California Pedestrians Recover $3M From Drunk Driver’s Insurer for Its Failure to Settle Civil Case

When you are injured in a vehicle accident in California, whether you are a driver, a passenger, or a pedestrian, there are many hurdles along your path to obtaining a damages award to compensate you for the harm you’ve suffered. One of the biggest impediments can be the at-fault driver’s auto insurance company. In one recent case, a pair of teens struck by a drunk driver ended up in a prolonged battle with the driver’s insurance company regarding payment for their injuries. Since the insurance company improperly declined to settle the case, a California court awarded the teens $3 million, and the Second District Court of Appeal recently upheld that decision.   The teens, L.B. and S.M., were trying to cross Second Street in Long Beach when an SUV driven by T.M. struck them. T.M. ran a red light and was intoxicated at the time. The accident inflicted serious injuries upon the two pedestrians. About a month after the accident, T.M.’s auto insurer, Mercury Casualty Co., offered to settle with the teens for the limit of T.M.’s policy, or $15,000 per pedestrian. Some time later, T.M. underwent a criminal trial, at which the court ordered her to pay roughly $165,000 in restitution. The teens’ attorney agreed to the insurer’s settlement offer, subject to the added condition that the release explicitly state that the settlement did not wipe away T.M.’s obligation to pay court-ordered restitution to the teens. Mercury balked, and, after months of dialogue about this added condition, the settlement offer expired without acceptance, and the teens sued. A year and a half later, the case settled. The stipulated judgment awarded S.M. $2.2 million and L.B. $800,000. In exchange for a written promise not to try to collect the judgment against her, T.M.’s assigned her rights against Mercury to the two pedestrians, who then sued the insurer for breach of contract and for breaching its duty of good faith and fair dealing. L.B. and S.M. argued that, given the facts of the incident, T.M.’s liability was virtually a lock, and the damages they suffered were clearly well in excess of the $15,000-per-person limit established in the driver’s policy. Under these circumstances, Mercury’s refusal to settle was a clear violation of its good faith and fair dealing obligations. A referee overseeing the case sided with the pedestrians. The language inserted by the teens’ attorney was “essentially superfluous,” since the $165,000 restitution was an aspect of T.M.’s criminal case, and the settlement and release would only cover the girls’ claims in civil court. Since the language did not alter the terms of the settlement deal, Mercury should not have declined to settle solely due to the added language. By refusing to accept, Mercury breached its duty. The trial judge accepted the referee’s recommendation and awarded the girls the $3 million they received in the stipulated judgment, plus interest. Mercury appealed, but the insurer lost. The appeals court stated that, at first, Mercury clearly acted in good faith. In a timely manner, Mercury offered to settle the case by paying each girl the limit allowed under its policy with T.M. The insurer’s actions later, though, were the basis for the pedestrians’ valid claims of bad faith. The teens’ attorney clearly communicated that the added language served only to maintain his clients’ basic rights to receive restitution. This language merely stated a principle already required by California law (that the settlement did not terminate the pedestrians’ right to receive restitution), meaning that Mercury’s acceptance of it would not have required it to surrender any of its rights and that it had no good-faith basis for refusing to accept the revision as part of the settlement. Doing battle with insurance companies as part of your auto accident case can be extraordinarily frustrating at times. One way to strengthen your position is to put the resources and abilities of experienced California injury attorneys on your side. The determined San Mateo pedestrian accident attorneys at the Law Offices of Galine, Frye, Fitting & Frangos are dedicated to helping injured people like you as they seek compensation for the injuries they have suffered. To set up a free consultation with one of our experienced attorneys, contact us at 650-345-8484 or through our website. More Blog Posts: California Court Rules that Injured Victims May Sue City After Pedestrian Accident, San Mateo Injury Lawyers Blog, Published March 8, 2016 California Appeals Court Allows Survivors of Pedestrian Victim to Sue Passenger for Encouraging Driver to Speed, San Mateo Injury Lawyers Blog, Published Dec. 15, 2015