Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-02648/USCOURTS-caed-2_05-cv-02648-2/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

LUI SAELEE,

NO. CIV. S-05-2648 WBS KJM

Plaintiff,

v.

ORDER RE: MOTION FOR SUMMARY

PROGRESSIVE CLASSIC INSURANCE JUDGMENT

COMPANY, STEPHEN R. ROMO, and 

DOES 1 through 20,

Defendants.

----oo0oo----

Currently before the court is defendant Progressive

Classic Insurance Company’s motion for summary judgment, which

argues that, based on the undisputed facts, plaintiff Lui

Saelee’s action for a breach of the implied covenant of good

faith and fair dealing must fail as a matter of law. 

California law implies a covenant of good faith and

fair dealing in every liability insurance policy. PPG Indus.,

Inc. v. Transamerica Ins. Co., 20 Cal. 4th 310, 312 (Cal. 1999). 

As the Ninth Circuit has so aptly observed, “What is ‘good faith’

or ‘bad faith’ on an insurer's part has not yet proved

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The insured, Stephen R. Romo, assigned to plaintiff his 1

rights under the policy on November 16, 2003, (Compl. ¶ 20),

thereby, allowing plaintiff to bring this action. Anguiano, 209

F.3d at 1169 (9th Cir. 2000) (claimant’s cause of action for

breach of the implied covenant of good faith and fair dealing

arises when insured assigns his/her rights to claimant). 

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susceptible to pat legal definition.” Allen v. Allstate Ins. Co.,

656 F.2d 487, 489 (9th Cir. 1981). What is clear under

California law is that an insurer acts in “bad faith” when it

fails “to inform the insured of a compromise offer.” Brown v.

Guarantee Ins. Co., 155 Cal. App. 2d 679, 689 (Cal. Ct. App. 2d

Dist. 1957); Anguiano v. Allstate Ins. Co., 209 F.3d 1167, 1169

(9th Cir. 2000) (“The implied covenant of good faith and fair

dealing imposes a duty upon insurers to . . . ‘advise the insured

of any settlement offers.’” (quoting Cain v. State Farm Mut.

Auto. Ins. Co., 47 Cal. App. 3d 783, 791 (Cal. Ct. App. 1st Dist.

1975))). 

Here, on November 15, 2000, plaintiff indicated she

would settle for the $25,000 policy limit, provided Romo sign a

declaration of assets. On March 16, 2001, defendant tendered the 1

policy limits to plaintiff, but without a declaration. Defendant

later communicated to its insured a request, with which the

insured complied, to provide a declaration that he had no excess

or other insurance assets that would be applicable to plaintiff’s

claim. On May 31, 2001, plaintiff indicated she would not settle

for the $25,000 policy limit unless the insured’s declaration

addressed the existence of insurance and non-insurance assets.

Defendant has presented evidence from which it could be

found that it communicated plaintiff’s May 31, 2001 request to

the insured by September 17, 2001, but there is at the very least

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a disputed issue of fact as to whether defendant timely

communicated this information to the insured prior to plaintiff

filing suit on June 29, 2001. (See Schwarzkopf Decl. ¶ 5; Pl.’s

Statement of Disputed and Undisputed and Additional Facts # 29,

31.) The trier of fact could further conclude that the failure

to communicate this information constituted bad faith. See

Allen, 656 F.2d at 489 (“An insurer’s ‘good faith’ is essentially

a matter of fact.”) and Kinder v. W. Pioneer Ins. Co., 231

Cal.App.2d 894, 900 (Cal. Ct. App. 1st Dist. 1965) (same).

An insurer’s duty to communicate a settlement offer

arises even if the offer is made in excess of policy limits. 

Heredia v. Farmers Ins. Exch., 228 Cal. App. 3d 1345, 1360 (Cal.

Ct. App. 6th Dist. 1991); See also Cont’l Cas. Co. v. United

States Fid. & Guar. Co., 516 F. Supp. 384 (N.D. Cal. 1981) (under

California law, insurer breached implied covenant of good faith

and fair dealing by failing to inform insured of offer in excess

of policy limits in order to afford insured opportunity to

contribute to settlement). Further, that duty to communicate may

be triggered by something less than a formal offer. Allen, 656

F.2d at 490 (insurer held liable for excess judgment under

California law based on failure to notify claimant of deficiency

in offer’s scope; claimants need not “begin settlement overtures

with letter-perfect offers to which insurers need only respond

‘Yes’ or ‘No.’ An insurer’s duty of good faith would be trifling

if it did not require an insurer to explore the details of a

settlement offer that could prove extremely beneficial to its

insured.”). 

Because the trier of fact could conclude that defendant

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failed to timely communicate plaintiff’s request for a

declaration of his non-insurance assets to Romo and that such

failure amounted to bad faith on the part of the insurer, the

court cannot grant defendant’s motion for summary judgment. 

IT IS THEREFORE ORDERED that defendant’s motion for

summary judgment be, and the same hereby is, DENIED. 

DATED: January 10, 2007

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