Chen

Po-Jen Chen and Fang-Mei Lin appeal from that portion of the court’s judgment awarding costs under Code of Civil Procedure section 998 to Interinsurance Exchange of the Automobile Club. We reverse and remand.

FACTS AND PROCEEDINGS

Po-Jen Chen and Fang-Mei Lin own their home in San Gabriel and own a second house in San Marino. In May 2003, their properties were damaged in two separate incidents. Their San Gabriel home suffered extensive water damage when an upstairs bathroom water line broke, and their San Marino property suffered damage from high winds. Respondent Interinsurance Exchange of the Automobile Club insured both houses against property damage. Appellants filed claims with respondent under those insurance policies.

In May 2004, appellants sued respondent, alleging breach of the policies and bad faith. According to the lawsuit, respondent mishandled appellants’ claims by, among other things, authorizing shoddy repair work, making lowball offers, failing to pay certain benefits such as an adequate temporary housing stipend, and refusing to properly remediate mold contamination. While the lawsuit was pending in August 2005, appellants’ San Gabriel home suffered…