State Farm agreed to pay $27,528.60 in prevailing costs and cost-of-proof costs but refused to pay the $287,040, arguing that attorney's fees were not covered under the PLUP.

Ms. Caine sued State Farm to recover the $287,040 in attorney's fees that State Farm refused to pay. She contended that the policy provision excluding attorney's fees did not apply because the $287,040 the trial court awarded Dr. Farhoomand was a "sanction" under California Code of Civil Procedure Section 2033.420.

State Farm moved for summary judgment.

The State Farm Policy

The PLUP stated:

ADDITIONAL COVERAGES

When we provide a defense to an insured at our expense by counsel of our choice for a loss that is not covered by any other insurance policy, but is covered by this policy, we will pay the following in addition to the Coverage L Limit of Liability, but only until we tender, deposit in court, or pay the amount due under this policy: . . .

4. costs taxed against an insured in a suit we defend. Costs do not include attorney fees;

California law provides:

If a party fails to admit the genuineness of any document or the truth of any matter when requested to do so under this chapter, and if the party requesting that admission thereafter proves the genuineness of that document or the truth of that matter, the party requesting the admission may move the court for an order requiring the party to whom the request was directed to pay the reasonable expenses incurred in making that proof, including reasonable attorney's fees.

Cal. Civ. Proc. § 2033.420. 

The District Court's Decision

The district court held that Ms. Cline was not entitled to cost-of-proof attorney's fees incurred after State Farm began providing a defense by counsel of its choice.

In its decision, the district court explained that Section 2033.420 never refers to the "expenses" as a "sanction." The district court acknowledged that some California courts have referred to an award under this statute as a "cost-of-proof sanction," but said that it was "clear" that an award under Section 2033.420 was not a "discovery sanction" or a "penalty."

Instead, the district court continued, expenses recoverable under Section 2033.420 reimbursed the party that propounded the request for admission for the attorney's fees and costs incurred in proving at trial the genuineness or truth of a document or matter covered by the request. Awards under this section were "more akin to damages or a traditional statutory award of attorney['s] fees to a prevailing party. . . ." Moreover, the district court added, regardless of whether they were categorized as "sanctions" or not, the trial court made it clear that the $287,040 was attorney's fees.

Accordingly, the district court concluded, the PLUP provision expressly excluded coverage for the cost-of-proof attorney's fees Dr. Farhoomand incurred after State Farm began providing Ms. Cline with a defense, and Ms. Cline was not entitled to cost-of-proof attorney's fees incurred after State Farm began providing a defense by counsel of its choice.

The case is Caine v. State Farm Fire & Casualty Co., No.: 17-cv-0954-BTM-JMA (S.D. Cal. June 21, 2018). Attorneys involved include: For Janet Justin Caine, an Individual, Plaintiff: Paul J. Molinaro, LEAD ATTORNEY, Fransen & Molinaro LLP, Corona, CA. For State Farm Fire and Casualty Company, an Illinois Corporation, Defendant: Dale Alan Amato, Berger Kahn, San Diego, CA.