Category Archives: insurance

Sanctions Should Punish Abuse, Not Be Abusive Themselves

Judge sanctions insurer $50K because its lawyer couldn’t settle dog-bite case for $750K.

The above article from abajournal.com should discourage all attorneys who represent insured defendants and insurance carriers.  If a carrier and counsel consult ahead of a settlement conference to set a valuation and to confirm an outer limit of settlement authority, then the court should not impose sanctions unless the evaluation or authority were unreasonable and showed a lack of a good faith intent to negotiate.

If an injured party has $75,000.00 of special damages, then $600,000.00 of settlement authority is certainly reasonable.  If the carrier limited authority to less than $100,000.00, for example, then the judge may have grounds to sanction the carrier, but this decision on sanctions indicates that the judge may have been more of an advocate for the injured plaintiff rather than a neutral settlement conference judge.

Sanctions should be a rare punishment for abuses of the judicial system and its processes, not to extract money from an insurance carrier that is offering eight times the special damages to settle a personal injury action.

Aguilar v. Gostichef- An uncommunicative carrier gets punished.

Aguilar v. Gostichef.

This case involved a motor vehicle accident with serious injuries.  The defendant had a liability policy with a $100,000.00 limit.  The plaintiff had over $500,000.00 of medical expenses.

Before filing suit, the plaintiff’s attorney asked for the policy limits so that he could make a policy limits demand and resolve the suit.  The carrier ignored this request and two others, forcing the plaintiff to file suit.

After filing suit, the carrier offered its full policy limits in settlement.  The plaintiff responded with a threat that the carrier would be responsible for any judgment in excess of the policy limits because it ignored the prior requests, later submitting a $700,000.00 offer to compromise pursuant to California Code of Civil Procedure Section 998.   The carrier responded by re-offering the policy limits.

The trial verdict was in excess of $2.3M.  One benefit of a 998 offer is that if the offering party does better at trial, then it can get prejudgment interest and expert witness fees from the date of the offer.  In this case, the recoverable costs exceeded $1.6M.  The carrier challenged the reasonableness of the 998 offer, but the appellate court rejected the arguments.

Few people would fell sorry for an uncommunicative insurance carrier hoping that a squeaky wheel of a plaintiff’s counsel might just go away.  This case compels carriers to fulfill their duty to settle at the earliest juncture.  The outcome, however, is quite harsh.  The carrier should have been able to avoid the consequences of rejecting a policy limits demand when it offered to settle for the policy limits two months after the plaintiff filed suit.  Some applaud harsh treatment of insurance carriers, but this one does not have the type of wilful misconduct that should turn a $100,000.00 insurance policy into a $1.6M payment to a plaintiff.