Bad Faith Insurance Tactics
Code of Civil Procedure section 128.5 authorizes the award of attorney's fees and costs as a sanction to control improper resort to the judicial process.
The statute was designed to strike a balance between competing interests: the need to control improper litigation tactics and the desire to avoid chilling vigorous advocacy.
Thus, fees are permitted not just as appropriate compensation to the prevailing party, but as a means of controlling burdensome and unnecessary legal tactics. ( Pacific Trends Lamp & Lighting Products, Inc. v. J. White, Inc. (1998) 65 Cal. App. 4th 1131, 1136.)
In order to obtain sanctions, the moving party must show that the other party engaged in bad faith actions or tactics that are frivolous or intended solely to cause unnecessary delay. (Code Civ. Proc., 128.5, subd. (a).) the tactics or actions at issue must have been undertaken with bad faith.
Notice and an opportunity to be heard must be given. (Code Civ. Proc., 128.5, subd. (c); Pacific Trends Lamp & Lighting Products, Inc. v. J. White, Inc., supra, 65 Cal. App. 4th at p. 1136.) We review an order awarding such sanctions for substantial evidence under the abuse of discretion standard. ( Sabek, Inc. v. Engelhard Corp. (1998) 65 Cal. App. 4th 992, 1001.)
The defendant insurer in Triplett v. Farmers Ins. Exchange (1994) was sanctioned for refusing to settle an action because the trial court felt the insurer's conduct in standing firm on its settlement offer, which the judge believed was unreasonably low, constituted bad faith.
In reversing that order, the appellate court held the insurer could not be punished for insisting on its constitutional right to a jury trial in lieu of settlement even if its motives were improper. (Id. at p. 1422.)
The court concluded by stating that Code of Civil Procedure section 128.5 "cannot be applied where the only action or tactic is defendant's decision to choose trial, rather than settlement, regardless of what subjectively motivated that choice.