Author: Daniel Schneiderman

The Prudent Associate’s Guide to Bad Faith Strategy, Part 3

The Prudent Associates Guide to Bad Faith Strategy - Personal Injury Lawyers - Roseville & San Diego - GHS LLP

Daniel Schneiderman, CCTLA Member

Capitol City Trial Lawyers Association is the voice of and for Sacramento Trial Attorneys. Founded in the early 1950s to create a meaningful source of information about Sacramento juries, CCTLA has grown into an effective guild of trial advocates. CCTLA serves its members as liaison to the courts, as providers of meaningful continuing legal education, as a network of the exchange of ideas and experiences and as a representative to Consumer Attorneys of California. https://cctla.com/

This article is intended to be Part 3 of a 5-part series to be read from the new or aged associate’s point of view. The first section Part 1 provided a 20000-foot view of third-party bad faith strategy for the prudent associate. Part 2 which appeared in the Fall 2022 Litigator focused on the demand phases and should be considered as a continuation of Part 1. This segment Part 3 addresses the relationship of the C.C.P. Section 998 to investigation and discovery. Part 4 will discuss late-stage litigation and alternative dispute resolution. Part 5 will pertain to post-judgment discussions, potential assignment and final thoughts.

I. The Litigation Workflow

In my experience, actualized or actionable bad-faith situations stem from clear and set expectations and communications from plaintiffs’ counsel. Once those expectations and communications are ignored often repeatedly, actionable bad faith starts to take form. There is no one-size-fits-all. Each case is different. However, once in litigation, the seeds of bad faith typically grow in my experience from memorialized acts of reasonableness (i.e., conveying your case and deadlines) by plaintiff’s counsel. Despite that reality, it is not unusual for an adjuster, primary counsel, or conflict counsel to claim that you “trapped them” or “set them up” for a bad-faith lawsuit. Such claims are inevitable as this is the fundamental defense to any allegation with a standard of “reasonable” action. With that in mind, you must be prepared to substantiate your actions and the reasons for your deadlines, statutory or otherwise. In my opinion, this strategy always involves a high level of transparency and cooperation and sometimes even extensions to allow defense counsel a true and reasonable opportunity to perform.

II. Discovery and the 998

For any civil attorney, let alone the illustrious prudent associate, it is vitally important to note the importance of the Code of Civil Procedure section 998 in the process of evaluating, attempting, and effectuating a resolution, especially one involving a policy limit. Written discovery and depositions (i.e., any process where each side has to say or do anything under oath with penalty of perjury) are only some of the natural junctures of a case that present opportunities to memorialize the unreasonableness of an “OPC” (i.e., opposing counsel or character). Therefore, it is important to understand the inherent relationship between basic discovery procedures (i.e., written discovery, depositions, IMEs) and your policy limit demand which [depending on the circumstances] will take the form of a Code of Civil Procedure section 998 “Offer to Compromise” once in litigation. This relationship was explained in Najera v. Huerta (2011) 191 Cal.App.4th 872, 879. In that case, the court made a determination regarding enforcement of an early expired 998. In coming to a decision to affirm the lower court’s ruling and not enforce 998-related penalties, the court referenced a dissent from Barba v. Perez (2008) 166 Cal.App.4th 445, 453. In that excerpt, the court re-stated “why it is ordinarily not reasonable to expect defendants to jam basic discovery into the 30 days following the service of a summons and complaint in order to respond to a section 998 offer… As a practical matter here is what typically has to happen within 30 days following service of a personal injury complaint upon a defendant: (1) The defendant has to deliver the summons and complaint to his insurance carrier; (2) A claims adjuster for the insurer has to review the allegations of the complaint with the insured; (3) The claims adjuster has to line up counsel for the defendant; (4) Defense counsel has to discuss the allegations of the complaint with the insured and prepare an answer.” This language is not cited as a cautionary warning regarding timing. Rather, it is intended to provide a guide as to the micro-factors a court or later a jury may consider when gauging your good-faith actions relative to the 998 and in the event of a “lid off” situation the policy limits. Make sure to consider, use, and take the next logical leaps necessary when timing your policy limit 998 around the discovery process.

III. Reasonableness of the 998

But sending out a 998 is not enough. These interactions must be documented (i.e., highlighted through writing[s]) to preserve your client’s future leverageable options, especially those geared towards pre-trial resolution. As in any negotiation, leverage and diligence are reasonable means to accomplish a good result for your client. Any attorney that ignores those elements does so to their own and their client’s detriment. To that effect, for any defense attorney out there who would like to attempt to use such a reality against the prudent associate, I would simply advise them that the written theatre of bad faith is again focused on one thing: showing reasonable or unreasonable conduct. One way to memorialize this? Showing that your actions are effectuating the purpose of the 998, i.e., to promote early and efficient resolution of matters prior to trial. In this regard, “the policy is plain.” Section 998s are meant to encourage a settlement by “providing a strong financial disincentive to a party.” (Bank of San Pedro v. Sup.Ct. (1992) 3 Cal. 4th 797, 804, 12 CR2d 696, 700-701.) This is true despite the party status, i.e., “whether it be a plaintiff or a defendant–who fails to achieve a better result than that party could have achieved by accepting his or her opponent’s settlement offer.” (Id.) “This is the stick. The carrot is that by awarding costs to the putative settler, the statute provides a financial incentive to make reasonable settlement offers.” (See Id. [emphasis added]. See also Mesa Forest Products Inc. v. St. Paul Mercury Ins. Co. (1999) 73 Cal. App. 4th 324, 331, 86 CR2d 398, 401 [citing text].) In case it is not clear, bad-faith “strategy” is and should be focused on one question: “What is reasonable?” Depending on the circumstances, this question may arise at different stages of pre-litigation and litigation and sometimes repeatedly. Ultimately, especially when discussing the timing of 998s with a policy limit demand, it is important to treat any situation as if you are being judged by it in front of a judge and/or jury. In this specific but not exclusive manner, a reasonably timed 998 is the perfect tool to accomplish or encourage each of these goals.

IV. Timing Extensions and Repeats

A. Early 998s
Despite the statutory and legal authorities that delineate the “earliest” a 998 may be sent, there are extenuating circumstances that may affect the enforceability of an early 998. For example, if you have memorialized the steps taken with the carrier pre-litigation, such a showing may be sufficient to avoid a taxation of costs following judgment. In the event that your 998 matches the pre-litigation policy limit demand (i.e., the “last chance 998), your opposition to a motion to tax will be even more persuasive, assuming you have put this chronology in writing. In short, if you are ever asking yourself whether you have provided enough time and information to the other side, or you believe there are other extenuating circumstances that take your matter outside the limitations of the statute or authorities, make sure you commemorate that on the written record.

B. Extending 998s

There are many ways to utilize policy limit 998s to progress discovery. Consider keeping the 998 open through mediation. Send an early 998 but provide that additional extension when requested on condition that they provide in writing EXACTLY what they require to make a reasonable determination during the extended time-period. The goals here are simple: take reasonable and necessary steps to resolve the matter, i.e., do not obstruct the discovery and deposition process and get the other side the information they need to make a reasonable determination. That being said… I want to make one thing clear… again… we ARE NOT talking about “setting the other side up.” The name of the game when it comes to bad faith, what “opens the policy up,” is being in fact reasonable in action and word. This, of course, is ultimately a question for the jury, but it is shown through your reasonable action throughout litigation.

C. Lowering 998s

To that effect, reasonableness is a two-way street. If a defendant serves an unreasonably low section 998 offer based on the damages of the plaintiff, the plaintiff’s attorney may want to object to that offer, citing a lack of information about liability to be able to properly evaluate the offer. This objection should cite to the need to request more time for discovery and identify the additional information they need to evaluate the offer. Then again, the prudent associate also knows that an unreasonably low 998 can be used as a double-edged sword, especially when more unreasonably low 998s (i.e., the “I hope they take it 998s”) follow. But what happens to a plaintiff that reduces their 998 to under the policy limits? Does a 998 under the policy limits evidence unreasonableness of your previous offers? The frank answer: yes, it can have an impact… but if used appropriately with the correct memorialization of events… it shouldn’t. There are simply too many possible circumstances/combinations of what happens between prelitigation and litigation to identify a clear and concise workflow for all situations. However, to avoid the situation described above and depending on the liability facts/damages, I will often send a 998 at the top of my value range. This value may very well be in excess of the policy limits and that in of itself is obviously important. That being said, in the event your 998 drops under the policy limit, it is important to pair that with a letter clearly delineating that the 998 is being provided for the purpose of early resolution vs. reasonableness. This is especially relevant for purposes of finding a “trial 998.” When the other side has set their stakes into the ground and you have a real idea of where they want to resolve the case (assumedly at an unreasonable value), always keep the methodology of reasonableness in mind. If you are changing your valuation, express the reason for it in your paired letter. If that reason is consistent with the scope and intention of the 998 (i.e., encouraging reasonable attempts at resolution prior to trial), you can avoid any later claims that your initial 998s were unreasonable or reflected a pattern of unreasonableness.

V. Conclusion

The message of this article: find a reasonable position, document, repeat. Do so knowing that your actions will be reviewed and analyzed. Always maintain professionalism but spell out what you want and why you need it in writing. If defense says they need something, comply to the degree that is reasonable and document where required for objection or limitation. Use the Code of Civil Procedure and its deadlines as an ally and effectively combine your procedure workflows with your demand workflows.

The Prudent Associate’s Guide to Bad Faith Strategy, Part 2

Daniel Schneiderman, CCTLA Member

By Daniel Schneiderman and Diego Velasquez

This article is intended to be Part 2 of a [growing] series. The previous section, Part 1, provided a 20,000-foot view of third-party bad faith strategy. Part 2 focuses on the pre-litigation demand phase. Part 3 will address litigation specific considerations (i.e., discovery timing, extension requests, etc.). Part 4 talks about CCP 998s, alternative dispute resolution, and mediation-related concerns. Part 5 pertains to trial considerations, post-judgment discussions, and assignment.

Introduction

In this article, we will explore just a few of the strategies available to the weary but bright-eyed prudent associate looking to develop their practice further into the world of “prospective bad-faith matters.” Utilizing the demand strategies discussed in this article will help the prudent associate learn to recognize the pressure points, leverage points, and factual showings necessary for the future prosecution of a bad-faith matter. This outlook will not only improve the efficacy of your efforts in pursuit of pre-trial resolution but will also prepare you further for the goal of going to trial and collecting a judgment in excess of the policy limits. I hope we can all agree that the prudent associate is not looking for a participation award when going to the boss with a potential bad faith situation. Rather, the prudent associate is going to the boss with one of two goals in mind: either you are handing over an airtight bad-faith case, or you have one that is close, and you want to update your boss. In either situation, you better be prepared. If you walk in only to say, “I sent a demand that they rejected… therefore bad faith,” you could be in for an afternoon of bad-faith seminars.

The Pre-Demand Phase – “PTG”

So what comes first? Parties, Types, Goals. When you first start as an associate, it is common to find yourself looking for cookie-cutter approaches to the job in an effort to make sure you are doing everything you should be doing. This, of course, is a foundational step for any young associate; however, what happens when that cookie cutter gets dull? Well, it is time to make yourself some new tools, of course. So how do you go about that? To put it simply, experience. Start today and get in the practice of evaluating your experiences with different people, be it attorneys, their staff, parties, or unrelated third parties and their counsel. You need to learn to speak with each of these folks, and find out what makes their job tick. Ask yourself: where is opposing counsel or this adjuster located along the Defense hierarchy? If I were in their position, what type of information would make me evaluate this matter in favor of Plaintiff? What would make me kick it up the food chain and bring to my boss? Ultimately, the more experience you get talking and dealing with each of these people, and LEARNING ABOUT THEIR JOB, the better. Don’t take this time for granted as it is the foundational stage for your eventual litigation in a given manner, as well as your long-term professional development. Breaking down and processing this readily available information immediately when you get a case [and updating as you move forward] will maximize your opportunities to not only steer a case towards resolution but also maximize your ability to pursue a recovery above the set policy limits.

Pre-Demand Letters

So, you get your initial PTG done, you draft and send your initial representation letter(s) (assumedly with a request for the adverse policy limit information), and you start down the path of investigation and collection of bill/record/wage-loss evidence. What comes next? Well, you wait for all that investigation and collection of evidence to come back as you wait for the carrier to comply with the coverage request. Right? NO. Instead, the prudent associate should be asking themselves, what is the core objective at this stage? Get the carrier to disclose or fail to disclose the available liability policy limits. This issue was addressed in Boicourt v. Amex Assurance Co. (2000) 78 Cal. App.4th 1390. In Boicourt, the claimant asked the insurer to disclose its policy limits. The insurer refused to do so (and did not ask its insured for permission to do so), explaining that it “had a ‘policy not to disclose the amount of the policy limits.’” (Id. at p. 1393.) The claimant then filed suit against the insured and recovered an excess judgment. (Ibid.) He later testified that he would have been willing to settle for the policy limits, had he known what they were. (Ibid.) The appellate court held “that a bad faith claim can be based on an insurer’s prelitigation refusal to disclose the policy limits” . . . “even in the absence of a formal offer to settle within the policy limits.” (Id. at pp. 1393-1399, 93 Cal. Rptr.2d 763.) In that situation, “A conflict of interest can indeed develop without a formal settlement offer being made by the claimant” between the insurer and the insured.” (Id.) More specifically, the Court stated that “[A] liability insurer ‘“is playing with fire”’ when it refuses to disclose policy limits. Such a refusal ‘“cuts off the possibility of receiving an offer within the policy limits”’ by the company’s ‘“refusal to open the door to reasonable negotiations.”’ [Citation.]” (Id. at p. 1391.) Thus, the court also held that “a formal settlement offer is not an absolute prerequisite to a bad faith action ….” (Id. at p. 1399.) “At a minimum, Boicourt means that the existence of an opportunity to settle within the policy limits can be shown by evidence other than a formal settlement offer.” (Planet Bingo LLC v. Burlington Insurance Company (2021) 62 Cal. App.5th 44.) Again, when the prudent associate runs into this issue, and they will, often, it is vitally important to memorialize any verbal conversations in writing. The core assignment: to convey that you will be pursuing a lawsuit for the specific purpose of collecting the policy limits information, that the carrier has unreasonably withheld the limits following a good-faith request, and that carrier is putting their insured at risk by not providing the policy limits. Such correspondence sets the stage for future interactions and demands, especially if carrier fails to reasonably correspond with the insured during this process.

“The Judgment-Proof Defense”

The unpredictability of bad-faith matters, at least from a business model perspective, comes from the notion that defendants “can always just declare bankruptcy,” i.e., that they are “judgment-proof.” Unlike secured judgments (i.e., judgments that have already attached to a piece of property or collateral, e.g., foreclosure of a home mortgage following default, etc.), unsecured judgments typically do not share similar protection under bankruptcy laws. Furthermore, unlike certain fraud or contractual litigations, California law does not allow for “prejudgment writs of attachment” (i.e., the procedural tool you can use to “secure” an anticipated future judgment) for personal injury matters. This means that the prudent associate, or their boss, can spend all the way to trial, get a righteous judgment, only to have the defendant declare bankruptcy (i.e., Defendant says they have no cash or other fungible assets to pay or auction after satisfying secured creditors). Because the judgment is unsecured, there is a higher level of risk related to collection as an “unsecured creditor.” Such a [high] risk can be a tough pill to swallow, and it is certainly the insurance lobby’s intention to keep it that way. This is what I and most of the prudent associate’s colleagues have come to identify as the “judgment-proof defense.” If an insurance adjuster OR attorney ever tries to use bankruptcy or insolvency to dissuade you from pursuing a matter over the policy limits, I can only tell you to do one thing: get that person to articulate their position in writing, and then promptly save that writing. In my personal opinion, an adjuster or attorney hired by the carrier to protect or represent an insured is arguably acting in actionable bad faith if they are exposing their insured to an excess judgment over policy limits while using the “judgment-proof defense.” Bankruptcy is not a fun thing to go through. People do not want to declare bankruptcy. Despite the clever commercials on the radio talking about how easy it is, it is not an asset to a defendant in most situations. No one on the defense side should be using the threat of bankruptcy to protect the insurer’s interests over their insured. (Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 658-66; Hamilton v. Maryland Casualty Co. (2002) 27 Cal.4th 718, 724-725.) Though evaluation of this type of conduct falls follows an objective standard, in my opinion, this is per se bad faith, and potentially professional malpractice.

The Policy Limit Demand

The initial demand is the prudent associate’s primary opportunity to resolve the case, or alternatively, an opportunity to preserve the carrier’s unreasonableness on the record. To that end, again, it is vital that you immediately begin to memorialize and highlight specific acts of unreasonableness both before and in the initial demand. But what should go into the initial demand for the purpose of bad faith? Of course, any demand should include a thorough and accurate recitation on the basic positions and facts relative to causation, liability, and damages (“CLD”). We will skip over presentation style and content for purposes of this article. Rather, we will be focusing on those relevant conditions/terms and authorities that may impact the prudent associate’s ability to pursue a bad faith action following the demand phase. In practice, “An offer to settle an insurance claim is generally multidimensional, the most obvious component being the amount demanded. Other components include the conditions for acceptance and the scope of any release.” (Pinto v. Farmers Ins. Exchange (2021) 61 Cal.App.5th 676, 688). This evaluation must include, at the very least, a determination of what information the carrier has or reasonably needs (Isaacson v. California Ins. Guarantee Assn. (1988) 44 Cal.3d 775, 793), a reasonable time to respond (Graciano v. Mercury General Corp. (2014) 231 Cal.App.4th 41), and analyses of what impact, if any, other requirements or conditions in the demand will have on the carrier’s obligation to tender or respond. (See Heredia v. Farmers Ins. Exchange (1991) 228 Cal.App.3d 1345, 279) [settlement offer deemed in excess of the policy limits, because it required insurer to pay the policy limits and to continue to provide a defense post-settlement]. See also Coe v. State Farm Mut. Auto. Ins. Co. (1977) 66 Cal.App.3d 981, 994 [timing of offer issue for jury].

In addition to the above, every policy limit demand should include a request for the carrier to provide their insured with your firm’s standardized Asset Declarations Form as well as a request for a [certified] Declaration of No Additional Coverage. Once conveyed, these requests must be communicated to the insured. If the carrier and/or its adjuster is reasonably performing their job, the next communication between the carrier and its insured will include information about the risks the insured may assume if they choose not to comply with the requests, namely that they will be subject to litigation. Such communications between the carrier or defense attorney and their insured or client, respectively, can effectively drive a wedge between the interests of the carrier and the insured by highlighting the reality that a law firm is taking stock of the insured’s assets beyond the policy limits. Especially when litigation is likely to follow, involving the insured at this stage can provide significant leverage later down the line.

Conclusion

If you have accomplished and concluded the above steps, and you receive a denial to your demand, your next trip should be back to your computer. Do yourself a favor and put all of your documents and materials together into a tabbed summary and memorandum. This summary should include, at minimum, relevant dates (e.g., incident, complaint filing, demand, correspondence, pertinent procedural steps, discovery responses, depositions, etc.), but also relevant materials (with proofs of service, notices and correspondence tabbed). Once that is complete, you are now ready to head down the hallway to your boss’s office. Get after it, and good luck.

The Prudent Associate’s Guide to Bad Faith Strategy, Part 1

The Prudent Associate’s Guide to Bad Faith Strategy by Daniel Schneiderman provides best practice for third-party bad faith strategy.

$750,000 First Day of Trial Settlement

roseville-premises-liability-injury-attorney

In October 2018, our client was walking through a hotel lobby in Anaheim, California. As he headed towards the conference area, his leg suddenly slipped out from under him, and he collapsed to the floor.

At 66 years old, our client had a history of osteoarthritis, a fact that the Defense relied on over the course of litigation. He would eventually move on to have a knee arthroscopy, and later a knee replacement.

This injury and the subsequent procedures significantly impacted the life of our client, an inventor and manufacturer of telecommunications vehicles for emergency responders, and he continues to deal with the aftermath of this incident on a daily basis.

It was later determined that the water on the floor had migrated down from the extensive plumbing and construction work taking place directly above the lobby. All three defendants involved in the litigation, the property owner, contractor, and subcontractor, denied liability and causation up to the day of trial. Nevertheless, yesterday, we were able to secure a largely non-economic settlement for our client in the amount of $750,000.00.

This was a team effort from a firm that knows and understands what it takes to get the RIGHT results for its clients. If you or someone you know has been injured due to the fault of another, Gingery Hammer & Schneiderman LLP is here to help.

$1 Million Settlement After $16,500 Offer

Motorcycle Accident Attorney Roseville CA - Gingery Hammer Schneiderman LLP

In April 2019, our client was stopped on his motorcycle at a stoplight in Concord, California. When the light turned green, he entered the intersection and was suddenly struck by an elderly driver that had failed to come to a stop before the intersection.

In the year that followed, the adverse driver and insurance carrier denied liability for the incident, despite us tracking down several witnesses that stated how the adverse driver entered the intersection against a red light.

This was a tough case, not only due to the liability issues involved, but the age of the adverse driver and our client’s medical history (he had been in another motorcycle incident 2 years before) inherently impacted the carrier’s decision-making from the start. The highest offer we received pre-litigation was $16,500. We recently finalized a settlement with the insurance carrier for $1,000,000.

As always, this result was a team effort, and we are so proud of our team for putting in the time, effort, and work product to get this terrific result for our client.

Welcome to the Family!

The days go by, and with each, we continue to grow! We are so pleased to announce the addition of three new team members. Dana Pappas will be joining our Roseville office as Receptionist and Legal Support. Tiera Chambers and Ashley Willcox also recently joined our San Diego Litigation Team and will be acting as paralegal and law clerk to firm partner Daniel Schneiderman. All three have already proved themselves integral to our growth and mission to help injured persons and families across California. Thank you for all you do here at Gingery Hammer & Schneiderman LLP!

Project Completed!

In total we got 914 shields out to first responders and hospitals across the United States and even abroad! Yesterday we completed our project. We donated the remaining $1500 in the GoFundMe account to Lincoln High School’s engineering program in San Diego. We also donated the $900 printer we used to complete the project. As a thank you to everyone who helped us, we matched the $1500 donation and purchased another $900 printer to be donated to Hoover High School’s engineering program. This pushed us right up to almost $10,000 raised in total. Thank you to everyone again for helping us with this effort. Stay safe everyone!

3rd Goal Met: 800 Face Shields for COVID-19

We started our 3D printing journey two months ago with the goal of raising $1,000 and making a few hundred shields in six to eights weeks. Instead, we raised over $7,000 in just a few weeks and recently sent our 814th face shield out to those who need it most, our first responders and medical providers. These shields did not just go out in the San Diego community, but reached as far as Seattle, New York, and Tijuana.

Thank you to all of our partners and everyone who contributed their time and money to this effort over the last few months. We are still trying to hit that 1,000 mark, but the printers keep breaking! A big thank you to the Midway Post Office and Rotary International for helping us get these where they needed to go.

From us to you, we hope you and your families are safe and well! We will all get through this together!

Meet our new staff member!

Our new paralegal, Karen Hoey, grew up in San Diego, California. After graduating from Poway High School, she attended the University of California, Santa Cruz where she earned a Bachelor’s of Arts degree in Psychology. After her graduation, Karen moved back to San Diego and attended the Paralegal Program at the University of San Diego.

Since that time, Karen has worked in many different areas of law, including personal injury, employment, construction defect, and real estate. She is excited to start working for plaintiffs and getting them the compensation they deserve.

Congratulations to our University City High School Mock Trial Team!

For the last 6 months, our own Daniel Schneiderman had the opportunity to coach a group of high schoolers from the University City High School for the annual San Diego High School Mock Trial Competition. These young adults put in 10 hours a week for 6 months to compete in the competition, eventually going on to win several awards and multiple rounds.

Congrats to all of you, and thank you for letting our Firm play a small part in your journey. The legal field is going to get a whole lot better once you all get out of law school!