Facts

On Feb. 6, 2011, plaintiff Jose Cardona, 59, was driving southbound with his wife, Irene Cardona, 53, who was seated in the front passenger seat and their son Eduardo Cardona, 22, was in the back passenger's seat. Jose had just made a left-hand turn onto 47th Street East, when Galdino Navarro Cortes collided with their sedan. Plaintiff's filed an underlying personal injury suit against Cortes. Defendant QBE Insurance Corp. insured Cortes under an automobile liability policy with limits of $15,000/person and $30,000/accident. QBE rejected an early policy limits demand.

Ultimately, on June 15, 2015, a Lancaster jury found in favor of the plaintiffs in the underlying suit, and awarded $20,974,903 against the insured.

While in prison, Cortes assigned to QBE all rights he had under the policy, including any claim for bad faith refusal to settle, in exchange for payment of $25,000. After QBE agreed to voluntarily rescind the assignment, plaintiffs filed suit against QBE claiming it was liable for the $21 million judgment against its policyholder.

PLAINTIFFS' CONTENTIONS:
QBE insured Cortes under an automobile liability policy with limits of $15,000/person and $30,000/accident. QBE initially failed to accept an early policy limits demand, thereby subject it to liability for failure to settle. It then exacerbated its breach by fraudulently inducing Cortes to assign to QBE all rights he had under the policy, including any claim for bad faith refusal to settle, in exchange for payment of $25,000. In its zeal to protect itself, QBE crossed numerous lines and committed numerous breaches.

Plaintiffs argued that QBE's assignment was unconscionable, and was obtained fraudulently. At the time of the assignment, Cortes was disabled, of limited mental capacity, and in prison. QBE improperly used its control of Cortes' defense to allow its counsel unfettered access to Cortes, and then feigned alliance with Cortes to fraudulently induce him into assigning his bad faith rights to QBE. The trial court in the bad faith action concluded that obtaining the assignment constituted constructive fraud. QBE acknowledged as much by agreeing to voluntarily rescind the assignment. However, the Cardonas were no longer willing to accept an assignment from Cortes in exchange for a covenant not to execute. QBE had an opportunity to rescind the assignment in time for Cortes to negotiate a covenant with the Cardonas, but refused to do so. Plaintiffs contended that QBE's post-hoc good could not exonerate it from the substantial harm it had already caused.

Plaintiffs alleged QBE was liable for Elder Financial Abuse, which under California law, states that persons/entities are prohibited from taking the personal property of individuals, like Cortes, who are over the age of 65, where that taking is for a wrongful use. A violation occurs whether or not the defendant had an intent to defraud. A wrongful use is defined as one where the defendant is aware that taking the property will be harmful to the elder. Plaintiffs argued that QBE negotiated an assignment of Cortes' rights, knowing that this would prevent Cortes from obtaining a covenant not to execute from the Cardonas. This was the actual intent of the assignment, as expressed in the agreement itself. Plaintiffs claimed that QBE, by the very words of the assignment it drafted, was aware, and intended, for Cortes to be personally harmed by the assignment, but went forward with it. Having done so, QBE is liable for all harm proximately caused by its conduct.

Plaintiffs also claimed QBE was liable for its original failure to accept the Cardonas' policy limits demand. After QBE agreed to rescind the assignment, its original bad faith failure to settle was actionable, as the Cardonas' $30,000 settlement demand was reasonable. The Cardonas' demand letter enclosed a copy of the police report, which documented both Cortes' liability and the Cardonas' severe, internal injuries. Plaintiffs claimed QBE was under an obligation to accept the demand prior to its expiration, or at the very least to request an extension. QBE did neither, and therefore, was liable for bad faith failure to settle.

DEFENDANT'S CONTENTIONS:
Defendant denied liability.

Settlement Discussions

After the trial court verdict in the underlying personal injury case, the parties mediated the case several times with Robert Kaplan at Judicate West.

Result

The case settled for $15 million.

Other Information

FILING DATE: July 14, 2015.