Court Opinion

ID: 4248418
Source: CourtListenerOpinion
Date Created: 2018-02-27 01:04:31.962649+00
Date Added: 2024-06-11T14:43:37.693256
License: Public Domain

Filed 2/26/18
                           CERTIFIED FOR PUBLICATION

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                             FIRST APPELLATE DISTRICT

                                     DIVISION TWO

VICTAULIC COMPANY,
        Plaintiff, Cross-defendant and
        Respondent,                               A146617

v.                                                (Alameda County
AMERICAN HOME ASSURANCE                           Super. Ct. No. RG12642929)
COMPANY et al.,
        Defendants, Cross-complainants
        and Appellants.

        Victaulic Company (Victaulic), a manufacturer of plumbing products, sued its
insurers in connection with nine product liability claims against Victaulic that resulted in
litigation. Following a favorable ruling for Victaulic on summary adjudication (potential
for coverage and thus a duty to defend) and then a favorable ruling in a court trial for
declaratory relief (duty to indemnify), the case proceeded to a jury trial on Victaulic’s
claim of bad faith. That trial lasted three and one-half weeks, during which numerous
witnesses testified and over 100 exhibits were introduced.
        One of those witnesses was Nancy Finberg, the examiner on a majority of the
claims, who had also verified the insurers’ responses to Victaulic’s requests for
admissions (RFAs). Reversing an in limine ruling to the contrary, the trial court allowed
Victaulic to interrogate Finberg about those responses, interrogation twice interrupted by
interrogation by the court itself, the second round of which was abruptly halted by the
court for an in-chambers conference where the court concluded Finberg had “made an
admission that she perjured herself.” Finberg’s testimony was stopped at that point, and
when she resumed the stand the next day, represented by personal counsel, the court ruled

                                              1
that she could, on a blanket basis, claim the Fifth Amendment privilege against self-
incrimination—and would do so in front of jury.
       And so came Victaulic’s closing arguments, with their focus on “Finberg,”
“RFAs,” “lies,” and “penalty of perjury,” words used so often, and so interrelatedly, that
it is truly difficult to count. The jury deliberated for some five hours, and returned with a
verdict answering a total of six separate questions, one of which had seven subparts, a
total of 13 separate questions. That verdict awarded damages for breach of contract
totaling $1,073,868.80, finding for Victaulic on each of seven claims in the exact amount
sought. The verdict awarded attorney fee damages for bad faith of $8,259,712.31, the
exact amount Victaulic’s expert testified to. And the jury also found, by a nine-to-three
vote, the insurers acted with fraud, oppression, or malice committed by a managing
agent. All this, after a three and one-half week trial, in some five hours of deliberation.
       The punitive damages trial followed shortly, a trial that was nothing but argument.
Following brief deliberation, by a ten-to-two vote the jury awarded $46 million, the
amount suggested by Victaulic’s counsel.
       The insurers appeal, asserting six separate claims of error why the verdict cannot
stand. We agree with the insurers there was error, beginning with the court’s allowance
of the use of the RFA responses, compounded by the court’s intensive questioning of
Finberg, and compounded further by several errors in how the court handled Finberg’s
invocation of the Fifth Amendment privilege. We conclude such error was prejudicial,
and thus reverse on that ground, without the need to address the insurers’ other
arguments.
                                     BACKGROUND
       The Parties
       Appellants are three insurance companies, American Home Assurance Co.
(American Home), Insurance Company of the State of Pennsylvania (ICSOP), and
National Union Fire Insurance Company of Pittsburgh, PA (National Union). All three
companies are members of the American Insurance Group (AIG), and will usually be
referred to collectively, as the insurers or AIG.

                                              2
       Respondent is Victaulic, a developer and producer of mechanical pipe joining
systems, headquartered in Easton, Pennsylvania. It is a global company with major
facilities that manufactures over 60,000,000 units per year, and employs over 3,600
employees worldwide. As one underwriter described Victaulic, it is “one of the world’s
leading developer[s] and producer[s] of unique mechanical pipe coupling systems. They
manufacture pipe couplings, fittings, valves, custom ductile iron castings and plastic
piping systems. . . . Victaulic products are now in use worldwide for a variety of
industrial, commercial and institutional uses including heating, air conditioning, fire
protection including sprinkler heads, mining, maritime, oil field, municipal treatment and
automotive.”
       The Insurance Program
       Victaulic approached AIG concerning possible insurance coverage, and such
coverage was arranged, under a complex program with layers of insurance as described
below. While the coverage was comprehensive, it was understood by AIG underwriters
that the primary risk Victaulic would present was for its products. An early
memorandum from an underwriter noted that Victaulic “is clearly a product risk,” going
on to note that “[s]ince the main products are different types of pipe couplings, the main
hazards are product failure, i.e., pipe leaking or bursting, which can cause extensive
property damage and business interruption.” Another memorandum noted that “the
products exposure has highest frequency and activity level,” and “[m]ost claims [are] a
result of water damage to third party locations.” As AIG underwriter Clara Pincus would
come to testify at trial, “obviously we knew that we had a products liability risk on our
hands and the potential claims associated with it.”
       The insurance program was a customized, specialized plan that included a primary
policy and also excess and umbrella policies. The original primary policy had policy
limits of $1 million, later increasing to $2 million. Above the primary policy was an
umbrella policy with $25 million in limits, above which were two excess policies, each
with $25 million in limits.

                                             3
       The insurance program also included three interrelated agreements regarding the
primary layer of coverage: (1) a large risk rating plan (LRRP), (2) a payment agreement,
and (3) a direct pay addendum (DPA) to the payment agreement. The effect of these
agreements was that claims were handled differently than in the usual insurance situation,
which is directly between insurer and insured. The program here involved the
participation of a third party claims administrator, York Claims Association (York), and
worked as follows: Victaulic would fund an account maintained by York, from which
defense and indemnity costs under the primary policies would be paid based on a
complicated formula. The account would be used to cover 100 percent of the indemnity
and defense costs for any clam within Victaulic’s “retained amount” (which under the
LRRP varied by year from $250,000 to $1 million). So, if a claim was resolved by
settlement or judgment within the retained amount, the insurers had no obligation to pay
any defense or indemnity costs on the claim. Thus, until a claim was resolved—and the
primary insurer’s payment obligations able to be calculated—Victaulic fronted all costs
through the York account. Once the calculation of relative responsibility was made, the
primary insurer then reimbursed Victaulic.
       As Victaulic describes in its brief: “In effect, the LRRP and DPA result in
Victaulic initially funding the costs that AIG incurs defending Victaulic under a given
primary policy. But because those agreements do not apply to the Program’s umbrella or
excess policy layers, AIG is solely responsible for all defense and indemnity costs once
the applicable primary policy exhausts. [¶] By designing the Program such that the
ancillary agreements apply only to its primary polices, however, AIG created for itself an
economic incentive to slot Victaulic claims in stacks with unexhausted primary policies:
‘If the claims are chargeable to the primary policy, a large proportion of those claims
would be [] the responsibility [of] Victaulic. If they were charged with the umbrella
policies, they would be for AIG’s account.’ ” So, Victaulic would come to assert in
support of its position at trial, these economic incentives would “drive AIG’s improper
claims handling decisions here.”

                                             4
       Another aspect of Victaulic’s theory at trial might be called AIG’s motive for
some aspects of its claims handling, which was that beginning with the renewal process
for the 2009–2010 policy period, AIG became concerned about its financial exposure
under the insurance program. And so, again quoting Victaulic’s brief, “AIG’s excess
underwriters agreed they needed the primary policy’s products coverage aggregate limit
increased. This would delay or prevent its exhaustion, thereby protecting the excess
policies. But the underwriters also recognized that AIG ‘is in jeopardy of losing this
[client] as well if we change our program.’ Accordingly, [AIG] Chief Underwriting
Officer Stafford Hay ultimately made a ‘business decision’ in September 2009 to renew
the 09/10 Program policies on the prior year’s terms . . . the ‘underlying Product
aggregate will need to be increased to $4M next year in order for us to continue any
further support.’ ” In short, because of AIG’s long standing relationship with Victaulic, it
made a business decision to continue support over a products aggregate that was deemed
too low by the actuaries.
       The same concern was raised again during the 2010–2011 renewal process.
Acknowledging again that Victaulic was a “loyal and profitable [AIG] account,” Hay
concluded that the program presented AIG with “a lot of exposure on a class that is prone
to a frequency of [property damage] claims . . . some of them severe.” AIG therefore
increased the 2010–2011 primary policy’s product aggregate limit from $2 million to $3
million.
       The Claims and the Claim Handlers
       What would ultimately come to be in issue were nine specific claims made against
Victaulic that resulted in lawsuits against it, the first of which was in March 2012, called
the Elizabeth claim. Before discussing it and the other claims, we set out the primary
participants in the claims handling process at AIG, who would come to testify—or be
testified about—at trial:
       Megan Watt was global head of complex casualty at AIG. Under her was James
Scalise, who took control of the Victaulic program. Scalise then reassigned the handling
of the claims to Assistant Vice President Keith Taylor and, under him, to Nancy Finberg,

                                              5
director of complex claims. As noted above, and discussed in detail below, Finberg
became a focus of the trial, and whose handling by the trial court is at the heart of the
insurers’ appeal.
       Turning back to the claims, the Elizabeth claim was a lawsuit in Oregon alleging
that rubber on a Victaulic plumbing component installed in a condominium complex was
deteriorating, causing black specks to appear in the water. Responding to Victaulic’s
“request for coverage,” on March 20, 2012, Taylor wrote a letter with what he called
AIG’s “coverage position.” The letter summarized the underlying complaint, set forth in
four pages various bases for excluding or denying coverage, and concluded that AIG was
reserving “all rights under the policies.”
       AIG had retained Oregon attorney Anne Cohen to defend Victaulic in the
Elizabeth claim. And on June 21, Taylor telephoned Cohen to advise that “AIG had filed
a lawsuit against Victaulic,” a reference to a declaratory relief lawsuit AIG had filed in
Pennsylvania. Before discussing it and the other lawsuits, we set forth a complete list of
the claims that ultimately came to be in issue between Victaulic and the insurers,
including their outcome or status:
       1. Elizabeth: A lawsuit in Oregon described above. Victaulic settled this claim
for $150,000 and a warranty.
       2. Essex: A condominium construction defect lawsuit in California, alleging that
rubber on Victaulic valves and gaskets deteriorated, causing black specks to appear in the
water. American Home settled this claim for $320,000.
       3. Edge: A condominium construction defect lawsuit in Oregon, alleging black
specks due to deteriorating rubber on Victaulic valves, as well as property damage due to
leaky pipes. This claim resulted in a $113,726 judgment against Victaulic, paid by
National Union.
       4. Benson: A condominium construction defect lawsuit in Oregon, alleging black
specks in the water due to deteriorating rubber on Victaulic valves. This claim resulted in
an approximately $2 million judgment against Victaulic, which at the time of trial was on
appeal at National Union’s expense.

                                              6
       5. Avenue: A condominium construction defect lawsuit in Oregon, alleging leaks
and black specks due to deteriorating valves. At the time of trial, this claim was ongoing,
with National Union funding the defense.
       6. 1521: A construction defect lawsuit in Washington, alleging defective
Victaulic plumbing components caused water damage to a condominium complex.
Victaulic settled this claim within its retention for $10,000.
       7. Grant: A condominium construction defect lawsuit in Colorado, alleging
degraded Victaulic valves and couplings had caused property damage. Victaulic settled
this claim within its retention for $20,000.
       8. United Hospital: A subrogation lawsuit in West Virginia brought by Travelers
Insurance Company to recover the cost of repairing a hospital damaged by flooding from
failed Victaulic couplings. Victaulic settled this claim for $1.2 million, $700,000 of
which was contributed by AIG companies.
       9. Massachusetts Water Resources Authority (MWRA): A product liability
lawsuit in Massachusetts, alleging a Victaulic coupling installed in a Boston municipal
water line had broken, resulting in millions of dollars in investigation and repair costs.
Victaulic settled this claim for $875,000, $234,615 of which was contributed by AIG
companies.
       All of these claims were tendered to York. And “in consultation with” Victaulic,
counsel was retained to represent Victaulic in all of them: Craig Diamond to defend the
Essex claim in California; AIG panel attorney Phil Sbrolla to defend the United Hospital
claim in West Virginia; AIG panel attorney Grace Garcia to defend the MWRA claim in
Massachusetts; and AIG panel attorney Cohen to defend the other six, in Oregon,
Washington, and Colorado.
       There was no question that all four of these attorneys performed well, as
Victaulic’s general counsel Mark Van De Voorde would confirm at trial: all attorneys
“did an excellent job.”

                                               7
       The Lawsuits
       In June 2012, the insurers filed a declaratory relief action in Pennsylvania,
Victaulic’s headquarters, and also the home state of National Union and ICSOP. The
Pennsylvania action, which came to be referred to as PA1, sought a declaration as to
whether three of the claims—Essex, Edge, and Elizabeth—involved “property damage”
caused by an “occurrence,” and whether any of the damages were excluded as business
risks. The basis for PA1 was the opinion in Kvaerner Metals v. Commercial Union Ins.
(2006) 589 Pa. 317 [908 A.2d 888], holding that claims of faulty workmanship are not
covered “occurrence[s].” PA1 was ultimately dismissed by court order on December 31,
2013, on the basis that the third party claimants were indispensable parties under
Pennsylvania law, and were not amenable to jurisdiction there.
       After PA1 was filed, Watt, joined by AIG’s head of underwriting and AIG’s
coverage counsel, met with representatives of Victaulic. Following that meeting,
Victaulic decided not to renew the insurance program with AIG.
       Meanwhile, in August 2012, Victaulic filed this action in California, alleging that
defendants had breached their duty to defend the Essex, Edge, and Elizabeth claims,
forcing Victaulic to pay substantial sums to defend itself. The complaint alleged claims
for breach of contract, bad faith, intentional misrepresentation, and declaratory relief.
AIG sought to dismiss or stay the California action on the basis of the Pennsylvania
action, but was unsuccessful.
       In December 2013, the insurers filed a cross-complaint in the California action
seeking a declaration they did not owe payments for seven of the claims—Essex,
Elizabeth, Edge, 1521, Benson, Grant, and Avenue. Victaulic later obtained leave to add
the United Hospital and MWRA claims, so all nine claims were involved in the
California action.
       In May 2014, Victaulic filed a second amended complaint (SAC), the operative
complaint here. In light of the fact that defenses were being provided, Victaulic alleged
that the insurers should be liable for “failing to acknowledge their duty to defend
Victaulic, meaningfully participate in the defense or settlement of Claims, acknowledge

                                              8
coverage for and/or pay covered settlements in a timely manner, and otherwise pay
amounts due,” and that they “have unreasonably and without justification refused to
provide and/or delayed the payment of policy benefits.” The SAC also sought
declaratory relief that the allegations in each of the underlying actions triggered
defendants’ duties to defend and indemnify under the program.
        To complete the lawsuits, in April 2014 the insurers filed a second action in
Pennsylvania (PA2), seeking a declaration as to the United Hospital and MWRA claims.
PA2 was later dismissed in light of the California action.
        The Trial Court Grants Summary Adjudication for Victaulic
        on the Potential for Coverage
        Both sides moved for summary adjudication. The insurers sought summary
adjudication on the basis that Pennsylvania law applied, that under Kvaerner “faulty
workmanship” is not an “occurrence,” and thus none of the nine claims would be
covered.
        Victaulic’s motion sought summary adjudication that the insurers had a duty to
defend and indemnify it in connection with three claims—MWRA, United Hospital, and
Edge.
        The trial court heard argument on the motions on December 4, 2014. And on
December 12 the court entered its order denying the insurers’ motion and granting in part
Victaulic’s, specifically holding that the insurers had a duty to defend the three claims
because they all potentially involved “property damage” caused by an “ ‘occurrence.’ ”
The order noted in part that “even if AIG were correct that Pennsylvania law applies,
summary adjudication in Victaulic’s favor is appropriate. In Indalex Inc. v. National
Union Fire Insurance Co. of Pittsburgh, Pa. (2013) 83 A.3d 418, a Pennsylvania appellate
court specifically rejected the arguments AIG makes here.” The order further held that
there were triable issues on the scope of indemnity as to what portions of the settlements
are for covered losses and must be indemnified.
        The court ordered the case bifurcated, with the declaratory relief claim to be tried
first in a bench trial, which came to be called Phase 1.

                                              9
       The Phase 1 Trial
       Phase 1 took place over 12 trial days, in February and March 2015. On June 10,
2015, the trial court issued its statement of decision, addressing two fundamental issues:
“(1) does AIG have the duty to defend Victaulic in each of the underlying actions;
(2) does AIG have the duty to indemnify Victaulic in each of the underlying actions.”
The court answered yes to both questions, holding for Victaulic all the way.
       With respect to AIG’s position as to “occurrence,” the court first said that
“[i]nitially, AIG contended that the policies did not cover any of the claims found in any
of the lawsuits for lack of an ‘occurrence’ that would trigger coverage, redefining the
meaning of ‘occurrence’ from the definition earlier used by the parties.” The court then
noted that “AIG persisted in its contention that Victaulic had no products liability
coverage under its policies for want of an ‘occurrence’ until a Pennsylvania case entitled
Indalex . . . became final in mid-2014, and until after this court ruled, in the context of the
parties’ competing summary judgment motions, that AIG’s contentions regarding the
definition of ‘occurrence’ were incorrect as a matter of law.” And, the court went on,
“[i]n a stark reversal of its previously-stated contentions, AIG now contends that it
accepted the duty to defend all along in the underlying actions and that AIG has
performed that duty,” leading to this observation: “This change in position has confused
the matters pending herein, as AIG has now adopted positions contrary to its contentions
in its Cross-Complaint, but has not, however, dismissed any of the causes of action in the
Cross-Complaint.”
       The court made similar findings regarding the duty to defend. It found that Taylor
and Finberg “[e]ach testified during trial that AIG never denied that the [Victaulic]
claims . . . gave rise to a potential for coverage and, accordingly, had always
acknowledged the existence of a duty to defend Victaulic.” But the court noted, “In
dramatic contrast to these averments, AIG initiated litigation against Victaulic in
Pennsylvania asserting that they had no duty to defend Victaulic in connection with the
Essex, Edge Lofts, and Elizabeth Lofts cases on grounds that, inter alia, garden-variety

                                              10
product liability claims do not constitute ‘an occurrence’ under AIG’s policies with
Victaulic.”
       In sum, in this sternly worded statement of decision, the trial court granted
declaratory relief in Victaulic’s favor on the duty to defend, holding that all the
underlying claims triggered the potential for coverage. It also held that defendants had a
duty to indemnify with respect to all of the claims except Avenue, for which the duty to
indemnify could not be finally determined until the claim resolved.
       The trial court set the case for Phase 2, a jury trial on the issues of breach of
contract, bad faith, and punitive damages.
       The Phase 2 and Phase 3 Trials
       Phase 2 began on February 4, 2015. It would last some three and one-half weeks,
during which the jury would hear from numerous witnesses and over 110 exhibits would
be introduced. The bulk of Phase 2 was devoted to Victaulic’s claim of bad faith, a
“cornerstone[]” of which was that the insurers acted unreasonably in litigating against
Victaulic, and Victaulic sought to introduce evidence of the insurers’ litigation positions
in the Pennsylvania and California actions. The trial court initially ruled that such
evidence would be excluded, but after Phase 1, Victaulic convinced the court to
reconsider, and the court let the evidence in.
       And so it began, in the opening statement in Phase 2, where counsel for Victaulic
displayed the PA1 and PA2 declaratory relief complaints and told the jury that the
insurers “broke [their] promises” by suing, that an insurer should not act as its insured’s
adversary as AIG did here when it filed the lawsuits. And during its case-in-chief,
Victaulic called AIG claims personnel Taylor, David Luden, and Finberg as adverse
witnesses, examining them in great detail about the litigation positions the insurers had
asserted in the Pennsylvania complaints and in the California action.
       We need not detail all that examination here, but do note that one aspect of the
court’s ruling—and its fallout—is at the heart of two of the insurers’ arguments on
appeal, as discussed in detail below. Suffice to say here that it began with the trial
court’s allowance of Victaulic’s counsel to interrogate Finberg with the insurers’

                                              11
responses to the RFAs, which was improper enough. This error was compounded by the
court’s own involvement—twice—in the questioning of Finberg, the second round of
which was abruptly halted for an in-chambers conference where the court concluded
Finberg had “made an admission that she perjured herself.” Finberg’s testimony was
abated at that point, and when she resumed the stand the next day, represented by
personal counsel, the court ruled that she could claim the Fifth Amendment privilege
against self-incrimination on a blanket basis, and would do so in front of the jury.
Following that, Finberg was excused. But her testimony remained in the case.
       Instructing the jury, the court gave the CACI instructions pertinent to a bad faith
case. (See CACI No. 2330 et seq.) Both sides had proposed special instructions, the
insurers requesting instructions on principles such as the genuine dispute doctrine and
that reservation of rights letters and declaratory relief actions are not evidence of bad
faith. The trial court refused the insurers’ special instructions. The trial court also gave
CACI No. 3946 on punitive damages, which in its last paragraph provides that an
employee is a “ ‘managing agent’ if he or she exercises substantial independent authority
and judgment in his or her corporate decision making such that his or her decisions
ultimately determine corporate policy.” At Victaulic’s request—and over the insurers’
objection—the court added a further instruction that told the jury in the case of insurance
companies, “[i]f an employee has substantial independent authority to pay or deny a
claim for benefits under an insurance policy, then that individual is a managing agent for
the purpose of awarding punitive damages.” 1

       1
         Such an instruction might be problematic. The instruction was, according to
Victaulic, supported by Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal. 3d 809,
822–823. But as the leading California insurance treatise describes, “It is difficult to
reconcile more recent Supreme Court authority with Egan’s conclusion that merely
vesting an employee with discretion over the handling of plaintiff’s insurance claim
renders that employee a ‘managing agent’ for punitive damages purposes. Only persons
with discretionary authority to determine formal corporate policy affecting a substantial
portion of the company are ‘managing agents’ within the meaning of [Civil Code]
§3294(b). [Roby v. McKesson Corp. (2009) 47 [Cal.]4th 686, 714].” (Croskey, et al.,
Cal. Practice Guide: Insurance Litigation (The Rutter Group 2017) ¶ 13.407.1,

                                             12
       It was against that background that Victaulic’s closing argument focused on
Finberg and her “lies” in the RFAs—and all of it under penalty of perjury.
       The jury deliberated for some five hours, and on July 30 returned with a verdict
answering a total of six separate questions in favor of Victaulic. The jury awarded
damages for breach of contract on each of the seven claims 2 in the exact amount sought,
down to the penny. Likewise the Brandt bad faith attorney fee damages of
$8,259,712.31, the exact amount its expert testified to. 3 The jury also found, by clear and
convincing evidence, fraud, oppression, or malice committed by a managing agent. The
punitive damages trial followed, where, following brief deliberation, the jury awarded
Victaulic $46 million. 4
       Following the verdict, on September 4, the trial court awarded Victaulic
approximately $5.5 million in cost of proof sanctions under Code of Civil Procedure
section 2033.420 for the insurers’ refusal to admit there was a “potential for coverage”
for the claims and that the damage alleged was caused by an “occurrence.” The trial
court noted that the award duplicated the Brandt fee award. 5
       On October 19, the trial court entered judgment in conformity with the above,
adding some $840,000 in prejudgment/postjudgment interest.
       The insurers moved for judgment notwithstanding the verdict and new trial on
multiple grounds, including excessive damages. The trial court denied the motions, and
the insurers appealed.

p. 13-106.)
       2
           Two of the claims, 1521 and Grant, were not submitted to the jury.
       3
        Brandt v. Superior Court (1985) 37 Cal. 3d 813 (Brandt). Actually the bad faith
damage award was slightly larger than the expert’s figure because it includes Victaulic’s
general counsel’s own receipts for travel and other litigation expenses.
       4
        The insurers assert that this award is “unsupported, excessive, and
unprecedented.” And their reply brief has a footnote that, discussing various awards,
says: “To our knowledge, no punitive damage award even approaching $46 million has
been upheld in any California published decision in a bad faith case.”
       5
           The insurers paid this award plus interest, and it is not at issue on appeal.

                                                13
                                       DISCUSSION
       Introduction and Background
       The insurers assert six separate arguments why the judgment cannot stand, the first
of which is that the trial court committed reversible error in two respects. The first is
allowing Victaulic to present evidence of defendants’ litigation conduct, as part of which
the insurers contend that it was error to allow Victaulic’s counsel to use the responses to
the RFAs in the examination of Finberg. 6 The second is the court’s handling of Finberg,
including the court’s own interrogation of her, its abrupt halting of her testimony, and
how the court handled the situation from then on, when Finberg asserted her privilege
against self-incrimination. We agree—there was error in several respects.
       By way of background, Finberg was an experienced claims person with 35 years’
experience, who was involved in handling six of the claims here. She was also the
representative who verified the insurers’ responses to the RFAs sent by Victaulic,
verified, of course, under penalty of perjury.
       As pertinent here, referring to a specific third party claim, the RFAs asked the
insurers to admit that the claim created a “potential for coverage under one or more of the
insurance policies.” The insurers’ responses, prepared and signed by their attorneys,
were after a series of objections: “Deny.” 7

       6
         The other part of the first argument, one we need not address, asserts that the
filing of the declaratory relief actions was privileged under Civil Code section 47,
subdivision (b), and thus could not serve as a basis for tort liability outside of a malicious
prosecution claim. (See generally California Physicians’ Service v. Superior Court
(1992) 9 Cal. App. 4th 1321, 1330.)
       7
          The actual response, illustrated here by one response on behalf of National
Union, was as follows: “NATIONAL UNION incorporates by reference its general
objections and reservations as though fully set forth herein. NATIONAL UNION further
objects to this request in that it is vague, ambiguous, overbroad and unduly burdensome
due to the definition of ‘POTENTIAL FOR COVERAGE.’ NATIONAL UNION further
objects to this interrogatory as vague and ambiguous with respect to the phrase ‘the
allegations.’ NATIONAL UNION further objects to this interrogatory on the ground that
it seeks information that is neither relevant to the subject matter of this action nor
reasonably calculated to lead to the discovery of admissible evidence. Subject to and

                                               14
       Finberg was called by Victaulic as an adverse witness under Evidence Code
section 776. She had noted in the claim files that there was a potential for coverage, and
testified that in her role as a claims examiner she believed the claims asserted property
damage caused by an occurrence, and that is why the claims were defended through the
insurance program, to Victaulic’s benefit. The RFAs, on the other hand, responded as
noted above: after all the objections, “Deny.” Despite that she did not prepare the
responses, Finberg was interrogated at length about all this, interrogation twice
interrupted by the court, the upshot of which was Finberg’s invocation in front of the jury
of her privilege against self-incrimination—and her departure from the witness stand.
       The story cannot adequately be told by description, or narration, or summation, or
paraphrasing. It can adequately be told only by the transcript itself, a story that goes as
follows:
       Confronting Finberg with the responses to the RFAs, counsel for Victaulic asked:
“So each of the seven cases at issue in this litigation presented a potential for coverage;
right?” Finberg responded, “Are you making a distinction between the handling of the
claims or the coverage litigation? Because they’re two separate things.” Counsel then
clarified his question, leading to this colloquy:
       “[MR. JEAN (counsel for Victaulic)]: So in the underlying claims handling, you
make a determination as a potential for coverage one way, and then in the coverage case,
this litigation, the potential for coverage is determined differently?
       “[MS. FINBERG]: They’re two separate things.
       “THE COURT: Answer his question. Are they determined differently?
       “[MS. FINBERG]: I don’t know that I can answer yes or no because they’re two
separate things.”
       Counsel for Victaulic began to formulate a question, interrupted by the court:
“ I can see that we should take our break now.” Following the break, the questioning
resumed. This is how it went:

without waiving the foregoing objections, NATIONAL UNION responds as follows:
[¶] Deny.”

                                              15
       “MR. JEAN: . . . Now, Ms. Finberg, before we left for break we were talking
about potential for coverage. [¶] Do you recall that?
       “[MS. FINBERG]: Yes.
       “[MR. JEAN]: And I think where we left off, you had—you started talking about
that maybe you handled the potential for coverage one way in the—when you handled
claims, and perhaps in the litigation or this litigation maybe it’s handled differently?
[¶] Did I understand your testimony correctly?
       “[MS. FINBERG]: Well, there are two separate issues, two separate things.
       “THE COURT: That was a yes-or-no question.
       “[MS. FINBERG]: I don’t know if I can answer yes or no, Your Honor, the
way—
       “THE COURT: You don’t know if you can answer that.
       “[MS. FINBERG]: The way he asked it. [¶] I’m sorry, would you ask it again.
       “THE COURT: Why don’t you rephrase the question. The witness doesn’t
understand it.
       “MR. JEAN: Thank you. I will. [¶] . . . And I think what I—this is just what I
took away from what you’d said and I just want to clarify. [¶] You handle claims every
day. You handle Victaulic claims; right?
       “[MS. FINBERG]: Yes.
       “[MR. JEAN]: And we’ll call that claims handling?
       “[MS. FINBERG]: Okay, yes.
       “[MR. JEAN]: Okay. And then you have—where you’re testifying today, we
have a litigation?
       “[MS. FINBERG]: Yes.
       “[MR. JEAN]: And that’s a coverage litigation?
       “[MS. FINBERG]: Yes.
       “[MR. JEAN]: And it involves AIG and Victaulic in suit against each other about
whether the policies cover the particular claims, the seven underlying claims; right?
       “[MS. FINBERG]: Yes.

                                             16
       “[MR. JEAN]: Okay. So with that baseline understanding, we were talking about
the potential for coverage; right? Now, do you handle the potential for coverage or make
your assessments as a potential for coverage differently when you handle claims than as
is done in this litigation?
       “THE COURT: Do you understand the question?
       “[MS. FINBERG]: I understand what he’s asked, but it’s hard to answer yes or no
to that question, Your Honor.
       “THE COURT: Do you use the same analysis to determine if there’s coverage in
your claims handling as you would in responding to questions in this lawsuit?
       “[MS. FINBERG]: If it’s yes or no, then I would have to say no.
       “THE COURT: You don’t?
       “[MS. FINBERG]: If I could qualify that.
       “THE COURT: You use a different analysis to determine coverage in coverage
litigation as in claims handling?
       “[MS. FINBERG]: May I—
       “THE COURT: I’m just trying to get you to say yes or no. You’ll be given
plenty of opportunity to make your explanations.
       “[MS. FINBERG]: Okay. I’ll say no then.
       “THE COURT: So the answer is no. Mr. Jean, the answer is no.
       “BY MR. JEAN: . . . All right. So is the answer—I just want to make sure I’m
clear. [¶] Do you treat the analysis for the potential for coverage as a claims handler the
same as is done by AIG in connection with this litigation?
       “MR. GOINES [counsel for the insurers]: Objection. Vague, Your Honor.
       “THE COURT: Not vague.
       “[MS. FINBERG]: No, not—no.
       “BY MR. JEAN: . . . Okay. So—okay. You asked for an opportunity to explain.
       “[MS. FINBERG]: Yes.
       “[MR. JEAN]: Please explain.

                                            17
         “[MS. FINBERG]: Thank you. The claims handling I handle no matter what. In
these claims that you—the claims that are the subject of the litigation I’ve handled the
same all along. Nobody’s asked me to change the way I handle the claims or make any
decisions differently than I normally would because of this coverage litigation.
         “[MR. JEAN]: But then in connection with the litigation—
         “THE COURT: So how is it that your analysis is different if it’s coverage
litigation than if it’s claims handling? Isn’t the potential for coverage based on the facts
that you find by the plaintiff in the underlying case? Isn’t that where you get the concept
of potential for coverage?
         “[MS. FINBERG]: In the underlying case, yes, that’s correct.
         “THE COURT: So how is that analysis different in a coverage case?
         “[MS. FINBERG]: Because in this coverage litigation—
         “THE COURT: So what? The facts are the facts, aren’t they?
         “[MS. FINBERG]: We’re taking a legal position in this coverage—
         “THE COURT: The facts of the underlying cases are the facts of the underlying
cases.
         “[MS. FINBERG]: Yes, correct.
         “THE COURT: Is that right? [¶] And is it an analysis of the facts of the
underlying cases that lead you to a determination of whether there’s a potential for
coverage?
         “[MS. FINBERG]: Yes.
         “THE COURT: And that’s both in—wherever you are and whenever you are,
that’s the rule; right?
         “[MS. FINBERG]: That’s correct.
         “THE COURT: Okay. Good luck, Mr. Jean.
         “MR. JEAN: Thank you, Your Honor.”
         Brief questioning followed, counsel for Victaulic asking Finberg “what AIG is
doing in litigation.” Finberg answered: “The only thing I know about this litigation is
involving the RFAs that I reviewed with counsel and signed.”

                                             18
         The court said, “excuse me one moment,” and there was a short pause in the
proceedings, followed by this:
         “THE COURT: Ladies and gentlemen of the jury, before trial each party has the
right to ask other parties to admit in writing that certain matters are true. Those are called
requests for admissions, RFA. If the other party admits those matters, you must accept
them as true. No further evidence is required to prove them, okay? I just wanted to read
my usual instruction on discovery.”
         Victaulic’s counsel said: “Thank you. I appreciate that. Thank you, Your
Honor.”
         There followed several pages of questioning by counsel for Victaulic, confirming
that Finberg had been deposed as AIG’s person most knowledgeable, and that AIG had
decided to defend the claims. Finberg also authenticated the individual insurer’s
responses to the RFAs, and acknowledged that she verified those responses. And Finberg
pointed out, the insurers’ response: “ ‘Deny’ ” was “after a series of objections.”
         Victaulic’s counsel then asked a question beginning with his claimed confusion,
leading to some brief questioning by counsel—and then questioning by the court. This is
how it all went:
         “[MR. JEAN]: So when you were—I’m a little confused because how is it that
you could sign these under oath under penalties of perjury and deny the potential for
coverage when you knew as a claims handler that there was the potential for coverage?
         “[MS. FINBERG]: I think I can clear up your confusion.
         “[MR. JEAN]: Yeah. Please do. I mean, that was an open-ended question, so go
ahead.
         “[MS. FINBERG]: Okay. Thank you. These verifications, these requests for
admissions were drafted and provided to me by coverage counsel, Mr. Eads’ office.
         “[MR. JEAN]: Yes.
         “[MS. FINBERG]: These are legal documents. I’m not an attorney. I’m just an
adjuster. And I read them, and I reviewed them with Mr. Eads and his partners and was
told, ‘This is a legal position that we’re taking in the coverage litigation. We’re

                                             19
preserving legal issues. We’re asking the Court for guidance, if you will.’ [¶] It had
nothing to do with the way I handled my claims. Nobody ever asked me to withdraw a
defense or stop handling or change the way I was handling. I signed these as the person
most knowledgeable, the legal position asking the Court for guidance.
       “THE COURT: So you knew it was false when you verified it under penalty of
perjury based on your own understanding of the underlying facts? Is that what you’re
telling us?
       “[MS. FINBERG]: What was false, Your Honor?
       “THE COURT: It’s false that there was, in fact, a potential for coverage under all
of those seven. You told us that already today. [¶] And what you’re telling me is that
you signed this under penalty of perjury, and you knew it was false?
       “[MS. FINBERG]: No, Your Honor. This is not false. I was handling my claims
because there was a potential for coverage under all those claims. But these verifications,
RFAs, were legal positions that were being taken in this coverage litigation, so . . .
       “THE COURT: So you knew that the underlying facts were that it was true that
there was a potential for coverage, and yet you write in your verification that you declare
under penalty of perjury that the foregoing responses are true and correct?
       “[MS. FINBERG]: Right, because that was true and correct to the legal position
that was being taken.
       “THE COURT: Oh, okay.
       “[MS. FINBERG]: So I wasn’t being inconsistent.
       “THE COURT: I understand now. The facts don’t matter. [¶] Is that what
you’re telling me?
       “[MS. FINBERG]: The facts don’t matter in this litigation.
       “THE COURT: All right.
       “BY MR. JEAN: . . . So—
       “THE COURT: May I see counsel in my chambers.”
       Following the session in chambers, the court returned to tell the jury, “we are
going to take an early lunchtime today. We’re going to come back at one o’clock, and

                                             20
we are going to proceed. [¶] We’ll have a different witness this afternoon, and we’ll be
dealing with things that are outside of your purview during that time, all right?” The
court then discharged the jury, and requested Finberg to “step outside.” She did, and this
is what followed:
       “THE COURT: The record will reflect that the jurors have departed the
courtroom and the witness, Ms. Finberg, has stepped outside. [¶] Is there anything that
either of the counsel wish to put on to the record?
       “MR. GOINES: Not at this time, Your Honor . . . .
       “THE COURT: All right. Well, I will try to summarize. We’ve had a
conversation, counsel and I, in my chambers regarding the testimony of the current
witness, and the admission that she perjured herself in her verification. [¶] And at the
conclusion of our conversations, it was determined at Mr. Goines’ request that the
witness be allowed an opportunity to obtain private counsel and either take the Fifth
Amendment and refuse to respond to questions or not. [¶] Consequently in our
questioning we’re going to have a different witness this afternoon starting at one o’clock,
and Ms. Finberg will be back tomorrow at nine o’clock for continued examination.” The
court broke for lunch.
       There is no record of the discussion in chambers. But when the parties returned to
the courtroom, the insurers’ counsel made a record of arguments the court had obviously
already rejected, and Agelo Reppas, one of the attorneys for the insurers, moved for a
mistrial. After brief argument, it was denied. This is the entire proceeding:
       “THE COURT: All right. We’re now on the record. The parties and counsel are
present. The jurors are out of the room. [¶] Ms. Reppas is at the counsel table. [¶] You
wish to address the Court?
       “MS. REPPAS: Yes, Your Honor. Thank you. Based on what happened just
before the lunch break, the defendants are moving for a mistrial based on the fact that the
interactions in front of the jury, Your Honor’s questioning of the witness and then going
into chambers clearly conveyed to the jury that there was something serious, something
was amiss, that Your Honor disbelieved the credibility of the witness, and that is not an

                                             21
impression now that can be cured before the jury, so the jury has been irrevocably tainted
by witnessing the events that took place right before the lunch break.
       “Your Honor, we would also like to put on the record our objections to Your
Honor’s questioning of the witness in a manner that telegraphed to the jury that Your
Honor disbelieved the witness, and that that is invading the exclusive province of the jury
to determine the credibility of the witness, and now the jury has the impression that Your
Honor disbelieves Ms. Finberg, and on that basis we’d also like to lodge our objection for
the record.
       “THE COURT: All right. So that’s one motion, two bases?
       “MS. REPPAS: Well, Your Honor. Sorry. It’s a motion for mistrial and also an
objection on the same basis.
       “THE COURT: All right. Do plaintiffs wish to respond?”
       Victaulic’s counsel responded with 12 lines of opposition. The court then asked if
the insurers’ counsel had a reply. This is what followed:
       “MS. REPPAS: Can I briefly respond, Your Honor? [¶] While the in-chambers
discussion may be appropriate, it was done at such a point in time and in the middle of
proceedings while the jury was still waiting that it clearly conveyed to them that
something was seriously amiss, and it led—was right on the heels of—
       “THE COURT: And when should I have had that in-chambers conference?
Tomorrow?
       “MS. REPPAS: No. I’m not suggesting tomorrow. I’m suggesting at the time—
the jury witnesses all this, and the point here is, Your Honor, is that the jury cannot forget
what it has seen, it cannot forget what it has heard, and it is tainted now.
       “THE COURT: All right. The motion is denied, and the objection is overruled.”
       Mr. Goines, co-counsel for the insurers, asked for a brief adjournment, to address
whether his law firm (Greenberg Traurig) could continue to represent the insurers based
on Victaulic’s intent to use the RFA responses prepared by his firm as a basis for
impeachment of Finberg. Counsel wanted to speak with his firm’s general counsel. And,
he concluded, “I think our clients will be severely prejudiced, one, if they can go forward

                                              22
with that discovery; two, if I can’t get advice as to whether Greenberg Traurig should
continue as counsel for the defendants on this case.”
       The next day, Finberg appeared with personal counsel, who advised the court that
Finberg would assert her Fifth Amendment privilege against self-incrimination and refuse
to testify further. In the course of discussion, counsel for Victaulic acknowledged that
Finberg had “of course” waived the privilege as to “the topics she has answered the
questions on.” The court ruled that Finberg “will take the stand, will retake the stand,
and the question will be posed to her.” The court went on to note that it is a “difficult
question to determine what areas of inquiry she may have waived her right to assert” the
privilege, acknowledging that the court was “really . . . uncertain . . . with regard to the
waiver question.”
       Later, in preparation for Finberg’s retaking the stand, Victaulic’s counsel again
indicated his understanding that the privilege would be evaluated on a “particular
question” by question basis. Following brief colloquy, the court said it did not want
counsel “to go through his litany of questions and have every questions that he wants to
ask and have her answer in the same manner to every one of them.” That, the court said,
would be “very wasteful of time.”
       The insurers’ counsel requested that at the least the testimony be previewed in
camera. The court refused. The insurers again moved for a mistrial, on the basis that,
with Finberg’s testimony cutoff midstream, it would be impossible for the insurers to
rehabilitate her or give her an opportunity to explain her prior testimony. The court
denied the motion.
       Finberg resumed the stand and in the jury’s presence broadly asserted a privilege
not to testify to any substantive questions from either Victaulic or the insurers. And the
court excused her. The insurers renewed their motion for mistrial. The court again
denied it.
       The above, we conclude, manifests several errors, beginning with the allowance of
the RFAs into evidence.
       Requests for Admissions Are Not Admissible

                                              23
       Gonsalves v. Li (2015) 232 Cal. App. 4th 1406 (Gonsalves) involved an automobile
accident. Plaintiff called defendant as an adverse witness and asked about his qualified
denials of plaintiff’s RFAs that he was responsible for the accident. And in closing
argument, plaintiff emphasized that the denials were evidence defendant refused to take
responsibility for plaintiff’s injuries. (Id. at p. 1413.) The jury returned a verdict for
plaintiff for $1,208,642.86. (Id. at p. 1411.) Our colleagues in Division Five reversed,
holding it was error for the trial court to allow questions about RFAs.
       The court first discussed analogous cases, including Rifkind v. Superior Court
(1994) 22 Cal. App. 4th 1255, holding that it was improper to ask at deposition “ ‘legal
contention questions,’ ” which questions were condemned as requiring the party “ ‘to
make a “law-to-fact” application that is beyond the competence of most lay persons.’ ”
(Gonsalves, supra, 232 Cal.App.4th at p. 1415.) These concerns, the court concluded,
“apply to the use of qualified denials to RFA’s in the examinations here. Li was asked to
explain ‘by memory and on the spot’ and without the ability to consult with his attorney
why he took the legal position that he could not admit or deny certain RFA’s without
further inquiry. And he was asked to do this not in a deposition, as in Rifkind, but in front
of the jury.” (Id. at pp. 1415–1416.)
       And the court went on to hold: “The weight of authority in other jurisdictions also
favors Li’s position. Massachusetts’s highest court interpreted a statutory scheme similar
to California’s and concluded that denials to RFA’s are not admissible evidence at trial:
‘The purpose of [RFA’s] is to narrow the issues for trial by “identifying those issues and
facts as to which proof will be necessary.” [Citation.] A denial . . . is not a statement of
fact; it simply indicates that the responding party is not willing to concede the issue and,
as a result, the requesting party must prove the fact at trial. [Citations]. The sanction for
improperly responding to [RFA’s] is the shifting of the award of incurred expenses[—see
rule 36(a) of the Massachusetts Rules of Civil Procedure]. [¶] Further, [Massachusetts
Rules of Civil Procedure, rule 36(b)], which governs [RFA’s], does not specifically
provide for the admission of denials in evidence. Although the rule states that admissions
are conclusively binding on the responding party, it makes no parallel provision for the

                                              24
use of a denial. By contrast, [Massachusetts Rules of Civil Procedure, rule 33(b)],
governing interrogatories, states that the answers to interrogatories “may be used [at trial]
to the extent permitted by the rules of evidence.” The omission of a similar provision in
rule 36(b) indicates that, although admissions have binding effect, denials do not have
such an effect and cannot be introduced in evidence.’ [Citation.] Therefore, the trial
court ‘incorrectly concluded that a denial of a request for admission is admissible as a
prior inconsistent statement’ to impeach a witness at trial. [Citation.]” (Gonsalves,
supra, 232 Cal.App.4th at p. 1416, fns. omitted.)
       Finally, Gonsalves noted that appellate courts in at least three states have similarly
held that denials of RFA’s are inadmissible at trial, citing to Winn Dixie Stores, Inc. v.
Gerringer (Fla.Dist.Ct.App. 1990) 563 So. 2d 814, 817; Mahan v. Missouri Pacific
Railroad Co. (Mo.Ct.App. 1988) 760 S.W.2d 510, 515; and American Communications
v. Commerce North Bank (Tex.App. 1985) 691 S.W.2d 44, 48.) (Gonsalves, supra,
232 Cal.App.4th at pp. 1416–1417.)
       Gonsalves has a footnote that said this: “At least one court has held that such
refusal may be relevant evidence of bad faith at trial in bad faith insurance cases,” citing
Home Ins. Co. v. Owens (Fla.Dist.Ct.App. 1990) 573 So. 2d 343, 344 (Owens).
(Gonsalves, supra, 232 Cal.App.4th at p. 1417, fn. 8.) Relying in part on that footnote,
Victaulic contends that Gonsalves is distinguishable on two bases. First, the RFAs in
Gonsalves were consistent with the witness’s trial testimony, whereas the denials
Victaulic used to cross-examine Finberg were “inconsistent” with her trial testimony and
therefore admissible as prior inconsistent statements under Evidence Code section 780,
subdivision (h). Second, Gonsalves carves out an “exception” for insurance bad faith
cases. We disagree.
       Evidence Code section 780, subdivision (h) provides that prior inconsistent
statements are admissible “[e]xcept as otherwise provided by statute.” California’s
discovery statutes address the use of RFAs and the sanction for improper denial. They do
not authorize use of denials as evidence at trial. (See Code Civ. Proc., § 2033.410.)
Indeed, holding RFA denials not admissible, Gonsalves cited with approval the

                                             25
Massachusetts Supreme Court decision in Gutierrez v. Massachusetts Bay Transportation
Authority (2002) 437 Mass. 396, where the Massachusetts high court expressly held that
RFA denials were not admissible as prior inconsistent statements, reasoning that under
Massachusetts’s discovery statutes—statutes, as Gonsalves noted, similar to
California’s—RFA denials represent legal positions, not statements of fact. (Gonsalves,
supra, 232 Cal.App.4th at p. 1416.)
       As seen from the transcript quoted above, this was precisely Finberg’s position
here: she signed at the direction of the insurers’ counsel when she verified the denials,
responses that represented their “legal position.” In short, Gonsalves’s holding that RFA
denials are inadmissible does not rest on whether the denial is consistent or inconsistent
with the trial testimony, but on the fact that RFA responses represent legal strategy.
       As to the “exception” for bad faith cases, although Gonsalves stated that one court
held that “such refusal may be relevant . . . at trial in bad faith insurance cases,” the court
did not endorse that rule, and noted that it “has been criticized as unfairly compromising
a defendant’s right to defend himself.” 8 (Gonsalves, supra, 232 Cal.App.4th at p. 1417,
and fn. 8.)

       8
         In fact, a close reading of the case Gonsalves cited in the footnote—Owens,
supra, 573 So. 2d 343—reveals that it does not even support the point for which it was
cited. In Owens, the insured claimed its insurer failed to settle his first party automobile
claim in bad faith. (Id. at p. 344.) The opinion notes that the insurer denied coverage and
bad faith in its pleadings, and denied coverage in its initial responses to RFAs, before
later admitting coverage. On appeal, the insurer argued the insured improperly attempted
to cross-examine the claims handler using the insurer’s pleadings. The opinion provides
no detail about how the insured attempted to use the pleadings, and does not indicate
whether the insured even attempted to use RFA denials. In fact, the opinion notes, “the
insurer’s pleadings in the case sub judice were, in the end, denied admittance.” (Ibid.)
Thus, while the court did generally state that litigation conduct was “relevant” to whether
the insurer denied the claim in bad faith, the statement was apparently dictum, since the
evidence was not admitted.
       Moreover, the one case Owens cited for the proposition that litigation conduct was
“admissible, relevant evidence” in bad faith cases does not even mention the use of any
pleadings as evidence, much less RFA denials. The case was T.D.S. Inc. v. Shelby Mut.
Ins. Co. (11th Cir. 1985) 760 F.2d 1520, 1527, which involved an insurance claim for a

                                              26
       The Interrogation by the Court Was Error
       The insurers assert that in addition to allowing use of the responses to RFAs, the
trial court committed a series of prejudicial errors in how it handled Finberg, beginning
with the argument that the court “improperly assumed the role of advocate and impugned
Finberg’s integrity before the jury.” Describing the court’s conduct with verbs and
adjectives not generally seen in appellate briefs—at least not in briefs from respected
counsel, which all three of the insurers’ counsel are—the insurers assert that the trial
court acted most inappropriately in the manner in which it questioned Finberg, “assuming
the role of cross-examiner, questioning Finberg in a way that was overtly hostile and
sarcastic,[9] and ultimately accusing her of perjury in front of the jury.”
       Victaulic’s brief responds that “the trial court’s questions simply attempted to
clarify the seemingly contradictory evidence of Finberg’s trial testimony and her
verification of the RFA responses—the trial court’s questions did not imply that Finberg
perjured herself during her testimony at trial. The trial court did not belittle Finberg or
express its views on the issue in the case.” In addition to its claim of “clarif[ication],”
Victaulic asserts, however halfheartedly, that what the trial court did here was “fair
comment” under Article VI, section 10, of the California Constitution. 10 It also asserts
that the jury was instructed that the court “ ‘ha[s] not intended by anything I have said or
done, or by any questions that I have asked, to suggest . . . that I believe or disbelieve any

fire at the insured’s restaurant. The insurer contended that the fire was arson and refused
the claim. The entire discussion of the use of “litigation conduct” was about the fire
investigation: “The gist of Shelby’s complaint is that TDS was allowed, over objection,
to attack the accuracy and adequacy of the fire investigation which Shelby asserted
resulted in the denial of TDS’s claim.” (Ibid.) That, of course, has nothing to do with
any pleadings.
       9
         The brief makes accusations such as the trial court “mocked” Finberg and
“ridiculed” her, and was overtly hostile and harsh.
       10
        Which provides: “The court may make any comment on the evidence and the
testimony and credibility of any witness as in its opinion is necessary for the proper
determination of the cause.”

                                              27
witness. If anything I have done or said has seemed so to indicate, you must disregard it
and form your own opinion.’ ”
       Victaulic’s reading of the record is, we conclude, myopic, that any fair reading of
the record reveals that the court acted in a way that from every indication was hostile to
Finberg—and that it did not believe her. It was error, error that could not be cured by a
two-sentence instruction.
       There is no question the trial court has the power to examine witnesses. (Evid.
Code, § 765, subd. (a); see Estate of Dupont (1943) 60 Cal. App. 2d 276, 290.) But, the
Supreme Court has cautioned, in such examination the trial court cannot “become an
advocate for either party or cast aspersions . . . upon a witness.” (McCartney v.
Commission on Judicial Qualifications (1974) 12 Cal. 3d 512, 533, overruled on other
grounds by Spruance v. Commission on Judicial Qualifications (1975) 13 Cal. 3d 778,
799, fn. 18.) The reason, of course, is the significance of the court in the eyes of the jury,
the influence it has. Thus the admonition from long ago is still valid today: a trial court
“should exercise great caution in the examination of witnesses, lest by the nature or form
of the questions asked he throw the weight of his influence to the one side or the other.”
(People v. Silva (1924) 67 Cal. App. 351, 357.) In sum, any interrogation by the court
must be “done with care,” for if it is not, the jury might “because of the court’s
intervention, . . . alone, indulge in adverse inferences and conclusions . . . .” (People v.
Robinson (1960) 179 Cal. App. 2d 624, 639.)
       In People v. Sturm (2006) 37 Cal. 4th 1218, the Supreme Court reversed the death
penalty determination, ruling in part that the trial court committed misconduct by making
disparaging comments directed toward defense counsel and defense expert witnesses, and
by interposing objections to defense counsel’s questions, leaving the overall impression
that the court favored the prosecution. Doing so, the court included this instruction:
       “Trial judges ‘should be exceedingly discreet in what they say and do in the
presence of a jury lest they seem to lean toward or lend their influence to one side or the
other.’ (People v. Zammora (1944) 66 Cal. App. 2d 166, 210.) A trial court commits
misconduct if it ‘ “persists in making discourteous and disparaging remarks to a

                                              28
defendant’s counsel and witnesses and utters frequent comment from which the jury may
plainly perceive that the testimony of the witnesses is not believed by the judge.” ’
(People v. Boyette (2002) 29 Cal. 4th 381, 460, quoting People v. Mahoney [(1927)]
201 Cal. [618,] 627.)” (People v. Sturm, supra, 37 Cal.4th at pp. 1237–1238.)
       The trial court’s questioning of Finberg here violated those principles—and was
improper. While it is difficult to read inflection, or tone, or demeanor from a cold
transcript, any fair reading of the transcript here lends support to the insurers’ contention
that the court “openly mocked Finberg on the stand, acting as an advocate for Victaulic.”
It began when Finberg attempted to explain the distinction between her role as a claims
handler and the insurers’ legal positions reflected in the RFA responses; the trial court
apparently grew frustrated and intervened with the admonition to “[a]nswer his question.”
Two pages later was more of the same, telling her that Victaulic’s counsel’s question was
a “yes-or-no question.” Then, when Finberg said she was not sure she could answer with
a simple yes or no, the court, apparently incredulously, said: “You don’t know if you can
answer that?” Two pages later, the court took over the questioning the first time, telling
Finberg, “I’m just trying to get you to say yes or no. You’ll be given plenty of
opportunities to make your explanations.” The court also asked Finberg to admit that the
“facts are the facts, aren’t they?” and then turned Finberg back over to Victaulic’s
counsel, remarking: “Good luck, Mr. Jean.”
       Before long, the court intervened again, acting as cross-examiner for Victaulic, in
the colloquy quoted above, grilling her with questions including: “So you knew [the
RFA denial] was false when you verified it under penalty of perjury based on your own
understanding of the underlying facts? Is that what you’re telling us?” Finberg
responded with a question, to which the court said, “It’s false that there was, in fact, a
potential for coverage [for all of the underlying claims]. You told us that already today.
[¶] And what you’re telling me is that you signed this under penalty of perjury, and you
knew it was false?” Finberg said: “This is not false. I was handling my claims because
there was a potential for coverage under all those claims. But these verifications, RFAs,
were legal positions that were being taken in this coverage litigation, so . . . .” The court

                                             29
interrupted: “So you knew that the underlying facts were that it was true that there was a
potential for coverage, and yet you write in your verification that you declare under
penalty of perjury that the foregoing responses are true and correct?” Finberg answered,
“Right, because that was true and correct to the legal position that was being taken.
[¶] . . . [¶] So I wasn’t being inconsistent.” The court’s interrogation ended with this:
       “THE COURT: I understand now. The facts don’t matter. [¶] Is that what
you’re telling me?
       “[MS. FINBERG]: The facts don’t matter in this litigation.”
       Such conduct, we conclude, was misconduct, as it was in other cases that were
reversed based on such misconduct alone. (See, for example, People v. Sturm, supra,
37 Cal.4th at p. 1243; People v. Mahoney, supra, 201 Cal. at p. 627; People v. Perkins
(2003) 109 Cal. App. 4th 1562, 1571–1572; People v. Williams (1942) 55 Cal. App. 2d 696,
702–703; People v. Earl (1935) 10 Cal. App. 2d 163, 166.)
       But there is much more here than just this misconduct—several errors in the trial
court’s handling of Finberg’s invocation of the Fifth Amendment privilege.
       The Trial Court Erred in Its Handling of Finberg’s Invocation of the
       Privilege Against Self-Incrimination
       The insurers contend that the trial court erred in four separate ways in how it dealt
with Finberg’s invocation of the privilege: (1) allowing her to invoke her privilege after
she had already testified under Victaulic’s questioning for nearly two days, (2) allowing
her to unilaterally invoke the privilege on a blanket basis, (3) failing to either strike
Finberg’s testimony or declare a mistrial, and (4) requiring Finberg to invoke the
privilege in front of the jury.
       Victaulic’s response does not come to grips with most of the insurers’ arguments,
beginning its response with the assertion that “AIG ignores that it has waived most of its
various claims of error.” Passing over that waiver of “most” is not waiver of all, we
begin with Victaulic’s claim of waiver—and conclude it has no merit.
       To begin with, most of the errors which the insurers assert on appeal were
decisions the trial court made sua sponte. Thus, for example, the trial court twice

                                              30
interrupted Victaulic’s questioning of Finberg and began interrogating her itself. Then,
dissatisfied with her answers, the court halted the proceedings in the middle of Finberg’s
testimony and ordered counsel to chambers. None of these actions was requested by
Victaulic, so the insurers had no opportunity to interpose an objection before the court
acted.
         There is no record of the discussion in chambers. But when the parties returned to
the courtroom, the insurers’ counsel made a record of arguments the court had obviously
already rejected, and “based on what happened just before the lunch break,” moved for a
mistrial “based on the fact that the interactions in front of the jury, Your Honor’s
questioning of the witness and then going into chambers clearly conveyed to the jury that
there was something serious, something was amiss, that Your Honor disbelieved the
credibility of the witness, and that is not an impression now that can be cured before the
jury, so the jury has been irrevocably tainted by witnessing the events that took place
right before the lunch break.”
         In short, the insurers’ counsel clarified that the insurers were moving for a mistrial
and also objecting to the court’s questioning of the witness, and to the court’s having
telegraphed its disbelief of Finberg’s testimony. And when counsel noted the court’s
abrupt decision to halt the proceedings and demand a “chambers” conference, the court
interrupted counsel midsentence with this: “And when should I have had that in-
chambers conference? Tomorrow?” The court then ruled: “All right. The motion is
denied, and the objection is overruled.”
         The next day, when Finberg returned with her personal counsel to assert the
privilege, the insurers renewed their motion for mistrial. Counsel again objected to the
court’s handling of the matter, specifically noting two critical points: first, it was wrong
to make Finberg invoke the privilege in front of the jury; and second, that it was unfair to
allow Finberg to invoke the privilege in the middle of her testimony without giving the
insurers an opportunity to question her. Counsel also asked the court to recuse itself
based on its improper treatment of Finberg. The court rejected these arguments,

                                               31
responding: “Well, let me stop you right there. I think that you’re completely wrong
about the facts that are underpinning that, and I will not recuse myself.”
       When Finberg’s personal counsel appeared, the trial court told him that it had
essentially made up its mind how to proceed: “All right, Mr. Nedeau. But I will tell you
that my perception of how to proceed in this unusual circumstance is that your client will
take the stand, will retake the stand, and the question will be posed to her.” 11 The
insurers’ counsel again noted it was fundamentally unfair to allow Finberg to assert her
privilege mid-testimony. The court responded indifferently: “Every litigant is prejudiced
in every case about a testimony or the lack of testimony from one witness or another.”
Counsel persisted, and again attempted to explain the insurers’ objection: “We’re in the
middle of a critical witness who handled six of the seven underlying claims at issue in
this case, and now we can’t put on any evidence to present our side of the story and to
rehabilitate her? That is severely—that’s preventing us from having a fair trial.”
Without further explanation, the court denied the motion.
       Later that day, when Finberg was ready to resume the stand, the insurers’ counsel
noted the trial court had already determined Finberg would invoke the privilege in the
presence of the jury. 12 Victaulic’s counsel attempted to assert that the defense had
acquiesced in this procedure, but the insurers’ counsel disagreed: “Well, we would
request it [i.e., that Finberg be questioned outside the presence of the jury], but I
understand it’s going to be denied.” Then, after Finberg took the stand, the insurers again
renewed the motion for mistrial, “in light of the fact that we will not be able to
rehabilitate Ms. Finberg.” The court responded: “It’s denied.”

       11
         In the course of this discussion, the trial court denied having accused Finberg of
perjury. Finberg’s counsel responded by a reading a portion of the transcript where, he
claimed, the trial court had done just that.
       12
         When Finberg’s personal counsel stated that Finberg will “take the Fifth [on] all
substantive questions from either side after she invokes it,” the trial court added: “Either
side and me too, I’ll bet.” The transcript reflects that Finberg’s personal counsel “[n]ods
head up and down.”

                                              32
       In sum, the insurers’ counsel repeatedly objected to the trial court’s handling of
Finberg—its interrogation of her, its decision to halt her testimony, and its decision to
require Finberg to invoke the privilege in front of the jury. And they repeatedly
requested a mistrial. The insurers made their position clear every step of the way.
       Waiver
       In People v. Williams (2008) 43 Cal. 4th 584, the Supreme Court discussed the
issue of waiver of the privilege against self-incrimination, saying this: “A nonparty
witness may elect to waive his or her privilege against self-incrimination. In addition, in
some instances a waiver may be implied when a witness has made a partial disclosure of
incriminating facts. ‘It is well established that a witness, in a single proceeding, may not
testify voluntarily about a subject and then invoke the privilege against self-incrimination
when questioned about the details. [Citation.] The privilege is waived for the matters to
which the witness testifies, and the scope of the “waiver is determined by the scope of
relevant cross-examination.” [Citation.]’ (Mitchell v. United States (1999) 526 U.S. 314,
321 . . . .)” (People v. Williams, supra, at p. 615.) In other words, notwithstanding the
significance of the privilege, a witness is subject to cross-examination on topics on which
he or she has already testified. As we tersely put it in Fost v. Superior Court (2000)
80 Cal. App. 4th 724, 735, “the right to cross-examination cannot be defeated by a valid
claim of privilege, even a privilege as strong as that embodied in the Fifth Amendment.”
       “[T]he waiver rule ‘rests primarily . . . on the need to avoid leaving triers of fact
with the limited version of relevant information that would be before them if a witness
was permitted to at will pick a point at which to invoke the privilege.’ ” (People v.
Williams, supra, 43 Cal.4th at p. 616, quoting 1 McCormick on Evidence (6th ed. 2006)
§ 133, p. 562.) This would undermine the integrity of the fact finding process, as it
would mean that only one party could question a witness, giving that party an unfair
advantage. (Mitchell v. United States, supra, 526 U.S. at pp. 322–323.)
       That unfairness was present here. Victaulic was allowed to examine Finberg. The
insurers were not. This was error, an error that Victaulic itself noted—indeed, perhaps
the court itself, admitting it was “really . . . uncertain” as to the waiver issue. The court

                                              33
nevertheless ruled as it did, allowing Finberg’s testimony to remain in the case without
more, to devastating effect. 13
       The Blanket Claim of Privilege
       The insurers also contend that it was error for the trial court to allow Finberg to
invoke the privilege on a blanket basis. We agree, as we ourselves have held, in Warford
v. Medeiros (1984) 160 Cal. App. 3d 1035, 1045. There, following an exhaustive
discussion of the privilege, and citing numerous state and federal cases, we concluded as
follows: “For the reasons set forth in the federal case law, we hold that a blanket refusal
to testify is unacceptable; a person claiming the Fifth Amendment privilege must do so
with specific reference to particular questions asked or other evidence sought. We hold,
additionally, that once this is done, the trial court must undertake a particularized inquiry
with respect to each specific claim of privilege to determine whether the claimant has
sustained his burden of establishing that the testimony or other evidence sought might
tend to incriminate him.” (See also Oiye v. Fox (2012) 211 Cal. App. 4th 1036, 1053;
Fuller v. Superior Court (2001) 87 Cal. App. 4th 299, 308; Blackburn v. Superior Court
(1993) 21 Cal. App. 4th 414, 428.)
       Moreover, Finberg could invoke the privilege only as to testimony that would
furnish a “ ‘link in the chain’ ” of a perjury charge. (Warford v. Medeiros, supra,
160 Cal.App.3d at p. 1043.) Without analyzing whether there was any real likelihood

       13
          As we said in Fost v. Superior Court, supra, 80 Cal.App.4th at pp. 735–736, fn.
omitted: “Where a witness refuses to submit to cross-examination, or is unavailable for
that purpose, the conventional remedy is to exclude the witness’s testimony on direct. As
stated in Witkin: ‘In either a civil or criminal case, where a party is deprived of the
benefits of cross-examination of a witness by refusal of the witness to answer, the trial
court may strike out the direct examination. [Citations.]’ (3 Witkin, Cal. Evidence, [(3d
ed. 1986)] § 1877, p. 1831.) This rule applies even ‘where the refusal to answer is based
on a valid claim of privilege.’ (Ibid.) Where a witness refuses to submit to proper cross-
examination regarding material issues, the striking out or partial striking out of direct
testimony is common . . . . Striking a witness’s entire testimony is, of course, a ‘drastic
solution,’ only to be employed ‘after less severe means are considered.’ [Citations.]”

                                             34
Finberg committed perjury, 14 such risk related at the most to the responses to the RFAs.
But Finberg’s testimony to Victaulic’s counsel covered much more than just the RFAs,
and questioning of her by the insurers’ counsel would have addressed other relevant
subjects, including how she handled the claims.
       This ruling, too, was error. 15 But perhaps the most egregious error was yet to
come, making Finberg invoke the privilege in front of the jury.
       In the Presence of the Jury
       As indicated, the trial court determined that Finberg would “retake the stand”
and invoke the privilege in front of the jury. This ruling is hard to comprehend, in light
of the authorities, beginning with this court’s holding in People v. Johnson (1974)
39 Cal. App. 3d 749, 757. As the Supreme Court has put it: “Allowing a witness to be put
on the stand to have the witness exercise the privilege before the jury would only invite
the jury to make an improper inference” from the invocation of the privilege. (People v.
Frierson (1991) 53 Cal. 3d 730, 743; People v. Holloway (2004) 33 Cal. 4th 96, 130
[“having the witness exercise her privilege in the jury’s presence would be ‘in direct
violation of Evidence Code section 913’ ” 16]; People v. Richardson (2008) 43 Cal. 4th
959, 1011.)
       As one Court of Appeal summed up: “Once a court determines a witness has a
valid Fifth Amendment right not to testify, it is, of course, improper to require him to

       14
          Perjury requires that the witness make a willful statement that he or she knows
to be false. (People v. Garcia (2006) 39 Cal. 4th 1070, 1091.) As the extensive testimony
quoted makes clear, Finberg did not prepare the responses to the RFAs. She signed what
the attorneys prepared in connection with the litigation, and did not believe it was false.
       15
          Victaulic argues “invited” error in connection with this claim, based on the
insurers’ counsel’s summary of his understanding of how Finberg’s testimony would be
handled. But such summation was only after it was clear the trial court planned to allow
Finberg, through personal counsel, to decide unilaterally whether the privilege applied
and to assert the privilege as to all questions.
       16
          Evidence Code section 913 states that it is impermissible for the jury to draw an
inference from a claim of privilege regarding “any matter at issue in the proceeding,” and
that any “party who may be adversely affected” by such an inference is entitled to a
remedy.

                                             35
invoke the privilege in front of a jury; such a procedure encourages inappropriate
speculation on the part of jurors about the reasons for the invocation. An adverse
inference, damaging to the defense, may be drawn by jurors despite the possibility the
assertion of privilege may be based upon reasons unrelated to guilt. These points are well
established by existing case law. (See, e.g., People v. Mincey [(1992)] 2 Cal.4th [408,]
441.)” (People v. Lopez (1999) 71 Cal. App. 4th 1550, 1554.)
       Victaulic suggests that because the privilege belonged to Finberg, it was up to her
whether to assert it in front of the jury, and the insurers cannot complain about her
choice. Here, however, Finberg did not make a choice. The trial court “chose” for her.
Victaulic also asserts the trial court has discretion to force a witness to invoke the
privilege in the jury’s presence, citing Warford v. Medeiros, supra, 160 Cal.App.3d at
p. 1048. But we said there only that the trial court has discretion to require the witness to
invoke the privilege “in open court” rather than in camera. “[I]n open court” does not
equate with “in front of the jury.”
       That, then, is the setting vis-à-vis critical witness Finberg: her attempt to explain
how she came to verify the RFAs prepared by counsel twice interrupted by the court, the
second time injecting itself into the proceedings with aggressive, it not hostile,
examination; abruptly stopping the testimony for the in-chambers session where the court
stated that Finberg had “made an admission that she perjured herself”; as much as
compelling her to invoke the privilege in front of the jury; and then simply excusing
Finberg from testifying further, denying the insurers any opportunity to rehabilitate her,
or even ask her to explain or clarify her answers.
       Beyond that, the trial court allowed Victaulic to exploit the Finberg situation
throughout the rest of the trial, including, for example, allowing this question of Van De
Voorde, Victaulic’s chief legal officer: “Q. [by Mr. Jean]: [W]hen you heard Ms.
Finberg tell us that she lied on the request for admission, what impact, if any, did that
have on you?” Over objection, Van De Voorde replied, “I’m both personally and
professionally shocked and disgusted. . . . [W]e’re here as a result of what I would
consider to be some pretty egregious and malicious conduct by AIG.” That was

                                              36
improper. (People v. Riggs (2008) 44 Cal. 4th 248, 318; People v. Melton (1988)
44 Cal. 3d 713, 744.) 17
       But the real impact of the Finberg situation was yet to come—in closing argument.
       Victaulic’s Closing Argument
       Early in Victaulic’s closing argument, counsel referred to Finberg’s response that
she opened some claim files because she was told to by Taylor, that she was just “ ‘doing
what [she was] told.’ ” And then counsel said this:
       “Zero basis to open this. And she just does it anyway. Ms. Finberg had more than
35 years of experience in the business. She ran the fraud investigation unit at Sequoia.
She knew exactly what she was doing. Incredibly, it didn’t stop there. Because what
happened after that? AIG decides it’s going to lie on the RFAs.
       “Remember, these are requests for admission. These are documents that are
submitted under oath, penalties of perjury. They are designed to help parties narrow the
issues in dispute. They are required under the law to answer these truthfully.
       “And how did they respond? Forty, more than 40 times, how did they respond?
You walked through these with Mr. Van de Voorde. I’m not going to go through all of
them with you today. But deny. Admit the potential for coverage under one or more of
the insurance policies. Deny. [¶] . . . [¶]
       “So they send Ms. Finberg out. They authorize her. She says, ‘I’m the chief of
PMK,’ and that, if you remember, is the person most knowledgeable. That is a very
important person in the litigation process. It is someone who is authorized by the
defendant or by the plaintiff. . . . The person authorized by the company to testify under
oath, penalties of perjury, and give their response. And you heard her say she was the
PMK on these RFAs.
       “Now, this is a long way of getting to AIG breached the contracts. I’m going to
walk through the verdict form in a few minutes. But they breached it. They knowingly

       17
          Victaulic’s expert witness, an expert only on the Brandt attorney fee damages
issue, testified that Finberg’s testimony evidenced “trick[ery] and decei[t].”

                                              37
breached it. They fraudulently breached it by lying, and they did it in bad faith, ladies
and gentlemen.”
       Victaulic’s counsel then moved to the verdict form, saying that he couldn’t
“possibly hope to summarize it all today. We’ll be here for several days.” But he did
“walk through” it, and following discussion on the “breach of contract” question, said the
jury must move to question Nos. 2 and 3, damage caused by the breach, which he would
try to “summarize.” And, he said, the “easiest place . . . to look is Exhibit 1267, because
that summarizes all in one place the monetary component of that harm.”
       The argument then turned to question No. 4 on the verdict form, bad faith. After
reading from a portion of CACI No. 2337, off counsel went, with the “lies,” the
“subterfuges and evasions.” This was it:
       “Subterfuges and evasions. That’s what we have heard about over the last three
weeks. Conduct that does not comply with community standards of decency, fairness
and reasonableness. We heard a lot about that, too.
       “During my opening, I said, ‘These are the very lessons that we teach our children.
The rules that we all try to live by.’ Keep our promises, act fairly and honestly. And
perhaps most importantly, don’t lie.
       “You’ll recall that AIG lied in over 40 of its responses, requests for admission.
Important documents that AIG fraudulently used to perpetuate this litigation, even though
its claims handlers knew the response was wrong. Important documents that AIG used to
fraudulently deny Victaulic policy benefits.
       “Now, AIG seems to suggest that that was okay, and its lies are okay as long as we
had a reason for it, and as long as there was an explanation to why we lied. Now, these,
of course, are the requests for admission. There’s a stack of them. We all know Ms.
Finberg verified them with the authorization.”
       Then, after a brief description of a request for admission, and that Finberg verified
them, counsel said this:

                                               38
       “How did you verify under penalty of perjury interrogatory responses that point to
a document you had never seen before, you don’t have any knowledge of? You don’t.
Another lie.
       “This is the type of conduct that complies with these community standards of
decency, fairness or reasonableness, or is it just subterfuge or evasion? I submit the
latter. And it is this type of despicable conduct that screams out bad faith. It’s AIG’s lies
and misrepresentations to Victaulic and the courts that cause Victaulic to incur more than
$10 million in fees to get here today before you. And asking you to render a verdict in
our favor.
       “Now, you heard Jim Schratz. Done a lot of claims handling. He testified that
this is one of the worst cases of bad faith—well, he didn’t use bad faith. He said one of
the worst cases in the industry he had ever seen, top five. And this is the guy who has
seen it all.” There were “lies in the coverage positions,” counsel went on, three pages
later referring to the RFAs “[u]nder oath, penalties of perjury.”
       Turning then to the claim for damages from the claimed bad faith, counsel referred
to exhibit No. 1179, Schratz’s expert witness summary, arguing that what Victaulic seeks
is an award, “I’m rounding, $8.25 million in fees.” The actual amount in the summary
was $8,232,677.68.
       The argument concluded with the issues regarding punitive damages, and CACI
instruction No. 3946. It was a “long” instruction, counsel said, and he was “not going to
go through all of it here.” But summarizing a few paragraphs, beginning with:
“Conduct. Malice, oppression or fraud,” this is what counsel said:
       “So let’s look at these, and we’ll look at the conduct you saw throughout the case.
But first, let’s focus on the conduct. Malice. What does ‘malice, oppression’ mean? It’s
in your jury instructions. Not words that we commonly use. But malice and oppression.
Despicable conduct. Knowing disregard for someone else’s rights. Fraud. Intentional
misrepresentation or concealment of a material fact plus an intent to harm.
       “We have that here. Both of these. AIG’s lying on the RFAs, lying on the
interrogatories is despicable under any measure. Under oath, penalties of perjury. They

                                             39
know what they are doing. They lied. And they did it with complete disregard for the
law and for Victaulic’s rights. Not only, though, do those constitute, those RFAs, the
interrogatories, do they constitute malice and oppression. It’s fraud. It is fraud. They
knew what they were doing and they intentionally misrepresented the facts.
       “You heard Ms. Finberg. The facts don’t matter in litigation. The facts don’t
matter. It’s the only witness that said that. . . . [18]
       “Now, one of the things that in retrospect, when I was thinking about the cross-
examination of Ms. Finberg, I was thinking, okay. So you’re wearing your claim adjuster
hat and you’re wearing your litigation hat. And you know what? There’s not two hats.
There’s not two hats. There’s one hat. You get to tell the truth. You have to tell the
truth. She knew it. She signed the request for admission. She was authorized to do so.
AIG knew and they let her do it. They made her do it. And that is despicable.
       “And I think I personally felt a sense of disgust when I, at that moment when I
realized she admitted to lying. That’s something that just doesn’t happen. Shouldn’t
happen. Shouldn’t happen in documents and shouldn’t happen in business and shouldn’t
happen in our everyday lives. Certainly not on—certainly under oath. Certainly not
under penalty of perjury. Certainly not by someone who ran a fraud investigation unit
and knows better.
       “Was it intentional? Absolutely, absolutely. Ms. Finberg testified. Her attorneys
told her, ‘This is the legal position we are taking in the coverage position,’ and she
continued. Nobody ever asked me to withdraw a defense or stop handling or changing
the way I was handling. I signed these as the person most knowledgeable. The legal
position asking the courts for guidance. Asking the courts for permission while lying
about it. That is just not right.
       “AIG would not change its position in any of the underlying matters based on the
facts until it was forced to do so, and then in litigation, rather than relying on the facts, it
falsified the facts. It falsified the requests for admission and it falsified the interrogatory

       18
          “[F]acts don’t matter,” it will be recalled, were the exact words of the court’s
last question to Finberg before the court halted her testimony.

                                                 40
responses. We went through all the other ones that she responded to. All 40 of them.
And those are all examples of malicious, oppressive and fraudulent acts.”
       Victaulic’s final argument was, as he promised, “extremely brief,” three pages to
be exact. It began this way:
       “Yes. Thank you, Your Honor. I’ll be extremely brief. Mr. Goines had a quite
shining presentation, very impressive. But if you scratch a little bit under the surface,
you will see that it is based upon—virtually entirely upon lies and misrepresentations.
       “And I know that you sat here through three and a half weeks of trial. It was
actually quite difficult for me to listen to because of that. The lies and the
misrepresentations. But you sat here for three and a half weeks. You listened to the
testimony. You heard the evidence. You saw the evidence.
       “And I’m not going to go over everything. I’m not going to show you what he
misrepresented. I’m going to leave it to you to find the truth for yourself. Because it is
there. But I do want to say one thing. Mr. Goines, AIG is asking for you to look at
reasonableness under a lens that lies are reasonable. Lying under oath on more than 40
RFAs, requests for admission that could have brought this case to an end a year ago.
That is okay. And if that is the standard, then everything they did, everything is
reasonable. And that is just not acceptable.”
       The Verdict
       Closing arguments concluded in the afternoon of July 29, followed by the
concluding instructions, and the matter was in the hands of the jury. The jury began
deliberations at 3:42 p.m. and recessed at 5:00 p.m. The next day, July 30, the jury
deliberated from 9:00 a.m. to 12:00 p.m., and from 1:15 p.m. to 2:40 p.m., at which time
it announced it had a verdict. So, following a three and one-half week trial, the jury
deliberated for some five hours. It asked for no readback. It asked no questions of the
court. It asked for no clarification of any instruction. No, after such short deliberation,
the jury returned a verdict that went absolutely down the line with Victaulic, awarding
the exact amounts argued by Victaulic.

                                              41
       Finally, the jury had to grapple with the issue that underlay the possibility of
punitive damages, the questions of “malice, oppression or fraud” and whether a managing
agent was involved, which had to be proved by “clear and convincing evidence.” This
was, in the words of Victaulic’s counsel quoted above, the “long” instruction, the
insurers’ counsel calling it the “difficult, complicated” question. The jury answered those
questions too for Victaulic. All this in over five hours. After three and one-half weeks.
Right down to the penny for Victaulic.
       Phase 3, the punitive damages case, was more of the same. The issue was “tried”
on stipulation, with counsel then arguing based on that stipulation, arguments that,
including a break, lasted barely over an hour. Victaulic’s counsel argued somewhere
between “40 and a half to $50 million” was appropriate. The jury awarded $46 million—
right in between.
       There is no question that the closing argument can play a significant role in
assessing whether error was prejudicial. (Veronese v. Lucasfilm Ltd. (2012)
212 Cal. App. 4th 1, 26–27.) As described in detail above, Victaulic’s argument was
Finberg, Finberg, Finberg; RFAs, RFAs, RFAs; her lies, lies, lies; and plenty of “penalty
of perjury.” Countless times Finberg’s name and those terms were mentioned,
culminating in the argument that ultimately led to the punitive damages: “[M]alice and
oppression. Despicable conduct. . . . [¶] We have that here. . . . AIG’s lying on the
RFAs, lying on the interrogatories is despicable under any measure. Under oath,
penalties of perjury. They know what they are doing. They lied.” Lest the jury miss the
point, Victaulic’s counsel added that he “personally felt a sense of disgust when I, at that
moment when I realized she admitted to lying. That’s something that just doesn’t
happen. Shouldn’t happen. Shouldn’t happen in documents and shouldn’t happen in
business and shouldn’t happen in our everyday lives. . . . Certainly not under penalty of
perjury.”
       The series of trial court errors in handling Finberg’s testimony, coupled with
Victaulic’s exploitation of those errors in closing argument, surely influenced the bad
faith verdict, especially as the vote was nine to three. (See Robinson v. Cable (1961)

                                             42
55 Cal. 2d 425, 428 [“The fact that only the bare number of jurors required to reach a
verdict agreed upon the verdict” lends support to finding of prejudice]; Whiteley v. Philip
Morris, Inc. (2004) 117 Cal. App. 4th 635, 665 [10-to-two verdict was “close”].)
       Superimposed on the above is that there were multiple errors which, as our
colleagues have put it, is significant in and of itself: “Without attempting to analyze
separately these issues of prejudice, we conclude that the cumulative effect of the errors
was unquestionably to make it ‘reasonably probable that a result more favorable to the
appealing party would have been reached in the absence of the error[s].’ ” (Johnson v.
Tosco Corp. (1991) 1 Cal. App. 4th 123, 141; see Delzell v. Day (1950) 36 Cal. 2d 349,
351 [cumulative comments by trial court].) Likewise here. 19
                                      DISPOSITION
       The judgment is reversed. The insurers shall recover their costs on appeal.

       19
          In light of the result we reach, we need not discuss the other issues raised by the
insurers, including the claims that there was error in the instructions; that the Brandt
attorney fees in bad faith are not supported by substantial evidence, and in any event are
excessive; and that the $46,000,000 punitive damage award is “unsupported, excessive,
and unprecedented.”

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                                            _________________________
                                            Richman, Acting P.J.

We concur:

_________________________
Stewart, J.

_________________________
Miller, J.

A146617; Victaulic v. American Home Assurance Co.

                                       44
Trial Court: Alameda County Superior Court

Trial Judge: Hon. Frank Roesch

Counsel:

Pillsbury Winthrop Shaw Pittman, Joseph D. Jean, Kevin Murray Fong, Colin T. Kemp,
Clark T. Thiel for Plaintiff, Cross-defendant and Respondent.

Horvitz & Levy, Peter Abrahams, Mitchell C. Tilner, Emily V. Cuatto; Riordan &
Horgan, Dennis P. Riordan, Donald M. Horgan; Law Offices of Doron Weinberg and
Doron Weinberg for Defendants, Cross-complainants and Appellants.

                                        45