In a case where the defendant is deceased, California Probate Code §§550 through 555 allow actions “to establish [a] decedent’s liability for which the decedent was protected by insurance” and limits the liability of the decedent’s insurer’s liability to covered damages within policy limits. The California Court of Appeal recently held that the decedent’s insurer can be subject to penalties arising from the failure to accept a settlement offer under Code of Civ. Proc. §998.
Plaintiff was injured when Albert Hotlen ran a red light and collided with her vehicle. By the time Plaintiff brought the lawsuit, Hotlen was deceased and had no estate from which Plaintiff could recover. However, Hotlen had a $100,000 insurance policy with Allstate Insurance Company covering the accident.
Plaintiff filed the lawsuit and served her complaint on Allstate pursuant to Probate Code §§550 through 555. Plaintiff then attempted to settle the matter before going to trial by making a settlement offer pursuant to C.C.P. §998 for $99,999.00 – one dollar less than the policy limit. Allstate rejected the offer. The jury awarded Plaintiff $180,613.86.
Since Plaintiff was awarded judgment in excess of her §998 offer to compromise, Plaintiff argued that she was entitled to recover from Allstate her costs of suit, the post-offer costs of the services of expert witnesses, and other litigation costs, even if such costs exceeded the policy limits. The trial court disagreed, and Plaintiff appealed.
Plaintiff argued that Allstate was a party within the meaning of § 998 for purposes of recovering costs, and that such costs were recoverable from the insurer despite the limitation on the recovery of “damages” found in Probate Code §§550 through 555.
The Court of Appeal agreed and reversed the judgment. It offered the following reasoning: “Even though the decedent’s estate is the named defendant in actions under Probate Code §§550 through 555, this is a legal fiction. The insurance company accepts service of process, hires and pays for counsel to defend the action, makes all decisions regarding settlement of the litigation, is responsible for paying the judgment in favor of the plaintiff if such judgment is rendered, and makes the decision whether or not to appeal an adverse judgment. There is no actual person or entity other than the insurance company to do any of this. This is a reality we will not ignore. Moreover, we find it manifestly unfair that §998 could be employed by Allstate to recover costs from the plaintiff (which costs it would have no obligation to pay to the estate), but Allstate would have no corresponding responsibility to pay costs merely because it is not a named party.”
In sum, courts are likely to view insurers as the real parties in interest in suits under the Probate Code. This decision underscores the distinction between amounts awarded as “damages” to which the cap applies, and “costs” to which the cap does not apply.
For a copy of the complete decision, see: Meleski v. Estate of Hotlen