action by the trial court, when the insurer's lack of participation is a result of its abandonment of its insured. "The insurer not only had a right to participate in and to control the litigation, it had a duty to do so. An insurer which has wrongfully abandoned its insured should not be heard to complain or be allowed to relitigate the trial court's judgment merely because the default or uncontested proceedings followed, and were related to, an agreement between the insured and the claimant. Whatever the terms of the settlement, the entry of judgment was based on an independent review and adjudication of the evidence by the trial court. An insurer which has breached its contract is properly bound by the result of such trial proceedings and will not be heard to raise the policy's 'no action' clause in defense." (Pruyn v. Agricultural Ins. Co., supra, 36 Cal. App. 4th at p. 517.) It is true that when the insurer does not provide a defense, or denies coverage, the insured is entitled to make a reasonable settlement of the claim in good faith and may then maintain an action against the insurer to recover the amount of the settlement. (Isaacson v. California Ins. Guarantee Assn. (1988) 44 Cal. 3d 775, 791, 244 Cal. Rptr. 655, 750 P.2d 297; Safeco Ins. Co. v. Superior Court, supra, 71 Cal. App. 4th at p. 787; Clark v. Bellefonte Ins. Co. (1980) 113 Cal. App. 3d 326, 335-336, 169 Cal. Rptr. 832.) Pruyn v. Agricultural Ins. Co. (1995) 36 Cal. App. 4th 500, cited extensively by As one court put it, '. . . where an insurer provided a defense to its insured in the underlying litigation, and the insured, without the participation or the consent of the insurer, stipulated to a judgment without evidentiary support and with no potential for personal loss, such judgment is insufficient to impose liability on the insurer in a later action against the insurer under section 11580. To hold otherwise would create in the insured the ability to escape all liability for his or her own wrongdoing while imposing on the insurer totally unsupported liability. The potential for fraud and collusion is evident." (Pruyn v. Agricultural Ins. Co., supra, 36 Cal. App. 4th at pp. 515-516, citing Wright v. Fireman's Fund Ins. Companies (1992) 11 Cal. App. 4th 998, 1024.)