Terry Blankenbaker v. Progressive Casualty Insurance

FILED
NOT FOR PUBLICATION
AUG 14 2015
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
TERRY BLANKENBAKER; GREG No. 13-55520
BLANKENBAKER; TRACI
BLANKENBAKER; RAYMOND D.C. No. 5:11-cv-01844-CJC-DTB
SHIPLEY; DENISE SHIPLEY,
MEMORANDUM *
Plaintiffs – Appellants,
v.
PROGRESSIVE CASUALTY
INSURANCE COMPANY, a corporation,
Erroneously Sued As Progressive
Northern Insurance Company,
Defendant – Appellee.
Appeal from the United States District Court
for the Central District of California
Cormac J. Carney, District Judge, Presiding
Argued and Submitted March 5, 2015
Pasadena, California
Before: MURPHY, ** GOULD, and TALLMAN, Circuit Judges.
*
This disposition is not appropriate for publication and may not be cited to
or by the courts of this circuit except as may be provided by Ninth Circuit Rule
36-3.
**
The Honorable Michael R. Murphy, Senior Circuit Judge for the U.S.
Court of Appeals, Tenth Circuit, sitting by designation.
In April 1997, Terry Blankenbaker was driving a car on Interstate 40 near
Barstow, California. Norma Blankenbaker, Raymond Shipley, and Denise
Shipley were passengers in Mr. Blankenbaker’s car. Because a sandstorm
decreased visibility, Mr. Blankenbaker stopped his car behind a large truck. A
car driven by Janet Ingram, in which Janet Jarrett was a passenger, rear-ended Mr.
Blankenbaker’s car. As a result of the collision, Mrs. Blankenbaker died and Mr.
Blankenbaker, Mr. Shipley, Ms. Shipley, Ms. Ingram, and Ms. Jarrett suffered
injuries. Ms. Ingram was insured by Progressive Casualty Insurance Company
(“Progressive”) with a policy limit of $30,000.
After failing to reach a settlement, Plaintiffs 1 filed suit against Ms. Ingram
and were awarded more than $2.3 million in damages. Ms. Ingram assigned to
Plaintiffs her right to bring this action in exchange for an agreement on the part of
Plaintiffs not to execute the judgment against her. Plaintiffs then sued
Progressive, alleging Progressive acted in bad faith when it rejected a proposed
settlement offer 2 and failed to inform Ms. Ingram of the proposed settlement.
The district court granted summary judgment to Progressive, concluding
Progressive did not act in bad faith when it rejected Plaintiffs’ settlement offer.
1
The term “Plaintiffs” refers collectively to Mr. Blankenbaker, the
Blankenbakers’ two children, and Mr. and Ms. Shipley.
2
The record reveals Progressive rejected the proposed settlement offer
because it did not include a release of claims by all individuals injured in the
accident, i.e., it did not resolve potential claims Ms. Jarrett had against Ms.
Ingram.
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The district court concluded Progressive could not have accepted Plaintiffs’ full-
policy-limits settlement offer because it would have exposed Ms. Ingram to
uninsured liability from Ms. Jarrett’s claim for damages. Because accepting such
an offer would have exposed Progressive to a bad faith claim from its own
insured, Ms. Ingram, Progressive’s refusal could not constitute bad faith. The
district court determined that although Progressive failed to communicate the
settlement offer to Ms. Ingram, that failure did not cause Ms. Ingram any harm.
Undisputed evidence showed that Ms. Ingram was aware of the offer. Because
Ms. Ingram urged Progressive not to settle, the district court concluded it was
clear she would not have taken the opportunity to “add to the pot” to effectuate a
settlement, an underlying rationale for the communication requirement.
Plaintiffs filed this timely appeal from the entry of summary judgment in
favor of Progressive. On appeal, Plaintiffs limit their argument to the claim the
district court erred in concluding Progressive did not act in bad faith in failing to
timely communicate the settlement offer to Ms. Ingram.
This court reviews a district court’s grant of summary judgment de novo.
Trishan Air, Inc. v. Fed. Ins. Co., 635 F.3d 422, 426 (9th Cir. 2011). Summary
judgment is proper when “there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A
reviewing court “must determine whether the evidence, viewed in a light most
favorable to the non-moving party, presents any genuine issues of material fact
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and whether the district court correctly applied the law.” Warren v. City of
Carlsbad, 58 F.3d 439, 441 (9th Cir. 1995).
The record reveals genuine disputes of material fact as to whether
Progressive complied with its duty to timely notify Ms. Ingram of the settlement
offer made by Plaintiffs. See Martin v. Hartford Accident & Indem. Co., 228 Cal.
App. 2d 178, 183-84 (Cal. Ct. App. 1964) (describing parameters of duty to
communicate). Even assuming such a breach, however, the district court was
correct to grant Progressive summary judgment because no reasonable jury could
find Progressive’s assumed breach caused any damage to Ms. Ingram. See Ca.
Civil Jury Instruction (CACI) 2333 (setting out elements of a bad faith failure-to-
communicate claim in the insurance context, which elements include the
requirement that a plaintiff demonstrate the insurer’s actions were “a substantial
factor in causing [his/her/its] harm”). The record evidence unequivocally
demonstrates that Ms. Ingram was made aware of the settlement offer no later
than May 22, 1997, when Plaintiffs’ attorney contacted her directly and asked her
to encourage Progressive to accept the offer. The record further demonstrates
Plaintiffs’ settlement offer remained open for at least another few days, and
possibly much longer. The offer indicated, by its own terms, that it remained
open until May 25, 1997. Furthermore, the record demonstrates Plaintiffs’
attorney continued to negotiate with Progressive for several additional days, with
no indication Plaintiffs’ settlement offer was withdrawn. There is absolutely
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nothing in the record indicating Ms. Ingram was interested in this offer or willing
to “add to the pot” 3 by entering into separate negotiations with Ms. Jarrett in an
effort to free up the entire Progressive policy to settle Plaintiffs’ claims. Instead,
all record evidence demonstrates Ms. Ingram: (1) did not think she was at fault in
the accident; (2) did not want to settle with Plaintiffs and did not want
Progressive to settle the suit; and (3) was not worried about a judgment in excess
of policy limits because she did not have any assets and Plaintiffs’ attorney had
told her Plaintiffs were not, for that reason, interested in suing her. 4
3
See Hartford Accident & Indem. Co., 228 Cal. App. 2d at 183-84 (“The
company, having the right to select counsel to defend the insured, had the duty to
communicate to him the results of any investigation indicating liability in excess
of policy limits, and any offers of settlement which were made, so that he might
take proper steps to protect his own interest. . . . An insured who is kept
informed may have further information to give to the carrier; he may use powers
of persuasion upon the carrier to increase its offer; he may engage counsel; he
may have other courses of action open to him.”).
4
The dissent faults us for relying on evidence from the time period after
Progressive rejected Plaintiffs’ settlement offer. As noted above, however, the
record unequivocally demonstrates that negotiations were ongoing despite that
rejection. In any event, the dissent fails to identify even a scintilla of evidence
indicating Progressive’s failure to provide Ms. Ingram notice prior to rejecting
Plaintiffs’ offer caused the alleged injury. Merely reciting the hypothetical
actions Ms. Ingram could have taken if provided with timely notice does not
create a material issue of fact as to causation. The dissent appears to conclude a
material issue of fact exists as to causation merely because a material issue of fact
exists as to whether there was a breach of the duty to communicate. Absent
affirmative evidence on the causation element, the district court was correct to
grant summary judgment to Progressive. See Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249-50 (1986) (holding that the party opposing summary judgment
must come forward with significant probative evidence as to each element of the
claim on which it bears the burden of proof).
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Because the record unequivocally demonstrates Ms. Ingram was aware of
the settlement offer during the relevant time period and was not remotely
interested in settling the case, the district court was correct to conclude
Progressive was entitled to summary judgment on the basis of lack of causation.
The district court is, therefore, AFFIRMED.
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FILED
Blankenbaker v. Progressive, No. 13-55520
AUG 14 2015
GOULD, Circuit Judge, Dissenting MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
The full panel agrees that there are genuine and material fact issues whether
Progressive complied with its duty to notify Ms. Ingram of the settlement offer
made by Plaintiffs. The crux of the majority’s decision to affirm is its conclusion
that “no reasonable jury could find Progressive’s assumed breach caused any
damage to Ms. Ingram.” This mistaken conclusion is understandable because
nearly a month after Ms. Ingram arguably learned of the offer, she made
statements, indicating a disinclination to accept the offer. But those statements
came only after the offer expired. The majority’s premise rests on an inference
that with timely notice, she would have had the same attitude later expressed. It is
incorrect to give the insurer inferences rather the non-moving party.
California law requires that an insurer “take into account the interest of the
insured and give it at least as much consideration as it does to its own interest”
when evaluating settlement offers. Comunale v. Traders & General Ins. Co., 328
P.2d 198, 201 (Cal. 1958) (In Bank). This is particularly important when a conflict
of interest arises, where “an offer to settle an excess claim is made within policy
limits.” Merritt v. Reserve Ins. Co., 110 Cal. Rptr. 511, 523–24 (Ct. App. 1973).
Communication of the settlement offer to the insured allows the insured to take
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steps to alleviate that conflict of interest, as the majority recognizes. See Martin v.
Hartford Accident and Indem. Co., 39 Cal. Rptr. 342, 346 (Ct. App. 1964) (“[A]n
insured who is kept informed may have further information to give to the carrier;
he may use powers of persuasion upon the carrier to increase its offer; he may
engage counsel; he may have other courses of action open to him.”). To give a few
examples: Ms. Ingram might have added some of her own money to sweeten the
pot to get rid of all claims. Or Ms. Ingram might have tried to persuade Ms.
Jarrett, the passenger and other claimant, to drop her claims earlier in the course of
events. Or Ms. Ingram might have told Progressive to accept the offer settling
claims of the Blankenbakers, the passengers in the other car, while she would take
her chances defending against any remaining claim of Ms. Jarrett. The majority
concludes that Progressive’s failure to inform Ms. Ingram of the settlement offer is
of no matter because she would not have taken any such step. But that conclusion
ignores the timeline of negotiations between Progressive and the Blankenbakers,
assuming that what Ms. Ingram said after the offer had expired would have been
her position if the offer had been timely communicated to her.
The record shows that Progressive rejected the Blankenbakers’ settlement
offer on May 13, nine days before anything in the record suggests that Ms. Ingram
had even arguable knowledge of such an offer. The rejection of an offer terminates
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that offer, see, e.g, Beverly Way Associates v. Barham, 276 Cal. Rptr. 240, 244
(Cal. App. 1990). It is true that settlement negotiations continued through May
28th, when the Blankenbakers rejected Progressive’s proposed counter-offer. But
the majority’s conclusion that “nothing in the record” indicated Ms. Ingram was
interested in the Blankenbakers’ offer or was “willing to ‘add to the pot’” rests on a
conversation from nearly three weeks later, on June 19th. The Blankenbakers’
original offer had expired before Ms. Ingram told Progressive that they should not
settle and that she was unafraid of litigation. Whatever Ms. Ingram had done at
that point, there were no options to mitigate the conflict of interest between her and
Progressive.
One of our prior precedents is instructive. In Anguiano v. Allstate, we
reversed summary judgment for an insurer, where the insurer belatedly tried to
accept an expired settlement offer, and belatedly told its insured of that settlement
offer. 209 F.3d 1167, 1169–70 (9th Cir. 2000). After a settlement offer expired,
we reasoned “it was too late for the [insureds] to exercise any influence over
Allstate’s decision to reject the settlement offers.” Id. at 1170. Following
Anguiano, I would reverse the district court.
I respectfully dissent.
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