Contreras v. United States Security Insurance Co.

Arnold Dale was intoxicated and speeding when he struck and killed Flor Osterman as she was walking in a residential area. Dale fled the scene and was criminally charged for Osterman’s death. Deana Dessanti owned the car that Dale was driving, and the car was covered by a liability-insurance policy issued by United States Security Insurance Company (US Security) (defendant). Dessanti was a named insured, and Dale was an additional insured because Dessanti gave Dale permission to drive the car. The policy covered bodily injury or property damage that any insured became liable for. Osterman’s mother, Carmen Maria Contreras (plaintiff), hired counsel to represent Osterman’s estate in the matter. Contreras’s counsel sent a letter to US Security demanding the policy limit. US Security’s counsel remitted the policy limit but required that Contreras sign a general release form, discharging Dessanti and Dale from any further claims. Contreras refused to release Dale given his misconduct but was willing to release Dessanti and US Security. US Security’s offer was firm. Contreras rejected the offer and sued Dessanti and Dale for wrongful death. A jury awarded Contreras compensatory damages against both insureds, punitive damages against Dale, and costs. The award was affirmed on appeal. Meanwhile, Dessanti filed for bankruptcy and assigned her claims against US Security to Contreras. Contreras then filed a bad-faith claim against US Security. A state trial court directed a verdict in favor of US Security, finding that the offer to settle with only one insured created a no-win, automatic bad-faith situation for US Security. Contreras appealed.