{"id":184,"date":"2015-10-02T13:25:23","date_gmt":"2015-10-02T17:25:23","guid":{"rendered":"http:\/\/blogs.duanemorris.com\/insurancelaw\/?p=184"},"modified":"2015-10-02T13:25:23","modified_gmt":"2015-10-02T17:25:23","slug":"protections-against-defended-policyholder-manufacturing-bad-faith-case-via-stipulated-judgment-confirmed-by-california-court","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/insurancelaw\/2015\/10\/02\/protections-against-defended-policyholder-manufacturing-bad-faith-case-via-stipulated-judgment-confirmed-by-california-court\/","title":{"rendered":"Protections Against Defended Policyholder Manufacturing Bad Faith Case Via Stipulated Judgment Confirmed By California Court"},"content":{"rendered":"

The California Court of Appeal for the Fourth District, Division Two, in 21st Century Ins. Co. v. Superior Court<\/em> (Tapia)<\/em>, ___ Cal.App.4th ___ \u00a0(No. E062244, September 10, 2015), recently confirmed some of the important protections for defending\u00a0insurers against stipulated judgments\u00a0that were established in the Hamilton<\/em> and Safeco<\/em> decisions\u00a0and limited the application of other\u00a0decisions that have been relied on by claimants and policyholders\u00a0seeking to get around\u00a0the Hamilton<\/em> rule against bad faith actions premised on such stipulated judgments.<\/p>\n

In 21st Century<\/em>, the Court\u00a0of Appeal enforced the Hamilton<\/em> rule established by the California Supreme Court and granted a petition for writ to reverse the denial of summary judgment to the insurer as to a bad faith claim premised on a $4.15 million stipulated judgment between the injured passenger claimants\u00a0and driver policyholder, with a covenant not to execute against policyholder assets.\u00a0\u00a0The stipulated judgment was entered\u00a0while the insurer defended the policyholder under only one of the three policies\u00a0the insurer\u00a0issued, and followed the insurer’s\u00a0refusal to pay more than the $100,000 limits of the one applicable policy.\u00a0 Although the insurer later offered to (and eventually did pay) the additional $50,000 limits of the other two policies, the claimant withdrew its offer to settle for the lower amount and sought to\u00a0transform the refusal to settle for the total $150,000 limits into a multi-million bad faith lottery ticket.<\/p>\n

The court summarized the Hamilton<\/em> rule as barring a stipulated judgment reached between a claimant and policyholder directly, while the\u00a0policyholder\u00a0was being defended,\u00a0from having any weight in a later bad faith action, because no damages from a refusal to settle can be shown\u00a0by a defended policyholder until judgment after\u00a0adversarial trial actually exceeds available limits.\u00a0 Under Hamilton<\/em>, and the Safeco<\/em> case on which it relied, the defended policyholder whose insurer refuses a settlement may strike a deal to assign the policyholder’s contract and bad faith rights after judgment in exchange for a covenant not to execute, but they cannot skip past the actual trial by directly settling for what they think the case is worth.<\/p>\n

The policyholder in this case tried to get around Hamilton<\/em> rule\u00a0by arguing that the insurer had breached its duty to defend by offering an inadequate and ineffective defense.\u00a0\u00a0But, the court noted that both Hamilton<\/em> and Safeco<\/em> rejected such arguments.\u00a0 The court observed that such stipulated judgments only arise when some party believes its insurer has acted in bad faith, and so “hyperbolic and accusatory” recitations of wrongdoing do not avoid the rule of Hamilton<\/em>.<\/p>\n

The policyholder also relied on the post-Hamilton<\/em> intermediate appellate decision in\u00a0Risely<\/em> (permitting action against defending insurer\u00a0on stipulated judgment as to non-defending policies)\u00a0and the pre-Hamilton<\/em> decision of the California Supreme Court in Wint<\/em> (permitting action against non-defending insurer on direct settlement despite policyholder being defended by settling insurer).\u00a0 The Court of Appeal rejected that argument, finding Risely<\/em> and Wint<\/em> distinguishable as being limited to the circumstance where the defending policy\u00a0had significantly lower limits than the non-defending policy (one-seventh and one-tenth in those cases, respectively), so the protection offered by the defending policy was considered significantly less effective.\u00a0 The court concluded that, “even if [the insurer] had a duty to defend under all [three] policies, its partial breach of that duty cannot have affected the defense offered.”<\/p>\n

The 21st Century<\/em> decision confirms that the limitations against defended policyholders stipulating to judgments to create bad faith cases are alive and well under California law.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

The California Court of Appeal for the Fourth District, Division Two, in 21st Century Ins. Co. v. Superior Court (Tapia), ___ Cal.App.4th ___ \u00a0(No. E062244, September 10, 2015), recently confirmed some of the important protections for defending\u00a0insurers against stipulated judgments\u00a0that were established in the Hamilton and Safeco decisions\u00a0and limited the application of other\u00a0decisions that have … <\/p>\n

Continue reading “Protections Against Defended Policyholder Manufacturing Bad Faith Case Via Stipulated Judgment Confirmed By California Court”<\/span><\/a><\/p>\n","protected":false},"author":52,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[303,100,39,18,75,300,57,92,38,208,301,12,282,50,306,307,304,302,111,299,305],"ppma_author":[413],"class_list":["post-184","post","type-post","status-publish","format-standard","hentry","category-general","tag-21st-century","tag-assignment","tag-bad-faith","tag-california","tag-california-court-of-appeal","tag-covenant-not-to-execute","tag-duty-to-defend","tag-duty-to-settle","tag-failure-to-defend","tag-failure-to-settle","tag-hamilton","tag-insurance","tag-insurance-law","tag-max-stern","tag-partial-breach","tag-petition-for-writ","tag-risely","tag-safeco","tag-settlement","tag-stipulated-judgment","tag-wint"],"authors":[{"term_id":413,"user_id":6,"is_guest":0,"slug":"duanemorris3","display_name":"Max H. Stern","avatar_url":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-content\/uploads\/sites\/12\/2024\/12\/sternmax-100x100.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/posts\/184","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/users\/52"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/comments?post=184"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/posts\/184\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/media?parent=184"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/categories?post=184"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/tags?post=184"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/insurancelaw\/wp-json\/wp\/v2\/ppma_author?post=184"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}