Facts

Tu Pham suffered a traumatic brain injury as a result of an accident caused by Hung Chu, who was insured under a Mercury insurance policy with $15,000 limits. When Pham made a claim for his injuries, Mercury denied the claim because Pham lived with Chu, and therefore, he qualified as an insured under the policy, and the policy excluded coverage for injury to an insured.
Pham eventually obtained a $333,300 judgment against Chu. Mercury then filed a declaratory relief action on coverage. The Court of Appeal determined that Pham's claim was covered, ruling that the Mercury policy's inclusion of people who live with, but are not related to, the named insured, or non-relative residents, within the policy's definition of an insured was contrary to public policy.

PLAINTIFF'S CONTENTIONS: Chu and Pham sued Mercury for bad faith, alleging that before the underlying trial, Pham made a settlement offer for Mercury's $15,000 policy limit, but Mercury unreasonably failed to accept it. Chu also brought a claim under Business & Professions Code Section 17200, seeking an injunction preventing Mercury from denying any claims on the ground that the claimant was a non-relative resident, and requiring Mercury to pay all past claims that were denied on that ground.

DEFENDANT'S CONTENTIONS: Mercury contended that it did not act in bad faith because its failure to accept Pham's $15,000 settlement offer was reasonable. Mercury also asserted that Chu was not entitled to an injunction because it had stopped denying claims on the ground that the claimant was a non-relative resident and had changed its policy form.

Damages

They sought damages in excess of $10 million, including the amount of the excess verdict plus interest, attorney fees, emotional distress, and punitive damages.

Result

The trial was bifurcated. The bad faith claim was tried before a jury, and the claim for injunctive relief was tried in a bench trial. The jury rendered a unanimous defense verdict in favor of Mercury. The court denied Chu's claim for an injunction.

Length

Length, five days (Jury Trial); one day (Bench Trial);