Facts

According to the plaintiff, Jamey Parks sued Michelle Miller, a minor, for non auto-related negligence for abandoning him in the dark on Highway 101 near Gaviota at 3 a.m. on Feb. 28, 1999. According to defendant, Parks sued Miller for negligence for ordering him to be ejected from a vehicle in which they were both passengers and abandoning him on Highway 101 at 3. a.m. on Feb. 29, 1999.

A hit-and-run driver subsequently struck him. Parks sued Miller and the owner and driver of the vehicle.

According to the defendant, they were defended by California Casualty under the auto policy insuring the vehicle. According to the plaintiff, Miller tendered her defense and indemnification to SAFECO for her non auto-related torts.

Eddie Barnette, Michelle Miller's stepfather, owned a house in Santa Maria. He purchased homeowner's insurance through SAFECO covering the residence.

According to the defendant, Miller tendered her defense for the lawsuit under the Barnette policy. SAFECO was put on notice of the lawsuit against Miller, this policy was referred to and SAFECO was advised to do whatever was appropriate regarding investigation. SAFECO denied coverage, including a defense, asserting that Miller was not actually a resident of Barnette's house, but instead resided only with her father and grandmother, Evelyn Miller.

Evelyn Miller rented a house in Santa Maria. She also purchased renter's insurance through SAFECO covering the residence. Defendant claimed this was because SAFECO did not have actual notice of the Evelyn Miller policy. This renter's policy provided liability coverage for herself and her resident relatives. Plaintiff contended that SAFECO did not disclose this policy, and objected to identifying this policy in pre-trial discovery.

Defendant contended that it objected to overbroad discovery and plaintiff failed to move to compel further responses. Her grandmother did not realize that this policy would protect her granddaughter, Michelle. Michelle was unaware of this policy. Parks contended that SAFECO at no time disclosed this policy per 10 CCR 2695.4. SAFECO contended that it had no obligation under 10 CCR 2695.4 to search for the Evelyn Miller policy. SAFECO additionally contended it had no actual notice of that policy. Plaintiff disputed this.

Park's lawsuit was submitted to a binding arbitration before retired Judge James Slater in October 2001. Parks prevailed at the arbitration and obtained a judgment against Miller on a theory that Miller undertook a duty to care for Parks and breached that duty when she negligently abandoned him while drunk on the side of Highway 101 late at night. He was subsequently struck by a hit-and-run motorist and suffered severe personal injuries, including a coma, a crushed pelvis, multiple fractures and a complete amputation of his left leg. The arbitrator's award was $4,375,772, which was reduced by 50 percent for comparative fault to $2,187,886.

In 2002, Parks and Miller executed an assignment of rights in exchange for a covenant not to execute. Parks and Miller filed separate actions against SAFECO for breach of contract and insurance bad faith.

SAFECO filed a declaratory relief action contending that Miller was not entitled to a defense or indemnification under the Barnette/SAFECO policy. SAFECO did not disclose the existence of the Miller/SAFECO policy. According to the defendant, this was because SAFECO did not have actual notice of the policy.

In SAFECO's action, it alleged no duty to defend or indemnify under the Barnette policy because Miller was not an insured and based upon the auto exclusion. The actions were consolidated. The declaratory relief action was tried first before the Hon. J. William McLafferty. The court ruled that SAFECO owed a duty to defend and indemnify and owed the judgment of $2,187,886 to Parks.

SAFECO appealed and the judgment was reversed. (SAFECO v. Parks [2004] 122 Cal.App. 4th 779). During the appeal, Parks learned for the first time that SAFECO issued a separate homeowner's policy to Michelle Miller's grandmother at the house where SAFECO argued that Michelle Miller resided. After the appellate decision was filed, Parks made a time-limit policy limit demand to SAFECO under the Evelyn Miller policy.

SAFECO paid the $100,000 liability limits. Five months later SAFECO paid $1000 medical payments limits under the policy. According to the plaintiff, SAFECO refused to pay the judgment against its insured Miller. After SAFECO's successful appeal, Parks amended his complaint to identify the previously undisclosed policy.

PLAINTIFF'S CONTENTIONS:
Jamey Parks contended that SAFECO acted in bad faith in failing to conduct an adequate investigation, in failing to settle for policy limits and in failing to provide a defense. Parks also contended that SAFECO violated the Fair Claims Practices Act 10 CCR 2695.1 et seq. by failing to disclose all applicable policies. SAFECO maintained a sophisticated computer system that was able to locate any SAFECO policy by entering a name, an address, or a phone number.

DEFENDANT'S CONTENTIONS:
SAFECO contended that Park's action was barred by the statute of limitations and that late notice of the claim and the auto exclusion barred coverage under the Miller/SAFECO policy.

SAFECO also contended that constructive notice could not provide a basis for bad faith and that since Miller was defended by California Casualty, SAFECO could not be liable for a wrongful refusal to defend. In addition, SAFECO contended that Parks' attorneys could have and should have discovered the Evelyn Miller policy during discovery in the underlying lawsuit, despite SAFECO's objection to identify this policy.

Settlement Discussions

The plaintiff made a statutory offer to compromise for $1,699,999. According to defendant, plaintiff reduced his demand to $1 million at trial. Plaintiff disputes this. The defendant made no offer at the mandatory settlement conference. The defendant made a statutory offer to compromise of $500,001 before trial. The defendant increased the offer to $700,000 during trial.

Result

Verdict for plaintiff for $3,204,934, including interest plus Brandt fees. The plaintiff filed a motion for cost-of-proof sanctions and was awarded an additional $426,208, pursuant to C.C.P. Section 2033.420, for a total judgment of $3,671,542. The court awarded plaintiff costs of $70,104.25. Brandt fees of $40,400 on policy amount of $101,000 stipulated. SAFECO has appealed.

Deliberation

1.5 days

Poll

11-1 (breach of the implied covenant of good faith and fair dealing), 9-3 (breach of contract)

Length

15 days