Filed 10/23/26 Wing Inflatables v. Certain Underwriters at Lloyd’s CA1/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION ONE

WING INFLATABLES, INC.,
Plaintiff and Respondent,
A172050
v.
CERTAIN UNDERWRITERS AT (San Francisco City & County
LLOYD’S, Super. Ct. No. CGC-21-589722)
Defendants and Appellants.

WING INFLATABLES, INC.,
A173263
Plaintiff and Appellant,
v. (San Francisco City & County
Super. Ct. No. CGC-21-589722)
CERTAIN UNDERWRITERS AT
LLOYD’S,
Defendants and Respondents.

Representations and warranties insurance is a specialized insurance
product purchased in connection with certain corporate transactions, such as
mergers and acquisitions. It indemnifies the insured for covered breaches in
the representations and warranties of other parties to the transaction. In
connection with its 2019 acquisition of another company, plaintiff Wing
Inflatables, Inc. purchased a representations and warranties policy from
defendants Certain Underwriters at Lloyd’s subscribing to Policy No.

1
TLH001130428 (Underwriters). Wing subsequently became aware of
irregularities in the other company’s financial statements and filed a claim
with Underwriters.
After nine months, during which time Underwriters never took a
coverage position on, let alone paid, any aspects of Wing Inflatables’ claim,
Wing filed this bad faith case. Ultimately, the case was tried and the jury
awarded Wing approximately $3.1 million in compensatory damages and
$15 million in punitive damages. Both parties appealed.
Underwriters challenges only the punitive damages award, asserting
(1) the jury’s finding under Delaware law that they committed “outrageous”
bad faith supporting a punitive damages award is not supported by
substantial evidence; (2) the amount of punitive damages awarded is
constitutionally excessive; and (3) the trial court committed prejudicial error
by excluding the testimony of Underwriters’ claims handling expert and
curtailing Underwriters’ closing argument on punitive damages.
In its appeal, Wing challenges the denial of its post-verdict motion for
litigation bad faith attorney fees under Delaware law, claiming the court
abused its discretion in denying such fees.
While we conclude the evidence supports a punitive damages award, we
also conclude the amount awarded is unconstitutionally excessive and order
the award reduced to $10 million. We affirm the order denying Wing’s
motion for bad faith litigation fees.
BACKGROUND
The Acquisition and Related Insurance Policy
Wing Inflatables, Inc. is a family of companies that supplies marine
products to recreational, commercial, and military customers. In June 2019,
Wing acquired Mustang Survival, Inc.—a company that designed and

2
manufactured personal flotation devices and other lifesaving products for the
marine and aviation industries—for $27 million. The stock purchase
agreement through which the acquisition was consummated required Wing
Inflatables to procure a buyer-side representations and warranties insurance
policy as a condition of closing. With respect to choice of law, the acquisition
agreement provides: “This Agreement shall be governed by and construed in
accordance with the internal Laws of the State of Delaware applicable to
agreements made and performed in such state and without regard to conflicts
of law doctrines of such state.”
In March 2019, CFC Underwriting Ltd. (CFC)—a company authorized
to offer insurance through Lloyd’s of London’s insurance market—furnished
Wing Inflatables with a proposal to provide the required representations and
warranties insurance. The proposal stated it was nonbinding and remained
subject to change based on CFC’s “underwriting and due diligence process.”
In addition to the premium for the policy, the proposal required Wing
Inflatables to agree to a $30,000 expense agreement because CFC anticipated
“incurring significant underwriting costs, including outside counsel costs, in
connection with the transaction.” CFC also required various specified
transactional and financial documents and access to the virtual data room for
the transaction to complete a “full underwriting review.”
The Lloyd’s of London market allows companies to pool assets and
share risk when issuing insurance policies. A managing general agent like
CFC is “given a pen” to write a policy and acts as the claims manager on
behalf of other companies who financially back the policy. Those backers,
called syndicates, subscribe to a portion of the policy. If, for example, a
syndicate subscribed to 10 percent of a policy, it would receive 10 percent of
the premium payments and be responsible for paying 10 percent of the policy

3
benefits. To avoid coordination problems among what could be dozens of
subscribing syndicates, the syndicates are divided into two groups for each
policy: leads and follows. The follow syndicates agree to be bound by the
decisions of leads, which in turn grant any needed approval for claims-
handling decisions to the managing general agent.
Under the policy ultimately issued to Wing Inflatables by
Underwriters, CFC acted as the managing general agent, responsible for the
day-to-day handling of the claim. However, because it was the insurers’
money, CFC worked within a binding authority agreement. This means
there was “a cap in terms of what [it could] actually do, and beyond that cap,
that’s when insurers step in to provide—or basically to decide . . . a coverage
decision to be made. CFC’s cap for purposes of settling claims related to
Wing’s policy was $250,000. Under the policy, there were two lead
syndicates—Channel 2015 and Markel 3000—and eight follow syndicates.
The lead syndicates acted as the final decisionmakers. In other words,
Channel and Markel had settlement authority with respect to Wing’s claim,
with CFC acting as the claims manager.
The representations and warranties policy issued to Wing Inflatables—
which Wing purchased for $145,000—lists the percentage interests of each of
the 10 syndicates. It insures Wing against “any loss arising out of or
resulting from a breach” of the identified seller representations and
warranties in the stock purchase agreement for a specified period of years, up
to a maximum of $5.4 million. There was a deductible of $270,000 which
could be eroded in specified ways through payments received from others.
The policy lists Delaware as the choice of law and further provides: “Any
dispute between you and us regarding this Policy will be settled in
accordance with the choice of law without reference to conflict-of-law

4
principles that would require or allow the application of the law of any other
jurisdiction.”
Pursuant to the policy, Wing Inflatables was required to “notify the
claims managers as promptly as is reasonably practicable” of any claimed
breach. Moreover, “to the extent the breach [was] reasonably likely to involve
[Underwriters] or this Policy,” Wing was required to “use commercially
reasonable efforts” to provide Underwriters with all material documents
within its possession relating to the breach or claim, along with its “good
faith estimate of the actual or expected loss (to the extent known), and use
commercially reasonable efforts to continue to provide [Underwriters] with
this information until the breach or claim is settled.” The policy also
provides, however, that “a notice of breach or claim shall not be invalid for
failing to provide a reasonably complete description of the facts. We
acknowledge that . . . you may have incomplete knowledge of a breach or the
facts and circumstances underlying a claim at the time notice is provided
hereunder and that any notice may reflect such incomplete knowledge and
may be supplemented. . . .” And it additionally required Wing to permit
Underwriters “to review and take copies of your records, at [Underwriters’]
sole cost and expense, relating to the breach or claim” and to provide
Underwriters with other information and assistance “at [Underwriters’] sole
cost and expense.” (Italics added.)
Underwriters’ obligations under the policy included the following: “As
soon as is reasonably practicable after you have provided the information
above and in any event within 30 calendar days, we will acknowledge the
notification and either confirm coverage, decline coverage (including the
reasons why we have denied coverage or claimed erosion of the deductible) or,
if we are not in a position to determine the coverage position based on the

5
information provided, then the claims manager’s response shall state why it
is unable to do so in reasonable detail and request further information
(including to the extent any such breach or claim would not actually be
payable due to the deductible) from you as may be reasonably required to
confirm or decline coverage.”
The policy defines “ ‘[c]osts and expenses’ ” to include “that part of any
loss which constitutes third party costs, charges, fees and expenses”
reasonably incurred by Wing Inflatables in, among other things, the
investigation, resolution, defense, or appeal of any breach or claim, including
potential breaches and claims. The burden on disproving the reasonableness
of the costs and expenses was placed on Underwriters. In addition,
Underwriters agreed: “Within 30 business days of our receipt of invoices
regarding the costs and expenses you incur, we will pay such costs and
expenses.”
Wing Inflatables’ Claim and Underwriters’ Claim Processing
In the year following the acquisition, Wing Inflatables became aware
that various representations and warranties made by the sellers had been
breached. It submitted a detailed notice of claim to Underwriters in May
2020.
The claim identified six categorical errors in the financial statements:
(1) credit card fees for e-commerce transactions were never listed as an
expense in the financial statements, leading to an overreporting of revenue in
the amount of $54,197, and certain credits and refunds were not properly
reflected; (2) failure to account for annual bonuses for certain Florida
employees in the financial statements, leading to an annual loss of $15,800;
(3) vendor expenses that were never properly recorded or paid in the amount
of $80,000; (4) treating the internal consumption of inventory (i.e.,

6
demonstration or promotional products) as a receivable instead of an
expense, leading to an annual loss of $52,406; (5) under reporting of certain
IT expenses (previously provided by the seller’s parent company) in the
annual amount of $28,000; and (6) overstating the value of certain obsolete
inventory, leading to an annual loss of $39,918. Because an EBITDA
multiplier1 of 9.85 was used to determine the purchase price of the company,
Wing Inflatables applied that multiplier to the stated losses (except for
$30,000 in one-time vendor charges) and estimated its losses for purposes of
the policy at $2,223,829.
In June, Underwriters acknowledged receipt of Wing Inflatables’ claim
by and through their attorney, Kevin Mattessich, who had been retained to
assist in the investigation of the matter. Several days later, Mattessich
responded to Wing with 28 multi-part questions seeking additional
information and documents regarding the six identified losses.2

1 EBITDA means earnings before interest, tax, depreciation, and
amortization. EBITDA is the amount of cash that is being generated from a
business in an ongoing operation. As Mark French, Wing Inflatables’ CFO
explained it: “[Y]ou’re trying to assess the cash flow from the operations of
the company without taking consideration of the interest or the debt that’s
going to be put on the company. And same thing with taxes; it’s sort of
considering the business without the effect of the payments you’ll be making
to the government based on your profits or losses or lost carry-forwards or
what have you. [¶] And then depreciation and amortization are both noncash
expenses. So you don’t actually outlay cash for depreciation or for
amortization, so those are taken out of the equation.” When acquiring a
company, EBITDA is “a proxy, effectively, for how many years will it take to
pay back the investment that you make to buy that particular company.”
The EBITDA multiplier in a particular transaction is set based on
comparable sales.
2 The list of questions was provided to Mattessich by Rodney Crawford,
a financial consultant retained by Mattessich to assist in responding to
Wing’s claim.

7
 Wing Inflatables responded in September, providing an updated claim
with detailed responses to all questions asked and voluminous documentation
regarding each of the six categories of losses, some of which Wing had
increased and some of which it had decreased upon further review. Wing’s
updated claim contained two additional categories of loss denoted as category
7 (fixed assets listed on the financial statements that did not appear to exist)
in the amount of $84,985 and category 8 (multiple accounts receivable that
should have been reserved or written off), leading to a loss of $74,357. As a
result, the claim amount increased to $6,575,418 (plus reimbursement for the
costs for Wing’s professional advisors), well over the maximum payable under
the policy.
Rather than taking a coverage position based on the additional
information Wing Inflatables provided, Mattessich again responded with
questions, this time 23 in number. One sought more information regarding
how the EBITDA of 9.85 for the transaction was set. Wing provided a full
response within a week.
A conference call was then set for the end of October, with an agenda
that, according to Wing Inflatables, was largely a rehash of information it
had already provided. Nevertheless, Wing promptly responded to the issues
identified on the agenda and raised during the conference call. As a result, it
lowered the amount of its claim to $5,710,230 (plus costs and expenses). The
decrease included a reduction of the category 6 loss regarding obsolete
inventory.
Wing Inflatables heard nothing from Underwriters for several months,
until it received, in January 2021, a “preliminary assessment” of the claim.
Underwriters continued to raise numerous issues with the 9.85 EBITDA
multiplier, stating there was “insufficient evidence to conclude that an

8
EBITDA multiple was the sole basis for the transaction price,” and asserting
a “forward-looking” EBITDA rather than an historic one was more
appropriate. (Italics omitted.) They suggested an EBITDA of 6.5 or 7.5.
With respect to the category 7 non-existent fixed assets loss, Underwriters
speculated various circumstances could exist justifying denial of coverage for
the loss.
Applying a reduced or no EBITDA multiplier, and agreeing to covered
losses in only the first three identified categories, Underwriters valued Wing
Inflatables’ claim at $540,158. It then reduced that amount by the $270,000
deductible, for a total claim value of $270,158—less than five percent of
Wing’s $5,710,230 claim, not including costs and expenses which remained
unaddressed.
Wing Inflatables responded to this “preliminary assessment” in mid-
January with a detailed, point-by-point rebuttal. Wing took issue, for
example, with Underwriters’ “conceptual” EBITDA calculation, stating it was
unaware “of any precedent or accepted use” of Underwriters’ methodology
and the 9.85 EBITDA in the purchase price was a matter of calculated fact.
To the extent the warranted financial statements were inaccurate, Wing
overpaid for the acquired company based on the amount of that multiple.
Moreover, ample market data existed that supported purchase price
multipliers in the10x range for similar companies. Wing also noted the
assessment ignored its balance sheet claims, failed to consider the
approximately $300,000 in expenses Wing had already incurred in
responding to Underwriters’ requests that were recoverable under the policy,
improperly applied the deductible without considering the extent to which it
had been eroded by post-closing payments from the seller, and failed to

9
consider that the post-closing working capital settlement of $886,392 was
negotiated with the seller and did not cover all of Wing’s losses.
Wing Inflatables summarized: “We have endeavored to provide
detailed responses and supporting documentation for each of your requests
concerning our claim. We made ourselves and our representatives available
to you and provided you with complete and honest information during our
numerous written and oral communications with you and your team. We
have revised our claim in response to points you have raised and have tried to
be fair and balanced. For your part, we feel we have not seen similar
considerations.” It suggested a conference call the following week to “walk
through any remaining issues.”
During that call, Underwriters indicated they would be sending Wing
Inflatables additional questions. Wing responded that the time for questions
had “long since passed” and that it wanted the claim to be paid or a denial of
coverage to be articulated. Underwriters refused.
The following month, in February 2021, Underwriters issued 10 more
requests for information, which Wing Inflatables claims were “virtually
identical” to those already made and for which Underwriters already had
information. Wing nevertheless responded to the requests.
The Complaint and Pretrial Matters
Wing Inflatables filed a complaint that same month, asserting claims
for breach of contract, breach of the implied covenant of good faith and fair
dealing, and unfair business practices. With respect to bad faith, Wing
alleged Underwriters “breached the implied covenant of good faith and fair
dealing arising out of their insurance contract with [Wing] by unreasonably
and in bad faith refusing and failing to pay amounts due under the policy,
effectively denying [Wing] insurance coverage to which it is entitled and

10
placing their interests above those of their insured, all to the detriment of
[Wing].” Among other alleged acts, Underwriters: “(1) [U]nduly delayed
adjusting [Wing’s] claim. (2) [F]ailed to acknowledge the claim and act
reasonably promptly after receiving communications about [Wing’s] claim.
(3) [F]ailed to either approve or deny the claim within a reasonable time
period after receiving from [Wing] adequate proof of covered losses.
(4) [F]ailed to timely pay benefits due under the policy. (5) [F]ailed to provide
prompt justification for their effective denial of the claim. (6) [F]ailed to
properly inquire into bases that support payment of the claim. (7) [F]ailed to
adopt and implement reasonable standards for the prompt investigation and
processing of the claim. (8) [R]elied on unreasonable, erroneous and/or
irrelevant standards to manufacture bases on which to refuse to pay amounts
legitimately owed under the terms of the policy, effectively looking for means
by which to deny coverage rather than ways to pay the claim. (9) [M]ade a
‘low ball’ coverage offer[. And] (10) failed to adequately explain their effective
denial of coverage by completely ignoring entire components of [Wing’s]
claim.”
Wing Inflatables sought declaratory and injunctive relief, general and
compensatory damages of no less than $5.4 million, punitive damages, and
attorney fees, costs, and prejudgment interest.
The following month, Underwriters provided a “supplement” to its
“preliminary assessment” of Wing Inflatables’ claim. They first agreed to
accept Wing’s 9.85 EBITDA multiple for certain claimed losses “in the
absence of a judicial resolution of the issue.” They then agreed Wing’s
claimed loss based on certain e-commerce fees (category 1) was “reasonable”
and stated they would pay the claimed amount plus the multiplier, or
$373,877. With respect to the claimed loss based on Florida employee

11
bonuses (category 2), Underwriters agreed to pay a portion of the loss and
apply the 9.85 multiplier for a total of $321,159. Underwriters also agreed to
pay a portion of Wing’s claimed loss for undisclosed vendor liabilities and
customer credits (category 3) but refused to apply the EBITDA multiple
($48,899). Finally, they stated they were reviewing Wing’s recently provided
invoice for $280,000 in expenses. All told, Underwriters stated they would
issue payment to Wing in the amount of $591,339, representing the total of
the allowed claimed losses ($861,339), less the deductible ($270,000). Wing
accepted the partial payment and proceeded with the lawsuit as
Underwriters still had not made a coverage determination, not paid the claim
amount Wing believed it was entitled to, not reimbursed Wing’s expenses,
and continued to misapply the deductible.
The procedural history of the lawsuit from this point onward is
extensive and because neither party has adequately presented it in their
briefing on appeal, we include the following recitation.
Pretrial Rulings
Early in the case, Underwriters moved to quash service of summons
and to stay/dismiss the matter based on forum non conveniens. Both motions
were denied (J. Ulmer).
Specifically, the court concluded exercising specific jurisdiction over
Underwriters was warranted because they “purposefully availed themselves
of the privilege of doing business in California” and Wing Inflatables’ legal
claims arose out of Underwriters’ contacts with California. Underwriters also
failed to prove “the exercise of jurisdiction over it would be unreasonable even
though the policy includes a Delaware choice of law provision and the parties
agreed that this matter could also be litigated in Delaware.” With respect to
forum non conveniens, Wing’s choice of forum was entitled to great deference,

12
the witnesses and documents were in California, and Underwriters (located
in the United Kingdom) did not “sufficiently show why litigating this bad
faith matter in Delaware is more desirable.”
In early 2022, Underwriters filed a motion for summary adjudication.
It first sought a ruling that, pursuant to the terms of the insurance policy,
Delaware law applied to the case. It then maintained that under Delaware
law (1) Wing Inflatables could not establish Underwriters acted in bad faith,
(2) Wing could not establish entitlement to punitive damages, and (3) Wing
was not entitled to attorney fees. The record reflects that the parties and the
trial court understood the fees at issue to be “Brandt fees”—fees recoverable
as damages in an insurance bad faith case under Brandt v. Superior Court
(1985) 37 Cal.3d 813, 815 (Brandt). The court (J. Bolanos) also denied this
motion.
Specifically, the court denied without prejudice Underwriters’ request
for summary adjudication on “issues 1 [liability for bad faith] and 2
[entitlement to punitive damages]” because Underwriters had failed to prove
its threshold assertion that Delaware law applied. The court also ruled
summary adjudication was premature as to these issues under Code of Civil
Procedure section 437c, subdivision (h) because Underwriters had not yet
produced all ordered discovery regarding its claims handling practices and
how it valued Wing Inflatables’ claim.
The court denied Underwriters’ request for summary adjudication on
“issue 3” (Brandt attorney fees) without caveat, stating Underwriters had
merely cited the policy’s choice of law provisions without providing any
analysis under Nedlloyd Lines B.V. v. Superior Court (1992) 3 Cal.4th 459
(Nedlloyd) in which our high court addressed the enforceability of such
provisions. The trial court further observed the connection to Delaware was

13
attenuated given that Wing Inflatables is a California company, it operates
the purchased entities from California, and the purchased entities reside in
various jurisdictions, with only one residing in Delaware. Thus,
Underwriters had failed to show that Delaware had a substantial
relationship to the transaction or that there was a reasonable basis for the
choice of Delaware law. It added that “if fees are not recoverable under
Delaware law, that policy would conflict with California’s fundamental policy
and California has a materially greater interest in enforcing its fee policy.”
A year later, in 2023, Underwriters filed a second motion for summary
adjudication, this time arguing Delaware law applied to any dispute
regarding the insurance policy without reference to choice-of-law principles,
as stated in the “freely negotiated” policy. (Boldface, capitalization &
underscoring omitted.) Underwriters further maintained that, as a matter of
law, Wing Inflatables could not establish bad faith under either Delaware or
California law. Underwriters ultimately withdrew this motion.
After more than another year had passed, Underwriters, in March
2024, filed a third motion for summary adjudication. It again asserted that
under the policy’s choice of law provisions Delaware law applied and went on
to argue that under either Delaware or California law, Wing Inflatables’ bad
faith claim failed as a matter of law. The court (J. East) denied the motion
shortly before trial.3 Specifically, it denied Underwriters’ claim that
Delaware law applied to the dispute because Underwriters had failed to
analyze adequately the choice-of-law issue. Although Wing represented that
a prior judge had ruled California law applied, the court did not get into the

3 On our own motion we take judicial notice of the trial court’s order,
which was not included in the record on appeal. (Evid. Code, §§ 452, subd.
(d), 459, subd. (a).)

14
specifics of that order but simply ruled Wing had raised a triable issue as to
whether Underwriters’ claims handling decisions were unreasonable and in
bad faith under California law.
Motions in Limine and Trial Proceedings
Three months later, in June 2024, after the case was assigned out for
trial, Underwriters made an in limine motion asserting Delaware law
applied. At the hearing, the trial judge (J. Flores) honed in on attorney fees,
asking whether the difference between California and Delaware law in this
context, meaning the bad faith context, was related to the recovery of
attorney fees. It is again clear from the record that the court and parties
understood the fees at issue to be Brandt fees. Counsel for Underwriters
stated that was the “primary difference.” He also stated the standards for
establishing bad faith are higher under Delaware law.
Counsel for Wing Inflatables asserted the choice-of-law issue had
already been determined and California law applied because prior judges had
denied two summary adjudication motions whereby Underwriters had sought
rulings that Delaware law applied. Counsel further argued: “You can’t
contract away from the rights and obligations—the rights that a California
policyholder has to the protections afforded by California claims handling
practices. And that’s outside of the interpretation of the insurance contract.”
Underwriters then asked to brief the matter, stating “this is something
that could never have been decided at the pleading stage” (although it had
sought years earlier to have the issue resolved by motion).
Expressing significant dissatisfaction that this fundamental issue had
not been resolved earlier, the court requested further briefing on the matter.
Underwriters had also filed a motion in limine to prevent Wing
Inflatables from presenting invoices for attorney fees it had incurred

15
(relevant to Brandt fee damages). Underwriters maintained the invoices
should be excluded because Underwriters had requested copies which it had
never received. Wing Inflatables countered that Underwriters’ discovery
request had been a general one, it had responded, and Underwriters had
never moved to compel production of the invoices or sought updated
discovery. Moreover, Wing had designated an expert witness with respect to
Brandt fees many months earlier and had presented him for deposition along
with copies of the fee invoices. The trial court granted Underwriters’ motion
and precluded the evidence, ruling the discovery requests “were specific
enough to trigger an obligation” to produce the invoices and that producing
them on the eve of trial would prejudice Underwriters.
The next court day, Wing Inflatables asked the court to reconsider its
evidentiary ruling. Wing again pointed out it had inadvertently turned over
unredacted copies of fee invoices through its Brandt expert and had been
producing redacted copies of more recent invoices. (See Byers v. Superior
Court (2024) 101 Cal.App.5th 1003, 1013–1014 [upholding order allowing
redaction of work product in fee invoices].) Underwriters complained the
reconsideration request was procedurally and substantively deficient and
requested time to review it. The court indicated it would need to have a
hearing on the matter the following week.
The court then turned to the choice of law issue, which, per the court’s
directive, the parties had briefed.
Underwriters pointed out that the contractual choice of law provisions
required application of Delaware law to all issues, “without reference to
conflict-of-law principles.” (Italics added.) Underwriters asserted Wing
Inflatables had “freely and voluntarily, and with advice of counsel, executed
written agreements that dictated the choice of Delaware law and Delaware

16
law only” to this dispute. It further asserted the choice of law issue had not
been finally decided in connection with its 2022 motion for summary
adjudication because the motion had been denied without prejudice.4
Underwriters acknowledged that, under California law, a choice of law
provision is not controlling if a party “can establish both that the chosen law
is contrary to a fundamental policy of California and that California has a
materially greater interest in the determination of the particular issue.”
(Washington Mutual Bank v. Superior Court (2001) 24 Cal.4th 906, 917
(Washington Mutual).) But they maintained “a claim for breach of the
implied covenant of good faith and fair dealing is not a fundamental policy of
California.” They did not separately analyze the enforceability of the choice
of law provisions as to Brandt fee damages under Nedlloyd, supra, 3 Cal.4th
459.
Wing Inflatables, in turn, asserted the prior court had conducted a
Nedlloyd analysis and determined “ ‘Delaware’s connection to the transaction
is . . . attenuated’ ” and Underwriters have never “ ‘show[n] that Delaware
has a substantial relationship to the transaction or there is a reasonable

4As we have recited, the trial court specifically denied the first two
issues Underwriters had raised (bad faith liability and liability for punitive
damages) without prejudice. But it denied the third issue (Brandt attorney
fees) without such caveat. Thus, Underwriters were not entirely accurate in
what they told the trial court. At the hearing, they argued: “So when we
talked earlier about these various decisions that were made by the Court
without prejudice or saying that . . . Underwriters didn’t meet their burden, it
seems to me that all of the pretrial decisions fall within that bucket, and that
this Court should consider the choice of law separately, independently,
pursuant to the contract of the parties, without regard to a prior discussion
that may have been between the parties in a prior hearing.”

17
basis for the Choice of Delaware law.’ ”5 Wing further asserted that the court
had also concluded, with respect to attorney fees, that application of
Delaware law “ ‘would conflict with California’s fundamental policy of
protecting its insureds’ ” and “ ‘California has a materially greater interest in
enforcing its fee policy.’ ”6 Wing additionally cited Pitzer College v. Indian
Harbor Ins. Co. (2019) 8 Cal.5th 93, 97–99, 105 (Pitzer College), in which our
Supreme Court concluded California’s notice-prejudice rule (which “generally
allows insureds to proceed with their insurance policy claims even if they give
their insurer late notice of a claim, provided that the late notice does not
substantially prejudice the insurer”) is a fundamental policy of California law
that can trump a contractual choice of law provision. (Id. at pp. 97, 105.)
The trial court granted Underwriters’ motion. It first concluded the
prior orders denying summary adjudication were not dispositive. It then
agreed the Nedlloyd line of cases was applicable but concluded the Delaware
choice-of-law provisions in the policy and related share purchase agreement
governed.
In light of the court’s ruling on the choice of law in limine motion, there
was no need to address Wing Inflatables’ motion for reconsideration with
respect to the admissibility of its fee invoices because Delaware does not have
an analog to Brandt fees. Thus, pursuant to the in limine ruling excluding
the evidence, Wing did not present evidence of its attorney fees at trial. Nor

5 On our own motion we take judicial notice of Wing’s trial court brief,
which was not included in the record on appeal. (Evid. Code, §§ 452,
subd. (d), 459, subd. (a).)
6 Wing did not, however, point out that only portions of the prior
court’s summary adjudication order were made without prejudice; nor did it
do so during subsequent argument on the in limine motion.

18
was the jury instructed it could award such fees as a component of Wings’
compensatory damages.
Jury Instructions, Verdict, and Award of Punitive Damages
The case was bifurcated for trial, with liability, including for punitive
damages, being determined in the first phase, and the amount of any
punitive damages being awarded in the second phase.
Thus, at the conclusion of the first phase, the jury was instructed
pursuant to Delaware law: “If you decide to award compensatory damages to
plaintiff, you must determine whether defendant is also liable to plaintiff for
punitive damages. [¶] Punitive damages are different from compensatory
damages. Compensatory damages are awarded to compensate the plaintiff
for the injury suffered. Punitive damages, on the other hand, are awarded in
addition to compensatory damages. [¶] You may award punitive damages to
punish a party for outrageous conduct and to deter a party and others like it
from engaging in similar conduct in the future. [¶] To award punitive
damages, you must find by a preponderance of the evidence that defendant
engaged in outrageous conduct that was either intentional in nature or with
a reckless disregard in investigation and handling of the claim. Punitive
damages cannot be awarded for mere inadvertence, mistake, errors in
judgment, and the like, which constitute ordinary negligence.” The jury was
then provided with definitions of intentional and reckless conduct. It was
also informed it was only to determine whether Wing Inflatables was entitled
to a punitive damages award, not the amount of such an award.
The jury returned a bad faith liability verdict and awarded $3,094,083
in compensatory damages—an amount significantly closer to Wing
Inflatables’ ultimate claim for approximately $4,500,000 than to
Underwriters’ suggestion in its preliminary assessment that Wing was owed

19
only $270,158 or its offer of $591,339 after Wing filed suit. It also found
Underwriters liable for punitive damages.
The trial court immediately moved to the second phase, reading to the
jury the following: “The parties have stipulated that the defendant can pay
whatever amount the jury decides is proper for punitive damages. The
collective annual profits in 2023 for the ten syndicates was 1 billion U.S.
dollars.”
Each side then presented a five-minute argument. Wing Inflatables
stressed the need to punish Underwriters and deter them and others from
acting with similar bad faith. It suggested an award of $50 million—
reflecting 18 days of Underwriters’ profits, less time than the jury had served
on the case. Underwriters argued any punitive damages award must bear a
reasonable relationship to the compensatory damages and that the amount
sought by Wing was neither rational nor reasonable.
The court next instructed the jury with a modified version of
Delaware’s form punitive damages jury instruction that stated: “The law
provides no fixed standards for the amount of punitive damages. In
determining an award of punitive damages, you may consider the nature of
Underwriters’ conduct and the degree to which the conduct was
reprehensible. Finally, you may assess an amount of damages that will deter
Underwriters and others like it from similar conduct in the future. You may
consider Underwriters’ financial condition when evaluating deterrents. Any
award of punitive damages must bear a reasonable relationship to Wing’s
compensatory damages.”
Shortly thereafter, the jury returned a $15 million punitive damages
award.

20
JNOV and New Trial Motions
Underwriters filed a notice of intent to move for a new trial and a
motion for judgment notwithstanding the verdict (JNOV), both limited to
punitive damages. They argued in their new trial motion that the punitive
damages award was unconstitutionally excessive and there had been
procedural irregularities during the punitive damages phase of the
proceedings. Underwriters likewise argued in its JNOV motion that the
punitive damages award was excessive and urged that the amount be
reduced to that of the compensatory damages. The trial court denied both
motions.
Underwriters timely appealed, challenging only the punitive damages
award. (Appeal No. A172050.)
Request for Attorney Fees Under Delaware Law
After the jury trial was concluded, Wing Inflatables filed a motion for
attorney fees under Delaware law which permits courts to award fees as
sanctions for bad faith litigation conduct (hereinafter “litigation bad faith”
attorney fees). (See Johnston v. Arbitrium (Cayman Islands) Handels AG
(Del. 1998) 720 A.2d 542, 545–546 (Johnston) [Delaware recognizes fees for
bad faith litigation conduct as an exception to the “American Rule” which
requires parties to bear their own fees].) Wing maintained Underwriters
engaged in a host of bad faith litigation tactics which increased the costs of
the case, including forcing Wing to file suit before offering any payment of
Wing’s claim, repeatedly refusing to comply with California procedural rules
and court orders, delaying and obstructing discovery, obstructing the
deposition process, asserting frivolous arguments that were frequently
withdrawn after Wing spent time and money responding to them, causing

21
three trial continuances due to their discovery abuses, and continuing their
obstructionist tactics throughout the trial.
According to Wing Inflatables, these bad faith tactics forced them to
spend millions of dollars more than it otherwise would have to enforce its
rights. It submitted voluminous exhibits in support of its fee request and
sought approximately $8 million in fees and costs.
Underwriters opposed the motion on the ground the law of the forum,
here California, governs procedural matters and the litigation bad faith
attorney fees Wing Inflatables sought were procedural in character.
Accordingly, as to this issue, Delaware law did not apply. Underwriters
additionally argued: (1) Wing had been prevented from presenting evidence
regarding its fees to the jury and should not be allowed to present it now; (2)
the jury already awarded Wing $279,507 in compensatory damages for
investigations, costs, and expenses under the insurance policy; (3) damages
are a question of fact for the jury; (4) Wing should be barred from relitigating
discovery disputes and sanction requests previously decided in this litigation;
(5) Wing did not meet the requirements for relief under Delaware’s litigation
bad faith attorney fee law because it can only be administered in a court of
equity such as the Delaware Court of Chancery; and (6) regardless,
Underwriters’ litigation conduct was not sufficiently deplorable to support a
litigation bad faith attorney fee award, and (8) any such award would apply
to only a fraction of the fees generated.
The trial court denied Wing Inflatables’ motion. However, it first
rejected Underwriters’ assertion that Delaware’s litigation bad faith attorney
fee law is procedural rather than substantive. As the court saw it,
“Defendant requested that Delaware law applies and that, as such, it is
entitled to all of the substantive benefits afforded to Delaware law—excuse

22
me––to Delaware parties in Plaintiff’s situation.” It also commented: “This
Court agrees, as somewhat of a side note, that the equities in this case side
with the Plaintiff. The jury found that what happened to Wing and to
Mr. Branagh [Wing’s CEO] should have never happened, and that
[Underwriters] should have never taken the positions that they took in this
case. [¶] The Court has made one of the most significant rulings in a civil
case that this bench officer has ever made, in this case, for precisely the same
reasons.[7]It was gamesmanship that happened in this case, and the Court
has no doubt when it hears Plaintiff’s Counsel complaining about how
difficult it has been to litigate this case that such is true.”
Nevertheless, the court went on to deny the litigation bad faith
attorney fee motion for two reasons: (1) “the Court decline[d] to review the
entire litigation history and make new rulings regarding Defendant’s alleged
litigation conduct” and (2) “the jury in this case already awarded punitive
damages against Defendant and awarding attorney’s fees in addition to
punitive damages risks duplication of damages.”8

7We discuss the trial court’s decision to exclude Underwriters’ claims
handling expert below in our analysis of the court’s evidentiary rulings.
8 As to this second point, the court observed: “Plaintiff argued in essence—
this is not verbatim—that Defendant preferred to engage in years of litigation,
including an entire trial where no less than three Plaintiff’s attorneys were present
throughout, than to simply pay what they owed to Plaintiff.” It further stated:
“Here, the jury found it proper to punish [Underwriters] in what amounts to
roughly three times the value of the insurance policy. A message sent that
Defendant should have just paid the policy and saved Plaintiff a tremendous
amount of trouble and effort, the tremendous amount of trouble and effort it took to
get the verdict, a deterrence against future similar conduct, a real win for the little
guy was argued by Plaintiff. This Court finds that, under the totality of the
circumstances, equity does not require a further award.”

23
 Wing Inflatables then moved for reconsideration, asserting the trial
court had failed to recognize the distinction between the purpose of the
punitive damages award (to punish and deter misconduct in handling
insurance claims) and an award of litigation bad faith attorney fees under
Delaware law (to punish improper litigation conduct to preserve the integrity
of the Delaware courts).
The trial court denied the motion. In doing so, it elaborated on its
reasoning. With respect to not wanting to revisit the pretrial rulings of other
judges, the court explained: “It’s not because there were some wins, there
were some losses, and I’m just going to call it a day.” Rather, the court’s
point was that, in the pretrial litigation history, requests for sanctions were
made and ruled on. Under such circumstances, the judge queried: “[H]ow do
I come and review other superior court judges’ rulings? Because I happen to
know more information? Because I happen to have made myown ruling that
addressed bad litigation conduct, if you will?”
As for the court’s concern about overlap with the punitive damages
award, it was based on “what happens in the court of chancery and what
happens in the superior court under Delaware law. And how in Delaware,
under Delaware law, those two courts are separate.” Thus, in Delaware
superior court, there is a right to a jury and punitive damages can be
awarded. But in the chancery court, while there is no jury and no right to
punitive damages, litigation bad faith attorney fees are available. The court
saw the “similar ground” between the litigation bad faith attorney fees and
punitive damages (i.e., the overlap) to be punishment and deterrence.

24
 Wing Inflatables appealed the order denying it litigation bad faith
attorney fees under Delaware law. (Appeal No. A173263.)9
UNDERWRITERS’ APPEAL (No. A172050)
Sufficiency of the Evidence to Support Punitive Damages
Summary of Relevant Evidence10
Because we are reviewing the record for substantial evidence, our
summary here is not exhaustive and is presented in the light most favorable
to the jury’s verdict. (See Alper v. Rotella (2021) 63 Cal.App.5th 1142, 1148
[“When conducting a substantial evidence review, we view the whole record
in a light most favorable to the judgment, we resolve all evidentiary conflicts
in favor of the decision, and we draw all reasonable inferences in favor
thereof.”].)

9We concluded Wing Inflatables’ notice of appeal was timely in a
published order dated July 21, 2025. The Supreme Court subsequently
denied Underwriters’ petition for review.
10 As Wing points out, we could disregard Underwriters’ argument
altogether given their one-sided discussion of the record. “ ‘ “The rule is well
established that a reviewing court must presume that the record contains
evidence to support every finding of fact, and an appellant who contends that
some particular finding is not supported is required to set forth in [their]
brief a summary of the material evidence upon that issue. Unless this is
done, the error assigned is deemed to be waived. [Citation.] It is incumbent
upon appellants to state fully, with transcript references, the evidence which
is claimed to be insufficient to support the findings.” ’ ” (Schmidlin v. City of
Palo Alto (2007) 157 Cal.App.4th 728, 737, quoting In re Marriage of Fink
(1979) 25 Cal.3d 877, 887.) Nevertheless, since a discussion of the evidence
helps elucidate the remaining issues on appeal, we address Underwriters’
argument.

25
 Wing Witnesses
Andrew Branagh
Andrew Branagh is the president and CEO of Wing Inflatables, which
he and his partner, Mark French, purchased in 2013. Branagh had
experience purchasing companies based on a multiple of their earnings, or
EBITDA, which is a way of estimating how much cash flow a business will
generate. As Branagh explained: “[I]f you buy a business using a six times
EBITDA multiple, it’s theoretically going to take you six years to pay yourself
back for the investment, if all things remain the same.” The buyer and the
seller both agree to a certain timeframe on which to base the value, and the
EBITDA may be adjusted to normalize amounts on the income statement
(such as a huge CEO salary being adjusted down to market rates). Often, the
seller numbers for earnings tend to come in higher than the buyer numbers
for earnings in a buy-sell situation. Branagh had previously sold a business
at 12 times EBITDA.
When Branagh learned the seller was interested in selling Mustang
Survival, he saw it as an opportunity to service more fully Wing Inflatables’
customer base. Eventually, a deal was struck, with one of the seller’s
requirements being that Wing purchase buyer-side representations and
warranties insurance. Branagh and French were unfamiliar with the concept
but educated themselves. As Branagh explained it in the context of the
acquisition: “Because Mustang Survival was a smaller part of a large
company, their specific income statements were not audited. So if they’re not
audited income statements, then I need the company, the seller, to warrant
that the income statements are true and accurate according to accounting
standards—or true and accurate, actually. And we—what I learned was a
way to ensure that they were true and accurate and the [sic]—and stand

26
behind the rep and warranty of those was via the insurance policy.”
Underwriters offered two possible coverage options for Wing, and the
company went for the higher level of coverage ($5.4 million) because, as
Branagh put it, “this was a big stretch for our company. We were being
aspirational, and I wanted to make sure that we had all the components
necessary to be successful.” Wing would not have been able to do the deal
without this form of protection.
Later, when Wing Inflatables found inaccuracies in the Mustang
Survival financial statements and needed to file a claim under the policy,
Wing hired Kevin Bandoian, a corporate due diligence expert, to help it
assemble and submit the claim, as well as answer any questions. As of the
time of trial, Wing had not been reimbursed for the approximately $280,000
in costs and expenses largely related to hiring Bandoian, which it had
submitted to Underwriters for payment “[w]ithin 30 days” under the policy.
Prior to trial, in July 2023, Underwriters suggested Wing trade payment for
its expenses in return for Underwriters not using a claw back provision under
the policy to recover some of the money already paid to Wing.11
Branagh further testified that, although the policy stated Wing
Inflatables was to allow Underwriters to review and take copies of relevant
records at Underwriters’ sole cost and expense, Wing never met anyone from
Underwriters prior to trial. Instead, the insurer required Wing to bear the
burden of providing the documents. According to Branagh, it would have

11 The claw back provision was essentially a “true up” which allowed
Underwriters to be reimbursed for any amounts they paid in excess of their
obligations under the claim “after final resolution of all claims or disputes in
relation to this Policy.” As the claim was still open and disputed at the time
of trial, any use of the claw back provision would have been premature under
the terms of the policy.

27
been much better if Underwriters had come and collected the data rather
than having Wing’s team do it amid everything else going on at the company.
Branagh was dismayed that, after Wing put so much time and effort into
answering all of Underwriters’ questions in its September 2020 supplemental
claim submission, Mattessich responded almost a month later with more
questions rehashing the original claim. Nevertheless, Wing endeavored to
answer them and continued to supply information, at one point even reducing
the amount of the claim.
When Underwriters finally sent their “preliminary assessment” of the
claim in January 2021, it was still not an acceptance or denial of the claim
despite Wing Inflatable’s extensive submissions. Branagh was baffled by
their suggestion that a forward-looking EBITDA should be used. He noted
the application of the $270,000 deductible to the suggested payment amount
was incorrect.
Branagh was extremely frustrated and felt Wing Inflatables would
never be able to satisfy Underwriters. He felt small and powerless against
the large insurer with whom the company had never had any direct contact.
Instead, only a faceless attorney ever responded, repeatedly with more
questions. So, Wing filed suit.
Mark French
Mark French is the CFO of Wing Inflatables. He had previous
experience while working for an investment bank with representations and
warranties as well as EBITDA. He explained that, when CFC made its
initial proposal to provide Wing with representations and warranties
insurance for the Mustang Survival acquisition, it was nonbinding because
CFC had to do its own due diligence with respect to Mustang before it would
commit to coverage. Both in the proposal and later during CFC’s due

28
diligence process, CFC gave Wing an “extensive list of things that they were
going to take a look at, and did.” In addition, CFC had “broad access to the
data room,” and there were at least seven or eight people from CFC, or people
working with CFC on the underwriting process, conducting due diligence.
They also had access to the individuals who had prepared relevant due
diligence reports for the acquisition. It was French’s understanding that CFC
had available to it information on the purchase price, the EBITDA, and the
9.85 EBITDA multiple.
Once the policy was issued, it clearly provided that the deductible
would be eroded for every dollar that Wing Inflatables recovered from the
seller for covered losses. Separate from the working capital adjustment,
Wing also received money from the seller for certain financial statement
errors that had not been set forth on the Mustang Survival balance sheets in
accordance with generally accepted accounting principles (GAAP). Wing
learned it had overpaid for Mustang because it had an earnings shortfall and
was suffering unanticipated losses. Although the seller had paid Wing for
certain financial statement errors, “they were explicitly not interested in
talking about any of the income statement or earnings effects of the things
that they admitted were wrong with financial statements.” The seller,
instead, referred Wing to the insurance policy. So, Wing hired Kevin
Bandoian to help them file a claim.
When Mattessich responded to Wing Inflatables’ claim in June 2020, it
was a “much more onerous” inquiry than French expected. In his opinion,
most of the questions did not directly address the claimed breaches and a
“fair bit of what was asked for” were items that Underwriters already
possessed through their due diligence process and access to the data room.
French felt like Underwriters “were flipping the burden on us to somehow

29
prove what our claim was, versus processing it.” Even though he did not feel
it was required of Wing, French felt the best way to get the claim paid was to
respond in detail to all the questions asked by Mattessich. After Wing did so,
French expected the claim to be paid, but it was not. When Mattessich
responded with more questions, French found them to be largely duplicative.
During the claims process, the amount of the claim changed several
times. French explained: “We have strived all the way through this to get to
the most accurate number possible for each of these claims, and I think we’ve
done that.” Throughout that timeframe, French never spoke to anyone from
CFC or Underwriters. Wing ultimately filed suit because it was at “an
impasse. We believed truly that our claim should’ve been paid, and we had
received not a dollar.”
French described the impact of Underwriters’ delay in paying Wing
Inflatables’ claim as follows: “Early on, again, in the early days following our
claim, we suffered from the income that we expected we had bought. We had
difficulties with our bank because we had promised them a certain amount of
earnings that were going to come from Mustang, that weren’t there. We had
to raise capital. There are lots of things that we would have done with the
earnings that would have been generated by Mustang that we would have
used to do other things to grow our business, to add employees. There are
times where we’ve been terribly crunched for cash because we didn’t get what
we paid for here. So we’ve had difficulty.” And “the amount of time involved
in all of that has just been unquantifiable. It’s been lots and lots and lots of
hours over many, many years.” French believed Underwriters did not treat
Wing fairly, put their interests before Wing’s, and looked for ways not to pay
the claim.

30
 Expert Testimony
Kevin Bandoian
Kevin Bandoian was hired by Wing Inflatables to assist it with filing a
claim under the representations and warranties insurance policy. He spent
his career as an accountant, later moving to specialty consulting in the areas
of bankruptcy, financial due diligence, mergers and acquisitions, fraud
investigations, and insurance claims work. He had worked on approximately
a dozen claims involving representations and warranties insurance.
Bandoian was qualified as an expert in accounting with respect to the
accounting issues relating to representations and warranties insurance
policies.
After he was hired by Wing Inflatables, he helped respond to the initial
round of questions sent by Mattessich in response to Wing’s claim. In
Bandoian’s opinion, the requests were excessive and many were irrelevant
and unnecessary. Nevertheless, he advised Wing to respond as fully as
possible, thinking that would be the more productive approach. Wing’s
response to this initial request was “a very thorough, comprehensive, point-
by-point response.” In Bandoian’s opinion, Underwriters “absolutely” should
have understood that these were breaches that were covered under the policy.
He described it as “Accounting 101.” Yet Underwriters did not take a
coverage position. The second round of requests from Mattessich asked for
more information, some of which was duplicative. In Bandoian’s opinion,
Wing’s responding submission was “very responsive and it provided
everything they needed to evaluate or get their questions answered.” But
Underwriters still failed to take a coverage position.
Bandoian further opined that 9.85 was the right EBITDA multiple,
“because that was the actual multiple in the transaction.” He never

31
understood the problem Mattessich and Crawford had with the 9.85 multiple,
and in “the e-mails behind the scenes” which Bandoian reviewed, “they were
saying it was the right multiple.” In his work as an accountant on
representations and warranties claims, Bandoian had never heard of an
insurance company making a “preliminary assessment” of a claim, as opposed
to making a coverage determination. Underwriters’ January 2021 letter to
that effect was surprising to him. Underwriters should have reduced the
deductible based on payments made by the seller to Wing Inflatables, but
they did not do so.
Bandoian offered several formal opinions in connection with Wing
Inflatables’ claim, including: (1) all eight of Wing’s claims are breaches of the
representations and warranties set forth in the share purchase agreement;
(2) all eight claims are breaches because they were violations of GAAP;
(3) this was a simple claim; (4) Wing was fully responsive to all questions;
(5) the nature of Wing’s claims did not change over time; (6) many of the
requests from Underwriters “were excessive, they were duplicative, they were
unnecessary, they were irrelevant, and they weren’t really needed to evaluate
whether there was a breach or not”; and (7) Wing was entitled to be
compensated under the policy for its out-of-pocket professional fees.
On cross-examination, Bandoian stated he surmised Mattessich and
Crawford got the accounting wrong because “they approached this as a
litigation. They approached it as an adversarial proceeding, which is not the
way these claims are supposed to work. And so they were trying to keep the
insurance company from paying anything.”
Michael Mitrovic
Michael Mitrovic spent his professional career in the insurance
industry, including an approximately 25-year stint at American International

32
Group (AIG), where he became one of 20 “star” partners. While at AIG,
Mitrovic became involved in the creation of a new transactional liability
product line in the 1990s, which included representations and warranties
insurance. Initially, representations and warranties insurance covered only
balance sheet and income statement claims. By approximately 2010, more
companies entered this sector of the market, and some companies sold
expanded representations and warranties insurance which also covered
purchase price adjustment claims. Mitrovic opined that the policy purchased
by Wing Inflatables is “a broad liberalized policy that covers EBITDA
purchase price adjustments.”
Over the previous five years, Mitrovic had been working as a litigation
consultant, handling 15 matters. This is the only time he testified on behalf
of an insured instead of an insurer. He did so, because “it was such an
egregious example” of mishandling a claim. In preparation for his testimony
in this case, Mitrovic reviewed the claims handling documentation, various
depositions, the stock purchase agreement, and claims manuals involving
minimum standards that had been provided by the defendants. Mitrovic
stated that, during his 48 years in the industry, he had authored, reviewed,
and executed on the type of minimum standards documentation provided.
Without objection, Mitrovic was designated as an expert in underwriting,
claims handling, representations and warranties insurance policies, and
insurance practices.
Discussing relevant portions of the minimum standards documentation
provided by Lloyd’s, Markel, and Channel, Mitrovic opined that they were
generally good claims handling standards if they were followed. He opined
that, contrary to stated standards, the claims adjusters assigned to the Wing
Inflatables claim did not have sufficient skill sets with respect to

33
representations and warranties insurance and were not qualified to adjust
the claim. He further objected to their abdication of their duties to
Mattessich and Crawford, stating: “You can’t hire a third party as an
underwriter, okay, without the third party understanding what their role is,
what the requirements are, and not going off the rails and doing something
and thinking that they’re the ones adjusting the claim. They are not the ones
adjusting the claim. [¶] The people adjusting the claim are the underwriter
and a mat [sic] claim manager of the underwriter, and they have to exercise
the right oversight and management over that third-party provider. [¶]
Okay? [¶] That’s the way it’s supposed to work. [¶] That’s not the way it
worked here.” Rather, “[i]n every instance, [Underwriters] failed to comply
with the standards of their individual syndicate [and] of the Lloyd’s market.”
Mitrovic rendered several other opinions during his testimony. He
stated, for instance, that he did not believe “that the burden is on the insuree
to provide proof. I believe the burden is on the part of the insurer to refute
the claim and provide an explanation as to why the claim is being refused in
response to the claim submission that contained detailed information, if not
full documentation.” Mitrovic also opined that the May 2020 claim submitted
by Wing Inflatables was “reasonable and appropriate” and should have
resulted in Underwriters taking a coverage position and/or paying the claim.
He would have acknowledged coverage and paid the full $2.2 million claim at
that point. He found the fact that the claim was still open after four years
“[t]horoughly and totally unreasonable, unconscionable, and unacceptable.”
Indeed, “[t]here is absolutely nothing in the policy or in custom and practice
in the industry that would suggest that the insurer should terminate all
efforts to bring the claim to a conclusion if litigation has been advanced by
the insured.” He opined that Underwriters were supposed to accept or deny

34
coverage or explain why they couldn’t provide a coverage opinion within 30
days.
Finally, Mitrovic testified there are certain red flags adjusters look for
in attempting to determine whether a claim is overstated. He saw no such
red flags in Wing Inflatables’ case. Rather, he “concluded these guys are
choir boys. I mean, what they’re doing is they’re going the other direction.
They’re revising the claim downward.” He found it “shocking.” And he
characterized Bandoian’s work supporting the claim in Wing’s September
2020 submission as “exhaustive.” In his mind, Underwriters “had more than
enough information to make a coverage decision and also a payment
decision.”
Underwriters’ Claims Handling Witnesses
Rodney Crawford
Rodney Crawford is a financial consultant who worked with Mattessich
on Underwriters’ responses to Wing Inflatables’ claim. He testified on cross-
examination that, when he provided his initial suggested requests for
information to Mattessich, he expected the law firm “to use its judgment to
pass on those questions to the insurance company.” But the questions were
incorporated without change. He also acknowledged the EBITDA multiplier
is a mathematical calculation where the purchase price of the company is
simply divided by the multiplier. The calculation was in one of the due
diligence reports, but Crawford still initially questioned it. By February
2021, however, he sent an e-mail to Mattessich stating there was “a
significant risk that 9.85 would prevail.”
In June 2020, Crawford had e-mailed Mattessich, stating that the
issues in the claim were “ ‘pretty simple in terms of facts.’ ” After Crawford
provided his initial questions to Mattessich, he only billed .8 hours between

35
the end of June 2020 and the September 2020 response from Wing
Inflatables. He never talked to Safariland or met with Wing or Underwriters
to help with the processing of the claim as Mattessich’s firm was his client.
Crawford agreed that Wing Inflatables’ September 2020 claim
submission provided “a lot of detail.” He “may have” concluded at that point
that he did not have any issue with Wing’s e-commerce claim (category 1).
The employee bonus claim also appeared legitimate at that time (category 2).
Crawford agreed that fixed assets would show as a net book value on
financial statements and, if they had been disposed of, there should have
been an entry to take them off the books. Crawford did not recall an actual
knowledge defense being asserted by Underwriters with respect to the IT
expense claim (category 5) through March 2021. He acknowledged receiving
an e-mail from Mattessich in December 2020 with respect to the IT claim in
which Mattessich stated: “ ‘I’m thinking that we don’t accept or deny at the
moment . . . and say, based on the current information, we cannot make a
determination.’ ” Crawford responded: “ ‘The issue I see with that is that we
really know everything there is to know other than cross-examining the
knowledge witnesses.’ [¶] . . . [¶] . . . ‘So I’m not sure there is a good basis to
defer an answer.’ ”
Hannah Maher
Originally from Australia (where she trained as a solicitor and was
employed as an insurance litigator for approximately four years), Hannah
Maher moved to London and began working for CFC in October 2016 in
various capacities related to claims handling. She started handling
representations and warranties claims sometime in 2017. By May 2020,
when Wing Inflatables made their claim, she had handled between 30 and 40

36
such claims. On approximately 30 percent of those claims, a financial
consultant was retained.
When she received Wing Inflatable’s claim, she reviewed the policy, the
sale purchase agreement, and the underwriting file. She also spoke to the
internal underwriting team that had originally underwritten the policy. It
was her job to work with the representatives of the two lead syndicates and
with CFC’s counsel and forensic expert to handle the claim.
Maher testified that a reserve is money put aside for payment of a
claim—“we would try to ascertain what we think a claim might be valued at
and then reserve that money.” In Wing Inflatables’ case, it was the
responsibility of the lead syndicates to set the reserve. She would then raise
the reserve on CFC’s system. A reserve of $275,000 was set for Wing’s claim
in December 2020.
After Mattessich and Crawford were retained, Maher reviewed their
suggested responses to Wing Inflatables’ first two submissions and made no
changes. After the second submission, it was decided that the best course of
action was to schedule a “call with the experts so that they could discuss with
each other and ask any questions that they might have had to assist
Mr. Crawford frame his opinion.” The agenda for the call was prepared by
Mattessich and Crawford.
Maher was designated as CFC’s person most knowledgeable on
numerous topics when she was deposed in connection with this case. CFC
had an automated system on which Maher kept her claims notes. When
Maher was shown the produced claim file at deposition, she testified her
claims notes were not included because they were stored on an automated
system. At trial, Wing Inflatable’s attorney showed her five pages of notes
from the system that had been produced during discovery, and Maher

37
testified she had no “reason to believe” they were not her notes. Although
“best practice” would be to notate every call on the system, she “clearly” did
not memorialize all the calls with Mattessich and Crawford she testified
occurred on direct examination. As a claims manager, Maher agreed she was
bound to ensure that third parties, such as retained experts, paid due regard
to the best interests of customers and always treated them fairly. She
believed Underwriters was committed to protecting Wing’s best interests
throughout the claims management process.
Thomas Fassnidge
Thomas Fassnidge, the Markel claims manager initially assigned to
Wing Inflatables’ claim, was presented to the jury via recorded deposition.
He handed over the file in December 2023 to Tony Halling. He did not recall
doing any work on the claim, which was still open, in 2023. He recalled
nothing other than being deposed from 2022. Fassnidge identified the
relevant Markel claims handling manual and stated he never sought help
from the Markel claims team identified as experts in U.S. claims.
The Markel claims’ philosophy was to make decisions promptly and
communicate them quickly and clearly. In addition, “Markel believes that
claims adjusters should look for ways to pay claims.” Fassnidge recalled
setting a reserve for the Wing Inflatables’ claim, but he did not remember
when or for how much. He failed to “specifically” recall most of the questions
asked of him. He did not recall preparing his own individual coverage
assessment of the Wing claim, said it was likely and he would have written
notes in the file, but explained he did not see those notes in his “brief
perusal” of the file.

38
 Tony Halling
Tony Halling, who replaced Fassnidge and was also presented to the
jury through deposition, was entirely unfamiliar with Wing Inflatables’
claim, even though he assumed responsibility for the claim while it was open
and supposedly still being adjusted. He could not recall ever talking to
Fassnidge about the substance of Wing’s claim. In fact, since he took the
claim over in December 2023, he could not recall talking to anyone at Markel
about it.
Ted Langer
Ted Langer, a lead claims adjuster for lead syndicate Channel 2015 and
another deposition witness, could not provide basic information about work
done on Wing Inflatables’ claim or why work was or was not done on the
claim. When presented with Underwriters’ March 2021 letter—which stated
Underwriters had previously acknowledged (in January 2021) that identified
credit card fees and other transactional expenses associated with Mustang
Survival’s e-commerce sales were not expensed in the financial statements
covered by the Section 3.4(b) representation—and asked why that portion of
Wing’s losses had not been paid, Langer responded: “Good question. . . . I
don’t know.”12

12 Later, in considering Wing Inflatables’ costs motion, the trial court
reflected as follows with respect to Underwriters’ representatives: “It is
somewhat painful to even hear a debate about depositions. The performance
of [Underwriters’] representatives at these depositions was the poorest I have
ever seen in any case. I mean, the fact that [Wing’s] Counsel decided—if they
did. I guess, there’s a dispute about that—but, you know, to the extent that
it was not worthwhile to keep having a deposition with people that absolutely
did not remember or did not know anything in the case was painful to watch.”

39
 Legal Framework
The Delaware Supreme Court has summarized the framework for
awarding punitive damages in an insurance bad faith action as follows: “The
processing of a claim by an insurer encompasses the making of judgment on
at least two levels: (a) determining whether the claim is within the policy’s
coverage; and (b) where damages are not liquidated, determining the amount
of compensation. Mere delay is not evidence of bad faith, provided that a
reasonable justification exists for refusing to make payment upon submission
of proof of loss. Delays attributed to a ‘get tough’ policy, i.e., a general
business practice of claims denial without a reasonable basis, may subject the
insurer to a bad faith claim. Additionally, if the denial or delay is wilful [sic]
or malicious, it may provide the basis for punitive damages. In the latter
event, there must be an element of malice with a ‘reckless indifference’ to the
plight of the insured.” (Tackett v. State Farm Fire & Casualty Insurance Co.
(Del. 1995) 653 A.2d 254, 265–266 (Tackett).)
The Tackett court elaborated: “Where an insurer fails to investigate or
process a claim or delays payment in bad faith, it is in breach of the implied
obligations of good faith and fair dealing underlying all contractual
obligations. [Citation.] A lack of good faith, or the presence of bad faith, is
actionable where the insured can show that the insurer’s denial of benefits
was ‘clearly without any reasonable justification.’ ” (Tackett, supra, 653 A.2d
at p. 264.) The court concluded, however, that the insurer’s conduct in the
case before it did not rise to the heightened standard required for punitive
damages, stating: “While a delay of seven months in paying policy limits in
the face of full documentation and recommendations of the claim agent and
outside counsel may well constitute bad faith, we agree with the Superior
Court that the Tacketts were not singled out for malicious treatment.” (Id. at

40
p. 266; see ACE American Ins. Co. v. Guaranteed Rate, Inc. (Del. 2023)
305 A.3d 339, 350 [punitive damages not available where ACE denied
coverage based on colorable argument that the language of an exclusion
applied; its position did not clearly lack reasonable justification even though
wrong]; Enrique v. State Farm Mutual Automobile Insurance Co. (Del. 2016)
142 A.3d 506, 513–514 [pre-and post-litigation conduct did not support bad
faith on summary judgment where there were significant issues as to
causation with respect to the injury involved, various experienced claims
handlers and a personal injury lawyer all valued the claim at different
amounts below the policy limit; and the insurer advanced some funds and
continued attempting to settle during the litigation].)
In sum, “the taking of an unreasonable or unjustified stance by an
insurer, standing alone, will not justify the imposition of punitive damages.
[Citation.] However, when the bad faith actions of an insurer are taken with
a reckless indifference or malice toward the plight of the injured employee,
punitive damages are justified.” (Pierce v. International Insurance Company
of Illinois (Del. 1996) 671 A.2d 1361, 1367, citing Tackett, supra, 653 A.2d at
p. 266.) Pierce noted the question on summary judgment (as it is here after
jury trial) is “whether the evidence viewed in a light most favorable to Pierce
shows that the delay in making payments was clearly without any reasonable
justification.” (Pierce, at p. 1368, italics added; see id. at p. 1366 [the duty of
good faith and fair dealing “would create liability on the part of [insurer] for
unreasonable delay in recognizing Pierce’s rightful claim”].)
We review a punitive damages liability finding for substantial evidence.
(Mazik v. Geico General Ins. Co. (2019) 35 Cal.App.5th 455, 462.) “In
applying that standard, we ‘ “view the evidence in the light most favorable to
the prevailing party, giving it the benefit of every reasonable inference and

41
resolving all conflicts in its favor.” ’ ” (Ibid.) We must “presume every fact
the trier of fact could reasonably deduce from the evidence[] and defer to the
trier of fact’s determination of the weight and credibility of the evidence.”
(Rufo v. Simpson (2001) 86 Cal.App.4th 573, 614.) “ ‘[T]he testimony of a
single witness, including the testimony of an expert, may be sufficient to
constitute substantial evidence. . . .’ ” (People v. Wright (2016) 4 Cal.App.5th
537, 545.)
Sufficient Evidence Supports Punitive Damages Liability
Underwriters maintain there was no substantial evidence of bad faith
conduct sufficiently egregious to support punitive damages. At most, they
claim, the record shows “inadvertence on Underwriters’ part, not ‘particularly
egregious’ bad faith.” The jury, however, saw things differently, and there is
sufficient evidence to support its view of the case.
Contrary to Underwriters’ argument, that the jury rejected two
categories of Wing Inflatables’ claimed losses does not indicate their conduct
did not otherwise cross the line from bad faith to egregious bad faith. If
anything, it shows the jury paid close attention to the claims and was careful
in its deliberations.
Moreover, with respect to the category 1 loss related to e-commerce fees
that had been improperly accounted for, Wing acknowledged it had been paid
in full and asked the jury in argument only for any additional loss it thought
was reasonably due to the delay in payment. The judge then sustained an
objection to this argument on the ground it exceeded what was properly
recoverable as contract damages. In short, the jury was essentially told
nothing could be awarded for the category 1 loss. As to the category 5 loss
related to ongoing IT fees, evidence was presented that Wing knew about the

42
recurring IT cost before the acquisition closed and actual knowledge was a
clear exception under the policy.
As to the category 6 loss for failure of the financial statements to
properly account for aging and obsolete inventory, Wing asked the jury to
award $2,150,000 and the jury awarded $1,152,450. Underwriters had
argued the EBITDA multiplier should not cover this category, the obsolete
inventory could be sold for some reduced value, and there was a $1,000,000
reserve in the financial statements to take account of aging inventory. As
Underwriters acknowledge, the jury appears to have considered the million-
dollar reserve but rejected their other arguments as to the EBITDA and
reduced value.
None of this detracts from the fact there is ample evidence in the record
from which the jury could reasonably find Underwriters’ delays in processing
and payment were attributable “to a ‘get tough’ policy, i.e., a general business
practice of claims denial without a reasonable basis” and were taken with at
least “ ‘reckless indifference’ ” to Wing Inflatable’s plight. (Tackett, supra,
653 A.2d at p. 266.)
For instance, as we have recounted, Underwriters spent approximately
eight months taking issue with the 9.85 EBITDA multiplier, finally
conceding, after Wing filed suit, it was appropriate. As Underwriters’ counsel
put it during his closing argument: “The calculation of the EBITDA
multiplier, that was at issue at some point. Later it didn’t become an issue.”
But at that point, Underwriters changed tack, and instead of disputing the
multiplier number, claimed the multiplier simply did not apply to four loss

43
categories because the claims were not based on recurring charges.13 The
jury found otherwise, applying the multiplier to each challenged category.
Given the evidence regarding how the EBITDA was determined, its
application to this matter, and Underwriters’ actions with respect thereto,
the jury could reasonably have concluded Underwriters had no reasonable
basis for disputing the EBITDA multiplier and that they did so in bad faith to
obfuscate a key issue that corresponded to significant amounts of Wing’s
claim.
Another example is Underwriters’ failure to reimburse Wing
Inflatables for its expenses related to the claim within 30 days of receipt, as
the policy clearly required Underwriters to do. Branagh testified that as of
the time of trial, Wing still had not been reimbursed for the approximately
$280,000 in expenses it claimed under the policy. Moreover, Underwriters
suggested several years after Wing submitted its claim that the company
“trade” payment of its expenses in exchange for Underwriters not using the
claw back provision in the policy to get back some of the money it had paid
Wing shortly after it filed suit. But as we have explained, the claw back
provision would only have come into play after the full amounts due under
the policy were determined and the claim was closed. Given that the claim
remained open throughout the trial, the jury could reasonably have concluded
Underwriters acted with at least reckless indifference to Wing’s losses.
The jury also could reasonably have concluded Underwriters acted with
reckless indifference by essentially abdicating their claims handling
responsibilities to Mattessich and Crawford. Indeed, the testimony of

13 Wing agreed not to apply the multiplier to its fixed assets claim
(category 7). Underwriters argued it should also not apply to categories 3, 4,
6, and 8.

44
Underwriters’ claims handling team was so poor, the trial court remarked
upon it later when awarding costs and expenses. Moreover, the lawyer,
Mattessich, appeared to be in control and acting in an adversarial fashion
throughout the process. The jury could have reasonably concluded he was
attempting to get Wing to give up and accept a paltry payment by repeatedly
asking for more information which Wing’s experts characterized as repetitive
and unnecessary, taking untenable positions to avoid payment, and placing
the burden on Wing to prove its claim rather than on Underwriters to refute
it.
As Wing Inflatables’ expert opined: “[T]he burden is on the part of the
insurer to refute the claim and provide an explanation as to why the claim is
being refused in response to the claim submission that contained detailed
information, if not full documentation.” Here, Wing spent hundreds of hours
and thousands of dollars providing answers to questions and supporting
documentation that Underwriters could have, and should have, retrieved at
their expense through their own underwriting file and team, the data room,
Wing, and the prior owner. Instead, after drafting the initial questions sent
to Wing in May 2020, Crawford simply sat back and waited for Wing to
respond, spending just .8 hours during the next three months. It appears
there was no attempt to further investigate or process the claim other than to
put the onus on Wing. And, under Mattessich’s oversight, no portion of the
claim was accepted or denied for years, even though some of the categories
Underwriters ultimately paid (after suit was filed) never materially changed
and Mattessich’s own expert told him (at least as to one issue) they really had
all the information they needed.
In sum, collectively, Underwriters’ claims handling could reasonably be
characterized as outrageously incompetent and oppressively unfair to the

45
insured, providing a sufficient basis for an award of punitive damages. (See
Tackett, supra, 653 A.2d at p. 266.)
The Punitive Damages Award Is Excessive
“In a series of decisions culminating in State Farm [Mut. Automobile
Ins. Co. v. Campbell (2002)] 538 U.S. 408 [(State Farm)], the United States
Supreme Court . . . determined that the due process clause of the Fourteenth
Amendment to the United States Constitution places limits on state courts’
awards of punitive damages, limits appellate courts are required to enforce in
their review of jury awards.” (Simon v. San Paolo U.S. Holding Co., Inc.
(2005) 35 Cal.4th 1159, 1171 (Simon).) “Eschewing both rigid numerical
limits and a subjective inquiry into the jury’s motives, the high court
eventually expounded in [BMW of North American, Inc. v. Gore (1996)
517 U.S. 559 (Gore)] and State Farm a three-factor weighing analysis looking
to the nature and effects of the defendant’s tortious conduct and the state’s
treatment of comparable conduct in other contexts.” (Id. at pp. 1171–1172.)
“As articulated in State Farm, the constitutional ‘guideposts’ for
reviewing courts are: ‘(1) the degree of reprehensibility of the defendant’s
misconduct; (2) the disparity between the actual or potential harm suffered
by the plaintiff and the punitive damages award; and (3) the difference
between the punitive damages awarded by the jury and the civil penalties
authorized or imposed in comparable cases.’ (State Farm, supra, 538 U.S. at
p. 418; see [Gore], supra, 517 U.S. at p. 575.)” (Simon, supra, 35 Cal.4th at
p. 1172.) We assess the constitutionality of a punitive damages award de
novo. (Ibid.)
Reprehensibility
“Of the three guideposts that the high court outlined in State Farm,
supra, 538 U.S. at page 418 . . . , the most important is the degree of

46
reprehensibility of the defendant’s conduct. On this question, the high court
instructed courts to consider whether ‘[1] the harm caused was physical as
opposed to economic; [2] the tortious conduct evinced an indifference to or a
reckless disregard of the health or safety of others; [3] the target of the
conduct had financial vulnerability; [4] the conduct involved repeated actions
or was an isolated incident; and [5] the harm was the result of intentional
malice, trickery, or deceit, or mere accident.’ (Id. at p. 419.)” (Roby v.
McKesson Corp. (2009) 47 Cal.4th 686, 713 (Roby).)
“The existence of any one of these factors weighing in favor of a
plaintiff may not be sufficient to sustain a punitive damages award; and the
absence of all of them renders any award suspect. It should be presumed a
plaintiff has been made whole for [its] injuries by compensatory damages, so
punitive damages should only be awarded if the defendant’s culpability, after
having paid compensatory damages, is so reprehensible as to warrant the
imposition of further sanctions to achieve punishment or deterrence.” (State
Farm, supra, 538 U.S. at p. 419.)
Because Underwriters’ tortious conduct “caused only economic harm
and did not show disregard of others’ health or safety,” the first two
subfactors “are clearly inapplicable.” (Simon, supra, 35 Cal.4th at p. 1180.)
With respect to financial vulnerability, the facts are mixed. On one
hand, Wing Inflatables is a multinational company with annual revenue in
the tens of millions of dollars, the underlying purchase was an arms-length
transaction in which Wing was represented by counsel, and during the claims
process Wing was also represented by counsel. On the other hand, Wing’s
CEO testified the acquisition was a “big stretch for our company.We were
being aspirational, and I wanted to make sure that we had all the

47
components necessary to be successful.” Thus, while this subfactor is not
particularly significant, it exists to some degree.
As for repeated bad acts, we observe this insurance bad faith case, as
do most, involved repeated acts that could reasonably be found to exhibit at
least reckless indifference to the insured. However, there is no evidence in
the record of bad faith conduct by Underwriters towards other insureds
making claims under representations and warranties policies (or any other
insureds). In fact, Wing’s counsel conceded during argument on
Underwriters’ posttrial motions that no evidence of misconduct as to other
insureds had been presented.
State Farm, involved a bad faith claim based on the insurer’s refusal to
accept multiple settlement offers below its insureds’ policy limits, its
insistence on denying its insured’s liability for the underlying vehicle
accident (despite all the evidence otherwise and contrary to the advice of its
own investigator), its assurance to the insureds their assets were “ ‘safe’ ”
(when that was far from the case), and its refusal to post an appeal bond after
an excess judgment was entered against its insureds. At that point, the
insureds retained their own attorney who eventually reached an agreement
wherein the injured parties would not execute on the judgment against the
insureds in exchange for the pursuit of a bad faith case against State Farm.
(State Farm, supra, 538 U.S. at pp. 413–414.) In discussing the “repeated
conduct” subfactor, the high court pointed out that the insureds identified
“scant evidence of repeated misconduct of the sort that injured them,”
suggesting this factor generally is focused on like mistreatment of other
insureds in like contexts. (Id. at p. 423; see Simon, supra, 35 Cal.4th at p.
1180 [although defendant’s conduct over course of several weeks could be
characterized “as more than a single isolated incident,” no evidence existed

48
that defendant “acted similarly toward other potential buyers”]; cf. Pulte
Home Corp. v. American Safety Indemnity Co. (2017) 14 Cal.App.5th 1086,
1125–1126, 1133 [evidence established the insurer engaged in the same kind
of bad faith conduct visited upon its contractor insured in handling the
defense and indemnity claims of other contractors in construction defect
cases; punitive damages in “roughly” a one-to-one ratio with economic
damages were not constitutionally excessive].)
It is true our courts have sometimes treated an insurer’s repeated bad
faith acts against one insured over a long period of time as enhancing the
reprehensibility of the insurer’s conduct. (See, e.g., Mazik v. Geico General
Ins. Co. (2019) 35 Cal.App.5th 455, 458, 472 [course of conduct over seven
years caused serious mental suffering; jury awarded slightly over $13,500 in
economic losses and $300,000 in noneconomic damages; trial court reduced
$4 million punitive damages award to $1 million (approximately three times
the amount of the compensatory damages); Court of Appeal affirmed reduced
amount as “within the constitutionally permitted range in view of the degree
of reprehensibility” of insurer’s conduct]; Century Surety Co. v. Polisso (2006)
139 Cal.App.4th 922, 965–966 [course of conduct over five years caused
severe economic and emotional harm that eventually resulted in serious
physical symptoms; jury awarded over $300,000 in economic damages,
$300,000 in noneconomic damages, and $2.015 million in punitive damages;
ratio of 3.2 to 1 was “well within the constitutional limit”].)
The facts here, however, are not as egregious as in those cases. Thus,
on balance, we conclude the recidivism subfactor does not tip heavily towards
either a low or high degree of reprehensibility.
Turning to the last subfactor—whether the harm “was the result of
intentional malice, trickery, or deceit, or mere accident”—insurance bad faith

49
cases cannot be characterized as involving mere accidental conduct. (See
Roby, supra, 47 Cal.4th at p. 716 [in finding employer liable in discrimination
lawsuit, jury necessarily found it acted “ ‘with conscious disregard’ of the
rights of others” and therefore the “conduct at issue was certainly not ‘mere
accident’ ”].) And here the jury was instructed, in accordance with Delaware
law, that to find Underwriters liable for punitive damages, it had to find that
they “engaged in outrageous conduct that was either intentional in nature or
with reckless disregard in investigation and handling of” Wing’s claim. (See
Tackett, supra, 653 A.2d at p. 266.) While there is, as we have discussed,
ample evidence Underwriters acted with at least “reckless disregard” of Wing
Inflatables’ plight, subjecting them to liability for punitive damages, this is
not a case where the defendant’s conduct was such a quantum beyond
“reckless disregard” as to amount to “intentional malice, trickery, or deceit.”
(See Roby, supra, 47 Cal.4th at p. 717; Simon, supra, 35 Cal.4th at p. 1181.)
In sum, while Underwriters certainly acted wrongfully towards Wing
Inflatables and in a manner warranting punitive damages, after taking into
account all five of the reprehensibility subfactors the high court has
explicated in Gore and State Farm, we conclude the reprehensibility of their
conduct was in the mid-range of wrongdoing that can support an award of
punitive damages. (See Roby, supra, 47 Cal.4th at p. 717.)
Ratio Analysis
Turning to the second guidepost, State Farm reiterated that the high
court has been “reluctant to identify concrete constitutional limits on the
ratio between harm, or potential harm, to the plaintiff and the punitive
damages award. [Citations.] . . . Our jurisprudence and the principles it has
now established demonstrate, however, that, in practice, few awards
exceeding a single-digit ratio between punitive and compensatory damages,

50
to a significant degree, will satisfy due process. In Haslip, in upholding a
punitive damages award, we concluded that an award of more than four
times the amount of compensatory damages might be close to the line of
constitutional impropriety. [Haslip, supra,] 499 U.S.[ at pages] 23–24. We
cited that 4-to-1 ratio again in Gore[, supra,] 517 U.S.[ at page] 581. The
Court further referenced a long legislative history, dating back over 700 years
and going forward to today, providing for sanctions of double, treble, or
quadruple damages to deter and punish. [Citation.] While these ratios are
not binding, they are instructive. They demonstrate what should be obvious:
Single-digit multipliers are more likely to comport with due process, while
still achieving the State’s goals of deterrence and retribution, than awards
with ratios in range of 500 to 1, [citation], or, in this case, of 145 to 1.” (State
Farm, supra, 538 U.S. at pp. 424–425.)
“Nonetheless, because there are no rigid benchmarks that a punitive
damages award may not surpass, ratios greater than those we have
previously upheld may comport with due process where ‘a particularly
egregious act has resulted in only a small amount of economic damages.’
[Citations.] The converse is also true, however. When compensatory
damages are substantial, then a lesser ratio, perhaps only equal to
compensatory damages, can reach the outermost limit of the due process
guarantee. The precise award in any case, of course, must be based upon the
facts and circumstances of the defendant’s conduct and the harm to the
plaintiff.” (State Farm, supra, 538 U.S. at p. 425.)
Here, the ratio between the punitive damages award ($15 million) and
the compensatory damages awarded ($3.1 million) is 4.8:1—over the
quadruple damages that “might be close to the line of constitutional
impropriety” (State Farm, supra, 538 U.S. at p. 425), particularly in a case

51
where only compensatory damages were sought and the amount of
compensatory damages awarded is substantial.14
Wings maintains, however, that the $3.1 million compensatory award is
not the appropriate comparator figure. It asserts that figure should be $5.4
million, the policy limits, because that was “the harm likely to result from”
Underwriters’ bad faith handling of its claim, quoting from Gore, supra,
517 U.S. at page 581.
In Gore, the high court held a $2 million punitive damages award in a
case where the jury awarded $4,000 in actual damages was excessive. (Gore,
supra, 517 U.S. at pp. 565, 580.) In addressing the ratio of the awards (the
punitive damages award was 500 times the compensatory award), the court
observed that the principle that “exemplary damages must bear a ‘reasonable
relationship’ to compensatory damages has a long pedigree.” (Id. at pp. 580,
582.) And in considering whether a ratio is constitutionally acceptable, the
court stated, “the proper inquiry is ‘ “whether there is a reasonable
relationship between the punitive damages award and the harm likely to
result from the defendant’s conduct as well as the harm that actually has
occurred.” ’ ” (Id. at p. 581, quoting TXO Production Corp. v. Alliance
Resources Corp. (1993) 509 U.S. 443, 460 (TXO).) But with respect to the
case before it, Gore went on to point out there was “no suggestion that

14 We reject Underwriters’ assertion that the ratio is actually greater
than 4.8:1 because only a portion of the compensatory damages should be
counted—i.e., only those stemming from “particularly egregious” bad faith,
which Underwriters calculates could lead, variously, to ratios of 50:1, 27:1, or
8:1. Underwriters relies on a series of California cases that allow punitive
damages only for that portion of a compensatory damages award that relates
to a tort claim. However, under Delaware substantive law, which applies
here, punitive damages are available in a bad faith contract action. (See
Tackett, supra, 653 A.2d at p. 256.)

52
Dr. Gore or any other BMW purchaser was threatened with any additional
potential harm by BMW’s” policy not to disclose to consumers minor presale
repairs; rather the jury had determined Gore’s “actual harm.” (Gore, at
pp. 562–563, 582.)
In TXO, in contrast, the jury awarded $19,000 in compensatory
damages on a slander of title cross-claim filed after the cross-plaintiff
prevailed on TXO’s quiet title claim. The high court found TXO’s misconduct
particularly egregious: “In addition to the evidence that TXO knew that
Alliance had good title to the oil and gas and that TXO had acted in bad faith
when it advanced a [quiet title] claim on the basis of the worthless quitclaim
deed in an effort to renegotiate its royalty arrangement, Alliance introduced
evidence showing that TXO was a large company in its own right and a
wholly owned subsidiary of an even larger company; that the anticipated
gross revenues from oil and gas development—and therefore the amount of
royalties that TXO sought to renegotiate—were substantial; and that TXO
had engaged in similar nefarious activities in its business dealings in other
parts of the country.” (TXO, supra, 509 U.S. at pp. 450–451, fns. omitted.)
The court summed up that “[o]n this record, the jury may reasonably have
determined that [TXO] set out on a malicious and fraudulent course to win
back, either in whole or in part, the lucrative stream of royalties that it had
ceded to Alliance.” (Id. at p. 462.)
In a plurality decision, the high court upheld the $10 million punitive
damages award (526 times the compensatory damages), emphasizing there is
no hard and fast calculus to determine the bounds of due process for a
particular punitive damages award; rather, it is an assessment of
reasonableness. (TXO, supra, 509 U.S. at p. 459.) The court concluded that
while the punitive damages award was “certainly large,” in light of “the

53
amount of money potentially at stake, the bad faith of [TXO], the fact that
the scheme employed in this case was part of a larger pattern of fraud,
trickery and deceit, and [TXO’s] wealth,” the award was not so “ ‘grossly
excessive’ ” as to exceed constitutional bounds. (Id. at p. 462.)
The instant case does not share the attributes of TXO. Rather, it is a
case like Gore, where the jury determined Gore’s “actual harm.” (Gore, supra,
517 U.S. at p. 582.) Nor is this a case where “ ‘the injury [was] hard to detect
or the monetary value of noneconomic harm might have been difficult to
determine.’ ” (State Farm, supra, 538 U.S. at p. 425; see Simon, supra,
35 Cal.4th at p. 1183 [jury’s $5,000 compensatory award “accurately
measure[d] the actual harm done to Simon, and Simon failed to demonstrate
that San Paolo Holding’s fraud threatened to cause him substantial
additional harm”].) Rather, this is a case where the jury determined Wing
Inflatables’ “actual harm” and awarded “substantial” compensatory damages,
suggesting “a lesser ratio, perhaps only equal to compensatory damages, can
reach the outermost limit of the due process guarantee.” (State Farm, at
p. 425.)
In short, this is not a case where there is need to consider “potential
damages” to “ensure that the measure of punishment is both reasonable and
proportionate to the amount of harm to the plaintiff and to the general
damages recovered.” (State Farm, supra, 538 U.S. at p. 426; see Willow Inn,
Inc. v. Public Service Mutual Ins. Co. (3d Cir. 2005) 399 F.3d 224, 232–235,
238 [district court erred in using claim amount as comparator in insurance
bad faith case; “The lesson of TXO Productions is that punitive damages
amounts need not be tethered to the small actual harm frauds visited upon
their victims. . . . Here, PSM was merely unreasonable in not settling and
paying Willow Inn’s claim in a fair and timely manner” through

54
“stonewalling tactics” that “implied a concerted effort to lessen [its] expected
payment on the claim” and suggested “its actions were designed to achieve a
fiscally beneficial result for itself” and the claim was for “repairing . . .
damage,” “so TXO Production’s potential harm analysis [was] inapposite,”
and the “approximately a 1:1 ratio” was “indicative of constitutionality under
Gore and Campbell”].)
Comparable Civil Penalty
Turning to the third Gore guidepost—comparing the amount of
punitive damages awarded to the size of “ ‘civil penalties authorized or
imposed in comparable cases’ ” (State Farm, supra, 538 U.S. at p. 428)—we
reach the same conclusion as did the high court in State Farm—that the most
“relevant civil sanction” for purposes of this case is a $10,000 “fine for an act
of fraud.” (Ibid.) We further conclude, as did State Farm, that that statutory
sanction is not a helpful analogue measure in this bad faith case. (See, e.g.,
Diamond Woodworks, Inc. v. Argonaut Ins. Co. (2003) 109 Cal.App.4th 1020,
1053, fn. 33 [similar statutes were “not particularly helpful” and the other
two Gore guideposts were sufficient to assess constitutionality of punitive
damages award], overruled on other grounds in Simon, supra, 35 Cal.4th at
pp. 1182–1183.)
Underwriters’ Wealth
As we have recited, at the outset of the second phase of trial, the court
informed the jury: “The parties have stipulated that the defendant can pay
whatever amount the jury decides is proper for punitive damages. The
collective annual profits in 2023 for the [10] syndicates [i.e., Underwriters]
was 1 billion U.S. dollars.” The jury was also later instructed under
Delaware law: “[Y]ou may assess an amount of damages that will deter

55
Underwriters and others like it from similar conduct in the future. You may
consider Underwriters’ financial condition when evaluating deterrence.”
“Because a court reviewing the jury’s award for due process compliance
may consider what level of punishment is necessary to vindicate the state’s
legitimate interests in deterring conduct harmful to state residents, the
defendant’s financial condition remains a legitimate consideration in setting
punitive damages. (See State Farm, supra, 538 U.S. at p. 428 [use of wealth
as a factor not ‘ “unlawful or inappropriate” ’].)” (Simon, supra, 35 Cal.4th at
p. 1185.) However, wealth “cannot substitute for the high court’s guideposts
in limiting awards and cannot alone justify a high award.” (Id. at p. 1186.)
And while the “guideposts were not intended ‘to prevent juries from levying
awards that serve important state interests and provide a meaningful
deterrent against corporate misconduct,’ ” the Gore/State Farm guideposts
“cannot be abandoned or ignored.” (Ibid.) Thus, “in determining whether a
lesser award ‘could have satisfied the State’s legitimate objectives’ (State
Farm, . . . at p. 420), a reviewing court may nonetheless give some
consideration to the defendant’s financial condition.” (Ibid.)
In other words, “[i]n some cases, the defendant’s financial condition
may combine with high reprehensibility and a low compensatory award to
justify an extraordinary ratio between compensatory and punitive damages.
[Citation.] In other cases, especially those involving substantial
compensatory awards, the level of deterrence may be limited, after State
Farm, to that provided ‘as a natural result of imposing damages over and
above traditional compensatory damages, not from the imposition of
sanctions in an individual case that are actually disabling to the defendant’
[citation]; the state may have to partly yield its goals of punishment and

56
deterrence to the federal requirement that an award stay within the limits of
due process.” (Simon, supra, 35 Cal.4th at pp. 1186–1187.)
For the reasons we have discussed, this is not, under the five Gore
subfactors, a “high” reprehensibility case. Nor, however, is it a “low”
reprehensibility case. Rather, measured by the applicable subfactors,
Underwriters’ conduct is in the mid-range of reprehensibility for purposes of
assessing constitutional excessiveness. This is also not a “low compensatory
award” case, which, when combined with high reprehensibility, would
warrant significant consideration of the defendant’s wealth to ensure that a
punitive damages award provides the bite necessary to fulfill the state’s
interest in deterring conduct harmful to its residents. (See Simon, supra,
35 Cal.4th at pp. 1186–1187.) Thus, on balance, in this case, while
Underwriters’ annual profit bears consideration, it does not call for a
heightened ratio that might come within constitutional bounds were the
Gore/State Farm factors of different weight.
In sum, we conclude the $15 million punitive damages award is
constitutionally excessive. While we recognize that we could remand to the
trial court to reconsider the constitutionally allowed maximum award, we
conclude the “better course is for this court itself to determine the maximum
punitive damages award that satisfies the constraints of due process and to
order the judgment reduced accordingly.” (Simon, supra, 35 Cal.4th at
p. 1187). We therefore order the punitive damages award reduced to $10
million (resulting in a 3.22 to 1 ratio to the compensatory damages award),
an amount that in our view meets constitutional parameters. (See Contreras-
Velazquez v. Family Health Centers of San Diego, Inc. (2021) 62 Cal.App.5th
88, 108–111 [given moderate reprehensibility of defendant’s conduct and
substantial compensatory damages which included punitive element that was

57
somewhat duplicative of punitive damages award, trial court’s reduction of
punitive damages to 2:1 ratio was affirmed]; Colucci v. T-Mobile USA, Inc.
(2020) 48 Cal.App.5th 442, 458–460 [given low-to-moderate reprehensibility
of defendant’s conduct and substantial $1,020,042 compensatory damages
which contained punitive component, punitive damages reduced on appeal to
1.5:1 ratio]; Jet Source Charter, Inc. v. Doherty (2007) 148 Cal.App.4th 1, 11
[given substantial $6.5 million compensatory damages, punitive damages
reduced on appeal to 1:1 ratio].)
Trial Handling Issues
Underwriters lastly contend the trial court abused its discretion by
excluding testimony by its claims handling expert and by refusing to allow
argument that Wing Inflatables suffered only economic injury, entitling it to
a new trial on punitive damages. Neither claim has merit.
Exclusion of Expert Testimony
Additional Background
Several months before trial, Underwriters designated Victoria Roberts
as their claims handling expert. Underwriters represented that although
Roberts had not yet completed her investigation, she would “be sufficiently
familiar with the pending action to submit to a meaningful oral deposition
concerning the issues identified.” She was deposed shortly before trial.
One week later, the court considered Wing Inflatables’ motion in limine
to exclude any documents or testimony on topics not disclosed during
discovery after a proper request had been made. Given the extensive
discovery litigation that had occurred, the court agreed to this general
proposition, subject to specific objections being made at trial. When asked
about the “potential prejudice” Wing was seeking to avoid―that at trial
witnesses would talk about the unredacted version of documents―counsel for

58
Underwriters assured the court witnesses would not be shown “unredacted
versions of things, since they were produced in redacted forms. . . . Not one
witness has seen an unredacted version of a document that we sent to them
in redacted form.” Given this assurance, the court excluded “any trial
document that is not in the same form as it was disclosed in discovery.”
Several days later, the court considered Wing Inflatables’ motion in
limine to exclude any character evidence that Wing was litigious, including a
prior arbitration arising out of the original purchase of Wing from the Wing
family. Underwriters agreed they would not argue litigiousness but
maintained they should be allowed to make reference to the 32-page
arbitration decision on a case-by-case basis. However, when queried by the
court, Underwriters’ counsel admitted not having read through the decision
and thus did not know whether anything in it might actually be germane.
The court found this response confounding, stating: “We are no longer at the
eve of trial. We’re in trial. So to have a party explain to me that something
that is in the [Evidence Code section] 352 realm is something that they just
want to keep open because it might be beneficial, I mean, this is classic
unring the bell type situation. If it was important, it should be known by
now.” Nevertheless, the court did not wholly exclude the arbitration decision,
ruling that if Underwriters found something in the decision they wanted to
reference at trial, they would need to seek leave of court to do so.
The court next considered Wing Inflatables’ motion in limine to exclude
Roberts’ testimony at trial. Wing maintained she lacked expertise in
representations and warranties insurance, was unaware of basic information
regarding the claim at issue, and her opinions were based on materials not
produced in discovery. With respect to the discovery issue, for example,
Roberts testified at deposition to reviewing a claims file where “there wasn’t

59
much that was redacted,” while the claims file Underwriters produced to
Wing was heavily redacted. She also testified to having reviewed an
unredacted report that was withheld from Wing on a claim of privilege, and
to reviewing “more than 20” e-mails between the various defendants, while
Wing was provided only a “handful” of e-mails.
The court denied the motion without prejudice, stating: “The claim
that this witness has been provided with more information than Plaintiffs
have been provided is denied without prejudice. This is, we’ve already had
conversations of this type of thing. As a precaution, I am ordering that Ms.
Victoria Roberts bring her entire file to court for review by Plaintiff, Plaintiff
inspection, prior to her testifying. That’s one. [¶] The Court further orders
that she may not base any opinions or other testimony on anything not
contained in her file. So that would provide a natural opportunity for
Plaintiffs to point to something specific that is in this person’s file that
Plaintiffs do not have. And if that causes the need to revisit this motion, so
be it. We’ll have to revisit it. If there’s not, then I think this order provides a
mechanism that, should she have something in her mind because she maybe
read 20 e-mails versus a handful of e-mails, then Plaintiff will be on the
lookout for that, will state an objection. [¶] If we need to take this outside the
presence of the jury, we will, but I think that that is the better approach than
to excluding a Defense’s expert particularly because the Defense
fundamentally disagrees. The Defense has told me by way of the response
that this person has gotten the same information that the Plaintiffs have.”
(Italics added.)
Wing responded that since Roberts was an expert witness
Underwriters should have turned over her file before she was deposed. The
court agreed, stating it appreciated why Wing was “uncomfortable” with the

60
situation and why its ruling might not be enough to address all issues. It
added: “I hope that when you review what she brings in to court, we’ll have
an answer to that question. You know, did she testify incorrectly, and what
she has is redacted, or does she have something that’s not redacted? And
then we’ll have to maybe revisit this whole motion.”
Three weeks later, with trial scheduled to end the next day based on
juror availability, Wing Inflatables asked for a sidebar when Underwriters
called Roberts to the stand. Back on the record, the court stated there had
been a discussion about Roberts’ testimony that was “quite concerning.”
Wing then renewed its motion to exclude her testimony and asked for
sanctions, stating: “[I]t’s discovery that we had requested multiple times,
that had been ordered to be produced, and the Court was assured that it had
been produced, and it was not produced. And we received recently, pursuant
to the Court’s order―your order, Your Honor―the file that Ms. Roberts relied
on, and we’ve identified numerous documents, we continue to identify more
documents, that had not been produced to us in discovery, on which she
relied.”
The court agreed sanctions were warranted and considered the options,
“It’s not only that the law prefers trials on the merits, but just personally, it
[i.e., exclusion, is] the last thing I want to even have to consider.” It
nevertheless found “inadequate” on its face the alternative of restricting
Roberts’ testimony to certain identified documents because it would not allow
Wing Inflatables to impeach the reasonableness of her opinions based on the
other undisclosed information in her file. The court also ruled out a mistrial
on the ground Wing would be more prejudiced than Underwriters. The court
considered a second deposition but felt that would not be feasible in light of
the time constraints the court was now facing.

61
 Counsel for Underwriters then informed the court that Roberts told
him she did not review any correspondence after March 2021. He further
stated: “I think what’s happened here is there’s been some confusion about
what she actually received as part of the assignment for this case versus
what was put on a flash drive and provided to counsel for Wing.” Wanting to
“fully understand,” the court queried: “So even after I ordered [Underwriters]
to produce the accurate file that plaintiffs complained about not receiving
during discovery, are you telling me that [Underwriters] somehow produced
an incorrect file to plaintiffs on the last day of trial?” Counsel acknowledged
this was correct.15 Counsel then tried to argue Underwriters had complied
with the court’s order by producing “the total file.” The court disagreed:
Producing an “avalanche” of additional documents―more than 250 separate
documents―“[t]hat is not complying with the Court’s order that her file be
produced. Her file should be the file that she has. Like, the one and only file.
If you give more or if you give less, you haven’t complied with the Court’s
order.”
The court then asked Underwriters for suggestions, and counsel
requested an Evidence Code section 402 hearing to ensure Roberts’ opinions
were based on documents produced during discovery. The court replied: “If I
understand the request, you’re asking that the Court, on what should be the
last few hours of trial, have a court hearing so that the defense can
understand what they should have produced to the plaintiffs by way of the
court order that I made in motions in limine. [¶] We’re going to collectively go
through this process and understand what Victoria Roberts really had. [¶]

Underwriters claimed they actually produced this new, expanded file
15

on Monday, July 8, not Wednesday, July 11.

62
And then at what point in time would plaintiffs have the opportunity to
prepare for this?”
Counsel then suggested Roberts simply be asked if she had reviewed
anything that had not been Bates stamped, as the new materials were
apparently not stamped. If she hadn’t seen them, she could not have relied
on them. At this point, counsel admitted he did not know what had been
produced to Wing Inflatables. The court found this astounding, stating
counsel’s failure to know what another of the defense attorneys knew did not
advance Underwriters’ situation, and that Wings’ counsel had opened a
laptop in the hallway during their break 20 minutes ago and was pointing at
and referencing e-mails by date, author, and recipient. The court then
stated: “Let me be clear. None of this is about punishment. None of this is,
Oh, you gave the wrong file to the plaintiffs, and that was just a simple
mistake but the Court is choosing to punish you as if this were, you know,
some type of punitive measure. That’s not the case at all. I need to take
corrective measures to ensure that we have a fair trial. [¶] So the perspective
is not on the bad conduct. The perspective is on the fairness of plaintiffs
being able to try their case.” The court then allowed a break, instructing
Underwriters’ counsel to “[t]alk to plaintiff’s counsel and see if you can gain
an understanding, collectively, as to what–what they consider documents
that weren’t produced in the initial file.”
At that point Roberts was sequestered. The court, in turn, reviewed
relevant portions of her deposition during which she testified that the “vast
majority” of documents she reviewed were not Bates stamped. This added to
the court’s concern regarding how they could isolate the documents Roberts
reviewed. The court again asked Underwriters if they had come up with any
other alternative approach. Underwriters suggested Mr. Mattessich–

63
Underwriters’ coverage counsel–testify first, but there were also issues with
that witness related to the new information.
The court then called the jury in and asked which members could be
available at the beginning of the following week for trial if necessary. Only
eight of the 14 jurors stated they were available. Both sides stipulated to
proceed with a jury of eight, with six for a verdict. At Underwriters’ request,
the court polled the jurors a second time to see if they would also be available
either of the following two weeks, and the stipulation remained the same.
The court next decided to put Roberts on the stand while the jury had
lunch so it could “figure out if it’s fair to allow her to testify in some limited
amount or if the atomic option of exclusion is what’s necessary.” Wing
Inflatables pointed out it still did not have her file. Roberts then testified
that she reviewed materials up through late March 2021, sent to her in April
2024. She did not review the materials sent to her in late June 2024. She
forwarded approximately 20 e-mails with numerous attachments between
her office and Underwriters to include in any production to Wing. Roberts
further testified she would not be able to isolate which, if any, claims notes
she reviewed from various claims note systems.
After lunch, Underwriters’ counsel informed the court he had “to
further complicate a complicated situation.” Over the break, Underwriters
had discovered the extra documents inadvertently sent out were in a file of
attorney-client privilege communications for which they had never provided a
privilege log. After the court asked if there was “[a]ny acknowledgement that
this is yet another problem caused by the defense in this trial for everyone,”
Underwriters conceded they had caused the problem.
The court then stated it had thought a lot about “how is it that we’re in
this position that we’re in now? How is it that this became such a mess? To

64
state it casually. And I go back to the defense not following my order. Right?
[¶] My order was not that the defense counsel send a file to plaintiff’s counsel.
My order was Victoria Roberts is ordered to bring her entire file to court for
review of the parties. That didn't happen. It still has not happened. And I
think both parties would acknowledge that if that would have happened the
way that I ordered it, we wouldn’t be in any of this mess that has consumed
the majority of today’s court time.”
Counsel for Underwriters responded: “Couldn’t agree with you more,
Your Honor.”
In response to the court’s request for suggestions, Wing Inflatables
proposed that Underwriters “make an offer of proof or Your Honor conducts
an in camera review of the documents to determine whether they’re actually
privileged.” Wing stated it had ceased reviewing the documents on learning
of Underwriters’ claim of privilege.
The court then identified Roberts and Mattessich as the two witnesses
connected to the privilege issue. It suggested Underwriters proceed with
Mattessich’s direct examination. As to Roberts, the court stated: “[N]ow that
I have honed in on the fact that defense counsel has still not complied with
my order, I still have to figure out what to do about that. It doesn’t cure the
issue. Like where are her notes? She didn’t take any notes to herself? Like
how is it that defense counsel is sending her file? And what did you do? [¶]
That should be a note in and of itself: What is it that defense counsel told Ms.
Roberts, and how did she document what she was going to do to prepare her
file? This is backwards. Instead of her giving the file, which was, I mean,
you know, in the heat of this, we just kind of jumped over this entire issue.
Like the issue was to know exactly what Ms. Roberts has in her hands, not

65
what [Underwriters] has in [their] hands. That’s not the issue. So we have a
big problem still.”
After Underwriter’s acknowledged failing to comply with the court’s
order, the court stated: “[I]t’s the effect of not following the order I’m
concerned with. I’m not concerned about it being my order, you know, some
type of disobeyance [sic]. That’s not the issue. There’s no ego here. It’s
you’ve caused a humongous problem by doing this in this case. And–and I’m
still evaluating the prejudices.”
Mattessich then testified on direct.
Once that testimony was complete, the court asked Wing Inflatables for
an example of something in the new material it believed was not subject to
attorney client privilege. Underwriter’s counsel then stated he had not
reviewed all the materials but “believed” it was the file where they put
privileged documents. Reportedly, Underwriters had changed their
document depository six months previously, and it had been “a complete
mess.” Counsel opined the file might have been mislabeled in the transition.
The court also placed on the record that there had been conversations during
the lunch hour where it indicated it was inclined to allow Roberts to testify
the next day based on the timeline of her opinions. The court ordered her to
return the next morning and to sit for a video deposition at 6:30 that evening.
With respect to the example of something arguably not privileged, Wing’s
counsel testified he had been in court and had told his people to stop
reviewing the materials once the claim of privilege had been made.
Underwriters then reiterated that they had provided Roberts’ file to
Wing Inflatables within the materials they produced. The court responded:
“I don’t accept that. I don’t accept that her file is contained in a bunch of
other files, including the ones that you wanted excluded, and that that was

66
fair production to plaintiff. In fact, that is part of the problem. [¶] Every time
you bring this up, you’re just making plaintiff’s case for them, as far as I’m
concerned. It’s a rabbit hole that you want them to chase through right now,
in the middle of trial. It does not help.”
At this point the court ruled it was excluding Roberts’ testimony,
stating: “Here’s where I think this is going: As I reflect more on this issue, I
think it’s appropriate to exclude Victoria Roberts from this process. I think I
have bent over backwards to try to find a way for defense to have another
opportunity to do what it should have done months ago. And it’s one problem
after the next, including what [Underwriters’ counsel] has stated. [¶] But it’s
much more than that, because the first argument this morning was that that
is her file. And then it became, well, you know, maybe there’s some other
documents there, but it’s nothing different. You know, maybe it was
DOCOsoft stuff, maybe just in a different format. And then we got to the
point that we already memorialized, where I had to order a deposition to
figure this out. And we had a[n Evidence Code section] 402 hearing. And
then we came back from the lunch break and said, No, time out, Judge, you
know, red lights, emergency, we just conveyed a whole bunch of attorney-
client privileged information. [¶] And as the clock ticks and the day goes on,
we still―most importantly, plaintiff still has no clarity as to what her file is,
and that’s just not appropriate. And the precedential [sic] impact―weighing
the precedential [sic] impact, in my discretion, I think it’s gone too far. It has
crossed the line of being irreparable at this point in time, and that’s my
analysis, having considered every other way to salvage this issue, to try to
mend the break in the proceedings caused by defendants’ multiphase error.”
After Underwriters protested, the court further stated: “So I made a
ruling in this case out of concern that this expert witness had been privy to

67
information that was not given to the plaintiff in discovery. Right? I’m not
going to relitigate that. That was my ruling out of concern that there would
be an unfair trial to the plaintiff. That ruling has still not been complied
with. Instead of providing clarification, we have a whole lot more confusion
that we, to this moment, really can’t get behind.” The court then rejected
Underwriters suggestion they could have Roberts produce her file right then,
stating: “No, it wouldn’t be in compliance with the Court’s order
because―you know, the fact that I didn’t put a time and date on this doesn’t
erase the fact that she was supposed to be our first witness today.” At that
point, it was 2:40 in the afternoon.
With respect to Mattessich, even understanding the different roles he
had played at different points in time, everything the court had heard fit with
Underwriters’ position that the new information was attorney-client
privileged. “And given the scope of Mr. Mattessich’s direct, which has been
very limited, [the court saw] no reason why he can’t be cross-examined now,
and whatever those other documents are don’t need to come in.”
After the discussions regarding Roberts and a break, Wing Inflatables
indicated it had identified some examples relevant to Mattessich’s cross-
examination that appeared not to be attorney-client privileged. The court
saw nothing in the examples that would necessarily disadvantage Wing in its
cross-examination if they were unavailable. Wing suggested it might seek a
sanction for discovery misconduct later, and the court indicated a willingness
to consider a request if made.
Analytical Framework
“The purpose of the discovery rules is to ‘enhance the truth-seeking
function of the litigation process and eliminate trial strategies that focus on
gamesmanship and surprise.’ [Citation.] In other words, the discovery

68
process is designed to ‘ “make a trial less a game of blindman’s bluff and more
a fair contest with the basic issues and facts disclosed to the fullest
practicable extent.” ’ ” (Juarez v. Boy Scouts of America, Inc. (2000)
81 Cal.App.4th 377, 389 (Juarez), disapproved on other grounds by Brown
v. USA Taekwondo (2021) 11 Cal.5th 204, 222, fn. 9.)
“Code of Civil Procedure section 2023.030 permits the trial court to
impose as sanctions against anyone who has engaged in a misuse of the
discovery process monetary sanctions, issue sanctions, evidence sanctions,
terminating sanctions, or contempt sanctions. Code of Civil Procedure
section 2023.010 provides that the following, among others, are misuses of
the discovery process: failing to respond or to submit to an authorized method
of discovery; making, without substantial justification, an unmeritorious
objection to discovery; making an evasive response to discovery; and
disobeying a court order to provide discovery.” (Department of Forestry &
Fire Protection v. Howell (2017) 18 Cal.App.5th 154, 191 (Howell),
disapproved on another ground in Presbyterian Camp & Conference Centers,
Inc. v. Superior Court (2021) 12 Cal.5th 493, 516, fn. 17.)
“[T]rial courts should select sanctions tailored to the harm caused by
the misuse of the discovery process and should not exceed what is required to
protect the party harmed by the misuse of the discovery process.” (Howell,
supra, 18 Cal.App.5th at p. 191.) Generally, the appropriate sanction when a
party repeatedly and willfully fails to provide evidence to the opposing party
as required by the discovery rules is preclusion of that evidence from the
trial. (Juarez, supra, 81 Cal.App.4th at p. 390.)
“[T]he trial court has broad discretion in selecting the appropriate
sanction, and we must uphold the trial court’s determination absent an abuse
of discretion. [Citation.] Thus, we will reverse the trial court only if it was

69
arbitrary, capricious, or whimsical in the exercise of that discretion.”
(Howell, supra, 18 Cal.App.5th at p. 191; accord, Juarez, supra,
81 Cal.App.4th at p. 388 [choice of sanctions reversible “only for manifest
abuse exceeding the bounds of reason”].) “ ‘[T]he question before this court is
not whether the trial court should have imposed a lesser sanction; rather, the
question is whether the trial court abused its discretion by imposing the
sanction it chose.’ ” (Collisson & Kaplan v. Hartunian (1994) 21 Cal.App.4th
1611, 1620.)
No Abuse of Discretion in Exclusion of Expert
With respect to the trial court’s exercise of its discretion, little more
need be said than what the court, itself, said on the record. At the eleventh
hour, the court had a mess on its hands due entirely to Underwriters’ failure
to comply with its obligation to turn over the materials on which its expert
relied, save for any privileged documents identified in a privilege log. As we
have recited, on what was scheduled as the last day of trial, the trial court
was faced with the fallout of Underwriters’ failure to produce prior to
deposition the file on which Roberts relied and continued failure to produce it
when ordered to do so during in limine motions, the confusion then caused by
Underwriters’ error in turning over the wrong file, and disruption caused by
Underwriters’ subsequent assertion that some of the materials they had
dumped on Wing Inflatables at the last minute were covered by attorney-
client privilege. Sanctions were clearly warranted.
The trial court then spent substantial time considering what sanction
was appropriate, not to punish Underwriters for its recalcitrant and bungling
conduct, but to ensure Wing Inflatables was not prejudiced by the fiasco for
which Underwriters was responsible. The court considered numerous
options―restricting the scope of Roberts’ testimony, allowing Roberts to

70
testify with an instruction to the jury regarding Underwriters’ discovery
misconduct, an Evidence Code section 402 hearing, taking Roberts’ deposition
overnight, a mistrial and even extending the trial with fewer jurors―before
concluding excluding Roberts’ testimony was the only way to avoid the
irreparable harm caused by Underwriters’ “multiphase” misconduct.
Nor did the court reach this decision lightly. To the contrary, the court
was fully aware of the drastic nature of the sanction it imposed. Indeed, at
the time, the court referred to excluding Robert’s testimony as the “atomic
option,” and later reflected on the proceedings as follows: “[T]he equities in
this case side with the Plaintiff. The jury found that what happened to Wing
and to Mr. Branagh should have never happened, and that [Underwriters]
should have never taken the positions that they took in this case. [¶] The
Court has made one of the most significant rulings in a civil case that this
bench officer has ever made, in this case, for precisely the same reasons.It
was gamesmanship that happened in this case, and the Court has no doubt
when it hears Plaintiff’s Counsel complaining about how difficult it has been
to litigate this case that such is true.”
In short, the trial court made a difficult call, but there was no abuse of
discretion.
Curtailment of Closing Argument
During closing argument on punitive damages, Underwriters urged the
jury to take into account the fact the harm to Wing Inflatables was economic,
and not physical, in character. The trial court sustained Wings’ objection,
stating “physical harm is not and could not be part of this type of case, so it’s
an improper comparison.” Underwriters asserts this was error because the
nonphysical nature of the harm caused is a factor to be considered in
evaluating the reprehensibility of the defendant’s conduct and, had they been

71
permitted to make this point, there is a reasonable probability that the
punitive damages award would have been lower.
Underwriters are correct that California’s instruction on punitive
damages lists the five reprehensibility factors identified in Gore, including
whether the conduct caused physical harm or disregarded the health and
safety of others. (CACI No. 3949.) However, this case proceeded under
Delaware law at Underwriters’ request and thus the jury was instructed with
Delaware’s form punitive damages jury instruction. As we have recited, that
instruction states only that there are no fixed standards for the amount of
punitive damages; the jury can consider the reprehensibility of Underwriters’
conduct and their financial condition; and any award must bear a reasonable
relationship to the compensatory damages awarded. Had Underwriters
wanted this instruction modified to expressly reference the five Gore factors,
it could have, and should have, asked the trial court to do so. (See Marich v.
MGM/UA Telecommunications, Inc. (2003) 113 Cal.App.4th 415, 426 [“ ‘a
jury instruction which is incomplete or too general must be accompanied by
an objection or qualifying instruction to avoid the doctrine of waiver’ ”].)
Since the jury instruction did not expressly include reference to physical
harm, the trial court’s conclusion that argument on that point would have
been confusing to the jurors was not unreasonable.
Underwriters have not cited, nor have we discovered, any authority
requiring that a jury be instructed on, or that oral argument be directed at,
the specific Gore reprehensibility factors. Nor are we persuaded that had
Underwriters made the argument the court foreclosed, the result would have
been any different. The focus of the arguments was on the character of
Underwriters’ claims handling process and the motivation behind it. There is
nothing in the record that remotely suggests the jury’s assessment would

72
have been different had Underwriters pointed out their conduct caused only
economic and not physical harm.
WING INFLATABLES’ APPEAL (No. A173263)
Wing Inflatables maintains the trial court abused its discretion in
denying its posttrial motion for litigation bad faith attorney fees under
Delaware law. Specifically, Wing takes issue with the court’s stated reasons
for denying such fees—it would not revisit the earlier discovery rulings other
judges made on motions that sometimes included sanction requests, and
there was a risk of overlap between such fees and the punitive damages
awarded.
Underwriters assert Wing Inflatables cannot invoke this Delaware law
because it is procedural in character, and the procedural law governing this
case is that of California, the forum state. Underwriters alternatively assert
that, even if the Delaware litigation bad faith attorney fees law is substantive
in character and therefore applicable, the trial court did not abuse its
discretion in declining to award such fees.
Analytical Framework
Basic Choice of Law Principles
The default rule is that California procedural law applies to
proceedings in California courts “absent a choice-of-law provision expressly
mandating the application of the procedural law of another jurisdiction.”
(Mave Enterprises, Inc. v. Travelers Indemnity Co. (2013) 219 Cal.App.4th
1408, 1429; accord, EpicentRx, Inc. v. Superior Court (2025) 18 Cal.5th 58, 79
[The “ ‘basic rule is well settled that matters of procedure are governed by the
law of the forum.’ ”]; Saw v. Avago Technologies Limited (2020)
51 Cal.App.5th 1102, 1108 [“ ‘It is well established that while the courts
generally enforce the substantive rights created by the laws of other

73
jurisdictions, the procedural matters are governed by the law of the forum.’ ”
Italics omitted.].)
This position is consistent with section 122 of the Restatement Second
of Conflict of Laws (Restatement), which provides: “A court usually applies
its own local law rules prescribing how litigation shall be conducted even
when it applies the local law rules of another state to resolve other issues in
the case.” The Restatement explains the rationale behind this
procedural/substantive distinction as follows: “Each state has local law rules
prescribing the procedure by which controversies are brought into its courts
and by which the trial of these controversies is conducted. These rules for
conducting lawsuits and administering the court’s processes vary from state
to state. The forum has compelling reasons for applying its own rules to
decide such issues even if the case has foreign contacts and even if many
issues in the case will be decided by reference to the local law of another
state. The forum is more concerned with how its judicial machinery functions
and how its court processes are administered than is any other state. Also, in
matters of judicial administration, it would often be disruptive or difficult for
the forum to apply the local law rules of another state. The difficulties
involved in doing so would not be repaid by a furtherance of the values that
the application of another state’s local law is designed to promote.” (Rest.2d
Conf. of Laws, § 122, com.)
Moreover, “[p]arties do not usually give thought to matters of judicial
administration before they enter into legal transactions. They do not usually
place reliance on the applicability of the rules of a particular state to issues
that would arise only if litigation should become necessary. Accordingly, the
parties have no expectations as to such eventualities, and there is no danger
of unfairly disappointing their hopes by applying the forum’s rules in such

74
matters. [¶] Enormous burdens are avoided when a court applies its own
rules, rather than the rules of another state, to issues relating to judicial
administration, such as the proper form of action, service of process, pleading,
rules of discovery, mode of trial and execution and costs. Furthermore, the
burdens the court spares itself would have been wasted effort in most
instances, because usually the decision in the case would not be altered by
applying the other state’s rules of judicial administration. Even if the
outcome would be altered, however, the forum will usually apply its own rule
if the issue primarily concerns judicial administration. The statute of
limitations is a striking example of such an issue (see § 142).” (Rest.2d Conf.
of Laws, § 122, com.)
It thus follows that choice of law is not resolved with respect to the
litigation as a whole. Rather, “a separate conflict of laws inquiry must be
made with respect to each issue in the case.” (Washington Mutual, supra,
24 Cal.4th at p. 920.)
“Whether a particular question is one of substance or procedure is
determined by forum law.” (Roberts v. Home Insurance Indemnity Co. (1975)
48 Cal.App.3d 313, 318.) We review a trial court’s choice-of-law ruling de
novo. (Chen v. Los Angeles Truck Centers, LLC (2019) 42 Cal.App.5th 488,
494; Brown v. Grimes (2011) 192 Cal.App.4th 265, 274.)
Conflict of Law Principles
“California applies the principles set forth in section 187 of the
Restatement Second of Conflict of Laws (section 187) in determining the
enforceability of contractual choice of law provisions. (Nedlloyd[, supra,]
3 Cal.4th [at pp.] 464–466 . . . , citing § 187, subd. (2).) Under section 187,
the parties’ choice of law generally governs unless (1) it conflicts with a
state’s fundamental public policy, and (2) that state has a materially greater

75
interest in the determination of the issue than the contractually chosen
state.” (Pitzer College, supra, 8 Cal.5th at p. 100.)
In Nedlloyd, our high court “articulated California’s multistep choice of
law analysis: ‘[T]he proper approach under Restatement section 187,
subdivision (2) is for the court first to determine either: (1) whether the
chosen state has a substantial relationship to the parties or their transaction,
or (2) whether there is any other reasonable basis for the parties’ choice of
law. If neither of these tests is met, that is the end of the inquiry, and the
court need not enforce the parties’ choice of law. . . . If, however, either test is
met, the court must next determine whether the chosen state’s law is
contrary to a fundamental policy of California. . . . If there is no such conflict,
the court shall enforce the parties’ choice of law. If, however, there is a
fundamental conflict with California law, the court must then determine
whether California has a “materially greater interest than the chosen state in
the determination of the particular issue. . . .” (Rest., § 187, subd. (2).) If
California has a materially greater interest than the chosen state, the choice
of law shall not be enforced, for the obvious reason that in such circumstance
we will decline to enforce a law contrary to this state’s fundamental policy.’ ”
(Pitzer College, supra, 8 Cal.5th at pp. 100–101.)
Delaware Litigation Bad Faith Attorney Fees
“[I]n Delaware there remains an historic and constitutional separation
of law and equity. Indeed, under article IV, section 7 of the Delaware
Constitution, the Superior Court’s jurisdiction relates to all civil causes at
‘common law’ while article IV, section 10 and 10 Del. C. § 341, make clear the
Court of Chancery’s jurisdiction to hear and determine all matters and causes
in equity.” (Monroe Park v. Metropolitan Life Insurance Co. (Del. 1983)
457 A.2d 734, 738.) The Court of Chancery also has jurisdiction to hear a

76
plaintiff’s legal claims under the “clean-up doctrine.” (Carlson v. Rodriguz
(Del.Ch. 2026) 2026 Del. Ch. LEXIS 32 at p. *4 (Carlson); accord, Getty
Refining & Marketing Co. v. Park Oil, Inc. (Del.Ch. 1978) 385 A.2d 147, 150
[“ ‘it is settled law that when equity obtains jurisdiction over some portion of
the controversy it will decide the whole controversy and give complete and
final relief, even though that involves the grant of a purely law remedy such
as a money judgment’ ”].) Thus, should a plaintiff choose “to simultaneously
file complaints in two courts that ‘essentially mirror each other and include
both . . . legal and equitable claims,’ the Court of Chancery has jurisdiction to
resolve the entire dispute.” (Carlson, at p. *5.)
The Court of Chancery does not, however, have jurisdiction to award
punitive damages. “The rationale of these cases denying Chancery’s power to
award punitive damages is clear. Traditionally and historically the Court of
Chancery as the Equity Court is a court of conscience and will permit only
what is just and right with no element of vengeance and therefore will not
enforce penalties or forfeitures.” (Beals v. Washington International, Inc.
(Del.Ch. 1978) 386 A.2d 1156, 1159; ibid. [“a Court of Chancery has never
had jurisdiction to impose punitive or exemplary damages in the absence of
specific statutory authority”].) This is true even under the clean up doctrine.
(Ibid. [“The Delaware cases holding that the Court of Chancery, once having
acquired jurisdiction over a controversy may, in appropriate cases, go on to
grant complete relief although the relief granted is in the nature of a legal
remedy, are not inconsistent with this holding. To say that Chancery may
award compensatory damages in certain instances is not to say that
Chancery may also award punitive damages.” Fn. omitted.].) In reaching
this conclusion, the Beal court noted two cases holding that punitive damages
could be awarded in a stockholder derivative action, but both arose in Iowa,

77
“a state which has combined its law and equity courts.” (Ibid.)
Under Delaware law, a prevailing party may obtain an award of
litigation bad faith attorney fees “if it demonstrates that the losing party
engaged in bad faith conduct that increased the costs of the litigation.” (Nagy
v. Bistricer (Del.Ch. 2000) 770 A.2d 43, 51, fn. 6; accord, Dover Historical
Society, Inc. v. City of Dover Planning Commission (Del. 2006) 902 A.2d 1084,
1093 (Dover) [“Delaware courts have the power to shift attorneys’ fees where
a ‘losing party has “acted in bad faith, vexatiously, wantonly, or for
oppressive reasons.” ’ ”].) “The purpose of this so-called ‘bad faith’ exception
is to ‘ “deter abusive litigation in the future, thereby avoiding harassment
and protecting the integrity of the judicial process.” ’ ” (Kaung v. Cole
National Corp. (Del. 2005) 884 A.2d 500, 506 (Kuang).) Were it otherwise,
“defendants with deep pockets [would] have no disincentive to exert undue
pressure on less well-off plaintiffs to settle strong claims on the cheap simply
because the plaintiffs cannot afford the costs necessary to pursue their claims
to a final resolution.” (Nagy, at p. 65; accord, Beck v. Atlantic Coast PLC
(Del.Ch. 2005) 868 A.2d. 840, 850 (Beck) [litigation bad faith attorney fees are
“designed to ensure that litigation is prosecuted in a candid and non-frivolous
manner that does not inexcusably add to the substantial costs that almost
always result when a complex case is filed”].)
Bad faith litigation conduct has been found to exist in cases where
“ ‘parties have unnecessarily prolonged or delayed litigation, . . . knowingly
asserted frivolous claims[,] . . . mis[led] the court, alter[ed] testimony, or
chang[ed] position on an issue.’ ” (Dover, supra, 902 A.2d at p. 1093; see
Arbitrium (Cayman Islands) Handels AG v. Johnston (Del.Ch. 1997) 705 A.2d
225, 231 (Arbitrium) [fee shifting appropriate where “the defendants’ bad
faith forces the filing of the action”].)

78
 “[T]he bad faith exception does not apply to conduct that gives rise to
the substantive claim itself. But this does not preclude the Court of
Chancery, in its discretion, from using this information . . . for the sole
purpose of determining whether the [d]efendants defended [the] action in bad
faith. . . .”16 (Johnston, supra, 720 A.2d at p. 546, fn. omitted.)
The court “has the power to award fees in ‘an individual case . . . where
equity requires.’ ” (ASB, supra, 2013 Del.Ch. LEXIS 236 at p. *19.) “There is
no single standard of bad faith that warrants an award of attorneys’ fees in
such situations; rather, bad faith is assessed on the basis of the facts
presented in the case.”17 (Beck, supra, 868 A.2d. at p. 851.)

16
It appears Delaware courts also allow equitable fee shifting in
limited cases “where the underlying (pre-litigation) conduct of the losing
party was so egregious as to justify an award of attorneys’ fees as an element
of damages.” (Arbitrium, supra, 705 A.2d at p. 231; accord, ABS Allegiance
Real Estate Fund v. Scion Breckenridge Managing Member, LLC (Del.Ch.
2013) 2013 Del.Ch. LEXIS 236 at p. *19 (ASB Allegiance).) This “quite
narrow exception is applied in only the most egregious instances of fraud or
overreaching.” (Arbitrium, at p. 231.) As Wing Inflatables requested only
litigation bad faith attorney fees, we do not analyze whether there could have
been recovery under any other such “narrow exception” afforded by Delaware
law.
17 We have discovered one Chancery Court that applies a “ ‘glaringly
egregious’ standard” in this context but have not found any Delaware
Supreme Court case adopting that rubric. (Seidman v. Blue Foundry
Bancorp (Del.Ch. 2023) 2023 Del. Ch. LEXIS 168, at p. *12 (Seidman); see
RBC Capital Mkts., LLC v. Jervis (Del. 2015) 129 A.3d 816, 879 [concluding
the “glaringly egregious” standard was in the discretion of the trial court and
stating: “[W]hile this is a close issue, we decline to find an abuse of
discretion, even though we might have come to a different conclusion if we
were reviewing this as an original application.”].) Other cases speak of
“ ‘unusually deplorable behavior.’ ” (Wallace v. Schrock (Del.Ch. 2018)
2018 Del. Ch. LEXIS 183, at p. *9; id. at pp. *10–11 [recalcitrance in
engaging in litigation meets unusually deplorable standard where party
negotiated and then repeatedly refused to follow stipulations].)

79
California Procedural Law Applies
As we have discussed, the parties agreed to a choice of law provision
stating Delaware law applies. It further specifies: “Any dispute between you
and us regarding this Policy will be settled in accordance with the choice of
law without reference to conflict-of-law principles that would require or allow
the application of the law of any other jurisdiction.” Since this choice-of-law
provision does not expressly mandate the application of Delaware procedural
law, it does not supplant the general rule that matters of procedure are
governed by the law of the forum state—here, California.
Characterization of Delaware’s Litigation Bad Faith Attorney Fee
Law
Thus, the pivotal question here is whether Delaware’s litigation bad
faith attorney fee law is substantive or procedural. The trial court concluded
this bad faith fee law is substantive, ruling Underwriters had “requested that
Delaware law applies and . . . , as such, [Wing Inflatables] is entitled to all of
the substantive benefits afforded to . . . Delaware parties in [Wing’s]
situation.”

In Kaung, supra, 884 A.2d 500, for example, the Delaware Supreme
Court upheld a fee award where the record suggested suit was filed for
improper motives. (Id. at p. 507.) The record also “show[ed] that throughout
the litigation [plaintiff’s] representatives made excessive and duplicative
deposition requests while ignoring their own discovery obligations. They
refused to facilitate the schedule of [a defense] deposition, and when [the
individual] finally appeared for deposition, he refused to answer questions
and instead peppered the [defendant’s] attorneys with questions and
accusations. [Another plaintiff’s representative], who accompanied [the
witness] to the deposition, aggravated the situation by supporting [the
witness’s] behavior and failing to provide any substantive answers to [the
defendant’s] discovery requests regarding [the witness].” (Ibid.)

80
 That the trial court made this ruling without undertaking a choice-of-
law analysis can be laid squarely at the doorstep of both parties’ inadequate
briefing. Underwriters raised the issue for the first time in their posttrial
brief opposing Wing Inflatables’ fee motion, urging that the matter was
procedural because it was related to discovery issues. And, while Wing
argued in reply that Delaware law establishes a substantive, equitable right
to litigation bad faith attorney fees, none of the cases on which it relied
involved a choice-of-law issue because they had all been brought in Delaware
courts, where Delaware procedural law applied. (See Blue Hen Mech., Inc. v.
Christian Bros. Risk Pooling Trust (Del. 2015) 117 A.3d 549, 558–560 (Blue
Hen); Scion Breckenridge Managing Member, LLC v. ASB Allegiance Real
Estate Fund (Del. 2013) 68 A.3d 665, 687–688; Dover, supra, 902 A.2d at
p. 1093; Johnson, supra, 720 A.2d 542, 546.) It was not until their
respondents’ brief on appeal that Underwriters finally provided a reasoned
analysis on the choice-of-law issue. In reply, Wing cited the same unhelpful
Delaware cases it provided to the trial court.
Delaware’s Bad Faith Litigation Attorney Fee Law is Procedural
A thorough summary of the law pertaining to choice of law in the
attorney fee context was set forth by a Tennessee appellate court in Boswell
v. RFD-TV The Theater, LLC (Ten.Ct.App. 2016) 498 S.W.3d 550 (Boswell)
and we reproduce it here: “Courts in several other jurisdictions have
expressly considered whether awards of attorney’s fees are governed by
substantive or procedural law for purposes of conflicts of law. However, those
decisions have produced mixed results. Some courts have held that issues
involving attorney’s fees are procedural and governed by the law of the
forum. See, e.g., Alaska Rent-A-Car, Inc. v. Avis Budget Grp., Inc., 738 F.3d
960, 974 (9th Cir. 2013) (predicting that the Alaska Supreme Court would

81
hold, for choice of law purposes, that its attorney’s fee rule is procedural);
Sentinel Indus. Contracting Corp. v. Kimmins Indus. Serv. Corp., 743 So.2d
954, 960 (Miss. 1999) (‘In Mississippi, the law of the forum applies to all
procedural and remedial issues. That includes attorneys’ fees[.]’) (citation
omitted); Neb. Nutrients, Inc. v. Shepherd, 261 Neb. 723, 626 N.W.2d 472,
518 (Neb. 2001) (‘Nebraska law deems the recovery of attorney fees in the
action in which they are incurred to be a procedural issue governed by the
law of the forum’); N. Bergen Rex Transp., Inc. v. Trailer Leasing Co.,
158 N.J. 561, 730 A.2d 843, 848 (N.J. 1999) (‘attorneys’ fees are a matter of
practice and procedure, rather than of substantive law’); GB Auctions, Inc. v.
Private Ledger, Inc., 183 Wn.App. 1028 [published in full-text format at 2014
Wash. App. LEXIS 2283], 2014 WL 4627773, at *5 (Sept. 16, 2014) (finding
contractual attorney’s fees to be a procedural issue governed by the law of the
forum); Smithco Eng’g, Inc. v. Int’l Fabricators, Inc., 775 P.2d 1011, 1017[,
fn.] 4, 1019 (Wyo. 1989) (finding a statute that authorized awards of
attorney’s fees to a prevailing party, ‘to be taxed and collected as costs,’ was
procedural).
“Other courts have held that attorney’s fees are substantive issues.
See, e.g., PVI, Inc. v. Ratiopharm GmbH, 253 F.3d 320, 329 (8th Cir. 2001)
(explaining that Missouri law regards a contractual right to attorney’s fees as
a substantive right created by the contract and governed by the substantive
law applicable to the contract generally); Boyd Rosene & Assocs., Inc. v. Kan.
Mun. Gas Agency, 174 F.3d 1115, 1125 (10th Cir. 1999) [(Boyd)] (predicting
under Oklahoma choice-of-law principles that attorney’s fees would be
considered a substantive issue in a contractual dispute); Aries v. Palmer
Johnson, Inc., 153 Ariz. 250, 735 P.2d 1373, 1381 (Ariz.Ct.App. 1987)
(holding that the recovery of contractual attorney’s fees as authorized by

82
statute was a substantive issue); Seattle-First Nat'l Bank v. Schriber,
51 Ore.App. 441, 625 P.2d 1370, 1373 (Or.Ct.App. 1981) (concluding that a
statute authorizing contractual attorney’s fee awards involved a matter of
substantive right).
“Some courts recognize a distinction between different types of claims
for attorney’s fees, such as those awarded to a party for prevailing on its
claim versus those assessed against a party as sanctions for bad faith
litigation practices. See, e.g., Boyd Rosene & Assocs., Inc., 174 F.3d at 1125–
26 (noting the distinction and finding the latter category more related to
judicial administration). For instance, Florida courts treat contractual
awards of attorney’s fees as substantive and bad faith awards of attorney’s
fees as procedural. Compare Precision Tune Auto Care, Inc. v. Radcliffe,
815 So.2d 708, 711 (Fla.Ct.App. 2002) (applying the contractually chosen
substantive law of Virginia to an award of attorney’s fees based on a contract;
with Weatherby Assocs., Inc. v. Ballack, 783 So.2d 1138, 1143 (Fla.Ct.App.
2001) (finding a contract’s choice of law clause irrelevant to an award of
attorney’s fees not made pursuant to the contract but pursuant to a Florida
statute regarding frivolous litigation). Texas courts have held that the
recovery of attorney’s fees for breach of contract is a substantive issue, while
a discretionary attorney’s fee award under the state’s Declaratory Judgment
Act is procedural. Man Indus. (India), Ltd. v. Midcontinent Exp. Pipeline,
LLC, 407 S.W.3d 342, 353–54 (Tex.Ct.App. 2013). Idaho courts hold that ‘a
statute providing for the discretionary award of attorney fees is remedial and
procedural and does not affect the substantive claim for relief, while a statute
providing for a mandatory award of attorney fees to the prevailing party is
substantive[.]’ Houston v. Whittier, 147 Idaho 900, 216 P.3d 1272, 1283 (Id.
2009). As these cases and various approaches demonstrate, ‘this is by no

83
means an obvious or settled issue.’ ” (Boswell, supra, 498 S.W.3d at pp. 557–
559, fns. omitted.)
We agree that the best way to harmonize these cases, as many courts
considering the question have done, is to distinguish between fees awarded
based on the substance of the claim (for example, fees based on a contractual
attorney fees provision) and fees that can be awarded in any case to punish
abusive litigation conduct and preserve the integrity of the court. As the
Boyd court explained it: “This court recognizes a distinction, as do other
courts and commentators, between loser-pays attorney’s fees, that is,
attorney’s fees awarded to a party simply because it prevailed, and attorney’s
fees assessed for a willful violation of a court order or against a losing party
who acted in bad faith, vexatiously, wantonly, or for oppressive reasons. . . .”
(Boyd, supra, 174 F.3d at pp. 1125–1126, citing Servivios Comerciales
Andinos, S.A. v. General Electric Del Caribe, Inc. (1st Cir. 1998) 145 F.3d 463,
480, fn. 9 [noting that a rule awarding loser-pays attorney fees “has a much
better claim to being ‘substantive’ than a rule awarding attorney’s fees only
as a sanction for frivolous litigation”].)
The Boyd court further explained: “Loser-pays attorney’s fees are
normally not within a court’s inherent power. Instead, they reflect a
conscious policy choice by a legislature to depart from the American rule and
codify the English rule.” (Boyd, supra, 174 F.3d at p. 1126, citing 20
Am.Jur.2d (1995) Costs § 57 [“Fees paid to attorneys are ordinarily not
recoverable from the opposing party as costs, in the absence of express
statutory or contractual authority.”].) In contrast, “[t]he authority to award
bad-faith attorney’s fees, though frequently codified, is usually within a
court’s inherent powers, which it has discretion to exercise in the interest of
justice and efficient judicial administration. For example, the Oklahoma

84
Supreme Court noted that a court’s inherent power to make ‘an award of
attorney’s fees against an opponent under the “bad faith” exception to the
American Rule’ was based upon its need ‘to manage its own affairs so as to
achieve the orderly and timely disposition of cases.’ ” (Boyd, at p. 1126;
accord, In re Larry’s Apartment, L.L.C. (9th Cir. 2001) 249 F.3d 832, 838
[“when fees are based upon misconduct by an attorney or party in the
litigation itself, rather than upon a matter of substantive law, the matter is
procedural”]; First Bank of Marietta v. Hartford Underwriters Insurance Co.
(6th Cir. 2002) 307 F.3d 501, 529 [holding that the Ohio statute providing for
attorney’s fees is procedural and thus inapplicable because it is “based upon
the conduct of the parties and the attorneys in filing and litigating [a]
claim”].)
This approach is also consistent with the reasoning behind
Restatement section 122 which, as we have discussed, provides that the
procedural rules of the forum state generally apply. According to the
Restatement, “[e]normous burdens are avoided when a court applies its own
rules, rather than the rules of another state, to issues relating to judicial
administration.” (Rest.2d Conf. of Laws, § 122, com., italics added.)
Moreover, “[e]ven if the outcome would be altered . . . the forum will usually
apply its own rule if the issue primarily concerns judicial administration.”
(Ibid., italics added.)18
Analyzed under this rubric, Delaware’s litigation bad faith attorney
fees must be deemed procedural. Indeed, the very cases Wing Inflatables

18 In addition, while it remains in draft form and therefore is not
binding, we note the current draft of the Restatement expressly recognizes
this distinction. (Restatement (Third) Conflict of Laws TD 5-5.16 [“The law
of the forum determines whether attorneys’ fees will be awarded as a
sanction based on misconduct during litigation.”].)

85
cites make clear that such fees are meant to protect the integrity of the
Delaware judicial process. (See Blue Hen, supra, 117 A.3d 549, 560, fn. 48
[“ ‘The purpose of this exception is not to award attorney’s fees to the
prevailing party as a matter of right, but rather to “deter abusive litigation in
the future, thereby avoiding harassment and protecting the integrity of the
judicial process.” ’ ”], quoting Brice v. State Dept. of Corrections (Del. 1998)
704 A.2d 1176, 1179; Dover, supra, 902 A.2d at p. 1093 [“[t]his exception
applies only in extraordinary cases, its purpose being to ‘deter abusive
litigation in the future, thereby avoiding harassment and protecting the
integrity of the judicial process.’ ”].)
Moreover, we have located at least one Delaware case that appears to
have adopted this distinction. In El Paso Natural Gas Co. v. Amoco Prod. Co.
(Del.Ch. 1994) 1994 Del. Ch. LEXIS 205, Amoco argued Texas law should
apply in accordance with the parties’ contractual choice of law provision.
Under Texas law, reasonable attorney fees were recoverable by the prevailing
party in a breach of contract action. El Paso asserted that Delaware deems
the issue of recovery of attorney fees to be procedural and thus governed by
Delaware law (the forum state), which did not recognize a right to such a fee
award. (Id. at p. *4.) The court concluded that even though the contract did
not specifically address attorney fees, the parties had nevertheless made the
victor’s entitlement to fees a “substantive contractual right[] by reason of
designating as governing the law of . . . Texas.” (Id. at p. *16.) In doing so,
the court distinguished litigation bad faith attorney fees, stating: “In many
instances involving adjudication of a foreign-law issue attorneys’ fees will
involve a non-substantive (procedural) issue. For example, where fee shifting
is contemplated as a result of bad faith litigation . . . , the interest of the
parties or the foreign state to have foreign law apply to an award of

86
attorneys’ fees will be very weak. In such cases the application of forum law
to this question could not be seen as failing to accord full faith and credit to
the laws of a sister state; nor could it even be seen as disappointing the
reasonable expectations of either party. It may thus be said to be ‘procedural’
in this choice of law sense.” (Id. at pp. *12–13.)
We therefore conclude the Delaware litigation bad faith attorney fee
law Wing Inflatables invoked is procedural in character and therefore not
applicable in this case in which California procedural law applies.
Accordingly, Wing’s posttrial motion for attorney fees based on Delaware’s
litigation bad faith attorney fees law was properly denied, albeit for a
different reason than relied on by the court.
As a final matter, Wing Inflatables urges that should we conclude its
motion for Delaware litigation bad faith attorney fees was properly denied,
the case should be remanded for a determination of Brandt fees (or, in other
words, for an award of additional compensatory damages). Wing faces two
problems.
First, Brandt fees are plainly a substantive facet of California
insurance bad faith law and thus are unavailable in this case given that
Delaware substantive law applies. Such fees are based on a conscious policy
choice to depart from the American rule in favor of the English rule. (See
Boyd, supra, 174 F.3d at p. 1126.) As our Supreme Court has explained:
“The availability of tort remedies in the limited context of an insurer’s breach
of the covenant [of good faith and fair dealing] advances the social policy of
safeguarding an insured in an inferior bargaining position who contracts for
calamity protection, not commercial advantage.” (Kransco v. American
Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390, 400.)

87
 Second, while Wing Inflatables might have been able to persuade the
trial court to allow Brandt fees under a Nedlloyd choice-of-law-exception
analysis had it made that argument—that is, that the parties’ choice of
Delaware law conflicts with Brandt’s fundamental California public policy
and California has a materially greater interest in the determination of the
issue than Delaware—it did not do so, and the court ruled that Delaware law
applied. Moreover, Wing did not appeal or cross-appeal from the judgment
subsuming those pretrial rulings. Thus, at this juncture, the trial court’s
choice-of-law decision, applying Delaware substantive law to all substantive
issues is final as to Wing and therefore immune from attack. (See Gonzales
v. R.J. Novick Constr. Co. (1978) 20 Cal.3d 798, 804–805 [“ ‘Ordinarily [an
appeal from a specific portion of a judgment] would leave the parts not
appealed from unaffected, and it would logically follow that such unaffected
parts must be deemed final.’ ”]; see also ReadyLink Healthcare v. Cotton
(2005) 126 Cal.App.4th 1006, 1014–1015.)
DISPOSITION
The punitive damages award in No. A172050 is reduced to $10 million
and otherwise affirmed. The order denying attorney fees in No. A173263 is
affirmed. The parties shall bear their own costs on appeal.

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 _________________________
Banke, Acting P. J.

We concur:

_________________________
Langhorne Wilson, J.

_________________________
Smiley, J.

A173263, A172050, Wing Inflatables, Inc. v. Certain Underwriters at Lloyd’s

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