Court Opinion

ID: 3203761
Source: CourtListenerOpinion
Date Created: 2016-05-16 20:01:00.668874+00
Date Added: 2024-06-11T14:28:28.185467
License: Public Domain

NOT FOR PUBLICATION                         FILED
                       UNITED STATES COURT OF APPEALS                      MAY 16 2016
                                                                       MOLLY C. DWYER, CLERK
                                                                        U.S. COURT OF APPEALS
                              FOR THE NINTH CIRCUIT

    MATTHEW GRAYSON and GABRIEL L.                No. 14-55959
    PEPER,
                                                  D.C. No. 2:13-cv-05324-BRO-JCG
           Plaintiffs - Appellants,

     v.                                           MEMORANDUM*

    ALLSTATE INSURANCE COMPANY,

           Defendant - Appellee.

                     Appeal from the United States District Court
                         for the Central District of California,
                   Beverly Reid O’Connell, District Judge, Presiding

                           Argued and Submitted May 2, 2016
                                 Pasadena, California

Before: FLETCHER and GOULD, Circuit Judges, and LEMELLE, Senior District
Judge.**

          Matthew Grayson and Gabriel L. Peper appeal the district court’s grant of

summary judgment in favor of the defendant, Allstate Insurance Company

(“Allstate”). The lower court ruled in favor of Allstate because it found that Allstate

*
   This disposition is not appropriate for publication and is not precedent except as
provided by 9th Cir. R. 36-3.
**
    The Honorable Ivan L.R. Lemelle, Senior District Judge for the U.S. District
Court for the Eastern District of Louisiana, sitting by designation.
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did not breach the implied covenant of good faith and fair dealing. This case arises

out of an automobile accident in which Peper’s vehicle struck Grayson’s motorcycle,

causing Grayson severe injuries. Peper’s insurer, Allstate, recognized soon after the

accident that Peper was likely at fault and that Grayson’s claims would exceed

Peper’s $15,000 policy limit. Grayson’s attorney then sent Allstate a letter offering

to settle Grayson’s bodily injury claim for the policy limit. After conferring with

Peper, Allstate’s claim representative, Donna Czupryn, sent a letter to Grayson’s

attorney stating that she was “authorized to accept” Grayson’s policy limit demand.

Additionally, because Grayson’s offer did not include a release of Peper, Czupryn

included Allstate’s standard release form with the letter. The letter stated that

Allstate would promptly send the settlement check upon execution of the release.

However, the standard release form included terms not contained in the original

offer, meaning Czupryn’s communication qualified as a rejection and counteroffer

rather than an acceptance. Diamond Fruit Growers, Inc. v. Krack Corp., 794 F.2d
1440, 1443 (9th Cir. 1986) (“At common law, an acceptance that varies the terms of

the offer is a counteroffer and operates as a rejection of the original offer.”).

      After receiving Czupryn’s letter, Grayson’s counsel answered by identifying

her letter as a counteroffer and explicitly rejecting it. Allstate responded within one

day of receiving Grayson’s rejection by having outside counsel prepare a revised

release form. Allstate’s counsel sent the revised release to Grayson’s attorney with

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a letter explaining that he should contact him if he found anything else objectionable,

because it was Allstate’s “intent simply to accept [the] settlement demand.” Without

explanation, Grayson rejected Allstate’s follow-up offer as well. His counsel’s

rejection letter simply stated that Allstate should advise its insured of the need to

retain an independent lawyer “experienced in tort law and the Covenant of Good

Faith and Fair Dealing.” Despite Allstate’s continued attempts to settle Grayson’s

claim for Peper’s policy limits, Grayson proceeded to trial in state court where he

obtained a substantial judgment against Peper.

      Thereafter, Peper and Grayson entered into an agreement pursuant to which

Peper assigned all of his assignable rights against Allstate to Grayson. In return,

Grayson covenanted not to enforce the judgment against Peper. Peper and Grayson

then filed suit against Allstate. On cross-motions, the district court granted summary

judgment in favor of Allstate, finding: (1) Grayson’s settlement offer was

unreasonable because it did not include a release, meaning Allstate had no duty to

accept it; and (2) that even if the settlement offer was reasonable, Allstate did not

breach the implied covenant of good faith and fair dealing because it did not

unwarrantedly or unreasonably refuse to settle. ER 12-18.

      This Court reviews de novo a district court’s grant of a motion for summary

judgment. Bergt v. Ret. Plan for Pilots Employed by MarkAir, Inc., 293 F.3d 1139,

1142 (9th Cir. 2002) (citing Lang v. Long-Term Disability Plan of Sponsor Applied

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Remote Tech., 125 F.3d 794, 797 (9th Cir. 1997)). It is well-established under

California insurance law that, “[w]hen there is great risk of a recovery beyond the

policy limits so that the most reasonable manner of disposing of the claim is a

settlement which can be made within those limits, a consideration in good faith of

the insured’s interest requires the insurer to settle the claim.” Gibbs v. State Farm

Mut. Ins. Co., 544 F.2d 423, 426-27 (9th Cir. 1976) (quoting Comunale v. Traders

& Gen. Ins. Co., 328 P.2d 198, 201 (Cal. 1958)). An insurer’s “unwarranted refusal

to do so constitutes a breach of the implied covenant of good faith and fair dealing.”

Id. at 427 (quoting Comunale, 328 P.2d at 201). “However, the insurer must be given

a reasonable opportunity to settle within the policy limits and any offer must be

capable of acceptance on the part of the insurer.” Wallace v. Allstate Ins. Co., No.

97-3806, 1999 WL 51822, at *2 (N.D. Cal. Jan. 29, 1999), aff’d 221 F.3d 1350 (9th

Cir. 2000) (affirming on the ground that refusal to accept a policy limit settlement

offer that does not contain a release is within the boundaries of good faith).

      Here, Allstate did not refuse to settle, much less unreasonably or

unwarrantedly refuse. In fact, Allstate attempted repeatedly to settle the claim.

Allstate’s initial attempt failed because Allstate included an overly broad release

form with its acceptance letter. Including the proposed release with the acceptance

letter did not constitute bad faith or a breach of the covenant of good faith and fair

dealing because, had Allstate failed to attach a release, it may have breached its duty

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to its insured. Strauss v. Farmers Ins. Exch., 31 Cal. Rptr. 2d 811, 814 (Cal. Ct. App.

1994) (stating that “an insurer may, within the boundaries of good faith, reject a

settlement offer that does not include a complete release of all of its insureds.”);

Lehto v. Allstate Ins. Co., 36 Cal. Rptr. 2d 814, 821 (Cal. Ct. App. 1994) (“[A]n

insurer can breach its duty to its insureds by disbursing the policy proceeds to the

insureds’ claimant without first obtaining a release of the insureds.”). Moreover,

Allstate promptly revised its release form and repeatedly offered its policy limits to

Grayson on terms consistent with his original offer. Grayson rebuffed these

settlement attempts without explanation, providing Allstate with no reasonable

opportunity to settle the claim. Without such an opportunity, there can be no breach

of the covenant. See Wallace, 1999 WL 51822, at *2. Accordingly, the district court

did not err by granting summary judgment in Allstate’s favor because Allstate acted

reasonably under the circumstances and in good faith.

      AFFIRMED.

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