When an HOA Demands a Special Assessment After a Wildfire: Key Coverage Issues for Carriers and Coverage Counsel in California
The California wildfire crisis has created a familiar and increasingly expensive post-loss scenario: the homeowners association suffers catastrophic damage, the association’s master policy proves inadequate, delayed, limited, or burdened by a substantial deductible, and the board turns to the membership for a special assessment to bridge the gap. For carriers and coverage counsel, that sequence raises a distinct set of issues that differ from the usual first-party wildfire claim.
The central point is that an HOA special assessment is not automatically synonymous with covered loss. Whether the assessment triggers coverage under an individual owner’s policy depends on the governing documents, the nature of the assessment, the reason for the funding shortfall, and the specific language of the owner’s policy, particularly any loss-assessment provision. At the same time, the legality and procedural validity of the HOA’s demand may become a threshold issue in the coverage analysis.
Under California’s Davis-Stirling Act, HOA boards generally cannot impose special assessments exceeding 5% of the association’s budgeted gross expenses for the fiscal year without approval of a majority of a quorum of members. California Civil Code section 5605 also limits annual increases in regular assessments, absent member approval.
That general rule matters because many wildfire-related assessments are substantial. In a large-loss setting, the board may attempt to characterize the assessment as an “emergency” measure to avoid a membership vote. California Civil Code section 5610 allows boards to exceed the usual limitations for emergency situations, including extraordinary expenses needed to repair or maintain the development where a hazardous condition exists, or expenses that could not reasonably have been foreseen during the budget process. But the statute also requires the board to adopt a resolution with written findings explaining the necessity of the expense and why it was not reasonably foreseeable, and to distribute that resolution with the notice of assessment.
In the wildfire context, that procedural point is not academic. Community-association guidance in California has expressly recognized that post-fire reconstruction and insurance shortfalls may force boards to rely on special or emergency assessments, especially where reserves are insufficient and insurance proceeds do not fully fund the rebuild. The same guidance also notes that many associations are struggling with reduced availability of wildfire coverage, rising premiums, and greater reliance on FAIR Plan-type solutions.
From a defense and coverage standpoint, the first question is often whether the assessment itself was validly imposed. If the board exceeded the statutory cap without securing the required vote, or invoked the emergency exception without making the findings required by section 5610, the carrier may have a substantial argument that the insured has not established an enforceable covered obligation. A demand letter from the HOA is not, by itself, the end of the inquiry. Coverage counsel should examine the assessment notice, board resolutions, membership vote materials, CC&Rs, bylaws, reserve disclosures, and any reconstruction or budget materials before assuming the charge qualifies as a covered loss.
The second issue is causation. Wildfire may be the backdrop, but not every special assessment “because of” a wildfire is necessarily for direct physical loss in the sense contemplated by a loss-assessment provision. Some assessments may fund uninsured reconstruction costs. Others may address code upgrades, deferred maintenance exposed during demolition, premium spikes at renewal, expanded deductibles, or reserve replenishment. California HOA guidance has observed that boards may seek special assessments not only for reconstruction, but also for extraordinary and sudden insurance-premium increases in high-fire-risk locations.
That distinction matters because carriers should separate at least four categories of post-fire HOA assessments: assessments to cover the association’s deductible; assessments to repair covered physical damage to common areas after insurance proceeds are exhausted; assessments driven by underinsurance or valuation gaps; and assessments imposed to fund future insurance premiums or financial stabilization. Those categories may look similar from the insured’s perspective, but they do not present the same coverage analysis.
The third issue is policy wording. Many owner policies provide some form of loss-assessment coverage, but that coverage is usually limited and highly dependent on the nature of the underlying assessment. Some forms are directed to assessments arising from direct loss to commonly owned property. Others may extend, in varying degrees, to certain liability assessments. Many contain sublimits, exclusions, or restrictions tied to deductibles, earthquake or flood losses, or assessments not made pursuant to the association’s authority. Because of that variation, carriers should resist broad assumptions and instead analyze the exact triggering language, sublimit, and exclusions at issue.
This is particularly important where the HOA’s assessment is framed broadly as a response to “wildfire losses” but the underlying components are mixed. An assessment package may include demolition, code compliance, consultant fees, uncovered upgrades, landscaping, temporary security, reserve replacement, and legal or management expenses. The claim file should identify which portion, if any, is tied to covered physical damage to commonly owned property and which portion is better characterized as uninsured business planning, governance, or capital improvement expense.
There is also a practical claims-handling point. California community-association sources have warned owners to review their separate-interest policies to determine whether they carry loss-assessment coverage specifically because associations may levy special assessments for damage or deductibles following wildfire events. That reality suggests carriers should expect more of these claims, not fewer, especially as associations confront rising reconstruction costs and tighter insurance markets.
For carriers, the better approach is disciplined triage rather than reflexive denial or reflexive payment. The insurer should request the HOA’s formal assessment notice, the board resolution, supporting budgets, the association’s master-policy information, a breakdown of what the assessment funds, and the governing documents authorizing the charge. If the HOA invoked an emergency assessment, counsel should verify that the statutory prerequisites were actually satisfied. If the assessment followed a membership vote, the insurer should confirm that the vote complied with the Davis-Stirling framework and the association’s governing documents.
This is also an area where reservation-of-rights practice becomes important. If part of the assessment arguably relates to covered loss, but other components appear to involve uncovered upgrades, premium increases, reserve deficits, or questionable procedural authority, the carrier may need to address those issues expressly and early. A vague response risks turning a limited contractual issue into an avoidable bad-faith dispute.
For coverage counsel, wildfire-related HOA assessments sit at the intersection of first-party property law, community-association law, and claim-administration risk. The pressure on associations to rebuild quickly is real. But so is the pressure on carriers to distinguish between a valid covered loss-assessment claim and an attempt to shift a broader financial shortfall to individual unit-owner insurers.
The larger lesson is that post-wildfire HOA assessments should not be treated as routine pass-through losses. In California’s current market, they are often symptoms of deeper problems: underinsurance, premium shock, FAIR Plan limitations, reserve inadequacy, valuation disputes, and reconstruction costs that outpace legacy coverage structures. Those pressures may explain why an HOA issued the assessment, but they do not answer the coverage question. That answer still depends on authority, causation, allocation, and policy language.
For carriers and defense counsel, the safest position is straightforward: investigate the assessment the same way you would investigate any other claimed loss. Determine whether the HOA had authority to impose it, what the money is actually for, and whether the insured’s policy covers that kind of charge. In the wildfire setting, those distinctions are likely to determine both exposure and litigation posture.
California’s 2026 Insurance Reforms: Key Coverage and Claims Implications for Carriers, FAIR Plan Stakeholders, and Coverage Counsel
California’s 2026 Insurance Reforms: Key Coverage and Claims Implications for Carriers, FAIR Plan Stakeholders, and Coverage Counsel
California’s 2026 insurance reforms mark another significant development in the state’s continuing effort to respond to instability in the property insurance market, particularly in the context of wildfire exposure, insurer retrenchment, FAIR Plan expansion, and mounting regulatory pressure. While much public commentary has focused on consumer relief, the new legislation also carries important implications for carriers, claims professionals, underwriting personnel, and coverage counsel evaluating first-party property exposure in California.
From the defense and coverage perspective, the new statutory framework is notable for two reasons. First, it reflects California’s continued movement toward a more interventionist regulatory model in response to perceived market failure. Second, it creates new operational and legal issues in claims handling, valuation, reserving, rate scrutiny, and FAIR Plan participation that insurers and their counsel will need to monitor closely.
One of the most consequential claim-handling changes is the new rule applicable to qualifying total-loss wildfire claims, under which insurers must pay 60% of contents coverage, up to a statutory cap, without requiring the insured to submit a complete itemized personal property inventory as a condition of initial payment. Policyholders may still seek up to full limits if they can substantiate the loss, but the threshold obligation has changed in a way that will materially affect adjustment practices.
For carriers, this reform raises several practical and legal considerations. Traditionally, itemization requirements served not only as a valuation tool, but also as an important fraud-control mechanism and a basis for assessing scope, depreciation, duplication, and policy-limit exposure. By mandating partial payment without a complete inventory, the statute shifts a greater front-end burden onto insurers and may compress the timeline for investigating questionable or inflated contents claims. That does not eliminate an insurer’s right to investigate or dispute unsupported amounts above the statutory threshold, but it does narrow one of the carrier’s historical leverage points in total-loss adjustment.
As a result, insurers should expect increased attention to documentation standards, claim file consistency, reservation language where appropriate, and internal protocols distinguishing between mandatory statutory payment obligations and additional sums claimed beyond the statutory minimum. Coverage counsel will likely see disputes over whether a loss qualifies under the statute, how the cap applies, and what evidence remains necessary to support payment above the baseline amount.
The reforms also reinforce the centrality of the FAIR Plan in California’s present insurance landscape. Recent legislation addressing FAIR Plan governance, payment administration, and financial stability confirms what the market has already demonstrated: the FAIR Plan is no longer functioning as a limited residual-market mechanism in the traditional sense. It has become a major structural component of California property insurance availability.
That shift matters for admitted carriers because FAIR Plan growth has downstream consequences for market participation, reinsurance strategy, policy layering, claims allocation, and political pressure on private insurers. Reforms designed to improve FAIR Plan solvency and administration may reduce some immediate system strain, but they also underscore the degree to which California’s insurance market remains dependent on a backstop mechanism that was never intended to absorb sustained, large-scale concentration of high-risk business.
Coverage lawyers and claims professionals should also be watching how California’s expanded use of wildfire catastrophe modeling affects the rate and underwriting environment. The state’s effort to create a public catastrophe model reflects an ongoing attempt to reconcile two competing objectives: encouraging insurers to write more property business in wildfire-exposed regions while simultaneously increasing transparency and regulatory oversight over forward-looking risk assumptions. For carriers, that means continued scrutiny of how wildfire risk is modeled, justified, and incorporated into rate filings and underwriting decisions.
Although catastrophe modeling is often discussed primarily as a regulatory or actuarial issue, it also has broader defense implications. Market pressure tied to rate adequacy and geographic concentration frequently shapes later disputes regarding non-renewals, underwriting withdrawals, alleged bad faith, and claims-handling expectations in catastrophe settings. As regulators press for both increased availability and greater transparency, carriers may face a more complicated environment in which underwriting judgment is second-guessed from multiple directions.
Another important development is the expansion of post-wildfire non-renewal protections beyond individual homeowners to include additional categories such as businesses, HOAs, condominiums, affordable housing properties, and nonprofits. From a carrier perspective, this change may constrain underwriting flexibility following catastrophic events and may increase the likelihood of disputes over the timing, scope, and applicability of statutory renewal protections.
That issue should not be underestimated. Non-renewal restrictions can create tension between risk management objectives and regulatory compliance obligations, particularly in areas where wildfire exposure, rebuilding risk, and future catastrophe probability remain acute. Counsel advising carriers should ensure that non-renewal, renewal, and underwriting communications are reviewed carefully for statutory compliance, especially where a property falls within an expanded protected category.
The new mitigation and wildfire-hardening initiatives may also influence future coverage disputes. State efforts to promote mitigation grants and to encourage or review insurer mitigation discounts are likely to generate greater focus on whether a property qualifies for underwriting credits, whether mitigation efforts were properly evaluated, and whether premium or eligibility decisions were consistent with regulatory expectations. Over time, these issues may surface not only in administrative proceedings, but also in bad-faith or unfair-practices allegations where insureds contend that carriers failed to account for risk-reduction measures.
Against this backdrop, insurers should resist the temptation to treat the 2026 reforms as purely consumer-facing changes. They are also signals of where California intends to push the market next: faster claims payments, more regulation of catastrophe-risk assumptions, broader limits on underwriting discretion, stronger residual-market infrastructure, and increased emphasis on mitigation-based accountability.
For claims teams, the immediate takeaway is the need to revisit first-party property protocols, especially for total-loss and wildfire claims. For underwriting and product personnel, the reforms reinforce the need for careful documentation supporting risk selection, renewal decisions, and pricing assumptions. For coverage counsel, the changes present fertile ground for emerging disputes involving statutory payment obligations, claims investigation rights, non-renewal limitations, FAIR Plan interaction, and the evolving boundary between regulatory compliance and extra-contractual exposure.
The larger point is that California’s insurance crisis is no longer merely a market-cycle problem. It is now a legal and regulatory restructuring of the property insurance environment. Carriers operating in the state should expect continued legislative and regulatory intervention, and counsel advising those carriers should be prepared for a correspondingly more complex mix of coverage, compliance, and bad-faith risk.
Howell v. Hamilton Meats: A Comprehensive Analysis of Developments in California Law
The California Supreme Court's decision in Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541 has had a lasting impact on personal injury law, particularly in the area of medical expense damages. This article provides a detailed analysis of the decision, examining its consequences, subsequent related case law, and the broader implications for insurers and insureds.
Background
Howell v. Hamilton Meats addressed the question of the recoverable amount of past medical expenses in a personal injury action. The Supreme Court concluded that an injured plaintiff may recover only the amount paid by their health insurer and accepted by medical providers as payment in full, rather than the higher billed amount.
A Close Look at the Decision
The Opinion: The court's rationale in Howell was grounded in the principle that a plaintiff should not recover more than the actual loss incurred. By limiting recovery to the amount paid and accepted, the court aimed to prevent a windfall to the plaintiff. (Howell, 52 Cal.4th at 555-56)
Dissenting Opinions: In Howell, there were dissenting opinions that argued this limitation was contrary to the collateral source rule, which historically permitted recovery of the full billed amount regardless of any discounts or write-offs. (Id. at 577)
Subsequent Relevant Case Law
Corenbaum v. Lampkin (2013) 215 Cal.App.4th 1308: This case clarified the Howell rule by further limiting the admissibility of evidence of billed amounts for future medical care and other damages. Corenbaum held that such evidence was irrelevant and inadmissible.
Bermudez v. Ciolek (2015) 237 Cal.App.4th 1311: This decision further expanded on Howell, confirming that the rule also applies to governmental healthcare providers.
Ochoa v. Dorado (2015) 237 Cal.App.4th 381: This case reinforced that Howell’s principles apply even when a plaintiff is uninsured, underscoring the focus on actual loss.
Broader Implications
Impact on Settlement Negotiations: Howell's focus on accepted medical expenses has brought a new layer of predictability to negotiations, as cited in Pebley v. Santa Clara Organics, LLC (2018) 22 Cal.App.5th 1266.
Challenges for Subrogation: Navigating subrogation has become more complex due to the difficulties in defining the 'reasonable value' of medical services, a central issue that continues to be debated in various appellate courts.
Interplay with Medicare and Medi-Cal: The application of Howell to governmental providers like Medicare and Medi-Cal introduces further complexities, as seen in cases like Ochoa.
Conclusion
Howell v. Hamilton Meats has significantly reshaped the landscape of personal injury law and insurance in California. It has triggered further developments in case law, changed the dynamics of settlement negotiations, and added complexity to subrogation matters.
Our firm's expertise in defense for insureds, businesses, ride-share operators, transportation operators, and extensive experience as seasoned coverage counsel in California puts us at the forefront of these developments. We remain committed to providing informed and strategic guidance.
For a comprehensive and tailored consultation on how Howell and related case law may affect your specific legal needs, we invite you to contact our expert team.
Understanding the Genuine Dispute Doctrine: A Cornerstone of Insurance Coverage
The "genuine dispute doctrine" is a fundamental concept in insurance law that is often pivotal in the defense of insurance claims.
This doctrine posits that a genuine dispute between an insurer and an insured over the legitimacy or value of a claim shields the insurer from bad faith liability. It emphasizes the principle that not every claim denial constitutes bad faith, provided that a genuine dispute exists.
At Straus Meyers, one of California's most experienced coverage attorneys, we excel in the nuanced application of this doctrine. We have assisted countless large national insurance companies in navigating the intricate pathways of the genuine dispute doctrine.
With our extensive experience in defending insured persons, businesses, ride-share, and transportation operators, Straus Meyers excels in this complex area of law. Contact our expert team to explore how our refined understanding of the genuine dispute doctrine can assist you in safeguarding your interests in insurance claim disputes.
Tendering a Claim Before Requesting Declaratory Relief: A California Perspective
In the world of insurance defense litigation, the nuances of when and how an insured must tender a claim or an insurer may request declaratory relief can have substantial implications. Understanding the complexities of these actions is essential for insurers, insureds, and legal professionals engaged in insurance matters.
The Importance of Tender
In California, a tender is the formal presentation of a claim to an insurer, essentially asking the insurer to defend or indemnify against a particular loss. It triggers the insurer's duty to investigate the claim and respond appropriately.
Declaratory Relief: An Overview
Declaratory relief is a legal process through which an insurer or insured seeks a judicial determination of their rights and obligations under an insurance policy. It's a way to resolve uncertainties, often related to coverage, before further legal action takes place.
The Intersection of Tender and Declaratory Relief
Under California law, an insured is generally required to tender a claim to the insurer as a prerequisite for the insurer's duty to defend or indemnify. But does an insured have to tender before an insurer requests declaratory relief against the insured?
The answer to this question is nuanced, depending largely on the specific facts of the case and the terms of the insurance policy.
1. Insurer's Request for Declaratory Relief Without Tender
California courts have held that an insurer may seek declaratory relief without the insured first tendering a claim, especially if there are uncertainties or disputes regarding coverage. This step allows the insurer to clarify its responsibilities and obligations under the insurance policy before the insured formally tenders the claim.
2. Importance of Policy Language and Facts of the Case
The specific policy language and facts of the case may also influence the interaction between tendering and declaratory relief. Certain policy terms or unique situations may necessitate or obviate the need for tender before declaratory relief is sought.
Conclusion
The interplay between tender and declaratory relief under California law is complex and requires expert legal guidance. At Straus Meyers, our deep understanding of California's insurance law allows us to navigate these complexities, ensuring that the rights and interests of our clients are robustly protected.
Whether you are an insurer seeking to understand your obligations or an insured navigating the claims process, our team of skilled coverage counsel is here to assist you. Reach out to us at Straus Meyers to discuss your specific situation, and let our expertise in insurance defense guide you through these intricate legal waters.
Litigation After The Death Of A Defendant In A Personal Injury Lawsuit
When a defendant dies during litigation, there are specific procedural requirements that allow a plaintiff to continue the case. Specifically, when a defendant dies while a personal injury lawsuit is pending, the Plaintiff must choose to proceed under one of two methods. One of the two ways a plaintiff may choose to continue an action is by proceeding against the deceased defendant’s personal representative or against the deceased defendant’s successor in interest. This is found in California Code of Civil Procedure section 377.40 through 377.43. When a plaintiff chooses to pursue their claim against the deceased defendant in this way, they must also show compliance with Part 4 of Division 7 of the California Probate Code governing creditor claims. As it pertains to potential damages when this method is utilized by the Plaintiff, there is no limit to the amount the plaintiff can potentially recover at trial.
If the deceased defendant was protected by insurance at the time of their death, the plaintiff may choose to proceed with their lawsuit against the deceased defendant through California Probate Code section 550 through 555. When a plaintiff chooses to pursue their claim against the deceased defendant in this manner, they do not have to show compliance with Part 4 of Division 7 of the California Probate Code governing creditor claims. However, when these code sections are utilized by the plaintiff, the amount the plaintiff can potentially recover at trial is capped at the limits and coverage of the insurance policy in effect at the time of the accident giving rise to the suit.
Recently, there have been a multitude of articles written by plaintiff’s lawyers suggesting that a third method to continue a personal injury lawsuit against a deceased defendant exists. These articles suggest that California Probate Code section 13550 through 13554 can be used as a procedural method to continue a pending personal injury lawsuit against the surviving spouse of a deceased defendant. The articles further contend that use of this method does not require having to show compliance with Part 4 of Division 7 of the California Probate Code governing creditor claims while simultaneously not limiting the plaintiff to the limits and coverage of an insurance policy. Essentially, plaintiff’s lawyers suggest that utilizing this “third method” gives a plaintiff the best of both worlds.
The code section specifically relied on by plaintiff’s lawyers is California Probate Code section 13550. This code section states, “Except as provided in Sections 11446, 13552, 13553, and 13554, upon the death of a married person, the surviving spouse is personally liable for the debts of the deceased spouse chargeable against the property described in Section 13551 to the extent provided in Section 13551.” Plaintiff’s lawyers further rely on the case of Collection Bureau of San Jose v. Rumsey (2000) 24 Cal.4th 301 to make their assertion that a personal injury lawsuit can be continued against a deceased defendant’s surviving spouse using California Probate Code section 13550.
Rumsey involved a surviving spouse that was sued almost four years after his deceased spouse died. The suit involved a plethora of unpaid medical bills which the deceased spouse left behind when she passed away. However, in Rumsey, the sole issue before the California Supreme Court was whether the limitations period of former California Code of Civil Procedure section 353 or California Code of Civil Procedure section 337 applied to collection of the deceased spouse’s unpaid debt.
Plaintiff’s lawyers assume the word debt in California Probate Code section 13550 can be interpreted to mean disputed and unliquidated claims, such as pending lawsuits. However, nowhere in Division 8, Part 2, or Chapter 3, of which California Probate Code section 13550 is included, is debt defined to mean the same. Plaintiff’s lawyers further state that Rumsey stands for the notion that a surviving spouse steps into the shoes of a deceased defendant under California Probate Code section 13550, allowing them to continue a lawsuit against the surviving spouse. However, Rumsey’s discussion of California Probate Code section 13550 is limited and largely surrounds the code section’s effect on which statute of limitations should apply to the collection of the subject debt. Nowhere in Rumsey does it state or suggest that California Probate Code section 13550 can be used as a procedural means to DOE-in a surviving spouse of a deceased personal injury defendant in order to continue a lawsuit for negligence.
This issue of whether California Probate Code section 13550 can be used a procedural means to continue a personal injury lawsuit against the surviving spouse of a deceased defendant was recently litigated. Defense Attorneys Marvin J. Straus, Esq. and Anthony J. Puzo, Esq. of Straus Meyers, LLP, filed a Demurrer to Plaintiff’s Amendment to Complaint which named the surviving spouse of a deceased defendant that had passed away roughly two months before trial. On opposition, the plaintiff made the argument that Probate Code section 13550 allowed him to continue the pending lawsuit against the surviving spouse of the deceased defendant, also relying on Rumsey. In their reply, Defense counsel presented the argument that California Probate Code section 13550 and Rumsey did not give Plaintiff the procedural means to continue his suit against the surviving spouse. Specifically, Defense counsel raised the argument that debt as used in California Probate Code section 13550 is not defined to mean disputed and unliquidated claims, such as pending lawsuits. Defense counsel also highlighted how Rumsey was a highly distinguishable case from the situation at hand and how its discussion of California Probate Code section 13550 was limited and off point.
The court sustained the Demurer to Plaintiff’s Amendment to complaint without leave to amend in an 8-page tentative ruling, which was adopted as the official ruling of the court. That said, it is not yet clear whether this issue will ever be taken up on appeal and how court of appeal will decide the possible procedural usages of California Probate Code section 13550. However, to the chagrin of plaintiff’s lawyers, the ruling of the trial court tends to demonstrate that California Probate code section 13550 does not offer a third means to continue a personal injury lawsuit against the surviving spouse of a deceased defendant.
New Requirements for Creating Enforceable Settlement Agreements in Negotiation and Mediation
A recently amended version of Code of Civil Procedure Section 664.6 establishes new requirements for creating a settlement agreement in negotiation or mediation that is enforceable as a judgment. This new statute is important for all individuals participating in mediation.
The amended procedure for enforcing settlement agreements is effective as of January 1, 2021. Code of Civil Procedure Section 664.6 now allows lawyers who have received expressed authorization to sign settlement documents for clients after concluding negotiations or mediation. This new amendment aligns the law with current practices as some lawyers have already been signing settlement agreements for their clients. Furthermore, the new statute addresses situations in which a party is absent from the end of a mediation session or negotiation. The amendment streamlines the execution of settlements documents and introduces a new disciplinary provision for lawyers who sign settlements documents without receiving express authorization from a client. Although neither the statute or specific provision specify that the authorization must be in writing, a lawyer may choose to get a signature in order to avoid being subject to State Bar disciplinary action.
The newly amended Code of Civil Procedure Section 664.6 does not apply to civil harassment actions, matters adjudicated in juvenile or dependency Court, or actions brought under either the Family Code or Probate Code. Additionally, this new statute does not apply to pre-litigation settlements because the Court does not have jurisdiction over non-litigants. Common law causes of action may enforce pre-litigation agreements; however, statutory confidentiality for both negotiation and mediation may cause evidentiary challenges. Also, according to Evidence Code Section 703.5, mediators are generally unable to be subpoenaed to testify about communications during mediation. In order to meet the requirement of pending litigation, pre-litigation parties may agree to the filing of a complaint with appearances by defendants as well as the execution of settlement documents. However, since parties create the terms of agreement for both negotiations and mediation, compliance is rarely an issue.
* Attached below are the current statute and old statue.
[CURRENT] CODE OF CIVIL PROCEDURE – CCP
PART 2. OF CIVIL ACTIONS [307 – 1062.20] ( Part 1 enacted 1872 .)
TITLE 8. OF THE TRIAL AND JUDGMETN IN CIVIL ACTION [577 – 674]
( Chapter 8 enacted 1872. )
CHAPTER 8. The Manner of Giving and Entering Judgment [664 - 674] ( Chapter 8 enacted 1872. )
664.6. (a) If parties to pending litigation stipulate, in a writing signed by the parties outside of the presence of the court or orally before the court, for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement. If requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement.
(b) For purposes of this section, a writing is signed by a party if it is signed by any of the following:
(1) The party.
(2) An attorney who represents the party.
(3) If the party is an insurer, an agent who is authorized in writing by the insurer to sign on the insurer’s behalf.
(c) Paragraphs (2) and (3) of subdivision (b) do not apply in a civil harassment action, an action brought pursuant to the Family Code, an action brought pursuant to the Probate Code, or a matter that is being adjudicated in a juvenile court or a dependency court.
(d) In addition to any available civil remedies, an attorney who signs a writing on behalf of a party pursuant to subdivision (b) without the party’s express authorization shall, absent good cause, be subject to professional discipline.
(Amended by Stats. 2020, Ch. 290, Sec. 1. (AB 2723) Effective January 1, 2021.)
2018 CALIFORNIA CODE
CODE OF CIVIL PROCEDURE – CCP
PART 2. OF CIVIL ACTIONS [307 – 1062.20] ( Part 1 enacted 1872 .)
TITLE 8. OF THE TRIAL AND JUDGMETN IN CIVIL ACTION [577 – 674]
( Chapter 8 enacted 1872. )
CHAPTER 8. The Manner of Giving and Entering Judgment [664 - 674] ( Chapter 8 enacted 1872. )
664.6.
If parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement. If requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement.
(Amended by Stats. 1994, Ch. 587, Sec. 7. Effective January 1, 1995.)
“Reasonable Value” After Pebley
“Reasonable Value” After Pebley
By Douglas J. Petkoff, Esq.
Nearly two years ago, in the case Pebley v. Santa Clara Organics, LLC (2018) 22 Cal.App.5t 1266, the sixth division of the Second Appellate District upended, to the chagrin of personal injury defendants, and to the joy of personal injury plaintiffs, what the former had too optimistically believed was settled law on economic damages in personal injury cases. That law had come down from the California Supreme Court in its decision in the seminal case Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541, 566. Under Howell, the measure of economic damages was held to be the lesser of 1) the dollar amount actually incurred, rather than billed, for a patient’s treatment, or 2) the reasonable value of that treatment. Howell’s most vigorous offspring perhaps was Corenbaum v. Lampkin (2013) 215 Cal.App.4th 1308. The court in Corenbaum ruled, building on the logic of Howell, that not only are medical bills not the measure of damages in personal injury cases; such bills are, in fact, inadmissible, since they are irrelevant to determining those damages.
It was widely felt that Howell and Corenbaum had dealt a serious blow to the ability of personal injury plaintiffs to prove damages in an amount sufficient to satisfy the needs, or the desires, of such plaintiffs and of their attorneys. (See, e.g., “Supreme Court Puts Plaintiffs Through The Hamilton Meats Grinder”, Gary Simms and Michael Danko, Plaintiff, https://www.plaintiffmagazine.com/recent-issues/item/supreme-court-puts-plaintiffs-through-the-hamilton-meats-grinder.) In recent years, in order to avoid the harsh impact of Howell and Corenbaum, plaintiff personal injury attorneys have adverted more frequently to the use of medical providers who are outside the plaintiff’s provider network. With the Pebley decision, this strategy seems to have been vindicated. How did plaintiff personal injury claimants manage to carve out an apparent safe zone in which they could expect some protection from the regime of Howell? And how safe, really, is that safe zone?
“Reasonable Value” And The “Wide-Ranging Inquiry”
The answer to the first question starts with the observation that Pebley decided that plaintiffs who treat outside their medical provider network are, for damages purposes, equivalent to being an uninsured plaintiff, even if the plaintiff had insurance which he might have otherwise utilized. The consequences of being reckoned an uninsured plaintiff means, according to Pebley, that a plaintiff’s damages are evalulated under Howell’s “reasonable value” prong, rather than its “paid or incurred” prong. The advantage of this standard for personal injury plaintiffs is that the full amount of treatment bills, barred under Howell and Corenbaum, may now be offered as evidence of damages, if such bills are offered in conjunction with other evidence such as expert billing testimony.
In its decision holding that the measure for damages for plaintiffs who are uninsured or who are the equivalent of uninsured is to be established by recourse to the “reasonable value” prong of the Howell holding, Pebley followed the case Bermudez v. Ciolek (2015) 237 Cal.App.4th 1311. In analyzing the applicability of the Howell rule to an uninsured plaintiff, the Bermudez court astutely noted that
[T]he holding in Howell ultimately depended upon the "paid or incurred" prong of the test, not the "reasonable value" prong (Citations) . . . ¶Howell offered no bright line rule on how to determine "reasonable value" when uninsured plaintiffs have incurred (but not paid) medical bills. Bermudez, 1329.
Because Howell left “reasonable value” undefined, Bermudez also declined to provide any clear parameters. Instead, in the course of analyzing Howell and some of its successor cases, it announced, in the form of a rule, what is essentially a recommendation that parties engage in a broad investigation into reasonable value in lien cases: “the measure of damages for uninsured plaintiffs who have not paid their medical bills will usually turn on a wide-ranging inquiry into the reasonable value of medical services provided . . .” Bermudez, 1330-1331.
Pebley adopted and fully endorsed this “wide-ranging inquiry” process as a rule for determining reasonable value for “uninsured” plaintiffs. (Pebley, 1278, 1280.) Whereas the “paid or incurred” prong of the Howell damages holding is simple, straightforward, and results in a dollar figure to which all parties can, and usually must, reasonably stipulate, the “reasonable value” prong of Howell, utilizing Bermudez’ “wide-ranging inquiry” process, is unclear as a methodology, and yields no predictable results. As the court in Bermudez perhaps wryly put it, “The ramifications of Howell on the proper measure of damages in a case brought by an uninsured plaintiff (who has not paid his bill) are less clear [than the measure for insured plaintiffs].” Bermudez, 1329.
Because of the amorphousness of the “reasonable value” prong, plaintiffs who are uninsured or deemed by Pebley to be effectively uninsured due to their choice to treat outside their insurance have welcomed the Pebley ruling as an opportunity to provide maximum, favorable evidence of their damages. As noted above, whereas under Howell and Corenbaum, billing evidence of damages offered by insured plaintiffs is automatically excluded as irrelevant, under Pebley, such bills constitute part of a “wide-ranging inqury.” Thus under Pebley, the full bill, banished to the realm of irrelevance under Howell and Corenbaum, is back, even though in theory the bill is not dispositve of the “reasonable value” of treatment. In fact, according to both Bermudez (1336-1338) and Pebley (1278), such evidence alone is, by law, insufficient for the purpose of proving reasonable value. Pebley inferred from this legal conclusion, without providing further elaboration as to the reason, that a determination of “reasonable value” requires, inter alia, expert testimony. (Id.) Ever since, it has been the usual practice in lien cases for each party to retain “billing experts” to opine as to the reasonable value of plaintiff’s damages.
Reasonable Value and “Market Value”
But there has been little guidance from the courts, as yet, as to what methodology or even basic logic should be used by experts in order to establish what “reasonable value” is. Some experts have seized on the following statement from Bermudez in order to opine that “reasonable value” is equivalent to “market value”:
En route to its holding, Howell observed, "The rule that medical expenses, to be recoverable, must be both incurred and reasonable [citations] applies equally to those with and without medical insurance." (Citations.) And Howell endorsed "a rule, applicable to recovery of tort damages generally, that the value of property or services is ordinarily its 'exchange value,' that is, its market value or the amount for which it could usually be exchanged." (Citations.) Bermudez, 1329.
There are numerous problems of both a practical and legal nature with attempting to use this theory as a basis for determining reasonable value in lien cases. The first problem is determining which “market” one is referring to. Some plaintiffs, believing themselves guided by the following statements in Bermudez, argue that the “lien market” is distinct from the insurance or cash paying market; and thus, that the proper indication of market value in the lien context is simply the bill:
Howell noted "pricing of medical services is highly complex and depends, to a significant extent, on the identity of the payer. In effect, there appears to be not one market for medical services but several, with the price of services depending on the category of payer . . . ." (Citations.) . . . ¶Howell offered no bright line rule on how to determine "reasonable value" when uninsured plaintiffs have incurred (but not paid) medical bills. Ciolek is correct that the concept of market or exchange value was endorsed by Howell as the proper way to think about the "reasonable value" of medical services. Bermudez, 1329, 1330.
Obviously however, interpreting “market value” to mean “whatever the bill says” would resurrect the very evil which Howell attempted to do away with: an award of damages for medical care in excess of the reasonable value of such care:
[A]s a consequence of the discrepancy in recent decades between the amount patients are typically billed by health care providers and the lower amounts usually paid in satisfaction of the charges (whether by a health insurer or otherwise), controversy has arisen as to how to measure the reasonable costs of medical care in a variety of factual scenarios. Citing the collateral source rule, some plaintiffs suggested they should be entitled to recover the reasonable costs of medical care, even if that dollar value exceeded the amount actually paid in exchange for the medical services.
Our Supreme Court rejected this contention: "[A]n injured plaintiff whose medical expenses are paid through private insurance may recover as economic damages no more than the amounts paid by the plaintiff or his or her insurer for the medical services received or still owing at the time of trial." (Citations.) In other words, "a plaintiff may recover as economic damages no more than the reasonable value of the medical services received and is not entitled to recover the reasonable value if his or her actual loss was less." (Citations; see also Corenbaum v. Lampkin (2013) 215 Cal.App.4th 1308, 1325-1326 (Corenbaum) ["Damages for past medical expenses are limited to the lesser of (1) the amount paid or incurred for past medical expenses and (2) the reasonable value of the services"].) Bermudez, 1328-1329.
It is altogether unlikely that Howell intended that the evil it vanquished under its first prong should nevertheless be tolerated and encouraged to flourish under its second prong.
Moreover, as Bermudez makes clear, interpreting “market value” to mean “whatever the bill says” is altogether untenable as a matter of law if the bill alone is the evidence: “a plaintiff who relies solely on evidence of unpaid medical charges will not meet his burden of proving the reasonable value of medical damages with substantial evidence.” Bermudez, 1335.
Is There A “Lien Market”?
Although Howell endorsed “market or exchange value” as the way to think about “reasonable value,” Howell simultaneously recognized the difficulty created by its holding: “how a market value other than that produced by negotiation between the insurer and the provider could be identified is unclear”. Howell, 562. “Unclear” is a succinct summary of the problems with determining reasonable value by reference to market value in a lien context. The difficulty in determining “market value” outside of negotiations is due in part to the nature of markets. A market consists of buyers and sellers freely negotiating the value of a product or service. A generally agreed upon price between sellers and buyers can therefore be reasonably considered to be the reasonable value of that product in a particular marketplace. In lien cases, however, the process by which treaters are paid for their lien bills bears very little resemblance to a market. In lien cases, the treater sets a price, and then another person—the defendant--who is not the person who has agreed to be treated--settles because of the threat of trial, or pays a judgment determined by jury assumed [in the case of settlement, without any direct evidence other than the settlement itself] to constitute the “reasonable value” of the services. If it’s arguable, albeit a large stretch, that the amount of a settlement might be considered to be established by a species of “negotiation” between a defendant who, albeit unwillingly, “requested” the services from the treater on behalf of the plaintiff, by virtue of defendant’s tort and therefore, that such settlements are evidence of the “reasonable value” of plaintiff’s treatment, it’s nevertheless clear that the amount of any judgment was certainly not established in a negotiation. The amount of a judgment is established by a legal order. Thus, payments for charges in lien cases cannot fairly, or least not readily, be charcterized as being an example of a “market or exchange value.” If not, they cannot constitute a “reasonable value” under Howell or Bermudez.
Thus, Howell and Bermudez have created a conundrum for determining “reasonable value” in lien cases: they have endorsed the idea of determining “reasonable value” by recommending that this value be determined by reference to a “market exchange value” in lien cases where no market exists.
Problems With “Lien Market” Data
It’s not only that the idea of a “lien marketplace” fails on the level of theory. Even if there were such a thing as a “lien marketplace”, one would still have to overcome the initial hurdle of having access to payment and charge data in that marketplace. No such data exists. Unlike charges, and sometimes payments, made in the insurance and Medicare context, payments received for lien cases are not reported or aggregated anywhere. An expert attempting to testify as to the customary value in general of treatment provided in lien cases would therefore have to do so without access to any data, since there are no existing databases containing the aggregate of payments in lien cases to which an expert might refer. Since there is no data about lien payments, there is no basis upon which to offer an opinion about customary payments which might shed light on the reasonable value of a payment in a particular instance. Thus, on a practical level, there is no means available for an expert to provide an opinion about the reasonable value of services in a hypothetical “lien marketplace”, if the expert’s methodology and inquiry is limited to data from that “marketplace.”
If nevertheless some sort of data showing charges and payments in lien cases could be obtained; and, if an expert were to use such data to “reverse-engineer” reasonable value by aggregating a substantial number of representative payments in lien cases within a particular geographical area which ended in settlement or judgment; and, if the expert were then to utilize a mean or median payment as evidence of the “reasonable value” of those treatments for that area; his opinion might, in theory, shed some light on the “reasonable value” of treatment for that geographical area. However, how well it did so would depend on the type of available data. For instance, he would almost certainly run into the problem that neither judgments nor settlements made in lien cases typically break down economic damages into component parts so that each treatment’s value is clearly indicated. [E.g.: “Settlement/judgment is for $1,000,000, of which $700,000 dollars represents noneconomic damages; $1,500 is the value of the cost of x-rays; $600 is the value of preop; $1,200.00 is the value of anasthesia; $1,400 is for the physician assistant’s work during the discectomy; etc.”] Additionally problematic in the case of settlements is that they most often neglect even to distinguish between noneconomic and economic damages. The failure to break down settlements and judgments by treatment, and settlements by category of damages, leads to the impossibility of determining which portion of any negotiated settlement or judgment applies to one particular treatment rather than another, or to economic or noneconomic damages. This lack of clarity about what the judgment or settlement amount represents means that any determination of “reasonable value” for particular charges in particular cases would be extremely indefinite.
“Market-Value” By Proxy
In response to the problem of the complete lack of public, reliable data upon which to base any opinion about reasonable value in lien cases, some experts have been known to theorize that the data from the insurance and Medicare market can and should be used as a proxy source and applied--perhaps with modifications to address issues such as the delay in payment which lien treaters are generally obliged to endure--as an essentially wholesale representative of “reasonable value” in the lien “marketplace.” Since the use of such methods generally results in figures far below the amount charged by lien treaters, these methods are generally favored by defendants, and disfavored by plaintiffs.
Since such methods do not rely on any access to data from actual lien cases [since, as noted, no such data exists] regarding what actually happens to liens [are they paid? How often? How much?]; and in consequence, they do not directly comply with the “market or exchange value” standard which, according to Bermudez, constitutes an effective measure of “reasonable value” in lien cases [where, as noted, the idea of “marketplace” is, at the least, highly problematic], one would imagine that courts would reject the attempt to indirectly determine reasonable value in lien cases by using insurance and cash payment cases as a proxy. Nevertheless, some courts have upheld the use of such methods as being helpful to the trier of fact in determining reasonable value. (See, e.g., Stokes v. Muschinske (2019) 34 Cal.App.5th 45.)
A Third Way: How Treaters Treat In Particular Cases
Because of the problems with determining reasonable value based on an aggregation of market transactions, whether hypothetically direct [for lien cases], or indirect [using non-lien cases as a proxy], there is a need for a method that will better demonstrate the reasonable value of treatment in lien cases. One alternative possibility is to attempt to find how treaters in particular cases are actually re-imbursed for their treatments. This methodology poses some difficulties, but offers some promise as well. It also appears to be supported by Pebley itself.
Treaters have the actual records showing how much they actually receive for their treatments in lien cases. Even though these payments are not received as part of a free market transaction, they would nevertheless tend to shed light on the question of whether bills alone are indicative of, or are instead unsupportive of, the “reasonable value” of treatment. This is so because disparities between charge and payment, or the lack thereof, would, in reason, substantially either undermine or support claims that the charge constitutes a “reasonable value” for the treatment. Such an approach was perhaps indirectly suggested in Pebley when the court observed: “On cross-examination, Dr. Alexander testified there is an expectation that a private pay party with a large bill will pay the bill. Pebley has not paid his bill, but Dr. Alexander expects it will be paid. He conceded he does not always get paid 100% of his bills, but stated he does not routinely discount them.” Pebley, 1279. In other words, if Dr. Alexander did, in fact, “routinely discount” his bills, that fact, and the amount of discounts generally, might be relevant to determining, under the “wide-ranging inquiry” standard, the reasonable value of Dr. Alexander’s treatment, since his bill couldn’t reasonably be said to constitute the reasonable value when it doesn’t represent the amount he generally receives for treatment, or bear a significant relationship to the amount he receives for treatment. Inquiry into the actual payments received by treaters, therefore, might provide information which a reviewing court might consider relevant on the question of “reasonable value.”
Further support for the idea that such a method is within the scope of Pebley’s interpretation of the “wide-ranging inquiry” rule for determining reasonable value is found in Pebley’s approval of the use of the treater’s actual experience in treating and billing patients:
It is apparent from the record that both surgeons “were qualified to provide expert opinions concerning the reasonable value of the medical costs at issue. [Their] opinion testimony was based in part on the medical costs incurred by [Pebley] and in part on other factors considered by the experts, including their own experiences treating patients. This was not purely speculative evidence without any basis in the real world . . .” Pebley, 1280.
Note that in this context, the court in Pebley makes no reference of any kind to market value or aggregated market exchange rates for the purpose of determining “reasonable value”, despite the fact that it has purportedly adopted the rule and logic of Bermudez. It appears that, despite its limited lip service to the “marketplace” for a means of determining reasonable value (Pebley, 1275), the Pebley court was in fact looking at the particular history of transactions of treaters in the case as evidence of “reasonable value.” To call this particular history a “marketplace” would be a highly idiosyncratic use of that word, to say the least. In fact, the Pebley ruling provided that such essentially non-market evidence as a single treating doctor’s personal testimony regarding what he typically gets paid should be used to help determine reasonable value. This approach is consistent with Pebley’s professed agnosticism on the usefulness and necessity of “market value” for determining reasonable value:
As defendants point out, both surgeons emphasized the reasonable cost of the medical services rather than their reasonable value, market value or exchange rate value. The applicable jury instructions, however, refer to "cost" instead of any type of "value." The trial court instructed the jury with CACI No. 3903A, which states: "To recover damages for past medical expenses, David Pebley must prove the reasonable cost of reasonably necessary medical care that he has received." (Italics added.) It further states: "To recover damages for future medical expenses, David Pebley must prove the reasonable cost of reasonably necessary medical care that he is reasonably certain to need in the future." fn. 3 (Italics added.) Thus, as far as the jury was concerned, it was Pebley's burden to prove the "reasonable cost" of past and future medical expenses. The surgeons' testimony was consistent with CACI No. 3903A and, in the absence of an objection to the instruction, it was appropriate for them to testify regarding the reasonable cost of reasonably necessary medical care that Pebley has received and is expected to receive in the future. Pebley, 1279.
Thus, so far as Pebley is concerned, and in contrast to Bermudez, the necessity of “market value” to determining reasonable value is still undecided.
Pebley’s decision to permit treater and expert evidence regarding amounts of payment typically received in a particular case by a particular treater to determine reasonable value seems well-suited to shedding light on the original problem that motivated Howell in the first place: the injustice done to defendants by the failure to take account of the discrepancy—sometimes enormous--between billed amounts, and amounts actually paid by plaintiffs and/or received by providers in satisfaction of those bills, in determining a plaintiff’s actual economic damages under the law.
Discovery Of Particular Payments
Defendants wishing to combat damages claims by showing how treaters in particular cases are actually reimbursed need to obtain evidence that shows or tends to show that the treater does not, in fact, usually receive the full amount of the bill from his patients. The source of such evidence will most likely be the treater, or whoever handles bills for the treater. Such evidence should be sought during the discovery process through well-tailored document subpoenas and PMK subpoenas of treaters, and document production requests from any treaters who are also retained as experts by the plaintiff.
Anything that would tend to show that the treater does not, in fact, usually get paid the value of his bill, would tend in reason to show that the bill does not represent the reasonable value of treatment. Evidence of this kind would typically include both itemized and aggregated payment amounts received for particular services; and both itemized and aggregated charges for particular services. From each treater, this evidence should be obtained from lien cases, cash patients, and insurance patients, so that lien cases may be viewed in comparison to other types of cases. The type of case or patient must be clearly identified in the documents obtained, or at least a clear distinction between lien and non-lien cases must be made, so that comparisons with lien cases to other cases are possible.
Since the revelation of such information may make it impossible for a treater to claim that he usually gets paid the full amount of his bill, or that he expects to be fully paid, subpoenas and document requests of this kind can be expected to elicit strong opposition. Defendants may have to endure numerous motions to quash and requests for protective orders from plaintiffs and treaters, and will have to rouse themselves to file numerous motions to compel, in order to obtain this information. Since the alternative is to allow self-serving trial testimony from treaters, like that of Dr. Alexander in Pebley, who claim that they expect that their patients will pay their bills in full, and that they do not routinely discount their bills, to go unrebutted, filing and defending against such discovery motions is the price that defendants will have to pay until perhaps the Supreme Court crafts a formula for determining damages under its second Howell prong which is as mathematically elegant as its method for determining damages under the first Howell prong.
Asking the Right Questions
Depositions are often a crucial part of any case. The success of a case, the ability to uncover additional information to help your case, and the discovery of information that will support impeachment at trial, often rises and falls with a deposition. While most depositions start with a thorough outline, the outline should serve as a starting point and not the be all end all. It is oftentimes, the very best information that come from the following questions not found in ones deposition outline.
During a recent deposition of a personal injury plaintiff, it was uncovered that a significant medical procedure that was billed for and submitted as part of the claim did not take place. Initially, the plaintiff testified that she did in fact go in for the medical procedure that was in fact billed for by her provider. However, on follow up questioning, it was determined that the plaintiff never went to the location where the procedure allegedly occurred. We inquired further and Plaintiff wholeheartedly denied ever having any medical procedures performed in the city where the record in fact stated it occurred. We further uncovered that the procedure did not go forward as the plaintiff was too afraid. This discovery turned what may have been significant case into one that may have significant ramifications for the provider, but will also too likely result in the outright dismissal of the case.
Winning from the Beginning—How an Adjuster Can Avoid Liability In A Bad Faith Lawsuit
A Washington appellate court recently sent shockwaves through the insurance industry by holding that an insurance adjuster can be sued in their individual capacity in a bad faith lawsuit. In Keodalah v. Allstate Ins. Co., (2018) 413 P.3d 1059, Division One of the appellate court declared that the applicable statute “imposes a duty of good faith on all persons engaged in the business of insurance, including individual adjusters.”[1] Why would a plaintiff sue an adjuster when they know the insurance company is the party with deep pockets? In one word, intimidation; the Court’s ruling gives consumers (not to mention plaintiff attorneys) the power to threaten adjusters to give in to their demands.[2] These threats are more than just “puffing” or brutum fulmen; as any defendant will admit, being named in a lawsuit can have real consequences, including stress and financial exposure. In fact, some lending companies require potential borrowers to disclose any pending/past lawsuits, which could affect one’s ability to apply for a mortgage, car loan, or a line of credit.[3] Adding an adjuster to a lawsuit also increases the cost of defense, as an adjuster will likely need his/her own attorney (that will be paid for by the insurance company).[4] Adding an adjuster to a lawsuit may also destroy diversity jurisdiction, which is likely an advantage to plaintiffs because State courts are often “plaintiff-friendly.” A 2018 insurance litigation report found that out of the 93,000 federal district bad faith cases reviewed between 2009-2017 that 90% of cases found no bad faith and 75% of those cases were dismissed on summary judgment.[5]
The Washington Supreme Court granted review in September 2018. Thus, it remains to be seen if Washington will join the handful of States that allow adjusters to be sued in their individual capacity. However, in light of the appellate court’s decision, an adjuster may be tempted to worry that any minor infraction will land them in the middle of a bad faith lawsuit. However, the Keodalah Court provided some guidance on how an adjuster may avoid liability. The following are three ways an insurance adjuster (and the insurance company) can avoid having liability imputed to individual adjusters in a bad faith lawsuit.
1. Take A Reasonable Position
The holding in Keodalah, arose out of an auto accident in which the plaintiff was injured when a motorcycle struck his truck.[6] Plaintiff had a $25,000 UIM insurance policy through his insurance company, Allstate.[7] The police found that the motorcyclist was traveling between 70-74 m.p.h. in a 30 m.p.h. zone, and that the plaintiff was not on his cellphone at the time of the accident.[8] Allstate’s investigation revealed several witnesses who confirmed that the motorcyclist was traveling faster than the speed limit, was weaving between cars and had “cheated” at the intersection.[9] Allstate’s accident reconstruction firm analyzed the accident and concluded that the motorcyclist was traveling at least 60 m.p.h. (double the speed limit) and that the motorcyclist’s “excessive speed” caused the collision.[10]
Notwithstanding the overwhelming evidence proving the motorcyclist was at fault for the accident, the adjuster found that the plaintiff was 70% at fault for the accident.[11] The Court highlighted the fact that Allstate’s adjuster had both the traffic collision report and their own expert’s report in her possession and still testified in deposition that the plaintiff ran a stop sign and had been on his cell phone.[12] This is simply not true; either the adjuster failed to read the reports or, in the words of Justice Antonin Scalia, engaged in some “interpretive jiggery-pokery.”[13] Simply put, no reasonable adjuster could reach the same conclusion the adjuster reached in Keodalah.
2. Provide Written Explanations of Any Offer that Falls Short of the Claimant’s Demand
In response to the plaintiff’s $25,000 policy-limits demand in Keodalah, the adjuster offered a minimal $1,600 to settle the UIM claim.[14] The appellate court pointed out that when Keodalah asked the insurance company to explain its position, it raised its offer to $5,000 without explanation.[15] This lack of explanation is problematic. Absent any legitimate explanation, a claimant is left to assume (and may eventually argue) that an adjuster is merely lowballing him/her. In Keodalah, not only did the adjuster have no reasonable basis for her position, but she also failed to provide any reasonable explanation for her settlement offers. From this, one can surmise that a well-reasoned written explanation of any settlement offer could go a long way in avoiding liability for bad faith.
3. Move Claim Handling Staff to States That Barr Suits Against Adjusters for Bad Faith
The decision in Keodalah could have a chilling effect on the insurance industry. Individual adjusters may think twice about working for an insurance company when they know that they could be sued in their individual capacity. However, the holding in Keodalah is not universal. Many States, such as California, New York, Hawaii, and Tennessee, do not recognize bad faith claims against individual adjusters.[16] Albeit this may be a costly measure, moving adjusters to other States could save insurance companies money over the long term from having to pay additional legal fees. An additional benefit is that it would help insurance companies maintain diversity jurisdiction, which also provides an additional advantage.
4. Conclusion
Keodalah is a prime example of what not to do. The facts highlighted by the Court show how far the adjuster was willing to go to avoid paying out the policy. For now, an insurance adjuster can be sued in the State of Washington for bad faith and taking a position against the clear weight of the evidence (presumedly to avoid paying policy limits) may land an adjuster exactly where he/she does not want to be. However, taking a reasonable approach to liability and providing reasoned explanations in writing to claimants, an adjuster can likely avoid liability if they are sued in their individual capacity.
[1] Id. at 1060.
[2] Johnson, Denise, The Impact of the Keodalah Decision on Insurers, Adjusters (January 2, 2019) Claims Journal < https://www.claimsjournal.com/news/west/2019/01/02/288527.htm > [as of May 1, 2019].
[3] Ibid.
[4] Ibid.
[5] Lex Machina, Lex Machina’s First Annual Insurance Litigation Report Reveals Distinct Case Filing Trends (October 9, 2018) Lex Machina < https://lexmachina.com/media/press/lex-machina-first-annual-insurance-litigation-report/>; White and Williams LLP, Insureds Suing Individual Adjusters-What Will Change If the Washington Supreme Court Decides That Adjusters May be Sued for Bad Faith? (December 12, 108) JD Supra <https://www.jdsupra.com/legalnews/insureds-suing-individual-adjusters-13390/>
[6] Keodalah, Supra, 413 P.3d 1060.
[7] Ibid.
[8] Ibid.
[9] Ibid.
[10] Ibid.
[11] Ibid.
[12] Ibid.
[13] King et al v. Burwell, Secretary of Health and Human Services, et al (2014) 576 U.S. 2500. (in his dissenting opinion on the Obamacare case, Scalia argued that the majority’s interpretation was “interpretive jiggery-pokery.”)
[14] Keodalah, Supra, 413 P.3d 1060
[15] Ibid.
[16] White and Williams LLP, Insureds Suing Individual Adjusters-What Will Change If the Washington Supreme Court Decides That Adjusters May be Sued for Bad Faith? Supra.
EDR Data In Modern Litigation
Since 1994, the prevalence of vehicle Electronic Data Recorders has risen dramatically. Nearly all mass produced vehicles sold on the United States have at least one Electronic Data Recorder (“EDR”) and oftentimes have numerous additional module storing similar data. Pre-Crash data points are voluminous, such as:
Sideways acceleration
Forward or rearward acceleration
Engine speed
Driver steering input
Right front passenger safety belt status
Engagement of electronic stability control system
Anti lock brake activity
Side airbag deployment time
Driver and right front passenger and seat track positions
Driver and right front passenger occupant size
Tire pressure
Cruise control status
Video
and much more
The data permanently stored by EDRs at the time of an airbag deployment event can be a game changer in litigation, providing definitive, admissible, and reliable proof of how an accident actually occurred.
Critical, the data must be obtained properly, honoring the data owner’s rights pursuant to state and federal statute. These statutes include California Vehicle Code section 9951 which states:
(c) Data described in subdivision (b) that is recorded on a recording device may not be downloaded or otherwise retrieved by a person other than the registered owner of the motor vehicle, except under one of the following circumstances:
(1) The registered owner of the motor vehicle consents to the retrieval of the information.
(2) In response to an order of a court having jurisdiction to issue the order.
(f) This section applies to all motor vehicles manufactured on or after July 1, 2004.
and
The Federal Driver Privacy Act of 2015, (Passed as part of the FAST Act, H.R.22, 114th Congress, 2015) which says:
“Any data retained by an event data recorder… is the property of the owner or, in the case of a leased vehicle, the lessee of the motor vehicle…”
We have utilized EDR data in countless cases to date which have resulted in favorable defense results for cases with initial seemingly impossible liability arguments. EDR data truly can be a game changer.
Building on Howell v. Hamilton Meats
Pebley v. Santa Clara Organics, LLC (2018) 22 Cal. App. 5th 1266 has provided further clarification to litigants seeking medical special damages based on unpaid medical bills obtained from providers outside of his/her health insurance plan.
Plaintiff Dave Pebley was injured in a motor vehicle accident caused by defendant Jose Pulido Estrada, an employee of defendant Santa Clara Organics, LLC (Santa Clara). Although Pebley has health insurance, he elected to obtain medical services outside his insurance plan.
Howell v. Hamilton meats holds that: An injured plaintiff with health insurance may not recover economic damages that exceed the amount paid by the insurer for the medical services provided. (Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541, 566.
In addition, the amount of the “full bill” for past medical services is not relevant to prove past or future medical expenses and/or non-economic damages. Corenbaum v. Lampkin (2013) 215 Cal.App.4th 1308, 1330-1331.
In contrast, the amount or measure of economic damages for an uninsured plaintiff typically turns on the reasonable value of the services rendered or expected to be rendered. (Bermudez v. Ciolek (2015) 237 Cal.App.4th 1311, 1330-1331. Thus, an uninsured plaintiff may introduce evidence of the amounts billed for medical services to prove the services' reasonable value. (Id. at pp. 1330-1331, 1335.)
The Pebley Court concluded as follows:
We conclude the trial court properly allowed Pebley, as a plaintiff who is treating outside his insurance plan, to introduce evidence of his medical bills.
Pebley's medical experts confirmed these bills represent the reasonable and customary costs for the services in the Southern California community.
Pebley testified he is liable for these costs regardless of this litigation, and his treating surgeons stated they expect to be paid in full
Thus: The court ruled: The full lien amounts that were billed were admissible.
The Pebley holding is quickly changing the how litigants handle medical treatment and present medical bills to a jury. Defense counsel must carefully review Pebley for its terminology and key holdings which provide insight on countering excessive and unreasonable medical services conducted on lien basis.