Trial Court Has No Authority to Sanction Non-Party Insurer
The Court of Appeal for the Second Appellate District, Division Seven, issued an interesting decision this week regarding the importance of insurance adjusters attending mandatory settlement conferences and other court-ordered alternative dispute resolution dates.
Vidrio v. Hernandez 09 C.D.O.S. 4465 concerned a personal injury action by Vidrio against Hernandez (insured by Mercury) arising out of an automobile accident. The matter was mediated without resolution, and Hernandez’s counsel subsequently served Vidrio and another plaintiff with Code of Civil Procedure section 998 offers of $1,000 each.
The court then ordered the parties to participate in a mandatory settlement conference. Local court rules required that an adjuster with “full authority” to settle the case also attend. Mercury complied. However, in response to Vidrio’s offer to settle for $30,000, Hernandez and Mercury refused to increase their offer from the section 998 offers previously served.
The trial judge was incensed, and at a subsequent order to show cause hearing found that Mercury had failed to participate in the mandatory settlement conference in good faith. It sanctioned Mercury $1,500 payable to the court and $357.50 payable to Vidrio’s counsel.
The Court of Appeal overturned the sanctions award. It found that the only authority for the imposition of sanctions against a non-party insurance carrier came from Local Rule 2.30, allowing the court to sanction a party or non-party required to attend a mandatory settlement conference for an unexcused failure to do so. However, the Court of Appeal noted that nothing in that rule or any other applicable statute provided a proper basis for awarding sanctions for the failure to “participate meaningfully in settlement negotiations.” The Court of Appeal observed that “Hernandez filed an appropriate settlement conference statement; her lawyer and Mercury attended the conference and participated in it. While the trial court’s frustration at the parties’ lack of movement is understandable, no more was required.”
