Facts

Plaintiff Jeffrey Golden is a Bankruptcy Trustee, suing on behalf of the estate of Tung Nguyen. Nguyen was a home healthcare nurse who was sued for allegedly negligently causing brain damage to her patient Emma Borges, then 2 years old, due to a dislodged tracheostomy tube. Defendant Margaret Holm was retained by defendant MedPro, Inc. (Nguyen's liability insurer) to defend Nguyen against the allegations.

During the course of that litigation, plaintiff's counsel, Neil M. Howard, issued an offer to settle the case for $1 million, the policy limit. Holm conveyed the offer to MedPro, which declined to accept it. MedPro issued an offer to settle the case for $500,000, which plaintiff's counsel declined to accept.

The matter went to arbitration, which resulted in an award of $6 million against both Nguyen as well as her employer. After appealing unsuccessfully, Nguyen subsequently filed for bankruptcy protection. The bankruptcy court appointed plaintiff as Chapter 7 trustee, who retained Jerome L. Ringler to pursue the present litigation against MedPro.

PLAINTIFF'S CONTENTIONS: Plaintiff contended that MedPro breached its obligations of good faith and fair dealing to its insured, nurse Nguyen, by failing to accept the $1 million dollar policy demand in the underlying action. Plaintiff argued the test for whether or not an insurance carrier must accept a policy limits demand is whether at the time the demand was made it was reasonable. Plaintiff asserted that an insurance carrier is liable for refusing to pay a policy limits demand if its refusal was unreasonable. Plaintiff argued that at the time the policy limits demand for $1 million was refused by MedPro, there was significant evidence reflecting the case had a value well in excess of the policy limits of $1 million. Plaintiff argued this unreasonable refusal to pay the policy on the part of MedPro constituted a clear case of its breach of the obligations of good faith and fair dealing, which MedPro was obligated to satisfy in the defense of its insured nurse.
Plaintiff alleged that Holm negligently failed to urge MedPro to accept the $1 million settlement offer. Plaintiff alsocontended that Ms. Holm included conditions to a counter-offer MedPro did not authorize, and which caused the rejectionof that offer.

DEFENDANT'S CONTENTIONS: MedPro contended that at all times it fairly and without bias analyzed the facts before rejecting the $1 million dollar demand in the underlying action and that further, they relied upon counsel who advised that such rejection of the policy limits demand was proper. MedPro further contended that the only reason the case did not settle in the underlying action was that plaintiff's counsel in the underlying action refused to accept an offer of the $1 million policy shortly after plaintiff's demand for that $1million policy expired. MedPro further claimed that Howard rejected
MedPro's initial settlement offer of $500,000 within seven minutes after receiving it and refused to negotiate in good faith thereafter.

Attorney Holm contended that California law does not impose any duty on an attorney to advise or insist that their client accept a settlement offer, and because an attorney has no power over a client, an attorney's alleged failure to urge a client to settle cannot be a cause of a decision not to settle. Moreover, Holm contended that she conveyed the settlement offers
precisely as instructed, and consistent with her duties to her client

Damages

Plaintiff alleged damages of $6 million.

Result

Summary judgment was granted in favor of defendant Holm. In granting Holm's motion for summary judgment, Judge Sherman found that Holm had no duty to urge MedPro to settle, and did not cause MedPro's decision not to settle. Judge Sherman further found that Holm conveyed the counter-offer as she was instructed, and that the conditions in the counter-offer were to protect Nguyen. Plaintiff dismissed with prejudice his appeal of the judgment in favor of defendant Holm. At the time of trial, the case against defendant MedPro settled for $5 million.