Is Evidence of Insurance Company Low Settlement Offers Admissible ?
In White v. Western Title Ins. Co. (1985) 40 Cal. 3d 870 221 Cal. Rptr. 509, 710 P.2d 309, the insureds demanded payment of benefits under their policy, and the insurer denied this claim. (Id. at pp. 878-879.)
After the insureds sued the insurer for breach of contract and bad faith, the insurer made low settlement offers during the litigation, and the trial court permitted evidence of these offers and other postlitigation conduct to be admitted as evidence of the insurer's bad faith. (Id. at p. 879.)
On appeal, the insurer contended that the settlement offers were absolutely privileged under Civil Code section 47. (White v. Western Title Ins. Co., supra, at p. 887.)
The court in White affirmed the admission of the settlement offers as evidence that the insurer was not evaluating the insureds' claim fairly and in good faith, reasoning that "even if liability cannot be founded upon a judicial communication, it can be proved by such a communication," and that a "careful distinction" must be drawn "between a cause of action based squarely on a privileged communication . . ., and one based upon an underlying course of conduct evidenced by the communication." (Id. at p. 888.)
Subsequently, the courts have limited the application of White. In California Physicians' Service v. Superior Court (1992) 9 Cal. App. 4th 1321, 1330 and footnote 7 12 Cal. Rptr. 2d 95, the court held that Civil Code section 47 precluded the insured's bad faith claim resting solely on the insurer's defensive pleadings.
Other courts have concluded that in some circumstances an insurer's defensive pleadings are not admissible as evidence of bad faith (Nies v. National Auto. & Casualty Ins. Co. (1988) 199 Cal. App. 3d 1192, 1200-1203 245 Cal. Rptr. 518), and that a claim for bad faith cannot be based on an insurer's appeal from an adverse judgment (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal. App. 4th 1766, 1770-1772 31 Cal. Rptr. 2d 224).