Zero Damages Constitutes Prima Facie Evidence That Offer of Settlement was Reasonable
Post 4954
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Wild Chang and Kenneth Lo appealed from a post judgment order denying their motion to strike or tax costs. The trial court awarded costs to defendants Fire Insurance Exchange and Stacy Chern (collectively, insurance defendants) after the trial court granted their motion for terminating sanctions and entered judgment in their favor.
In Wild Chang et al. v. Fire Insurance Exchange et al., B334217, California Court of Appeals (December 19, 2024) an offer of settlement rejected by plaintiffs requires plaintiffs to pay costs and expert witness fees after case dismissed with terminating sanctions.
FACTUAL BACKGROUND
Plaintiffs’ Insurance Claim and Consolidated Actions
An insurance claim plaintiffs submitted for losses caused by a fire in their home in 2014. In 2016, Fire Insurance Exchange offered $19,925.91 in structural repairs, which plaintiffs rejected. In 2017, plaintiffs Chang and Lo sued Farmers Insurance Company, Inc. (Farmers), Fire Insurance Exchange, Stacy Chern Insurance Agency, and Chern.
In May 2019, the insurance defendants made settlement offers of $14,242.56 each to Chang and Lo pursuant to Code of Civil Procedure section 998. The offers each stated: “This offer expires the earlier of 30 days from the date hereof, or at the commencement of trial.”
In January 2021, plaintiffs Chang, Lo, and Chang Jr. sued Farmers, Fire Insurance Exchange, Chern, and defendants’ counsel, Woolls Peer in a second action. The lawsuits were consolidated and the operative third amended complaint deemed filed in July 2021. Farmers demurred to the third amended complaint on numerous grounds, which the trial court sustained, and the California Court of Appeals affirmed on appeal. (Chang v. Farmers Insurance Company, Inc. (June 16, 2023, B321411)
As the matter neared trial, the trial court issued several discovery orders with which Chang and Lo did not comply. In November 2022, the trial court granted a motion for terminating sanctions filed by the insurance defendants (the only remaining defendants) and entered judgment against Chang and Lo on the remaining causes of action (for breach of the covenant of good faith and fair dealing, breach of contract, unfair business practices against Fire Insurance Exchange, and professional negligence against Chern).
The Trial Court’s Award of Costs to the Insurance Defendants
Plaintiffs moved to strike or tax costs on multiple grounds, including that the expert witness fees were not recoverable because the matter was never tried, no invoices were attached, and expert witness fees are generally not recoverable as costs.
The trial court entered an order granting $14,849.75 in costs to the insurance defendants.
DISCUSSION
Section 998 allows for recovery of expert witness costs in certain circumstances when an offer of settlement is not accepted and there is a judgment less than the amount of the offer.
The Costs Award Was Not Erroneous or an Abuse of Discretion – Expert Witness Fees as Costs
The statutory basis for the trial court’s award of expert witness fees was section 998. Once the offeror shows the section 998 offer is valid, the burden shifts to the offeree to show the offer was not made in good faith. An offer is made in good faith if it is realistically reasonable under the circumstances of the particular case – that is, if the offer carries with it some reasonable prospect of acceptance.
Plaintiffs made no argument that the section 998 offers they received were invalid. The insurance defendants obtained a judgment in their favor on all the remaining causes of action brought by Chang and Lo.
An award of zero damages generally constitutes prima facie evidence showing the offer was reasonable and the offeror is eligible for costs as specified in section 998. Plaintiffs do not challenge the reasonableness of the expert witness fees that the insurance defendants sought, or that such fees were all incurred after the expiration of the section 998 offers.
Rather than addressing whether the expert fees were proper under section 998, plaintiffs instead raised a number of other arguments.
Plaintiffs had the burden to establish the insurance defendants’ offer was invalid or not in good faith. Chang and Lo did not make any such showing. Accordingly, the Court of Appeals concluded the criteria for an award of post offer expert witness costs under section 998 were satisfied.
The post judgment order awarding costs was affirmed. Fire Insurance Exchange and Chern are entitled to recover their costs on appeal.
ZALMA OPINION
California’s Section 998 is a tool available to defendants to encourage settlement. The insurers made a viable offer of settlement which the Plaintiffs refused. After the case was dismissed by the court the Defendants were entitled to their costs including expert witness fees incurred after the offer was rejected. To appeal this issue is a clear act of desperation and is contumacious conduct. I doubt, without a writ, that Farmers will be paid the costs ordered.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Chutzpah: After Criminal Prosecution Defendant Sues USA
Post 5164
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Dr. Segun Patrick Adeoye, a medical doctor, filed a lawsuit against the United States of America, seeking damages for alleged violations during his criminal prosecution. He was acquitted by a jury but claims to have suffered significant harm, including financial losses, damage to his professional reputation, and personal distress.
In Dr. Segun Patrick Adeoye v. The United States Of America, Civil Action No. 4:25-cv-83, United States District Court, E.D. Texas, Sherman Division (July 23, 2025) the USDC dismissed Adeoye’s suit.
FACTUAL BACKGROUND
Dr. Adeoye was indicted on charges of conspiracy to commit wire fraud and money laundering. The indictment alleged that he and his co-conspirators obtained at least seventeen million dollars through various fraudulent schemes. Despite being acquitted, Dr. Adeoye claims that his ...
Payment of Appraisal Award Defeats Claim of Bad Faith
Post 5163
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Hurricane Damage to Dwelling Established by Appraisal Award
In Homeowners Of America Insurance Company v. Emilio Menchaca, No. 01-23-00633-CV, Court of Appeals of Texas, First District (July 31, 2025) after a hurricane Homeowners of America Insurance Company (“HAIC”) estimated that the cost of covered repair to Menchaca’s house was $3,688.54, which was less than his deductible, and therefore no payment would be made.
FACTS
After Menchaca retained counsel HAIC advised that, under the terms of the policy, Menchaca was required to first invoke the appraisal process prior to filing suit, and that HAIC reserved the right to request that Menchaca and any adjuster hired on his behalf submit to an Examination Under Oath (“EUO”).
On August 23, 2018, Menchaca’s counsel ...
Payment of Appraisal Award Defeats Claim of Bad Faith
Post 5163
Read the full article at https://lnkd.in/dNpKKcYx, see the full video at https://lnkd.in/dNgwRP8q and at https://lnkd.in/dA9dvd-D, and at https://zalma.com/blog plus more than 5150 posts.
Hurricane Damage to Dwelling Established by Appraisal Award
In Homeowners Of America Insurance Company v. Emilio Menchaca, No. 01-23-00633-CV, Court of Appeals of Texas, First District (July 31, 2025) after a hurricane Homeowners of America Insurance Company (“HAIC”) estimated that the cost of covered repair to Menchaca’s house was $3,688.54, which was less than his deductible, and therefore no payment would be made.
FACTS
After Menchaca retained counsel HAIC advised that, under the terms of the policy, Menchaca was required to first invoke the appraisal process prior to filing suit, and that HAIC reserved the right to request that Menchaca and any adjuster hired on his behalf submit to an Examination Under Oath (“EUO”).
On August 23, 2018, Menchaca’s counsel ...
Rulings on Motions Reduced the Issues to be Presented at Trial
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CASE OVERVIEW
In Richard Bernier v. State Farm Mutual Automobile Insurance Company, No. 4:24-cv-00002-GMS, USDC, D. Alaska (May 28, 2025) Richard Bernier made claim under the underinsured motorist (UIM) coverage provided in his State Farm policy, was not satisfied with State Farm's offer and sued. Both parties tried to win by filing motions for summary judgment.
FACTS
Bernier was involved in an auto accident on November 18, 2020, and sought the maximum available UIM coverage under his policy, which was $50,000. State Farm initially offered him $31,342.36, which did not include prejudgment interest or attorney fees.
Prior to trial Bernier had three remaining claims against State Farm:
1. negligent and reckless claims handling;
2. violation of covenant of good faith and fair dealing; and
3. award of punitive damages.
Both Bernier and State Farm dispositive motions before ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
