Kaiser Foundation Health Plan, Inc. v. Aguiluz
California Court of Appeal
47 Cal. App. 4th 302 (1996)

- Written by Kate Douglas, JD
Facts
Paulito Frez (defendant) was insured through Kaiser Foundation Health Plan, Inc. (Kaiser) (plaintiff). When Frez was injured in a motorcycle accident, Kaiser paid approximately $23,000 for Frez’s medical expenses. Frez then retained attorney Heroico Aguiluz (defendant) to sue the other driver. Kaiser asked Frez to confirm in writing that Frez’s contract with Kaiser obligated him to reimburse Kaiser for any amounts Kaiser paid to treat injuries Frez sustained at the hands of a third party, up to and including the amounts received from such a third party. Frez complied. Frez also expressly agreed to reimburse Kaiser for medical costs Kaiser paid as a result of the motorcycle accident up to the amount Frez recovered from the other driver. Frez authorized Aguiluz to disperse directly to Kaiser any amounts owed to Kaiser out of a resulting judgment or settlement. Ultimately, Frez and the other driver settled for $85,000. Aguiluz then attempted to negotiate with Kaiser to reduce Kaiser’s recovery, but those settlement negotiations were unsuccessful. Neither Aguiluz nor Frez paid Kaiser anything. Aguiluz made no effort to protect Kaiser’s interest in the settlement proceeds, instead disbursing the entire amount. Accordingly, Kaiser sued Aguiluz and Frez for breach of contract and constructive trust. Frez settled, and Kaiser later obtained a judgment for approximately $23,000 against Aguiluz in municipal court. The matter was later transferred to the California Court of Appeal.
Rule of Law
Issue
Holding and Reasoning (Corrigan, J.)
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