GOURLEY v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY (1990)

OPINION

State Farm Automobile Insurance Company appeals the judgment entered in favor of Julie Gourley after a jury trial.   State Farm contends:  (1) as a matter of law, it was not guilty of bad faith in its dealings with Gourley;  (2) the evidence was insufficient to support the award of punitive damages;  (3) the punitive damages award was excessive;  (4) the punitive damages award violated due process and the Eighth Amendment;  (5) the trial court erred prejudicially by admitting evidence of receipt by State Farm of restitution monies payable to Gourley;  (6) the trial court erred prejudicially in granting a directed verdict against State Farm on its comparative bad faith defense;  and (7) prejudgment interest was not allowable.   We affirm.

3

In late 1981, Gourley was a passenger in an automobile which was struck by a drunk driver's out-of-control vehicle.   Gourley was not wearing a seat belt and suffered a broken arm when she struck some portion of the vehicle's interior.

The drunk driver was uninsured so Gourley made a claim in March 1982 under her uninsured motorist coverage with State Farm.   She retained attorney Wylie A. Aitken who demanded arbitration and commenced discovery.   When State Farm's attorney, Barry Allen, learned that Gourley was not wearing her seat belt, he became interested in the effect of that fact upon liability.   He decided to seek input from an expert.

In September 1982, Allen advised Aitken that State Farm would contest the proximate cause of the injuries based upon Gourley's failure to wear her seat belt.   Aitken responded that assertion of this defense was an insult.   The expert eventually concluded that had Gourley used a seat belt, her injuries would have been negligible.   Allen provided Aitken with a copy of the report, and made numerous requests for Aitken's theory of the case.   Robert Phillips, State Farm's adjuster, also made numerous unsuccessful attempts to obtain medical records from, or hold settlement discussions with, Aitken.

In June 1983 Aitken demanded the policy limit of $100,000.   He enclosed a medical report from a doctor who concluded Gourley had some permanent disability, would probably develop arthritis, and might require surgery in the future.   Gourley's personal physician had also examined her and found that her condition was improving but she had some discomfort and limited range of motion.   A physician selected by State Farm to conduct a defense medical examination opined that Gourley had residual pain and limited range of motion.

Allen told Phillips an arbitrator would be hard pressed to award Gourley anything based upon the seat belt expert's report.   Phillips expressed concern that the arbitrator would not “buy” the seat belt defense.   Nonetheless, it was decided the settlement value of the case was $25,000 and an offer of $20,000 was conveyed to Aitken.   In a subsequent discussion, Aitken told Allen that, at most, the seat belt issue was one of comparative negligence.   Allen responded that he was unaware of law supporting that proposition and asked for authority on point.

Before the first session of the arbitration hearing in November 1983 Gourley again saw her personal physician.   He concluded her condition was worsening and might require future surgery.   Prior to the second session in October 1984, Aitken reduced Gourley's settlement demand to $60,000.   State Farm countered with $25,000.   The arbitrator awarded Gourley $88,137 which State Farm promptly paid.   At the second session, Allen argued the case was only worth “a couple thousand dollars” because Gourley would not have suffered serious injury had she worn her seat belt.   He conceded the case was worth $50,000 to $60,000 in the absence of the defense.

Gourley later sued State Farm for bad faith in the handling of her claim.   At the trial an attorney, Vernon Hunt, testified the case was worth $135,000 but the settlement value was somewhat less.   In his opinion State Farm's evaluation was unreasonable.   He opined comparative negligence was the proper analysis for the seat belt defense and there was no comparative fault on Gourley's part.   Even considering the defense, the case was worth $128,000.

Attorney Dana Hobart also testified for Gourley.   He also said failing to wear a seat belt is, at most, a basis for comparative negligence.   He believed the most the arbitrator could have reduced the damages for comparative fault would have been 10 percent.   He valued the case conservatively at $98,000 and concluded State Farm did not act in good faith in raising the seat belt defense in conscious disregard of Gourley's rights.

Attorney Arthur Schartel testified for State Farm that the comparative negligence analysis was not correct.   He valued the case at $20,000 to $25,000 without the defense and $15,000 to $20,000 with it.   State Farm claims superintendent Belinda Goodman inexplicably testified that the claim was worth $25,000, with or without the seat belt issue.   Claims managers Hugh Donahue and John Rath testified State Farm's conduct was within the industry standard of care and it was proper to raise the seat belt defense.   Donahue opined the defense justified a reduction of 20 to 30 percent in the claim, making its value $25,000.   Rath testified he would reduce the claim by 20 percent due to the failure to wear a seat belt and the case was worth $25,000 with the defense and $50,000 without it.

The jury returned a verdict of $15,765 in actual damages and $1,576,500 in punitive damages.   The trial court denied State Farm's request to strike or reduce the punitive damages and awarded interest on the total amount from the date Gourley tendered an offer to settle.  (Code Civ.Proc., § 998.)

I

State Farm first contends that the evidence does not show bad faith because it reasonably relied upon the advice of its attorney.   We disagree.

There is an implied covenant in every insurance contract that the insurer will do nothing to impair the insured's right to receive the benefit of the contractual bargain—that the insurer will promptly pay to the insured all sums due under the contract.  (Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 818–819, 169 Cal.Rptr. 691, 620 P.2d 141;  Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 573, 108 Cal.Rptr. 480, 510 P.2d 1032;  Austero v. National Cas. Co. (1978) 84 Cal.App.3d 1, 29–30, 148 Cal.Rptr. 653.)   A major motivation for the purchase of insurance is the peace of mind that claims will be paid promptly.  (Egan v. Mutual of Omaha Ins. Co., supra, 24 Cal.3d at p. 819, 169 Cal.Rptr. 691, 620 P.2d 141;  Austero v. National Cas. Co., supra, 84 Cal.App.3d at p. 30, 148 Cal.Rptr. 653.)

When an insurer unreasonably refuses to pay benefits due, it frustrates that motivation and a cause of action in tort arises.  (Austero v. National Cas. Co., supra, 84 Cal.App.3d at p. 30, 148 Cal.Rptr. 653.)   Withholding benefits is unreasonable if it is without proper cause.   (California Shoppers, Inc. v. Royal Globe Ins. Co. (1985) 175 Cal.App.3d 1, 54–55, 221 Cal.Rptr. 171.)   In determining proper cause, the interests of the insured must be given at least as much consideration as those of the insurer.   (Egan v. Mutual of Omaha Ins. Co., supra, 24 Cal.3d at p. 818–819, 169 Cal.Rptr. 691, 620 P.2d 141.)

 Proper cause may exist where the insurer relies in good faith upon the advice of counsel.  (See Merritt v. Reserve Ins. Co. (1973) 34 Cal.App.3d 858, 876, 110 Cal.Rptr. 511;  Davy v. Public Nat'l Ins. Co. (1960) 181 Cal.App.2d 387, 396, 5 Cal.Rptr. 488.)   However, the advice alone does not establish proper cause as a matter of law for asserting the seat belt defense.

Allen was more than a legal advisor.   He encouraged Phillips to propose a smaller settlement than Phillips was inclined to offer.   He explained it was his duty to assert any viable defense against State Farm's insured, even one which only had a five to ten percent chance of success.   Even as a layperson, Phillips had reservations about the defense, yet went along with it.

 Some cases imply advice to assert a patently untenable defense is not proper cause for withholding payment.  (See Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 921, 148 Cal.Rptr. 389, 582 P.2d 980;  Moore v. American United Life Ins. Co. (1984) 150 Cal.App.3d 610, 627, 197 Cal.Rptr. 878;  Beck v. State Farm Mut. Auto. Ins. Co. (1976) 54 Cal.App.3d 347, 354–355, 126 Cal.Rptr. 602;  Allen v. Allstate Ins. Co. (9th Cir.1981) 656 F.2d 487, 489.)   Expert testimony presented to the jury provided a basis for concluding the defense was untenable.   More importantly, we do not believe good faith is established merely because a defense is “tenable.”   As noted, a major purpose of insurance is to provide peace of mind through prompt payment.  (Egan v. Mutual of Omaha Ins. Co., supra, 24 Cal.3d at p. 819, 169 Cal.Rptr. 691, 620 P.2d 141.)   That purpose is frustrated where the insurer consciously decides to try out an untested legal argument against its own insured.¹

State Farm goes to great lengths to show other states have taken the position that failure to wear a seat belt can be a complete defense when all injuries would have been prevented by wearing the belt.   The argument proves too much.   It demonstrates that when this case was arbitrated, all case law favorable to State Farm was from out-of-state and California law was, at best, not in agreement on the issue.  (Compare Franklin v. Gibson (1982) 138 Cal.App.3d 340, 343–344, 188 Cal.Rptr. 23 with, e.g., Dunn v. Durso (1986) 219 N.J.Super. 383, 530 A.2d 387, 389.)   State Farm never tendered to the trial court any of the case law it espouses here.   All the evidence shows that it relied upon an untested legal theory at the expense of Gourley, its own insured.²

Beyond this, the jury could reasonably find “intentional” bad faith.  (See McCormick v. Sentinel Life Ins. Co. (1984) 153 Cal.App.3d 1030, 1046, 200 Cal.Rptr. 732;  Richardson v. Employers Lia. Assur. Corp. (1972) 25 Cal.App.3d 232, 239, 102 Cal.Rptr. 547 overruled on other grounds in Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 580, fn. 10, 108 Cal.Rptr. 480, 510 P.2d 1032.)   The testimony of the expert witnesses and the arbitrator's award provided ample basis to conclude State Farm intentionally made settlement offers which it knew were inadequate.   State Farm's own witnesses only justified a 20 to 30 percent reduction based upon the seat belt defense.   It never explained why the additional medical information from Gourley's personal physician received before the first arbitration session did not merit an increased settlement offer.   Gourley had suffered a hard tissue injury with probable permanent disability of some degree to her primary arm.

Although there was conflicting evidence, Gourley presented substantial evidence that State Farm adopted a “stonewall” or “see-you-in-court” attitude as exhibited by grossly insufficient offers to settle.  (See Seaman's Direct Buying Service, Inc. v. Standard Oil Co. (1984) 36 Cal.3d 752, 770, 206 Cal.Rptr. 354, 686 P.2d 1158.)   The evidence was sufficient to support the jury's finding of bad faith.

II

 State Farm next argues the evidence was insufficient as a matter of law to support the award of punitive damages.   Not so.

To support an award of punitive damages, the plaintiff must show more than bad faith by the insurer;  she must show “oppression, fraud, or malice.”   (Silberg v. California Life Ins. Co. (1974) 11 Cal.3d 452, 462, 113 Cal.Rptr. 711, 521 P.2d 1103;  and see Beck v. State Farm Mut. Auto. Ins. Co., supra, 54 Cal.App.3d 347, 355–356, 126 Cal.Rptr. 602.)   When this case was tried, malice could be established by showing the insurer acted with a conscious disregard for the rights of the insured.  (Civ.Code, § 3294, subd. (c);  Weisman v. Blue Shield of California (1984) 163 Cal.App.3d 61, 67, 209 Cal.Rptr. 169.)³  On appeal, an award of punitive damages will be upheld if supported by substantial evidence (Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d 910, 922–923, 148 Cal.Rptr. 389, 582 P.2d 980.)

An expert testified State Farm's actions were in conscious disregard of Gourley's rights.   Allen testified Phillips had trepidation about asserting the defense, yet Allen felt he had a duty to champion any defense no matter what the chance of success.   Although he asked Aitken for authority contrary to his position, it was Allen's duty, on behalf of State Farm, to thoroughly research the applicable law before denying benefits to Gourley.   His apparent failure to do so implies the necessary scienter.

Moreover, the witnesses' failure to explain State Farm's methodology in arriving at and essentially sticking to its original offer, supplied an inference of the requisite conscious disregard.   There was ample evidence to support an award of punitive damages.

III

 State Farm contends that even if the award of punitive damages was proper, the amount was excessive as a matter of law.   We may only make this finding “ ‘ “where the recovery is so grossly disproportionate as to raise a presumption that it is the result of passion or prejudice.” ’ ”  (Schroeder v. Auto Driveaway Co. (1974) 11 Cal.3d 908, 919, 114 Cal.Rptr. 622, 523 P.2d 662.)   There is no such showing here.   In this regard, we give great weight to the decision of the trial court in upholding the award upon the motion for new trial.  (Moore v. American United Life Ins. Co., supra, 150 Cal.App.3d 610, 642, 197 Cal.Rptr. 878.)

 In making our determination, we look to three factors:  (1) whether the amount of the award reasonably reflects the reprehensibility of the defendant's conduct;  (2) whether the punitive damages bear a reasonable relationship to the actual damages;  and (3) whether the award will have a deterrent effect without crippling the financial existence of the defendant.   (Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d 910, 928, 148 Cal.Rptr. 389, 582 P.2d 980.)   We examine these factors.

As to the first, case law has recognized the propriety of an award of $5,000,000 in punitive damages where the insurer approached the claim with an eye to defeating it rather than paying it, used spurious grounds to deny the claim and at all times kept “all possible defenses at the forefront.”   (Downey Savings & Loan Ass'n v. Ohio Cas. Co. (1987) 189 Cal.App.3d 1072, 1084, 234 Cal.Rptr. 835.)   The same factors are present here.   From the evidence, the jury could find State Farm used a bogus defense to attempt to defeat Gourley's claim and now attempts to justify it after the fact by using out-of-state authority.   While not rising to the level of fraud, we cannot say the award is out of proportion to the wrong done.

Turning to the second factor, the punitive award is exactly 100 times the actual damages.   Case law supports such a ratio.  (Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d 910, 920, 148 Cal.Rptr. 389, 582 P.2d 980 [78:1];  Moore v. American United Life Ins. Co., supra, 150 Cal.App.3d 610, 636, 197 Cal.Rptr. 878 [83:1];  Wetherbee v. United Ins. Co. of America (1971) 18 Cal.App.3d 266, 271, 95 Cal.Rptr. 678 [190:1].)

The final factor is the relationship of the award to the financial condition of the defendant.   It is:  (1) one-hundreth of one percent (.01 percent) of State Farm's net worth through June 1986;  (2) less than a half day of average net income for 1986;  and (3) less than 4 percent of net earnings for one week.   Compared to other cases approving large awards, it is the proverbial “drop in the bucket.”  (See Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d 910, 929, 148 Cal.Rptr. 389, 582 P.2d 980 [discussing one week's net earnings as reasonable];  Downey Savings & Loan Assn. v. Ohio Casualty Ins. Co., supra, 189 Cal.App.3d 1072, 1099–1100, 234 Cal.Rptr. 835 [3.64 weeks of net income;  one percent of net worth];  Betts v. Allstate Ins. Co. (1984) 154 Cal.App.3d 688, 711, 201 Cal.Rptr. 528 [less than one-half week's earnings];  Moore v. American United Life Ins. Co., supra, 150 Cal.App.3d 610, 642, 197 Cal.Rptr. 878 [3.4 weeks of net income];  Pistorius v. Prudential Insurance Co. of America (1981) 123 Cal.App.3d 541, 554–555, 176 Cal.Rptr. 660 [1/20120 of one percent of net worth;  less than two days net income];  Roemer v. Retail Credit Co. (1975) 44 Cal.App.3d 926, 937, 119 Cal.Rptr. 82 [10 days income;  less than one percent of net worth].)

While there is always some concern that plaintiffs not receive a windfall as a result of punitive damages, their major purpose remains punishment and deterrence.  (Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d 910, 929, 148 Cal.Rptr. 389, 582 P.2d 980.)   To punish extremely wealthy defendants, it will often be necessary to increase the ratio of the punitive award to the actual damages.  (Ibid.)  We cannot say as a matter of law the award is the result of passion or prejudice.

IV

State Farm also argues the punitive damages award should be set aside on constitutional grounds.   It first asserts that punitive damages constitute a penalty without limit and without adequate standards to determine the amount of the award in violation of due process.   In support of this contention it argues:  (1) Civil Code section 3294 permits a penalty of indeterminate amount;  (2) the vagueness doctrine precludes ad hoc determination of a penalty, particularly because punitive damages constitute a criminal penalty;  (3) punitive damages are subject to arbitrary and discriminatory enforcement;  (4) guidelines presented to the jury are insufficient;  and (5) case-by-case judicial review does not remedy the defects.

 We note first that numerous cases have rejected vagueness attacks on Civil Code section 3294.  (See, e.g., Bertero v. National General Corp. (1974) 13 Cal.3d 43, 66, fn. 13, 118 Cal.Rptr. 184, 529 P.2d 608;  Grimshaw v. Ford Motor Co. (1981) 119 Cal.App.3d 757, 811, 174 Cal.Rptr. 348.)   State Farm implicitly distinguishes these cases on the ground they dealt with determining liability for punitive damages while the attack here centers on determining the amount of the damages.   However, it cites no authority which, by analogy or otherwise, supports the proposition that the procedure for determining the amount of punitive damages is impermissibly vague.

The jury was instructed that the amount of punitive damages must be arrived at without resorting to passion and prejudice, be reasonably related to the reprehensibility of defendant's conduct, bear a reasonable relationship to the actual damages, and have a deterrent effect considering the defendant's financial condition.  (BAJI No. 1471.)   The jury instructions on the issue emphasize the heavy burden on a plaintiff and the necessity to avoid imposing an unreasonable amount.   But State Farm contends the terms of this standard are impermissibly vague themselves.

For example, it attacks the use of the word “reprehensible.”   Although the word has been found vague in other circumstances (see Giaccio v. Pennsylvania (1966) 382 U.S. 399, 404–405, 86 S.Ct. 518, 521–522, 15 L.Ed.2d 447), it must be viewed in context here.   The jury does not determine the amount of punitive damages unless it has already determined that the conduct of the defendant was malicious, oppressive, or fraudulent under standards State Farm does not attack.   The term “reprehensible” relates to that prior determination.   The jury merely considers the proved conduct as part of its analysis to determine the appropriate amount to punish the defendant.

The “wealth” factor is likewise sufficiently clear.   Indeed, it is particularly well suited to quantification.   State Farm argues that it “becomes less and less meaningful as wealth increases, to the point of providing no guidance whatsoever when a multi-million or multi-billion dollar corporation is involved.”   To the contrary, the cases we have discussed supra (see, e.g., Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d 910, 929, 148 Cal.Rptr. 389, 582 P.2d 980), demonstrate that using wealth as a factor produces reasonable awards when considered as a percentage of net worth or earnings.   We suspect State Farm's real complaint is that the wealth factor means that deterrence considerations may result in larger awards against wealthier defendants.   This is as it should be.

The “ratio-of-punitive-damages-to-actual-damages” factor is similar to the “wealth” factor.   It is capable of mathematical determination.   The fact that it may be subjugated to the other factors on occasion (Neal v. Farmers Ins. Exchange, supra, 21 Cal.3d 910, 929, 148 Cal.Rptr. 389, 582 P.2d 980), does not render it or the whole scheme of guidelines vague.

Short of imposing a monetary limit or providing a mathematical formula for determining punitive damages, the jury was provided with sufficient guidance.   Any dollar limit on punitive damages creates the risk that wealthy defendants will not be adequately deterred from future wrongful conduct.  (See Downey Savings & Loan Assn. v. Ohio Casualty Ins. Co., supra, 189 Cal.App.3d 1072, 1098, 234 Cal.Rptr. 835.)   No mathematical formula could be created to accurately apply to all tortious conduct meriting punitive damages.   Of course, such a formula has never been required of actual damages.

As cogently observed in Devlin v. Kearny Mesa AMC/Jeep/Renault, Inc. (1984) 155 Cal.App.3d 381, 388, 202 Cal.Rptr. 204, “[T]he justice system need not and should not mirror a mechanistic view of life.   The life of the law should continue to be experience.   The concept of justice connotes a human process, performed by judges and juries in good faith, exercised with compassion, still tinged with sufficient subjectivity to conform the rules of law to the realities of life.”

State Farm urges special consideration concerning vagueness because punitive damages amount to a criminal penalty.   The United States Supreme Court rejected this characterization of punitive damages in Browning–Ferris v. Kelco Disposal (1989) 492 U.S. ––––, ––––, 109 S.Ct. 2909, 2918, 106 L.Ed.2d 219, 236.

The foregoing discussion effectively disposes of State Farm's assertion that punitive damages are susceptible to arbitrary and discriminatory enforcement.   In particular, case-by-case judicial review using the factors discussed above does ensure that defendants—even those with substantial assets like State Farm—will not be subject to capricious awards.   Similar review has been found to be an important and sufficient safeguard in death penalty cases.   (Gregg v. Georgia (1976) 428 U.S. 153, 198, 96 S.Ct. 2909, 2936, 49 L.Ed.2d 859.)

State Farm also contends that punitive damages are violative of the Eighth Amendment prohibition against excessive fines.   The United States Supreme Court has determined the issue adversely to State Farm in Browning–Ferris v. Kelco Disposal, supra, 492 U.S. ––––, ––––, 109 S.Ct. 2909, 2919–2921, 106 L.Ed.2d 219, 237–239, and we are bound by that decision.

V

 State Farm asserts the trial court erred prejudicially in admitting evidence of a Superior Court order that no further restitution payments be made to it after it had received and retained a payment for $176.75.   Any error was not prejudicial.

The ground State Farm sets forth for the inadmissibility of the evidence—that there was no evidence State Farm knew of the order—provides a strong inference there was no prejudice.   Although Gourley's counsel mentioned the issue briefly in his final argument, the major thrust of Gourley's case was that State Farm raised a virtually spurious defense to justify withholding payment.   Based upon the substantial evidence on that issue, the impact of the brief mention of the restitution order was de minimis.

VI

 State Farm complains that the trial court wrongly granted a directed verdict against it on its comparative bad faith defense.   Not so.

A directed verdict may be granted when, disregarding conflicts in the evidence and indulging every reasonable inference in favor of the opposing party, an appellate court would be compelled to reverse should a verdict be rendered supporting the opposing party's contention on the issue.  (Hale v. Venuto (1982) 137 Cal.App.3d 910, 917, 187 Cal.Rptr. 357.)

This is such a case.   Viewing the evidence most favorably to State Farm, there was insubstantial evidence of bad faith by Gourley during the relevant time period.   Gourley stipulated there was no bad faith prior to the first arbitration session.   All of the alleged comparative bad faith by Aitken, except for one unanswered letter, occurred before then.   Moreover, Aitken had reduced his demand by 40 percent to $60,000, a move which brought only a $5,000 increase, to its admitted maximum, from State Farm.   Phillips testified nothing but a “weak moment” could have changed his evaluation of the case.

State Farm also points out that Aitken did not provide seat belt statistics until just before the second arbitration session.   But these statistics varied from the testimony of State Farm's expert by only a few percentage points.   There is no showing this information would have changed State Farm's offer.   Most importantly, this argument smacks of the concept we rejected above—that it was Gourley's duty to provide State Farm with legal research and statistics to persuade it to abandon an essentially spurious defense.   Aitken's conduct did not affect the unreasonable position taken by State Farm and no reasonable jury could conclude otherwise.

VII

 State Farm argues the trial court erred in awarding interest on the judgment from the date of Gourley's Code of Civil Procedure section 998 offer.   We disagree.

Civil Code section 3291 provides in relevant part:  “In any action ․ for personal injury ․ it is lawful for the plaintiff in the complaint to claim interest on the damages alleged․   If the plaintiff makes an offer pursuant to section 998 of the Code of Civil Procedure ․ the judgment shall bear interest at the legal rate of ten percent ․ from the date of the plaintiff's first offer․”  (Emphasis added.)

The operative words are “for personal injury.”   In Slater v. Textron, Inc. (1989) 215 Cal.App.3d 907, 928, 264 Cal.Rptr. 460, Division One of this court held the provisions of section 3291 applied to an award of damages for age discrimination resulting in loss of employment.   After recognizing the dearth of legislative history on the meaning of “for personal injury,” the court concluded, “While an age discrimination claim does not attempt to obtain compensation for physical injury, it nonetheless seeks to vindicate decidedly personal interests.   As such, discrimination is a personal injury within the meaning of section 3291.”  (Ibid.)

An action for insurance bad faith falls into the same category.   As we have noted, a major reason for purchasing insurance is to provide peace of mind for the insured.  (Egan v. Mutual of Omaha Ins. Co., supra, 24 Cal.3d at p. 819, 169 Cal.Rptr. 691, 620 P.2d 141;  Austero v. National Cas. Co., supra, 84 Cal.App.3d at pp. 29–30, 148 Cal.Rptr. 653.)   The gist of the bad faith action is to compensate the insured for the angst caused when the insurer wilfully refuses to pay under the policy.   The primary focus of the tort is the personal wrong done.   If it were merely pecuniary, a contract cause of action would suffice.   The presence of some ancillary economic loss does not make the damages claim less “personal.”   No one would suggest a claim for personal injuries arising out of an automobile accident is not “personal” merely because there is also an ancillary claim for lost earnings or property damage.

Common sense bolsters this conclusion.   The primary purpose of Civil Code section 3291 is to encourage prompt settlements by providing a monetary disincentive to parties who drag out disputes for economic reasons.   (Woodard v. Southern Cal. Permanente Medical Group (1985) 171 Cal.App.3d 656, 666, 217 Cal.Rptr. 514.)   It should apply to a bad faith case where the crux of the action evolves from a wrongful withholding of benefits by the insurer.

We are aware Richardson v. Allstate Ins. Co. (1981) 117 Cal.App.3d 8, 12–13, 172 Cal.Rptr. 423, a statute of limitations case, held an insurance bad faith action is not one for infringement of personal rights.   But the Richardson court was concerned with a statute of limitations defense.   Civil Code section 3291 is concerned with the nature of the harm suffered, not the nature of the right sued upon.  (Compare Richardson v. Allstate Ins. Co., supra, 117 Cal.App.3d 8, 12, 172 Cal.Rptr. 423.)  “Detriment is a loss or harm suffered in person or property.”  (Civ.Code, § 3282.)   A bad faith action is “brought to recover damages for personal injury.”  (Civ.Code, § 3291.)   The trial court was correct in awarding prejudgment interest.

The judgment is affirmed.

FOOTNOTES

1.   It is this concept which separates Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 254 Cal.Rptr. 336, 765 P.2d 498 from this case.   There, the Supreme Court held that in a malicious prosecution action the trial court must initially determine, as a matter of law, whether the defendant's basis for the allegedly malicious lawsuit was “objectively tenable.”  (Id. at p. 883, 254 Cal.Rptr. 336, 765 P.2d 498.)   If it was, the jury need not determine whether the defendant acted with malice in prosecuting the case;  the cause of action is not made out.  (Id. at p. 874–875, 254 Cal.Rptr. 336, 765 P.2d 498.)That result makes sense, given the desire of the legal system to avoid a chilling effect upon litigants.  (Id. at p. 872, 254 Cal.Rptr. 336, 765 P.2d 498.)   But the tort of bad faith in the insurance context serves to promote the reasonable expectations of the defendant's own insured.   That purpose is frustrated if the applicable standard of defense is whether the insurer's defense is patently untenable.   A defense may be theoretically “tenable,” yet it may be grossly unreasonable to use it as a shield to delay or avoid payment under the terms of the insurance contract.

2.   That this is a “first party” case (one involving the insured as opposed to a third party) is important.   Any claim by an insurer that our conclusion might have a chilling effect upon the development of new legal theories is answered by observing that there are numerous third party cases in which those theories may be tested by proposing jury instructions, for example.   One of the major negative aspects of this case is that State Farm chose its own insured as the guinea pig.

3.   A 1988 amendment to the section added the requirement that the conduct be willful and despicable.   We need not consider whether that standard was met in this case.

WALLIN, Associate Justice.

SCOVILLE, P.J., and SONENSHINE, J., concur.