Traditionally, liability insurance companies have refused to reveal the amount of policy limits to third party claimant’s pre-litigation, even though eventually those policy limit amounts must be revealed in response to formal discovery once litigation has commenced [see, California’s Judicial Council Form Interrogatories, No. 4.1(e)].

The short answer to the question of when/how a liability insurance carrier operating in California must disclose policy limits information to a claimant pre-litigation is that whenever a California claimant makes a pre-litigation request for policy limits information, a carrier must make a prompt written inquiry to its California insured whether or not to release policy limits information.  If the insured provides that written consent, the policy limits information should be disclosed to the claimant

Otherwise, in the absence of evidence of this sort of written inquiry to the insured, if it later is proved the case could have settled for at or below policy limits pre-litigation, and there is an excess of policy limits outcome at trial, the carrier is placed in jeopardy of bad faith liability to its insured, and potential exposure greatly in excess of the applicable policy limits.  Why take that risk?


In Aguilar v. Gostischef (2013) 220 Cal.App.4th 475, and in Reid v. Mercury Insurance Company (2013) 220 Cal.App.4th 262, the Second Appellate District (Division 8), made a clear distinction between when a California liability carrier needs to act on a policy limits demand made by a claimant pre-litigation, and when it may with impunity choose to not reveal the limits.

Aguilar involved an outcome in where just the costs award alone was 16 times the $100K policy limits, and damages awarded were 24 times the policy limits.  Farmers has spent a small fortune defending the case to date at the trial and appellate levels and in prosecuting a companion declaratory relief action.  This harsh outcome in Aguilar reaffirms the appellate courts’ obvious dislike of the practice of liability carrier’s not disclosing policy limits when asked, at least in serious injury cases.

The facts examined by the Appellate Court in Reid involved a situation where despite the existence of a severe injury and clear liability, the auto liability carrier with $100K limits was found to not be in bad faith for not settling pre-litigation because there had been no real efforts initiated by claimant pre-litigation.

Finally, under the prevailing view of California’s appellate courts, once a claimant makes a pre-litigation policy limits information request, a liability carrier operating in California is “playing with fire” when it at least does not promptly seek written consent from its insured to release policy limits information in response to such a request made by a claimant.  Boicourt v. Amex Assurance Co. (2000) 78 Cal.App.4th 1390, 1397  [California’s requirement of obtaining an insured’s written consent before disclosing policy limits is found in California Insurance Code § 791.13(a) (see also, Griffith v. State Farm Mut. Auto. Ins. Co. (1991) 230 Cal.App.3d 59, 65-68)].

Aguilar v. Gostischef

In Aguilar, the Appellate Court upheld the trial court’s order that Farmers, whose adjuster had refused to reveal its $100K policy limits pre-suit, and later had rejected a pre-trial California Code of Civil Procedure § 998 Offer (“998 Offer”) of $700K (well in excess of policy limits), was ordered to pay more than $1.6M in costs to Aguilar, the third party claimant who had lost his leg in a motor vehicle accident, incurring $508K in medical bills.

The Aguilar case has a tortured procedural history.  The personal injury action was filed originally in 2004.  After answering the complaint, Gostischef went bankrupt in 2005.  The case against Gostischef emerged from bankruptcy in 2006, both as to any non-dischargeable claims for Gostischef’s willful or wanton misconduct and as to any available liability insurance coverage.  Gostischef ultimately made a pre-trial 998 Offer for the Farmers $100K policy limits.  At that point, Aguilar’s counsel  wrote to Farmers and rejected the policy limits offer, contending Aguilar was entitled to recover in excess of policy limits because Farmers had ignored multiple pre-litigation requests for disclosure of the amount of policy limits and other attempts to settle.   Aguilar in turn made a 998 Offer for $700K.  Farmers rejected Aguilar’s 998 Offer, and again offered up the $100K policy limits to settle the case, which Aguilar again rejected for the same reasons previously stated.

The case went to trial in L.A. early in 2008, and a jury verdict was entered in favor of Aguilar for total damages of $4.68M, reduced to $2.34M due to a jury finding of 50% comparative fault on the part of Aguilar.  Gostischef then sought and obtained a JNOV from the trial court, which Aguilar immediately appealed.  While the JNOV was up on appeal, Farmers intervened in the action as a real party in interest.

In 2011 the trial court’s JNOV was reversed by the Appellate Court in a non-published decision (Case No. B217824), and the case was remanded back to the trial court.  After the trial court reinstated the $2.34M verdict, Aguilar filed a cost bill consisting mainly of pre and post judgment interest and post offer expert costs.  Farmers & Gostischef contested Aguilar’s cost bill on the grounds that Aguilar’s pre-trial $700K 998 Offer was above policy limits and had not been made in “good faith.”

The trial court found that the 998 Offer had been made in the requisite good faith, taxed costs of only about $5K, and entered a cost award in excess of $1M, for a total judgment of close to $4M.  Farmers & Gostischef thereafter appealed the cost award (Farmers also has filed a separate declaratory relief action against Gostischef & Aguilar re: Farmers duty to indemnify that remains pending).

In making its decision, the Appellate Court in Aguilar re-stated the general rule that whether a 998 Offer is reasonable depends on the information available to the parties as of the date the offer was served.  Id, 220 Cal.App.4th at 480.   Those circumstances in this instance included not only the severe extent of Aguilar’s injuries, but the repeated refusal by Farmers adjuster to reveal the $100K policy limits during pre-litigation negotiations with Aguilar’s counsel.  Id, 220 Cal.App.4th at 480-481.

Boicourt v. Amex Assurance Co.

In Boicourt v. Amex Assurance Co. (2000) 78 Cal.App.4th 1390, the Fourth Appellate District held that Amex’ blanket policy of refusing to disclose policy limits during pre-litigation communication with claimants or their representatives may give rise to a bad faith claim.

The Boicourt court reasoned that a liability insurer is “playing with fire” when it refuses to disclose policy limits.  Such refusal “cuts off the possibility of receiving an offer within policy limits” by the insurer’s “refusal to open the door to reasonable negotiations.”  Id, 78 Cal.App.4th at 1391.  The court in Boicourt also ruled that:

“the insurer’s sin here was a blanket refusal to contact the insured to see if he wanted the policy limits disclosed. But functionally it was the same thing. The insurer’s refusal to disclose (or in California, the refusal to give the insured the option of disclosing) policy limits may have foreclosed a possible settlement of the underlying claim within those limits.”


Reid v. Mercury Insurance Company

The sort of harsh outcomes in Aguilar and Boicourt are contrasted by outcomes in cases such as Reid v. Mercury Insurance Company (2013) 220 Cal.App.4th 262 , in which the Second Appellate District (Division 8), ruled that an insurer’s duty to settle is not precipitated solely by the likelihood of an excess judgment against the insured.  The court reasoned in Reid that:

“In the absence of any pre-litigation settlement demand or any other manifestation the injured party is interested in settlement, when the insurer has done nothing to foreclose the possibility of settlement, we find there is no liability for bad faith failure to settle.”

Id, 220 Cal.App.4th at 266.

The court in Reid concluded that:

“An ‘opportunity to settle’ does not arise simply because there is a significant risk of an excess judgment.  And none of the evidence presented to the trial court, disputed or not, allows an inference that plaintiff at any time conveyed to defendant any interest in settlement, at policy limits or otherwise, at any time before defendant offered its policy limits. In short, there was no evidence of a bad faith failure to settle in this case. Accordingly, there was no foundation for a claim of breach of contract or breach of the insurer’s covenant of good faith and fair dealing.”

Id, 220 Cal.App.4th at  278-79.


Depending on the circumstances presented, liability insurers operating in California should carefully review any existing policy of not revealing the amount of policy limits in response to a claimant’s pre-litigation request for that information.  This is especially the case when the policy limits information is requested on the stated ground that the claimant “needs it to make a policy limits demand.”

There at least should be a contingency plan in place for high value claims (i.e., wrongful death claims or instances when the extent of potential special damages far exceeds applicable policy limits, and there is no potential for a fraudulent claim or significant potential comparative fault by the insured party).

In those scenarios when a claimant or its counsel requests policy limits information in a potentially high value case, the adjuster should promptly inquire in writing to any California insured whether they should disclose policy limits information in response to any such pre-litigation policy limits information request made by a claimant.  That way, the potential risk the sort of a harsh post-trial outcome that occurred in Aguilar can be avoided with (1) a better claims policy than blanket non-disclosure; and (2) good record keeping to prove the disclosure positions taken.

Fredrickson, Mazeika & Grant, LLP, is a full service law firm with offices in San Diego, Las Vegas, San Francisco and Los Angeles. The firm’s specialty areas include construction law & construction defect, products liability, personal injury & property damage, business & real property transactions, business litigation, transportation litigation, pharmacy law, environmental/toxic tort claims, insurance law, real estate & land use litigation, equine law, and general civil litigation.

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