Aguilar v. Gostischef

(Insurer Obligated to Pay One Million Dollar Cost Bill Awarded in Underlying Personal Injury Lawsuit After Rejecting Settlement Demand in Excess of Policy Limits)

In Aguilar v. Gostischef, 220 Cal.App.4th 475 (October 11, 2013), the California Second District Court of Appeal affirmed the trial court’s award of costs in an amount over one million dollars against Farmer’s insured, Larry Gostischef. Such award was based on Farmer’s rejection of plaintiff’s demand of $700,000 to settle his personal injury lawsuit against Gostischef. Farmers insured Gostischef under a liability policy with a $100,000 limit. Notwithstanding requests for information regarding the policy limits made prior to the filing of the lawsuit, Farmers failed to provide such information to plaintiff so as to enable him to make a policy limits demand. Subsequently, after plaintiff filed a lawsuit, Farmers offered its policy limits of $100,000. Such offer was rejected. Rather, prior to trial, plaintiff made an offer pursuant to California Code of Civil Procedure section 998 in the amount of $700,000 to settle his lawsuit against Farmer’s Insured, Gostischef. Such offer was rejected. Thereafter, the underlying personal injury lawsuit was tried and resulted in a verdict of $4,679,314 in damages which was later reduced to $2,239,657. Plaintiff also requested $1,639,451.14 in costs. The trial court taxed costs in the amount of $5,903.85 and awarded the remainder to plaintiff.

Farmers intervened in the Aguilar action and filed an appeal addressing the trial court’s award of costs. Farmers argued that plaintiff’s 998 offer in excess of available policy limits was made in bad faith and should be overturned. However, the Court of Appeal noted that plaintiff had requested Farmers to provide him with its policy limits on at least three different occasions before filing suit against Farmers insured. As such, the Court of Appeal held that the plaintiff had not acted in bad faith and Farmers was obligated to pay the costs award.