Barickman v. Mercury Casualty Co. CA2/7

Filed 7/25/16 Barickman v. Mercury Casualty Co. CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

LAURA BETH BARICKMAN et al., B260833

Plaintiffs and Respondents, (Los Angeles County
Super. Ct. No. BC504911)
v.

MERCURY CASUALTY COMPANY,

Defendant and Appellant.

APPEAL from a judgment of the Superior Court of Los Angeles County, Judge
Susan Bryant-Deason. Affirmed.
Hager & Dowling, Christine W. Chambers, John V. Hager and Thomas J.
Dowling for Defendant and Appellant.
The Yarnall Firm and Delores A. Yarnall; Dewitt Algorri & Algorri and Mark S.
Algorri for Plaintiffs and Respondents.
_______________________
 Timory McDaniel, driving while intoxicated in a car insured by Mercury Casualty
Company, ran a red light, struck and seriously injured Laura Beth Barickman and
Shannon Mcinteer, who were in a crosswalk with the walk signal in their favor.
1
Barickman and Mcinteer agreed to settle their claims against Timory for her insurance
coverage limits, $15,000 each; but Mercury would not agree to additional language
inserted by Barickman and Mcinteer’s lawyer in Mercury’s form release of all claims:
“This does not include court-ordered restitution.” After Barickman and Mcinteer sued
Timory and settled the case with a stipulated judgment for $3 million, Timory assigned
her rights against Mercury to Barickman and Mcinteer, who filed this action for breach of
contract and breach of the implied covenant of good faith and fair dealing. Following a
trial by reference, judgment was entered in favor of Barickman and Mcinteer for
$3 million plus interest from the date of judgment in the personal injury action.
We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
1. The Accident and Claim Processing
During the early morning hours on July 11, 2010, Timory entered the intersection
of Pacific Coast Highway and East Second Street in Long Beach against a red light and
struck Barickman and Mcinteer with her sports utility vehicle while they were in a
crosswalk. Timory fled the scene, but was apprehended shortly thereafter. It was
determined Timory was driving under the influence of alcohol. The incident was
witnessed by several individuals, who gave statements to the police.
The day after the incident Timory informed Mercury she had been in an accident,
but, on advice of counsel, did not provide any additional information. On August 4, 2010
Mark Algorri, counsel for Barickman and Mcinteer, sent Mercury a letter describing their
extensive injuries and enclosing a copy of the police report.

1 Because Timory McDaniel and her mother, Helen McDaniel, who was authorized
to act on Timory’s behalf while she was incarcerated, share the same name, we refer to
them by their first names for convenience.

2
 On September 1, 2010 Mercury offered Timory’s policy limits of $15,000 per
person to Barickman and Mcinteer. On September 24, 2010 Algorri requested Timory
complete a statement of assets to assist his clients in determining whether to accept
Mercury’s offer in satisfaction of all civil claims. During the following months Algorri
and Oliver Chang, the Mercury field representative responsible for processing the claim,
exchanged correspondence about the statement of assets.
In late October 2010 Timory was sentenced to three years in state prison and
ordered to pay approximately $165,000 in restitution. In mid-December 2010 Algorri
informed Mercury that Barickman and Mcinteer accepted the policy limits offer and
returned signed releases on the form provided by Mercury, but added an explanatory
sentence to Mercury’s recitation of a $15,000 payment: “This does not include court-
2
ordered restitution.” Algorri also demanded as a condition of settlement that payment be
made within five days of delivery of the executed releases.
For the next several weeks Mercury considered whether it would agree to the
additional language inserted by Algorri, requesting and receiving extensions of time to
respond. As part of its review process, Mercury consulted with Timory’s mother, Helen,
as well as Timory’s criminal defense attorney, Bruce McGregor. Additionally, Chang
spoke to Algorri to determine whether the proposed language was intended only to ensure
the release did not waive Barickman and Mcinteer’s right to the restitution award or also
to preclude offset against the restitution award by the amount of the insurance settlement.
As reflected in a note written by Chang memorializing a December 23, 2010
conversation, “[Algorri] just says he doesn’t want this settlement to stop his client[s]

2 In substantially identical letters Algorri wrote Chang confirming that Barickman
and Mcinteer had each “settled her case against your insured Timory J. McDaniel for her
policy limits of $15,000 (excluding court-ordered restitution) . . . .” The letters enclosed
the form releases provided by Mercury, signed by each of Algorri’s clients, with asterisks
next to the recitation of the “payment of $15,000,” with the typed explanation, “THIS
DOES NOT INCLUDE COURT-ORDERED RESTITUTION.” The printed release on
Mercury’s form covered “all claims, demands, actions, causes of action, known or
unknown, suspected or unsuspected relating to the referenced incident and matters” and
included a waiver of the provisions of Civil Code section 1542.

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from receiving restitution[.] [¶] Asked if this settlement w/[Mercury] would
impact/offset any restitution settlement and he says he is not sure[.] [¶] He hasn’t
handled restitution for quite some time and can’t answer us right now[.] [¶] He says he
doesn’t believe that is the case but he can’t be sure of it[.] [¶] Advised we will provide
to him a response by 1/7/2011[.]” A note by Chang of a January 6, 2011 conversation
states, “[Algorri] confirms that his clients want 100 percent restitution on top of the 15K
[policy limit] offers for settlement [Mercury] is offering. . . . He says that his clients are
firm on this and won’t reconsider anything less.”
On January 7, 2011, the final deadline to respond imposed by Algorri, Chang
informed him Mercury required a further extension because it did not have “an official
response” from McGregor. Algorri responded, “As you know Mercury has dilly dallied
for months in concluding a settlement, even though they have had full power, authority,
obligation and opportunity to do so from the outset. [¶] Hence, there is no settlement of
this case and my clients are now forced to file suit, effective immediately, to pursue fair
and reasonable compensation for their devastating losses.”
On January 10, 2011 Chang advised Algorri that McGregor had instructed
Mercury not to accept the revised releases and asked Algorri to reconsider whether the
3
matter could be settled without the added language. Although it is not apparent from the
record what precipitated Algorri’s next letter to Chang or whether he was addressing a
specific conversation, on January 11, 2011 Algorri wrote, “Just to make my point clear
Mercury has intentionally mischaracterized my added language. The added language
simply eliminates any argument that the Court’s restitution order is wiped out by the

3 In a January 14, 2011 letter to Mercury, McGregor explained the reason he did not
approve the language: “[W]e would object to any clause in the release of [Timory’s]
policy limits to the plaintiffs which waives her legal right to offset those payments
against any criminal court ordered restitution. We believe that the current law specifies
that if Ms. McDaniel personally paid insurance premiums [then] she is entitled under law
to offset any payments in regards to any criminal restitution order.” McGregor attached
to his letter a decision from this court filed December 13, 2010, People v. Vasquez (2010)
190 Cal.App.4th 1126.

4
release. Your characterization that Mercury’s payments would not . . . act as a credit on
what your insured owes under the restitution order is not only false but, as you
undoubtedly know, would violate Cal. Law under [People v. Bernal (2002)
101 Cal.App.4th 155].”
2. The Personal Injury Action; the Continuing Dispute Regarding the Additional
Language
On January 13, 2011 Barickman and Mcinteer sued Timory for personal injuries.
For the next several weeks Chang and Algorri exchanged letters disputing what had led to
the impasse. For example, in a January 25, 2011 letter Algorri wrote, “To reiterate my
past discussions with you, my clients never objected to a Mercury payment set off against
the court ordered restitution and axiomatically, they never requested that your insured
waive any set off. Indeed, I told you early on that case law specifically allowed your
insured a set off, and I gave you the case citation. I again clarified this position to you in
my letter of January 11, 2011. Also, the language my client[s] added to the release
simply clarified their rights of restitution – that there could be no later dispute or
subsequent contrary argument made by your insured.” Mercury appointed the law firm
of Ghormley & Associates to represent Timory in the personal injury lawsuit.
Although Helen had informed Chang on February 4, 2011 that Algorri’s proposed
“vague and confusing language” was not acceptable, on February 24, 2011 she advised
Chang that she and McGregor had met with the restitution paralegal assigned to Timory’s
case and had learned the language “would not and could not impact the insurance money
offsetting the restitution. [¶] Therefore, with Timory’s agreement, and acting as her
Attorney in Fact, I am instructing Mercury Insurance to Pay the policy limits of
$15,000.00 to each of the claimants at the earliest possible date, despite any pending civil
action.”
On March 8, 2011 Scott Ghormley spoke to Algorri about the dispute regarding
the proposed language. Notwithstanding that Helen had advised Mercury she no longer
objected to the modified release and had instructed Mercury to pay Barickman and
Mcinteer as soon as possible, in a letter written that day Ghormley offered to draft

5
language making clear Algorri’s intent that his clients’ right to restitution be protected
with no waiver of any offset rights so the matter could be settled. Algorri, however,
chose to proceed with the personal injury lawsuit that had been filed the previous month.
Additionally, notes made in Mercury’s online claims processing database on March 29
and April 1, 2011 indicate Mercury was still attempting to persuade Barickman and
Mcinteer to sign the unedited releases.
In August 2012 the personal injury action was settled with a stipulated judgment
in favor of Mcinteer against Timory for $2.2 million and in favor of Barickman against
Timory for $800,000. Timory assigned her rights against Mercury to Barickman and
Mcinteer in exchange for their agreement not to attempt to collect the judgment against
her. Mercury paid each woman the $15,000-per-person policy limits.
3. The Bad Faith Action
On April 4, 2013 Barickman and Mcinteer filed the instant action asserting claims
for breach of contract and breach of the implied covenant of good faith and fair dealing.
The complaint alleged Timory’s liability for the catastrophic injuries caused to
Barickman and Mcinteer was virtually certain, as was the likelihood that their damages
would result in judgments against Mercury’s insured well in excess of the
$15,000/$30,000 policy limits. As a result, Mercury’s failure to make an offer without
unacceptable terms and conditions, its refusal to settle the case at policy limits when it
had the opportunity to do so, and its unwillingness to make efforts to reach a reasonable
settlement constituted a breach of its obligation of good faith and fair dealing, exposing
Timory to excess damages.
On May 13, 2014 the parties agreed to a trial by reference of all issues of fact and
law pursuant to Code of Civil Procedure section 638; the Honorable Robert Feinerman
(retired) was appointed as referee. The parties stipulated that Justice Feinerman’s
statement of decision would be entered as a judgment as though the case had been tried to
the court pursuant to Code of Civil Procedure section 644, subdivision (a).
After a bench trial, which included testimony from Chang, Algorri and claims-
handling experts for both sides, the referee found Mercury had breached the covenant of

6
good faith and fair dealing by refusing to accept the releases with the language added by
Algorri. Resolving Chang and Algorri’s conflicting testimony and the documentary
evidence regarding Algorri’s intent, the referee found, “In December 2010 Mercury
asked Algorri for a clarification of his intent in adding the additional language to the
release. Algorri told them that he was just interested in preserving his client[s’]
restitution rights and was not seeking to affect McDaniel’s rights to an offset for the
amounts paid by Mercury against the restitution ordered by the criminal court. Algorri
reconfirmed his position in writing in January of 2011 in letters he sent to Mercury.
Despite these assurances from Algorri, Mercury refused to go forward with the
settlements without an unedited release.”
The referee further explained, based upon the totality of the evidence, the language
did not constitute a nonacceptance of the policy limits and was essentially superfluous:
“It was unnecessary for [Algorri] to put it in the release, because the law was clear that a
release in a civil case would not release a defendant in a criminal case from a restitution
order made by a criminal court. The language added was not vague or ambiguous. It
only dealt with the Plaintiffs’ legal right to receive restitution. It did not refer to the
insured’s right to offset the money paid by the insurer against the restitution ordered by
the criminal court. Mercury’s contention that the language added to the release ‘did not
protect the insured against a waiver of her right to restitution offset’ has no merit.” With
respect to Helen’s, Timory’s and McGregor’s objection to the language, the court found,
“[T]he law is clear that an insured does not have a right to object to a settlement within
the policy limits of an automobile liability policy.” The referee awarded Barickman and
Mcinteer damages in the amounts of the judgment in the underlying case ($2.2 million
for Mcinteer; $800,000 for Barickman) plus 10 percent interest from the date of the
August 31, 2012 judgment and costs of suit. The superior court entered judgment based
on the statement of decision on November 14, 2014.

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 DISCUSSION
1. Standard of Review
Code of Civil Procedure section 638, subdivision (a), provides that a referee may
be appointed by agreement of the parties to “hear and determine any or all of the issues in
an action or proceeding, whether of fact or of law, and to report a statement of decision.”
The judgment based on a statement of decision following a consensual general reference,
as here, is treated as if the action had been tried by the court (Code Civ. Proc., § 644,
subd. (a)) and is reviewed on appeal using the same rules that apply to a trial court’s
decision following a bench trial. (Central Valley General Hospital v. Smith (2008)
162 Cal.App.4th 501, 513.) “‘“In general, in reviewing a judgment based upon a
statement of decision following a bench trial, ‘any conflict in the evidence or reasonable
inferences to be drawn from the facts will be resolved in support of the determination of
the trial court decision. [Citations.]’ [Citation.] In a substantial evidence challenge to a
judgment, the appellate court will ‘consider all of the evidence in the light most favorable
to the prevailing party, giving it the benefit of every reasonable inference, and resolving
conflicts in support of the [findings]. [Citations.]’ [Citation.] We may not reweigh the
evidence and are bound by the trial court’s credibility determinations. [Citations.]
Moreover, findings of fact are liberally construed to support the judgment.”’” (Tribeca
Companies, LLC v. First American Title Ins. Co. (2015) 239 Cal.App.4th 1088, 1102;
accord, Cuiellette v. City of Los Angeles (2011) 194 Cal.App.4th 757, 765.)
2. Governing Legal Principles
a. The covenant of good faith and fair dealing
“In each policy of liability insurance, California law implies a covenant of good
faith and fair dealing. This implied covenant obligates the insurance company, among
other things, to make reasonable efforts to settle a third party’s lawsuit against the
insured. If the insurer breaches the implied covenant by unreasonably refusing to settle
the third party suit, the insured may sue the insurer in tort to recover damages
proximately caused by the insurer’s breach.” (PPG Industries, Inc. v. Transamerica Ins.
Co. (1999) 20 Cal.4th 310, 312; see id. at pp. 314-315 [“covenant imposes a number of

8
obligations upon insurance companies, including an obligation to accept a reasonable
offer of settlement”].) “The duty to settle is implied in law to protect the insured from
exposure to liability in excess of coverage as a result of the insurer’s gamble—on which
only the insured might lose. (Murphy v. Allstate Ins. Co. (1976) 17 Cal.3d 937, 941.)
Thus, “the insurer must settle within policy limits when there is substantial likelihood of
recovery in excess of those limits.” (Ibid.; see Isaacson v. California Ins. Guarantee
Assn. (1988) 44 Cal.3d 775, 792, fn. 12 [“reasonableness of a settlement offer is to be
evaluated by considering whether, in light of the victim’s injuries and the probable
liability of the insured, the ultimate judgment is likely to exceed the amount of the
settlement offer”].)
“[A]n insurer, who . . . refuses to accept a reasonable settlement within the policy
limits in violation of its duty to consider in good faith the interest of the insured in
the settlement, is liable for the entire judgment against the insured even if it exceeds the
policy limits.” (Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 661;
accord, Coe v. State Farm Mut. Auto Ins. Co. (1977) 66 Cal.App.3d 981, 989.)
b. Restitution
A victim is entitled to restitution for economic losses incurred as a result of the
commission of a crime from the defendant convicted of that crime. (Pen. Code,
§ 1202.4.) In addition to compensating the victim, a restitution order is intended to
rehabilitate a defendant and deter crime. (People v. Vasquez (2010) 190 Cal.App.4th
1126, 1133 (Vasquez).)
“An order of restitution pursuant to [Penal Code] section 1202.4 does not preclude
the crime victim from pursuing a separate civil action based on the same facts from
which the criminal conviction arose.” (Vasquez, supra, 190 Cal.App.4th at p. 1132.) A
restitution order reimburses the crime victim for only economic losses; noneconomic
losses, such as pain and suffering, are recoverable in a civil action. (Ibid.) “Because of
the separate interests at stake and different purposes served by a restitution order and a
civil action for damages by the crime victim, as well as the different categories of
damages recoverable in the two proceedings, the settlement of a civil action and release

9
of the defendant by the crime victim does not discharge the defendant’s responsibility to
satisfy the restitution order: ‘Even when a victim obtains a settlement from a company
that insured the defendant for civil liability, the court in a criminal action may order the
defendant to pay victim restitution. This is so because the victim “might rationally
choose to accept an insurance settlement for substantially less than his or her losses rather
than risk the uncertain . . . possibility that the defendant will pay the entire restitution
amount” [citation], and the “victim’s willingness to accept the [insurance settlement] in
full satisfaction for all civil liability, . . . does not reflect the willingness of the People to
accept that sum in satisfaction of the defendant’s rehabilitative and deterrent debt to
society.”’” (Id. at p. 1133, fn. omitted.)
Although payments received by a crime victim from the victim’s insurance
company or from an independent third party such as Medicare for economic losses
suffered as a result of the defendant’s criminal conduct cannot reduce the amount of
restitution the defendant owes, the defendant is entitled to an offset to the extent those
payments are from his or her own insurance for items of loss included in the restitution
order. (Vasquez, supra, 190 Cal.App.4th at pp. 1133-1134; see People v. Bernal (2002)
101 Cal.App.4th 155, 167-168.) “‘The defendant’s own insurance company is different
than other sources of victim reimbursement, in that (1) the defendant procured the
insurance, and unlike the other third party sources, its payments to the victim are not
fortuitous but precisely what the defendant bargained for; (2) the defendant paid
premiums to maintain the policy in force; (3) the defendant has a contractual right to have
the payments made by his insurance company to the victim, on his behalf; and (4) the
defendant’s insurance company has no right of indemnity or subrogation against the
defendant. In sum, the relationship between the defendant and its insurer is that
payments by the insurer to the victim are ‘directly from the defendant.’” (Vasquez, at
p. 1134; accord Bernal, at pp. 167-168.)

10
 3. Substantial Evidence Supports the Finding Mercury Unreasonably Refused To
4
Accept the Modified Release
a. The offering of the policy limits was not sufficient in and of itself to
defeat a bad faith claim as a matter of law
Relying primarily on language from Graciano v. Mercury General Corp. (2014)
231 Cal.App.4th 414 (Graciano), Mercury contends it acted in good faith as a matter of
law because it timely (nine weeks after the accident) offered Timory’s policy limits to
Barickman and Mcinteer. According to Mercury, the only reason the case did not settle
was Algorri’s insistence on the unacceptable additional language he had drafted, not its
failure to offer Timory’s policy limits.
Mercury reads far too much into the holding and analysis in Graciano. In that
case Sonia Graciano had been injured after she was struck by a car driven by the
defendant’s insured. Less than three weeks after Graciano’s attorney contacted the
insurance company, misidentifying the driver, the applicable policy number and the date
of the accident, the insurance company completed its investigation, identified the correct
insured and policy number and offered the full policy limits to Graciano. That offer was
made within the 10-day time limit specified in a policy limits demand letter sent by
Graciano’s attorney that continued to misidentify the driver and referred to an expired
insurance policy. Graciano did not accept the offer and instead pursued her previously
filed action against the driver. Graciano obtained a judgment in excess of $2 million and
received an assignment of the driver’s rights against his insurer. Graciano then sued the
insurance company for wrongful failure to settle. The complaint alleged the insurance

4 Barickman and Mcinteer argue Mercury’s challenge to the sufficiency of the
evidence should be deemed forfeited because it failed to submit an adequate record on
appeal. We agree the record is deficient—Mercury failed to include key documents
including Algorri’s January 11, 2011 letter to Chang. Mercury’s argument the record is
adequate because it includes the evidence Mercury contends is insufficient (as opposed to
all the evidence bearing on the issues) borders on frivolous (see Cal. Rules of Court,
rule 8.124(b)(1)(B) [appendix must contain trial exhibits “the appellant should reasonably
assume the respondent will rely on”]). Nevertheless, we reach the merits because
Barickman and Mcinteer have filed a respondents’ record that permits our review of the
issues.

11
company “could have and should have earlier discovered the facts, and should have made
the full policy limits offer more quickly.” (Graciano, supra, 231 Cal.App.4th at pp. 418-
419.)
The Court of Appeal reversed, holding there was no substantial evidence the
insurance company had unreasonably rejected an offer to settle the driver’s liability
because the only demand letter from Graciano’s attorney identified a different driver and
a different, expired insurance policy. (Graciano, supra, 231 Cal.App.4th at pp. 427-428.)
The court also held there was no substantial evidence the insurance company had
unreasonably failed to accept an otherwise reasonable offer within the time specified for
acceptance. The court explained, “A claim for bad faith based on an alleged wrongful
refusal to settle also requires proof the insurer unreasonably failed to accept an otherwise
reasonable offer within the time specified by the third party for acceptance. [Citation.]
However, when a liability insurer timely tenders its ‘full policy limits’ in an attempt to
effectuate a reasonable settlement of its insured’s liability, the insurer has acted in good
faith as a matter of law [citations] because ‘by offering the policy limits in exchange for a
release, the insurer has done all within its power to effect a settlement.’” (Id. at p. 426.)
Mercury relies on the Graciano court’s assessment that the insurer in that case had
acted in good faith as a matter of law (that is, that no substantial evidence supported a
conclusion it had acted in bad faith) to assert that it, too, acted in good faith as a matter of
law. However, that argument ignores the fundamental principle, articulated in Graciano
and other cases, that, “[w]hen a claim is based on the insurer’s bad faith, . . . the ultimate
test is whether the insurer’s conduct was unreasonable under all of the circumstances.”
(Graciano, supra, 231 Cal.App.4th at p. 427; accord, Bosetti v. United States Life Ins.
Co. in City of New York (2009) 175 Cal.App.4th 1208, 1237 [“[i]f an insurer is to avoid
liability for bad faith, its actions and positions with respect to the claim of an insured, and
the delay or denial of policy benefits, must be ‘founded on a basis that is reasonable
under all the circumstances’”]; see Shade Foods, Inc. v. Innovative Products Sales &
Marketing, Inc. (2000) 78 Cal.App.4th 847, 888 [“[o]rdinarily, the question whether the
insurer has acted unreasonably in responding to a settlement offer is a question of fact to

12
be determined by the jury”]; see also Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th
713, 724, fn. 7.) In Graciano there were no other circumstances that raised a question of
the insurer’s good faith either before or after it tendered the full policy limits. As the
appellate court held, the evidence was undisputed that the insurer did “‘all within its
5
power to effect a settlement.’” (Graciano, at p. 435.)
In the case at bar, in contrast, although Mercury did initially act in good faith by
offering Timory’s policy limits—the minimum $15,000/$30,000 bodily injury liability
coverage required by California law (Veh. Code, §§ 16050, 16056, subd. (a))—in
exchange for a general release of all claims, there were disputed facts, including
significant issues of credibility, as to whether Mercury did all within its power to effect a
settlement once Barickman and Mcinteer accepted that offer but proposed a slightly
modified version of the accompanying release. Here, as is true in many bad faith cases,
the reasonableness of the insurer’s claims-handling conduct was a question of fact to be
resolved following a trial. (See Lee v. Fidelity National Title Ins. Co. (2010)
188 Cal.App.4th 583, 599; McCoy v. Progressive West Ins. Co. (2009) 171 Cal.App.4th
785, 794; see also Crisci v. Security Ins. Co. (1967) 66 Cal.2d 425, 430 [“liability based
on an implied covenant exists whenever the insurer refuses to settle in an appropriate case
and that liability may exist when the insurer unwarrantedly refuses an offered settlement
where the most reasonable manner of disposing of the claim is by accepting the
settlement”].) Mercury’s contrary position, if accepted, would mean an insurer that at

5 In support of its holding the Graciano court cited State Farm Mut. Auto. Ins. Co.
v. Crane (1990) 217 Cal.App.3d 1127, 1136, in which the Court of Appeal held only that
“in the present context” the insurer had acted in good faith as a matter of law by making a
timely policy limits settlement offer, rejecting the argument it was bad faith not to
evaluate the likelihood of success of its settlement offer. And the Graciano court quoted
Lehto v. Allstate Ins. Co. (1994) 31 Cal.App.4th 60, 73, in which the appellate court
rejected the argument the insurer should have attempted to settle the case without
obtaining a full set of releases from the injured parties, holding that, “by offering the
policy limits in exchange for a release, the insurer has done all within its power to effect a
settlement.” Neither case stands for the proposition asserted by Mercury that, regardless
of any other circumstances, a timely policy limits settlement offer insulates an insurer
from a claim of bad faith.

13
one point acted in good faith during settlement negotiations has fully discharged its
obligations under the implied covenant and has no further responsibility to make
reasonable efforts to settle a third party’s lawsuit against its insured. Mercury cites no
authority for that rather remarkable proposition.
b. Substantial evidence supports the referee’s finding that Mercury
unreasonably rejected the policy limits settlement proposed by Algorri
Barickman and Mcinteer each agreed in mid-December 2010 to settle her civil
claims against Timory for $15,000, as offered by Mercury, after their lawyer had finished
his due diligence regarding Timory’s insurance, assets and employment. The only
obstacle to completion of the settlement was the dispute between Algorri and Mercury
over the language of the accompanying release. Mercury contends the addition proposed
by Algorri could have been interpreted as a waiver by Timory of her right to an offset and
it had an obligation to its insured not to jeopardize that right. (See Coe v. State Farm
Mut. Auto Ins. Co., supra, 66 Cal.App.3d at p. 994 [“[b]ad-faith refusal to accept a
settlement offer cannot occur where ‘acceptance’ would itself be bad faith”].) However,
after hearing conflicting testimony from Algorri and Chang regarding their conversations
as to the import of the language added by Algorri—“this does not include court-ordered
restitution”—the referee found, in the portion of his statement of decision quoted above,
that Algorri assured Mercury both orally and in writing that he intended only to preserve
his clients’ basic restitution rights and was not seeking to eliminate Timory’s right to an
offset for the amounts paid by Mercury. In view of that finding, Algorri’s added
language was simply intended to incorporate and make explicit what Vasquez, supra,
190 Cal.App.4th 1126 and People v. Bernal, supra, 101 Cal.App.4th 155 required: A
civil settlement does not eliminate a victim’s right to restitution ordered by the criminal
court, but the defendant is entitled to an offset for any payments to the victim by the
defendant’s insurance carrier for items included within the restitution order. Based on
these foundational findings and Timory’s certain exposure to substantial liability, the
referee could properly conclude that Mercury’s refusal to accept the release as amended
by Algorri or, at least, to present to Barickman and Mcinteer in a timely fashion a revised

14
release that included both Algorri’s language and his explanation of its meaning (for
example, by inserting after Algorri’s addition, “and does not affect the insured’s right to
offset”) was unreasonable. (See Heredia v. Farmers Ins. Exchange (1991)
228 Cal.App.3d 1345, 1360 [insurer’s duty of good faith requires it to explore details of a
settlement offer with a view toward resolving issues that may take the offer outside
policy limits]; cf. Betts v. Allstate Ins. Co. (1984) 154 Cal.App.3d 688, 708 [insurer
should seek clarification rather than simply reject settlement offer it finds ambiguous or
incomplete].)
Instead of accepting the amended release or modifying it to clarify the mutual
intent of the parties, Mercury purported to place the decision whether to settle in the
hands of Timory’s criminal defense lawyer, McGregor, without providing him with the
relevant facts. The referee impliedly found that Chang had neglected to communicate to
McGregor in December that Algorri sought only to preserve his client’s right to seek
criminal restitution rather than to disturb Timory’s offset rights. (See State Bar of
California v. Statile (2008) 168 Cal.App.4th 650, 673 [reviewing court presumes trial
court made all factual findings that support the judgment].) This implied finding is
supported by McGregor’s letter dated January 14, 2011, in which he “object[ed] to any
clause in the release . . . which waives [his client’s] legal right to offset those payments
against any criminal court ordered restitution” and argued that his client was “entitled
under law to offset [those] payments.” Had McGregor been aware of Algorri’s stated
position that he was not seeking to alter Timory’s offset rights, there would have been no
need for such an objection and argument. Instead, a proposed language change to clarify
Algorri’s intent in modifying the release would have sufficed. In view of the referee’s
findings that Algorri clearly conveyed the limited purpose of his proposed language,
there is thus no merit to Mercury’s additional argument that it had to consult with Helen,
as Timory’s legal representative, and Timory’s criminal defense attorney because the
additional language in the release potentially affected Timory’s rights on a matter outside
the policy.

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 In sum, the referee’s finding that Mercury breached its duty of good faith and fair
dealing and that, as a result, it was liable for the amounts of the judgment entered against
its insured, is supported by the evidence presented at trial.
DISPOSITION
The judgment is affirmed. Barickman and Mcinteer are to recover their costs on
appeal.

PERLUSS, P. J.
We concur:

ZELON, J.

BLUMENFELD, J.*

* Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.

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