California Court of Appeal

In bad faith action brought against insurer, summary judgment for defendant insurer is affirmed as to a tort claim, however, it is reversed as to a contract claim as: 1) where a liability insurer has provided a defense and, prior to the filing of an action by an insured (or assignee), has fully paid out the amount of its policy limit, it may not be liable for the breach of any express policy provision promising such benefits, but nonetheless could be held liable for a breach of the implied covenant of good faith and fair dealing; 2) an insurer's failure to accept a reasonable settlement offer to resolve a third party claim against its insured constitutes a breach of the covenant of good faith and dealing implied in a liability policy; 3) such a breach, if it results in an excess judgment against the insured, will support a claim sounding in contract as well as tort; 4) the amount of the excess judgment is a consequential damage of such a breach under Civil Code section 3300 and may be recovered as a matter of contract damages; in such event, the applicable limitations period is four years; 5) while an insured's claim against an insurer arising from a failure to accept a reasonable settlement offer will accrue upon the entry of an excess judgment in the underlying action, the running of the limitations period is tolled until the time for appeal has expired or, if an appeal is taken, until entry of a final judgment and the issuance of a remittitur; and 6) Civil Code section 2313 will not invalidate an insured's retroactive assignment of a claim against his or her insurer if the assignment is made prior to the expiration of the relevant limitation period on that claim.

Appellate Information

• Decided 08/22/2007
• Published 08/22/2007

Judges

• CROSKEY, J.

Court

• California Court of Appeal

Counsel

• For Appellant:
  
• Girardi & Keese, Thomas V. Girardi and Robert W. Finnerty, Los Angeles, for Plaintiffs and Appellants.


• For Appellees:
  
• Horvitz & Levy, Peter Abrahams, Daniel J. Gonzalez, Encino;  Branson, Brinkop, Griffith & Strong and John R. Campo, Redwood City, for Defendant and Respondent.