VERDICT & SETTLEMENT REPORT FORM
INSURANCE BAD FAITH
BREACH OF INSURANCE CONTRACT DUTY TO DEFEND
SETTLEMENT: $1,950,000.00
Case Name: Confidential
Confidential- Los Angeles Superior Court
ATTORNEYS Plaintiff- Michael H. Whitehill
(Kussman & Whitehill, Los Angeles)
Defendant- Chris Kelly, Bryan Merryman
(White & Case, Los Angeles)
FACTS: On December 8, 1995, plaintiff Maria Olague and her two-year-old son, Emmanuel Olague, were waiting at an intersection in Pasadena for the light to turn green when two vehicles collided in the intersection. One of the vehicles climbed the sidewalk and pinned Emmanuel, who was in a baby carriage, against a building. Emmanuel suffered a broken neck and died. Maria Olague suffered serious personal injuries.
One of the drivers involved in the accident, Magana, was allegedly employed by Barajas. Barajas was insured with defendant, Nautilus Insurance Company.
Barajas was eventually served as a Doe Defendant and he tendered his defense to defendant Nautilus Insurance Company. Nautilus interviewed Barajas who stated that Magana was not his employee and that the involved vehicle was owned by a customer of Magana. Nautilus denied a defense to Barajas on the basis of an auto exclusion in its policy which provides that there is no coverage for any accident arising out of the "ownership, maintenance, use, or entrustment to others of any . . . auto, . . .owned or operated by or rented or loaned to any insured." Barajas was a named insured under the policy and Magana was not.
Barajas was unable to afford an attorney. As a consequence, a default judgment was entered against Barajas in April 1998 for $1.5 million. In return for a covenant not to execute on the judgment, Barajas assigned his rights against Nautilus Insurance Company to the Plaintiffs. Plaintiffs argued that even though there was evidence that Magana was not Barajas' employee, and that the vehicle was owned or controlled by Barajas, there was one factual scenario (i.e. Magana was an employee of Barajas and Barajas did not own or control the vehicle) for which the exclusion would not bar coverage. Accordingly, Nautilus owed a duty to defend Barajas. Moreover, since Nautilus' failure to defend Barajas led to the default judgment, Nautilus is liable for the entire judgment pursuant to Amato v. Mercury Casualty.
Defendant argued that under either Magana or Barajas' contradictory versions of the relevant facts, the auto exclusion would bar coverage under the policy. Magana testified the involved vehicle was controlled by Barajas and Barajas testified that the Magana was not his employee. The Honorable L.C. Nunley agreed with Nautilus and entered summary judgment. The Second District Court of Appeal, however, reversed Judge Nunley's ruling.
DAMAGES: $1.5 million judgment plus attorney's fees.
SETTLEMENT DISCUSSIONS: Defendant made no offer prior to the Court of Appeal decision. After the Court of Appeal decision, Defendant's original offer was $1.5 million and Plaintiffs' original demand was 2.1 million.