Chu v. Mercury Casualty Company

Insurance Bad Faith

Orange County

Superior Court Judge Craig L. Griffin

Defense Lawyers: Peter H. Klee, Marc J. Feldman, Sheppard, Mullin, Richter & Hampton LLP

Plaintiff’s Lawyers: Jeffrey T. Lauridsen, Anh Q.D. Nguyen, Law Offices of Anh Quoc Duy Nguyen Inc.; Joseph Di Monda, Christopher E. Angelo, Angelo & Di Monda LLP

Bad faith “failure to settle” claims are often brought against insurers, but they are rarely tried and almost never won by the defendant. An exception was Peter H. Klee’s defense of client Mercury Casualty Co.

“We suspected a setup. We conducted background research on other cases these [plaintiff] attorneys had handled,” Klee said. “We talked to others who had been involved with them. We discovered other setup efforts and learned they’d been very successful. They had recovered literally millions of dollars.”

The case arose when plaintiff Tu Pham suffered a traumatic brain injury as a result of an auto accident caused by plaintiff Hung Chu, who was insured under a Mercury policy with $15,000 limits. Mercury denied Pham’s claim because it did not believe the claim was covered. Pham eventually obtained a $333,300 judgment against Chu and later, in a declaratory relief action, established the claim had been covered.

Chu and Pham sued Mercury for the amount of the underlying judgment and more than $10 million in tort damages. Chu v. Mercury Casualty Co., 30-2012-00556310 (Orange Super. Ct., filed June 26, 2012).

Klee and colleagues established that the lawyers representing Chu and Pham worked together to orchestrate events in the underlying action to set up Mercury for a subsequent bad faith suit.

“The conspiracy was proven by evidence obtained from other cases, which showed that they had previously worked together to accomplish the same goals,” Klee said. “We were able to introduce that evidence into the bad faith trial because we had evidence they did not want to settle and had come up with endless excuses not to do so.”

Joseph Di Monda, whose firm represented Pham, said that in court there was no suggestion of conspiracy, only implications by the defense that the plaintiff lawyers had a conflict of interest. “Otherwise there would have been all sorts of trouble for us, and there wasn’t,” Di Monda said.

“It was all a smokescreen by the other side to make the jury think that because we had a prior business relationship, there was a conflict. But plaintiff lawyers work together all the time,” he said. “We have an ethical obligation to zealously advocate for our clients. ... We have won some bad faith cases and lost some, and this was one we lost.”

Klee said cases like this one are common for attorneys like him and partner Marc J. Feldman.

“It constitutes as much as 50 percent of our practice,” Klee said. “The last thing the plaintiff’s lawyer wants is to settle for the policy limits. They want to argue that the insurance company blew the settlement so they can go for big bad faith damages. They have taken a law designed to protect policyholders and turned it on its head.”

— John Roemer