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Graciano v. Mercury General Corporation

California Court of Appeals, Fourth District, First Division

October 17, 2014

SONIA GRACIANO, Plaintiff and Respondent,
MERCURY GENERAL CORPORATION et al., Defendants and Appellants.

[As modified Nov. 12, 2014.]

APPEAL from a judgment of the Superior Court of San Diego County, No. 37-2010-00055207-CU-IC-NC Timothy M. Casserly, Judge.

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Hager Dowling Lim & Slack, John V. Hager and Alison M. Bernal for Defendants and Appellants.

Dabney Finch and Carla DeDominicis for Plaintiff and Respondent.

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Plaintiff Sonia Graciano suffered severe injuries when she was struck by a car driven by Saul Ayala (Saul). Saul was insured by a policy issued by defendant California Automobile Insurance Company (CAIC), which had policy limits of $50, 000. Less than three weeks after Graciano's attorney first contacted CAIC alleging Graciano was injured by one of CAIC's insureds, during which time Graciano misidentified both the name of the driver and the applicable insurance policy, CAIC completed its investigation of the accident, identified the correct insurance policy and driver, and tried to settle Graciano's claim against Saul by delivering to Graciano's attorney a "full policy limits offer."

Graciano did not accept CAIC's full policy limits offer and, in the present action, asserts CAIC and its parent and affiliated companies (together Defendants) acted in bad faith, based on an alleged "wrongful failure to settle." Graciano argues CAIC could have and should have earlier discovered the facts, and should have made the full policy limits offer more quickly. The jury found in favor of Graciano and this appeal followed.

CAIC asserts that, as a matter of law, there was no evidence to support the verdict that CAIC acted in bad faith by unreasonably failing to settle Graciano's claim against Saul. We agree, and reverse the judgment.[1]



A. The Accident

In the early morning hours of October 20, 2007, Graciano was severely injured when she was struck by a 2004 Cadillac driven by Saul, who had been drinking before the accident.

B. The Two CAIC Policies

Saul was a named insured on CAIC policy No. 040115180005897, in effect on the date of the accident (Saul's policy) with a policy limit of $50, 000. The Cadillac was a listed vehicle on Saul's policy.

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CAIC had also insured Jose Saul Ayala (Jose) under a separate policy (policy No. AP00401514, Jose's policy), and the Cadillac was also a listed vehicle on Jose's policy. Jose's policy, which had policy limits of $15, 000, had been canceled approximately six months before the accident.

C. The Two Reports of the Accident

Saul's Report (CAIC Claim No. 20070032006723-81)

Late on the afternoon of October 23, 2007, CAIC first learned of the accident when Saul contacted an adjuster working for CAIC to report he had been in an accident in the early morning hours of October 21, 2007. Saul reported he fell asleep while driving and had struck a woman and injured her. Saul's claim was handled by the adjusters of the Vista claims unit, and CAIC immediately began investigating this claim. CAIC contacted the California Highway Patrol (CHP) that same day to order a copy of the police report and, at that time, learned the actual date of the accident was October 20, 2007. CAIC also contacted the tow yard the following day and learned the CHP had an "evidence hold" on the Cadillac, which would require permission from the CHP to allow CAIC to inspect it.

Based on the preliminary information, CAIC believed the driver was 100 percent at fault. By October 30, 2007, CAIC's adjuster believed it would likely be an "excess bodily injury claim, " meaning the amount for which Saul was liable would exceed the amount of coverage provided by CAIC's policy. However, CAIC apparently did not know at that point the identity of the person injured by Saul.

Graciano's Report (CAIC Claim No. 20070065006697-01)

Three days after Saul's report, Ms. DeDominicis contacted a CAIC call center in Texas to report her client (Graciano) had been injured by a driver insured by CAIC. DeDominicis reported Graciano was injured on October 21, 2007, gave the call center "AP00297623" as the driver's policy number with CAIC, and told CAIC the driver's name was "Saulay Ala."[2]

CAIC assigned this report to a different claim identification number (claim No. 20070065006697-01), which identified Jose as the insured and identified

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his last effective policy number as AP00401514.[3] Graciano's claim was assigned to the La Mesa claims unit. The La Mesa claims unit transferred Graciano's claim to the factfinder unit (Factfinder unit) in Sacramento, which did coverage investigations, because the listed policy (policy No. AP00401514) appeared to have been canceled before the date of the accident and the Factfinder unit needed to determine whether policy No. AP00401514 had validly been canceled. Ms. Talley of the Factfinder unit attempted to contact Jose without success, requested the underwriting file, and also confirmed it appeared Jose's policy had been canceled in April 2007. Talley also corresponded with DeDominicis on November 1, 2007, to inform DeDominicis it was investigating a "coverage problem" for Jose under policy ...

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