$2,106,000: Playing With Fire

June 4, 2010

CASE DESCRIPTION:  A young boy was rendered a paraplegic while a riding in a friends car.  The insurance covering that vehicle refused to disclose the policy limits despite evidence that the boy’s injuries far exceeded the limits of the policy.  A law suit was filed alleged Bad Faith on the part of the insurance company.

RESULT:  $2,106,000.00 total settlement

On October 27, 1990, 15 year old plaintiff Levi B. was rendered a paraplegic in an automobile collision while writing as one of three passengers in a Volkswagen driven by 16 year old Michael B. The Volkswagen overturned on the freeway as a result of a collision with another Volkswagen.  At the time of the collision, the Michael B. vehicle and its occupants were covered under a policy of insurance issued by defendant AMEX Assurance Company (“AMEX”).

Levi B. immediately submitted his claim to AMEX, and the company knew the injuries he suffered had a value far in excess of policy limits.  AMEX’s claims adjuster noted in the claim file Levi B’s poor prognosis indicating he would not in all likelihood walk again.  Insurer’s notes just 10 days following the accident stated that Levi B. “remains in intensive care with two fractured and to compress discs.”

On December 17, 1990, James J. DiCesare, the attorney hired by Levi B’s family requested written confirmation from the adjusting firm of its insured’s policy limits.  On December 20, 1990 the adjusting firm received a medical bills of $20,000 and by May of 1991 had received over 35,000 of plaintiff’s medical bills and on July 22, 1991 the Company new the medical bills were no less than $80,561.81.

On January 2, 1991 AMEX informed Adams in a telephone call not to disclose the policy limits to Mr. DiCesare as it would be against company policy.  Mr. Adams confirmed AMEX’s company positioned in a letter to Mr. DiCesare on January 22, 1991 stating he had been advised by the principal that it is their policy not to disclose the amount of policy limits.

On May 28, 1991 Mr. DiCesare wrote Mr. Adams confirming AMEX’s refusal to disclose any information about policy limits; summarizing the severity of his clients injuries; advising that without policy limits information he would be forced to file a lawsuit.  A complaint was filed that day and served thereafter.  It was not until October 20, 1991 the defendant through its defense counsel finally informed  Mr. DiCesare of the policy limits and offer to settle the case for policy limits in exchange for a full release of all claims.  In light of the position taken by the defendant, and due to the added the lay and expense of formal litigation, plaintiff rejected the settlement offer.

On December 23, 1994 a trial was held which awarded Levi B. $2,985,000 as against Michael B., and $15,000 against his father, Michael B.  As partial satisfaction of the judgment, defendant paid $100,000 policy limits.  The Michael B. is then assigned their right to proceed against AMEX for the excess judgment in exchange for Levi B’s covenant not to execute against their personal assets.

On October 18, 1996, defendant AMEX moved for summary judgment on the grounds that, as a matter of law there was no bad faith because the plaintiff never made an offer to settle for policy limits and the insurer had no duty or obligation to disclose the amount of the policy limits.  The trial court granted the motion.  The plaintiff appealed this ruling.  In the published opinion of the appellate case Boicourt v. Amex Assurance Co. 78 Cal.App.4th 1390,93 Cal.Rptr.2d 763 (2000), the appellate court reversed the summary judgment ruling.  In this appellate ruling Justice Sills noted that an insurer who refuses to reveal policy limits to a plaintiff is “playing with fire” explained the court’s decision:

“A blanket rule against precomplaint disclosure of policy limits creates a conflict of interest each wing liability insurers and their insureds.  First the insurer saves some money on administrative cost might never having to contact its policyholders to obtain the necessary authorization for disclosure.  Second the insurer deems a tactical advantage vis-à-vis the claimant by forcing the claimant to make any prelitigation offers ‘in the dark.’  Because the essence of bad faith in the liability insurance context is the insurer’s elevation of its own parochial interest over the insured’s at the expense of a policy limits settlement – that is, preferring its own interest over the insured’s when there is a conflict of interest between them – we reverse the summary judgment in this case.  That judgment was based on the idea that there could be no conflict of interest absent a formal settlement offer.”

Following the appellate court decision the defendant filed a second motion for summary judgment.

TYPE OF CASE:  Insurance  Bad Faith

INJURIES:  Levi B. was rendered a paraplegic as a result of the accident.

PLAINTIFF’S AGE:  16 years old at the time of the accident.

OCCUPATION: Student

PLAINTIFF’S ATTORNEYS:
Wylie A. Aitken & Darren O. Aitken
AITKEN * AITKEN * COHN
For Plaintiff – Levi B.

DEFENDANT’S ATTORNEYS:
Samuel Y. Edgerton
LAW OFFICES OF NASH & EDGERTON
For Defendant – Amex Assurance Company

Donna Melby
SEDGWICK, DETERT, MORAN & ARNOLD
Also for Defendant

DEFENDANT INSURANCE CO.:  Amex Assurance Company