ANGUIANO v ALLSTATE INSURANCE9756704summaryjudgment
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JESUS ANGUIANO, an individual, Plaintiff-Appellant, No. 97-56704 v. D.C. No. CV-97-01690-WMB ALLSTATE INSURANCE COMPANY, an Illinois corporation, OPINION Defendant-Appellee.
Appeal from the United States District Court
for the Central District of California
William Matthew Byrne, Jr., Chief District Judge, Presiding
Argued and Submitted
October 8, 1999--Pasadena, California
Memorandum Filed March 10, 2000
Memorandum Withdrawn April 19, 2000
Filed April 19, 2000
Before: Betty B. Fletcher, Dorothy W. Nelson, and
Melvin Brunetti, Circuit Judges.
Per Curiam Opinion
_________________________________________________________________
COUNSEL
William D. Chapman, Peterson & Chapman, Rancho Santa
Margarita, California, for the plaintiff-appellant.
Gregory M. MacGregor, MacGregor & Berthel, Woodland
Hills, California, for the defendant-appellee.
_________________________________________________________________
OPINION
PER CURIAM:
Third party claimant Jesus Anguiano ("Anguiano"), a pas-
senger injured in a car driven by the insured, Louis Romero
("Romero"), appeals the district court's grant of summary
judgment in favor of Allstate Insurance Company
("Allstate"). Anguiano sued Allstate for breach of its duty of
good faith and fair dealing to its insured Romero under an
assignment from Romero to Anguiano. We have jurisdiction
under 28 U.S.C. S 1291. Reviewing the district court's grant
of summary judgment de novo, we reverse. See Paresi v. City
of Portland, 182 F.3d 665, 667 (9th Cir. 1999).
I.
On December 17, 1994, Anguiano was involved in an auto-
mobile accident while traveling as a passenger in a car driven
by Louis Romero. Anguiano was rendered a quadriplegic as
a result of the accident. At the time of the accident, Romero
and his parents were insured by Allstate. The policy provided
liability coverage of $15,000 per passenger, $30,000 per acci-
dent, and an additional $1,000 in medical payments coverage.
Shortly after the accident, Allstate determined that Louis
Romero, its insured, was 100% responsible. Allstate also
decided that the Romeros were potentially exposed to dam-
ages in excess of their policy limits due to the severe physical
damage suffered by Anguiano. Therefore, Allstate initially
made a full policy limits offer to Anguiano's mother, Graciela
Campos ("Campos"), shortly after determining that the
Romeros were exposed to liability in excess of their policy
limits. Campos did not accept Allstate's offer, stating that she
needed additional time to consider her options. Allstate failed
to communicate any of the details of this conversation to the
Romeros.
On April 21, 1995, Campos contacted Allstate's adjuster,
Barbara Meza, and attempted to accept Allstate's full policy
limits offer. Meza again reiterated that Allstate would be will-
ing to settle the claim for $16,000; however, Meza injected
additional terms into the agreement including the requirement
that the settlement be structured in order to account for
Anguiano's minority status. While it is clear that Campos did
not accept those additional terms, her deposition testimony
demonstrates that she counteroffered by indicating her will-
ingness to settle the claim for $16,000 in cash. Allstate
rejected that offer and failed to contact the Romeros regarding
Campos' settlement offer.
Campos employed an attorney and on June 16, 1995, the
attorney sent a letter informing Allstate that it could settle the
claim for $16,000 but that the check must be received within
five days. Meza responded to the letter two days after its expi-
ration date. As a result, she was informed by Anguiano's
attorney that the acceptance was not timely and thus they
would not consummate a settlement with Allstate. Allstate
also failed to inform the Romeros about any of the details of
this second offer.
On August 24, 1995, Anguiano filed a complaint against
the Romeros in California state court. On September 23,
1996, a stipulated judgment was entered against the Romeros
and in favor of Anguiano in the amount of $8 million. The
stipulation assigned all of the Romeros' claims against All-
state to Anguiano in exchange for a covenant not to execute
the judgment against the Romeros.
On February 10, 1997, Anguiano filed a complaint against
Allstate in California state court asserting the Romeros' bad
faith claims against Allstate. The action was subsequently
removed to federal court on diversity grounds. On November
7, 1997, the district court granted Allstate's motion for sum-
mary judgment. This appeal followed.
II.
Summary judgment is only proper if, upon viewing the evi-
dence in the light most favorable to the party opposing the
motion, we find that no genuine issue of material fact exists,
and that the moving party is entitled to judgment as a matter
of law. See Newman v. American Airlines, 176 F.3d 1128,
1130 (9th Cir. 1999). We reverse the district court's grant of
summary judgment because a genuine issue of material fact
exists as to whether Allstate properly handled Campos' two
settlement offers.
[1] California law implies a covenant of good faith and fair
dealing in every insurance contract. See PPG Indus., Inc. v.
Transamerica Ins. Co., 975 P.2d 652, 654 (Cal. 1999). This
duty extends to an insurance company's insureds, in this case
the Romeros. See Moradi-Shalal v. Fireman Fund Insurance
Cos., 758 P.2d 58, 68 (Cal. 1988) (In Bank). Anguiano's
cause of action arises because the Romeros assigned their
claims against Allstate to Anguiano. Allstate's treatment of
Campos, therefore, is relevant only insofar as the company's
actions towards Campos exposed the Romeros to liability
over and above the limits of the Allstate policy.
Anguiano alleges that Allstate breached the covenant of
good faith and fair dealing when it failed to inform the
Romeros about the two settlement offers that Campos made.
Allstate argues that it did not have a duty to inform the
Romeros about the settlement offers because the offers failed
to account for a Medi-Cal lien over any settlement proceeds
paid to Anguiano, and were therefore defective. The facts
regarding the Medi-Cal lien are in dispute. However, a defect
such as this does not relieve the insurer of its obligation to
forward settlement offers to the insured.
[2] California law requires that an insurer " `take into
account the interest of the insured and give it at least as much
consideration as it does to its own interest' " when evaluating
settlement offers. Walbrook Ins. Co. v. Liberty Mutual Ins.
Co., 7 Cal. Rptr. 2d 513, 521 (Cal. Ct. App. 1992) (quoting
Comunale v. Traders & General Ins. Co., 328 P.2d 198, 201
(Cal. 1958) (In Bank)). As a result, the implied covenant of
good faith and fair dealing imposes a duty upon insurers to
give an "offer its intelligent and informed consideration; that
the insurer advise the insured of any settlement offers,
together with the results of its investigations; and that the
insurer give equal consideration to the interests of its
insured." Cain v. State Farm Mutual Auto. Ins. Co., 121 Cal.
Rptr. 200, 205 (Cal. Ct. App. 1975). A breach of any of these
obligations coupled with a refusal to settle within policy lim-
its may render an insurer liable for any judgment against its
insured, including any portion in excess of the policy limits.
See id.
[3] The insurer's duty to communicate a settlement offer to
the insured is particularly important when there is a conflict
of interest between the insurer and the insured. See Miller v.
Elite Ins. Co., 161 Cal. Rptr. 322, 331 (Cal. Ct. App. 1980).
A conflict of interest arises when "an offer to settle an excess
claim is made within policy limits or when a settlement offer
is made in excess of policy limits and the assured is willing
and able to pay the excess." Merritt v. Reserve Ins. Co., 110
Cal. Rptr. 511, 523-24 (Cal. Ct. App. 1973).
[4] In this case, a conflict of interest arose the moment that
Campos made an offer to settle the claim within the policy
limits because Allstate was aware that the Romeros were
exposed to liability well beyond the policy limits. Acceptance
of Campos' settlement offer, if properly structured, could
have eliminated any liability exposure to the Romeros.
[5] Construing the evidence in the light most favorable to
the nonmoving party, Campos made two separate offers to
settle within policy limits.1 However, Allstate failed to inform
the Romeros about either settlement offer or any settlement
negotiation details until August 24, 1995, the day that Angui-
ano filed a lawsuit against the Romeros in California state
court. By that time, it was too late for the Romeros to exercise
any influence over Allstate's decision to reject the settlement
offers. See Martin v. Hartford Accident and Indemnity Co., 39
Cal. Rptr. 342, 346 (Cal. Dist. Ct. App. 1964) ("[A]n insured
who is kept informed may have further information to give to
the carrier; he may use powers of persuasion upon the carrier
to increase its offer; he may engage counsel; he may have
other courses of action open to him.").
[6] Under California law, Allstate's failure to inform the
Romeros about Campos' settlement offers presents a genuine
issue of material fact. Accordingly, we reverse the district
court's grant of summary judgment.
REVERSED.
_______________________________________________________________
FOOTNOTES
1 Campos introduced evidence that she made her first settlement offer
during the April 21 conversation with Barbara Meza, and her second offer
in the June 16 letter to Allstate. Allstate contends that Campos never made
an offer during the April 21 conversation. However, for the purposes of
summary judgment, we must construe the evidence in the light most favor-
able to the nonmoving party, the plaintiff in this case.
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