Albert Sonntag’s Legal Blog

“Moradi-Shalal:  The sad plight of California’s Plaintiffs’ Bar.”

 
In 1988, the California Supreme Court eliminated a third party plaintiff’s ability to sue his insurance company on grounds of bad faith.  The case of Moradi-Shalal v. Fireman’s Fund Ins. Companies (1988) 46 Cal.3d 287 held that no private cause of action could be maintained under California’s Unfair Practices Act.  (Ins. Code, § 790 et seq.).  Moradi-Shalal demonstrated that as a matter of statutory analysis, it is wrong to conclude that the Unfair Practices Act was intended to include private causes of action.  (See Moradi-Shalal v. Fireman’s Find Ins. Companies, supra, 46 Cal.3d at pp. 297-301.) Under the provisions of that Act, a third party plaintiff who was roughly handled, in some manner that could be argued to be unfair, by the insurance company of the adverse party, had recourse to the courts in what amounted to a second trial on the facts to establish whether the insurance company had acted in bad faith by denying the claim.  This private cause of action was henceforth no longer available. The underlying object of Moradi-Shalal was to stem the tide of threadbare personal injury cases, mostly based on low impact automobile accidents that constituted the bread and butter of the plaintiffs’ bar.  I cannot describe in this short paragraph vividly enough the devastating impact this ruling had on the plaintiffs bar in California during the decade of the late eighties and early nineties. For, once the plaintiff’s counsel in a fender-bender case no longer had the power to threaten the adverse party’s insurance company with a second lawsuit to review the outcome of the first, she was forced to try every one of these little cases before increasingly skeptical juries. The settlement monies dried up.  The result was a dramatic reduction in plaintiffs’ filings.  The effect of the ruling was twofold:  the Court threw away the baby with the bath water, as many low impact cases cause long-lasting and crippling injuries and disabilities to many people whose claims are now routinely denied, particularly if the plaintiffs are members of a minority group.  As well, because of the chilling effect on the plaintiffs’ bar, it handicapped the bar’s ability to fund riskier and costlier cases with the income it received previously from the settlement of low impact cases.  In the greater Los Angeles area, automobile collisions occur in the dozens every day, and the number of low impact claims is therefore enormous.  This has not changed to date, in fact it has increased, but most low impact cases are now making their way to Small Claims courts, including the meritorious ones, and the riskier big ticket cases are prosecuted with a lack of funds.  In fact, there is an increasing reliance on loans that handicap the eventual prospects of the case.  The chill on the California Plaintiffs’ Bar continues.