Barickman v. Mercury Cas. Co.

• Decision Date: 25 July 2016
• Docket Number: B260833
• Court: California Court of Appeals Court of Appeals
• Parties: Laura Beth BARICKMAN et al., Plaintiffs and Respondents, v. MERCURY CASUALTY COMPANY, Defendant and Appellant.

2 Cal.App.5th 508

206 Cal.Rptr.3d 699

Laura Beth BARICKMAN et al., Plaintiffs and Respondents

v.MERCURY CASUALTY COMPANY, Defendant and Appellant.

B260833

Court of Appeal, Second District, Division 7, California.

Filed July 25, 2016

Hager & Dowling, Christine W. Chambers, John V. Hager and Thomas J. Dowling, Santa Barbara, for Defendant and Appellant.

The Yarnall Firm and Delores A. Yarnall, Valencia; Dewitt Algorri & Algorri and Mark S. Algorri, Pasadena, for Plaintiffs and Respondents.

PERLUSS

, P.J.

Timory McDaniel, driving while intoxicated in a car insured by Mercury Casualty Company, ran a red light, struck and seriously injured Laura Beth Barickman and Shannon Mcinteer, who were in a crosswalk with the walk signal in their favor. Barickman and Mcinteer agreed to settle their claims against Timory¹ for her insurance coverage limits, $15,000 each; but Mercury would not agree to additional language inserted by Barickman and Mcinteer's lawyer in Mercury's form release of all claims: “This does not include court-ordered restitution.” After Barickman and Mcinteer sued Timory and settled the case with a stipulated judgment for $3 million, Timory assigned her rights against Mercury to Barickman and Mcinteer, who filed this action for breach of contract and breach of the implied covenant of good faith and fair dealing. Following a trial by reference, judgment was entered in favor of Barickman and Mcinteer for $3 million plus interest from the date of judgment in the personal injury action. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Accident and Claim Processing

During the early morning hours on July 11, 2010, Timory entered the intersection of Pacific Coast Highway and East Second Street in Long Beach against a red light and struck Barickman and Mcinteer with her sports utility vehicle while they were in a crosswalk. Timory fled the scene, but was apprehended shortly thereafter. It was determined Timory was driving under the influence of alcohol. The incident was witnessed by several individuals, who gave statements to the police.

The day after the incident Timory informed Mercury she had been in an accident, but, on advice of counsel, did not provide any additional information. On August 4, 2010 Mark Algorri, counsel for Barickman and Mcinteer, sent Mercury a letter describing their extensive injuries and enclosing a copy of the police report.

On September 1, 2010 Mercury offered Timory's policy limits of $15,000 per person to Barickman and Mcinteer. On September 24, 2010 Algorri requested Timory complete a statement of assets to assist his clients in determining whether to accept Mercury's offer in satisfaction of all civil claims. During the following months Algorri and Oliver Chang, the Mercury field representative responsible for processing the claim, exchanged correspondence about the statement of assets.

In late October 2010 Timory was sentenced to three years in state prison and ordered to pay approximately $165,000 in restitution. In mid-December 2010 Algorri informed Mercury that Barickman and Mcinteer accepted the policy limits offer and returned signed releases on the form provided by Mercury, but added an explanatory sentence to Mercury's recitation of a $15,000 payment: “This does not include court-ordered restitution.”² Algorri also demanded as a condition of settlement that payment be made within five days of delivery of the executed releases.

For the next several weeks Mercury considered whether it would agree to the additional language inserted by Algorri, requesting and receiving extensions of time to respond. As part of its review process, Mercury consulted with Timory's mother, Helen, as well as Timory's criminal defense attorney, Bruce McGregor. Additionally, Chang spoke to Algorri to determine whether the proposed language was intended only to ensure the release did not waive Barickman and Mcinteer's right to the restitution award or also to preclude offset against the restitution award by the amount of the insurance settlement. As reflected in a note written by Chang memorializing a December 23, 2010 conversation, “[Algorri] just says he doesn't want this settlement to stop his client[s] from receiving restitution[.] [¶] Asked if this settlement w/[Mercury] would impact/offset any restitution settlement and he says he is not sure[.] [¶] He hasn't handled restitution for quite some time and can't answer us right now[.] [¶] He says he doesn't believe that is the case but he can't be sure of it[.] [¶] Advised we will provide to him a response by 1/7/2011[.]” A note by Chang of a January 6, 2011 conversation states, “[Algorri] confirms that his clients want 100 percent restitution on top of the 15K [policy limit] offers for settlement [Mercury] is offering.... He says that his clients are firm on this and won't reconsider anything less.”

On January 7, 2011, the final deadline to respond imposed by Algorri, Chang informed him Mercury required a further extension because it did not have “an official response” from McGregor. Algorri responded, “As you know Mercury has dilly dallied for months in concluding a settlement, even though they have had full power, authority, obligation and opportunity to do so from the outset. [¶] Hence, there is no settlement of this case and my clients are now forced to file suit, effective immediately, to pursue fair and reasonable compensation for their devastating losses.”

On January 10, 2011 Chang advised Algorri that McGregor had instructed Mercury not to accept the revised releases and asked Algorri to reconsider whether the matter could be settled without the added language.³ Although it is not apparent from the record what precipitated Algorri's next letter to Chang or whether he was addressing a specific conversation, on January 11, 2011 Algorri wrote, “Just to make my point clear Mercury has intentionally mischaracterized my added language. The added language simply eliminates any argument that the Court's restitution order is wiped out by the release. Your characterization that Mercury's payments would not ... act as a credit on what your insured owes under the restitution order is not only false but, as you undoubtedly know, would violate Cal. Law under [People v. Bernal (2002) 101 Cal.App.4th 155

].”

2. The Personal Injury Action; the Continuing Dispute Regarding the Additional Language

On January 13, 2011 Barickman and Mcinteer sued Timory for personal injuries. For the next several weeks Chang and Algorri exchanged letters disputing what had led to the impasse. For example, in a January 25, 2011 letter Algorri wrote, “To reiterate my past discussions with you, my clients never objected to a Mercury payment set off against the court ordered restitution and axiomatically, they never requested that your insured waive any set off. Indeed, I told you early on that case law specifically allowed your insured a set off, and I gave you the case citation. I again clarified this position to you in my letter of January 11, 2011. Also, the language my client[s] added to the release simply clarified their rights of restitution—that there could be no later dispute or subsequent contrary argument made by your insured.” Mercury appointed the law firm of Ghormley & Associates to represent Timory in the personal injury lawsuit.

Although Helen had informed Chang on February 4, 2011 that Algorri's proposed “vague and confusing language” was not acceptable, on February 24, 2011 she advised Chang that she and McGregor had met with the restitution paralegal assigned to Timory's case and had learned the language “would not and could not impact the insurance money offsetting the restitution. [¶] Therefore, with Timory's agreement, and acting as her Attorney in Fact, I am instructing Mercury Insurance to Pay the policy limits of $15,000.00 to each of the claimants at the earliest possible date, despite any pending civil action.”

On March 8, 2011 Scott Ghormley spoke to Algorri about the dispute regarding the proposed language. Notwithstanding that Helen had advised Mercury she no longer objected to the modified release and had instructed Mercury to pay Barickman and Mcinteer as soon as possible, in a letter written that day Ghormley offered to draft language making clear Algorri's intent that his clients' right to restitution be protected with no waiver of any offset rights so the matter could be settled. Algorri, however, chose to proceed with the personal injury lawsuit that had been filed the previous month. Additionally, notes made in Mercury's online claims processing database on March 29 and April 1, 2011 indicate Mercury was still attempting to persuade Barickman and Mcinteer to sign the unedited releases.

In August 2012 the personal injury action was settled with a stipulated judgment in favor of Mcinteer against Timory for $2.2 million and in favor of Barickman against Timory for $800,000. Timory assigned her rights against Mercury to Barickman and Mcinteer in exchange for their agreement not to attempt to collect the judgment against her. Mercury paid each woman the $15,000–per–person policy limits.

3. The Bad Faith Action

On April 4, 2013 Barickman and Mcinteer filed the instant action asserting claims for breach of contract and breach of the implied covenant of good faith and fair dealing. The complaint alleged Timory's liability for the catastrophic injuries caused to Barickman and Mcinteer was virtually certain, as was the likelihood that their damages would result in judgments against Mercury's insured well in excess of the $15,000/$30,000 policy limits. As a result, Mercury's failure to make an offer without unacceptable terms and conditions, its refusal to settle the case at policy limits when it had the opportunity to do so, and its unwillingness to make efforts to reach a reasonable settlement constituted a breach of its obligation of good faith and fair dealing, exposing Timory to excess damages.

On May 13, 2014 the parties agreed to a trial by reference of all...