Sonia Garcia v. Geico Casualty Company

• Court: Court of Appeals for the Ninth Circuit
• Decided: October 21, 2024
• Docket: 23-55646
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS OCT 21 2024 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

SONIA MENA GARCIA, an individual; No. 23-55646 JUAN VALENCIA, an individual, D.C. No. Plaintiffs-Appellants, 2:22-cv-06041-PA-JEM

v. MEMORANDUM* GEICO CASUALTY COMPANY,

Defendant-Appellee.

Appeal from the United States District Court for the Central District of California Percy Anderson, District Judge, Presiding

Argued and Submitted October 9, 2024 Pasadena, California

Before: NGUYEN and HURWITZ, Circuit Judges, and EZRA,** District Judge.

The issue in this diversity action is whether the district court erred in granting

summary judgment against Sonia Mena Garcia and Juan Valencia (“Plaintiffs”),

who had been assigned any rights that Luis Herrera, the named insured under an

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable David A. Ezra, United States District Judge for the District of Hawaii, sitting by designation. automobile insurance policy issued by GEICO Casualty Company, had against the

insurer after Plaintiffs obtained a judgment against Herrera greatly in excess of the

policy’s $15,000 limits. We have jurisdiction pursuant to 28 U.S.C. § 1291 and

affirm.

1. Plaintiffs claim that GEICO acted in bad faith by conditioning settlement

of Plaintiffs’ claims in a wrongful death action on obtaining a release for both

Herrera and Ramiro Hernandez, Herrera’s father-in-law. The operative wrongful

death complaint asserted claims against both Herrera and Hernandez, whose vehicle

Herrera was driving in the accident that killed Plaintiffs’ decedent, and to whom

GEICO extended coverage under its policy as an additional insured. Under

California law, however, an insurer “cannot favor the interests of one insured over

the other,” and thus an insurer does not act in bad faith by making a policy limits

offer on behalf of all insureds and rejecting a counteroffer for policy limits that

releases only one. Lehto v. Allstate Ins. Co., 31 Cal. App. 4th 60, 72 (1995).

Seeking to avoid this rule, Plaintiffs argue that a competent investigation by

GEICO would have revealed that Hernandez was not living with Herrera at the time

of the accident, had not given Herrera permission to drive the vehicle, and therefore

did not qualify under the policy as an additional insured. However, the cases that

Plaintiffs cite concerning the insurer’s duty to conduct an adequate investigation,

see, e.g., Betts v. Allstate Ins. Co., 154 Cal. App. 3d 688, 707 (1984); Wilson v. 21st

2 Century Ins. Co., 171 P.3d 1082, 1086 (Cal. 2007), involve the denial of coverage.

Plaintiffs have provided no California authority holding that an insurer acts in bad

faith to its named insured by agreeing to extend coverage to a relative of the named

insured as an additional insured, and we are aware of no such case.

2. Plaintiffs also argue that “even if Hernandez could be construed as an

additional insured,” GEICO acted in bad faith by demanding a release for both

insureds, because “by settling with Plaintiffs for Herrera’s $15,000 policy limits,

GEICO would have also completely wiped away Hernandez’s exposure under

Plaintiffs’ complaint.” This argument is premised on (1) California Vehicle Code §

17151(a), which limits an automobile owner’s vicarious liability to $15,000 “for the

death of or injury to one person in any one accident,” and (2) the California rule that

“where the operator settles the claim of the injured third party for a sum equal to, or

in excess of the amount of the owner’s statutory liability, the owner’s obligation is

discharged,” Rashtian v. BRAC-BH, Inc., 9 Cal. App. 4th 1847, 1853 (1992).

However, when GEICO rejected Plaintiffs’ settlement offer, it could not be

certain that Plaintiffs’ claims against Hernandez were premised solely on vicarious

liability. The complaint did not so allege, and Plaintiffs’ insistence that any

settlement agreement exclude a release for Hernandez implied that vicarious liability

was not their only theory about Hernandez’s liability. Indeed, if such were the case,

there would have been no reason for Plaintiffs to reject GEICO’s offer to settle the

3 claims against both defendants for policy limits and instead reserve their claims

against Hernandez, because any vicarious liability of Hernandez would have been

limited to $15,000 and satisfied by GEICO’s payment of policy limits.

3. Plaintiffs also claim that GEICO acted in bad faith by failing to

communicate their settlement counteroffer to Herrera. But, an insurer acts in bad

faith by failing to communicate a settlement offer only if that failure “prevented the

insurer from settling the claim within policy limits.” Hedayati v. Interins. Exch. of

the Auto. Club, 67 Cal. App. 5th 833, 845 (2021). Here, any failure to communicate

Plaintiffs’ offer did not prevent GEICO from settling within policy limits because

Plaintiffs were unwilling to release both insureds in return for the limits of the

GEICO policy. See Lehto, 31 Cal. App. 4th at 72.

AFFIRMED.