In a plaintiff’s personal injury action brought against a deceased insured’s estate pursuant to Probate Code sections 550 et seq., the deceased insured’s liability insurer was a de facto “party” that could be liable for costs after rejecting the plaintiff’s reasonable statutory offer to compromise.(Meleski v. Estate of Hotlen (2018) 29 Cal.App.5th 616)
Facts
Amanda Meleski was injured in an automobile accident caused by Albert Hotlen. At the time of the accident, Hotlen was insured on an Allstate Insurance Company automobile policy with liability limits of $100,000.
After the accident, Hotlen died. Hotlen did not have any assets other than the Allstate policy.
Pursuant to Probate Code sections 550 et seq., Meleski filed a personal injury lawsuit naming “the Estate of Albert Hotlen” as the defendant, without naming Hotlen’s personal representative or successor in interest as a defendant. Probate Code sections 550 et seq. allowed Meleski to serve her complaint on Allstate, and to recover damages in the lawsuit only to the extent of Allstate’s policy limits. Allstate hired counsel to defend Hotlen’s estate against Meleski’s lawsuit.
Before trial, pursuant to Code of Civil Procedure section 998, Meleski offered to settle her claims against Hotlen’s estate for $99,999 (one dollar less than the policy limits). Allstate, on behalf of the estate, declined to accept the offer. The matter proceeded to trial and the jury awarded Meleski $180,613.
Meleski then asserted that because she obtained a verdict in excess of her pre-trial statutory offer, she was entitled to recover expert witness fees and other litigation costs totaling $66,017. Specifically, Meleski argued that she was entitled to recover those costs not from Hotlen’s estate but rather from Allstate, since it was Allstate that had refused to accept Meleski’s statutory offer. The trial court disagreed, ruling that pursuant to the Probate Code, Meleski’s recovery was limited to Allstate’s policy limits of $100,000. Meleski appealed.
Holding
The California Court of Appeal reversed. It held that pursuant to Code of Civil Procedure section 998, Allstate was liable for Meleski’s expert witness fees and other litigation costs.
Section 998 provides that before trial, “any party” may serve a written offer to compromise upon “any other party to the action.” The statute allows an award of costs against a party who refuses a reasonable offer of compromise. According to the appellate court, the named defendant, Hotlen’s estate, was not really a “party” because an estate is not a legal entity and the estate was not at risk for payment of damages. Rather, Allstate alone controlled the litigation and Allstate alone was at risk for payment of damages; thus, for purposes of section 998, Allstate should be considered a “party” who had failed to accept a reasonable settlement offer from Meleski.
The appellate court agreed that when a plaintiff sues an insured’s estate pursuant to Probate Code sections 550 et seq., the plaintiff can only recover “damages” up to the amount of the policy limit. Here, however, Meleski’s expert witness fees and other litigation costs were not “damages,” but rather were “costs.” Further, the purpose of the Probate Code sections is to restrict an estate’s liability to the available policy limits, not to limit a litigating insurer’s liability for failing to accept a reasonable offer of compromise.
Comment
The appellate court concluded that under the circumstances of this case, treating Hotlen’s estate as a party was a “legal fiction.” According to the court, “in actuality, Allstate is the party litigating the case, inasmuch as it alone is at risk of loss and it alone controls the litigation.” The court concluded that requiring Allstate to pay Meleski’s expert witness fees and other litigation costs would uphold the purpose of Code of Civil Procedure section 998 (i.e., making a party accountable for its own actions in failing to accept a reasonable settlement offer) without offending the objective of Probate Code sections 550 et seq. (i.e., protecting a deceased insured’s estate from obligations in excess of the insurance policy limits).