Opinion
SIMS, J.
In this case we hold that a settlement of a personal injury lawsuit is in “good faith,” for purposes of sections 877 and 877.6 of the
Code of Civil Procedure,
where a defendant pays the plaintiff the limit of the defendant’s insurance policy and has no other assets, even though the amount paid in settlement is far less than the likely amount of a judgment against the defendant were the case to go to trial. (All further undesignated code references are to the Code of Civil Procedure.)
Procedural History
Petitioner Geraldine Schmid seeks a writ of mandate directing respondent superior court to vacate its order denying a motion for determination of good faith settlement pursuant to sections 877 and 877.6 and to enter a new order granting the motion.
The facts recited below are taken from the moving papers of the settling parties.
Petitioner Schmid is the settling defendant in the underlying action, which arose out of an automobile accident on the night of December 11, 1987. Schmid was the driver; plaintiff Bert Sargent was a passenger in her car. About 11 p.m., Schmid missed a sharp left turn, drove off the road and collided with a tree near Placerville in El Dorado County, severely injuring Sargent. The road was an unmarked, unlit, winding road in the hills, lack
ing a shoulder area. Other accidents had occurred on this road recently but the county had taken no steps to reduce the danger. After the accident, Schmid’s blood-alcohol level measured approximately .17. Sargent was hospitalized for 20 days.
In his complaint (in which his wife Charlotte Sargent is also a plaintiff) Sargent named Schmid and El Dorado County (County) as defendants. He alleged permanent physical, mental, and emotional damages in excess of $500,000, including medical bills already incurred in the range of $20,000 and expected to reach $60,000. He alleged further that the accident had deprived him of his ability to work or support himself.
Schmid offered a settlement of $55,000, representing the policy limit of her insurance coverage. Undisputed evidence submitted on the motion showed she had no other assets.
In their “Joinder in Motion for Determination of Good Faith Settlement,” plaintiffs estimated that Schmid’s share of liability for the accident was 10-20 percent, and the share of liability of nonsettling defendant County was 80-90 percent.
The moving parties’ papers in the trial court analyzed the settlement in light of the factors specified in
Tech-Bilt, Inc.
v.
Woodward-Clyde & Associates
(1985) 38 Cal.3d 488 [213 Cal.Rptr. 256, 698 P.2d 159]. (See also
Far West Financial Corp.
v. D
& S Co.
(1988) 46 Cal.3d 796 [251 Cal.Rptr. 202, 760 P.2d 399];
Abbott Ford, Inc.
v.
Superior Court
(1987) 43 Cal.3d 858 [239 Cal.Rptr. 626, 741 P.2d 124].) These factors include “a rough approximation of plaintiffs’ total recovery and the settlor’s proportionate liability, the amount paid in settlement, the allocation of settlement proceeds among plaintiffs, ... a recognition that a settlor should pay less in settlement than he would if he were found liable after a trial. . . . the financial conditions and insurance policy limits of settling defendants, . . . the existence of collusion, fraud, or tortious conduct aimed to injure the interests of nonsettling defendants. . . . [and the need to evaluate the settlement] on the basis of information available at the time of settlement.”
(Tech-Bilt, supra,
38 Cal.3d at p. 499.) The moving parties stressed defendant Schmid had no assets to pay a judgment in excess of her insurance policy limit.
Nonsettling defendant County did not oppose the motion seeking good faith approval of the proposed settlement. Nonetheless, following a hearing the trial court denied the motion. Although the court acknowledged that defendant Schmid had no assets other than her insurance policy, good faith
approval was denied because the court did not feel that the percentage of negligence attributable to the County was realistic and that the amount of the settlement bore a realistic proportion to damages that could be awarded.
After receiving Schmid’s petition, we notified all parties that we were considering issuing a peremptory writ in the first instance and we requested opposition pursuant to
Palma
v.
US. Industrial Fasteners, Inc.
(1984) 36 Cal.3d 171 at page 180 [203 Cal.Rptr. 626, 681 P.2d 893]. No opposition has been filed. We shall issue the writ.
Discussion
The trial court plainly refused good faith approval of the settlement because it understandably rejected plaintiifs’ facially preposterous allocation of proportionate fault (10-20 percent to Schmid; 80-90 percent to County). The trial court apparently believed the disparity between Schmid’s fault and the amount of her contribution precluded good faith approval. The trial court may have relied on the rule stated in
Tech-Bilt
that, “ ‘[A] defendant’s settlement figure must not be grossly disproportionate to what a reasonable person, at the time of the settlement, would estimate the settling defendant’s liability to be.’ ”
(Tech-Bilt, supra,
38 Cal.3d at p. 499, quoting
Torres
v.
Union Pacific R.R. Co.
(1984) 157 Cal.App.3d 499, 509 [203 Cal.Rptr. 825].)
However, the court in
Tech-Bilt
acknowledged that the quoted rule is subject to an exception. Thus, the court noted that bad faith is not established merely by a showing that a settling defendant with limited ability to satisfy a judgment will pay less than his or her theoretical proportionate share: “Such a rule would unduly discourage settlements. ‘For the damages are often speculative, and the probability of legal liability therefor is often uncertain or remote.
And even where the claimant’s damages are obviously great, and the liability therefor certain, a disproportionately low settlement figure is often reasonable in the case of a relatively insolvent, and uninsured, or underinsured, joint tortfeasor.’
[Citation.]” (38 Cal.3d at p. 499, italics added.)
The latter rule controls here. We can think of no earthly good that would come from requiring defendant Schmid to remain in the action. Good faith approval of the settlement would bar contribution or indemnity claims against Schmid by codefendant County. (§ 877.6, subd. (c);
Far West Financial Corp.
v.
D & S Co., supra,
46 Cal.3d at p. 817.) However, the County, which has eschewed every opportunity to contest the settlement, has clearly concluded the pursuit of contribution or indemnity claims against Schmid would be of no practical value.
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Opinion
SIMS, J.
In this case we hold that a settlement of a personal injury lawsuit is in “good faith,” for purposes of sections 877 and 877.6 of the
Code of Civil Procedure,
where a defendant pays the plaintiff the limit of the defendant’s insurance policy and has no other assets, even though the amount paid in settlement is far less than the likely amount of a judgment against the defendant were the case to go to trial. (All further undesignated code references are to the Code of Civil Procedure.)
Procedural History
Petitioner Geraldine Schmid seeks a writ of mandate directing respondent superior court to vacate its order denying a motion for determination of good faith settlement pursuant to sections 877 and 877.6 and to enter a new order granting the motion.
The facts recited below are taken from the moving papers of the settling parties.
Petitioner Schmid is the settling defendant in the underlying action, which arose out of an automobile accident on the night of December 11, 1987. Schmid was the driver; plaintiff Bert Sargent was a passenger in her car. About 11 p.m., Schmid missed a sharp left turn, drove off the road and collided with a tree near Placerville in El Dorado County, severely injuring Sargent. The road was an unmarked, unlit, winding road in the hills, lack
ing a shoulder area. Other accidents had occurred on this road recently but the county had taken no steps to reduce the danger. After the accident, Schmid’s blood-alcohol level measured approximately .17. Sargent was hospitalized for 20 days.
In his complaint (in which his wife Charlotte Sargent is also a plaintiff) Sargent named Schmid and El Dorado County (County) as defendants. He alleged permanent physical, mental, and emotional damages in excess of $500,000, including medical bills already incurred in the range of $20,000 and expected to reach $60,000. He alleged further that the accident had deprived him of his ability to work or support himself.
Schmid offered a settlement of $55,000, representing the policy limit of her insurance coverage. Undisputed evidence submitted on the motion showed she had no other assets.
In their “Joinder in Motion for Determination of Good Faith Settlement,” plaintiffs estimated that Schmid’s share of liability for the accident was 10-20 percent, and the share of liability of nonsettling defendant County was 80-90 percent.
The moving parties’ papers in the trial court analyzed the settlement in light of the factors specified in
Tech-Bilt, Inc.
v.
Woodward-Clyde & Associates
(1985) 38 Cal.3d 488 [213 Cal.Rptr. 256, 698 P.2d 159]. (See also
Far West Financial Corp.
v. D
& S Co.
(1988) 46 Cal.3d 796 [251 Cal.Rptr. 202, 760 P.2d 399];
Abbott Ford, Inc.
v.
Superior Court
(1987) 43 Cal.3d 858 [239 Cal.Rptr. 626, 741 P.2d 124].) These factors include “a rough approximation of plaintiffs’ total recovery and the settlor’s proportionate liability, the amount paid in settlement, the allocation of settlement proceeds among plaintiffs, ... a recognition that a settlor should pay less in settlement than he would if he were found liable after a trial. . . . the financial conditions and insurance policy limits of settling defendants, . . . the existence of collusion, fraud, or tortious conduct aimed to injure the interests of nonsettling defendants. . . . [and the need to evaluate the settlement] on the basis of information available at the time of settlement.”
(Tech-Bilt, supra,
38 Cal.3d at p. 499.) The moving parties stressed defendant Schmid had no assets to pay a judgment in excess of her insurance policy limit.
Nonsettling defendant County did not oppose the motion seeking good faith approval of the proposed settlement. Nonetheless, following a hearing the trial court denied the motion. Although the court acknowledged that defendant Schmid had no assets other than her insurance policy, good faith
approval was denied because the court did not feel that the percentage of negligence attributable to the County was realistic and that the amount of the settlement bore a realistic proportion to damages that could be awarded.
After receiving Schmid’s petition, we notified all parties that we were considering issuing a peremptory writ in the first instance and we requested opposition pursuant to
Palma
v.
US. Industrial Fasteners, Inc.
(1984) 36 Cal.3d 171 at page 180 [203 Cal.Rptr. 626, 681 P.2d 893]. No opposition has been filed. We shall issue the writ.
Discussion
The trial court plainly refused good faith approval of the settlement because it understandably rejected plaintiifs’ facially preposterous allocation of proportionate fault (10-20 percent to Schmid; 80-90 percent to County). The trial court apparently believed the disparity between Schmid’s fault and the amount of her contribution precluded good faith approval. The trial court may have relied on the rule stated in
Tech-Bilt
that, “ ‘[A] defendant’s settlement figure must not be grossly disproportionate to what a reasonable person, at the time of the settlement, would estimate the settling defendant’s liability to be.’ ”
(Tech-Bilt, supra,
38 Cal.3d at p. 499, quoting
Torres
v.
Union Pacific R.R. Co.
(1984) 157 Cal.App.3d 499, 509 [203 Cal.Rptr. 825].)
However, the court in
Tech-Bilt
acknowledged that the quoted rule is subject to an exception. Thus, the court noted that bad faith is not established merely by a showing that a settling defendant with limited ability to satisfy a judgment will pay less than his or her theoretical proportionate share: “Such a rule would unduly discourage settlements. ‘For the damages are often speculative, and the probability of legal liability therefor is often uncertain or remote.
And even where the claimant’s damages are obviously great, and the liability therefor certain, a disproportionately low settlement figure is often reasonable in the case of a relatively insolvent, and uninsured, or underinsured, joint tortfeasor.’
[Citation.]” (38 Cal.3d at p. 499, italics added.)
The latter rule controls here. We can think of no earthly good that would come from requiring defendant Schmid to remain in the action. Good faith approval of the settlement would bar contribution or indemnity claims against Schmid by codefendant County. (§ 877.6, subd. (c);
Far West Financial Corp.
v.
D & S Co., supra,
46 Cal.3d at p. 817.) However, the County, which has eschewed every opportunity to contest the settlement, has clearly concluded the pursuit of contribution or indemnity claims against Schmid would be of no practical value. No evidence suggests that Schmid has any assets, or any prospect of acquiring assets, other than her
insurance policy. Yet disapproval of the good faith of the settlement would doubtless require Schmid to continue her defense, possibly at the expense of her insurer,
to avoid a judgment in excess of her policy limits that could require her to declare bankruptcy.
We see no virtue in this.
Schmid’s continued defense would simply increase her defense costs (possibly producing an unnecessary ultimate boost in insurance premiums) and needlessly add to the work of all personnel of the court.
“Ordinarily a determination as to whether a settlement is in good faith must be left to the discretion of the trial court.” (Tech-Bilt,
supra,
38 Cal.3d at p. 502.) However, if an abuse of discretion is shown, relief by writ is available.
(Ibid.)
Since the record shows no unfairness in the proposed settlement here, the settlement should be approved as having been entered in good faith.
Having complied with the procedural prerequisites of
Palma
v.
U.S. Industrial Fasteners, Inc., supra,
36 Cal.3d 171, we are authorized to dispense with an alternative writ and issue a peremptory writ in the first instance.
(Id.,
at p. 180.)
Let a peremptory writ of mandate issue directing respondent superior court to vacate its order denying the motion for determination of good faith settlement and enter a new order granting the motion.
Puglia, P. J., and Sparks, J., concurred.