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Attorney, firm not liable to client for failing to eliminate exposure to criminal restitution

October 22, 2024

A California appellate court held that an attorney and firm had no duty to structure a settlement so as to absolve a client from criminal restitution liability.

Drew Grundfor rear-ended a car driven by N.M. At the time of the collision, Grundfor’s blood-alcohol content was three times the legal limit. His insurer, Allstate, retained attorney John Demarest and his law firm to defend Grundfor against N.M.’s subsequent lawsuit. Grundfor’s Allstate policy, which covered up to $500,000 in damages for bodily injury per occurrence, allowed Allstate to settle any claim but did not cover damages incurred by an insured for injuries resulting from criminal acts. N.M. and Allstate settled for Grundfor’s policy limits. The following year, N.M. requested $178,000 in attorney fee restitution from Grundfor in a parallel criminal proceeding, and a trial court ordered him to pay the requested amount.

Grundfor sued Demarest and the firm for negligence, arguing that the defendants should have extinguished his liability for criminal restitution by including such language in the settlement agreement and conditioned the settlement on the trial court’s confirmation that it resolved any criminal restitution claim. The trial court granted the defendants summary judgment.

Affirming, the appellate court reasoned that Grundfor’s Allstate policy was limited to defending him from civil liability, and the defendants fully performed their duty under the policy. Moreover, the court said, the plaintiff presented no evidence that the defendants performed an act that increased the risk of injury. The plaintiff’s exposure to criminal restitution resulted from his act of injuring several motorists while intoxicated, the court noted. A restitution order is between a defendant and the state. Thus, the court reasoned, any release in the underlying settlement would not have relieved the plaintiff of paying criminal restitution—a financial debt to the state.

Consequently, the court concluded that the defendants had no duty to absolve the plaintiff’s criminal restitution liability in the civil settlement with N.M.

Citation: Grundfor v. Demarest, 2024 WL 4181660 (Cal. Ct. App. Sept. 13, 2024).