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Vidrio v. Hernandez

April 13, 2009


APPEAL from an order of the Superior Court for the County of Los Angeles County, Thomas I. McKnew, Judge. Reversed. (Los Angeles County Super. Ct. No. VC047790).

The opinion of the court was delivered by: Perluss, P. J.


Mercury Insurance Company (Mercury) appeals from the trial court's order imposing $1,857.50 in monetary sanctions after the court determined Mercury's claims adjuster and the lawyer it had provided to defend its policyholder in this personal injury action had failed to negotiate in good faith at a mandatory settlement conference. Because neither Code of Civil Procedure section 177.5*fn1 nor California Rules of Court, rule 2.30*fn2 nor any other statute or court rule authorizes the imposition of sanctions on a nonparty insurer in this circumstance, we reverse.


1. The Underlying Litigation

Miguel Vidrio, Jr. and Patricia Salinas filed a lawsuit in December 2006 alleging they had been injured a year earlier when, as a result of Maria Hernandez's negligence, the car Hernandez was driving collided with the car being driven by Vidrio. Hernandez was insured by Mercury, which provided her with a defense.

In response to a March 2007 request for a statement of damages, Vidrio claimed he had suffered general damages of $30,000, medical expenses of $3,836.98, loss of earnings of $1,223.60 and property damage of an undetermined amount. Salinas claimed general damages of $50,000, medical expenses of $4,745 and loss of earnings of $900.

In opposition to Hernandez's motion to reclassify the matter as a limited civil case, Vidrio added a claim for estimated future medical expenses of $4,500 and increased his claim for lost earnings to $2,015.60. However, his claim for general damages was reduced to $20,000. Salinas, who explained she was 17 weeks pregnant at the time of the accident and sought medical treatment because of her concern about her unborn child, added a claim for future medical costs of $3,000, but reduced her general damages claim to $25,000. The motion to reclassify was denied.

Counsel for Hernandez, Dean Chalamidas, an associate with Michael G. Hogan & Associates, took Vidrio's and Salinas's depositions in May 2007. The plaintiffs were represented by Jon A. Dieringer, a contract attorney working with plaintiffs' counsel of record, Michael H. Silvers.

A mediation was conducted in September 2007, attended by the parties, counsel for plaintiffs (once again, a contract attorney working with Silvers), Hernandez's counsel Chalamidas and Victor Ambriz, the adjuster for Mercury. The case was not resolved at that time. Hernandez served Vidrio and Salinas with settlement offers of $1,000 each pursuant to section 998.

2. The Mandatory Settlement Conference

A mandatory settlement conference was scheduled for December 7, 2007. Hernandez filed her mandatory settlement conference statement on December 4, 2007. The brief contested liability, contending Vidrio's car had stopped suddenly and for no reason, leaving Hernandez insufficient time to avoid the rear-end collision. Hernandez also disputed the nature and extent of Vidrio's and Salinas's claimed injuries, essentially arguing the accident was minor and could not be expected to cause any personal injuries and only limited damage to Vidrio's car (repair estimated at approximately $1,600).

Hernandez was represented at the mandatory settlement conference by Chalamidas. Mercury's adjuster Ambriz, who had full authority to settle the case, was also present. Plaintiffs were again represented by a specially appearing contract attorney (James M. McKanna) affiliated with counsel-of-record Silvers. Vidrio and Salinas made settlement demands of $15,000 each (demands that had previously been served on counsel for Hernandez pursuant to section 998). Hernandez repeated her prior settlement offer of $1,000 for each plaintiff. Neither side made a counter-proposal, and the case did not settle.

Following the settlement conference the court held a proceeding on the record at which it observed the rules of court, the Local Rules and the litigation guidelines published by the Los Angeles County Bar Association "all mandate good faith representation by counsel as well as the authorized representative of the company, in this case Mercury Insurance." The court then stated, "On its surface, it would appear that this case is one of damages, not liability. Counsel and the adjuster came to court today unprepared to discuss damages, unprepared to discuss costs of defense, unprepared to have an intelligent conversation about how they derive a thousand dollars in total to be paid to the plaintiffs. There is an auto claim as well for repair of the vehicle of Miguel Vidrio, Jr., of which little or no discussion could be elicited from counsel. . . . I have every intention of imposing a monetary sanction. I find there was bad faith conduct by counsel."

The court also expressed its view Hernandez's counsel, Chalamidas, was "just a conduit for somebody, I believe, at Mercury" and indicated, "I don't want to get you personally wrapped up in this." The court then issued an order to show cause why sanctions should not be imposed, naming Chalamidas, ...

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