United States: Barickman v. Mercury Casualty Company

In Barickman v. Mercury Cas. Co., 2 Cal.App.5th 508 (August 15, 2016), the California Second District Court of Appeal affirmed a judgment for bad faith damages in favor of third party claimants and assignees, Laura Beth Barickman ("Barickman") and Shannon Mcinteer ("Mcinteer"), for a total of $3 million. The parties' lawsuit arose out of an underlying accident, wherein, Mercury's insured, Timory McDaniel struck and injured Barickman and Mcinteer while driving an automobile intoxicated. Barickman and Mcinteer were in a cross-walk when struck by McDaniel. Subsequently, on September 1, 2010, Mercury offered McDaniel's policy limits of $15,000 per person to Barickman and Mcinteer. On September 24, 2010, Barickman's and Mcinteer's counsel, Mark Algorri, advised that he would need a complete statement of assets to assist his clients in determining whether to accept Mercury's offer and satisfaction of all civil claims.

Subsequently, in October 2010, McDaniel 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-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 McDaniel's mother, Helen, as well as her criminal defense attorney, McGregor. The Mercury adjustor, Oliver Chang, also communicated with Algorri, to clarify the intent behind the additional language in the releases related to preserving Barickman's and Mcinteer's restitution rights.

On January 10, 2011, Chang advised Algorri that criminal defense attorney, McGregor, had instructed Mercury not to accept the revised releases and asked Algorri to reconsider whether the matter could be settled without the added language. In response, Algorri clarified the intent behind the added language by stating "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 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 California law."

Ultimately, Barickman and Mcinteer and Mercury failed to reach an agreement regarding the additional language in the releases provided in connection with Mercury's settlement offer. As such, they filed a personal injury action which was ultimately settled pursuant to a stipulated judgment in favor of Mcinteer against McDaniel for $2.2 million and in favor of Barickman against Mcinteer for $800,000. Thereafter, McDaniel assigned her rights against Mercury to Barickman and Mcinteer in exchange for their agreement not to attempt to collect the judgment against her. Thereafter, Mercury paid each claimant the $15,000 per person policy limits.

Subsequently, Barickman and Mcinteer filed a bad faith lawsuit against Mercury arguing that Mercury unreasonably delayed in settling the case based on its unreasonable position in connection with the added language in the proposed release agreements used for the purpose of settling the Barickman and Mcinteer claims.

After a bench trial by reference, the judgment was entered against Mercury in favor of Barickman and Mcinteer in the amount of $2.2 million for Mcinteer and $800,000 for Barickman, along with 10% interest from the date of the August 31, 2012 judgment and costs of suit.

In affirming the judgment, the Court of Appeal held as follows:

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 ["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 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 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. . . . Mercury's contrary position, if accepted, would mean an insurer that at 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.

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 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 [279 Cal. Rptr. 511] [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.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions