Pinto v. Farmers Insurance Exchange: A Lesson on How to Avoid a Bad Faith Claim

May 6, 2021

The recent California appelleate court decision, Pinto v. Farmers Insurance Exchange (2021) 61 Cal.App.5th 676 (Pinto)(decided March 8, 2021), which resulted in a $9 million bad faith judgment against an insurer, is a good real world case study on what an insurer should not do to avoid a bad faith clai by their insured.

Underlying Factual Background of the Case

Pinto arises from a March 31, 2013 vehicle rollover while the four occupants were returning from a party in Lake Havasu.  The policy covering the truck had limits of $50,000 per person, $100,000 per occurrence and covered the insured and “permissive drivers.”  Early reports to the insurer indicated one occupant suffered brain damage and was in a coma and also that another occupant was paralyzed.  Due to alcohol and drug use, reports on who was driving at the time of the accident were inconsistent.

Post-Accident Settlement Discussions and Investigation

The insurer tendered the $100,000 limit to the three occupants, except for the occupant the police determined to be the driver, under the influence and having committed aggravated assault in causing the accident.  The insurer inquired whether the permissive driver had other coverage, but the permissive driver did not respond.

On July 1, 2019, one occupant (hereinafter “claimant”) sent a demand letter claiming to be quadriplegic, making a claim against the insured, but not making a claim against the driver as a possible permissive driver and possible insured.  The demand was for the policy limit within 15 days.

The insurer forwarded the letter to the insured and the permissive driver, then hired an investigator to locate the permissive driver and obtain a statement.  The insurer also retained an attorney, who tendered the $50,000 limit in response to the demand, but requesting a release of the insured and permissive driver, whereas the demand was only against the insured.  The insurer’s attorney also inquired whether a claim against the auto manufacturer would be made, whether liens existed, whether the claimant’s spouse would be making a claim and asked for a 30 day extension to respond to the demand. 

The next day, on July 17, 2019, the claimant rejected the $50,000 on the basis the insurer had failed to provide proof of the policy limits and proof of whether the permissive driver had been in the course and scope of employment.

The Subsequent Lawsuit Against The Insured and Permissive Driver

A lawsuit was filed by the quadriplegic occupant against the insured and permissive driver, then settled.  The settlement entailed a $10,000,000 judgment and the insured and permissive driver assigned their rights against the insurer to the quadriplegic claimant.

The Bad Faith Action

The assignee claimant then sued the insurer for bad faith failure to settle in the Los Angeles Superior Court.  At trial, the claimant used a spcial verdict which mirrored the model jury instruction but failed to include a finding on whether the insurer had been unreasonable in failing to accept the demand.  The jury made a number of other findings: the claimant’s demand was reasonable, it was not accepted, a judgment had been entered against the insured and permissive driver, the permissive driver did not cooperate with the insurer, the insurer used reasonable efforts to obtain cooperation from the permissive driver and the insurer was prejudiced by the permissive driver’s lack of cooperation.  A bad faith judgment was entered for $9,935,000.

The Appeal

The insurer had the judgment reversed on appeal as the Appeals Court determined that failure to accept a reasonable settlement offer is not bad faith per se, but there must be an express finding of unreasonable conduct by the insurer.  The absence of that specific finding in the special verdict form nullified the entire judgment.  On appeal, the claimant asserted the insurer acted unreasonably by demanding that the release include the insured and the permissive driver, but that was inconsistent with the claimant’s rejection based on the lack of evidence of the policy limits and lack of proof whether the permissive driver was acting in the course and scope of employment.  As such, the Court of Appeal determined that insurer had attempted to accept the demand, tendered the policy limit and there was no finding of unreasonable conduct.  

Rather than order a retrial, the Court of Appeal directed the Superior Court to enter a judgment for the insurer because the special verdict error was caused by the claimant.


Pinto serves a reminder that when injuries are severe and the policy limits are a fraction of the exposure, the insurer’s pre-litigation exchanges with a claimant will later be put under the proverbial microscope by a potentially sympathetic jury.  The key to pre-litigation negotiations with a claimant are a well-documented claims file, aggressive investigation by assigned counsel, chronicling pre-litigation events in formal correspondence to the claimant and developing a pattern of reasonable conduct in the event hindsight is used to impeach the insurer’s conduct.

As a further word of caution, the claimant’s implementation of a special verdict form which mirrored the model jury instruction offered no reprieve.  As noted in the model instructions guide, they are “not a primary source of law, they are a statement or compendium of the law.”  It is not uncommon to find appellate analyses scrutinizing the model instrutions and reliance on the model instructions must be carefully cross-referenced by the more recent case law.

Finally, it is noteworthy that Pinto adopted a “de novo” review of the special verdict form without any deference to the trial court’s adoption and implementation of that form.  “A special verdict is ‘fatally defective’ if it does not allow the jury to resolve every controverted issue.”  (J.P. Carlsbad Unified School Dist. (2014) 232 Cal.App.4th 323, 338.)  When seeking reversal, special verdicts provide a starting block for evaluating reversable error since the Court of Appeal evaluates their accuracy with new eyes.