Judge: Peter A. Hernandez, Case: 23STCV28184, Date: 2025-02-10 Tentative Ruling

Case Number: 23STCV28184    Hearing Date: February 10, 2025    Dept: 34

S.K.C. Holding Co., Inc., et al. v. Rockingham Insurance Company, et al. (23STCV28184)

Defendant Rockingham Insurance Company’s Motion for Determination of Good Faith Settlement is GRANTED.

Background

            On November 16, 2023, Plaintiffs S.K.C. Holding Co., Inc. and Sue Choi (“Plaintiffs”) filed a complaint against Defendants Rockingham Insurance Company and IBE Insurance Marketing Inc. (“Defendants”) arising from an insurance contract between the parties alleging causes of action for:

1.     Declaratory Relief;

2.     Breach of Written Contract;

3.     Breach of Implied Covenant of Good Faith and Fair Dealing;

4.     Failure to Comply with Insurance Laws (Bad Faith Insurance Claim);

5.     Fraud;

6.     Negligence; and

7.     Violations of Business and Professions Code Sections 17200 Et Seq.

7.

On January 24, 2024, Defendant IBE Insurance Marketing Inc. filed an answer to Plaintiffs’ complaint.

On January 9, 2025, Defendant Rockingham Insurance Company (“Rockingham”) filed this Motion for Determination of Good Faith Settlement. On January 28, 2025, Defendant IBE Insurance Marketing Inc. (“IBE”) filed an opposition. On February 3, 2025, Rockingham filed a reply.

Legal Standard

“Any party to an action in which it is alleged that two or more parties are joint tortfeasors or co-obligors on a contract debt shall be entitled to a hearing on the issue of the good faith of a settlement entered into by the plaintiff or other claimant and one or more alleged tortfeasors or co-obligors, upon giving notice in the manner provided by subdivision (b) of Section 1005.” (Code Civ. Proc., § 877.6(a)(1).)  

“In the alternative, a settling party may give notice of settlement to all parties and to the court, together with an application for determination of good faith settlement and a proposed order.” (Code Civ. Proc., § 877.6(a)(2).) “The application shall indicate the settling parties, and the basis, terms, and amount of the settlement.” (Ibid.) “The notice, application, and proposed order shall be given by certified mail, return receipt requested, or by personal service.” (Ibid.) “Proof of service shall be filed with the court. Within 25 days of the mailing of the notice, application, and proposed order, or within 20 days of personal service, a nonsettling party may file a notice of motion to contest the good faith settlement.” (Ibid.) “If none of the nonsettling parties files a motion within 25 days of mailing of the notice, application, and proposed order, or within 20 days of personal service, the court may approve the settlement.” (Ibid.)  

“The issue of the good faith of a settlement may be determined by the court on the basis of the affidavits served with the notice of hearing, and any counteraffidavits filed in response, or the court may, in its discretion, receive other evidence at the hearing.” (Code Civ. Proc., § 877.6(b).) “A determination by the court that the settlement was made in good faith shall bar any other joint tortfeasor or co-obligor from any further claims against the settling tortfeasor or co-obligor for equitable comparative contribution, or partial or comparative indemnity, based on comparative negligence or comparative fault.” (Code Civ. Proc., § 877.6(c).) “The party asserting the lack of good faith shall have the burden of proof on that issue.” (Code Civ. Proc., § 877.6(d).)  

When determining whether a settlement was made in good faith, the following factors are considered: (1) a rough approximation of plaintiff’s total recovery and the settlor’s proportionate liability; (2) the amount paid in settlement; (3) the allocation of settlement proceeds among plaintiffs; (4) a recognition that a settlor should pay less in settlement than he would if he were found liable after a trial; (5) the financial conditions and insurance policy limits of settling defendants; and (6) the existence of collusion, fraud, or tortious conduct aimed to injure the interests of the non-settling defendants. (Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal.3d 488, 499.) 

“The ultimate determinant of good faith is whether the settlement is grossly disproportionate to what a reasonable person at the time of settlement would estimate the settlor’s liability to be.” (City of Grand Terrace v. Superior Court (1987) 192 Cal.App.3d 1251, 1262 (citation omitted).) “[A] good faith settlement does not call for perfect or even nearly perfect apportionment of liability.” (Abbott Ford, Inc. v. Superior Court (1987) 43 Cal.3d 858, 875 (internal quotations omitted).) “[O]nly when the good faith nature of a settlement is disputed, it is incumbent upon the trial court to consider and weigh the Tech-Bilt factors.” (City of Grand Terrace, supra, 192 Cal.App.3d 1251, 1261.) “That is to say, when no one objects, the barebones motion which sets forth the ground of good faith, accompanied by a declaration which sets forth a brief background of the case is sufficient.” (Ibid.) 

Discussion

            On February 20, 2023, a rear building in Plaintiffs’ property caught fire giving rise to Plaintiffs’ insurance claim under a policy issued by Rockingham. (Complaint, ¶¶ 3, 18.) On March 16, 2023, Rockingham denied the claim stating that the rear building was not described in the policy and therefore not covered by insurance. (Id., ¶ 19.) As such, Plaintiffs filed this action against Rockingham, as the insurance provider, and IBE, as Plaintiffs’ insurance brokers. (Id., ¶¶ 21-22.)  

            Rockingham moves the court for a determination that a settlement made between Plaintiffs and Rockingham was made in good faith. (Motion, at p. 3.) Pursuant to the settlement agreement reached between the parties, Rockingham is to pay Plaintiffs the total sum of $200,000.00 in return for Plaintiffs dismissing the complaint with prejudice and releasing all claims against Rockingham. (Bobak Decl., ¶¶ 21-23, Exh. A.) Such settlement is conditioned upon the court granting this motion for determination of a good faith settlement and the settling parties agree to a mutual waiver of fees and costs. (Ibid.)

            Rockingham contends that Plaintiffs provided Defendants with a section 998 Offer of Compromise for a total of $420,000.00 split as a demand of $220,000.00 from each defendant which is an indication of Plaintiffs’ evaluation of Rockingham’s proportionate share of liability. (Motion, at p. 9.) Rockingham also argues that its expert determined that the cost to repair the damaged building would be around $200,852.17 if it had been insured. (Ibid.) Moreover, even if insured, Rockingham argues that there would have been an insurance limit of $120,900.00 for the damaged property. (Ibid.) As such, Rockingham contends that there is a complete defense available to Rockingham and, even if found liable, Rockingham is settling for an amount near exact to Plaintiffs’ demand and the approximate cost of repair. (Ibid.)

            In opposition, IBE argues that the proposed settlement fails to meet the Tech-Bilt factors. (Opp., at p. 3.) First, IBE contends that Rockingham bears 80 to 90 percent of the liability to Plaintiffs given its role as the primary insurer in comparison to IBE’s role as an insurance broker. (Id., at pp. 5-7.) As such, IBE argues that allowing Rockingham to settle for $200,000.00 would shift most of the liability onto IBE. (Ibid.) Second, IBE contends that the settlement amount is grossly disproportionate to Plaintiffs’ claimed damages which includes $410,000.00 in repair costs, $18,110.90 in permit costs, $28,500.00 in attorney’s fees and litigation costs, and ongoing lost rental income. (Id., at pp. 7-8.) Third, IBE argues that Rockingham does not provide evidence of financial hardship or policy limits justifying the disproportionately low settlement. (Id., at p. 8.)

            In reply, Rockingham argues that IBE has not met its burden of showing that the settlement agreement lacks good faith. (Reply, at p. 2.) Rockingham contends that the defenses available to them against Plaintiffs’ claims limits Rockingham’s liability and IBE does not provide any contrary authority to those defenses making the settlement amount proportionate to Rockingham's expected liability. (Id., at p. 6.) Rockingham also argues that the settlement amount is not grossly disproportionate to what a reasonable person would estimate to recover. (Ibid.) Lastly, Rockingham contends that the Tech-Bilt factors do not require Rockingham to provide evidence of financial hardship for a court to find the settlement was made in good faith. (Id., at p. 9.)

            After consideration, the court finds that IBE has failed to show that the settling parties have not complied with the Tech-Bilt factors. The court analyzes each factor separately.  

1.     A Rough Approximation of Plaintiffs’ Total Recovery and the Settlors’ Proportionate Liability  

            The first Tech-Bilt factor consists of two parts – a rough approximation of Plaintiffs’ total recovery and the settlors’ proportionate liability. When approximating a plaintiff’s total recovery or the settling defendant’s proportionate liability, “judges should . . . not yearn for the unreal goal of mathematical certainty. Because the application of section 877.6 requires an educated guess as to what may occur should the case go to trial, all that can be expected is an estimate, not a definitive conclusion.” (North County Contractor’s Assn. v. Touchstone Ins. Services (1994) 27 Cal.App.4th 1085, 1090.)

            Additionally, “a court not only looks at the alleged tortfeasor’s liability to the plaintiff, but it must also consider the culpability of the tortfeasor vis-a`-vis other parties alleged to be responsible for the same injury. Potential liability for indemnity to a nonsettling defendant is an important consideration for the trial court in determining whether to approve a settlement by an alleged tortfeasor. [Citation.]” (TSI Seismic Tenant Space, Inc. v. Superior Court (2007) 149 Cal.App.4th 159, 166.)  

            Here, IBE does not provide arguments addressing Rockingham’s defenses against liability from Plaintiffs’ claims. Specifically, Rockingham provides expert opinion that Rockingham has no liability for Plaintiffs’ damage because the rear building was not listed on Plaintiffs’ application or in the insurance policy. Additionally, that expert testimony provides that the estimated cost to repair the property is nearly the same as the settlement amount. As such, IBE fails to show that this factor is not met.  

2.     The Amount Paid in Settlement  

            ‘“[A] defendant’s settlement figure must not be grossly disproportionate to what a reasonable person, at the time of the settlement, would estimate the defendant’s liability to be.’ [Citation.]” (Tech-Bilt, supra, 38 Cal.3d at p. 499.) However, even though “an offer of settlement must bear some relationship to one’s proportionate liability, bad faith is not ‘established by a showing that a settling defendant paid less than his theoretical proportionate or fair share.’ [Citation.]” (North County, supra, 27 Cal.App.4th at p.1090.) “Such a rule would unduly discourage settlements” and “convert the pretrial settlement approval procedure into a full-scale mini-trial.” (Tech-Bilt, supra, 38 Cal.3d at p. 499.) Rather, in order to meet the proportionality requirement, “all that is necessary is that there be a ‘rough approximation’ between a settling tortfeasor’s offer of settlement and his proportionate liability. [Citation.]” (North County, supra, 27 Cal.App.4th at pp. 1090–1091.) In determining whether the settling defendant’s settlement figure is “within the ballpark” of his fair share of liability, the Court may rely on “the judge’s personal experience” and the experience of “experts in the field.” (Tech-Bilt, supra, 38 Cal.3d at p. 500.)  

            The total amount of the settlement reached between Plaintiffs and Rockingham is $200,000.00 in return for Plaintiffs dismissing Rockingham from the complaint. The court finds that IBE fails to meet its burden to show the settlement amount is so far out of the ballpark that it is not in good faith.  

3.     The Allocation of Settlement Proceeds Among Plaintiffs  

            Where defendants are potentially liable for separate injuries, or a “sliding scale” settlement is involved, the settling parties must include in their agreement a joint allocation or valuation of the amount of the offset. (Alcal Roofing & Insulation v. Superior Court (Sears) (1992) 8 Cal.App.4th 1121, 1124.)  

            Such allocation is essential to a “good faith” determination because without it there is no way to compute the set-off to which the nonsettling defendants will be entitled against whatever judgment is rendered against them. (L.C. Rudd & Son, Inc. v. Superior Court (1997) 52 Cal.4th 742, 750 [allocation required where each defendant was potentially liable for different areas of damage in construction defect case].)  

            Such allocation is required both in partial settlements where plaintiff intends to pursue claims against nonsettling tortfeasors, and in a complete settlement of plaintiff's claim where the settling defendant intends to pursue the nonsettling defendants for contribution. Absent such allocations, the trial court, after trial against the nonsettling defendants, must allocate “in the manner which is most advantageous to the nonsettling defendants.” (Dillingham Const. N.A., Inc. v. Nadel Partnership, Inc. (1998) 64 Cal.App.4th 264, 288.)  

            Here, Rockingham contends that it had no role in the allocation of settlement among and between Plaintiffs. The court notes that Plaintiff Sue Choi is the sole owner of Plaintiff S.K.C. Holding Co., Inc. As such, the settling parties did not need to provide an allocation of the settlement proceeds.

4.     A Recognition that a Settlor Should Pay Less Than if Found Liable at Trial  

            The court expressly recognizes that a settlor should pay less in settlement that he would if he were found liable after trial. This factor supports a determination of good faith. (Cahill, supra, 194 Cal.App.4th at p. 968.)  

5.     The Financial Conditions and Insurance Policy Limits of Settling Defendants  

            An exception to the proportionality requirement described above is that “a disproportionately low settlement figure is often reasonable” when the settling defendant is “relatively insolvent” and uninsured or underinsured. (Tech-Bilt, supra, 38 Cal.3d at p. 499; see Schmid v. Superior Court (1988) 205 Cal.App.3d 1244, 1245–6 [holding that “a settlement of a personal injury lawsuit is in ‘good faith[]’ . . . where a defendant pays the plaintiff the limit of the defendant’s insurance policy and has no assets, even though the amount paid in settlement is far less than the likely amount of a judgement against the defendant were the case to go to trial”]; see also County of Los Angeles v. Guerrero (1989) 209 Cal.App.3d 1149, 1157–8 [finding that the settling defendant’s “modest” financial condition and insurance limits “are necessarily controlling and effectively override the other Tech-Bilt factors”].)  

            Here, IBE has failed to show that the settlement amount was disproportionately low; therefore, the lack of evidence of Rockingham’s financial information and insurance policy limits does not weigh against a good faith determination.  

6.     The Existence of Collusion, Fraud, or Tortious Conduct Aimed to Injure the Interests of the Non-Settling Defendants  

            “Any negotiated settlement involves cooperation, but not necessarily collusion. It becomes collusive when it is aimed to injure the interests of an absent tortfeasor. Although many kinds of collusive injury are possible, the most obvious and frequent is that created by an unreasonably cheap settlement.” (River Garden Farms, Inc. v. Superior Court (1972) 26 Cal.App.3d 986, 996.)  “Prevention of collusion is but a means to the end of preventing unreasonably low settlements which prejudice a nonparticipating tortfeasor. The price of a settlement is the prime badge of its good or bad faith. Construed in the light of [section 877.6’s] objectives, the good faith release clause extends the obligation of good faith beyond the parties to the negotiations, embracing an absent tortfeasor.” (Ibid.)  

            Rockingham contends that the settlement was not entered into for any improper reason and there is no collusion, fraud or other tortious conduct. (Motion, at p. 11.) IBE does not provide any evidence to support collusion, fraud or tortious conduct. Therefore, this factor supports a good faith determination.  

Conclusion

Defendant Rockingham Insurance Company’s Motion for Determination of Good Faith Settlement is GRANTED.