Preview
FILED
Ognian A. Gavrilov, SBN 258583 SEP 16 2022
GAVRILOV & BROOKS
2315 Capitol Avenue
NY
Sacramento, CA 95816
Phone: (916) 504-0529
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Facsimile: (916) 727-6877
Email: Ognian@gavrilovlaw.com
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Attorney for Plaintiff
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PAUL BETENBAUGH
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SUPERIOR COURT OF THE STATE OF CALIFORNIA
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FOR THE COUNTY OF GLENN
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PAUL BETENBAUGH, an individual Case No.: 22 CV 02982
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Plaintiff, COMPLAINT FOR:
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v. Professional Negligence
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By Fax
Breach of Fiduciary Duty
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SAFECO INSURANCE COMPANY OF Breach of Contract
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AMERICA, a New Hampshire corporation; Fraudulent Concealment
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GURNEE MASON RUSHFORD BONOTTO Breach of the Implied Covenant of
& FORESTIERE LLP, a California limited Good Faith and Fair Dealing
liability partnership; PHILLIP R. BONOTTO,
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an individual; TRACY W. FRITCH-THYM,
an individual; DOES 1-25, inclusive
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Defendants.
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PNSRRRBRBBRB&FGe
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COMPLAINT
Plaintiff Paul Betenbaugh alleges as follows:
PARTIE
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1. Plaintiff Paul Betenbaugh (“Betenbaugh”) is, and all relevant times herein was, an
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individual residing in Glenn County, California.
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2. Betenbaugh is informed and believes, and thereon alleges that defendant Safeco
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Insurance Company of America (“Safeco”) is an insurance company authorized to do business in
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the State of California. Betenbaugh is further informed and believes, and thereon alleges that
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Safeco is a corporation organized under the laws of the State of New Hampshire, and that its
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principal place of business is in Boston, Massachusetts.
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5. Betenbaugh is informed and believes, and thereon alleges that defendant Gurnee
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Mason Rushford Bonotto & Forestiere LLP (the “Firm”) is a California limited liability
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partnership with its principal place of business in Roseville, California. The Firm is a California
law firm with approximately 11 licensed, practicing attorneys.
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4, Betenbaugh is informed and believes, and thereon alleges that defendant Phillip
R. Bonotto (“Bonotto”) is an attorney residing and working in Placer County, California. At all
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times relevant hereto, Bonotto was a partner at the Firm, and in doing the things herein alleged
was acting within the scope of such employment and agency.
KF
5. Betenbaugh is informed and believes, and thereon alleges that defendant Tracy
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W. Fritch-Thyme (“Fritch-Thyme”) is an attorney residing and working in Placer County,
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California. At all times relevant hereto, Fritch-Thyme was an associate at the Firm, and in doing
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the things herein alleged was acting within the scope of such employment and agency. The
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Firm, Bonotto, and Fritch-Thyme are collectively referred to herein as the “Firm Defendants.”
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6. Betenbaugh is ignorant of the names and capacities of the defendants sued herein
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as DOES 1 through 25, inclusive, and therefore sues these defendants by such fictitious names.
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Plaintiff will amend this action to allege these DOE defendants’ names and capacities when
ascertained. Betenbaugh is informed and believes, and thereon alleges that each of the DOE
defendants is responsible in some manner for the events and occurrences alleged herein, thereby
proximately causing injury and damage to Betenbaugh. Safeco, Firm Defendants, and DOES 1
a
through 25, inclusive, are collectively referred to herein as “Defendants.”
7. Betenbaugh is informed and believes, and thereon alleges that at all times
NY
mentioned herein, Defendants, and each of them, were the agents, servants, employees and/or
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joint venturers of their co-defendants and were, as such, acting within the scope, course and
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authority of said agency employment and/or joint venture and that each and every defendant has
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ratified and approved of the acts of his or her agent. Relief is sought against each and all
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defendants as well as their agents, assistants, successors, assigns, employees, and persons acting
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in concert or cooperation with them or at their direction or under their supervision.
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JURISDICTION AND VENUE
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8. The injury and damages in dispute, upon which Betenbaugh sues herein, occurred
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in Glenn County, California. Venue and jurisdiction are proper because the amount at issue
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exceeds the jurisdictional minimum of this Court, the defendants named herein were doing
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business in the County of Glenn, and because the majority of witnesses and events occurred in
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the County of Glenn. As such, jurisdiction and venue lie in Glenn County Superior Court.
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BACKGROUND
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9. This case arises from a prior legal dispute in which Betenbaugh was a defendant
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in the matter of Dalas L. Gundersen v. Paul Betenbaugh et al., Glenn County Superior Court
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Case Number 15-CV-01484 (the “Underlying Action”). The Firm Defendants represented
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Betenbaugh in the Underlying Action.
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B&G
10. Prior to December 2014, Betenbaugh and Dalas L. Gundersen (“Gundersen”)
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were employees of Edward Jones & Co., LP (“Edward Jones”) as financial advisors.
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Betenbaugh ran the Orland office and Gundersen ran the Willows office.
NY
BB
11. In December 2014, Edward Jones terminated Gundersen’s employment and
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replaced him with third-party, Lisa Rodriguez (“Rodriguez”). Shortly thereafter, Gundersen
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started his own practice, and engaged in direct competition with Edward Jones.
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12. By summer 2015, Gundersen learned Rodriguez was making defamatory remarks
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in an effort to leverage her book of business and steal Gundersen’s clients.
13. In the fall of 2015, Gundersen began receiving unsolicited text messages from
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COMPLAINT
homosexual men on his business and personal cell phone. The text messages were sent in
response to several advertisements posted on the “men seeking men” section of the website
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Craislist.com (the “Posts”). The Posts allegedly contained Gundersen’s cell phone number,
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general physical description, and statements that he sought anonymous sexual encounters with
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homosexual men.
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14. On September 29, 2015, Gundersen filed the Underlying Action in Glenn County
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Superior Court, naming Doe defendants for internet impersonation pursuant to California Penal
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Code section 528.5.
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15. Gundersen’s operative complaint at trial included causes of action for negligent
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infliction of emotional distress and several other intentional torts against Betenbaugh, Rodriguez,
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and Edward Jones.
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16. Throughout the Underlying Action, Betenbaugh and his legal team maintained
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that the Craigslist Posts were merely meant as a joke, and that the matter was all in good fun.
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Thus, Betenbaugh and his legal team maintained that, if anything, Betenbaugh could only be
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liable for mere negligence.
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SAFECO’S PRESENCE IN THE UNDERLYING ACTION
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17. Betenbaugh and his wife maintain two insurance policies with Safeco: (1) a
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Quality-Plus Homeowners Policy, Policy Number OA3319225 (the “Homeowner’s Policy”);
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and, (2) a Personal Umbrella Policy, Policy Number UA3886335 (the “Umbrella Policy” and
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collectively, the “Policies”). Betenbaugh is informed and believes and thereon alleges that
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between the two Policies, he has $1.5 million in coverage. Under the express terms of the
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Policies, Betenbaugh is covered up to $1.5 million (“Policy Limit’) for the causes of action
NO
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asserted in the Underlying Action.
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18. Safeco and its parent company, Liberty Mutual Insurance Company (“Liberty
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Mutual”), have a well-established pattern and practice of refusing to provide coverage to their
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insureds in cases of an excess verdict.
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19. Safeco has established a pattern and practice of refusing to pay policy limits, even
NO
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when liability is clear, in the hope of leveraging plaintiffs to accept lower settlements. In
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COMPLAINT
essence, Safeco has established a clear pattern and practice of gambling with their insureds’
financial futures by refusing to settle claims, even when liability is clearly established, because
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the company knows it is not planning to pay a verdict in excess of the policy limits.
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20. Safeco’s pattern and practice is well known throughout the personal injury bar in
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Northern California. Safeco has even gone so far as to threaten to bankrupt their own insureds
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after an excess verdict instead of paying the judgment.
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21. Safeco was on notice since the inception of the Underlying Action that
Betenbaugh faced liability in excess of the Policy Limits. Betenbaugh is informed and believes,
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and thereon alleges that Safeco knew and believed that Betenbaugh would likely be found liable
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for negligent conduct covered under the Policies, yet refused to negotiate or settle Gundersen’s
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claims in good faith.
22. Safeco’s refusal to settle the Underlying Action for the Policy Limits is consistent
with its pattern and practice of throwing its insureds under the bus and gambling the stability of
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their insureds’ financial futures. Safeco’s refusal to settle the claims against Betenbaugh for the
Policy Limits was undertaken with conscious disregard of the likelihood of causing Betenbaugh
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to sustain significant and irreparable financial injury.
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23. Betenbaugh is informed and believes, and thereon alleges that in or around 2018,
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Gundersen offered to settle the claims against Bettenbaugh for $500,000 (the “2018 Settlement
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Offer”). Safeco was unwilling to accept the 2018 Settlement Offer, despite the fact that it was
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below the limit on both Policies.
NO
24. From July 19, 2021 through July 22, 2021, Gundersen’s counsel and Bonotto
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exchanged back-and-forth email correspondence regarding the possibility of settling the
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Underlying Action (“Settlement Correspondence”). A true and correct copy of the Settlement
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Correspondence is attached hereto as Exhibit 1 and incorporated by reference as though fully set
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forth herein.
NO
25. On July 19, 2021, Gundersen’s counsel made a demand for the Policy Limits on
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the Betenbaugh Policies (the “2021 Settlement Offer”). Gundersen’s counsel informed the Firm
Defendants and Safeco that the 2021 Settlement Offer expired on July 26, 2021. In addition,
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NO
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COMPLAINT
Gendersen’s counsel stated, “[i]n the interim, please provide me with the names of Mr.
Betenbaugh’s Cumis counsel. As we both know, Civil Code section 2860(b) makes Cumis
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counsel mandatory in cases where the carrier is defending under reservation of rights.”
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26. Betenbaugh is informed and believes, and thereon alleges that Firm Defendants
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never informed Betenbaugh of the 2021 Settlement Offer. Betenbaugh is further informed and
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believes, and thereon alleges that Safeco instructed Firm Defendants not to communicate the
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2021 Settlement Offer to Betenabugh, and Firm Defendants followed Safeco’s instruction.
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27, On July 21, 2021, the Firm Defendants and Safeco rejected the 2021 Settlement
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Offer without Betenbaugh’s knowledge or consent, and instead made a settlement offer of
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$150,001 pursuant to California Code of Civil Procedure section 998 (“998 Offer”). In his
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rejection letter, Bonotto stated, “At this point, both my client and his insurance carrier are
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prepared to try the case against that settlement offer.” Bonotto further stated, “Separately, we
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disagree with your interpretation of Ca. Civ. Code 2860. Furthermore, any rights, obligations, or
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duties if any exist contained in Ca. Civ. Code 2860 are between Mr. Betenbaugh and his
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insurance carriers and do not involve plaintiff. Regardless, my firm is the sole representation in
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this matter on behalf of Mr. Betenbaugh. Accordingly, please direct all communications you
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have for Mr. Betenbaugh through my office.”
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28. Betenbaugh is informed and believes, and thereon alleges that in sending the
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Settlement Correspondence quoted above in Paragraph 27, Firm Defendants were acting at the
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direction of Safeco and its representatives and putting Safeco’s interests above that of their
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client, Betenbaugh, consistent with the Defendants’ established pattern and practice, as alleged
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more fully herein.
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29. On July 21, 2021, Gundersen rejected the inadequate 998 Offer. In so doing,
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Gundersen’s counsel further stated, in relevant part:
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More importantly, let me clear up your confusion because I am keenly aware that
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your office is not trained in insurance bad faith and legal malpractice. Civil Code
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2860 can only be circumvented if the carrier agrees there is no reservation of
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rights, that they will pay all damages, including punitive damages, and there is no
YN
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other conflict of interest. While the carrier gets to avoid bad faith if the
aforementioned issues are resolved (which is highly doubtful here), your office,
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COMPLAINT
on the other hand, has competing ethical and legal duties that are not subject to
waiver. For example, your office is clearly beholden to the insurance carrier and
the carrier’s desire to gamble cannot be reconciled with your client’s desire to
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avoid public humiliation from the sizable punitive damages award that is coming
his way. Speaking of punitive damages, I get to examine your client’s financial
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condition on the stand, which is a problem for you because I will get to ask him if
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he has valued the malpractice case against your firm and the bad faith case against
the carrier.
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It is also your independent duty to inform your client that it is my practice to
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collect the excess verdict directly from the defendant when I pop a policy at trial.
In other words, I do not accept bad faith assignments. If a defendant files
bankruptcy, I then take the insurance bad faith and attorney malpractice cases
me
from the bankruptcy trustee on contingency.
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30. On July 22, 2021, Bonotto confirmed receipt of Gundersen’s rejection of the 998
Offer and stated, “I would appreciate the professional courtesy of you not attempting to instruct
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me how to handle our case.”
31. On July 22, 2021, Gundersen’s counsel responded in relevant part:
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Mr. Bonoto,
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My responses to you were not rooted in arrogance or absence of professional
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courtesy. I have an affirmative duty to my client to make sure I have you and the
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insurance carrier properly set up for malpractice and bad faith should things go
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sideways for you in trial. You are an experienced trial attorney, so you must
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know the result of this case is wildly unpredictable on both sides and I can just as
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easily leave the court with a $20M verdict against your client or with a number
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that I won’t like.
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The last time I popped a policy the insurance carrier (Liberty Mutual) hired Blake
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Russum from Ropers Majeski to tell me how I didn’t properly open the policy and
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didn’t properly set up the attorney. The carrier ultimately paid the full judgment
but not until I had to waste time by garnishing wages, filing liens, and setting up
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the debtor’s examination.
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The bottom line is that while you may not like the e-mails I sent, they are all
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within bounds and they are meant to document your office’s and the insurance
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carrier’s actions in case the carrier takes the position that they do not wish to pay
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the judgment.
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32. Thus, no later than July 22, 2021, Firm Defendants and Safeco were on notice of
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the following:
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(A) Safeco was at significant risk of facing liability on an insurance bad faith action for
on
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COMPLAINT
its unreasonable refusal to settle for the Policy Limits;
(B) The Firm Defendants and Safeco, on the one-hand, and Betenbaugh on the other
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hand, had an irreconcilable conflict of interest such that Betenbaugh should have been properly
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advised of his right to obtain Cumis counsel;
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(C) Betenbaugh was staring down the barrel of a jury verdict far in excess of his Policy
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Limits, which if obtained, could and would ruin him financially; and,
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(D) The Firm Defendants were in the midst of committing attorney malpractice by failing
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to communicate an offer of settlement to their client, rejecting an offer for settlement of Policy
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Limits without their client’s knowledge or consent, and failing to properly advise Betenbaugh of
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his right to Cumis counsel.
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TRIAL IN THE UNDERLYING ACTION
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33. On August 17, 2021, trial commenced in the Underlying Action. Betenbaugh’s
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entire defense at trial was predicated on the theory that the Craigslist Posts were merely a
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lighthearted joke for which Betenbaugh did not willfully commit any injury.
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34. On the seventh day of trial, August 27, 2021, Gundersen’s counsel made a motion
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to conform to proof to add a cause of action for Negligent Infliction of Emotional Distress. In
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support of his oral motion, Gundersen’s counsel stated, in relevant part, “the reason we bring it
ON
today, Mr. Betenbaugh testified at length how he thought this was a prank. And so if the jury
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takes the position this was a prank, then negligent infliction of emotional distress would kick in.”
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35. Bonotto responded, “Your Honor, we have no objection to the amending in that —
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in that fashion.” Thus, at trial, the operative complaint was amended to conform to proof to add
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a negligence-based-cause of action.
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36. In light of the oral amendment to the operative complaint, Gundersen’s counsel,
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on the one hand, and the Firm Defendants, on the other hand, worked together to craft the special
SF
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verdict form (“Special Verdict Form”). Question 2 of the Special Verdict Form (“Question 2”)
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read: “Was the conduct of Paul Betenbaugh: Defamation OR False Light OR Negligent Infliction
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of Emotional Distress OR Intentional Infliction of Emotional Distress?” Thus, Question 2 makes
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no distinction between whether the jury was asked to find Betenbaugh liable for an intentional
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COMPLAINT
tort or a negligence-based cause of action.
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37. On the tenth day of trial, September 1, 2021, the jury unanimously answered
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Question 2 in the affirmative. The jury further awarded Gundersen $3 million in past
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noneconomic loss, and $5 million in future noneconomic loss, including loss for “mental
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suffering, anxiety, humiliation, [and] emotional distress[.]” A true and correct copy of the
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Special Verdict Form is attached hereto as Exhibit 2 and is incorporated by reference as though
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fully set forth herein.
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38. | On September 17, 2021, judgment was entered in favor of Gundersen and against
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Betenbaugh. On February 10, 2022, a Corrected Amended Judgment was entered, which
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included, inter alia, $2,827,397 in pre-judgment interest to Gundersen through November 30,
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2021 from Betenbaugh. The Corrected Amended Judgment included $3 million in favor of
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Gundersen and against Betenbaugh for past noneconomic loss, $5 million in favor of Gundersen
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and against Betenbaugh for future noneconomic loss, and $35,000 in stipulated punitive
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damages.
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THE FIRM DEFENDANTS’
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TORTIOUS ACTS IN THE UNDERLYING LITIGATION
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39. Betenbaugh is informed and believes, and thereon alleges that in attempting to
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defend the Underlying Action, the Firm Defendants placed the interests and wishes of Safeco
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above the interests of Betenbaugh, in violation of Firm Defendants’ professional and fiduciary
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obligations.
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40. Betenbaugh is further informed and believes, and thereon alleges that the Firm
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Defendants placed the interests of Safeco above Betenbaugh’s interests because Safeco, and its
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parent company Liberty Mutual, are important clients to the Firm, and Firm Defendants wish to
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maintain a continuing, ongoing, and mutually beneficial relationship with one of the Firm’s
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flagship clients.
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41. The Firm Defendants’ derogation of duty took multiple forms and permutations
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A
throughout the life of the Underlying Action, and infected the quality of representation rendered
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to Betenbaugh.
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42. Betenbaugh is informed and believes, and thereon alleges that from the inception
on
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COMPLAINT
of the Underlying Action, the Firm Defendants were aware that Safeco has a pattern and practice
of gambling the integrity of their insureds’ financial security by refusing to settle cases of clear
YN
liability for the policy limits. The Firm Defendants failed to advise Betenbaugh of Safeco’s
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pattern and practice. Firm Defendants and Safeco concealed Safeco’s well-established pattern
F&F
and practice from Betenbaugh.
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43. The Firm Defendants failed to advise Betenbaugh that he was at risk of facing a
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verdict in excess of the Policy Limits, or that Safeco did not intend to cover any verdict rendered
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against him.
44. The Firm Defendants failed to properly advise Betenbaugh of his right to Cumis
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counsel. Had Betenbaugh known of Safeco’s standard pattern and practice, known of the
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conflict of interest between the Firm Defendants and Safeco, and fully understood his right to
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Cumis counsel, Betenbaugh would have sought and obtained Cumis counsel to safeguard his
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interests.
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45. The Firm Defendants failed to communicate the 2021 Settlement Offer to
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Betenbaugh. Betenbaugh is informed and believes, and thereon alleges that Firm Defendants
rejected the 2021 Settlement Offer at Safeco’s direction, without first informing Betenbaugh of
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its existence.
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46. Firm Defendants unilaterally and without the knowledge or consent of
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Betenbaugh waived any opportunity for Betenbaugh to assert he was acting within the course
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and scope of his employment at Edward Jones when he issued the Craigslist Posts (the
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“Employment Defense”).
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47. Had the Firm Defendants not waived the Employment Defense, Edward Jones
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would have had to pay any verdict rendered against Betenbaugh pursuant to the doctrine of
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respondeat superior, regardless of whether the verdict was issued for committing an intentional
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tort or a negligence-based tort.
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48. Firm Defendants’ unilateral waiver of the Employment Defense was made with
full knowledge that Safeco was proceeding with a reservation of rights, and with full knowledge
that Safeco would refuse to pay any verdict, if any, rendered against Betenbaugh in the
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COMPLAINT
Underlying Action.
49. Betenbaugh is informed and believes, and thereon alleges that Firm Defendants,
and each of them, failed to consult an employment attorney before waiving the Employment
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Defense. Betenbaugh is further informed and believes, and thereon alleges that had Firm
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Defendants consulted an employment attorney before waiving the Employment Defense, they
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would have discovered that the Employment Defense would fully protect Betenbaugh in the
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event of an adverse verdict. Firm Defendants’ unilateral decision to waive the Employment
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Defense fell below the applicable standard of care.
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50. Betenbaugh is informed and believes, and thereon alleges that from the inception
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10 of the Underlying Action to the date of this Complaint, Safeco paid more than $500,000 in
11 attorneys’ fees to “defend” Betenbaugh in the Underlying Action.
12 51. Betenbaugh is informed and believes, and thereon alleges that any reasonable
13 attorney in Firm Defendants’ position would have:
14 (A) Placed Betenbaugh’s interests above the interests of Safeco;
15 (B) Informed Betenbaugh of Safeco’s pattern and practice of gambling its
16 insureds’ financial security by refusing to settle cases of clear liability in hopes of obtaining a
17 favorable verdict at trial;
18 (C) Informed Betenbaugh of Safeco’s intention to disclaim any duty to settle
19 for the Policy Limits;
20 (D) Informed Betenbaugh of Safeco’s intention to disclaim any duty to
21 indemnify if Betenbaugh was hit with an adverse verdict at trial;
22 (E) Informed Betenbaugh of the substantial likelihood of an adverse verdict at
23 trial;
24 (F) Informed Betenbaugh of the substantial likelihood of an adverse verdict at
25 trial in excess of the Policy Limits;
26 (G) Informed Betenbaugh of the conflict of interest between the Firm
27 Defendants and Safeco, on the one hand, and Betenbaugh on the other hand; and,
28 (H) Properly informed and advised Betenbaugh of his right to Cumis counsel.
11
COMPLAINT
52. Betenbaugh is informed and believes, and thereon alleges that any reasonable
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attorney in Firm Defendants’ position would not have waived the Employment Defense.
NY
53. In addition to the allegations set forth above in Paragraphs 9 through 52 above,
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which are incorporated by reference as though fully set forth herein, Betenbaugh is further
F&F
informed and believes, and thereon alleges that Bonotto failed to understand and fully appreciate
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the gravity of the Underlying Action and the exposure Betenbaugh ultimately faced (the “Failure
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to Appreciate”).
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54. Betenbaugh is informed and believes, and thereon alleges that as a result of the
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Failure to Appreciate, Bonotto and the Firm entrusted an unreasonable bulk of Betenbaugh’s
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defense to Fritch-Thym, a Junior Associate unequipped to adequately handle the complexities of
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the defense in the Underlying Action.
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55. Betenbaugh is further informed and believes, and thereon alleges that Firm
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Defendants negligently failed to appreciate the gravity of the allegations asserted in the
Underlying Action, and negligently failed to comprehend the exposure Betenbaugh faced once
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the matter was submitted to the jury.
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56. Betenbaugh is informed and believes, and based thereon alleges that Defendants’
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failures as alleged in Paragraphs 9 through 55 above, which are incorporated herein by reference
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as though fully set forth herein, fell below the applicable standard of care.
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THE CONSPIRACY BETWEEN SAFECO AND FIRM DEFENDANTS
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57. Betenbaugh is informed and believes, and thereon alleges that Safeco, its parent
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company Liberty Mutual, and Firm Defendants have a long-standing and well-established
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professional relationship. Betenbaugh is further informed and believes, and thereon alleges that
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Firm Defendants and Safeco conspired together in a manner intended to conceal Safeco’s duty to
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indemnify Betenbaugh, to Betenbaugh’s detriment.
NY
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COMPLAINT
74. Under the Policies, Safeco agreed to provide coverage to Betenbaugh for the acts
and events giving rise to the Underlying Action.
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75. The Underlying Action and the damages and verdict arising therefrom constitute
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an occurrence for which Safeco had a contractual obligation to settle for the policy limits prior to
F&F
trial.
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76. Betenbaugh performed all conditions, covenants, and promises required by him
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on his part to be performed, in accordance with the terms and conditions of the Policies.
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77. Safeco breached the insurance contract by denying payment of a covered claim
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and disclaiming any obligation to indemnify Betenbaugh.
10 78. Safeco breached the insurance contract by failing to timely investigate the claims
11 in the Underlying Action, Betenbaugh’s exposure, and the existence of coverage under the
12 Policies.
13 79. Safeco breached the insurance contract by failing to make a good faith offer of
14 settlement in the Underlying Action.
15 80. Safeco breached the insurance contract by failing to make a reasonable offer to
16 Gundersen.
17 81. | Safeco breached the insurance contract by rejecting Gundersen’s settlement
18 demand without any basis.
19 82. Asa direct and proximate result of Safeco’s breaches of the Policies, Gundersen
20 has suffered, and will continue to suffer damages in excess of $10 million in an amount to be
21 shown at the time of trial.
22 FOURTH CAUSE OF ACTION
23 FRAUDULENT CONCEALMENT
24 (Against All Defendants)
25 83. Betenbaugh re-alleges and incorporates by reference Paragraphs 1 through 82 as
26 though fully set forth herein.
27 84. Safeco promised to cover and indemnify Betenbaugh for the acts, omissions, and
28 conduct alleged in the Underlying Action, which ultimately led to an adverse verdict. Safeco
16
COMPLAINT
purposefully, fraudulently, and unlawfully failed to disclose that Betenbaugh would have to spend
an unreasonable amount of time (likely years on end) pleading and arguing with Safeco before
NO
Safeco will pay what Betenbaugh is legally entitled to recover under the insurance Policies.
W]
85. Safeco concealed or suppressed the following material facts:
FF
A. Betenbaugh’s claim would not be handled expediently, efficiently and with
nN
due diligence;
Dn
B. Betenbaugh’s claim would not be handled fairly or reasonably but would
NIN
be systematically and methodically denied, delayed and lowballed.
ea
C. Benefits would not be paid when Betenbaugh became legally entitled to
oo
recover damages. Rather, such claims would be systematically and methodically denied, delayed
Ss
et
and lowballed.
EZ
86. Safeco was under a duty to disclose the true and actual facts to Betenbaugh, which
BOB
it did not.
87. Safeco intentionally concealed and/or suppressed the aforementioned material
ABE
facts with the intent to defraud Betenbaugh.
88. Betenbaugh was unaware of the true facts and would not have obtained the Policies
had he known of the aforementioned concealed and/or suppressed facts.
ERR
89.
wR
As a direct and legal result of Safeco’s conduct, Betenbaugh has suffered and
sustained general, economic and consequential damages in an amount within the jurisdictional
limits of this Court and subject to proof at time of trial.
RO
B
90. The suppression and concealment of material facts was carried out by Safeco in a
NO
BBR
deliberate, calculated, fraudulent and malicious fashion with the specific intent to oppress
HN
Betenbaugh and others similarly situated. By reason of such contemptible and vile conduct,
DN
Betenbaugh is entitled to exemplary and punitive damages within the jurisdictional limits of this
NO
oR
court and subject to proof at time of trial.
NO
eR
NO
FIFTH CAUSE OF ACTION
NO
BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING
eas
17
COMPLAINT
(Against All Defendants)
91. Betenbaugh re-alleges and incorporates by reference Paragraphs 1 through 90 as
NY
though fully set forth herein.
WO
92. Implied in every insurance contract are the covenants of good faith and fair
fF
dealing.
OHO
93. The Policies are insurance contracts.
Don
94. As an “insured” under the Policies, Betenbaugh was entitled to coverage
NN
thereunder.
mo
95. The implied covenant of good faith and fair dealing applies to Betenbaugh’s claim,
Co
96. The acts and omissions giving rise to the Underlying Action and the subsequent
SS
ee
jury verdict were covered under the Policies.
RHEE
97. Betenbaugh tendered the Policies to Safeco for coverage to cover and/or indemnify
me
Betenbaugh for the acts and omissions giving rise to the Underlying Action.
mm
98. Safeco provided unreasonable and inadequate offers to settle the case despite being
provided with evidence to support a greater amount than Safeco was willing to and ultimately did
AaB
offer.
99. Safeco breached the implied covenant of good faith and fair dealing by
eR
unreasonably denying payment of a covered claim.
ee
100. Safeco breached the implied covenant of good faith and air dealing by refusing to
SkRaPBBERBREFE
negotiate a fair settlement of Gundersen’s claims so as to protect its insured, Betenbaugh.
YN
101. Safeco breached the implied covenant of good faith and fair dealing by failing to
HN
timely investigate the claims giving rise to the Underlying Action.
HN
102. Asa direct and proximate result of Safeco’s breaches of the implied covenant of
HN
good faith and fair dealing, Betenbaugh has suffered, and will continue to suffer damages in an
NO
amount to be shown at the time of trial.
NO
103. Safeco’s improper claims handling conduct described herein is part of Safeco’s
NO
pattern and practice whereby Safeco prioritizes its profit motives over its contractual obligations
to its insureds.
N
>
18
COMPLAINT
104. Safeco’s conduct as alleged herein, was done by multiple Safeco actors and agents
over a period of time, and was ratified by Safeco.
NO
105. Safeco oppressed Betenbaugh by using its position of power to consciously
WY
deprive Betenbaugh of Policy benefits without any good faith basis for doing so.
Fk
106. Safeco created avoidable stress and anxiety for Betenbaugh by refusing to settle
aA
for the Policy Limits in good faith, thereby exposing him to an adverse judgment well in excess
Dn
of the Policy Limits. This behavior and conduct on the part of Safeco is particularly egregious,
eon
unwarranted, and outrageous, because Gundersen offered to settle the Underlying Action for the
Policy Limits.
o
107. As a further direct and proximate result of Safeco’s breaches of the implied
et
aS
covenant of good faith and fair dealing, Betenbaugh was forced to retain legal counsel, and has
incurred and will continue to incur attorneys’ fees in an effort to obtain the benefits due and owing
RB
under the Policy, thereby justifying an award of Brandt fees.
Rmmm
REE
108. Safeco’s conduct as alleged herein was intentional, despicable and malicious,
justifying an award of exemplary and punitive damages in an amount sufficient to punish and
SBE
make an example of Safeco’s unfair business practices.
PRAYER FOR RELIEF
WHEREFORE, Betenbaugh prays for judgment against Firm Defendants and Safeco as
ES
follows:
1. For general damages in excess of $10 million;
HNO
SBOBHREB
2. For special damages according to proof;
HNO
3. For consequential damages according to proof;
NO
4, For punitive damages;
NO
5. For the costs of suit incurred herein;
EF
NY
6. For attorneys’ fees according to proof pursuant to Code of Civil Procedure section
NO
souanh
1021.5;
NO
7. For pre-judgment and post-judgment interest; and,
8. For such other and further relief as the Court may deem just and proper.
dN
19
COMPLAINT
Dated: September 16, 2022 GAVRILOV & BROOKS
NO
WY
By: LE
FP
Ognian Gavrilov
Attorneys for Plaintiff
A
PAUL BETENBAUGH
Dn
NTNOo
Co
CO
ee
KF
NO
WO
ee
F&F
vA
WDB
Fe
NH
KF
DB
F—
OBO
FF
CO
HN
K§
NHN
NY
ND
WO
NH
F&
HN
uU
HBO
Dn
NO
Nn
NO
on
NO
20
COMPLAINT
EXHIBIT 1
Friday, September 16,202 10:12:26 Pacific Daylight Time
From: Ognian Gavrilov
Sent: Thursday, July 22, 2021 10:52 AM
To: Phil Bonotto
Ce: Tracy Fritch-Thym ; erika.gaspar.law@gmail.com; John Garner
; Kristina Spears ; Larina Falcona
Subject: RE: Gundersen v Betenbaugh et al.
Mr. Bonotto,
My responses to you were not rooted in arrogance or absence of professional courtesy. | have an affirmative
duty to my client to make sure | have you and the insurance carrier properly set up for malpractice and bad
faith should things go sideways for you in trial. You are an experienced trial attorney, so you must know the
result of this case is wildly unpredictable on both sides and | can just as easily leave the court with a $20M
verdict against your client or with a number that | won’t like.
The last time
Preview
FILED Ognian A. Gavrilov, SBN 258583 SEP 16 2022 GAVRILOV & BROOKS 2315 Capitol Avenue NY Sacramento, CA 95816 Phone: (916) 504-0529 WY Facsimile: (916) 727-6877 Email: Ognian@gavrilovlaw.com FSF Attorney for Plaintiff vA PAUL BETENBAUGH Dn NIN SUPERIOR COURT OF THE STATE OF CALIFORNIA eo FOR THE COUNTY OF GLENN So PAUL BETENBAUGH, an individual Case No.: 22 CV 02982 S Plaintiff, COMPLAINT FOR: RAaAaBRaHRA v. Professional Negligence ESE By Fax Breach of Fiduciary Duty PSPrr SAFECO INSURANCE COMPANY OF Breach of Contract FEF AMERICA, a New Hampshire corporation; Fraudulent Concealment FO GURNEE MASON RUSHFORD BONOTTO Breach of the Implied Covenant of & FORESTIERE LLP, a California limited Good Faith and Fair Dealing liability partnership; PHILLIP R. BONOTTO, KF an individual; TRACY W. FRITCH-THYM, an individual; DOES 1-25, inclusive KF Defendants. KF KF PNSRRRBRBBRB&FGe KF NO NO NYO NY NO ww WN N COMPLAINT Plaintiff Paul Betenbaugh alleges as follows: PARTIE NY 1. Plaintiff Paul Betenbaugh (“Betenbaugh”) is, and all relevant times herein was, an WO individual residing in Glenn County, California. &F— 2. Betenbaugh is informed and believes, and thereon alleges that defendant Safeco nH Insurance Company of America (“Safeco”) is an insurance company authorized to do business in BO the State of California. Betenbaugh is further informed and believes, and thereon alleges that NY Safeco is a corporation organized under the laws of the State of New Hampshire, and that its mem principal place of business is in Boston, Massachusetts. o 5. Betenbaugh is informed and believes, and thereon alleges that defendant Gurnee Sle Mason Rushford Bonotto & Forestiere LLP (the “Firm”) is a California limited liability ESO partnership with its principal place of business in Roseville, California. The Firm is a California law firm with approximately 11 licensed, practicing attorneys. Ee FOO 4, Betenbaugh is informed and believes, and thereon alleges that defendant Phillip R. Bonotto (“Bonotto”) is an attorney residing and working in Placer County, California. At all FF times relevant hereto, Bonotto was a partner at the Firm, and in doing the things herein alleged was acting within the scope of such employment and agency. KF 5. Betenbaugh is informed and believes, and thereon alleges that defendant Tracy F W. Fritch-Thyme (“Fritch-Thyme”) is an attorney residing and working in Placer County, KF California. At all times relevant hereto, Fritch-Thyme was an associate at the Firm, and in doing NO the things herein alleged was acting within the scope of such employment and agency. The NO Firm, Bonotto, and Fritch-Thyme are collectively referred to herein as the “Firm Defendants.” NO 6. Betenbaugh is ignorant of the names and capacities of the defendants sued herein NO as DOES 1 through 25, inclusive, and therefore sues these defendants by such fictitious names. NO Plaintiff will amend this action to allege these DOE defendants’ names and capacities when ascertained. Betenbaugh is informed and believes, and thereon alleges that each of the DOE defendants is responsible in some manner for the events and occurrences alleged herein, thereby proximately causing injury and damage to Betenbaugh. Safeco, Firm Defendants, and DOES 1 a through 25, inclusive, are collectively referred to herein as “Defendants.” 7. Betenbaugh is informed and believes, and thereon alleges that at all times NY mentioned herein, Defendants, and each of them, were the agents, servants, employees and/or WY joint venturers of their co-defendants and were, as such, acting within the scope, course and EP authority of said agency employment and/or joint venture and that each and every defendant has UW ratified and approved of the acts of his or her agent. Relief is sought against each and all ODO defendants as well as their agents, assistants, successors, assigns, employees, and persons acting NIN in concert or cooperation with them or at their direction or under their supervision. eo JURISDICTION AND VENUE oOo 8. The injury and damages in dispute, upon which Betenbaugh sues herein, occurred Ss ESE|llllhlh Sl in Glenn County, California. Venue and jurisdiction are proper because the amount at issue | exceeds the jurisdictional minimum of this Court, the defendants named herein were doing BS business in the County of Glenn, and because the majority of witnesses and events occurred in & OF the County of Glenn. As such, jurisdiction and venue lie in Glenn County Superior Court. & KF BACKGROUND KF au 9. This case arises from a prior legal dispute in which Betenbaugh was a defendant KF in the matter of Dalas L. Gundersen v. Paul Betenbaugh et al., Glenn County Superior Court FF eS Case Number 15-CV-01484 (the “Underlying Action”). The Firm Defendants represented HF Betenbaugh in the Underlying Action. KF B&G 10. Prior to December 2014, Betenbaugh and Dalas L. Gundersen (“Gundersen”) NO were employees of Edward Jones & Co., LP (“Edward Jones”) as financial advisors. RB NO Betenbaugh ran the Orland office and Gundersen ran the Willows office. NY BB 11. In December 2014, Edward Jones terminated Gundersen’s employment and ND replaced him with third-party, Lisa Rodriguez (“Rodriguez”). Shortly thereafter, Gundersen Fr NHNMO started his own practice, and engaged in direct competition with Edward Jones. &@ NO 12. By summer 2015, Gundersen learned Rodriguez was making defamatory remarks wo soa in an effort to leverage her book of business and steal Gundersen’s clients. 13. In the fall of 2015, Gundersen began receiving unsolicited text messages from oe 3 COMPLAINT homosexual men on his business and personal cell phone. The text messages were sent in response to several advertisements posted on the “men seeking men” section of the website LY Craislist.com (the “Posts”). The Posts allegedly contained Gundersen’s cell phone number, WY general physical description, and statements that he sought anonymous sexual encounters with FF homosexual men. eA 14. On September 29, 2015, Gundersen filed the Underlying Action in Glenn County Dn Superior Court, naming Doe defendants for internet impersonation pursuant to California Penal Nn Code section 528.5. mea 15. Gundersen’s operative complaint at trial included causes of action for negligent oO infliction of emotional distress and several other intentional torts against Betenbaugh, Rodriguez, OO and Edward Jones. | KF 16. Throughout the Underlying Action, Betenbaugh and his legal team maintained Ee NY that the Craigslist Posts were merely meant as a joke, and that the matter was all in good fun. WY EF Thus, Betenbaugh and his legal team maintained that, if anything, Betenbaugh could only be F&F FF liable for mere negligence. vA SAFECO’S PRESENCE IN THE UNDERLYING ACTION DB HF 17. Betenbaugh and his wife maintain two insurance policies with Safeco: (1) a NAIA KF Quality-Plus Homeowners Policy, Policy Number OA3319225 (the “Homeowner’s Policy”); DO HF and, (2) a Personal Umbrella Policy, Policy Number UA3886335 (the “Umbrella Policy” and OBO KF collectively, the “Policies”). Betenbaugh is informed and believes and thereon alleges that FD NO between the two Policies, he has $1.5 million in coverage. Under the express terms of the F§ NO Policies, Betenbaugh is covered up to $1.5 million (“Policy Limit’) for the causes of action NO NV asserted in the Underlying Action. WwW YN 18. Safeco and its parent company, Liberty Mutual Insurance Company (“Liberty Ff NY Mutual”), have a well-established pattern and practice of refusing to provide coverage to their An NO insureds in cases of an excess verdict. AO WN 19. Safeco has established a pattern and practice of refusing to pay policy limits, even NO oN when liability is clear, in the hope of leveraging plaintiffs to accept lower settlements. In NO 4 COMPLAINT essence, Safeco has established a clear pattern and practice of gambling with their insureds’ financial futures by refusing to settle claims, even when liability is clearly established, because N the company knows it is not planning to pay a verdict in excess of the policy limits. WH 20. Safeco’s pattern and practice is well known throughout the personal injury bar in FSF Northern California. Safeco has even gone so far as to threaten to bankrupt their own insureds nO after an excess verdict instead of paying the judgment. NO 21. Safeco was on notice since the inception of the Underlying Action that Betenbaugh faced liability in excess of the Policy Limits. Betenbaugh is informed and believes, wea and thereon alleges that Safeco knew and believed that Betenbaugh would likely be found liable o for negligent conduct covered under the Policies, yet refused to negotiate or settle Gundersen’s ee VPaRPBBRNHRBFeRABEBHRZS claims in good faith. 22. Safeco’s refusal to settle the Underlying Action for the Policy Limits is consistent with its pattern and practice of throwing its insureds under the bus and gambling the stability of eRe their insureds’ financial futures. Safeco’s refusal to settle the claims against Betenbaugh for the Policy Limits was undertaken with conscious disregard of the likelihood of causing Betenbaugh KF to sustain significant and irreparable financial injury. KF 23. Betenbaugh is informed and believes, and thereon alleges that in or around 2018, F&F Gundersen offered to settle the claims against Bettenbaugh for $500,000 (the “2018 Settlement FF Offer”). Safeco was unwilling to accept the 2018 Settlement Offer, despite the fact that it was KF below the limit on both Policies. NO 24. From July 19, 2021 through July 22, 2021, Gundersen’s counsel and Bonotto HN exchanged back-and-forth email correspondence regarding the possibility of settling the NO Underlying Action (“Settlement Correspondence”). A true and correct copy of the Settlement HB Correspondence is attached hereto as Exhibit 1 and incorporated by reference as though fully set NY forth herein. NO 25. On July 19, 2021, Gundersen’s counsel made a demand for the Policy Limits on Ny the Betenbaugh Policies (the “2021 Settlement Offer”). Gundersen’s counsel informed the Firm Defendants and Safeco that the 2021 Settlement Offer expired on July 26, 2021. In addition, eo NO 5 COMPLAINT Gendersen’s counsel stated, “[i]n the interim, please provide me with the names of Mr. Betenbaugh’s Cumis counsel. As we both know, Civil Code section 2860(b) makes Cumis NYO counsel mandatory in cases where the carrier is defending under reservation of rights.” WO 26. Betenbaugh is informed and believes, and thereon alleges that Firm Defendants FF never informed Betenbaugh of the 2021 Settlement Offer. Betenbaugh is further informed and vA believes, and thereon alleges that Safeco instructed Firm Defendants not to communicate the DH 2021 Settlement Offer to Betenabugh, and Firm Defendants followed Safeco’s instruction. NI 27, On July 21, 2021, the Firm Defendants and Safeco rejected the 2021 Settlement eae Offer without Betenbaugh’s knowledge or consent, and instead made a settlement offer of oO $150,001 pursuant to California Code of Civil Procedure section 998 (“998 Offer”). In his OC rejection letter, Bonotto stated, “At this point, both my client and his insurance carrier are KF prepared to try the case against that settlement offer.” Bonotto further stated, “Separately, we |e NO disagree with your interpretation of Ca. Civ. Code 2860. Furthermore, any rights, obligations, or Fe WO duties if any exist contained in Ca. Civ. Code 2860 are between Mr. Betenbaugh and his FF & insurance carriers and do not involve plaintiff. Regardless, my firm is the sole representation in A KF this matter on behalf of Mr. Betenbaugh. Accordingly, please direct all communications you Ho FF have for Mr. Betenbaugh through my office.” NH FF 28. Betenbaugh is informed and believes, and thereon alleges that in sending the eH KF Settlement Correspondence quoted above in Paragraph 27, Firm Defendants were acting at the Oo KF direction of Safeco and its representatives and putting Safeco’s interests above that of their Fo NO client, Betenbaugh, consistent with the Defendants’ established pattern and practice, as alleged F-|§ NO more fully herein. NY NO 29. On July 21, 2021, Gundersen rejected the inadequate 998 Offer. In so doing, WO HB Gundersen’s counsel further stated, in relevant part: Ff WN More importantly, let me clear up your confusion because I am keenly aware that nA NO your office is not trained in insurance bad faith and legal malpractice. Civil Code Dn 2860 can only be circumvented if the carrier agrees there is no reservation of NY rights, that they will pay all damages, including punitive damages, and there is no YN NO other conflict of interest. While the carrier gets to avoid bad faith if the aforementioned issues are resolved (which is highly doubtful here), your office, ono Ny 6 COMPLAINT on the other hand, has competing ethical and legal duties that are not subject to waiver. For example, your office is clearly beholden to the insurance carrier and the carrier’s desire to gamble cannot be reconciled with your client’s desire to YO avoid public humiliation from the sizable punitive damages award that is coming his way. Speaking of punitive damages, I get to examine your client’s financial WD condition on the stand, which is a problem for you because I will get to ask him if Fe he has valued the malpractice case against your firm and the bad faith case against the carrier. HW It is also your independent duty to inform your client that it is my practice to NO collect the excess verdict directly from the defendant when I pop a policy at trial. In other words, I do not accept bad faith assignments. If a defendant files bankruptcy, I then take the insurance bad faith and attorney malpractice cases me from the bankruptcy trustee on contingency. Co 30. On July 22, 2021, Bonotto confirmed receipt of Gundersen’s rejection of the 998 Offer and stated, “I would appreciate the professional courtesy of you not attempting to instruct CO lhlUc ES|llhlhUh S| FS me how to handle our case.” 31. On July 22, 2021, Gundersen’s counsel responded in relevant part: NY Ww Mr. Bonoto, OE Fe My responses to you were not rooted in arrogance or absence of professional FOYE courtesy. I have an affirmative duty to my client to make sure I have you and the AH insurance carrier properly set up for malpractice and bad faith should things go DBD sideways for you in trial. You are an experienced trial attorney, so you must KF know the result of this case is wildly unpredictable on both sides and I can just as NN easily leave the court with a $20M verdict against your client or with a number FF that I won’t like. FH OHO The last time I popped a policy the insurance carrier (Liberty Mutual) hired Blake F- Russum from Ropers Majeski to tell me how I didn’t properly open the policy and CO NO didn’t properly set up the attorney. The carrier ultimately paid the full judgment but not until I had to waste time by garnishing wages, filing liens, and setting up F& NY the debtor’s examination. N NO The bottom line is that while you may not like the e-mails I sent, they are all Ye within bounds and they are meant to document your office’s and the insurance NO carrier’s actions in case the carrier takes the position that they do not wish to pay FF NO the judgment. AN NY 32. Thus, no later than July 22, 2021, Firm Defendants and Safeco were on notice of DBD NYO the following: NY (A) Safeco was at significant risk of facing liability on an insurance bad faith action for on No COMPLAINT its unreasonable refusal to settle for the Policy Limits; (B) The Firm Defendants and Safeco, on the one-hand, and Betenbaugh on the other NO hand, had an irreconcilable conflict of interest such that Betenbaugh should have been properly WO advised of his right to obtain Cumis counsel; F&F (C) Betenbaugh was staring down the barrel of a jury verdict far in excess of his Policy A Limits, which if obtained, could and would ruin him financially; and, BO (D) The Firm Defendants were in the midst of committing attorney malpractice by failing NI to communicate an offer of settlement to their client, rejecting an offer for settlement of Policy Be Limits without their client’s knowledge or consent, and failing to properly advise Betenbaugh of oO his right to Cumis counsel. ee CO TRIAL IN THE UNDERLYING ACTION KF 33. On August 17, 2021, trial commenced in the Underlying Action. Betenbaugh’s NY entire defense at trial was predicated on the theory that the Craigslist Posts were merely a YY lighthearted joke for which Betenbaugh did not willfully commit any injury. eke 34. On the seventh day of trial, August 27, 2021, Gundersen’s counsel made a motion RRR AW to conform to proof to add a cause of action for Negligent Infliction of Emotional Distress. In BO support of his oral motion, Gundersen’s counsel stated, in relevant part, “the reason we bring it ON today, Mr. Betenbaugh testified at length how he thought this was a prank. And so if the jury RB takes the position this was a prank, then negligent infliction of emotional distress would kick in.” Oo 35. Bonotto responded, “Your Honor, we have no objection to the amending in that — OO HNO in that fashion.” Thus, at trial, the operative complaint was amended to conform to proof to add KF& HN a negligence-based-cause of action. Ne YN 36. In light of the oral amendment to the operative complaint, Gundersen’s counsel, WY NO on the one hand, and the Firm Defendants, on the other hand, worked together to craft the special SF NY verdict form (“Special Verdict Form”). Question 2 of the Special Verdict Form (“Question 2”) UN NO read: “Was the conduct of Paul Betenbaugh: Defamation OR False Light OR Negligent Infliction fO NY of Emotional Distress OR Intentional Infliction of Emotional Distress?” Thus, Question 2 makes NO oN no distinction between whether the jury was asked to find Betenbaugh liable for an intentional Ny 8 COMPLAINT tort or a negligence-based cause of action. & 37. On the tenth day of trial, September 1, 2021, the jury unanimously answered NO Question 2 in the affirmative. The jury further awarded Gundersen $3 million in past WY noneconomic loss, and $5 million in future noneconomic loss, including loss for “mental FF suffering, anxiety, humiliation, [and] emotional distress[.]” A true and correct copy of the HA Special Verdict Form is attached hereto as Exhibit 2 and is incorporated by reference as though Dn fully set forth herein. NN 38. | On September 17, 2021, judgment was entered in favor of Gundersen and against Oo Betenbaugh. On February 10, 2022, a Corrected Amended Judgment was entered, which oO included, inter alia, $2,827,397 in pre-judgment interest to Gundersen through November 30, OC 2021 from Betenbaugh. The Corrected Amended Judgment included $3 million in favor of KF | Gundersen and against Betenbaugh for past noneconomic loss, $5 million in favor of Gundersen NYO OO EFe and against Betenbaugh for future noneconomic loss, and $35,000 in stipulated punitive WO FOF damages. FF THE FIRM DEFENDANTS’ FO TORTIOUS ACTS IN THE UNDERLYING LITIGATION A 39. Betenbaugh is informed and believes, and thereon alleges that in attempting to WDB FF defend the Underlying Action, the Firm Defendants placed the interests and wishes of Safeco NI FF above the interests of Betenbaugh, in violation of Firm Defendants’ professional and fiduciary Oo FF obligations. Oo KF 40. Betenbaugh is further informed and believes, and thereon alleges that the Firm FD NO Defendants placed the interests of Safeco above Betenbaugh’s interests because Safeco, and its KF|& NO parent company Liberty Mutual, are important clients to the Firm, and Firm Defendants wish to NV NY maintain a continuing, ongoing, and mutually beneficial relationship with one of the Firm’s WHO NO flagship clients. FP NH 41. The Firm Defendants’ derogation of duty took multiple forms and permutations NO A throughout the life of the Underlying Action, and infected the quality of representation rendered Dn NY to Betenbaugh. NY WhO 42. Betenbaugh is informed and believes, and thereon alleges that from the inception on NO 9 COMPLAINT of the Underlying Action, the Firm Defendants were aware that Safeco has a pattern and practice of gambling the integrity of their insureds’ financial security by refusing to settle cases of clear YN liability for the policy limits. The Firm Defendants failed to advise Betenbaugh of Safeco’s WOW pattern and practice. Firm Defendants and Safeco concealed Safeco’s well-established pattern F&F and practice from Betenbaugh. nA 43. The Firm Defendants failed to advise Betenbaugh that he was at risk of facing a Ana verdict in excess of the Policy Limits, or that Safeco did not intend to cover any verdict rendered won against him. 44. The Firm Defendants failed to properly advise Betenbaugh of his right to Cumis oO counsel. Had Betenbaugh known of Safeco’s standard pattern and practice, known of the lhl conflict of interest between the Firm Defendants and Safeco, and fully understood his right to lhUh Cumis counsel, Betenbaugh would have sought and obtained Cumis counsel to safeguard his OO S| interests. OF 45. The Firm Defendants failed to communicate the 2021 Settlement Offer to FO OF Betenbaugh. Betenbaugh is informed and believes, and thereon alleges that Firm Defendants rejected the 2021 Settlement Offer at Safeco’s direction, without first informing Betenbaugh of KF its existence. KF 46. Firm Defendants unilaterally and without the knowledge or consent of FF Betenbaugh waived any opportunity for Betenbaugh to assert he was acting within the course KF and scope of his employment at Edward Jones when he issued the Craigslist Posts (the NO “Employment Defense”). NY 47. Had the Firm Defendants not waived the Employment Defense, Edward Jones NH would have had to pay any verdict rendered against Betenbaugh pursuant to the doctrine of NHN respondeat superior, regardless of whether the verdict was issued for committing an intentional NYO tort or a negligence-based tort. NY 48. Firm Defendants’ unilateral waiver of the Employment Defense was made with full knowledge that Safeco was proceeding with a reservation of rights, and with full knowledge that Safeco would refuse to pay any verdict, if any, rendered against Betenbaugh in the 10 COMPLAINT Underlying Action. 49. Betenbaugh is informed and believes, and thereon alleges that Firm Defendants, and each of them, failed to consult an employment attorney before waiving the Employment W Defense. Betenbaugh is further informed and believes, and thereon alleges that had Firm >. Defendants consulted an employment attorney before waiving the Employment Defense, they nun would have discovered that the Employment Defense would fully protect Betenbaugh in the WD event of an adverse verdict. Firm Defendants’ unilateral decision to waive the Employment NN Defense fell below the applicable standard of care. Oo 50. Betenbaugh is informed and believes, and thereon alleges that from the inception oO 10 of the Underlying Action to the date of this Complaint, Safeco paid more than $500,000 in 11 attorneys’ fees to “defend” Betenbaugh in the Underlying Action. 12 51. Betenbaugh is informed and believes, and thereon alleges that any reasonable 13 attorney in Firm Defendants’ position would have: 14 (A) Placed Betenbaugh’s interests above the interests of Safeco; 15 (B) Informed Betenbaugh of Safeco’s pattern and practice of gambling its 16 insureds’ financial security by refusing to settle cases of clear liability in hopes of obtaining a 17 favorable verdict at trial; 18 (C) Informed Betenbaugh of Safeco’s intention to disclaim any duty to settle 19 for the Policy Limits; 20 (D) Informed Betenbaugh of Safeco’s intention to disclaim any duty to 21 indemnify if Betenbaugh was hit with an adverse verdict at trial; 22 (E) Informed Betenbaugh of the substantial likelihood of an adverse verdict at 23 trial; 24 (F) Informed Betenbaugh of the substantial likelihood of an adverse verdict at 25 trial in excess of the Policy Limits; 26 (G) Informed Betenbaugh of the conflict of interest between the Firm 27 Defendants and Safeco, on the one hand, and Betenbaugh on the other hand; and, 28 (H) Properly informed and advised Betenbaugh of his right to Cumis counsel. 11 COMPLAINT 52. Betenbaugh is informed and believes, and thereon alleges that any reasonable & attorney in Firm Defendants’ position would not have waived the Employment Defense. NY 53. In addition to the allegations set forth above in Paragraphs 9 through 52 above, WY which are incorporated by reference as though fully set forth herein, Betenbaugh is further F&F informed and believes, and thereon alleges that Bonotto failed to understand and fully appreciate UU the gravity of the Underlying Action and the exposure Betenbaugh ultimately faced (the “Failure Dn to Appreciate”). NI 54. Betenbaugh is informed and believes, and thereon alleges that as a result of the wea Failure to Appreciate, Bonotto and the Firm entrusted an unreasonable bulk of Betenbaugh’s o defense to Fritch-Thym, a Junior Associate unequipped to adequately handle the complexities of S the defense in the Underlying Action. S| 55. Betenbaugh is further informed and believes, and thereon alleges that Firm FeO EF BOHR Defendants negligently failed to appreciate the gravity of the allegations asserted in the Underlying Action, and negligently failed to comprehend the exposure Betenbaugh faced once FO WAAR the matter was submitted to the jury. KF 56. Betenbaugh is informed and believes, and based thereon alleges that Defendants’ KF failures as alleged in Paragraphs 9 through 55 above, which are incorporated herein by reference Fe as though fully set forth herein, fell below the applicable standard of care. KF Ce THE CONSPIRACY BETWEEN SAFECO AND FIRM DEFENDANTS KF 57. Betenbaugh is informed and believes, and thereon alleges that Safeco, its parent HBB NO company Liberty Mutual, and Firm Defendants have a long-standing and well-established NY professional relationship. Betenbaugh is further informed and believes, and thereon alleges that Ne BS Firm Defendants and Safeco conspired together in a manner intended to conceal Safeco’s duty to NY indemnify Betenbaugh, to Betenbaugh’s detriment. NY 15 COMPLAINT 74. Under the Policies, Safeco agreed to provide coverage to Betenbaugh for the acts and events giving rise to the Underlying Action. WN 75. The Underlying Action and the damages and verdict arising therefrom constitute WO an occurrence for which Safeco had a contractual obligation to settle for the policy limits prior to F&F trial. A 76. Betenbaugh performed all conditions, covenants, and promises required by him HA on his part to be performed, in accordance with the terms and conditions of the Policies. YI 77. Safeco breached the insurance contract by denying payment of a covered claim oo and disclaiming any obligation to indemnify Betenbaugh. 10 78. Safeco breached the insurance contract by failing to timely investigate the claims 11 in the Underlying Action, Betenbaugh’s exposure, and the existence of coverage under the 12 Policies. 13 79. Safeco breached the insurance contract by failing to make a good faith offer of 14 settlement in the Underlying Action. 15 80. Safeco breached the insurance contract by failing to make a reasonable offer to 16 Gundersen. 17 81. | Safeco breached the insurance contract by rejecting Gundersen’s settlement 18 demand without any basis. 19 82. Asa direct and proximate result of Safeco’s breaches of the Policies, Gundersen 20 has suffered, and will continue to suffer damages in excess of $10 million in an amount to be 21 shown at the time of trial. 22 FOURTH CAUSE OF ACTION 23 FRAUDULENT CONCEALMENT 24 (Against All Defendants) 25 83. Betenbaugh re-alleges and incorporates by reference Paragraphs 1 through 82 as 26 though fully set forth herein. 27 84. Safeco promised to cover and indemnify Betenbaugh for the acts, omissions, and 28 conduct alleged in the Underlying Action, which ultimately led to an adverse verdict. Safeco 16 COMPLAINT purposefully, fraudulently, and unlawfully failed to disclose that Betenbaugh would have to spend an unreasonable amount of time (likely years on end) pleading and arguing with Safeco before NO Safeco will pay what Betenbaugh is legally entitled to recover under the insurance Policies. W] 85. Safeco concealed or suppressed the following material facts: FF A. Betenbaugh’s claim would not be handled expediently, efficiently and with nN due diligence; Dn B. Betenbaugh’s claim would not be handled fairly or reasonably but would NIN be systematically and methodically denied, delayed and lowballed. ea C. Benefits would not be paid when Betenbaugh became legally entitled to oo recover damages. Rather, such claims would be systematically and methodically denied, delayed Ss et and lowballed. EZ 86. Safeco was under a duty to disclose the true and actual facts to Betenbaugh, which BOB it did not. 87. Safeco intentionally concealed and/or suppressed the aforementioned material ABE facts with the intent to defraud Betenbaugh. 88. Betenbaugh was unaware of the true facts and would not have obtained the Policies had he known of the aforementioned concealed and/or suppressed facts. ERR 89. wR As a direct and legal result of Safeco’s conduct, Betenbaugh has suffered and sustained general, economic and consequential damages in an amount within the jurisdictional limits of this Court and subject to proof at time of trial. RO B 90. The suppression and concealment of material facts was carried out by Safeco in a NO BBR deliberate, calculated, fraudulent and malicious fashion with the specific intent to oppress HN Betenbaugh and others similarly situated. By reason of such contemptible and vile conduct, DN Betenbaugh is entitled to exemplary and punitive damages within the jurisdictional limits of this NO oR court and subject to proof at time of trial. NO eR NO FIFTH CAUSE OF ACTION NO BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING eas 17 COMPLAINT (Against All Defendants) 91. Betenbaugh re-alleges and incorporates by reference Paragraphs 1 through 90 as NY though fully set forth herein. WO 92. Implied in every insurance contract are the covenants of good faith and fair fF dealing. OHO 93. The Policies are insurance contracts. Don 94. As an “insured” under the Policies, Betenbaugh was entitled to coverage NN thereunder. mo 95. The implied covenant of good faith and fair dealing applies to Betenbaugh’s claim, Co 96. The acts and omissions giving rise to the Underlying Action and the subsequent SS ee jury verdict were covered under the Policies. RHEE 97. Betenbaugh tendered the Policies to Safeco for coverage to cover and/or indemnify me Betenbaugh for the acts and omissions giving rise to the Underlying Action. mm 98. Safeco provided unreasonable and inadequate offers to settle the case despite being provided with evidence to support a greater amount than Safeco was willing to and ultimately did AaB offer. 99. Safeco breached the implied covenant of good faith and fair dealing by eR unreasonably denying payment of a covered claim. ee 100. Safeco breached the implied covenant of good faith and air dealing by refusing to SkRaPBBERBREFE negotiate a fair settlement of Gundersen’s claims so as to protect its insured, Betenbaugh. YN 101. Safeco breached the implied covenant of good faith and fair dealing by failing to HN timely investigate the claims giving rise to the Underlying Action. HN 102. Asa direct and proximate result of Safeco’s breaches of the implied covenant of HN good faith and fair dealing, Betenbaugh has suffered, and will continue to suffer damages in an NO amount to be shown at the time of trial. NO 103. Safeco’s improper claims handling conduct described herein is part of Safeco’s NO pattern and practice whereby Safeco prioritizes its profit motives over its contractual obligations to its insureds. N > 18 COMPLAINT 104. Safeco’s conduct as alleged herein, was done by multiple Safeco actors and agents over a period of time, and was ratified by Safeco. NO 105. Safeco oppressed Betenbaugh by using its position of power to consciously WY deprive Betenbaugh of Policy benefits without any good faith basis for doing so. Fk 106. Safeco created avoidable stress and anxiety for Betenbaugh by refusing to settle aA for the Policy Limits in good faith, thereby exposing him to an adverse judgment well in excess Dn of the Policy Limits. This behavior and conduct on the part of Safeco is particularly egregious, eon unwarranted, and outrageous, because Gundersen offered to settle the Underlying Action for the Policy Limits. o 107. As a further direct and proximate result of Safeco’s breaches of the implied et aS covenant of good faith and fair dealing, Betenbaugh was forced to retain legal counsel, and has incurred and will continue to incur attorneys’ fees in an effort to obtain the benefits due and owing RB under the Policy, thereby justifying an award of Brandt fees. Rmmm REE 108. Safeco’s conduct as alleged herein was intentional, despicable and malicious, justifying an award of exemplary and punitive damages in an amount sufficient to punish and SBE make an example of Safeco’s unfair business practices. PRAYER FOR RELIEF WHEREFORE, Betenbaugh prays for judgment against Firm Defendants and Safeco as ES follows: 1. For general damages in excess of $10 million; HNO SBOBHREB 2. For special damages according to proof; HNO 3. For consequential damages according to proof; NO 4, For punitive damages; NO 5. For the costs of suit incurred herein; EF NY 6. For attorneys’ fees according to proof pursuant to Code of Civil Procedure section NO souanh 1021.5; NO 7. For pre-judgment and post-judgment interest; and, 8. For such other and further relief as the Court may deem just and proper. dN 19 COMPLAINT Dated: September 16, 2022 GAVRILOV & BROOKS NO WY By: LE FP Ognian Gavrilov Attorneys for Plaintiff A PAUL BETENBAUGH Dn NTNOo Co CO ee KF NO WO ee F&F vA WDB Fe NH KF DB F— OBO FF CO HN K§ NHN NY ND WO NH F& HN uU HBO Dn NO Nn NO on NO 20 COMPLAINT EXHIBIT 1 Friday, September 16,202 10:12:26 Pacific Daylight Time From: Ognian Gavrilov Sent: Thursday, July 22, 2021 10:52 AM To: Phil Bonotto Ce: Tracy Fritch-Thym ; erika.gaspar.law@gmail.com; John Garner ; Kristina Spears ; Larina Falcona Subject: RE: Gundersen v Betenbaugh et al. Mr. Bonotto, My responses to you were not rooted in arrogance or absence of professional courtesy. | have an affirmative duty to my client to make sure | have you and the insurance carrier properly set up for malpractice and bad faith should things go sideways for you in trial. You are an experienced trial attorney, so you must know the result of this case is wildly unpredictable on both sides and | can just as easily leave the court with a $20M verdict against your client or with a number that | won’t like. The last time