## Facts

- Plaintiffs Miguel Vidrio, Jr. and Patricia Salinas sued Maria L. Hernandez for negligence arising from a 2005 automobile collision.
- Hernandez was defended by her automobile liability insurer, Mercury Insurance Company, through appointed counsel.
- Plaintiffs served statements of damages reflecting modest medical specials and wage loss, with some asserted future medical expenses; the case remained an unlimited civil action.
- After depositions and a mediation attended by counsel and Mercury’s adjuster, the matter proceeded to a mandatory settlement conference (MSC).
- At the MSC, the trial court found Mercury’s adjuster and defense counsel did not negotiate in good faith, relied on a prior offer of $1,000 to each plaintiff, and were not prepared to discuss damages or defense costs.
- The trial court imposed $1,857.50 in monetary sanctions against Mercury, even though Mercury was not a party to the tort action.

## Issues

1. Whether a trial court has statutory or rule-based authority to impose monetary sanctions on a nonparty insurer for failure to participate in good faith at a mandatory settlement conference.
2. Whether Code of Civil Procedure § 177.5 authorizes such sanctions against a nonparty insurer.
3. Whether California Rules of Court, rule 2.30 authorizes such sanctions against a nonparty insurer.
4. Whether any other statute, statewide rule, or local rule authorizes sanctions against a nonparty insurer in these circumstances.

## Decision

- The Court of Appeal reversed the sanctions order.
- Neither Code of Civil Procedure § 177.5 nor California Rules of Court, rule 2.30 authorized monetary sanctions against a nonparty insurer for alleged bad-faith participation in an MSC.
- No other statute or rule supplied the missing authority; policy concerns about settlement efficiency could not replace express authorization.

## Legal Principles

- A court’s authority to impose monetary sanctions is strictly limited to powers conferred by statute or court rule; such provisions are strictly construed.
- Code of Civil Procedure § 177.5 does not, without express application, extend sanctionable obligations at a settlement conference to a nonparty insurer that is not a party of record.
- California Rules of Court, rule 2.30 governs compliance by parties, attorneys, and persons appearing before the court, and does not provide a textual basis to sanction a nonparty insurer for MSC negotiation conduct.
- Absent explicit authorization by statute, statewide rule, or valid local rule, a court may not sanction a nonparty insurer for failure to negotiate in good faith at an MSC.

## Conclusion

The Court of Appeal held that monetary sanctions against a nonparty insurer for alleged bad-faith participation in a mandatory settlement conference are unauthorized absent explicit statutory or rule-based authority, and it reversed the sanctions imposed on Mercury.


Vidrio v. Hernandez, 172 Cal. App. 4th 1443, 92 Cal. Rptr. 3d 178 (Ct. App. 2009)