Judge: Stephen P. Pfahler, Case: 22STCV11454, Date: 2025-02-28 Tentative Ruling
Case Number: 22STCV11454 Hearing Date: February 28, 2025 Dept: 68
Dept. 68
Date: 2-28-25 (Specially Set at 1-27-25 FSC)
Case # 22STCV11454
Trial Date: 4-7-25 c/f 1-31-25 c/f 11-4-24 c/f 7-1-24
GOOD FAITH SETTLEMENT
MOVING PARTY: Defendant, International Specialty
Insurance Services, Inc.
RESPONDING PARTY: Defendants, Paradigm-Gilbert Insurance
Group, LLC, et al.
RELIEF REQUESTED
Motion for Determination of Good Faith Settlement Between
Plaintiff and Defendant International Specialty Insurance Services, Inc.
Paradigm-Gilbert Insurance Group, LLC Motion Contesting
Good Faith Settlement Application of International Specialty Insurance
Services, Inc.
SUMMARY OF ACTION
Plaintiff Matthew S. Garza was a Major League Baseball
(MLB) pitcher for 12 years. Plaintiff’s career with an MLB team ended after the
2017 season, due to a pitching arm shoulder injury, which was not successfully
repaired following surgery well enough to return to MLB pitching form.
Prior to the injury causing event, Plaintiff procured a
ten million disability insurance policy from defendant Certain Underwriters at
Lloyd’s of London Subscribing to the Policy (Lloyd’s). Plaintiff maintains the
policy was procured and submitted by defendant International Specialty
Insurance Services, Inc. (ISI), Nigro Karlin Segal & Feldstein, LLP and
NKSFB, LLC (collectively NKSFB). Defendants Paradigm - Gilbert Insurance Group,
LLC, and Gilbert Insurance Services, Inc. (Paradigm and Gilbert) assisted Plaintiff
in providing information in support of the application, though the application
admittedly omitted certain information at the time of submission. Following
submission of the claim to Lloyd’s, the claim was denied based at least in part
on the provision of an incomplete application.
On Jul 1, 2021, Plaintiff filed a complaint for Breach of
Contract, Breach of Implied Duty of Good Faith and Fair Dealing, and Breach of
Duties as an Insurance Broker. The case was initially filed in Fresno County,
and transferred to Los Angeles County on April 5, 2022, following a successful
motion to change venue. Lloyd’s also previously filed a cross-complaint against
Paradigm and Gilbert for Fraud, Negligence, Negligent Misrepresentation, and
Comparative Fault/Contribution.
On May 11, 2022, the case was reassigned from complex
court to Department 68, and independent calendar court. On July 26, 2022, the
court granted the motion to strike the cross-complaint with leave to amend.
Lloyd’s filed its first amended cross-complaint on August 11, 2022. On December
6, 2022, the court denied the motion to strike the first amended
cross-complaint.
On December 21, 2022, the court granted Plaintiff leave
to file a first amended complaint. The amended pleading added in defendants
NKSFB and new causes of action. On the same date, the first amended complaint
for Breach of Contract (first and fourth causes of action), Breach of Implied
Covenant of Good Faith and Fair Dealing, Breach of Duties as an Insurance
Brokers, Intentional Misrepresentation, Negligent Misrepresentation, and Breach
of Fiduciary Duties, was filed.
On March 23, 2023, the court denied the motion to compel
arbitration. On March 29, 2203, the court overruled the demurrer to the first
amended complaint, and a motion for sanctions, both brought by Gilbert
Insurance Services.
On December 14, 2023, the court granted the motion of
International Specialty Insurance Services, Inc. to interplead $133,624.68 in
funds with the court.
RULING: Denied as to International Specialty
Insurance Services, Inc. Application for Good Faith Settlement / Granted as to
Paradigm-Gilbert Insurance Group, LLC, Gilbert Insurance Services, Inc., Nigro
Karlin Segal & Feldstein, LLP and NKSFB, LLC Motion to Challenge
Application for Good Faith Settlement
The court specially set the hearing for determination of
good faith settlement and any motion challenging at the time of the Final
Status Conference on January 27, 2025. On January 30, 2025, ISI filed a notice
of settlement and application for determination of good faith settlement.
Plaintiff and ISI settled all claims for $750,000. [Application for
Determination of Good Faith Settlement, Declaration of Anna Novruzyan, Ex. 1.] Defendants
International Specialty Insurance Services, Inc. (ISI), and Nigro Karlin Segal
& Feldstein, LLP and NKSFB, LLC (collectively NKSFB), Gilbert Insurance Services,
Inc. (Gilbert), and Paradigm-Gilbert Insurance Group, LLC (Paradigm-Gilbert) filed
a counter motion challenging the application for good faith settlement between
Plaintiff and International Specialty. The court ordered the motions filed no
later than February 6, 2025. The motion of Paradigm-Gilbert, Gilbert, and
NKSFB, was untimely filed four days late on February 10, 2025. The court
consolidates the motions into a single order.
The court previously granted the unopposed motion of
Certain Underwriters at Lloyd’s of London Subscribing to the Policy (Lloyd’s)
for determination of good faith settlement on September 19, 2024. All
consideration of the subject motion and hearing on the application will take
into account the $5,000,000 settlement with Lloyd’s.
ISI represents the $750,000 settlement represents a good
faith payment based on continuing denial of liability due to disavowal of any
duty of care owed to Plaintiff. Plaintiff further asserts the settlement amount
is well within the ballpark for liability given a represented “burning limit”
of $2,000,000 in insurance coverage which is now depleted. ISI denies any
collusion and represents all terms were negotiated in good faith.
Paradigm-Gilbert, et al. in a counter motion challenge
the settlement on the ground of proportionality. Paradigm-Gilbert, et al.
represent Garza still seeks $12,500,000 in damages [3:21-22], which renders the
$750,000 settlement only six percent (6%) of total potential liability [4:3-4].
The basis of the remaining $12.5 million outstanding amount, notwithstanding
the $5,000,000 payout from Lloyd’s, derives from a claimed $17.5 million damages
claim broken down as the $10,000,0000 in damages, $2,500,000 in attorney fees, plus
$5,000,000 in (prejudgment) “interest.” The Lloyd’s settlement amount therefore
only reduced total liability to $12.5 million from $17.5 million [6:4-8].
Non-Settling Defendants reiterate the sub-agency
relationship claims and continue to ascribe responsibility for the submission
of the incomplete application to Lloyd’s and lack of notice to Plaintiff
regarding the submission. “Paradigm” then presents a separate position
apparently only addressing its own denial of liability based on assumption of
assets without any liabilities from a former entity identified as “GIS.”
Non-Settling Defendants also challenge the representation of the $2,000,000
insurance limit as lacking factual support, and also speculate as to whether
the transaction was truly conducted in good faith.
Defendant ISI in opposition to the Paradigm-Gilbert, et
al. motion challenging the application for good faith settlement, first
reiterates the standard regarding the burden of a challenging party to establish
a lack of good faith. ISI next addresses the total damages claim. ISI maintains
it is not subject to the $2,500,000 attorney fee liability, in that no
contractual basis of recovery exists as against ISI. The $5,000,000 in
prejudgment interest also lacks support in that any such amount is not subject
to a fixed determination, thereby allowing calculation for such recovery. With
consideration of the $5,000,000 Lloyd’s payment, ISI therefore contends the
$750,000 constitutes 15% of total liability as applicable to ISI. ISI concludes
with re-argument of its legal positions denying liability, as well as reference
to the standard of insurance limits as a valid basis of consideration for
settlement, and denial of any collusion or fraud.
Plaintiff filed a “response” and Declaration of Richard
Giller to non-settling Defendants’ motion challenging the determination of good
faith settlement. Plaintiff notes the multiple, repeated and extensively
discussed denials of liability: denial of the policy by Lloyd’s due to an
incomplete application. Plaintiff repeats the basis of the action and disputes
the categorization of the settlement representing on “6%” of total liability.
Plaintiff maintains that such a representation improperly diminishes the
$5,000,000 settlement from Lloyds towards the $10,000,000 amount of the policy,
which represents 28.5% of total liability from the $17.5 million in damages.
The demand for an additional $2.5 million represents attorney fees caused by
the repeated challenges to any liability. Plaintiff concedes that the remaining
amount of liability against non-settling defendants remains at (more than)
$12.5 million ($7,500,000 + $5,379,452 in prejudgment interest + attorney fees
and costs “now in excess of $3,000,000”) following the $5,000,000 payment from
Lloyd’s. [Response, 1:17, 2:6-7 (footnotes 2, 5).]
Paradigm-Gilbert, et al. in reply describe the opposition
as reliant on irrelevant facts and particularly focuses on the ISI position
minimizing its role in the scope of the action. Paradigm-Gilbert, et al.
validly brings attention to the disputed amount of outstanding damages claim.
The reply concedes to the potential validity on the position regarding
inability to collect attorney fees and prejudgment interest from ISI, but still
reiterates the core position regarding the determination of “ballpark” figure.
The reply seemingly also suggests that ISI could remain jointly liable as to
prejudgment interest and fees recovered against co-defendants, but the legal
basis of such recovery remains unclear.
“[T]he intent and policies underlying section 877.6
require that a number of factors be taken into account including a rough
approximation of plaintiffs' total recovery and the settlor's proportionate
liability, the amount paid in settlement, the allocation of settlement proceeds
among plaintiffs, and a recognition that a settlor should pay less in
settlement than he would if he were found liable after a trial. Other relevant
considerations include the financial conditions and insurance policy limits of
settling defendants, as well as the existence of collusion, fraud, or tortious
conduct aimed to injure the interests of nonsettling defendants.” (Tech-Bilt, Inc. v. Woodward-Clyde &
Associates (1985) 38 Cal.3d 488, 499.)
Making a good faith settlement determination necessarily
requires the trial court to examine and weigh all of the Tech-Bilt factors, one
of the most important of which is the settling party's proportionate liability.
(Toyota Motor Sales U.S.A., Inc. v.
Superior Court (1990) 220 Cal.App.3d 864, 871.) Indeed, 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.)
In determining the good faith of a settlement, the court may
rely upon declarations, or in its discretion, other evidence at the
hearing. (Code Civ. Proc., §
877.6(b).) The court may also “‘rely on
its own expertise and the opinions of experts in reaching a determination of
good or bad faith of a settlement.’” (Regan
Roofing Co. v. Superior Court (1994) 21 Cal.App.4th 1685, 1702.) The burden on a motion for determination of
good faith settlement rests squarely on the party opposing the finding of good
faith. (Code Civ. Proc., § 877.6.)
The “Insurance Broker” Defendants, Paradigm, Gilbert, and
ISI, were only named in the third cause of action for Breach of Duties in the
operative first amended complaint. Plaintiff alleges “Paradigm, Gilbert, and
ISI each held themselves out as having expertise in the specialized world of
disability insurance for professional athletes and, as such, owed an additional
duty to use reasonable care, diligence, and judgment in procuring the insurance
requested including the duty to accurately, timely and truthfully submit
information to Lloyd’s on Mr. Garza’s behalf.” [First Amend. Comp., ¶ 97.]
Plaintiff specifically articulates several bases of the
purported breach, including:
1) improperly allowing Mr. Garza to submit an incomplete
policy application to Lloyd’s;
2) failing to ensure that Lloyd’s obtained all relevant
medical records during the underwriting process;
3) failing to check publicly available information to ensure
that Mr. Garza’s injury history was fully and accurately reported to the
Insurers;
4) failing to perform even a rudimentary search of the
Internet to confirm Mr. Garza’s prior injury history;
5) failing to properly shepherd Mr. Garza’s claim through
the claims process;
6) failing to prevent Lloyd’s from conducting improper post
claims underwriting in a transparent attempt to manufacture a basis to deny Mr.
Garza’s claim and rescind the Subject Policy;
7) as to ISI only, despite agreeing in writing to take it
upon itself to secure “the team medicals [for Mr. Garza] ASAP” during the
procurement process in order to submit a complete and accurate policy
application, ISI failed to obtain any of Mr. Garza’s medical records and ISI
also failed to conduct any of its own investigation into Mr. Garza’s injury
history which, in turn, meant that ISI failed to take steps ensure that Mr.
Garza’s application was complete and accurate when it was submitted to Lloyd’s
The court considers the settlement and challenge relative to
the seven (7) articulated claims against the broker defendants. ISI denies any
duty of care owed to Plaintiff due to the lack of any insurance agent
relationship with Plaintiff. The common thread amongst the challenging
co-defendants relies on a claim of joint liability in the alleged submission of
the incomplete application, thereby leading to the denial of the claim.
ISI represents it solely acted as the agent for Lloyd’s
pursuant to a Binding Authority Agreement and denies the existence of any dual
agency relationship. The court denied ISI’s motion for summary judgment based
at least in part on a finding of a duty of care under insurance broker
standards, and as an agent on behalf of Lloyd’s, to review, submit and procure
the sought after policy on behalf of Plaintiff. Said broker-based claim of liability
remains specifically distinguished from any claims arising from the terms of
policy itself initially underwritten by Lloyd’s.
The opposition to the motion for determination of good faith
settlement disputes causation as to all non-settling defendants with citation
to both the motions for summary judgment and pending motions in limine. Again, Paradigm
in the counter motion also offers additional, separate discussion regarding a
limited to no basis of liability against it on the basis of a denial of any
acquisition of liabilities from a predecessor entity.
All Defendants were previously allowed to bring summary
judgment motions on any and all topics dispelling liability, which the court
denied. Repeated denial of liability after the
summary judgment motions will neither elucidate distinctions nor encourage
reconsideration. The court declines the invitation to now (re)consider
any positions denying liability. The court also declines to proactively
consider the motions in limine as a basis for re-adjudication on the denial of
liability in the separately filed motion. An application for determination of
good faith settlement and challenging motion are not the proper means for any
such re-examination, even if the court were inclined to consider further
evidentiary and legal argument regarding the varying roles of the parties.
In holistically considering the liability claims in context
of the subject motion, the parties rely on certain distinctions in conduct
based on lack of assumption of liabilities or challenge to a sub-agency
relationship. Such positions insufficiently parse the grouped liability claims
as to the “broker” defendants or the management/agent parties. The broker
parties are only named in the third cause of action versus the NKSFB parties
named in the fourth, fifth, sixth, and seventh causes of action for Breach of
Contract, Intentional Misrepresentation, Negligent Misrepresentation, and
Breach of Fiduciary Duties. Other than differing causes of action, the motion
to challenge, opposition to the motion, and response of Plaintiff, lack distinction.
Plaintiff plainly relies on alternative claims for relief, yet jointly lumps
all damages, prejudgment interest and attorney fees into a single sought after
amount without explanation as to the exceptions apparently carved out regarding
the prejudgment interest and attorney fees claim for ISI. While ISI may in fact
present a legally valid position on one or both positions, the court cannot
disregard the potential re-addition of said amounts to non-settling Defendants
both named in the same claims and differing claims, but also part of the same
collective damages claim. Said lack of categorical differentiation reflects on
the determination as to the validity of any proportionality determination.
Potentially differing levels of wrongful conduct can
arguably lead to a finding of differing proportions of liability based on said
differing conduct, especially as presented in the separate causes of action. “[T]he relevant language of section 877(a) ...presupposes
the existence of multiple defendants jointly liable for the same damages. The
settlement by one or more of several tortfeasors ‘claimed to be liable for the
same tort’ reduces ‘the claims against the others.’” (Hoch v. Allied-Signal, Inc. (1994) 24 Cal.App.4th 48, 63.) “Under a system of joint and
several liability, in which nonsettling defendants are liable for all of the
damages unsatisfied by pretrial settlement, the nonsettling defendants bear the
risk the settlement was ‘low’ compared to the amount the settling defendant
would have been liable for according to the jury verdict. The nonsettling
defendant may also obtain a benefit if the settlement was “high” and the
settling defendant does not obtain equitable partial indemnity. (Citation.) The
plaintiff, in the joint and several liability system, can neither lose nor win
by divergence between the settlement and the verdict; whether the settlement
was ‘high”’ or ‘low,’ the plaintiff's potential recovery from all solvent
defendants is the same—the damages awarded by the jury.[] This system also
provides all parties reasonable incentives to settle.” (Id. at p. 65.)
The dismissal of any attorney fee and prejudgment interest
claims by ISI, and representation of continued maintenance of said recovery
against remaining, non-settling defendants now totaling nearly $8,000,000 in
additional sought after damages, lacks sufficient address. Assuming remaining
total liability of $12,500,000+, as represented by Plaintiff, said amount
enumerates to (less than) six percent (6%) total of the remaining proportion. While
the risk of settlement presents the potential for an upper end level of
exposure, the non-settling parties are entitled to consider the fundamental
existence of a common damages pool. New positions dispelling liability for
attorney fees and prejudgment without address to the impacts of other defendants
constitutes a concerning disregard and dismissal of the true proportionality of
the settlement amount.
Again, in the underlying action Plaintiff effectively
asserts all non-insurance parties (e.g. the parties other than Lloyd’s) were
collectively responsible for the submission of a completed application. The
settlement under the policy constitutes a particular form of contractually
based damages, the broker and management defendants proceed under a negligence
approach though none of the parties provide clear demarcation between Lloyd’s. Whether
the “broker” parties remain equally and proportionately bound as the sports
manager parties even with allegedly differing courses of conduct articulated in
the differing causes of action, the result ended up with the denied policy
claims.
A near $8,000,000 disparity in potential liability remaining
against the non-settling parties at least partially sharing responsibility for
the submission of an incomplete application presents two scenarios: the ISI
image, whereby payment of $750,000 on the $7.5 million only sought after ISI
raises the proportion by four percent (4%) from six to 10 percent no matter the
denials of liability. The alternative picture is a $750,000 settlement applied
to a represented sought after total from Plaintiff in the response of
$15,879452 ($7,500,000 + $5,379,452 in prejudgment interest + attorney fees and
costs “now in excess of $3,000,000”), for an approximate proportion of 4.7%, or
a reduction of 1.3% from the six percent (6% position).
The court accepts the representation of the insurance limits
and refuses to find any collusion based on the circumstances or conclusive
assertions in the motion. Challenging Defendants fail to meet their burden of
establishing such circumstances. Nevertheless, the court finds an uneven
playing field based on the disparate amounts of damages sought from an
undistinguished pool of jointly liable tortfeasors. The court declines to
consider potential, insufficiently addressed legal authority regarding the prejudgment
interest. (Wisper Corp. v. California
Commerce Bank (1996) 49 Cal.App.4th 948,
960-962.) The court cannot also determine the basis for acceptance from
Plaintiff of no recovery of attorney fees against ISI, yet the non-settling
parties remain potentially liable for the $3,000,000 and growing amount.
The disparate positions from a
seemingly fairly common core of facts and liability prevents a finding of
proportionate liability. Even considering the public policy favoring settlement
thereby allowing for a lower required proportionate amount, especially when
finding financial conditions, policy limits as valid elements, and a lack of
fraud or collusion, the lack of an established equal division prevents approval
of the settlement. (Tech-Bilt,
Inc. v. Woodward-Clyde & Associates, supra, 38 Cal.3d at p. 499;
(Toyota Motor Sales U.S.A., Inc. v.
Superior Court, supra, 220 Cal.App.3d at p. 871; City of Grand Terrace v. Superior Court,
supra, 192 Cal.App.3d at p. 1262.) The settlement lacks a sufficient
showing of proportion relative to the continued commonality of the claims and
outstanding unaccounted for distinctions in damages.
The application for determination of good faith settlement is
DENIED. The motion challenging the application for determination of good faith
settlement is GRANTED.
Motion in limine number 1 set for hearing on March 7, 2025.
Moving Defendants to give notice.