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Gregory B. Scher, Woolls & Peer, Los Angeles, CA, obtained a defense verdict for Farmers Insurance in a bad faith lawsuit arising from an auto liability claim. In February 2010, Farmers' insured struck a 72-year-old woman in a crosswalk, causing brain and substantial other physical injuries. The victim, who remained comatose for three months following the accident, was a Medicare recipient. The Farmers policy contained a $50,000 liability limit. Two weeks after the accident counsel retained by the victim's son sent a "blind" policy limits settlement demand to Farmers, requiring within thirty five (35) days either delivery of a release and check for the policy limit made payable to counsel and the claimant alone, or interpleader of the policy limit. The demand letter stated that the claimant would be "exclusively responsible for all liens" and would indemnify Farmers and its insured against any lien claims.

            Within the time specified, Farmers sent a check and a release for the policy limit to counsel. However, the check named Medicare as an additional payee. The proposed release also included a provision for the claimant to indemnify Farmers and its insured against lien claimants, as well as including a release of another named insured not involved in the accident.

            The claimant and counsel took that response as a rejection of the demand and a counter-offer. The claimant then filed suit and recovered a $5,000,000 judgment. After trial the insured assigned to the claimant his right to collect from Farmers the amount of the excess judgment (without giving a covenant not to execute on the judgment against the insured). Both the claimant and the insured then joined as plaintiffs in a bad faith suit.

            The court precluded evidence that the injured claimant had died approximately fourteen months after the accident, so the jury assumed the injured claimant needed the money for ongoing life care, while the insured – an elderly man working as a produce clerk in a grocery store – had experienced emotional distress accompanied by hypertension and depression as well as credit disability because of the unsatisfied judgment. At the time of trial the judgment with interest amounted to more than $6,400,000.

            The plaintiffs argued that if Farmers didn't want to accept the payment terms and accept the indemnity offer, it should have filed the interpleader, as California law requires an insurer to settle a claim within policy limits when it has an opportunity to do so and excess exposure is realistic. Having done neither, California law required Farmers to pay the full underlying judgment, with interest, as well as additional consequential damages to the insured. Plaintiffs presented evidence that Farmers never interpleads under such circumstances and used that evidence to argue a pattern and practice of institutional misconduct. 

            The pre-trial settlement demand was $72,000,000, making the decision to try the case relatively simple. Farmers will be sending the claimant's counsel a check for its $50,000 policy limit shortly.

Well done, Greg!

Do you have a triumph to share? Send a brief summary and a recent photograph to David Fuqua at dfuqua@fc-lawyers.com


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