Yan Fang Du v. Allstate Insurance
697 F.3d 753
| 9th Cir. | 2012Background
- Du sued Deerbrook (Allstate/Deerbrook) for breach of the implied covenant of good faith and fair dealing after Kim’s liability was established in an accident.
- Kim’s $4,126,714.46 judgment was assigned to Du as a bad-faith claim against Kim’s insurer.
- Deerbrook’s policy had $100,000 per-claim limits and $300,000 per-accident aggregate; Deerbrook engaged in settlement discussions but delayed corroborating medical information.
- Du and Deerbrook negotiated in mid-2006; Deerbrook offered $100,000 in June 2006, which Du rejected; medical documentation remained incomplete.
- Du obtained a jury verdict against Kim; Deerbrook paid the policy limit; Kim assigned the bad-faith claim to Du.
- Du alleged Deerbrook breached the covenant by not initiating settlement discussions promptly after liability became reasonably clear; the district court rejected an instruction based on a proposed CAC I 2337.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to settle without third-party demand | Du argues CACI 2337 applies even without a demand and reflects breach when settlement isn’t pursued. | Deerbrook contends no duty to initiate settlements absent a demand and factual basis for such instruction is lacking. | No evidentiary basis for the instruction; district court’s decision affirmed. |
| Application of genuine dispute doctrine to third-party settlements | Du contends the doctrine could bar or limit the duty to settle in a third-party claim context. | Deerbrook argues doctrine applies or is unsettled, potentially informing reasonableness of settlement. | Not resolved on appeal; the court did not rely on it to affirm. |
| Existence of an evidentiary foundation for Du’s proposed instruction | Du contends facts supported an instruction guiding consideration of failure to settle. | Deerbrook contends there was insufficient evidence to support such an instruction. | There was no evidentiary foundation; court affirmed denial of the instruction. |
Key Cases Cited
- Moradi-Shalal v. Fireman’s Fund Insurance Co., 46 Cal.3d 287 (Cal. 1988) (established post-Mow rule guiding bad-faith insurance actions)
- Jordan v. Allstate Ins. Co., 148 Cal.App.4th 1062 (Cal. App. 2007) (section 790.03(h) evidence can support breach of covenant)
- Pray ex rel. Pray v. Foremost Insurance Co., 767 F.2d 1329 (9th Cir. 1985) (duty to settle once liability clear; active settlement obligation)
- McLaughlin v. Nat’l. Union Fire Ins. Co., 23 Cal.App.4th 1132 (Cal. App. 1994) (broader scope of 790.03(h)(5) than mere demand)
- Gibbs v. State Farm Mutual Insurance Co., 544 F.2d 423 (9th Cir. 1976) (affirmative action in settlement can breach good faith)
- Boicourt v. Amex Assurance Co., 93 Cal.Rptr.2d 763 (Cal. App. 2000) (settlement not absolutely required to prove bad faith)
- Merritt v. Reserve Ins. Co., 34 Cal.App.3d 858 (Cal. App. 1973) (no per se rule requiring settlement demand)
- Coe v. State Farm Mutual Automobile Insurance Co., 66 Cal.App.3d 981 (Cal. App. 1977) (actionable bad faith arises from unwarranted failure to accept reasonable offer)
- Howard v. American National Fire Insurance Co., 187 Cal.App.4th 498 (Cal. App. 2010) (insurer may not rely on coverage disputes to refuse settlement)