Facts

Everest National Insurance Co. provided excess liability insurance to the County of Kern, over the county's $2.5 million retained limits. The county was required to report death cases to Everest, but it did not report one such case, Lucero v. County of Kern, in which the county went to trial and lost, with a verdict of $4.5 million.

After an unsuccessful appeal, the county paid about $5.1 million and incurred about $400,000 in defense expenses. The county reported the Lucero claim after the verdict. Everest denied coverage.

The sole jury issue at trial was whether Everest could prove that there was a substantial likelihood that with timely notice, the Lucero case would have settled for a substantially smaller amount.

PLAINTIFF'S CONTENTIONS:
The county claimed that the jury was required to speculate as to what Everest most likely would have done had the county given Everest timely notice. In another death case pending at the same time, the county gave notice to Everest, but Everest closed its file. Everest's claims manager testified that it was not unusual for Everest to close files on death cases, and Everest might have closed its file in the Lucero case. Had Everest been involved before the Lucero trial, there most likely would not have been a settlement with the county paying money. In settlement discussions, the Lucero trial judge said he did not think the case was worth $450,000. The county did not offer any money, and Everest would not have paid the entire $450,000 because its exposure only was for cases worth over $2.5 million, no one expected the Lucero case to result in a verdict of more than that, and Everest has never paid an entire settlement otherwise owed by its insured.

DEFENDANT'S CONTENTIONS:
In the Lucero case, the plaintiffs made several settlement offers the county was required to have reported to Everest, but didn't. Everest contended it and/or the county could have settled for $450,000, which was an offer the plaintiffs made before evidence was taken. Instead, the county went to trial and lost, with a verdict of $4.5 million. Everest claimed that the county's late notice deprived Everest of the opportunity to investigate and attempt a settlement of the Lucero case before trial. Everest's witnesses said the underlying case was a dangerous case that the county should have settled within its retained limit when it had the chance, but the county misjudged the strength of the plaintiff's claim.

In a case against a different insured of Everest, in order to prevent exposure to it, Everest "dropped down" and paid nearly half of the settlement in that case even though Everest did not owe for any part of that settlement. Everest contended it would have done the same thing in the Lucero case. As a last resort, Everest would have paid the entire $450,000 settlement, to avoid a large adverse verdict.

Settlement Discussions

The county made a CCP 998 demand of $2.5 million. Everest made a CCP 998 offer of $500,000.

Result

Verdict for $2,782,322.74 (all economic damages) plus prejudgment interest of $250,000.

Other Information

The case recently has been settled for the amount of the judgment, $3,087,714.76. FILING DATE: Aug. 8, 2013.

Deliberation

two hours and 15 minutes

Poll

10-2

Length

seven days