Judge: Mark H. Epstein, Case: 23SMCV01063, Date: 2025-04-02 Tentative Ruling

Case Number: 23SMCV01063    Hearing Date: April 2, 2025    Dept: I

This is an interesting case.  Plaintiff was involved in an auto accident.  Defendant Thomas was the driver.  A second defendant was the car’s owner.  There was a $15,000 policy (combined) for the defendants in the case.  The owner and plaintiff settled for $14,999 pursuant to a 998 offer by plaintiff.  Thomas, the remaining defendant, therefore had only $1.00 left in the policy.  Plaintiff’s damages, however, were allegedly very substantial and far, far exceeded the policy limits.  At one point, Thomas offered to settle for $3001.  The $3000 was going to come from his own pocket.  Rather than take the money, plaintiff, who wanted his day in court, offered an unusual agreement.  He would agree to a stipulation in which the case would go to trial, Thomas would admit liability, and Thomas would admit to plaintiff’s alleged actual damages (which were over $400,000).  Thomas was not required to be present or to testify.  Plaintiff, for his part, agreed that the court could and would, on post judgment order, reduce the judgment to $3001 plus any recoverable fees and costs to the extent that such fees and costs were recoverable under the policy.  In other words, according to plaintiff, plaintiff would settle without going above the policy limits except for the $3000 that Thomas had already agreed to pay, and plaintiff would not seek more than the policy provided from the carrier.  The alternative, according to Thomas’s counsel, was that Thomas was going to declare bankruptcy.  Thomas, presumably with the carrier’s agreement (although plaintiff suggests that Thomas might not have agreed), did not accept the offer and instead filed for bankruptcy protection.  This suit was listed as a debt and plaintiff got notice of it.  Plaintiff never appeared in the bankruptcy proceedings, and in the interim, the instant case was stayed.  It seems that at one point, plaintiff offered to forego the $3000 but there was still no deal.  Eventually, Thomas received a discharge in bankruptcy and now seeks to dismiss the instant action.  (The carrier tendered the remaining $1.00 in the policy, but plaintiff will not accept it.)  

Plaintiff’s theory is that the policy is now “open” due to the carrier’s improper refusal to accept the proposed settlement.  Because of that, plaintiff insists, he can sue Thomas so long as he agrees to limit the recovery to the carrier.  Plaintiff wants a trial date.

The court must agree with defendant here.  Had plaintiff offered to settle within policy limits and without conditions and had the carrier refused, that would be one thing.  But plaintiff’s offer had strings.  Thomas had to admit to liability—something typically not done in a settlement.  Thomas, or at least the carrier, would be liable for fees and costs—again something not typical in a settlement, but worse, the costs at least would increase by virtue of the trial.  After all, there would be jury fees, potentially a reporter’s fee, and other costs associated with even a relatively short trial.  Thomas was under no obligation to accept a “settlement” like that, and neither was the carrier.  Indeed, it was not really a settlement at all.

Defendant believes that plaintiff is acting in bad faith.  The court is not so sure.  His client wants his day in court and counsel was trying to get it for him.  Frankly, there was nothing in it for plaintiff’s counsel at the stipulation stage.  The court is not aware of any theory under which plaintiff could have recovered attorneys’ fees here, and there would be time associated with the trial.  The court’s take is that counsel was acting to try and achieve what his client wanted.  He was offering something in return—an avenue by which Thomas could avoid bankruptcy.  It might have been an advantageous deal for both parties, but neither Thomas nor the carrier was under any obligation to accept it.  (And there is no evidence that the carrier was acting without Thomas’s approval.)

There is a second problem.  While the court understands plaintiff wanting to have his day in court, sometimes litigants just don’t get that day.  A defendant can always moot out a trial by agreeing to pay the amount of the prayer without condition.  Courts are here to resolve disputes—real ones.  We don’t force a defendant to try a case just for the sake of trying it.  So here.  And there are other considerations.  Plaintiff wanted to empanel a jury—at $15.00 per day per juror—to take up their time to hear a case where the judgment had already been agreed upon.  Plaintiff wanted to take up the court’s time as well.  To be honest, had Thomas agreed to the deal, the court would have rejected it.  It is one thing to agree on a high-low stipulation and try the case; it is another to agree on the judgment ahead of time so that a party can engage in a show trial.  And had the court not been aware of the stipulation before-hand, there would have been heck to pay after.

The court also doubts that plaintiff can pursue the remedy he seeks.  Plaintiff claims that he can get a large judgment because the policy is open, so that the exception to a bankruptcy discharge—that a plaintiff can still sue to recover under the policy—applies.  But that is not quite true.  Thomas has a discharge, and a bad faith action can only be brought by Thomas; plaintiff cannot bring it.  Accordingly, the court does not believe that a jury or the court could award damages in excess of $1.00 to plaintiff even if he wins.  Because the full amount of any potential judgment has been tendered without strings, the case is moot at best.  (While the court will not go into it in detail, the theory for opening the policy is that the carrier is playing with the insured’s money.  Because the purpose of insurance is to avoid precisely that, where the carrier rejects a demand within policy limits the carrier may be liable for whatever the judgment winds up being because that is necessary to protect the insured.  Due to the discharge, Thomas needs no protection.)

In sum, the court will give plaintiff points for creativity and thinking outside the box.  But the end result is that defendant Thomas has received a bankruptcy discharge, and the case is over.  The matter is DISMISSED.