Kurt J. Lewin
Plaintiff - Michael H. Whitehill
Defendant - Alan Michael and Daniel L. Gardner
FACTS: On April 6, 1996, Decedent, a 22 year old marine, was run over and killed by Defendants' insured, 82 year old Melvin Kerslake, while operating an automobile in Twenty-Nine Palms. Six weeks after the accident, Farmers unconditionally offered Mr. Kerslake's $15,000.00 policy limits to Decedent's widow, Amy Collins. After receiving Defendants' offer, Amy Collins and her counsel undertook an extensive asset search on Kerslake, only to find he had no significant assets. Thus, on July 15, 1996, Mrs. Collins' counsel forwarded a letter to Farmers stating that she would accept Kerslake's $15,000.00 policy limits in return for a complete release, as long as payment was received by August 1, 1996. Farmers received the demand on July 18, 1996. On July 22nd, a claims representative for Farmers wrote to Mrs. Collins' counsel indicating that Farmers investigation was continuing on the heir issue and that Farmers was requesting a written guarantee from Mrs. Collins' counsel that should any heir come forward the $15,000.00 policy limits be responsible for payment to those heirs. Farmers did not forward the $15,000.00 policy limits by August 1, 1996. On August 5, 1996, Farmers abandoned its request for a written guarantee from Mrs. Collins' counsel regarding hers but placed a new condition on settlement that a death certificate be produced. On August 20, 1996, Mrs. Collins forwarded the death certificate but indicated that Farmers' $15,000.00 policy limits offer was being rejected. A lawsuit was filed and five days before the first scheduled trial date, Kerslake declared bankruptcy. Kerslake's potential bad faith claim against Farmers was eventually declared an asset of the bankruptcy estate. The bankruptcy court filed the stay, allowing the case to proceed to trial and assigned to Kerslake's trustee all of Kerslake's right to prosecute a bad faith action against Farmers. On April 22, 1998, a jury returned a verdict in favor of Mrs. Collins and against Kerslake for $750,000.00. Farmers paid $15,000.00 but refused to pay the rest of the judgment and this lawsuit ended. The action was prosecuted by Keslake's trustee in bankruptcy.
CONTENTIONS: Farmers breached the covenant of good faith and fair dealing owed to Kerslake in failing to accept Plaintiff's July 15, 1996, settlement demand which was reasonable. Farmers breached the covenant of good faith and fair dealing in persuading Kerslake to declare bankruptcy, and paying for his bankruptcy attorney, in an attempt to discourage Mrs. Collins from obtaining a judgement against Kerslake.
Defendant argued all of their actions were reasonable at all times. They offered the policy limits within six weeks of the dat e of the accident. Mrs. Collins' July 15, 1996, demand was an attempt to "set up" Farmers for bad faith. Farmers offered to pay the policy limits five days after the demand expired. Kerslake's decision to declare bankruptcy was his own and based upon the advice of independent counsel.
DEMAND: Nor firm.