Meleski v. Estate

29 Cal.App.5th 616

240 Cal.Rptr.3d 552

Amanda MELESKI, Plaintiff and Appellant,

v.ESTATE OF Albert HOTLEN, Defendant and Respondent.

C080023

Court of Appeal, Third District, California.

Filed November 29, 2018

Arnold Law Firm, Anthony M. Ontiveros ; and Leslie Mitchell, Sacramento, for Plaintiff and Appellant.

Spinelli, Donald & Nott, Ross R. Nott and Alison W. Winter, Sacramento, for Defendant and Respondent.

Blease, Acting P.J.

This case involves a procedure by which an insurance company, as the entity controlling the litigation and incurring the risk of loss, is a de facto party under Probate Code sections 550 through 555 in "an action to establish [a] decedent's liability for which the decedent was protected by insurance" ( Prob. Code, § 550 ),¹ and thus also is a party under Code of Civil Procedure ² section 998 that must pay specified costs after rejecting a reasonable settlement offer.

Amanda Meleski was injured when Albert Hotlen ran a red light and collided with her vehicle. Unfortunately, Hotlen was deceased at the time of the lawsuit, and he had no estate from which she could recover. However, Hotlen had purchased a $100,000 insurance policy from Allstate Insurance Company (Allstate) covering the accident. Meleski brought her action pursuant to Probate Code sections 550 through 555, which allowed her to serve her complaint on Allstate and recover damages from the Allstate policy, but limited her recovery of damages to the policy limits.

Meleski attempted to settle the matter before going to trial by making an offer pursuant to section 998 for $99,999. The offer was not accepted, and at trial a jury awarded her $180,613.86. Because the offer was rejected and Meleski was awarded judgment in excess of her offer to compromise, she expected to recover her costs of suit, the postoffer costs of the services of expert witnesses, and other litigation costs.

Meleski argued that she should be able to recover costs in excess of the policy limits from Allstate, since it was Allstate that had refused to accept a reasonable settlement offer prior to trial. The trial court disagreed, and Meleski filed this appeal. She argues Allstate is a party within the meaning of section 998 for purposes of recovering costs, and that such costs are recoverable from the insurer despite the limitation on the recovery of "damages" found in Probate Code sections 550 through 555. " ‘[Costs] constitute no part of a judgment at the moment of its rendition ....’ [Citations.]" ( Folsom v. Butte County Assn. of Governments (1982) 32 Cal.3d 668, 677, 186 Cal.Rptr. 589, 652 P.2d 437.)

We agree and shall reverse the judgment. Even though the decedent's estate is the named defendant in actions under Probate Code sections 550 through 555, this is a legal fiction. The insurance company accepts service of process, hires and pays for counsel to defend the action, makes all decisions regarding settlement of the litigation, is responsible for paying the judgment in favor of the plaintiff if such judgment is rendered, and makes the decision whether or not to appeal an adverse judgment. There is no actual person or entity other than the insurance company to do any of this. This is a reality we will not ignore. Moreover, we find it manifestly unfair that section 998 could be employed by Allstate to recover costs from the plaintiff (which costs it would have no obligation to pay to the estate), but Allstate would have no corresponding responsibility to pay costs merely because it is not a named party.

FACTUAL AND PROCEDURAL BACKGROUND

Meleski suffered physical injuries in a vehicle collision with Albert Hotlen. When Meleski's attorney attempted to serve the summons and complaint on Hotlen, he was informed Hotlen had died. Hotlen was insured by Allstate at the time of the collision.

When Allstate refused to tender the policy limit of $100,000, Meleski amended the complaint to name the estate of Albert Hotlen as the defendant in the action. The parties agree this was done pursuant to Probate Code sections 550 through 555, which allow an action to establish a decedent's liability for which the decedent was covered by insurance to be continued against the estate without the need to join the decedent's personal representative or successor in interest. ( Prob. Code, § 550, subd. (a).) Under this statutory scheme, the estate must be named as the defendant, but service is on the insurance company. ( Prob. Code, § 552, subd. (a).) Any judgment in such an action does not adjudicate rights by or against the estate, unless the personal representative of the estate is joined as a party. ( Prob. Code, § 553.) Also, unless the personal representative is joined as a party, no damages may be recovered outside the policy limits. ( Prob. Code, § 554, subd. (a).) A judgment in favor of the plaintiff in the action is enforceable only from the insurance coverage and not against the estate. (Ibid .) In this case, Hotlen did not leave an estate.

Meleski sent an offer of compromise pursuant to section 998 for $99,999, which was one dollar less than the policy limits. The offer provided that each party would bear its own costs, interest, and attorney fees. The offer was served on Allstate. Allstate did not accept the offer. Instead, defendant sent its own section 998 offer of compromise for $40,000, with each side to bear its own costs and fees. Meleski did not accept the offer, and the matter went to trial.

The jury returned a verdict for Meleski and found her total damages to be $180,613.86. Judgment was entered in Meleski's favor in the amount of $180,613.86, plus interest and costs. Following the verdict, Meleski filed a memorandum of costs seeking to recover expert witness fees and other litigation costs pursuant to section 998. These amounts totaled $66,017.08. Defendant responded by arguing, in a motion to strike costs, or tax costs, that its liability was limited to the policy limits, pursuant to Probate Code section 550 et seq.

The trial court agreed with defendant that Meleski's recovery was limited to the policy limits of $100,000. Defendant also moved for a new trial for excessive damages. The trial court denied this, stating "there is no evidence the jury's verdict of damages was excessive or unreasonably high given the underlying facts of the case. Rather, judgment must be reduced, as a matter of law, under Probate Code section 554, because the judgment is enforceable only up [to] the maximum insurance coverage, in this case $100,000." The trial court found that whether Meleski was entitled to costs pursuant to section 998 was a moot point, since the judgment was limited to $100,000. In any event, the trial court found that section 998 was applicable to the case, and that the costs submitted by Meleski were reasonable and appropriate, and that Meleski would have been entitled to the requested costs had there not been an insurance cap.

DISCUSSION

Meleski argues Allstate was obligated to pay an award of costs under section 998, that Allstate was a party pursuant to Probate Code sections 550 through 555 and section 998, and that relieving insurers of the obligation to pay costs in this circumstance would conflict with the Legislature's intent in passing section 998. We agree.

Defendant argues Allstate cannot be forced by section 998 to pay costs because it was not a party to the action, and that in any event Probate Code sections 550 through 555 limit the amount a plaintiff can recover to the coverage limits of the decedent's policy. We address each of these claims in turn.

IAllstate Is a Party for Purposes of Section 998

Section 998 provides in pertinent part that prior to commencement of trial, "any party may serve an offer in writing upon any other party to the action to allow judgment to be taken or an award to be entered in accordance with the terms and conditions stated at that time." ( § 998, subd. (b), italics added.) If the offer is not accepted within 30 days of being made, it is deemed withdrawn. ( § 998, subd. (b)(2).) "If an offer made by a plaintiff is not accepted and the defendant fails to obtain a more favorable judgment or award in any action or proceeding ... the court ... in its discretion, may require the defendant to pay a reasonable sum to cover postoffer costs of the services of expert witnesses, who are not regular employees of any party, actually incurred and reasonably necessary in either, or both, preparation for trial ..., or during trial ..., of the case by the plaintiff, in addition to plaintiff's costs." ( § 998, subd. (d).)

The purpose of section 998 is to encourage settlements. ( Santantonio v. Westinghouse Broadcasting Co . (1994) 25 Cal.App.4th 102, 113, 30 Cal.Rptr.2d 486.) The statute " ‘achieves its aim by punishing a party who fails to accept a reasonable offer from the other party.’ (Original italics.) [Citation.]" ( Ibid . ) The policy behind section 998 is "plain." ( Bank of San Pedro v. Superior Court (1992) 3 Cal.4th 797, 804, 12 Cal.Rptr.2d 696, 838 P.2d 218.) "It is to encourage settlement by providing a strong financial disincentive to a party--whether it be a plaintiff or a defendant--who fails to achieve a better result than that party could have achieved by accepting his or her opponent’s settlement offer. (This is the stick. The carrot is that by awarding costs to the putative settler the statute provides a financial incentive to make reasonable settlement offers.)" ( Ibid . ) The policy in favor of settlement "primarily is intended to reduce the burden on the limited resources of the trial courts. The trial of a lawsuit that should have been resolved through compromise and settlement uses court resources that should be reserved for the resolution of otherwise irreconcilable disputes." ( Wilson v. Wal-Mart Stores, Inc. (1999) 72 Cal.App.4th 382, 390-391, 85 Cal.Rptr.2d 4.)

Obviously, since the purpose of section 998 is to encourage settlement by punishing the refusal of a reasonable settlement offer, it is directed at the entity...