Confidential
Settlement – $2,000,000Judge
Mediator
Court
L.A. Superior Central
Attorneys
Plaintiff
Dean H. McVay
(Lewis Brisbois Bisgaard & Smith LLP)
Paul C. Cook
(Frost Law Firm, PC)
Defendant
Experts
Plaintiff
Patricia Doyle Grace
(technical)
Adrian Stern
(technical)
Steven Thomas
(technical)
George T. McDonald
(technical)
Defendant
George E. Moore
(technical)
John Boudreau
(technical)
Alan D. Wallace
(technical)
Barbara C. Luna
(technical)
Gerard P. Breslin
(technical)
Lou Bermudez
(technical)
C. Snyder Patin
(technical)
Facts
In November 1993, the plaintiff, a medical doctor, was sued by a patient for claims covered by the plaintiff's liability insurance ("underlying action"). The plaintiff tendered the underlying action to his insurer to provide a defense to the claims and to provide, if necessary, indemnity payment to the plaintiff. The plaintiff in the underlying action made various demands to the doctor from March to July 1995 to settle the underlying action for the policy limits of $1 million. The insurer rejected the settlement demands and did not offer the doctor's policy limits to the plaintiff in the underlying action until the first day of jury selection, at which time it was rejected. The underlying action proceeded to trial. On Sept. 1, 1995, the jury rendered a verdict against the doctor and co-defendant surgical center in excess of $20 million. This verdict was the largest medical malpractice verdict in Orange County history, and the attendant adverse publicity proved devastating to the doctor's career. On Nov. 8, 1995, judgment was entered against the doctor in the underlying action in the amount of $9,387,109 (joint and several liability after reduction to "present cash value"), and $137,500 (individual liability), plus interest. The insurer subsequently agreed to modify the limits of the insurance policy and agreed to pay the plaintiff's portion of the judgment. While the appeal was pending, the insurer entered into a settlement with the plaintiff in the underlying action. Subsequent to the settlement, the plaintiff learned that rather than paying the judgment against him in the underlying action, the insurer obtained a Covenant Not to Execute from the plaintiff in the underlying action as to that plaintiff and the insurer only, in exchange for payment of $4 million. The insurer then dismissed the doctor's appeal without his knowledge or consent. The plaintiff filed this action against the insurer alleging breach of contract, breach of the implied covenant of good faith and fair dealing, fraud (constructive fraud, concealment and suppresion of fact), and violation of Business and Professions Code º17200.
Settlement Discussions
The plaintiff made a settlement demand for $5.9 million.
Damages
Plaintiff alleged that defendant insurer was liable for the entire judgment in the underlying action as well as any exposure the plaintiff might have, in a later contribution action, to co-defendant surgical center. The plaintiff doctor also sought to recover all consequential damages caused by defendant insurer's failure to settle. These consequential damages included financial injury (loss of wages; loss of income, interest and penalties from pension account and IRA; loss of partnership interest; and forced real estate sale), emotional distress, and injury to plaintiff's professional reputation. Plaintiff's expert, calculated financial losses at $2.2 million. Plaintiff also claimed punitive damages as a result of defendant insurer's bad faith conduct in refusing to settle despite the undeniable risk of a verdict in excess of policy limits, and where defendant insurer's own assigned defense counsel strongly recommended settlement.
Other Information
The settlement was reached approximately one year and nine months after the case was filed. MEDIATION: Mediation held before R. William Schoettler resulted in the reported settlement. In addition to paying the $2 million dollar settlement, defendant insurer agreed to obey a prior ruling on the plaintiff's motion for summary adjudication wherein the court ruled, "[defendant insurer] shall be obligated to pay any further judgment as to liability or indemnity arising out of or entered in the [underlying] matter."
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