Crisci v. Sec. Ins. Co.

66 Cal. 2d 425, 58 Cal. Rptr. 13, 426 P.2d 173 (1967)



Liability based on an implied covenant exists whenever the insurer refuses to settle in an appropriate case and that liability may exist when the insurer unwarrantedly refuses an offered settlement where the most reasonable manner of disposing of the claim is by accepting the settlement. Liability is imposed not for a bad faith breach of the contract but for failure to meet the duty to accept reasonable settlements, a duty included within the implied covenant of good faith and fair dealing.


Defendant's failure to settle an insurance claim in a prior personal injury litigation resulted in a jury award that exceeded plaintiff's policy limits. The trial court held that defendant knew there was a risk of substantial recovery beyond the policy limits and gave more consideration to its own interests than it gave to plaintiff's financial interests.


Can insurer be held liable for the amount of final judgment even if it is beyond the policy limits?




The court affirmed, holding that an insurer was not permitted to further its own interests by rejecting opportunities to settle within its insured's policy limits unless it was also willing to absorb losses from its failure to settle. The court also found that the award for pain and suffering was proper because the recovery was permitted for defendant's breach of contract that caused personal injury to plaintiff.

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